TriCore Finds Value-Based Healthcare a Profitable Endeavor

Value-based healthcare means insurers are willing to pay for data and analytics

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This is an excerpt from a 3,380-word article in the May 20, 2019 issue of THE DARK REPORT. The full article is available to members of The Dark Intelligence Group.

CEO SUMMARY: To develop new sources of revenue to offset declining fee-for-service payments, TriCore Reference Labs is collaborating with health insurers in novel ways to improve patient outcomes and lower healthcare costs. To achieve this desired value-based healthcare,TriCore brings together data from lab tests, EHRs, patient demographics, and geography. Analytical tools allow it to assess population health while identifying specific patients with undiagnosed diseases and care gaps. In turn, insurers are paying TriCore for this information.


IN RECENT YEARS, clinical laboratory leaders have heard plenty about how labs can monetize their clinical laboratory information by using it to help health insurers manage the members they serve. Until now, this enticing idea has been little more than a concept.

Today, however, health insurers are paying some labs for supplying insights—based on their clinical lab test data—that are used to add value for payers and the physicians in their provider networks. One of the nation’s lab pioneers in this trend is TriCore Reference Laboratories of Albuquerque, N.M.

At the Executive War College in New Orleans in May 2019, Rick VanNess, TriCore’s Director of Product Management, gave a presentation in which he explained how TriCore has developed a method that helps health insurers in New Mexico provide  value-based healthcare: improving patient care, filling gaps in care, and managing population health. The title of his remarks is, Your Lab Can Do Analytics with Your Payers Today: How We Used Excel Spreadsheets to Engage Health Insurers and Launch Collaborative Care Initiatives.

Over the past three years, health insurers have expressed interest in paying TriCore for these services and, at some point, might be willing to share the savings with the lab as they collaborate to achieve value-based healthcare, VanNess said. The analytics TriCore provides would generate new sources of revenue for TriCore and would come in addition to the existing fee-for-service payments the clinical laboratory gets for the testing it performs due to the additional value the insurers receive.

Lab-Payer Collaborations

TriCore is believed to be one of the earliest clinical labs to collaborate with health insurers in ways that meet the clinical lab 2.0 business model. The lab’s collaboration with insurers makes its experience useful to other clinical laboratories seeking to develop new sources of revenue while pursuing value-based healthcare. These new sources of revenue can be used by labs to offset the ongoing cuts to fee-for-service lab prices.

The basis for creating new value and revenue for the lab under the clinical lab 2.0 model is how it contributes to gains in quality measures, improved patient care, and reductions in the overall cost of care.

Conversations with Payers

“This is a very different conversation for our clinical lab to have with health insurers in New Mexico,” VanNess explained. “It means we must come to the negotiating table prepared to document what we know about the payer’s beneficiaries, where gaps in care exist, and where insurers and physicians can use our actionable information to improve outcomes and quality measures.”

The key to this story is a three-step process TriCore used in its negotiations with health insurers. The goal was to convince health insurers that TriCore could contribute to the twin value-based healthcare goalsof improving health outcomes and estimating the resulting reductions in costs; then persuade those same insurers to pay for those services based on the estimated savings. TriCore’s three-step process involved:

  • Collecting, analyzing, and presenting actionable insights from lab test data that health insurers could use to improve quality measures, thus enabling TriCore to receive compensation on a per member per month (PMPM) fee in exchange for providing such valuable information.
  • Correlating how much the insurers benefit from increased quality score payments because of helping physicians and other providers avoid adverse health outcomes. For this part of the discussion, VanNess said TriCore’s estimates about improvements in patient outcomes were conservative enough that he was confident TriCore could win the health insurers’ trust.
  • Asking insurers to compensate TriCore with a portion of the estimated savings as a result of getting the information they need to improve care in measurable ways, while recognizing the clinical laboratory’s role in adding value to the delivery of patient care.

TriCore’s Proposal Accepted

Some of New Mexico’s largest health insurers reacted positively to TriCore’s PMPM proposal and enabled the lab to augment care coordination processes delivered to their members.

“This was a crucial first step in developing our value proposition with each payer,” VanNess recalled. “And, the fee we offered to provide this service to the health insurer was accepted from the start of these contract negotiations.”

Improving care and lowering costs are two of the most important goals health insurers pursue every day. Those twin goals are almost akin to the Holy Grail of healthcare. “In one collaboration, our actionable information contributed to a 25% increase in the insurers’ efficiencies and more than a 40% reduction in adverse outcomes, such as preterm deliveries,” VanNess said.

In his presentation, VanNess described TriCore’s challenges in learning what insurers needed and how his lab then brought together the different types of data it would deliver to payers that would give their providers insights they could use to improve care.

What to Expect from Series on Clinical Lab 2.0

EDITOR’S NOTE: This special series on the clinical lab 2.0 business model is designed to give clinical laboratory executives and pathologists an inside perspective on how TriCore Reference Laboratories in Albuquerque, N.M., is transitioning to this new arrangement. To explain how TriCore generates new streams of revenue by working with health insurers, the editors have organized this series into several installments.

How will your lab leverage its data going forward, if at all? Please share your thoughts with us in the comments below.


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