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Impact of Declining Reimbursement on Hospital Laboratory Operations and Test Utilization Management Lab Institute Washington, DC October 25, 2018 Linda L. Smith, MHA, MT(ASCP)DLM Vice President Laboratory Services SSM Health St. Louis, MO. Linda L Smith SSM Health, Inc.
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Impact of Declining Reimbursement on Hospital Laboratory Operations and Test Utilization Management Lab Institute Washington, DC October 25, 2018 Linda L. Smith, MHA, MT(ASCP)DLM Vice President Laboratory Services SSM Health St. Louis, MO Linda L Smith SSM Health, Inc.
Recent and future changes in laboratory and pathology reimbursement Linda L Smith SSM Health, Inc.
PAMA: 2018 Clinical Lab Fee Schedule Implementation • Section 1834A(b)(3) of the Act limits the reduction of the payment amount for an existing test as compared to the payment amount for the preceding year. • For the first three years after implementation, the statute limits the reduction to 10 percent per year, and to 15 percent per year for the following three years. • The 10 percent payment reduction limit will apply for CY 2018 through CY 2020, and the 15 percent payment reduction limit will apply for CY 2021 through CY 2023. • Total reduction: 75% by 2023 ? • The phased-in payment amount limit per year for existing tests paid under the CLFS prior to January 1, 2018 will be applied using the 2017 national limitation amount (NLA) for the existing test as the baseline payment amount.* * AMA presentation: Implementation Clinical Laboratory Fee Schedule Provision Protecting Access to Medicare Act . July 2017 Linda L Smith SSM Health, Inc.
PAMA: New CMS Clinical Lab Fee Schedule Implementation Most hospital labs’ data excluded from the new CLFS analysis Noeth, D chart: Is your organization prepared for PAMA’s billion dollar impact? Linda L Smith SSM Health, Inc.
PAMA: New CMS Clinical Lab Fee Schedule Implementation Linda L Smith SSM Health, Inc.
PAMA: Data used to reduce CLFS rates? “CMS did not change course in the face of criticism from the lab community as it collected data that focused on large national reference labs that are known for intense price competition. . . . CMS proposed cuts to 75% of all tests on the CLFS in 2018 with more than half cut so severely that CMS will have to phase in the reductions over 3 years under the limits of the Protecting Access to Medicare Act (PAMA), which set the pricing change in motion. Overall, the proposed rates would cut lab payments in 2018 by approximately 21% compared to 2017 rates, although PAMA will only allow a 10% cut each year through 2020.”* * AACC CLN: Labs’ fears realized in 2018 fee schedule proposal. December 1, 2017 Linda L Smith SSM Health, Inc.
Impact of CMS rate reductions for labs – NILA Report • 11 community and regional independent labs interviewed • All labs reported that at a minimum, 60% of the lab’s business • is associated with the CMS Part B CLFS, indicating broader • implications that include Medicaid and private payers. • 4 labs reported 100% of business impacted by PAMA cuts. • New CLFS rates forces changes to business practices, services • Change in business models – increased focus on profitability • Limited services, less flexibility to serve patients • Reductions in workforce Linda L Smith SSM Health, Inc.
Impact of CMS rate reductions for labs PAMA projected laboratory savings in first 10 years: $3.91 billion* *information limited, estimates vary Linda L Smith SSM Health, Inc.
Impact of CMS rate reductions for labs “Over ten years, the cuts may total as much as $13 billion, which is more than three times the estimate of $3.9 billion Congress originally anticipated.” Linda L Smith SSM Health, Inc.
Impact of CMS rate reductions for labs OIG estimates that 2018 payments will go down by $400 million and $5.4 billion over the next 5 years after the annual decrease limits are exhausted. This is twice what PAMA projected when PAMA was passed in 2014. Commercial insurance fees are often tied to the Medicare rate – commercial rates will also decrease. The next CMS data collection period will be measuring even lower private payer rates. CLMA presentation: Koeppel, Paul, 2017 Washington Legislative and Regulatory Update. March 2017 Linda L Smith SSM Health, Inc.
Impact of CMS rate reductions for labs • National Independent Laboratory Association (NILA): • 11 community and regional independent labs interviewed • All labs reported that at a minimum, 60% of the lab’s business • is associated with the CMS Part B CLFS, indicating broader • implications that include Medicaid and private payers. • 4 labs reported 100% of business impacted by PAMA cuts. • New CLFS rates forces changes to business practices, services • Change in business models – increased focus on profitability • Limited services, less flexibility to serve patients • Reductions in workforce Linda L Smith SSM Health, Inc.
WHAT WE FOUND Medicare paid $7.1 billion under Part B for lab tests in 2017, a total that has changed very little in the 4-year period from 2014 through 2017. The top 25 tests by Medicare payments totaled $4.5 billion and represented 64 percent of all Medicare payments for lab tests in 2017. The top five tests, which remained consistent with the top five from the previous 3 years, totaled $2.2 billion in 2017. Although more than 50,000 labs received Medicare payments in 2017, 3 labs received $1.1 billion of the $7.1 billion (15 percent) in total payments for lab tests. Spending in the top 25 tests was similarly concentrated among a few labs: 1 percent of labs received 55 percent of all Medicare payments for the top 25 lab tests in 2017. Linda L Smith SSM Health, Inc.
WHAT WE CONCLUDE Clinical labs play a critical role in delivering health care to millions of Medicare beneficiaries. The new payment system for lab tests took effect on January 1, 2018, and resulted in significant changes to the Medicare payment rates for lab tests. This data brief, like those before it, will provide baseline statistics that OIG will use to measure the effects of changes to the payment system when data from 2018 become available. We will continue to monitor Medicare payments for lab tests and to identify emerging trends in these payments and vulnerabilities to potential cost savings. Copies found at Office of Public Affairs at Public.Affairs@oig.hhs.gov. Linda L Smith SSM Health, Inc.
Laboratory utilization and operations management opportunities that can improve lab quality and service as well as lower total cost Linda L Smith SSM Health, Inc.
CMS Rationale: 30% of diagnostic testing is ‘waste’ Do labs and hospitals over-utilize diagnostic tests? Linda L Smith SSM Health, Inc.
Hospital Executives: 30% of diagnostic testing is ‘waste’? “Routine daily laboratory testing of hospitalized patients reflects a wasteful clinical practice that threatens the value of health care. Choosing Wisely initiatives from numerous professional societies have identified repetitive laboratory testing in the face of clinical stability as low value care. Although laboratory expenditure often represents less than 5% of most hospital budgets, the impact is far-reaching given that laboratory tests influence nearly 60% to 70% of all medical decisions. Efforts to reduce the frequency of laboratory orders can improve patient satisfaction and reduce cost without negatively affecting patient outcomes. To date, numerous interventions have been deployed across multiple institutions without a standardized approach. Health care professionals and administrative leaders should carefully strategize and optimize efforts to reduce daily laboratory testing. This review presents an evidence-based implementation blueprint to guide teams aimed at improving appropriate routine laboratory testing among hospitalized patients.” JAMA Intern Med. doi:10.1001/jamainternmed.2017.5152 Published online October 16, 2017. Linda L Smith SSM Health, Inc.
Laboratory Executives: 30% of diagnostic testing is ‘waste’? Cleveland Clinic Lab – Strategies for Appropriate Test Utilization Same day duplicate test reduction initiative Restricting the ordering of genetic tests Genetics testing review and triage Regional smart alerts Expensive test notification * Procop, Gary, Cleveland Clinic Labs Strategies for Appropriate Test Utilization. June 2014 Linda L Smith SSM Health, Inc.
Management practices that lead to optimized test utilization Lab quality and operations performance that optimizes hospital growth Metrics that drive laboratory performance Employee engagement Lab results accuracy Patient safety ED and early AM turnaround time Critical values Phlebotomy performance Microbiology – blood culture contamination rate Anatomic Pathology – case volume TAT, technical delays Linda L Smith SSM Health, Inc.
Management practices that lead to optimized test utilization Improve clinical accuracy, test TAT, reduce patient safety errors. • Lab goals standardized, measured for 6 labs: • Annual Employee Survey >90th %tile (employee engagement) • ED TAT <3% outliers (patient satisfaction) • Proficiency testing >98% accuracy rate (clinical outcome) • Lab patient ID errors “0” errors (patient safety) • Early AM TAT >98% (physician satisfaction) • Blood Culture Contamination Rate < 2.0% (clinical, operations outcomes) • Histology Technical Delay Outliers < 1.5% (physician, patient satisfaction) Linda L Smith SSM Health, Inc.
Employee engagementis key to achieving best practice performance Linda L Smith SSM Health, Inc.
228 days at “0” Linda L Smith SSM Health, Inc.
Engaging physicians, hospital executives, nursing, and laboratory staff to work together to achieve evidenced-based test utilization management that leads to best practice outcomes. • Our SSM stories . . . . Linda L Smith SSM Health, Inc.
Lab Optimization - Stakeholders Laboratory: Medical directors, lab leaders, engaged laboratory staff Physicians: Chief medical officers, ID physicians, oncologists, surgeons . . . Hospitals: C-suite, nursing, supply chain, IT . . . Linda L Smith SSM Health, Inc.
Lab Optimization through Standardization, Consolidation 2009 – 2014 Standardization to ‘1’ lab at 6 sites Employee engagement 6 lab average from 22nd %tile to 90th %tile Technology, methodologies, and clinical practices Policies/procedures Training, competencies, staffing models, productivity metrics Consolidation intended to improve quality as well as reduce costs Microbiology: New technology, new staffing models, 24/7/365 coverage Histology: New technology, new services, new staffing models, multi-site coordination Linda L Smith SSM Health, Inc.
Lab Optimization – Lab Outreach Implementation 2015 Hospital labs recaptured SSMSL Medical Group’s testing SSMSL Medical Group contracted with LabCorp in 1998 (stopped sending testing to SSM labs). SSM hospital labs had 2 options: 1) Traditional outreach 2) Cooperative Testing Agreement Cooperative Testing Agreement with LabCorp SSMSL hospital labs act as ‘reverse reference lab’ for LabCorp Each lab increased outpatient test volume by 15–40% (25% overall) FTEs added for increased test volume: “0” Cost of specimen processing, couriers, phlebotomy covered by LabCorp SSMSL hospital labs only cost increase was incremental reagent cost per test Invoice LabCorp monthly – LabCorp pays us directly to perform each test. 2018 revenue for region (not reimbursement) annualizes at $3.5M Linda L Smith SSM Health, Inc.
Lab Optimization Linda L Smith SSM Health, Inc.
High-cost test management – Respiratory Viral Panel RVP test volume/cost increased System effort to reduce test volume and cost included: System CMO System FLU Steering Committee Antibiotic Stewardship Committee Lab medical directors Lab leaders and staff Outcome: algorithm for RVP testing, enforced by hospital CMO Also, system worked with vendor for per unit cost decrease. Linda L Smith SSM Health, Inc.
High-cost test management – Respiratory Viral Panel RVP test volume/cost increased System effort to reduce test volume and cost included: System CMO System FLU Steering Committee Antibiotic Stewardship Committee Lab medical directors Lab leaders and staff Outcome: algorithm for RVP testing, enforced by hospital CMO Also, system worked with vendor for per unit cost decrease. Linda L Smith SSM Health, Inc.
High-cost test management – Respiratory Viral Panel RVP test volume/cost increased System effort to reduce test volume and cost included: System CMO System FLU Steering Committee Antibiotic Stewardship Committee Lab medical directors Lab leaders and staff Outcome: algorithm for RVP testing, enforced by hospital CMO Also, system worked with vendor for per unit cost decrease. Linda L Smith SSM Health, Inc.
Reducing blood culture contamination rate Decreasing blood culture contamination rate: Focused on the ED at all sites Lab involved in training ED staff - and retraining . . . . . . . . . . . . System, region CMO involvement Infection Prevention Team Antibiotic Stewardship Committee Action plans Accountability Consistent monthly review Lab phlebotomists < 0.5% BCC contamination all labs Linda L Smith SSM Health, Inc.
Consistent insourcing/outsourcing for value – Procalcitonin insourced Assists antibiotic stewardship; critical care bed control; decreases overall patient care cost. Annual savings projection: ($208,608) Linda L Smith SSM Health, Inc.
Redirecting outpatients directly to ‘source’ vendor for reference lab tests • Local urologist sent his patients to hospital outpatient department. Lab sent GenPath 4K Score test to ARUP – price $770.00. ARUP sending 4K Score to GenPath – about 10 day turnaround time. BioReference Labs has local patient service center – bills insurance directly - bills patient for the difference. Average TAT is 48 hours. Medicare reimburses this test. If not reimbursed, patient pays $395.00. Hospital lab no longer the ‘middle man’ – hospital no longer writing off denials. Linda L Smith SSM Health, Inc.
Reference laboratory utilization Regional laboratories standardized with one vendor, strong accountability for using that vendor. Pathologists also standardized with the same vendor for pathology reference lab. Medical directors work with us to limit medically unnecessary testing – not just high cost tests. Monthly medical director meetings Frequent review of reference lab utilization Education for medical directors and pathologists – assists them with physician communications Frequent, consistent interactions between tech send-out processing, lab manager, and medical director Hospital CMO and hospital executives support reference lab utilization efforts - willing to get involved in specific cases Lab managers, supervisors review invoices – provide frequent input about test volume/pricing issues. Frequent meetings with reference lab representatives to ‘tweak’ menu and pricing. Linda L Smith SSM Health, Inc.
Reference laboratory utilization In 5 labs, primary reference lab vendor used for 85 – 93% of send-out testing. Consolidated anatomic pathology lab sending 83.1% of pathology reference lab to the same vendor. As volume increased, vendor has provided reduced pricing. Ongoing opportunity at pediatric hospital lab: In 2018, pediatric hospital lab sends reference testing to 61 labs Only 41% of reference testing is sent to primary reference lab. Current pediatric lab is 60% of total regional reference lab cost. Reimbursement review: only 37.9% of total cost reimbursed in 2017/2018. Working with lab medical director and hospital directors committee to manage utilization, reduce cost, improve reimbursement. Genetics counselor position approved for pediatric hospital lab (expected ROI) Linda L Smith SSM Health, Inc.
Lab Test Optimization Linda L Smith SSM Health, Inc.
What’s next for 2018 and 2019: Microbiology: BD Kiestra installation 2018, 80% of cultures by mid-2019 FLU testing utilization project based on CDC guideline (less is more) Blood utilization: Anemia management program New ‘system’ blood bank and chemistry vendor contracts Increase system standardization (and consolidation if it ‘fits’) Improve system clinical and operations performance Lower cost Linda L Smith SSM Health, Inc.
Linda L. Smith| Vice President Laboratory SSM Heath Office: 314-344-7271 Cell: 704-607-8277 Linda.l.smith@ssmhealth.com|ssmhealth.com Linda L Smith SSM Health, Inc.
