Despite Pending Payment Cuts, Diagnostics Are Still A Big Opportunity

March 2017

Smart Selling: Distributor Sales Strategies From HIDA

By Elizabeth Hilla
Senior Vice President, HIDA

Some distributor sales reps think lab sales aren’t the golden opportunity they once were. It’s true that if you’ve relied on telling doctors how much money they could make by doing more tests in-house, it may be time to update your pitch. But I believe that sales reps who adapt their sales message to today’s environment can be more successful in diagnostics sales than ever before.

I had the chance to learn a lot more about diagnostics market trends and opportunities at HIDA’s recent Laboratory & Diagnostics Market Conference in Coral Gables, Florida.

Let’s start with the headwinds, just to get them out of the way:

  • The shift toward value-based reimbursement will lead to more careful test utilization. Robert Michel, publisher of The Dark Report, said, “Payers are starting to focus on unnecessary procedures, and that includes a lot of lab testing.”
  • Lab test reimbursements will drop dramatically. PAMA (the Protecting Access to Medicare Act, which changes how lab test reimbursements are calculated) will result in fee schedule cuts of up to 20 percent, predicted Ran Whitehead, President & CEO of PeaceHealth Labs. (Keep in mind, however, that these cuts won’t affect “episode” type reimbursements, such as the DRG payment that hospitals receive from Medicare.)
  • Eventually, the lab fee schedule may be replaced completely by bundled payment or capitation models. The result, predicted Brian Jackson, MD, of ARUP Laboratories, will be doctors ordering tests because they need the information to make specific patient care decisions, rather than because they want the information to confirm a decision or provide an additional measure of confidence.

Those challenges are more than matched by one major tailwind – the “volume-to-value” shift:

  • Payers in every market are shifting toward value-based payment models. These models reward providers for improving outcomes, reducing costs, and increasing patient satisfaction – and everyone who sells lab tests knows that a fast diagnosis contributes to all three of these goals.
  • The power of lab testing to reduce downstream costs is greater than ever. Speakers at the lab conference pointed to examples such as using HbA1C testing to reduce complications and hospitalizations for diabetic patients, testing for medication adherence, and testing for opioid use. Lab and diagnostic providers have a key opportunity to impact downstream costs, such as readmissions, Whitehead observed. “Downstream impact counts more than immediate impact,” added Dr. Jackson. For example, Jackson noted that even though molecular testing for enterovirus can be expensive, it is typically cost-effective because it can be used to rule out meningitis and avoid costly hospitalizations.
  • The emphasis on value is likely to increase demand for point-of-care (POC) testing. One forecast predicts use of POC tests will triple over the next eight years because of its emphasis on proactive care, total costs, and patient satisfaction, Michel reported. “Surveys indicate that patient expectations are not met by a lab system that collects a sample on Tuesday and provides results to the patient on Wednesday or Thursday,” he said.

If your sales pitch for diagnostics is built around improving the provider’s profitability by increasing reimbursements, you don’t need to throw that out entirely. Many tests still add much-needed revenues to a practice. But your customers are also concerned about outcomes – making patients well is why they work in healthcare, and their reimbursements are becoming more closely tied to quality metrics. Talk with your manufacturer partners about how their diagnostic products can provide a fast diagnosis, keep patients happy and well, and reduce the total cost of care, and be sure to share those benefits with your customers.