CEO SUMMARY: Since the year began, three trends have affected clinical laboratories and anatomic pathology groups. First is a continuing surge in COVID-19 test volume. Second is inconsistent payment from government and commercial insurers for SARS-CoV-2 test claims. Third is growing consumer acceptance of digital devices to monitor their health, a trend that leads them to order more and pay cash for direct-to-consumer tests. Labs doing strategic planning should consider the influence of these trends.
THREE SIGNIFICANT TRENDS ARE TAKING HOLD IN THE CLINICAL LABORATORY INDUSTRY. Two are linked directly to the COVID-19 pandemic and the third is boosting testing demand because it reflects changes in patient behavior that are bringing increased cash flow to clinical labs.
Lâle White, Executive Chairman and CEO of XIFIN, identified the trends as a result of the work her company does in processing clinical lab test claims and in helping labs manage payment processes.
The first of the three trends is the latest surge in COVID-19 test volume. This increase in testing for the SARS-CoV-2 virus is forcing labs to balance rising demand against a steady increase in the need for routine tests.
“We have seen a rather robust bounce-back in the volume of routine testing,” noted White. “When the pandemic began last March, health systems shut down as COVID-19 cases rose and patients stayed away from doctors’ offices. Now, almost a year later, routine test volume is climbing as patients decide they can no longer delay the healthcare they didn’t get last year.”
The second trend in labs is inconsistent payment from government and commercial health insurers for claims resulting from the rising number of COVID-19 tests. “We have seen this inconsistency in reimbursement payment as a drop in payment rates since Jan. 1,” added White. (See sidebar, “As Health Insurers Adjust to New COVID-19 Billing Codes, Payment Has Been Inconsistent,” below.)
The third trend is growing interest among consumers in digital health. For example, wearable devices are used to measure the user’s heart rate, hours of sleep, daily steps, and other activities. “This rising interest in digital devices is a positive development for labs because it drives demand for direct-to-consumer (DTC) testing,” she said. “That’s good for clinical labs since consumers will pay cash for DTC testing.
“Experts predict this trend will continue long-term, in part because digital devices tend to raise consumers’ interest in their personal health,” she said. “For labs, such increased interest motivates consumers to get DTC tests to identify any health problems as early as possible, rather than find out later when cancer or another condition is a bigger problem.”
As clinical labs see an increase in testing for the novel coronavirus, they also are getting more inquiries about identifying variants to the virus, but payment for identifying variants is not considered in current reimbursement rates, White noted.
“Right now, viral load reporting and variant-identification of SARS-CoV-2 are included in the price of the test because there’s no additional fee associated with reporting these elements,” she added. “Even so, many labs started reporting patients’ viral load once its significance in disease management was determined.
“Typically, there is not a big cost to labs associated with adding variant sequencing, other than the investment in research and development to introduce such assays,” she noted.
As virus mutations began to emerge, many labs revised their COVID assays to provide variant-identification results. “But from early in the pandemic, a number of labs have produced information on variants because they knew that identifying variants would be needed,” explained White. “So, while some clinical labs have had viral load and variant information, they have not necessarily been reporting that data. But soon, they will do so.
“At the same time, clinical labs will also need to report any information they have on variants to public-health authorities in their cities and states,” she added.
“The increased need for information on viral load and variants means we’ll continue to see a fairly healthy volume of SARS-CoV-2 PCR testing in clinical diagnostic labs,” White predicted, “particularly since that information is unavailable in at-home or over-the-counter tests.”
As to the surge in testing, White explained that labs saw a drop in lab test volume in January and February, partially due to the introduction of vaccinations and to winter weather. At the same time, routine clinical lab-test volume returned almost in full this year after a slowdown in the first six months of 2020. And in the last two weeks of January and into February, labs also saw molecular diagnostic tests and genetic testing volumes surge, she added.
“The base testing business in clinical laboratories continues to be very strong and high in some cases,” she noted. “But molecular diagnostics and genetic testing for other diseases are seeing the highest increases in testing volume. In those two areas, volume is higher this year than pre-COVID volumes by 15% or so.
More Oncology Testing
“Mostly that increase in testing is coming from oncologists for cancer-related testing, primarily because patients delayed getting those tests last year,” she speculated. “That’s a good portion of the increase in standard testing that we see.”
At the same time, anatomic pathology testing has risen about 10% to 15% over pre-COVID volumes and that increase could be due to delayed cancer testing from 2020, she added. The story is similar for hospital labs, where test volume increased by about 10% to 15% over pre-COVID volume. Most of that increase is coming from routine lab testing, said White.
“Also, even as these clinical labs do more testing, they also are dealing with a huge volume spike in testing for COVID-19, which continues to be strong,” she commented. “At this stage, even with the declining volume, we continue to see a strong demand for COVID-19 testing.”
Factors that may contribute to a softening in demand for COVID-19 testing volume are the rising numbers of Americans getting vaccinated and a fall-off of the need for testing related to Christmas travel and family gatherings over the holidays, White said.
“Meanwhile, when you see anatomic pathology, genetic testing, and hospital laboratory testing all have an uptick in their core business, it’s safe to say that such increases are coming from people who delayed their healthcare services last year,” White concluded.
As Health Insurers Adjust to New COVID-19 Billing Codes, Payment Has Been Inconsistent
AFTER THE FEDERAL CENTERS FOR MEDICARE AND MEDICAID SERVICES (CMS) introduced new billing codes for COVID tests starting on Jan. 1, payment has been inconsistent, said Lâle White, Executive Chairman and CEO of XIFIN, which processes testing claims and helps labs manage payment processes.
In October, CMS said it would pay $100 per test to laboratories that complete high-throughput COVID-19 diagnostic tests within two calendar days of specimen collection, but would pay only $75 per test when results take longer than two days. At the same time, CMS introduced a new CPT code (U0005) for meeting the two-day-turn-around time for these high-complexity COVID-19 tests.
Then, on Jan. 6, CMS introduced more new codes to identify conditions related to COVID-19 and said all the new codes were effective on Jan. 1. The new codes include Z11.52 for screening for COVID-19; Z20.822 for contact with and suspected exposure to COVID-19; Z86.16 for personal history of COVID-19; M35.81 for multisystem inflammatory syndrome; M35.89 for other specified systemic involvement of connective tissue; and J12.82 for pneumonia due to COVID-19.
“It doesn’t appear that government and commercial payers were ready to process all the new CPT and ICD-10 codes introduced in January,” White explained. “At the beginning of January, a lot of payers weren’t recognizing the new codes, even though they had said previously they would be ready. For example, many of the Blue Cross Blue Shield plans said they would be ready, but they had difficulties paying for those codes.
“To be fair, many insurers were paying for U0005 almost across the board,” White noted. “That code was announced in October and it has had fairly good acceptance. But we’ve seen many claims-payment problems for COVID-19 testing because some insurance companies just weren’t timely in understanding the new codes and updating their payment systems appropriately.
“For these reasons, there has been some erosion in payment for SARS-CoV-2 tests,” she added. “One reason for the erosion is the lack of preparation to implement the new codes in January, when these codes were not even announced until after that date. To their credit, insurers have fixed most of those problems.
“Another reason for the erosion in payment is clinical labs have not been able to show that they have run 100% of their high-complexity COVID-19 PCR tests in the two-day turnaround time,” she said. “Also, some clinical labs have not been able to show that at least 51% of their high-complexity COVID-19 PCR tests done in the previous month were completed in the two days that CMS requires.”
Contact Lâle White at 858-436-2908 or lwhite@XIFIN.com.