Gavel and American flag

Despite being one of the most highly anticipated Supreme Court cases in decades, the June decision to allow the Affordable Care Act to remain largely intact ultimately eliminates only one question in a cloud of uncertainty around the fate of the healthcare reform law. Republicans in Congress still vow to repeal the law, and policy experts have moved from prognosticating about the high court's decision to warning that implementation of the law's myriad provisions may require a rollback of key deadlines.

Many unknowns remain because some of the most ambitious elements of the law have yet to go into full effect, such as expanding Medicaid, establishing state insurance exchanges, or collecting new taxes. Nevertheless, this year labs and other providers are getting their first glimpse of how the Affordable Care Act will affect the delivery of care. Chief among several new Medicare initiatives is the Shared Savings Program that recognizes Accountable Care Organizations (ACO). These networks of integrated providers receive money back from Medicare if they achieve savings compared to benchmarks and meet quality standards. More than 150 ACOs serving 2.4 million Medicare patients already have formed under the Shared Savings Program, and commercial insurers are moving ahead with ACO-style arrangements as well.

How can laboratorians be proactive in this new model of healthcare? According to Joe Miles, MT(ASCP), MHS, senior consultant for outreach development at ARUP Laboratories in Salt Lake City, laboratorians will have to venture even further out of their comfort zones to make a difference. "It's always surprising when an organization moves ahead with a clinical initiative that involves the laboratory, but doesn't involve laboratory experts. Unfortunately, this can also happen with the development of ACOs," Miles said. "Lab directors are going to have to become more involved in initiatives such as care path development, but they can't do this if they don't know about their parent organization's strategic plans before development work is completed."

How Are Labs Fitting In?

Organizations that have embraced the ACO concept say that labs are integral to their mission to improve both quality and efficiency. Under ACOs, physicians and other providers sign up for the risks and the rewards of managing the health of the Medicare beneficiaries assigned to them. They want to leverage the data and expertise of labs to achieve their goals, such as closely monitoring high-risk patients to keep them healthy and avoid costly hospital stays. But while the role of lab data is always key, the role of laboratorian experts varies.

Crystal Run Healthcare in New York exemplifies an ACO based on a physician-owned organization. The 15-year-old, multi-specialty group includes some 300 providers and was an early adopter of electronic health records (EHR), one of the basic requirements for an ACO. Since its inception, Crystal Run has focused on integration and innovation to improve quality and lower costs, according to co-chief transformation officer Scott Hines, MD.

With the benefit of owning its own lab, Crystal Run has tried to make the most of lab data to reduce variation in care, Hines explained. The organization focuses on specific diseases, such as diabetes, and shows physicians their total cost of care per diabetic compared to their colleagues. "One of the things we noticed was that variation in laboratory cost was huge," Hines said. "Some providers had very little, and for some it was astronomical."

In response, a team of Crystal Run physicians developed and published on the organization's intranet a best practice standard for treating diabetes based on current literature. To reduce variation in lab utilization, the standard includes information on how frequently hemoglobin A1c (HbA1c) should be ordered, as well as urine albumin/creatinine ratio, and lipid profiles. With the standard in place, Crystal Run reduced the cost of lab orders for diabetes by almost 15%. This example reflects one of the initial 33 quality guidelines under the Shared Savings Program, which requires that the ACO track the progress of how well diabetes is controlled by reporting HbA1c results.

Crystal Run did not consult with the lab on creating guidelines for diabetes testing. But in other projects, the lab director has taken a direct role. Similar to monitoring patients with chronic illnesses such as diabetes, Crystal Run also closely follows lab results for patients on certain medications, tracking kidney function, liver function, and electrolytes. For this project, the lab director helped the organization understand whether it was better to order comprehensive metabolic panels (CMP) or alanine aminotransferase, creatinine, potassium, and other tests à la carte.

"She helped us understand the cost to the lab to run each test and the reimbursement amounts for each," Hines said. "Interestingly, for a shared savings contract, ordering a CMP made the most sense financially. However, if a contract is capitated, ordering the tests separately makes the most sense. We would not have realized this without engaging our lab manager." Since ACOs in the Shared Savings Program initially get paid under a fee-for-service system, keeping costs down still means understanding the clinical lab fee schedule, which reimburses some individual tests as high as grouped tests, like a CMP.

Going forward, Hines sees the lab playing an important role in developing protocols for health maintenance testing, beyond the guidelines that the organization has created for diseases such as diabetes. "I think it's vital to involve leaders in the lab to help develop protocols such as standing HbA1c orders for diabetics so that we can be sure these tests are performed no matter where the patient is receiving care in the organization," he said. "This has the potential to improve quality by making sure more patients receive the needed tests, and reduce cost by preventing redundant testing." Hines has also sought assistance from the lab with integrating results from reference labs into the Crystal Run EHR so that the organization can mine data more effectively.

In May, the College of American Pathologists (CAP) published a white paper, "Contributions of Pathologists in Accountable Care Organizations: A Case Study." Prepared by the director of CAP's Policy Roundtable, David Gross, PhD, the report summarized visits to three organizations using the ACO model: Catholic Medical Partners-IPA in Buffalo, N.Y., Geisinger Health Systems in Danville, Pa., and the Accountable Care Alliance in Omaha, Neb. Gross pinpointed four ways these labs were adding value: developing protocols for lab ordering; developing standards for identifying and managing patients with chronic illness; improving access to lab data; and encouraging greater collaboration with clinicians.

One of the main findings of the CAP study was that lab leaders need to be proactive if they want to play a role in the future of an ACO. To do that, labs need to document the value they bring to an organization beyond delivering test results. "Don't wait for them to come to you, was the message I got. It's probably not going to happen," Gross said. "The concern about documentation came up because in one of the organizations we visited, the lead pathologist mentioned that he had called a physician about a $1,500 test that did not seem indicated, only to find that the physician was only vaguely interested in the test's results and agreed to cancel the order. The ACO administrator was in on our conversation, and said to the pathologist, ‘I didn't know you do that!' So I think that's one example where the lab could have documented how they avoided inappropriate tests that have a big impact on costs and patient care."

Similar to the findings of the CAP study, two leading pathologists at Montefiore Medical Center in Bronx, N.Y. have published about their experience as a Pioneer ACO, a special program under Medicare for organizations with experience in coordinating care (See Box, below). Ira Sussman, MD, and Michael Prystowsky, MD, PhD, wrote that pathologists will have to "demonstrate value to the system" in at least five ways: helping clinicians choose the correct tests; reducing unnecessary tests; guiding treatment by helping to personalize therapy; designing lab information technology solutions that will promote accurate, complete data mining; and administering efficient cost effective labs (Hum Pathol 2012;43:629–631). Sussman and Prystowsky are both professors of pathology at the Albert Einstein College of Medicine. Prystowsky is chair, and Sussman vice chair, of the department of pathology at Montefiore Medical Center.

Accountable Care Under the Affordable Care Act
Healthcare Delivery Reform Pushes
Bundled Payments, Quality Measures

Shared Savings Program

Under the new Medicare Shared Savings Program, 154 accountable care organizations (ACOs) have entered into agreements with Medicare to take responsibility for the quality of care furnished to people with Medicare in return for the opportunity to share in savings realized through improved care. Participation in an ACO is purely voluntary for providers and beneficiaries, and Medicare patients retain their current ability to seek treatment from any provider they wish.

The first 154 Shared Savings Program ACOs will serve an estimated 2.4 million beneficiaries. This includes the 32 Pioneer Model ACOs that were announced last December, and six Physician Group Practice Transition Demonstration organizations that started in January 2011.

To ensure that savings are achieved through improving and providing care that is appropriate, safe, and timely, an ACO must meet quality standards. For 2012, Medicare has established 33 quality measures relating to care coordination and patient safety, appropriate use of preventive health services, improved care for at-risk populations, and the patient and caregiver experience of care.

Pioneer ACO

The structure of Pioneer ACOs has led to what many see as the eventual fate of all ACOs: fully capitated payment replacing the fee-for-service system. The Pioneer ACO Model was designed specifically for organizations with experience offering coordinated, patient-centered care. The first performance period began January 1, 2012. In the first 2 performance years, the Pioneer Model tests a shared savings and shared losses payment arrangement, with higher levels of reward and risk than in the Shared Savings Program. These shared savings are determined through comparisons against an ACO's benchmark, which is based on previous expenditures for the group of patients aligned to the Pioneer ACO. In year three of the program, those Pioneer ACOs that have shown savings over the first 2 years will be eligible to move to a population-based payment model. Population-based payment is a per-beneficiary per month payment amount intended to replace some or all of the ACO's fee for-service payments with a prospective monthly payment.

Advanced Payment ACO

The Advance Payment ACO Model provides additional support to physician-owned and rural providers participating in the Shared Savings Program who need additional start-up resources to build the necessary infrastructure, such as new staff or information technology systems. The selected participants will receive upfront and monthly payments, which they can use to make important investments in their care coordination infrastructure.

Value-Based Purchasing

For those hospitals not part of an ACO, payments based on quality start in October. Medicare will reward hospitals that provide high quality care through the new Hospital Value-Based Purchasing Program.

This program aims to improve quality and reduce costs by incentivizing hospitals with extra payments based on their overall performance on a set of quality measures and compared to other hospitals. This will be taken from what Medicare otherwise would have spent for hospital stays, and the size of the fund will gradually increase over time, resulting in a shift from payments based on volume to payments based on performance.

Examples of the care processes included in the measures include how quickly heart attack patients receive percutaneous coronary intervention, how often surgery patients receive the right treatment at the right time to prevent blood clots, and how satisfied patients are with their experience of care at the hospital.

In the future, the Centers for Medicare and Medicaid Services plans to add additional outcomes measures that focus on improved patient outcomes and prevention of hospital-acquired conditions. Measures that have reached very high compliance scores would likely be replaced, continuing to raise the quality bar.

Hospitals will continue to receive payments for care provided to Medicare patients based on the Medicare Inpatient Prospective Payment System, but those payments will be reduced across the board by 1% starting in fiscal year 2013 to create the funding for the new value-based payments. In federal fiscal year 2013, this amount is estimated to be $850 million.

The Push Towards Outpatient Care

As physician groups and hospitals adopt the ACO model of managed care, one consequence is a move towards outpatient care. With a shift from paying for the volume of care to the quality and outcomes of care, ACOs are highly motivated to keep patients healthy and out of the hospital.

"We're seeing evidence of a huge migration away from testing being hospital-based to being done in the outpatient arena," ARUP's Miles said. "Whether it's in a physician's office, an urgent care clinic, or now in a retail setting—patients are receiving more care in non-traditional settings. Laboratorians, particularly hospital-based laboratorians, have had a mindset that inpatient testing was the most important and even the predominant work that they do, but I think that's changing now." Miles predicted that within 5 to 10 years, the majority of volume for most labs will be from outpatients, requiring a new management style from laboratorians.

"When we get groups of laboratorians together, we're seeing the thinking changing dramatically, from having a good handle on taking care of the captured hospital patients, to now having this enormous challenge of servicing physicians everywhere, patients everywhere, and the lab is trying to figure out how to take care of all of them," Miles said.

According to Sussman and Prystowsky, an ACO cannot be successful without this shift in care. "Ultimately fee-for-service will disappear in the ACO model, and we won't be paid for how much we do, but by how well we keep people healthy and out of the hospital," Sussman said. "It's an inevitable consequence of the model that shifts care to the outpatient world."

Sussman noted the progression that has taken place over the past decade of labs and other providers first working to shrink the length of hospitalization, then focusing on the reasons why certain groups of patients, like those with congestive heart failure, have high readmission rates, in the hopes of reducing readmissions.

Now, most ACOs like Crystal Run and Montefiore have invested in nurses that work as care managers, keeping in touch with high-risk patients over the phone or in person to closely monitor their condition and avoid readmissions. For example, in the case of heart failure patients, the care manager might help a patient keep track of her daily weight, and suggest an extra dose of diuretic when her weight goes up, Hines explained. This kind of care, though not reimbursed on a traditional fee-for-service system, can contribute greatly to both reduced cost and improved quality of care—outcomes that now bear a financial incentive under the Shard Savings Program and other ACO arrangements.

At the end of the day, ACOs are essentially a "primary care phenomenon," Miles explained. But this should be an advantage for labs, not a handicap. "Historically, primary care has not received a lot of attention. It has never been the center of reimbursement, and in some ways, primary care is a lot like laboratory medicine," Miles said. "And yet primary care is exactly where labs live, because getting an early and accurate diagnosis is number one in primary care. It is known that at least 30 percent of all care is unnecessary for one reason or another. And somewhere between 25 and 45 percent of working diagnoses do not correlate with final diagnoses. So those two facts represent huge opportunities for savings. And how do you fix those two things? Getting an early and accurate diagnosis is a primary function of labs. And for unnecessary care, it's getting the right information to the right person at the right moment, and that's what labs concentrate on doing best. In this regard we have an opportunity to shine under accountable care."

What Are You Worth?

The driving force behind ACOs is reversing the so-called perverse incentives that favor volume over value. However, in a system transitioning from fee-for-service to bundled or global payments based on quality, laboratorians are still facing a significant struggle to achieve recognition for their full contribution to care.

Whether an incentive payment under the Shared Savings Program, or a bundled payment under other Medicare payment options, Miles predicts "epic squabbling" among providers to hash out how the money is apportioned among various groups providing care. Each ACO gets to decide how such payments will be distributed—not Medicare. "Although these finance mechanisms are just beginning, it's very important for the lab to know who the payee is, such as a hospital or physician group, so they know who they're negotiating with," Miles said. "We're hearing from clients that this is a complex issue. But I do think that code-based claims processing will remain in place, since we don't have anything better to replace it."

Miles noted that even after 25 years under the current diagnosis related group (DRG) bundled payment system in hospitals, many lab managers have very little idea what the lab is actually paid out of a DRG. "In hospitals, labs don't really have much experience working out the relative value of what they contribute to patient care. Usually, it just comes down to making their department budgets work."

At Montefiore Medial Center, Sussman and Prystowsky have developed a unique financial model that helped make the lab more nimble and independent. In 1998, they created a virtual fee schedule for inpatient care paid under DRGs. This pathology service line gave pathologists more control over the lab and contributed to their ability to take ownership of lab data to help the ACO model thrive.

"As Montefiore was moving to a managed care model, we successfully convinc-ed the administration that 75 to 80 percent of clinical data was laboratory data, and that having the pathologists owning, understanding, and manipulating that data was important to the success of their operation," Sussman said. "So early on, we became important to the organization's ability to operate as an ACO." Having gained some independence on the business side of lab operations, Sussman and Prystowsky found themselves in a better position to prove their clinical value as well, they said.

Recognizing Added Value

However, demonstrating value outside of producing lab results may prove more difficult. As labs are called upon to add value to care management by analyzing data, helping track at-risk patients, and eliminating unnecessary testing, it is not clear how these extra services will be accounted for in the financial arrangements of ACOs.

"Unfortunately, our industry has allowed the whole idea that laboratory services are a commodity to exist," Miles said. "The problem now is that in today's world under accountable care, the commodity—which is a lab test result—encompasses far more than a simple test result. Payers expect the lab to help determine if the right test was done at the right time, to take aggregate data and help payers understand how population health is improving or not as a result of the care that's being provided, and to make sure that test result information gets to the right provider in the right way, whether an EHR or a mobile device—all of these are things far beyond the commodity concept of a lab test result. And yet this hasn't been acknowledged by the payers when they turn around and say, ‘we're going to negotiate with laboratories on the basis that we just want lab results.' Well, in fact, they want many more services beyond the scope of lab testing. We as an industry need to articulate more clearly, what are the pre- and post-analytical functions that labs actually provide that are not being acknowledged and that are not being paid for?"

It will be very difficult for labs to measure exactly how they have contributed to reductions in costs and improvement in care, according to an executive at Universal American, an organization that has partnered with dozens of physician organizations to help them develop ACOs under a division called Collaborative Health Systems. "I would encourage labs to start thinking about this, and help us develop tools and techniques that we can use to measure their contributions," said Robert Waegelein, co-president and chief financial officer of Universal American. "I think everyone should share the benefits and incentives if they can, because I think the Shared Savings Program is going to be very successful."

Meanwhile, labs should focus on providing the best service they can to hospitals and physician groups, concentrating on communication and integration with EHRs to make ordering and receipt of lab results as seamless as possible, Waegelein said. "Better communication between the physician group and the lab will give a better diagnosis for the doctor to treat more appropriately and in a timely manner, with less cost and better experience for the patient. I think lab volumes will be directed to those labs that are cooperating and providing back the best service."

At Montefiore, Prystowsky emphasized that it was key for pathologists and labs to align with the goals of the ACO and provide the best customer service experience possible. "I think providing basic good customer service adds a lot of value in itself," he said. "If we provide a level of service that makes the clinician's job easier, then we are doing what we're supposed to do. But for us at Montefiore to provide that level of service, we needed a financial model where we didn't feel squeezed. Because the Montefiore financial model recognizes essentially all of our work, the pathology service line has resources to respond positively to support clinical programs."