ACOs and the Lab: Threat or Opportunity?

Contributing LabLeaders: Donald Karcher, MD, FCAP; Robert I. Field, JD, MPH, PhD; and Steven Gudowski, MBA, C-PM(APF), MT(ASCP)

Financial

Article highlights:

Accountable care organizations and other value-based reimbursement arrangements change the value equation for hospital labs.
Labs must think about how they can participate in patient care management and use resources efficiently.
Getting a firm handle on cost-per-test will be essential.

Accountable care organizations have a mandate to reduce the cost of care and improve its quality, focusing on keeping patients healthier and achieving better outcomes. But where do hospital and health system labs fit into a new world where their performance is measured on more than volume and accuracy? Can they add enough value to keep their functions from being outsourced to reduce overhead? The answers to these questions depend on many factors.

“We can't compete on price alone, but we can add extra value that enhances the value equation for the organization and for the patient," says Donald Karcher, MD, chair of pathology and director of laboratories at George Washington University Medical Center, Washington, D.C. The medical center currently operates an ACO, GWHealth, under the Medicare Shared Savings Program. “A pathologist can provide a variety of services other than just the results: telephone consultation, utilization management of laboratory resources, providing better care for patients with chronic diseases. We can really help in coordination of care." Karcher says the economics of the MSSP ACO are working out well for GW so far, but “we have a long way to go in terms of making sure that we can make this model sustainable."

Which approach is right for your organization? Here's a look at the pros and cons of each according to two experienced and respected laboratory leaders.

Defining the Product

Hospital labs can be at a disadvantage if the hospital or health system administration still regards its “product" as hospital care, rather than care coordination or better patient health, says Robert I. Field, professor of law at Drexel University's Thomas R. Kline School of Law and professor of health management and policy at the Dornsife School of Public Health. Despite the slow shift to accountable care, he says, hospitals still focus on cost without necessarily looking at the value associated with particular expenditures. “It will be interesting to see the transition as CMS tries to get more ACOs to take downside risk, whether that will be more of an incentive to better coordinate care," he says. (The MSSP , CMS's largest ACO initiative currently, does not require financial risk from participants, but increases payments for improved performance.) “The silver lining is that the more experience ACOs have, the better they seem to do."

A Handle on Costs

Regardless of payment structures, hospital labs would do well to get a better handle on their costs, says Steven Gudowski, administrator, Department of Pathology, Anatomy, and Cell Biology, Sidney Kimmel Medical College, Thomas Jefferson University in Philadelphia. “There's not many hospital laboratories that can even tell you their cost per test," he says. “Without knowing that, it's difficult for them to even try to figure out whether they're going to lose their shirt or not by projecting some sort of financial model.

That knowledge about costs will help labs make a stronger case to health system management to keep lab services in-house, says Field. “I think hospitals running an ACO are going to want to partner with the services that they can't provide already in- house," he says. “Those that they provide in-house, they're going to want to keep because they have more control over them. If one of the goals is efficiency, they have more control over the levers that are going to determine efficiency for the in-house lab than for an external one."

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Steven Gudowski, MBA, C-PM(APF), MT(ASCP)

Administrator, Department of Pathology, Anatomy and Cell Biology

Sidney Kimmel Medical College, Thomas Jefferson University

Contributing Lab Leaders

Donald Karcher, MD, FCAP

Chair, Department of Pathology

George Washington University Medical Center

Robert I. Field, JD, MPH, PhD

Professor of Law and Professor of Health Management and Policy

Drexel University's Thomas R. Kline School of Law and Dornsife School of Public Health