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New Study on Hospital Pricing by Houston Business Group Highlights Gaps Between Medicare and Private Insurance Payments

Employer group in Houston plans to use the numbers to pressure lawmakers for policy changes involving how hospitals and health plans price their services

Clinical laboratory leaders will probably not be surprised to learn that wide disparities exist between what Medicare pays hospitals and what is paid by private insurers and employers. That’s according to analysis by the Houston Business Coalition on Health (HBCH) which examined costs and billing practices at four of the region’s top hospitals, each a flagship for its respective health system.

This study—by a business group concerned about the spiraling cost of healthcare for their employees—is significant because it indicates that some large employers are willing to become more aggressive in driving down healthcare costs. In the Houston study, three of these hospitals—Houston Methodist, Memorial Hermann, and HCA Houston Medical Center—charged more than 250% over Medicare, noted a press release, which stated the group plans to use the numbers to lobby Texas lawmakers for policy changes.

“The prices employers paid to hospitals are unsustainable and negatively impact business growth, family quality of life, and resources needed for other critical community social needs,” said HBCH executive director Chris Skisak, PhD, in the press release. “Our intent in sharing and publicizing these resources is to facilitate direct discussions with health systems and employers to better understand the ramifications to Houston businesses and the greater community.”

The HBCH describes itself as a resource for local employers and healthcare providers seeking to promote cost-effective healthcare delivery and health benefits. It has 60 members that collectively provide healthcare coverage for 500,000 area residents.

Chris Skisak, PhD
“We’re entering a new age of transparency and it’s clear from these tools that pricing is not directly correlated with quality, but rather on what the market will bear,” said HBCH executive director Chris Skisak, PhD (above), in a press release. “While this is cause for concern, there are opportunities for change and these resources will enable employers and health plans to negotiate future contracts to select health systems that offer the best value—the highest quality at the lowest costs.” (Photo copyright: Houston Business Journal.)

Hospital Claims Medicare Reimbursement Flawed

A spokesperson for Memorial Hermann disputed the HBCH’s analysis, telling the Houston Chronicle that “Medicare reimbursement is a flawed and an inappropriate benchmark to use for commercial payments, as Medicare payments do not cover the cost of services provided.”

But the HBCH analysis also disclosed that each hospital was charging private insurers more than double the breakeven, defined as the amount needed “to make up for any shortfalls from public sector payers such as Medicare and Medicaid and uninsured patients.” And they “achieved a commercial profit margin of more than 45%” over the breakeven.

The fourth hospital, Baylor St. Luke’s, charged 216% over Medicare and had a commercial profit margin of close to 20%.

The HBCH based its analysis on publicly available data and tools from RAND Corporation, The National Academy for State Health Policy (NASHP), and Sage Transparency, an interactive, customizable dashboard which uses both public and proprietary data to compare and display hospital prices and quality.

The Medicare claims data came from a RAND study, titled, “Prices Paid to Hospitals by Private Health Plans.” The 53-page report is accompanied by a downloadable spreadsheet with details on prices at more than 4,000 hospitals in 49 states plus the District of Columbia. Released in May, it covers data from 2018 through 2020.

The HBCH analysts combined data from this report with data from the NASHP Hospital Cost Tool (HCT), which was released in April. The HCT allows anyone with a web browser to look up cost metrics for 4,600 hospitals in the US. The numbers, available through 2019, include revenue, profitability, and breakeven points. It also incorporates an earlier set of the RAND Medicare claims data.

An NASHP press release notes that the breakeven calculation “accounts for a hospital’s operating costs, profit or loss from public coverage programs, charity care and uninsured patient hospital costs, Medicare disallowed costs, and a hospital’s other income and expense.”

The HBCH press release notes that hospitals need only 127% of Medicare to break even.

National Numbers

Nationally, the RAND study found wide variations in prices paid by private health plans from state to state. “In Texas, prices paid to hospitals for privately insured patients by employers averaged 252% of what Medicare would have paid,” the HBCH press release noted.

But that places Texas around the middle of the pack compared with other states. According to a Rand press release, prices charged to commercial payers were over 310% of Medicare in Florida, West Virginia, and South Carolina. But in Arkansas, Hawaii, and Washington, the numbers were below 175% of Medicare. The overall national average was 224%, the study found.

The RAND report’s downloadable spreadsheet breaks out the numbers by state and for individual health systems by name.

Numbers like these could have policy ramifications as employers seek to reduce the costs of providing health benefits. “The data is already being used to guide a new path forward,” states the HBCH press release. “As an example, HBCH and its members are working to demand transparency and change policies in the upcoming Texas 88th Legislative Session to eliminate anti-competitive language between hospitals and health plans.” 

Clinical laboratory managers and pathologists working in hospitals and health systems will want to watch how employer groups respond to future studies of hospital pricing compared to the Medicare program. Employers increasingly are dissatisfied with the status quo in how hospitals and doctors price their services to health insurers.

It is reasonable to expect more studies to be published that compare what hospitals charge private health insurers versus what they are paid by the Medicare program.

Stephen Beale

Related Information:

Houston Employers Pay Hospitals More than Twice the Medicare Rate, Needlessly Reaping Large Profits from Commercial Payers

Understanding NASHP’s Hospital Cost Tool: Commercial Breakeven

Private Health Plans During 2020 Paid Hospitals 224% of What Medicare Would

Prices Paid to Hospitals by Private Health Plans

Understanding Hospital Costs—New Tool Makes Data More Transparent and Accessible

Sage Transparency

Some Houston Hospitals Are Charging Private Insurers Up To 3x What Medicare Pays as Deductibles Rise

Employers Paying Hospitals More than Double Medicare Prices

Employers Pay Hospitals Billions More than Medicare

Maryland’s Statewide Value-Based Payment Models Benefit both Healthcare Providers and Patients

By shifting away from fee-for-service, the state encouraged collaboration between hospitals and physicians to improve care and lower costs

Maryland “leads the way” in value-based payment reform, according to a series of articles published in Health Affairs. “The evidence is clear,” the article declares, “Maryland’s application of uniform prices within global budgets lowers total care costs, reduces unnecessary utilization, and incentivizes proactive preventive and chronic disease management care. Can other states implement Maryland-like payment models and achieve similar financial success?” It’s a fair question.

It is widely-known that clinical laboratory testing is integral to early and accurate diagnosis, and, under Maryland’s current reimbursement model, hospital/health system C-suite administrators have recognized that a robust clinical laboratory service is invaluable to showing progress toward cost containment and patient outcomes goals. But how did that come about? And what can other states learn from Maryland’s success?

Focusing on Better Patient Outcomes at Reduced Costs

Maryland’s current value-based payment arrangement set its first roots back in 2014. That is the year when the state of Maryland and the federal Centers for Medicare and Medicaid Services (CMS) announced a “new initiative to modernize Maryland’s unique all-payer rate-setting system for hospital services aimed at improving patient health and reducing costs,” declared a press release at that time.

Dubbed Maryland’s “All-Payer Model,” the press release went on to say, “This initiative will replace Maryland’s 36-year-old Medicare waiver to allow the state to adopt new policies that reduce per capita hospital expenditures and improve health outcomes as encouraged by the Affordable Care Act. Under this model, Medicare is estimated to save at least $330 million over the next five years.” Did that happen? Apparently so.

The state designed its “All-Payer Model” hospital payment system to render reimbursements based on populations served and the quality of care provided. The program focused on better patient outcomes and higher quality care at a reduced cost, instead of concentrating on the volume of care. The system incentivized hospitals to prevent readmissions, infections, and other potentially avoidable events. 

“By shifting away from traditional fee-for-service payment, Maryland’s new model encourages collaboration between hospitals and physicians to improve patient care, promotes innovative approaches to prevention, and accelerates efforts to avoid unnecessary admissions and readmissions,” said pediatrician Joshua Sharfstein, MD, Vice Dean for Public Health Practice and Community Engagement at the Johns Hopkins Bloomberg School of Public Health in a 2014 CMS press release.

Sharfstein was the Secretary of Maryland’s Department of Health from 2011 to 2014.  

Then, in 2019, Maryland implemented the successor to the state’s “All-Payer Model” dubbed the “Total-Cost-of-Care (TCOC) Model.”

According to the CMS, whereas the All-Payer Model “established global budgets for certain Maryland hospitals to reduce Medicare hospital expenditures and improve quality of care for beneficiaries,” the TCOC “builds on the success of the Maryland All-Payer Model by creating greater incentives for healthcare providers to coordinate with each other and provide patient-centered care, and by committing the State to a sustainable growth rate in per capita total cost of care spending for Medicare beneficiaries.”

The TCOC began on January 1, 2019, and runs through December 31, 2026.

Nicole Stallings of the Maryland Hospital Association
“Our focus is really on the health of our communities,” Nicole Stallings of the Maryland Hospital Association told State of Reform. “We don’t have a public hospital system, we don’t have tiered hospitals, we don’t have hospitals that are having to close because we are able to spread cost really equitably across our system. Equity being a core pillar is something that we know is critically important to maintain. We want to see more alignment there as we now try to tackle these population health goals. But we believe there’s more collaboration happening here than anywhere else,” she added. Clinical laboratories have an important role to play in population health. (Photo copyright: Center Maryland/Vimeo.)

Results of Maryland’s All-Payer-Model Program

In general, an all-payer system allows a state to manage healthcare prices via rate setting where all healthcare payers, including the government, private insurers, and employer healthcare plans, pay similar prices for services provided at individual hospitals.

When it announced the results of the five-year All-Payer-Model program, Maryland’s Health Services Cost Review Commission—the state agency responsible for regulating cost and quality of hospital care in Maryland—declared the program’s targets had been achieved. They included:

  • 1.92% average annual growth per capita in hospital revenue (goal was to be less than or equal to 3.58%).
  • $1.4 billion cumulative Medicare savings in hospital expenditures.
  • 53% reduction in hospital-acquired conditions (goal was 30% reduction over five years).
  • Below national average for hospital readmissions of Medicare patients within five years.
  • All of Maryland’s 47 acute-care hospitals paid based on health populations served—not number of services rendered—with 98% of total hospital revenue under Global Budget Revenue (GBR) payment method.

In addition, the Maryland HSCRC report indicated that innovative care was a key tenet of the model and that hospitals benefitted from being given the ability to:

  • Invest in new healthcare programs that improve collaboration with other providers in the community.
  • Implement new clinical protocols, patient safety techniques, and follow-up procedures for high-risk patients at hospital discharge.
  • Create hubs of care to triage needs, coordinate important services, and ensure patients in need are connected to services outside the hospital.

After the success of the Maryland All-Payer Model, the state’s Total-Cost-of-Care Model program continued to focus on healthcare cost savings to Medicare. But it introduced population health improvement activities across the entire healthcare delivery system.

Future of Maryland’s Total-Cost-of-Care Model Program

Maryland’s TCOC Model program seeks more than $1 billion in Medicare savings by the end of 2023, or the fifth performance year of the program. According to the CMS Innovation Models webpage, Maryland’s TCOC Model includes the following three programs:

  • The Hospital Payment Program, where each hospital receives a population-based payment amount which covers all hospital services provided during a year.
  • The Care Redesign Program, which allows hospitals to make incentive payments to nonhospital healthcare providers who partner with hospitals to provide care.
  • The Maryland Primary Care Program, which incentivizes primary care providers to offer advanced care services to their patients.

An analysis of the first two years of the TCOC program found some significant improvements particularly in the areas of care management, access, and continuity.

In the first performance year of Maryland’s TCOC model, the state reduced spending by $365 million, relative to national trends, according to a Mathematica implementation report.

Part of the success of the model is due to its use of global, fixed budgets that are set for every hospital. Rates are established by an independent commission which prevents cost shifting and provides a more equitable system for patients where they pay the same price for the same service at all hospitals throughout the state, Mathematica noted. 

“We believe [global budgets are] a real distinguishing factor, because unlike the rest of the country, our hospitals aren’t paid more to do more,” said Nicole Stallings, told State of Reform. Stallings is Chief External Affairs Officer and Senior Vice President, Government Affairs and Policy at the Maryland Hospital Association (MHA).

Expanding Maryland’s All-Payer-Model Program to Other States

In 2016, CMS established the Center for Medicare and Medicaid Innovation (CMMI) to identify ways to improve healthcare quality and reduce overall costs in the Medicare, Medicaid, and Children’s Health Insurance Program (CHIP) programs. Maryland’s All-Payer model has produced the most savings out of any of the projects and experimental payment programs researched by CMMI. The success of Maryland’s programs prompted CMMI to look at expanding similar programs in other states.  

Reductions in hospital costs combined with improved outcomes can only benefit patients and the healthcare industry in the long run. Since clinical laboratory testing is integral to early diagnoses and treatment of diseases, under Maryland’s current reimbursement model a robust clinical laboratory service is invaluable for succeeding at cost containment and patient outcome goals.   

JP Schlingman

Related Information:

Meaningful Value-Based Payment Reform, Part 1: Maryland Leads the Way

Meaningful Value-Based Payment Reform, Part 2: Expanding The Maryland Model to Other States

The National Implications of Maryland’s All-Payer System

The Total Cost of Care Model: Uniquely Maryland, Uniquely Successful

CMS and Maryland Announce Joint Initiative to Modernize Maryland’s Health Care System to Improve Care and Lower Costs

Maryland All-Payer Model to Deliver Better Care and Lower Costs

CMS: Maryland All-Payer Model

CMS: Maryland Total-Cost-of-Care Model

Maryland’s All-Payer Model Results

Evaluation of the Maryland Total Cost of Care Model: Implementation Report

Maryland Total Cost of Care Model Reduced Spending by $365 Million in First Year

Sonic Healthcare Acquires Propath, while PathGroup Buys Pathology Consultants in More Signs of a Consolidating Market

An estimated 80 pathologists will now work for larger pathology superlabs as part of the deals, bringing stiffer competition to independent anatomic pathology groups

This story comes from the desk of The Dark Report. If you’re not a subscriber, sign up for a free trial and read exclusive insider content for laboratory directors and pathologists.

Consolidation among private practice anatomic pathology groups continues with news that two large regional pathology groups decided to sell to larger pathology companies. The first transaction announced was on Dec. 16, 2021, when Sonic Healthcare of Sydney, Australia, disclosed that it had acquired Dallas-based ProPath. Sales price and other terms were not announced. 

The second transaction happened last month. On Jan. 24, Nashville-based PathGroup announced it had bought Pathology Consultants of Greenville, S.C. Price and terms of this transaction also were not disclosed. 

Pathology Consolidation Continues

The decision by two of the nation’s leading regional pathology groups to sell themselves to larger pathology entities confirms that the trend of consolidation is continuing within the pathology profession. It is also a sign that smaller pathology groups will find it increasingly difficult to compete and stay profitable as new technologies transform the surgical pathology profession, such a digital pathology platforms.

ProPath was considered a financially strong regional super-group, as it operates facilities in three states and has 50 pathologists and 500 employees. Sonic noted that ProPath’s annual revenue was about $110 million. 

Sonic Healthcare has been a major acquirer of anatomic pathology practices in the United States. In early 2011, it purchased Physicians Automated Laboratory, and just six weeks earlier, acquired CBL Path for $123.5 million. 

Sonic Healthcare also purchased Aurora Diagnostics in 2018 for $540 million. That deal brought it 32 pathology practice sites and added 220 pathologists to its roster. 

With its acquisition of Pathology Consultants, PathGroup adds 30 pathologists and 100 employees. Prior to this acquisition, PathGroup said it had 225 pathologists. 

PathGroup CEO Ben Davis, MD

“We will continue providing highly specialized pathology expertise, as well as a broad range of clinical and molecular pathology services,” PathGroup CEO Ben Davis. MD, said of the Pathology Consultants acquisition. (Photo copyright: ProPath)

Maintaining Independence Gets Tougher

Anatomic pathologists will want to understand why two major regional pathology groups have decided to give up their independence and sell to a larger company. The reasons are several and include: 

  • Need for cash to purchase the equity of retiring baby boomer pathologist partners in the group. 
  • Challenges in recruiting new pathologists to the group. 
  • Need for capital to acquire digital pathology capabilities and other needed advanced diagnostic technologies.
  • Access to managed care contracts as private health plans continue to narrow their provider networks. 

It should be noted that graduating pathology residents and fellows are tech-savvy and want to work in practices that have all the latest technologies in histology, scanning, and digital pathology. This observation plays into the consolidation of the market.

Robert Michel

Related Information:

Sonic Healthcare Acquires ProPath, a Texas-Based AP Company

PathGroup Acquires Pathology Consultants, Continuing Expansion Across the Southeastern United States

Attention All Surgical Pathologists: Algorithms for Automated Primary Diagnosis of Digital Pathology Images Likely to Gain Regulatory Clearance in Near Future

Sonic Healthcare Buys California Clinical Pathology Laboratory Company

Six Practices for Effective Managed Care Contracting

Executive War College: Efficient Data Structure Can Bring in More Reimbursement Dollars and Allow Clinical Laboratories to Sell Aggregated Information

Speakers at this week’s Executive War College in San Antonio explained that the way records are collected and stored plays a large part in the long-term usefulness of clinical laboratory data

Data structure as a term may not flow off the lips of clinical laboratory and pathology laboratory managers, but it should be top-of-mind. Well-structured data improves reimbursements and, in aggregated form, can be an enticing avenue to partnerships with outside parties.

Data structure refers to the makeup of digital records—in other words, how data is collected, stored, and accessed. Structured information offers consistency and is easier to analyze and share.

However, data structure often is difficult to achieve for clinical laboratories, according to Patricia Goede, PhD, Vice President, Clinical Informatics, at XIFIN, Inc. She spoke Tuesday during this year’s Executive War College Conference on Laboratory and Pathology Management in San Antonio. The conference concludes today.

“You have to make sense of all that messy data, and that’s a heavy lift,” she said. “Results are not standardized.”

Appeals Payments Increase with More Clinical Data

Data quality can improve claim reimbursement appeals, Goede noted. When a more complete clinical record is provided to payors, they are more likely to reimburse for services.

According to information Goede covered along with Julie Ramage, Director of Precision Medicine Quality Initiatives and Partnerships at biopharmaceutical company AstraZeneca, when appealing a denied claim for a colon cancer molecular test, for example, the average appeal payment was $318 without cross-specialist clinical records.

Meanwhile, payment for a similar claim appeal which included that added data jumped to $612!

Goede and Ramage shared their knowledge and experiences during their EWC presentation, “New Ways to Add Value! What Innovative Labs and Collaborating Physician Groups Are Doing Today to Provide Aggregated Data Sets to Big Pharma, Bioresearch, and Oncology Centers.”

Structured data that ties in information from the ordering physician helps increase those appeal payments, Goede said, citing research published in the Journal of Clinical Oncology, titled, “Laboratory and Clinical Data Integration: Toward an Evidence Development Framework.”

Other useful clinical data for reimbursement appeals include:

  • Demographics,
  • Medical history,
  • Patient family history,
  • Prior clinical laboratory test results, and
  • Predicted impact of medical treatment.

This information is often available, but may not be structured in a way that makes it easy to share with a payer. “You really have to be thinking about what elements you need,” Goede said.

Market for Structured, Anonymized Lab Data

Clinical laboratories that want to provide or sell anonymized, aggregated data to outside parties—such as research firms or pharmaceutical companies—also need to pursue efficient data structure. The re-use of existing, high-quality lab data can create a new business revenue stream.

“But it has to be more than that vanilla, male/female, date-of-birth stuff,” Ramage noted.

For example, she said, genetic testing builds up data registries, and that’s what pharma is looking for to find patients early on.

“If you don’t have a way to structure your data, you’re not going to be able to play in the sandbox,” she added.

Co-presenters Julie Ramage and Patricia Goede, PhD

Co-presenters Julie Ramage (left), Director of Precision Medicine Quality Initiatives and Partnerships at AstraZeneca Pharmaceuticals, and Patricia Goede, PhD (right), Vice President of Clinical Informatics at XIFIN, Inc., answer attendee questions about data structure during their presentation at this week’s Executive War College Conference on Laboratory and Pathology Management in San Antonio. To register for EWC 2022 and receive a special early-bird rate, click here by November 6.

How Clinical Laboratories Can Improve Clinical Data Structure

Here are some tips for clinical laboratory executives to consider as they tackle data structure:

  • Standardize how to enter patient information and test results. A common problem with data input is that the same information is entered differently over time. For example, various patient records might refer to dates in different ways: November 1, 2021, can also be entered as 11/1/21, 11/1/2021, or 11-01-21. Structured data uses a single way to list dates in records. This lesson applies to all similar clinical data.
  • Use dropdown menu choices instead of free-typing, open fields. An online box to enter a test result can create a variety of entries that affect data structure. While not perfect, drop-down options create a consistent set of entries, Goede said.
  • Ask patient advocacy groups about common nomenclature. Clinical laboratory data should reflect how patients speak, Ramage said. For example, do patients refer to genomic and genetic testing as the same thing? Establishing more consistency improves data structure as records are updated.
  • Enlist your organization’s IT or research team for help. Tech workers and principal investigators can easily look at clinical laboratory data and tell what information is missing or inconsistent, said Cheryl Schleicher, Director of IT Strategy at Northwell Health Labs in Lake Success, NY. Schleicher attended this week’s Executive War College.

Look Further into Clinical Laboratory Data Structure

Data structure can help clinical laboratories and pathology laboratories grab more reimbursement dollars and potentially sell anonymized data to external partners.

It is an area many lab executives are not familiar with and need to investigate more, particularly following the accelerated move to digital lab services during the COVID-19 pandemic. Your organization’s IT department or Chief Information Officer can be a useful ally.

If you could not make it to this week’s Executive War College, then join us for our next Executive War College on April 27-28, 2022, in New Orleans. Click here to take advantage of special early-bird pricing for this critical event.

Scott Wallask

Related Information:

With Consumer Demand for Ancestry and Genealogy Genetic Tests Waning, Leading Genomics Companies are Investigating Ways to Commercialize the Aggregated Genetics Data They Have Collected

Recent Acquisitions by Roche Highlight the Importance of Structured Data and Concerns for Diagnostics Providers and Pathology Laboratories

FTC Orders Hospital, Health System, and Five Insurers in Two States to Share Vast Amounts of Data on Their Customers and on Past Acquisitions and Mergers

PAMA Price Reporting Update: What to Watch for During Data Validation

Unstructured Data Is a Target for New Collaboration Involving IBM’s Watson Health and Others; Could Help Pathologists and Radiologists Generate New Revenue

Media Reporting Shows Some Clinical Laboratories Charge Significantly Higher than Average Prices for COVID-19 Tests—and It Is Perfectly Legal

When people receive COVID-19 testing at an out-of-network facility, federal law requires insurers to pay that clinical laboratory’s posted ‘cash price’ when negotiated prices have not previously been established

In the latest example that some COVID-19 testing companies are charging significantly higher prices than others, The New York Times (NYT) recently reported that one COVID lab company with “more than a dozen testing sites” throughout the US was charging $380 for a COVID-19 rapid test that can be purchased at many drug stores for $20. Sadly, this practice, the NYT also noted, is protected by federal law.

Media reporters and the lay public are not fully aware of the long-established clinical laboratory test payment modalities that govern the daily performance of tests ordered as part of regular healthcare. Thus, when the COVID-19 pandemic hit—along with tens of billions of federal dollars to pay for SARS-CoV-2 tests—it triggered a gold rush of people wanting to get into the clinical laboratory testing business specifically to make money.

It is the bad actors in this group who are tainting the entire clinical laboratory industry with often outrageous business practices that, at best, cross ethical lines—such as overpricing tests to consumers—and at worst, represent fraudulent behavior, such as inducing medically-unnecessary tests, then submitting claims for these tests.

Even as the pandemic appears to be waning, news outlets are reporting instances of insurers being charged higher “cash prices” for tests performed by out-of-network testing laboratories. Worse yet, federal law requires insurers to pay these exorbitant prices and they are not happy about it.

In-Network versus Out-of-Network Pricing

In its report, the NYT noted that the CARES Act (H.R. 748) requires insurers to pay whatever “cash prices” out-of-network labs post online, and that this is leading to “expensive coronavirus tests” that could ultimately be reflected in future “higher insurance premiums” charged to healthcare consumers.

One company the NYT highlighted in its report is GS Labs in Omaha, Neb., a provider of COVID-19 testing throughout the US. The testing company’s COVID-19 Pricing Transparency webpage lists these prices for the following COVID-19 tests:

“Insurers are obligated to pay cash price, unless we come to a negotiated rate,” Christopher Erickson, a GS Labs Partner, told the NYT.

Negotiate or ‘Pay the Provider’s Cash Price’

In Missouri, Blue Cross and Blue Shield of Kansas City (Blue KC) has filed a lawsuit against GS Labs. “This action seeks a judgment declaring Blue KC and our members are not required to pay GS Labs’ unreasonable, inflated reimbursement demands,” according to a Blue KC news release.

However, section 3202 of the Coronavirus Aid, Relief, and Economic Security (CARES) Act “specifies the process for private health insurance plan issuers to reimburse providers of COVID-19 diagnostic tests. Specifically, a reimbursement rate negotiated for such test prior to the public health emergency declared on January 31, 2020, continues to apply for the duration of the emergency. If a reimbursement rate was not negotiated prior to the emergency declaration, an issuer may either negotiate such rate or pay the provider’s cash price.”

In its own news release, GS Labs said it has “countersued Blue KC over the insurance company’s failure to pay $9.7 million for COVID tests covered by federal law.”

According to a legal expert who spoke with the NYT, GS Labs has grounds for its test charges due to the CARES Act. “Whatever price the lab puts on their public facing website, that is what has to be paid. I don’t read a whole lot of wiggle room in it,” said Sabrina Corlette, JD, Research Professor and Co-Director of the Center on Health Insurance Reforms at Georgetown University.

The law is aimed, partially, at “guaranteeing out-of-network testing entities receive payment,” wrote Loren Adler, Associate Director of the USC-Brookings Schaeffer Initiative for Health Policy, in a blog post, titled, “How the CARES Act Affects COVID-19 Test Pricing.”

The blog post, the Brookings editors noted, “is part of the USC-Brookings Schaeffer Initiative for Health Policy, which is a partnership between Economic Studies at Brookings and the University of Southern California Schaeffer Center for Health Policy and Economics.”

Loren Adler

“Unfortunately,” noted Loren Adler (above), Associate Director of the USC-Brookings Schaeffer Initiative for Health Policy, in a blog post, “this ‘cash price’ is not a market-determined price—it is irrelevant to patients because all options have to be made free to them by law, so there is little constraint on how high this is set by testing entities. Nor is there any reason for out-of-network entities to accept any less than this amount (other than a desire to contract in the future with the insurer for fear of a public relations backlash). Moreover, in theory the patient can still be surprise balance billed if the provider’s charge is higher than this ‘cash price,’ though it is unclear why any provider would list a ‘cash price’ lower than their charge.” (Photo copyright: The Brookings Institution.)

In his analysis, Adler suggested the law be revised to require commercial insurers to pay for COVID-19 testing at Medicare prices.

Patient Receives a $54,000 ‘Surprise’ Bill for COVID-19 Out-of-Network Test

Meanwhile, in Texas, a consumer was billed $54,000 for a COVID-19 PCR (polymerase chain reaction) test, an antigen test, and ER facility fee by a SignatureCare Emergency Center in Lewisville, Texas, according to a Kaiser Health News (KHN) Bill of the Month report, titled, “A COVID Test Costing More Than a Tesla? It Happened in Texas.” 

The patient, Travis Warner, reportedly has insurance from Molina Healthcare through the federal Health Insurance Marketplace. After an employee at his company tested positive for COVID-19, Warner drove 30 miles outside of Dallas in search of COVID-19 testing sites. He eventually visiting an out-of-network free-standing emergency room in Lewisville where he received PCR diagnostic and rapid antigen tests. The results of the tests were negative for COVID-19. But the bill was a shock.

The total bill came to $56,384. Molina Healthcare paid its negotiated rate of $16,915.20 for the testing and facility fee, leaving Warner responsible for the remaining $54,000!

In the end, Warner did not have to pay the bill. Molina resolved the charge with SignatureCare and, in a statement to KHN, wrote, “This matter was a provider billing error, which Molina identified and corrected.”

For its part, SignatureCare Emergency Centers, with freestanding centers throughout Texas, said it has a “robust audit process” to flag errors and processed “thousands of records a day” at the height of the pandemic, according to KHN, which reported the business showing a $175 price for a COVID-19 test on its website.

“If the insurance company is paying astronomical sums of money for your care, that means in turn that you are going to be paying higher (insurance) premiums,” Adler told KHN.

Insurance Group Finds Price Gouging

“Price gouging on COVID-19 tests by certain providers continues to be a widespread problem,” according to a statement by America’s Health Insurance Plans (AHIP), a national association representing insurers.

AHIP has studied COVID-19 test prices since April 2020. It released a survey earlier this year which found COVID-19 test prices were on average $130. However, AHIP also found that out-of-network providers charged “significantly higher” (more than $185) for more than half (54%) of COVID-19 tests (PCR, antigen, antibody) in March 2021—a 12% increase since 2020. More than 27% of COVID-19 tests in March 2021 were done out-of-network, a 6% increase since 2020.

However, in, “COVID-19 Lab Test Prices Give Some Health Plans ‘Indigestion’,” Dark Daily’s sister publication, The Dark Report, wrote, “Interestingly, [AHIP] researchers reported that the share of COVID-19 tests claims submitted from ‘high-cost locations’—identified as hospitals and emergency departments—declined from 18% in the first three months of the pandemic to only 5% during the first three months of 2021.”

Niall Brennan, President and CEO of the Health Care Cost Institute (HCCI), told KHN, “People are going to charge what they think they can get away with. Even a perfectly well-intentioned provision like [the CARES Act] can be hijacked by certain unscrupulous providers for nefarious purposes.”

Of course, most medical laboratories priced their tests fairly and have performed them in an efficient and professional manner during the pandemic. So, it is unfortunate to learn through AHIP’s survey findings and the media that some COVID-19 testing providers are posting prices that may confuse patients and affect their health insurance premiums. 

Donna Marie Pocius

Related Information:

This Lab Charges $380 for a COVID Test. Is That What Congress Had in Mind?

Lawsuit Seeks a Judgment to Ensure Blue KC Members Are Not Required to Pay GS Labs’ COVID-19 Testing Reimbursement Demands

GS Labs Countersues, Fires Back at Blue KC over $9.7 Million Payment Failure

How the CARES Act Affects COVID-19 Test Pricing

A COVID Test Costing More than a Tesla? It Happened in Texas

New Data Shows Continued Evidence of COVID-19 Testing Price Gouging

AHIP: COVID-19 Test Prices

COVID-19 Lab Test Prices Give Some Health Plans ‘Indigestion’

German Feasibility Study Shows Cerenkov Luminescence Imaging May Provide New Technique for Identifying Positive Margins during Prostatectomies

Prostate cancer currently has the highest positive surgical margin rate of any cancer in men, with 21% of patients left with cancer cells at the resection site

Cancer surgeons may soon have a new technology to help them completely remove cancerous tissue during prostate cancer surgery. Called Cerenkov luminescence imaging (CLI), this new diagnostic technology under development at the Essen University Hospital in Essen, Germany, will be of interest to surgical pathologists since it could become a common intraoperative strategy to improve surgical precision during radical cancer procedures.

For example, radical prostatectomy is the removal of the entire prostate gland and surrounding tissues. It is one of the primary treatments for malignant cancer. Failure to remove all the cancer tissue during the procedure typically leads to poor clinical outcomes, including tumor reoccurrence and subsequent increased risk of metastasis and death.

A 2018 study published in Nature Scientific Reports, titled, “Positive Surgical Margins in the 10 Most Common Solid Cancers,” noted that prostate cancer has the highest positive surgical margin rate of any cancer in men, with 21.03% of patients left with remaining cancer cells at the resection site.

Currently, intraoperative frozen-section analysis of the prostate is the most common intraoperative method for real-time analysis of surgical margins. But research into CLI may provide surgeons with an additional strategy for reducing positive surgical margins.

Comparing CLI to Postoperative Histopathology

The Essen University Hospital researchers published the results of their feasibility study in the Journal of Nuclear Medicine (JNM), titled, “Intraoperative 68Ga-PSMA Cerenkov Luminescence Imaging for Surgical Margins in Radical Prostatectomy: A Feasibility Study.”

“Our objective was to assess the feasibility and accuracy of Cerenkov luminescence imaging (CLI) for assessment of surgical margins intraoperatively during radical prostatectomy,” they wrote.

According to the Essen researchers, the “single-center” study “included 10 patients with high-risk primary prostate cancer. 68Ga-PSMA PET scans were performed followed by radical prostatectomy and intraoperative CLI of the excised prostate. CLI images were analyzed postoperatively to determine regions of interest based on signal intensity, and tumor-to-background ratios were calculated. CLI tumor margin assessment was performed by analyzing elevated signals at the surface of the intact prostate images.

“To determine accuracy, tumor margin status as detected by CLI was compared to postoperative histopathology. Tumor cells were successfully detected on the incised prostate CLI images and confirmed by histopathology. Three patients had positive surgical margins, and in two of the patients, elevated signal levels enabled correct identification on CLI. Overall, 25 out of 35 CLI regions of interest proved to visualize tumor signaling according to standard histopathology,” the Essen researchers concluded.

The research showed that CLI can accurately assess surgical margins during radical prostatectomy. This first in vivo research of the technique was conducted over a 17-month period between 2018 and 2019.

Christopher Darr, PhD

“Intraoperative radio guidance with CLI may help surgeons in the detection of extracapsular extension, positive surgical margins, and lymph node metastases with the aim of increasing surgical precision,” said the study’s first author Christopher Darr, PhD (above), a resident urologist at Essen University Hospital, in a Society of Nuclear Medicine and Molecular Imaging (SNMMI) news release. “The intraoperative use of CLI would allow the examination of the entire prostate surface and provide the surgeon with real-time feedback on the resection margins.” (Photo copyright: Essen University Hospital.)

The researchers found that two of three patients who had positive surgical margins were correctly identified using CLI images. Overall, 25 of 35 CLI regions of interest successfully visualized tumor signaling, which is a result in line with standard histopathology. The one positive surgical margin CLI missed had group 3 prostate cancer at the surgical margin.

Essen Study Finds CLI Results in ‘Higher than Expected’ False Positives

A companion article published in the JNM, titled, “Cerenkov Luminescence Imaging for Surgical Margins in Radical Prostatectomy: A Surgical Perspective,” noted that, “Although this is consistent with other studies showing reduced PSMA (prostate-specific membrane antigen) expression in lower-grade prostate cancer, the interval between PSMA-agent injection and CLI (median, 333 min) was long and potentially detrimental to identification of lower-grade [prostate cancer]. Future studies may aim to reduce the interval between PSMA-agent injection and commencement of surgery to improve signal intensity and potentially the overall sensitivity of CLI.”

The Essen University Hospital’s CLI feasibility study also revealed the technique resulted in a higher-than-expected number of false positives, with 10 of 35 regions of interest showing “elevated signal levels without histopathologic evidence of PC tissue at the resection margin.” Most of the false positives occurred at the prostate base.

The Essen study authors speculated that the presence of radioactive tracer in the urinary bladder and other factors may explain the false positive rate. They suggested that, “Further optimization of the CLI protocol, or the use of lower-energy imaging tracers such as 18F-PSMA, is required to reduce false-positives.”

The researchers called for a larger study to assess CLI’s diagnostic performance.

Boris A. Hadaschik, PhD, Director of the Clinic for Urology at Essen University Hospital, added, “Radical prostatectomy could achieve significantly higher accuracy and oncological safety, especially in patients with high-risk prostate cancer, through the intraoperative use of radioligands that specifically detect prostate cancer cells. In the future, a targeted resection of lymph node metastases could also be performed in this way. This new imaging combines urologists and nuclear medicine specialists in the local treatment of patients with prostate cancer.”

Because of the high reoccurrence rate of prostate cancer in men, surgical pathologists will find this potential new strategy for reducing positive surgical margins a welcomed advancement, but additional investigation will be needed to ensure its promise can be realized.

Andrea Downing Peck

Related Information

Cerenkov Luminescence Imaging Identifies Surgical Margin Status in Radical Prostatectomy

Positive Surgical Margins in 10 Most Common Solid Cancers

Intraoperative 68Ga-PSMA Cerenkov Luminescence Imaging for Surgical Margins in Radical Prostatectomy: A Feasibility Study

Cerenkov Luminescence Imaging for Surgical Margins in Radical Prostatectomy: A Surgical Perspective