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Lab Benefit Management and 9-12% Savings Opportunity
Episode 578

Barry Davis, Chief Growth Officer at Avalon Healthcare Solutions

Lab Benefit Management and 9-12% Savings Opportunity

We hear news about COVID testing every day. But how much do we know about the testing and what’s going on inside the laboratory? In this episode, we interview Barry Davis, the Chief Growth Officer at Avalon Healthcare Solutions and he shares with us a few important insights we need to understand about COVID testing.

Barry also discusses how Avalon is scaling laboratory management and how it is incorporating a value-based care model, getting away from the volume-driven approach to improve outcomes, save money, and help people get better. He explains how waste is happening in genetic testing and shares insights that can help all stakeholders be better. This is an incredible conversation and we enjoyed talking to Barry. Please tune in and discover for yourself how Avalon can help your company.

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Lab Benefit Management and 9-12% Savings Opportunity

Episode 578

About Barry Davis
Barry joined Avalon as its Chief Growth Officer in 2017. In his role as Chief Growth Officer, Barry’s responsible for growing Avalon’s revenues and services through the company’s National Business Development Strategy and team. Barry has 30 years of health care experience working with and servicing health plans. Before joining Avalon, Barry was Senior Vice President of Health Plan segment at OptumRX, a business of UnitedHealth Group where he led a cross-functional team managing a multi-billion dollar business servicing over twenty-five health plan clients. Before OptumRX, Barry was a member of CatamaranRX executive team in Chicago, and spent nearly 20 years in various sales, service and operations roles at Medco Health Solutions, now part of Express Scripts.

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Lab Benefit Management and 9-12% Savings Opportunity with Barry Davis, Chief Growth Officer at Avalon Healthcare Solutions was automatically transcribed by Sonix with the latest audio-to-text algorithms. This transcript may contain errors. Sonix is the best audio automated transcription service in 2020. Our automated transcription algorithms works with many of the popular audio file formats.

Saul Marquez:
Welcome back to the Outcomes Rocket, Saul Marquez is here and today I have the privilege to have Barry Davis on the podcast. Barry joined Avalon as its Chief Growth Officer in 2017. In his role as Chief Growth Officer, Barry’s responsible for growing Avalon’s revenues and services through the company’s National Business Development Strategy and team. Barry has 30 years of health care experience working with and servicing health plans. Before joining Avalon, Barry was Senior Vice President of Health Plan segment at OptumRX, a business of UnitedHealth Group where he led a cross-functional team managing a multi billion dollar business servicing over twenty five health plan clients. Prior to OptumRX, Barry was a member of CatamaranRX executive team in Chicago, and spent nearly 20 years in various sales, service and operations roles at Medco Health Solutions. Now part of Express Scripts. He’s got a track record of starting companies in and the PBM space and just flipping them. He is creating incredible value. And there’s a reason he’s had success is because he’s certainly well informed and sees insights that maybe others don’t. And so today I’m excited to host him here on the podcast and with that intro, Barry, I just want to thank you so much for being on here with us today.

Barry Davis:
Saul, thank you. Appreciate the time. And good to be here.

Saul Marquez:
Absolutely. And so before we dive into the very interesting things that you and the team and Avalon health care solutions are up to, tell me a little bit more about you and what inspires your work in health care.

Barry Davis:
And as you said, I’ve been in health care for now over 30 years, and it has been a wonderful career. United States has the most advanced health care system in the world. But obviously we still have a lot of work to do. Make the system better, remove waste in the system. There’s lots of studies that say twenty five to 30 percent of the health care cost is waste. And as you know, there’s lots of niche players working on this. And and it’s a complex system with not easy solutions. But it’s been a fascinating journey for me. It’s never been dull. It’s always changing. And I think we keep moving the ball forward to make it better. But we still have a lot of work to do. It’s always a top political topic, as we know, as we head into the next election. And obviously with the COVID-19 pandemic, health care is in the forefront of everybody’s mind today. And there’s there’s always something going on that that brings it to the to the front and center.

Saul Marquez:
Yeah. It keeps you on your feet and is certainly always an important topic. So I’m captivated by the mission of Avalon, which is to deliver the right tests at the right time, in the right setting to patients. And that’s something that’s so critical. Right? I mean, we talk about overuse and over testing in this country. And so tell us a little bit about Avalon and what exactly you guys are doing to deliver value here in the in the health care ecosystem.

Barry Davis:
Yeah, Avalon is the leader in laboratory science, which then leads to being the leader and lab benefit management. So what do I mean by that? We the science is our True North. We have a hundred and forty evidence based lab policies. Our scientists, our PhDs and clinicians to all the literature research, gather all the information. And then we work with an independent clinical advisory board to define and review and approve these hundred and forty evidence based policies. And every policy gets reviewed at least every year or whenever the science changes. On our advisory board, our representatives from Cleveland Clinic, the New Haven Hospital, University of Washington. They’re the rock stars in the lab industry and most of them running academic labs and bringing that experience to help us. It was fascinating to me when I joined Avalon in twenty seventeen to fully understand that the labs, the laboratories define their panels, their tests themselves. So there was no consistency when you or I go to the doctor to get our basic lipid panel checked your cholesterol. Each lab is defining that differently. So what we’re doing is bringing consistency based on these evidence based lab policies to say what should be in a lipid panel, what should be in a wellness panel, what should be in your allergy panel and taking out the waste because the science is exploding. A lot of people talk about genetic testing and the science is exploding there. And that is absolutely true. But it’s also exploding on routine testing. And so labs can do some fractionated HDL or LDL testing, but it doesn’t do all the testing, doesn’t bring clinical value to you, the patient and the doctor.

Barry Davis:
So the labs are smart. They make it easy for a doctor to check one box to make it quick. An easier check lipid panel. But the science says four things should be in that -your HDL, your LDL, your triglycerides and your total cholesterol. Anything else you’re putting in there is additive and not necessary. The doctor is not changing your therapy or your decisions your doctor and the patient are making together. So we have several solutions for routine testing. We have sixty of one hundred and forty policies. Focus on your routine testing, your basic chemistry test and then software that automates the fix criteria. It’s mostly procedure to diagnosis code rules that say what should be in there and what should not, and therefore improve outcomes and reduce the cost for both the patient and the health care system. In that and the other 80 policies focus on genetic testing. As a good example, there are about seventy five thousand genetic tests on the market today, with ten new tests being introduced daily. So that’s just one example of the explosion in science that we’re all seeing. And then if you look at COVID-19, that is shown a spotlight on the importance of testing across access, do you have access to the test? What’s the turnaround of that COVID test? And now what waste and abuse is occurring in those tests? Because they’re also adding expert respiratory test into the COVID test?

Saul Marquez:
Yeah, these are these are very, very important things to call out. I mean, especially with the with the pandemic. But there’s others right in that. And I love that you honed in on those basic tests because, I mean, there’s opportunity there. There’s tons of opportunity to to get lean and to do the right thing. And so tell us a little bit more about what makes what Avalon does different and better than than what’s available today.

Barry Davis:
Yeah, and a great point. what a lot of people are not aware of. Again, people health plans and a lot of experts focus on the genetic testing and it is important to get out ahead of that. And that is typically managed through prior authorization. But genetic tests represent less than 10 percent of your lab spend. The other 90 percent are your basic routine tests to your basic chemistry test. And what we we’ve looked at data for over 70 health plans and we consistently see eight to 12 percent of the routine testing being unnecessary, as I was the example that was given before. So what’s unique about Avalon A is the science as our true north and one hundred forty lab policies, but then you need to be able to administer and enforce them. So for routine testing, that’s basically your high volume, low cost testing. You can’t look at all of them. Genetic tests are the opposite, low volume, high cost, and you look at all of them through prior authorization to make sure they’re appropriate. But for routine testing, you need software. You need to automate the procedure to diagnosis code rules to apply to administer and enforce the rules.

Barry Davis:
So Avalon is the only company out there with we have proprietary cloud based software to administer these clinical lab editing rules. And we our software is called APEA standing for automated policy enforcement application. And so in real time, we we connect our software to the health plan, medical claim processing system. So as they’re reviewing it, this is a post service pre-payment review. And in less than a second, they’ll get the advice back based on the policies they’ve selected from us to pay, reduce or deny at a unit level. Does does everything in that test, is it appropriate per the science and should it be paid for? So it’s health care technology that Avalon built to bring this solution and that eight to 12 percent over utilization comes out to be both for routine and genetic testing on a million lives. That’s twenty one to twenty eight million dollars in savings that we’re producing on an annualized basis per member per month. I’d be a dollar seventy five to two dollars and thirty five cents per pound.

Saul Marquez:
This is this is just incredible. And it’s post service pre-payment review. So you’re you’re totally empowering these plans to really vet those routine tests that tend to slip through. And and in effect, you’re conditioning the providers as well to do the right thing. So, I mean, it’s just it’s fascinating.

Barry Davis:
Absolutely. And we do a tremendous amount of work up front before we launch with a health plan, A they get to we call it adapt and adopt the policy. So they customize them and they become and they become their own policies. And then they publish the policies to their physicians, to their laboratories, all their providers. So this is you’re saying we’re out there? Educating and promoting follow the science, do the right thing. So we’ll give you the policy information, then the next step before Go Live is we’ll take the historical data for the health plan, run it through the policies, have selected and produce impact reports by laboratory. Give them that information to show them. Here’s what you’re processing that follows the science. Here’s what’s outside the science. And that is not going to get reimbursed. And so it gives them the chance to change their panels and their ordering menus up front. And it’s their decision. And we see a mix where we have a health plan that is the majority market share leader. They start to change their panels. But if they’re in a state and it’s spread across multiple health plans, they really don’t change their panels because they’re still getting paid for the other providers. So without the tools to identify the policies, monitor and administer them, you’re going to continue to have this tremendous amount of waste. And actually what we see year over year, this problem is getting worse. That eight to 12 percent keeps creeping up. And this is across all laboratory places, a service, independent labs, physician office labs and outpatient hospital laboratories. Another surprise that a lot of people don’t understand in the lab space, most people think of lab coding class. They are the big players, but they only process independent labs in total, do about twenty five to thirty five percent. At most of all, the lab processing and lab requests do about half of that. So they’re 12 to 18 percent of the total lab spent. So where a lot of health plans, I would say, take the wrong or narrow approach to manage this. They focus on how on the unit cost, what lab conquest and trying to squeeze that down to manage laboratory costs. But as I’ve just walked it through, that becomes a small piece of the pie that you’re managing our software, our solution for routine routine testing management goes across all places of service.

Saul Marquez:
Yeah. And it’s more utilization appropriateness based on the science versus that unit cost.

Barry Davis:
Absolutely. You’ve got to look at both. You’ve got to look at your lab trend and look at unit cost and the utilization and what’s driving it up. We also see in the data that as a health plan squeezes, unit costs down. A lot of times the utilization spikes up to make up for that.

Saul Marquez:
Yeah. And, you know, I mean, in this time, you’ve got a lot of cash flow issues, you know, and potentially the appetite to do more testing to make up for lost revenues. You know, the pandemic is certainly pushing us to be more creative and more innovative and be more cost effective. So talk to us a little bit about how what you’re doing and maybe you have a specific example, higher improving outcomes and making business better.

Barry Davis:
Yeah, give you two examples. First, to talk about COVID-19 testing. There’s a tremendous amount of resources that are on our website and we’ll give that address out at the end. But to help people understand the science of all the COVID testing, there’s different types of testing. There’s the RT-PCR, which is considered the gold standard, the nasal swab, there’s antibody testing and antigen testing. And so on our website, we’re tracking all of these different tests and they’re going through what’s called emergency use authorization approval, which is unique. Again, good news, lots of innovation going on in health care, but also causing lots of confusion around the COVID testing, initially antibody testing, which tells you, do you have the antibodies? Did you have the virus previously? I was getting lots of promotion by the laboratories, but the science is not there yet. We don’t know what to do with that antibody information. Does it mean you’re immune? We don’t know. If you have it, How long will you be immune to it? So it was a lot of advertising by the lab saying go get your antibody testing. And again, the example is let’s understand the science first. And what’s the best test and what what’s the purpose for it to bring that information to you. For routine testing when you have all this unnecessary testing? A The obvious thing is it drives up costs for patients and the health care system. That’s unnecessary, but it also leads to not just the the waste and lab cost, but it leads to wasting the doctor’s time explaining unnecessary tests. A lot of times it leads to more testing or more medication or more doctor visits. So tremendous amount of incremental waste in the health care system caused by all of this extra testing. It’s been fascinating when I when I talk to some of the medical directors at the health plan, they and physicians servicing the patients, they want the waste removed. They don’t want to confuse the patient with misinformation. And the worst case scenario would be the. Leads to a misdiagnosis or mistreatment because of this extra information, so pure, straight, simple, reduce the lab cost and then much, even much bigger than that side is let’s make sure we’re treating a patient right. and removing all the waste in the system. Can I share one more example.

Saul Marquez:
Absolutely. And this is super interesting, Right.. And you think about the the the downstream impacts, like you mentioned, Right. all the visits. I mean, everything adds up to the invasiveness of these tests. Certainly an issue. Yeah, please. Please.

Barry Davis:
I was going to share one on the genetic testing side. OK, about a third of genetic tests are ordered in error today. It’s a combination of physicians will tell you they can’t keep up with the science. They don’t know what genetic tests to order. And it’s a combination of genetic laboratories adding extra genetic test into their bundling genetic test together. So what then happens is the health plans, as I said, review them through prior authorization and it causes the whole test to get denied. And so what Avalon focuses on, we take a a high touch model and we reach out to the doctor and have a conversation. What’s the problem? What are you looking for? What are you trying to treat and work with them to identify what specific genetic tests they do need to help the doctor and the patient get that test. So it might start out where they submitted a request and it had five genetic test to it at high cost. And in the end, they just needed one or two. And we work with them, identify them, work with them to resubmit it and get it through the process to get approved, to bring better results, to get the test and results for that patient.

Saul Marquez:
Fascinating. And to your point, Right., it’s what would you say is 10 percent of all tests so you could do this high touch approach with those tests?

It’s less than 10 percent of the spend, so it’s even less in terms of volume of tests. And so you can do it. I would say we some others in this space do focus a little bit more on the pay and the denials. We’re focused on getting the right tests for the right patient. I think we go a little bit further with the high touch and the education.

That’s fascinating. And so as you think about the last three years at Avalon and your experience there, what would you say has been one of the biggest setbacks you’ve experienced and a key learning that’s made you guys better as a result?

Barry Davis:
Yeah, there’s there’s really been two I touched upon it a little bit earlier to say the health plans as they manage the laboratory benefit, let me even back up. The laboratory benefit is probably the number one utilized benefit that we have because it it’s necessary to determine your therapy and next steps. But it’s also the least managed benefit of everything out there. And it’s partly because in total laboratory is less than 10 percent of the total medical spend so normal that people focus on the high cost hospital cost. And what can you do there? But I hope people listen to this. You see the importance of the laboratory test and getting it right to determine the right diagnosis and treatment that we need to bring more management to it. So that was the first thing that surprised me that how unmanaged the laboratory space is. And obviously that created the opportunity for Avalon to come in and bring the management to it. The second part of that is when they do think of managing it, they’re focusing on small slices of it. Let me let me manage the lab core and quest good companies. But that, again, would be less than it would be about 12 to 18 percent of your total lab span that you’re managing. And if you throw on top of that, you’re managing genetics. That is less than 10 percent as well. So maybe you’re managing a quarter of your lab spend and you’re probably not doing the analytics that you need to do to look at the lab trend, your lab PMPM, understanding how many lab policies you do have and making sure that if you do have them, that they’re getting applied and enforced.

Saul Marquez:
That’s interesting. So you mentioned 10 percent. And, you know, I’m thinking, OK, what’s that number? So what’s the number, Barry, that 10 percent of the entire spend is a lab. You know, the number?

Barry Davis:
It is north of I think it’s eight billion dollars. It’s in total. It’s not a small number. I think coming from lab core quest analysts reports that I believe it’s a plus billion dollars in total lab spend.

Saul Marquez:
That’s significant. So we’re looking at a space that, you know, flies under the radar. Right. So you’re saying potentially shaving off like what, like 10 to 18 percent of that 8 billion. Yeah, yeah. That’s so significant.

Barry Davis:
So, again, on a million lives, it’s twenty one to twenty eight million in annualized savings to take out of the system. So and then to your point in the bigger picture. Ten. Eighteen. percent of billion.

Saul Marquez:
And that’s significant in dollars, so something to think about here, folks, as you as you think about the approach to to your plan and how you’re managing costs. Definitely think about managing that 10 percent. It could be significant savings overall. And so very I appreciate you sharing that as you think about what makes you most excited today with the work you guys are doing. What is it? And and tell us more about it.

Barry Davis:
If I could share two things we just touched upon. One of them is the opportunity to bring bring management to the lab space while producing better outcomes. We are moving lab testing from the old fee for service volume driven test test test model to a value based care model, removing the waste, improving the outcomes and reducing costs for the health care system and the patients. So tremendous opportunity. The second thing we recently did a press release that we were selected by the Health Plan Alliance. This is an organization that represents forty six health plans owned by health systems that have their own hospitals and their own labs, and they cover 10 million lives. And so they selected Health Plan Alliance, selected Avalon as their preferred lab benefit manager. And so for us, that was a great testimony of these are some of the most advanced companies, both a health plan and a health system, great clinical leadership. But they recognize they need help in the lab space to develop, keep up with the science and the policies and then to administer them. And so we are working our way through the forty six health plans as part of that alliance and are getting tremendous interest in uptake in our program. So a great endorsement in Avalon. Again, it all starts with the sciences, our TrueNorth, and bringing the solutions to our partners that way.

Saul Marquez:
Well, congrats on that. On that partnership. And you know, with the numbers you shared, 10 million lives. You’re talking almost three hundred million dollars in annual savings. I mean, that’s yeah, that’s that’s just impressive and exciting. Thanks.

Barry Davis:
Thank you very much. Very, very exciting. And we also have strong, strong relationships with many Blue Cross Blue Shield plans. Our founding CEO, Dr. Bill Curre, came out of the Blue Cross plans and chief medical officer at Florida Blue and then also well care. And what’s been very interesting is he built Avalon from the health plan, chief medical officer, medical director’s chair, saying, what would I need in a program to do this? And it’s been fantastic. Everything they need. And what is there, you want to be able to customize the policies? Yes. You have complete flexibility in total by line of business, however you want to do it, and then how to administer and enforce them. So Bill did a great job in 2013, launching Avalon and building it all out of it.

Saul Marquez:
Great history. And when you have that that background and experience to know what exactly people are looking for, that’s what makes it successful. So just incredible work. I really appreciate the the insights, Barry, and the work you guys are doing. Why don’t you leave us with a closing thought here and then the best place for the listeners could get in touch and learn more.

Barry Davis:
Thanks Saul. Really appreciate your questions. And and we covered a lot of ground and for a period of time to summarize it, I would say taking it one of the top medical benefits, laboratory testing and bringing a value based care model to it, getting away from the volume driven approach to produce the outcomes you would expect, get rid of the waste again, improve outcomes and reduce costs. We talked about many examples here of why that’s important and COVID shining a bright light on testing. You can’t turn on the news without hearing what’s going on with testing. So this is a hot topic. This is an important topic and has tremendous opportunity to improve outcomes for patients, doctors and the health care system. And with that, I would love for your listeners to come to our website w w w dot avalon h c. s dot com. That’s for Avalon Health Care Solutions.com and slso, they have questions. They can email me directly at barry.davis@avalonhcs.com.

Saul Marquez:
Barry, what a great call to action to leave us all with something that Barry mentioned to you resonated. Be sure to reach out. This is where it begins by taking action with the great insights that you hear on the podcast. Barry has given us incredible insights on this opportunity for us to do better, to deliver value based care, to save money, to help people get better. I mean, just an incredible opportunity, Avalonhcs.com and if you go to the podcast website at Outcomes Rocket, that helps just type in Avalon and you’re going to find our entire interview with transcripts and all the links to reach Barrie and learn more about what they’re up to. So, Barry, just want to say thanks again for for sharing your knowledge and insights with us. It’s been a tremendous time. Thank you.

Barry Davis:
Thank you. I really appreciate what you’re doing to bring this information, to share it and bring it forward for Avalon and the all the other companies you’re talking to. So thank you.

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Things You’ll Learn

  • How Avalon is incorporating the value-based care model and improving outcomes.
  • How making science as its true north has helped Avalon in its fantastic journey.
  • The importance of laboratory testing and getting it right to determine the right diagnosis and treatment that we need to bring more management to it.

References
barry.davis@avalonhcs.com
https://www.avalonhcs.com/