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The order for a genetic test panel for Charcot-Marie-Tooth peripheral neuropathy caught the rapt attention of Thomas L. Williams, MD, FCAP.

Whoa! Let’s take a breath here, the pathologist thought. That test carries a price tag of $17,500, more than half the cost of his car. “We’re concerned that those sorts of tests can create billing issues,” he says. “We try to straighten all that up front so the lab doesn’t wind up sitting on a $17,500 bill that no one is going to pay.”

Dr. Williams got in touch with the ordering clinician, who was totally in the dark on the price of the test. The clinician withdrew the order, saying he would consult with the patient and see whether payment for the test could be arranged through his group’s neuroscience center.

It’s not as if a definitive diagnosis of Charcot-Marie-Tooth disease is a bad idea. But in an era of cost containment in coordinated care, typified by accountable care organizations (ACOs), vigilant and creative approaches can play a role. And in big-ticket testing, pathologists are ideally situated to be the proverbial traffic cops. The ACO environment offers a financial incentive for better patient care for the least possible cost. Both, not one or the other. This is the new normal for pathologists, and it is likely to bring on a significant change to their professional lives.

Dr. Williams is the medical director for The Pathology Center serving Methodist Hospital and Children’s Hospital in Omaha, Neb., a salaried 12-member clinical and anatomic pathology practice that handles 1.5 million tests per year.

He says the price check is routine procedure for his group, and he expects tight controls will become increasingly common around the country. “There are just too many tests now. They’re too complicated. It’s a huge management problem for physicians.”

Within the traditional fee-for-service system, clinicians had every incentive to test and test and test because they would be paid more, without considering whether all the tests were medically necessary, ordered without thinking, or, in some cases, ordered to scratch an intellectual curiosity.

3 THE ACO OPPORTUNITYImproving Outcomes, Containing Costs

Thomas L. Williams, MD, FCAP


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ACO models attempt to address the problems of a fragmented, largely fee-for-service-based medical care system. These fragmented models reward provision of services rather than achievement of outcomes, contributing to rapid growth in health care spending (now higher than 17% of GDP) and a system in which as much as 30% of costs are generated because of overuse, underuse, and misuse of health care services.

Now policymakers, the government, and insurers are giving more than lip service to cost containment and closer scrutiny to appropriate and efficient care as well. They are doing the same for collaboration across specialties such as described by Dr. Williams. Not only many experts and organizations, including the College of American Pathologists (CAP), but also the government view fee-for-service medicine as living on borrowed time. That being so, what’s the alternative? Perhaps it’s incentives, predicated on cost savings along with patient improvement, both compared with the past.

That model, with shared savings, where doctors meet certain standards to get a piece of the action, as defined by incentive payment eligibility when certain quality measures and cost of care reductions are achieved, is getting intense scrutiny. In this ACO model, the traditional incentives are being turned on their heads. It’s all part of a campaign by the federal and state governments, especially Massachusetts, and insurance carriers to introduce new financial schemes to control skyrocketing costs and at the same time improve care. It’s also about accountability, reduced fragmentation, improved efficiency, quality (at least per metrics), and, of course, dollars.

In an ACO, a medical organization, such as an independent practice association, or physician hospital organization, accepts responsibility to care for a group of patients. Practitioners receive compensation from “bundled payments” given to the ACO (except, so far, in the Medicare ACO program, where reimbursement is still fee for service). The same is so in some private sector programs, with bundled payments covering the cost of care rather than on a piecework basis.

In this model, groups of primary care practitioners, surgeons, oncologists, pathologists, and other specialists work together to give the patients the best care rather than competing to treat them. Payments are made on a capitated basis.

Under the Centers for Medicare & Medicaid Services Shared Savings, or ACO, Program, when physicians demonstrate savings and improved care compared with past experience, physicians will share in the dollars saved. So no longer is a test such as the one for Charcot-Marie-Tooth disease pursued willy-nilly. The desirability needs careful thought and rationale.

Fee-for-service medicine is living on borrowed time. The alternative is predicated on cost

savings along with patient improvement.


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Capitation, one of the ACO payment options some are considering outside of the Medicare program, is far from a new idea. In some form, it was frequently employed by health maintenance organizations (HMOs) and other organizations seeking to manage care. How are ACOs different?

“My feeling is capitation with HMOs didn’t really succeed because there was very little emphasis placed on quality and health. It was mostly placed on saving money,” says Donald S. Karcher, MD, FCAP, chairman of pathology at George Washington University School of Medicine and Health Sciences in Washington, DC. Dr. Karcher is also president-elect of the Association of Pathology Chairs, and he serves on several CAP committees dealing with ACOs. He is the chair of the CAP ACO Network.

“Accountable care, on the other hand, has been described as having the triad of aims: quality care for individuals, improved health of the population, and cost savings value,” he adds. “Capitation really only put an emphasis on only one of those three: cost savings. No emphasis was placed on quality or health improvement for the population. The theory of accountable care includes those as two necessary legs of the stool. If any one of these is missing, the stool will fall over and the organization will not succeed. Each of the three is considered equally important.”

He says ACOs under the CMS must produce data demonstrating improved good quality for the patients and increased health for the population. ACOs were given emphasis and formally established as a Medicare program under the Affordable Care Act of 2010. Yet the ACO rulebook’s critical chapters on how to divide the booty among specialties on shared savings were still being written in 2012. So how does pathology earn its proper its share?

With the ACO, Medicaid or insurance plans make base payments that are divvied up with physicians by some incentive payment eligibility formula the ACOs establish. Medicare chose to stay out of this,

indicating it did not have the statutory authority to mandate incentive payment methodologies.

If shared savings are generated, then it is up to the ACO to disseminate them in accordance with the methodology it has developed to physician groups, such as independent practice associations (IPAs) and physician health organizations.

ACOs under the CMS must produce data

demonstrating improved good quality for the

patients and increased health for the population.

Donald S. Karcher, MD, FCAP


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Jonathan L. Myles, MD, FCAP, chairman of the CAP’s Economic Affairs Committee and an anatomic pathologist at the Cleveland Clinic, says, “All of a sudden in this ACO environment, there’s an incentive to become more efficient. The incentive is not to produce more widgets. The incentive is to make the patient better in a cost-effective manner.”

He says the purse strings are tightening just as the medical world is starting to enter another era, an era of personalized health care in which expensive genetic testing is becoming a standard of practice in laboratories. For example, testing for HER2/neu is used to see whether

a breast cancer patient is a candidate for Herceptin (trastuzumab). Dr. Myles notes that the Herceptin treatment costs about $100,000 per year. “If the patient is HER2-negative, spending that $100,000 isn’t going to help the patient, and it’s not going to help the health care system. That $100,000 could be used on someone else,” he says.

Sometimes pathologists get pushback from clinicians whose orders are questioned. As one pathologist put it, “There is more of this than you would imagine. Some clinicians just want an answer, and they don’t really care whether it’s right because if they have an answer then they’ll do something with it. You can tell them it’s not worth anything. And sometimes they say, ‘I don’t care.’ And judging by what they do, it’s pretty shocking sometimes.”

Dennis Horrigan is chief executive officer and president of Catholic Medical Partners of Buffalo, N.Y., a nonprofit IPA, which has been awarded a contract to participate in the Medicare Shared Savings Program. His organization applied but wasn’t selected to participate in Medicare’s Pioneer ACO program. In fact, Catholic Medical Partners has been using an ACO model for six years as well as commercial insurers, with 900 physicians caring for more than 200,000 patients.

Mr. Horrigan describes ACOs and coordinated care as game changers: “In the last 50 years there have been four major game changers in health care: Medicare and Medicaid enactments in 1965; the HMO movement—the government sponsorship of promoting HMOs; the diagnosis-related group (DRG) prospective payment where doctors or hospitals were paid on a basis of a diagnosis, not per diem; and now accountable care. There is a revolution going on. The number of ACOs is probably going to triple in the next year and then double again. Every health system is trying to put them together.”

He says physicians in his IPA have to lead the way in establishing guidelines for appropriate testing and eliminating unnecessary tests.

“We want the physicians to engage their peers,” Mr. Horrigan says. “We [the IPA] don’t want to be in the middle. We support the doctors doing that because the doctors have an economic incentive. That’s the difference. Historically, the doctors haven’t benefited from efficiency. The health plans have benefitted from it.”

Jonathan L. Myles, MD, FCAP


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Preauthorization of high-cost testing, as also happens in Omaha, is critical. And pathology holds the key, working closely with clinicians. If there are savings, pathologists are supposed to share with other specialties in the savings while helping clinicians deliver high-quality care.

Both pathologists and nonpathologists agreed that pathologist leadership and collaboration with other physicians and with ACO leaders are major contributors to their success. As they note, many clinicians do not understand the analytic role that pathologists play or the expertise of pathologists in understanding the most effective applications of laboratory medicine. As a result, it is easy for pathologists and for laboratory medicine to be overlooked during the development of ACOs, according to a CAP white paper on ACOs.

ACOs come in a variety of flavors. However, all are responsible for reducing health care costs and meeting quality standards for its population.

The coordinated care revolution requires that ACOs have to document cost savings and improvement to health. Informatics, an area where pathologists could excel and prove their value, can be used to demonstrate cost savings and also can be used to follow patient populations and improve their health. Pathologists already are mining data to help manage chronic illnesses, such as diabetes. (See Chapter 9.)

David Gross, PhD, director of the CAP’s Policy Roundtable, notes in the group’s white paper, “[W]ith their emphasis on health care quality and population health supported by electronic connectivity, the ACO model also offers opportunities for pathologists to apply their skills to help ACOs achieve their goals while finding new ways to show value in an environment where reimbursement rates are expected to continue their downward trend.”

He cites the experience with Geisinger Health System in Danville, Pa. Through its ProvenCare programs, Geisinger emphasizes clinical guidelines and also offers guarantees to patients and third-party payers that they don’t have to pay for readmission resulting from unneeded care. “The laboratory standards for this program are based on applying clinical data trends that identify the most effective treatment and that use the EHR [electronic health records] to notify physicians [and patients] when certain treatments are required,” says Dr. Gross.

He notes examples of the results:

• Reducing the median days for renal patients on EPO to reach a target hemoglobin level, from 62.5 days to 35 days, and saving about $2,200 per patient per year.

• Effectively following standardized guidelines for treatment of diabetic patients, resulting in a one-third increase in the percentage of these patients who received flu vaccines, a 40% increase in pneumococcal vaccination, a 50% increase in patients who met goal measures of HbA1c levels, and a 46% increase in meeting goals for blood pressure.

“You want to have accurate tests,” says Mr. Horrigan. “You want timely tests. And you don’t want unnecessary tests. Those are the three areas. I don’t think there’s anything else there. All this requires the pathologist to take the lead.”


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But sharing the savings in the real world may be easier said than done. The savings emerging from the decision making by pathologists is not inherently obvious and is hard to document. Overall, the savings may be there, but how should it be credited to pathologists? Stay tuned.

David O. Scamurra, MD, FCAP, is president of Eastern Great Lake Pathology, a private 14-member clinical and anatomic pathology group in Buffalo, N.Y., which contracts with four local hospitals and helped form Mr. Horrigan’s PA.

His group wrote guidelines aimed at steering cardiologists toward troponin to diagnose suspected MIs and away from CKMB and myoglobin. He says, “We told them: ‘Look. The troponin diagnoses heart attacks, and CKMB and myoglobin are not really adding anything except in less than 1% of the cases. If we stop using CKMB and myoglobin, we can save a lot of money.’ But our guys are just entrenched. They’re used to CKMB and myoglobin.”

Dr. Scamurra expects the ACO to become more active in the next year or two and that the cardiologists will get on board when they and the rest of the medical staff clearly see the improved care and reduced costs coming from eliminating the unnecessary tests—and how they get to share in the savings.

“My suspicion is when I bring this up again next year and this ACO structure is more in place and everybody is a little more in tune with how this impacts them and the shared profit model with Medicare, you’re going to hear a different tune,” he says.

But will the savings amount to much? And will pathologists actually benefit? “As a pathologist the best thing you can do is get involved with your hospital and make sure they know you,” he advises. Pathologists who are not hospital based should also make sure their value is known to an ACO.

In the new payment environment, pathologists will have to stand up for themselves and prove their value and be involved in making decisions about cutting the pie.

Michael Laposata, MD, PhD, FCAP, pathologist-in-chief at Vanderbilt University Hospital in Nashville, Tenn., thinks pathologists actually do well now being paid per “click” of care for each case. “If we’re going to get paid X dollars to take care of people, and the goal is to figure out how to do it with the fewest dollars per physician/patient encounter, that’s a different thing,” he says. “Now, people who save money are just as important as the people who provide a service and charge. I think that if we get a diagnosis faster, two days instead of four, we’ve saved a fortune.”Michael Laposata, MD, PhD, FCAP


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He says molecular testing also offers a way for pathologists to prove their value. “Now all the pathologists can do is look through the microscope and say it looks bad to the person at the other end, the surgeon, who is going to treat this patient for, say, melanoma. If you don’t tell that surgeon here’s the molecular change in that cancer, they don’t know which therapy to use. I think we as a field have the chance to be the one who says, ‘This is the molecular alteration and let me explain how this works.’ They give the right therapy, the patient never gets a recurrence of melanoma, and they live—the surgeon looks good. You provided value. I think it all boils down to who provides value. If somebody comes along and says, ‘Pay me, but I’m only going to give you half the story,’ that’s like paying the whole price and watching half the movie.” (See Chapter 8.)

Based on pathology’s recommendations, Dr. Scamurra says testing for C. difficile at Mercy Hospital of Buffalo recently was changed, incorporating a molecular component to make the test more sensitive and specific. At the same time, he says an infectious-disease expert reviews cases to ensure the best antibiotics and tests are being used.

He says he expects patient care to improve, but he feels it will be hard to prove savings.

“I would expect that No. 1, with the infectious disease person involved, fewer tests will be ordered. No. 2, the tests will become positive more frequently so that the appropriate antibiotics will be given to these patients. And the appropriate isolation precautions will be more quickly instituted or taken off when it’s suspected. When these people generally get isolated—that entails a lot of expense to the hospital. You can eliminate a lot of that—the gloves, the gowns, whatever. How they’re going to measure that? I don’t know.”

But Dr. Myles says documenting savings is essential for pathology to prove its value and share in savings. “There is a big difference between the ACO and how we get paid now. Today, I do a test; I’m going to get paid. With the ACO, you’ve got to meet with the administrator, set up guidelines, and figure out how to quantify. You have to figure out what the incentive is. This is just the beginning for the College. We have to continue to figure out how we get paid in this environment.”

There are no guarantees that pathologists, or any of the specialties, for that matter, will get a fair share of the ACO pie.

Provencare Programs, Geisinger Health System


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Internist Bruce Landon, MD, MBA, a professor of health care policy at Harvard Medical School and a professor of medicine at the Beth Israel Deaconess Medical Center in Boston, researches the impact of different characteristics of physicians and health care organizations. He expects primary care physicians (PCPs) to be among the big winners under ACOs and global payment systems. He argued in the New England Journal of Medicine in January 2012 that to make those gains, PCPs will “have to shoulder the largest burden of the work needed to succeed under risk-sharing arrangements.”

Where do pathologists fit in? Dr. Landon concedes he hasn’t paid much attention to pathologists. But he notes: “My overall sense is that there are a lot of price discrepancies among pathologists (there certainly are in Massachusetts) and that, similar to radiology, there may be shifts in referral patterns as a result. Certainly those who run clinical labs and the like might play a role in optimizing test ordering, but per my anecdotal experience, most of those efforts have been led by others (and often by primary care).”

Again, with the new models of financing health care, pathologists find themselves in a situation in which they will have to stand up for themselves and prove their worth.

Dr. Karcher at George Washington says, “Within most health care organizations pathologists unfortunately are thought of as being in the background, providing their very limited service, but not being out front in seeing patients and organizing care. Pathologists feel otherwise about themselves. So when it comes to ACOs, we in the College have been advocating very strongly that pathologists need to be very proactive and get a seat at the table.” (See Chapter 6.)

He says that when his organization formed a task force to look at the possibility of starting an ACO, he attended the first meeting. “I could sense everybody around the table looking at me—I could almost read their minds like, ‘What the heck is he doing here? He’s a pathologist.’ I’m happy to say that over time, I was able to demonstrate to the group, I think, what pathologists really bring to the table. We have a lot of things that we can offer to help make the ACOs a success.”

Dr. Karcher says although the ACO is not a fait accompli at George Washington, the standing of pathology and pathologists has increased, and he is considered a leader in the movement within his organization. “I’ve come a long way in the eyes of my own colleagues,” he adds.

Montefiore Medical Center of the Albert Einstein College of Medicine in the Bronx, N.Y., was an early adopter of the coordinated-care idea, going back nearly 20 years. Montefiore put together a group of physicians, an IPA, including both full-time and voluntary physicians, to contract with insurance companies to provide care. A care-management organization (CMO), working with the IPA, contracts with the insurance companies managing everything from credentialing to delivering care. Primary care physicians are paid on a per-member-per-month basis. Specialty physicians, including pathologists, are not capitated; they are paid on a fee-for-service basis.


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“The leap to this thing called an ACO was essentially a name change because Montefiore has been involved in all kinds of provider plans and payment plans as well,” says Michael B. Prystowsky, MD, PhD, FCAP, chairman of pathology at Montefiore, who is responsible for pathology at the medical school and hospital.

Physicians in the academic center for the most part are salaried, and 85% of patients are in Medicare or Medicaid. Ira Sussman, MD, a hematologist and vice chairman of pathology, says these arrangements ease the way for Montefiore to adopt the ACO concept.

What will a world of “right” testing mean for pathology?

“We’re going to have to sort out what the pathologist is going to get for that care and how we’re going to be valued in providing savings,” says Dr. Prystowsky. “We all know that as we reduce testing, then in this current revenue distribution model, [pathologists] lose on that. At some point, we’re going to have to value how we’ve contributed to the overall savings, and some of that money is going to have to come back. Everybody has agreed to it in principle, but as you know, it’s easy to agree to principles. When you start dividing up dollars that will get a little more interesting.”

A new approach is starting to be taken for monitoring the 10 million tests a year done at Montefiore.

“Up until very recently, we’ve always had the attitude that if physicians feel they need to do a particular test that most of the time we won’t push back or question whether the test is needed,” says Dr. Prystowsky.

He says now pathologists will discuss test use by medical staff, and residents are being trained to be more aware of costs. “There may be alternatives where the care we’re delivering is still optimal; it’s just as good, but you don’t have to break the bank,” he says.

The cheap test isn’t always the right one in delivering the best care for the patient. “Sometimes that means spending money. So, if we look at a cancer case where there is a genetic test that may cost a lot—and a lot may mean thousands of dollars—if it tells you which drug to select and that means that the patient gets the right treatment faster, has a better chance for a better outcome, and in looking in the total care picture, you’ve now maybe saved hundreds of thousands of dollars on the care because you’re giving the right drug faster, which will affect everything else down the road. Then you need to spend some money upfront in order to give the best care and the most efficient and optimal care,” says Dr. Prystowsky.

He says pathology will help develop guidelines on testing and working with clinicians. “At some point, the role of the pathologist in doing that is going to have to be valued not only as a contribution to patient care, but in the splitting of dollars,” he says.

Dr. Prystowsky says pathology is well positioned to have its voice heard at the day of reckoning. Dr. Sussman is on the board of the Montefiore IPA. And Dr. Prystowsky meets quarterly with the medical center’s executive president.

“It was by design,” he says.


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New Paths…New ChoicesCollege of American Pathologists

February 2013

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