Genetic Testing on the Rise While Routine Lab Testing Stabilizes with Better Management, Report Finds


Lab test spending is challenged by a lack of control, pricing discrepancies and explosive growth in several tests

The use and cost of genetic testing rose last year while routine testing remained relatively stable, according to the new 2024 Lab Trend Report from Avalon Healthcare Solutions, the world’s first Lab Insights company.

Avalon’s annual Lab Trend Report is based on an analysis of 15 million client health plan members, a subset of Avalon’s 39+ million managed lives. It offers the industry’s leading analysis of lab testing and testing trends, a crucial component of healthcare. Approximately 14 billion clinical lab tests are performed yearly in the U.S., making them the most utilized medical benefit. The results of those tests affect 70% of treatment decisions.

Though lab testing is still a relatively small part of overall health plan spending, health plans are paying more attention as the number of tests grows exponentially and patient demand for testing increases. Avalon uses its specialized knowledge of lab science and breadth of data on how lab testing impacts other areas of medicine to identify trends in clinical testing.

“Lab testing is an often overlooked but critical part of healthcare, and it is becoming increasingly important to guiding care decisions,” said Bill Kerr, MD, CEO, Avalon Healthcare Solutions. “Its potential to improve care is vast, but that largely depends on finding better ways to manage its use and associated costs.”

Below are some of the highlights of the report:

Pricing discrepancies

While the use of testing grows, so do the discrepancies in pricing related to where the tests are performed. The Lab Trend Report compared the prices of a general health panel (CPT 80050) by location and found that a test that cost $27 at an independent lab was $35 at a physician’s office (+30%) and $157 at a hospital outpatient lab (+475%). And the gap is widening. Hospital lab prices are growing faster than independent labs (46% increase in hospital lab prices from 2022 to 2023).

Routine testing

Routine testing, which accounts for approximately 90% of testing by volume, cost health plans that contract with Avalon an average of $175 PMPY last year, roughly the same as in 2022. This contrasts with an industry trend of 2% to 5% CAGR. The volume of testing was down, mainly due to a decline in COVID testing.

A 13% decrease in routine testing spend in 2023 was greater than the 6% decrease in routine testing utilization. This results from a better mix of testing and Avalon’s data-driven management solutions, ensuring members receive the appropriate tests while controlling costs and eliminating fraud, waste, and abuse.

The challenges for routine testing are overutilization and underutilization, the need for disease-specific care models, place-of-service discrepancies, and fraud, waste, and abuse.

Genetic testing

The average health plan spend on genetic testing in 2023 was $13 PMPY, an increase of 8% from 2022. The utilization of genetic testing was up by 5%. This increased spending and utilization are due to the increasing costs of genetic tests and the increasing use of genetic testing and intended use populations. Though only 10% of testing by volume, genetic testing accounts for nearly 30% of payer spending. Spending per member was 3.6x higher on genetic testing than routine testing.

There are over 175,000 genetic tests in the U.S., with about ten new ones added daily, but only about 500 CPT codes to cover them. The challenges to genetic test management continue to be insufficient coding to identify and differentiate tests (40,000 tests under CPT 81479), quality control (including a strong concentration of labs running genetic tests and a shortage of trained lab professionals), pricing, and determining the clinical utility of the tests.

Emerging Trends

The report, the fourth issued by Avalon, reviews the recent lab data experience and market dynamics to identify significant emerging trends for healthcare executives. It includes:

  • A look at the legislative and regulatory changes affecting testing
  • An evaluation of newly marketed tests and those under development
  • A comprehensive summary of the benefits health plans can realize by integrating laboratory values into their decision-making and member and provider management to realize the promise of patient-centric, value-driven care.

“The necessary transition to value-based care requires a better understanding and management of testing, which will help provide the best possible treatments for patients while controlling costs. This report provides healthcare leaders with valuable information to help accomplish that goal,” said Pamela Stahl, President of Avalon Healthcare Solutions.

To download the Avalon 2024 Lab Trend Report, click here.