Expanding healthcare services into communities is expected to increase orders for clinical laboratory tests, promote precision medicine, and lower overall costs
Clinical
laboratories continue to adapt to servicing providers in non-traditional
healthcare settings. These include freestanding urgent care centers as well as
mini-clinics in retail locations. Dark Daily has covered this trend
extensively in previous
e-briefings.
To secure a share of this new market, national retailers,
pharmacy chains, and grocery stores are increasing their health and medical
service offerings and forging partnerships with other organizations, such as
tech developers.
One such recent partnership involves Walgreens Boots Alliance Inc.
(NYSE:WBA) and the Microsoft
Corporation (NASDAQ:MSFT). In January, both parties announced a joint
venture to develop new healthcare solutions that will improve patient outcomes while
lowering cost through research and development, funding, and technology.
“Our strategic partnership with Microsoft demonstrates our
strong commitment to creating integrated, next-generation, digitally-enabled
healthcare delivery solutions for our customers, transforming our stores into
modern neighborhood health destinations, and expanding customer offerings,”
said Stefano
Pessina, Executive Vice Chairman and Chief Executive Officer of Walgreens,
in a Microsoft press
release.
Through this partnership, Walgreens plans to provide personalized healthcare (aka, precision medicine) by connecting its customers to pertinent health information through digital devices and in-store expert advice. The goal is to proactively engage patients in their own care to improve medication adherence, reduce emergency room visits, decrease hospital readmissions, and provide customers with lifestyle management solutions.
In addition, the two companies will share each other’s
market research and work with consumers, payers, providers, and pharmaceutical
manufacturers to devise solutions that improve health outcomes while lowering
costs.
“[Walgreens Boot Alliance] will work with Microsoft to harness the information that exists between payers and healthcare providers to leverage, in the interest of patients and with their consent, our extraordinary network of accessible and convenient locations to deliver new innovations, greater value, and better health outcomes in healthcare systems across the world,” Pessina said in the press release.
As part of this partnership, Walgreens will move the majority of its IT infrastructure onto Microsoft Azure, a cloud computing and artificial intelligence (AI) platform. Walgreens also will provide Microsoft 365 to more than 380,000 employees and stores located throughout the world. Microsoft 365 is a business solution which bundles Windows 10 and Office 365 with advanced security features.
Other Walgreens Collaborations That Provide Healthcare at
Retail Locations
Walgreens also announced several collaborations with other
companies to become more competitive and secure their share of the healthcare
market.
Through its partnership with Chicago-based VillageMD, a national provider of primary
care clinics, Walgreens will open five primary care clinics next to Walgreens
stores in the Houston area. These clinics, called “Village Medical at Walgreens,”
will offer customers comprehensive primary care services, pharmacists, nurses,
and social workers.
“This collaboration with VillageMD demonstrates our ongoing commitment to create neighborhood health destinations that bring affordable healthcare services to customers and provide a differentiated patient experience to the communities we serve,” stated Patrick Carroll, MD (above), Chief Medical Officer, Clinical Programs and Alliances, Walgreens, in a Walgreens press release. “VillageMD has a strong track record nationally of improving outcomes and reducing the cost of healthcare through their transformative primary care model.” (Photo copyright: Walgreens.)
Another collaboration involves Verily Life
Sciences, a research arm of Alphabet Inc. (NASDAQ:GOOG), Google’s parent company. The
agreement is for multiple projects to improve health outcomes for patients with
chronic illnesses. The two companies will be exploring the use of technology, such
as sensors, and software to help prevent, manage, screen, and diagnose disease
with the ultimate goal of deploying those technologies at Walgreens retail
locations.
“The
continued rise in chronic diseases today can be costly to patients as well as
to our healthcare system,” Pessina told Business
Wire. “Working with Verily, we’ll look at how we can best support
integrated and value-based care to meet our patients’ needs, as well as
opportunities to address other chronic conditions over time.”
Service Agreements with LabCorp and Quest
In 2018, Walgreens
announced a significant expansion of their collaboration with LabCorp, to increase the number of patient
service center (PCS) locations within Walgreens stores. The two companies
agreed to open at least 600 additional LabCorp-at-Walgreens facilities across
the US over the next four years. At the time of the announcement, LabCorp operated
17 facilities at Walgreens in Florida, Colorado, North Carolina, and Illinois.
Along the same lines, Quest
Diagnostics (NYSE:DGX) also has opened hundreds of patient-serviced centers
within various food and drug retail stores throughout the US, which Dark
Daily reported in 2017.
“Healthcare is too complicated, too big, and if I can say, a
little too messy,” Pessina told Digital
Commerce 360. “We cannot be helpful to our patients if we don’t team up
with many, many different, practically all, the players in this industry.”
CVS HealthHubs Offer Blood Testing, Health Screenings,
and Other Services
To remain competitive, CVS also is trying new ways to
capitalize on the growing healthcare market.
In February, CVS announced
the creation of three newly designed stores in the Houston area as pilot
projects. These stores, called HealthHubs,
will include expanded health clinics with medical laboratories for blood
testing and health screenings. They’ll also feature dieticians, respiratory
specialists, and dedicated space to assist customers with the management of
some chronic health conditions, as well as wellness rooms for yoga classes and
health seminars.
“We’re pleased and surprised pleasantly with the ecosystem
of healthcare that we’ve created here and how approachable it is, how much
people are interested in it, and there are certain things we can take to all
stores,” Kevin
Hourican, Executive Vice President, CVS Health and President, CVS Pharmacy,
told Becker’s
Hospital Review.
With more retailers
adding an ever-increasing number of healthcare services to their offerings, the
number of medical laboratory tests available at those locations will likely
also increase. Although this trend may boost competition for clinical
laboratories, it could also benefit them by creating new opportunities to
provide value-added services to their clients.
For blood brothers Quest and LabCorp this is good news, since the two medical laboratory companies perform most of the testing for the biggest DTC genetic test developers
Should clinical laboratories be concerned about direct-to-consumer (DTC) genetic tests? Despite alerts from healthcare organizations about the accuracy of DTC genetic testing—as well as calls from privacy organizations to give DTC customers more control over the use of their genetic data—millions of people have already taken DTC tests to learn about their genetic ancestry. And millions more are expected to send samples of their saliva to commercial DTC companies in the near future.
This growing demand for at-home DTC tests does not appear to be subsiding. And since most of the genetic testing is completed by the two largest lab companies—Quest Diagnostics (NYSE:DGX) and Laboratory Corporation of America (NYSE:LH)—other medical laboratories have yet to find their niche in the DTC industry.
Another factor is the recent FDA authorization allowing DTC company 23andme to report the results of its pharmacogenetic (PGx) test directly to customers without requiring a doctor’s order. For these reasons, this trend looks to be gaining momentum and support from federal governing organizations.
Dark Daily has
reported on DTC genetic
testing for many years. According to MIT’s Technology Review, 26 million people—roughly
8% of the US population—have already taken at-home DNA tests. And that number
is expected to balloon to more than 100 million in the next 24 months!
“The genetic genie is out of the bottle. And it’s not going
back,” Technology Review reports.
The vast majority of the genetic information gathered goes into the databases of just four companies, with the top two—Ancestry and 23andMe—leading by a wide margin. The other two major players are FamilyTreeDNA and MyHeritage, however, Ancestry and 23andMe have heavily invested in online and television advertising, which is paying off.
In an op-ed response to a NYT editorial that warned readers to avoid 23andMe’s DTC genetic testing, 23andMe CEO and co-founder Anne Wojcicki (above) wrote, “We believe that consumers can learn about genetic information without the help of a medical professional, and we have the data to support that claim.” The FDA agreed and in February approved 23andMe to report pharmacogenetic test results directly to its customers. How this will play out for clinical laboratories remains to be seen. (Photo copyright: Inc.com.)
As more people add their data to a given database, the likelihood they will find connections within that database increases. This is called the Network Effect (aka, demand-side economies of scale) and social media platforms grow in a similar manner. Because Ancestry and 23andMe have massive databases, they have more information and can make more connections for their customers. This has made it increasingly difficult for other companies to compete.
Quest Diagnostics and LabCorp do the actual gene sequencing
for the top players in the DTC genetic testing sector. The expected wave of new
DTC genetic test costumers (74 million in the next 24 months) will certainly
have a beneficial revenue impact on those two lab companies.
Why the Explosion in Genetic
Testing by Consumers?
In 2013, just over 100,000 people took tests to have their
DNA analyzed, mostly using Ancestry’s test, as Dark Daily reported. By 2017, that
number had risen to around 12 million, and though Ancestry still had the
majority market share, 23andMe was clearly becoming a force in the industry,
noted Technology Review.
And now there are several health-related reasons as well. For
example, the study of pharmacogenetics has led clinicians to understand that
certain genes reveal how our bodies process some medications. The FDA’s clearance
allows 23andMe to directly inform customers about “genetic variants that may be
associated with a patient’s ability to metabolize some medications to help
inform discussions with a healthcare provider. The FDA is authorizing the test
to detect 33 variants for multiple genes,” the FDA’s press
release noted.
Controversy Over DTC
Genetic Tests
The use of DTC genetic tests for healthcare purposes is not without scrutiny by regulatory agencies. The FDA removed 23andMe’s original health test from the market in 2013. According to Technology Review, the FDA’s letter was “one of the angriest ever sent to a private company” and said “that the company’s gene predictions were inaccurate and dangerous for those who might not fully understand the results.”
23andMe continues to refine its DTC tests. However, the debate continues. In February of this year, the New York Times (NYT) editorial board published an op-ed warning consumers to be wary of health tests offered by 23andMe, saying the tests “look for only a handful of [genetic] errors that may or may not elevate your risk of developing the disease in question. And they don’t factor into their final analysis other information, like family history.”
Anne Wojcicki, CEO and co-founder of 23andMe, responded with her own op-ed to the NYT, titled, “23andMe Responds: Empowering Consumers.” In her letter, Wojcicki contends that people should be empowered to take control of their own health, and that 23andMe allows them to do just that. “While 23andMe is not a diagnostic test for individuals with a strong family history of disease, it is a powerful and accurate screening tool that allows people to learn about themselves and some for the most common clinically useful genetic conditions,” she wrote.
Nevertheless, privacy concerns remain:
Who owns the results, the company or the
consumer?
Who can access them?
What happens to them a year or five years after
the test is taken?
When they are sold or used, are consumers
informed?
Even as experts question the accuracy of DTC genetic testing
in a healthcare context, and privacy concerns continue to grow, more people
each year are ordering the tests. With predictions of 74 million more tests
expected in the next 24 months, it’s certain that the medical laboratories that
process those tests will benefit.
UPS’ program on
WakeMed Hospital’s Raleigh campus in N.C. is first drone delivery service
cleared by FAA for commercial purposes
UPS (NYSE:UPS) Chairman and CEO David Abney emphasizes patients, not packages, in the company’s new drive toward drone technology in medical laboratory specimen transport and logistics.
“Healthcare is a strategic imperative for us,” Abney said.
“We deliver a lot of important things, but lab [shipments] are critical, and
they’re very much a part of patient care.”
UPS entered the healthcare sector in 2000 with its acquisition of Livingston HealthCare. In 2016, the company acquired Marken, a move that Abney said, “sent a clear message to our customers that we were taking healthcare and clinical trials very seriously.”
UPS Chairman and CEO David Abney (above) explained the company’s new drive toward drone technology in medical laboratory specimen transport and logistics. Abney closed Day 1 sessions at the 24th Annual Executive War College on Lab and Pathology Management. (Photo copyright: DARK Daily.)
Clinical Laboratory
Specimens Delivered by Drone
With healthcare deliveries already a big part of UPS’ ground
business, the company now moves lab specimens by drone on WakeMed’s hospital campus in
Raleigh, N.C. The effort marks the first commercial daily drone service to be
cleared by the Federal Aviation Administration (FAA) for lab specimen
transport, and it is made possible through UPS’s new partnership with Menlo
Park, Calif.-based Matternet.
Matternet Founder and CEO Andreas Raptopoulos described how the new technology is impacting turnaround time, specimen stability, and viability. The “Future of Lab Logistics” session at EWC, featuring Raptopoulos and Shannon DeMar, Senior Marketing Manager Healthcare Strategy at UPS in Atlanta, Ga., brought questions about FAA regulations, risk mitigation, and more. Laboratory leaders are looking at how to take their logistics to the next level.
On-Demand/Same-Day
Delivery of Medical Lab Samples
The UPS/Matternet program represents a major milestone for
unmanned aviation in the United States, according to UPS, in a recent release.
Currently, the majority of medical samples and specimens are transported across
WakeMed’s expanding health system by courier cars. The addition of drone
transport provides an option for on-demand and same-day delivery, the ability
to avoid roadway delays, increase medical delivery efficiency, lower costs, and
improve the patient experience.
How drones, sensors, and new technologies are poised to
increase the quality and accuracy of specimen transport and logistics
represented just a slice of the first full day of sessions at Executive War
College. UPS is an official partner and sponsor.
Also speaking at the 24th Annual Executive War College on
Lab and Pathology Management:
Evolving market trends are creating both concern and
opportunities for the clinical laboratory industry. New sources of revenue are essential
at a time when fee-for-service prices for lab tests are decreasing.
Early registration is already open for 2020 Executive War College, happening April 28-29, in New Orleans.
Operational efficiencies, strong management teams, and successful outreach business are key clinical laboratory success in today’s era of mergers and acquisitions
Fierce economic headwinds are taking aim at the entire pathology industry, as shrinking Medicare reimbursement rates, shifting federal regulations and compliance requirements, and changing care models squeeze profit margins and threaten valuations of most clinical laboratories and anatomic pathology groups.
The reimbursement rate changes mandated by the Protecting Access to Medicare Act of 2014 (PAMA), which took place January 1, 2018, loom as the most immediate danger to the long-term financial health and viability of medical diagnostic laboratories.
“Medicare reimbursement rates to labs providing essential testing services are estimated to drop by $670 million this year, and additional reductions scheduled for 2019 and 2020 will cut payments by nearly 30% for many tests critical to caring for Medicare beneficiaries,” noted Julie Khani, President of the American Clinical Laboratory Association (ACLA), in “Patient Care Is Put to the Test as Clinical Laboratory Services Are Hit With a One-Two Punch in Rate Cuts,” an article she penned for the ACLA website.
“For some labs, such as rural hospitals and labs serving patients in skilled nursing facilities—which already have significantly higher operating costs—this could be a death knell that would precede a devastating loss of patient access to necessary testing services,” she concluded.
Assessing Financial Solvency to Survive Impending Mergers and Acquisitions
The ACLA has filed a lawsuit against the U.S. Department of Health and Human Services (HHS) for what it called a “flawed and misguided” implementation of the law. For now, however, the roll out of reimbursement rates cuts will continue, an ACLA blog post reports.
As a result, post-PAMA pressures combined with other factors are forcing clinical laboratory leaders to consider their strategic options, including:
Reorganizing;
Restructuring;
Merging/consolidating with another laboratory; and,
Selling.
As GenomeWeb pointed out prior to PAMA’s implementation, “All clinical labs in the U.S.—from the largest reference labs to in-hospital labs to physician-practice labs—will be touched by the changes to varying degrees.” The future, GenomeWeb predicts, “may be a market with fewer independently operated small and regional labs, as well as fewer outreach labs owned by hospitals. Instead, such operations could become part of [Quest Diagnostics’] and LabCorp’s networks.”
This changing landscape means laboratories need to be assessing their financial solvency and maximizing their valuation even if they are not currently candidates for either side of the merger and acquisition equation. Failing to anticipate and respond to unfolding changes could leave laboratory executives courting a financial reckoning.
One speaker is Vicki DiFrancesco, Chief Strategy Officer, XIFIN, San Diego. DiFrancesco has an insider’s understanding of mergers and acquisitions and 25 years of executive leadership experience. Prior to joining XIFIN, DiFrancesco served as President and CEO of Pathology Inc., the West Coast’s premier women’s health laboratory, which was acquired by LabCorp in March 2016.
The other speaker is David Nichols, Founder and President at Nichols Management Group (NMG) in York Harbor, Maine. NMG provides laboratory consulting services for healthcare organizations. Since its founding in 1988, NMG has provided expertise in improving overall effectiveness and in implementing such strategies as sales force development, market planning, compliance/financial auditing, and in selected cases, hands-on management responsibilities by working onsite with senior personnel in each area of need.
During their 90-minute presentation, you will learn:
Market factors creating financial challenges for your laboratory;
How revenue compression and compliance issues are driving merger and acquisition activity;
Steps to optimizing your lab’s reimbursements, a key to improving financial performance;
Revenue cycle management’s importance as a valuation driver;
Strategies to significantly improve your market position;
Components of an effective compliance program and why compliance is so important to laboratory valuation;
Value drivers that attract buyers, such as profitable growth, a strong compliance program, competent management teams, EBITDA, cash flow and gross margins; and,
Specific challenges that should be addressed in any merger or consolidation plan.
David Nichols (left), Founder and President at Nichols Management Group (NMG); and Vicki DiFrancesco, Chief Strategy Officer, XIFIN, will share vital insights and share critical strategies that clinical laboratories can immediately use to drive valuations and prepare for current and future financial challenges. (Photo copyright: Dark Daily.)
To register for this critical webinar, use this link (or copy and paste this URL into your browser: https://www.darkdaily.com/product/the-pathway-to-driving-valuation-for-your-laboratory-your-roadmap-to-achieving-success-and-how-to-sustain-growth-despite-a-changing-lab-environment/.)
Despite the financial pressure on many existing laboratories, the medical laboratory industry continues to play a vital role in the healthcare system, with clinical laboratory tests guiding more than 70% of all medical decisions made by healthcare providers, according an ACLA fact sheet.
The industry also contributes more than $100 billion in annual economic impact and produces more than 622,400 jobs. While the role of diagnostic laboratories will continue to grow in an era of personalized medicine, only laboratories that optimize their strategic position in response to the changes taking place may be left standing when the predicted industry consolidation is complete.
As PAMA brings estimated Medicare reimbursement cuts of up to 30% over the next three years to a range of typically high-volume tests and diagnostics, medical laboratories that wish to stay competitive must understand the needs of managed care payers and learn how to optimize collections, reduce denials, and communicate value effectively or risk their financial health
Recent years have seen major shifts in consolidation, automation, and efficiency analysis to help streamline both workflows and cashflows. However, the threat from the current and coming cuts to Medicare lab test prices will be particularly acute for smaller independent laboratories and hospital/health system lab outreach programs. These labs will continue to feel added strain due to reduced reimbursement across 25 of the most common tests billed to Medicare.
And, that doesn’t account for subsequent cuts, which are estimated to reach nearly 30% over the next three years.
Cost of Service Disparities/In-Network Status Further Impact Clinical Labs
If the CLFS reductions weren’t enough, labs face another threat—managed care and commercial payers aligning with big national laboratories and narrowing networks in an attempt to lower costs and provide maximum return for both patients and shareholders. For smaller and independent laboratories, this represents a double threat.
In the first situation, larger laboratories can offer services at lower costs due to increased automation, batch processing, and other scale advantages. This means that while the lower CLFS rates will impact the financial integrity of larger labs, the actual margin lost is less than that of smaller laboratories and facilities that face higher costs to perform tests and provide services.
Compounding the situation, commercial and managed care payers searching out the best value for their patients and shareholders tend to narrow their networks by excluding many independent clinical lab companies and hospital lab outreach programs, amplifying this inherent disparity and skewing the advantage away from independent providers yet again.
Higher cost providers without a clear understanding of promoting their value to payers could have trouble obtaining in-network status. Yet, failing to obtain in-network status may reduce overall test quantities, further raise prices, and make smaller labs less competitive with larger national laboratories—a dangerous cycle with today’s competitive laboratory landscape.
Shifting Focus and Optimizing Managed Care Reimbursements
As the financial stability of Medicare reimbursements wanes, it is imperative that laboratories look to new methods to further increase efficiency and stabilize cashflows. Once a smaller portion of laboratory revenue, managed care organizations and commercial payers will be of increased importance as overall reimbursement rates continue to shrink in the face of healthcare reform and value-based care.
Special June 26 Webinar: Improving Managed Care Reimbursement Efficiency
Understanding not just what these payers are attempting to achieve for their organization—but also how they structure requirements and processes to support their goals—is an essential element of succeeding in this previously smaller share of the marketplace.
For those interested in learning more about critical concerns regarding managed care payers in the post-2018 CLFS landscape, Pathology Webinars is hosting a 90-minute webinar on Tuesday, June 26, 2018, at 2:00 PM Eastern.
The webinar will include presentations from two experts on a range of topics including:
Actionable steps to absorb the loss of Medicare revenue due to the impact of the 2018 CLFS reductions;
How managed care payers process network status and payments;
Who in the managed care chain of command should receive your value proposition;
How to better align your value propositions, policies, and workflows with the requirements of managed care and commercial payers; and,
Understanding the roles managed care payers expect clinical laboratories and anatomic pathologists to play in managing and reducing unnecessary testing.
The first speaker, Frank Dookie, MBA, will provide an inside look at:
How managed care payers function;
Their requirements and workflows; and,
What they look for when considering network status for a laboratory.
Dookie is a laboratory professional who has worked on the payer side for 28 years. He is passionate about the role that diagnostics play or can play in healthcare, and has spent his career working for instrumentation providers, clinical laboratories, the intermediary space between laboratories and managed care companies, and managed care companies.
The second speaker, Michael Snyder, will bring the entire payment process into sharp focus. He will cover:
Optimizing the collection process;
Identifying the purpose of each step, each review, and each team member involved; and,
Critical points laboratories must address to ensure payment.
Snyder is the Senior Vice President of Network Operations for Avalon Healthcare Solutions, LLC, a firm that provides comprehensive benefit management services to the health plan industry and has more than 30 years’ experience in clinical laboratory management.
Frank R. Dookie, MBA (left), Contracting Executive with a major managed care company in Woodbridge, N.J.; and Michael Snyder (right), Senior Vice President with Avalon Healthcare Solutions in Flemington, N.J., will provide critical insights and actionable details for clinical laboratory and anatomic pathology group leaders who want to ensure future revenues.
An Essential Opportunity to Improve Your Reimbursements
This critical webinar offers anatomic pathology groups and medical laboratory managers essential information and actionable next steps to immediately leverage the potential of managed care payers. Additionally, it provides insider insight to laboratories straining to retain financial integrity as reduced reimbursements and increased regulatory burdens strain budgets and cashflows.
To register for the webinar and see further details about discussion topics, use this link (or copy and paste the URL into your browser: https://pathologywebinars.com/current/managed-care-an-insiders-guide-to-improving-your-reimbursement-efficiency-with-strategies-that-work-626/).
As further Medicare payment reductions over the next three years drive reimbursements even lower, understanding how to capture the positive attention of payers—while working within the rules and policies driving their reimbursement decisions—will be an essential element of successful laboratory management and growth. Register now!
