| R. Lewis Dark:
Why Capitate Genetic and Molecular Test Prices?
HOW MANY OF YOU LIVED THROUGH THE DECADE OF THE 1990S and experienced the
free fall in the prices managed care plans paid for clinical laboratory testing? In
California—at the peak of this insanity-some lab companies offered full risk,
capitated contracts for as low as 20˘ PMPM (per member per month)!
Also during this decade, the nation's largest public lab firms found themselves
in dire financial straits. I know that when MetPath acquired Nichols Institute
in 1994, its executives told the Nichols staff that, at that time, MetPath's average
revenue-per-requisition was about $25, its average cost-per-requisition was about
$20, and its average revenue-per-managed care requisition was $10. This caused
Metpath to lose $10 for each managed care requisition it handled.
MetPath execs noted that, in 1994, managed care was only about 10% of its
total business. But their own strategic planning projected that continued
growth in HMO enrollment would lift that number to as much as 60% of
MetPath's total business within five years. Some of you know how the
MetPath story unfolded. Because of serious financial losses, its parent,
Corning Corporation, spun off that company on December 31, 1996, thus
creating Quest Diagnostics Incorporated.
Why do I remind you of those unhappy days? It is because one of the
nation's larger clinical laboratory companies has created a new business unit
which is approaching the payer community and selected clinical laboratory
organizations with a business plan that calls for it to offer full risk, capitated
contracts for genetic tests and molecular diagnostics assays.
As you will read on pages 5-8 of this report, the new business is called BeaconLBS. It is
an attempt by its lab testing parent to create a company that will manage the
pre-authorization of expensive genetic and molecular assays. That is fine and
well, as regular readers know that I support the free market as a source of
innovation and added value to consumers.
On the other hand, howdoes any lab company have awinning financial strategy
when it uses marginal cost prices to win business, with the expectation that
Medicare and other fee-for-service business will offset the fully-loaded cost of performing
those tests? Will BeaconLBS's willingness to write full risk, capitated contracts
with major payers lead to a downward spiral in the prices paid for these
important genetic andmolecular tests? Were that to happen, then every clinical lab
in the United States would be forced to bear the resulting financial pain.
Not getting The Dark Report in your mailbox every 3 weeks?
ACLA Has Its Say Regarding
Molecular Dx Proposals
In a 23-page public comment letter, lab group
takes issue with Palmetto GBA’s draft proposals
CEO SUMMARY: It is not known how many public comments
have been submitted to Palmetto GBA, the big Medicare carrier, in
response to its published proposals to change how code stacked
claims for genetic and molecular tests will be handled, effective
February 27, 2012, for labs inMedicare region J1.After filing its comments,
the American Clinical Laboratory Association (ACLA) then
made its letter public. The ACLA's concerns include dissatisfaction
with the draft proposals and how they were developed.
LabCorp's BeaconLBS Aims
To Manage Genetic Tests
New business unit wants to create lab network,
offer lab test pre-authorization services to payers
CEO SUMMARY: BeaconLBS is a new business created by
Laboratory Corporation of America. It says it wants to help health
insurance plans manage molecular diagnostics and genetic testing.
BeaconLBS is now recruiting other clinical labs to join its network
and is meeting with payers to offer its lab test preauthorization
services. What may make BeaconLBS a significant
development is that it is telling health insurers that it is willing to
sign capitated, full-risk contracts to manage molecular testing.
Market Update: Allina Opens State-of-the-Art
Central Laboratory Facility
News Maker Interview Part Two: Dirk G. Soenksen
Constidering Full versus Partial Adoption of Digital Pathology
CEO SUMMARY: Digital pathology is considered to be one of the
more disruptive technologies now finding acceptance in anatomic
pathology. Since founding Aperio Technologies, Inc., of Vista,
California, in 1999, President Dirk G. Soenksen, M.S., M.B.A., has been
in the forefront of this important trend. In part one of this two-part
interview, Soenksen discussed the most significant forces now
reshaping the profession of surgical pathology. Now, in this concluding
part two, Soenksen addresses some of the barriers to the adoption
of digital pathology technology. He also explains why partial adoption
is the preferred course for most anatomic pathology laboratories.
Spectra Lab in Milpitas
Accredits to ISO 15189
Spectra Laboratories benefits from operating
ISO 15189-accredited labs on both coasts
CEO SUMMARY: Spectra Laboratories, Inc., a renal-specific
testing services company with labs in New Jersey and
California, announced earlier this month that the American
Association for Laboratory Accreditation awarded accreditation
to ISO 1589 to its laboratory in Milpitas, California. It was
in May 2010 when Spectra's laboratory in Rockleigh, New
Jersey, earned ISO 15189 accreditation. Spectra is using the
quality management system (QMS) of ISO 15189 to create a
standardized service experience at both laboratory sites.
INTELLIGENCE: Late & Latent
IN MINNEAPOLIS
DNA TESTS USED
ON DOG POOP
TRANSITIONS: On December 31, Thomas
Tiffany, Ph.D., is scheduled
to retire as the CEO
of Pathology Associates
Medical Laboratories, Inc.
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