Ending ‘Lab Tests as a Commodity’

Ending ‘Lab Tests as a Commodity’

WITH HEALTHCARE POISED TO MAKE FUNDAMENTAL CHANGES in both the delivery of care (think integration, ACOs, medical homes) and how providers are paid (less fee-for-service, more budgeted payment methods), it is time for the entire profession of laboratory medicine to tackle the elephant in the room: lab tests bought and sold as commodities.

The commoditization of lab tests since the mid-1980s has done consistent financial harm to independent labs, anatomic pathology groups, and hospitals with lab outreach programs. In classic economics, a commodity product is, by definition, identical. Think salt, aluminum billets, soy beans, and pork bellies.

Pathologists often argue that there are clinical labs of high quality and labs of low quality. But when payers ask the lab profession: “Why should we pay more for lab A’s chemistry test than for lab B’s chemistry test?”, the lab profession cannot provide evidence to support the assertion that one lab’s chemistry test result is better than another lab’s.

Consequently, since the 1980s, payers have regularly chosen the lab that offers them the lowest price per test. Because the national public lab companies have the lowest average cost per test, they can bid managed care contracts at prices lower than independent labs, anatomic pathology groups, and hospi- tal laboratory outreach programs.

That game changes, however, in healthcare’s next era. Integrated health systems, ACOs, and patient-centered medical homes must demonstrate to payers and employers that they can meet two goals. First, they must keep patients healthy. Second, they must cut the cost of care because their patients are staying healthy.

Local labs, hospital labs, and pathology groups have the opportunity to do more than simply offer an accurate test at a low price. They can add value by taking the commodity-priced chemistry test or CBC and wrapping it inside a lab test service offering that helps physicians order the right test at the right time, then assists him or her with interpreting results and selecting the best therapies for patients.

Adding value is the essential attribute of clinical lab 2.0. At the Executive War College in New Orleans on May 2-3, first-mover labs learning to add value in these ways will be sharing their successes and lessons learned.

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