Skip to main content

Health Plans Should Scrutinize Lab, Genetic Testing for Unneeded Expenses

Analysis  |  By Gregory A. Freeman  
   January 31, 2018

Doctors are ordering more advanced laboratory and genetic tests than ever before, and the reimbursement cost can hit health plans hard. Expenses can be cut without harming patients, one expert says.

Health plans could improve profitability by paying more attention to the laboratory tests they pay for, says Russel E. Kaufman, MD, chief medical officer of Kentmere Healthcare Consulting Corporation, which provides laboratory and genetic testing utilization management for health plans.

A practicing physician in biomedicine for 35 years, Kaufman previously served as chief of hematology/oncology and vice dean and vice chancellor at Duke University, and now specializes in deep analytics of insurance company lab expenditures.

The good news, he says, is that health plans can save money without shortchanging their customers on needed laboratory or genetic testing.

Health plans can cut their testing expenditures by 10% to 20% with better guidance to physicians and improved internal reviews, says Kaufman.

The key is to identify exactly what testing the health plan is paying for, he says.

"The goal isn't just to have the health plans make more money by finding another way they can say no to testing," Kaufman says. "The goal is to have the whole system work better so that costs are lower, everyone saves money, and patients get the testing that they need and from which they can benefit. Finding that point where a health plan is spending what it should, but not wasting money on testing that does not yield any real benefit for the patient, is the challenge here."

Significant sums are wasted on testing.

Medicare lost hundreds of millions last year on inappropriate urine, genetic, or heart disease tests. One analysis found that spending on urine screens and related genetic tests quadrupled from 2011 to 2014 to an estimated $8.5 billion a year

Kaufman's company begins its work with health plans by asking for a massive data dump and then looking for potential cost savings.

"We take that data and dice it and slice it in ways that health plans really don't do," Kaufman says. "You would think health plans would have pretty deep analytics around all this, but that's not their expertise. They need help in determining exactly where they're spending their money on laboratory costs."

Gregory A. Freeman is a contributing writer for HealthLeaders.

Get the latest on healthcare leadership in your inbox.