Three years ago, when the Senate Finance Committee was trying to limit the growing cost of hospital laboratory services to the Medicare program, four members of the Kansas Society of Pathologists paid a visit to Sen. Robert J. Dole (R-Kan.).
Congress has never placed limits on what the Medicare program paid hospital pathologists--the specialists who analyze blood and tissue samples for telltale signs of disease--and these doctors were determined to keep it that way.
"The lobbying got to be pretty heated," Dole recalled. "They were bringing people back here from my state. They really got their juices flowing. It was difficult to resist." Dole agreed to a watered-down version of the bill that would make less severe cuts in pathologists' compensation; the effort later died in a House-Senate conference.
But Dole gradually changed his mind. He became annoyed when rural pathologists testified that they needed high salaries to pay for the private jets they use to fly from one hospital to another. So when the Senate approved a package of domestic spending cuts last week, the measure included a proposal by Dole to cut Medicare reimbursements for laboratory and X-ray services by more than $220 million a year.
"When we're taking pennies away from school lunches and Medicaid patients, we've got to be willing to do it to people at the upper end of the scale," said Dole, who became chairman of the Finance Committee last year when the Republicans took control of the Senate.
"Everyone else is tightening their belts. We can't veer off course every time another special-interest group comes to town."
Like dairy farmers, used-car dealers and a host of other industry groups, the nation's 16,000 pathologists have long used an aggressive mixture of fund-raising, lobbying and litigation to preserve the federal rules that help boost their compensation.
Now, however, even some of their onetime supporters now believe that Medicare, the federal health care program for the elderly, has been too generous in the way it compensates pathologists.
Federal officials estimate that the average fulltime compensation for pathologists rose from $66,200 a year in 1972 to $170,000 in 1978.
But Dr. Jerald Schenken, a top officer in the College of American Pathology, insists there is no evidence that pathologists are abusing the Medicare program.
"I don't think it's appropriate to set income levels for anyone," said Schenken, who uses a chartered jet to visit 14 hospitals in Nebraska, Iowa and Missouri. "What has to be evaluated is what patients are getting for their money."
The nub of the controversy is whether Medicare is paying pathologists too much for work that is done by others. A growing number of pathologists now decline to work at hospitals for a salary. Instead, many operate a business within the hospital's business, setting their own prices and delegating many of their duties to subordinates.
For example, when a patient needs one of several hundred potential lab tests at Fairfax Hospital, a sample of his blood or tissue is sent to the basement, where Dr. C. Barrie Cook runs the pathology lab. A medical technologist runs the test through a machine, and the hospital sends the patient a bill. Some of that money helps to pay Dr. Cook, even though, like most hospital pathologists, he never looks at the test in about 90 percent of the cases.
If Cook finds the need to examine the sample himself, he sends the patient a second bill. Cook also sends about 138,000 of these tests every year, or about 15 percent of the total, to American Medical Laboratories, a nearby private facility where Cook is part owner and chairman of the board.
"We realize it's a delicate situation," Cook said. "Obviously, it could be a conflict of interest. I've been concerned about it. We've tried to bend over backwards not to do anything that was off color."
Cook said that while he and six other full-time pathologists at Fairfax Hospital read about 10 to 20 percent of the lab tests, there's no reason they shouldn't be paid for all of them. "The input a pathologist has can be very meaningful without actually doing the test himself," he said.
Cook, who supplements his billings with an annual management fee from the hospital, said he sends some of the hospital's tests to American Medical Laboratories because they are uncommon or require more sophisticated equipment. While other outside labs may be less expensive, he said, "I have confidence in the pathologists there to make decisions about what's good and what's bad."
Other area pathologists also charge patients for individual tests. Dr. Ivan Mattei, chief pathologist for Prince George's General and Greater Laurel-Beltsville hospitals, was paid $1.3 million last year for himself, five full-time and three part-time doctors. Mattei called this "a pretty good deal" for the two hospitals.
Many other local pathologists have "percentage" contracts, in which they are paid a fixed portion of the charge for every test done in the lab, whether they handle it or not. For example, Dr. Vernon E. Martens and four other pathologists at Washington Hospital Center were paid at least $771,728 last year under a contract that gives them 11 percent of the net proceeds, along with unspecified management fees. Martens also is chief pathologist at the 75-bed Hadley Hospital, where he was paid $144,508 last year under a similar percentage arrangement. Martens declined to be interviewed.
Hospital pathologists acknowledge that most lab tests that don't show abnormal results are read by technologists, who earn an average of $15,000 a year. But many pathologists say it is only fair to pay them for every test because they manage the facilities, supervise the technologists and are ultimately responsible for the quality of the tests.
Others are critical. "Frankly, the technologists do 90 percent of the work and the pathologists get 90 percent of the money," said Dr. Walker B. Sorrell, a pathologist in Montgomery, Ala. "It is absolutely crazy, insane and idiotic."
There have been virtually no limits on what hospital-based pathologists can charge the Medicare program. While Medicare pays only "reasonable" or "customary" fees for other medical services, Congress has largely exempted pathologists from these limits, along with radiologists and anesthesiologists, who have similar contracts with many hospitals.
Medicare covers 80 percent of a patient's bill for most medical services, but Congress has required the program to pay 100 percent of all lab and X-ray charges. Medicare also helps finance "percentage" contracts by paying pathologists a professional fee for every test done in their lab. If the lab does more tests or raises its fees, the pathologists are paid more money. Moreover, industry rules require that a pathologist visit all hospital labs at least once a month.
Under Dole's new proposal, however, pathologists no longer would be allowed to charge Medicare "professional" fees for overseeing tests that are handled by technologists. What they charge for their supervisory work would be limited to the prevailing fees in each local area, as if the doctors were being paid a regular salary. Medicare payments for lab and X-ray services also would be cut from 100 to 80 percent of the charge.
The House Ways and Means Committee recently voted to impose similar limits and to bar Medicare from paying for most percentage contracts. The issue is to be resolved by a House-Senate conference.
The problem of lab fees is acknowledged at the U.S. Department of Health and Human Services, where auditors found that the cost of lab services is "increasing at an alarming rate."
"Hospital-based specialists . . . have no limitation applied to their compensation," the auditors said. "The Medicare program is making payments for physicians' compensation which may not be reasonable."
They found that many pathologists with percentage contracts received pay raises up to 51 percent a year that "appear to be unwarranted and excessive."
But when Dole and then-senator Herman E. Talmadge (D-Ga.) tried to abolish percentage contracts in 1979, pathology groups responded with hundreds of letters of protest.
The Georgia Association of Pathologists, for example, asked doctors across the country to complain that the legislation "would seriously disrupt the delivery of medical care in your state."
The Kansas pathologists made a similar plea to Dole, and the group's president, Dr. K. William Bruner, later wrote his members that "the senator has responded by working with us 100 percent . . . and has proven himself a real friend of medicine. We have turned this thing around for now. With friends like Senator Dole, I am optimistic about the future."
In the next paragraph, he added: "About half of you have generously responded to my appeal for help for Sen. Dole's current campaign. Those of you who have not already done so, please send your checks to Dole for President Committee . . . ."
In 1980, the Carter administration announced that Medicare no longer would pay a professional fee for any lab tests that pathologists did not perform "in person."
But the pathologists blocked that change in court, and the Reagan administration is now considering a new rule to replace it.