CEO SUMMARY: One stark difference between the presentations delivered at last year’s Executive War College and this year’s presentations in New Orleans last week was near-unanimous recognition that the era of fee-for-service payment is soon to end! Speaker after speaker urged the audience to accept this marketplace reality. The common recommendation was for lab administrators and pathologists to take immediate steps to help their laboratories respond to this development in effective ways.
IF THERE WAS ONE UNIFYING THEME to most of the presentations delivered at this year’s Executive War College on Lab and Pathology Management, it was the need for labs of all sizes and types to be more nimble and responsive to the changing needs of physicians, patients, and payers.
There was a specific reason why so many knowledgeable speakers advised labs to become more nimble and responsive. It is the recognition that the era of fee-for-service reimbursement is coming to an end-and fast! This was an important element in the keynote presentation delivered by Robert L. Michel, Editor-inChief of THE DARK REPORT and Founder of the Executive War College that opened the program on Tuesday, May 5.
In his remarks, Michel reminded the audience that the federal Department of Health and Human Services (HHS) was accelerating the Medicare program’s transition away from fee-for-service and toward other forms of reimbursement. “In its press conference on January 26, HHS officials declared that the goal was to tie 30% of existing fee-for-service payments to ‘quality or value’ via such delivery models as ACOs and bundled payments,” noted Michel.
“This will happen with unprecedented speed,” he emphasized. “HHS says it wants to reach this 30% conversion by the end of 2016! That’s just 19 months from now. It also wants to raise that 30% to 50% by the end of 2018.
“The story doesn’t end here,” continued Michel. “HHS officials further outlined a goal of tying 85% of all traditional Medicare payments to quality or value by 2016, then moving that to 90% by 2018. This would be done within the Medicare Hospital Value Based Purchasing and the Hospital Readmissions Reduction Programs.
Private payers and Medicare
“Lab managers should keep in mind that, when Medicare changes coverage guidelines and reimbursement, private health insurers tend to incorporate similar changes into their policies,” added Michel. “Therefore, if Medicare takes aggressive steps to reduce the proportion of pure feefor-service reimbursement in favor of more value-based and bundled reimbursement, it can be expected that private payers will act with equal swiftness to adopt nearly identical payment models.”
Michel’s observations on the speed with which Medicare is poised to transition away from fee-for-service payments were affirmed by speakers who followed. For example, in his presentation, Sam Terese, CEO of Alverno Clinical Laboratories in Hammond, Indiana, pointed out that “ongoing budget cuts to Medicare will be the norm. Current projections are for Medicare cuts of $260 billion by 2022.
“Thus, going forward, there will be fewer Medicare dollars even as we see more bundled reimbursement from Medicare and private insurers,” noted Terese. “The other trend for which labs must prepare is continued growth in the number of Medicare beneficiaries, accompanied by an increase in enrollment in Medicare Advantage plans.”
Big Regional Lab Network
Alverno operates a central laboratory that provides lab outreach testing services. It also administers one of the nation’s largest regional laboratory networks that includes 27 hospitals owned by its parent health systems, along with labs in four non-owned hospitals.
One key strategy at Alverno is to continue standardization of lab testing services across the organization. This has the
benefit of supporting the full integration of lab test data, which, in turns, gives Alverno a rich data base of clinical information to mine as it works to deliver more value to clinicians and stakeholders.
“Another development with our parent healthcare organizations is their ongoing acquisitions of physician practices,” explained Terese. “Alverno must then work to bring this ‘captured outreach’ into the system in ways that foster the ongoing integration of clinical care and clinical workflow.”
Of course, cutting costs is another big goal. According to Therese, Alverno is committed to a 25% reduction in costs over the next five years, to be achieved through a succession of cost-cutting initiatives.
Better Use of Lab Test Data
The morning’s next speaker reinforced the comments of Michel and Terese, while challenging the audience to think creatively in how to use lab test data to improve patient outcomes and help parent institutions contribute to bending the U.S. healthcare system’s cost curve.
That speaker was Khosrow Shotorbani, CEO and President of TriCore Reference Laboratories, based in Albuquerque, New Mexico. Shotorbani stepped up to the podium and immediately cut to the chase, confronting the Executive War College audience with the three most significant questions facing every clinical lab and anatomic pathology practice today.
“First, if a lab will not be paid on a volume-based business model, how does it capitalize or monetize on value-based payments, particularly when it must deal with less volume as clinicians improve their utilization of lab tests?” asked Shotorbani. “Second, if your lab testing services are paid with bundled reimbursement arrangements, how does your lab make money?
“Third, during the time it takes to make the transition away from fee-for-service payment,” he continued, “how does your lab team manage the dichotomy of operating two opposing business models (volume versus value) at the same time?”
With these questions, Shotorbani had the full attention of the audience. He then laid out TriCore’s vision for serving the changing needs of healthcare. “We all recognize how lab test data plays an essential role in the continuum of care,” explained Shotorbani. “At TriCore, we want to leverage lab data in ways that allow us to be a partner and collaborator across the continuum of care. By supporting the improvement of patient outcomes and the reduction of healthcare costs, TriCore ensures that it will be paid appropriately for its contributions.”
IVD CEOs and Lab CEOs Identify Strategic Drivers Currently Confronting the Clinical Lab Industry
NOT IN MANY YEARS HAVE SO MANY CEOS of large lab industry vendors and clinical lab organizations come together at one time and in one place specifically to share strategic thinking and current developments in the lab testing marketplace.
On Wednesday morning last week at the Executive War College, the general session featured two special panel discussions. The first included CEOs from in vitro diagnostics (IVD) and lab informatics companies. The second panel was made up of clinical lab CEOs.
Because the IVD and informatics companies serve thousands of labs here and abroad, it was an opportunity to learn how they assess the current state of the clinical lab testing market, along with their predictions of the likely paths for healthcare’s evolution.
Perspectives of Lab Vendors
On the first panel were: Matt Hawkins, President, Sunquest Information Systems, Inc., Tucson, Arizona; John Kershaw, President
and CEO, Sysmex America, Inc., Lincolnshire, Illinois; and, Jennifer Zinn, Vice President, Strategic Affairs, Roche Diagnostics Corporation, Indianapolis, Indiana.
The three panelists all agreed that consolidation involving hospitals and health systems, as well as clinical labs and pathology groups, would be an ongoing and major trend. Zinn of Roche pointed out that “consolidation leads to standardization and, for labs, that contributes to the commoditization of diagnostics.” Kershaw of Sysmex added that this consolidation, combined with more effective lab automation, is contributing to a de-skilling of the lab workforce-absolutely the wrong thing to happen to the lab testing industry at a time when personalized medicine is gaining momentum.
Hawkins of Sunquest noted that the consolidation of hospitals and labs among his company’s client base is ongoing. As a consequence of this trend, and the accompanying regionalization of clinical services that follows, he said that improved interoperability becomes a critical success factor for labs serving these regional health organizations.
Panel of Lab CEOs
The following panel was made up of clinical lab CEOs: Richard Cotten, COO, Boyce & Bynum Pathology Laboratories, Columbia, Missouri; Stan Schofield, President, NorDx, Scarborough, Maine; and, Gregory N. Sossaman, M.D., Ph.D., Chairman, Pathology & Laboratory Medicine, Ochsner Health System and Foundation, New Orleans, Louisiana.
All three lab CEOs put improving capabilities with the lab’s data analytics at the top of their strategic initiatives. Cotten of Boyce & Bynam and Sossaman of Ochsner both discussed how their respective labs were pursuing innovative collaborations and partnerships as a way to sustain their labs’ abilities to contribute value in each of the regions that they serve.
Schofield of NorDx emphasized the need for all labs to do more with less and to develop ways to more smoothly integrate lab services as the parent healthcare system acquires hospitals or establishes new collaborations.
One of the interesting perspectives offered by Sossaman of Ochsner was about the relative value of expanding molecular test capabilities versus using data from routine tests to help physicians manage patient populations. He discussed the example of hemoglobin A1c testing and shared how his lab team was working to identify instances where diagnosed diabetics had not had their tests performed within the previous 12 months. By providing enriched lab test data to physicians, the Ochsner lab was contributing to improved patient outcomes across a large number of patients.
Diagnostic Info Exchange
Shotorbani next invited the audience to think of the concept of a diagnostic health information exchange. “In New Mexico, TriCore currently provides up to 70% of all lab test results throughout the state,” he noted. “TriCore also has access to the full patient data held by its health system owners. This gives TriCore a unique position from which to help its parent hospitals, physicians, patients, and payers.
“We are engaged with specialized informatics companies to create such a diagnostic health information exchange,” continued Shotorbani. “The goal is to deliver measurable value to all stakeholders in healthcare. This provides our lab with opportunities at three different levels.
“The first level is improving utilization of lab testing, such as with CPOE,” he stated. “The second level is to use data analytics to help providers with prognosis, monitoring, and prevention. This is a more active collaboration involving TriCore, clinicians, integrated care organizations, and payers.
“The third level is the exciting one for lab professionals,” noted Shotorbani. “This is where TriCore delivers predictive tools to stakeholders that enable diagnosis-based population health management, in return for a share of the bundled payment.”
Proposing Programs to Help Next Generation of Lab Leaders
FOR AT LEAST TWO DECADES, many in the lab industry have called attention to the looming retirements of baby boomer pathologists, med techs, and lab scientists. These individuals make up the largest proportion of supervisors, managers, and lab administrators working in labs today.
As they retire, every clinical lab and pathology group needs to have the next generation of leaders ready to step up and assume responsibilities. But, across the lab industry, there are limited opportunities for every lab’s brightest up-and-comers to get the regular management development opportunities that are common among Fortune 500 companies.
That is why leadership was a major theme at this year’s Executive War College. In his keynote presentation on Wednesday, May 6, Jeffrey McCausland, CEO of Diamond6 Leadership and a retired U.S. Army colonel, encouraged the audience to be more proactive at developing the next class of leaders within their laboratories. One way to accomplish this is to support mentoring activities.
Picking up this theme, Robert L. Michel, Founder of the Executive War College, asked the audience if a mentoring program at upcoming conferences would be a welcome addition to the program’s offerings. The response was strong and enthusiastic.
Michel then asked if a reduced tuition program for young lab leaders would be of interest for the 2016 conference. Again, the audience was positive to the concept, particularly when McCausland suggested that such a program be organized so that a lab’s mentor would attend with his/her mentoree.
He recommended that these two individuals could participate in special workshops designed to teach both mentor and mentoree how to interact to accelerate the mentoree’s development and his or her ability to make significant contributions to the lab’s clinical service excellence and operational success.