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Clinical Laboratories and Pathology Groups

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FEMA Paid a Just-Formed Company Millions of Dollars for COVID-19 Specimen Collection Tubes That Were Unusable for Clinical Laboratory Testing

The fledgling test-kit company sent plastic preforms that were intended for use in the manufacturing of soda bottles, not clinical laboratory specimen tubes

When is a specimen tube not a specimen tube? When it is a plastic tube made for creating soda bottles. And that may be exactly what the Federal Emergency Management Agency (FEMA) received after paying $7.3 million to a fledgling Florida-based company that won a multi-million-dollar no-bid contract from the federal government for COVID-19 clinical laboratory testing supplies, which FEMA then shipped nationwide to states that had requested the supplies.

FEMA signed the deal with Fillakit, LLC, on May 7, 2020, “just six days after the company was formed,” reported ProPublica, which went on to state that the shipment of unusable Fillakit specimen tubes contributed to delays in rolling out widespread COVID-19 testing in the US.

According to ProPublica, Fillakit supplied “preforms” that are designed to be expanded with heat and pressure into 2-liter soda bottles, not laboratory specimen tubes.

Michelle Forman, a spokesperson for the Association of Public Health Laboratories, told ProPublica one major flaw of the Fillakit tubes is their size. “They are an unusual shape, so they don’t fit racks,” she said, “and we are getting lots of pushback about how difficult it is to work with them from our clinical partners.”

Fillakit image shows the preform tube that is intended to be die-molded into a large soda bottle
The photo of the preform sent by Fillakit above is taken from a Fox23 news report that stated “FEMA sent the Washington State Department of Health nearly 300,000 plastic tubes. They thought they were getting test tubes for coronavirus testing, but instead, they received tiny plastic preforms that can be made into 2-liter soda bottles.” This photograph shows the preform tube that is intended to be die-molded into a large soda bottle. That is why the cap on the tube is appropriate for the tubes intended purpose as a soda bottle.  (Photo copyright: Alison Grande, KIRO7/Fox23.)

Fillakit Employees Describe ‘Unsanitary’ Working Conditions

Ex-employees of Fillakit told the Wall Street Journal (WSJ) the specimen tubes were being handled in unsanitary open-air conditions in a warehouse outside of Houston where the test kits were being assembled.

“There were up to 250 workers crowded in a small warehouse room, shoulder to shoulder … working off of fold-up tables with supplies placed on the floor and handled without gloves,” Teresa Bosworth Green told Community Impact (CI), which reported that Green worked at Fillakit from May 11-20.

“We were told that we would be filling and capping tubes that would be used for COVID testing,” Green told CI.

However, according to CI, Green “expressed concern about the lack of cleanliness and facemasks. Green brought her own mask, but workers were not initially provided any.”

Green told CI, “People were breathing and coughing right over the solution.”

In a letter to FEMA and the Department of Health and Human Services (HHS) after Michigan received more than 322,000 tubes of transport media manufactured by Fillakit, Democrat Senators Debbie Stabenow and Gary Peters wrote, “Even if the tubes themselves were not unsuitable for testing purposes, the contamination risks inherent in such careless handling would cause serious concerns about the reliability of any tests conducted using these materials.”

On July 7, 2020, the Wall Street Journal reported that Fillakit had notified the Florida Secretary of State on June 26 that the company had been dissolved.

Kira Doyle, JD, owner/attorney at Kira Doyle Law in St. Petersburg, FL
Kira Doyle, JD (above), owner/attorney at Kira Doyle Law in St. Petersburg, Fla., who multiple media outlets listed as Fillakit’s manager, told the Tampa Bay Times that media portraits of the company have been unfair. In a series of emails, she said Fillakit was attempting to fill a void in the medical supply chain. “If you are interested in writing an article about empowered female business owners or entrepreneurs creating jobs and helping this great country during an unprecedented pandemic, Fillakit LLC, fits that profile,” Doyle wrote. (Photo copyright: Kira Doyle Law.)

Under Pressure, Feds Award Contracts for COVID-19 Test Supplies to Inexperienced Suppliers

Fillakit as just one example out of “more than 250 companies that got contracts worth more than $1 million without going through a fully competitive bidding process,” NPR reported.

“Government procurement experts say federal officials were trying to move quickly to deliver desperately needed personal protective equipment,” NPR continued. “But they question the need to turn to contractors who have never worked with the government before and lacked experience making or delivering the protective gear.”

Among those receiving contracts were companies with little to no experience in manufacturing clinical laboratory testing supplies, personal protective equipment (PPE), as well as others that had never worked in the medical field. One company imported vodka, while another was a school security consultant. Many of the contractors served as middlemen, securing PPE from Chinese manufacturers, which meant they often were “competing with federal agencies, state governments, and local health systems,” all of which were attempting to buy the same equipment in the global marketplace, NPR reported.

“Giving business to people who don’t have experience is something you don’t want to do in an emergency,” Joshua Schwartz, JD, a professor of Government Contracts Law and co-director of the Government Procurement Law Program at George Washington University School of Law, told NPR.

FEMA Defends Its Contracting Process

A ProPublica analysis of coronavirus contracts found that about 13% of total federal government pandemic spending went to first-time vendors. And in a follow-up article, ProPublica claimed, “many of the new contractors have no experience acquiring medical products.”

FEMA, however, maintains it pays for purchases only after they have been delivered to minimize potential for waste of taxpayer dollars. “FEMA does not enter into contracts unless it has reason to believe they will be successfully executed,” the agency told ProPublica.

The US’ lack of preparedness for the COVID-19 pandemic has resulted in missteps and misspending as federal agencies struggle to provide hospitals, clinical laboratories, and healthcare providers with personal protective gear and test supplies, and to ramp up COVID-19 testing nationwide.

This is yet another instance where federal agencies appear to lack the competencies required to fulfill healthcare requirements with proven products that meet critical specifications. Meanwhile, in every community throughout the United States, independent medical laboratories and hospital-based laboratories are clamoring for adequate supplies of everything from collect swabs and viral transport media to reagents and cuvettes.

—Andrea Downing Peck

Related Information:

The Trump Administration Paid Millions for Test Tubes and Got Unusable Mini Soda Bottles

Conroe-Based Company Made Unusable COVID-19 Test Supplies Using $10-Million FEMA Grant

Covid-19 Test-Tube Firm Awarded U.S. Contract, Is Accused of Unsanitary Workplace

Coronavirus Test-Kit Maker Dissolves Amid Probes

Senators Stabenow and Peters Press Trump Administration for Answers on Rewarding an Unreliable Company to Produce Testing Supplies

How a St. Petersburg Company with No History in Medical Supplies Won a $10 million Coronavirus Contract

A Closer Look at Federal COVID Contractors Reveals Inexperience, Fraud Accusations and a Weapons Dealer Operating Out of Someone’s House

Tracking Federal Purchases to Fight the Coronavirus: Search Contract Descriptions, Companies and Agencies

Feds Spend Billions on COVID-19 Contracts, Often without Fully Competitive Bidding

FEMA: Federal Support to Expand National Testing Capabilities

Instead of Coronavirus Testing Supplies, FEMA Sent 300K Tiny Soda Bottles to Washington

Skeptical Missouri Pathologist Played a Key Role in Wall Street Journal Reporter John Carreyrou’s Expose´ Of Medical Lab Test Company Theranos

Fawning media coverage Theranos’ blood-test claims ended once experts spoke out, showing the importance of strong relationships between pathologist and journalists

Wall Street Journal (WSJ) reporter John Carreyrou’s investigation into former Silicon Valley darling Theranos is credited with turning the spotlight on the blood-testing company’s claims and questionable technology. However, Carreyrou’s investigation may never have happened without the assistance of Missouri pathologist Adam Clapper, MD, who tipped off the reporter to growing skepticism about Theranos’ finger-stick blood testing device.

Clapper’s involvement in Theranos’ fall from grace provides a lesson on why anatomic pathologists, clinical pathologists, and other medical laboratory leaders should cultivate strong working relationships with healthcare journalists who seek out expert sources when covering lab-related issues.

Dark Daily has written extensively about Theranos—once valued at nine billion dollars—and its founder and former CEO Elizabeth Holmes, whose criminal trial on nine counts of wire fraud and two counts of conspiracy to commit wire fraud is scheduled to begin this summer, noted the WSJ.

In 2018, Holmes and former Theranos President Ramesh “Sunny” Balwani settled a civil case with the Securities and Exchange Commission (SEC). Holmes agreed to pay a $500,000 penalty and relinquished control of Theranos. She also was barred from serving as Director of a public company for 10 years.

Theranos Investigation Would Not Have Occurred without Clapper

Holmes founded Theranos in 2003 when she was 19 years old. By 2013, Holmes had become a media sensation based on her claims that Theranos had developed a medical technology that could run thousands of clinical laboratory tests using the blood from a tiny finger-prick. And, she claimed, it could do so quickly and cheaply.

By 2015, Carreyrou’s exposé in theWall Street Journal revealed Theranos’ massive deceptions and questionable practices. His series of stories kickstarted the company’s downfall. However, Carreyrou acknowledges his investigation would not have occurred if it were not for pathologist Clapper.

“Without Adam Clapper, I am almost 100% sure that I wouldn’t have done anything,” Carreyrou told the Missourian. “It was the combination of him calling me and telling me what he had found out and how he felt and my feelings about the New Yorker story that really got me on the call of this scandal,” he said.

Anatomic and clinical pathologist Adam Clapper, MD (above), became skeptical about Holmes’ claims after reading a profile on her in The New Yorker. In December 2014, Clapper ended a post on his now defunct Pathology Blawg by saying, “Until proven otherwise, I’m going to be skeptical of Theranos’ claims.” That comment became a starting point for Carreyrou’s later investigation into Theranos. (Photo copyright: Missourian.)

According to the Missourian, Clapper turned to Carreyrou because the reporter had impressed him as “very fact-oriented and fact-driven” during telephone interviews for a series Carreyrou had written the year prior on Medicare fraud.

“I could hear his wheels spinning in his head as we were talking the first time, then he definitely sounded interested and intrigued,” Clapper told the Missourian. “And then I could tell he was even more so because very soon thereafter—like half an hour after that initial conversation—he’d already started to do some research into Theranos.”

Ten months later, the WSJ published Carreyrou’s first installment of his series on Theranos.

“The fact that this tip originated from a guy in Columbia, Missouri, thousands of miles from Silicon Valley—who never spoke to Elizabeth Holmes, who had no connection to the company or even to Silicon Valley other than he read about her claims in a magazine and knew a lot about this by virtue of being a pathologist—tells you that the people who put in all the money in [Theranos] didn’t spend enough time talking to experts and asking them what was feasible and what wasn’t,” said Carreyrou.

Benjamin Mazer, MD (above), an anatomic and clinical pathology resident in pathology and lab medicine at Yale New Haven Hospital, argues pathologists’ voices were noticeably—and critically—absent from media coverage during Theranos’ decade-long ascension. “For many of us in the pathology community, the writing was on the wall long before Carreyrou’s article was published,” he wrote in Health News Review. “Had journalists consulted pathologists as expert sources, the news coverage of Theranos might have been less fawning and more skeptical. Patients might have been spared erroneous tests.” (Photo copyright: Yale University.)

The lawyers defending Holmes against criminal fraud charges are contending Carreyrou “went beyond reporting the Theranos story” by prodding sources to contact federal regulators about the company’s alleged frauds and “possibly biased the agencies’ findings against [Theranos],” Bloomberg News reported.

The Wall Street Journal, however, stands behind Carreyrou’s reporting, which later was published as book, titled, “Bad Blood: Secrets and Lies in a Silicon Valley Startup.”

Carreyrou told New York Magazine he doesn’t blame reporters for hyping Holmes and the technology she touted.

“You could make a case that maybe they should have done more reporting beyond interviewing her and her immediate entourage,” he said. “But how much is a writer/reporter to blame when the subject is bald-face lying to him, too?”

Nonetheless, the Theranos scandal offers a lesson to pathologists and clinical laboratory professionals in the importance of building good working relationships with healthcare journalists who not only must accurately report on healthcare breakthroughs and developments, but also need someone they can trust for an unbiased opinion.

—Andrea Downing Peck

Related Information:

Blood, Fraud and Money Led to CEO’s Fall from Grace

Theranos Founder Elizabeth Holmes to Face Trial Next Year on Fraud Charges

Theranos, CEO Holmes, and Former President Balwani Charged with Massive Fraud

Hot Startup Theranos Struggled with Its Blood Test Technology

The Pathologist and ‘The Inventor’: How a Columbia Doctor Helped Take Down Theranos

Blood Simpler

Elizabeth Holmes Blames Journalist for Theranos Troubles

Pathologists Predicted the Theranos Debacle, but their Voices Were Missing from Most News Coverage

The Reporter Who Took Down a Unicorn

Previously High-Flying Theranos Provides Clinical Laboratories and Pathology Groups with Valuable Lesson on How Quickly Consumer Trust Can Be Lost

Affected patients speak about emotional, financial, and medical costs of receiving inaccurate results from the startup’s faulty Edison ‘finger-stick’ blood draw testing device

Healthcare consumers trust America’s clinical laboratories and anatomic pathology groups to provide accurate test results. When those test results are inaccurate, the loss of public trust can trigger a sharp decline in referrals/revenue and draw an avalanche of lawsuits by those harmed by inaccurate results.

The most recent example of this object lesson is disgraced blood testing company Theranos, previously estimated to be worth $9 billion but now struggling to stay afloat. The once high-flying startup has been brought to the edge of bankruptcy in the aftermath of a fraud settlement with the Securities and Exchange Commission (SEC), sanctions from the Centers for Medicare and Medicaid Services (CMS), investor lawsuits, consumer lawsuits, and a settlement with Walgreens over claims about Theranos’ Edison portable blood analyzer.

Theranos first made its unproven finger-stick blood draw device available to consumers in September 2013, when it announced a partnership with drugstore chain Walgreens (NASDAQ:WBA). At its height, Theranos operated 40 “Wellness Centers” in Walgreens stores in Arizona and a single location in California, which were the source of much of its revenue. USA Today reported the metro Phoenix-area centers alone sold more than 1.5 million blood tests, which yielded 7.8 million tests results for nearly 176,000 consumers. Theranos shuttered the wellness centers in 2016 after CMS inspectors found safety issues at Theranos’ laboratories in California and a Wall Street Journal (WSJ) investigation raised questions about the company’s testing procedures and accuracy claims. Ultimately, Theranos voided the results of all blood tests run on its Edison device from 2014 through 2015.

Breast-cancer survivor Sheri Ackert (above) told the WSJ she panicked when blood-test results from Theranos indicated her cancer may have reoccurred or were indicative of a rare type of tumor. After being retested by a different clinical laboratory, her results were found to be normal. Click here to watch a WSJ video about Ackert’s experience. (Photo/video copyright: Mark Peterman/Adya Beasley/Wall Street Journal.)

USA Today outlined the impact Theranos’ supposedly low-cost, cutting-edge technology had on several customers:

  • A woman inaccurately diagnosed with the thyroid condition Hashimoto’s disease changed her lifestyle, made unnecessary medical appointments, and took medication she didn’t need;
  • A woman inaccurately diagnosed with the autoimmune disease Sjögren’s syndrome was checked for food allergies before being retested and found not to have an autoimmune condition; and,
  • An Arizona resident who had heart surgery visited a Theranos clinic five times to monitor the results of blood-thinning drug warfarin and was switched to a different drug. He had to have a second heart surgery to drain blood from the pericardial sac and believes more accurate test results could have averted the follow-up operation.

Arizona resident Steven Hammons visited a Theranos clinic several times to have his blood tested. He’d been placed on blood thinners following heart surgery. He was taken off the blood thinners presumably based on the results of those tests. However, as USA Today reported, one test result was later found to be inaccurate. Hammons, who underwent a second procedure to remove blood that had built up around his heart, told USA Today he was concerned about the safety of his fellow citizens.

“That makes me very concerned and worried for the safety of other Arizonans,” said Hammons, who once worked in the medical services division of a private health insurance company. “Government had a role in patient safety. The powers that be dropped the ball.”

Arizona Attorney General Mark Brnovich spearheaded a lawsuit against Theranos under the state’s Consumer Fraud Act, which led to a $4.65 million settlement covering full refunds for every Arizona customer who used the company’s testing services.

“Theranos may have not only had some erroneous test results, but they may have misread my rising blood pressure level as well,” Brnovich told The Republic in a 2017 article announcing the state’s fraud settlement with Theranos. “They said that about 10% of the results were inaccurate. The problem is, as an Arizona consumer, you don’t know whether you were part of that class or not.”

Downfall of a Once-Vaunted Clinical Laboratory Company

Dark Daily and sister publication The Dark Report have written extensively about these events. Former CEO Elizabeth Holmes founded Theranos in 2003 when she was just 19-years old. By 2013, Holmes had become a media sensation based on her claims that “Theranos had developed a medical technology that could do what seemed to be impossible: Its secret machines could run thousands of medical tests using the blood from a tiny finger-prick, and do so quickly and cheaply,” Bloomberg reported in a recent article outlining Holmes’ fall from grace.

While Holmes continues in the role of Chairman of Theranos’ Board of Directors, she was stripped of control of the company as part of the SEC settlement in 2016. The SEC found Holmes and then-company President Ramesh “Sunny” Balwani had fabricated claims Theranos technology had been validated by the Food and Drug Administration (FDA) and pharmaceutical companies and battle-tested by the US military in Afghanistan.

As a result, the SEC also barred Holmes from serving as an officer or director of any public company for 10 years. In October 2016, Theranos announced it would be closing its laboratory operations and focusing on its effort to create miniature medical testing machines, which it did. Nevertheless, the fallout continues.

As pressures on medical laboratories and pathology groups to cut costs while delivering quality care and value increases, laboratory leaders must not lose sight of the fact that accuracy of results remains the key to maintaining trust with healthcare consumers and a financially viable business.

—Andrea Downing Peck

Related Information:

Theranos, CEO Holmes, and Former President Balwani Charged with Massive Fraud

Theranos Receives Notice of Sanctions from the Centers for Medicare & Medicaid Services

Two More Investors Sue Theranos and Elizabeth Holmes for Fraud

Theranos Hit with Consumer Lawsuit over Faulty Blood Tests

Theranos, Walgreens Reportedly Reach a Deal to Settle Suit for under $30 Million

Theranos Selects Walgreens as a Long-Term Partner Through Which to Offer Its New Clinical Laboratory Service

An Open Letter from Elizabeth Holmes

How Startup Theranos Has Struggled with its Blood-Test Technology

Theranos Reaches $4.65 Million Fraud Settlement with Arizona

As Theranos Drama Unwinds, Former Patients Claim Inaccurate Tests Changed Their Lives

Theranos Statement on CMS 2567 Report

Agony, Alarm and Anger for People Hurt by Theranos’ Botched Blood Tests

Blood, Fraud and Money Led to Theranos CEO’s Fall from Grace

Holmes, Balwani Indicted by Department of Justice

Theranos News Gets Worse for the Former Silicon Valley Hero

After AACC Presentation, Elizabeth Holmes and Theranos Failed to Convince Clinical Laboratory Scientists and the News Media about Quality of Its Technology

Now Theranos Faces Criminal Investigation on Whether the Clinical Laboratory Company Misled Investors, according to Published Reports

Online Negative Reviews Can Threaten Clinical Laboratories Not Prepared to Address Feedback or Manage Their Internet Presence

As consumers increasingly choose physicians and service providers based on other people’s feedback on review websites, Internet-based customer service programs are becoming critical business tools for clinical laboratories and pathology groups

Clinical laboratory managers are becoming increasingly aware that negative reviews on anonymous online review sites, such as Yelp and others, can negatively impact revenues.

Official sources and surveys, such as Medicare’s Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS), already provide information and ratings on healthcare service providers. However, recent coverage in Healthcare Dive highlights how consumers are finding the narrative reviews on websites such as Yelp more accessible and relatable. And, that these reviews focus on the criteria consumers find most important.

“We’re moving to a health system where patient ratings are becoming more important, [one] where top-down ratings are really inaccessible to patients and probably not that useful,” Yevgeniy Feyman, PhD, told Healthcare Dive. Feyman, along with Paul Howard, PhD, co-authored the Manhattan Institute report, “Yelp for Health.”

In the report, they examined the correlation between Yelp reviews of New York hospitals and objective measures of hospital quality. “We find that higher Yelp ratings are correlated with better-quality hospitals and that they provide a useful, clear, and reliable tool for comparing the quality of different facilities as measured by potentially preventable readmission rates (PPR), a widely accepted metric,” they stated.

This is a significant finding for clinical laboratory administrators and pathologists. It demonstrates that how patients review their provider experiences does align with objective measures of provider quality that may be public, but are not as easy for consumers to find as websites like Yelp, Healthgrades, and others.

Online Reviews: A Metric for Determining Healthcare Value and Quality?

Andrea Ducas, Senior Program Manager with the Robert Wood Johnson Foundation (RWJF), told Healthcare Dive the primary considerations patients use to pick providers include:

  • “Treats patients with respect;
  • “Accepts insurance;
  • “Shares in decision-making;
  • “Responsiveness to phone calls; and,
  • “Professional skill.”

Research into how patients find/choose their physicians conducted by OnePoll and commissioned by Binary Fountain determined that, of more than 1,000 adults surveyed:

  • “95% of respondents regard online ratings and reviews as ‘somewhat’ to ‘very’ reliable;
  • “75% of Americans say online ratings and review sites have influenced their decision when choosing a physician; and,
  • “30% of consumers share their own healthcare experiences via social media and online ratings and review sites.”

Common research sources listed by respondents included:

Can Online Reviews Damage Healthcare Providers?

“Given that the majority of quality measures out there … aren’t really that accessible for patients, this is a very good proxy,” Feyman told U.S. News in a report on physicians’ concerns about the use and popularity of review sites.

“[T]he emphasis placed on a small number of patient opinions—far fewer patients leave reviews than are treated in a typical health system—makes it harder for doctors to do their job for fear of a career-harming bad review. And a few negative posts from disgruntled patients could unfairly skew public perception—and eventually, a provider’s bottom line,” U.S. News noted.

Despite this, Luther Lowe, Yelp’s Senior Vice President of Public Policy and Government Affairs, assured Healthcare Dive they have processes to “filter spam and quell suspicious activity daily.”

Online reviews recently played an important role in the Wall Street Journal (WSJ) exposé on Theranos, which Dark Daily covered in 2016. Investigative reporter John Carreyrou (above) used Yelp to locate patients who reported negative experiences with specific healthcare services and practices. He described how he used the platform during a presentation to the Association of Health Care Journalists (AHCJ) in April 2018. Click on this link to watch a video of Carreyrou’s presentation. (Photo copyright: Association of Healthcare Journalists.)

Negative Reviews: A Critical Concern for Medical Laboratories

Consumers continue to use Internet platforms to both share ratings and compare information on healthcare professionals and the clinical laboratories supporting them. Thus, to prevent damage from negative reviews, labs must actively monitor feedback, pursue inaccurate information posted online, and encourage consumers to provide positive feedback and opinions.

According to data from Alexa, Yelp is the 32nd most visited website in the United States. Yelp’s own data reports that more than 150-million reviews have been added to the site since its inception 13 years ago.

And, Yelp categorizes 7% of the reviewed businesses as “health-related.”

Between easy-to-access information distributed online and an increased push for transparency, clinical laboratories and other healthcare service providers must work to take charge of the narrative created about their businesses and encourage positive feedback on these developing platforms.

Failing to do so could cost laboratories the physicians’ practices they service.

“There are some providers who are trying to get ahead of the curve and post reviews directly on their website,” Ducas told Healthcare Dive. “Another thing they can do is encourage their patients to read some reviews online and invite them to leave feedback. That’s a radical invitation but it’s certainly something they can do.”

As healthcare customers increasingly turn to review sites for feedback about healthcare facilities and the service providers supporting them, clinical laboratories and anatomic pathology groups must focus on their Internet presence and respond quickly to any negative review feedback with great customer service.

—Jon Stone

Related Information:

Providers Jittery over ‘Yelpification’ of Healthcare

Highlights from the Healthcare Consumer Insight and Digital Engagement Survey

Yelp Proving to Be Reliable for Hospital Reviews, Addresses 12 More Measures than HCAHPS Scores

Using Yelp for Your Health

Most Top Hospital Online Reviews Are Lukewarm or Negative

Hospitals That Receive Top Marks in Quality Rankings Earn Mediocre Reviews Online, Analysis Finds

Study: Nearly 63% of Yelp Reviewers Give Top-Ranked Hospitals Mediocre to Poor Ratings

Study Suggests Yelp Can Help People Find Quality Healthcare

Yelp for Health: Using the Wisdom of Crowds to Find High-Quality Hospitals

Federal Appeals Court Rules Yelp Not Responsible for Bad Reviews; Labs Advised to Examine Their Online Presence

CMS Seeks ‘New Direction’ for its Innovation Center as the Agency Evaluates Current Value-Based Payment Models for Medicare Services, including Medical Laboratory Testing

Federal agency receives input on eight focus areas as it looks for ways to enable providers ‘to design and offer new approaches to delivering care’

Medical laboratories and anatomic pathology groups preparing for the transition from fee-for-service healthcare will want to keep a close eye on the Centers for Medicare and Medicaid Services (CMS). The federal agency’s administrator plans to set a “new direction” for CMS as it shifts to value-based reimbursement models for Medicare services that could impact clinical laboratory revenues.

In an informal Request for Information (RFI), the Center for Medicare and Medicaid Innovation (CMMI) sought feedback on a “new direction to promote patient-centered care and test market-driven reforms that empower beneficiaries as consumers, provide price transparency, increase choices and competition to drive quality, reduce costs, and improve outcomes.”

CMS to ‘Move Away’ from Engineering Healthcare ‘From Afar’

The agency requested input on eight focus areas:

1. Increased participation in Advanced Alternative Payment Models (APMs);

2. Consumer-directed care and market-based innovation models;

3. Physician specialty models;

4. Prescription drug models;

5. Medicare Advantage innovation models;

6. State-based and local innovation;

7. Mental and behavioral health models; and,

8. Program integrity.

Comments from healthcare providers, clinicians, states, payers, and stakeholders were accepted through November 20, 2017.

In a Wall Street Journal (WSJ) op-ed, CMS Administrator Seema Verma explained the agency’s process moving forward. “We will move away from the assumption that Washington can engineer a more efficient healthcare system from afar—that we should specify the processes healthcare providers are required to follow,” she wrote.

CMS Administrator Seema Verma (above) plans to lead the Center for Medicare and Medicaid Innovation “in a new direction” and may be signaling a willingness to give providers more flexibility with value-based care payment models for Medicare services. (Photo copyright: Healthcare Dive.)

The RFI states the new model design will follow six guiding principles:

1. Choice and competition in the market;

2. Provider choice and incentives;

3. Patient-centered care;

4. Benefit design and price transparency;

5. Transparent model design and evaluation; and,

6. Small scale testing.

Providers Need Freedom to Design New Approaches to Healthcare

Verma said CMS plans to review all Innovation Center models to determine “what is working and should continue, and what isn’t and shouldn’t.” She voiced concern that the complexity of some of the current models may have encouraged consolidation in the healthcare system, resulting in fewer choices for patients.

“We must shift away from a fee-for-service system that reimburses only on volume and move toward a system that holds providers accountable for outcomes and allows them to innovate,” Verma wrote in the WSJ op-ed. “Providers need the freedom to design and offer new approaches to delivering care. Our goal is to increase flexibility by providing more waivers from current requirements.”

Actual Progress of Value-based Healthcare ‘Herky-Jerky’

In its reporting on the recent CMS announcements, Healthcare DIVE suggested that the U.S. Department of Health and Human Services (HHS) “is looking to make some potentially major changes” in value-based payment models.

However, Neil Smiley, CEO of Loopback Analytics, which assists healthcare organizations with managing outcome-based care, believes the transition to value-based care may face stiffer headwinds under the new administration. He points to an August CMS proposal that canceled some mandatory bundled payment programs and scaled back others as an indication that healthcare transformation could be slowing.

“The pace at which CMS committed to rolling out value-based care is fundamentally different from the pace we’re currently seeing,” he told Health IT. “The progress toward value-based care, instead of this steady momentum they expected, is more of a herky-jerky fashion.”

Modify, Don’t Abandon Existing Payment Models, suggests HCTTF

The Health Care Transformation Task Force (HCTTF), a 42-member industry consortium, was among the stakeholders who responded to CMS’ RFI. In a 22-page letter, the task force reiterated its support for the healthcare system’s transformation to value-based payment and care delivery, while outlining areas for improvements. The group urged CMS to continue to develop new models while modifying, rather than abandoning, existing models that show promise and need time to achieve a lasting return.

“We would like CMS to continue support for promising models while balancing the current portfolio with new, innovative payment models,” Clare Wrobel, Director of Payment Reform Models at HCTTF, told Home Health Care News. “[But] it would be a mistake to discard current models that providers have already invested in and are showing real promise.”

Smiley, meanwhile, suggests clinical laboratory managers, pathologists, and other healthcare providers keep watch as healthcare transformation continues to evolve.

“The fee-for-service model, love it or hate it, is not dying. The organism has adapted,” he told Health IT. “For those that were aggressive early adopters of value-based care and really believed what they were hearing, and have gone fully after value-based care, some of them may feel a little exposed. If they go too hard too fast, they may suffer economically if they misjudge the pace at which this moves.”

—Andrea Downing Peck

Related Information:

Centers for Medicare and Medicaid Services: Innovation Center New Direction

Medicare and Medicaid Need Innovation

CMS Seeks ‘New Direction’ for Innovation Center

Comprehensive Care for Joint Replacement Payment Model

Task Force Calls on CMS to Encourage Alternative Payment Models

CMS Request for Information: Innovation Center New Direction

Task Force Urges CMS to Preserve Value Based Payment Models