Get the E-newsletter
The ongoing flood of newly available
laboratory tests comes with a big downside: They are increasing healthcare
costs but, in many cases, not improving the value of care.
“Although there are new diagnostic
tests coming out, there are few studies that focus on when a test is clinically
useful and when it is appropriate to perform a test,” says Mary Zutter, MD (pictured at right), vice
president-integrative diagnostics at Vanderbilt University Medical Center
(VUMC) in Nashville.
In some instances, in fact, there is
a lack of clarity about the utility of a given test under any circumstances.
“We often see new tests that have almost no evidence—tests that are only
available from one small company and the only paper about it was paid for by
that company,” she says.
VUMC is tackling the challenge with
a laboratory formulary—a list of approved tests and the guidelines for ordering
them. A multidisciplinary
committee vets every new test proposed for the formulary and reviews
the value of longstanding tests to identify those that need to be dropped.
In 2016 alone, the formulary
approach saved more than $1 million, in part by eliminating some low-value
tests—for example, tests that are commonly used but only appropriate for
specific situations. The savings also came from restricting the circumstances
under which some tests can be ordered and controlling who can order certain
Physicians historically have been
trained to prioritize “thoroughness,” but today’s medical practice must be
guided by value, says Tina Hartert, MD, co-chair of VUMC’s Laboratory
Formulary Committee. “Sometimes on the clinical side, we don't ask the question
of why we need this, what we're going to do with the information, and what's
the downside of getting the same tests done every day during an inpatient stay,”
she says. “This is an area where there has been a lot less focus on both
improving quality and containing costs.”
The concept of a laboratory
formulary began to emerge in health care several years ago, although it has not
been widely adopted. That may reflect the lack of consensus about what a good
“What is amazingly lacking are
guidelines for the most efficient and effective use of a laboratory test,”
Zutter says. “We have to create our own knowledge base around the guideline
VUMC’s Laboratory Formulary Committee
supports the organization’s commitment to Choosing Wisely, a national
initiative of the American Board of Internal Medicine Foundation that
encourages providers and patients to avoid common medical tests and procedures
unless they are truly needed.
“From an institutional perspective,
there's this broad campaign about ‘choosing wisely’ to improve the quality of
care and contain costs,” says Hartert, who is VUMC’s assistant vice president
for translational science. “Does a patient need a blood count every day? It’s
the idea of asking, ‘Do I need to order this test?’ and ‘What am I going to do
with the information from this test?’”
The proliferation of new tests is
contributing to America’s healthcare cost crisis. As of mid-2017, there were
about 75,000 genetic tests on the market, with about 10 new tests appearing
daily, according to a Health
Affairs article. Each DNA
sequencing costs about $1,000.
Those advanced diagnostic tests
contribute to the cost trends in laboratory testing overall. “Laboratory spend
is increasing at nearly double the rate of the healthcare spend in general, so
people are beginning to recognize it as a genuine monetary issue,” Zutter says.
More than 5 billion laboratory tests
are ordered each year, according to Costs of Care, and many of them are
either duplicates or the wrong test. In fact, a study found that, when a clinical-decision support tool blocked unnecessary duplicate
test orders during computerized physician order entry (CPOE), nearly 12,000
tests were prevented over two years, saving more than $180,000.
Despite the “low-hanging fruit” in
U.S. medical labs, the cost of testing has traditionally not received much
attention because, compared to other areas of spending, most tests are
relatively inexpensive. In most cases, clinicians who order lab work have no
idea what a test costs, so it’s easy for “more is better” thinking to take hold,
“It’s not just the cost of the
test,” she says. “Every test requires a paid person to draw the blood and a
paid person to run the test, even if the blood test itself is very
The biggest value in eliminating unnecessary tests is in
improving the quality of care. “Inappropriate testing actually leads to more
inappropriate testing,” Zutter says. “If a patient receives a
borderline test result, they have to come back to the hospital or clinic for
retesting, thereby delaying diagnosis, increasing costs, and consuming more
time—not to mention the unnecessary anxiety and inconvenience we’ve created for
The Laboratory Formulary Committee—a
subgroup of the Pharmacy, Therapeutics and Diagnostics Committee—reports to the
medical center’s medical board. The committee consists of voting members from
several clinical departments and specialties, including a pathologist.
“At VUMC we’ve been extremely careful
to ensure that the process is not perceived as driven by a select group,”
Zutter says. “Providers from across the institution are involved in making
decisions that impact patient care.”
The following elements help the
committee function effectively.
A standardized decision-making process. A template guides the presentation
of each new test being considered. The presentation includes a description of
the test, the data that supports its utility, when the test should be ordered,
how test results should be interpreted, and the financial impact of the test.
Committee members discuss what they
heard in the presentation and then vote on whether to add the test to the
formulary. A simple majority decides the vote, but Zutter says every vote has
been unanimous (sometimes after delaying a vote and asking the requesting
provider for additional evidence or for a way to monitor testing over time).
The committee votes not only on new
tests but also on removing tests from the formulary, restrictions on who can
order or when a test can be ordered, and clinical-decision support protocols to
be added to the CPOE system.
“We don't completely eliminate anything that has some
value,” Zutter says. “We'll often provide an alternative test, and our health
IT team will develop a best-practice alert that pops up to tell a physician
that this is the better test to be ordering.”
Support from the finance department. For each test under review, a member
of the finance department uses several data points—including the applicable CPT
codes; estimated volumes for the test; the ratio of tests likely to be done in the
inpatient versus the outpatient setting; and the payer mix for the patient
population most likely to receive the test—to estimate the cost to individual
patients and to the institution.
A finance department leader presents
that information to the Laboratory Formulary Committee right after the
clinical-utility information is presented.
Efficient implementation of decisions. An implementation team, which Zutter
leads, includes laboratory medical directors, administrators, finance
department representatives, laboratory information systems specialists, health IT
developers, data analysts, genetic counselors, and project managers.
That team meets—typically a week
after the formulary committee meeting—to communicate the committee’s decisions
to all laboratory staff and providers. The IT team members make sure formulary
changes, along with decision-support guidance, are reflected in the CPOE system
that providers use to order tests, and they track the outcomes of the formulary changes.
“If we add something, take something
away, change an algorithm, or provide clinical-decision support, we ask Dr. Zutter’s
group to look at the impact of that and come back to our committee with
outcomes data in six or nine months,” Hartert says. The data provide insight
into changes in test ordering and, when applicable, in clinical outcomes.
About 60 percent of the committee’s work is evaluating new
tests that a provider has proposed for the formulary; the rest is reviewing
tests already on the formulary, Zutter says. For example, if there is wide
variability in the usage of a certain test among different physician groups, or
the National Comprehensive Cancer Network Guidelines change for a given test,
the committee conducts a review.
In 2016, savings came from:
Eliminating tests that offer low
example, providers often were ordering a special test—fractionated
25-hydroxyvitamin D, in addition to a total Vitamin D test—as a matter of
course, even though the special test was recommended only for certain clinical
presentations. By removing the test from the order menu, VUMC saved nearly
$103,000 in 2016. (The test remains available for patients who meet the
Restricting when certain tests can
be ordered. Physicians
often order certain tests for inpatients—for example, genetic tests—that might
provide helpful information, but the turnaround time for getting results typically
exceeds the patient’s expected length of stay. Thus, the results are not
available for decision making about treatment during the inpatient stay.
The Laboratory Formulary Committee set a rule that, if an
inpatient test has a median turnaround time of more than seven days, it must be
approved by a laboratory medical director before it will be conducted. In 2016,
the rule led to a 48 percent decrease in the ordering of tests with long
turnaround times, saving VUMC more than $250,000.
Requiring expert review for all
These tests, some of which cost more than $10,000, are among the most expensive
and most likely to be ordered inappropriately. The committee established a team
of genetic counselors and pathologists to review all orders for genetic tests
to consider appropriateness, price variations among vendors, and other factors.
In 2016, canceled and modified genetic test orders resulted in more than
$390,000 in savings.
that have traditionally been in the formulary but are of questionable value are
reviewed by the committee only after providers have been contacted. If a test
is being considered for review, the health IT staff creates a list of the
physicians who order it.
engage the providers and senior leaders prior to a presentation to the
formulary committee,” Zutter says. “It's really the teamwork that has made us
The laboratory formulary concept also
has the clear support of Jeffrey Balser, MD, PhD, president and CEO of the
medical center. Zutter recommends that other health systems adopt a formulary
only if senior leaders are enthusiastic about the concept.
“The senior leadership of the
hospital as well as the involved stakeholders must be supportive and be willing
to provide not only support for the individuals leading the program, but also
guidance that endorses and solidifies the path for the institution,” she says.
Lola Butcher writes about healthcare business
and policy topics for several HFMA publications.
Interviewed for this article: Tina
Hartert, MD, MPH, assistant vice president of translational science, professor
of medicine, and director of the Center for Asthma Research, Vanderbilt
University Medical Center (VUMC), Nashville; Mary Zutter, MD, vice
president-integrative diagnostics and professor of pathology, microbiology, and
Kaufman Hall: Five Key Learnings from HFMA’s Financial Analytics Leadership Council
Grant Thornton: Guiding Organizations Through Cloud-Based ERP Adoption
A senior leader at Grant Thornton LLP HealthCare Advisory Services talks about key ways to lay the groundwork for a shift to cloud-based ERP solutions. Insights stem from a presentation given at the HFMA Large System Controllers Council.
HealthTrust: Solving Workforce Management Challenges
R1 RCM: Partnering with Healthcare Organizations to Reimagine the Revenue Cycle
Two senior leaders at R1 talk about the advantages of working with an innovative revenue cycle partner that offers technology-enabled revenue cycle and patient experience services.
6 Patient Revenue Cycle Metrics You Should Be Tracking (and How to Improve Your Results)
Patient financial engagement is more challenging than ever – and more critical. With patient responsibility as a percentage of revenue on the rise, providers have seen their billing-related costs and accounts receivable levels increase. If increasing collection yield and reducing costs are a priority for your organization, the metrics outlined in this presentation will provide the framework you need to understand what’s working and what’s not, in order to guide your overall patient financial engagement initiatives and optimize results.
10 Ways to Reduce Patient Statement Volume (and Reduce Costs)
No two patients are the same. Each has a very personal healthcare experience, and each has distinct financial needs and preferences that have an impact on how, when and if they chose to pay their healthcare bill. It’s no longer effective to apply static billing techniques to solve the complex challenge of collecting balances from patients. The need to tailor financial conversations and payment options to individual needs and preferences is critical. This presentation provides 10 recommendations that will not only help you improve payment performance through a more tailored approach, but take control of rising collection costs.
Reduce Patient Balances Sent to Collection Agencies: Approaching New Problems with New Approaches
This white paper, written by Apex Vice President of Solutions and Services, Carrie Romandine, discusses the importance of patient segmentation and messaging specifically related to the patient revenue cycle. Applying strategic messaging that is tailored to each patient type will not only better educate consumers on payment options specific to their billing needs, but it will maximize the amount collected before sending to collections. Further, targeted messaging should be applied across all points of patient interaction (i.e. point of service, customer service, patient statements) and analyzed regularly for maximized results.
The Future of Online Patient Billing Portals
This white paper, written by Apex President Patrick Maurer, discusses methods to increase patient adoption of online payments. Providers are now seeking ways to incrementally collect more payments due from patients as well as speeding up the rate of collections. This white paper shows why patient-centric approaches to online payment portals are important complements to traditional provider-centric approaches.
Payment Portals Can Improve Self-Pay Collections and Support Meaningful Use
Increased electronic engagement between healthcare providers and patients provides significant opportunities for improving revenue cycle metrics and encouraging patients to access EHRs. This article, written by Apex Founder and CEO Brian Kueppers, explores a number of strategies to create synergy between patient billing, online payment portals and electronic health record (EHR) software to realize a high ROI in speed to payment, patient satisfaction and portal adoption for meaningful use.
Large Health System Drives 10% UP (Patient Payments) and 10% DOWN (Billing-related Costs)
Faced with a rising tide of bad debt, a large Southeastern healthcare system was seeing a sharp decline in net patient revenues. The need to improve collections was dire. By integrating critical tools and processes, the health system was able to increase online payments and improve its financial position. Taking a holistic approach increased overall collection yield by 10% while costs came down because the number of statements sent to patients fell by 10%, which equated to a $1.3M annualized improvement in patient cash over a six-month period. This case study explains how.
ICD-10: Managing Performance
With the ICD10 deadline quickly approaching and daily responsibilities not slowing down, final preparations for October 1 require strategic prioritization and laser focus.
Clarity Drives Collections
Read how Gwinnett Medical Center provides clear connections to financial information, offers multiple payment options for patients, and gives onsite staff the ability to collect payments at multiple points throughout the care process.
Orlando Health Gains Insight into Denials, Reduces A/R Days with RelayAnalytics Acuity
Read how Orlando Health was able to perform deeper dives into claims data to help the health system see claim rejections more quickly–even on the front end–and reduce A/R days.
Revenue Cycle Payment Clarity
To maintain fiscal fitness and boost patient satisfaction and loyalty, healthcare providers need visibility into when and how much they will be paid–by whom–and the ability to better navigate obstacles to payment. They need payment clarity. This whitepaper illuminates this concept that is winning fans at forward-thinking hospitals.
Streamlining the Patient Billing Process
Financial services staff are always looking for ways to improve the verification, billing and collections processes, and Munson Healthcare is no different. Read about how they streamlined the billing process to produce cleaner bills on the front end and helped financial services staff collect more than $1 million in additional upfront annual revenue in one year.
Wallace Thomson Hospital Automates to Maximize Limited Resources
Effective revenue cycle management can be a challenge for any hospital, but for smaller providers it is even tougher. Read how Wallace Thomson identified unreimbursed procedures, streamlined claims management, and improved its ability to determine charity eligibility.
7 Steps for Building and Funding Sustainability Projects
Before launching an energy-efficiency initiative, it’s important to build a solid business case and understand the funding options and potential incentives that are available. Healthcare leaders should consider taking the steps outlined in the whitepaper to ease the process of gaining approval, piloting, implementing, and supporting sustainability projects. You will find that investing in sustainability and energy efficiency helps hospitals add cash to their bottom line. Discover how hospitals and health systems have various options for funding energy-efficient and renewable-energy initiatives, depending on their current financial structure and strategy.
Key Capital Considerations for Mergers and Acquisitions
Health care is a dynamic mergers and acquisitions market with numerous hospitals and health systems contemplating or pursuing formal arrangements with other entities. These relationships often pose a strategic benefit, such as enhancing competencies across the continuum, facilitating economies of scale, or giving the participants a competitive advantage in a crowded market. Underpinning any profitable acquisition is a robust capital planning strategy that ensures an organization reserves sufficient funds and efficiently onboards partners that advance the enterprise mission and values.
Key Capital Considerations for Mergers and Acquisitions
The success of healthcare mergers, acquisitions, and other affiliations is predicated in part on available capital, and the need for and sources of funding are considerations present throughout the partnering process, from choosing a partner to evaluating an arrangement’s capital needs to selecting an integration model to finding the right money source to finance the deal. This whitepaper offers several strategies that health system leaders have used to assess and manage capital needs for their growing networks.
Trend Watch: Providers adapt as value-based care moves from hype to reality
Announcements from several commercial payers and the Centers for Medicare and Medicaid Services (CMS) early in 2015 around increased efforts to form value-based contracts with providers seemed to point to an impending rise in risk-based contracting. Rather than wait for disruption from the outside in, health care providers are now making inroads on collaborating with payers on various risk-based contracting models to increase the value of health care from within.
Yuma Regional Medical Center case study
Yuma Regional Medical Center (YRMC) is a not-for-profit hospital serving a population of roughly 200,000 in Yuma and the surrounding communities.
Before becoming a ZirMed client, Yuma was attempting to manually monitor hundreds of thousands of charges which led to significant charge capture leakage. Learn how Yuma & ZirMed worked together to address underlying collections issues at the front end, thus increasing Yuma’s overall bottom line.
Reforming with a New 50-Bed Acute Care Facility
Kindred Hospital Rehabilitation Services works with partners to audit the market and the facility’s role in that market to identify opportunities for improvement. This approach leads to successes; Kindred’s clinical rehab and management expertise complements our partners’ strengths. Every facility and challenge is unique, and requires a full objective analysis.
5-Minute Briefing on Revenue Integrity Through HIM WhitePaper Hospitals FS
As the critical link between patient care and reimbursement, health information enables more complete and accurate revenue capture. This 5-Minute White Paper Briefing shares how to achieve cost-effective revenue integrity by your optimizing HIM systems.
5-Minute Briefing on Accelerating Cash Flow Through HIM WhitePaper Hospitals FS
Speedier cash flow starts with better CDI and coding. This 5-Minute White Paper Briefing explains how providers can improve vital measures of technical and business performance to accelerate cash flow.
5-Minute Briefing on Reducing the Cost of RCM WhitePaper Hospitals FS
Qualified coders are getting harder to come by, and even the most seasoned professional can struggle with the complexity of ICD-10. This 5-Minute White Paper Briefing explains how partnerships can help improve coding and other key RCM operations potentially at a cost savings.
Providers Focus Too Much On Revenue Cycle Management
The point of managing your revenue cycle isn’t just to improve revenue and cash flow. It’s to do those things effectively by consistently following best practices— while spending as little time, money, and energy on them as possible.
Lucille Packard Children’s Hospital Stanford Case Study
How Lucile Packard Children’s Hospital Stanford increased payments received within 45 days by 20% and reduced paper submission claims by 70% by using ZirMed solutions.
Using Predictive Modeling To Detect Meaningful Correlations Across Claims Denials Data
The reasons claims are denied are so varied that managing denials can feel like chasing a thousand different tails. This situation is not surprising given that a hypothetical denial rate of just 5 percent translates to tens of thousands of denied claims per year for large hospitals—where real‐world denial rates often range from 12 to 22 percent. Read about how predictive modeling can detect meaningful correlations across claims denials data.
ZOLL and Emergency Mobile Health Care Case Study
Emergency Mobile Health Care (EMHC) was founded to be and remains an exclusively locally owned and operated emergency medical service organization; today EMHC serves a population of more than a million people in and around Memphis, answering 75,000 calls each year.
Maximizing Medicare Reimbursements White Paper
Since the Physician Quality Reporting Initiative (PQRI) introduction, CMS has paid more than $100 million in bonus payments to participants. However, these bonuses ended in 2015; providers who successfully meet the reporting requirements in 2016 will avoid the 2% negative payment adjustment in 2018, so now is the time to act! Included in this whitepaper are implications of increasing patient responsibility, collections best practices, and collections and internal control solutions.
Denials Deconstructed: Getting Your Claims Paid
Getting paid what your physician deserves—that’s the goal of every biller. Yet even for the best billers, achieving that success can be elusive when denials stand in the way of success, presenting challenges at every turn. Denials aren’t going away, but you can learn techniques to manage and even prevent them.Join practice management expert Elizabeth W. Woodcock, MBA, FACMPE, CPC, to: Discover methods to translate denial data into business intelligence to improve your bottom line, determine staff productivity benchmarks for billers, and recognize common mistakes in denial management.
Automation and Operational Improvement Drive Sustainable Results
Physician practices must improve organizational efficiency to compete in this era of reduced reimbursement and escalating administrative costs.
Revenue Cycle Management Resolves Migration Implementation Issues
Many healthcare organizations are pursuing next-generation health information systems solutions. Learn more about Navigant's work with University of Michigan Health System.
Partnering For Success – Provider Achieves Strength in Stability
The proper implementation of healthcare information technology systems is crucial to an organization’s financial health.
Building a Clinically-Integrated Network
As value-based payment models evolve, providers are challenged to maintain superior clinical outcomes while controlling costs.
Winning in the Post-Acute Marketplace
Read more about factors contributing to the changes in the post-acute marketplace and what it means for manufacturers, physicians, clinicians, patients, and post-acute facilities as they anticipate the transition to the second curve.
Building A Common Vision with Employed Physicians
HSG helped the physicians and executives of St. Claire Regional in Morehead, Kentucky, define their shared vision for how the group would evolve over the next decade. As well as, develop the strategic and operational priorities which refocused and accelerated the group’s evolution.
Practice Performance Improvement
The client was a nine-hospital health system with 14 clinics serving communities in a multi-state market with very limited access to care, poor economic conditions, high unemployment, and a heavy Medicare/Medicaid/uninsured payer mix. In most of these communities, the system was the sole source of care.
Though the clinics were of substantial size (they employed 98 physicians) and comprised of multiple specialists, the physicians functioned as individuals and the practices lacked any real group culture.
Clinical Integration Without Spending a Fortune
Clinical integration can be expensive, but it doesn’t have to be, as this four-step road map for developing a CIN proves. Does it have to cost millions to initiate a clinical integration strategy?
Contrary to popular belief, we have clients who have generated substantial shared savings and a significant ROI over time, without massive investments. Yes, some financial capital is required for resources the CIN providers can’t bring to the table themselves. But the size of that investment can be miniscule relative to the value it produces: improved outcomes and documentation for payers.
Adding Value to Physician Compensation
Today’s concerns about physician compensation are the result of the changing healthcare environment. The transition to value is slow, but finally becoming a reality. Proactive hospitals want to ensure that provider incentives are properly aligned with ever-increasing value-based demands.
This report focuses on the three big questions HSG receives about adding value to physician compensation; Why are organizations redesigning their provider compensation plans? What elements and parameters must be part of successful compensation plans? How are organizations implementing compensation changes?
Effective Revenue Cycle Management in Your Network
Revenue Cycle Management has become an even more complex issue with declining reimbursements, implementation of Electronic Health Records, evolving local carrier determinations (LCD), and payer credentialing [The emphasis on healthcare fraud, abuse and compliance has increased the importance of accuracy of data reporting and claims filing).
The efficiency of a medical practice’s billing operations has critical impact on the financial performance. In many cases, patient billings are the primary revenue source that pays staff salaries, provider compensation and overhead operating cost. Inefficiencies or inaccurate billing will contribute to operating losses.
Succeeding in Value-Based Care
This publication identifies and outlines the necessary characteristics of a fully-functioning clinically integrated network (CIN). What it doesn’t do is detail how hospitals and providers can participate in the value-based care environment during the development process.
One common misconception is that the CIN can’t do anything significant until it has obtained the FTC’s “clinically integrated” stamp of approval. While the network must satisfy the FTC’s definition of clinical integration before single signature contracting for FFS rates and contracts can legally start, hospitals and providers can enjoy three key benefits during the development process.
Therapy: Benefits at All Levels of Care
Nearly half of all Medicare beneficiaries treated in the hospital will need post-acute care services after discharge. For these patients, a stay in an inpatient rehabilitation facility, skilled nursing facility or other post-acute care setting comes between hospital and home.
Does Your Budgeting Process Lack Accountability?
With the proper process, tools, and feedback mechanisms in place, budgeting can be a valuable exercise for organizations while helping hold organizational leaders accountable. Having a proper monthly variance review process is one of the most critical factors in creating a more efficient and accurate budget. Monthly variance reporting puts parameters around what is to be expected during the upcoming budget entry process.
Cost Accounting: the Key to Cost Management and Profitability
Managing the cost of patient care is the top strategic priority of most hospital CFOs today. As healthcare shifts to more data-driven decision making, having clear visibility into key volume, cost and profitability measures across clinical service lines is becoming increasingly important for both long-range and tactical planning activities. In turn, the cost accounting function in healthcare provider organizations is becoming an increasingly important and strategic function. This whitepaper includes five strategies for efficient and accurate cost accounting and service line analytics and keys to overcoming the associated challenges.