Part 1: Stakeholder perceptions of value

Roundtable moderated by Steve Halasey

The clinical laboratory community has long recognized the need to provide payers and policymakers with a clear understanding of the value of diagnostic testing. But moving that task from the ‘to do’ to the ‘done’ column has proven to be more difficult than those outside the community could ever imagine, and experts acknowledge that the need to demonstrate the value of diagnostics is as strong today as it ever was.

To find out more about how their makers and users view the value of diagnostics—and how changing views are affecting the adoption and use of such tests—CLP recently spoke with a number of experts in the field (see sidebar, Roundtable Participants). Below is the first portion of the resulting conversation, in which participants discuss how various stakeholder groups define the value of diagnostics—and the implications of those definitions for reimbursement and public policy.

Visit the CLP Web site to access Part 2 and Part 3 of this roundtable.

CLP: How do varied stakeholders related to the clinical laboratory community define the value of diagnostics?           

Franz Walt, MBA: We certainly do have a variety of stakeholders—including patients, physicians, laboratorians all the way up to the C-suite decisionmakers, payors, and regulators—and ‘value’ means different things to each group.

For patients, value resides in fast tests that provide accurate diagnoses. For physicians, fast turnaround time and accuracy are important, but they also want to have access to an attractive menu of assays that are relevant to their practice area.

For the decisionmakers in the central lab, there is high value in being able to provide their customers relevant clinical information in a very cost-efficient manner. In addition, laboratorians all over the world tell us they would like to feel more in control. They would like to have a simplified operation. And they would like to be able to optimize patient outcomes as well as their business.

For payors and regulators, key value metrics include a test’s ability to reduce healthcare costs, maximize accountable care, and—especially for regulators—protect public safety.

At Siemens Healthcare, our strategic response to these differing definitions of value is to focus on clinical and workflow excellence. Clinical excellence means offering the right menu of high-quality tests, which is essential for any company doing business in this arena. Workflow excellence means providing the tools necessary to manage a lab’s flow of equipment, materials, samples, and operational information, all in support of providing highly accurate test results to patients and their physicians. By substituting manual steps with automated workflow excellence, the entire process will produce fewer errors, thereby automatically improving clinical outcomes.

Robert Jenison, Great Basin Scientific.

Robert Jenison, Great Basin Scientific.

Robert D. Jenison: Approaching this question more from a point-of-care perspective, the issues are quite similar. Clinicians and patients are the key stakeholders, and for both groups the accuracy of a test is of vital importance. A great example is the problem of Clostridium difficile, a potentially fatal hospital-acquired infection. Patient-to-patient transmission of that pathogen was rising at an alarming rate until more-accurate molecular testing technologies came into play for managing the disease. Since then, the incidence of healthcare-associated C. diff has dropped significantly.

Another objective of importance to clinicians and patients is to have tests that can drive appropriate treatment and patient management within an actionable time frame. Having a fast and accurate test result enables clinicians to treat patients appropriately, and there are many outcomes studies showing that the use of faster, more accurate diagnostics leads to better patient outcomes and lower treatment costs.

The laboratorians who serve as point-of-care coordinators are not unlike central laboratory staff. They want their tests to be accurate and easy to perform, with very few hands-on steps, and they want to have a good workflow. They want to be able to load a specimen into an instrument and return later for the result; they don’t want to have to come back to the instrument to perform processing within the step. Turnaround time is also important, as a way to get the test results back to physicians quickly.

Payors and purchasing organizations naturally look at the upfront purchase costs of both instruments and consumables, but we’re beginning to see them also look at the versatility and cost-benefit profiles of the tests they are planning to adopt. Versatile instruments should be able to run tests that use different types of specimens and produce several types of results. As tests evolve, increased accuracy and reduced turnaround times result in lower hospital costs.

Walt: Running a central laboratory is a little like running a factory, without making compromises on quality. Automation can contribute to this effort, and Siemens is the global market leader in lab automation. But we often have to address the concern of lab technicians that automation will be used to replace people.

The real problem that labs face is not having enough qualified technicians. In this situation, labs aren’t reducing staff, but redirecting them to more meaningful, value-adding tasks. Automation is helping labs to cope with the shortage of qualified people.

Jenison: Automation allows labs to do more work, too. It has really just enabled them to be more efficient in using the resources they have. It’s certainly clear that the number of qualified people in labs is decreasing.

Chris Bird, Roche Diagnostics Corp.

Chris Bird, DPhil, Roche Diagnostics Corp.

Chris Bird, DPhil: Lab professionals understand the value of diagnostics because they’re right in the thick of it everyday. They see the effects that diagnostics have on managing patients—helping to determine whether a patient can be released from the emergency department or must be sent to the catheterization lab for treatment, or providing a diagnosis that can result in the patient having or not having a drug.

However, there may be something of a disconnect between clinical laboratories and the decisionmaking executives in the C suite, who are charged with looking out for the total continuum of patient care. They look at radiology, at the clinical laboratory, at the patient experience with informatics, and a whole lot more. Laboratory medicine plays a part, but it is certainly not the key driver in how those executives see healthcare changing.

To get a seat at that table, laboratory medicine needs to have stronger communications on behalf of its interests, including the value of diagnostics and the roles that diagnostics play in clinical decisionmaking. It is believed that diagnostic testing represents just 2% to 3% of all healthcare spending, but influences 60% to 70% of medical decisionmaking. So the gist of this is that there’s very little spent on diagnostics, but the amount that is spent has significant influence on how decisions are made clinically.

CLP: Brian, in your experience are those numbers about right—a 2% to 3% spend influencing 60% to 70% of medical decisionmaking?           

Brian R. Jackson, MD, MS: The spend side is the more reliable number, but I would estimate that the actual figure is closer to 3% to 5% than 2% to 3%. The 70% number was certainly taken out of the air. Nevertheless, Im personally convinced that the clinical impact of diagnostic testing is disproportionately high in relation to its cost side.

I am a firm believer that getting the upstream steps right is critical to optimizing both the quality and efficiency of healthcare. But I dont know how you would ever set up a study to quantify those relationships.

CLP: Peter, how does the equation for defining the value of diagnostics change when the different stakeholders involved with point-of-care diagnostics are considered?

Peter Koerte, SIemens Healthcare.

Peter Koerte, PhD, SIemens Healthcare.

Peter Koerte, PhD: The point-of-care environment does have many stakeholders, but I would highlight just four, beginning with the patients themselves. Point-of-care testing enables patients to get the results of their tests right away, which is a major factor in increasing patient satisfaction. With point-of-care testing, by the time the patient leaves the doctor’s office or outpatient clinic they may have already received their test results, consulted with their physician, and even been started on a good path forward for treatment. That’s very different from traditional testing, where the patient consults with a physician, goes to a collection station to have their blood drawn, waits several days to receive the results—and then still has to go through another round of appointments to find out what the test results mean and what their treatment should be.

The second group I would highlight is physicians—and especially those in emergency departments—who may need to triage patients and make quick decisions about a course of treatment. Emergency physicians don’t have time to wait for a blood draw or for test results that may show up hours later. By that time, they have moved on to other patients and forgotten where they were with the first one. For this group, the value of point-of-care tests derives from their fast turnaround time, which makes possible better clinical decisionmaking.

The third group is the laboratorians themselves. They recognize that in many areas the central lab cannot achieve turnaround times equivalent to point-of-care testing. In the recent past, companies have developed tools that now enable lab directors and point-of-care coordinators to manage their point-of-care environment much more effectively than they could previously. Being able to achieve the same level of control as they have over a central lab—including quality control, staff training, and proficiency testing—has made laboratorians much more confident about managing their point-of-care programs.

The final and probably most important group is made up of payors and others who are concerned with the economic aspects of testing. It’s important for these stakeholders to understand that faster test results drive better patient outcomes, and better outcomes reduce overall healthcare costs. In the United States, for instance, about 75% of all healthcare costs are related to chronic diseases. Point-of-care testing is at the forefront of population screening to prevent individuals from developing such diseases, and is also a primary tool for monitoring the progress of chronic diseases when they do arise. In this regard, point-of-care testing needs to be both dispersed and ubiquitous, making it possible to control those chronic diseases that are such a great burden to today’s healthcare systems.           

Daniella Cramp, Alere.

Daniella Cramp, Alere.

Daniella Cramp: Diagnostics plays a vital role in healthcare and in improving patient outcomes. Laboratory tests are ingrained in clinical practice: although only about 2% of healthcare spending is related to lab testing, test results influence 70% of all medical decisions.1 Point-of-care (POC) testing performed at or near a patient’s site of care has the added value that test results are available rapidly, enabling healthcare providers to make expedited and informed clinical decisions that help improve patient satisfaction.1-3           

Patrick R. Murray, PhD, BD Life Sciences.

Patrick R. Murray, PhD, BD Life Sciences.

Patrick R. Murray, PhD: Stakeholders within the clinical laboratory community include laboratory directors and supervisors as well as the personnel who actually perform the tests. They have a direct concern for the effects of a test on laboratory workflow, including the number and timing of manual steps involved with performing the test, hands-on time, and time to results. They are also concerned with the cost of tests, reagent stability and storage conditions, quality control testing, analytical performance, and the objective interpretation of results. When it comes to defining the value of diagnostics and determining the benefits of alternative testing options, clinical laboratory professionals consider all of these factors.

If we broaden the community to include the physicians who order tests to detect such infections as influenza, respiratory syncytial virus, and strep, the value of diagnostics would be defined less by laboratory factors and more by factors such as easy sample collection, rapid time to result, and overall analytical performance.

CLP: How do perceptions about the value of diagnostics influence reimbursement and public policy?

Photo WhiteLale_2011

Lâle White, MBA, Xifin.

Lâle White: Although the importance of quality and efficiency in performing diagnostic testing is not self-evident, the payor community has generally accepted the notion that in the lab industry there’s very high value to delivering a quality item in a timely fashion.

Having said that, within the past 20 years clinical labs have gone from offering almost 800 genetic tests to offering more than 33,000 such tests. And the issues for defining value right now have more to do with whether ordering physicians know what tests are available; whether they are able to select the optimal test for the patient’s condition; and whether they are able to get that test performed effectively, efficiently, and with quality in a short period of time.

For reimbursement, the big problem is that payors believe that a lot of these tests are not being ordered or utilized properly, and they don’t think that physicians are making the right therapy decisions after receiving the test results. While these aspects of testing are outside the workflow controlled directly by lab personnel, the need to influence reimbursement policy means that labs must somehow make sure that physicians are ordering the best tests for their patients at the time of service, and that test results provide enough information for physicians to make sound therapy decisions.

From my perspective, communications with physicians about ordering tests with clinical utility are best done at the time of service, using technology solutions that provide physicians enough information to prioritize the types of diagnostics that would be effective for this patient. And when test results are delivered, there needs to be some kind of real-time feedback about what types of therapy should be considered for the patient.

The increase in genetic testing is so extreme that the physician community cannot keep track of it. Meanwhile, payors are declining to cover and reimburse for certain tests and procedures, until they believe that the tests are being used properly and have been accepted as a standard of care.

The explosion of genetic testing has also led to big compression in reimbursement. As a total, the amount of reimbursement that’s being provided is very high. This is an area where payors have to reduce reimbursement, because the Patient Protection and Affordable Care Act (PPACA) changed the way payors are financially measured.

Essentially, payors are requiring tremendous amounts of medical necessity documentation in order to cover anything, and then they are providing very little coverage and lower reimbursement. And it’s all a result of the increase in testing and the fact that physician education isn’t completely there on a timely basis. The diagnostic industry is ahead of physicians in terms of the type of diagnostics being put out, and that education process probably has a technology solution.

Franz Walt, MBA, Siemens Healthcare.

Franz Walt, MBA, Siemens Healthcare.

Walt: Generally speaking, we in industry and our customers in the labs are not doing a very good job selling ourselves as part of the solution, instead of being perceived as part of the problem. I think we should all do more lobbying, of course, and sell the value of diagnostics.

The difficulty in health economics is to find somebody who has a holistic perspective. Normally, companies that make an investment today expect to accrue its benefits later. But today, everyone is focused entirely on the next 3 months; they can’t wait for long-term benefits. In addition, many times an investment in one part of healthcare produces savings somewhere else, but these benefits aren’t acknowledged because they are in a different budget. Nobody has a holistic budget perspective.

We have additional challenges when it comes to providing evidence for diagnostics. In the pharmaceutical industry, by way of contrast, blockbuster drugs undergo 8 to 12 years of clinical trials and may be expected to have sales of a billion dollars or more, so it’s very easy to establish clinical evidence. There is also a causal relationship between taking a drug and the effect of that drug, which is easier to measure.

For diagnostic tests, the situation is much more fragmented. There is less sales revenue behind an individual test, making it difficult to justify very expensive investments in clinical trials. On top of that, it is often very difficult to isolate the effects of a diagnostic test. Even if the test results are extraordinarily accurate, they can still only influence a physician’s choice of therapeutic actions. By themselves, diagnostics have at best an indirect impact on improving medical outcomes.

What diagnostics contribute is everything necessary to get the right quality of test result into the hands of the corresponding decisionmakers as quickly as possible. That is a valuable contribution that deserves better recognition.

Jenison: The value of a diagnostic is usually strongly associated with its clinical utility, which ultimately also drives reimbursement. If a test is medically necessary and there are no acceptable alternatives, payors will provide reimbursement. Payors also want to see that diagnostic tests can provide value in the form of reducing unnecessary treatments, or driving toward appropriate treatments, which is key for treating infectious diseases. Giving appropriate treatment sooner results in better patient outcomes. Taking these factors into account, our overall objective should be to provide tests that are deemed medically useful, as demonstrated in better patient outcomes and lower treatment costs.

But achieving that objective can be tricky. There is also an increased interest in capturing additional information about patients and their diseases, as in the case of large-scale genomic sequencing initiatives. In some cases, the capabilities of new diagnostics are running a little bit ahead of clinicians’ knowledge about how to use them. Information is being provided that doctors don’t know what to do with.

At least for now, and in the near term, our company intends to keep focused on panels that deliver clinical utility, and not to provide information of no clinical value.

Bird: Personalized healthcare and precision medicine are two ways of referring to the similar goal of developing therapies that are very targeted to their intended populations, as designated by companion diagnostics. This trend has dramatically enhanced the role of diagnostics, to the point that a patient cannot even be prescribed some drugs without prior use of a diagnostic.

In the past, using companion diagnostics to guide prescribing was the exception rather than the rule. But because Roche has both pharmaceutical and diagnostics divisions, we’re seeing that the expectation of using a companion diagnostic is more and more becoming the rule when a company is trying to influence a payor to cover a drug. More and more, when we are going to market with a drug, we’re meeting with policymakers in pairs. Because the policymakers want to make sure that we are addressing the healthcare risks that can arise with the use of a new drug, and that we are appropriately managing the risk-benefit ratios that relate to economic pressures. As a result, the value of companion diagnostics has increased, because they can curtail costs through better drug selection and patient management.

The rise of companion diagnostics has changed views about the value of diagnostics. And on the reimbursement side, we’ve seen preferential reimbursement for companion diagnostics that have gone through a very thorough FDA review. When there is preferred reimbursement for FDA-approved companion diagnostics, this shows that payors value the role of diagnostics in the process, and understand that they really can help manage care a little bit better.

CLP: If there is pressure in the payment system, labs are really at the epicenter. Brian, how do labs view the issue of value versus reimbursement and public policy?

Brian R. Jackson, MD, MS, ARUP Laboratories.

Brian R. Jackson, MD, MS, ARUP Laboratories.

Jackson: It’s historically problematic. Labs are highly underappreciated at the public level, and also at the reimbursement level. This is part of a larger phenomenon affecting today’s healthcare systems, which is that healthcare tends to be managed from an accountant’s perspective rather than a clinician’s perspective. To an accountant, every aspect of healthcare is a cost bucket that can be analyzed in isolation. But diagnostics are not like drugs or surgical procedures, which have a direct impact on the patient. When you take a diagnostic test out of context, it’s really hard to answer the question of what its value is to a patient, because lab tests only provide value in a clinical context. Lab testing has a really important impact on patients, but in an indirect way.

So the value of lab testing is all about integration into the clinical scheme. Yet historically, hospitals, healthcare systems, and insurance payors have all managed laboratories in isolation. I think that’s really problematic. It’s problematic for FDA to try to evaluate the risks and benefits of lab tests if it’s not doing so in the context of a clinical process. My hope is that the movement toward value-based care, bundled payments, and more attention to clinician and patient perspectives, as opposed to payor perspectives, will lead to greater recognition of the value of the whole clinical process. In turn, this should lead to tighter integration of labs in that process, and a greater appreciation of their critical role.

CLP: Peter, do you see point-of-care diagnostics earning preferential payment for the value they provide, or does the pricing of such tests also suffer from significant downward pressure?

Koerte: The pricing pressure is certainly there. Nevertheless, the fact of the matter is that in order to treat a patient well, one must have the right diagnosis. And in general, that’s what diagnostics are meant to provide.

But the cost issues are serious, especially in the United States, where something like 17% of GDP is spent on healthcare. There may also be some isolated tests that have been misused, in the sense that, in a fee-for-service environment, simply having a reimbursement code can drive increased usage of a test.

The value of a test always needs to be demonstrated in terms of its clinical context, with a clear definition of when the test should be used and when it should not be used. Right now, for example, we are working with the National Kidney Foundation to target individuals at high risk of developing kidney disease, which includes people over 60 years old, diabetics, hypertensives, and people with a family history of kidney disease. Many studies have demonstrated the value of albumin to creatinine ratio as a screening tool in this population. Outcomes studies such as these are needed to establish the value of a test, and to provide support in discussions about reimbursement.

Cramp: In general, payors and policymakers are not aware of the full value of laboratory diagnostics. As a result, there is constant pressure to reduce reimbursement for diagnostic testing. In vitro diagnostics manufacturers are continually challenged to demonstrate the value of their tests for both positively influencing patient outcomes and providing efficiency to healthcare systems.

Steve Halasey is chief editor of CLP.


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  2. Drain PK, Hyle EP, Noubary F, et al. Diagnostic point-of-care tests in resource-limited settings. Lancet Infect Dis. 2014;14(3):239–249.
  3. Lewandrowski EL, Lewandrowski K. Implementing point-of-care testing to improve outcomes. J Hosp Adm. 2013;2(2):125–132.