Anticipating Washington’s Next Blows to Lab Testing

Even as laboratories react to reduced revenue from multiple cuts in lab prices, more is to come

CEO SUMMARY: With the advent of 2013, almost every lab was responding to some type of price cut. Clinical labs are dealing with the sequential, multi-year cuts to the Medicare Part B Lab Test Price Schedule. Anatomic pathology labs are still adjusting to the expiration of the TC Grandfather clause last summer, as well as the substantial reduction to Medicare fees for the 88305-TC CPT code that became effective on January 1. Some lab industry observers expect more price cuts this year.

DURING THE PAST 12 MONTHS, the clinical lab testing industry and the pathology profession have suffered multiple hammer blows to coverage guidelines and the level of reimbursement paid for certain lab test procedures.

These developments are having an immediate and negative effect on large numbers of labs in 2013. To survive, these labs must quickly cut expenses or find new sources of specimens that will be reimbursed at adequate rates.

Even as they scramble today to offset the revenue losses associated with recent coverage and price policies, they are casting a wary eye to the future. It should be no surprise, then, that lab administrators and pathologists are asking “What’s next?”

At the inception of 2013, labs were dealing with the negative financial consequences from the expiration of the TC grandfather clause in mid-2012, the sequential multi-year series of cuts to the Medicare Part B Laboratory Test Fee Schedule, and the radical reduction to CPT code 88305-TC that became effective on January 1, 2013.

But the bad news is not limited to just these three examples of recent policy changes. There are other healthcare trends and market dynamics with the potential to disrupt the lab testing industry as it exists today. These trends range from hospitals and payers acquiring physicians’ practices to the arrival of integrated clinical care as delivered by ACOs and medical homes.

To help lab managers and pathologists understand what is expected to come during the balance of 2013 and beyond, THE DARK REPORT has arranged a number of special sessions at the upcoming 18th annual Executive War College on Lab and Pathology Management. This will take place on April 30-May 1, 2013, at the Sheraton Hotel in New Orleans, Louisiana.

Anticipating Future Events

One particularly unique presentation will bring together an exceptional group of experts. It is a two-hour panel titled “Big Changes Ahead in Federal, State, and Private Payer Policies Affecting Laboratory Testing Reimbursement and Regulation.”

As the title implies, this is an up-to-the-minute understanding of events unfolding within Washington, DC, at key state capitals, and with private payers. The panelists include:

  • Michael Arnold, Executive Director, California Clinical Laboratory Association (CCLA)
  • Mark S. Birenbaum, Ph.D., Administrator, American Association of Bioanalysts (AAB)
  • Andrew Fish, Executive Director, Advanced Medical Technology Association, Diagnostics (AdvaMedDx)
  • Alan Mertz, President, American Clinical Laboratory Association (ACLA)
  • John Scott (invited), Vice President, College of American Pathologists (CAP)

Each panelist is actively involved in educating elected officials, regulators, and health insurance executives about the value of laboratory testing services. This session will provide attendees with a solid understanding of the best and the worst of what is being proposed by legislators, regulators, and payers that affect the clinical practices and financial integrity of clinical laboratories and pathology groups.

However, these actions are not the end of the bad news for the profession of laboratory medicine. To the contrary, they can be considered the opening round in what some long-time lab industry observers believe will be a multi-year series of major policy changes and reimbursement cutbacks that will continually and consistently undermine the financial stability of lab testing organizations.

Take the example of the 104 new molecular CPT codes. Will the Medicare program and private payers establish reasonable coverage guidelines and equitable prices for these new CPT codes? There are already good and bad examples of pricing by the first few Medicare contractors to issue their respective policies for these molecular CPT codes.

Even as you read this, different Medicare contractors are taking steps to post their prices for these molecular CPT codes. Charles Root, Ph.D., widely recognized as the founder and CEO of CodeMap, LLC, will provide a timely review and analysis of these developments at the Executive War College. He plans to share data and insights about molecular test pricing and the ramifications of the specific pricing published by Medicare contractors as of that date.

How ACOs Can Be Disruptive

Possibly the most disruptive development in healthcare today is the transformation to integrated clinical care. The best manifestation of this trend is accountable care organizations (ACOs). As reported recently in THE DARK REPORT, the consulting company Oliver Wyman of New York City estimates that, as of the end of 2012, between 25 million to 31 million patients were already affected by Medicare and private ACOs.

In order for ACOs to deliver integrated clinical care, they are bringing different classes of healthcare providers into their organization. Included are hospitals, primary care physicians, specialist physicians, and ancillary service providers, ranging from skilled care facilities to physical therapy clinics.

Some experts predict that the clinical labs of hospitals and health systems that are part of the ACO will have the inside track to provide lab testing to these ACOs. They also predict that the ACOs will move away from fee-for-service reimbursement for lab testing services.

Given the importance of the ACO trend, this year’s Executive War College has scheduled many presentations by speakers who are fully engaged in either developing ACOs or providing services to the ACOs in their community.

ACOs Forming in Northwest

For example, in the Pacific Northwest, several Catholic health systems are coming together via consolidation or affiliation to create regional and supra-regional health systems. Ran Whitehead, CEO of Eugene, Oregon-based PeaceHealth Laboratories, will discuss how his lab, owned by PeaceHealth, is positioning itself to add value across the multi-state geography served by these health systems.

Similarly, Texas is a state where large health systems are scrambling to buy up physician groups and develop ACOs that offer competitive advantage in their home cities. Ernest Franklin, M.D., Vice President of Surgical and Ancillary Services at Baylor Health Care System in Dallas, will describe these developments.

Baylor Health & med fusion

Baylor Health is made up of 15 owned, leased, or affiliated hospitals and six “short-stay” hospitals. Baylor Health is also an investor in med fusion, a unique laboratory joint venture with a distinct vision and strategy for using lab testing to add value. Keith Laughman, CEO of med fusion, will speak about this new lab testing paradigm and why the lab joint venture includes pathologists and U.S. Oncology as investors.

Given the uncertain times in the lab testing marketplace, the full range of topics and speakers at this year’s Executive War College is designed to give lab administrators and pathologist business leaders, the essential insights and information they need to craft effective strategies to keep their laboratory organizations financially stable and properly positioned to respond to these market trends.

Prepare for Powerful Trends That Change Lab Test Market

ACROSS THE NATION, laboratory leaders are telling the editorial team of THE DARK REPORT that their lab organizations are facing an unprecedented time of change. They can identify numerous powerful trends that are reshaping healthcare within their communities and their regions.

Here is a partial list of the more significant trends reported by these lab leaders. Each trend has the potential to change the status quo in laboratory testing.

  • Price cuts to lab tests by government and private payers.
  • Introduction of integrated care via ACOs, medical homes, and the like.
  • Private payers narrowing and excluding local labs from their provider networks.
  • Value-based reimbursement and bundled reimbursement arrangements for providers.
  • Continuing adoption of EHRs by hospitals and physicians, with staged requirement to meet meaningful use criteria.
  • New diagnostic technologies, ranging from next-generation gene sequencing to increased use of mass spectrometry in clinical testing.

Experts on each of these trends and developments will be speaking at the upcoming 18th annual Executive War College, to happen on April 30-May 1 in New Orleans, Louisiana. Full program and speaker information can be found at: http://www.executivewarcollege.com.

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