Laboratory benefit managers claim they have demonstrated a reduction in healthcare costs. But are they equipped to make the final decision on whether a predictive test should or should not be covered? Are they causing undue administrative burden and limiting best practice in patient care?
An LBM is a company that manages lab benefits for a health insurance plan. LBMs aim to optimize test utilization and reduce healthcare costs by controlling the funding and payment for lab services. Most LBMs have a team of clinical experts and/or professional partnerships that help them determine their coverage and payment policies.
LBMs could serve as a valuable resource in the ever-expanding field of Precision Medicine. They may be a useful stakeholder to help reduce confusion and prevent testing barriers for targeted therapy.
However, given their current aim of reducing healthcare costs, not of decreasing barriers in the healthcare system, it is more likely that LBMs will hinder access to precision medicine in the US, by adding undue administrative burden, delaying patient care, deterring growth and innovation within the diagnostics industry, and limiting physician and patient choice in their health care management.
Primary benefits of LBMs for precision medicine:
- Decrease healthcare costs by preventing unnecessary testing.
- Guide physicians towards clinically actionable tests and recommend labs performing reliable testing.
- May help labs identify appropriate CPT codes for reimbursement coverage.
Primary concerns of LBMs for precision medicine:
- Delay of or suboptimal patient care and increased administrative burden for healthcare providers (HCPs) due to prior authorization (PA) requirements.
- Hinder patients access to testing through denying test coverage and payment.
- Risk of stifling innovation in the diagnostics industry
Diaceutics’ opinion on what is needed:
- Transparent and evidence-based policies and determination criteria
- Collaboration across different healthcare stakeholders to encourage LBMs to alter their objective from reducing healthcare costs toward removing barriers in the healthcare system
With Precision Medicine at the forefront of oncology and rare disease management, new tests are being developed and approved alongside targeted drugs. This increased demand for more complex, and often expensive genetic testing, has led to more scrutiny around test utilization and coverage in the US. Laboratory Benefit Management (LBM) plays a significantly increasing role in the healthcare system.
LBMs aim to optimize test utilization and control costs; however, they also introduce complexities that can have a negative impact on patient care and deter innovation in laboratory diagnostics.
Introduction to Lab Benefit Managers (LBMs)
An LBM is a company that manages lab benefits (coverage and payment) for a health insurance plan primarily focus on the more complex and costly molecular and specialty lab services and act as intermediaries between laboratories, payers, and healthcare providers (HCPs), to negotiate coverage agreements and establish guidelines for test utilization. Their aim is to reduce costs to the healthcare system by managing the use and payment for lab testing.
While LBMs are not new to the US landscape, having been established in the 1990s, they have evolved and gained more prominence and influence over molecular and predictive testing in the past 10 years. Today there are at least 6 LBMs operating in the US; AIM Specialty Health, Kentmere Healthcare Consulting Corporation, eviCore, Avalon Healthcare Solutions, Beacon LBS, and Optuml. Three are privately owned, two are owned by commercial payers, and one is owned by a commercial lab.
Role of LBMs
LBMs are responsible for:
- Approving tests for a patient
- Determining which labs will be paid for the approved testing.
- Determining which HCPs can request approved tests.
Payment coverage amounts and distribution to labs for the execution of the tests. Specifically, LBMs:
- Select and manage preferred labs for payers and physicians: state which labs are included in a payer’s policy and from which labs a physician can obtain testing.
- Manage the use of testing by determining when a prior authorization (PA) is required from a physician before a test can be ordered: request justification for a test before agreeing to pay for it;
- Review clinical evidence and medical necessity to determine outcome for PAs – decide whether or not to pay for a test.
- Develop payer policies, diagnostic formularies, and determining coverage, reimbursement, and claims payments – control testing by controlling the funding and payment for lab services.
How do LBMs determine policies and coverages?
Most LBMs are composed of a team of clinical experts, clinical and policy advisory teams, and/or professional partnerships that help determine their policies based on different sources such as CPT codes, evidence-based literature, lab and medical policies. While these experts and reference sources are available on most of their websites, the extent of what specifically is reviewed and how it influences their decisions and policies are still unclear.
Healthcare stakeholders (patients, physicians, labs) relying on large commercial payers, such as Blue Cross Blue Shield and United Healthcare, and even some Medicare Advantage plans will see the effect of LBM policies: perhaps as an HCP being required to submit a prior authorization before ordering a genetic test for patient with one of these insurers, or as a laboratory being denied payment for a test performed by one of these payers.
Diaceutics’ opinion on how LBMs may affect the precision medicine space.
The optimistic outlook is that LBM policies could reduce confusion about necessary tests improving access to precision drugs for patients. These policies may direct clinicians to laboratories that offer high quality testing ensuring full payment for services.
By guiding HCPs towards clinically actionable tests for their patients, LBMs may help improve result interpretation and treatment decisions. The vast quantity and type of tests available for precision medicine patient identification can be overwhelming for HCPs.
If LBMs become more integrated with lab procedure, they could boost lab efficiency by reviewing lab protocol to ensure robust policies are followed, promoting high quality results. Additionally, LBMs can also aid in CPT code identification and usage facilitating full reimbursement for lab services.
On the pessimistic side, LBMs, driven by financial interests, may deny services, creating barriers for patients and clinicians alike to access predictive testing. In precision medicine, where tailored treatments are dependent on specific diagnostic tests, prior authorizations could impede informed clinical decision-making and affect subsequent treatment selection.
LBMs can hinder physicians by requiring prior authorizations (PAs) for lab tests. The PA process can add undue administrative burden and burnout to HCPs and delays testing turnaround, thus delaying potential life-saving treatments.
LBMs hinder labs by potentially denying services or payment to a lab if they are not part of the LBM’s preferred network. This can deter labs from onboarding new, helpful lab developed tests (LDTs) and may prevent them from purchasing new, innovative assays or technologies.
LBMs can hinder patients’ access to testing and may cause doubt in their provider or subject them to undue medical expense. If, for example, their physician has determined a test is relevant, however payment is denied by the payer, a patient may be concerned about their physicians’ decision. Alternatively, the patient may be forced to pay out of pocket for any testing still deemed relevant by them or their provider.
LBMs can hinder innovation in the US diagnostics industry if they choose to deny tests performed with innovative technologies in favor of more established technologies deemed standard of care that may be more cost effective albeit slower or less sensitive. If this becomes the case, diagnostic companies will face more hurdles to market penetration and may prioritize launching in other markets over the US.
Conclusion: what is still needed to unlock the potential of LBMs in precision medicine
As LBMs are unlikely to leave the US, to realize the best possible outcome in the Precision Medicine space there is a need for transparency of their decision-making processes and a need to influence their core mission toward eliminating barriers in the healthcare system.
Transparency is needed around the specific guidelines, clinical evidence, and reimbursement criteria LBM experts use to determine test eligibility and coverage; an understanding how cashflows are set-up across payers, labs, and LBMs; and visibility to their cross-industry collaborations and what partnership dynamics influence their decisions. The current lack of clarity and transparency can impede effective communication between healthcare providers and LBMs, hindering patient care and creating frustration. Furthermore, potential conflicts of interest within the complex network of relationships involving insurers, healthcare organizations, and laboratories underscore the need for careful regulation and oversight to ensure patient care remains the primary focus of LBM operations.
By seeking a collaborative approach across stakeholders, including laboratories, payers, regulators, healthcare providers, and patients, a balance may emerge that prioritizes patient-centered care while considering cost-effectiveness. Establishing transparent and evidence-based coverage policies, guided by clinical guidelines and expert input, can help mitigate the negative impact of LBMs and enhance patient access to necessary tests and precision treatments.
While LBMs may become as a useful resource in the ever-expanding field of Precision Medicine, we need a collaborative approach to realize a shift in agenda: to move toward removing barriers in the healthcare system. Without this, the US precision medicine landscape may face more testing hurdles that impede quality patient care.
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