As a result, health system-based clinical laboratories likely saw a decline in test orders as well a decrease in outreach revenue
Bad financial news continues in the hospital industry. According to an August 2023 National Hospital Flash Report from consulting firm Kaufman Hall, hospitals’ financial performance deteriorated in July, partly due to declines in inpatient and outpatient volumes and rising bad debt and charity care.
The implication from these findings is that hospital-based clinical laboratories saw a drop in test volume and any lab revenue associated with inpatient testing.
In an analysis of data from more than 1,300 hospitals, Kaufman Hall noted a dip in hospitals’ median calendar year-to-date operating margin from 1.4% in June down to 1.3% in July. The data also showed “a greater pullback in volume on the outpatient side, which may be attributed to patients choosing not to pursue elective procedures during the summer,” a Kaufman Hall news release stated.
Kaufman Hall’s National Hospital Flash Report by Erik Swanson, Senior Vice President, Data and Analytics, and Brian Pisarsky, Senior Vice President, Strategic and Financial Planning, is an analysis of actual and budget data—sampled from Syntellis Performance Solutions—which is representative of hospitals of various sizes and areas in the US.
“It’s clear that today’s challenging financial environment is here to stay, and hospital leaders must be proactive in seeking out opportunities to refine their operations and remain competitive,” said Erik Swanson, Senior Vice President, Data and Analytics, Kaufman Hall, in a news release. Clinical laboratory leaders would be wise to follow the same advice. (Photo copyright: Kaufman Hall.)
Expenses Declined, Bad Debt and Charity Care Rose
Here are other national data Kaufman Hall reported for July 2023 as compared to June 2023:
Adjusted discharges per calendar day dropped 7%.
Operating room minutes per calendar day declined 13%.
Emergency department visits per calendar day fell 1%.
Bad debt and charity care as a percentage of hospitals’ gross operating revenue was up 7%.
Purchased service expense per adjusted discharge was down 3%.
Labor expense per adjusted discharge also fell 3%.
Even though expenses slightly declined during July, patient volume decreases “pulled down” the margins, Healthcare Innovation reported, which called the report “a gloomy one.”
Also, the uptick in bad debt and charity care while volumes decreased created a “difficult situation for hospitals,” Medical Economics observed.
Here are the report’s “key takeaways,” according to Kaufman Hall:
All volume indicators were down, but operating margins were still better than 2022.
Outpatient volume decreased more than inpatient, possibly due to patients choosing not to have elective procedures during the summer.
The decline in expenses was “not enough to offset revenue losses,” and inflation will continue to take its toll on labor expenses.
Medicaid has been “disenrolling” members in 30 states during June and July, and bad debt and charity care have increased.
The report also called out need for improvement in providers’ discharge of patients to skilled nursing facilities. “Hospitals that prioritize care transitions to skilled nursing facilities are performing better than institutions [that] do not,” Swanson said in the news release.
“Identifying steps that can ensure a smooth transition, such as obtaining pre-authorizations and planning discharge early, will help organizations reduce expenses and improve patients’ experience,” he continued.
For Hospitals, 2023 Not as Bad as 2022
MedCity News pointed out that though July’s operating margin index decline followed four months of growth, hospitals are still way ahead of 2022 performance when median operating margins were -0.98% in July 2022.
Still, it appears hospitals are struggling to secure financial footing after 2022, an overall bad financial year for the hospital industry.
More recently, a 2023 Becker’s Hospital CFO Report compiled a list of 81 hospitals that had cut jobs since the start of the year in response to “financial and operational challenges.”
Included was Tufts Medicine in Burlington, Massachusetts. In August, the hospital “eliminated hundreds of jobs” in an outsourcing of lab outreach services to Labcorp. The Becker’s report noted that “[Tufts] said it will work with Labcorp to have the majority of affected employees transition to a similar position with Labcorp.”
Tips for Clinical Lab Financial Viability
Medical laboratory leaders need to help ensure financial health of their labs as well as quality and efficiency of services. Advice from Kaufman Hall may be applicable.
The report writers advised providers to secure payer authorizations before a “patient comes in the door.” For clinical labs, this is comparable to the need to secure insurance company authorizations for expensive genetic tests before samples are taken and tests performed.
Another tip from Kaufman Hall is to “collect and use data to inform process improvement” and “make change.” Along those lines, medical laboratories could leverage patient data to guide launch of new services, entry to markets, workflow improvement, and costs reduction.
Healthcare attorneys advise medical laboratory leaders to ensure staff understand difference between EKRA and other federal fraud laws, such as the Anti-kickback Statute
More than four years have passed since Congress passed the law and yet the Eliminating Kickbacks in Recovery Act of 2018 (EKRA) continues to cause anxiety and confusion. In particular are the differences in the safe harbors between the federal Anti-Kickback Statute (AKS) and Stark Law versus EKRA. This creates uncertainty among clinical laboratory leaders as they try to understand how these disparate federal laws affect business referrals for medical testing.
According to a news alert from Tampa Bay, Florida-based law firm, Holland and Knight, “EKRA was enacted as part of comprehensive legislation designed to address the opioid crisis and fraudulent practices occurring in the sober home industry.” However, “In the four years since EKRA’s enactment, US Department of Justice (DOJ) enforcement actions have broadened EKRA’s scope beyond reducing fraud in the addiction treatment industry to include all clinical laboratory activities, including COVID-19 testing.”
It is important that medical laboratory leaders understand this law. New cases are showing up and it would be wise for clinical laboratory managers to review their EKRA/AKS/Stark Law compliance with their legal counsels.
“Keeping in mind that [EKRA is] a criminal statute, clinical laboratories need to take steps to demonstrate that they’re not intending to break the law,” said attorney David Gee, a partner at Davis Wright Tremaine, in an exclusive interview with The Dark Report. “[Lab leaders should] think about what they can do to make their sales compensation program avoid the things the government has had such a problem with, even if they’re not sure exactly how to compensate under the language of EKRA or how they’re supposed to develop a useful incentive compensation plan when they can’t pay commissions.” David Gee will be speaking about laboratory regulations and compliance at the upcoming Executive War College in New Orleans on April 25-26, 2023. (Photo copyright: Davis Wright Tremaine.)
How Does EKRA Affect Clinical Laboratories?
The federal EKRA statute—originally enacted to address healthcare fraud in addiction treatment facilities—was “expansively drafted to also apply to clinical laboratories,” according to New York-based law firm, Epstein Becker and Green. As such, EKRA “applies to improper referrals for any ‘service,’ regardless of the payor. … public as well as private insurance plans, and even self-pay patients, fall within the reach of the statute.”
In “Revised Stark Law, Anti-Kickback Statute Rules Are Good News for Labs,” Dark Daily’s sister publication The Dark Report noted that EKRA creates criminal penalties for any individual who solicits or receives any remuneration for referring a patient to a recovery home, clinical treatment facility, or clinical laboratory, or who pays or offers any remuneration to induce a referral.
According to Epstein Becker and Green, EKRA:
Applies to clinical laboratories, not just toxicology labs.
Has relevance to all payers: Medicare, Medicaid, private insurance plans, and self-pay.
Is a criminal statute with “extreme penalties” such as 10 years in prison and $200,000 fine per occurrence.
Exceptions are not concurrent with AKS.
Areas being scrutinized include COVID-19 testing, toxicology, allergy, cardiac, and genetic tests.
“For many clinical laboratories, a single enforcement action could have a disastrous effect on their business. And unlike other healthcare fraud and abuse statutes, such as the AKA, exceptions are very limited,” Epstein Becker and Green legal experts noted.
“Therefore, a lab could potentially find itself protected under an AKS safe harbor and still potentially be in violation of EKRA,” they continued. “The US Department of Health and Human Services (HHS) and the DOJ have not provided any clarity regarding this statute (EKRA). Without this much needed guidance clinical laboratories have been left wondering what they need to do to avoid liability.”
EKRA versus AKS and Stark Law
HHS compared AKS and the Stark Law (but not EKRA) by noting on its website prohibition, penalties, exceptions, and applicable federal healthcare programs for each federal law:
AKS has criminal fines of up to $25,000 per violation and up to a five-year prison term, as well as civil penalties.
The Stark Law has civil penalties only.
AKS prohibits anyone from “offering, paying, soliciting, or receiving anything of value to induce or reward referrals or generate federal healthcare program business.”
The Stark Law addresses referrals from physicians and prohibits the doctors “from referring Medicare patients for designated health services to an entity with which the physician has a financial relationship.”
EKRA is more restrictive than AKS, as it prohibits some compensation that AKS allows, healthcare attorney Emily Johnson of McDonald Hopkins in Chicago told The Dark Report.
Recent enforcement actions may help lab leaders better understand EKRA’s reach. According to Holland and Knight:
Malena Lepetich of Belle Isle, Louisiana, owner and CEO of MedLogic LLC in Baton Rouge, was indicted in a $15 million healthcare fraud scheme for “allegedly offering to pay kickbacks for COVID-19 specimens and respiratory pathogen testing.”
In S-G Labs Hawaii, LLC v. Graves, a federal court concluded the laboratory recruiter’s contract “did not violate EKRA because the recruiter was not referring individual patients but rather marketing to doctors. According to the court, EKRA only prohibits percentage-based compensation to marketers based on direct patient referrals.”
In another federal case, United States v. Mark Schena, the court’s rule on prohibition of direct and indirect referrals of patients to clinical labs sent a strong signal “that EKRA most likely prohibits clinical laboratories from paying their marketers percentage-based compensation, regardless of whether the marketer targets doctors or prospective patients.”
What can medical laboratory leaders do to ensure compliance with the EKRA law?
In EKRA Compliance, Law and Regulations for 2023, Dallas law firm Oberheiden P.C., advised clinical laboratories (as well as recovery homes and clinical treatment facilities) to have EKRA policies and procedure in place, and to reach out to staff (employed and contracted) to build awareness of statute prohibitions and risks of non-compliance.
One other useful resource for clinical laboratory executives and pathologists with management oversight of their labs’ marketing and sales programs is the upcoming Executive War College on Diagnostics, Clinical Laboratory, and Pathology Management. The conference takes place on April 25-26, 2023, at the Hyatt Regency in New Orleans. A panel of attorneys with deep experience in lab law and compliance will discuss issues associated with EKRA, the Anti-Kickback Statutes, and the Stark self-referral law.
Researchers at the university suggested their findings could lead to new genetic tests that could be offered by medical laboratories
New research conducted at the University of Utah suggests that clinical laboratories may someday be able to deploy genetic tests to indicate whether a couple has a higher-than-average risk of stillbirth.
This is yet another example of how researchers are cracking DNA’s code to understand how certain gene variants may affect the healthcare of offspring. The knowledge produced by this research, as confirmed by additional studies, may lead to genetic markers that medical laboratories can use to diagnose the risk of stillbirth using the parent’s DNA.
“Stillbirth is one of those problems that is so tragic and life-changing,” said study co-author Jessica Page, MD (above). “It is especially frustrating when you don’t have a good answer for why it happens. This knowledge may give us the opportunity to change how we risk stratify people and reduce their risk through prevention.” Should this research be validated, clinical laboratories may soon have new genetics tests to help doctors identify risk for stillbirth. (Photo copyright: Intermountain Healthcare.)
Can Stillbirth be Prevented?
Jessica Page, MD, an assistant professor in the Department of Obstetrics and Gynecology at the University of Utah School of Medical and co-author of the 2022 study, was lead author of a 2018 study that estimated nearly one-fourth of stillbirths are preventable.
“Stillbirth rate reduction has been slow in the US and we think many stillbirths may be potentially preventable,” she said in a university press release. “This is motivating us to look for those genetic factors so we can achieve more dramatic rate reduction.”
According to the press release, the University of Utah researchers found that stillbirth “can be inherited and tends to be passed down through male members of the family. That risk preferentially comes from the mother’s or father’s male relatives—their brothers, fathers, grandfathers, uncles, or male cousins. But the odds of a couple losing a baby to stillbirth are even greater when the condition comes from the father’s side of the family.”
The researchers made this discovery by analyzing data from the Utah Population Database (UPDB), which contains information on eight million people who were born in the state or have other connections there. The database is maintained by the Huntsman Cancer Institute at the University of Utah. It includes genealogical information and health records that allowed the researchers to trace incidence of stillbirths across multiple generations of families.
The researchers examined 9,404 stillbirth cases between 1978 and 2019, along with 18,808 live births that served as controls. They identified 390 multi-generational families with high numbers of stillbirths. Within that group, they looked at incidence of stillbirth among first-, second-, and third-degree relatives of stillborn babies. They then compared those numbers with data from unaffected families.
“We were able to evaluate multigenerational trends in fetal death as well as maternal and paternal lineages to increase our ability to detect a familial aggregation of stillbirth,” said genetic epidemiologist Tsegaselassie Workalemahu, PhD, lead author of the study. “Not many studies have examined inherited genetic risk for stillbirth because of a lack of data. The Utah Population Database allows for a more rigorous evaluation than has been possible in the past.”
Workalemahu described the research as “an important step toward identifying specific genes that increase the risk of stillbirth, which could one day lead to better diagnosis and prevention,” according to the university press release.
One caveat, the press release notes, is that Utah’s population is disproportionately of northern European descent. “Future studies will need to determine whether the trends hold true among people of different races and ethnicities,” it stated.
Call for More Testing
The University of Utah study is part of a larger effort to gain a greater understanding of the causes of stillbirths.
The story notes that “more than 20,000 pregnancies in the US end in stillbirth,” and in one in three of those cases, the cause is not determined.
Drucilla Roberts, MD, an obstetric and perinatal pathologist at Massachusetts General Hospital (MGH), told ProPublica that at a minimum, “the placenta should definitely be evaluated in every stillbirth.” But citing CDC data, the story notes that this is done in only 65% of stillbirths, and autopsies are performed in less than 20%.
“Experts blame the low rates on several factors,” the story states. “Because an autopsy often is performed in the days following a stillbirth, doctors and nurses have to ask families soon after they receive news of the death if they would like one. Many families can’t process the loss, let alone imagine their baby’s body being cut open. What’s more, many doctors aren’t trained in the advantages of an autopsy, or in communicating with parents about the exam.”
One consequence, ProPublica notes, is that clinicians are ill-equipped to advise patients on how to reduce risk in future pregnancies. The story describes the case of Karen Gibbins, MD, a maternal-fetal medicine specialist and an assistant professor of obstetrics and gynecology at the Oregon Health and Science University (OHSU) in Portland.
An Opportunity for Pathologists
Gibbins’ son was stillborn in 2018. She asked for an autopsy and learned that her son “had a rare disease caused by her antibodies attacking the cells in his liver,” the story states. When she became pregnant again, her doctor prescribed antibody infusions and she later gave birth to a healthy son. “If we had not had that autopsy, my third child would have died as well,” she told ProPublica.
This parent’s comment about the value of the autopsy done after her son’s stillbirth identifies an opportunity for the pathology profession. For several decades, health plans have become ever more reluctant to pay for autopsies. Yet, pathologists know the value that autopsies can provide.
The immediate value comes from revealing useful insights about all the health conditions of the deceased. The long-term value comes from the ability to gather the findings across a large number of autopsies that can contribute to new knowledge about health conditions that physicians use to improve the diagnoses of different health conditions.
Thus, with the publication of this peer-reviewed study about the connection between genetic variations and stillbirth, there is the opportunity for some of the nation’s pathology societies to advocate for funding a pilot program to fund more autopsies of stillborn babies, specifically to add more knowledge about the role of gene mutations as a causative factor in stillbirths.
In fact, the UB study suggests traditional anatomical methods for determining the evolutionary relationships between species may not be as accurate as once thought, an article in SciTechDaily reported.
Nevertheless, the UB’s research into convergent evolution is unlocking new insights into how genes evolve over time and this new knowledge may help researchers develop genetic tests that more accurately identify different diseases and health conditions.
Additionally, studies that bring a better understanding of how beneficial genetic mutations work their way into a species’ genome might also aid researchers in developing personalized clinical laboratory testing and therapies based on manipulating a patient’s genetic sequences in ways that would be beneficial.
Gene Sequencing More Accurate at Determining Evolutionary Relationships
The UB study suggests that existing evolutionary (phylogenetic) trees may need to be reconsidered. To put a finer point on the findings, a UB news release on the study states, “determining evolutionary trees of organisms by comparing anatomy rather than gene sequences is misleading.”
The UB scientists used genetic sequencing to quickly—and more cost effectively—determine evolutionary relationships as compared to traditional morphology (anatomy and structure), according to the news release.
They found genetic data that revealed surprising relationships about where the sequenced species originated, and which differed with prior conclusions that were drawn based on the species’ appearance. The findings suggest there may be need to “overturn centuries of scientific work in classifying relation of species by physical traits,” the UB scientists said.
“For over a hundred years, we’ve been classifying organisms according to how they look and are put together anatomically, but molecular data often tells us a rather different story,” said Matthew Wills, PhD (above), Professor of Evolutionary Paleobiology, Milner Center for Education at the University of Bath, in the news release. “Our study proves statistically that if you build an evolutionary tree of animals based on their molecular data, it often fits much better with their geographical distribution.” This new use of genetic sequencing could lead to improved precision medicine treatments and clinical laboratory testing. (Photo copyright: University of Bath.)
Molecular Data Leads to New Insights into Convergent Evolution
The UB study’s use of genetic sequencing led the researchers to a greater understanding of convergent evolution, defined by “a characteristic evolving separately in two genetically unrelated groups of organisms,” according to UB.
For example, wings are a widely developed characteristic. But they are not necessarily a sign of relatedness when it comes to birds, bats, and insects.
“Now with molecular data, we can see that convergent evolution happens all the time—things we thought were closely related often turn out to be far apart on the tree of life,” Wills said, adding, “Individuals within a family don’t always look similar; it’s the same with evolutionary trees, too.”
Family Trees: Morphology Versus Molecular
In their paper, the UB researchers acknowledged the importance of phylogenies (evolutionary history of species) in areas of biology, including medicine. They aimed to study a better way to produce accurate phylogenetic trees.
“Phylogenetic relationships are inferred principally from two classes of data: morphological and molecular,” they wrote, adding, “The superiority of molecular trees has rarely been assessed empirically.”
So, they set out to compare the two approaches to building evolutionary trees:
Traditional morphology analysis, and
Phylogenetic trees developed using molecular data.
Using 48 pairs of morphological and molecular trees, they mapped data geographically.
“We show that, on average, molecular trees provide a better fit to biogeographic data than their morphological counterparts, and that biogeographic congruence increases over research time,” the researchers wrote.
Biogeography a Better Gauge of Relatedness than Anatomy
The study also found animals on molecular trees lived geographically closer as compared to groups on morphological trees.
For example, molecular studies put aardvarks, elephants, golden moles, swimming manatees, and elephant shews in an Afrotheria group, named for Africa, which is where they came from. Therefore, the biogeography matches, however the appearances of these mammals clearly do not, the UB scientists point out.
“What’s most exciting is that we find strong statistical proof of molecular trees fitting better not just in groups like Afrotheria, but across the tree of life in birds, reptiles, insects, and plants,” said Jack Oyston PhD, UB Department of Biology and Biochemistry Research Associate and first author of the study, in the news release.
The researchers believe their findings support the accuracy of genetic-themed trees.
“It being such a widespread pattern makes it much more potentially useful as a general test of different evolutionary trees. But it also shows just how pervasive convergent evolution has been when it comes to misleading us,” Oyston added.
Advantages of Molecular Data
In their Nature Communications Biology paper, the UB scientists wrote that molecular data offer up these advantages over morphology:
Widely available in vast quantity.
Opportunity exists to “search, repurpose, and reanalyze sequenced data alongside novel sequences.”
Less subjectivity in researchers’ analysis.
Well-developed data at the ready and “still in their infancy.”
The University of Bath’s study of convergent evolution, phylogenetic trees, and comparison of molecular data versus morphology, has implications for medical laboratories. Should their research lead to new insights into how genes evolve over time, diagnostics professionals may have new information to identity diseases and work with others to precisely treat patients.
23andMe executives say they plan to leverage their database of millions of customer genotypes ‘tohelp accelerate personalized healthcare at scale,’ a key goal of precision medicine
In what some financial analysts believe may be an indication that popularity of direct-to-consumer (DTC) genetic testing among customers who seek info on their ethnic background and genetic predisposition to disease is waning, personal genomics/biotechnology company 23andMe announced it has completed its merger with Richard Branson’s VG Acquisition Corp. (NYSE:VGAC) and is now publicly traded on NASDAQ.
According to a 23andMe news release, “The combined company is called 23andMe Holding Co. and will be traded on The Nasdaq Global Select Market (“NASDAQ”) beginning on June 17, 2021, under the new ticker symbol ‘ME’ for its Class A Common shares and ‘MEUSW’ for its public warrants.”
Now that it will file quarterly earnings reports, pathologists and clinical laboratory managers will have the opportunity to learn more about how 23andMe serves the consumer market for genetic types and how it is generating revenue from its huge database containing the genetic sequences from millions of people.
After raising $600 million and being valued at $3.5 billion, CNBC reported that 23andMe’s shares rose by 21% during its first day of trading.
“23andMe is more than just a genetics company. We are an activist brand that is approaching healthcare and drug discovery with the individual at the center, as our partner,” said Anne Wojcicki (above), 23andMe’s co-founder and Chief Executive Officer, during remarks she gave after ringing the opening bell on the company’s first day of public trading, a 23andMe blog post noted. “We are going to continue pioneering a consumer-centered personalized healthcare world. We are going to show that drug discovery can be more efficient when you start with a human genetic insight,” she continued. (Photo copyright: TechCrunch.)
Might the quick rise in its stock price be a sign that 23andMe—with its database of millions of human genotypes—has found a lucrative path forward in drug discovery?
23andMe says that 80% of its 10.7 million genotyped customers have consented to sharing their data for research, MedCity News reported, adding that, “The long-term focus for 23andMe still remains using all of its accumulated DNA data to strike partnerships with pharmaceutical companies.”
Time for a New Direction at 23andMe
While 23andMe’s merger is a recent development, it is not a surprising direction for the Sunnyvale, Calif.-based company, which launched in 2006, to go.
Even prior to the COVID-19 pandemic, both 23andMe and its direct competitor Ancestry had experienced a decline in direct-to-consumer testing sales of at-home DNA and genealogy test kit orders. This decline only accelerated during the pandemic.
Meanwhile, 23andMe Therapeutics, a division focused on research and drug development, has been on the rise, Bloomberg News reported. On its website, 23andMe said it has ongoing studies in oncology, respiratory, and cardiovascular diseases.
“It’s kind of an ideal time for us,” Wojcicki told Bloomberg News.
“There are huge growth opportunities ahead,” said Richard Branson, founder of the Virgin Group, which sponsors the special-purpose acquisition company (SPAC) VG Acquisition Corp., in the 23andMe news release.
In a VG Acquisition Corp. news release, Branson said, “Of the hundreds of companies we reviewed for our SPAC, 23andMe stands head and shoulders above the rest.”
“As an early investor, I have seen 23andMe develop into a company with enormous growth potential. Driven by Anne’s vision to empower consumers, and with our support, I’m excited to see 23andMe make a positive difference to many more people’s lives,” he added.
Report Bullish on Consumer Genetic Testing
Despite the apparent saturation of the direct-to-consumer (DTC) genetic testing market, and consumers’ concerns about privacy, Infiniti Research reported that worldwide sales of DTC tests “are poised to grow by $1.39 bn during 2021-2025, progressing at a CAGR [compound annual growth rate] of over 16% during the forecast period.”
“This study identifies the advances in next-generation genetic sequencing as one of the prime reasons driving the direct-to-consumer genetic testing market growth during the next few years. Also, reduction in the cost of services and growing adoption of online service platforms will lead to sizable demand in the market,” the report states.
Clinical laboratory leaders will want to stay abreast of 23andMe rise as a publicly-traded company. It will be interesting to see if Wojcicki’s vision about moving therapies into clinics in five years comes to fruition.
