Nov 30, 2018 | Laboratory Pathology, Laboratory Testing, Managed Care Contracts & Payer Reimbursement, News From Dark Daily
Studies show medical laboratories may be particularly hit by adjustments to hospital chargemasters as hospitals prepare to comply with Medicare’s New Transparency Rule
Recently, Kaiser Health News (KHN) published a story about a $48,329 bill for allergy testing that cast a spotlight on hospital chargemaster rates just as healthcare providers are preparing to publish their prices online to comply with a new Centers for Medicare and Medicaid Services (CMS) rule aimed at increasing pricing transparency in healthcare. The rule goes into effect January 1, 2019.
The patient—a Eureka, Calif., resident with a persistent rash—had received an invoice for more than $3000 from her in-network provider.
Though this type of allergy skin-patch testing is usually performed in an outpatient setting by a trained professional, such as an allergist or dermatologist, the patient elected to have the testing performed at Stanford Health Care (Stanford), a respected academic medical system with multiple hospitals, outpatient services, and physician practices.
The patient’s insurance plan, Anthem Blue Cross (Anthem), paid $11,376 of the $48,329 amount billed by Stanford Health Care, which was the rate negotiated between the insurer and Stanford, Becker’s Healthcare reported. The patient ultimately paid $1,561 out-of-pocket.
So, where did that $48,329 in total charges come from? Experts pointed to the provider’s chargemaster. A chargemaster (AKA, charge description master or CDM) lists a hospital’s prices for services, suppliers and procedures, and is used by providers to create a patient’s bill, according to California’s Office of Statewide Health Planning and Development (OSHPD).
Chargemasters note high prices beyond hospitals’ costs and may be considered jumping off points for hospitals to use in invoicing payers and patients, RevCycleIntelligence explained.
Hospital representatives will negotiate with insurance companies, asking them to pay a discounted rate off the chargemaster list. A patient with health insurance accesses care at that negotiated rate and perhaps has responsibility for a share of that amount as well.
However, an out-of-network patient, uninsured person, or cash customer who receives care will likely be billed the full chargemaster rate.
In a statement to KHN, Stanford explained that the California woman’s care was customized and, therefore, costly: “We conducted a comprehensive evaluation of the patient and her environmental exposures and meticulously selected appropriate allergens, which required obtaining and preparing putative allergens on an individual basis.”
Johns Hopkins researchers Ge Bai, PhD, CPA (left), and Gerard Anderson, PhD (right), authored a study published in Health Affairs that shows “Hospitals on average charged more than 20 times their own costs in 2013 in their CT scan and anesthesiology departments.” Hospitals with clinical laboratory outreach programs will want to consider how their patients may respond as new federal price transparency requirements make it easier for patients to see medical laboratory test prices in advance of service. (Photo copyright: Johns Hopkins University.)
Now is a Good Time for Clinical Laboratories to Make Chargemaster Changes
Some organizations, such as the Healthcare Financial Management Association (HFMA), are calling for chargemaster adjustments as part of a comprehensive plan to improve transparency and lower healthcare costs. This falls in line with the new CMS rule requiring hospitals to post prices online starting Jan.1, 2019.
In fact, hospital medical laboratories, which cannot distinguish their services from competitors, may be impacted by the new CMS rule perhaps more than other services, the HFMA analysis warned.
“The initial impact for healthcare organizations, if they have not already experienced it, will be on commoditized services such as [clinical] lab and imaging. Consumers do not differentiate between high and low quality on a commoditized service the same way a physician might, which means cost plays a larger role in consumers’ decision making.” That’s according to Nicholas Malenka, Senior Consultant, GE Healthcare Partners, and author of the HFMA report. He advises providers to do chargemaster adjustments that relate charges to costs of services, competitors’ charges, and national data.
Medical laboratory leaders also may want to take another look at the opportunities and risks for labs suggested in an earlier Dark Daily e-briefing on the Medicare requirement. (See, “Latest Push by CMS for Increased Price Transparency Highlights Opportunities and Risks for Clinical Laboratories, Pathology Groups,” August 8, 2018.)
Are Chargemaster Charges Truly Excessive? Johns Hopkins Researchers Say ‘Yes!’
Most hospitals with 50 beds or more have a charge-to-cost ratio of 4.32. In other words, $432 is charged when the actual cost of a service is $100, according a study conducted by Johns Hopkins University and published in Health Affairs.
The researchers also noted in a news release about their findings titled, “Hospitals Charge More than 20 Times Cost on Some Procedures to Maximize Revenue,” that:
- Charge-to-cost ratios range from 1.8 for routine inpatient care to 28.5 for a CT scan; and,
- Hospitals with $100 in CT costs may charge an uninsured patient or out-of-network patient $2,850 for the service.
“Hospitals apparently markup higher in the departments with more complex services because it is more difficult for patients to compare prices in these departments,” lead author Ge Bai, PhD, CPA, Associate Professor at Johns Hopkins Carey Business School, noted in the news release.
“(The bills for high charges) affect uninsured and out-of-network patients, auto insurers, and casualty and workers’ compensation insurers. The high charges have led to personal bankruptcy, avoidance of needed medical services, and much higher insurance premiums,” co-author Gerard Anderson, PhD, Professor of Health Policy and Management at Johns Hopkins Bloomberg School of Public Health, stated in the news release.
Legal Issues Possible for Hospitals, Medical Laboratories, Other Providers
Still another study published in the American Journal of Managed Care (AJMC) explored the legality of “surprising” uninsured and out-of-network patients with bills at the chargemaster rates. It found that contract law supports market-negotiated rates—not chargemaster rates that do not reflect actual costs or the market.
“Patients and payers should know that they are under no obligation to pay surprise bills containing chargemaster rates, and state attorneys generally can use the law to prevent providers from pursing chargemaster-related collection efforts against patients,” the researchers wrote.
Labs Need to Get Involved
Clinical laboratory leaders in hospitals and health systems are advised to reach out to hospital chargemaster coordinators to ensure the chargemaster, as it relates to the lab, is inclusive, accurate, and in sync with competitive market data. Independent medical laboratories may want to similarly check their chargemasters to see how their lab test prices compare to the prices charged by other labs serving the same community.
—Donna Marie Pocius
Related Information:
That’s a Lot of Scratch: The $48,329 Allergy Test
Allergy Tests
Six Things to Know About a Woman’s $48K Allergy Test
The Role of the Hospital Chargemaster in Revenue Cycle Management
Why Your Access Strategy Demands Pricing Transparency
CMS Proposes Changes to Empower Patients and Reduce Administrative Burden
US Hospitals Are Still Using Chargemaster Markups to Maximize Revenue
Hospitals Charge More than 20 Times Costs on Some Procedures to Maximize Revenue
Battling the Chargemaster: A Simple Remedy to Balance Billing for Unavoidable Out-of-Network Care
Latest Push by CMS for Increased Price Transparency Highlights Opportunities and Risks for Clinical Laboratories and Pathology Groups
Oct 19, 2018 | Laboratory Management and Operations, Laboratory News, Laboratory Operations, Laboratory Pathology, Laboratory Testing, Managed Care Contracts & Payer Reimbursement, Management & Operations
Employers and consumers continue to pay more for health benefits from one year to the next, continuing a trend that is not auspicious for clinical laboratories and anatomic pathology groups
Most clinical laboratories don’t have the capability to collect payments from patients at time of service the same way patients pay doctors during office visits. Thus, Milliman’s annual report which details the increasing amounts patients are expected to pay out of their own pockets should be of interest to clinical laboratory managers and stakeholders. As this trend accelerates, labs will need to adopt new procedures and technologies to conduct business and remain profitable.
The Milliman Medical Index report (MMI) details how much consumers are predicted to pay for healthcare each year, as compared to previous years. Milliman, a Seattle-based independent actuarial and consulting firm with offices throughout the world, examines healthcare costs, property and casualty insurance, life insurance, financial services, and employee benefits.
Milliman released its first MMI in 2005. That year, the average annual medical cost for a family of four was $12,214.
Both Employees and Employers to See Increase in Healthcare Costs
The 2018 MMI report provides both good and bad news for the healthcare industry and patients. Milliman examined the costs for a typical family of four that participates in an employee-sponsored health insurance plan. For the report, a family of four consists of a 47-year old male, a 37-year old female, and two children under the age of five.
The MMI estimates a family of four will spend an average of $28,166 in healthcare expenditures in 2018. Included in this amount is the cost of the insurance paid by the employers and the employees, deductibles and out-of-pocket expenses. The figure represents an increase of $1,222 from 2017. The report found the amount families have been paying for healthcare has been increasing by an average of $100 per month over the last ten years.
The graphic above, taken from the 2018 Milliman Medical Index report, illustrates the increasing medical costs for a family of four. (Image copyright: Milliman.)
Both employers and employees will see an upsurge in costs from last year with employees experiencing an increase of 5.9% and employers seeing an increase of 3.5%.
The MMI found that employees will pay approximately 44% of their healthcare costs in 2018. By contrast, in 2008 employees paid less than 40% of their healthcare expenditures. In 2018, employers will pay about $15,788 of healthcare costs for a family of four, the employee will pay $7,674 via payroll deductions, with the remaining $4,704 being out-of-pocket expenses.
Costs Increasing While Growth Slows
The MMI also found that while the dollar amount families are spending on healthcare is increasing, the overall pace of the growth is slowing. The 4.5% rate of increase over last year is the slowest percentage growth in 18 years.
“We asked key stakeholders across the healthcare system what might be driving the decline in growth rates,” said Sue Hart, co-author of the MMI, in a Milliman news release. “Several common themes emerged, in particular provider engagement, more effective provider contracting, value-driven plan design, and spillover effects from public program initiatives.”
The reasons cited for this slowing trend include:
- Involvement of healthcare providers to reduce costs;
- More sophisticated contracting and provider consolidation;
- Increased member cost sharing;
- High deductible health plans;
- Role of government and public programs; and the,
- Impact of pharmacy initiatives.
“There are two ways of looking at this year’s MMI,” said Chris Girod, co-author of the Milliman Medical Index, in the news release. “On the one hand it’s heartening to see the rate of healthcare cost increase remain low. On the other hand, we’re still talking about more than $28,000 in total healthcare costs for the typical American family.”
The MMI graphic above breaks down healthcare costs into their constituent categories. (Image copyright: Milliman.)
To explore how costs have grown, the MMI examined five separate components of services. The typical family of four spends:
- 31% ($8,631) of their healthcare costs on inpatient facility care;
- 29% ($8,257) on professional services;
- 19% ($5,395) on outpatient facility care; and,
- 17% ($4,888) on pharmacy services.
The remaining 4% ($995) of costs are spent on other services, such as:
- Home healthcare;
- Ambulance services;
- Durable medical equipment; and,
- Prosthetics.
The MMI measures costs for a typical family of four, but certain families or individuals may have variations in costs depending on such factors as age, gender, health status, geographic area, provider variation, and insurance coverage.
Prescription drug costs is one such variance that is hard to predict. The 2018 MMI determined drug costs for a family of four increased by 6%, which represents the lowest percentage increase since 2015.
“Prescription drug costs have steadied, but this trend is volatile and hard to predict,” said Scott Weltz, co-author of the MMI in the news release. “High-cost drugs can have a big impact on trends, as we witnessed a few years ago when hepatitis C treatments hit the market. Alternatively, point-of-sale rebates could push a consumer’s costs in the other direction, particularly for people taking high-cost drugs. As the environment evolves, changes in drug prices can be deployed quite quickly.”
Scott Waltz (left), Christopher Girod (center), and Susan Hart (right) are Principles, Consulting Actuaries, for Milliman in Seattle. They co-authored the 2018 annual Milliman Medical Index report, which outlines the rising burden of out-of-pocket medical and insurance costs on patients, especially those on high deductible health plans. These costs are increasing and could impact clinical laboratories unprepared to collect fees at time of service. (Photo copyrights: Milliman.)
Preparing to Accept Payments
The results of this year’s MMI illustrate the impact increasing consumer costs could have on the way clinical laboratories conduct business and receive payments for services rendered. Studies have shown that patients with high deductible health plans (HDHPs), who frequently must pay 100% of lab costs, are especially affected by these trends. And the numbers of patients on HDHPs have increased each year since they were enacted.
Many clinical laboratories and anatomic pathology practices do not have the capability to collect fees from patients at the time of service. This lack of preparedness could threaten the survival of those labs and should be addressed.
—JP Schlingman
Related Information:
$28k: The Average Price a Family of Four Will Spend on Healthcare in 2018
2018 Milliman Medical Index
Milliman Medical Index: Healthcare Costs for Typical American Family Reach $28,166 Despite Low Annual Rate of Increase
Cost of Health Care for a Typical Family of Four Now over $28,000
Sep 17, 2018 | Compliance, Legal, and Malpractice, Laboratory Management and Operations, Laboratory News, Laboratory Operations, Laboratory Pathology, Managed Care Contracts & Payer Reimbursement, Management & Operations
Ongoing federal regulatory push for EHR interoperability requires medical laboratories and anatomic pathology groups to have strategies for ensuring seamless interfaces with providers and hospitals
What difference does a name make? Clinical laboratories and anatomic pathology groups soon may know the answer to that question following the renaming of the Centers for Medicare and Medicaid Services (CMS) “Meaningful Use” program to “Promoting Interoperability” (PI).
CMS first announced the rebranding in April as part of a proposed rule aimed at transforming the Meaningful Use aspect of the federal Health Information Technology for Economic and Clinical Health (HITECH) Act. HITECH has been Medicare’s roadmap to electronic health record (EHR) implementation and interoperability since it was enacted in 2009.
The final rule arrived on August 2, 2018, and it may impact how clinical laboratories interface with provider and hospital EHRs.
Removing Obstacles to Quality Patient Care
In the news release outlining the updates to Medicare payment policies and rates under the Inpatient Prospective Payment System and the Long-Term Care Hospital Prospective Payment System, CMS states the “overhaul” of the meaningful use program will:
- Make the program more flexible and less burdensome;
- Emphasize measures that require the exchange of health information between providers and patients; and,
- Incentivize providers to make it easier for patients to obtain their medical records electronically.
“We’re excited to make these changes to ensure care will focus on the patient, not on needless paperwork,” CMS Administrator Seema Verma stated in the news release. “We’ve listened to patients and their doctors who urged us to remove the obstacles getting in the way of quality care and positive health outcomes. Today’s final rule reflects public feedback on CMS proposals issued in April and the agency’s patient-driven priorities of improving the quality and safety of care, advancing health information exchange and usability, and removing outdated or redundant regulation on healthcare providers to make way for innovation and greater value.” (Photo copyright: Centers for Medicare and Medicaid Services.)
According to a CMS fact sheet, key provisions of the overhaul include:
- The rule finalized an EHR reporting period to a minimum of any continuous 90-day period in each of calendar years 2019 and 2020 for new and returning participants attesting to CMS or their State Medicaid agency;
- For the Medicare Promoting Interoperability Program, the rule finalized a new performance-based scoring methodology consisting of a smaller set of objectives that CMS states will provide a more flexible, less-burdensome structure, allowing eligible hospitals and critical access hospitals (CAHs) to place their focus back on patients;
- CMS finalized two new e-Prescribing measures related to e-prescribing of opioids (Schedule II controlled substances); and,
- Beginning with an EHR reporting period in CY 2019, all eligible hospitals and CAHs under the Medicare and Medicaid PI programs will be required to use the 2015 Edition of Certified EHR Technology;
- CMS finalized changes to measures, including removing certain measures CMS believes do not emphasize interoperability and the electronic exchange of health information.
According to CMS, about 3,300 acute care hospitals and 420 long-term care hospitals will be subject to the final rule, which takes effect October 1. Obviously, medical laboratories servicing these healthcare organizations will be similarly affected.
Rebranding More than a Name Change
Healthcare Informatics analyzed the 2,593-page final rule explaining that the “core emphasis” of the meaningful use overhaul is “on advancing health data exchange among providers.”
The initial proposal in April, according to Healthcare Informatics, invited stakeholder feedback through a request for information on the possibility of revising CMS’ “Conditions of Participation” for hospitals by requiring providers to electronically transfer medically necessary information following a patient discharge or transfer. The final rule, however, did not include that change.
Instead, the CMS Fact Sheet on the rule states the April request for information was “to obtain feedback on positive solutions to better achieve interoperability, or the sharing of healthcare data between providers, which will inform next steps in advancing this critical initiative.”
Rebranding meaningful use is CMS’s first step in implementing core pieces of the Administration’s MyHealthEData Initiative to strengthen interoperability. In remarks during the ONC Interoperability Forum in Washington, DC, CMS Administrator Seema Verma described the rebranding decision as “much more than a name change” and signaled future CMS actions.
“It is a change in direction for the programs—from programs that support the adoption of health IT, to programs that promote interoperability and patient access to data,” she explained. “To avoid payment reductions and gain incentives, doctors and hospitals will have to give patients electronic access to their health records. We are also considering whether CMS should require—as a condition of participation in the Medicare program—that providers share data with patients in a universal electronic format and hope to share more information on that soon.”
The recent changes follow passage of the Bipartisan Budget Act of 2018, which included a provision relaxing meaningful-use requirements. Though the legislation affects only hospitals and outpatient Medicaid providers, Robert Tennant, Director of Health Information Technology Policy for the Medical Group Management Association (MGMA), declared the revision a “huge win” for providers.
“I don’t think the government recognized how difficult it would be to move from stage 1 to stage 2 to stage 3 [meaningful use] requirements and the significant costs involved,” Tennant stated told Modern Healthcare. “We hope that it signals an interest in Congress in having the administration and HHS (Federal Health and Human Services) not make these quality reporting programs so onerous that it results in large swaths of providers not being successful.”
Clinical laboratories and anatomic pathology groups should be aware that interoperability between their laboratory information systems and the EHRs of providers and hospitals continues to be important. Although the term “Meaningful Use” is to be supplanted by “Promoting Interoperability,” the ability to move patient health information seamlessly among providers continues to be a major goal of this country’s healthcare system.
—Andrea Downing Peck
Related Information:
CMS Finalizes Changes to Empower Patients and Reduce Administrative Burden
In Proposed MU Rebranding Rule, CMS Raises the Interoperability Stakes
Fact Sheet: Fiscal Year (FY) 2019 Medicare Hospital Inpatient Prospective Payment System (IPPS) and Long-Term Acute Care Hospital (LTCH) Prospective Payment System Final Rule (CMS-1694-F)
H.R. 1892: Bipartisan Budget Act of 2018
Printable PDF: Final Rule (CMS-1694-F)
Speech: Remarks by Administrator Seema Verma at the ONC Interoperability Forum in Washington, DC
Congress Budget Deal Relaxes Meaningful-Use Requirements
CMS Proposes Changes to Empower Patients and Reduce Administrative Burden
CMS Proposes Meaningful Use Changes to Promote Interoperability
Sep 7, 2018 | Laboratory News, Laboratory Operations, Laboratory Pathology, Laboratory Testing, Managed Care Contracts & Payer Reimbursement
Healthcare revenue cycle consultant Jonathan Wiik suggests healthcare providers must prepare their organizations for patients who need help paying increasing medical costs
When patients cannot pay their bills, all of healthcare—including clinical laboratories and anatomic pathology groups—also struggle. And, according to experts, medical laboratories already complying with federal value-based payment programs and precision medicine directives should expect increased pressure from patients seeking ways to pay for their services.
A recent analysis of this issue by TransUnion Healthcare (NYSE:TRU) states, “patients experienced an 11% increase in average out-of-pocket costs during 2017, rising from $1,630 in Q4 2016 to $1,813 in Q4 2017.” It is a development that should send up red flags to clinical laboratory managers seeking ways to maintain and increase revenues.
“Given the increased payment responsibility, being able to determine a patient’s ability to pay is increasingly important for hospitals,” noted Jonathan Wiik, Principal, Healthcare Strategy at TransUnion Healthcare (TRU). “In order to allow patients to focus on getting the care they need healthcare providers need processes and tools in place to help patients meet their financial obligations and to establish funding mechanisms that will benefit both the patient and provider.” Obviously, this also applies to clinical laboratories.
According to a news release, “The [TRU] analysis also revealed that in 2017, on average, 49% of patient out-of-pocket costs per healthcare visit were below $500; 39% were $501-$1,000; and 12% were more than $1,000.”
For providers, patients’ swelling unpaid balances mean more uncompensated care, the analysis also showed. And that means more unpaid balances for clinical laboratories as well.
Patients Struggle to Pay Amounts Under $500
Each year, more healthcare consumers are forced onto high-deductible health plans (HDHPs) that make them responsible for thousands and even tens of thousands of dollars in upfront costs.
And according to another TRU news release, patients with commercial insurance plans experienced a 67% increase in their financial responsibility over five years. In other words, after insurance plans paid providers, patients still needed to pony up 12.2% of the total bill in 2017, as compared to 8% in 2012.
During the most recent year studied by TransUnion Healthcare, patients’ out-of-pocket costs increased 11%, rising to $1,813 in 2017 from $1,630 in 2016, a news release revealed.
And it doesn’t take a huge bill for patients to feel the pain. TransUnion’s data reveals that 68% of patients with medical bills below $500 did not fully pay what they owed, RevCycle Intelligence reported. This has major implications for clinical laboratories and anatomic pathology groups because many lab charges fall under $500 and TransUnion shows that almost 70% of patients do not pay the full amount of these bills.
According to TRU, medical specialties with the highest out-of-pocket estimated amounts due from patients include:
- Orthopedics, $1,663;
- Plastic surgery, $1,566;
- Urology, $1,415; and,
- Neurology, $1,241.
The average deductible was $1,200 in 2016, up from just $303 in 2006, a 176% increase, Healthcare Dive reported, citing a new Peterson-Kaiser Health System Tracker report.
And, as Dark Daily previously reported, affluent and self-employed people also feel the pinch, as deductibles can be as high as $5,000/year for individuals and more than $10,000/year for a families, whether plans are purchased through the Affordable Care Act (ACA) or employers.
What Happens When Patients Don’t Pay?
Dark Daily also reported on a 2017 TransUnion Healthcare analysis that showed 99% of hospital bills of $3,000 or more were not paid in full by the end of 2016. (See, “Hospitals, Pathology Groups, Clinical Labs Struggling to Collect Payments from Patients with High-Deductible Health Plans,” September 6, 2017.)
When patients cannot afford to pay their bills, hospitals’ bad debt and charity-care levels rise. Together, bad debt and charity care comprise a provider’s uncompensated care.
“A lot of patients can’t afford these bills, which is why uncompensated care has bounced,” Wiik told Modern Healthcare.
Indeed, uncompensated care was $38.3 billion in 2016, up $2.6 billion since 2015, according to an American Hospital Association (AHA) 2017 fact sheet.
Meanwhile, the Centers for Medicare and Medicaid Services (CMS) reported that Medicare bad debt (the effect of Medicare patients not paying deductibles and co-pays) increased to $3.69 billion in 2016 from $3.14 billion in 2012, a 17% bump, TransUnion Healthcare pointed out.
Consumers Say They Want Prices, Financing Plans
Consumers say healthcare providers are not transparent about costs for procedures, nor do they effectively offer financing options. That’s according to a HealthFirst Financial news release, which states, “More than three-quarters, or 77%, of healthcare consumers say it’s important or very important they know their costs before treatment and 53% want to discuss financing options before care. However, the vast majority of healthcare providers are not satisfying these consumer demands.”
And, according to a HealthFirst Financial Patient Survey of 1,011 adults nationwide:
- “53% voice concern about the ability to pay a medical bill of less than $1,000;
- “35% worried about the ability to pay a bill of less than $500; and,
- “16% are concerned about the ability to pay a bill of less than $250.”
These numbers fall well into the amounts clinical laboratories charge for services rendered.
What Can Medical Laboratories Do?
To help their customers pay their bills and improve revenue, Dark Daily suggest labs:
- Use software that enables ordering clinicians to process advanced beneficiary notices and prior authorizations for services;
- Inform the customer prior to specimen collection about their financial responsibility for the test;
- Ask for payment-due at time of the patient encounter;
- Share key lab test price data in easily accessible and understandable ways;
- Keep credit card information securely on-hand for agreed-to balances patients are responsible for paying; and,
- Offer payment options, such as e-billing and financing plans.
As we’ve pointed out many times, because clinical laboratories are dependent on the physicians and hospitals they service, they are particularly vulnerable when patients stop paying their bills.
—Donna Marie Pocius
Related Information:
TransUnion Healthcare Analysis: Fight Rising Uncompensated Care
Patient Balances Continue to Increase in 2018, Driving Bad Debt and Uncompensated Care
Patient Payment Responsibility Increases 11% in 2017
Patient Financial Responsibility Increased 11% in 2017
It’s Never Too Soon to Communicate Pricing and Payment Options
Deductibles, Coinsurance on the Rise, But Cost of Copays Are Down
Growing Bad Debt Problem Illustrates Broken Billing System
American Hospital Association Uncompensated Care Cost Fact Sheet, December 2017 Update
From Millennials to Boomers, Patients Want to Discuss Healthcare Pricing and Payment Options Before Treatment
Even Higher Income Americans Are Frustrated with High Health Insurance Costs and Many Drop Coverage and Switch to Concierge Care
Hospitals’ Pathology Groups and Clinical Labs Struggling to Collect Payments from Patients with High Deductible Health Plans
Jun 22, 2018 | Laboratory Management and Operations, Laboratory News, Laboratory Operations, Laboratory Pathology, Laboratory Testing, Managed Care Contracts & Payer Reimbursement, Management & Operations, Webinars
As PAMA brings estimated Medicare reimbursement cuts of up to 30% over the next three years to a range of typically high-volume tests and diagnostics, medical laboratories that wish to stay competitive must understand the needs of managed care payers and learn how to optimize collections, reduce denials, and communicate value effectively or risk their financial health
In what experts have called the biggest financial upheaval for the healthcare industry in three decades, the onset of new Medicare Part B Clinical Laboratory Fee Schedule (CLFS) reductions based on the Protecting Access to Medicare Act (PAMA)—and their continued decrease over coming years—places the financial integrity of clinical laboratories and anatomic pathology groups of all sizes in peril.
Recent years have seen major shifts in consolidation, automation, and efficiency analysis to help streamline both workflows and cashflows. However, the threat from the current and coming cuts to Medicare lab test prices will be particularly acute for smaller independent laboratories and hospital/health system lab outreach programs. These labs will continue to feel added strain due to reduced reimbursement across 25 of the most common tests billed to Medicare.
The Centers for Medicare and Medicaid Services (CMS) and the Office of the Inspector General (OIG) predict that the cuts enacted on January 1, 2018, alone will result in Medicare payments to labs falling by a total of $670 million just in 2018. This amount is almost 70% greater than the $400 million in fee cuts the federal agency had predicted in statements it published last year. (See Dark Daily, “For Top 20 Tests, CMS to Cut Payment by 28% in 2018-2020,” October 9, 2017.)
And, that doesn’t account for subsequent cuts, which are estimated to reach nearly 30% over the next three years.
Cost of Service Disparities/In-Network Status Further Impact Clinical Labs
If the CLFS reductions weren’t enough, labs face another threat—managed care and commercial payers aligning with big national laboratories and narrowing networks in an attempt to lower costs and provide maximum return for both patients and shareholders. For smaller and independent laboratories, this represents a double threat.
In the first situation, larger laboratories can offer services at lower costs due to increased automation, batch processing, and other scale advantages. This means that while the lower CLFS rates will impact the financial integrity of larger labs, the actual margin lost is less than that of smaller laboratories and facilities that face higher costs to perform tests and provide services.
Compounding the situation, commercial and managed care payers searching out the best value for their patients and shareholders tend to narrow their networks by excluding many independent clinical lab companies and hospital lab outreach programs, amplifying this inherent disparity and skewing the advantage away from independent providers yet again.
Higher cost providers without a clear understanding of promoting their value to payers could have trouble obtaining in-network status. Yet, failing to obtain in-network status may reduce overall test quantities, further raise prices, and make smaller labs less competitive with larger national laboratories—a dangerous cycle with today’s competitive laboratory landscape.
Shifting Focus and Optimizing Managed Care Reimbursements
As the financial stability of Medicare reimbursements wanes, it is imperative that laboratories look to new methods to further increase efficiency and stabilize cashflows. Once a smaller portion of laboratory revenue, managed care organizations and commercial payers will be of increased importance as overall reimbursement rates continue to shrink in the face of healthcare reform and value-based care.
Unfortunately, many laboratories assume that by simply providing requested services they are due reimbursement from commercial payers. In the age of value-based care this is no longer the case and considered an outdated mindset—one that can lead to endless audits, increased recoupment costs, and which could drastically impact successful collection from managed care and commercial payers. (See Dark Daily, “Payers Hit Medical Laboratories with More and Tougher Audits: Why Even Highly-Compliant Clinical Labs and Pathology Groups Are at Risk of Unexpected Recoupment Demands,” October 16, 2015.)
Special June 26 Webinar: Improving Managed Care Reimbursement Efficiency
Understanding not just what these payers are attempting to achieve for their organization—but also how they structure requirements and processes to support their goals—is an essential element of succeeding in this previously smaller share of the marketplace.
For those interested in learning more about critical concerns regarding managed care payers in the post-2018 CLFS landscape, Pathology Webinars is hosting a 90-minute webinar on Tuesday, June 26, 2018, at 2:00 PM Eastern.
The webinar will include presentations from two experts on a range of topics including:
- Actionable steps to absorb the loss of Medicare revenue due to the impact of the 2018 CLFS reductions;
- How managed care payers process network status and payments;
- Who in the managed care chain of command should receive your value proposition;
- How to better align your value propositions, policies, and workflows with the requirements of managed care and commercial payers; and,
- Understanding the roles managed care payers expect clinical laboratories and anatomic pathologists to play in managing and reducing unnecessary testing.
The first speaker, Frank Dookie, MBA, will provide an inside look at:
- How managed care payers function;
- Their requirements and workflows; and,
- What they look for when considering network status for a laboratory.
Dookie is a laboratory professional who has worked on the payer side for 28 years. He is passionate about the role that diagnostics play or can play in healthcare, and has spent his career working for instrumentation providers, clinical laboratories, the intermediary space between laboratories and managed care companies, and managed care companies.
The second speaker, Michael Snyder, will bring the entire payment process into sharp focus. He will cover:
- Optimizing the collection process;
- Identifying the purpose of each step, each review, and each team member involved; and,
- Critical points laboratories must address to ensure payment.
Snyder is the Senior Vice President of Network Operations for Avalon Healthcare Solutions, LLC, a firm that provides comprehensive benefit management services to the health plan industry and has more than 30 years’ experience in clinical laboratory management.
Frank R. Dookie, MBA (left), Contracting Executive with a major managed care company in Woodbridge, N.J.; and Michael Snyder (right), Senior Vice President with Avalon Healthcare Solutions in Flemington, N.J., will provide critical insights and actionable details for clinical laboratory and anatomic pathology group leaders who want to ensure future revenues.
An Essential Opportunity to Improve Your Reimbursements
This critical webinar offers anatomic pathology groups and medical laboratory managers essential information and actionable next steps to immediately leverage the potential of managed care payers. Additionally, it provides insider insight to laboratories straining to retain financial integrity as reduced reimbursements and increased regulatory burdens strain budgets and cashflows.
To register for the webinar and see further details about discussion topics, use this link (or copy and paste the URL into your browser: https://pathologywebinars.com/current/managed-care-an-insiders-guide-to-improving-your-reimbursement-efficiency-with-strategies-that-work-626/).
As further Medicare payment reductions over the next three years drive reimbursements even lower, understanding how to capture the positive attention of payers—while working within the rules and policies driving their reimbursement decisions—will be an essential element of successful laboratory management and growth. Register now!
—Jon Stone
Related Information:
Continued ‘Aggressive Audit Tactics’ by Private Payers and Government Regulators Following 2018 Medicare Part B Price Cuts Will Strain Profitability of Clinical Laboratories, Pathology Groups
Payers Hit Medical Laboratories with More and Tougher Audits: Why Even Highly-Compliant Clinical Labs and Pathology Groups Are at Risk of Unexpected Recoupment Demands
Tougher Lab Regulations and New Legal Issues in 2018: More Frequent Payer Audits, Problems with Contract Sales Reps, Increased Liability for CLIA Lab Directors, Proficiency Testing Violations, and More
Coming PAMA Price Cuts to Medicare Clinical Lab Fees Expected to Be Heavy Financial Blow to Hospital Laboratory Outreach Programs
What Every Lab Needs to Know about the Medicare Part B Clinical Laboratory Price Cuts That Take Effect in Just 157 Days, on Jan. 1, 2018
Medicare Clinical Laboratory Price Cuts and Cost-cutting Predicted to be 2018’s Two Biggest Trends for Medical Laboratories in the United States
Jun 18, 2018 | Laboratory Hiring & Human Resources, Laboratory Management and Operations, Laboratory News, Laboratory Operations, Laboratory Pathology, Managed Care Contracts & Payer Reimbursement, Management & Operations
Clinical laboratories will want to develop value-based lab testing services as the nation’s largest health insurers prepare to engage with Medicare Advantage patients in record numbers
UnitedHealth Group (UNH), the nation’s largest health insurer, forecasts wildly impressive growth of Medicare Advantage plans and value-based care. If this happens, it would further shrink the proportion of fee-for-service payments to providers, including medical laboratories.
Changes to how clinical laboratories and anatomic pathology groups in America get paid have been the subject of many Dark Daily briefings—such as, “Attention Anatomic Pathologists: Do You Know Medicare Is Prepared to Change How You Are Paid, Beginning on January 1, 2017?” August 22, 2016—and many others since then.
Switching to a value-based care reimbursement system, administered through Medicare Quality Payment Programs (QPPs), is one of the more disruptive changes to hit physicians, including pathologists. And, given UnitedHealthcare’s predictions, healthcare system adoption of QPPs will likely accelerate and continue to impact clinical laboratory revenue.
50% of All Americans in Value-based Care Systems by 2028
UnitedHealth Group also envisions more than 50% of seniors enrolled in Medicare Advantage plans within five to 10 years, up by 33% over current enrollments, Healthcare Finance reported.
“Where it can go, hard to tell, but I don’t think it’s unreasonable to think about something north of 40% and approaching 50%. It doesn’t seem like an unreasonable idea,” said Steve Nelson, CEO, UnitedHealthcare, a division of UnitedHealth Group, during the earnings call.
In light of UNH’s widely-publicized comments, clinical labs should consider:
- Preparing strategies to reduce dependence on fee-for-service payments;
- Developing diagnostic services that add value in value-based reimbursement arrangements.
For labs, more seniors in Medicare Advantage plans means fewer patients with Medicare Part B benefits, which cover tests in a fee-for-service style. In contrast, Medicare Advantage plans are marketed to seniors by companies that contract with Medicare. These insurance companies typically restrict their provider network to favor clinical laboratories that offer them the best value.
Why Insurers Like Medicare Advantage Plans
UnitedHealth Group is not the only insurer anticipating big changes in the Medicare Advantage market. Humana (NYSE:HUM) of Louisville, Ky., is reallocating some services from Affordable Care Act health insurance exchange plans to the Medicare Advantage side of the business, Healthcare Dive reported.
According to a Kaiser Family Foundation (KFF) report, these insurers are ranked by number of enrollees in Medicare Advantage plans:
- UnitedHealthcare—24%;
- Humana—17%;
- Blue Cross Blue Shield affiliates—13%.
Healthcare Dive noted that, in a volatile healthcare industry, payers seem to prefer the stability and following benefits of Medicare Advantage plans:
- Market potential, as evidenced by growing elderly population;
- Good retention rate of Medicare Advantage customers; and
- Favorable payments by the Centers for Medicare and Medicaid Services (CMS) to the insurers.
Cleveland Clinic Makes Deals with Humana, Blue Cross Blue Shield
Last year, Cleveland Clinic and Humana announced creation of two Medicare Advantage health plans with no monthly premiums or charges for patients to see primary care doctors, and no need for referrals to in-network specialists, according to a joint Humana-Cleveland Clinic news release.
And, along with Anthem Blue Cross and Blue Shield in Ohio, Cleveland Clinic also launched Anthem MediBlue Prime Select, a Medicare Advantage HMO plan with no monthly premium, a news release announced. For most of their care needs, members access Cleveland Clinic hospitals and physicians.
Control Costs as Medicare Advantage Plans Grows
These examples highlight the necessity for clinical laboratories to prepare as the Medicare Advantage program expands and accompanying networks narrow.
“Medicare Advantage plans will result in more pressure on providers [such as clinical laboratories] and hospitals to focus on the cost of care,” said Michael Abrams, Managing Partner at Numerof and Associates, told Healthcare Dive.
With an exploding elderly population, medical laboratories should analyze what the shift to value-based care and Medicare Advantage plans may mean for their revenues.
—Donna Marie Pocius
Related Information:
UnitedHealth Group’s David Wichmann on Quarter1 2018 Results, Earnings Call Transcript
UnitedHealth Group Grows First Quarter Profits Driven by Medicare Advantage
Medicare Advantage Will Have More Enrollment, Lower Premiums in 2018
Payers are Flocking to the Medicare Advantage Market
Medicare Advantage 2017 Spotlight on Enrollment Market Update Issue Brief
Medicare Advantage Benefits
UnitedHealth Group Predicts 50% of Seniors Will Choose Medicare Advantage
Medicare Advantage Plans Keep Growing
Cleveland Clinic and Humana Create Two New Zero Premium Medicare Advantage Plans
Anthem Blue Cross Blue Shield Ohio Collaborate to Deliver Integrated Care
Attention Anatomic Pathologists: Do You Know Medicare Is Prepared to Change How You Are Paid, Beginning on January 1, 2017?
