HERE’S AN EXAMPLE OF HOW an accountable care organization views cost control. Atrius Health sought to control excess costs by focusing on high-priced items. It started with inappropriate hospitalizations and imaging studies and moved on to laboratory testing.
Atrius Health is a non-profit alliance of six community-based medical groups and a home health and hospice agency. Its 1,000 physicians care for more than 1 million patients in 50 practice locations in eastern and Central Massachusetts.
Currently, Atrius Health has three initiatives in place to limit the ordering of unnecessary laboratory tests. It is saving hundreds of thousands of dollars on each effort for a total savings that could be $1 million or more annually.
Different Financial Incentives
Capitated and shared savings contracts it has with health plans in Massachusetts provide incentives are designed to drive out unnecessary costs. under these contracts, Atrius Health is responsible for the total cost of care. This includes office visits in and outside of its facilities, hospitalization, pharmacy, post-acute care and diagnostic testing.
“About 50% of our patients are on some sort of risk contract, such as a budgeted or capitated amount per month,” said Richard Lopez, M.D., Chief Medical Officer. “About 70% of our revenue comes through risk-related contracts.
“These contracts create an incentive to closely manage costs,” he noted. “In a completely fee-for-service medical practice, doing plenty of lab tests generates revenue. under capitated and shared-savings arrangements, the incentives are reversed. Now we must carefully watch what we spend on care.”
Meeting Quality Targets
Lopez said that the risk contracts also offer financial incentives for physicians and hospitals to meet certain quality targets. This factor thus prevents providers from skimping on care.
In November, the Journal of General Internal Medicine published the results of a study in which Atrius Health participated. The study evaluated the effect of real-time display of laboratory test costs on primary care physician ordering of 27 common laboratory tests for outpatients (21 low-cost and six high-cost tests).
There was a decrease in ordering rates for four of 21 (19%) of the low-cost tests and for one of six (17%) of the high-cost tests. For the low-cost lab tests used in the study, Medicare paid less than $40; for high-cost lab tests, Medicare paid above $40.
In this study, researchers showed a potential savings on lab testing of $45.45 per 1,000 visits per month. Given that Atrius Health has about 3.5 million patient visits per year, the savings could total $157,000 per year.
“This study showed that displaying more price information in the electronic health record (eHR) could result in greater savings,” observed Lopez. “That is why, in the past month, as one of three current initiatives that target use of lab tests, we’ve started another study.
Using EHR To Display Costs
“We are using the EHR to display lab test costs and the costs of x-ray procedures, CT scans, cardiac testing, and emergency room visits,” he continued. “For lab tests, we have added the costs of another five or 10 more tests.”
A second effort to control costs involved setting guidelines for pre-visit lab tests. “In the past, it was common to order many pre-visit lab tests when a patient was due for an annual physical,” Lopez said. “But there was a lot of variation in how many pre-visit tests a physician would order. Some physicians would order a lot of blood tests and some would not. even more importantly, the ordering of these tests was not always evidence-based.
“Some of the tests were unnecessary,” he stated. “For example, a patient with a normal cholesterol profile typically doesn’t need a lot of blood tests ordered every year. Also, there are potential risks for the patient when doing unnecessary tests.
Pre-Visit Lab Test Protocols
“The change was to intervene in the pre-visit lab process by giving the medical assistants guidelines based on the patient’s age, which medications the patient was taking, and which diagnoses the patient had in the past,” explained Lopez. “With that information, the guidelines identify which lab tests would be appropriate. By instituting that process, we drove down lab testing associated with routine physicals, saving about $500,000 per year.
“The cost of a typical lab test might be $15 to $40 or so, which is not a lot compared with the cost of an MRI, which can be $1,000 or more. But when we analyzed the frequency of some test ordering and recognized that we have 1 million patients, the numbers added up quickly,” Lopez explained.
“In our third initiative, we reduced the number of liver function tests we do for patients on cholesterol-lowering drugs,” he noted. “When statins were introduced, there was a lot of concern about their potential effect on liver function. So many physicians ordered these tests.
“Now, with more than a decade of experience with statins, we know it’s not necessary to order a liver function test every year for every patient,” observed Lopez. “Again, that’s a low-cost lab test but we were doing a lot of them. After we promoted the most recent FDA guideline on liver function tests for these medications, we experienced a reduction in the number of tests ordered and that alone saved several hundred thousands of dollars annually.”
The efforts of Atrius Health show pathologists and lab executives how providers— in response to the emerging value-based reimbursement arrangements—are taking swift steps to identify inappropriate utilization of clinical services, including laboratory tests. under capitated and shared savings contracts, providers such as Atrius Health have a powerful motivation to help their clinicians become more effective at ordering the right test at the right time for each patient.
With hundreds of ACOs and medical homes now providing care to millions of patients, labs can expect to see changes in both the volume of tests and the mix of tests referred by these care organizations. For labs that still depend on fee-for-service revenue, the resulting decline in the volume of lab testing from clients improving their utilization of lab tests may be measurable and financially painful.