Public Health Laboratories and Health System Change . Other PHL Responses to Managed Care and Health Market Change

10/06/1997

Aside from engaging in contracting with MCOs and/or private laboratories for clinical services and collaborating on laboratory issues with the private sector, a number of state PHLs have, or are beginning, strategic planning efforts to address the changes in the clinical laboratory services marketplace. These responses include narrowing down the types of testing performed by the PHL and tailoring PHL testing services to suit potential managed care clients. The following examples illustrate some of the different state-level responses to managed care and other health market change that were uncovered by our interviews and case studies.

The Michigan state PHL (called the Bureau of Laboratories) is seeking to shape managed care activities to be responsive to public health needs. By narrowly defining their testing functions to encompass only tests of public health importance or specialized tests best centralized for purposes of cost and quality, the Bureau has enhanced its ability to establish collaborative relationships with private sector laboratories as well as other state and local public health agencies. The Bureau has used this ability to influence state policy, outlining the responsibilities of MCOs with regard to laboratory testing and disease reporting. Additionally, it has cultivated relationships with private sector laboratories to ensure that the Bureau can continue to serve its traditional public health functions even as hospital laboratory consolidation and other health system changes proceed.

Michigan is also engaging in collaboration activities as part of the state's overall response to health market change. The PHL in Michigan has traditionally avoided competing with reference laboratories by refraining from providing routine diagnostic tests. In addition, Michigan has formalized the notion of public-private collaboration in laboratory services by creating the position of Managed Care Coordinator at the PHL. The Managed Care Coordinator is responsible for maintaining communication with MCOs and private laboratories, and ensuring that MCOs support the state's testing and disease reporting programs as more of the state's Medicaid population moves to managed care. It should be

noted, however, that beyond the implementation of this position, most of Michigan's efforts are in the planning stages (see below).

Aside from strategically avoiding competition with the private sector, the Bureau's success can be attributed to its commitment to active advocacy for laboratory issues and its experienced leadership, which facilitates steady access to state funding and opportunities to participate in high level decision-making within the Department of Community Health. Recently, the Bureau played a significant role in drafting the state's latest request for proposal (RFP) for MCOs seeking to provide services to the managed care population. The Bureau ensured that issues relevant to disease reporting and specimen/isolate submission were included in the RFP. The part of the RFP most directly contingent on the Bureau's involvement was a table describing the various duties of the health plan, the local health department, and the Michigan Department of Community Health with regard to initial testing, reference testing, confirmatory testing, and disease reporting (see Michigan Case Study Report, Appendix D).

Other states that have used the approach of avoiding direct competition for select testing services with the private sector include Massachusetts and Vermont. Massachusetts's PHL recently decided to discontinue its Lyme Disease testing service because it was losing much of its business to the private sector laboratories in this area. Similarly, Vermont does not duplicate laboratory services, such as HIV testing and syphilis testing, which are performed by private laboratories in the state, and the PHL supported the state health department's decision to outsource chlamydia and gonorrhea testing to the private laboratories. However, Vermont's PHL has retained and continues to perform some testing services that the private laboratories do not currently perform (e.g., water testing, food-borne illness, salmonella, yersinia, hepatitis testing). New Mexico PHL officials, in anticipation of managed care, are prioritizing those functions specific to assessment, quality assurance, and policy development, and plan to discontinue clinical chemistry tests and other routine, patient-specific diagnostic tests that compete with private laboratories.

In New Jersey, on the other hand, the shift of health care delivery to MCOs has elicited a competitive response from the public health infrastructure, and the PHL in particular. Interviews indicated that PHL officials were not confident in their ability to rely on direct state funds to ensure long term financial stability, and, therefore, have embarked on a plan to improve efficiencies across all public health laboratories in the state (i.e., county and local laboratories as well as the state PHL) in an effort to obtain contract work from MCOs. In addition to streamlining processes across the state, the PHL has recently made capital investments, allowing it to perform clinical chemistry tests and other routine patient tests on a larger scale.