CEO SUMMARY: Laboratory administrators and pathologists will want to carefully study eight important trends that will guide their business strategies in 2023. Many of these macro trends center on financial and operational difficulties and ways to steer around these obstacles. Another broad theme is how established technology is poised in the new year to tackle chronic problems with staffing shortages while also improving the time and efficiency to reach patient diagnoses.
IT WAS 13 YEARS AGO WHEN THE DARK REPORT last detailed a list of upcoming important macro trends for clinical laboratories and anatomic pathology groups.
While some themes have continued to percolate from 2010 into 2023 (e.g., the need to capitalize on automation, albeit today there is more urgency to do so), newer trends have also emerged (e.g., finding innovative ways to recruit pathologists when current demand exceeds those seeking positions.)
The Dark Report’s 2023 review of major trends and developments in the marketplace is useful as a strategic planning tool for laboratory executives and pathologists. It provides context for interpreting current developments and describes how the clinical lab testing marketplace may evolve in the immediate future.
Meanwhile, in vitro diagnostics (IVD)manufacturers and laboratory informatics vendors can also study these trends to better position their products and services to meet the needs of lab and pathology customers.
Our 2023 macro trends for clinical laboratories broadly split into two main categories: operations and technology. Our full list follows below after this introduction.
Several of the eight lab macro trends for 2023 are directly or indirectly associated with the eroding finances at many hospitals and health systems. As we reported throughout 2022, some health systems lost hundreds of millions of dollars every quarter during the year.
The anticipated expiration of the federal government’s public health emergency for the COVID-19 pandemic will likely further increase financial tensions, forcing health system executives to explore other ways to make up budget gaps.
The industry-wide lack of pathologists and lab bench staff will add to both financial concerns and workload volumes heading into the new year. Forward-thinking lab leaders will need to identify and deploy new solutions that favor process changes over simply searching for hard-to-find talent. Further, reimbursement difficulties for genetic testing, including an uptick in prior authorization requests from payers, will strain timely payments to labs.
Market forces will make technology choices—some of which have been around for more than a decade—more attractive and viable in 2023. For example, automation has long been recognized as a way to improve operational efficiency in clinical labs and pathology groups. Thus, the need to address chronic staffing shortages in the new year will be bring added motivation to adopt automation.
Similarly, digital pathology systems will garner greater attention as their benefits become more evident in the post- pandemic working environment. The fact that new Class III Current Procedural Terminology (CPT) codes for digital pathology activities took effect on Jan. 1 will encourage adoption of digital pathology solutions. Pathologists using these CPT codes have an opportunity in 2023 to demonstrate with this data how digital pathology aids in improving diagnoses.
Watch for upcoming federal action on updated provisions for next-generation sequencing technology as well.
Now that 2023 has arrived, your team at The Dark Report hopes that these eight macro trends for clinical laboratories will be useful in helping you shape your clinical, business, and financial strategies in a sustainable manner.
Labs Will Need to Re-evaluate Solutions to Staffing Shortages
PROBABLY THE SINGLE MOST OBVIOUS TREND FOR 2023 is the acute shortage of medical technologists/clinical laboratory scientists, as well as with all the other skilled positions needed by labs. The new year opened with most labs reporting great difficulty in maintaining staffing at anything close to 100% of authorized levels.
Clinical laboratory staffing levels were already tight before the COVID-19 pandemic. However, stress and burnout during the height of the SARS-CoV-2 coronavirus led to an abnormal amount of healthcare workers—including medical technologists, medical laboratory scientists, and medical laboratory technicians—leaving the field as part of the Great Resignation.
Meanwhile, a general lack of interest among younger workers in laboratory science is exacerbating the staffing gap clinical labs face going into this new year.
There is no brigade of replacement workers coming—at least the kind that have traditionally filled laboratory bench jobs. So, new ways to do the work and improve productivity will become a priority for innovative lab managers.
What to Know
That means technology will get more attention. This will be particularly true in those areas of the lab which still have many manual processes, such as microbiology and histology.
Use of automated instruments enables remaining human staff to work up to their training and license levels rather than focus on routine tasks. In such cases, greater efficiency will be a new advantage coming out of the staffing crisis.
In the area of specimen collection and phlebotomy, several companies are developing technologies and new devices at blood draw sites that make it easier for less-skilled workers to collect specimens. (See TDR, “Babson Diagnostics’ Hybrid Model Combines Quality, Convenience,” Nov. 21, 2022.)
In fact, the notion of non-traditional workers stepping up to handle laboratory testing activities has caught the attention of the federal Centers for Medicare and Medicaid Services (CMS). In July 2022, as part of a proposed rule to amend the Clinical Laboratory Improvement Amendments of 1988, CMS sought to allow those with doctoral, master’s, and bachelor’s degrees in nursing to qualify as testing personnel for high and moderate complexity testing.
“We do not have any reason to believe that nurses would be unable to accurately and reliably perform moderate and high complexity testing with appropriate training and demonstration of competency,” CMS wrote at the time.
The American Hospital Association objected to the nursing language, and the College of American Pathologists stated that nurses should have supervision if performing these tests. A final rule from CMS has yet to be released.
Actions to Take
Lab managers should explore Lean Six Sigma models, which seek to weed out processes that are wasteful or inefficient and potentially help existing staff better handle their volume of duties. (See TDR, “Henry Ford Health System Laboratory Division Combines Lean with ISO 15189,” Feb. 29, 2016.)
While Lean Six Sigma won’t eliminate staffing shortages, innovative laboratories can use the approach to identify subpar workflows, improve these processes, and potentially help existing staff better handle their volume of duties.
Multiple Factors Threaten Stability of Hospitals, Labs
HOSPITALS AND HEALTH SYSTEMS FACE ANOTHER ROUGHT YEAR FINANCIALLY IN 2023. The hospital industry is besieged on multiple fronts, and this directly squeezes the budgets of hospital-based clinical laboratories.
Multi-hospital health systems bled red ink at unprecedented rates during 2022, and experts predict more financial stress for hospitals in the new year. Multiple factors are to blame. These include the inability to maintain enough nurses, ongoing staffing woes, dramatic upward swings in the cost of nurses (both salaries and payment for temporary nurses), supply chain concerns, and inflation.
In December 2022, Moody’s Investor Services released a report that concluded the not-for-profit healthcare (hospital) sector outlook remains negative for 2023.
“Labor shortages will remain a primary driver of elevated expenses, which will restrain growth in margins,” Moody’s reported. “Higher inflation, persistent COVID-19 surges, supply chain disruptions, and continued cybersecurity investments will also increase expenses.”
This predicts continuing financial pressure on hospitals and hospital labs in the coming year. The magnitude of 2022 losses experienced by hospitals may be duplicated during 2023. For example, Brigham and Women’s Hospital in Boston reported a record operating loss for fiscal year 2022 of $432 million, according to a Dec. 21 story in The Boston Globe.
What to Know
Experts further note that the public health emergency (PHE) associated with the SARS-CoV-2 pandemic is scheduled to end on Jan. 11, 2023. When the PHE expires, many patients covered by Medicare, Medicaid, or private insurance will face higher costs associated with COVID-19 treatment, including some diagnostic laboratory tests. If patients are unable to pay these costs, hospitals will absorb the resulting loss of revenue.
More significantly, as part of the PHE, hospitals have received a 20% payment increase for discharges of Medicare patients diagnosed with COVID-19, according to the Kaiser Family Foundation. That increase will end when the PHE expires.
Actions to Take
As financial pressures mount on hospitals and health systems, laboratory leaders will want to be alert to any signs that their hospital leadership is entertaining proposals by commercial lab companies to buy their hospital’s lab outreach services. The Dark Report noted several such major lab outreach acquisitions in 2022. (See TDR, “Public Laboratory Companies Eye More Lab Outreach Acquisitions,” Aug. 29, 2022.)
Efforts by lab administrators and pathologists to present lab outreach as a healthy revenue stream may keep those services in-house. There are steps labs can take to make outreach more consumer focused. (See “Consumers Shape Modern Lab Outreach” here for further information.)
Innovative labs within health systems may want to work with other departments, such as care quality or business analytics, to tackle areas that have drained budgets. A collaborative effort may uncover savings that will present the lab as a driving force behind high-value changes. (See TDR, “Lab’s Anemia Program Brings in New Revenue,” June 27, 2022.)
Digital Pathology Expected to Experience Wider Adoption
ENTERING 2023, ADVOCATES OF DIGITAL PATHOLOGY ARE OPTIMISTIC that this is the year adoption of whole-slide images and digital pathology systems accelerates.
One factor generating excitement is the issuance of new Class III Current Procedural Terminology (CPT) codes covering the process of converting glass slides into whole-slide images. These CPT codes became effective on Jan. 1, 2023.
Another factor that is seen as encouraging adoption of digital pathology is the soaring demand for pathologists that outstrips supply. This will motivate anatomic pathology groups to look for ways to improve the productivity of their staff pathologists. Adoption of a digital pathology system is associated with improving the productivity of a group’s pathologists.
What to Know
By transitioning glass slides of specimens to whole-slide images, laboratories and pathology practices gain efficiencies in the following areas:
- Speed of diagnoses.
- Capability to assign cases to pathologists with available time for more work.
- Reduced physical storage space for slides.
- Potential for artificial intelligence to aid in evaluation of cases.
- Ability to review slides from any computer in the world.
The onset of the pandemic in March 2020 is also a major factor in the growing interest by pathology groups in “going digital.” During the lockdown, many pathologists—working remotely from home—got comfortable with using digital pathology images. However, much like electronic health records initially, digital pathology has been dogged by its hefty price tag and an uncertain return on investment (ROI).
It is hoped that the new CPT codes for digitizing pathology images from glass slides will help improve the ROI for digital pathology systems. Note that these CPT codes are not yet reimbursable—as Category III codes are a set of temporary codes assigned to emerging technologies, services, and procedures. These codes are intended to be used for data collection to substantiate more widespread use or to provide documentation for Food and Drug Administration approval process.
Actions to Take
Pathology groups already using a digital pathology system should judiciously use the Category III codes to document the benefit of digital images in the diagnosis of cancer and other diseases for Medicare and private payers.
For those practices that are unsure about digital pathology technology, the new CPT codes may provide an incentive to at least begin an evaluation, because it is expected that payers will issue favorable coverage and reimbursement guidelines in coming years. As that happens, pathology groups would be able to file claims for the step of converting a glass slide into a whole-slide image. That would be a new stream of revenue that pathology groups could use to amortize the costs of their conversion to a fully-digital workflow.
All pathologists and their practice administrators should factor these developments into their group’s strategic planning. Digital pathology is the future of the profession.
Demand for Pathologists Exceeds Available Supply
DEMAND FOR ANATOMIC PATHOLOGISTS WILL CONTINUE TO OUTSTRIP SUPPLY, challenging pathology practices that have a growing number of case referrals but not enough physicians to perform diagnostics work.
Consider these figures for full- and part-time pathologists as posted on the job board at PathologyOutlines.com:
- 2022 for Q1 though Q3 had 1,200 job postings, which looks for the full year to be pulling ahead of 2021 significantly.
- 2021 had 1,359 job postings, a 78.1% increase from 2020.
- 2020 had 763 job postings, a 9.7% decrease from 2018. Note the website did not compile totals for 2019.
- 2018 had 845 job postings, a 28% increase from 2017.
In reviewing the above statistics, it is conceivable that when PathologyOutlines.com releases its final 2022 figures, the amount of open pathologist jobs in the U.S. will have doubled within five years. The anatomic pathology industry is falling short of training enough pathologist to meet current demand, and there are no signs that this will improve in 2023.
What to Know
It is widely acknowledged that the ongoing retirement of Baby Boomer pathologists is a factor in the marketplace supply/demand equation. Not only does the retirement of these pathologists reduce the supply of professionals available to fill open positions, but these retirements are causing a shrinkage in the number of independent private practices.
In pathology groups of three to six physicians, the retirement of one or two of these pathologists—and the inability of the remaining partners to recruit replacements—often means that this independent private practice agrees to merge or sell itself to a larger regional pathology group.
This pattern of mergers and acquisitions involving pathology groups has been happening for years. A quick online search shows an active year in 2022 for pathology practice consolidation.
Actions to Take
During 2023, acquisition-minded pathology practices should have a favorable market in which to seek out new opportunities. Big pathology groups are likely to become bigger over the course of the year.
Meanwhile, any pathology group being squeezed by the lack of available talent will need to assess their recruitment options to offer a combination of salary and benefits that attract all candidates, with the addition of work/life balance and perhaps even social causes that can attract younger pathologists who are Millennials or older Generation Z members.
Additionally, technologies such as digital pathology and artificial intelligence may gain a greater foothold in 2023 if they can ease logjams with case reviews.
For example, if digital pathology adoption increases in the new year, it may enable pathologists to remotely view cases from regions with limited access to these professionals. (See Trend #3 above for more details.)
It should be expected that the current imbalance in supply-versus-demand for pathologists will be a powerful force in reshaping the profession.
Expect Greater Payer Scrutiny of Genetic Test Reimbursement
WIWTH AN ESTIMATED 175,000 GENETIC TESTS ON THE MARKET—and that number will rise by the thousands this year—the scrutiny of genetic test reimbursement from Medicare and private payers will increase for genetic testing companies and labs.
Payers are not equipped to deal with a deluge of claims for tens of thousands of genetic tests—many of which lack comprehensive documentation of their accuracy and how the test results guide physicians to improve patient care.
Medicare reimburses genetic test claims for diagnostic purposes only in limited situations, such as when a physician orders the test to treat a patient’s specific condition. Medicare does not cover genetic testing done for predictive purposes. Likewise, private payers have set up limits on when they will reimburse for genetic tests.
Meanwhile, it is widely acknowledged that precision medicine and value-based care is the future of healthcare. Molecular and genetic tests are the backbone of precision and personalized clinical services. Such tests can provide early clues about potential hereditary illnesses and what treatments work best based on a patient’s genetic makeup.
Genetic testing companies will need to tread carefully with reimbursement claims throughout 2023 given the heightened interest from federal auditors.
What to Know
The groundwork for this scrutiny was laid by the government in a December 2021 report from the Office of Inspector General (OIG) at the federal Department of Health and Human Services. That document chronicled the rise in referrals and payments for genetic tests from 2016 through 2019. During that four-year period, Medicare payments for genetic tests quadrupled, to $1.4 billion in 2019.
What followed in 2022 were payer audits and at least 13 indictments on genetic test and related telemedicine fraud in the amount of half a billion dollars. Some of the cases alleged that defendants ordered medically-unnecessary genetic cardiovascular lab tests for patients via suspicious telemedicine consults. (See TDR, “Feds Target Genetic Test and Telemedicine Fraud,” Sept. 19, 2022.)
Some of these cases will go to trial in 2023 pending any attempts to negotiate settlements. The sheer amount of money allegedly involved will make headlines and further embolden prosecutors.
Meanwhile, a 2019 case concluded recently with a jury conviction against Minal Patel, 44, owner of LabSolutions in Atlanta, for submitting $463 million in fraudulent lab test claims. Patel conspired with patient marketing firms, telemedicine companies, and call centers to target Medicare beneficiaries with telemarketing calls falsely stating that Medicare covered genetic tests for cancer. Patel is scheduled to be sentenced on March 7 and faces up to 20 years in prison.
Actions to Take
Genetic testing lab companies may want to review seven characteristics of potential telemedicine pitfalls as outlined in OIG Special Fraud Alert, “OIG Alerts Practitioners to Exercise Caution when Entering into Arrangements with Purported Telemedicine Companies.”
When dealing with private payers, it behooves labs to focus discussions about reimbursement on how a genetic test fills a void in patient care.
More Prior Authorization for Molecular and Genetic Tests
PRIOR AUTHORIZATION OF GENETIC TESTS IS, IN MANY WAYS, an attempt by health plans to lasso the fast-growing genetic test market, which offers an estimated 175,000 tests. Insurance carriers, unsure of which genetic tests are legitimate and actually solve patient care problems, want to know where their reimbursement money will go ahead of time.
Prior authorization requirements are a burden for both referring physicians and the genetic testing labs providing these services. Much paperwork and effort is required, particularly when a genetic test request is denied during prior authorization. Often the genetic test company will run the test anyway, specifically to keep the referring physician happy while the denial of that claim is appealed.
What to Know
Tufts Health Plan, based in Canton, Massachusetts, perhaps offered a preview of what the genetic testing industry will face this year. As of Oct. 1, 2022, the company now requires members of Tufts Public Health Plans to receive prior authorization for genetic tests in 11 broad areas, including whole genome sequencing, prenatal testing, and tumor markers.
AIM Specialty Health, a third-party health benefits management company in Chicago, administers the prior authorization program on behalf of Tufts.
Meanwhile, earlier in 2022, Optum, owned by UnitedHealth Group, launched a widely available laboratory benefit management solution designed to help health insurers improve utilization of genetic tests. (See TDR, “UnitedHealth’s Optum to Offer Lab Test Management,” June 27, 2022.)
Prior authorization requirements appeal to health plans because there are administrative costs of $125 for every genetic test claim, as reported previously by Concert Genetics in Nashville, Tennessee. Multiply that dollar figure by tens of thousands of genetic test claims, and it is easy to see the financial benefit for payers to manage those claims more tightly.
Actions to Take
Genetic test laboratories should look at prior authorization requests as a chance to bolster their argument in favor of the test order, said Kelly Athman, Senior Director of Medical Affairs at InformedDNA, a genomics services company in St. Petersburg, Florida.
“In general, I would say prior authorization offers providers an opportunity to submit information about the test that’s being requested, such as the test name, the performing laboratory, the billing codes, their procedure codes for the test, and also some medical information about how that test will help someone change their care plan or impact their care plan,” Athman told AIS Health on Sept 15.
“So, that could be in the form of medical records for some laboratories that have [performed the test] to show the need for this genetic testing, or even a letter of medical necessity,” she added. “Some providers choose to write that very specifically to a health plan.”
Prior authorization is an uphill climb. When labs submit pre-authorization requests for genetic testing, 40% to 50% of those requests are denied. (See TDR, “How to Achieve Success with Genetic Test Prior Authorization,” July 26, 2021.)
Wider Adoption of Automation in Labs, Microbiology, Histology
INTEREST IN FURTHER AUTOMATION ACROSS THE SPAN OF LAB WORKFLOW AND PROCESSES IS ON THE INCREASE, not the least because many clinical laboratories are unable to hire enough medical technologists and skilled laboratory scientists to handle their current volume of testing.
This will be particularly true for automating workflows in microbiology and histology. These are two areas where manual work processes are still common in most labs. By contrast, the majority of high volume core laboratory tests involving chemistry, immunoassay, and hematology are extensively automated.
In microbiology, automation is making steady progress, often centered around solutions provided by bioMérieux, Becton Dickinson, and Copan Diagnostics, for example. Histology has been slower to automate, primarily because of the wide range of specimen types and the number of stains that are handled by a busy histology laboratory.
What to Know
Two urgent factors stand behind the motivation to increase adoption of automation: keeping up with more technology-savvy pathology practices and finding new ways to close the workflow gap created by the difficulty in hiring experienced histology technologists. (See Trend #1 above for more details.)
The obvious targets for automation in histology labs are these manual work processes:
- Slide preparation for embedment in paraffin and cutting.
- Slide staining.
- Slide labeling.
In addition to improving the productivity of labor, automation can also reduce the variation in how each specimen is processed. That can improve turnaround time and may increase the accuracy of diagnoses. Automation can also integrate with laboratory information system workflows, improving process efficiency.
As with many examples of healthcare automation, use of automated solutions in core lab, microbiology, and histology has wider implications in terms of artificial intelligence and deep learning algorithms, particularly for anatomic pathology. Deep learning is a form of AI that simulates human learning.
Through automated processes, tissue specimens can be prepped quicker thanks to the elimination of manual steps, which then allows AI to analyze more diagnostic data. Digital pathology can also serve efforts to automate recognition of infected tissue.
Actions to Take
Clinical laboratories and pathology practices facing competitive pressures, or which lack success in recruitment efforts, should step back and consider whether it is time to instead deploy technology such as automation.
A multidisciplinary team, including bench staff, pathologists, billing, quality of care, and IT, should evaluate available automation tools and analyze whether implementation costs would outweigh recruitment and competition risks.
For pathology groups that are part of a hospital or health system, presenting a cost analysis of an automation system installation to administration and procurement teams will also be necessary.
Next-Generation Sequencing May Be Part of CLIA Updates
LONG-OVERDUE REVISIONS TO THE CLINICAL LABORATORY IMPROVEMENT AMENDMENTS OF 1988 (CLIA) will be evaluated and possibly implemented during 2023. Some of the potential significant changes involve next-generation sequencing (NGS).
The federal Clinical Laboratory Improvement Advisory Committee (CLIAC)—which includes representatives from clinical laboratories, healthcare, and consumers—has an important role going into the new year. The CLIAC Regulatory Assessment Work Group is examining three reports that were presented to the full committee in 2019, one of which focused on NGS. Those reports generally suggest that CLIA should be modified to better reflect modern biomarkers, new informative capabilities, and genomic technologies, including NGS.
What to Know
Reynolds Salerno, PhD, Director of the Division of Laboratory Systems (DLS) at the federal Centers for Disease Control and Prevention (CDC), outlined some of the changes in an exclusive interview with The Dark Report.
“In my opinion, this is the most assertive CLIAC has been in convening work groups and assigning them mandates regarding the need for revision of the CLIA regulations,” including for NGS, Salerno noted. “I anticipate that CLIAC will begin to pressure the federal government to make more substantive changes to the CLIA regulations.” (See TDR, “Newsmaker Interview: Director of CDC’s Division of Laboratory Systems Talks COVID-19, CLIA, and More,” Oct. 31, 2022.)
Among the eight NGS-themed recommendations presented in 2019 were the following:
- The federal Department of Health and Human Services should update CLIA responsibilities of bioinformaticists; establish more appropriate quality control measures for NGS; and determine delivery of NGS data to patients.
- Federal health agencies should encourage professional societies to develop or update NGS guidelines for areas such as revalidation of analytical targets, data retention, and data sharing.
- The CDC should survey clinical laboratories and other organizations that perform NGS to collect data on bioinformaticists, including training requirements, salaries, and job turnover.
Actions to Take
The focus on bioinformaticists is an interesting aspect for lab leaders to pay attention to in upcoming NGS discussions. If that job role is added to CLIA language, it raises the profile of that position considerably.
“Bioinformatics expertise has minimal overlap with the expertise of a pathologist, laboratorian, or geneticist related to NGS technology,” the College of American Pathologists stated in prior comments to CLIAC. “Therefore, a category of bioinformatics should be added to CLIA for the personnel performing bioinformatics or pathology/laboratory informatics activities.”
The CLIAC meeting to discuss NGS will take place on April 12-13, according to Salerno. Interested clinical laboratory leaders can join the meeting via phone or Zoom. (Go to www.cdc.gov/cliac/upcoming-meeting.html for further details.)
Looking Back at 2010’s Trends in Clinical Lab Market Reveals How Priorities Have Changed in Past Decade
IT WAS 2010 WHEN WE LAST PRESENTED OUR LIST OF clinical laboratory macro trends. Here are highlights from back then.
- Quality Management Systems. In the late 2000s, the first clinical labs began using ISO 15189: Medical Laboratories to guide their quality management approach. ISO 15189 has gained popularity with innovative labs since then.
- Workflow as a Management Driver. Redesigning diagnostic work processes has become a hallmark of more efficient labs in recent years. Automation and artificial intelligence helped reveal the value of streamlined workflows.
- Automated Instruments Improve Turnaround Time. As evidenced in our 2023 list, automation continues to be key to efficient clinical lab management. Improved worker productivity amid staffing shortages joined established benefits, such as increased quality.
- Lab Outreach Earns New Respect. In 2010, hospital CEOs began to note that laboratory outreach was a service-rich offering. Ironically, today national commercial labs are paying to acquire lab outreach programs from cash-strapped hospitals and health systems.
- Cloud Computing Gains Wider Acceptance. This trend has enveloped society, not just healthcare. Any lab manager or patient using an app to deliver or access services is intertwined with modern cloud computing.
- Molecular Tests Show More Value. Back in 2010, the promise of molecular and genetic testing was evident, but cost was a concern. Prices have dropped to an extent, but the public demand for genetic tests has only been matched by the sheer volume of options available. Payers are now more forcefully pushing providers to justify these tests.