Health Plan Contracting: Are Labs Becoming Expendable? Intel and Solutions for Lab Contracting Mike Snyder

Lab Networks are Shrinking Medicaid Shift to commercial managed care Exclusive networks Bluecard Confusion for both plans and providers Aetna Lab terminations ‘freestanding clinical labs’ need not apply!

‘Managing’ Laboratory Diagnostics BCBS Association Consultant study Participation in a GPO For Profit Hospital Network Models Regional Diagnostic Labs aLabs (Accretive Health) Quest Blueprint for Wellness LCA: Beacon Lab Benefit Solution

Key Drivers for Health Plan Behavior National lab influence? Healthcare Environment in the US: Healthcare Reform Increasing Costs

Healthcare Cost Trend

Lab Industry Revenue Trend G2 Intelligence

Average Annual Worker and Employer Contributions to Premiums and Total Premiums for Family Coverage, 1999-2010 $5,791 $6,438* $7,061* $8,003* $9,068* $9,950* $10,880* $11,480* $12,106* $12,680* $13,375* $13,770* * Estimate is statistically different from estimate for the previous year shown (p<.05). Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 1999-2010.

Among All Large Firms (200 or More Workers) Offering Health Benefits to Active Workers, Percentage of Firms Offering Retiree Health Benefits, 1988-2010* *Tests found no statistical difference from estimate for the previous year shown (p<.05). No statistical tests are conducted for years prior to 1999. Note: Data have been edited to include the less than 1% of large firms who report “yes, but no retiree” responses in 2010. Historical numbers have been recalculated so that the results are comparable. Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 1999-2010; KPMG Survey of Employer-Sponsored Health Benefits, 1991, 1993, 1995, 1998; The Health Insurance Association of America (HIAA), 1988.

Employer Pressure for Cost Containment 25% shift to ‘High Performance’ networks 22% demand for cost ‘transparency’ 1/3 require that health plans provide data that exposes high cost providers Towers Watson 2012 Employer Survey

Payors: Contracting ‘Constants’ Trend and Leakage Trend rises due to new technology and utilization increases Out of Network or non-contracted providers Lowest costs Competitive bidding: Price Services Preferred agreements (perception of value) New services, same price HIE participation

What Do the Plans Want from Labs Today? Broad menu that incorporates AP and other esoteric testing (one stop care) Generous access to services (locations) Electronic interface (orders and reporting) to physicians Submission of member lab results to the plan Participation in managed networks Electronic claims submission (clearinghouse) Strong marketing program (Leakage management) Tech advisory council

What are the Expectations for Tomorrow? Participation in Utilization Management Synchronization of Test Menu to Medical Policy Notification of Test Identity (no code or generic stack codes) Expanded Credentialing: demonstrate proficiency of testing against standards Participation in Preauthorization Ability to meet employer demands for member transparency to healthcare costs

Needs and Weaknesses of the Health Plans Medical Loss Ratio (MLR) Utilization Management Resources for Technical Assessment Coding and Reimbursement Physician Education Data Transformation: Data Information Knowledge

Solutions: Short Term Bill “Intelligently” Use the data Utilization by plan: Know Your Numbers Mode of communication Messages to Patients and Employers Seek Employer Collaboration: Education (Dx connection to health mgmt) Direct services (e.g. Biometrics) “Healthcare is Local!”

Evolve! From Tests to Technology Service “Total Solution” approach to contracting: Consider the customer’s customer Offer demonstration projects Collaborate (Power of the Pie!) Form networks and affiliations Plans are willing to accept lab ‘aggregation’ Laboratory Association and Buying Service (“LABS”)

BENEFITS FOR LABS AND INSURERS Why a Network Model? BENEFITS FOR LABS AND INSURERS LABS INSURERS Creates standard requirements for participation in health plan contracts Offers a 'managed' network of independent labs Emphasizes valuation of requirements beyond testing services Assures the fulfillment of requirements necessary to manage the benefits of the plan membership Leverages the purchasing power of membership Allows the plans an alternative to increasing admin cost; instead, addresses a positive impact to MLR calculation Assures the ability of the membership to compete for lab contracts  Reduces ‘lab leakage’ by fielding a broad network of qualified labs

Model for Lab Association Primary Functions Messenger model for lab contracting GPO to accomplish ‘required’ services Value to Member Labs Channel for health plan participation Change the ‘Value’ conversation Negotiates services for association under a GPO-type model Manages the requirements of the plans for network management (plan by plan basis)

Organizational Characteristics Not For Profit; DE corporation (McDonald Hopkins) Staff Model Management: No employment relationship to any member Manager responsible for recruitment of new members and engagement of health plans Board of Directors leadership Guide for Participation Member fees Participation in lab credentialing process Must follow requirements for participation in select plans Receive education re: Messenger Model

The Game is Changing Plans have the leverage: Technology Reimbursement Employers and consumers demand lower costs and price transparency Enrollment is increasing (‘Caid, ‘Care, and Self Funded) Competition: Becoming a “Beige” industry! Technology Demand for integration (EMR, eligibility, transparency, etc) New applications (evidenced-based, coding, etc) Collaboration: Diagnostics and Therapeutics Reimbursement Coding FFS Bundling Greater incorporation of required services

Mike Snyder msnyder@clbslab.com