CEO SUMMARY: Much like 2020, the pandemic dominated our new list of the top 10 lab industry stories for 2021. Beyond COVID-19 testing, the virus crept its way into long-term trends, such as pathology jobs and technology innovation. New ways of delivering healthcare will need responses by clinical laboratories, as will significant developments in the regulatory environment and related reimbursement. The biggest message emerging for our list of 2021’s top 10 lab stories is that changes far beyond the clinical lab’s walls are wielding large influence on the future of day-to-day operations.
FOR THE SECOND YEAR IN A ROW, the public health emergency caused by the SARS-CoV-2 pandemic takes the top spot among the 10 most influential stories in 2021 that affected clinical laboratories and pathology groups.
Life with COVID-19 will be a defining period for generations of Americans and the healthcare system upon which they rely. The clinical lab profession continued to play an oversized role in the pandemic, performing and analyzing hundreds of millions of SARS-CoV-2 tests administered since this coronavirus arrived in the U.S. almost two years ago.
Looking at the full list of top 10 lab stories this year, COVID-19 stretched its grip into at least four of them, making the pandemic an overlapping topic. But this year also saw major developments that will need immediate responses by all labs, particularly changes involving government regulation and new managed care contracting practices, as noted below:
- A busy regulatory year, with important new or revised laws coming into play.
- Technology’s ever-growing presence in the day-to-day life of lab directors and pathologists—for both good and criminal purposes.
- The continued shift in healthcare delivery that is driven by the patients themselves and how they want to receive their tests and treatments.
One big unknown hanging over the future of healthcare and the profession of laboratory medicine is whether COVID-19 becomes endemic even with mass vaccinations occurring. Also unknown is whether a future variant will emerge that proves resistant to vaccines and therapies currently used to treat infected patients.
For clinical laboratories, that means continued, long-term testing will be required to monitor COVID-19, much like influenza. (See story 1, below.)
The pandemic also influenced pathology jobs, which are in high demand as an older generation retires and fewer new doctors come forward to replace them. This trend is related to a new term that is linked to the pandemic: the Great Resignation, also often described as the Big Quit. As The Atlantic noted, “The term Great Resignation was likely coined by Anthony Klotz, a professor at Texas A&M, in May ; at the time, he framed a mass exodus from the workforce as a prediction for this year.”
In a paper released last month, the World Economic Forum pointed out two dynamics of the Great Resignation that must be dealt with by clinical laboratories and anatomic pathology groups. One is that “resignation rates are highest among mid-career employees,” and the other is that “resignation rates are highest in the technology and healthcare industries.”
Regulatory: Good and Bad
But 2021 has not been a year dominated by bad news or negative developments. In fact, 2021 started with good news (for once) from two federal agencies as revised new final rule versions of the Stark Rule and Anti-kickback Statute went into effect on Jan. 1, 2021. (See story 2, below.)
The move cleared up confusion between the two regulations for laboratory directors and their compliance teams.
Yet throughout the year, another regulatory effort grew that—like other laws—threatens reimbursements to laboratories for testing services. The No Surprises Act, which goes into effect on Jan. 1, 2022, generally bans copayments for certain services such that a patient’s cost cannot be higher than what they would pay in-network. This is a legislative and regulatory response to the practice—conducted by many providers including anatomic pathologists and some labs—of submitting high-priced bills in order to be paid at out-of-network rates.
The No Surprises Act aims to protect consumers caught off guard by unanticipated, higher out-of-network bills and cost sharing. From the patients’ perspective, added protection is welcome because it keeps more money in their pockets. But the opposite will happen for labs that do not have in-network status with most health plans. (See story 4, below.)
Fueled by technology advancements and nudged further by the pandemic, new testing and analysis methods found fertile ground in the clinical laboratory industry.
Artificial intelligence (AI) seemed to finally stake its ground in aiding billing, operations, and diagnosis. Digital pathology in particular enjoyed a surge thanks to AI and the pandemic. Additionally, the federal Food and Drug Administration warmed up to AI as a tool to diagnose prostate cancer. (See stories 4 and 6 below.)
For more than 20 years, The Dark Report has published its pick of the 10 biggest lab stories for the year about to end. Because our picks and our analyses are on the record, it demonstrates to clients and careful readers that we tend to be on the money at highlighting those developments that should get priority attention from clinical lab administrators and pathologists.
For that reason, we consistently recommend that every lab should incorporate the current year’s 10 biggest lab stories into their strategic planning. These lab stories typically represent important new developments that are in the process of establishing deep roots. Such timely strategic planning can help astute lab leaders position their laboratories to deliver a high level of clinical testing and other services, while doing it in a financially-sustainable manner.
WE’RE GUILTY—ALONG WITH MANY OTHERS—of assuming the pandemic was on its way out this year after being the top challenge for clinical laboratories in 2020.
What shouldn’t be lost on laboratory directors and pathologists is that SARS-CoV-2 has a bad habit of rising back up again. The resulting burdens placed on clinical labs may not be going away for a long time, especially if COVID-19 becomes endemic or a seasonal challenge like influenza. (See TDR, Nov. 8, 2021.)
Surges of the coronavirus in the winter and of the Delta variant over the summer finally waned, but then came another variant in the fall: Omicron. Once again, testing demand has outstripped the healthcare system’s ability to provide the tests in some areas and new emphasis is being placed on at-home rapid testing.
The question of whether SARS-CoV-2 is a pandemic that fades, as did SARS in 2003, or becomes endemic and a respiratory virus that shows up every season like influenza and the common cold, is of major concern to clinical lab administrators. That’s because clinical labs and pathology groups must continue to serve physicians and patients with the usual menu of routine, reference, and esoteric testing.
What is true as of today is that most laboratories have mastered the duality of providing timely COVID-19 test results even as they continue to serve the regular, ongoing demand for lab testing by client physicians and their patients.
IN WELCOME NEWS, revisions to the federal Anti-Kickback Statute (AKS) and the Stark Law went into effect on January 19. The changes clear up confusion for clinical laboratories and pathology groups about conflicting language between the two regulations and how to best comply. (See TDR, March 22, 2021.)
Regulators first proposed these changes in 2019, and in December 2020, the revisions were finalized by the Centers for Medicare and Medicaid Services (CMS) and the Department of Health and Human Services (HHS) Office of Inspector General (OIG).
The changes sought to clarify what labs encounter when contracting with insurers and physician groups in care-coordination arrangements. Federal officials recognized that the Stark Law and AKS can impede care coordination.
One of the highlights was CMS, for the first time, defining what “commercially reasonable” means, as that term is often used in many Stark Law exceptions. Now, an arrangement is commercially reasonable if it makes good business sense, even if it does not turn a profit.
It’s likely most laboratory and pathology compliance teams have reviewed these changes, but if not, add it to your to-do list for the new year.
In February, a federal appeals court upheld that it is a violation of the Anti-Kickback Statute to pay sales commissions to independent contractors working as sellers for clinical labs and pathology groups. (see TDR, May 3, 2021.)
THIS IS THE YEAR THAT ENCRYPTION AND RANSOMEWARE ATTACKS became the single biggest risk to the nation’s clinical laboratories and anatomic pathology groups. In just minutes, hackers can totally lock out access to the information systems and back-up systems of hospitals and laboratories.
For example, Scripps Health in San Diego fell victim to a malware attack in May that prevented patients from accessing their medical records and making appointments online. (See TDR, May 24, 2021.) Of the 328 healthcare organizations Sophos Group plc surveyed, 34% experienced a ransomware attack in 2020, and 34% of those that encrypted their data paid a ransom to unlock it. (See TDR, September 7, 2021.)
Labs and other healthcare settings are hesitant to discuss their experience with ransomware—and for good reason. Such crimes become public relations nightmares that can decrease revenue. And the publicity also may invite further attacks.
Ransomware attacks are costly. The average bill to respond to and rectify an intrusion is $1.27 million, Sophos Group estimated. These attacks shut off a lab’s access to its own servers and data, forcing laboratory and pathology directors to make tough decisions about whether to pay the offending party for a de-encryption key to unlock the information.
The Dark Report was first to alert the laboratory profession to the still-growing threat from encryption and ransomware attacks. All labs need to continually harden their software and hardware systems against the attack of hackers.
ARTIFICIAL INTELLIGENCE (AI) IS A TERM BOLSTERED BY MEDIA HYPE and dubious claims of efficacy, so one can be forgiven for not fully investing in it. However, the technology is real, and in 2021 clinical laboratories started to see true progress in practical areas from AI.
Consider billing and operations. An executive for Labcorp detailed to The Dark Report how its large clinical lab network uses AI and machine learning to assist lab workflows and operations, such as ensuring the right test at the right location and minimizing turnaround time. (See TDR, July 6, 2021.)
Additionally, in tandem with robotic technology, Labcorp uses AI to visually recognize loaded test tubes and appropriate positioning for them. This combination of robotics, AI, and automation brings increased efficiency.
Other providers have turned to AI to automate the collection of a patient’s information for lab-billing purposes and correct inaccurate data in real time. (See TDR, July 27, 2021.) Meanwhile, AI has also improved cancer screening and diagnostics. (See story 7 on page 8.)
In fact, use of AI-powered tools and products is exploding in labs across the United States. When the next Executive War College convenes in the spring, expect to hear many examples of AI in lab operations during the sessions to be presented.
LABORATORY DIRECTORS AND PATHOLOGISTS are just a few days away from the Jan. 1, 2022, rollout of the No Surprises Act, which brings significant financial concerns to the nearly 30,000 labs it affects.
The law, which Congress passed in December 2020, aims to protect patients from unexpected higher billing for non-emergency services performed by out-of-network laboratories and other providers at in-network healthcare facilities. (See this article in this issue for more information.) The act also sets up procedures to determine payment amounts for out-of-network services and requires labs to issue good-faith cost estimates to uninsured patients.
The Centers for Medicare and Medicaid Services (CMS) issued a host of rules and guidance during 2021 that formally set up provisions within the act. (See TDR, Sept. 7, 2021.)
Many clinical laboratories and pathology groups sought out-of-network status to get paid more for services. However, CMS and other federal agencies published data that showed pathologists were among the six medical specialties that issued more surprise bills than other specialists, based on prior research from the Health Care Cost Institute. (See TDR, Oct. 18, 2021.) The College of American Pathologists took issue with some of that data.
Will some labs close due to lower reimbursements caused by the No Surprises Act? Possibly. Has reimbursement for testing gotten more complicated? Absolutely!
GROWING DEMAND FOR PATHOLOGISTS may be good news for jobseekers but bad news for pathology groups and health systems needing people to handle increased volumes of tests.
The Dark Report revealed in August that there were 600 open pathologist jobs in the U.S. alone. (See TDR, Aug. 16, 2021.) One lab industry recruiter noted there were more openings for sub-specialist pathologists than at any time in the past 20 years. (See TDR, Nov. 8, 2021.)
Among the biggest reasons for this gap: older pathologists are retiring, and fewer new pathologists are graduating from residency programs to replace them.
This situation poses a challenge for private practice pathology groups across the nation. Even as the number of biopsies for cancer and other diseases is increasing—and the complexity of diagnosing cancer increases—there are fewer pathologists in the pipeline to meet demand.
In the short term, it means pathology groups will need to pay more in salary and benefits to recruit qualified pathologists. In the long term, the gap in the supply of pathologists versus the demand for these physicians will motivate companies to develop tools that automate the analysis of tissue. (See trend #7 below.) When labor is scarce and/or expensive, automation is almost always the final market solution.
IN SEPTEMBER, the federal Food and Drug Administration (FDA) for the first time cleared the use of an artificial intelligence (AI)-powered solution to diagnose prostate cancer. It marked a milestone for AI in healthcare and anatomic pathology. (See TDR, Sept. 27, 2021.)
Created by Paige, a New York vendor, the software increases the diagnostic accuracy for prostate cancer from digital images of biopsy specimens. Paige’s tool improved detection of cancer by 7.3% compared with pathologists not using the software, the FDA concluded. An AI tool for prostate cancer could lead to earlier diagnoses and help pathologists limit the number of false positives as a companion to visual reviews of images.
Anatomic pathologists will want to explore the performance of the Paige Prostate system, now that it can be used to make a primary diagnosis of cancer on digitized images of prostate specimens collected via biopsy. Data submitted by the company to the FDA also demonstrated that the algorithm can discern high grade and low grade areas of cancer from the digital pathology image. That capability was a factor in the assessment that the accuracy of Paige Prostate is comparable to a trained pathologist.
Interest in AI-powered digital pathology image analysis tools is at an all time high. Paige and at least three other digital pathology firms collectively raised $326 million this year from investors.
THE GROWING INTEREST FROM PATIENTS in genetic testing hit a hard wall from Medicare and private insurers, who remained resistant to paying for the tests.
Moreover, growing numbers of patients have joined the game. Recognizing that the genetic test suggested by their physician could cost them thousands of dollars out-of-pocket, they are holding up the genetic test order while they go out and search for a better test at a more attractive price.
This trend is called “benefit investigation” and most lab coding, billing, and collections companies have organized service reps who specialize in helping patients find a genetic test at a price they will accept. This increases the length of time from when a physician orders a test to when the lab may actually get the specimen and perform the test. (See TDR, July 6, 2021.)
Meanwhile, payers are still reluctant to cover genetic tests. Savvy lab executives are learning that a faster path to positive coverage and reimbursement decisions is to provide the payer with complete data on the analytical and clinical validity of the test before the payer makes a coverage decision. (See TDR, June 14, 2021.)
These twin trends make it advisable for clinical labs to put a program in place that helps patients with their benefit investigation, and another program that delivers comprehensive data on the lab’s genetic test’s analytical and clinical validity to speed coverage decisions.
THIS IS THE YEAR THAT RETAIL CHAINS indicated they want to go “all-in” in building full-service primary care clinics in their retail pharmacies. This has major implications for the existing business model of clinical laboratory services.
The retail chains see a big opportunity to capture market share and generate new revenue. Convenience is the motivator here, as patients often live or work closer to a retail store with a pharmacy than their doctor’s office. For clinical laboratories, this change means pharmacies have an opportunity to become new partners to provide lab tests to this new class of buyer. (See TDR, Oct. 18, 2021.)
Walgreens Boots Alliance, CVS Health, and Walmart are leading this expansion into retail primary care, even as COVID kept people home and Millennial and Generation Z patients showed their preference for new care models.
In October, Walgreens announced it would spend $5.2 billion to acquire a majority interest in Village MD, which operates primary care clinics in certain Walgreens. Walgreens’ goal is to build 1,000 clinics at its stores by 2027. CVS has already opened 1,100 HealthHUBs in its retail pharmacies. Walmart continues to open retail clinics in its stores.
As these national chains push into primary care, they could become the nation’s biggest buyers of lab analyzers and tests. (See TDR, June 14, 2021.)
THREE YEARS AFTER BEING INDICTED on wire fraud and conspiracy charges, the trial of disgraced former Theranos CEO Elizabeth Holmes began in August 2021. Closing arguments were scheduled for Dec. 16 and 17, just as this issue of The Dark Report went to press.
Many in the clinical laboratory profession are closely watching the trial as it unfolds because when Theranos became a high-profile company back in 2013, they recognized the lab company could not deliver on its promise of: 1) dozens of tests from a capillary blood sample; 2) results in two hours; and, 3) a price that was 50% of Medicare reimbursement.
The interesting twist in the trial is how attorneys raised questions about the role and responsibility of the laboratory directors at Theranos who were on the lab’s CLIA license. For example, former Theranos lab director Adam Rosendorff, MD, spent days on the witness stand being grilled by prosecutors and defense attorneys. (See TDR, Oct. 18, 2021.)
Prosecutors said Holmes and ex-Theranos Chief Operating Officer Ramesh Balwani lied to investors about the success of the company’s Edison blood-testing technology. Balwani goes on federal trial next year.
Holmes countered that she relied on her lab directors to stay on top of CLIA and equipment operation. However, Rosendorff testified that when he pointed out problems with test results, Holmes shrugged them off. If convicted, Holmes—a new mother—faces up to 20 years in prison.