Pathology and laboratory services are vital to clinical decision-making, from routine diagnostic testing to guiding complex cancer care. Yet, these professionals increasingly feel the squeeze from declining reimbursements and rising operational costs. For both hospital-based pathology groups and labs, now is the time to make the case for better compensation from hospital administrators by citing ongoing industry factors working against your reimbursement.

Here’s how to leverage current reimbursement challenges to advocate for fair pay and protect the sustainability of your pathology and laboratory services.

1. Highlight Declining Reimbursement Rates

One of the most powerful arguments for increased compensation is the steady decline in reimbursement rates, especially from Medicare and Medicaid, which are often mirrored by private payers.

Key Points to Address with Hospital Administrators:

• Medicare/Medicaid Cuts: Pathology groups are receiving less compensation for services while costs—like staffing and technology—are increasing.
• Private Payer Impact: Many commercial insurers, including Anthem and Cigna, base their reimbursement rates on Medicare, creating a domino effect that amplifies the cuts across all payers.
• The Impact on Operations: These financial pressures make it difficult to maintain staffing levels, invest in technology, and ensure timely service delivery.

2. Explain the Consequences of PAMA and Sequestration

Reimbursement cuts aren’t just an immediate concern — they’re a looming threat that will continue to escalate in the coming years:

PAMA (Protecting Access to Medicare Act) will begin cutting Medicare reimbursement rates for Clinical Lab Fee Schedule (CLFS) tests in 2026. Even though implementation of these cuts has been delayed in recent years, hospitals must recognize the significant revenue pressure this will cause for impacted services.

Sequestration, which mandates a 2% cut to Medicare payments, has resumed and will continue until 2030. Every year, this creates automatic reductions to compensation for services rendered to Medicare patients.

3. Call Attention to the Impact of Medicare’s Budget Neutrality Rules

Medicare’s budget neutrality rules require that any spending increases (e.g., in primary care) must be offset by cuts elsewhere, often targeting specialties like pathology.

Key Concerns to Discuss:

• Physician Fee Schedule Reductions: Proposed reductions in the Medicare Physician Fee Schedule (MPFS) for 2025, including a 2.8% decrease in the conversion factor and downward adjustments to Relative Value Units (RVUs) for pathology services.
• Consolidated Appropriations Act (CAA): Temporary protections under the CAA will expire in 2025, likely leading to a sharp drop in Medicare payments for pathology services. Hospital administrators need to understand that without additional financial support, pathology groups could see their compensation plummet.

4. Address the Lack of Reimbursement for New Technologies

Advances in molecular diagnostics, digital pathology, and artificial intelligence offer significant potential to improve patient outcomes, yet current reimbursement structures do not account for the value these innovations provide.

5. Link Staffing Constraints to Financial Pressure

Pathology groups and medical laboratories across the country are facing staffing shortages due to a number of factors ranging from a workforce shortage to salary constraints. Financial pressures have forced some groups to reduce staff, leading to longer turnaround times and reduced service capacity.

Key Points to Share:

• Staffing Issues: Pathology groups and labs are losing skilled professionals because they sometimes lack the autonomy or approval to offer salaries competitive within their area.
• Service Disruptions: This loss of personnel inevitably impacts turnaround times and limits the lab’s ability to meet the demands of patient care.
• Related Reading: Lighthouse’s 2024 Wage & Morale Survey of Medical Lab Professionals

6. Present a Call-to-Action for Fair Compensation

Given these financial challenges, it is essential that pathology groups and labs advocate for compensation that reflects the true value of their services. Hospital administrators must understand that the sustainability of pathology and lab services — and their crucial role in patient care — is at risk without increased financial support.

Propose These Solutions:

• Negotiate Contracts: Push for contracts with hospital administrators that account for rising operational costs and declining reimbursements. Our Payer Strategy Team is uniquely positioned to assist in this area by reviewing existing agreements and helping enter new payer networks.
• Work with Revenue Cycle Experts: Partner with specialists who can help navigate complex reimbursement systems, audit your billing processes, and negotiate alongside you to ensure your services are fairly compensated.

Lighthouse RCM Solutions is here to assist pathology groups and labs in building the case for better compensation. By working with a revenue cycle expert, your group can safeguard its financial health and continue delivering high-quality services to patients.

Contact us today for a free consultation.

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