Market and Valuation Risks




© Springer International Publishing Switzerland 2016
Lewis A. Hassell, Michael L. Talbert and Jane Pine Wood (eds.)Pathology Practice Management10.1007/978-3-319-22954-6_19


19. Market and Valuation Risks



Lewis Hassell  and Michael L. Talbert 


(1)
Department of Pathology, University of Oklahoma Health Sciences Center, 940 Stanton L. Young Blvd., BMSB 451, 73104 Oklahoma City, OK, USA

 



 

Lewis Hassell (Corresponding author)



 

Michael L. Talbert




Keywords
Market valueValuationMarket riskAdvocacyMarket shareReferral patternsStructural riskValuation risk



Case: Market and Payment Risk

UroGiants, Inc., a regional urology practice, has decided to consolidate the management of their specialized pathology needs and enhance their shrinking profit margin by retaining their biopsy samples and processing them in their own histology lab. They have offered your group the chance to continue providing diagnostic reports on their patients and the samples produced in their histology lab. Basing their projections on the technical component reimbursement rates in 2010, they calculate they can add about US$200K in profit to their practice of seven urologists each year if they do this, and they have offered your group the opportunity to provide the professional component as well as direct the histology lab at an attractive monthly rate. Having heard the stories of great profits from histology at national meetings, UroGiants gets the lab equipped, hires away one of your histotechs, and starts the operation in October of 2011.

The Centers for Medicare and Medicaid Services (CMS) then announces a 50 % reduction in the technical component reimbursement for 88305 and the business manager for UroGiants comes to you to say they will no longer pay you the current medical director fee. She proposes that you can continue providing both services, but UroGiants needs to cut your medical director payment by 75% to “maintain profitability.”

Discussion: This case illustrates both market risk and “regulatory risk” in a very dramatic way and points out that they can affect not only your own operations, but also how you interact with other clients or partners. Up-front due diligence in establishing relationships might expose settings where such risks are more likely to suddenly occur if a particular client or relationship is dependent upon a single contract, payer, reimbursement rate, or similar circumstance vulnerable to change. Continued monitoring of the practice, regulatory, and payment environments may also help mitigate potential negative impacts.


Market Risks


Pathology is not practiced in a vacuum or a single market . Even those working in the smallest clinical settings are influenced in part by the flutter of butterfly wings in China, which is to say that the globalization shift that has happened in other economic sectors is underway in pathology practice as well. Assuming that the economic moat that surrounds a practice because of geographic isolation, captive referral sources and solid long-term contracts cannot be breached is like assuming that the borders of a modern country can be secured by Maginot Line-like physical barriers alone.

Of course markets can expand as well as contract or shift, and we will have more to say about this in the entrepreneurial segment later on, but the important thing to recognize is that the health-care market is becoming a much bigger and more fluid market than it has been in the past.

Simultaneously, one of the biggest risks in the market is that a single large customer, such as CMS (Medicare), can, with a single regulatory shift, change drastically how profitable or unprofitable your segment of the market is (or if a type of specimen or procedure is even covered). This is a major reason why organized medicine and organized pathology have taken such an active advocacy role through the various national organizations. The vested interests of the profession and individual practices are sufficiently great that it is prudent to monitor and actively participate in the educational and relationship-building activities to ensure that regulators and legislators properly consider a correct and broad view of the market and profession. This is one key to managing the market risks associated with regulatory and legislative action. Become engaged in and monitor what is happening on the national stage that can affect your practice and learn to become an effective advocate. One of the lessons that should be emphasized here above all is that when the need to exert influence arises, the time for building an effective relationship is usually long past. These relationships with both local leaders and national representatives are based on history and political currency, principally money in the form of contributions, and organization, the kind of organization that gets additional contributions and mobilizes voters and public opinion. These are activities that are best carried out in advance of the acute needs. Build individual relationships based on contact and communication, such as through hosting laboratory visits for legislative leaders, while engaging in the political “game.”

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Oct 29, 2016 | Posted by in PATHOLOGY & LABORATORY MEDICINE | Comments Off on Market and Valuation Risks

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