Sep 29, 2017 | Coding, Billing, and Collections, Instruments & Equipment, Laboratory Instruments & Laboratory Equipment, Laboratory Management and Operations, Laboratory Operations, Laboratory Pathology, Laboratory Testing, Managed Care Contracts & Payer Reimbursement
Insurers might use blockchain technology to enable instantaneous verification and interoperability of healthcare records, which could impact clinical laboratory payment systems
Medical laboratories and anatomic pathology groups are keenly aware that connected, secure, interoperable health records are critical to smooth, efficient workflows. However, the current often dysfunctional state of health information technology (HIT) in America’s healthcare system often disrupts the security and functionality of information exchange between hospital and ancillary practice patient record systems.
One solution to this could be blockchain technology. With its big data and abundant touchpoints (typically: insurer, laboratory, physician, hospital, and home care), the healthcare industry could be ripe for blockchain information exchanges. Blockchain might enable secure and trusted linkage of payer, provider, and patient data. But what exactly is blockchain technology and how might it impact your laboratory?
Blockchains Could Transform Healthcare
Blockchain refers to a decentralized and distributed ledger that enables the interface of computer servers for the purpose of making, tracking, and storing linked transactions.
“At its core, blockchain is a distributed system recording and storing transaction records. More specifically, blockchain is a shared, immutable record of peer-to-peer transactions built from linked transaction blocks and stored in a digital ledger,” explained risk-management group Deloitte in a report, which goes on to state:
- “Blockchain technology has the potential to transform healthcare, placing the patient at the center of the healthcare ecosystem and increasing the security, privacy, and interoperability of health data. This technology could provide a new model for health information exchanges (HIE) by making electronic medical records more efficient, disintermediated, and secure.
- “Blockchain relies on established cryptographic techniques to allow each participant in a network to interact (e.g., store, exchange, and view information), without pre-existing trust between the parties.
- “In a blockchain system, there is no central authority; instead, transaction records are stored and distributed across all network participants. Interactions with the blockchain become known to all participants and require verification by the network before information is added, enabling trustless collaboration between network participants while recording an immutable audit trail of all interactions.”
Instant Verifications and Authorizations at Point-of-Care
In a Healthcare Finance News (HFN) article, insurers acknowledged blockchain’s potential for information verification and authorizations in real-time, fast payments, and access to patient databases that could fulfill population health goals.
“Everybody that is part of a transaction has access to the network. There’s no need for an intermediary. Blockchain allows for verification instantly,” noted Chris Kay, JD, Senior Vice President and Chief Innovation Officer at Humana, in the HFN article.
At clinical laboratories, blockchain could enable nearly instantaneous verification of a patient’s health insurance at time of service. Blockchain also could enable doctors to review a patient’s medical laboratory test results in real-time, even when multiple labs are involved in a person’s care.
“Everyone has to have a node on the blockchain and have a server linked to the blockchain. The servers are the ones talking to one another,” explained Kay. “What’s really transformative about this is it takes the friction out of the system. If I see a doctor, the doctor knows what insurance I have because it’s on the network. All this is verified through underlying security software.”
Healthcare Obstacles to Overcome
Breaking down data silos and loosening proprietary holds on information can help healthcare providers prepare for blockchain. However, in our highly regulated industry, blockchain is at least five years away, according to blockchain experts in a Healthcare IT News (HIT News) article.
“We’re hearing that blockchain is going to revolutionize the way we interact with and store data. But it’s not going to happen tomorrow. Let’s find smaller problems we can solve as a starting point—projects that don’t have the regulatory hurdles—and then take baby steps that don’t require breaking down all the walls,” advised Joe Guagliardo, JD, Intellectual Property/Technology Attorney and Chair of the Blockchain Technology Group at Pepper Hamilton, a Philadelphia-based law firm, in the HIT News article.
Healthcoin: Rewarding Patients for Improved Biomarkers
One company has already started to work with blockchain in healthcare. Healthcoin is a blockchain-based platform aimed at prevention of diabetes, heart disease, and obesity. The idea is for employers, insurers, and others to use Healthcoin (now in pre-launch) to reward people based on biomarker improvements shown in medical laboratory tests.
Healthcoin’s Chief Executive Officer Diego Espinosa and Chief Operating Officer Nick Gogerty, founded the company in 2016 after Espinosa, who had been diagnosed with diabetes, made diet changes to reverse it, according to an article in Bitcoin Magazine.
“When I saw my blood labs, the idea for Healthcoin was born—shifting the focus of prevention to ‘moving the needle’ on biomarkers, as opposed to just measuring steps,” Espinosa told Bitcoin Magazine.
Blockchain Provides Security
What does blockchain provide that isn’t available through other existing technologies? According to Deloitte, it’s security and trust.
“Today’s health records are typically stored within a single provider system. With blockchain, providers could either select which information to upload to a shared blockchain when a patient event occurs, or continuously upload to the blockchain,” Deloitte notes. “Blockchain’s security and ability to establish trust between entities are the reasons why it can help solve the interoperability problem better than today’s existing technologies.”
Should Clinical Laboratories Prepare for Blockchain?
It’s important to note that insurers are contemplating blockchain and making relevant plans and strategies. Dark Daily believes the potential exists for blockchain technology to both disrupt existing business relationships, including those requiring access to patient test data, and to create new opportunities to leverage patient test data in real-time that could generate new revenue sources for labs. Thus, to ensure smooth payments, medical laboratory managers and pathology group stakeholders should explore blockchain’s value to their practices.
—Donna Marie Pocius
Related Information:
Blockchain Opportunities for Health Care: A New Model for Health Information Exchanges
Blockchain Will Link Payer, Provider, Patient Data Like Never Before
Old Ways of Thinking Won’t Work for Blockchain, Experts Say
Blockchain-Styled Solutions for Healthcare on the Rise
Can Blockchain Give Healthcare Payers Better Analytical Insight?
Blockchain in Health and Life Insurance: Turning a Buzzword into a Breakthrough
Does Blockchain Have a Place in Healthcare?
Sep 25, 2017 | Compliance, Legal, and Malpractice, Laboratory Management and Operations, Laboratory News, Laboratory Operations, Laboratory Pathology, Management & Operations
Payers are cutting reimbursements for anatomic pathology services, making it essential for every pathology group to understand its financial present and future
Certain pathology business leaders are warning their colleagues that the era of private pathology group practice domination of the anatomic pathology marketplace is about to end. The only question is how rapidly the clinical and financial foundations of smaller pathology group practices erodes to the point where these groups are unable to generate adequate reimbursement to sustain the practice and the incomes of the individual pathologists.
However, along with this bad news comes a note of optimism. There is a once-in-a-lifetime opportunity for the anatomic pathology profession to take ownership of genetic testing and precision medicine—the most important diagnostic technologies to emerge in the past 100 years. The danger for anatomic pathologists is how to successfully transition from the private group practice model to the new clinical practice models that deliver genetic testing and precision medicine services.
Why Pathologists Are Making Less Money Today
The economic plight of private practice pathology is familiar to all pathologists. During the past decade, reimbursement for technical component (TC) and professional component (PC) services was regularly beat down by payers. For example, pathologists lost the TC grandfather clause in 2012, which immediately caused many histology labs to go from profit to loss. (See Dark Daily, “In Fixing Physician Medicare Pay, Congress Enacts Yet Another Cut in Clinical Laboratory Test Fee Schedule,” February 12, 2012.)
Similarly, over the past 10 years, each time private health insurers negotiated the renewal of a managed care contract with a pathology group practice, they aggressively cut the prices they paid for anatomic pathology services. And the corresponding explosive growth of narrow provider networks exacerbated the financial erosion from lower prices. Many smaller pathology groups found themselves excluded from these networks, causing them to lose access to the large numbers of private-pay patients served by these networks.
“It is important for every surgical pathologist and every pathology practice administrator to recognize that they have the ability to negotiate much more favorable terms and increased network access with health insurers, but only if they come to the negotiating table with the right information and techniques,” observed Robert L. Michel, Editor-in-Chief of Dark Daily and The Dark Report. “Pathology groups showing strong financial performance today know these techniques and strategies. When negotiating managed care contracts, they achieve higher reimbursements, more favorable terms, and in-network status.”
Proven Ways to Help Pathology Groups Protect and Increase Revenue
Pathologists who would like to protect their groups’ revenue and bolster their partners’ income have the opportunity to learn and master the most effective managed care contracting techniques and strategies. Three nationally prominent experts in pathology business and operations are participating in a special webinar, titled “How Payers Are Repricing Anatomic Pathology: Your Financial Present and Your Pathology Group’s Future,” which takes place on Thursday, September 28, 2017 at 2:00 p.m. EDT.
Pictured above left to right are Mick Raich, President and CEO, Vachette Pathology; Jeffrey Pearson, MD, System Medical Director, Bronson Hospital Laboratories; and, Christopher Jahnle, co-founder and Managing Director, Haverford Healthcare Advisors. The three distinguished speakers will share expertise and experiences you can use to protect your pathology group’s revenue while preserving partner income. (Photo copyright: Dark Daily.)
First to speak on this webinar is Mick Raich, founder and CEO of Vachette Pathology, of Blissfield, Mich. He will discuss how Medicare and private insurers are using new pathology and lab repricing models to slash reimbursement and control utilization of expense pathology testing services. Raich will explain why payers are engaging such third-party companies as AIM Specialty Health of Chicago, Avalon Healthcare Solutions of Tampa, Fla., BeaconLBS of Montvale, N.J., and InformedDNA of St. Petersburg, Fla., to develop coverage guidelines, issue preauthorization, and manage the network of labs and pathology groups allowed to provide services.
Raich will further explain what pathologists must know about the Medicare Access and CHIP Reauthorization Act (MACRA) physician payment program, with its MIPS—Merit-based Incentive Payment System—that is designed to pay bonuses or assess penalties each year, depending on how individual physicians perform against their own operational and clinical benchmarks.
Insidious Methods Payers Use to ‘Take Back’ by Underpaying Certain Pathology Claims
Another topic that Raich will address can mean significantly greater collected revenue for your pathology group. He will explain the new phenomenon of how private payers are auditing error rates on claims, then taking back those overpayments by underpaying the labs or pathology groups on claims for specific CPT codes (current procedural terminology codes). Raich will show how your billing/collection team can detect these claims and recover full payment from the payers.
How One Pathology Group Practice Doubled in Size
The second important financial topic of the webinar involves the merger, acquisition, and consolidation of private pathology group practices. You’ll learn why many group practices are losing their independence due to declining revenue or because their parent hospital was acquired by a health system. Pathologist Jeffrey Pearson, MD, is the System Medical Director at Bronson Hospital Laboratories in Kalamazoo, Mich. He is also a partner and President of Pathology Services of Kalamazoo, PC.
During his tenure at Bronson, Pearson helped facilitate the acquisition and assimilation of two hospital laboratories and one for-profit laboratory. His pathology practice has doubled in size and developed a high degree of subspecialization. Each time, the pathology group associated with the acquired entity had to be integrated with his health system’s existing pathology group practice. Experiences will be shared regarding:
· How to assimilate acquired laboratories;
· Practice utilization management; and
· Leveraging success to grow the practice and obtain favorable part A contracts.
Understanding How to Increase the Value of Your Anatomic Pathology Group
To round out the financial techniques and strategies you and your pathology practice administrator can use to protect your group’s revenue and boost partner income, the webinar’s third expert will discuss the latest developments in pathology practice mergers, acquisitions, and consolidations.
Christopher Jahnle is co-founder and Managing Director of Haverford Healthcare Advisors in Paoli, Penn., a suburb of Philadelphia. Over the past decade, his firm has represented Aurora Diagnostics of Palm Beach Gardens, Fla., as a purchaser of private pathology group practices.
Jahnle will describe the specific characteristics of a private pathology practice that have the highest value to buyers in today’s marketplace. You’ll understand how your pathology group’s unique mix of managed care contracts, hospital/health system relationships, and sub-specialist expertise will be valued by a potential acquirer or merger partner.
Jahnle will share case study examples to help you identify useful things your pathology group can do to make it more profitable and increase its value. This is essential knowledge if your group’s pathologists are considering such strategies as:
· “Should we merge with a bigger pathology group?”
· “Should we sell our pathology group?” and
· “Should we add subspecialists and pursue more hospital contracts?”
All three expert speakers have practical knowledge that you can use to protect your pathology group’s revenue while preserving partner income. It is why this webinar is timely and a “must attend” for you, your pathology practice administrator, and your pathology group’s legal and financial consultants.
Full details about this important webinar are at this link (or copy and paste this URL into your browser: http://pathologywebinars.com/how-payers-are-repricing-anatomic-pathology-your-financial-present-and-your-pathology-groups-future/).
—Michael McBride, Managing Editor
Related Information:
How Payers Are Repricing Anatomic Pathology: Your Financial Present and Your Pathology Group’s Future
In Fixing Physician Medicare Pay, Congress Enacts Yet Another Cut in Clinical Laboratory Test Fee Schedule
Sep 22, 2017 | Coding, Billing, and Collections, Laboratory Management and Operations, Laboratory News, Laboratory Operations, Laboratory Pathology, Managed Care Contracts & Payer Reimbursement
Medical laboratories and pathology groups should expect point-of-service collection strategies to become increasingly important to their overall success
Not only is patient bad debt a growing problem for the nation’s hospitals, but it is now getting national attention within the hospital industry. This is bad news for clinical laboratories and anatomic pathology groups, because the same trends causing increased patient bad debt at hospitals are doing the same thing within the lab industry.
Much of the blame can be attributed to the increase number of patients with high-deductible health plans (HDHPs). The latest statistics reveal that patients’ out-of-pocket payments now make up 30% of hospital revenues. That is why hospitals desperately need strategies for successfully collecting payments from patients. And they’re not alone.
Kaiser Family Foundation (KFF) reported that more than half of all workers have deductibles and out-of-pocket liability of greater than $1,000. That is the reason why clinical laboratories and anatomic pathology groups also need a formula for collecting the total bill from their patients.
Jase DuRard, Chief Revenue Officer for revenue-cycle technology company AccuReg, told Modern Healthcare the increase in patient self-pay represents a seismic shift from roughly five years ago. At that time, patients paid only 10% of their hospital bills out-of-pocket and insurers paid about 90% of hospital claims.
Patient Responsibility to Blame for Revenue Loss at Nation’s Hospitals
A November 2016 study of 660 hospitals conducted by Crowe Horwath—an international public accounting, consulting, and technology firm—stated that “patient responsibility” was to blame for an overall managed care net revenue decline of 2.5% for outpatient care and 1.4% for inpatient care. Self-pay-after-insurance (SPAI) collection rates have improved slightly during the past 12 months—with the inpatient median rising 0.2% and outpatient median increasing 0.7%.
However, according to the Horwath report, “While seemingly a good sign for providers in the face of rising patient copays and deductibles, slight increases in patient collection rates are not enough to counter the larger increase in self-pay-after-insurance patient responsibilities.”
High-deductible health plans (HDHPs) are becoming the coverage of choice for healthcare consumers struggling to pay medical bills in full. The net effect is that revenues are declining at hospitals, clinical laboratories, and pathology groups, as well as other providers. (Graphic copyright: Consumer Reports.)
In a Modern Healthcare article, Crowe Horwath’s Managing Partner of Healthcare Services, Brian Sanderson, noted, “It’s imperative that healthcare organizations establish effective point-of-service collection programs by training and educating front-line staff.”
Complicating matters is that many patients faced with self-pay are unable to pay their medical bills at time of service.
“Higher deductibles and the increase in patient responsibility are causing a decrease in patient payments to providers for patient care services rendered,” John Yount, TransUnion Vice President for Healthcare Products, told RevCycle Intelligence. “While uncompensated care has declined, it appears to be primarily due to the increased number of individuals with Medicaid and commercial insurance coverage.”
Hospitals Offer Patients Financial Options for Paying Bills
Some hospitals are responding to this trend by rolling out programs that offer patients financing options for their out-of-pocket costs. A recent article in Modern Healthcare outlined the steps taken by Missouri hospital system Mosaic Life Care, as it realized the full impact that $23 million worth of self-pay patient care had on its bottom line. Though the hospital posted record census and gross revenue during the first four months of 2017, net revenue was flat because patient self-pay didn’t keep pace.
“We win all kinds of awards for patient quality, but our revenue cycle didn’t match that performance,” Deborah Vancleave, Mosaic’s Vice President of Revenue Cycle, told Modern Healthcare.
Since then, Mosaic has taken steps to improve the accuracy of information it gets at registration and how it makes determinations on patients’ ability to pay. In addition, it has joined forces with ClearBalance— a provider of patient loan programs to US hospitals and health systems—to offer zero-interest or low-interest revolving lines of credit to patients for their out-of-pocket medical costs.
According to Modern Healthcare, ClearBalance pays hospitals “upfront for the outstanding bills of patients who sign up for their financing program, but the hospital guarantees the money and repays lenders if patients default on their credit lines. The companies make their profit by getting a 10% to 15% fee for the outstanding amount of the loan.”
Medical Laboratories Slow to Respond to Consumer Demand for Price Transparency
As consumers shoulder more of the burden for their healthcare, they also will be demanding more price transparency from medical laboratories and anatomic pathology groups, which so far have been slow to respond to the trend.
“Patients expect cost estimates in every other retail industry, and are starting to demand them in healthcare as well. According to one recent study, for example, more than 90% of patients felt it was important to know their payment responsibility upfront,” TransUnion, a global risk information provider, stated in a white paper outlining the importance of precare cost estimates.
As hospitals struggle to collect from patients saddled with HDHPs, laboratory executives and other healthcare providers should take note. The change in payment mix means the ability to collect payments from patients at the point of service is becoming a critical success factor.
—Andrea Downing Peck
Related Information:
Hospitals Struggle with the Dilemma of Patients Hit by High Deductibles
Kaiser Family Foundation 2016 Employer Health Benefits Survey
The Impact of Consumerism on Provider Revenues
Patient Financial Responsibility On the Rise
Improve Revenue Cycles and Patient Engagement by Delivering Pre-Care Cost Estimates
68% of Consumers Did Not Pay Patient Financial Responsibility
Sep 20, 2017 | Coding, Billing, and Collections, Laboratory Management and Operations, Laboratory News, Laboratory Operations, Laboratory Pathology, Managed Care Contracts & Payer Reimbursement, Management & Operations, News From Dark Daily
To offset the loss of revenue from the price cuts to Medicare Part B clinical laboratory tests, labs will need to aggressively—but wisely—slash costs to balance their budgets
Any day now, Medicare officials will announce the Medicare Part B Clinical Laboratory Fee Schedule (CLFS) for 2018. Both the Centers for Medicare and Medicaid Services (CMS) and the Department of Health and Human Services Office of Inspector General (OIG) have issued reports indicating that these fee cuts will total $400 million just during 2018, which Dark Daily reported on in July.
Many experienced industry executives expect this to be the single most financially disruptive event to hit the clinical laboratory profession in more than 20 years. This will not only have a substantial negative financial impact on all labs—large and small—but two sectors of the clinical lab industry are considered to be so financially vulnerable they could cease to exist.
At Greatest Risk of Financial Failure are Community Laboratories
The first sector is comprised of smaller community lab companies that operate in towns and rural areas. These labs are at the greatest risk because they are the primary providers of lab testing services to the nursing homes and skilled nursing facilities in their neighborhoods. And because they have a high proportion of Medicare Part B revenue.
Thus, the expected Medicare price cuts to the high-volume automated lab tests—such as chemistry panels and CBCs (complete blood count) that are the bread-and-butter tests for these labs—will swiftly move them from minimal profit margins to substantial losses. Since these labs have a cost-per-test that is significantly higher than the nation’s largest public lab companies, they will be unable to financially survive the 2018 Medicare fee cuts.
The second sector at risk is comprised of rural hospitals and modest-sized community hospitals. What officials at CMS and their consulting companies overlooked when they created the PAMA (Protecting Access to Medicare Act) private payer market price reporting rule is that these hospitals provide lab testing services to nursing homes and office-based physicians in their service areas.
Because of the low volumes of testing in these hospital labs, they also have a larger average cost-per-test than the big public labs. Thus, the 2018 cuts to Medicare Part B lab test prices will erode or erase any extra margin from this testing that now accrues to these hospitals.
Rural and Small Community Hospitals Rely on Lab Outreach Revenue
The financial disruption these Medicare lab test price cuts will cause to rural and community hospitals is a real thing. These hospitals rely on outreach lab test revenues to subsidize many other clinical services within the hospital. One rural hospital CEO confirmed the importance of lab outreach revenue to her organization. Michelle McEwen, FACHE, CEO of Speare Memorial Hospital in Plymouth, N.H., spoke to The Dark Report in 2012 about the financial disruption that was happening when a major health insurer excluded her hospital’s laboratory from its network.
Speare Memorial is a 25-bed critical access hospital in the central part of the state between the lakes region and the White Mountain National Forest. McEwen was blunt in her assessment of the importance of clinical laboratory outreach revenues to her hospital. “The funds generated by performing these [outreach] lab tests are used to support the cost of providing laboratory services to all patients 24/7, including stat labs for emergency patients and inpatients,” McEwen explained. “These funds also help support other services in the hospital where losses are typically incurred, such as the emergency room and obstetric programs.” (See “Critical Access Hospitals Losing Lab Test Work,” The Dark Report, April 2, 2012.)
For the second consecutive year, Lab Quality Confab (LQC) is offering an extended session on clinical laboratory accreditation and certification in New Orleans on October 24-25. CMS has indicated it will participate in this year’s session. It was an historic first for the clinical laboratory industry when last year’s Lab Quality Confab convened a panel that included experts in CLIA laboratory inspection and compliance from the four deeming organizations. From left to right: Moderator Nora L. Hess, MBA, MT(ASCP), PMP, Senior Consultant, Operations Management, Chi Solutions, Inc., Ann Arbor, Mich.; Kathy Nucifora, MPH, MT(ASCP), Director of Accreditation, COLA, Columbia, Md.; Stacy Olea, MBA, MT(ASCP), FACHE, Executive Director of Laboratory Accreditation Program, The Joint Commission, Oakbrook Terrace, Ill.; Randall Querry, Accreditation Manager, Clinical, American Association for Laboratory Accreditation (A2LA), Frederick, Md.; Robert L. Michel, Editor-in-Chief, The Dark Report, Spicewood, Texas; and Denise Driscoll, MS, MT(ASCP)SBB, Senior Director, Laboratory Accreditation and Regulatory Affairs, College of American Pathologists, Northfield, IL. (Photo by Linda Reineke of Riverview Photography. Copyright: The Dark Report.)
All Medical Laboratories Will Suffer Financial Pain from Medicare Price Cuts
But it is not just community lab companies and rural hospitals that are at risk of financial failure as the Medicare Part B cuts are implemented by CMS on Jan. 1, 2018. Any clinical laboratory serving Medicare patients will experience a meaningful drop in revenue. Many larger hospital and health system laboratories are recasting their financial projections for 2018 to identify how big a drop in revenue they will experience and what cost-cutting strategies will be needed to at least break even on their lab outreach business.
This explains why the first big trend of 2018 will be substantial revenue cuts from the Medicare program. It also explains why the second big trend of 2018 will be smart cost-cutting as labs attempt to balance their books and lower spending proportional to the reduced income they project.
Labs Have a Decade of Successful Cost-Cutting, More Cuts are Difficult
Aggressive cost-cutting, however, puts the nation’s medical laboratories at risk for a different reason. For the past decade, most well-run labs have already harvested the low-hanging fruit from obvious sources of cost reduction. They installed latest-generation automation. They re-engineered workflows using the techniques of Lean, Six Sigma, and process improvement.
During these same years, most medical laboratories also reduced technical staff and trimmed management ranks. That has created two new problems:
- First, there are not enough managers in many labs to both handle the daily flow of work while also tackling specific projects to cut costs and boost productivity. Basically, these labs are already at their management limit, with no excess capacity for their lab managers to initiate and implement cost-cutting projects.
- Second, technical staffs are already working at near peak capacity. Increased use of automation at these labs has reduced lab costs because labs were able to do the same volume of testing with fewer staff. However, the reduced staffs that oversee the lab automation are now working at their own peak capacity. Not only are they highly stressed from the daily routine, they also do not have spare time to devote to new projects designed to further cut costs.
Each Year Will Bring Additional Cuts to Medicare Part B Lab Prices
This is why all clinical laboratories in the United States will find it difficult to deal with the Medicare Part lab test fee cuts that will total $400 million during 2018. And what must be remembered is that, in 2019 and beyond, CMS officials will use the PAMA private payer market price reporting rule to make additional fee cuts. Over 10 years, CMS expects these cuts will reduce spending by $5.4 billion from the current spending level.
Taken collectively, all these factors indicate that many medical laboratories in the United States will not survive these Medicare fee cuts. The basic economics of operating a clinical laboratory say that less volume equals a higher average cost per test and higher volume equals a lower average cost per test.
Medical Labs with Highest Costs Most at Risk of Failure from Price Cuts
What this means in the marketplace is that labs with the highest average cost per test make the least profit margin on a fee-for-service payment. The opposite is true for labs with the lowest average cost per test. They will make a greater profit margin on that same fee-for-service payment.
Carry this fundamental economic principle of medical laboratory operations forward as Medicare Part B lab test fee cuts happen in 2018. Labs with the highest average cost per test will be first to go from a modest profit or break-even to a loss. As noted earlier, the clinical lab sectors that have the highest average cost per test are smaller community labs, along with rural and community hospitals. That is why they will be first to go out of business—whether by sale, bankruptcy, or by simply closing their doors.
Learning How to Cut Lab Costs While Protecting Quality
Every pathologist and lab administrator seeking the right strategies to further cut costs in their lab, while protecting quality and enhancing patient services, will want to consider sending a team from their laboratory to the 11th Annual Lab Quality Confab that takes place in New Orleans on October 24-25, 2018.
Anticipating the greater need for shrewd cost-cutting that also protects the quality of the lab’s testing services, this year’s Lab Quality Confab has lined up more than 51 speakers and 39 sessions. Of particular interest are these extended workshops that come with certifications:
- Lean Six Sigma Yellow Belt Training and Certification, led by Maureen Harte, MT(ASCP), LSSBB, Master Black Belt, of HartePro Consulting.
- Mastering Strategic Leadership in Pursuit of Clinical Lab 2.0, led by Karan Arora, Senior Global Marketing Director, Digital Health, Abbott Laboratories.
- Getting More from Lean for Lab Leaders: Henry Ford Production System Lean Gold Certification, led by Richard J. Zarbo, MD, DMD, System Chairman, Pathology and Laboratory Medicine at Henry Ford Hospital.
Sessions will address proven ways to:
- Use real-time analytics to improve workflow in molecular laboratories;
- Introduce automation in microbiology; as well as
- New breakthroughs in core lab automation; and
- Success stories in reducing lab test utilization.
Lab Quality Confab is recognized for its use of lab case studies—taught by the nation’s early adopter lab organizations. Certification classes are available to gain proficiency in the use of Lean methods and Six Sigma tools, such as:
Given the strong interest in smart ways to cut costs, boost productivity, and balance revenue-versus-cost, registrations for this year’s Lab Quality Confab is running at a record pace. The full agenda can be viewed at this link (or copy this URL and paste into your browser: http://www.labqualityconfab.com/agenda).
Of special interest to lab leaders preparing to stay ahead of the financial impact of the Medicare Part B fee cuts, Lab Quality Confab offers deep discounts for four or more attendees from the same lab organization. This allows your lab’s most effective cost-cutters to see, hear, and learn together, so that when they return they can get a flying start helping you align your lab’s costs to the expected declines in revenue that will happen on Jan. 1, 2018.
Reserve your place today and register now http://www.labqualityconfab.com/register.
—Robert L. Michel, Editor-in-Chief
Related Information:
Information, Agenda, and to Register for Lab Quality Confab Taking Place on October 24-25, 2017
In 2017, to Offset Declining Reimbursement and Shrinking Budgets, Savvy Clinical Laboratories Are Using LEAN to Improve Service and Intelligently Cut Costs
Lean-Six Sigma Medical Laboratories Begin to Innovate in Ways That Add Value to Physicians, Payers, and Patients
An Interview with Robert Michel, Editor-in-Chief of The Dark Report
At Lab Quality Confab in New Orleans this Week, Speakers Addressed Major Issues Faced by Medical Laboratories, including the Need for Labs to Deliver More Diagnostic Value to Physicians
Sep 15, 2017 | Compliance, Legal, and Malpractice, Instruments & Equipment, Laboratory Instruments & Laboratory Equipment, Laboratory Management and Operations, Laboratory Operations, Laboratory Pathology, Management & Operations
Horseshoe crabs have been utilized by the biomedical industry to save millions of lives around the globe for years. But now researchers fear the practice of bleeding them may be threatening their survival
Many medical laboratory scientists are aware that horseshoe crabs are harvested to get their blue blood and the limulus amebocyte lysate, or LAL (pronounce “el-ay-el”), because it can detect bacterial endotoxins. The popular wisdom has been that the collection procedure does not harm the crabs. However, there are growing concerns that indicate the biomedical industry is having a negative impact on the horseshoe crab population.
More than 600,000 horseshoe crabs are harvested annually for their blood in the United States (US). It is estimated that the blood is worth $60,000 per gallon and the global industry of processing the blue blood is valued at over $50-million per year, according to a CNN article.
The blood of the horseshoe crab is bright blue in color because it is rich in copper. Horseshoe crabs are bled in laboratories for a protein contained in their blood that scientists use to make LAL. This protein can detect bacterial endotoxins in clinical laboratory tests by solidifying when it comes in contact with certain bacteria.
LAL is prized by the biomedical industry because it can detect dangerous bacteria in injectable drugs, implantable medical devices, and on instruments and equipment. Federal law mandates that any medical device that is inserted or injected into a human body must pass the LAL test for contamination.
Capture, Bleeding, Leading to Depopulation of the Species
After the crabs are dredged from the ocean floor, or captured as they come ashore for breeding, they are transported to one of a handful of facilities authorized to perform the bleeding process. Once there, the horseshoe crabs are cleaned and sterilized, suspended upside down and inserted with a needle which extracts approximately one third of their blood. The helmet-shaped creatures are then returned to the sea.
Like all animals, horseshoe crabs have an immune system to protect them from infection due to an injury or presence of bacteria. The immune system of a horseshoe crab uses endotoxin as the major chemical signal that the crab is being infected. Even miniscule amounts of endotoxin will spark a clotting reaction. Types of cells in the blood called amebocytes are separated from all the harvested blood and broken open, or lysated, to release the coagulation properties. (Photo copyright: Popular Mechanics.)
An LAL solution is then concocted to test for endotoxins in medications and on medical supplies. After this solution is combined with a sample from a batch of medication or placed on a piece of equipment, the presence or absence of the clotting reaction signifies whether endotoxin is present or not. There are currently no other tests that can analyze the purity of medications with the same accuracy as the LAL test.
Fisherman Regulated but Not Biomedical Laboratories
The Atlantic States Marine Fisheries Commission (ASMFC) regulates how many horseshoe crabs fishermen can collect for use as bait. However, the biomedical industry is not bound to restrictions because the crabs are returned to the water after the blood is extracted. The number of crabs harvested by the US biomedical industry jumped 86% between 2003 and 2014, according to an article in Scientific American.
In “Changing Global Perspectives on Horseshoe Crab Biology, Conservation and Management”, Thomas Novitsky, PhD, Chief Executive Officer of Cape Cod Biosystems of East Falmouth, Mass., wrote, “Evidence is accumulating that mortality of bled horseshoe crabs is higher than originally thought [29% versus 15%]; that females may have an impaired ability to spawn following bleeding and release; and that bled crabs become disoriented and debilitated for various lengths of time following capture, handling, bleeding, and release.”
In 2012, a horseshoe crab subcommittee was created by the International Union for Conservation of Nature (IUCN), an organization that establishes global standards for species extinction. That subcommittee later determined the Atlantic horseshoe crab is “vulnerable to extinction,” which is just one level from its Red List of Threatened Species. Their report also stated that horseshoe crab populations could decrease by 30% over the next 40 years, the Scientific American article noted.
“I wouldn’t be surprised if they weren’t on the Red List very soon. The [Asian] populations are significantly declining,” stated John Dubczak, Director of Operations at LAL facility Charles River Laboratories in Charleston, S.C. “Between pollution, loss of habitat, and the animals being eaten in Asia, their populations are under a tremendous amount of stress.”
The facilities that perform the bleeding assert they are not harming the horseshoe crabs. Dubczak states his company has procedures in place to ensure the creatures will not be harmed during the bleeding process. They also provide economic incentives to their suppliers to help guarantee the crabs are being handled appropriately outside their facility.
“It reduces the injury, it reduces the stress, it’s better for [sustaining] the population, and it’s better for us,” Dubczak said in the Scientific American article, noting that the mortality rate for crabs used in his operation is just 4%. “One of my suppliers built a water slide to put the crabs back into the water. They love it!”
Christopher Chabot, PhD, Professor of Neurobiology, Physiology and Behavior at Plymouth State University in Plymouth, N.H. questions how the overall health of the crabs is affected by the 24- to 72-hours they spend out of the water during the bleeding process.
“As you might imagine, being an aquatic organism, that probably has an impact on their viability, their health, their mortality, perhaps, as well as their ability to bounce back after this bleeding,” said Chabot. It takes about a month for the horseshoe crabs to replenish the blood that was extracted and they are not very active after they are bled.
Horseshoe Crabs Critical to Marine Ecosystems
The biomedical industry isn’t the only threat to the survival of the horseshoe crab. Fishermen use them for bait to catch eel and conch. Many shorebirds, migratory birds, fish, and turtles dine on horseshoe crab eggs. In addition, developments along the shorelines are destroying their natural habitat and breeding grounds.
Since horseshoe crabs have a vital role in the preservation of marine ecosystems, it is crucial that alternatives to the current bleeding procedure are developed. Practical and cost-effective substitutes for the LAL test that do not require horseshoe crab blood are under development. A synthetic version of the clotting factor called recombinant factor C is made from cloned Deoxyribonucleic acid (DNA). A test called the monocyte activation test (MAT) uses human blood and may have the ability to detect endotoxin bacteria that horseshoe crab blood is unable to expose. At this time, however, the LAL test is the only one approved by the Food and Drug Administration.
These news reports about the shrinking population of horseshoe crabs along the Atlantic coast demonstrate how interconnected environmental issues are with society’s use of natural resources. Clinical laboratory managers and pathologists should take note of the fact that researchers determined that the number of horseshoe crabs harvested nearly doubled between 2003 and 2014. That raises the stakes for researchers to find a substitute for the limulus amebocyte lysate that is produced from the blood of horseshoe crabs and has some many essential uses in medicine and healthcare.
—JP Schlingman
Related Information:
Medical Labs May Be Killing Horseshoe Crabs
The Blood of the Crab
Crab Bleeders
As Horseshoe Crab Populations Steadily Decrease, their Indispensable Medical Use is Threatened
Could the Multi-Million Dollar Industry that Bleeds 500,000 Horseshoe Crabs a Year for Medical Research Drive Them to Extinction?
Sep 13, 2017 | Coding, Billing, and Collections, Laboratory News, Laboratory Operations, Laboratory Pathology, Laboratory Testing
While multiple studies show reference pricing is an effective approach to reduce the cost of testing and procedures, medical laboratories and consumers alike must continue to focus on quality to ensure positive outcomes
The Dark Report in its September 2016 issue highlighted how reference pricing is positioned to become one of the biggest contributors to price erosion medical laboratories and pathology groups have faced in more than a decade. The issue featured details of a 2016 study published in JAMA Internal Medicine outlining how Safeway’s use of reference pricing for clinical laboratory tests decreased laboratory spending for itself and employees by 32% between 2011 and 2013—a total savings of more than $2.5-million.
That issue of The Dark Report also highlights a similar use of reference pricing by CalPERS (California Public Retirement System) that involved hip and knee replacement surgeries. CalPERS saw a 30% reduction in the cost of these surgeries after 12 months.
These highly publicized efforts have fueled interest in how reference pricing might work for other businesses, insurers, and the US government. The 2014 Protecting Access to Medicare Act (PAMA) is already collecting private payer rates paid to laboratories for tests. This data will then be used to create new rate-based fee schedules in 2018.
Speaking with Joseph Burns, Managing Editor of The Dark Report, about the outcome and potential rise of reference pricing, study author James C. Robinson, PhD, of University of California Berkeley noted that, “Any discussion about how to contain inappropriate healthcare utilization is challenging. By contrast, significant price variation is the low-hanging fruit. Employers would much rather save money by having patients travel to cheaper clinical labs than get into some esoteric discussion about whether a clinical procedure is appropriate or not.”
Quality is Key to Both Avoiding Price Erosion and Improving Patient Outcomes
There’s no question that reference pricing has forever changed the landscape of clinical laboratory pricing. Paired with increased pricing transparency and easier access to pricing information through platforms such as Castlight Health, Healthcare Blue Book, and Change Healthcare Corporation, consumers and businesses can quickly compare prices across a range of service providers.
However, in April, Leah Binder, President and CEO of The Leapfrog Group, published an article in Forbes that highlights the potential downsides to price shopping for laboratory testing and medical care.
“Differences among providers in quality can eliminate any cost advantages,” stated Binder in the Forbes article. “Some purchasers assume they can get around this problem by targeting reference pricing only for procedures that don’t vary in quality. When quality is all the same, decisions can pivot on price alone. Unfortunately, no such procedures exist. Extreme variation is the hallmark of our healthcare system.”
As reference pricing continues to force more consumers to shoulder a portion of medical laboratory testing costs, prices for more expensive laboratories are likely to continue eroding unless they can convince consumers that their services are higher quality or produce better results. (Graphic copyright: California Public Retirement System.)
Binder cites a study in Spine Journal’s April 2017 issue regarding diagnostic error rates for magnetic resonance imaging (MRI). The study involved a 63-year-old woman seeking relief from low back pain. Over a three-week span, she received 10 different scans. These scans resulted in 49 different findings. Of these findings, none were repeated across all 10 scan reports provided to her physician.
“As a result,” the study’s authors concluded, “where a patient obtains his or her MRI examination, and which radiologist interprets the examination, may have a direct impact on radiological diagnosis, subsequent choice of treatment, and clinical outcome.”
Binder reinforced this, stating, “Purchasers should still pursue reference pricing and try to incorporate considerations of utilization and quality to the extent they have the data. Never assume any procedure is like a commodity—largely the same quality everywhere.”
High-Cost Medical Laboratories Likely to Face a Decision Between Volume or Price Erosion
A 2016 study by Health Care Cost Institute found the average pricing of 240 common medical services varied by as much as 200% between states. Within states, prices fluctuated as much as 300%.
Thus, for pathology groups and medical laboratories in the upper percentiles for their region, referencing pricing is likely to impact volume. Even if adoption of reference pricing by payers or self-insured business groups remains stable, price cuts due to PAMA loom on the horizon. As reported by Dark Daily in December 2016, price cuts to the Part B clinical laboratory fee schedule could add up to $400 million in reduced Medicare payments in 2018 alone.
This is particularly troublesome for hospital laboratory outreach programs, where Medicare patients commonly represent 40% to 70% of outreach lab volumes. The combination of reduced volume and reduced Medicare pricing could have dire financial consequences.
It will remain essential for medical laboratories to differentiate their services from those of lower-cost competitors to avoid volume and price erosion. Continuing to optimize test utilization, improving laboratory efficiency, and emphasizing the value of services rendered will help to further strengthen lab positions and reduce the impact of coming change.
—Jon Stone
Related Information:
Price Shopping Could Cut Employer Health Costs by 20%, but There’s a Catch
Variability in Diagnostic Error Rates of 10 MRI Centers Performing Lumbar Spine MRI Examinations on the Same Patient Within a 3-week Period
The Striking Variation of Commercial Healthcare Prices
Some States Pay Twice the Price for Health Care, Finds New Report
Association of Reference Pricing for Diagnostic Laboratory Testing with Changes in Patient Choices, Prices, and Total Spending for Diagnostic Tests
Coming PAMA Price Cuts to Medicare Clinical Lab Fees Expected to Be Heavy Financial Blow to Hospital Laboratory Outreach Programs
Volume XXIII No. 12 – September 6, 2016
Consumers Now Use Medical Cost Websites to Price Shop for Clinical Pathology Laboratory Tests and Other Medical Procedures
