Dr. Smith scratched his head and thought, “Wow, they are so different. It looks like Dr. Free is not earning her clinical salary. I thought my anatomic pathology director said they had similar workloads.”

How can this be?

Discussion: Though the RVU system was intended to normalize work effort and hence payment, with the relatively limited number of surgical pathology CPT codes, services under certain codes can vary substantially in difficulty and time required leading to variations in payment for work performed. In this example, the dermatopathology specialist is signing out large numbers of relatively simple skin biopsies and excisions under CPT code 88305. The breast pathologist, in contrast, does a mix of breast biopsies (CPT 88305), excisions (CPT 88305 and 88307), and mastectomies (CPT 88307 and 88309), each of which, on average, requires multiples of the work required for a skin biopsy/excision, even accounting for the differences in RVUs assigned to the higher codes for the breast pathologist. While the skin pathologist may be fairly compensated per service, the breast pathologist is relatively undercompensated for surgical pathology professional services.

For the pediatric pathologist, total RVUs fall somewhere in between. However, for the pediatric pathologist, on average, there may be more services provided for patients covered by Medicaid which, depending on how Medicaid payments are set in the state, can result in relatively different average payment per RVU as compared to collections of pathologists primarily providing services to a typical adult patient population of Medicare/Tricare/Champus, commercial insurance, Medicaid, and self-pay.

Therefore, given these variations in work, RVUs, and payment schema, the three faculty members could be doing similar amounts of work but collecting very different payment amounts. This example demonstrates how certain subspecialty areas can be more lucrative and illustrates why you must be cognizant of a wide variety of variables when considering issues of workload, pay, and fairness.

A typical business makes a profit by producing a product or providing a service for less than what the product or service costs to produce, creating a so-called profit margin. Bigger margins are typically better, and total profit rises as volume rises for products or services that have a positive margin. Margins and hence profits rise when costs are reduced, and often the cost of providing a unit of service or making a product drops as volume rises, the so-called economy of scale. Applied to pathology, the margin on an 88305 diagnostic biopsy professional service is hopefully positive but depends on many factors: the time required to examine the biopsy, the efficiency of the pathologist, the efficiency of the sign-out process, the cost of billing, the efficiency of collection, the cost of the practice setting, the value of an 88305 on a negotiated fee schedule for patients with a negotiated fee schedule type payment arrangement, and even if the patient has coverage at all. The margin can be improved by improving any of these factors. Similarly, increases in volume may drive efficiencies or enable greater investment in the system to provide automation and better computerization.

While there are over 8000 different CPT codes, one weakness of this system for defining services is the difference in efforts and expenses to provide different services that may be described by the same CPT code. As an extreme example of this breadth in pathology, an 88305 professional component may describe a relatively straightforward skin biopsy of a basal cell carcinoma or a difficult breast needle core biopsy of a complex sclerosing lesion. Yet, the payment for each service would be the same if the patients had the same insurance payment scheme. An experienced pathologist could diagnose several basal cell carcinomas in the time required for the breast core biopsy, resulting in a skewing of payments on a time basis even if the breast biopsy required additional CPT codes for immunohistochemical stains. There are similar differences in the technical component. Embedding, cutting, and staining a nine-block transurethral resection of the prostate (88305-technical component, 88305-TC) is much more work and, hence, expense than performing the technical component on a simple single-block skin biopsy.