Retail detail—hospitals mull direct access testing
Hospital laboratories are in danger of being left behind in
the emerging market for direct access testing, in which consumers
order lab tests without physician intervention and pay for them out
“Reference labs are leading the way [in
direct access testing],” warns Bruce A. Friedman, MD, professor
of pathology at the University of Michigan Medical School in Ann Arbor
and an expert in pathology informatics. But ultimately, he adds, hospital
labs “will have a higher stake” than reference labs in
direct access testing, or DAT, if they want to maintain their market
share and possibly lower costs.
“DAT is one facet of
a much larger phenomenon of consumers taking control of their health
care,” Dr. Friedman adds. “It’s not going to be
possible to stem the tide, and it’s my belief that DAT will
find its way into the testing repertoire of hospital-based labs.”
If such tests are used responsibly, “they can be an important
adjunct to health care,” he says.
However, if hospital labs decide to offer DAT, they should realize
they’re getting into a retail business—which requires
an approach quite different from their traditional focus, says Lawrence
Killingsworth, PhD, chief science and technical officer for Sacred
Heart Medical Center Laboratories and Pathology Associates Medical
Laboratories, both in Spokane, Wash. He directed a task force that
implemented the two organizations’ venture in direct access testing.
Both men spoke at a recent teleconference on DAT sponsored by the
American Association for Clinical Chemistry and the Association for
Pathology Informatics. Dr. Friedman addressed strategic business issues,
while Dr. Killingsworth shared his experience in setting up a pilot
project scheduled to be fully implemented this year. They were joined
by a health care ethicist, Dianne M. Bartels, RN, MA, PhD, associate
director of the University of Minnesota Center for Bioethics in Minneapolis,
who discussed the ethical considerations of direct testing.
Direct access testing has its antecedents in home testing kits for
pregnancy and glucose, Dr. Friedman notes. While opponents of DAT
cite the possibility of false-positives or -negatives, “the
same pitfalls apply to home kit testing,” he says, and have
not stopped the self-testing model from proliferating.
To be profitable for a reference laboratory, DAT must become a high-volume
business, Dr. Friedman says, noting that prices will fall as more
competitors enter the market. He points to Quest Diagnostics as
one national lab “aggressively pursuing DAT,” but he
adds that Quest must be careful not to alienate its physician office
customers in doing so. Another player is HealthcheckUSA, a Web-based
DAT broker that outsources its testing to commercial labs. In the
future, he predicts, biotechnology companies could enter the market
by offering genetic tests directly to the public. Already, Genelex
offers a DNA “prescription drug reaction profile,” with
CYP2D6, CYP2C9, and CYP2C19 screens that predict response to about
one-fourth of prescribed drugs.
Few hospital laboratories have entered the DAT business, in part
because many laboratory executives don’t have an entrepreneurial
mindset, Dr. Friedman says. But they should consider it. Since the
labs are embedded in large health delivery networks, they could
use DAT as a marketing tool to attract customers without worrying
about profit, he suggests. Then, too, having consumers order their
own tests could lower costs for a health care system by reducing
the number of physician visits.
Dr. Friedman, who describes himself as a proponent of lab Web sites,
says that while DAT order entry and results reporting can be offered
online, costs are associated with developing such a sophisticated
application. “There’s no ‘free lunch,’”
he says. However, many hospital labs have already invested in an
online Web-based order-entry and results-reporting infrastructure
for physicians and need only tweak it for consumers.
Eventually, Dr. Friedman predicts, some third-party payers will
cover DAT because it promotes wellness. For example, hospital-owned
insurance plans could offer “lab accounts” to their
subscribers, and employers with flexible spending accounts could
include DAT as an option. This will fuel more growth, he says, and
is all the more reason for hospital labs to at least consider offering
Case study: Results Direct
Results Direct is operated by Pathology Associates Medical Laboratories,
a for-profit subsidiary of Sacred Heart. The organizations wanted
to get into DAT to leverage their existing infrastructure and to
minimize fixed costs by spreading them over a larger volume of tests,
explains Dr. Killingsworth. The multidisciplinary task force set
up to oversee the project first looked at other DAT ventures and
surveyed consumers in the Spokane area to find out how they would
use direct testing.
“At first we were disappointed,” he says, because more
than 70 percent of respondents considered themselves “somewhat
unlikely” or “not likely” to use DAT. But the
marketing staff was wildly enthusiastic, Dr. Killingsworth says,
because 20 percent of those surveyed said they were likely to use
DAT—a response the staff considered phenomenal for a new service.
“Convenience” was the No. 1 reason consumers cited for
being likely to use the service; No. 2 was “no need for a
The task force predicted that consumers of Results Direct would
be young to middle-aged, but in fact they tend to be in their 50s
and older, Dr. Killingsworth reports. The surveyed group wanted
results mailed to them or available for on-site pickup; e-mail and
secure Web access scored lower. For now, Results Direct is not offering
results online, though that will change when the program is made
more broadly available. Consumers can already order tests and pay
for them via the Web.
In designing the DAT product, the task force had to choose a test
menu, decide what language to use in reporting results, set pricing,
and establish a customer support line. On the test menu are a chemistry
survey and panels for allergy, thyroid, cardiac lipid and risk,
and diabetes screen and management, and tests for mononucleosis,
pregnancy, testosterone, drugs, and more. They’re all automated tests that can be offered at reasonable
prices with rapid turnaround, Dr. Killingsworth notes. Results Direct
decided not to offer HIV and STD tests because of the need for associated
Prices range from $20 each for tests such as CBC, glucose, and urinalysis
to $175 for a panel of 20 allergens. Most of the major panels, such
as those for chemistry and diabetes, fall in the $40 range. “We
had to consider our costs, the competition, and our current list
prices,” says Dr. Killingsworth.
So far, Results Direct, in limited release, has had few complaints
from physicians. Those who have expressed concerns are worried about
encroachment onto their practices and liability-related issues if
they receive test results for patients they cannot contact. “We
agreed that no one would receive the results other than the patient,
and that [latter] concern went away,” Dr. Killingsworth says.
Patients must provide a phone number to order tests, and the health
center medical director calls any patient whose test results are
critical values. Each printed test report is accompanied by a brief
interpretation and a recommendation to contact a physician about
a positive result or any symptom of the condition in question.
Turnaround times have been about two days since the pilot launched
Sept. 1, 2002. Results Direct was scheduled to begin serving all
of Spokane in January and the rest of Washington some months later.
The plan is to franchise the model to other labs within the next
six months. “We want to have our product available when people
are ready to use it,” Dr. Killingsworth says, citing increasing
interest among hospital labs exploring DAT. Ninety-five facilities
participated in the AACC teleconference. Forty-five of those participants
responded to an informal poll about whether they were interested
in DAT. Thirty-five percent said they are studying it, and 19 percent
plan to implement a program within a year.
“We have a template and a proven program,” Dr. Killingsworth
says. It’s not just a matter of boosting volume but of dealing
with a new kind of business. For instance, hospital laboratories
probably haven’t had to deal with “something as simple
as making sure a customer credit card is valid,” he says.
“We had to set up a whole application for that.”
Marketing is critical to the success of a DAT program, he adds.
In fact, the number of clients spikes every time Results Direct
runs an advertisement. “You have to advertise to keep up the
demand,” Dr. Killingsworth says, “although how much
advertising to do remains to be determined.” Results Direct
has distributed brochures to all Pathology Associates Medical Laboratories
patient service centers and advertised in local media and on its
Although Dr. Killingsworth declines to give financial figures for
Results Direct, which is set up as an independent cost and revenue
center, he does say costs have been minimal. “We had to set
up customer phone support and develop some new IT applications,”
he says, such as a Web site with information on the type of tests
available, location of health care sites, pricing, and payment options.
To be successful with DAT, labs must “shift to a retail mentality,”
he says. They must be able to monitor test volumes separately from
other laboratory business and track revenue from consumers. “This
has been a good line of business for us,” he maintains. “If
we hadn’t put it in place, we’d be trying to figure
out how to do it now.”
Karen Southwick is a writer in San Francisco.
Dr. Bartels, an ethicist who specializes in genetic counseling, says as DAT
becomes more complex, providers must be prepared to help consumers understand
the results—“especially in the realm of genetic testing, since even
physicians are not prepared to interpret this. How could consumers be prepared
to interpret results on their own?”
Moreover, information from direct tests could make its way into patients’
medical records, particularly if they share it with a physician—and could
result in insurance or employment discrimination.
Protecting privacy is paramount to a successful DAT business, says Dr. Bartels,
who does not advocate for or against DAT but merely wants providers to understand
the risk-benefit ratio. But if providers want to use targeted marketing, they’re
likely to require information from pharmacies or other sources. For example,
advertising for liver function tests might target people on cholesterol drugs.
“What kind of incentives will marketers give to obtain this information?”
she asks. “Will privacy be at risk?”
With DAT, consumers can drive demand not only by ordering tests but also by
asking physicians for followup exams, in much the same way that pharmaceutical
advertising has prompted patients to ask for brand-name drugs, she says. This
could raise health care costs and contribute to a resource allocation problem.
A bottom-line ethical question for laboratory providers is whether direct tests
give consumers needed information they might otherwise not have or whether their
benefits are oversold. DAT’s advantage is that it allows consumers, rather
than physicians or third-party payers, to decide which tests are relevant for
them, Dr. Bartels notes. On the other hand, people may be manipulated into ordering
unneeded tests. Consider the example, she says, of advertising she has seen
purporting to “save the life of your child with newborn screening tests.”