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
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Biggest Opportunity for Clinical Laboratory Industry is Utilization Management of Lab Tests, But Only If It Is Done Well

Effective medical lab/physician collaborations to improve how lab tests are ordered and used can deliver big improvements in patient outcomes while reducing healthcare costs

Utilization management of clinical laboratory tests may be the single hottest trend in laboratory medicine today. Across the nation, medical laboratory scientists and pathologists are getting out of the lab to collaborate with physicians to meet the common goal of ordering the right test for the right patient at the right time.

“There are two urgent reasons why clinical laboratories and anatomic pathology groups are engaging with clinicians in projects to improve the utilization of lab tests and both involve money,” stated Robert L. Michel, Editor-In-Chief of The Dark Report. “First, an effective project to improve how physicians use lab tests can return immediate savings to both the lab and the parent hospital. Utilization management projects of this type have the goal of reducing or eliminating orders for duplicate tests, unnecessary tests, and outmoded lab assays. For hospital labs with shrinking budgets, the speedy savings that result from these lab test utilization efforts provide welcome relief.

Progressive Medical Laboratories Want to Deliver More Value

“Second, progressive medical laboratories that want to increase the value of their lab testing services to protect budgets and claim a fair share of value-based payments are going one step further,” explained Michel. “These labs are organizing collaborative projects with physicians and hospital administrators to leverage specific lab tests in ways that measurably improve patient outcomes while, at the same time, contributing to sizeable reductions in the overall cost per patient encounter.”

Today, almost every clinical laboratory and pathology group is under significant and sustained financial pressure. Payers continue to reduce the prices they pay for lab tests. Similarly, hospitals and health systems—facing flat or declining volume of inpatients—are pushing budget cuts across all their clinical service lines, including their labs. These trends force lab directors to pursue the twin strategy of cutting costs while increasing revenue.

Better utilization of lab tests is a business and clinical strategy that enables labs to meet both goals. When physicians do a better job of ordering the right test, and following up the lab test results with the right therapies, healthcare costs go down while patient outcomes improve.

Further, with Medicare and private health insurers continuing to move toward value-based reimbursement arrangements, any clinical lab that can step up and help its client physicians achieve documented improvements in patient outcomes has a legitimate claim to fair reimbursement under bundled and budgeted payment arrangements.

Keen Industry Interest in Utilization Management of Clinical Lab Tests

Proof of the keen interest that lab managers have in utilization management of clinical laboratory tests is the fact that a session on this topic was one of the best-attended at this spring’s Executive War College on Lab and Pathology Management.

Speaking first during this session was Tammy Fletcher, Administrator of Value-Based Services for Mayo Medical Laboratories (MML) in Rochester, Minnesota. As physicians and clinical pathologists at the Mayo Clinic develop and demonstrate clinical guidelines and protocols that utilize medical laboratory tests in the most effective way, Fletcher helps provide that information to client labs throughout the United States. This gives her a unique perspective on the best ways that lab managers can support successful lab test utilization management projects.


Tammy Fletcher (above), Administrator of Value-Based Services at the Mayo Medical Laboratories (MML), located in Rochester, Minn., is shown speaking at the Executive War College on Laboratory and Pathology Management last May. She is involved in helping the clinical laboratory clients of MML develop and implement effective utilization management programs to improve how physicians use medical laboratory tests. She will be speaking as part of a utilization management webinar that takes place on June 29. (Photo copyright: The Dark Report. Photo by Linda Reineke.)

Fletcher emphasized that, for utilization management initiatives to deliver optimal benefits, labs should follow a road map with five primary elements. They are:

  • Assess and assemble;
  • Message;
  • Education and guidance;
  • Analytics and evidence; and
  • Payer collaboration.

She emphasized that labs should understand how improving utilization of clinical lab tests helps the parent hospital and health system in two important ways. One way is to score higher in assessments by accrediting bodies. The second way is to deliver measurable improvements that meet and exceed the criteria of the health insurers that are key to the institution’s success, including Medicare and Medicaid.

Utilization Management Successes at Minneapolis Health System

Next to speak was Bobbi Jo Kochevar, MBA, MT (ASCP), Director of Diagnostic Services at North Memorial Health Care in Robbinsdale, Minnesota. Her clinical laboratory serves multiple hospitals and an integrated health system. Thus, the lab team has the opportunity to develop utilization management projects that can involve providers in inpatient, outpatient, and outreach settings in ways that contribute to improved patient care.

Bobbi Jo Kochevar (above), MBA, MLS(ASCP), is Director of Care Coordination for Diagnostic and Therapy Services at North Memorial Health Care in Robbinsdale, Minn. In recent years, she and her clinical laboratory team have conducted several utilization management projects involving how physicians order and use medical laboratory tests. These projects have improved patient care while significantly reducing billing denials. Kochevar will be sharing the lessons learned and successes of her lab team’s utilization management projects during Dark Daily’s upcoming webinar on June 29. (Photo copyright: The Dark Report. Photo by Linda Reineke.)

What caught the audience’s attention during this session was Kochevar’s demonstration of how the clinical laboratory was able to engage clinicians in utilization management projects targeting use of such assays as homocysteine and Enterobacteria phage T4 in ways that improved patient care while also meeting payer criteria. The result was improved patient outcomes and a substantial reduction in billing denials because more claims were properly documented at first submission, thanks to improved physician adherence to both the clinical protocols and to documenting compliance to payers’ requirements.

Many Labs Working to Improve Utilization of Medical Laboratory Tests

Because utilization management of lab tests is now a high priority at most clinical labs and pathology groups, Dark Daily is hosting a special webinar that features Tammy Fletcher and Bobbi Kochevar as the speakers titled, “Simple, Swift Approaches to Lab Test Utilization Management: Proven Ways for Your Clinical Laboratory to Use Data and Collaborations to Add Value.” The webinar takes place on Thursday, June 29, 2017, at 1PM EDT.

This is a must-attend for clinical pathologists, lab managers, and lab scientists who wants to:

  1. Develop their skills and knowledge in how to design an effective utilization management (UM) project; and
  2. Learn the best method for encouraging physicians and administrators to launch a winning collaboration and implement a UM project.

Fletcher will identify best practices in utilization management projects that she has learned from her work within the Mayo Clinic and with hospitals and health systems throughout the nation. She will discuss the five elements of the utilization management roadmap.

Nine Foundational Competencies in Utilization Management

Most importantly, Fletcher will describe the nine foundational utilization management competencies in detail. These range from leadership support and operations bandwidth to clinical content and knowledge diffusion. You’ll learn the essentials, as well as receive practical advice on specific pitfalls to avoid.

Kochevar will provide you and your lab team with the practical lessons learned from doing multiple, effective utilization management projects within her integrated health system. This is useful, handy knowledge that you can apply immediately.

An important topic that Kochevar will cover involves the five categories of lab test utilization. She will explain what needs to happen differently if a utilization management project is targeting repetitive or duplicate testing versus contraindicated screening and testing. Kochevar will help you understand how to customize a utilization management project to best address the different concerns and patient care improvement opportunities associated with each of the five different categories of lab test utilization.

The webinar on utilization management is ideal for clinical pathologists, lab managers, and anyone working on utilization management teams. It will help beginners understand the basics of working with clinicians on projects to improve lab test utilization while providing actual case studies and advanced techniques for intermediate and advanced practitioners.

To see the agenda and to register, use this link (Or copy and paste this URL in your browser:


—Michael McBride 


Related Information: 

Simple, Swift Approaches to Lab Test Utilization Management: Proven Ways for Your Clinical Laboratory to Use Data and Collaborations to Add Value

Increasing Costs for Genetic Tests are Busting Lab Budgets

Lab Test Utilization Delivers Big Gains at Cleveland Clinic

As Medical Laboratory Test Utilization Grows, Health Insurers Develop Programs to Manage Rising Costs

Naval Medical Center Study Reveals More than One-third of Genetic Tests are Misordered; Clinical Laboratories Critical to Improving Lab Test Utilization

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


Medical Laboratories in Canada Face Squeeze from a Retiring Labor Force, the Need to Acquire New Diagnostic Technologies, and Increased Demand for Lab Tests

In provinces across Canada, health systems are dealing with limited budgets, growing populations, and the need to transition to personalized medicine

Medical laboratories in Canada have something in common with medical laboratories in most other developed nations. Demand for healthcare services exceeds capacity, even as the healthcare system struggles to find adequate funding. This puts pathology labs in a bind, since they are asked to test growing numbers of specimens even as budgets are flat or shrinking.

That means the biggest two challenges facing labs in Canada will be familiar to pathologists, clinical chemists and medical laboratory scientists in almost every other developed nation across the globe. One challenge is how to meet the steady annual increase in lab specimens that must be tested. The second challenge is how to do that additional testing even as government health systems are forced to trim budgets year after year. (more…)

Creating Added Value from Clinical Pathology Laboratory Testing Produced Improved Outcomes at University of Mississippi Medical Center and Broward Health

Innovative medical laboratories shared their successes in improving lab test utilization that included physician engagement and close monitoring of key metrics

DATELINE: ORLANDO, FLORIDA—One big challenge facing medical laboratories  and anatomic pathology groups in the United States today is the need to transition from a transaction-based business model (increasing specimen volume leads to increasing revenue) to a value-based business model (helping providers improve their use of clinical laboratory tests in ways that measurably improve patient outcomes while controlling or reducing the cost of care.)

Two trends reinforce the need for clinical laboratories to craft strategies to develop new ways to add value to lab testing services.

One trend is the move by Medicare and private health insurers to shift reimbursement for providers away from fee-for-service  and toward bundled reimbursement and budgeted reimbursement.

The second trend is the emergence of integrated clinical care organizations. The most visible of these are accountable care organizations (ACO) and patient-centered medical homes (PCMH). What these care delivery organizations have in common is that they require hospitals, physicians, clinical laboratories, imaging centers, nursing homes and other types of providers to work together more effectively so that patients receive healthcare in a seamless fashion because there is a continuum: primary care to specialty care to acute care and back again. (more…)

As Medical Laboratory Test Utilization Grows, Health Insurers Develop Programs to Manage Rising Costs

After seeing a rise in the volume of clinical lab tests physicians order, managed care plans are develop a variety of strategies to manage utilization and costs

Health insurers are taking more aggressive actions to control the cost of clinical laboratory testing. For many years, clinical laboratories and pathology groups have been concerned about the strategies used by Medicare to control the utilization and costs of medical laboratory tests. Private health insurers usually follow the actions of Medicare, the nation’s largest health insurer. But today, managed care plans are developing their own lab-test-utilization strategies in addition to following those of Medicare.

Recently, Managed Care magazine explained many of the steps health insurers take to keep the costs of clinical laboratory tests under control. The cover story in the October issue of the magazine, “Health Plans Deploy New Systems To Control Use of Lab Tests,” outlined how health insurers Cigna, Group Health Cooperative, Priority Health, and UnitedHealthcare (UHC) are managing lab test utilization. (more…)