Saul Marquez, Host at Outcomes Rocket Podcast

Lab Benefit Management

Wednesday September 30th 2020

Lab Benefit Management

The United States has one of the most advanced high tech care systems in the world. Sadly, they also have the highest health care cost, compared to other countries. 

In 2018, the U.S. spent $3.6 trillion, which is 17.7% of its Gross Domestic Product (GDP). 

There is an increasing demand among the different facets of the US healthcare system – from its huge health systems to independent medical clinics and medical laboratories – to implement reforms to manage the continuously expanding health care spending. 

According to an article published by the New York Times in 2018, one of the reasons healthcare costs are more expensive in the US than in other countries is because they pay substantially higher prices for medical services, including hospitalization, doctor’s visits, and prescription drugs.  

Highly visible technologies and services like surgeries, prescription drugs, and hospital fees have all been under scrutiny lately. But it’s the ‘not so well known’ and ‘less glamorous technologies’ that accounts for a large share of the growth in health expenses. 

A study done by Danzon et al showed that lab tests have doubled in the past ten years. 

According to a United States 2017 laboratory market report, the laboratory testing market in 2016 was $72 billion. 

  • Largest market portion belongs to hospital labs at 58%. 
  • 33% of the market goes to independent labs
  • Physician office labs hold the smallest fort at  4%
  • Genetic testing is on the rise with more than 65,000 testing products available as of 2016. 
  • Molecular testing, valued at $6.45 billion globally, continues to gain traction as a more accurate alternative to common rapid tests. 

Clearly, the U.S. still has a lot of work to do to improve the system, make it more efficient, and remove the waste. If they are looking to reduce healthcare spending, one of the ways is to look at lab test cost and management. 

There is no denying that clinical lab results are crucial to the effective delivery of care. The results enable physicians and other healthcare professionals to make the best evidence-based diagnostic decisions for their patients. Therefore, it is of high importance that laboratories be well managed, and the lab process is curated to produce the highest effectiveness for patients. 

Offering premier laboratory benefit management

One company making a huge difference in laboratory benefit management is Avalon Healthcare, a leader in laboratory science and lab benefit management. 

AvalonHCS is a healthcare information technology that specializes in laboratory benefit management. It provides a comprehensive program managing all outpatient laboratory services across all providers, including independent, physician office, and hospital-based labs.

In my podcast interview with Barry Davis, Chief Growth Officer at AvalonHCS, he explained more about how the company works. 

“Science is our true north. We have a hundred and forty evidence-based lab policies. Our scientists, our PhDs, and clinicians do 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,” Barry said. “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.”


How has Avalon improved lab management?

One of the things that Avalon changed in their lab management is how labs define their panels or their tests themselves. This results in inconsistencies are what should be in a lipid panel, or an allergy panel, or a wellness panel. Using evidence-based lab policies, Avalon reduced inconsistencies and brought about a more cohesive and consistent definition of what should be in different tests. 


Driving down waste and healthcare costs

Another thing Avalon reduced is waste in lab tests. Barry shared that the company checked the data of over 70 health plans and saw that about 8-12% of routinely administered tests were unnecessary. Since routine tests are high volume and low cost, it would be impossible to look at every one of them. The upside is that for routine testing, you need software to automate the procedure before you can administer it. 

Since Avalon is the only company with proprietary cloud-based software to administer clinical lab editing, it allows them to connect their software to the health plan medical processing system, and process it in real-time. 

“Our software is called APEA standing for automated policy enforcement application. In real-time, we connect our software to the health plan medical claim processing system, so as they are reviewing it, this is a post-service pre-payment review. 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.” he further explained. 

The 8-12% overutilization when converted about $21M to $28M, a good amount of savings for payers, providers, and health insurance.

Avalon delivers top-quality care with the bottom line of reducing unnecessary tests and associated costs. It brings management to the lab space while producing better outcomes. 

Barry also mentioned that his company is “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.”


The truth about COVID testing

With COVID-19 patients continually increasing in numbers, people are looking at COVID tests as the first step in the recovery process. But with so much information out there, it can be confusing. 

Barry clarified the science and expressed his expert opinion on the matter. “I was getting lots of promotion from 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? There was a lot of advertising to get your antibody testing. But let’s understand the science first, and what’s the best test, and what’s the purpose for it to bring the information to you.”

He explained that all the unnecessary testing is driving up costs for both patients and the healthcare system. It also leads to waste and lab costs, as well as the doctor’s time explaining the tests. This also leads to more tests, medication, and doctor visits. 

“Tremendous amount of incremental waste in the health care system caused by all of this extra testing,” Barry said. 



With COVID test a hot topic in these pandemic times, we want to be sure that we are getting the right test we need and not adding to the waste in healthcare.

Avalon HCS ensures that medical laboratories are following the science, improving outcomes, delivering significant savings, and making health care better. They have just been selected by the Health Plan Alliance as the preferred lab benefits manager. 

Whether you’re a payer or a healthcare insurer, Avalon presents an incredible opportunity for you. 

Listen to our full conversation here: https://outcomesrocket.health/avalon/2020/08/


Written By

Saul Marquez

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