A Brave New World for Reimbursement Lab Institute October 26, 2017

What is impacting the Health Insurance Industry Uncertainty in planning for the coming years Affordable Care Act (repeal and replace) Proposed changes would impact how Insurers do business Consolidations Mergers and Acquisitions Larger and larger insurance companies

What is impacting the Health Insurance Industry Medicare Advantage Medicare Advantage now cover about 18M people (1/3 of Medicare beneficiaries) Medicaid Represents $1 of every $6 in healthcare spending. Medicare Advantage Medicare Advantage now cover about 18M people (1/3 of Medicare beneficiaries) Growth of 5% between 2015 and 2016 Premiums for Part A and B have increased 25% since 2011 ($5332) UHC and Humana together make up 39% of MA enrollment in 2016 Medicaid Represents $1 of every $6 in healthcare spending. States design their Medicaid program within broad federal rules Federal matching payments with no pre-set limit. 2/3 of Medicaid spending is on the elderly and those with disabilities, who make up about ¼ of the Medicaid population ¾ of Medicaid enrollees are working families 87% Continued move to Value Based Contracting ACO/Medical Homes/Bundled payments Aetna has long-held a goal to reach 75 to 80 percent of its medical spend in value-based relationships by 2020. Aetna's medical spend is now 45 percent tied to value. Optum formed strategic relationships with Walgreens and CVS Health, Quest Diagnostics and technology partner Availity. Kaiser Family Foundation, 2017

What is impacting the Health Insurance Industry: Laboratory Benefit Managers Preauthorization Rules far removed from the ordering physician and patient Laboratory Benefit Managers Beacon LBS (Beaconlbs.com)— Avalon Healthcare Solutions--(avalonhcs.com) AIM Healthcare EviCore Beacon LBS (Beaconlbs.com)— Rolled out in Florida, delayed in Texas. Front end pre-authorization Work flow impacts Entry into system at the end of an office appointment, requires clinical information, thus higher level employee to enter Large groups pushed back Avalon Healthcare Solutions--(avalonhcs.com) Laboratory Benefit Manager BCBS SC Hospitals (POS 22 and 19), physician offices (POS 11) and independent laboratories (POS 81). BCBS NC, effective 3/1/2017 Independent laboratories (POS 81)

What is impacting the Health Insurance Industry Value Based Contracts Anthem's goal is to have 50 percent of contracts in shared savings programs by next year, 2018. 13% of Health systems offer health plans, covering 18 million members (5% of the total population) Physician groups want to move beyond MIPS (Merit Based Incentive Payments) to Advanced Alternative Payment Models Anthem's goal is to have 50 percent of contracts in shared savings programs by next year, 2018. Anthem has more than 43 percent of payments tied to shared savings programs.  13% of Health systems offer health plans, covering 18 million members (5% of the total population) Provider owned health plans are increasing 6% every year. Physician groups want to move beyond MIPS (Merit Based Incentive Payments) to Advanced Alternative Payment Models ACO/Medical Homes Medicare Advantage Plans Direct to Employer

What is impacting the Health Insurance Industry Decision making is too far removed from the patient Current system has created adversarial roles insurers, doctors, pathologists, healthcare systems, commercial labs and patients. “No coverage” decisions leads to anger and discontentment. Perceived inappropriate testing makes insurers respond. Providers want autonomy. Loss of: Empathy Accountability System control Increased Silo’s

What is impacting the Health Insurance Industry Lack of transparency regarding High out-of-pocket expenses Difficult grievance and appeals procedures Out of network write offs Over utilization and redundancy in the system Lack of transparency Patient responsibility Medical policy Patient Costs of testing High out-of-pocket expenses Drive towards higher patient responsibility Difficult grievance and appeals procedures Out of network write offs Misordering tests (right test at the right time) Rerunning the same test when not clinically necessary Misinterpreting test results (actionable information) Failure to retrieve and act on test result Unnecessary cost to patients and healthcare system

Department of HHS Volume to Value Goal, 2018 Source: Department of HHS. Better, Smarter, Healthier: In historic announcement, HHS sets clear goals and timeline for shifting Medicare Reimbursement form volume to value.

The Value Equation Benefit Cost Improve quality Improve scores (HEDIS, STAR, MIPS, MACRA) Patient outcomes, safety and satisfaction Cost Reduce utilization Eliminate or reduce redundancy Unnecessary testing Increase efficiencies

Value Based Loop Feedback Test Orders Quality Measures Prospective Realtime Retrospective Feedback Test Menu Restrictions Test Orders Test Selection Reporting SOPs Risk Management Quality Measures

The Value Equation-Cost Testing protocols Diagnosis and best practices Validation of orders Complex cases with complex orders, validate necessity Reduce redundancy High cost or under-reimbursed testing Obsolete or unproven tests Contraindicated screening and testing Inappropriate test by demographic Review of expensive send-out tests

The Value Equation-Benefit Procedures to improve results retrieval & interpretation Complex testing has subject matter experts Early identification Positive or identifiable disease states Genetic testing insurance preauthorization policy and process Every plan has a different set of rules for testing

Value Based Drivers Quality Indicators HEDIS Scores Star Ratings Value based pricing Evidence based Practice Benchmark Patient Registry, MPI or EMPI Population Health Decision Support Utilization monitors Quality Indicators HEDIS Scores Star Ratings MIPS and MACRA

Reimbursement: Three pronged approach Coding Payment Coverage How will the payers identify your testing? What is the expected payment amount and is that impacted by the new patient centric plans? What type of coverage determination does the payer have?

Coding New Codes Medical Necessity denials Medical/Plan Denials Moldx, Tier 1 and 2 Medical Necessity denials Limiting Units of service DX code CPT code mismatch Medical/Plan Denials Limited units of service per year Plan limits

Payment and Coverage Payment based on negotiated fee schedule or Out of Network benefit Limiting units of service Limiting types of methodology or denying completely Large out of pocket patient responsibility 43% of large groups offer 1 “high” efficiency network Coverage determination made after services performed Lab held holding the bag Patient not held liable on ROI denials New pre-authorization programs windows are too tight

PAMA Update and Implications Impact Medicare reimbursement Most high volume codes could be reduced by 10% or more Other impacts? Medicare Advantage plans Based on current year Medicare rates. Your reimbursement for those plans will be reduced. Commercial plans Most payers have moved to a base fee schedule that uses Medicare. If based on a current year Medicare, the plan will follow suit with a reduction in your rates. Some plans will load new fee schedules in Q2 or Q3 of the following year. Blues typically revisit their baseline every 3-5 years.

Proposed PAMA Cuts Test Name Current Reimbursement Proposed Reimbursement % Change CMP(80053) $14.49 $13.04 10% CBC(85025) $10.66 $9.59 PSA(84152) $25.23 $22.71 CT (87491) $48.14 $43.33 PAP SMEAR (88142, 143) $27.29 $25.01 HPV (87623, 624, 625) Vitamin D(82306) $40.61 $36.55 No end date listed on 10% change

Shipwright Healthcare Group Questions? Thank you Shipwright Healthcare Group Shipwrighthg.com Andrew Stimmler astimmler@shipwrighthg.com 267.297.0090 Steve Stonecypher sstonecypher@shipwrighthg.com 980.444.3296