Public Health Laboratories and Health System Change . Issues Inherent in Health Market Change

10/06/1997

Changes in health markets and environment faced by PHLs naturally raise the question of whether the core functions of laboratories must change in response, or - to take a more activist position - whether more leadership from the laboratories can improve the public health. Our study suggests that while the overall charge of laboratories (e.g., involvement in assessment, assurance, and policy development) remains constant, many of the tactics used to achieve these goals must change in the context of health system and technological innovation.

There will always be a heated debate over what laboratory services belong in the public sector. PHL directors typically maintain that states can often provide services less expensively and of a higher quality because there is no profit motive. Commercial laboratories typically maintain the opposite position. We would not presume to judge this debate, but would point out that every situation is unique and that neither side is always correct.

There are some services that most agree belong in the public domain. These services typically include tests that are not commercially viable as well as those that are critical to ensuring that emerging infections are identified. Most MCOs will also not assume responsibility for environmental testing (e.g., lead and water) on their own, and it is unclear whether they will ultimately pay for population health management when there is no immediate payoff in reduced costs.

PHL viability in generating revenues is a central issue in defining core PHL functions. Public health officials are split on this issue between those that believe that PHLs need to show value and avoid "dumping" of patients by assessing user fees, and those that believe that user fees establish a perverse relationship with the private sector and may discourage indigent patients from seeking services and should not be assessed. Most states have established a middle ground by assessing user fees on some services in some cases; others leave the decision to the LHDs.

Another fundamental issue is whether direct patient care testing generally considered an "assurance" function is core. Over the years, many PHLs have done a considerable amount of direct patient care testing (e.g., STDs, HIV, TB, neonatal screening) and, in some cases, have derived significant revenues from such activities. Although such testing has often been provided in conjunction with counseling, case management, and other public health services, others have not. The debate in this area centers not around the reporting of results, but rather whether the state should be engaged in de-facto competition with the private sector.

Most neutral observers agree that quality assurance remains a critical function for PHLs. While regulators will never be popular with industry, assuring the quality and consistency of testing is a core public function, particularly in the area of infectious diseases. However, quality assurance needs to be updated relative to information technology; private sector stakeholders expressed strong and legitimate concerns about the cumbersome nature of regulatory intervention in most states.

Finally, policy development also needs to change in response to changes in the healthcare system. The notion of public-private partnerships has come into vogue, and, as the Washington experience shows, can be used proactively by states to help shape the delivery system. Policy development in laboratories also needs to come to terms with the growth of managed care, which is an important policy goal in most states. The Michigan experience demonstrates that states can use state managed care contracting proactively to forge a stronger safety net.