News, Analysis, Trends, Management Innovations for
Clinical Laboratories and Pathology Groups

Hosted by Robert Michel

News, Analysis, Trends, Management Innovations for
Clinical Laboratories and Pathology Groups

Hosted by Robert Michel
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Plans by large-scale employers to self-insure brings into question how clinical laboratories would submit claims and get reimbursed from inside and outside of a corporate provider/payer network

Clinical laboratories and anatomic pathology groups serving the nation’s hospitals and health systems may get increased network access to patients due to new developments in the health insurance marketplace. In recent months, both large corporate players and a number of smaller hospital systems have decided to form their own health insurance companies.

For example, six New Jersey hospital health systems announced they have taken steps to self-insure their employees by forming the Healthcare Transformation Consortium (HTC). This follows a similar joint agreement by Amazon, Berkshire Hathaway, and JPMorgan Chase to self-insure their employees as well. Inhouse medical laboratories and anatomic pathology groups that service these entities will likely find themselves part of new private provider/payer networks, which will impact how and when they get reimbursed for their services.

Both groups hope to slow skyrocketing healthcare costs, improve outcomes, and avoid having to navigate the increasingly complex insurance industry. Between the two groups, nearly one million employees will be insured directly by their companies.

Another reason these two events could be good news for the hospitals, doctor’s groups, and medical laboratories involved is they will no longer have to deal with narrow networks and mandates required of health plans subject to the federal Employee Retirement Income Security Act (ERISA) of 1974. This also may include regulations in the Health Insurance Portability and Accountability Act (HIPAA), which amended ERISA in 1996.

Local clinical laboratories will likely automatically become part of the combined provider group as well, which is good. But will they have to alter how they submit claims and get reimbursed for services rendered to a private corporate payment system?

Goals of Corporate Healthcare

In a press release, Amazon, JPMorgan Chase, and Berkshire Hathaway stated they are “partnering on ways to address healthcare for their US employees, with the aim of improving employee satisfaction and reducing costs.” A not-uncommon healthcare goal, these days.

One of the few concrete details in the release stated, “The initial focus of the new company will be on technology solutions that will provide U.S. employees and their families with simplified, high-quality and transparent healthcare at a reasonable cost.”

The six N.J. healthcare providers in the HTC include:

Together, they employ approximately 50,000 individuals who all will be enrolled in a single health plan, scheduled to go live January 1, 2019.

Kevin Slavin (above), President and CEO of St. Joseph’s Health in Syracuse, N.Y., told HealthLeaders Media. “Each of us have had our different strategies to reduce costs and improve care for our beneficiaries, but now we have six systems that can share those ideas and harness power together.” He added that they expect to see immediate cost savings per enrollee for hospital, outpatient, and medical laboratory services. (Photo copyright: St. Joseph’s Healthcare System.)

Stocks Fall in Response to Announcements

On the day that Amazon (NASDAQ:AMZN), JPMorgan Chase (NYSE:JPM), and Berkshire Hathaway (NYSE:BRK.A, BRK.B) made their announcement, UnitedHealth Group (NYSE:UNH), Anthem (NYSE:ANTM), and other healthcare companies saw their stocks fall. This demonstrates how disruptive such partnerships and coalitions can be in the healthcare marketplace, the New York Times reported.

They can be disruptive in more immediate ways, as well. For example, companies may use collected patient data to devise wellness programs they then offer their employees for free—even going as far as providing a financial incentive to participate. A healthier employee workforce means lower healthcare costs, but also less revenue to surrounding hospitals, physician’s practices, and medical laboratories.

What’s good for one group is not so good for the other, even though people are getting healthier in the long run.

And, to be fair, removing a million people from health insurance plans surely will negatively impact those companies’ finances, as well. The six HTC entities spend approximately $250 million annually for health benefits.

Kevin Joyce, VP of Insurance Networks at Atlantic Health System, a six-hospital health system in Morristown, N.J., told Healthcare Finance that, because the organizations involved in the HTC are healthcare providers themselves, the consortium has a particularly intimate knowledge of the issues causing the ever-rising cost of care.

“This is one of the ways to try to bend the cost curve,” he noted. “I honestly believe with the rise in high-deductible plans, trying to make healthcare more affordable should be the mission of both payer and provider. What makes us different from Amazon is that we as competitors came together to do this. This should have a ripple effect across all of our membership.”

Kevin Lenahan, CPA, Senior Vice President, Chief Financial and Administrative Officer, at Atlantic Health System agrees, adding, “It’s like-minded organizations that came together. We know each other. We all felt that we have a responsibility to improve quality, help transparency.”

Huge Obstacles on All Sides

In a CNBC interview covered by Inc. Magazine, Berkshire Hathaway CEO Warren Buffett emphasized that the obstacles such coalitions face are enormous.

“You talk about something that has $3.3 trillion in revenues presently going to people, and most people that are on the receiving end of the $3.3 trillion are happy with things.” He added, “If it was easy, it’d have been done.”

Nevertheless, both coalitions hope to serve as models for others. “By working closely with like-minded organizations, we can share best practices, learn from one another, and lead the transition from fee-for-service to value-based care, using our own benefit plans as proving grounds,” Joyce told Healthcare Finance.

As the trend to self-insure employees gains steam across corporate America, it will be interesting to see how the inhouse medical laboratories, and independent clinical laboratories and pathology groups that service these entities, are affected by the change.

—Dava Stewart

Related Information:

New Jersey Beats Amazon to the Punch on Self-Insured Health Plan

Amazon, Berkshire Hathaway, and JPMorgan Chase to Partner on US Employee Healthcare

Amazon, Berkshire Hathaway, and JPMorgan Team Up to Try to Disrupt Health Care

Six New Jersey Health Systems Borrow a Page from Amazon