News, Analysis, Trends, Management Innovations for
Clinical Laboratories and Pathology Groups

Hosted by Robert Michel

News, Analysis, Trends, Management Innovations for
Clinical Laboratories and Pathology Groups

Hosted by Robert Michel
Sign In

CVS Health is Changing the Way it Prices Prescription Drugs Using a New Cost-Plus Model

New ‘simple’ pricing scheme will provide transparency and value to all stakeholders, says company’s Chief Pharmacy Officer

Woonsocket, R.I.-based CVS Health (NYSE:CVS) is planning to scrap what it says is an old-school prescription reimbursement model and turn to a new way to price prescription medications at its 9,000 CVS pharmacies nationwide. Why is this relevant for clinical laboratory and pathology managers? It shows the disruption that is ongoing in healthcare.

Like clinical laboratories, retail pharmacies have significant reimbursement, competition, and labor challenges to address. But unique to retail pharmacies is the emergence of pharmacy benefit management (PBM) companies that work between health insurance plans and drug makers.

“National pharmacy chains found themselves disintermediated from providing prescriptions to patients by pharmacy benefit management (PBM) companies. By 2021, PBMs had captured $484 billion of the total prescription drug spending of $576.9 billion. That meant PBMs controlled 84% of the prescription drug market! That caused retail pharmacies to look for new sources of revenue,” noted Dark Daily’s sister publication The Dark Report.

This arrangement may be motivating retail pharmacy companies to seek ways to recover the volume lost to PBMs.

CVS’ new CostVantage model will work with a formula based on how much CVS paid for the drug, a set markup over those costs, and a fee for pharmacy services to fill the prescription, according to a news release. Some experts and publications have compared the change to the approach used by the Mark Cuban Cost Plus Drug Company.

CVS Health expects to start CostVantage in 2024 before introducing it to PBMs for commercial payers in 2025.

CVS is “committed to lowering drug pricing,” CVS Health Chief Executive Officer Karen Lynch (above), CVS Health’s President and Chief Executive Officer, told CNBC. “What this (the new model) does is it essentially aligns the economics of our pricing for drugs to what consumers will pay at the pharmacy counter,” she added. Clinical laboratory managers and pathologists should understand that this new pricing strategy may be an attempt by CVS to win back prescription business lost to pharmacy benefit management companies. (Photo copyright: Rick Burn/Wikipedia.)

CVS Aims for Value and Transparency

CVS Health’s leaders believe it is time for a change in how the company’s pharmacies are reimbursed by PBMs and other payers.

Prem Shah, PharmD, Executive Vice President and Chief Pharmacy Officer, CVS Health, explained during a CVS Health Corporation Investor Day presentation some of the challenges of current pharmacy reimbursement:

  • Generic drugs dispensed in CVS pharmacies reached 90%. “That limits the capacity or the amount of value remaining through the higher levels of generic dispensing,” he said.
  • Also branded drugs have risen in price about 40% since 2019, leading to “higher costs for patients, our customers’ plans, and PBM plan sponsors.”

“This model has reached an inflection point that is just ripe for change,” Shah said. “We’re changing this outdated reimbursement model that made sense for the last decade, but no longer works today or in the future. We’re introducing a new simple model that provides value for all stakeholders across the supply chain in a much more simple, transparent, and comprehensive way,” he continued.

Cost-Plus Plans versus Retail Drug Prices 

Fierce Healthcare compared CVS CostVantage to the Mark Cuban Cost Plus Drug Company, which claims it offers prescription drugs at prices below traditional pharmacies and openly shares with customers the “15% markup over its cost, plus pharmacy fees.”

Some examples on the company’s website include: Abiraterone acetate (generic for Zytiga), a prostate cancer treatment. It is priced at $33.50, compared to $1,093 retail. Cost Plus Drug Company says its costs are:

  • Manufacturing: $24.60
  • 15% markup: $3.90
  • Pharmacy labor fee: $5.00

Another drug offered is canagliflozin (generic for Invokana), a type 2 diabetes medication, which sells for $245.92, compared to $676.14 retail. Cost Plus Drug Company says its costs are:

  • Manufacturing: $209.50
  • 15% markup: $31.42
  • Pharmacy labor fee: $5

Expert Sees More Cost-Plus Plans

In a column he penned for Drug Channels titled, “What CVS Pharmacy’s New Cost-Plus Reimbursement Approach Means for PBMs, Pharmacies, Plan Sponsors, and Prescription Prices,” Adam Fein, PhD, President of the Drug Channels Institute, a pharmaceutical research firm, wrote “Mark Cuban should be flattered but not fearful.”

Fein predicts there will be more cost-plus models by retail pharmacies. “Other large pharmacies will likely follow CVS with attempts to force payers and PBMs to accept some form of cost-plus reimbursement,” he wrote.

Fein noted pharmacies prefer cost-plus models for reasons including the “stripping away of complexity and hidden cross-subsidies. … For a pharmacy, the same PBM would pay the same price for the same prescription regardless of the PBM’s arrangement with different plan sponsors.”

Turbulent Retail Pharmacy Market

CVS has also been dealing with limited growth, pharmacist labor relations issues, and a decline in COVID-19 testing, Healthcare Dive reported.

Meanwhile, pharmacies have been closing store sites and affiliated physician practices. CVS announced plans to close 900 stores between 2022 and 2024, according to a news release.

Rite Aid Corporation, Philadelphia, announced last year that it had filed for bankruptcy and may eventually close 400 to 500 of its 2,100 stores. 

Walgreens Boots Alliance, Deerfield, Ill., intends to close 150 US and 300 United Kingdom locations, according to its former Chief Financial Officer James Kehoe’s remarks in a third quarter 2023 earnings call transcribed by Motley Fool.

The turbulence in the retail pharmacy market is another sign of ongoing disruption in healthcare. Long-established sectors are experiencing market shifts that are eroding their access to patients and ability to generate adequate profits.

Understanding how pharmacies approach these issues may help medical laboratory and pathology managers develop strategies for adding value to their relationships with healthcare providers and insurance plans.

—Donna Marie Pocius

Related Information:

CVS Health Highlights Path to Accelerating Long-Term Growth through Building a World of Health Around Every Consumer

CVS to Change How it Prices Prescription Drugs with New Pharmacy Reimbursement Model

CVS Health Corporation Investor Day

Navigating CVS’s New Pricing Models: What to Know about CVS CostVantage and CVS Caremark TrueCost

CVS Health Revamps Pharmacy Reimbursement Model Amid Scrutiny on High Drug Prices

What CVS Pharmacy’s New Cost-Plus Reimbursement Approach Means for PBMs, Pharmacies, Plan Sponsors, and Prescription Prices

CVS Health Announces Steps to Accelerate Omnichannel Health

CVS Overhauls How Its Retail Pharmacies Charge for Prescription Drugs

Walgreens to Close 60 VillageMD Locations

Bankruptcies and Store Closings are Signs of Tough Times Ahead for US Retail Pharmacy Chains

Popular Science Review Finds Seven At-Home COVID-19 Antigen Tests ‘Easy to Use’ and ‘An Important Tool to Slow Spread of the Coronavirus’

Though clinical laboratory RT-PCR tests remain the ‘gold standard’ when diagnosing COVID-19, at-home antigen tests offer convenience and quick test results. But are they accurate?

Less than six months after the US Food and Drug Administration (FDA) issued the first ever emergency use authorization (EUA) for an over-the-counter SARS-CoV-2 diagnostic test to Ellume for its COVID-19 at-home antigen test, the number of do-it-yourself at-home tests available to consumers has grown large enough for Popular Science to publish a review of available consumer COVID-19 testing kits.

Clinical laboratory and pathologists generally acknowledge that RT-Polymerase Chain Reaction (RT-PCR) tests remain the preferred method for detecting COVID-19 disease. However, according to Popular Science, rapid at-home antigen tests that accurately identify people carrying larger loads of the virus are becoming important tools in the fight against spread of the coronavirus.

In “We Vetted Popular At-Home COVID-19 Tests. Here’s What We Learned: Everything you need to know about the growing number of at-home testing options for COVID,” Popular Science evaluated the ease-of-use and effectiveness of the following tests:

Many of the newest at-home tests not only have users collect their own swab or saliva samples, but some also provide results in less than an hour, which can be sent to the user’s smartphone. Conversely, home-based collection kits that are returned to clinical laboratories for testing can take 48 hours or longer for shipping and processing.

ellume-home-covid-test
The FDA’s emergency use authorization announcement (EUA) for Ellume’s $38.99 COVID-19 At Home Test (above) states the test “is a rapid, lateral flow antigen test, a type of test that runs a liquid sample along a surface with reactive molecules. The test detects fragments of proteins of the SARS-CoV-2 virus from a nasal swab sample from any individual two years of age or older.” Ellume’s self-collection test was the first such test to receive an FDA EUA for use without a physician’s order. (Photo copyright: Ellume).

Are At-Home COVID-19 Tests a Good Idea?

“The more we can do simple, regular, at-home testing, the less we need it,” Mara Aspinall, Professor, College of Health Solutions at Arizona State University, told Popular Science. “It’ll become a habit, as easy as brushing your teeth,” she added.

But in “Pathologists Urge Caution on At-Home COVID Test Kits,” MedPage Today, reporting on the College of American Pathologists (CAP) March 11 virtual media briefing, pointed out downsides to at-home COVID-19 tests.

Among the issues cited were the potential for inadequate samples and improper handling to cause inaccurate results, as well as uncertainty whether at-home antigen tests will pick up on COVID-19 variants.

At-home tests also are less likely to be covered by insurance, MedPage Today reported.

kalisha-hill-MD-head-shot
During the CAP virtual media briefing, pathologist Kalisha Hill, MD (above), Chief Medical Officer and Chair, Department of Pathology and Medical Director, Laboratory Services, at AMITA Health St. Mary’s Kankakee (Ill.), said, “The gold standard is still a laboratory-performed real-time PCR test and that is the most sensitive and most accurate that we do that is very specific for COVID-19.” Hill called at-home tests a “good screening tool,” but she noted, “You’re testing that moment, that day, and as soon as you leave your home or come in contact with someone else, you could potentially be COVID positive. It’s also important to recognize that when you’re collecting a sample yourself, you may not be able to obtain enough sample for an accurate result … It’s very important how it is collected and also the sensitivity and specificity of the test,” she added. (Photo copyright: AMITA Health/LinkedIn.)

How Do the Tests’ Accuracy Compare?

The Quest Direct and LabCorp Pixel tests—both of which are sent to company labs for PCR testing—scored highest on the two main statistical measures of performance sensitivity (positive percent agreement) and specificity (negative percent agreement). According to Popular Science, each of these tests’ sensitivities and specificities are close to 100%.

According to the websites of the other tests reviewed by Popular Science:

  • DxTerity test, which uses a saliva sample—97.2% sensitivity and a 92.5% specificity.
  • BinaxNOW test—84.6% sensitivity and 98.5% specificity.
  • Cue COVID-19 test—98.7% sensitivity and 97.6% specificity.
  • Lucira Check Its test—98% accuracy.
  • Ellume test—95% sensitivity and 97% specificity.

Rapid Antigen Tests Accurate and Easy to Use, says Popular Science

Popular Science found the tests generally easy to use and concluded they are a beneficial—if imperfect—tool in the fight against COVID-19.

“If you’re unvaccinated and symptomatic, they’re a great way to confirm a COVID-19 infection without risking a trip out of the house,” Popular Science stated in its article. “If you’re unvaccinated and have no symptoms, and just want to know whether you can safely attend a family dinner or soccer game, an at-home test remains an imperfect way of self-screening. Remember: If the test comes back negative, there’s still the chance the result is false, and you could accidentally expose others by being within six feet of them without a mask on.”

As the popularity of at-home COVID-19 tests increases, clinical laboratories that perform RT-PCR tests may want to keep a watchful eye on the demand for at-home rapid antigen testing, especially now that some tests are available without prescription.

Andrea Downing Peck

Related Information:

We Vetted Popular At-Home COVID-19 Tests. Here’s What We Learned

Coronavirus (COVID-19) Update: FDA Authorizes Antigen Test as First Over-the-Counter Fully At-Home Diagnostic Test for COVID-19

Pathologists Urge Caution On At-Home COVID Test Kits

The Rapidly Changing COVID-19 Testing Landscape: Vaccines, Variants, and Health Disparities

Cue COVID-19 Test for Home and Over-the-Counter (OTC) Use

DxTerity SARS-CoV-2 RT-PCR Test EUA Summary

Ellume’s COVID-19 Home Test Shows 96% Accuracy in Multi-Site US Clinical Study

Walmart Health Opens Two Primary Care Clinics at Retail Supercenters in Chicago with Plans to Open Seven Florida Locations in 2021

Walmart may be the largest, but it is not the only retailer offering clinical laboratory testing and primary care services at conveniently-located retail stores

Earlier this month in “How Walmart Plans to Take Over Health Care,” CNBC asked, “Is Walmart the future of healthcare?” Good question. In the midst of the COVID-19 pandemic, Walmart (NYSE:WMT) managed to open six Walmart Health locations in Georgia and Arkansas. In addition, the giant retailer announced plans to open more primary care clinics at Walmart Supercenters in Chicago and Florida.

Clinical laboratory managers who struggle to keep revenues flowing should take notice. These retail clinics may not have their own medical laboratories, but their primary care physicians will be generating lab specimens.

And because Walmart offers medical laboratory tests at these locations, with so many people opting to visit health clinics installed within retail stores, independent clinical labs could see a noticeable drop in business as Walmart Health expands its network across the US.

Therefore, clinical labs near Walmart Health locations would be wise to develop strategies and services toward becoming a lab test provider to these retail clinics.

Walmart Health Eyes Florida Primary Care Market

“The past few months in particular have exposed the vulnerabilities of our healthcare system and left many without access to adequate health resources,” said Lori Flees, Senior Vice President and Chief Operating Officer, Walmart US Health and Wellness, in a blog post. “We know our customers need us more than ever, which is why we’re announcing an expansion of Walmart Health.

“We’re planning to open seven Walmart Health locations in the Jacksonville [Florida] market in 2021, with at least one opening in early 2021, and we’re beginning conversations in the Orlando and Tampa markets. Our new health centers will be in communities in need of affordable, accessible preventive care, which we will help deliver through Walmart Health,” Flees wrote.

Exterior and interior images of Walmart Health Clinic with customers sitting on a blue couch in the lobby
Walmart could be operating 22 Walmart Health locations like that shown above in Georgia, Florida, Arkansas, and Illinois by the end of 2021, Fierce Healthcare reported. This means Walmart Health may double its locations by the end of this year. Clinical laboratories near these locations may want to reach out and offer lab testing services to these retail clinics. Notice that, in the picture of the exterior of a Walmart Health clinic, “Labs” is a service that is prominently displayed as one of the important clinical services offered at that site. (Photo copyright: Walmart.)

Can Clinical Laboratories Compete or Collaborate with Walmart?

A news release announcing the opening of the Walmart Health Centers in Chicago stated that Walmart Health partners with “local, on-the-ground health providers to deliver primary care, labs, x-ray and diagnostics, counseling, dental, and hearing services all in one facility at transparent pricing regardless of a patient’s insurance status.”

However, clinical laboratories wanting to be a testing provider to Walmart Health may have to keep their costs of tests and services down in order to be competitive.

As Dark Daily reported in “Walmart Opens Second Health Center Offering Clinical Laboratory Tests and Primary Care Services,” Walmart Health’s lab test prices—in conjunction with primary care services—are low. Some of those tests include:

  • Primary care physician office visit – $40
  • Lipid – $10
  • Hemoglobin A1c – $10
  • Pregnancy Test – $10
  • Flu Test – $20
  • Strep Test – $20
  • Mono Test – $20

Walmart Health’s “Summary Price List” provides a complete list of medical laboratory tests and services offered at the retail clinics.

Other Primary Care Disruptors

Walmart is not the only retailer offering primary care services amid the COVID-19 pandemic.

Walgreens Boots Alliance (NASDAQ:WBA) partnered with VillageMD, a provider of primary care services, to open 500-700 “Village Medical at Walgreens” primary care clinics “in more than 30 US markets in the next five years, with the intent to build hundreds more thereafter,” according to a news release.

Exterior image of Village Medical at Walgreens primary care site medical clinic
By end of summer 2021, 40 “Village Medical at Walgreens” primary care sites (above) are expected to open in Texas, Arizona, and Florida, according to a January 2021 news release. Walgreens is investing $1 billion over three years in the clinics, which will be situated near its stores. “Through these conveniently located clinics at our neighborhood stores, we will uniquely integrate the pharmacist as a critical member of VillageMD’s multi-disciplinary care team to provide patients with personalized and coordinated care,” said Stefano Pessina, Walgreens Executive Vice Chairman and CEO, in the news release. (Photo copyright: Walgreens Boots Alliance.)

Meanwhile, Forbes reported that CVS Health is intent on opening 1,500 more HealthHUB locations in its stores during 2021. In “Walgreens, CVS Add New Healthcare Services and Technology to Their Retail Locations; Is Medical Laboratory Testing Soon to Be Included?Dark Daily reported on CVS Health’s pilot program to test several HealthHUB locations in Houston that would offer expanded Minute Clinic services. These services include:

  • medical laboratory blood testing,
  • health screening,
  • telehealth visits,
  • durable medical and sleep apnea equipment, and
  • wellness programs.

Clinical laboratory managers and pathologists will want to be on the alert for opportunities to forge relationships with Walmart Health, Walgreens, and CVS Health to capture new primary care-related testing business coming out of these non-traditional healthcare providers.

—Donna Marie Pocius

Related Information:

How Walmart Plans to Take Over Health Care

Two Newly Remodeled Chicago Supercenters Introduce Walmart Health

One Year In, Walmart Health is Delivering Affordable Healthcare and Expanding

Walmart Health Opens Two More Locations in Chicago

Walmart to Expand Health Centers to Florida Next Year

Walmart to Launch Healthcare Supercenters in Lucrative Florida Market

Walmart Health Expands to Florida Bringing Affordable and Accessible Care to Local Communities

Walgreens Boots Alliance Accelerates VillageMD Investment and Large-scale Rollout of Primary Care Clinics

CVS HealthHUB Openings on Track Despite Pandemic

CVS Health Debuts HealthHUB Locations to Serve Greater Houston Community

Walmart Opens Second Health Center Offering Clinical Laboratory Tests and Primary Care Services

Walgreens, CVS Add New Healthcare Services and Technology to Their Retail Locations; Is Medical Laboratory Testing Soon to Be Included?

UPS Expands Drone Delivery Service for Transporting Clinical Laboratory Specimens Across Healthcare Systems to Include Delivering Prescriptions from CVS Pharmacy to Customers’ Homes

Through partnerships with CVS, Utah Health, and Kaiser Permanente the new UPSFF drone service could deliver savings to healthcare consumers and reduced TATs for clinical laboratories

United Parcel Service (UPS) successfully delivered by air medical prescriptions from a CVS pharmacy to customers’ residences in Cary N.C. This was the next step in the package delivery company’s plan to become a major player in the use of drones in healthcare and it has major implications for clinical laboratories and pathology groups.

Earlier this year, Dark Daily’s sister publication, The Dark Report (TDR), covered UPS’ launch of a drone delivery service on the WakeMed Health and Hospitals medical campus in Raleigh, N.C. The implementation followed a two-year test period during which UPS used drones manufactured by Matternet, a company in Menlo Park, Calif., to fly clinical laboratory specimens from a medical complex of physicians’ offices to the health system’s clinical laboratory more than 100 times. (See TDR, “WakeMed Uses Drone to Deliver Patient Specimens,” April 8, 2019.)

At the 24th Annual Executive War College on Lab and Pathology Management in April, Chairman and CEO David Abney (above) explained why UPS is investing in drone technology for clinical laboratory health network delivery. “Healthcare is a strategic imperative for us,” Abney said. “We deliver a lot of important things, but lab [shipments] are critical, and they’re very much a part of patient care.” (Photo copyright: Dark Daily.)

In October, UPS signed a letter of intent with CVS Health to “explore drone deliveries, expanding UPS’ sights from hospital campuses to the homes of CVS customers as it builds out its drone delivery subsidiary,” Modern Healthcare reported.

In November, UPS succeeded in these goals with UPS Flight Forward, Inc. (UPSFF), UPS’ new drone delivery service which, according to its website, is the first “drone airline” to receive full Part 135 certification (Package Delivery by Drone) from the Federal Aviation Administration (FAA).

“This drone delivery, the first of its kind in the industry, demonstrates what’s possible for our customers who can’t easily make it into our stores,” said Kevin Hourican, EVP, CVS Health and President of CVS Pharmacy, in a UPS press release. “CVS is exploring many types of delivery options for urban, suburban, and rural markets. We see big potential in drone delivery in rural communities where life-saving medications are needed and consumers at times cannot conveniently access one of our stores.” 

Drones Deliver Clinical Lab Specimens and Pharmaceuticals

Since March, UPSFF has completed more than 1,500 drone flights (with 8,000 clinical laboratory samples) at WakeMed in Raleigh, N.C. UPS’ drone delivery decreased delivery time of clinical laboratory specimens between WakeMed’s physician office building to the hospital-based lab from 19 minutes to three minutes, according to UPS data reported in October by an Advisory Board daily briefing.

WakeMed is seeking to “provide advantages in patient care that cannot be obtained in any other way” Michael Weinstein, MD, PhD, Director of Pathology Laboratories at WakeMed, told TDR.

With the signing of the UPS (NYSE:UPS)-UPSFF (UPS Flight Forward)-CVS (NYSE:CVS.N) agreement in October—and initial first flights which took place on November 1 between a CVS pharmacy and customers’ residences in Cary, NC—UPS completed the “the first revenue-generating drone delivery of a medical prescription from a CVS pharmacy directly to a consumer’s home,” the UPS press release states.

“When we launched UPS Flight Forward, we said we would move quickly to scale this business … and that’s exactly what we are doing,” Scott Price (above), UPS Chief Strategy and Transformation Officer, told Supply Chain Dive. “We started with a hospital campus environment and are now expanding scale and use-cases,” he added. Clinical laboratories can probably look forward to similar UPS drone delivery services in all 50 states and Washington, DC. (Photo copyright: UPS.)

Other Healthcare Organizations on Board

WakeMed and CVS are not alone in UPS drone deployment for healthcare deliveries. Advisory Board reported that UPSFF also partnered with other healthcare systems to provide drone flights for on-campus delivery of pharmaceuticals and medical supplies, including:

  • AmerisourceBergen: to move pharmaceuticals, supplies, and records to “qualifying” medical campuses;
  • Kaiser Permanente: to send medical supplies between buildings at different campus sites; and
  • University of Utah Health’s hospital campuses: to transport biological samples, documents, supplies, and medical instruments between their facilities.

Drone delivery of clinical laboratory specimens is swiftly become a global reality that labs should watch closely. Past Dark Daily e-briefings reported on drone deliveries being conducted in Virginia, North Carolina, Australia, Switzerland, and Rwanda.

Pathologists and medical laboratory managers need to stay abreast of these developments, as widespread drone delivery of clinical laboratory specimens may happen on a surprisingly fast timeline. Drone delivery already has TAT improvement implications and could be a way for labs to differentiate their businesses and enhance workflow.  

—Donna Marie Pocius

Related Information:

UPS and CVS Make First Residential Drone Deliveries of Prescription Medicines

UPS and CVS Completed Two Drone Last Mile Deliveries to Homes on Nov. 1; Both Carried Prescription Drugs and Launched from a CVS Store in Cary, North Carolina

The Drones are Coming: CVS, Kaiser, and More are Teaming up with UPS for Drone Deliveries

U of U Launching Utah’s First Drone Delivery Program

UPS to Kick Off Drone Delivery Service with Hospital Campuses

UPS Forms a New Subsidiary for Drone Delivery and Seeks FAA Approval to Fly

Dark Daily: Drones

WakeMed Uses Drone to Deliver Patient Specimens

Chairman and CEO David Abney Explains UPS Drive Toward Drone Technology

 25th Annual Executive War College on Lab and Pathology Management

Up to 50% of Aetna, UnitedHealth Group, and Anthem Reimbursements Go to Value-Based Contracts; Clinical Laboratories Must Implement Value-Based Strategies to Remain Competitive

Aetna expects 75% to 80% of its medical spending will be value-based by 2020

Many pathologists and medical laboratory executives may be surprised to learn how quickly private health insurers are moving away from fee-for-service payment arrangements. According to Forbes, the nation’s largest health insurance companies now associate nearly 50% of reimbursements they make to value-based insurance initiatives.

This is a sign that value-based managed care contracting continues to gain momentum. And that interest remains strong in this form of reimbursement, which associates payment-for-care to quality and rewards efficient providers.

UnitedHealth Group (NYSE:UNH) and Aetna (NYSE:AET) are the fastest adopters of value-based payment models, with Anthem (NYSE:ANTM) close behind, the Forbes article noted.

Moreover, UnitedHealth and Aetna intend to increase their percentage of value-based contracts. For example, Aetna, which now ties 45% of its reimbursements to value, says its goal is to have 75% to 80% of its medical spending in value-based relationships by 2020, Healthcare Finance News pointed out.

These compelling data should motivate pathology groups and medical laboratory leaders to adopt strategies for value-based contracting. That’s because payment schemes based on clinical laboratory performance will likely grow quickly, as compared to traditional fee-for-service reimbursement models, which are being phased out.

Aetna: Lowering Acute Admits

Aetna and other insurance companies are rewarding in-network hospitals, medical laboratories, and physicians who help them keep their customers healthy.

“One way we measure our success is by how well we are able to keep our members out of the hospital and in their homes and communities,” stated Mark Bertolini, Aetna’s Chairman and Chief Executive Officer, in the Healthcare Finance News article.

“I think value-based contracting is going to continue to be encouraged by even the current [federal] administration as a way of getting a handle on healthcare costs,” he continued. In fact, Aetna lowered acute admissions by 4% in 2016 and reduced readmission rates by 27%, reported Healthcare Finance News.

UnitedHealth: Outpatient Care a Focal Point

Meanwhile, UnitedHealth Group spends $52 billion (or about 45%) of a $115 billion annual budget on value-based initiatives, Forbes noted.

In March, UnitedHealth Group joined Optum, its health services company, to Surgical Care Associates, an ambulatory (outpatient) surgery provider with 205 sites nationwide.

As surgical cases (such as total joint replacements) continue their migration to ambulatory surgery center sites, UnitedHealth Group expects this merger to offer value to patients, payers, and physicians, a statement pointed out.

“We’ve been able to drive down on a per capita basis inpatient, and inside that we’ve focused a lot in those early years around the conversion of inpatient to outpatient. And I think this is sort of the continued evolution as we focus more on the side of service to how do we get that outpatient into the ambulatory setting,” said Dan Schumacher, UnitedHealthcare Chief Financial Officer, in the Healthcare Finance News story.

 

The graphic above is from a slide presentation given by Eleanor Herriman, MD, MBA, Chief Medical Informatics Officer with Viewics, a provider of big-data management solutions for hospitals and clinical laboratories. Because of healthcare’s drive toward value-based payment models, clinical labs must focus on “operational efficiencies” and “testing utilization management,” and be prepared to “demonstrate value of testing to payers and health organizations,” Herriman’s presentation notes. (Image copyright: Viewics, Inc.)

Also, in 2016, OptumRx (pharmacy benefit management) announced partnerships with Walgreens and CVS Pharmacy. The joint pharmacy care agreements are intended to improve patient outcomes, connect platforms for health data leverage, and address costs of care, UnitedHealth Group stated in dual press releases (Walgreens and CVS) announcing the strategic partnerships.

Anthem: Planning for 50% Value-Based Care by Next Year

For its part, Anthem now has 43% of its operating budget focused on shared savings programs. Furthermore, the company reportedly has a plan to associate at least 50% of its budget with value-based care by 2018.

“When you combine this with our pay for performance programs, we will have well over half our spend in collaborative arrangements over the next five years,” Jill Becher, Anthem Staff Vice President of Communications, told Forbes.

Clinical Laboratories Need Value-Based Strategy

The rise of value-based care should motivate clinical laboratory leaders to create and implement novel and responsive strategies as soon as possible. Without a focus on value, labs could be denied entry into provider networks.

In a Clinical Laboratory Daily News article, Danielle Freedman, MD, noted that value-based clinical laboratory strategies could entail the following:

  • Working with physicians on appropriate retesting intervals;
  • Adding clinical decision support tools; and
  • Vetting testing requests.

Freedman is Director of Pathology at Luton and Dunstable University Hospital NHS Foundation Trust in the United Kingdom (UK).

Clinical laboratory executives and pathology practice administrators should take note of the fact that some large healthcare insurers already have nearly half of their reimbursement under value-based contracts, with plans to grow their investment in value-based relationships in the future.

Already facing the challenges of narrowing healthcare networks, it is imperative that lab leaders also get their lab team to focus on value (and not just volume). It can be expected that, as health insurers look to partner with labs in different regions and communities, they will want medical laboratories that are creative in developing high-value diagnostic testing services.

—Donna Marie Pocius

 

Related Information:

United Health, Aetna, Anthem Near 50% of Value-Based Care Spending

Aetna, UnitedHealth Show Increasing Appetite for Value-Based Care Contracts

Aetna Premier Care Network Plus Helps Reduce Costs for National Employers and Members Through Simple Access to Value-Based Care

Surgical Care Associates/OptumCare to Combine

OptumRx and Walgreens to Expand Consumer Choice, Reduce Costs, and Improve Health Outcomes

OptumRx and CVS Pharmacy to Expand Consumer Choice, Reduce Costs, and Improve Health Outcomes

“V” is for Value, Not Volume

Advanced Laboratory Analytics—A Disruptive Solution for Health Systems

 

;