As PAMA brings estimated Medicare reimbursement cuts of up to 30% over the next three years to a range of typically high-volume tests and diagnostics, medical laboratories that wish to stay competitive must understand the needs of managed care payers and learn how to optimize collections, reduce denials, and communicate value effectively or risk their financial health

In what experts have called the biggest financial upheaval for the healthcare industry in three decades, the onset of new Medicare Part B Clinical Laboratory Fee Schedule (CLFS) reductions based on the Protecting Access to Medicare Act (PAMA)—and their continued decrease over coming years—places the financial integrity of clinical laboratories and anatomic pathology groups of all sizes in peril.

Recent years have seen major shifts in consolidation, automation, and efficiency analysis to help streamline both workflows and cashflows. However, the threat from the current and coming cuts to Medicare lab test prices will be particularly acute for smaller independent laboratories and hospital/health system lab outreach programs. These labs will continue to feel added strain due to reduced reimbursement across 25 of the most common tests billed to Medicare.

The Centers for Medicare and Medicaid Services (CMS) and the Office of the Inspector General (OIG) predict that the cuts enacted on January 1, 2018, alone will result in Medicare payments to labs falling by a total of $670 million just in 2018. This amount is almost 70% greater than the $400 million in fee cuts the federal agency had predicted in statements it published last year. (See Dark Daily, “For Top 20 Tests, CMS to Cut Payment by 28% in 2018-2020,” October 9, 2017.)

And, that doesn’t account for subsequent cuts, which are estimated to reach nearly 30% over the next three years.

Cost of Service Disparities/In-Network Status Further Impact Clinical Labs

If the CLFS reductions weren’t enough, labs face another threat—managed care and commercial payers aligning with big national laboratories and narrowing networks in an attempt to lower costs and provide maximum return for both patients and shareholders. For smaller and independent laboratories, this represents a double threat.

In the first situation, larger laboratories can offer services at lower costs due to increased automation, batch processing, and other scale advantages. This means that while the lower CLFS rates will impact the financial integrity of larger labs, the actual margin lost is less than that of smaller laboratories and facilities that face higher costs to perform tests and provide services.

Compounding the situation, commercial and managed care payers searching out the best value for their patients and shareholders tend to narrow their networks by excluding many independent clinical lab companies and hospital lab outreach programs, amplifying this inherent disparity and skewing the advantage away from independent providers yet again.

Higher cost providers without a clear understanding of promoting their value to payers could have trouble obtaining in-network status. Yet, failing to obtain in-network status may reduce overall test quantities, further raise prices, and make smaller labs less competitive with larger national laboratories—a dangerous cycle with today’s competitive laboratory landscape.

Shifting Focus and Optimizing Managed Care Reimbursements

As the financial stability of Medicare reimbursements wanes, it is imperative that laboratories look to new methods to further increase efficiency and stabilize cashflows. Once a smaller portion of laboratory revenue, managed care organizations and commercial payers will be of increased importance as overall reimbursement rates continue to shrink in the face of healthcare reform and value-based care.

Unfortunately, many laboratories assume that by simply providing requested services they are due reimbursement from commercial payers. In the age of value-based care this is no longer the case and considered an outdated mindset—one that can lead to endless audits, increased recoupment costs, and which could drastically impact successful collection from managed care and commercial payers. (See Dark Daily, “Payers Hit Medical Laboratories with More and Tougher Audits: Why Even Highly-Compliant Clinical Labs and Pathology Groups Are at Risk of Unexpected Recoupment Demands,” October 16, 2015.)

Special June 26 Webinar: Improving Managed Care Reimbursement Efficiency

Understanding not just what these payers are attempting to achieve for their organization—but also how they structure requirements and processes to support their goals—is an essential element of succeeding in this previously smaller share of the marketplace.

For those interested in learning more about critical concerns regarding managed care payers in the post-2018 CLFS landscape, Pathology Webinars is hosting a 90-minute webinar on Tuesday, June 26, 2018, at 2:00 PM Eastern.

The webinar will include presentations from two experts on a range of topics including:

  • Actionable steps to absorb the loss of Medicare revenue due to the impact of the 2018 CLFS reductions;
  • How managed care payers process network status and payments;
  • Who in the managed care chain of command should receive your value proposition;
  • How to better align your value propositions, policies, and workflows with the requirements of managed care and commercial payers; and,
  • Understanding the roles managed care payers expect clinical laboratories and anatomic pathologists to play in managing and reducing unnecessary testing.

The first speaker, Frank Dookie, MBA, will provide an inside look at:

  • How managed care payers function;
  • Their requirements and workflows; and,
  • What they look for when considering network status for a laboratory.

Dookie is a laboratory professional who has worked on the payer side for 28 years. He is passionate about the role that diagnostics play or can play in healthcare, and has spent his career working for instrumentation providers, clinical laboratories, the intermediary space between laboratories and managed care companies, and managed care companies.

The second speaker, Michael Snyder, will bring the entire payment process into sharp focus. He will cover:

  • Optimizing the collection process;
  • Identifying the purpose of each step, each review, and each team member involved; and,
  • Critical points laboratories must address to ensure payment.

Snyder is the Senior Vice President of Network Operations for Avalon Healthcare Solutions, LLC, a firm that provides comprehensive benefit management services to the health plan industry and has more than 30 years’ experience in clinical laboratory management.

Frank R. Dookie, MBA (left), Contracting Executive with a major managed care company in Woodbridge, N.J.; and Michael Snyder (right), Senior Vice President with Avalon Healthcare Solutions in Flemington, N.J., will provide critical insights and actionable details for clinical laboratory and anatomic pathology group leaders who want to ensure future revenues.

An Essential Opportunity to Improve Your Reimbursements

This critical webinar offers anatomic pathology groups and medical laboratory managers essential information and actionable next steps to immediately leverage the potential of managed care payers. Additionally, it provides insider insight to laboratories straining to retain financial integrity as reduced reimbursements and increased regulatory burdens strain budgets and cashflows.

To register for the webinar and see further details about discussion topics, use this link  (or copy and paste the URL into your browser: https://pathologywebinars.com/current/managed-care-an-insiders-guide-to-improving-your-reimbursement-efficiency-with-strategies-that-work-626/).

As further Medicare payment reductions over the next three years drive reimbursements even lower, understanding how to capture the positive attention of payers—while working within the rules and policies driving their reimbursement decisions—will be an essential element of successful laboratory management and growth. Register now!

—Jon Stone

Related Information:

Continued ‘Aggressive Audit Tactics’ by Private Payers and Government Regulators Following 2018 Medicare Part B Price Cuts Will Strain Profitability of Clinical Laboratories, Pathology Groups

Payers Hit Medical Laboratories with More and Tougher Audits: Why Even Highly-Compliant Clinical Labs and Pathology Groups Are at Risk of Unexpected Recoupment Demands

Tougher Lab Regulations and New Legal Issues in 2018: More Frequent Payer Audits, Problems with Contract Sales Reps, Increased Liability for CLIA Lab Directors, Proficiency Testing Violations, and More

Coming PAMA Price Cuts to Medicare Clinical Lab Fees Expected to Be Heavy Financial Blow to Hospital Laboratory Outreach Programs

What Every Lab Needs to Know about the Medicare Part B Clinical Laboratory Price Cuts That Take Effect in Just 157 Days, on Jan. 1, 2018

Medicare Clinical Laboratory Price Cuts and Cost-cutting Predicted to be 2018’s Two Biggest Trends for Medical Laboratories in the United States