April 14, 2013
Volume to Value: The Lab’s Role in the Future of Healthcare
Courtesy of Curt Johnson, Chief Operating Officer, Orchard Software Corporation colLABoration:
For the last two weeks, we have been reviewing this year’s AMGA conference and our perspective on not only the conference, but also the direction of healthcare in the U.S. It is clear that we are moving in a new direction at a speed faster than any change any of us has lived through. These changes can be summed up in the phrase “from volume to value.” The question is: What does this mean for each of us in the laboratory? This question and others were posed at the end of our last blog post.
Below are the questions that were asked in the post:
If the fee schedule goes away and specific lab tests are included in the reimbursement for a certain diagnosis or “bundle of care,” does it make sense to have an in-house laboratory?
Is quality or turnaround time enough of an added benefit to keep labs in-house? Are there certain specialties or care situations where the provider benefits from having lab results immediately? What structure will future organizations take?
I believe any answer to these questions is an informed opinion because no one knows exactly what our healthcare delivery system will look like. I am confident there will be multiple types of delivery options for no other reason than our country is large, with many urban, suburban, and rural areas, all having needs that cannot be met in the same manner. Let me start with the structure of our healthcare organizations.
We are moving rapidly from small, physician-owned practices to large institutions. Whether these are physician-owned, corporate-owned or hospital-owned organizations, they are larger than in the past and will continue to get bigger. These new organizations will be physician-led and care management teams will be the norm. We are now on a path to reach the ultimate goals of healthcare, such as preventing disease, improving overall wellness, and efficiently and effectively treating illnesses with best practices and treatment plans. The majority of groups at this year’s AMGA are already large group practices focused on accomplishing these goals. The question now becomes: Where does the lab fit in? I believe the term “in-house laboratory” will be changing in some way.
Personally, when I hear in-house lab, I think POL (Physician Office Laboratory) or hospital laboratory. If it isn’t in-house, it is a reference laboratory. I think in the future each organization will have a three-tier laboratory that will effectively meet the needs of these new organizations. In a large ACO, there will be hundreds of physicians, multiple hospitals, long-term care, nursing homes, and patient-centered medical homes that need laboratory services. I believe these organizations will have a large, centralized laboratory for their ACO, with STAT labs strategically placed where testing is needed immediately. These STAT labs may be located near the hospital ER or in the oncology portion of the group. In addition to the central lab and STAT labs, point-of-care (POC) testing will increase to allow for testing that meets the overall strategy of the ACO. This POC testing will occur where the physicians see the patient and monitor progress, so that immediate test results can impact the care being provided.
In terms of laboratory testing, the other big shift in thinking is in terms of payment models and value. I believe we are in the process of moving from a fee-for-service healthcare model to a value-based system. This transition will occur in our lifetime, but unfortunately no one knows exactly how it will occur or how long it will take. I believe this shift will take many years to encompass our entire country. Along with this change comes a new reality or new method of calculating ROI (Return On Investment) for laboratory testing.
Currently, I believe most people think of lab testing ROI as the reimbursement for any particular test versus the cost of a patient reportable. Different laboratories use different formulas for determining the patient reportable cost, but essentially if the test cost is low enough to do in-house, reimbursement is good, and the test is brought in. The new system will not only change this mindset, but it will change the tests we perform, the volumes of these tests, and our available testing menus.
ROI in the future will not be based on how much profit is made on a test, but on how much saving there is for the episode of care or what spending is prevented by doing these tests. Moving forward, lab testing will be focused on prevention and diagnosis. Screening tests for cancers, heart disease, and diabetes will increase, while other testing may be nearly eliminated. For example, Vitamin D may see a dramatic decrease in volume. The goal of preventive testing will be to diagnose an issue before it becomes a high-cost healthcare episode. In this scenario, the cost of the test versus reimbursement will not be the deciding factor on whether to perform the test. Instead, the focus will be on what it can save the patient and the entire organization by having early detection. Also, with the progressive emergence of molecular testing, our menu of preventive testing will continue to grow.
In addition to preventive testing, diagnostic testing as part of the care management team will increase. In a value-based system, it is imperative that the patient’s illness or disease be diagnosed as accurately and as quickly as possible. The correct diagnosis is critical to prescribing the right treatment plan initially. The value to the patient and our entire system is getting the diagnosis correct early. Treating the patient with the most effective treatment plan for them as an individual will bring the most value to the system. To do this, the laboratory and molecular testing must be involved. Again, the value or ROI for the lab testing is not in reimbursement for the testing it is providing, but in being a critical part of the care management team and supplying precise diagnoses that can be used to choose the most appropriate treatment protocols and save tens of thousands of dollars—ultimately having the best outcome for the patient.
As we move to a value-based system with an emphasis on prevention, wellness, and effective patient treatments, the lab will become an even more important piece of the overall healthcare system. These are exciting times for laboratorians, and I hope we all embrace our opportunity to make a difference.
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