College of American Pathologists
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  In health care reform, labs have winning hand


CAP Today




July 2010
Feature Story

Karen Lusky

A recent issue of Popular Science sports a catchy cover line, “Stem-cell tourism: adventures at the fringes of experimental medicine.” Sounds like a page-turner, but as far as health care topics go, none has captured as much attention in recent months as health care reform. While the Patient Protection and Affordable Care Act isn’t exactly on the fringe, it does promise to be an adventure.

And lab professionals and pathologists are preparing themselves for the ride into the largely new post-reform territory.

“The centerpiece of health care reform is better outcomes and lower costs,” says Louis D. Wright Jr., MD, chair of the CAP’s Council on Government and Professional Affairs. That bodes well for laboratory medicine and pathology, which have the tools to help the health care system provide care more efficiently and produce effective outcomes.

Still, to succeed at reform, there are “trapdoors ahead that all of the House of Medicine has to negotiate,” Dr. Wright says. Among them are the reform legislation’s substantial focus on fraud and abuse, as well as the demand to develop “more demonstrable evidence of quality outcomes.”

Some of the trapdoors have to do with the “pure and simple fact that the law puts 33 million more people in insured programs,” Dr. Wright says. The government will emphasize all initiatives to reduce cost and recapture dollars to help offset costs, he adds.

To balance the cost-payment equation, the health care reform legislation assembles three new entities that could prove to be friend or foe to providers, depending on how they end up functioning in various situations.

There’s the Patient-Centered Outcome Research Institute, or PCORI, says David Mongillo, VP for policy and medical affairs at the American Clinical Laboratory Association. He describes the PCORI as an “independent, stand-alone public-private approach” to continuing the federal government’s activities in comparative effectiveness research.

“The PCORI is taking effect almost immediately,” Mongillo says, adding, “It will be reasonably well funded.”

The reform law also creates the Center for Medicare and Medicaid Innovation, which will look at cost containment through a “health care delivery lens,” he says. That could include new models for providing coordinated care, including ones involving bundled payments.

Then there’s the Independent Payment Advisory Board, which will be using a “payment lens,” Mongillo says. The board will recommend cost-saving measures starting in 2015, says ACLA president Alan Mertz, if Medicare spending exceeds general inflation. The board’s recommendations will become law if Congress does not identify cost-saving alternatives.

LabCorp CEO David King said in a presentation at this year’s Executive War College that the advisory board has to come up with cost savings that don’t increase beneficiary cost sharing or taxes or change Medicare benefits and eligibility, according to what’s in the reform legislation. “So what’s left? The answer is, providers and provider reimbursement reductions.”

On the upside, Mertz predicts that once comparative effectiveness research and the Center for Medicare and Medicaid Innovation get going in about 2015, the Department of Health and Human Services could for the first time in some cases begin to look across what he calls Medicare’s silos. The agency may look at whether a test, even an expensive one, “will save money on the inpatient side or the treatment or drug side,” he says. Or the test might save money by curbing use of more expensive diagnostic tests.

That’s the theory. Some caution, however, that the devil may lie in the data threshold required to prove the cost-benefit proposition.

Pathologist Jeffrey Kant, MD, PhD, says the value-based reimbursement argument is “a relatively new concept” and one that Medicare embraces in principle. After all, “lower costs for improved patient care is kind of like motherhood and apple pie,” says Dr. Kant, director of the Division of Molecular Diagnostics at the University of Pittsburgh Medical Center. But how do you know you’re really lowering costs and improving care? “That’s the question.”

Take a look, he suggests, at how Medicare declined to pay for CYP2C9 and VKORC1 testing to flag patients likely to have problems with warfarin. A lot of data show that the testing is “theoretically useful” and there are examples of how it has helped some patients. But there are no data showing that the testing improves outcomes over time in a large number of patients, Dr. Kant says. So Medicare decided to pay for the testing in the context of a clinical trial, which is a “a more controlled type situation where CMS can get a feel for the benefit of the testing under certain parameters.”

Yet, says Rina Wolf, VP of strategic commercialization, consulting, and industry affairs for billing company Xifin, coming up with the data to prove an expensive new test has clinical utility can be difficult to do without ample funding and clinical experience with the test. “It’s a chicken-and-egg scenario,” Wolf says. “If you don’t have a way to get reimbursement up front, physicians won’t order your test.” And “we don’t know what comparative effectiveness is really going to look like. The government claims costs are not going to be the main driver like they are in England, for example, but is that really true?”

ACLA’s Mongillo thinks the concerns of test makers are on the mark in terms of the large amount of evidence required to obtain reimbursement for expensive new tests. But he says the Patient-Centered Outcome Research Institute handling compar­ative effectiveness research will provide more opportunity for stakeholders to be involved than did the interagency comparative effectiveness research activity. (The CAP and ACLA will nominate members from their respective organizations to serve on the PCORI board.) And he is confident that molecular technology will ultimately prevail because of its “strong, positive impact” on patient care.

Dr. Wright sees primary care and diagnostic medicine, including molecular testing, as “the two essences of health care going forward.” He predicts, in fact, that the new molecular science will eventually reduce the “intuitiveness” in medical practice, making it “more and more a scientific, predictive model.

“Gone will be the ‘I’ve seen 30 of these cases over the past year and know what I’m doing’ mentality that many physicians have now,” he says.

The health care reform law mandates demonstration projects to test coordinated-care delivery models, and the CAP is working to identify target groups and to make sure those groups understand “the power pathologists bring to these arrangements,” Dr. Wright says. These models include the medical home, which may or may not entail risk-sharing, and the accountable care organization, or ACO, which explicitly involves risk-sharing. (The CMS defines an ACO as an organization of providers that agrees to be accountable for the quality, cost, and overall care of a population of Medicare beneficiaries currently enrolled in the fee-for-service program.)

Pathologists could play a role in these models not only by guiding the use of molecular testing but also by doing what they do now, Dr. Wright says: providing often behind-the-scenes consultations that have a dramatic impact on patient outcomes. It could be, for example, ensuring adequate thyroid sampling for a cancer diagnosis or helping to manage a patient bleeding to death in the emergency department, he says—activities that are now largely unreimbursed in the absence of a formal consult request.

The College is spreading that message to public and private entities forming coordinated-care delivery initiatives that appear to have overlooked pathologists on the first pass. “As we have reminded them that the ultimate, real success of these models depends on... implementing modern and transformative medicine that we call molecular and genetic science,” they seem more willing to “stop a minute and see how they need to fit us in,” Dr. Wright says.

Pathologist Ronald Weiss, MD, MBA, of ARUP Laboratories and the University of Utah, says path­ol­ogists need to be “on the ground level” in helping to design these new care delivery models. How pathologists will be reimbursed in coordinated-care models with a bundled payment method is one issue that needs close attention, says Dr. Weiss, who is president of the American Pathology Foundation. “The question will be: Who gets the bundled payment, and how will the payment be apportioned between PCPs [primary care physicians] and other members of the health care team? Where does the pathologist and other ancillary service providers, such as radiologists and non-interventional cardiologists, fit in those payment models?”

To get in on the ground floor, attorney Jane Pine Wood, in an Executive War College presentation, urged pathologists to begin now to build up their credibility with other members of the medical staff and hospital administrators, “whoever you may see in your communities as being the logical, accountable care organization.” Then position yourself with that group such that if they form an ACO, “you’re one of the key players at the table talking about how it’s going to be formed [and] how the money will be divvied up.”

The coordinated-care models are a key part of the reform law’s plan to offset the cost of moving toward universal health care coverage. But will they work? Richard Gomez, MD, chair of the CAP Federal and State Affairs Committee, says, “We will need to have some solid data that these models will truly result in better outcomes and savings.”

To Xifin’s Wolf, accountable care organizations appear to be a lot like the old HMO gatekeeper models. “And no one in this country liked those,” she says.

Jack Shaw, executive director of Joint Venture Hospital Laboratories in Detroit, sees the ACO, too, as similar in concept to an HMO where all services are kept under control. In his view, the success of ACOs will hinge on the financial incentives they have to manage the money allocated to their member populations. Those who run successful HMOs in Michigan do say that “if you support appropriate care, you will attract members and make money,” Shaw says.

Risk-gain-sharing models have to work, Dr. Wright emphasizes. If they don’t, he fears, “we are headed toward more austere models.” In 2008, health care spending made up 17 percent of the gross domestic product in the U.S., and it is projected to rise to 20.3 percent by 2018. “Even the most narrowly conservative doctors in the U.S.—if you talk to them face-to-face quietly—will say they understand it’s not sustainable,” Dr. Wright says.

“We either make some model work that’s palatable to us as independent practitioners, or we get a more austere and stringent model that you might call socialized medicine.”

If demos testing coordinated-care approaches pan out, Dr. Kant predicts the concept will take hold—especially, he says, if president Barack Obama, who has pushed the approach, is re-elected. “Based on the signs coming from Congress, the issue of the national debt is probably not going to get better,” which could mean greater pressure to do something that’s been shown to work. And with demonstrations having been carried out, “these models will have been in place.”

Thus, Dr. Kant wouldn’t be surprised to see movement toward adoption of ACO-type models by the end of the decade. “But probably not until then except at progressive places,” such as Kaiser Permanente, he says.

Whether or not ACOs and medical homes move into the mainstream, laboratories will be a part of the reform law’s emphasis on preventive and wellness care. ACLA’s Mertz predicts the legislation’s preventive and wellness care provisions could lead to a major shift in health care.

Under the legislation, an estimated 15 million uninsured people will receive subsidies to buy insurance through a network exchange starting in 2014, Mertz points out. They will have access to preventive and wellness care free of cost-sharing responsibilities, he says—that is, no copays or deductibles.

The reform law also does away with copayments and deductibles for preventive services under Medicare, effective Jan. 1, 2011. New private health plans must also provide free preventive services “effective for plan years beginning on or after Sept. 23, 2010,” according to a fact sheet from the office of House speaker Nancy Pelosi (

The preventive lab testing benefits that health plans cover, Mertz says, depend on what the U.S. Preventive Services Task Force recommends. And the task force has been known to be “overly conservative” in the past, he adds, pointing to the recent mammography controversy.

The good news, he says, is that language in the reform law broadens the evidence the task force will use. One can hope, then, that “the task force will take a broader look at what testing should be included under prevention,” Mertz says.

Charles Root, PhD, president of CodeMap in Barrington, Ill., points to the expensive ramifications of inappropriate preventive testing when it’s applied to the entire population. He cites prostate-specific antigen testing as an example. “It’s difficult to prove that elevated results are benign unless you go through a ton of money,” he notes.

On the other hand, Dr. Root adds, “Tests like lip­ids and A1c don’t lead to expensive treatments and followup ... and the tests raise awareness among people about the need to make lifestyle changes.”

That public awareness, in Dr. Wright’s view, could in and of itself be a ticket to improved outcomes. “There’s the whole area of epigenetics, which deals with how the environment influences one’s genes, including over-eating, smoking, and sun worship,” he says. And having a more informed public makes it easier to develop and facilitate health promotion models on a communitywide basis to address such problems. “I think we will see a lot of that. We can’t afford the comorbidity of bad behaviors. We have to do something about that in this country.”

Insurers are starting to take action to curb payment related to disease-causing behaviors. “They are getting a lot of pushback, so they are going slowly and taking a soft approach at first,” Dr. Wright says. “But some already won’t pay for type 2 diabetes medications for people who don’t show evidence that they are serious about dieting as part of their care management.”

LabCorp CEO David King told his War College audience that under the reform bill, managed care organizations face a limit on their administrative expenses and must meet a certain medical loss ratio in money spent on their enrollees. The question, he said, is whether disease management will be classified as an administrative cost or a medical loss. If it’s administrative cost, MCOs are going to stop doing disease management. And if that happens, “labs have to step into ... the void and help physicians manage patients” in that way.

Marc Grodman, MD, CEO and chairman of the board, Bio-Reference Laboratories, Elmwood Park, NJ, says private payers might balk at investing too much in health promotion because they don’t “own” lives—they simply “rent” them for a few years under the current system. The health reform law, which put most of the expanded coverage in the hands of private insurers, did not change that underlying dynamic, he says.

On the cost-containment side, the Affordable Care Act contains two measures that lab professionals and pathologists should keep an eye on, CodeMap’s Dr. Root says.

For one, the legislation gives the CMS more power to change the physician fee schedule’s relative value units, or RVUs. “Up to now, the American Medical Association’s RVS Update Committee [RUC] has pretty much run that,” he says. The CMS reviews what the RUC does and might “quibble a bit about it,” but the effort is “pretty much in the hands of the doctors.”

The reform law, however, gives the CMS the right to contract with outside individuals and entities to do its own evaluations and reviews of relative value units, he says. To Dr. Root, this suggests that the agency may view physicians setting their own rates as a “fox in the chicken house” type of situation. “What CMS does with this new authority—who knows?”

The legislation also imposes on providers mandatory compliance programs aimed at rooting out overpayments. Dr. Root predicts the Department of Health and Human Services will roll out the compliance program requirements fairly soon. “The Office of Inspector General already has written guidance, so all HHS would have to do essentially is to require that [compliance with the guidance], rather than making it voluntary,” Dr. Root says. And that could be an issue because while “everyone says they have a compliance program,” a lot of the programs are what he calls “stealth” programs. “Someone has something somewhere,” he explains, “but when you ask the average person in the lab, they haven’t seen it or been affected by it.”

Some of the more sophisticated medical centers will have good programs, he says, but even they won’t have all of the Office of Inspector General-specific documentation in place, such as quickly accessible documentation of training and policies. “It’s like CLIA. You can have an excellent lab with excellent quality control, but if you don’t keep records, you have no proof of it,” he notes.

Dr. Root says it’ll be interesting to see what penalties the Department of HHS will impose on labs or hospitals that don’t have compliance programs that meet the specified requirements. “The easiest remedy would be exclusion from Medicare,” he says.

For those who are pinning their hopes on repeal of the reform law, what with its complexities, costs, and wild cards, don’t count on it.

“No one,” Mertz says, “believes that could happen while president Obama is in the White House. I also wouldn’t look for Congress to reopen the bill before the elections this November.”

Lab lobbyist Donald Lavanty doesn’t see any way the bill will be repealed. He predicts instead “an intensive refinement process.” And he foresees some of the bill’s cost-containment provisions being tempered by reality over the next decade or so. ”That’s what happened with the Balanced Budget Act of 1997,” which included the sustainable growth rate for the physician fee schedule, and the cap on Part B outpatient rehab therapy, both of which have been pushed back repeatedly.

The Congressional Budget Office, says Denise Bell, CAP’s director of federal legislative affairs, estimates that permanently repealing the SGR at this point would cost about $280 billion.

Congress will eventually have to address the SGR, Dr. Wright says, pointing out that the 21 percent physician fee payment cut proposed to go into effect on June 1 is “a fall off the cliff for many people. It would run half of the PCPs into the poorhouse.”

(On June 25, federal legislation withdrew the SGR-mandated payment reduction and instead gave physicians a 2.2 percent pay hike from June 1 through Nov. 30.)

The clinical lab fee schedule could end up in policymakers’ sights in a couple of years when they start scraping for cost savings. Any service that shows increased utilization, Mertz says, is going to find itself in the spotlight. And lab testing is going to show increased utilization because more patients will be getting tested and there will be many more tests, he adds.

Mertz says the best defense against reimbursement cuts is for the lab community to educate policymakers about how lab testing can help clinicians detect and manage—even preempt—the chronic diseases that drain the nation’s health care coffers.

“I’ve heard said about the U.S. economy that we have the winning hand, if only we would play it,” Mertz says. The same holds true for lab testing. “The lab industry has the winning hand. We just need to play it.” ?

Karen Lusky is a writer in Brentwood, Tenn.