"Managed Care Update"

New Lab Test Technology Must Meet Five Payer Requirements

HOSPITALS ARE NOT THE ONLY healthcare player wary of the high cost of new diagnostic test technologies. Insurance companies all over the United States have increased their scrutiny of new medical technology, including laboratory tests.

In a visit to Wall Street last week, THE DARK REPORT attended Bank of America Securities’ conference on “Genomics & Diagnostics: How Close Are We To The Future?” The conference was well-attended by professional money managers, a fact which indicates high interest in laboratory companies and diagnostic opportunities.

Payer acceptance of new lab tests is of particular interest to investors (and the laboratories which will perform the tests), so a panel was devoted to “A Payer Perspective: Will They Pay?” Panelists agreed that new laboratory test technology is now put under much greater scrutiny by payers now, as com- pared to past years.

Critical Of Some New Tests

Robert Derek Prentice, M.D., Medical Director at Blue Cross/Blue Shield of North Carolina, was particularly critical of laboratory tests which failed to demonstrably improve clinical care. In particular, he noted that liquid preparation Pap smears didn’t address the real problem in cervical cancer screening—the women who die of cervical cancer because they didn’t visit a doctor for timely Pap smear testing.

“From a payer perspective, our concern is that the increased cost of these new Pap tests may discourage patient access because it raises the cost of testing, thus increasing the cost of health insurance premiums and reducing the number of women covered by health insurance,” observed Dr. Prentice.

Payers Were “Harangued”

That Dr. Prentice was somewhat biased on this subject was revealed by his answer to a question from a financial analyst in the audience about why the nation’s health insurers accepted this test in the first place. “Payers were harangued by patients, physicians, and legislators to adopt this test,” he recalled. “The managed care industry gave in to the pressure.”

Dr. Prentice later identified the five criteria used by the national Blue Cross/Blue Shield organization’s technology committee to evaluate new medical technologies for acceptance. They are: 1) Technology must be government-approved. 2) Scientific evidence must prove the conclusions about clinical effect [benefit]. 3) There must be a net measurable improvement in health outcomes. 4) New technology must be as good as existing technology. 5)Improvement must be attainable outside the development setting.

Panelists had clear agreement on one point: until government and private payers agree to establish billing guidelines and adequate levels of reimbursement, manufacturers of new, FDA-approved diagnostic test technologies will find it difficult and expensive gain widespread clinical acceptance.

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