from volume to value · actionable findings on diagnostic industry markets, related regulatory...

From Volume to Value:

Laboratory Industry

Strategic Outlook

California Clinical Laboratory Association

Annual Conference

November 7, 2013

G2 Intelligence © 2012 Kennedy Information, LLC

About G2 Intelligence • Advancing the Business of Diagnostic Medicine

• Our mission is to deliver relevant, meaningful, and

actionable findings on diagnostic industry markets,

related regulatory changes, and laboratory operations.

• We’ve covered and reported on the diagnostic industry

for over 30 years.

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through live and virtual events, facilitate industry

meetings and information exchanges.


A Critical Juncture

• Providers under pressure

• Value-based case for pathology and labs

– Optimally informed care decisions

• Challenges—and opportunities—abound


Overview

• The big shift: From volume to value

• High-value, high-growth: Molecular

diagnostics

• Sneak peek: G2’s latest industry

benchmarks and market forecasts


Overview



diagnostics

• Sneak preview: Industry benchmarks and

market forecasts


Volume to Value: Full Steam Ahead


Hospitals and Health Systems Facing

Serious Threats


Desperately Seeking New Delivery Models


Bundled

Payment Models

Coming to

Cancer Care

Source:

Lee Newcomer

Health Affairs, April 2012


New (Value) Math:

Profit = Someone Else’s Revenue


Decision Time: Is Your Lab a Savings

Generator or a Source of Savings?


Care Decision-Making:

A Problematic Process


Key Source of Poor Performance?

Information Overload


What is the Return on Decision (ROD)?


The Value of Pathology and Lab Medicine:

Optimally Informing Care Decisions


Claim Your Rightful Role as

The Decision Expert


So What’s the Difference?


Can Dx-Informing Services Add

Significant Value? Let’s See…


G2 Prometheus Study: Key Findings


Examples of Value Generation


Overview



diagnostics


market forecasts


Molecular Diagnostics:

More Than Just Another Test

• One sample, potential for many tests

– Versatile: sample type, size

• Examples of cost savings

– Decrease hospital stay

– Establish duration of therapy

– Discontinue ineffective therapy

– Ability to identify high-risk patients


Molecular Diagnostics:

More Than Just Another Test • Labs relying on own send-out data as primary input for deciding

which tests to develop/bring in-house

– Time vs. resources

• Calculating send-out charges and startup costs

– What is cost per reportable result?

• What factors determine…

– Reagent costs -Supply costs

– Labor costs -Quality control/assurance costs

– Equipment costs -Standard costs

– Supply costs


MDx Innovation: A Virtuous Circle Research

Identifies molecular marker (mutation, etc.) and clinical implications

Test Development With demand comes need to improve test effectiveness and efficiency


• New tests and

technologies

• Personalized medicine

• Demand from specialists,

patients

• Influx of newly insured

• Value-based healthcare

• Aging population

• Reimbursement cuts

• Payer utilization

management, coverage

denials

• Lower patient healthcare

utilization due to

unemployment, high costs

• Physician education needs

G2 Intelligence © 2012 Kennedy Information, LLC 28

I am confident I can… PCP Cardiologist Oncologist

Explain test results to my patients 46% 61% ▲ P 84% ▲ P, C

Identify appropriate patients for testing 45% 57% ▲ P 85% ▲ P, C

Understand and interpret the test results 42% 52% ▲ P 83% ▲ P, C

Choose the right test 35% 50% ▲ P 83% ▲ P, C

Choose which lab to send tests to 30% 35% 56% ▲ P, C

Determine if the test is covered by insurance 24% 30% 39% ▲ P, C

Determine the right insurance codes 23% 25% 34% ▲ P, C

▲ P = Significantly higher than Primary Care. ▲ P, C = Significantly higher than Primary Care and Cardiology Source: Coamey, Jerry. “MDx and MDs: Is a dose of knowledge the prescription for adoption.” CAHG Physicians Landmark Study. Page 3.

Many doctors have little or no formal training in genetics and frequently order the wrong test, misinterpret results, or fail to refer the patient to a genetic counselor.


• Robust modeling

• Integrates diverse research

sources and estimation

methods

• “Triangulation” approach offsets

inherent biases and flaws

• Sources include: primary research

such as surveys of laboratories, modeling

based on disease incidence and testing

guidelines, secondary research of the in vitro

diagnostics industry, and top-down estimates

from Medicare sources

G2’s Approach to Estimating the Market


• G2 estimates the U.S.

molecular diagnostics market at

$7.8 billion in 2013

• Growth of 4% from 2012

• Forecasting 9% market growth

(2013-2014)

• Forecasting CAGR of 10%

(2013-2015)


Sector Sizes (2013)


Payer Value: Attractive in a value-based purchasing world? Assay Technology: Moving toward “game-changing” technology? Therapeutics: Impacting prescribing decisions? Population: Growing patient population?


• Integration with other areas of the laboratory while continuing to play

a complementary and/or replacement role?

• Progress across full range of disease testing:

– Diagnostics, screening, therapy response, risk/relapse prediction

• Specific tests (particular disorders) broader assays (variants)

• Focus on defining clinical significance of findings

– Effects of single gene on common diseases generally small

– Labs clarify how they will assist physicians with the complex

interpretation of clinical data generated • What do genotypes mean? Will pharmacist be involved in final recommendation to physician?

• Moving to a point-of-care orientation

• Next-generation sequencing

MDx 2020


Game Changers:

Next-Generation Sequencing


Game Changers:



Game Changers:


• Early applications: Multigene panels to address specific

medical situations where clinical utility has been more

adequately substantiated

– Prenatal screening, inherited-disorder carrier screening, id of rare

genetic conditions involving defined genes, tumor characterization to

guide targeted therapeutic choices, panels for identifying drug

metabolism status

• Multigene panels create foundation for more comprehensive

whole-genome testing

• Expansion of available phenotype–genotype correlative data

will accelerate application

• Platform manufacturers, software developers designing

applications to meet rigor, standards of clinical diagnostics


Game Changers: Value-Based Payment


PBM PGx Options CVS Caremark/ Generation Health

Express Scripts/Medco

Offers companion MDx

Lab network with testing services

Collaborations on research/pilot studies (e.g., clinical utility)

• Funding research/pilot studies • Establishing lab networks • Facilitating “turn-key” testing through contracts with Genetic Benefit Managers • Educating clinicians, payers, and patients • Key access point for information: clinical, economic, and educational • Linked to patient treatment adherence; potential for expanded models of liaison between physician, hospital, lab, and the patient

Game Changers: PBMs and PGx


Overview



diagnostics

• Sneak preview: Industry benchmarks

and market forecasts

– U.S. Clinical Laboratory and Pathology

Testing 2013-2015: Market Analysis, Trends,

and Forecasts (coming soon from G2)


What is your lab doing in response

to historic changes in the way that

lab services are delivered, valued,

and reimbursed?



diagnostics


market forecasts

Thank you

[email protected]

from volume to value · actionable findings on diagnostic industry markets, related regulatory...

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