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Fee-for-service
Fee-for-service has long been the primary payment model for clinical laboratories and pathology groups. Fee-for-service (FFS) is a payment model in which services are paid for as itemized in the provider’s invoice. It gives an incentive for physicians to provide more treatments because payment is dependent on the quantity of care, rather than quality of care. Similarly, patients are incentivized to welcome any medical service that might not be necessary. Insurance companies shield themselves against ruin by setting cover limits for every beneficiary.
FFS raises costs, discourages the efficiencies of integrated care, and a variety of reform efforts have been attempted, recommended, or initiated to reduce its influence (such as moving towards bundled payments and capitation).
Medicare Parts A (hospital insurance) and B (optional insurance that covers physician, outpatient hospital, home health, laboratory tests, durable medical equipment, designated therapy, outpatient prescription drugs, and other services not covered by Part A) are FFS programs. Medicare processes over one billion FFS claims per year.
As part of the ongoing drive to cut healthcare costs, this model is gradually being phased out by payers and healthcare organizations in favor of value-based payment models, such as pay-for-performance programs and accountable care organizations that are intended to cap costs and spread financial risk among providers, while encouraging coordination of care, disease prevention and better management of chronic conditions. This is seen as a threat to the survival of clinical labs, which expect to see far fewer tests ordered by healthcare providers.
The Clinical Laboratory Management Association is working to help labs navigate these changes. “As fee-for-service reimbursement gives way to bundled reimbursement and per-member-per-month payment, labs will only be successful if they add value to physicians by helping them diagnose disease earlier and more accurately,” says CLMA President Paul Epner.
CLMA has named this program “Increasing Clinical Effectiveness,” or ICE. THE DARK REPORT is one of CLMA’s partners in this effort.
“Our hope is that ICE is a catalyst that helps lab administrators, pathologists, and medical laboratory scientists broaden the focus of their laboratory beyond operational efficiency to include measurable impact on positive patient outcomes,” says Epner.
Better Data Needed to Support Pathologists as Consultants
MULTIPLE TRENDS ARE UNFOLDING that mutually reinforce the need for pathologists and PhDs to be experts and consultants in how physicians order and follow up on molecular diagnostics assays and genetic tests. “Healthcare in the United States is approaching a tipping point that can greatly favor pat…
Quest Gets into Wellness By Acquiring Summit Health
IT IS NO SURPRISE THAT THE NATION’S largest laboratory companies are looking for new revenue opportunities now that fee-for-service payment for lab tests is soon to end. One striking example of this trend was the move last week by Quest Diagnostics Incorporated to acquire …
Maine’s Spectrum Medical Group Offers Multiple Specialties
CEO SUMMARY: Pathologists looking for a viable future in a healthcare system marked by integration of clinical care and value-based reimbursement will be interested to learn about Spectrum Medical Group based in Portland, Maine. This 180-member multispecialist group includes 22 pathologis…
Labs, Path Groups Face Major Financial Issues
CEO SUMMARY: Are clinical labs and pathology groups ready for the end of fee-for-service reimbursement? That’s just one important question that will be answered at the upcoming Executive War College on Lab and Pathology Management that will take place in New Orleans on April 29-30. The …
Physician Group ACO Targets High-Volume Tests for Savings
HERE’S AN EXAMPLE OF HOW an accountable care organization views cost control. Atrius Health sought to control excess costs by focusing on high-priced items. It started with inappropriate hospitalizations and imaging studies and moved on to laboratory testing. Atrius Health is…
Federal Judge Lets Trial Proceed in Case against Quest
CEO SUMMARY: Four California labs have charged that Quest Diagnostics engaged in predatory pricing in a case filed originally in November 2012. After the lawsuit was amended last summer and fall, U.S. District Judge William H. Orrick III heard various motions in the case. On February 6 he…
Sonora Quest Builds EMPI To Serve Patients and ACOs
CEO SUMMARY: Probably no state has seen a faster transition to ACOs, medical homes, and other types of integrated clinical care organizations than Arizona. Recognizing that this change created a new opportunity to add more value with clinical lab testing services, Sonora Quest Laboratorie…
2013’s Top Ten Lab Stories Point to Tougher Times
CEO SUMMARY: For 2013, the big story was money—or, more accurately, less money for providers. This was not limited to clinical labs and pathology groups, but was equally true of hospitals and physicians. In THE DARK REPORT’S annual lookback at the year’s 10…
Ottawa Pathology Lab Cuts Turnaround Time By More Than 50%
CEO Summary: Pathologists at Ottawa Hospital not only must handle a large volume of specimens regularly, but are experiencing a 14% per year growth in the number of specimens. Last year, when the average turnaround time for a case was nine days, the pathology department embarked …
Hospitals Recognize Need for Uniform Lab Test Data
CEO SUMMARY: Hospitals may soon insist that payers allow their in-house labs to provide outpatient testing regardless of exclusive managed care contracts with national lab companies. The migration to accountable care organizations (ACOs) and medical homes makes it essential that physician…
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Volume XXXII, No. 6 – April 21, 2025
Now that a federal judge has vacated the FDA’s LDT rule, The Dark Report analyzes the judgement and notes the various steps the FDA could take in response. Also, lab testing at pharmacies is proving to be less successful than was once anticipated.
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