Public Health Laboratories and Health System Change . Impact of Managed Care on PHLs

The presence and growth of managed care has posed significant financial and organizational challenges to the clinical laboratory market as a whole. Because managed care organizations (MCOs) emphasize cost reduction, often have limited (or exclusive) arrangements with suppliers and service providers, and may tend to treat, not test, public health officials have been concerned that the growth of managed care would have negative impacts on the functions and practices of PHLs. Specifically, PHL stakeholders proposed two main hypotheses on managed care's possible adverse effects on the functions of PHLs:

• PHLs traditionally serving as the primary providers of diagnostic testing services to the Medicaid population will lose testing volume, and possibly entire testing areas, as these populations are covered by MCOs that have contracts with private clinical laboratories.
• PHLs traditionally playing a large role in disease reporting fear a lack of responsiveness to disease reporting requirements on the part of many MCOs. This lack of responsiveness, coupled with a possible approach of treating patients immediately rather than testing to identify the cause of an illness, may result in diminished disease surveillance and monitoring capacity.

Results of our poll show that PHL directors believe managed care is having an adverse effect on PHLs practices and functions. Twenty-one of the PHL directors (43%) stated that managed care had an adverse impact on their laboratories' functions (see Figure 15 below).

Figure 15: Managed Care Impact on PHLs

• Reduced PHL Testing Volume

  • The most frequently reported impact of managed care was a reduction in the number of specimens submitted to the laboratory for testing. Seventeen of the 49 PHL directors (35%) reported that managed care had led to a decrease in the number of specimens sent to the laboratory. Reports of testing decrease as an impact of managed care were directly related to the level of managed care penetration in the state. PHLs in states with high managed care penetration had a greater probability of associating managed care with reduction in testing volume. Some PHL directors specified the types of tests for which volume was decreasing, and others indicated specific initiatives (e.g., Medicaid managed care) as contributing to a general decrease in testing at the PHL.The results from the poll are corroborated by our findings from the case studies and interviews. The Tennessee PHL director reported that TennCare, the state's managed Medicaid program, has indirectly resulted in a reduction in test volume for the state's PHL. The PHL traditionally conducted much of the patient testing for the Medicaid population. However, with the implementation of TennCare, Medicaid patients were covered by MCOs that chose to subcontract for laboratory services with large independent reference laboratories like LCA, thereby bypassing the PHLs.

    Other state PHLs have also suggested that managed care is indirectly affecting their testing volume, either for all tests or for specific tests that are of public health importance and do not necessarily affect the treatment of individual patients (e.g., blood lead testing). Kansas's state PHL estimates that it has seen a 5-8% decrease in testing volume, due in part to the presence of managed care. States such as Connecticut, Maine, and Wisconsin have also noted decreases in the number of specimens seen by the laboratory. Four other PHLs have reported a decrease in the number of blood lead tests performed by their laboratories.

• Concerns About Reporting

  • Another concern of PHLs is that MCOs' member-driven focus (rather than public health / population-driven focus) will reduce disease reporting and thereby hamper national disease surveillance activities. While we did not uncover any empirical evidence to support this contention, three PHL directors, two state epidemiologists, and a CDC official in laboratory systems expressed concern that MCOs may not be accurately reporting true infectious disease incidence in their populations to state health agencies (e.g., since they may be less inclined to test).

• Difficulty in Obtaining Payment

  • Several PHL directors reported concern related to difficulty in obtaining reimbursement from MCOs for testing services rendered for their members. For example, Florida's PHL director reported that some managed care clients seek treatment at a county health department without authorization from the managed care organization, have tests performed by the PHL, then face MCO refusal to pay the PHL for testing services. Similarly, in New Hampshire, the PHL noted that it performed infectious disease testing for MCO providers B who sent specimens to the PHL for testing B only to have the MCOs refuse reimbursement because the PHL was not their contracted laboratory. The Texas PHL director echoed the problem of free-riding' off of PHL services by MCOs for their Medicaid members, and its inability to obtain reimbursement from MCOs for its testing services.

    Inherent in this comment is the conviction of many PHL directors, as expressed in our interviews, that a central mission of PHLs is to provide laboratory services to disenfranchised populations, regardless of their ability to pay. While providers in the health care system will typically establish financial terms with payers before delivering services, the labs almost universally provide services first and seek payment retrospectively. As noted in some of our interviews and discussed later in this document, proactive establishment of relationships with MCOs and other payers would help to mitigate this problem.

• Improved Collaboration With Private Constituencies

  • A few PHLs in our informal poll reported positive impacts from the growth of managed care. According to our informal poll results of PHL directors, among the positive impacts identified by PHL directors were increased collaboration between the PHL and the state health agency, and an increase in specialized types of reference testing by the PHL.

    In Virginia, the recognition of managed care and the pressure to be cost conscious have prompted the state PHL to strengthen its partnership with the state health agency, particularly the Office of Epidemiology. In Kentucky, the state PHL has begun its strategic planning process for the laboratory, which coincides with the Kentucky Department of Health's overall strategy development initiatives in response to increased managed care presence.

    Another example of collaboration, due in part to the growth of MCOs, is the Washington State Clinical Laboratory Advisory Committee (CLAC). With membership from both the public and private sectors, this program has assumed a proactive leadership role in shaping the laboratory delivery system in Washington state. Results from this program (described in more detail below) include improved communication, consensus on reimbursement issues, and pilot programs in the area of clinical guidelines.