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Industry Insights

Why Clinical Labs Must Prepare for Value-Based Care

As clinical laboratories continue to evolve to adapt to new innovations and approaches to patient care, one change the industry has been slow to fully embrace is the advent of value-based care and how it will impact laboratory medicine.

Value-based care describes the concept that healthcare providers should be paid for keeping patients healthy rather than the volume of services they deliver. The goal of this model is to help patients maintain the highest level of wellness as opposed to waiting until patients are already sick to provide care. This in turn lowers costs for payers and health systems as a whole.

Traditionally, labs and most healthcare providers have been reimbursed under a fee-for-service model, a method of payment in which a doctor or other healthcare provider is paid a fee for each particular service rendered, regardless of patient outcomes. This is the model under which the vast majority of labs operate by billing Common Procedural Terminology (CPT) codes that correspond to each test they run.

But, with the majority of Medicare payments predicted by many experts to be fully value-based by 2030, some clinical lab stakeholders have been working to raise awareness about the industry’s need to have a seat at the table as these changes take place to ensure labs are viewed as a partner as opposed to a commodity in the patient care process.

“We believe, simply, past does not represent the future,” says Khosrow Shotorbani, President and Executive Director of Project Santa Fe, a coalition of laboratory leaders who have come together to create a disruptive value paradigm and explore alternative business models that expand the role of diagnostic services in the future healthcare ecosystem. “In order to be relevant (clinical labs) really need to reimagine the future and quantify attributes in a future state that align with the changes in healthcare.”

Project Santa Fe is responsible for the broader Clinical Lab 2.0 movement, which encourages industrywide efforts to leverage laboratory medicine and pathology domain knowledge to establish the standards and evidence for a new model of lab care. The group holds an annual workshop each year where lab leaders and industry stakeholders gather to discuss these efforts.


What’s driving this change?

Shotorbani, MBA, MT (ASCP), says there are three primary factors driving the need for labs to focus more on the value proposition of the care they provide.

  • Substantial payment reductions to the Clinical Laboratory Fee Schedule (CLFS) driven by the reporting of private payer rates to CMS required under the Protecting Access to Medicare Act (PAMA). Shotorbani says he believes this is a precursor or steppingstone toward bundled payments.
  • The reduction of the commercial market spurred by increased utilization of the physician employment model.
  • The narrowing field of private payer networks, which limits labs’ ability to grow independently.

“At some point, the two models (fee-for-service and value-based care) that have opposing drivers are going to collide,” Shotorbani says. “We basically feel that our ability to manage the transition of the convergence, or collision, is not only going to help us to survive the change, but potentially even thrive.”


How long do labs have to react to these shifts?

Shotorbani, who previously served as President and CEO of Tricore Reference Laboratories, says he and others associated with the Lab 2.0 movement often say the timeline to prepare for change is usually pegged at somewhere between three to five years. However, he acknowledges that with CMS projecting its payments will be 100% value-based by 2030, that moving target is now more realistic than ever.

“Let me caution that we don’t have seven years to react. We really need to identify the runway that you have to put in place changes with evidence that basically provides the credibility and efficacy from our clinical colleagues,” Shotorbani says. “Now is the time to be establishing the credentials for being a laboratory of choice because you can be in-contract, but a payer will steer aggressively away from you if it’s only on the basis of your service being a commodity.


How labs can highlight their value

During a Feb. 22, 2023, webinar with Lighthouse Lab Services, Shotorbani and Dr. James Crawford, Chair of the Board of Directors for Project Santa Fe and Senior Vice President for Laboratory Services at Norwell Health, joined a roundtable discussion to highlight the steps labs can be taking now to become a preferred laboratory for the payers and health systems they work with. The pairweres joined by Lighthouse President Jon Harol, Vice President of RCM Solutions Ann Lambrix, and Vice President of Payer Strategy Brian Burns.

The panel discussed the importance of not only continuing to provide timely and accurate diagnostic testing results to help treat chronic disease and illness, but also partnering with the broader healthcare ecosystem to share data and become an integral part in improving patient outcomes by establishing a lab-initiated care model.

Burns and Lambrix also provide feedback from the private payer perspective and outline some of the existing opportunities for labs to engage in value- and risk-based care programs.

Click here to hear the whole discussion and learn more about how your lab can prepare for a value-based future or become involved in the Clinical Lab 2.0 movement.

If you’re interested in learning more about opportunities your lab can pursue to stay ahead of this trend, feel free to contact us for a free consultation.


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