To Be Paid More, Labs Must Deliver More Value

GETTING PAID FOR LAB TESTS IS BECOMING A MORE URGENT PRIORITY for both clinical laboratories and anatomic pathology groups this year. Multiple factors are responsible for lengthening the collection cycle and reducing overall reimbursement for lab testing.

Clients of THE DARK REPORT have followed our coverage of this development. On one hand, payers are getting tougher. In a change from past years, some payers are simply refusing to pay out-of-network claims—even as they narrow their networks by excluding local labs. On the other hand, both employers and the new health exchanges organized under the Affordable Care Act are enrolling more consumers in high-deductible health plans (HDHPs).

This is problematic for labs because patients covered by an HDHP must meet high annual deductibles, often as much as $5,000 for an individual and $10,000 for a family. Thus, more labs are faced with the need to collect the full cost of lab testing directly from the patient. This is a major reason why clinical labs and pathology groups are seeing substantial increases in patient bad debt.

These developments have raised the stakes for all lab administrators and pathologists. Labs must have the right response to this market shift in laboratory billing and collections in order to sustain themselves financially. What increases the difficulty of this challenge is that fee-for-service reimbursement is on its way out and most lab professionals don’t have a clear idea of how labs will be reimbursed in the coming era of integrated healthcare that is delivered by ACOs, medical homes, and similar types of provider organizations.

This is one reason why THE DARK REPORT is introducing the “Laboratory Value Pyramid.” In coming years, labs will be paid proportional to the value they deliver to physicians, payers, and patients. Such payments are likely to be part of a bundled payment for ambulatory services or in the form of a capitated monthly payment.

The laboratory value pyramid has been created to provide a useful roadmap for lab organizations to move from their current state to the ideal future state where their lab testing services contribute recognized value—and they are paid adequately for this value. In this issue, we explain level one of the four-level lab value pyramid. As the other levels are introduced in coming issues, I invite your feedback and suggestions for how to refine this useful concept.