How payers are reimagining cost strategies with lab services: Four Becker’s roundtable takeaways

During Becker’s Spring 2024 Payer Issues Roundtable, Labcorp’s Cameron Thomason, vice president for acute care services, hospitals and health systems, and Andrew Wirsul, vice president for payer solutions, moderated a discussion among a diverse group of payer executives about the evolution of lab services. The key themes that emerged are summarized below. 

1.) The challenge of rising healthcare costs

As healthcare costs in the U.S. continue to grow at an alarming rate, so too are health insurance premiums. Between 2018 and 2023, the average premium for family coverage increased by 22%—higher than the rate of inflation. Payer organizations, acutely aware of the financial strain impacting employers and individual members, are searching for ways to tame costs.

While labs only contribute to 3% of healthcare costs, they generate 70% of the data used in clinical decision-making and can play an important role in addressing the pervasive cost challenges, such as early detection, screening and cost-effective diagnosis. By improving access to high-quality, cost-effective specialty testing, innovative lab service companies can help payers and providers rein in testing costs.

2.) Shifting the site of service can unlock economic savings

For commercially insured populations, testing costs can vary significantly based on the site of service and the provider referring a patient for testing. For example, costs for routine tests performed in a hospital outpatient setting can be two to six times higher than tests performed at a physician’s office or at an independent lab network, such as Labcorp.

Because providers are the primary decision-makers when it comes to lab ordering, past initiatives have had limited impact on redirecting costs. Several roundtable participants shared how their health plan’s attempts to steer members to lower-cost sites also depended on provider discretion. 

3.) Lower-cost settings appeal to both members and employers

On the other side of the equation, employers and individual health plan members can impact premiums and out-of-pocket costs by adjusting the design of their benefit plans. Using narrow networks that reduce costs by limiting provider’s choice to high-quality, lower-cost labs, is a popular method for achieving that goal.

While narrow networks have been controversial in the past, they are increasingly seen as acceptable—precisely because of their impact on costs. This is especially true for younger, healthier and more price-sensitive members who are purchasing insurance on the open market and who do not necessarily have a strong preference for who performs their lab testing, other than having it be high-quality and cost-effective. 

4.) Managing patient and population health through data-driven decision support

Lab providers can also help lower the costs of care by enabling a longitudinal view into patient testing records. This helps physicians better understand their patients’ medical histories and reduce duplicative tests, a common occurrence when providers work with conventional, siloed test labs. 

This longitudinal view not only prevents duplicate testing but can also help providers identify changes in health history that could indicate early signs of disease, like chronic kidney disease or cancer. Enabling early detection, these capabilities help reduce the total cost of care. 

Further, these data capabilities inform decisions beyond individual patients to populations across geographical comparison areas, helping identify health challenges in vulnerable patient populations. For example, Labcorp’s Health Equity Report interactive dashboard can pinpoint areas with a high concentration of members with a probability of developing diabetes or kidney disease.

"If somebody crashes through dialysis, it is pretty expensive,” a roundtable participant said. “But if you know a year in advance that they’re going to need dialysis, based on multiple points of data, there would be multiple [healthcare stakeholders] who would be interested in that information."

Continuing education is essential to advance understanding of quality and cost

In alignment with the shift to more consumer-driven care, which includes testing services, it is important that both members and providers are well informed and educated about the availability of alternative testing sites and services, such as those Labcorp offers.