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

Preparing for Z-Codes as DEX Genetic Testing Registry Rolls Out to Commercial Health Plans

Palmetto GBA’s Chief Medical Officer will cover how clinical laboratories billing for genetic testing should prepare for Z-Codes at the upcoming Executive War College in New Orleans

After multiple delays, UnitedHealthcare (UHC) commercial plans will soon require clinical laboratories to use Z-Codes when submitting claims for certain molecular diagnostic tests. Several private insurers, including UHC, already require use of Z-Codes in their Medicare Advantage plans, but beginning June 1, UHC will be the first to mandate use of the codes in its commercial plans as well. Molecular, anatomic, and clinical pathologist Gabriel Bien-Willner, MD, PhD, who oversees the coding system and is Chief Medical Officer at Palmetto GBA, expects that other private payers will follow.

“A Z-Code is a random string of characters that’s used, like a barcode, to identify a specific service by a specific lab,” Bien-Willner explained in an interview with Dark Daily. By themselves, he said, the codes don’t have much value. Their utility comes from the DEX Diagnostics Exchange registry, “where the code defines a specific genetic test and everything associated with it: The lab that is performing the test. The test’s intended use. The analytes that are being measured.”

The registry also contains qualitative information, such as, “Is this a good test? Is it reasonable and necessary?” he said.

Bien-Willner will answer those questions and more at the upcoming annual Executive War College on Diagnostics, Clinical Laboratory, and Pathology Management in New Orleans on April 30-May 1. Lab professionals still have time to register and attend this important presentation.

Molecular, anatomic, and clinical pathologist Gabriel Bien-Willner, MD, PhD (above), Palmetto GBA’s Chief Medical Officer, will speak about Z-Codes and the MolDX program during several sessions at the upcoming Executive War College on Diagnostics, Clinical Laboratory, and Pathology Management taking place in New Orleans on April 30-May 1. Clinical laboratories involved in genetic testing will want to attend these critical sessions. (Photo copyright: Bien-Willner Physicians Association.)

Palmetto GBA Takes Control

Palmetto’s involvement with Z-Codes goes back to 2011, when the company established the MolDX program on behalf of the federal Centers for Medicare and Medicaid Services (CMS). The purpose was to handle processing of Medicare claims involving genetic tests. The coding system was originally developed by McKesson, and Palmetto adopted it as a more granular way to track use of the tests.

In 2017, McKesson merged its information technology business with Change Healthcare Holdings LLC to form Change Healthcare. Palmetto GBA acquired the Z-Codes and DEX registry from Change in 2020. Palmetto GBA had already been using the codes in MolDX and “we felt we needed better control of our own operations,” Bien-Willner explained.

In addition to administering MolDX, Palmetto is one of four regional Medicare contractors who require Z-Codes in claims for genetic tests. Collectively, the contractors handle Medicare claims submissions in 28 states.

Benefits of Z-Codes

Why require use of Z-Codes? Bien-Willner explained that the system addresses several fundamental issues with molecular diagnostic testing.

“Payers interact with labs through claims,” he said. “A claim will often have a CPT code [Current Procedural Technology code] that doesn’t really explain what was done or why.”

In addition, “molecular diagnostic testing is mostly done with laboratory developed tests (LDTs), not FDA-approved tests,” he said. “We don’t see LDTs as a problem, but there’s no standardization of the services. Two services could be described similarly, or with the same CPT codes. But they could have different intended uses with different levels of sophistication and different methodologies, quality, and content. So, how does the payer know what they’re paying for and whether it’s any good?”

When the CPT code is accompanied by a Z-Code, he said, “now we know exactly what test was done, who did it, who’s authorized to do it, what analytes are measured, and whether it meets coverage criteria under policy.”

The process to obtain a code begins when the lab registers for the DEX system, he explained. “Then they submit information about the test. They describe the intended use, the analytes that are being measured, and the methodologies. When they’ve submitted all the necessary information, we give the test a Z-Code.”

Then, the test undergoes a technical assessment. Bien-Willner described this as a risk-based process where complex tests, such as those employing next-generation sequencing or gene expression profiling, get more scrutiny than less-complex methodologies such as a polymerase chain reaction (PCR) test.

The assessment could be as simple as a spreadsheet that asks the lab which cancer types were tested in validation, he said. On the other end of the scale, “we might want to see the entire validation summary documentation,” he said.

Commercial Potential

Bien-Willner joined the Palmetto GBA in 2018 primarily to direct the MolDX program. But he soon saw the potential use of Z-Codes and the DEX registry for commercial plans. “It became instantly obvious that this is a problem for all payers, not just Medicare,” he said.

Over time, he said, “we’ve refined these processes to make them more reproducible, scalable, and efficient. Now commercial plans can license the DEX system, which Z-Codes are a part of, to better automate claims processing or pre-authorizations.”

In 2021, the company began offering the coding system for Medicare Advantage plans, with UHC the first to come aboard. “It was much easier to roll this out for Medicare Advantage, because those programs have to follow the same policies that Medicare does,” he explained.

As for UHC’s commercial plans, the insurer originally planned to require Z-Codes in claims beginning Aug. 1, 2023, then pushed that back to Oct. 1, according to Dark Daily’s sister publication The Dark Report.

Then it was pushed back again to April 1 of this year, and now to June 1.

“The implementation will be in a stepwise fashion,” Bien-Willner advised. “It’s difficult to take an entirely different approach to claims processing. There are something like 10 switches that have to be turned on for everything to work, and it’s going to be one switch at a time.”

For Palmetto GBA, the commercial plans represent “a whole different line of business that I think will have a huge impact in this industry,” he said. “They have the same issues that Medicare has. But for Medicare, we had to create automated solutions up front because it’s more of a pay and chase model,” where the claim is paid and CMS later goes after errors or fraudulent claims.

“Commercial plans in general just thought they could manually solve this issue on a claim-by-claim basis,” he said. “That worked well when there was just a handful of genetic tests. Now there are tens of thousands of tests and it’s impossible to keep up.

They instituted programs to try to control these things, but I don’t believe they work very well.”

Bien-Willner is scheduled to speak about Palmetto GBA’s MolDX program, Z-Codes, and related topics during three sessions at the upcoming 29th annual Executive War College conference. Clinical laboratory and pathology group managers would be wise to attend his presentations. Visit here (or paste this URL into your browser: to learn more and to secure your seat in New Orleans.

—Stephen Beale

Related Information:

Palmetto Issuing ‘Z-Codes’ to Track Molecular Dx Utilization, Gather Data CPT Codes Can’t Provide

McKesson and Change Healthcare Complete the Creation of New Healthcare Information Technology Company

UnitedHealthcare Commercial: Reimbursement Policy Update Bulletin: January 2024

UnitedHealthcare’s Z-Code Requirement for Genetic Testing Claims Impacts Laboratories and Payers

UHC Delays April 1st Z-Code Commercial Implementation to June 1, 2024

UHC Will Delay Enforcement of Z-Codes for Genetic Test Claims

Perfect Storm of Clinical Lab and Pathology Practice Regulatory Changes to Be Featured in Discussions at 29th Annual Executive War College

Forces in play will directly impact the operations and financial stability of many of the nation’s clinical laboratories

With significant regulatory changes expected in the next 18 to 24 months, experts are predicting a “Perfect Storm” for managers of clinical laboratories and pathology practices.

Currently looming are changes to critical regulations in two regulatory areas that will affect hospitals and medical laboratories. One regulatory change is unfolding with the US Food and Drug Administration (FDA) and the other regulatory effort centers around efforts to update the Clinical Laboratory Improvement Amendments of 1988 (CLIA).

The major FDA changes involve the soon-to-be-published Final Rule on Laboratory Developed Tests (LDTs), which is currently causing its own individual storm within healthcare and will likely lead to lawsuits, according to the FDA Law Blog.

In a similar fashion—and being managed under the federal Centers for Medicare and Medicaid Services (CMS)—are the changes to CLIA rules that are expected to be the most significant since 2003.

The final element of the “Perfect Storm” of changes coming to the lab industry is the increased use by private payers of Z-Codes for genetic test claims.

In his general keynote, Robert L. Michel, Dark Daily’s Editor-in-Chief and creator of the 29th Executive War College on Diagnostics, Clinical Laboratory, and Pathology Management, will set the stage by introducing a session titled, “Regulatory Trifecta Coming Soon to All Labs! Anticipating the Federal LDT Rule, Revisions to CLIA Regulations, and Private Payers’ Z-Code Policies for Genetic Claims.”

“There are an unprecedented set of regulatory challenges all smashing into each other and the time is now to start preparing for the coming storm,” says Robert L. Michel (above), Dark Daily’s Editor-in-Chief and creator of the 29th Executive War College on Diagnostics, Clinical Laboratory, and Pathology Management, a national conference on lab management taking place April 30-May 1, 2024, at the Hyatt in New Orleans. (Photo copyright: The Dark Intelligence Group.)

Coming Trifecta of Disruptive Forces to Clinical Laboratory, Anatomic Pathology

The upcoming changes, Michel notes, have the potential to cause major disruptions at hospitals and clinical laboratories nationwide.

“Importantly, this perfect storm—which I like to describe as a Trifecta because these three disruptive forces that will affect how labs will conduct business—is not yet on the radar screen of most lab administrators, executives, and pathologists,” he says.

Because of that, several sessions at this year’s Executive War College conference, now in its 29th year, will offer information designed to give attendees a better understanding of how to manage what’s coming for their labs and anatomic pathology practices.

“This regulatory trifecta consists of three elements,” adds Michel, who is also Editor-in-Chief of Dark Daily’s sister publication The Dark Report, a business intelligence service for senior level executives in the clinical laboratory and pathology industry, as well in companies that offer solutions to labs and pathology groups.

According to Michel, that trifecta includes the following:

Element 1

FDA’s Draft LDT Rule

FDA’s LDT rule is currently the headline story in the lab industry. Speaking about this development and two other FDA initiatives involving diagnostics at the upcoming Executive War College will be pathologist Tim Stenzel, MD, PhD, former director of the FDA’s Office of In Vitro Diagnostics. It’s expected that the final rule on LDTs could be published by the end of April.

Stenzel will also discuss harmonization of ISO 13485 Medical Devices and the FDA’s recent memo on reclassifying most high-risk in vitro diagnostics to moderate-risk to ease the regulatory burden on companies seeking agency review of their diagnostic assays.

Element 2

CLIA Reforms and Updates

The second element is coming reforms and updates to the CLIA regulations, which Michel says will be the “most-significant changes to CLIA in more than two decades.” Speaking on this will be Reynolds Salerno, PhD, Acting Director, Center for Laboratory Systems and Response at the federal Centers for Disease Control and Prevention (CDC).

Salerno will also cover the CDC’s efforts to foster closer connections with clinical labs and their local public health laboratories, as well as the expanding menu of services for labs that his department now offers.

Element 3

Private Payer Use of Z-Codes for Test Claims

On the third development—increased use by private payers of Z-Codes for genetic test claims—the speaker will be pathologist Gabriel Bien-Willner, MD, PhD. He is the Medical Director of the MolDX program at Palmetto GBA, a Medicare Administrative Contractor (MAC). It is the MolDX program that oversees the issuance of Z-Codes for molecular and diagnostic tests.

UnitedHealthcare (UHC) was first to issue such a Z-Code policy last year, although it has delayed implementation several times. Other major payers are watching to see if UHC succeeds with this requirement, Michel says.

Other Critical Topics to be Covered at EWC

In addition to these need-to-know regulatory topics, Michel says that this year’s Executive War College will present almost 100 sessions and include 148 speakers. Some of the other topics on the agenda in New Orleans include the following and more:

  • Standardizing automation, analyzers, and tests across 25 lab sites.
  • Effective ways to attract, hire, and retain top-performing pathologists.
  • Leveraging your lab’s managed care contracts to increase covered tests.
  • Legal and compliance risks of artificial intelligence (AI) in clinical care.

“Our agenda is filled with the topics that are critically important to senior managers when it comes to managing their labs and anatomic pathology practices,” Michel notes.

“Every laboratory in the United States should recognize these three powerful developments are all in play at the same time and each will have direct impact on the clinical and financial performance of our nation’s labs,” Michel says. “For that reason, every lab should have one or more of their leadership team present at this year’s Executive War College to understand the implications of these developments.”

Visit here to learn more about the 29th Executive War College conference taking place in New Orleans.

—Bob Croce

Related Information:

One Step Closer to Final: The LDT Rule Arrives at OMB, Making a Lawsuit More Likely

FDA: CDRH Announces Intent to Initiate the Reclassification Process for Most High Risk IVDs

FDA Proposes Down-Classifying Most High-Risk IVDs

Z-codes Requirements for Molecular Diagnostic Testing

2024 Executive War College Agenda

Patients and Physicians Go Online to Pressure Insurers on Prior Authorization Denial of Claims, Something Genetic Testing Labs Regularly Encounter

In a handful of cases, health insurers reversed denials after physicians or patients posted complaints on social media

Prior authorization requirements by health insurers have long been a thorn in the side of medical laboratories, as well as physicians. But now, doctors and patients are employing a new tactic against the practice—turning to social media to shame payers into reversing denials, according to KFF Health News (formerly Kaiser Health News).

Genetic testing lab companies are quite familiar with prior authorization problems. They see a significant number of their genetic test requests fail to obtain a prior authorization. Thus, if the lab performs the test, the payer will likely not reimburse, leaving the lab to bill the patient for 100% of the test price, commonly $1,000 to $5,000. Then, an irate patient typically calls the doctor to complain about the huge out-of-pocket cost.

One patient highlighted in the KFF story was Sally Nix of Statesville, North Carolina. Her doctor prescribed intravenous immunoglobulin infusions to treat a combination of autoimmune diseases. But Nix’s insurer, Blue Cross Blue Shield of Illinois (BCBSIL), denied payment for the therapy, which amounted to $13,000 every four weeks, KFF Health News reported. So, she complained about the denial on Facebook and Instagram.

“There are times when you simply must call out wrongdoings,” she wrote in an Instagram post, according to the outlet. “This is one of those times.”

In response, an “escalation specialist” from BCBSIL contacted her but was unable to help. Then, after KFF Health News reached out, Nix discovered on her own that $36,000 in outstanding claims were marked “paid.”

“No one from the company had contacted her to explain why or what had changed,” KFF reported. “[Nix] also said she was informed by her hospital that the insurer will no longer require her to obtain prior authorization before her infusions, which she restarted in July.”

“I think we’re on the precipice of really improving the environment for prior authorization,” said Todd Askew, Senior Vice President, Advocacy, for the American Medical Association, in an AMA Advocacy Update. If this was to happen, it would be welcome news for clinical laboratories and anatomic pathology groups. (Photo copyright: Nashville Medical News.)

Physicians Also Take to Social Media to Complain about Denials

Some physicians have taken similar actions, KFF Health News reported. One was gastroenterologist Shehzad A. Saeed, MD, of Dayton Children’s Hospital in Ohio. Saeed posted a photo of a patient’s skin rash on Twitter in March after Anthem denied treatment for symptoms of Crohn’s disease. “Unacceptable and shameful!” he tweeted.

Two weeks later, he reported that the treatment was approved soon after the tweet. “When did Twitter become the preferred pathway for drug approval?” he wrote.

Eunice Stallman, MD, a psychiatrist from Boise, Idaho, complained on X (formerly Twitter) about Blue Cross of Idaho’s prior authorization denial of a brain cancer treatment for her nine-month-old daughter. “This is my daughter that you tried to deny care for,” she posted. “When a team of expert [doctors] recommend a treatment, your PharmD reviewers don’t get to deny her life-saving care for your profits.”

However, in this case, she posted her account after Blue Cross Idaho reversed the denial. She said she did this in part to prevent the payer from denying coverage for the drug in the future. “The power of the social media has been huge,” she told KFF Health News. The story noted that she joined X for the first time so she could share her story.

Affordable Care Act Loophole?

“We’re not going to get rid of prior authorization. Nobody is saying we should get rid of it entirely, but it needs to be right sized, it needs to be simplified, it needs to be less friction between the patient and accessing their benefits. And I think we’re on really good track to make some significant improvements in government programs, as well as in the private sector,” said Todd Askew, Senior Vice President, Advocacy, for the American Medical Association, in an AMA Advocacy Update.

However, KFF Health News reported that Kaye Pestaina, JD, a Kaiser Family Foundation VP and Co-Director of the group’s Program on Patient and Consumer Protections, noted that some “patient advocates and health policy experts” have questioned whether payers’ use of prior authorization denials may be a way to get around the Affordable Care Act’s prohibition against denial of coverage for preexisting conditions.

“They take in premiums and don’t pay claims,” family physician and healthcare consultant Linda Peeno, MD, told KFF Health News. “That’s how they make money. They just delay and delay and delay until you die. And you’re absolutely helpless as a patient.” Peeno was a medical reviewer for Humana in the 1980s and then became a whistleblower.

The issue became top-of-mind for genetic testing labs in 2017, when Anthem (now Elevance) and UnitedHealthcare established programs in which physicians needed prior authorization before the insurers would agree to pay for genetic tests.

Dark Daily’s sister publication The Dark Report covered this in “Two Largest Payers Start Lab Test Pre-Authorization.” We noted then that it was reasonable to assume that other health insurers would follow suit and institute their own programs to manage how physicians utilize genetic tests.

At least one large payer has made a move to reduce prior authorization in some cases. Effective Sept. 1, UnitedHealthcare began a phased approach to remove prior authorization requirements for hundreds of procedures, including more than 200 genetic tests under some commercial insurance plans.

However, a source close to the payer industry noted to Dark Daily that UnitedHealthcare has balked at paying hundreds of millions’ worth of genetic claims going back 24 months. The source indicated that genetic test labs are engaging attorneys to push their claims forward with the payer.

Is Complaining on Social Media an Effective Tactic?

A story in Harvard Business Review cited research suggesting that companies should avoid responding publicly to customer complaints on social media. Though public engagement may appear to be a good idea, “when companies responded publicly to negative tweets, researchers found that those companies experienced a drop in stock price and a reduction in brand image,” the authors wrote.

However, the 2023 “National Customer Rage Survey,” conducted by Customer Care Measurement and Consulting and Arizona State University, found that nearly two-thirds of people who complained on social media received a response. And “many patients and doctors believe venting online is an effective strategy, though it remains unclear how often this tactic works in reversing prior authorization denials,” KFF Health News reported.

Federal Government and States Step In

KFF Health News reported that the federal government is proposing reforms that would require some health plans “to provide more transparency about denials and to speed up their response times.” The changes, which would take effect in 2026, would apply to Medicaid, Medicare Advantage, and federal Health Insurance Marketplace plans, “but not employer-sponsored health plans.”

KFF also noted that some insurers are voluntarily revising prior authorization rules. And the American Medical Association reported in March that 30 states, including Arkansas, California, New Jersey, North Carolina, and Washington, are considering their own legislation to reform the practice. Some are modeled on legislation drafted by the AMA.

Though the states and the federal government are proposing regulations to address prior authorization complaints, reform will likely take time. Given Harvard Business Review’s suggestion to resist replying to negative customer complaints in social media, clinical labs—indeed, all healthcare providers—should carefully consider the full consequences of going to social media to describe issues they are having with health insurers.

—Stephen Beale

Related Information:

Doctors and Patients Try to Shame Insurers Online to Reverse Prior Authorization Denials

Delays Related to Prior Authorization in Inflammatory Bowel Disease

Why You Shouldn’t Engage with Customer Complaints on Twitter

Feds Move to Rein In Prior Authorization, a System That Harms and Frustrates Patients

“Damaged Care” Premiere Features HMO Whistleblower

Major Insurers to Ease Prior Authorizations Ahead of Federal Crackdown

How Labs Can Improve Their Relationships with Payers for Genomic Test Reimbursement

Payers Request More Claims Documentation

Dallas Healthcare Executive Sentenced in Next Health Laboratories Fraud Case

Referral-kickback and bribery schemes that included medical laboratory tests bilked private insurers and government health plans out of $150 million over six-year period

Andrew Hillman, former co-owner of Next Health LLC, a network of drug and genetic-testing laboratories and pharmacies based in Dallas, who pleaded guilty in 2018 to violating federal anti-kickback laws, has been sentenced to 66 months in prison and ordered to pay $3 million in restitution for his role in Medicare fraud, money laundering, healthcare bribes, and doctor kickbacks, reported The Dallas Morning News.

Dark Daily’s sister publication The Dark Report (TDR) previously reported on the federal lawsuit filed by UnitedHealthcare (NYSE:UNH) against Next Health in 2017 for allegedly running fraudulent drug testing and doctor kickback schemes from 2012-2018 in Dallas.

The two owners of Next Health, Andrew Hillman and Semyon Narosov, pleaded guilty to “multiple medical kickback schemes in Dallas in which doctors were paid to steer patients to certain hospitals,” The Dallas Morning News reported. One scheme involved clinical laboratory test specimens that “were sent to the Next Health labs for a battery of unnecessary and expensive tests under the guise of a wellness study, court records say, and doctors were paid kickbacks for referring patients.”

Hillman and Narosov admitted to defrauding both government and private insurance through the phony “wellness” program and through a separate physician kickback scheme in which doctors were paid to refer patients to the now-closed Forest Park Medical Center (FPMC) in Dallas. In court filings, they admitted that “Next Health billed private and government health insurance plans more than $450 million between 2012 and 2018 and collected about $150 million in fraudulent proceeds,” Dallas Morning News reported.

Though Hillman’s guilty plea could have resulted in a 15-year prison sentence, he cooperated with federal investigators in the FPMC bribery scheme investigation and for that he received a reduced sentence. Narosov also pleaded guilty in both cases, but he has not yet been sentenced. 

UnitedHealthcare Uncovers Multiple Healthcare Fraud Schemes

Clinical laboratories were at the center of the Next Health money laundering scheme, which involved multiple shell companies, limited liability companies (LLCs) and umbrella corporations to shield the unlawful conduct from detection. And it worked for five years until 2017, when UnitedHealthcare (UHC) filed a $100 million federal lawsuit against Dallas-based Next Health and its subsidiary labs:

Additionally, two individuals also were charged: former Next Health marketing representative Erik Bugen and Kirk Zajac.

As outlined in the lawsuit, UnitedHealthcare initially uncovered the fraud during a review of routine medical laboratory test claims to identify abnormal testing activity. Upon a deeper investigation, the insurer discovered an array of bribes and kickbacks and other potential crimes. In one illicit arrangement, Next Health sales consultants provided $50 gift cards to people who provided urine samples in a Whataburger bathroom as part of the “wellness study.”

Clinical laboratory specimens were sent to Next Health laboratories for “multiple unnecessary and expensive drug tests that were later billed to United and its customers,” the lawsuit states.

The lawsuit contends the defendants:

  • Paid bribes and kickbacks to referral sources, including physicians, sober homes and sales consultants, in exchange for requesting out-of-network lab services;
  • Billed for lab services that were not ordered by medical providers;
  • Inflated claims by utilizing standing protocols for blanket testing, regardless of patients’ medical histories, clinical conditions, or needs;
  • Billed for services the defendants did not perform; and
  • Billed charges the defendants never intended to collect from patients.
UnitedHealthcare Director of Communications Matthew Rodriguez (above) told the Dallas Morning News, “UnitedHealthcare has taken an active role in recent years in prosecuting instances of lab fraud, and this decision will continue to shine light on companies engaged in inappropriate lab services that put patients at risk and drive up costs.” He said the nation’s largest single health insurer will continue to go after clinical laboratories they suspect may be defrauding the healthcare industry. [Photo copyright: BusinessWire.]

Other Healthcare Frauds and Kickback Schemes Against UnitedHealthcare

As TDR detailed in “Allegations in UHC Health Insurance Fraud Case Involve Multiple Defendants,” January 22, 2018, Hillman and several other defendants were not novices in devising healthcare kickback schemes. TDR noted the UnitedHealthcare lawsuit was the “visible tip of a large iceberg,” with the insurance giant the latest victim in a pattern of potential fraud and abuse that extended back almost a decade. Included in the laundry list of other allegedly illegal schemes was one distinctly similar to the Next Health fraud.

A year earlier, the US Attorney’s Office of the Northern District of Texas brought indictments against 21 persons affiliated with the physician-owned Forest Park Medical Center in Dallas. Next Health’s Hillman and Narosov were also included in that indictment, as well as 38 subsidiaries of U.S. Health Group, an earlier incarnation of Next Health.

The pair’s ownership and management positions within Next Health and its subsidiaries created “an illegal scheme that was similar to the one in place at Forrest [sic] Park,” UnitedHealthcare stated in its complaint.

The indictment alleged FPMC paid approximately $40 million in bribes and kickbacks to physicians, recruiters, and others in exchange for referring lucrative patients—particularly those with high-reimbursing, private health insurance or benefits under certain federal programs—to the out-of-network hospital.

Hillman, who was among 10 defendants who pleaded guilty before the FPMC case went to trial, testified for the government, the federal Department of Justice (DOJ) said in a statement.

In addition, seven others were convicted of conspiracy to pay or receive healthcare bribes.

“The verdict in the Forest Park case is a reminder to healthcare practitioners across the District that patients—not payments—should guide decisions about how and where doctors administer treatment,” US Attorney for the Northern District of Texas Erin Nealy Cox, JD, said in a press release announcing the guilty verdicts.

US District Court Judge John Parker, JD, who served as US Attorney for the Northern District of Texas when the FPMC indictments were handed down, explained the impact of fraud on the healthcare system.

“Medical providers who enrich themselves through bribes and kickbacks are not only perverting our critical healthcare system, but they are committing a serious crime,” Parker said in a statement announcing the FPMC indictments. “Massive, multi-faceted schemes such as this one, built on illegal financial relationships, drive up the cost of healthcare for everyone and must be stopped.”

The lesson for clinical laboratory leaders is that vigilance is key to spotting bad actors who wish to defraud the healthcare system. This is double critical at a same time when labs are under increased scrutiny from payers, federal and state regulators, and law enforcement.

—Andrea Downing Peck

Related Information:

Architect of Massive Medical Kickback Schemes Gets Light Prison Term after Giving Feds the Goods

Feds Raid Another Pharmacy as Dallas becomes Hot Spot for Physician Kickbacks

UnitedHealthcare Servs., Inc. v. Next Health, LLC

Prison Time for Another Man Who Ripped Off Health Insurance Program for Troops

Executives, Surgeons, Physicians, and Others Affiliated with Forest Park Medical Center (FPMC) in Dallas Indicted in Massive Conspiracy

Seven Guilty in Forest Park Healthcare Fraud Trial

Surgeons, hospital owner convicted in massive kickback scheme involving Forest Park Medical Center

Allegations in UHC Health Insurance Fraud Case Involve Multiple Defendants

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