Laboratory Services in Accountable Care Organizations

Laboratory Services in Accountable Care Organizations

Laboratory Services in Accountable Care Organizations Published by: G2 Intelligence PO Box 509 New London, CT 06320 Customer Service: 888-729-2315 Fax: +1-855-649-1623 www.g2intelligence.com

2015 Plain Language Media, LLLP Printed in the United States of America G2 Intelligence PO Box 509 New London, CT 06320 Customer Service: 888-729-2315 Fax: +1-855-649-1623 www.g2intelligence.com Mark Ziebarth Pete Stowe President and Publisher Publisher Laboratory Services in Accountable Care Organizations Analyst Jenny Xu, Ph.D. 978-1-58673-454-1 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic or mechanical, without the prior written permission of Plain Language Media, LLLP, New London, CT. This document is protected by copyright law. It is illegal under federal law (17USC101 et seq.) to copy or fax any of the contents of this document even for internal use without permission. Violators risk criminal prosecution and penalties of up to $150,000 in damages per offense. To report copyright abuses, please contact Jim Pearmain at 1-888-729-2315 or jim @plainlanguagemedia.com. 2 www.g2intelligence.com Notice: No part of this publication may be reproduced, stored in a retrieval system or transmitted by any means, electronic or

Table Of Contents Table of Contents CHAPTER 1: Overview and Outlook... 7 Report Objective...7 Report Scope...7 Target Audience...7 Methodology...8 Report Overview...9 Outlook for ACOs and Laboratory Services... 17 CHAPTER 2: ACO Market Landscape...21 ACO Background and Overview... 21 ACO Taxonomies... 25 ACO Growth... 36 The Future of ACOs... 42 CHAPTER 3: Structural Changes in Laboratory Services in ACOs...47 Overview... 47 Laboratory Service Provider Changes... 49 Laboratory Test Volume Dynamics... 63 Laboratory Outreach...74 CHAPTER 4: Financial Changes to Laboratory Services in ACOs...81 Overview... 81 Reimbursement Cuts for Laboratory Tests... 85 Laboratory Budget Cuts... 89 Payment Model Changes... 92 CHAPTER 5: Value of Laboratory Services in ACOs... 123 Laboratory Services Must Focus on Value in ACOs...123 ACO s Value Perception of Laboratory Services - A Snapshot... 124 Effective Laboratory Value Initiatives in ACOs...128 Summary...163 CHAPTER 6: Key Insights, Implications and Recommendations... 167 Key Insights...167 Implications and Recommendations for Action... 177 Conclusion... 187 APPENDIX A: Risk Stratification Methods... 189 About the Analyst... 191 About G2 Intelligence... 193 Notice: No part of this publication may be reproduced, stored in a retrieval system or transmitted by any means, electronic or www.g2intelligence.com 3

Table of Figures Value-Based Payment Models... 13 Laboratory Initiatives Shift Focus from Efficiency to Effectiveness... 15 ACO Taxonomy... 28 Growth in MSSP ACOs by Count... 30 Key Differentiators for Three Medicare ACO Models... 31 Distribution of Medicare ACOs by Population Density... 32 Share of Commercial ACOs by Payer... 32 Cigna s Collaborative Accountable Care (CAC)... 34 Aetna s ACO Strategy... 35 Growth in ACO Count 2010-2014... 36 Growth in Physician-Led ACOs vs. Hospital ACOs, 2012-2013... 37 Share of Government vs. Commercial ACOs, May 2014... 38 Growth in ACO Covered Lives 2011-2014 (Risk Contracts Only, in Millions)... 39 ACO Covered Lives by Sector, June 2014... 40 Projected ACO Covered Lives 2014-2018 (Risk Contracts Only, in Millions)... 41 Growth in ACO Reach 2012-2014... 42 Percent of Laboratories Closed Post-ACO Formation... 48 Percent of Laboratories Experienced Changes Post-ACO Formation... 49 Hospital and Health System Mergers and Acquisitions 2010-2013... 50 Physicians by Practice Setting 2012-2013... 53 Trends in Laboratory Consolidation... 55 Percent of ACOs Switched Contracts to Lower-Cost Laboratories... 59 ACOs Switched Contracts to These Types of Laboratories... 60 ACOs Lost Volume to These Types of Laboratories... 61 Overall Laboratory Test Volume Changes since Start of the ACO... 64 Scope of Increase/Decrease of Laboratory Test Volume... 64 Drivers of Laboratory Test Volume Increase... 65 Drivers of Laboratory Test Volume Decrease... 66 Prevention, Screening, and Wellness Test Volume Changes since Start of the ACO... 67 Scope of Increase/Decrease of Prevention, Screening, and Wellness Test Volume... 68 U.S. HHS Essential Health Benefits... 68 USPSTF Grade A and B Preventive Services... 69 Projected Numbers of New Cancer Cases/Growth Rates by Site (Number of People in Thousands)...71 Screening for Cancer (USPSTF Recommendations)... 72 Measures That Matter Identified by Medicaid s Million Hearts Program... 73 Percent of Laboratories Launching Outreach Initiatives by ACO Perception of Laboratory Value...74 Percent of Outreach Volume Lost to Competing Laboratories... 75 Changes in Laboratory Outreach since Start of the ACO... 78 Changes in Laboratory Outreach by ACO Length... 78 Elements of a Successful Laboratory Outreach Business... 79 4 www.g2intelligence.com Notice: No part of this publication may be reproduced, stored in a retrieval system or transmitted by any means, electronic or

ACO s Financial Compensation for Laboratory s Value Contribution... 83 Reasons for Laboratory Exclusion from Value-Based Compensation... 84 Percent of Laboratories Receiving Proper Financial Compensation by ACO Length... 84 Percent of Laboratories Receiving Lower Reimbursement Rates since Start of ACOs... 85 Progressive Medicare Reimbursement Cuts for CLFS 2013-2015P... 86 Laboratory Budget Cuts in ACOs... 90 Scope of Laboratory Budget Cuts in ACOs... 91 Value-Based Payment Models... 92 Payment Models Used by ACOs... 94 Methodology for Calculating Shared Savings and Losses for MSSP ACOs.. 96 Likelihood of Adopting Two-Sided Risk Model by MSSP ACOs... 97 Pay-for-Performance Inclusion in Laboratory Contracts... 107 Bundling and Capitation for Laboratory Services...109 Hospital Laboratory Revenue by Patient Type 2012...112 Percent of Value-Based Payments by Segment 2013-2014...115 Percent of At-Risk Payments vs. Not-At-Risk Payments 2013-2014...115 Percent of Value-Based Payments by Payment Models 2013-2014... 116 Laboratory-Related Medicare ACO Quality Measures...122 Perception of Laboratory Services by Respondent Type...125 Percent of ACO Executives Who View Laboratory Services as Very Valuable...126 ACO Executives View of the Significance of Laboratory Services to ACO Success...126 Laboratory Directors Report of Laboratory s Value Contributions to ACOs... 127 Laboratory Directors Report of Laboratory s Value Recognition by ACOs... 127 Percent of Laboratories Actively Pursuing Value Initiatives by ACO Length...128 Laboratory Value Initiatives in ACOs...129 Laboratory Initiatives That Shape ACO s Perception of Laboratory Value...130 Complexity Challenges in Clinical Decision Making...132 Turning Test Data to Test Knowledge...134 Tactics for Reducing Uncertainty among PCPs in Interpreting Laboratory Results...135 Clinical Impact of Genetic Tests and Genomic Applications... 137 Connecting Laboratory Services to Patient Outcomes...138 HIT Contributions to Improved ACO Performance...142 Laboratory HIT Initiatives to Drive Interoperability...146 Challenges Laboratories Encountered in Driving Interoperability...146 Population Health Management Core Activities...148 Risk Stratification and Associated Goals and Intervention Strategies for Each Patient Group...152 Geisinger Uses Laboratory Data to Drive and Show Success of Care Gap Management Programs...153 Drivers for Data Analytics...154 Laboratories Contract with Vendors to Support ACO Performance...156 Laboratory Services in Accountable Care Organizations Notice: No part of this publication may be reproduced, stored in a retrieval system or transmitted by any means, electronic or www.g2intelligence.com 5

Laboratory Initiatives in Population Health Management...158 Mayo Clinic Testing Cascade: Pernicious Anemia...159 Laboratory Test Utilization Initiatives... 161 Laboratory Services Influence Value in Two Ways...164 Laboratory Initiatives Shift Focus from Efficiency to Effectiveness...165 Laboratory Services Experience More Changes as ACOs Mature... 170 Laboratory Services Experience More Financial Changes in Commercial ACOs... 171 Laboratory Participation in ACO Discussions... 172 Laboratory Participation in ACO Discussions Impacts Ratings of Laboratory Value in ACOs... 173 Laboratory Participation Impacts Perceptions of Laboratory Services in ACOs...174 Laboratory s Eligibility for Shared Savings in ACOs... 175 Participation in ACO Discussions Influences Laboratory s Eligibility for Shared Savings... 176 View of Laboratories as Contributors to ACO Success Influences Laboratory s Eligibility for Shared Savings... 177 Laboratory Engagement in Value Initiatives and ACO Leadership... 178 6 www.g2intelligence.com Notice: No part of this publication may be reproduced, stored in a retrieval system or transmitted by any means, electronic or