Speeding Up of Value-Based Payments Could Be Clarion Call for Lab Sector

“It has already happened. Go to the village square, and ring the bell.” That is not a vampire novel excerpt, but rather a recent observation of a senior executive at North Shore-Long Island Jewish Health, an 18-hospital health care system that serves the most heavily populated urban area in the United States. It was in response to an announcement by the U.S. Department of Health and Human Services late last month that it was going to rapidly accelerate the timetable for value-based payments to providers participating in the Medicare program. Such payments are the virtual opposite of fee-for-service, where providers such as labs send a claim to Medicare and are paid a fixed amount. Instead, payments are based on the type of care the patient specifically needs, and the outcome of such care. Providers usually share some risk regarding what they’re paid. The sum can be reduced via financial penalties if a patient is readmitted to the hospital within 30 days of discharge, or increased via a bonus if the provider demonstrates it is improving overall outcomes. Or the payment can be “bundled” into a single amount intended to cover an entire episode of care. The accountable care organization movement was created specifically to address such changes in payments. Currently, only about 20 percent of all Medicare payments are risk or value-based. Under the plan announced by HHS, it will rise to 30 percent by next year and comprise half of all Medicare payments by 2018. “It is in our common interest to build a health care system that delivers better care, spends health care dollars more wisely and results in healthier people,” HHS Secretary Sylvia Burwell said when the initiative was announced last month. She added that speeding payment reform “is about improving the quality of care we receive when we are sick, while at the same time spending our health care dollars more wisely. We believe these goals can drive transformative change, help us manage and track progress, and create accountability for measurable improvement.” Finding and Defining Their Role The problem for the laboratory sector is that while the roles of hospitals, physicians and outpatient clinics are fairly well defined in a value-based environment, the lab’s role is not. Labs are, for better or worse, the purest form of fee-for-service health care. Perform more tests, and a lab generates more revenue. Perform fewer tests, and revenue shrinks. “A call to action hasn’t quite yet taken hold,” said Susan Dougherty, vice president of operations and outreach services for Chi Solutions, a laboratory consulting firm in Ann Arbor, Mich. Dougherty noted that many lab operators are still in a hunker-down mode due to ongoing cuts in reimbursement, such as the more than 50 percent cut in the technical component of CPT code 88305. Indeed, a couple of prominent figures in the laboratory sector declined to comment on the announcement from the HHS—including one with extensive experience with labs in an ACO setting—saying they were not yet prepared to render opinions on how things will shake out. However, Dougherty believes that the HHS announcement will create a new urgency for labs to begin to act. “You have 63 percent of (lab services) residing in hospitals and health systems. Those systems are already looking at the overall delivery of care. And knowing in reality that 70 percent of their clinical decisions are made relative to lab data, they would be hard-pressed not to have labs as part of this group.” Data and Blood The reams of data a lab generates on a single patient is a key opportunity for labs in an expanded value-based payment environment, according to James Crawford, M.D., senior vice president and executive director of laboratory services for the North Shore-LIJ Health System. “How do labs generate value?” is the question that Crawford and other North Shore-LIJ officials ask when examining their options for making care more cost-efficient. One of the first ways lab executives can find value is to use data to better manage perhaps one of the most crucial components of any health care system—its blood supply. Simply by dint of managing its blood supply more efficiently, North Shore-LIJ’s laboratory services division was able to curb the system’s blood costs per adjusted discharge by 54 percent–a savings of nearly $10 million a year. But it did not stop there. “How can you squeeze more blood from a stone?” is another question that Crawford said is continually being asked. One way is to better manage patients with sickle cell illness—the New York City area has one of the highest rates of the genetic disease in the United States. Blood transfusions can ameliorate the symptoms in many cases. North Shore-LIJ labs used special antigen typing to ensure units of blood were kept in the right locale for speedy delivery and optimal transfusions. The cost of blood product utilization for sickle cell patients dropped 44 percent. Systematic Testing Those are examples of how labs can use data to better manage some of their cost center components. But how about the direct use of testing? North Shore-LIJ places a high priority on identifying patients in the early stages of sepsis, a serious infection that can not only ramp up costs but also lead to organ failure and death. The sooner it is identified, the easier it is to mitigate. The system identifies it through the use of what is known as a sepsis bundle. A key element of this bundle is measuring serum lactate, which is both a strong predictor of risk for in-hospital mortality, and whether there should be a rapid escalation of the acuity of care. Another laboratory test used for every hospital admission is serum creatinine. “There’s a striking subset of patients being admitted with acute kidney injury,” that often goes unnoticed, according to Crawford. Paying close attention to whether the creatinine levels on admission are elevated, or are rising within the first hours of admission, can optimize care for these patients by reducing complications, cutting their lengths of stay. Serum creatinine can also be used to identify patients with unsuspected chronic kidney injury, permitting medical intervention to slow the progress of their kidney problems. The North Shore-LIJ Laboratories are also deploying its phlebotomy workforce in making about 200 daily blood draws from medically frail residents at their residences, to help providers better manage their chronic conditions and help avoid hospital admissions or readmissions. Dougherty noted that such initiatives make perfect sense for hospital-based labs. “It’s a department within a hospital that is being continually challenged to do more with less,” she said. Standalone reference laboratories will have their own challenges in a value-based payment environment. Whether or not they find their niche by managing more hospital-based labs using the kind of initiatives developed at North Shore-LIJ remains to be seen. Meanwhile, many hospital systems have actually been selling their outreach businesses to standalone labs—a phenomenon Crawford believes could impede the goal of improving care while cutting costs. “If the health system has given away its ability to have the lab data on their patients when they’re not in the hospital, they are left with the ... highest part of the cost of managing their care,” he said. “If you integrate your health system laboratories, you can not only achieve more competitive costing against national labs, but you also control your destiny.” Takeaway: Laboratories will likely play an expanding role in optimizing the value-based payment system many Medicare providers will be shifting to in the coming years. Their executives should become more proactive in executing initiatives.