Payment per Group of Tests. For tests that are routinely and frequently ordered together, bundling them and using panel-level payments can create administrative savings to physicians and the program. If the test can be done on a multichannel analyzer, the laboratory’s cost savings from performing all of the tests at once should be reflected in the payment. The payment for automated chemistry panels should be less than the sum of payments for individual tests in the panel because of economies of scale. The appropriate use of panel payments is complicated, in part, because the definitions of panels as well as the rules governing their payment have changed frequently over the years. Relatively few tests are included in panel fees, but they tend to be among those most frequently ordered. Grouped or panel tests could be a component of a system using payment per test or service, but could not be a separate option, because bundling is not appropriate for all tests.

Capitation. The use of capitation in the health sector grew during the 1990s. Increasingly, private health plans that receive capitation payments from Medicare under Medicare+Choice or from private purchasers, use capitation payments to buy laboratory services. Two basic approaches are used to capitate laboratories: (1) a managed care organization pays the laboratory an agreed-upon amount per member per month to provide all, or a defined list of, ordered laboratory services; or (2) the managed care organization includes laboratory services in the capitated payment to the physician.4 The latter approach is rarely used.

Capitated payments for laboratory services under fee-for-service Medicare are conceivable, although the committee is not aware of this method being used. This approach would require Medicare to contract selectively with certain laboratories to provide services to identifiable subgroups of beneficiaries, possibly on the basis of geography. It would be necessary to determine an appropriate per-person capitation payment rate. One or more laboratories would be paid a capitated amount to provide required laboratory services to the covered group of beneficiaries. By determining the size of the covered groups, Medicare would effectively be deciding how many laboratories in each area (or nationwide) would get Medicare business, which in turn could have tremendous implications for the numbers and types of laboratories that survive in future years. Physicians


A related payment option would be to integrate Medicare laboratory payments into the fee schedule for physicians providing care under fee for service, not managed care. This would put the physician in control of laboratory test payments as well as ordering. Conceptually, it is closer to a bundled payment than capitation, since payment would be based on a fee for a physician’s service, but the physician would be at risk for utilization of laboratory services. Although this approach has been discussed over the years at the theoretical level, practical issues of how to estimate appropriate laboratory payments for each relevant physician service, how to handle variations in testing patterns among specialties, and how to protect the chronically ill from underservice would have to be resolved.

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