Clinical laboratories and anatomic pathology groups should consider this another example of how CMS is taking forward steps to encourage value-based payment arrangements throughout the health system
With the sky-high cost of many prescription drugs and gene therapies, it was only a matter of time before the Centers for Medicare and Medicaid Services (CMS) would seek to link reimbursement for them to patient outcomes.
A recent CMS proposed rule (CMS-2842-P) concerning value-based purchasing (VBP) for prescription drugs covered by Medicaid encourages payers to engage in Medicaid state value-based purchasing (aka, pay-for-performance) arrangements for expensive prescription drugs. This rule may have implications for medical laboratories and anatomic pathology groups if it were extended to cover companion diagnostics linked to expensive therapeutic drugs and gene therapies.
CMS also intents the proposed rule to help drug manufacturers ease roadblocks to contracting with payers—including Medicaid—a CMS fact sheet explained.
Federal officials are looking to reimburse healthcare providers for prescribing drugs that are shown to work best on patients that truly need them, while also incentivizing pharmaceutical manufacturers to created drugs “of high patient value,” stated Laffer Healthcare Intelligence, a Nashville, Tenn. healthcare investment firm, in an email to its intelligence service subscribers.
In a press release announcing the proposed rule, Seema Verma, CMS Administrator, said “We are creating opportunities for drug manufacturers to have skin in the game through payment arrangements that challenge them to put their money where their mouth is.”
Old Regulations Don’t Address Value, Expensive Gene Therapies
According to CMS, for 30 years federal regulations have favored the “volume of drugs” sold over the “quality of drugs.” Simultaneously, during the past three years the US Food and Drug Administration (FDA) has approved four gene therapies with many more “in the development pipeline,” Verma wrote in the journal Health Affairs. “While the lifesaving impact of these often-curative therapies are profound, their costs are unprecedented,” she stated.
CMS’ new rule proposes to define value-based purchasing as “an arrangement or agreement intended to align pricing and/or payments to evidence-based measures and outcomes-based measures,” Verma added.
Companion Diagnostic: Molecular and Genetic Testing
For clinical laboratories, the case CMS makes for therapeutic drugs could be applied to expensive molecular diagnostics and genetic testing. CMS may base reimbursement on how accurately and how fast a lab test can enable a diagnosis. Also, payment could be linked to a lab’s report and guidance to the ordering provider in selecting a therapy that makes a difference in the patient’s outcome.
“This is exactly the concept of the companion diagnostic,” said Robert Michel, editor-in-chief of Dark Daily and its sister publication, The Dark Report. “Take, for example, a $5,000 genetic cancer test that that stages a $500,000 cancer prescription drug. Patients who will not benefit from the drug will not get it. And the $5,000 lab test may keep, say, 10 people from getting a drug that wouldn’t work for them. Thus, the $50,000 in lab tests could save $5 million in prescription drug costs,” he explained.
For its part, Novartis, the Basel, Switzerland-based creator of Zolgensma, said the proposed CMS changes are “an important first step,” and helpful to the company’s “access strategy” in the US, BioPharma Dive reported.
Healthcare experts envision that deals struck under the new proposed CMS rule will focus on gene therapies and expensive drugs, MedPage Today reported.
“Measuring outcomes is costly; it takes time, and everyone has to come up with a way to do it. So, if a drug costs $50, it’s not worth going to every single patient (in research). If the drug costs $500,000, maybe it’s worth it … figuring out if the drug worked. That’s why people talk about it in the context of gene therapies,” Alexander Dworkowitz (above), Partner, Manatt Health, New York, told MedPage Today. (Photo copyright: Manatt, Phelps and Phillips, LLP.)
According to the Laffer Healthcare Intelligence analysis email, CMS’ 137-page proposed rule is “very broad,” but focuses on three themes:
“First, CMS wants to establish an official definition for VBP models to accelerate development of drug pay-per-value programs.
“Second, CMS want to restrict the amount of opioids doctors can prescribe.
“Third, very subtle changes are proposed that negatively affect the PBM (pharmacy benefit management) industry.”
CMS’ proposal also includes standards aimed at fighting opioid prescription fraud and misuse in Medicaid drug programs, noted Fierce Healthcare.
Transparent Drug Prices
Medical laboratory leaders may want to monitor the progress of this proposed rule. In addition to value-based payment, the rule advances price transparency by clearing the way to sharing prices of therapeutic drugs and how they improve patient care, while also lowering costs.
Meanwhile, a refresh of lab information technology to enable authorization of genetic and molecular tests by payer also may prove worthwhile.
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.
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
This is a must-attend for clinical pathologists, lab managers, and lab scientists who wants to:
Develop their skills and knowledge in how to design an effective utilization management (UM) project; and
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.
Medicare’s latest payment rules for joint replacement surgeries is another step forward on the path toward bundled payments and similar value-based reimbursement models
By now, most clinical laboratory managers and pathologists know about an ambitious new Medicare program that essentially brings a value-based reimbursement model to joint replacement surgeries. The program has already commenced in a number of regional markets across the United States.
This new program was instituted by the U.S. Department of Health & Human Services (HHS). It is mandatory program and reimburses providers for hip and knee replacements using a reimbursement model that further ties Medicare payments to quality or value metrics. This program was launched in 67 metropolitan areas.
