Summary: According to Avalon Healthcare Solutions’ 2024 Lab Trend Report, the use and cost of genetic testing increased last year, while routine testing remained relatively stable.

Takeaways:

  1. Genetic testing saw an 8% increase in spending and a 5% rise in utilization in 2023, now accounting for nearly 30% of payer spending despite representing only 10% of testing volume.
  2. Routine testing costs remained stable at an average of $175 per member per year, but there was a 13% decrease in spending due to better test mix and data-driven management solutions, even though the volume of routine testing decreased.
  3. Pricing discrepancies in lab tests continue to grow, with hospital outpatient labs charging significantly more than independent labs and physician offices, highlighting the need for better cost management in lab testing.

The use and cost of genetic testing rose last year while routine testing remained relatively stable, according to the new 2024 Lab Trend Report from Avalon Healthcare Solutions, a lab insights company.

New Lab Trend Report

Avalon’s annual Lab Trend Report is based on an analysis of 15 million client health plan members, a subset of Avalon’s 39 million managed lives. It offers an analysis of lab testing and testing trends, a crucial component of healthcare, the company says. Approximately 14 billion clinical lab tests are performed yearly in the U.S., making them the most utilized medical benefit. The results of those tests affect 70% of treatment decisions.

Though lab testing is still a relatively small part of overall health plan spending, health plans are paying more attention as the number of tests grows exponentially and patient demand for testing increases. Avalon says it uses its specialized knowledge of lab science and breadth of data on how lab testing impacts other areas of medicine to identify trends in clinical testing.

“Lab testing is an often overlooked but critical part of healthcare, and it is becoming increasingly important to guiding care decisions,” says Bill Kerr, MD, CEO, Avalon Healthcare Solutions. “Its potential to improve care is vast, but that largely depends on finding better ways to manage its use and associated costs.”

Highlights of the Testing Report

Pricing discrepancies

While the use of testing grows, so do the discrepancies in pricing related to where the tests are performed. The Lab Trend Report compared the prices of a general health panel (CPT 80050) by location and found that a test that cost $27 at an independent lab was $35 at a physician’s office (+30%) and $157 at a hospital outpatient lab (+475%). And the gap is widening. Hospital lab prices are growing faster than independent labs (46% increase in hospital lab prices from 2022 to 2023).

Routine testing

Routine testing, which accounts for approximately 90% of testing by volume, cost health plans that contract with Avalon an average of $175 per member per year (PMPY) last year, roughly the same as in 2022. This contrasts with an industry trend of 2% to 5% CAGR. The volume of testing was down, mainly due to a decline in COVID testing.

A 13% decrease in routine testing spend in 2023 was greater than the 6% decrease in routine testing utilization. This results from a better mix of testing and Avalon’s data-driven management solutions, ensuring members receive the appropriate tests while controlling costs and eliminating fraud, waste, and abuse.

The challenges for routine testing are overutilization and underutilization, the need for disease-specific care models, place-of-service discrepancies, and fraud, waste, and abuse.

Genetic testing

The average health plan spend on genetic testing in 2023 was $13 PMPY, an increase of 8% from 2022. The utilization of genetic testing was up by 5%. This increased spending and utilization are due to the increasing costs of genetic tests and the increasing use of genetic testing and intended use populations. Though only 10% of testing by volume, genetic testing accounts for nearly 30% of payer spending. Spending per member was 3.6x higher on genetic testing than routine testing.

There are over 175,000 genetic tests in the U.S., with about ten new ones added daily, but only about 500 CPT codes to cover them. The challenges to genetic test management continue to be insufficient coding to identify and differentiate tests (40,000 tests under CPT 81479), quality control (including a strong concentration of labs running genetic tests and a shortage of trained lab professionals), pricing, and determining the clinical utility of the tests.

The report, the fourth issued by Avalon, reviews the recent lab data experience and market dynamics to identify significant emerging trends for healthcare executives. It includes:

  • A look at the legislative and regulatory changes affecting testing
  • An evaluation of newly marketed tests and those under development
  • A comprehensive summary of the benefits health plans can realize by integrating laboratory values into their decision-making and member and provider management to realize the promise of patient-centric, value-driven care.

“The necessary transition to value-based care requires a better understanding and management of testing, which will help provide the best possible treatments for patients while controlling costs. This report provides healthcare leaders with valuable information to help accomplish that goal,” says Pamela Stahl, president of Avalon Healthcare Solutions.

Further reading: Novel Strategies Eyed to Break Barriers to Genetic Testing for African Americans