The pressure on labs to rachet up quality and efficiency is like a steady drumbeat that seems to get louder and faster every year.
We’re all familiar with the forces at play.
First, of course, is the ballooning size of the annual U.S. healthcare tab, which now consumes nearly 18 percent of GDP. In 2018, healthcare spending grew by 4.6 percent to $3.6 trillion, or $11,172 per person, according to the Centers for Medicare and Medicaid Services (CMS).
Then there’s the Protecting Access to Medicare Act of 2014 (PAMA), which bases Medicare pricing for lab tests on rates that private insurers pay. Since the new payment system became effective on January 1, 2018, labs have seen as much as a 20 percent reduction in Medicare payments, according to COLA estimates in 2019.
There’s been a lot of controversy surrounding how CMS implemented the initial round of data reporting, with clinical laboratory advocacy groups arguing that the data skewed to large independent labs, which typically negotiate lower rates with payers than labs in hospitals or physician’s offices.
However, CMS has delayed its next round of data collection from labs. Under the revised schedule, labs will report data between January 1, 2021, and March 31, 2021, instead of January 1, 2020, and March 31, 2020.
The third force impacting the laboratory industry’s reimbursement is value-based care, which bases payment on patient outcomes and resource utilization. This is a big change from fee-for-service, which pays providers based on the volume of services they provide but can lead to overutilization. Some value-based programs, such as bundling initiatives, lump costs for lab tests with other medical services necessary to treat patients for an episode of care.
As a result of these converging forces, labs are transitioning from revenue generators to cost centers, and therefore, must focus on reducing costs while simultaneously boosting quality.
That’s a tough job, but lab managers appear to be up to the challenge, according to the results of Medical Laboratory Observer’s (MLO) State of the Industry survey on best practices for lab management, which we report on in this issue.
What we found is that lab managers are taking a plethora of steps to improve the value—or efficiency and quality—of the services their organizations provide. For example, they are installing automated equipment, deploying information systems, standardizing operational procedures, and enhancing employee training. They’re also closely tracking the costs and usage of consumable supplies, such as assays and reagents.
In addition to controlling costs and quality in their internal operations, lab managers also are implementing procedures to ensure providers order tests correctly, which helps prevent overutilization of diagnostic services. For example, lab managers are creating standardized test-ordering procedures and pre-approval programs for tests that are sent out to other labs.
In an era of declining reimbursement and heightened focus on quality, lab managers need to take these types of steps and many others to ensure that their teams produce accurate, informative testing services as efficiently as possible.
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