Labs, Path Groups Face Major Financial Issues

Early news of path group closures and lab BKs hints at coming wave of financial distress for labs

CEO SUMMARY: Are clinical labs and pathology groups ready for the end of fee-for-service reimbursement? That’s just one important question that will be answered at the upcoming Executive War College on Lab and Pathology Management that will take place in New Orleans on April 29-30. The American healthcare system is undergoing unprecedented transformation and sessions at this year’s conference will address how labs can tap new sources of revenue and deliver more value.

IT’S NO LONGER BUSINESS AS USUAL for clinical laboratories and pathology groups across the nation. Blame it on the swift evolution of the American healthcare system, in tandem with dramatic reductions in reimbursement for lab tests.

One could say that the entire profession of laboratory medicine is about to be hit full force by the “perfect storm.” The list of market forces expected to be negative to most clinical labs and pathology groups is extensive. Worse, that list is growing as additional destructive market developments become visible. (See sidebar below.)

The full consequences of these developments have yet to become obvious. But the early signs are ominous. Over the past year, THE DARK REPORT has chronicled the closures or the bankruptcies of lab companies like Pathworks Diagnostics Inc., Predictive Biosciences, and Laboratory Partners Inc. and its MedLabs business subsidiary. Expect there to be more lab closures, bankruptcies, and acquisitions.

What THE DARK REPORT has yet to report on is the closure of several anatomic pathology group practices that have occurred in the previous 24 months. These are small pathology groups and they are quietly closing their doors and going out of business. Pathology vendors see this happening because they lose customers this way.

What makes the closure of several small pathology groups notable is that there is no precedent for this in the past 30 years. These closures are sentinel events that tell savvy pathologists that a larger wave of financial distress is about to overtake the anatomic pathology profession.

Given the serious market transformation that lies ahead for clinical labs and pathology group practices, this year’s Executive War College on Lab and Pathology Management will put healthcare’s market transformation front and center. It will take place in New Orleans on April 29-30, 2014. Special sessions and knowledgeable speakers will help attendees understand the changing market dynamics, along with advice and insights on how to best respond to these trends.

Hospital Lab Outreach Wins

For example, hospital laboratory administrators will find the session titled “Lessons from the Northwoods: How NorDx Labs is Responding to Changing Clinical and Payer Needs in the Inpatient, Outpatient, and Outreach Sectors” to be essential learning.

NorDx CeO Stan Schofield will describe how his parent healthcare system in Portland, Maine, has responded to Medicare Part A funding cutbacks while launching ACOs, establishing medical homes, and developing its ownership of physician practices in the region.

Next, Schofield will identify the steps his lab organization has taken internally and externally to absorb reduced budgets and declines in outreach reimbursement, all with the goal of maintaining financial stability and clinical value even as traditional sources of lab funding are shrinking.

Strategies for Path Groups

To address the changes underway in the anatomic pathology marketplace, a strategic case study by the University of Miami Department of Pathology and Laboratory Medicine will be delivered by Chair Richard J. Cote, M.D.

This session is titled “Positioning Pathology and Clinical Laboratory Services to Add Value in the era of ACOs and Medical Homes” and addresses all the specific challenges now facing pathology groups, whether large or small; whether academic or community-based.

Florida is a hotbed of healthcare change and the university of Miami pathology department is in the midst of it all. Cote will discuss how his pathology department is developing new value-added services to retain and increase access to managed care patients. This includes providing testing to the office-based physicians that are part of the parent health system.

Cote and his colleagues recognize the importance of the pathology department supporting integrated clinical informatics. He will discuss the advanced solutions his team is developing in tandem with the ability to mine the system’s EHR and provide enriched diagnostic and prognostic information to physicians and payers. Of course, digital pathology has a role in increasing the pathology group’s value proposition and will be discussed.

Legislative, Regulatory News

Wonder what’s happening in Washington, D.C., with CMS and Congress? Experts from the American Clinical Laboratory Association (ACLA), College of American Pathologists (CAP), National Independent Laboratory Association (NILA), and the California Clinical Laboratory Association (CCLA) will participate in a special extended panel discussion.

These individuals are in regular conversations with Medicare officials, members of Congress, and other executive branch policymakers. They will report on new developments and have invaluable insights about what can be expected in Medicare funding for lab and pathology services, as well as with implementation of new Medicare regulations to which all labs must comply.

For laboratory chief financial officers, our CFO roundtable is now in its fifth year. This special 2-hour event brings together as many as 50 CFOs, lab controllers, and other financial managers for candid conversations about the issues that directly touch their own labs. Winning solutions and effective management strategies are regularly shared.

For the same reasons, there will also be a roundtable for laboratory chief information officers and a roundtable for laboratory sales and marketing VPs and managers. These are unique networking and information-sharing sessions.

New Lab Business Models

With so many changes happening across the entire spectrum of healthcare in the United States, new business models for lab testing organizations are emerging. To delve into the future of what labs will look like and how they will operate, the Executive War College is presenting a full-day seminar titled “Anticipating New Clinical and Business Models for Clinical Labs and Pathology Groups.”

This will take place on Thursday, May 1, immediately following the conclusion of the Executive War College which happens April 29-30.

Featured will be leaders from clinical laboratories and pathology companies who are posting consistent growth in specimen volume and revenue, accompanied by the needed profit margins to financially sustain the organization. They will share what they are doing differently than peer labs that works and for which payers will reimburse.

Time for Action By All Labs

Current events in healthcare and laboratory medicine make it essential that every lab manager and pathologist serving as the business leader for his or her group stay informed on the best and worst of what is to come. That makes this year’s Executive War College a timely and smart opportunity to learn the latest developments and master new financial strategies.

Market Forces Putting Labs and Path Groups under Severe Financial and Operational Stress

IN TODAY’S HEALTHCARE MARKET, change is happening at an unprecedented pace. Here is a list of individual market trends that are changing how clinical laboratories and anatomic pathology groups deliver testing services and are paid for those services:

1) Cumulative impact of multi-year fee cuts for lab tests and anatomic pathology services by the Medicare and Medicaid programs.

2) Ongoing and sustained reductions in the prices private payers pay for lab tests.

3) Impact of new Medicare bundled payment rules for the Outpatient Prospective Payment Schedule, affecting both clinical labs and pathology groups.

4) Less reimbursement and restricted coverage guidelines for molecular diagnostics and genetic tests.

5) Private health plans implementing narrow networks and excluding local labs and pathology groups as providers, limiting their access to patients.

6) Negative impact of the Blue Card policy change on local and regional labs.

7) Introduction of bundled reimbursement and capitated reimbursement arrangements that include lab tests and pathology services in the bundle.

8) Steady growth in the number of ACOs, medical homes, and other models of integrated care organizations. These care models use lab tests differently and often want to pay for lab tests using a per-member/per-month fee or a capitated rate.

9) Reduction in hospital inpatient admissions and inpatient revenue, causing hospitals to cut their labs’ budgets.

10) Need for labs and pathology groups to spend money to support the Meaningful Use requirements that their physician clients must meet to qualify for federal EHR incentives.

11) Need for labs to spend money on new diagnostic technologies and the skilled lab professionals to run the tests, including next-generation gene sequencing.

12) Need for pathology groups to invest in acquiring and using digital pathology systems, as well as beefing up their informatics capabilities in support of their hospital and physician clients.

13) Shortage of newly-trained clinical laboratory professionals and subspecialist pathologists due to reduced number of training programs.

14) Staffing shortages in clinical labs and pathology groups caused by Baby Boomers choosing to cut back hours or fully retire from the profession.

Learn Effective Strategies

At the upcoming Executive War College, to take place in New Orleans on April 29-30, 2014, there will be 60 sessions and 90 speakers addressing these topics.

Sessions are conducted by lab executives and pathologists from lab organizations that are succeeding in building market share and are holding their own in the face of budget cuts and restrictive managed care contracting policies. Each presentation is designed to help you understand and identify these healthcare marketplace drivers, then provide you with the solutions and strategies that you can implement in your laboratory to optimize revenue, deliver more value to referring physicians, and boost productivity.


Lab Sales VPs & Sales Leaders: Workshop to Boost Your Sales!

NOW, MORE THAN EVER, ALL LABS need a productive sales and marketing program to offset falling revenues and tap the new sources of lab test business that healthcare’s evolution is creating.

To help lab leaders boost the performance of their sales and marketing programs, a special, full-day workshop for lab sales leaders and sales managers will take place on Thursday, May 1 in New Orleans, following the Executive War College on April 29-30.

Designed specifically for sales VPs, sales managers, and lab administrators tasked with managing their labs’ sales programs, this workshop fills a huge gap in the professional development of lab sales leaders. It teaches the techniques needed by effective sales managers, including:

  • Accurately gauge your lab’s sales program’s weaknesses, with techniques to fix them.
  • Do you have the right people selling? Learn and master the secrets of recruiting, training, and motivating top sales producers.
  • Why your lab sales compensation program sucks! Simple changes that drive big increases in profitable new sales.
  • Avoid selling on lowest price; powerful techniques to sell on value.
  • Best ways to monitor sales productivity and profitability and sustain high-performance by the sales team.

Led by one of the nation’s most successful sales consultants and trainers, Karl Scheible, President of Market Sense, Inc., this workshop provides the executive and management principles taught by the Sandler Selling System. This is essential learning for those leading and managing lab sales programs.



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