Industry Experts Highlight Opportunities and Challenges Ahead for the Laboratory Sector

Throughout two and a half days on Capitol Hill, laboratory insiders debated and shared knowledge, insight and concerns about compliance issues, new business challenges and the latest regulatory changes affecting the diagnostic industry, during G2 Intelligence's 33rd Annual Lab Institute (Oct. 14-16).

The opening Keynote address from Steven Brill, author of America's Bitter Pill: Money, Politics, Backroom Deals, and the Fight to Fix Our Broken Healthcare System, helped set the tone of the conference discussing the rising cost of the American health care system and how the Affordable Care Act is both changing the industry yet failing to bring enough change. Following Brill, Quest Diagnostics Chief Executive Officer Steve Rusckowski referred to the laboratory industry as America's "Sweet Pill" and emphasized laboratories' influence on 70% of medical decisions for relatively low cost, exhorting the industry to take advantage of the opportunity to be a "part of the transformation of health care."

While emphasizing the need for laboratories to voice their concerns about issues such as the Centers for Medicare and Medicaid Services' Proposed Rule implementing the Protecting Access to Medicare Act (PAMA), Rusckowski asserted that changing reimbursement systems are also creating opportunity for the laboratory sector. "We're seeing more and more organizations that want to partner with our industry," said Rusckowski, who also serves as Chairman of the American Clinical Laboratory Association.

Impact of PAMA and Changing Reimbursement Debated
An overwhelming concern throughout the conference was how laboratories will be paid for their services. The Centers for Medicare & Medicaid's recently proposed rule implementing PAMA served as the focal point of a heated panel discussion that addressed the impact of proposed changes to how the clinical laboratory fee schedule is determined. The proposed rule requires specifically defined Applicable Laboratories prepare to report by March 31, 2016, private payer reimbursement data for the period July 1, 2015 through Dec. 31, 2015. Debate centered on whether the interests of all stakeholders in the industry have been adequately considered, with particular concern raised about the exclusion of hospital laboratory payment rates from the proposed data collection and the impact of the resulting Medicare rates on smaller and independent laboratories.

PeaceHealth Laboratories Chief Executive Ran Whitehead described his experiences meeting with Capitol Hill members to educate them on the realities that laboratories are facing and indicated the need for others to similarly inform their representatives. Panelists and attendees throughout the conference reiterated a consistent message: the laboratory industry needs to work together to demonstrate their value and make their voices heard by their legislators as well as other health care organizations, payers, potential partners, and patients.

PAMA was not the only reimbursement related topic generating spirited discussion. The dramatic cuts being faced by the toxicology labs and the proposed crosswalking for several molecular codes were also topics raising significant concern among attendees.

Regulatory and Enforcement Concerns Highlighted
In addition to reimbursement, sessions addressed other weighty regulatory issues affecting the industry—recent fraud and abuse enforcement initiatives and pending changes in oversight of laboratory developed testing dominated several discussions throughout the conference. A pre-conference workshop focused on compliance addressed recent cases highlighting top compliance issues such as arrangements with and provision of free items and services to referring providers, potential kickback risks of marketing and promotion efforts, client billing arrangements and the lack of clarity concerning the "usual charge" issue, and of course, surviving in a world of exclusive contracts and dealing with provision of out of network services.

Other sessions focused on compliance issues raised by business strategies, partnerships and ventures being undertaken or considered by laboratories and pathology groups to survive in and adapt to the new value-based environment. Attendees were advised to consult legal counsel earlier rather than later in developing a transaction or arrangement to avoid surprises that can delay a deal and to engage third party valuation consultants to provide guidance on fair market value for all compensation to avoid running afoul of fraud and abuse laws.

Finally, the status of laboratory developed testing oversight raised questions and concerns about how regulation may be implemented and what steps laboratories need to be taking in anticipation of increased scrutiny and new standards. Panelists discussed the potential for Congressional action and the various proposed alternatives to FDA regulation and offered practical advice for steps to take now to prepare laboratories for the changes ahead.

The Future of Laboratory Medicine: Engaging the Patient
The conference closed with a view to the future of laboratory medicine with a focus on the increasing involvement of patients in the diagnostic process. Presenters emphasized the value laboratories can bring to health care delivery by engaging patients and empowering them with information gained through diagnostics. Several speakers noted that patients are increasingly paying a larger portion of their health care bills as a result of high-deductible plans or those with higher co-pays and as a result are beginning to question health care costs, including the need for and price of laboratory tests. But, speakers also asserted that patients aren't just looking for lowest cost tests, but also to gain better understanding of the need for tests and the meaning of their test results.

Thus, presenters demonstrated how laboratories can provide added value by educating and engaging patients. For example, a case study discussed Boston Heart Diagnostics, a laboratory recognized for creating value through individualized patient management. Chief Executive Officer Susan Hertzberg explained how Boston Heart creates a "virtual hub" around the patient, seeking to improve treatment adherence and health literacy among high-risk patients. The company provides "personalized" and "contextualized" laboratory results that will provide an overall risk statement as well as simple explanations of results with visual supports. The company also uses a proprietary algorithm to provide customized lifestyle management counseling to patients based on their diagnostic results.

Following Hertzberg's presentation, 23andMe's Chief Medical Officer Dr. Jill Hagenkord detailed for attendees how use of genetic information can inform and personalize health care decisionmaking and improve patient outcomes, using examples of specific customers who gained life changing insight from genetic information. She explained current and potential uses for genetic information and research conducted using 23and- Me's database of genotyped and phenotyped participants, supplemented with questions and surveys directed to its customers.

Takeaway: While the laboratory industry faces significant regulatory and compliance challenges as it moves into a value-focused future, as an influencer of the majority of medical decisionmaking, the sector enjoys considerable opportunities as well.