Labs are facing new threats as managed care plans cut reimbursement levels and new companies are coming between labs and their physician clients

*** Revised Version – Original Version Misstated: The previous version had statements attributed to Ignis Systems that were incorrect. The corrected version is below.

DATELINE: NEW ORLEANS, LOUISIANA—It was a big opening for the 17th annual Executive War College (EWC) on Laboratory and Pathology Management yesterday. A record crowd of about 700 enthusiastic clinical laboratory managers and pathologists heard lab industry leaders predict a fast-changing future for the medical laboratory testing industry.

The editorial team from The Dark Report and Dark Daily are all here to cover the sessions and provide you with useful intelligence and insights about market trends and innovations in the management and operations of clinical laboratories. That was true of yesterday’s opening general session, followed by an afternoon of clinical laboratory management case studies.

The Executive War College 2012 opening session with Robert Michel of The Dark Report.

A record crowd attends The Executive War College 2012 opening session with Robert Michel of The Dark Report.

All members of the editorial team shared what they considered to be high points from these sessions and provided information they found particularly relevant. So, let us get started!

HEALTH PLANS DRIVING DOWN LAB TEST REIMBURSEMENT RATES

Health plans are coming between clinical laboratories and their physician clients and they are driving down lab test reimbursement, said Michael Snyder, Vice President Laboratory Services, Medical Spend Management, LLC, Flemington, New Jersey. Both of these efforts are forcing medical laboratories to adopt new strategies for survival, he said.

Network management vendors, such as BeaconLBS (a business division owned by Laboratory Corporation of America, NYSE:LH) are threatening labs through disintermediation, he said. These vendors want to create networks of clinical laboratories, then negotiate lab testing contracts with different managed care plans, explained Snyder. Essentially, these vendors want to interpose themselves between the clinical labs in their networks and the physician clients.

Snyder predicted that such vendors would steer well-reimbursed tests to national labs and away from local and regional labs because they would have the ability to communicate directly with physicians and patients as part of pre-authorization requirements.

The other significant development is that health insurance plans are reducing their reimbursement rates for clinical laboratory tests, he added. Among the five largest health plans, the two that currently pay the most for labs tests (Aetna and Wellpoint-Anthem) are working to cut payments, he said. The others (Cigna, UnitedHealthcare, and Humana) are already lower than Aetna and Wellpoint-Anthem and are keeping reimbursement at these low levels, he said.

“Do you feel that your business will survive under the current conditions and business model,” he asked. If not, then he suggested it is time for clinical labs to consider forming associations to facilitate participation in managed care networks, he said. He suggested that an association of this type would satisfy antitrust rules and still be allowed to negotiate services as a group-purchasing organization.

STAGE 2 MEANINGFUL USE WILL REQUIRE MORE EFFORT

Although Stage 1 of Meaningful Use (MU) implementation went smoothly, numbers indicate only 11% of eligible physicians applied and were approved for federal financial incentives to install electronic health record (EHR) systems. One Master Class at the Executive War College outlined the hurdles physicians and laboratories face after the federal Centers for Medicare & Medicaid Services (CMS) issued proposed Stage 2 MU rules in February. CMS requested comments on the proposed rule by May 7.

Under the Health Information Technology for Economic and Clinical Health (HITECH) Act, part of the American Recovery and Reinvestment Act of 2009, eligible health care professionals and hospitals can qualify for Medicare and Medicaid incentive payments when they adopt certified EHR technology and use it in a meaningful way, said CMS. What CMS considers “meaningful use” is evolving in three stages. CMS said:

  • Stage 1 (began in 2011): “meaningful use” consists of transferring data to EHRs and being able to share information, including electronic copies and visit summaries for patients.
  • Stage 2 (to be implemented in 2014 under the proposed rule issued in February): “meaningful use” includes new standards such as online access for patients to their health information, and electronic health information exchange between providers.
  • Stage 3 (expected to be implemented in 2016): “meaningful use” includes demonstrating that the quality of health care has been improved.

When the U.S. government pumped $20 billion into the EHR market, it had a huge impact on EMR vendors, said Pat Wolfram, Vice President of Marketing at Ignis Systems in Portland, Oregon, during his presentation. In 2009 there were 35 EMR vendors; in 2011 there were 435 certified EMR or module vendors; and as of March 2012, there 1,321 certified EMR or module vendors, he said.

Wolfram believes that the EMR market may be maturing, as there is evidence of consolidation among EMR vendors. Where some IT vendors have dropped newly introduces and un-adopted EMRs.

Now that the EMR market is past the early-adopter phase, Wolfram says that physicians and hospitals currently purchasing EMR systems are the “early majority,” because these buyers want less risk. This is driving the EMR market because these “early majority” purchasers are choosing “more mature products from major players,” he said.

Stage 1 provided little more than a “bump in the road” for most physicians and EMR vendors because the bar was set so low, Wolfram explained. The rules for Stage 2, however, will be completed this summer and will present many more challenges. This will be particularly true for computerized physician order entry (CPOE) and workflow issues, he added. “Meaningful Use Stage 2 will require a major overhaul of vendor capabilities,” he said.

During Wednesday’s sessions at the Executive War College, there will be presentations focused on next-generation gene sequencing and how progressive clinical labs and pathology groups are using molecular diagnostics testing to deliver more clinical value to referring physicians.

—By Joseph Burns and Mark Terry

 

Related Information:

17th annual Executive War College 

Experts Predict Explosive Growth in Molecular Diagnostics and Next-Generation Gene Sequencing for Clinical Pathology Laboratories

National Survey of Clinical Pathology Laboratory Executive Salaries to Be Presented at 17th Annual Executive War College on Lab and Path Management

The Dark Report laboratory intelligence