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Executive War College 5 May 2015 New Orleans, Louisiana
ROBERT L. MICHEL Editor In Chief
THE DARK REPORT Spicewood, Texas
[email protected] ph: 512-264-7103 fax: 512-264-0969
Aligning Lab Services to Meet New Needs
Getting Paid in the Coming Era of Budgeted Reimbursement
What’s Changed in 12 Months? At last year’s Executive War College…
Three key trends
One: Medicare/Medicaid budgets are limited—cuts to lab test prices.
Two: Majority of physicians are now employees (not owners of their practices).
Three: Shift to proactive care and integrated care, informed by genetic medicine.
Plus PAMA—Protecting Access to Medicare Act of 2014.
Key Point Inpatient procedures shrinking by single digits each year. Outpatient procedures growing at double-digit rates annually. Labs must have access to outpatient and outreach specimens!
Source: MedPac Report to Congress:
Medicare Payment Policy, March 2015
33%
-17%
10 12
21
51 66 70
16
17 15 5 7 12
Medicare’s Timetable to Replace Fee-for-Service
Announced on January 26, 2015 by Department of Health & Human Services (HHS)
“Better, Smarter, Healthier: In historic announcement,
HHS sets clear goals and timeline for shifting Medicare reimbursements
from volume to value”
New Payment Models Coming Fast From HHS press release on January 26:
“HHS has set a goal of tying 30% of traditional, or fee-for-service, Medicare payments to quality or value through alternative payment models, such as Accountable Care Organizations (ACOs) or bundled payment arrangements by the end of 2016…
…tying 50% of payments to these models by the end of 2018.”
New Payment Models Coming Fast for Medicare From HHS press release on January 26:
“HHS also set a goal of tying 85% of all traditional Medicare payments to quality or value by 2016…
…and 90% by 2018 through programs such as the Hospital Value Based Purchasing and the Hospital Readmissions Reduction Programs.
This is the first time in the history of the Medicare program that HHS has set explicit goals for alternative payment models and value-based payments.”
Priorities for Labs in 2015? Time to prepare for end of fee-for-service.
Time to step out and contribute to proactive healthcare and integrated clinical care.
Time to become masters of integration of lab test data with clinical data.
Time to support regional integration and consolidation of both clinical laboratory testing and anatomic pathology services.
How Labs Should Prepare? At 2014 Executive War College, new models of
healthcare and payment were front and center.
This year’s Executive War College, many sessions on how labs are adding value. This morning:
Alverno on regionalization of lab services.
UCLA on integration of radiology and pathology.
TriCore on leveraging lab data and clinical data.
From Ted Schwab during 2104 EWC Managing Director
at Strategy&, owned by PriceWaterhouseCoopers.
Focuses on healthcare system evolution, clinical transformation, and healthcare provider strategy
Spoke at 2014 Executive War College.
He interviewed 50 healthcare CEOs and
Clinical integration hits its stride
Next round of cost reduction comes from managing three things: populations, chronic care, and transitions in care.
Clinical teams increasingly focus on complex and chronic patients.
"Most of the low hanging fruit has been eaten."
Ted Schwab’s CEOs Say…
Budgeted care reaches critical mass
CEOs no longer speak of value-based care—their focus is budgeted care.
“Irrevocable” shift of financial risk to providers will drive organizational transformation.
Within three years, more than half of government and commercial contracts will be for budgeted care.
Hospitals will have to assume many, if not all, of the health plan skillset.
“Everyone becomes an insurer.”
Ted Schwab’s CEOs Say…
Positioning Your Lab to Add Value
Assume you agree with the premise that fee-for-service payment is on its way out.
How can a clinical lab or pathology group evolve and learn how to deliver more value?
Challenge: every healthcare setting is unique, thus each lab’s response will be unique.
Therefore, labs need a path, a roadmap for evolving from “current state” to desired “future state.”
Meet the ‘Laboratory Value Pyramid’ What path can clinical labs follow
to respond to healthcare’s transformation?
Introducing the concept of the “Laboratory Value Pyramid.”
Provides lab leaders with a four-step road map from current state to ideal future state.
Incorporates all concepts of modern business and quality management systems.
Level One: Achieve Normalcy and Predictability
Shift the lab organization away from system of inspection and adopt the system of prevention.
Shift to a system that incorporates real-time, visible performance metrics of lab processes alongside traditional QC data.
Shift to the mindset of continuous improvement.
Shift to a culture that regularly engages outside experts to help lab staff understand key issues and develop appropriate solutions for further improvement throughout the lab.
Level Two: Establish Standards & Meet Standards of Value
Establish criteria for value via benchmarking within the lab.
Transition from a lab-result-only mentality to one of a lab performance mentality.
Incorporate quality in patient results, customer & employee satisfaction, production best practices, supply chain best practices, financial best practices, and similar.
Manage the lab as a well-run business with all the accountability that comes with running a well-run business.
Lab staff can identify tasks that are value-added and those that are non-value-added and uses Lean and Six Sigma to continually improve value.
Recognizing Level Two
Lab is competent at this level when those outside the lab—including your boss and your boss’ boss—to want to know about the core competencies you have established, how you did it, what benefits it provided, then ask you to help them do something similar in another area of the organization.
Level Three: Deliver Value That Exceeds Expectations
Shift from service provider of lab results to a vital contributor in generating clinical value.
Apply knowledge of your core competencies that were created in level one and level two to other areas outside the walls of the lab.
Shift from a state of being held hostage by IT, LIS, HIS, and middleware to one of being proactive and in-charge based on value creation.
Cost justify IT projects that integrate essential lab patient info into algorithms that diagnose more accurately and sooner, thus contributing to shorter hospital stays, reduced diagnostic workups, and less chance of readmission within 30 days.
Recognizing Level Three
Your lab is competent at level three when your reputation and outcomes are recognized outside of your hospital and institution by your peer groups.
Regular requests for speaking engagements, requests for publications, citations in publications and similar outside recognition start to happen.
Level four: Use Benchmarks to Achieve Best-in-Class
Your lab’s practices and competencies are recognized as best-in-class by your peer groups and third party reviewers.
You are consulting with other hospitals and systems to help them replicate what you have done within your institution.
Your lab is recognized as among “the best in the business” because of how your lab team uses all the attributes from the first three levels.
Examples of world-class labs can be found within prestigious institutions like Mayo, Stanford, Vanderbilt, MGH, Cleveland Clinic.
Extra credit! Your lab has created the database structure that allows it to mine the value of lab test data.
Special Report Describes each
of the four levels Every attendee
received a copy in their conference bag.
To educate your lab team, it will be possible to order multiple copies of the Laboratory Value Pyramid Special Report.
Creative Team for Pyramid
Jim Ellis, BS, MS, MBA, MBB; Managing Partner, MME Consulting, LLC., Aiken, SC.
Roche Diagnostics; Indianapolis, IN.
Robert L. Michel; Editor-in-Chief, The Dark Report, Spicewood, TX
A Word on Disruption!
Theranos: Myth or Reality?
Theranos Says It Can Deliver… Because people don’t like needles,
it can collect a specimen with a needle stick on the fingertip.
Only requires a small amount of specimen, between 25 to 50 microliters.
Theranos can report results to physicians and patients in four hours.
Will charge only 50% of Medicare Part B lab test prices.
Lab Testing at Walgreens Agreement announced in September
2013 that Theranos would offer testing in all 8,200 Walgreens stores nationwide.
One Walgreens in Palo Alto, CA.
About 41 Walgreens in Phoenix, AZ.
CLIA lab in Fremont, CA.
New lab facility in Scottsdale, AZ, “in registration” for CLIA certification.
Fortune Magazine June 2014 Elizabeth Holmes becomes a “cover girl.”
Revealed in Fortune Story… “The company has performed as many
as 70 different tests from a single draw of 25 to 50 microliters collected in a tiny vial the size of an electric fuse.”
“…her company uses ‘the same fundamental chemical methods’ as existing labs do.”
“Its advances relate to ‘optimizing the chemistry’ and ‘leveraging software’ to permit those conventional methods to work with tiny sample volumes.”
Revealed in Fortune Story… On Theranos technology:
Richard A. Bender, M.D, “an oncologist who is also a medical affairs consultant for Quest Diagnostics,” was quoted by Fortune as saying “I don’t know what they’re measuring, how they’re measuring it, and why they think they’re measuring it.”
Theranos is using laboratory-developed test (LDT) exemption.
A Final Reminder! There are 320 million Americans
who continue to need clinical lab tests and anatomic pathology services.
Someone will do this work.
Message is for your laboratory to get out ahead of these trends.
Be one of the labs that do this work… by delivering clinical value.
“The opening up of new markets and the organizational development from the craft shop and factory to such concerns as US Steel illustrate the process of industrial mutation that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one ... [The process] must be seen in its role in the perennial gale of creative destruction; it cannot be understood on the hypothesis that there is a perennial lull.”
“Creative Destruction”
—Joseph Schumpeter Capitalism, Socialism and
Democracy, 1942
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