Top 10 Lab Stories of 2017 Dominated by Part B Cuts

Events in 2017 will trigger major disruptions in both clinical lab and anatomic pathology sectors

CEO SUMMARY: In hindsight, 2017 is likely to be remembered as a milestone year that launched several disruptive developments that will reshape the lab industry moving forward. For the clinical laboratory sector this year, CMS confirmed its intent to slash Part B clinical laboratory test prices aggressively, effective Jan. 1. For the anatomic pathology sector this year, the FDA cleared the first digital pathology system and whole slide imaging for use in the primary diagnosis of most types of tissue.

HISTORY WILL PROBABLY RECORD 2017 as the year that sparked fundamental and far-reaching changes to clinical laboratories and anatomic pathology groups.

Viewed strategically, the 12 months ending in 20 days was unlike any in the past three decades for laboratory medicine. Actions taken this year likely will exert major influence on how medical laboratories of any type or size operate, provide lab testing services, and earn remuneration from payers and patients for many years into the future.

This is one conclusion to be drawn from a review of THE DARK REPORT’S list of the Top 10 Lab Industry Stories for 2017. Further, the year’s developments in several specific areas of healthcare and laboratory medicine represent pivot points. In each case, whatever was the norm pre-2017 will be different post-2017.

Here are three examples of pivot points that are likely to create a different post-2017 environment for labs compared with the pre-2017 period:

• Release of the final Medicare Part B clinical laboratory test fee cuts in November.

• FDA clearance of the first digital pathology system and whole slide imaging for use in primary diagnosis in April.

• Implementation of genetic test prior-authorization programs by two payers covering 80 million beneficiaries that happened in July and November.

Moving into 2018, every clinical laboratory and anatomic pathology group will need to revise their strategies to respond to the most significant developments of 2017. Lab managers will need to design these strategies to help their labs adapt to healthcare’s transition from silos of reactive care to integrated delivery networks that focus on keeping patients healthy. Doing so will include helping physicians use lab tests to diagnose patients with chronic conditions earlier and collaborating with physicians to manage those patients to keep them out of hospitals.

Payers Become Stingier

Events of this year, as reflected in the list of the Top 10 Lab Industry Stories for 2017, provide evidence that payers—both government and private—grow stingier with reimbursement, are more willing to exclude labs from their networks, and are determined to conduct more frequent and rigorous audits of lab test claims.

Medicare officials and executives at health insurers have some justification for their actions. The increase in fraud involving lab testing is a top 10 lab story in 2017. Moreover, in the face of this increased fraud, the failure of federal and state prosecutors and regulators to take decisive action against the most obvious law-breakers leaves payers with few options other than to enact Draconian coverage requirements.

Use in Strategic Planning

Each year, many clinical labs and pathology groups use THE DARK REPORT’S list of the Top 10 Lab Stories as the basis for strategic planning sessions with their pathologists and senior management. It is recommended that these labs include some additional developments in these planning sessions.

For example, what are the implications of the FDA’s clearance of the CLIA-waived CBC test developed by Sysmex? (See TDR, Nov. 20, 2017.) This approval came last month and sales of the instrument system and CBC test won’t start until 2018. Sysmex told THE DARK REPORT that it developed this CLIA-waived CBC test because it believes that more lab testing will disperse outside the central laboratory to near-patient and point-of-care settings.

Sysmex also believes that integrated delivery networks, paid a capitated rate or a budgeted payment, will want more lab tests to be performed in near-patient settings. This would allow physicians to diagnose patients on the same office visit, then send them on their way with an electronic prescription waiting for them at the nearest pharmacy. These methods provide better and more timely patient care by making doctors’ offices more productive and lowering the cost of care.

Model for Dispersed Testing

Naturally, we are still several years from widespread adoption of this diagnostic testing model. But this new FDA-cleared, CLIA-waived CBC demonstrates that at least one in vitro diagnostics (IVD) manufacturer is ready to upend long-standing paradigms in clinical laboratory operations. In this way, a model of lab testing that is more distributed or dispersed is developing throughout the integrated delivery systems and ACOs that will dominate healthcare in coming years.

One of the more interesting stories on this year’s list is the observation that the paths of hospital and health system laboratories are now diverging from the paths of independent lab companies. THE DARK REPORT is first to identify and describe this development. (See TDR, Nov. 20, 2017.)

Divergent Paths

If this trend continues, it could represent the pendulum swinging back in favor of hospital laboratories after more than a decade of dominance by the nation’s largest lab companies. And, it could be one reason why many lab professionals would consider that there was some good news for hospital labs in 2017 after all.

Contact Robert L. Michel at 512-264-7103 or at labletter@aol.com.

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