Oct 4, 2017 | Coding, Billing, and Collections, Laboratory Management and Operations, Laboratory News, Laboratory Operations, Laboratory Pathology, Laboratory Testing
To help patients pay their clinical laboratory test bills, Sonora Quest Laboratories partners with CarePayment to provide patients with no-interest loans
With tens of millions of Americans now covered by a high-deductible health plan (HDHP), hospitals, physicians, and clinical laboratories now share a common problem: how to collect the full amount due for a patient who may have an annual deductible of $5,000 (individual) or $10,000 (family).
This is a significant problem for healthcare providers and Dark Daily has reported on this trend several times, most recently in “Hospitals, Pathology Groups, Clinical Labs Struggling to Collect Payments from Patients with High-Deductible Health Plans,” September 6, 2017.
Thus, many pathologists and clinical laboratory managers will be interested in a new solution that the largest commercial laboratory company in Arizona is using to help cope with the need to collect larger amounts of money from patients with a high-deductible health plan. Recently, Senora Quest Laboratories announced an innovative collaboration with healthcare finance company CarePayment to ensure cost is not a barrier to clinical laboratory and pathology patients needing medical tests.
Sonora Quest Laboratories, which performs more than 60-million diagnostic tests per year in Arizona, has established a new partnership with CarePayment of Nashville to provide no-interest loans to any Sonora Quest patient whose testing bill exceeds $100.
David Dexter, Chief Executive Officer at Sonora Quest Laboratories, believes patients have a right to “affordable access to much-needed laboratory testing.” In a statement, Dexter notes, “Across Arizona, rising out-of-pocket medical costs are impacting families’ budgets, and ultimately, their health. No one should delay having clinical testing done because they are worried about costs.
“Sonora Quest Laboratories understands the importance of making healthcare services affordable to consumers,” he added. “We are working with CarePayment to do our part to provide affordable access to much needed laboratory testing. We believe this will help improve testing compliance and lead to better outcomes for patients managing chronic disease or monitoring their overall wellness.”
Annual Deductibles Rise 153% for Workers
The annual deductible that patients must cover is climbing, not just in Arizona, but nationally. According to the Kaiser Family Foundation 2016 Employer Health Benefits Survey, the average worker’s annual deductible has gone up 153% from 2009 to 2016. In addition, after meeting their annual deductibles, most workers face additional cost sharing for hospital admission or outpatient surgery.
To address the problem of collecting these larger deductibles from patients and to avoid racking up patient bad debt, Healthcare Finance News (HFN) points out that hospitals and healthcare providers are looking for financial solutions that “benefit both sides of the patient-provider relationship.”
As the graph above illustrates, more workers each year find themselves enrolled in high-deductible health plans (HDHPs) they can barely afford. That’s why hospitals, medical laboratory companies, and financial services organizations are partnering to develop programs patients can use to make affordable payments on their healthcare bills. (Image copyright: Kaiser Family Foundation/Obeo Health.)
To fill this need, a new type of company is popping up: third-party finance companies. CarePayment is one example. These new companies want to partner with hospitals and other healthcare organizations to identify patients who need assistance with out-of-pocket expenses. After a patient’s insurance company pays its portion of a bill, patients are referred to the healthcare finance company, which charges the hospital or provider a “discount factor” on the accounts it establishes.
Helping Clinical Laboratories, Pathology Groups Collect from Patients
According to CarePayment, enrollment in its programs is voluntary, requires no application, and has no impact on a patient’s credit score. CarePayment states that providers “double net collections on average” when patients use its financing solutions.
Craig Hodges, CEO of CarePayment, maintains innovative payment solutions are necessary because of the increased consumer responsibility for healthcare costs. “There’s evidence out there that asking a consumer to pay interest on top of their out-of-pocket expense is impractical,” Hodges stated in the HFN article. “Consumer responsibility for the [the total] bill has grown from sub 5% to 25%. There’s a lot of sticker shock out there.”
Third-party healthcare finance companies are not the only alternative financing option open to healthcare providers. Healthcare Finance News points out that Docpay offers automated clearinghouse payment plans, which require the patient to preauthorize a payment schedule from their bank account or credit card, guaranteeing payments are made each month. A service fee is charged to the patient that covers credit card processing fees as well as payment plan fees. According to the company’s website, a healthcare practice receives a higher net collection percentage than if they used a third-party financing company or processed credit card payments in-house.
Banks Get into the Act to Help Physicians, Hospitals, Medical Laboratories
NBC News adds that some hospitals are partnering with banks to offer patients no-interest or low-interest loans as well, with the goal of offering patients more affordable payment options while increasing payment rates.
David and Nicole Rayman of Chatham, Ill., told NBC News a zero-interest hospital loan saved them from high-interest financing after they were hit with an unexpected $2,800 bill to remove a benign growth from David’s neck. Under terms of the loan, they paid $80 a month for 36 months.
“That’s going out to dinner one time a month, so that’s definitely something we could cut out,” Nicole Rayman stated in the NBC News article.
Failure to Collect Bills Directly from Patients
While Hodges predicts that healthcare financing could potentially be a $70-billion industry, he also notes that growth has been fueled by providers’ difficulty communicating costs with consumers and collecting bills directly from them.
“As those high-deductible health plans grew over time, providers realized they didn’t have the infrastructure to deal with that,” Hodges noted in the HFN article. “The portion of the bill the patient was responsible for used to be small. As that grew, providers didn’t have the experience, in-house, to interact with the consumer in a consumer-like environment.”
While medical laboratories and other providers have been slow to embrace price transparency, Hodges believes simplified and transparent financial responsibility will fuel healthcare consumerism and improve the provider-patient relationship.
“My theory is that we have to evolve to total transparency,” he told Healthcare Finance News. “Here’s what the service is going to cost you from an out-of-pocket perspective—that’s the first step.”
This development is another sign HDHPs are creating financial challenges for clinical laboratories and pathology groups as more patients are unable to pay out-of-pocket cost for testing services. In this environment, medical laboratory managers and pathology practice administrators will need a strategy for collecting payments from patients at the time of service.
—Andrea Downing Peck
Related Information:
Sonora Quest Laboratories Partners with CarePayment to Help Patients Pay for Clinical Testing
Kaiser Family Foundation 2016 Employer Health Benefits Survey
Healthcare Turns to Zero-Interest Loans to Give Patients a Better Reason to Pay
Some Hospitals Will Now Offer You an Interest Free Loan
To Handle Increased Bad Debt by Patients in High-Deductible Health Plans, Hospitals Are Offering Loan Programs
Hospitals, Pathology Groups, Clinical Labs Struggling to Collect Payments from Patients with High-Deductible Health Plans
Oct 2, 2017 | Laboratory Hiring & Human Resources, Laboratory Management and Operations, Laboratory News, Laboratory Operations, Laboratory Pathology, Laboratory Testing, Management & Operations
Research conducted by Kalorama suggests the popularity of retail clinics represents a trend towards newer healthcare models that challenge existing models of care, and which could severely impact hospitals, clinical laboratories, and pathology groups
In recent years, pathologists and medical laboratory managers have watched as retail clinics housed in drug and grocery stores became a go-to service for healthcare customers seeking relief from minor illnesses. However, to market research company Kalorama, retail clinics also are a “game-changer” that could pose a threat to healthcare providers if their growth remains unchecked.
At risk are health systems and office-based physicians, along with the clinical laboratories and pathology groups that serve them. This would happen if patients shy away from primary care doctors in favor of cheaper, faster, medical care. However, as retail clinics expand the services they provide, they also could become an important source of orders for certain types of medical laboratory tests.
Kalorama defines retail clinics as, “healthcare centers that provide basic and preventative care in a retail setting; excluded are crisis and acute care centers; urgent care centers; emergency facilities; and wellness centers.” According to Kalorama’s data, “in 2016, total US retail clinic sales are estimated at more than $1.4 billion, an increase of 20.3% per year from $518 million in 2010.”
This increased use of retail clinics is a mixed blessing. On one hand, easy accessibility, low-wait times, and flexibility combined with lower costs for basic care is a boon for certain patients. On the other hand, this emergent healthcare model requires that traditional healthcare facilities address the impact of retail clinics on traditional practices, patient care, and regulatory standards.
Here are five reasons why retail clinics could threaten traditional healthcare models:
Retail Clinics Disrupt the Normal Healthcare Delivery Environment
Retail clinics are designed for immediate treatment of symptoms and vaccinations, not in-depth examination or long-term healthcare relationships between physician and patient. However, because retail clinics are a convenient low-cost option for patients, they become direct competition for full-service. Why visit a primary care physician (PCP) when you can receive off-hour care at lower prices and with faster wait times?
Based on data from peer-reviewed journal Mayo Clinic Proceedings, the graph above illustrates the huge growth of retail clinics over just the past 10 years, which is expected to continue. (Image copyright: Accenture Consulting.)
There is a rising fear among PCPs that the quick fix of retail clinic services will translate into poorer overall health for patients who fail to establish permanent long-term healthcare connections. This fear is validated by an American Medical Association (AMA) report that states, “only 39% of retail clinic users report having an established relationship with a primary care physician, which contrasts to about 80% of the general population reporting such a relationship.”
Retail Clinics Increase Competition for Primary Care Practices
Rather than competing with emergency departments, retail clinics directly compete with primary care clinics, according to Kalorama and the AMA. Staffed primarily by nurse practitioners and physician assistants, retail clinics treat symptoms of acute and easily identifiable health issues. There is growing concern that this limits opportunity for patients to receive more comprehensive healthcare that includes identification and treatment of chronic diseases.
And though competition in the healthcare market is good, physicians worry that retail clinics may push smaller stand-alone clinics out of business. The Kalorama report explains that “ultimately, medical practices are businesses that rely upon a steady flow of [patients] for their success.” When primary care facilities close due to loss of patients, it can create immediate healthcare gaps in communities.
Retail Clinics Could Increase Strain on Medical Laboratories and Pathology Groups
Kalorama’s data shows that retail clinics could place strain on medical laboratories and pathology practices. The study notes, “retail clinics are becoming relatively large users of point-of-care (POC) tests, clinical chemistry, and immunoassay laboratory tests and vaccines.” Kalorama’s report states, “the combined sales of these three types of products to retail clinics reached $240 million” in 2015, reflecting a 26% per year growth in testing since 2010. Projections from Kalorama suggest further increases in retail clinic test ordering in years to come.
The Clinical Laboratory Improvement Amendments (CLIA) advisory boards, the US Food and Drug Administration (FDA), and the Commission on Office Laboratory Accreditation (COLA) all have expressed concerns about the rise of retail clinic testing. COLA’s 2017 Spring Newsletter states that the increased use of retail clinics could lead to unnecessary testing, and increasing use of “non-laboratory personnel for laboratory testing.”
The COLA newsletter also warns that pathologists and clinical laboratory managers “should expect to see, over time, a steady increase in the menu of diagnostic testing offered by retail clinics.” COLA suggests that pathologists and laboratory scientists will experience increased demand from retail clinics for their services and expertise, but that because retail clinics often require high-volume, fast-paced testing without the benefit of full clinical laboratories (both in terms of staff and equipment) there is potential for retail clinic testing to fall short of industry standards.
Retail Clinics Fragment Health Records
According to an article in AMA Wire, the AMA House of Delegates (HOD) established guidelines for retail clinics that focus on continuity of medical records and the safeguarding of patient care. The guidelines state that retail clinics “must produce patient visit summaries that are transferred to the appropriate physicians and other healthcare providers in a meaningful format that prominently highlights salient patient information.” The fear, according to the AMA, is that the fragmenting of medical records may bring harm to patients via miscommunication that undermines patient-physician relationships and complicates oversight in treatment plans.
The Kalorama report echoes this sentiment. It states that physicians often take a negative view of retail clinics because of the lack of communication between retail clinics and primary care practices, citing a lack of cooperation or “unwillingness or inability on the part of convenience clinics to share medical information about patients with primary care providers.”
Retail Clinics Are Expanding Their Reach
Despite the fact that the AMA Council on Medical Services 2017 report on delivery reform recommends that retail clinics limit the scope of their care, expansion of retail clinic services has gone unchecked in many areas according to the Kalorama report. AMA policy states that retail clinics must have a “well-defined and limited scope of clinical services,” and the AMA’s 2017 guidelines state that “retail health clinics should neither expand their scope of services beyond minor acute illnesses … nor expand their scope of services to include infusions or injections.”
As retail clinics open around the country and expand their offerings there is a call for increased regulation of retail clinics to check that growth. COLA states that retail clinics are positioning themselves to play a major role in the delivery of primary care services. And the Kalorama report suggests that the trend towards retail clinic use will continue to rise, creating both challenges and opportunities for providers, clinical laboratories, pathologists, and healthcare policy makers who will be required to address the disruption to their businesses.
-Amanda Warren
Related Information:
Retail Clinics 2017: The Game-Changer in Healthcare
Report 7 of The Council on Medical Service: Retail Health Clinics
COLA’s Insights Spring 2017: The Rise of Retail Medicine
The Advance of the Retail Health Clinic Market: The Liability Risk Physicians May Potentially Face When Supervising or Collaborating with Other Professionals
Primary Care Practice Response to Retail Clinics
Retail Clinics are Poised to Offer More Health Services, Participate in ACOS, and Offer Expanded Menu of Clinical Pathology Laboratory Tests
Retail Clinics Continue to Shape Local Healthcare Markets
More Medical Laboratory Testing Expected as Retail Clinics Change Delivery of Routine Healthcare Services
Top-5 Diagnostics Trends Identified by Kalorama Will Impact In Vitro Diagnostics Manufacturers, Medical Laboratories in 2017
UnitedHealth’s Plans to Build More MedExpress Urgent Care Centers Is a Sign of Strong Consumer Demand and Could Be an Opportunity for Clinical Laboratories
Sep 25, 2017 | Compliance, Legal, and Malpractice, Laboratory Management and Operations, Laboratory News, Laboratory Operations, Laboratory Pathology, Management & Operations
Payers are cutting reimbursements for anatomic pathology services, making it essential for every pathology group to understand its financial present and future
Certain pathology business leaders are warning their colleagues that the era of private pathology group practice domination of the anatomic pathology marketplace is about to end. The only question is how rapidly the clinical and financial foundations of smaller pathology group practices erodes to the point where these groups are unable to generate adequate reimbursement to sustain the practice and the incomes of the individual pathologists.
However, along with this bad news comes a note of optimism. There is a once-in-a-lifetime opportunity for the anatomic pathology profession to take ownership of genetic testing and precision medicine—the most important diagnostic technologies to emerge in the past 100 years. The danger for anatomic pathologists is how to successfully transition from the private group practice model to the new clinical practice models that deliver genetic testing and precision medicine services.
Why Pathologists Are Making Less Money Today
The economic plight of private practice pathology is familiar to all pathologists. During the past decade, reimbursement for technical component (TC) and professional component (PC) services was regularly beat down by payers. For example, pathologists lost the TC grandfather clause in 2012, which immediately caused many histology labs to go from profit to loss. (See Dark Daily, “In Fixing Physician Medicare Pay, Congress Enacts Yet Another Cut in Clinical Laboratory Test Fee Schedule,” February 12, 2012.)
Similarly, over the past 10 years, each time private health insurers negotiated the renewal of a managed care contract with a pathology group practice, they aggressively cut the prices they paid for anatomic pathology services. And the corresponding explosive growth of narrow provider networks exacerbated the financial erosion from lower prices. Many smaller pathology groups found themselves excluded from these networks, causing them to lose access to the large numbers of private-pay patients served by these networks.
“It is important for every surgical pathologist and every pathology practice administrator to recognize that they have the ability to negotiate much more favorable terms and increased network access with health insurers, but only if they come to the negotiating table with the right information and techniques,” observed Robert L. Michel, Editor-in-Chief of Dark Daily and The Dark Report. “Pathology groups showing strong financial performance today know these techniques and strategies. When negotiating managed care contracts, they achieve higher reimbursements, more favorable terms, and in-network status.”
Proven Ways to Help Pathology Groups Protect and Increase Revenue
Pathologists who would like to protect their groups’ revenue and bolster their partners’ income have the opportunity to learn and master the most effective managed care contracting techniques and strategies. Three nationally prominent experts in pathology business and operations are participating in a special webinar, titled “How Payers Are Repricing Anatomic Pathology: Your Financial Present and Your Pathology Group’s Future,” which takes place on Thursday, September 28, 2017 at 2:00 p.m. EDT.
Pictured above left to right are Mick Raich, President and CEO, Vachette Pathology; Jeffrey Pearson, MD, System Medical Director, Bronson Hospital Laboratories; and, Christopher Jahnle, co-founder and Managing Director, Haverford Healthcare Advisors. The three distinguished speakers will share expertise and experiences you can use to protect your pathology group’s revenue while preserving partner income. (Photo copyright: Dark Daily.)
First to speak on this webinar is Mick Raich, founder and CEO of Vachette Pathology, of Blissfield, Mich. He will discuss how Medicare and private insurers are using new pathology and lab repricing models to slash reimbursement and control utilization of expense pathology testing services. Raich will explain why payers are engaging such third-party companies as AIM Specialty Health of Chicago, Avalon Healthcare Solutions of Tampa, Fla., BeaconLBS of Montvale, N.J., and InformedDNA of St. Petersburg, Fla., to develop coverage guidelines, issue preauthorization, and manage the network of labs and pathology groups allowed to provide services.
Raich will further explain what pathologists must know about the Medicare Access and CHIP Reauthorization Act (MACRA) physician payment program, with its MIPS—Merit-based Incentive Payment System—that is designed to pay bonuses or assess penalties each year, depending on how individual physicians perform against their own operational and clinical benchmarks.
Insidious Methods Payers Use to ‘Take Back’ by Underpaying Certain Pathology Claims
Another topic that Raich will address can mean significantly greater collected revenue for your pathology group. He will explain the new phenomenon of how private payers are auditing error rates on claims, then taking back those overpayments by underpaying the labs or pathology groups on claims for specific CPT codes (current procedural terminology codes). Raich will show how your billing/collection team can detect these claims and recover full payment from the payers.
How One Pathology Group Practice Doubled in Size
The second important financial topic of the webinar involves the merger, acquisition, and consolidation of private pathology group practices. You’ll learn why many group practices are losing their independence due to declining revenue or because their parent hospital was acquired by a health system. Pathologist Jeffrey Pearson, MD, is the System Medical Director at Bronson Hospital Laboratories in Kalamazoo, Mich. He is also a partner and President of Pathology Services of Kalamazoo, PC.
During his tenure at Bronson, Pearson helped facilitate the acquisition and assimilation of two hospital laboratories and one for-profit laboratory. His pathology practice has doubled in size and developed a high degree of subspecialization. Each time, the pathology group associated with the acquired entity had to be integrated with his health system’s existing pathology group practice. Experiences will be shared regarding:
· How to assimilate acquired laboratories;
· Practice utilization management; and
· Leveraging success to grow the practice and obtain favorable part A contracts.
Understanding How to Increase the Value of Your Anatomic Pathology Group
To round out the financial techniques and strategies you and your pathology practice administrator can use to protect your group’s revenue and boost partner income, the webinar’s third expert will discuss the latest developments in pathology practice mergers, acquisitions, and consolidations.
Christopher Jahnle is co-founder and Managing Director of Haverford Healthcare Advisors in Paoli, Penn., a suburb of Philadelphia. Over the past decade, his firm has represented Aurora Diagnostics of Palm Beach Gardens, Fla., as a purchaser of private pathology group practices.
Jahnle will describe the specific characteristics of a private pathology practice that have the highest value to buyers in today’s marketplace. You’ll understand how your pathology group’s unique mix of managed care contracts, hospital/health system relationships, and sub-specialist expertise will be valued by a potential acquirer or merger partner.
Jahnle will share case study examples to help you identify useful things your pathology group can do to make it more profitable and increase its value. This is essential knowledge if your group’s pathologists are considering such strategies as:
· “Should we merge with a bigger pathology group?”
· “Should we sell our pathology group?” and
· “Should we add subspecialists and pursue more hospital contracts?”
All three expert speakers have practical knowledge that you can use to protect your pathology group’s revenue while preserving partner income. It is why this webinar is timely and a “must attend” for you, your pathology practice administrator, and your pathology group’s legal and financial consultants.
Full details about this important webinar are at this link (or copy and paste this URL into your browser: http://pathologywebinars.com/how-payers-are-repricing-anatomic-pathology-your-financial-present-and-your-pathology-groups-future/).
—Michael McBride, Managing Editor
Related Information:
How Payers Are Repricing Anatomic Pathology: Your Financial Present and Your Pathology Group’s Future
In Fixing Physician Medicare Pay, Congress Enacts Yet Another Cut in Clinical Laboratory Test Fee Schedule
Sep 22, 2017 | Coding, Billing, and Collections, Laboratory Management and Operations, Laboratory News, Laboratory Operations, Laboratory Pathology, Managed Care Contracts & Payer Reimbursement
Medical laboratories and pathology groups should expect point-of-service collection strategies to become increasingly important to their overall success
Not only is patient bad debt a growing problem for the nation’s hospitals, but it is now getting national attention within the hospital industry. This is bad news for clinical laboratories and anatomic pathology groups, because the same trends causing increased patient bad debt at hospitals are doing the same thing within the lab industry.
Much of the blame can be attributed to the increase number of patients with high-deductible health plans (HDHPs). The latest statistics reveal that patients’ out-of-pocket payments now make up 30% of hospital revenues. That is why hospitals desperately need strategies for successfully collecting payments from patients. And they’re not alone.
Kaiser Family Foundation (KFF) reported that more than half of all workers have deductibles and out-of-pocket liability of greater than $1,000. That is the reason why clinical laboratories and anatomic pathology groups also need a formula for collecting the total bill from their patients.
Jase DuRard, Chief Revenue Officer for revenue-cycle technology company AccuReg, told Modern Healthcare the increase in patient self-pay represents a seismic shift from roughly five years ago. At that time, patients paid only 10% of their hospital bills out-of-pocket and insurers paid about 90% of hospital claims.
Patient Responsibility to Blame for Revenue Loss at Nation’s Hospitals
A November 2016 study of 660 hospitals conducted by Crowe Horwath—an international public accounting, consulting, and technology firm—stated that “patient responsibility” was to blame for an overall managed care net revenue decline of 2.5% for outpatient care and 1.4% for inpatient care. Self-pay-after-insurance (SPAI) collection rates have improved slightly during the past 12 months—with the inpatient median rising 0.2% and outpatient median increasing 0.7%.
However, according to the Horwath report, “While seemingly a good sign for providers in the face of rising patient copays and deductibles, slight increases in patient collection rates are not enough to counter the larger increase in self-pay-after-insurance patient responsibilities.”
High-deductible health plans (HDHPs) are becoming the coverage of choice for healthcare consumers struggling to pay medical bills in full. The net effect is that revenues are declining at hospitals, clinical laboratories, and pathology groups, as well as other providers. (Graphic copyright: Consumer Reports.)
In a Modern Healthcare article, Crowe Horwath’s Managing Partner of Healthcare Services, Brian Sanderson, noted, “It’s imperative that healthcare organizations establish effective point-of-service collection programs by training and educating front-line staff.”
Complicating matters is that many patients faced with self-pay are unable to pay their medical bills at time of service.
“Higher deductibles and the increase in patient responsibility are causing a decrease in patient payments to providers for patient care services rendered,” John Yount, TransUnion Vice President for Healthcare Products, told RevCycle Intelligence. “While uncompensated care has declined, it appears to be primarily due to the increased number of individuals with Medicaid and commercial insurance coverage.”
Hospitals Offer Patients Financial Options for Paying Bills
Some hospitals are responding to this trend by rolling out programs that offer patients financing options for their out-of-pocket costs. A recent article in Modern Healthcare outlined the steps taken by Missouri hospital system Mosaic Life Care, as it realized the full impact that $23 million worth of self-pay patient care had on its bottom line. Though the hospital posted record census and gross revenue during the first four months of 2017, net revenue was flat because patient self-pay didn’t keep pace.
“We win all kinds of awards for patient quality, but our revenue cycle didn’t match that performance,” Deborah Vancleave, Mosaic’s Vice President of Revenue Cycle, told Modern Healthcare.
Since then, Mosaic has taken steps to improve the accuracy of information it gets at registration and how it makes determinations on patients’ ability to pay. In addition, it has joined forces with ClearBalance— a provider of patient loan programs to US hospitals and health systems—to offer zero-interest or low-interest revolving lines of credit to patients for their out-of-pocket medical costs.
According to Modern Healthcare, ClearBalance pays hospitals “upfront for the outstanding bills of patients who sign up for their financing program, but the hospital guarantees the money and repays lenders if patients default on their credit lines. The companies make their profit by getting a 10% to 15% fee for the outstanding amount of the loan.”
Medical Laboratories Slow to Respond to Consumer Demand for Price Transparency
As consumers shoulder more of the burden for their healthcare, they also will be demanding more price transparency from medical laboratories and anatomic pathology groups, which so far have been slow to respond to the trend.
“Patients expect cost estimates in every other retail industry, and are starting to demand them in healthcare as well. According to one recent study, for example, more than 90% of patients felt it was important to know their payment responsibility upfront,” TransUnion, a global risk information provider, stated in a white paper outlining the importance of precare cost estimates.
As hospitals struggle to collect from patients saddled with HDHPs, laboratory executives and other healthcare providers should take note. The change in payment mix means the ability to collect payments from patients at the point of service is becoming a critical success factor.
—Andrea Downing Peck
Related Information:
Hospitals Struggle with the Dilemma of Patients Hit by High Deductibles
Kaiser Family Foundation 2016 Employer Health Benefits Survey
The Impact of Consumerism on Provider Revenues
Patient Financial Responsibility On the Rise
Improve Revenue Cycles and Patient Engagement by Delivering Pre-Care Cost Estimates
68% of Consumers Did Not Pay Patient Financial Responsibility
Sep 20, 2017 | Coding, Billing, and Collections, Laboratory Management and Operations, Laboratory News, Laboratory Operations, Laboratory Pathology, Managed Care Contracts & Payer Reimbursement, Management & Operations, News From Dark Daily
To offset the loss of revenue from the price cuts to Medicare Part B clinical laboratory tests, labs will need to aggressively—but wisely—slash costs to balance their budgets
Any day now, Medicare officials will announce the Medicare Part B Clinical Laboratory Fee Schedule (CLFS) for 2018. Both the Centers for Medicare and Medicaid Services (CMS) and the Department of Health and Human Services Office of Inspector General (OIG) have issued reports indicating that these fee cuts will total $400 million just during 2018, which Dark Daily reported on in July.
Many experienced industry executives expect this to be the single most financially disruptive event to hit the clinical laboratory profession in more than 20 years. This will not only have a substantial negative financial impact on all labs—large and small—but two sectors of the clinical lab industry are considered to be so financially vulnerable they could cease to exist.
At Greatest Risk of Financial Failure are Community Laboratories
The first sector is comprised of smaller community lab companies that operate in towns and rural areas. These labs are at the greatest risk because they are the primary providers of lab testing services to the nursing homes and skilled nursing facilities in their neighborhoods. And because they have a high proportion of Medicare Part B revenue.
Thus, the expected Medicare price cuts to the high-volume automated lab tests—such as chemistry panels and CBCs (complete blood count) that are the bread-and-butter tests for these labs—will swiftly move them from minimal profit margins to substantial losses. Since these labs have a cost-per-test that is significantly higher than the nation’s largest public lab companies, they will be unable to financially survive the 2018 Medicare fee cuts.
The second sector at risk is comprised of rural hospitals and modest-sized community hospitals. What officials at CMS and their consulting companies overlooked when they created the PAMA (Protecting Access to Medicare Act) private payer market price reporting rule is that these hospitals provide lab testing services to nursing homes and office-based physicians in their service areas.
Because of the low volumes of testing in these hospital labs, they also have a larger average cost-per-test than the big public labs. Thus, the 2018 cuts to Medicare Part B lab test prices will erode or erase any extra margin from this testing that now accrues to these hospitals.
Rural and Small Community Hospitals Rely on Lab Outreach Revenue
The financial disruption these Medicare lab test price cuts will cause to rural and community hospitals is a real thing. These hospitals rely on outreach lab test revenues to subsidize many other clinical services within the hospital. One rural hospital CEO confirmed the importance of lab outreach revenue to her organization. Michelle McEwen, FACHE, CEO of Speare Memorial Hospital in Plymouth, N.H., spoke to The Dark Report in 2012 about the financial disruption that was happening when a major health insurer excluded her hospital’s laboratory from its network.
Speare Memorial is a 25-bed critical access hospital in the central part of the state between the lakes region and the White Mountain National Forest. McEwen was blunt in her assessment of the importance of clinical laboratory outreach revenues to her hospital. “The funds generated by performing these [outreach] lab tests are used to support the cost of providing laboratory services to all patients 24/7, including stat labs for emergency patients and inpatients,” McEwen explained. “These funds also help support other services in the hospital where losses are typically incurred, such as the emergency room and obstetric programs.” (See “Critical Access Hospitals Losing Lab Test Work,” The Dark Report, April 2, 2012.)
For the second consecutive year, Lab Quality Confab (LQC) is offering an extended session on clinical laboratory accreditation and certification in New Orleans on October 24-25. CMS has indicated it will participate in this year’s session. It was an historic first for the clinical laboratory industry when last year’s Lab Quality Confab convened a panel that included experts in CLIA laboratory inspection and compliance from the four deeming organizations. From left to right: Moderator Nora L. Hess, MBA, MT(ASCP), PMP, Senior Consultant, Operations Management, Chi Solutions, Inc., Ann Arbor, Mich.; Kathy Nucifora, MPH, MT(ASCP), Director of Accreditation, COLA, Columbia, Md.; Stacy Olea, MBA, MT(ASCP), FACHE, Executive Director of Laboratory Accreditation Program, The Joint Commission, Oakbrook Terrace, Ill.; Randall Querry, Accreditation Manager, Clinical, American Association for Laboratory Accreditation (A2LA), Frederick, Md.; Robert L. Michel, Editor-in-Chief, The Dark Report, Spicewood, Texas; and Denise Driscoll, MS, MT(ASCP)SBB, Senior Director, Laboratory Accreditation and Regulatory Affairs, College of American Pathologists, Northfield, IL. (Photo by Linda Reineke of Riverview Photography. Copyright: The Dark Report.)
All Medical Laboratories Will Suffer Financial Pain from Medicare Price Cuts
But it is not just community lab companies and rural hospitals that are at risk of financial failure as the Medicare Part B cuts are implemented by CMS on Jan. 1, 2018. Any clinical laboratory serving Medicare patients will experience a meaningful drop in revenue. Many larger hospital and health system laboratories are recasting their financial projections for 2018 to identify how big a drop in revenue they will experience and what cost-cutting strategies will be needed to at least break even on their lab outreach business.
This explains why the first big trend of 2018 will be substantial revenue cuts from the Medicare program. It also explains why the second big trend of 2018 will be smart cost-cutting as labs attempt to balance their books and lower spending proportional to the reduced income they project.
Labs Have a Decade of Successful Cost-Cutting, More Cuts are Difficult
Aggressive cost-cutting, however, puts the nation’s medical laboratories at risk for a different reason. For the past decade, most well-run labs have already harvested the low-hanging fruit from obvious sources of cost reduction. They installed latest-generation automation. They re-engineered workflows using the techniques of Lean, Six Sigma, and process improvement.
During these same years, most medical laboratories also reduced technical staff and trimmed management ranks. That has created two new problems:
- First, there are not enough managers in many labs to both handle the daily flow of work while also tackling specific projects to cut costs and boost productivity. Basically, these labs are already at their management limit, with no excess capacity for their lab managers to initiate and implement cost-cutting projects.
- Second, technical staffs are already working at near peak capacity. Increased use of automation at these labs has reduced lab costs because labs were able to do the same volume of testing with fewer staff. However, the reduced staffs that oversee the lab automation are now working at their own peak capacity. Not only are they highly stressed from the daily routine, they also do not have spare time to devote to new projects designed to further cut costs.
Each Year Will Bring Additional Cuts to Medicare Part B Lab Prices
This is why all clinical laboratories in the United States will find it difficult to deal with the Medicare Part lab test fee cuts that will total $400 million during 2018. And what must be remembered is that, in 2019 and beyond, CMS officials will use the PAMA private payer market price reporting rule to make additional fee cuts. Over 10 years, CMS expects these cuts will reduce spending by $5.4 billion from the current spending level.
Taken collectively, all these factors indicate that many medical laboratories in the United States will not survive these Medicare fee cuts. The basic economics of operating a clinical laboratory say that less volume equals a higher average cost per test and higher volume equals a lower average cost per test.
Medical Labs with Highest Costs Most at Risk of Failure from Price Cuts
What this means in the marketplace is that labs with the highest average cost per test make the least profit margin on a fee-for-service payment. The opposite is true for labs with the lowest average cost per test. They will make a greater profit margin on that same fee-for-service payment.
Carry this fundamental economic principle of medical laboratory operations forward as Medicare Part B lab test fee cuts happen in 2018. Labs with the highest average cost per test will be first to go from a modest profit or break-even to a loss. As noted earlier, the clinical lab sectors that have the highest average cost per test are smaller community labs, along with rural and community hospitals. That is why they will be first to go out of business—whether by sale, bankruptcy, or by simply closing their doors.
Learning How to Cut Lab Costs While Protecting Quality
Every pathologist and lab administrator seeking the right strategies to further cut costs in their lab, while protecting quality and enhancing patient services, will want to consider sending a team from their laboratory to the 11th Annual Lab Quality Confab that takes place in New Orleans on October 24-25, 2018.
Anticipating the greater need for shrewd cost-cutting that also protects the quality of the lab’s testing services, this year’s Lab Quality Confab has lined up more than 51 speakers and 39 sessions. Of particular interest are these extended workshops that come with certifications:
- Lean Six Sigma Yellow Belt Training and Certification, led by Maureen Harte, MT(ASCP), LSSBB, Master Black Belt, of HartePro Consulting.
- Mastering Strategic Leadership in Pursuit of Clinical Lab 2.0, led by Karan Arora, Senior Global Marketing Director, Digital Health, Abbott Laboratories.
- Getting More from Lean for Lab Leaders: Henry Ford Production System Lean Gold Certification, led by Richard J. Zarbo, MD, DMD, System Chairman, Pathology and Laboratory Medicine at Henry Ford Hospital.
Sessions will address proven ways to:
- Use real-time analytics to improve workflow in molecular laboratories;
- Introduce automation in microbiology; as well as
- New breakthroughs in core lab automation; and
- Success stories in reducing lab test utilization.
Lab Quality Confab is recognized for its use of lab case studies—taught by the nation’s early adopter lab organizations. Certification classes are available to gain proficiency in the use of Lean methods and Six Sigma tools, such as:
Given the strong interest in smart ways to cut costs, boost productivity, and balance revenue-versus-cost, registrations for this year’s Lab Quality Confab is running at a record pace. The full agenda can be viewed at this link (or copy this URL and paste into your browser: http://www.labqualityconfab.com/agenda).
Of special interest to lab leaders preparing to stay ahead of the financial impact of the Medicare Part B fee cuts, Lab Quality Confab offers deep discounts for four or more attendees from the same lab organization. This allows your lab’s most effective cost-cutters to see, hear, and learn together, so that when they return they can get a flying start helping you align your lab’s costs to the expected declines in revenue that will happen on Jan. 1, 2018.
Reserve your place today and register now http://www.labqualityconfab.com/register.
—Robert L. Michel, Editor-in-Chief
Related Information:
Information, Agenda, and to Register for Lab Quality Confab Taking Place on October 24-25, 2017
In 2017, to Offset Declining Reimbursement and Shrinking Budgets, Savvy Clinical Laboratories Are Using LEAN to Improve Service and Intelligently Cut Costs
Lean-Six Sigma Medical Laboratories Begin to Innovate in Ways That Add Value to Physicians, Payers, and Patients
An Interview with Robert Michel, Editor-in-Chief of The Dark Report
At Lab Quality Confab in New Orleans this Week, Speakers Addressed Major Issues Faced by Medical Laboratories, including the Need for Labs to Deliver More Diagnostic Value to Physicians
Sep 18, 2017 | Laboratory Instruments & Laboratory Equipment, Laboratory News, Laboratory Testing, Uncategorized
Owlstone Medical’s breath biopsy platform takes aim at breath biomarkers for an earlier diagnosis of cancer; could it supplant tissue biopsies sent to pathology labs?
For many years, medical laboratory scientists and pathologists have known that human breath contains molecules and substances that have the potential to be used as biomarkers for detecting different diseases and health conditions. The challenge was always how to create clinical laboratory test technology that could use human breath samples to produce accurate and clinically useful information.
Stated differently, breath, the essence of life, may contain medical laboratory test biomarkers that could provide early-detection advantages to pathology groups in their fight against cancer. Now diagnostics company Owlstone Medical—developer of the Breath Biopsy platform—is about to conduct a clinical study in collaboration with the United Kingdom’s (UK’s) National Health Service (NHS) and others to demonstrate the effectiveness of its breath-based diagnostic tests.
Anatomic pathology groups and clinical laboratory leaders know human breath contains volatile organic compounds (VOCs) that can be useful diagnostic biomarkers for medical laboratory testing. Many possible breath tests have been researched. One such test, the urea breath test for detecting Helicobacter pylori (H. pylori), has been in clinical use for 20 years. As part of the test, patients with suspect stomach ulcers or other gastric concerns, swallow a tablet with urea and exhale carbon dioxide that is measured for H. pylori bacteria.
According to an Owlstone Medical news release, the new study, called the “PAN Cancer Trial for Early Detection of Cancer in Breath,” will explore the ability of Owlstone Medical’s Breath Biopsy platform to detect cancers of the:
Current medical care standards call for these cancers to be diagnosed by analyzing biopsied tissue specimens. If Owlstone Medical’s breath test performs well during trial, it could provide advantages over traditional tissue-based cancer testing that include:
- A non-invasive approach to finding cancer earlier;
- A lower price point as compared to a tissue biopsy cancer test; and
- Faster return of test results, since tissue would not need to be collected from patients during surgical procedures and sent to medical laboratories for analysis.
“By 2030, the number of new cancer cases per year is expected to rise to around 22-million globally. Some cancers are diagnosed very late when there are few treatment options available. Non-invasive detection of cancer in breath could make a real difference to survival,” stated Richard Gilbertson, PhD, Li Ka Shing Chair of Oncology, Director of the CRUK Cambridge Center, and Oncology Department Head at University of Cambridge, in the news release.
How the Breath Biopsy Platform Works
The Breath Biopsy platform relies on Owlstone Medical’s Field Asymmetric Ion Mobility Spectrometry (FAIMS) technology, which the diagnostics company explains is a “fast means to identifying volatile organic compound biomarkers in breath.”
Billy Boyle (above), co-founder and Chief Executive Officer at Owlstone Medical, demonstrates the ReCIVA Breath Sampler. “Positive results from the PAN cancer trial could be game-changing in the fight against cancer,” he noted in the news release. “Success in this study supports our vision of saving 100,000 lives and $1.5 billion in healthcare costs.” This technology has the potential to be disruptive to anatomic pathology, which relies on the analysis of biopsied tissue to detect cancer. (Photo copyright: Owlstone Medical.)
Here is how FAIMS works in the Breast Biopsy platform, according to the Owlstone Medical website:
- Gases are exchanged between circulating blood and inhaled fresh air in the lungs;
- VOC biomarkers in the body’s circulation system pass into air in the lungs, along with oxygen, carbon dioxide, and other gases;
- Exhaled breath contains those biomarkers exiting the body;
- Because it takes one minute for blood to flow around the body, a breath sample during that time makes possible collection and analysis of VOC biomarkers of any part of the body touched by the circulatory system.
One publication compared the capture of VOCs to liquid biopsies, another possible non-invasive cancer diagnostic technique being widely researched.
“The advantage to VOCs is that they can be picked up earlier than signatures searched for in liquid biopsies, meaning cancer can be diagnosed earlier and treated more effectively,” reported Pharmaphorum in its analysis of five technology companies fighting cancer.
As part of the clinical trial, breath samples will be collected in clinic settings with the hand-held Owlstone Medical ReCIVA Breath Sampler (equipped with a dime-sized FAIMS silicon chip). The samples will come from people with a suspected cancer diagnosis who are seeking care at Cambridge University Hospital’s Addenbrooke’s Hospital. To test reliability of the biomarkers, breath samples from patients with cancer and without cancer will be analyzed.
“You’re seeing a convergence of technology now, so we can actually run large-scale clinical studies to get the data to prove odor analysis has real utility,” stated Owlstone Medical co-founder and Chief Executive Officer Billy Boyle, in a New York Times article.
Breath Tests Popular Area for Research
The company’s Breath Biopsy platform is also being tested in a clinical trial for lung cancer being funded by the UK’s NHS. The study involves 3,000 people, the New York Times article reported.
This is not the first time we have reported on Owlstone Medical. A previous e-briefing explored the company’s technology in a study focused on diagnosis of lung cancer (See Dark Daily, “In the UK, Pathologists Are Watching Phase II of a Clinical Trial for a Breathalyzer System That Uses Only a Breath Specimen to Diagnose Lung Cancer,” May 11, 2015.)
Breath tests in general—because they generally are non-invasive, fast, and cost-effective—have been the subject of several other Dark Daily e-briefings as well, including those about:
Owlstone Medical’s ability to get backing from Britain’s NHS, as well as investments to the tune of $23.5 million (the most recent coming from Aviva Ventures) is a positive sign. That Owlstone Medical’s Breath Biopsy platform is credible enough to attract such respected collaborators in the cancer trials as the Cancer Research UK Cambridge Institute (CRUK), University of Cambridge, and Cambridge University Hospitals (CUH) NHS Foundation Trust is evidence that the company’s diagnostic technology is considered to have good potential for use in clinical care.
Medical laboratory managers and pathology group stakeholders will want to monitor these developments closely. Once proven in clinical trials such as those mentioned above, breath tests have the potential to supplant other medical laboratory diagnostics and perhaps lower the number of traditional biopsies sent to labs for diagnosis of cancer.
—Donna Marie Pocius
Related Information:
Owlstone Medical and Cancer Research UK (CRUK) Initiate Pan Cancer Clinical Trial to Evaluate Breath Biopsy for Early Detection of Disease New Cancer Detecting Breath Test to Undergo Clinical Trials
Five Tech Companies Advancing Against Cancer
Aviva Invests in Owlstone Medical Breath Biopsy Platform and its Expected Drive Adoption of Breath Biopsy in Healthcare
Owlstone Medical’s ReCIVA Named Invention of the Year in Top 50 Digital Health Awards
One Day a Machine Will Smell Whether You’re Sick
Cancer Breath Biomarker: CRUK and Owlstone Start Multi-Cancer Trail
In the UK, Pathologists Are Watching Phase II of a Clinical Trial for a Breathalyzer That Uses Only a Breath Specimen to Diagnose Lung Cancer
Companies Developing Non-Invasive and Wearable Glucose-Monitoring Devices That Can Report Test Data in Real Time to Physicians and Clinical Laboratories
Wisconsin Company Developing Breath-Based Diagnostic Test Technology That Can Detect Early-Stage Infections Within Two Years of Onset
Study into Use of Breath Analysis to Monitor Lung Cancer Therapy Enhances Clinical Laboratories Ability to Support Precision Medicine
