A groundbreaking lab test startup: A Drop of Blood. An Instant Diagnosis

There’s a new lab testing service that is quick, painless, inexpensive and  more accurate than the current systems, according to a report in The Wall Street Journal. It’s called Theranos, and it was founded by a Stanford dropout named Elizabeth Holmes. It is announcing a partnership on Monday with Walgreen’s to do quick blood testing inexpensively in a retail location, first in Palo Alto and then expanding beyond that. Oh, and they’re publishing retail prices on their website. Look out, Labcorp and Quest. (Update, February 2016: Theranos has encountered a series of challenges and setbacks to its technology and business model; here’s a New York Times article.)

“A word about costs and what that investment bought, which doesn’t follow the usual rules about a new medical technology. Ms. Holmes says Theranos can conduct a battery of tests for ‘tens of dollars,’ a phrase that does not exist in U.S. health care. She calls it “a watershed opportunity to change the trajectory of health costs through price transparency.”

“Since 1984, the Medicare Clinical Laboratory Fee Schedule has set reimbursements for 1,140 unique lab tests across 57 U.S. jurisdictions. That’s 64,980 different price controls. Meanwhile, the prices that private insurers negotiate with providers are virtually trade secrets.

“Theranos is committing to a half-off discount on Medicare fees. ‘So a test that costs $100 now, we’ll do $50 or less. The quote-unquote payer community I don’t think has ever seen someone walk in and say we want to bill you at less than you’re willing to reimburse,’ she says. If this strategy succeeds in squeezing down prices—say, lowering testing as a share of total health costs to 1.5% from 2.3% now—it could save Medicare $61 billion over 10 years and Medicaid $96.1 billion, according to what Theranos calls a conservative estimate.”

via Joseph Rago: A Drop of Blood. An Instant Diagnosis – WSJ.com.