Three Major Challenges Facing POLs
Two Down, One To Go
(Part 1 of a 2-part series)
by Dr. Sheila Dunn
Reprinted with Permission from Washington G-2 Reports,
Physician Office Testing, December 1996
First Hurdle Down
Despite initial fear and frustration, physician office laboratories (POLs)
that chose to keep operating under the CLIA regulatory program have fared
well. Most certified labs now admit that CLIA quality standards and inspections
are reasonable. Moreover, CLIA fees account for only a few cents per test
and the number of waivers for tests commonly performed in POLs has been
growing steadily (Physicians Office Testing, Aug. 1996, p.4). One
down, two to go!
Second Hurdle Adds Hassles, But...
This year, Medicare began discouraging doctors from ordering large test
panels by either downcoding to lower payment or denying payment altogether.
Like all other labs, POLs must comply with more stringent medical necessity
documentation rules for automated test profiles (CPT 80002-80019); plus,
many carriers have limited coverage of many individual tests to specific
diagnosis codes. This hassle exists whether tests are run in-office or
at a referral lab. Still, Medicare reimbursement of lab tests remains an
important part of your revenue mix. Two down, one to go!
The Final Hurdle: Managed Care
POLs across the country report that managed care organizations (MCOs) either
slash typical test fees, or worse, steer lab services to "preferred
labs" which accept rock-bottom capitated rates in exchange for large
How can you surmount this hurdle? One phone call to the
MCO medical director or provider representative will do the trick, right?
Wrong. To win this battle, you must marshal the facts, state your case
in a way the MCO can understand, be persistent and don't expect to succeed
on your first try.
The near-patient (or point-of-care) testing your POL offers
has unique value in the healthcare system and to MCOs, but managed care
officials need to be persuaded of this. Here are key arguments you can
use to prepare your case prior to MCO contract negotiations.
"Set In Stone"?
MCOs often imply that their contract terms are "Take it or leave it!"
A good example is an April 25 Aetna memo to mid-Atlantic providers regarding
its "preferred vendor" policy. It exempts only four tests (CBC
with differential, glucose, quick strep, urinalysis) performed by primary
care doctors on a stat basis: "Pursuant to your contract, you have
30 days to advise [us], in writing, if you object...and wish to pursue
termination of your contract."
Most providers have, up to now, accepted MCO contract
terms without question, but physician practices that do will see their
POLs erode in direct proportion to their managed care payer mix. Don't
be intimidated--MCO restrictions on POL testing can be negotiated (see
box, p. 3)!
The Worth Of Near-Patient Testing
Getting test results during patients' office visits has noticeably improved
healthcare. Patients and front-line providers need no convincing; in fact,
in support of this value, many POLs offer labor-intensive services like
weekend or evening coverage and stat testing (a good point to make to MCOs).
Near-patient testing meets key goals sought by MCOs and
the rest of the healthcare system: it lowers costs and increases quality
of care, as evidenced by improved patient outcomes and better patient satisfaction.
Industries across America know that in today's competitive environment,
the key to success is excellent customer service. Healthcare is no exception.
Patients may be disappointed with the decline in services mandated by an
MCO. Patients who once enjoyed the convenience of on-the-spot test results
in your office won't look kindly on a plan that requires them to make an
extra trip to a drawing station, another lab or a pharmacy!
If you doubt that testing in ambulatory care settings
will be encouraged (and reimbursed) in the near future, consider that in
most hospital labs, a significant number of tests have been relocated to
patient rooms, emergency rooms and intensive care units. Initially skeptical,
hospital-based laboratorians now agree that certain testing at the point
of care provides faster turnaround time which expedites treatment, reduces
patient morbidity, cuts length of stay and lowers total cost of care per
Why then aren't managed care contracts being written with
provisions for office lab payments? Because the lab community has yet to
convince MCOs of the worth of near-patient testing. Put yourself in their
shoes and assume that, as the MCO contract negotiator, you don't know the
difference between a CBC and a glucose test. If shown two fee schedules,
one from a mega-lab bidding $2 and $1 respectively, and one from a POL
for $12 and $6 respectively, you'd likely pick the seemingly less expensive
While price is a crucial element in MCO contract awards,
it's not the only one. Along with economic benefits, managed care plans
also realize that in competing for members and meeting quality standards,
they must assure key clinical and psychosocial benefits.
Accordingly, you can point out the following:
Clinical benefits: On-site
test results are used as an extension of the physical exam to more confidently
classify patients as "well" or "sick." For patients,
seeing, discussing and understanding these results helps motivate them
to comply with a treatment plan. For many tests, when results are delayed,
the consequences will undoubtedly be misdiagnoses, improper therapy and
increased patient morbidity.
Near-patient testing virtually eliminates preanalytic
errors for tests requiring fresh specimens for accurate results (see above
table). Specimen loss or mix-up can be a problem with some referral labs.
Finally, errors may arise when physicians have difficulty interpreting
different reference ranges from a variety of referral labs.
Psychosocial benefits: Patient
anxiety is allayed by eliminating 2-3 days of uncertainty about test results.
Productivity at home and at work is enhanced if the person is treated during
the office visit and his/her clinical condition improves. Travel to specimen
drawing stations is a terrible inconvenience for sick patients.
Economic benefits: Though
cost per test at the point of care is higher than for mega-labs, overall
savings in total cost per patient episode often far exceed the initial
expense. Because of prolonged turnaround time, some patients will receive
inappropriate or delayed therapy, adding up to additional costs for repeat
visits or visits to other providers or emergency treatment facilities.
POL testing saves money by maximizing physicians' efficiency.
Lab results that appear 1-2 days after the patient has left the office
require providers to recall why the tests were ordered, check results against
prior ones, decide how to act on the results, and possibly, discuss the
results with the patient. Notifying patients of all test results is now
mandatory for most managed care plans. The 10-15 minutes per patient this
takes a physician is costly for a practice.
In-office testing streamlines workflow for the office
staff, eliminating the need to log, package, track and post results for
referred tests, as well as the possibility of error that accompanies each
of these steps. Not to mention the hassles associated with up to 10 specimen
boxes for each particular health plan!
Time lost from work for health reasons, whether due to
less than optimal patient outcomes or from playing telephone tag to get
test results, is beginning to draw attention from major MCO customers--namely,
employers. As a healthcare information manager for Massachusetts-based
phone giant GTE observed: "We're getting smart. We realize that value
costs less. GTE spends $600 million yearly on direct healthcare costs.
But lost time from work and lower productivity because of health problems
costs much more, well over $1 billion a year."
In today's volatile healthcare environment, POL managers
must learn myriad new skills, one of which is managed care contract negotiations.
The status quo is no longer an option!
>> Go to Part 2: Negotiating With Managed Care: Ready, Aim,