Advantages and Disadvantages Confronting Labs in a Post-PAMAgeddon World. Lâle White, Executive Chairman and CEO, XIFIN Inc.

Transcription

1 Advantages and Disadvantages Confronting Labs in a Post-PAMAgeddon World Lâle White, Executive Chairman and CEO, XIFIN Inc.

2 How Did We Get Here and What s Next? PAMA? Historical Rates In 2014 PAMA Industry Impact What s Next? Based on lab charges in , adjusted annually for inflation 57 local fee schedules Congress imposed across the board reductions to pay for SGR CMS proposed further reductions to reflect Technical Adjustments No cuts Reductions capped at 10% each year Repeal CMS authority for Technical Adjustment cuts 75% of codes on CLFS decreased;10% increased Elimination of ATP payment provides increase in AMCC tests OIG estimates 2018 impact at $670M vs. pre-pama estimate of $390M Fiscal leadership = insight on contractual process reviews and reimbursement due diligence Operational Efficiency Options post dismissal of ACLA suit Getting ready for the next PAMA data collection period 2

3 PAMA & 2019 PFS Impact by Sector (Cumulative) Segment Medicare/ Medicaid % of Revenue 2018 PAMA CLFS Impact 2019 PAMA CLFS Impact 2020 PAMA CLFS Impact No Cap CLFS Impact 2019 PFS IMPACT Pathology 35% -1.50% -2.88% -4.07% -5.32% 0.57% Molecular 26% 0.03% -0.16% -0.31% -0.61% -0.01% Clinical 31% -2.00% -3.77% -5.33% -7.04% -0.04% Pain/PGx 40% -0.63% -0.12% -0.15% -0.73% 0.00% Hospital 12%* -0.82% -1.55% -2.18% -2.81% 0.02% Nursing Home 51%** -3.59% -6.75% -9.44% % 0.00% * Excludes test included in OPPS ** Excluded Part A 3

4 Facility Type Break Down Impacts Analysis Proportion of Total Lab Market Proportion of CLFS Volume POLs 23% Hospital Labs 27% Independe nt Labs Lab Type Percent of Weighted Avg Total Impact % Big Labs 28% (44.8%)* Rest of Ind. Labs 28% 8.0%* Hosp. Outreach Labs 44% 32.1%* Total 100% 3.8% Source: XIFIN analysis based on XIFIN PAMA data set % CLFS Volume Applicable Data % Over/Under Representation Ind Labs 50% 90.1% 40% over Hosp Labs 27% 1% 26% under POLs 23% 7.5% 15.5% under 4

5 CMS Seeks Comments on Potential Changes to PAMA Reporting in PFS Rule Potential expansion in number of reporting labs though smaller in size Expect more: Independent Labs Doctor s Offices While CMS is seeking comments, support for current methodology suggests no inclination to change NPI definition the most significant impact that requires industry call to action. Comments were submitted to CMS by September 10 th, 2018 PROPOSED CHANGES TO THRESHOLDS Majority of Medicare revenues threshold New calculation methodology (excludes Part C from total) CMS suggests that 43% more labs may be included in the applicable lab Low expenditure threshold Proposed changes to $12,500 collection period revenue CMS seeking comments on impact of both lowering (to $6,500) and increasing (to $18,750) threshold NPI definition of applicable lab CMS considers identifying applicable lab using Form CMS x bill type or CLIA vs. NPI CMS Posture CMS tone in seeking comments reflects changes unlikely 5

6 Status of ACLA Suit Challenging HHS ACLA Claim Current Status CMS exceeded their authority to establish market pricing by deliberately excluding hospital labs that make up the largest portion of the market and collecting data from less than 1% of labs Injunctive Relief Sought Bar CMS for implementing the 2018 CLFS Does not challenge rate calculation Order CMS to obey PAMA by revising its pricing formula to include hospital labs as applicable labs for purposes of calculating market rates Feb 14: ACLA motion for summary judgement Mar 23: HHS submitted cross-motion, claims: Definition of applicable lab challenges fees; expressly not allowed by PAMA ACLA fails to show economic injury caused by definition of applicable lab ACLA did not exhaust administrative remedies required by Medicare statute Sept 21: District Judge Amy Berman dismissed ACLA s motion for summary judgement for lack of subject matter jurisdiction Legislative efforts continue Oct 19: ACLA files and appeal While the District Court ruled on narrow procedural grounds, its opinion acknowledges that ACLA s arguments on the merits raise important questions, about HHS s actions 6

7 Private Payor Reimbursement vs CLFS Payor Group Lab NPI Hospital NPI Service Specialties Lab NPI Hospital NPI Blue -23% 426% Therapeutic Drug Analysis -27% 163% Aetna -20% 60% Panels -22% 213% Cigna -22% 95% Tier 1 Molecular -18% 206% Humana -36% 93% Tier 2 Molecular -15% 342% UHC -25% 0% Microbiology -29% 140% Source: XIFIN analysis based on XIFIN data 7

8 Private Payor Pricing Erosion in 2018 Average Allowed for Private Payors Decreased from 2017 to YTD 2018 Hospital -3.5% Independent -2.9% Trends Aetna, Cigna, Blues, UHC offering 20-25% below 2018 Medicare rates Multiplan cutting their fee schedule in half in some regions Increasing number of beneficiaries in high deductible health plans % of Privately Insured Persons Under 65 Enrolled in High-deductible Health Plans 2010-March Series1 Series2 Percentage of persons under age 65 enrolled in a high-deductible health plan without a health savings account or in a consumer-directed health plan, among those with private health insurance coverage. CDHP is consumer-directed health plan, which is a high-deductible health plan (HDHP) with a health savings account (HSA). HDHP no HSA is a high-deductible health plan without an HSA. Source: NCHS, National Health Interview Survey 8

9 Upcoming Timeline for CMS and Laboratories Jan Jun Jan March Sep Jan Data Collection Period CMS makes FFSDC S availabl e for testing Reporting period CMS Develops New Rates Extension CMS Publish Draft Rates CMS Publish Final Rates New Rates Jan Jun Jan March Sep Jan

10 PAMA Data Collection Round 2 Second round of PAMA may cut 15% individual test payment rates by up to Solid reporting from labs is the key to mitigate future price cuts Report on actual allowables vs. payments Validate accuracy of payments Optimize appeals activity to avoid reporting under payments REPORTING PAMA statute allows penalties of $10K/day for each failure to report, error in reporting or omission in reporting applicable information. Correct contracting problems prior to reporting period Eliminate coupled contracts Evaluate fees for each CPT to determine outliers that need to be re-negotiated Establish financial systems with appropriate reporting capabilities and retain source documents 10

11 Strategies for Labs to Offset PAMA Impact Private Payor contract negotiations Leverage hospital to negotiate better lab pricing Leverage regional presence and value based pricing concepts Diversify testing menu and expand specialty testing capabilities Cost reduction efforts Workflow automation to remove clerical decision making and achieve labor efficiencies Reduce total cost of billing to below 4% while achieving bad debt targets 5-20% POTENTIAL A/R COLLECTIONS Update technology infrastructure Web based systems - WS integration capabilities for real time bi-directional connectivity Service based architecture that allows functionality to be used at point of need Select accounting based billing software Financial integrity (GAAP, SOX compliant) Referential integrity Enterprise BI reporting capability Patient engagement automation High deductibles now for 50% of beneficiaries Patient portal, IVR, Electronic secondary insurance filing 11

12 Evolving Market Trends Reimbursement Changes Shift Segment Focus Clinical Lab Physician Office Lab Molecular Diagnostics Hospital / Outreach Pain Management & Device Decline in number of labs offering full testing menus Growth in specialization (Pain, PGX, Cardiovascular, Genetic) Decline of rural labs with high Medicare/Medicaid mix and shift of business to hospital labs with higher routine testing margins Growth in esoteric reference testing labs and tighter partnership with hospitals Continued industry consolidation Independent labs pursue hospital JVs POL menus expand Shift of commodity testing to point of care with analyzer miniaturization & increased waived testing Physicians strive to achieve early diagnosis to manage chronic disease and hospitalization Quality reporting requirements align physicians with hospitals for integrated healthcare Greater physician specialization encourages alignment with specialty labs Post PAMA pricing stabilizing bringing back investment to specialty genetic labs Specialty labs fighting to maximize specialty physician referrals Companion diagnostics drive therapeutic drug sales Data provides new revenue stream for labs and efficiencies for Pharma R&D Hospital labs less impacted by PAMA cuts Health Systems focus on lab efficiencies: profit center vs. cost center Outreach business optimizes lab utilization Rural lab business shifts to higher margin hospital labs Creating complementary Reference Lab Partnerships Bringing lab, device & rad together Post PAMA pricing stabilizing PGX coverage advancing in 2018 Menu diversification extended to adjacent specialty areas, such as wound care Consolidation in market to drive economies of scale High demand created by opioid crisis Growing diagnostic Device Market New technology challenges for coverage & reimbursement Technology needs to align with increasing Segment needs Data Analytics Lab is an actionable data provider Value based pricing negotiations Data supports coverage/reimbursement Quality reporting Infrastructure Technology Infrastructure Connectivity to facilitate clinical integration Scalability Operational efficiency Financial Integrity Financial system GAAP/SOX/FASB Referential Integrity Business intelligence and analytics 12

13 Hospitals & Physician Offices Are Consolidating into Health Systems Total US Hospitals by # beds CAGR: -0.3% Hospitals Hospital Owned Practices 6,000 4,500 3,000 1, % 80% 60% 40% 20% 0% Series1 Series2 Series3 Series4 US Hospital Ownership of Physician Office Practices 14% 17% 19% 26% Hospitals 4,000 3,000 2,000 1,000 0 US Hospitals in Health Systems 3,811 3,884 3,936 4,004 4, Our biggest priority right now is dealing with how to integrate the new hospitals that are joining our system we ve had three in the last year. Director of RCM, Hospital Outreach Lab Source:Health Advances interviews and analysis, SK&A 2016, Kane 2015 AMA, Kane 2013 AMA, Singleton 2015 Family Practice Management, AHA, Laboratory Economics.

14 Laboratory M&A Large national reference labs are increasing their M&A activity, with specific focus on hospitals Labs with specific focus on Hospital Labs. 9 Acquisitions of US Hospital Labs by Major Reference Labs Reference Lab Acquisitions of Hospital Labs Series4 Series3 Series2 Series1 Smaller hospital labs send most of their test volumes out; we have been considering more acquisitions because they are often amenable and we would rather just have them as part of our system. VP Revenue Strategy, National Reference Lab Quest currently owns or manages over 65 hospital labs, and has cited further acquisitions as a core component of future growth strategy Note: Sonic acquired or made deals with 11 European academic reference labs in Source: Health Advances interviews and analysis, company materials, ThomsonOne, King 2013 Dark Daily, Lee 2014 Modern Healthcare, Rubenfire 2016 Modern Healthcare, Haverford 2014.

15 Claims Review Outsourcing Examples Prior Authorization Policy Changes Help Grow Genetic Counselor Roles in Lab Reimbursement April 25, 2018 Avalon LBM BCBS NC/SC Payors Out- Sourcing Lab Claims Management UnitedHealthcare, through its relationship with Beacon Laboratory Benefit Solutions, stopped allowing labs to complete the prior authorization process for a member or ordering care provider on Nov , High confirmed. The impact of UnitedHealthcare's move followed that of Anthem BlueCross BlueShield, which made a similar move on July 1 in partnership with its own lab benefit management subsidiary, AIM Specialty Health. FL 1 st, TX 2 nd, Expanding Beacon AIM UHC Anthem Insurers Turn to Automated Prior Authorization Programs to Rein in Genetic Testing Use August 21, 2017 EviCore (CareCore) BCBS HCSC Insurers worried about the overuse of genetic tests are increasingly employing automated systems to help them keep track of a rapidly growing industry and standardize the enforcement of CPT codes and coverage policies. Even when prior authorizations aren't required for a particular genetic test, it can take multiple rounds of appeals for the lab to convince the payor to cover it. In Cancer Genetics' experience, it can be anywhere from a few days to nine months from the time a claim is filed and when it is paid. 15

16 Major Change in Premier Exclusive Payor Agreements Does the end to UHC and Aetna s sole source contracts with LCA & Quest provide opportunities for OON labs? UHC & Aetna got 10 years of lowest cost at the expense of patient satisfaction Did not improve patient outcomes Did not obtain value based pricing Did not optimize utilization and lower the overall cost of care Generating member limitations to access and choice Resulting in shift to higher cost hospital & leakage costs for OON labs Opportunities with payors for regional & hospital labs Both have more convenient patient access, better T-A-T, community interrelationships Competition needed to improve patient care and the patient experience May be able to leverage non exclusivity to obtain lower fees from hospitals Regional labs need to understand the gaps in coverage payors need to fill (test data, price, comprehensive menu) Payors remain under pressure to keep administrative costs down (MLR with narrow networks) Regional and hospital providers need to determine how they can deliver greater value 16

17 Healthcare Data Remains Largely in Difficult-to-Access Silos Family Care Team Medical Record Payor Research INACCESSIBLE DATA ISOLATED TO PROVIDER OR DEVICE DATA ISOLATED TO DEPARTMENTS W/IN HEALTH SYSTEM

18 Diagnostic Information Empowers All Constituents and Stakeholders Improving Outcomes and Reducing Costs Requires Coordination of Data Patient Engagement Informed Consumer Personalized Therapy Better Outcomes Lower costs Diagnostic Value Proposition Provider Engagement Population Management Clinical Information Decision Support Patient Satisfaction Reimbursement Payor Engagement Population Management Risk Management Plan Design HEDIS and STAR Ratings 18

19 The Evolution of Diagnostics: Climbing the Value Chain Pace of change 150 Years Ago Diagnostics 1.0 Manual MD s Five Senses Is there disease? Source: Mara Aspinall 50 Years Ago Diagnostics 2.0 Basic Tools Introduced What disease? Today Increase in value Diagnostics 3.0 Automation & Medicinal Value What subtype? Is therapy working? Tomorrow Diagnostics 4.0 DX as Standard of Care Knowledge Mgmt Is Core Identify risk? Proactively target? Three necessary components Financial Data Clinical Data Business Intelligence / Analytics Three elements that can change how medicine is practiced and optimize the economics of healthcare Clinical decision support tools Collaboration across MDTs Patient centered coordinated care Laboratory s position of strength Diagnostics influence 70% of medical decisions & represent 80% of EHR Rich set of financial & clinical data Value of Lab to total cost of care 19

20 Macro Healthcare Trends Industry Disrupters Consumerism and Data Analytics Shape the Future of Healthcare Delivery Amazon Chase Berkshire Hathaway Alliance CVS Aetna Merger Cigna/ Express Scripts Walmart Humana Pharma Invests in Labs (Novartis, Roche, Opko) Already obtained licenses for DME distribution in 48 states Both mergers designed to control rising medical costs and provide data analytics Combining retail pharmacies with a PBM Companion Dx drive therapeutic drug sales Could partner with PBMs CVS has 9700 pharmacies & 1100 walk in clinics Data analytics building a 360 view of consumer Big Data (NGS) identifies cancer related DNA Amazon and Echo capabilities (schedule office visit; virtual house calls) Minute Clinic vs. ER option or Physician visit Medicare Advantage growth better care at lower cost Big Data helps physicians optimize test orders and treatment choices AI based in-home healthcare & diagnostics 3 largest PBMs become vertically integrated with insurers (UHC/Catamaran) Delivering care close to consumer Big Data helps manage population health and control medical costs 20

21 Amazon s Strategy to Enter Healthcare Consumerism and Data Analytics Shape the Future of Healthcare Delivery Step 1: Provide the Best Consumer Experience $50-$100 BN Step 2: Make it Easy to Manage Health $100-$500 BN Step 3: Become the New Front Door to Health by Owning the Consumer $500+ BN Amazon, Apple, Google, Microsoft Plan to Enter EHR/EMR Market Start with low hanging fruit like OTC, devices/supplies, and cash pay generics Leverage Alexa to help consumers manage healthcare more broadly Bring Amazon-era decision support to help customers find the best value care Expand the scope of drug products through PBM/payor partnerships Integrate virtual care with Alexa Facilitate healthcare information and transactions Incorporate in-home health services through Uber network of professionals and care givers Amazon IT team (1492) focused on interoperability of EHRs Apple health working on personal health record integration into Apple IOS for iphone, ipad Microsoft working on analytic tools & data storage Google working on data processing & storage Impact on Incumbents: Amazon is another participant in a consolidated space creating pressure on certain business lines, but it is not game-changing Impact on Incumbents: Drug retailers begin to lose strategic control and market share, but other stakeholders (pharma, payors) partner with Amazon Impact on Incumbents: Game over when Amazon owns patient data and influences consumer choice of where to access care 21

22 Patients Are so Frustrated They re Hacking the System Source: Dexcom

23 It s Not Just About the Data; It Is a Change of Mindset Commonality of products that succeed: Quality of life solutions - Improve the Human Condition Make lives better Stumbling Blocks -Outdated, unscalable data technologies -Data Silos -Incomplete cloud strategy -Lack of data engineering/science talent -Rationalizing data platform roadmap to evolving business models -Driving organizational alignment -Establish a vision for the role of Data in your organization -Leadership commitment and organizational alignment -Adopt best-in-class technologies throughout the organization that align with your data needs -Develop easy to convey use cases that demonstrate thought leadership -Develop a plan of execution and align all resources behind the plan Strategic Roadmap 23

24 Thank You Lâle White, CEO XIFIN Inc.