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Clinical Laboratories and Pathology Groups

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Trends Reshaping Hospitals Worldwide Also Impact Clinical Laboratories and Anatomic Pathology Groups

As hospitals are forced to innovate, anatomic pathologists and medical laboratories will need to adapt to new healthcare delivery locations and billing systems  

As new challenges threaten the survival of many hospitals worldwide, medical laboratories may be compelled to adapt to the needs of those transforming organizations. Those challenges confronting hospitals are spelled out in a recent report from management consulting firm McKinsey and Company with the provocative title, “The Hospital Is Dead, Long Live the Hospital!

A team of analysts led by McKinsey senior partner Penny Dash, MB BS, MSc, looked at nine trends affecting hospitals in North America, Europe, Asia, and other regions. These trends, the authors contend, will force hospitals to adopt innovations in how they are structured and how they deliver healthcare.

Here are nine challenges hospitals face that have implications for medical laboratories:

1. Aging Patient Populations

“Patient populations are getting older, and their needs are becoming more complex,” McKinsey reports, and this is imposing higher cost burdens. The US Census Bureau projects that by 2030 approximately 20% of the US population will be 65 or older compared with about 15% in 2016.

The federal Centers for Medicare and Medicaid Services (CMS) reports that this age group accounts for a disproportionate share of healthcare costs. In 2014, CMS states, per-capita healthcare spending was $19,098 for people 65 or older compared with $7,153 for younger adults.

The Census Bureau graphic above illustrates how the age of the US population is changing. People are living longer, and as Dark Daily reported in May, this could present opportunities for medical laboratories and anatomic pathologists, as early detection of chronic diseases affecting older patients could ultimately reduce treatment costs. (Photo copyright: US Census Bureau.)

2. Patients Are Behaving More Like Consumers

“Patients—along with their families and caregivers—expect to receive more information about their conditions and care, access to the newest treatments, and better amenities,” McKinsey reports.

Dark Daily has reported extensively on the rise of healthcare consumerism and the opportunities this might offer for clinical laboratories.

3. More Community-based Outpatient Care

Clinical advances are increasing the range of treatments that can be performed in outpatient settings, McKinsey reports. The authors point to multiple studies suggesting that patients can receive better outcomes when more care is delivered outside the hospital. Dark Daily has often reported on the impact of this trend, which has reduced demand for in-hospital laboratory testing while increasing opportunities for outpatient services.

4. Move Toward High-Volume Specialist Providers

Compared with general hospitals, specialized, high-volume “centers of excellence” can deliver better and more cost-effective care in many specialties, McKinsey suggests. As evidence, the report points to research published over the past 12 years in specialist journals.

Some US employers are steering patients to top-ranked providers as part of their efforts to reduce healthcare costs. For example, Walmart (NYSE:WMT) pays travel costs for patients to undergo evaluation and treatment at out-of-state hospitals recognized as centers of excellence, which Dark Daily reported on in July.

UnitedHealthcare’s new preferred lab network also appears to be a nod toward this trend. As The Dark Report revealed in April, the insurer has designated seven laboratories to be part of this network. These labs will offer shorter wait times, lower costs, and higher quality of care compared with UnitedHealthcare’s larger network of legacy labs, the insurer says.

5. Impact of Clinical Advances

Better treatments and greater understanding of disease causes have led to significantly lower mortality rates for many conditions, McKinsey reports. But the authors add that high costs for new therapies are forcing payers to contend with questions about whether to fund them.

As Dark Daily has often reported, new genetic therapies often require companion tests to determine whether patients can benefit from the treatments. And these also face scrutiny from payers. For example, in January 2018, Dark Daily reported that some insurers have refused to cover tests associated with larotrectinib (LOXO-101), a new cancer treatment.

6. Impact of Disruptive Digital Technologies

The McKinsey report identifies five ways in which digital technologies are having an impact on hospitals:

  • Automation of manual tasks;
  • More patient interaction with providers;
  • Real-time management of resources, such as use of hospital beds;
  • Real-time clinical decision support to enable more consistency and timeliness of care; and
  • Use of telemedicine applications to enable care for patients in remote locations.

All have potential consequences for medical laboratories, as Dark Daily has reported. For example, telepathology offers opportunities for pathologists to provide remote interpretation of blood tests from a distance.

7. Workforce Challenges

Many countries are contending with shortages of physicians, nurses, and allied health professionals, McKinsey reports. The authors add that the situation is likely to get worse in the coming decades because much of the current healthcare workforce consists of baby boomers.

An investigation published in JAMA in May indicated that, in the US, the number of active pathologists decreased from 15,568 to 12,839 between 2007 and 2017. In January, Dark Daily reported that clinical laboratories are also dealing with a generational shift involving medical technologists and lab managers, as experienced baby boomers who work in clinical laboratories are retiring.

8. Financial Challenges

In the United States and other countries, growth in healthcare spending will outpace the gross domestic product, the McKinsey report states, placing pressure on hospitals to operate more efficiently.

9. More Reliance on Quality Metrics

McKinsey cites regulations in Canada, Scandinavia, and the UK that require hospitals to publish quality measurements such as mortality, readmittance, and infection rates. These metrics are sometimes linked to pay-for-performance programs, the report states. In the United States, Medicare regularly uses quality-of-care metrics to determine reimbursement, and as Dark Daily reported in July, a new Humana program for oncology care includes measurements for medical laboratories and anatomic pathology groups.

The McKinsey report reveals that several trends in healthcare are forcing healthcare leaders to adopt new strategies for success. The report’s authors state that their “results show that contemporary healthcare providers around the world are facing several urgent imperatives: to strengthen clinical quality; increase the delivery of personalized, patient-centered care; improve the patient experience; and enhance their efficiency and productivity.”

These pressures on hospitals typically also require appropriate responses from clinical laboratories and anatomic pathology groups as well.

—Stephen Beale

Related Information:

The Hospital Is Dead, Long Live the Hospital!

The Nine Forces Changing the World for Hospitals

Older People Projected to Outnumber Children for First Time in US History

CMS: Health Expenditures by Age and Gender

Results of Harvard Study into Medicare Costs Offers Opportunities for Clinical Laboratories

Pathology Groups and Clinical Laboratories Have Unique Opportunity to Take Leadership Role in Healthcare Consumerism

Consumer Trend to Use Walk-In and Urgent Care Clinics Instead of Traditional Primary Care Offices Could Impact Clinical Laboratory Test Ordering/Revenue

Walmart Flies Employees to Top Hospitals for Surgeries in a Bid to Cut Healthcare Costs

New UnitedHealthcare Preferred Lab Network Launches July 1

Precision Medicine Requires Targeted Cancer Therapies, but Payers Reluctant to Pay for Some Genetic Testing Needed to Match a Patient with Right Drug

Telemedicine Gaining Momentum in US as Large Employers Look for Ways to Decrease Costs; Trend Has Implications for Pathology Groups and Medical Laboratories

Trends in the US and Canadian Pathologist Workforces From 2007 to 2017

With Experienced Baby Boomers Retiring in Ever-Larger Numbers, Clinical Laboratories and Pathology Groups Use New Methods to Improve Productivity, Reduce Costs

Humana’s New Oncology Value-based Care Program Includes Quality and Cost Measurements of Provider Performance, Clinical Laboratories, and Pathology Groups

Precision Medicine Requires Targeted Cancer Therapies, but Payers Reluctant to Pay for Some Genetic Testing Needed to Match a Patient with Right Drug

Precision Medicine Requires Targeted Cancer Therapies, but Payers Reluctant to Pay for Some Genetic Testing Needed to Match a Patient with Right Drug

Clinical labs and pathology groups know how advances in targeted therapies and genomics far outpace providers’ and patients’ ability to know how best to use and pay for them.

One fascinating development on the road to precision medicine is that many new cancer drugs now in clinical trials will require a companion genetic test to identify patients with tumors that will respond to a specific therapeutic drug.

This implies more genetic testing of tumors, a prospect that challenges both the Medicare program and private health insurers because they already struggle to cope with the flood of new genetic tests and molecular diagnostic assays. However, even as this genetic testing wave swamps payers, some pharmaceutical companies have cancer drugs for rare types of cancers and these companies would like to see more genetic testing of tumors.

Pathologists and clinical laboratory managers will find this to be precisely the dilemma facing specialty pharma company Loxo Oncology (NASDAQ:LOXO), a biopharmaceutical company located in San Francisco and Stamford, Conn.

Loxo is developing larotrectinib (LOXO-101), a “selective TRK inhibitor.” According to a Loxo press release, Larotrectinib is “a potent, oral, and selective investigational new drug in clinical development for the treatment of patients with cancers that harbor abnormalities involving the tropomyosin receptor kinases (TRK receptors).” In short, the drug is designed to “directly target TRK, and nothing else, turning off the signaling pathway that allows TRK fusion cancers to grow.”

How to Find Patients for This Cancer Drug

While a powerful, new, targeted cancer drug will be a boon to cancer therapy, it is only intended for a relatively small number of patients. Loxo estimates that between 1,500 and 5,000 cases of cancer are caused by TRK mutations in the United States each year. Conversely, according to the National Cancer Institute, the total number of new cancer diagnoses in the US in 2016 was 1,685,210.

An article in MIT Technology Review on larotrectinib notes, “To find patients, Loxo will need to convince more doctors to order comprehensive tests that screen multiple genes at once, including TRK.” And that is where things get complicated.

“These advanced genetic tests, which can cost $5,000 or more, are offered by companies like Foundation Medicine, Caris Life Sciences, and Cancer Genetics. The problem is, insurers still consider the tests ‘experimental’ and don’t routinely cover them, meaning patients are often stuck picking up the bill,” notes MIT Technology Review.

Data for the graph above comes from the National Human Genome Research Institute. The graph illustrates the steep decline in cost for whole genome sequencing over the past 17 years. As the cost of genetic testing drops, development of targeted-drug cancer therapies increases. Clinical laboratories and anatomic pathology groups can expect to be performing more such tests in the future. (Graphic copyright: National Human Genome Research Institute/Simple English Wiki.)

To further confuse the market, the National Cancer Institute states that “Insurance coverage of tumor DNA sequencing depends on your insurance provider and the type of cancer you have. Insurance providers typically cover a DNA sequencing test if there is sufficient evidence to support that the test is necessary to guide patient treatment. Tests without sufficient evidence to support their utility may be considered experimental and are likely not covered by insurance.”

Many reliable sources agree. For example, the US National Library of Medicine Genetics Home Reference states, “In many cases, health insurance plans will cover the costs of genetic testing when it is recommended by a person’s doctor.”

That, however, leads to a different conundrum for drug makers such as Loxo: the majority of doctors are not keeping up with the rapid-fire pace of discovery in the realm of genetics and targeted therapies. Some genes like BRCA1 and BRCA2 are familiar enough to doctors that they know how and why they are important. However, most other genes are less known, and critically, less understood by doctors who must also focus on all the other myriad aspects of patient care.

In an article on the Color Genomics $249 Hereditary Cancer Test, which tests for mutations in 30 genes, Timothy Hamill, MD, Professor Emeritus, University of California San Francisco (UCSF) Department of Laboratory Medicine, and former overall director of UCSF’s clinical laboratories, told Wired, “If you talk to docs, they say ‘BRCA, that’s the only thing I’m interested in because I don’t know what to do with the other information.’ Doctors don’t know what to do with it. Patients don’t know what to do with it.”

More Testing Equals More Knowledge

Further complicating the issue, there is an enormous lack of information on how multipanel screenings will affect individuals, public health, and the cost of healthcare in general. Several studies are underway, but they are so new it could be years before any real results become available.

Five years ago, it cost about $20,000 to sequence the whole human genome. Now the average price is $1,500, though there are more and less expensive types of genetic tests. As the cost continues to decline, however, more people will undergo the testing and scientists will learn more about how to identify the best therapy to treat cancers caused by genetic mutations.

—Dava Stewart

Related Information:

Loxo Oncology Announces Positive Top-Line Results from Independent Review Committee Assessment of Larotrectinib Dataset

National Cancer Institute Statistics

Promising New Cancer Drugs Won’t Go Far Unless Everyone Gets Genetic Testing

Tumor DNA Sequencing in Cancer Treatment

Will Health Insurance Cover the Costs of Genetic Testing?

A Single $249 Test Analyzes 30 Cancer Genes. But Do You Need It?

Personal Genome Test Will Sell at New Low Price of $250