Primary themes were healthcare’s transition away from fee-for-service and how innovative medical laboratories are delivering more value with lab testing services

NEW ORLEANS, LA.—Two clear themes for clinical labs and pathology groups emerged from yesterday’s opening presentations at the 20th annual gathering of the Executive War College on Laboratory and Pathology Management.

Transitioning from Fee-For-Service to Value-based Reimbursement Programs

Theme one is that the pace of transformation within the U.S. healthcare system is accelerating. In his opening remarks, Executive War College Founder Robert L. Michel warned medical laboratory professionals that they must not allow their lab organizations to be unprepared or unresponsive to the changes now unfolding across the nation’s healthcare system.

In particular, Michel reminded the more than 850 lab executives and pathologists in the audience that fee-for-service payment for clinical laboratory tests and anatomic pathology services will not remain the dominant form of reimbursement for much longer. “This market trend is aptly described as ‘volume to value,’” noted Michel. “For decades, labs maximized revenue and operating profits by maximizing the volume of specimens that they tested. Those days are coming to an end. Healthcare will increasingly want lab testing services to be high value. These lab services will be paid as part of a bundle, or included in the different forms of global payments and budgeted payments that are made to integrated care delivery organizations, such as ACOs and patient-centered medical homes.”

Do labs have much time to prepare for this transformation from fee-for-service to other types of reimbursement? Michel doesn’t think so. “Just track the speed with which the federal Department of Health and Human Services (HHS) intends to push hospitals, physicians, clinical laboratories, and other providers to accept value-based reimbursement arrangements,” he said. “It was in January when HHS officials announced that, as early as the end of 2016, it wanted 30% of its traditional fee-for-service payments to be tied to quality or value in the payments it makes to ACOs and bundled payment arrangements. It wants to increase the proportion to 50% by the end of 2018. That’s just 30 months for now!”

Michel reminded the audience that private health insurers tend to follow Medicare’s lead in establishing new models of provider reimbursement and setting prices for bundled services. “Further, the lag between when Medicare implements a new payment model for lab testing service, and when private payers incorporate a similar payment model into their provider agreements with clinical labs and pathology groups, is growing shorter,” observed Michel. “Thus, when doing strategic planning, every lab organization should anticipate that payers be much faster at adopting budgeted and bundled payment models. This will be accompanied by a steady shrinkage of the proportion of fee-for-service payments they receive for lab testing claims.”

Delivering Clinical Intelligence to Physicians

Theme two is that the clinical lab industry’s first-mover and early-adopter labs are devoting substantial resources to developing information technology that gives them the capability to combine lab test data with other types of healthcare “big data.” The goal of these innovative labs is to become consultants with physicians, with payers, and with their parent hospitals and health systems.

“Every pathologist and clinical laboratory scientist knows ways that they can help physicians do a better job of selecting the right medical laboratory tests, then use those lab test results to make a more informed diagnosis and select the most appropriate therapy,” noted Michel in his presentation to the Executive War College audience. “However, to leverage this capability to deliver more value, labs must become more sophisticated in their use of information technology.

“Thus, it is no surprise that, even as these innovative labs see the same cutbacks in revenue and shrinking lab budgets, they are spending more money on IT and laboratory informatics,” he continued. “These pathologists and lab managers recognize that they are in a unique position to pool other clinical data with lab test data and use this to deliver actionable clinical intelligence to physicians.”

Clinical Laboratory Professionals Share Lessons Learned

During the balance of yesterday’s general session, several speakers shared case studies about the programs their labs were implementing to deliver more value. These speakers included:

• From Alverno Clinical Laboratories of Hammond, Indiana: Sam Terese, CEO. This is one of the nation’s largest integrated laboratory systems, operating a major central laboratory and the labs in 27 hospitals representing 5,900 patient beds. Major strategic initiatives are to reduce costs by 25% during the next five years and to begin helping clinicians manage patients in a proactive manner, guided by analyses of lab test data. One example discussed was helping physicians pay attention to hemoglobin A1c tests in cases where the results were above the target range.

• From UCLA Medical Center in Los Angeles, California: William “Dean” Wallace, M.D., Chief of Pulmonary Pathology; and, Corey Arnold, Ph.D., Assistant Professor, Departments of Radiology and Bioengineering. Radiologists and pathologists are collaborating in one the nation’s first examples of an integrated diagnostic service. Since last fall, lung cancer patients have benefited from integration of radiology and pathology diagnostic services, delivered to referring physicians in a single, unified report. After discussing the workflow arrangements, and a homegrown software program designed to give radiologists and pathologists access to each other’s images and findings, Wallace and Arnold shared the lessons learned on how the collaborators were preparing to use this integrated diagnostic approach for other types of cancers.

• From TriCore Reference Laboratories, Albuquerque, New Mexico: Khosrow R. Shotorbani, President and CEO. This presentation addressed the advanced strategic thinking unfolding at TriCore. One goal is for TriCore to evolve into a diagnostic health exchange. It is putting the information technology tools in place to make this a reality. TriCore discussed how it planned to leverage this information technology to help providers in New Mexico succeed with population health management.

Robert L. Michel delivered a keynote presentation

Yesterday at the 20th Annual Executive War College on Laboratory and Pathology in New Orleans, Louisiana, Founder Robert L. Michel delivered a keynote presentation that introduced the concept of the Laboratory Value Pyramid as an approach to help pathologists and clinical laboratory managers to move their labs from their current states to best-class laboratories. (Photo by Duane Stork.)

Efforts to Eliminate Unnecessary Medical Tests

Another common element in many of the presentations that were delivered over the course of the day involved efforts by many lab organizations to improve the utilization of medical laboratory tests. Speakers attributed this trend to the need for medical laboratories to play an increased role in cutting costs by eliminating unnecessary lab test orders. In addition, speakers from a couple of early-adopter clinical laboratories provided specific examples of how their projects to improve how physicians ordered and used lab tests were also making measurable improvements in patient outcomes.

Essential Insights from Executive War College 2014

In its May 11 issue, The Dark Report is planning to publish a full report of key developments that took place at this year’s Executive War College on Laboratory and Pathology Management. During day two, important presentations on how to develop leaders in the laboratory are scheduled to take place.

Yours truly,

Robert L. Michel

Your Dark Daily Editor

Related Information:

It’s Not Too Late! Order Recorded Audio Sessions from Executive War College 2015 – 70+ Presentations

H.R. 4302: Protecting Access to Medicare Act of 2014

113th Congress, 2013–2015. Text as of Apr 02, 2014 (Passed Congress/Enrolled Bill)

Facing the Looming End of Fee-for-Service, Clinical Laboratories and Anatomic Pathology Groups Look for New Business Models

Innovations in Clinical Pathology Laboratory Management at the 2011 Executive War College in New Orleans

Meet the ‘Laboratory Value Pyramid’

To Be Paid More, Labs Must Deliver More Value 

Lab Quality Confab: Laboratory Value Pyramid – Understand the Four Levels and Apply Them to Your Lab