Labs vs Payer Industry: A New Paper by Astion & Baird

 

In the past couple years, I've heard some excellent talks on the lab, hospital, and payer industries from Michael Astion MD of Seattle.   Here, we get some of this thinking distilled in an article, by Astion & Baird, 2025.   The title is, "Payer Perspectives on Laboratory Stewardship," find it here at J Appl Lab Med.

I'll quote the abstract in full:

Background: The US healthcare system is complex and includes a number of entities and systems that provide services to patients and to pay for them. While improving health and well-being are accepted goals of healthcare, the 3 stakeholder groups relevant to healthcare—patients, providers, and payers—often have different perspectives on how care should be utilized, performed, and paid for. These differing perspectives are discussed as they relate to clinical laboratory testing.

Content: Patients expect that the laboratory tests performed on them are necessary and covered by their insurance. Providers expect that they will be able to carry out what they believe to be the standard of care for their patients, and they furthermore expect that the systems in place from laboratories and payers will support their efforts without exposing their patients or their practice to financial toxicity. Payers, finally, desire to meet the needs of their customers, who are both patients as well as employers, by providing access to necessary healthcare services at a fair cost. Aligning these desires and perspectives is challenging in a fragmented healthcare system, and in the face of substantial opportunities for secondary gain from disreputable practices such as fraud, waste, and abuse.

Summary: Within the constraints of a US healthcare system based on competition and susceptible to misalignment, opportunities nonetheless exit for all relevant stakeholders in the laboratory testing space (patients, providers, and payers) to align and agree on practices that provide reasonably priced, fairly distributed, and medically necessary healthcare.

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AI CORNER

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I asked Chat GPT to provide six take-aways that went beyond the title and abstract content.

1. Medical Necessity ≠ Standard of Care

While most stakeholders assume payers cover what is considered “standard of care,” the article explains that payers often base decisions on stricter, formalized evidence hierarchies. This disconnect leads to denials of common tests even when supported by consensus guidelines or typical specialist practice. For lab leaders, this is a reminder that payers may not follow clinical logic—and labs must bridge the gap through clear documentation and advocacy.

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2. Poor CPT Specificity Undermines Claims Accuracy

Generic CPT codes like 81479 (genetic testing) and 83520 (immunoassays) allow very different tests to be billed under a single code, making payer adjudication inconsistent. The article stresses how vague codes increase denials, slow claims, and limit coverage decisions, reinforcing the need for labs to support PLA code development or utilize DEX Z-codes for more transparent claims.

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3. Laboratories Often Incur Hidden Costs from “Free Testing”

Astion skewers the notion of “free testing” from outside labs. Even when the assay itself is gratis (e.g., sponsored research or pharma partnerships), there are internal costs—tubes, logistics, IT, result reconciliation, and clinician education. These costs are real and recurring, and labs need to quantify and communicate them when asked to permit out-of-network or ad hoc ordering.

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4. Grievances are Toast: Prevention Beats Scraping

The “burnt toast” metaphor is apt: labs and providers are stuck doing time-consuming appeals (grievances) that could often be avoided by front-end ICD-10 coding accuracy and improved EMR documentation. The article encourages labs to focus stewardship not just on test utilization, but on pre-adjudication readiness—ensuring orders are defensible before submission.

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5. Lab Test Waste is a Payer Red Flag

Astion highlights wasteful practices (e.g., duplicate testing, overly bundled panels, obsolete assays like CK-MB), citing Choosing Wisely. Payers view these as signposts for poor stewardship. Labs that fail to police this waste risk tighter controls, lower fee schedules, and greater scrutiny. The article indirectly calls for labs to proactively deimplement low-value tests as a strategy for payer trust.

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6. Payers Prefer In-Network Labs Not Only for Cost, But Quality

While the cost of out-of-network testing is well known, the article notes that payers also worry about data opacity, variable test quality, and patient dissatisfaction. By aligning test menus, utilization policies, and education with payer goals, labs can position themselves as preferred in-network providers—an increasingly strategic distinction as payers steer patients more aggressively.