As laboratories remake themselves, will the healthcare industry capitalize?

When it comes to healthcare delivery, laboratories are in a tough spot.

Whether hospital-based or standalone businesses, labs don't do much to stir the souls of healthcare finance executives. They require a lot of equipment and material to operate, while even the priciest molecular tests cost just a few thousand dollars. That's a pittance in the hospital setting, where an aspirin fetches $20 or more or a doctor can bill six figures for making a cameo appearance at a spinal surgery.

Revenue is leverage, and labs generate so little that several big hospital operators dump the parts of their businesses that service outside medical practices. The realm of pathology has also been savaged by huge cuts in Medicare reimbursement, (their colleague doctors have been using most of their power to repeal the Sustainable Growth Rate formula instead).

Yet I can't imagine there is single doctor who wouldn't admit he or she would be flying blind by treating patients without lab tests. Labs are huge repositories of patient data, and they're beginning to flex their muscles in that arena.

A good example is Quest Diagnostics. Its researchers crunched the numbers on more than 420,000 blood sugar tests. They found the rate of new diabetes diagnoses increased 23 percent in states that expanded their Medicaid eligibility under the Affordable Care Act, compared to 0.4 percent in states that did not expand their Medicaid programs.

The conclusion: There are probably tens of millions of low-income Americans that have diabetes, but have yet to be diagnosed, and are unlikely to receive any assistance any time soon. A publicly traded company has just announced a public health crisis--one that will no doubt envelop hospitals in the coming years.

I'm not in the business of feeling bad for multibillion companies, let alone the nation's largest freestanding laboratory. But Quest went the better part of two years without reporting any increases in revenue. It is in brutal competition with LabCorp, whose recent acquisition of drug firm Covance will allow it to leapfrog past Quest in terms of overall size. That it devoted the resources to this report while struggling to grow its test volumes is a sign that the lab sector is trying very hard to recast itself as a macro rather than a micro-messenger.

Another report recently released by the Centers for Disease Control and Prevention and published in Weekly Morbidity and Mortality Report suggests that even the smaller labs try to remake themselves. The CDC reported that 67 percent of the data reports it received from laboratories were submitted electronically last year, compared to 62 percent in 2013. The agency predicts that it could reach 80 percent by next year. Much of that volume was generated by some of the larger commercial labs, but hospital labs transmitted 20 percent of their information electronically last year. That sounds small, but given they only transmitted 14 percent of data electronically in 2013, a significant leap forward.

That's important because the CDC can immediately crunch all that test data as opposed to manually inputting it first. In this era of Ebola on U.S. soil, and parents who think their children shouldn't be vaccinated, this is a major step toward ensuring that any major epidemic is quickly identified and confronted.

How will the healthcare industry financially capitalize on how labs remake themselves as aggregators of data? It's too soon to tell. But given the relentless make-a-buck ethos that rules these shores, we should find out shortly. -- Ron (@FierceHealth

Related Articles:
"Drive-by doctoring" drives up hospital costs 
Medicaid expansion leads to more diabetes diagnoses

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