Clinical 2.0 to Increase Value & Profitability of Clinical Pathology Labs

AUSTIN, Texas - Oct. 16, 2019 - PRLog -- Over the last few decades, clinical labs serving the healthcare industry have made great strides in providing:

• Reducing TAT (turn-around-time, e.g. wait time for results)
• Providing more innovative, clinically useful tests
• Integrating tests into the EHR information stream
• And most importantly, providing more accurate, more standardized, and more repeatable test results

The last bullet item above is the most critical. As labs have striven to provide more accurate results, those paying for the tests (the federal CMS, insurance companies, hospital administrators, etc.) have taken notice.

But, rather than congratulating laboratories for their efforts, they have interpreted this progress as evidence that labs tests, taken as a whole, have become a commodity item — a commodity that can be bid out to the lowest bidder.

Acting under the auspices of PAMA (the Protecting Access to Medicare Act), the CMS made deep cuts (as much as 30% percent) on Jan 1, 2018 to the Clinical Laboratory Fee Schedule (CLFS), which sets the all-important reimbursement amounts paid to clinical pathology laboratories by the government.

Because insurance companies also use CMS rates as guidance for their own non-CMS reimbursement rates, the effect of these cuts was widespread — despite bitter opposition from groups, such as the AMA, who argued that the process for determining reimbursement rates was inherently flawed.

Nonetheless, given the ongoing trend toward falling reimbursement rates (the CMS intends to set new reimbursement rates again in 2021 that are expected to be even lower), quite a few hospital administrators are considering their options before reimbursements go any lower, including spinning off their internal clinical laboratory operations as separate businesses, or selling their lab operations outright to private lab companies, and taking the money to fill shortfall gaps in their own hospital budgets.

Reducing reimbursement rates is part of the effort to reduce healthcare costs in the US, which despite spending far and away the most of any country (up to 17.8% of US GDP went to healthcare spending in 2016, according to a JAMA published study), continues to lag behind most developed countries when it comes to patient healthcare outcomes and life expectancy.

Clinical labs, which have been doing an outstanding job within their testing "silos," are frankly not that well placed in the healthcare 'budget wars.' And the existing business model of most clinical laboratories is about as FFS (fee for service) as you can get.

Something has to change.

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