MCOs Asking For More Lab Test Information

Demand for information based on lab testing outruns ability of labs to provide such info

CEO SUMMARY: During the past 12 months, managed care companies in Michigan have increased the quantity and quality of the laboratory test information they want from their laboratory providers. Once again, the marketplace is raising the bar for competitive laboratory services. In response, Joint Venture Hospital Laboratories has made strategic lab information services its number one business priority.

THERE’S A NEW CLINICAL LAB industry trend now revealing itself in the marketplace for healthcare services.

“During the past 12 months, we’ve seen a definitive shift in how MCOs (managed care companies) select their laboratory providers,” stated Jack Shaw, Executive Director of Joint Venture Hospital Laboratories (JVHL), headquartered in Detroit, Michigan.

“Formerly, insurers in Michigan were primarily interested in whether a laboratory provider had adequate patient access points in areas where the beneficiaries lived and worked, as well as quality testing resources and basic reporting capability, mostly on test utilization,” noted Shaw. “That emphasis has changed.

“A growing number of MCOs in Michigan now want expanded laboratory information capabilities from their clinical lab providers,” he continued. “Their demand for lab information reaches beyond basic test utilization and HEDIS-required lab data.

“At JVHL, we view the MCOs’ interest in more sophisticated lab information products as a great business opportunity,” explained Shaw. “But there is bad news and good news associated with this opportunity.

“The bad news is that not all member labs in our regional laboratory network have the capability to readily gather this laboratory information and present it to the MCOs. The good news is currently no competing laboratory in Michigan can do it either,” observed Shaw.

“If I were to characterize the changes we see in how managed care companies contract for lab testing services in Michigan, it would be simple: ‘information management of lab test data is now king’,” said Shaw. “Some of the biggest insurers in Michigan made it clear to us that our regional laboratory network must be able to deliver more sophisticated lab information if we are to continue as their provider.

“More importantly, this is not a one-time change. These MCOs are telling us that we must continuously upgrade and expand the types of lab information we provide them,” continued Shaw. “From a strategic business perspective, JVHL now considers lab information to be its top priority. This is a change from one year ago.

Information Highway

“In our markets, MCOs are flying down the information highway,” he said. “Only recently, it was adequate for lab providers to simply report utilization data and basic HEDIS-specified laboratory test results.

“Now we see individual MCOs in Michigan requesting that the laboratory deliver all the test results, not just those tests involved in HEDIS reporting. One MCO even wants these test results reported in LOINC format [Logical Observation Identifier Names and Codes],” Shaw stated.

“For JVHL, this is a wonderful business opportunity. If we can be first in our market to deliver enhanced laboratory information services to local MCOs, then we will have a competitive advantage over the commercial labs competing for the physicians’ office business,” he said.

“Moreover, JVHL, as a network of hospital laboratories, has something which the MCOs clearly want, and which commercial labs cannot provide. That is the test data for hospital outpatient testing [compared to hospital inpatient and physicians’ office outreach]. JVHL’s 109 hospital laboratories have that outpatient test data.

Lack Of LIS Products

“What holds us back is the lack of LIS products capable of doing the job,” added Shaw. “Every hospital lab administrator is familiar with the problem. For example, existing LIS clinical data repositories cannot link the patient’s test results with his health insurance. Concerns about HIPPA policies and the privacy of patient data also need resolution.

“We are searching diligently for a lab information services vendor which can help us efficiently aggregate the test data from our member laboratories and package it to meet the needs of our MCO customers,” he continued. “We are frustrated by the vast amount of vaporware and vendor hype that we encounter.

“So far, not one lab-based IS vendor we’ve talked with has a product ready for market,” he observed. “Ask these vendors to let us visit a laboratory site where their IS solution is already operating and they become masters of the dance. It is very difficult to get straight answers to simple questions about what their products do, and when these products will actually be ready for the market.”

Frustration With IS Vendors

JVHL’s frustration with IS vendors may lead it to design its own information product. “We already have an internally-developed program for electronic reporting of test utilization data from our member laboratories,” he explained. “Several years back, it was faster and cheaper for us to develop our own electronic reporting solution.

“Meetings and interviews with LIS vendors to date make us think we may be better off developing our next generation of lab information services internally,” added Shaw. “This is not the daunting task it would have been five years ago. The Internet and new software technology is making it easier, faster, and cheaper to engineer our own lab information solutions.”

Successful Lab Network

Joint Venture Hospital Laboratories is probably the nation’s most successful regional laboratory network. It was founded in 1992 by four integrated hospital systems in the Detroit metropolitan area to protect existing outreach testing business. Member labs have joined at a steady rate. Currently JVHL has 109 participating hospital laboratory members throughout the state of Michigan.

JVHL has been extremely successful at managed care contracting. It now covers 1.6 million lives, including Blue Care Network, Michigan’s largest private HMO. As a result, JVHL has a strong market presence in the state and competes effectively with the national laboratory companies.

Five Strategic Drivers Now Guide JVHL’s Strategic Business Plan

SINCE ITS INCEPTION IN 1992, Joint Venture Hospital Laboratories (JVHL) has operated with clearly-defined strategic business goals.

It was designed to be financially self sufficient, something that many other pioneering regional laboratory networks failed to do. Consequently, JVHL has met the expectations of its laboratory members, while generating the cash flow it needs to be a viable laboratory service organization. That is one reason why it has grown to include 109 hospital laboratory members and encompasses the entire state of Michigan.

Executive Director Jack Shaw outlined the current strategic priorities for JVHL. “There are a couple of things we try to accomplish with our strategic priorities,” he observed. “One, we want to have a vision of what JVHL will be as we accomplish these goals. Two, we want to develop multiple management projects. Our healthcare marketplace is evolving too rapidly to allow us the leisure of concentrating on one management priority at a time.” Here are JVHL’s strategic goals:

1. Be the preeminent outpatient and community based laboratory services provider organization to patients, physicians and payers in Michigan. Explore multi-state contracting opportunities with compatible organizations.

2. Implement an expandable electronic functionality that will efficiently gather and consolidate the test results data reported to JVHL by its network laboratories in format(s) accepted by MCO clients. Functionality must include future use of LOINC coding and “all results” reporting.

3. Eliminate the use of UB92 or HCFA 1500 claims by all JVHL network laboratories for JVHL lab agreements, by offering sufficient electronic billing services options — direct reporting or commercial vendors (i.e., NDC, HDS).

4. Obtain a license as a Michigan third party administrator (TPA) to meet new Michigan managed care risk sharing regulations. Investigate best uses of TPA functionality to support associated priorities.

5. Expand group purchasing and shared services initiatives to reduce network laboratories’ costs.

“Over the last year, we were quite surprised at how quickly certain MCOs became interested in getting expanded laboratory information services and started to write new information requirements into the RFPs for lab services,” recalled Shaw.

Managed care companies are waking up to the fact that clinical laboratory test data has tremendous value in improving the quality of care while simultaneously reducing the cost of care

“Preparing to meet this change in the lab information needs of the managed care companies is now the major subject we talk about at every management meeting,” he stated. “It’s the strategic business objective that’s become the priority over everything else.

“As a regional lab network, we consider laboratory testing to be a local business. JVHL’s role is to help individual hospital laboratory members get themselves in front of their local physicians. The individual hospital labs keep their names in the doctor’s mind, while JVHL offers back stop services,” concluded Shaw.

Market Evolution

THE DARK REPORT believes that the changing lab information requirements wanted by managed care companies in Michigan is typical of many regional healthcare markets across the country. Managed care companies are waking up to the fact that clinical laboratory test data has tremendous value in improving the quality of care while simultaneously reducing the cost of care.

JVHL was alert to the evolving needs of its managed care customers. As the first MCOs began to request additional laboratory information services as part of their RFP packages, executive management at JVHL recognized that a fundamental change was occurring in how MCOs would contract for laboratory testing services in the future.

JHVL took immediate action to act upon this market insight. It decided to invest time and management resources to create these new, more sophisticated lab information services. To that end, JVHL has already interviewed a number of LIS vendors seeking the right IS solution. It is contemplating whether to develop new LIS capabilities as an in-house project or in partnership with an outside vendor.

These are both elements critical to JVHL’s sustained financial success as a regional laboratory network. Essentially, the JVHL executive team is alert to shifts in the competitive makeup of its healthcare marketplace. It is then willing to act swiftly and invest in upgrading its services to meet these competitive challenges.

Marketplace Evidence

For laboratory executives and pathologists, the Michigan marketplace provides evidence that the hunger of MCOs for more comprehensive laboratory testing information is about to explode on the upside.

None of this should come as a surprise to clinical pathologists and laboratory executives. After all, the ability of diagnostic testing to deliver improved healthcare outcomes at declining costs has been a constant theme of lab industry papers and podium presentations throughout the 1990s.

Now the MCOs are finally listening. The question is a simple one: will pathologists and lab executives be willing to respond swiftly to the very
opportunity they have vociferously advocated for ten years?

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