Public Health Laboratories and Health System Change . Conclusions

The PHLs we studied are operating in a highly fluid and challenging environment. While the function of PHLs varies from state to state (each is unique with respect to its approach, the services it offers, and its history), every PHL serves a pivotal role in linking the private and public sectors. Funded by public sources, PHLs are typically intertwined with the private sector as regulator, arbiter of policy concerns, and sometimes competitor as the provider of tests or services.

As detailed in this report, directors of PHLs see fundamental change on both the public and private sides of this complex ledger. On the private side, PHLs see managed care and independent laboratories growing in strength, as well as rapid technological change in both clinical and information technologies. On the public side, PHLs see a re-definition of the public health safety net, reliance on managed care to address public health needs, and tightening state budgets.

This study presents a framework for understanding PHLs in the context of the larger laboratory services marketplace and fundamental changes to the health care system. To develop this framework, we polled PHL directors from every state, interviewed numerous laboratory stakeholders in both the public and private sector, conducted in-depth case studies of three PHLs, and also carried out secondary research.

The purpose of this final section is to summarize what we learned through this study with reference to two fundamental issues: (1) strategic positioning of PHLs and their core functions relative to health system change; and (2) critical policy issues the state and the federal government will face over the coming decade. We also acknowledge the limitations of our study and suggest avenues for further research.

• Impact of Managed Care

  • The initial purpose of the study was to characterize the relationships between PHLs and managed care organizations in the context of health system change. There is universal concern in the public health community about managed care. Despite some isolated examples of positive effects of managed care on PHLs, such as increased reference testing for select areas and better coordination with the state health department, our results suggest that managed care is creating considerable anxiety in PHLs. In most cases, the impact appears to be modest or even minimal, but the novelty of this topic suggests to PHL directors that we have only observed initial effects.

    PHLs serving as traditional providers of testing services for Medicaid populations have seen reductions in testing volume and diminishing testing areas as these populations have entered coverage under managed care. Although this effect was reported in seventeen states, when quantified, its magnitude appeared to be relatively small. The effect did, however, vary with the strength of the managed care presence in a state - states with high levels of managed care penetration had a greater probability of reporting decreased testing volume due to managed care. Some PHLs report small reductions in all types of testing volume, while other states report reductions for only certain types of specimens (e.g., blood lead).

    Several PHLs have reported difficulty in obtaining reimbursement from MCOs for testing services rendered to its members, and a number of PHL directors believe MCOs' lack of awareness of, and responsiveness to, disease reporting requirements are negatively affecting the PHLs' disease reporting efforts. We did not uncover any formal information to support this latter contention, but it may well be correct - establishing this link is beyond any of the data we encountered in conducting this study.

    A critical shortcoming in the current debate (and a limitation of this study) is that there is currently no mechanism through which adverse effects on PHL function can be quantified. While there are data showing decreases in the number of samples for selected tests, this may well be due in part to reductions in unnecessary testing or the growth of commercial laboratories. Furthermore, despite constraints in many PHL budgets, there is no tangible indication that PHLs are having difficulty achieving their core objectives. This is an issue of major public health importance that merits further study.

    In response to managed care's increasing reach, some PHLs have pursued contractual relationships with MCOs. However, despite much discussion on this topic at conferences and among the PHL directors, very few of these contracts currently exist:

    • In Minnesota, the PHL has two limited contractual arrangements with MCOs: one in which it provides laboratory testing for pertussis, and a second in which it performs adenovirus tests. The first contract has produced only 250 specimens since 1995, and the second contract was fulfilled in 1996 and not renewed.
    • In Tennessee, the state PHL has contracts with three of the twelve MCOs that cover beneficiaries from the state's managed Medicaid program, TennCare. The contracts, which constitute less than 5% of the PHL's annual revenues, create reimbursement vehicles for tests that the PHL provides for local health departments that have re-invented themselves to be TennCare primary care service providers in remote areas.
    • In California, a PHL in Alameda County became a joint contractor with a private laboratory and county hospital laboratories to provide services to MCOs covering local MEDI-CAL patients. The venture was intended to avoid redundancy and create full service areas. However, the PHL reports that it has not produced anticipated test volume increases.
    • The Colorado PHL has limited agreements with MCOs for selected services.

    In addition to the above cases, a few states (e.g., Arkansas, Florida, Maine, and Michigan) have indicated that they are attempting to establish some type of contractual relationship with MCOs. These activities are currently in the discussion stage.

    Our results clearly show the PHL directors are highly anxious about the impact of managed care. However, the adverse effects of managed care cannot be supported empirically, raising the possibility that these fears may in fact be misguided. Managed care is only a small part of broader changes affecting the laboratory infrastructure, which include consolidation of hospital labs and the growth of large commercial laboratories. Further, these changes present significant opportunities to improve the provision of laboratory services and the collection of meaningful data on which to base policy advice.

    Our results also show that there has been little proactive leadership from the public sector in shaping the laboratory delivery system. With a few notable exceptions (e.g., the activities in WA state), lab directors, state decision makers, and the federal government have done little to strengthen the PHL infrastructure. There is no single and clear locus of responsibility for such matters within the CDC or elsewhere within HHS. At present, one of the weakest parts of this infrastructure appears to be information systems, but the entire system needs to be reviewed carefully to prevent deterioration of this important aspect of our public health infrastructure.

• Evolution in Laboratory Infrastructure

  • While the initial focus of this study was to explore the relationship between PHLs and managed care, over the course of the study, other environmental factors proved equally, if not more, important influences on the PHL operating environment.

• Models for Relationships

  • Our interviews and case studies revealed a number of models for relationships between PHLs, MCOs, and commercial laboratories that reflect different attitudes about the core functions of PHLs and the very different current configurations of PHLs relative to testing. These diverging (but not mutually exclusive) approaches also have implications for the federal role in promoting the public health infrastructure through laboratory services.

• Core PHL Function

  • A central concern of both state and federal actors is the definition of core PHL functions and activities. This subject has been closely studied over the years by the Association of State and Territorial Lab Directors (ASTPHLD) and by a number of PHL directors. As discussed above, the function of PHLs varies dramatically from state to state. The notion of a core set of activities is particularly charged, because it defines the appropriate role of the PHL in the safety net.

• Positioning PHLs for the Future: The Federal Role

  • It was striking to us how many times interviewees stressed the need for federal leadership. While our report stresses the need for proactive change among states in defining, protecting, and enhancing the role of PHLs, some consideration of the federal role is clearly in order. The fragmentation of responsibilities vis-à-vis the labs within the CDC, as documented above, is of particular concern to effective support of PHL functions. The themes that emerge in this regard are laboratory system structure, information technology, and facilitation of communication.