How Labs Can Add Value for Providers, Insurers, Pharma

Using Lab Data to Generate New Sources of Revenue

CEO SUMMARY: For pathologists and clinical, molecular, and genetic testing labs, appropriate reuses of lab data can provide a new source of revenue. Labs that serve as preferred providers of diagnostic testing data can help health systems, ordering physicians, pharmaceutical companies, and other organizations when they reuse lab test data to support evidence-based care and clinical utility for reimbursement and payer contracting. Reusing lab data also can help pharmaceutical companies evaluate medications for effectiveness, safety, and to support research.

First in Our Series on Data

IN RECENT YEARS forward-looking clinical laboratories, pathology groups, and molecular and genetic labs have recognized that the lab test data they produce from patients has value that can be tapped in ways that generate new streams of revenue.

Finding new sources of revenue is essential if clinical laboratories are to remain financially viable and have the resources needed to deliver high-quality lab testing services. That’s because government and private payers continue to make deep cuts in what they pay for laboratory tests. Also, corrosive to lab revenue are the trends of narrow networks and the use of lab test prior-authorization rules.

Probably more significant than these factors is the reality that many healthplans are steadily moving away from fee-for-service payment for clinical services. Instead, these payers want to reimburse providers—including labs—with new forms of value-based payment. As that trend spreads, more hospitals and physicians get larger portions of their income from bundled payments and capitated or per-member-per-month fees.

Another powerful trend is genetic medicine. New insights into the human genome and new technologies that make gene sequencing faster, cheaper, and more accurate are fueling an explosion in precision medicine. The number of clinical services that now can benefit from a molecular or genetic analysis grows almost monthly.

Moving forward, these two powerful trends will have tremendous influence on how clinical laboratory and anatomic pathology services are organized, delivered, and reimbursed. And it is precisely these developments that create opportunities for innovative labs and pathologists to develop new streams of revenue.

One individual sitting at the intersection of the payer changes and advances in genetic testing and precision medicine is Patricia Goede, PhD, Vice President of Clinical Informatics at XIFIN, a company in San Diego that helps labs optimize revenue.

The Dark Report is basing this new series of intelligence briefings on how clinical labs and pathology groups can develop new sources of revenue from the insights Goede shared during a presentation she made at XIFIN’s annual user group meeting in September, supplemented by information she provided during multiple interviews with THE DARK REPORT.

Goede is watching the intersection of multiple forces and dynamics now reshaping healthcare, diagnostics, and therapeutics. At this intersection are pharmaceutical companies (with deep pockets for developing promising therapies), integrated health networks, physicians, government and private payers, and even employers.

She commented that labs can leverage test data in multiple ways to develop new streams of revenue independent of the traditional fee-for-service reimbursement for an individual lab test. Moreover, for labs that believe test data belongs to the patient and shouldn’t be sold even when de-identified, Goede suggested several clinical service offerings labs could use to leverage that data, while protecting patient privacy.

Why Labs Are Well-Positioned

In this first installment, Goede discusses why labs are well-positioned to deliver value to healthcare stakeholders. She then identifies different ways labs can use their lab test data to improve patient care, for which the lab can be appropriately reimbursed. These strategies and approaches include:

1) Labs stepping into the role of diagnostic experts and diagnostic collaborators.

2) Labs providing hospitals, physicians, and payers with support for healthcare big data/population management at the macro level, and precision medicine at the micro level.

3) Labs helping providers and payers with quality metrics (MACRA/MIPS, HEDIS, Medicare Star ratings).

4) Labs protecting and increasing their own revenue by using lab data with other clinical data to increase collected revenue, appeal denied claims, obtain prior-authorization for key tests, and more.

5) Labs helping both providers and payers in their risk-sharing arrangements by improving diagnostic accuracy, identifying patients at risk or with gaps in care, and similar.

6) Labs collaborating with pharmaceutical companies in the development of new therapies and clinical services.

Inherent Value of Lab Data

Goede emphasizes that it is important for lab administrators and pathologists to understand the inherent value of diagnostic data, especially when the data are combined with clinical and financial data. Laboratory testing is the highest-volume medical activity that generates large volumes of data that provide value in different ways. Lab data has value that is more than monetary because diagnostic information from lab tests can be used to save money as well.

This can be seen with first-mover labs. As they partner with their ordering physicians, laboratories and pathologists begin to understand that, when used appropriately, high quality diagnostic data can also be reused in many ways for health systems, health insurers, pharmaceutical companies, and contract research organizations.

New Era in Lab Medicine

“We are fast approaching a new era in laboratory medicine,” predicted Goede. “This new era will emphasize producing an accurate lab test result within an acceptable turnaround time that provides a clear interpretation of the results with reasonable clinical judgment.

“The emphasis on helping caregivers use accurate lab test results to guide effective care will be the foundation for all the collaborations between laboratory clinicians and ordering physicians in addition to value-based reimbursement arrangements that involve the lab,” she added.

“Lab medicine’s new era will be firmly rooted in how all labs leverage the value of the lab test data they produce to the benefit of patients, physicians, and payers,” explained Goede. “Health insurers, government health programs, and employers are willing to pay labs for the value they deliver—but only if labs learn how to convert raw lab test data into actionable clinical intelligence.

“In this new era, healthcare’s transformation to value-based payment creates opportunities for clinical labs and pathology groups,” she continued. “Providers are forming integrated health networks. Healthcare big data, population management, and personalized medicine are evolving as service lines designed to improve clinical care. The goal is to give physicians new tools to improve patient care and control costs.

Labs as Diagnostic Experts

“Increasingly, health systems rely on pathologists and labs as strategic partners because they have become preferred providers of diagnostic testing,” Goede said. “Developing a strategic partnership with ordering physicians in the integrated health network allows labs to develop their own data strategy to extract the most value from lab test data.

“In their role as preferred diagnostic data providers, labs can assist all healthcare organizations in multiple ways,” she explained. “For example, lab data can support clinical utility for reimbursement and payer contracting.

“Also, lab data are essential to support evidence-based care, and lab data also are used as a source of subject matter expertise to guide decision-making for test ordering,” she said.

“As most laboratory clinicians know, getting the right treatment to the right patient at the right time is not possible without knowing the results of the right laboratory test,” Goede commented. “That’s why combining diagnostic and clinical data can help hospitals and health systems negotiate favorable managed care contracts.

Quality Reporting Programs

Separate from the use of lab data to support clinical care is another opportunity for labs to leverage the value of their lab test data to support quality initiatives,” noted Goede. “Physicians and other providers already use lab data for quality reporting in new payment systems, such as those under the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA), including the Merit-based Incentive Payment System (MIPS) and any alternative payment models (APMs).

“Physicians and providers participating in their quality reporting programs use diagnostic results as part of the data collection efforts to demonstrate how they are improving the quality of care for patients,” she said. “The calculations to determine how well physician groups perform in value-based arrangements are partially dependent on diagnostic data. The good news is that every lab has the opportunity to assist physicians in value-based programs, but only if the lab develops strategies for the reuse and exchange of their test data.

“Also, because of evaluation systems like Medicare STAR ratings and the Healthcare Effectiveness Data and Information Set (HEDIS) from the National Committee for Quality Assurance, labs are finding that lab test data have value for health plans in their own compliance with regulatory and quality assurance agencies and for quality reporting,” noted Goede.

Demand Grows for Real-World Data

DEMAND FOR REAL-WORLD DATA will explode within five years, according to respondents in a survey XIFIN conducted with the publisher of The Journal of Precision Medicine.

Pathologists and clinical laboratory administrators will see increased demand for real-world data (RWD) to support claims adjudication, coverage decisions, and regulatory submissions, the survey showed. Survey respondents expect to see a continuing demand for RWD to support clinical utility, drug safety and efficacy testing, disease insights, and the development of patient registries.

The problem for medical laboratory professionals is that the current status of information technology systems does not always meet the needs of clinicians engaged in precision medicine (PM), the survey respondents reported. Asked if electronic health record (EHR) systems are meeting the needs of PM users, 26% of survey respondents said no; 33% said somewhat; and only 24% said yes. The other 17% did not know.

One reason EHRs fail to provide what oncologists and other ordering physicians need is that much of the data from clinical laboratories is unstructured, making that data difficult to find in a patient’s EHR, said Patricia Goede, PhD, XIFIN’s VP Clinical Informatics.

Also, she added, many lab results are provided as PDFs, which are difficult for physicians to use at the point of care, she added. For health systems, the survey revealed that the most pressing challenges in implementing IT systems to support PM included analytics tools for clinical and diagnostic claims and financial data, integrating data for interoperability, reporting on clinical improvements, and curating and annotating structured and unstructured data.

Boosting Lab Revenue

Goede next discussed how labs can use test data to improve the revenue they collect from payers and others. “Labs should keep in mind that they can and should develop strategies to reuse their own lab test data to appeal denied claims,” she explained. “Part of the lab data strategy involves developing collaborative relationships with ordering physicians and health systems to exchange diagnostic and clinical information to improve reimbursement when health insurers are concerned about clinical utility.”

All labs know that uncertainty about clinical utility leads to denial of claims. Often, these denied claims end up in appeal, a process that can be lengthy, costly, and time-consuming, yet may or may not result in payment.

“For a recent study, XIFIN reviewed the success rate, time to adjudication, and additional cost for the portion of molecular tests denied on submission last year,” Goede commented. “The results showed that the average appeal process was completed in 60 to 120 days. For such appeals, the costs incurred for labs and payers often totaled thousands of dollars.

“If labs can adopt strategies with physician partners to integrate diagnostic, clinical, and financial data, they can then start to streamline the claims adjudication process,” she added. “In that way, integrated data can be used to simplify the reimbursement, improve lab revenue, and reduce the cost required to bill and collect that revenue.

“Moreover, a lab-focused data strategy can enable a lab to enter into risk-sharing programs with payers and for physician certification programs,” she explained. “Some of these programs are similar to that of the MolDx Certification and Training Registry. Several Medicare contractors use MolDx as a way to build trusted partnerships between payers and diagnostic providers. In turn, that can minimize the claims and appeals cycle for the tests listed in the MolDx registry.

Pharma Wants Lab Data

Pharmaceutical manufacturers have long looked to the diagnostic industry to improve the development of and regulatory approvals for new tests and companion diagnostics by linking lab test results to a defined treatment.

“For example, pharmaceutical companies want to use diagnostic information for clinical trials, to evaluate safety and effectiveness, to support research and development, and to analyze how genomic and biomarker testing can be used to assess the effectiveness of new medications,” commented Goede. “Therefore, laboratories need to develop data strategies by developing partnerships with pharmaceutical manufacturers.”

New Lab Revenue Sources

The consistent theme in Goede’s insights and recommendations is that clinical laboratories and anatomic pathology groups become masters of their lab test data. This is consistent with the Clinical Lab 2.0 business model developed by the Project Santa Fe labs in recent years.

Stated differently, the clinical lab profession is seeing a radical shift. Since the 1950s, the economic model of labs was based on increasing volume to lower average cost per test and maximize profits from fee-for-service payments. In this world, to be paid, labs simply needed to provide an accurate, reproductible test result within the targeted turnaround time.

That is no longer the case. The change in how payers reimburse providers and the need for providers to deliver personlized care, tailored to each patient’s unique needs, is creating a once-in-a-lifetime opportunity for labs. It is why Goede predicts that the laboratory medicine profession is on the verge of a new era.

In this new era, healthcare big data and precision medicine both will heavily rely on lab data. Consequently, labs are positioned to be the perfect collaborators—and be paid for those collaborations.

Contact Patricia Goede at 801-455-1197 or


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