Preview of 2024 Lab Trend Report – Key Insights & Takeaways

Federal Policy and Regulatory Changes

Julie Barnes, JD from Maverick Health Policy, detailed significant federal policy and regulatory changes impacting the healthcare system, with a primary focus on Medicare Advantage (MA) plans. She highlighted the scrutiny on MA due to its increased enrollment growth. Over half of eligible Medicare beneficiaries are now enrolled in these private MA plans. This has prompted accusations of overpayment due to manipulated risk adjustment systems, as a whistleblower accused Aledade, the largest US Independent Primary Care Network of Medicare fraud through exaggerating medical diagnoses in EHRs.

Moreover, Barnes pointed out the influence of investigative journalism on policy, such as the Stat News report on United Healthcare’s NaviHealth program, which led to CMS warnings against using algorithms as the sole criterion for coverage decisions. CMS has since issued regulations prohibiting MA plans from using prior authorization algorithms that do not consider individual patient circumstances. This regulation, effective January 1, 2024, mandates MA plans to enhance their prior authorization processes to ensure compliance and transparency.

The ongoing scrutiny extends to M&A activities in the healthcare sector. Federal enforcement agencies, including the FTC and DOJ, are actively investigating anti-competitive behaviors and consolidations, particularly involving private equity firms. This focus aims to maintain competition, lower healthcare costs, and enhance service quality. Barnes also touched on the cybersecurity threats leading to regulatory responses, such as the cyberattack on Change Healthcare, which spurred discussions about the risks of large-scale consolidations.

Additionally, Barnes mentioned the revived debate on national privacy laws, with the American Privacy Rights Act reintroduced by the Congressional Commerce Committees.

Barnes highlighted the challenges in implementing price transparency rules, particularly the “No Surprises Act,” which aims to address unexpected medical bills but has encountered difficulties in arbitration processes. The push for site-neutral payments, ensuring consistent pricing for services regardless of location, is another key focus area to streamline healthcare costs.

Lastly, Barnes discussed the future of Lab-Developed Tests as the FDA published a final rule on May 6, 2024. This rule:

  • Classifies in vitro diagnostics (IVDs) as medical devices even when the manufacturer is a laboratory (LDTs).
  • Includes a phase-down of “enforcement discretion” over LDTs that would begin 60 days after publication of a final rule.
Avalon’s Lab Trend Report

Mark Monane, MD, MBA, and Chief Medical Officer at the Monane Group, presented insights from Avalon’s Lab Trend Report, emphasizing the critical role of lab tests in healthcare. Routine tests, essential for diagnosis, prognosis, treatment decisions, and disease monitoring, constitute a significant portion of medical practice, with 14 billion tests conducted annually in the U.S. Despite accounting for only 3-5% of healthcare costs, lab tests drive 70% of downstream decisions and spending.

Monane highlighted stable general testing costs from 2020 to 2023, with a decrease in COVID-related testing costs. The average spend for routine testing was $175 per member per year, with a notable reduction in utilization and spend, indicating a better mix of tests and optimized care.

The report also addressed the stark price disparities in routine testing based on the location, with hospital settings charging up to 500% more than independent labs for the same tests. This discrepancy incentivizes hospitals to acquire primary care practices, leveraging higher pricing. Monane suggested that site neutrality could help address these disparities.

Genetic testing has seen significant growth, with a 5% increase in utilization and an 8% increase in spending year-over-year. The average spend on genetic testing is $13 per member per year, driven by innovative and high-priced tests. Despite genetic tests comprising only 10% of utilization, they account for 30% of spending among members who receive at least one test. Monane emphasized the importance of managing over- and under-utilization, quality control, and pricing to ensure effective use of genetic tests.

Looking to the future, Monane discussed emerging trends in lab testing, including multi-cancer early detection tests, polygenic risk scores, and biomarkers for various diseases. These innovations promise to enhance early detection and risk assessment, although challenges remain regarding clinical utility, cost-effectiveness, and data interpretation. The ongoing surveillance of advances and the application of rigorous evaluation criteria are essential to integrating these new technologies into clinical practice effectively.

Avalon offers 65 routine testing policies that can help health plans with the goal of the right patient with the right test at the right time, as well as genetic testing policies that assist with science-based coverage criteria for genetic testing.

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