Expert Q&A: 2023 Lab Industry Highs and Lows, and 2024 Outlook

As we move forward into 2024, the lab industry continues to face key challenges such as staff shortages, falling reimbursements, and the loss of independent labs to mergers or acquisitions by large national labs. However, there are bright spots in the form of new partnerships and business models to help meet these challenges. Robin Divine, MBA, president and CEO of TriCore Reference Laboratories, discusses the key 2023 developments for the lab industry as a whole and her company specifically, as well as lessons learned for 2024.

Q: What, in your opinion, were the biggest developments in 2023 for the laboratory industry?

A: There continues to be consolidation of independent laboratories into the larger national laboratories, however, the root cause remains the inequity in the clinical lab fee schedule that drives the payment methodology for laboratory services today. This, coupled with increasing staffing challenges, further impacts the availability of timely diagnostics in support of patient care. The best scenario is a local independent clinical laboratory or one associated with a health system or academic medical center that supports more timely answers to make diagnoses and treatment plans available to patients. Consolidation of these labs pushes those clinical answers out of the state and out of range for time to diagnose.

Q: How did those developments affect your company?

A: The ability to recruit and retain the patient-facing workforce rose to the top of our priority list. We are no longer competing with other laboratories for staff, we are competing with retail and restaurants for talent. When we do not have the staff to collect the specimens, we have instruments that are not running at full capacity or in some cases could be idle, which further impacts our costs and turnaround times for diagnosis.

Q: What were the biggest challenges of 2023 for your company and how did you manage them?

A: 1) Staffing, especially in our patient-facing positions (phlebotomy), has been a significant challenge, with turnover in these positions at historical highs. We are competing with retail, restaurants, and other businesses for the same talent, which can change jobs for better pay.

2) Volumes are up, revenues are down, and costs have increased, creating the perfect storm. Because of the cost of supplies and labor, our current reimbursements are not adequate to cover our costs. In a state like New Mexico, whose payer mix is upwards of 60 percent government payers (Medicare and Medicaid) the clinical lab fee schedule is not a reliable payment method. To add insult to injury, we are seeing payers increase their medical necessity denials for lab services that are standard of care.

Q: What have been the biggest positives in 2023 so far?

A: This year was TriCore’s 25^th anniversary. As part of the celebration, we embarked upon a listening tour, visiting over 70 sites in three months. Being in the field again with our staff and observing the passion that they bring to their work and the communities they serve was a humbling and inspirational experience. Additionally, 2023 has been the year of exploration, discussion, and collaboration around how to improve access to diagnostic laboratory services. This led to the formation of Atalan, a technology-enabled national lab network. Joining the Atalan partnership has given us a new energy as we transition into 2024.

Q: How do you expect the key trends of 2023 to progress as we move into 2024?

A: I expect that volumes will continue to rise without much relief from a reimbursement standpoint other than a further delay of PAMA cuts. In fact, as all of health care (including the health plans / payers) struggle with the operational challenges, the expense / wage pressures, and diminishing reimbursements, healthcare organizations will be forced to look at different business models.

Q: Based on the lessons of 2023, what key advice do you have for other lab business leaders for tackling the challenges of 2024 and beyond? 

A: Look for partnership opportunities such as Atalan as a defensive mechanism against acquisition or merger and protect the clinical laboratory and the value it brings to health care and to patients. There is strength in numbers and with that strength comes purchasing power, influence, and a larger voice.

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Robin Divine, MBA, serves as president and chief executive officer for TriCore. In this role, she focuses on TriCore’s growth and expansion strategy to guide the organization through unprecedented times as the company aims to redefine the laboratory as a strategic partner in health care.

Her healthcare experience spans 30 years across all settings of an integrated health system including hospitals, medical group, health plan, IT, managed services, and clinical laboratory services. Her business development experience includes a client engagement strategy for a start-up managed services organization as well as a market expansion strategy with the focus being on consumer solutions, strategic affiliations, and new service areas. Prior to her business development roles, she led the $200 million effort to transform the patient experience with the implementation of an integrated electronic medical record and financial system.