Clinical labs and pathology groups will want to be prepared for cash-paying patients who demand discounted prices for medical laboratory tests
For decades, it has typically been difficult for a patient to get, in advance of treatment, a specific price from a healthcare provider. This has been true, whether the provider was a hospital, an office-based physician, or an ancillary clinical service. This lack of “price transparency” makes it difficult for patients to shop for healthcare providers—including clinical laboratories—based on the same combination of quality and price that they use to make other important purchases in their lives.
Recently, the Los Angeles Times looked into the arcane world of healthcare pricing. Its reporter was astonished to discover that, in California, it was possible for a cash-paying patient to be charged a price by a hospital that was just 16% of the “patient list price.” Furthermore, this cash price was less than half of what that hospital had negotiated with at least one major health plan!
Patient’s Health Insurer Did Not Get Hospital’s Lowest Price
In a story written by reporter Chad Terhune and published on May 27, 2012, the following example set the theme for the story: “A Long Beach hospital charged Jo Ann Snyder $6,707 for a CT scan of her abdomen and pelvis after colon surgery. But because she had health insurance with Blue Shield of California, her share was much less: $2,336. Then Snyder tripped across one of the little-known secrets of healthcare: If she hadn’t used her insurance, her bill would have been even lower, just $1,054. ‘ I couldn’t believe it,’ said Snyder, a 57-year-old hair salon manager. ‘I was really upset that I got charged so much and Blue Shield allowed that. You expect them to work harder for you and negotiate a better deal.’”
For pathologists and clinical laboratory managers, it is significant that the Los Angeles Times wanted to publish a story about the growing willingness of hospitals and physicians to offer deep discounts to cash-paying patients. Moreover, the reporter was quite specific about the implication of his investigation.
“Unknown to most consumers, many hospitals and physicians offer steep discounts for cash-paying patients regardless of income,” wrote Terhune. “But there’s a catch: Typically you can get the lowest price only if you don’t use your health insurance.”
Terhune then described a problem with this approach to pricing healthcare services. “That disparity in pricing is coming under fire from people like Snyder,” he said, “who say it’s unfair for patients who pay hefty insurance premiums and deductibles to be penalized with higher rates for treatment.”
Cash-Paying Patients Showing Up at Clinical Laboratories
Dark Daily believes that it is important to understand this healthcare pricing trend as described by the Los Angeles Times. No pathologist or medical laboratory manager is surprised to learn that there is a huge gap between a provider’s “patient list price” and the much lower price negotiated for the same clinical service between that provider and a health insurance plan. What is new is the stunning disparity in the specific prices for the same service that some providers are willing to charge a cash-paying customer.
Why is this disparity poised to become an issue with patients? Blame it on the spectacular growth in the number of people covered by high-deductible health plans (HDHP). In recent years, employers raised deductible and out-of-pocket costs in the health benefits plans they provide for their employees. In turn, this means tens of millions of patients—who are cash-paying customers at the start of each calendar year until they meet their deductible—are no longer shy about asking for a hefty discount prior to time of service.
In simplest terms, the nation now has a large proportion of insured individuals who are motivated to leverage their cash payment in exchange for a deep discount. For their part, most physicians recognize that, by accepting the cash payment before service, they are saving all the billing and collection costs that normally accompany a claim filed with an insurance company.
In fact, the Los Angeles Times did publish an example of the disparity in the price of clinical laboratory testing. It wrote: “David Belk, an internist in Alameda [California], launched a website about medical costs and speaks to community groups about the huge markups compared with the prevailing cash price. Belk recently told a group gathered at a seniors center about the vast price difference when he requested routine blood work for a patient last year. A local hospital charged her $782. Her insurer said that with its discount, she owed only $415. ‘She could have gotten it for $95 in cash. How does that make sense?’ Belk said. ‘The last thing the insurance companies want you to know is how inexpensive this stuff really is.’”
And there is more to this story, which is what caught the attention of the Los Angeles Times. Jo Ann Snyder, the patient profiled in the news story, has sued her insurance carrier, Blue Shield of California, in Orange County Superior Court, in a class action lawsuit. She is accusing her insurer of unfair business practices, breach of good faith, and misrepresentation over her medical bills.
What appears to have motivated Snyder to file this legal action is that, after undergoing a CT scan at an outpatient center in 2009 for which she was charged at the negotiated rate of $660, Snyder was referred one year later for another CT scan. This procedure was performed by a hospital in Long Beach. On this occasion, her bill was $3,497, with the insurer’s negotiated rate of $2,336. This amount was four times what Snyder had paid in 2009.
For its part, Blue Shield of California has stated that the Snyder case has no merit. Blue Shield officials say they negotiate the best discounts they can from providers.
Several additional aspects to this trend in provider pricing were discussed in the Los Angeles Times news story. At a minimum, however, clinical lab administrators and pathologists will want to acknowledge the existence of this trend. The number of patients with high-deductible health plans is growing at a steady rate. When they need medical laboratory tests, they will ask—in advance—what the price of the medical laboratory test is and whether they can get a discount for paying cash.
Clinical Labs and Pathologists Should Have Policies for Cash Payment
In fact, it is this demand for a low price in exchange for a cash payment that is fueling the growth of Internet-based clinical laboratory testing companies. Pathologists and clinical lab managers are invited to enter the search terms “laboratory test” and “order online” into their web browser and scroll through the dozens of companies that offer lab tests to anyone who will fill out a lab request form and provide a credit card payment.
Across the lab testing industry, this trend is not one which should be ignored. Every clinical laboratory and pathology group should have policies in place to serve the patient who is seeking a discounted price and will pay cash before time of service.