The end of fee-for-service payments has huge implications for U.S. medical laboratories and anatomic pathology practices

SAN DIEGO, CALIFORNIA—In the American healthcare system today, the era of fee-for-service medicine will soon end. This development has huge implications for every clinical laboratory and anatomic pathology practice in the United States because fee-for-service is their primary source of revenue.

This week at the 2013 Annual Conference of the California Clinical Laboratory Association (CCLA), no single topic got more attention than that of reimbursement for clinical laboratory tests and anatomic pathology services.

Speakers Tackle Medical Laboratory Test Reimbursement Changes

Speakers ranged from Medicare Administrative Contractors and Medical Directors Elaine Jeter, M.D., of Palmetto GBA and Bernice Hecker, M.D., of Noridian Administrative Services, on Medicare reimbursement policies to Rina Wolfe, Vice President of Strategic Commercialization at XIFIN, Inc., and Mark Birenbaum, Ph.D, Administrator for the National Independent Laboratory Association (NILA) on how medical laboratories should respond to various payment changes being introduced by the Medicare program and private insurers.

In San Diego, California, this week, the California Clinical Laboratory Association (CCLA) conducted its 2013 Annual Conference. On hand to deliver presentations were (on left) Robert L. Michel, Editor of The Dark Report, and, (at right) Francisco Velázquez, M.D., President and CEO of Pathology Associates Medical Laboratories (PAML).

Because of the speed with which public and private payers have changed coverage guidelines and reduced the prices they pay for lab tests over the past 24 months, there is much uncertainty as to the full financial impact that will be experienced by different laboratory organizations. Even the experts at the CCLA meeting were unsure about how fast the negative financial consequences from these changing payer policies will impact lab organizations across the United States.

If there was one bright spot in the CCLA sessions, it was on the topic of the direct-to-consumer (DTC) market for healthcare services, including medical laboratory testing. In this segment of the healthcare marketplace, clinical labs and pathology groups have opportunities to directly provide medical laboratory testing to consumers and be paid adequately for these services.

Growth of Consumerism Fuels Demand for DTC Medical Laboratory Tests

“Consumerism in healthcare is taking hold at a steady pace,” observed Francisco R. Velázquez, M.D., S.M., President and Chief Executive Officer, Pathology Associates Medical Laboratories (PAML) of Spokane, Washington. “This reflects the difficulty in gaining access to primary care physicians, as well as expansion of healthcare services in retail settings that give consumers an option to be treated faster and for less money than in an emergency room, for example.”

Velázquez presented data that indicated that, to a great extent, consumers of every generation are gaining interest in the category of care described as “health and wellness. He presented four findings of the Hartman Group on the current state of the health and wellness market:

• “Wellness” is no longer equivalent with simple notions of physical wellbeing.
• “Quality of Life” now represents the major aspiration of most consumers.
• 54% of all consumers say they have recently changed their views on health and wellness.
• The average household spends $148.48 per month on categories that have a wellness halo.

“This consumer interest in health and wellness is tangible and easily seen,” stated Velázquez. “The growth of convenient care clinics in retail stores across the nation validates this trend. There are already 1,560 such clinics in operation today and predictions are that as many as 2,215 convenient care clinics will be in operation by 2016 That’s a 41% increase in the next 36 months!”

Strong Prospects for DTC Clinical Laboratory Testing

Velázquez is enthusiastic about the prospects for direct-to-consumer medical laboratory testing. He said that PAML’s DTC program, called “Results Direct,” is growing at almost 15% per year. “We have surveyed our ‘Results Direct’ customers, and the results support continued growth in this sector of medical laboratory testing,” explained Velázquez. He showed the CCLA audience a chart that indicated how 33% of the customers valued the convenience of DTC testing and approximately 20% of respondents liked the inexpensive cost of such medical tests and the fact that no appoint is necessary.

Informed by a 10-year track record of strong growth in specimen volume and revenue from its DTC testing program, PAML is ready to expand further into this sector. “Last week, we announced the launch of AION Laboratories, Inc.,” said Velázquez. “This lab company specializes solely in ‘Age Management Medicine Diagnostics.’ Our goal is to provide a full spectrum of laboratory testing to age management physicians and clinics across the country.”

Medical Laboratory for ‘Age Management Medicine Diagnostics’

With its creation of AION Laboratories, PAML is showing how other clinical laboratory organizations can tap into the increasing demand for direct-to-consumer medical testing services. It represents a diversification of revenue that will be essential if labs are to make the transition from today’s fee-for-service payment model into the value-based and bundled reimbursement models expected to become dominant in coming years.

The CCLA Annual Conference wraps up today with sessions on legislative and regulatory developments unfolding in the federal government and State of California. All three days of this year’s conference have been packed with informative speakers and useful information. Because of all the marketplace changes unfolding in California, attendance is strong and attendees show keen interest in all the sessions.

Your Dark Daily Editor,

Robert L. Michel

Related Information:

AION Laboratories to Deliver Age Management Diagnostics

PAML creates new division for age-management testing: Aion to compete nationwide in growing medical field