Public Health Laboratories and Health System Change . 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.