Lab Serving Large MD Group Manages Quality and Costs

Under capitated payment, focus is on delivering high quality care at low cost

 CEO SUMMARY: For decades, pathologists have pointed out that their expertise in laboratory medicine can be tapped by physicians to improve utilization of lab tests, contribute to improved patient outcomes, and reduce the overall cost of care. Exactly that is now happening at Atrius Health, where new value-based reimbursement models and integration of clinical care have created an opportunity for pathologists and lab experts to develop care pathways and help physicians order the right laboratory test at the right time.

NEW PAYMENT MODELS are already changing the behavior of physicians and motivating them to order and utilize lab tests more efficiently.

This is a significant development and has major implications for all clinical laboratories and pathology groups. On the negative side— and in the short term—it can mean a decline in test volume from referring physicians, generating less fee-for-service reimbursement for clinical lab organizations.

On the positive side—and over the longer term—it can mean that referring physicians will want to engage pathologists and laboratory scientists for more consultations. These physicians will request expert help in determining the right lab tests to order, how to use the lab test results to determine best therapies for the patient, and for ongoing involvement in monitoring a patient’s progress.

One example of a large physician organization now using lab tests differently is Massachusetts-based Atrius Health. It is transitioning away from pure fee-for-service reimbursement because a growing proportion of its revenue is shifting to value-based payments, including capitation.

“Atrius Health is a nonprofit multispecialty group of 1,138 physicians that gets more than 70% of its income and 50% of its patient volume from capitated contracts,” stated Beth Honan, Vice President of Contracting for Atrius Health. “As a consequence, while delivering high quality care, capitated payment requires our physicians to carefully manage costs and laboratory test volume.”

Formed in 2004, Atrius Health is an alliance of six medical groups and a home health care and hospice agency. Atrius Health serves approximately 1,044,000 patients in Eastern and Central Massachusetts. The group contracts with Blue Cross Blue Shield of Massachusetts under a capitated contract and has fee-for- service and at-risk contracts with Aetna and other health plans.

It is also a Pioneer Accountable Care Organization and 37 of its physician groups have earned the Level 3 designation as patient-centered medical homes from the National Committee for Quality Assurance.

To control costs and laboratory test volume, Atrius Health conducts educational sessions with physicians who tend to order more laboratory tests than others. In this way, it helps to ensure that patients get the best healthcare without overusing health care services.

These strategies to manage the use of clinical laboratory testing more efficiently were described in an earlier issue of THE DARK REPORT. Richard Lopez, M.D., Chief Medical Officer at Atrius Health, discussed how the medical group had produced savings of about $1 million per year through three programs designed to encourage physicians to use lab tests more appropriately. (See TDR, February 24, 2014.)

The first initiative involved showing physicians how much a lab test cost at time of order. As reported in the Journal of General Internal Medicine, researchers determined a potential savings on lab testing of $45.45 per 1,000 visits per month. For Atrius Health and its 3.5 million patient visits per year, the projected savings were about $157,000 annually.

The second initiative involved setting guidelines for pre-visit lab tests and was designed to address the variation from one physician to the next in the number and types of lab tests ordered. The key change was tointroduce evidence-based guidelines based on each patient’s age, which medications the patient was taking, and which diagnoses the patient had in the past.

When booking appointments with patients, medical assistants now use the guidelines to order only the lab tests that are appropriate. The reduction in unnecessary tests saved Atrius Health about $500,000 per year. The third initiative centered upon reducing the number of liver function tests performed for patients on cholesterol-lowering drugs. The updated FDA guideline means that fewer patients on statins need an annual liver function test. Among the 1 million patients Atrius Health serves, a reduction of such testing produced savings of several hundred thousands of dollars annually.

Harvard Vanguard Medical Associates is the largest of the Atrius Health groups. It has a clinical laboratory with a core lab, an anatomic pathology lab, and 18 regional labs that also provide some testing to other Atrius Health groups. The lab does about 2 million tests annually for Harvard Vanguard and some of the Atrius Health physicians who practice in 58 locations across the state.

Physician-Owned Clinic Labs

Pathologist Juliana Szakacs, M.D., is the Director of Pathology and Laboratory Medicine for the Harvard Vanguard Medical Associates. “The way we operate is not much different from the way many other large physician-owned clinics operate, such as Kaiser Permanente,” she said.

“Large clinic groups in the United States usually have their own laboratories because a lab is an important part of delivering care to patients,” observed Szakacs. “It is a resource that contributes to a higher quality of care, since our pathologists are close at hand to provide consulting as needed to our physicians.

“Equally important is that our in-house laboratory team can develop specific tests that our physicians need for their patients,” she added. “Another advantage of having a lab in this system is that we can transmit our test results directly into the Epic medical record system.”

In addition to sending data to the EHR, Atrius Health also stores patients’ lab test results in a data warehouse. The Atrius Health data warehouse contains information from EHRs, medical claims, lab test data, and pharmacy data for hundreds of thousands of patients.

Szakacs noted that the lab team has collaborated in the efforts at Atrius Health to reduce variation in how physicians utilize lab tests. “Our lab staff regularly develops educational initiatives to help physicians standardize ordering for certain tests,” stated Szakacs. “One program was designed to improve ordering for vitamin D tests.

“Like most labs, a few years back we saw big increases in vitamin D testing in response to media stories,” she continued. “Our first step was to bring that test in-house to bring the cost down.

“Our second step was to work with endocrinologists and internal medicine physicians,” said Szakacs. “We presented information about appropriate testing at educational meetings. Also our data told us who was ordering vitamin D and how often.

“Among other things, we could also tell whether they were ordering as part of well-visit screening or for a specific diagnosis,” she noted. “Having that data allowed us to be very specific in our training from one department to the next.

“In the Internal Medicine Department, for example, physicians were doing physicals and screening for vitamin D insufficiency,” recalled Szakacs. “In this case, we told them they did not need to screen for vitamin D levels in Massachusetts because most patients will have low levels routinely. We added that if their patients had any of a specific list of comorbidities, then they should check their vitamin D levels.

Tremendous Results

“The results were tremendous,” stated Szakacs. “In the first 24 months, utilization of vitamin D tests fell by 50%, to a more appropriate level. As a result of these changes, we now spend 80% less for vitamin D testing, compared with spending at the start of our educational program.

“We followed a similar procedure for pre-visit lab testing,” she continued. “When patients have a physical, the physician may normally consider a CBC, urine, chemistry, thyroid, and a few other tests depending on the age of the patient and gender and what conditions the patient has had in the past.

“However, the evidence says that, generally, there is no need to order all these tests on healthy individuals,” Szakacs noted. “Together with the quality assurance staff and some internal medicine physicians, our lab team developed guidelines for which testing should be done at what ages as part of well visits.

“The team also identified which tests to order for patients with certain comorbidities such as diabetes or enlarged prostate,” she said. “Guidelines were then developed that would allow the physicians to order tests specific for each patient.”

This initiative produced significant results by improving patient care while reducing the cost of lab testing associated with these specific office visits. “Our data shows that, over the years, the trend was for clinicians to order more and more tests,” recalled Szakacs. “This data showed the number of tests ordered had climbed to 1.51 tests per patient visit.

“After we launched our educational initiative in 2010, we tracked the number of tests per visit,” she explained. “It initially declined to 1.35 tests per visit and is now down to 1.28! When you run 2 million tests a year, that 16% decrease in average tests-per-patient-visit represents significant savings.”

Physician Compensation

At Atrius Health, the physicians have a variety of compensation systems. Some, such as the pathologists, are on salary, and some are paid per procedure.

To compensate pathologists for exceptional work, the department instituted a bonus pool taken from the department’s salary budget. Money from this pool is distributed based on participation in what Szakacs called good citizenship projects.

“Citizenship behaviors involve helping with conferences or working to improve quality, for instance,” noted Szakacs. “In the recent past, we installed a computer system to track pathology specimens via barcode from the time we receive them until we issued a report. With this system, we can track every piece of tissue and every jar, block, or slide all the way to the pathologists’ desks.

“We decided a certain amount of our department salary pool would be divided among those who worked on that project,” she explained. “Now, with our barcode system in place and fully implemented, we have reduced our error rate down to zero for four months in a row.”

Laboratory Team at Atrius Health Engaged In Projects to Support Improved Patient Care

ONE DISTINGUISHING CHARACTERISTIC of the laboratory at Harvard Vanguard Medical Associates is that it includes a full anatomic pathology laboratory and professional services in addition to its clinical laboratory testing services.

“This makes us a bit different from how other physician groups operate,” observed Juliana Szakacs, M.D., Director of Pathology and Laboratory Medicine for Harvard Vanguard, an affiliate of Atrius Health. “Our pathology department does tissue specimens, including breast and other biopsies, because we have a complete breast service and other subspecialist pathologists.

“If a patient has a mammogram during the day and then needs a biopsy we can refer that specimen to pathology,” she said. “That patient’s test results will be sent to the physician within 24 hours. Our patients love that fast turnaround time.

“For patients with cancer, our pathologists participate on tumor boards with the oncologists, the surgeons, and the radiologists,” added Szakacs. “Our clinical integration allows us to schedule surgery within a couple of days if necessary. That speed is rare, even from the best-known health care systems.

“Our subspecialists include gastrointestinal pathologists, dermatopathologists, gynecological pathologists, breast specialists, and cytopathologists,” she stated. “Our lab has nine pathologists, including some who are part-time. There are 202 full-time equivalent employees, including technicians who work in our rapid response labs in 18 physician clinics.

“Among the approximately 2 million tests we run every year in our core lab in Needham, about 40,000 are surgical specimens and 60,000 are Pap smears and cytology cases,” commented Szakacs. “Our rapid response labs perform stat testing and the test menu includes such tests as CBCs, basic chemistry, PT/INR, urinalysis, pregnancy, and strep testing.

“Our lab team also oversees a huge point-of-care testing operation,” she explained. “Our nurses perform such tests as urine analysis, flu, and HIV testing while patients are in the office seeing the physician. For these tests, a patient gets the results immediately during the same appointment with the doctor.”

Lean Program In The Lab

The lab’s Lean management program has been another source of significant cost reduction and productivity improvement. The Lean program was started when Szakacs joined Harvard Vanguard in 2005.

“All our laboratory staff have been trained in Lean,” stated Szakacs. “They are empowered to bring up anything they think needs to be improved. We encourage staff to become involved in implementing quality and efficiency improvements that they identify.

“In addition, as part of our process improvement efforts, all testing has been standardized,” she continued. “All lab locations have the same instrumentation, the same orders and methodology, and labeling.

“One example is the automation and new instrumentation we acquired to track all blood products via bar code as they move through the system,” noted Szakacs. “That system has helped us get as close to zero errors as possible with blood management.”


New Reimbursement Models Require a Different Response

Changes in reimbursement models are reshaping how the physicians at Atrius Health maintain high quality while addressing the need to rein in unnecessary costs.

“While we have a variety of payment terms, it’s important to emphasize that we focus on delivering population-based health- care and being accountable for the care we provide, regardless of whether it’s capitated or fee-for-service,” stated Beth Honan, Vice President of Contracting for Atrius Health. “The laboratory and the clinicians are not asked and don’t need to know about reimbursement or how our contracts work. Their primary focus is on providing appropriate care and delivering the right services to patients at the right time.

“In addition, our laboratory does not do any managed care contracting because Atrius Health does the contracting for each of the six affiliated groups,” explained Honan. “When we contract with a health plan, we negotiate for all of the services that the groups provide, including the laboratory at Harvard Vanguard Medical Associates.”

The largest of Atrius Health’s six physician groups, Harvard Vanguard Medical Associates runs a clinical laboratory that does about 2 million tests annually for its physicians who practice in 58 locations.

“Our contracts are not specific to lab services,” noted Honan. “For that reason, you won’t hear us talk about whether we are at risk or capitated or not. You’ll just hear us talk about providing the best and most cost-effective care to our patients.

“We are unlike other physician practices and delivery systems that look at the clinical laboratory as a revenue-generating center,” commented Honan. “Instead, we look at all of our services as cost centers. That includes the laboratory.”


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