Giving physicians Information on the price of medical laboratory tests at the time of order decreased overall use of such tests by about 9%, researchers said.
Physicians order fewer clinical laboratory tests when they know how much they cost, according to a recent study at the Johns Hopkins University School of Medicine.Those findings are good news for hospital-based pathologists who must often respond to physicians who order expensive esoteric tests that are inappropriate for the patient’s condition or lack documentation as to clinical utility.
The study results show another dimension to the power of transparent pricing in healthcare because it demonstrates that physicians are willing to take cost into consideration when deciding what clinical laboratory tests they should order. Some experts believe that publishing price information on the costs of care empowers consumers to shop for the best price, thus helping to reduce the overall cost of healthcare.
Journalists, researchers, and a growing number of consumers now recognize the often huge variability in the prices different medical laboratories charge for the same lab tests
One step at a time, the Medicare program, private health insurers, and employers are putting policies in place that require providers—including clinical laboratories and pathology groups—to allow patients and consumers to see the prices they charge for their medical services. Recent studies into test price transparency in hospitals and health networks have garnered the attention of journalists, researchers, and patients. These groups are now aware of enormous variations in pricing among providers within the same regions and even within health networks.
Now that hospitals’ medical laboratory test prices are
required to be easily accessible to patients, researchers are beginning to compile
test prices across different hospitals and in different states to document and
publicize the wide variation in what different hospital labs charge for the
same medical laboratory tests.
Journalists are jumping on the price transparency bandwagon
too. That’s because readers show strong interest in stories that cover the
extreme range of low to high prices providers will charge for the same lab
test. This news coverage provides patients with a bit more clarity than
hospitals and other providers might prefer.
Shocking Variations in Price of Healthcare
Services, including Medical Laboratory Tests
The Health Care Cost Institute (HCCI) in conjunction with the Robert Wood Johnson Foundation (RWJF), examines price levels of various procedures and medical laboratory tests at healthcare institutions across the United States in the first release of a series called Healthy Marketplace Index. According to the HCCI website, “a common blood test in Beaumont, Texas ($443) costs nearly 25 times more than the same test in Toledo, Ohio ($18).”
In April, the New
York Times (NYT) made the wide variation
in how clinical laboratories price their tests the subject of an article titled,
“They Want It to Be Secret: How a Common Blood Test Can Cost $11 or Almost
$1,000.” The article discusses the HCCI findings.
The coverage by these two well-known entities is increasing the
public’s awareness of the broad variations in pricing at clinical laboratories
around the country.
Aside from the large differences in medical laboratory test
prices in different regions, the HCCI found that there are sometimes huge price
variations within a single metro area for the same lab tests. “In just one
market—Tampa, Fla.—the most expensive blood test costs 40 times as much as the
least expensive one,” the NYT notes.
In other industries, those kinds of price discrepancies are
not common. The NYT made a comparatively outrageous example using
ketchup, saying, “A bottle of Heinz ketchup in the most expensive store in a
given market could cost six times as much as it would in the least expensive
store,” adding, however, that most bottles of ketchup tend to cost about the
same.
The graphic above is taken from the New York Times article on test price discrepancies in healthcare. The range of prices for the medical lab test known as a comprehensive metabolic panel are for metropolitan areas only. The data is sourced from the Health Care Cost Institute study. It’s easy to see why patients would be confused by clinical laboratory pricing that varies so widely. (Graphic copyright. The New York Times.)
The CMS mandate designed to make the prices of medical services accessible to healthcare consumers has, in many ways, made things more confusing. For example, most hospitals simply made their chargemaster available to consumers. Chargemasters can be confusing, even to industry professionals, and are filled with codes that make no sense to the average consumer and patient.
“This policy is a tiny step forward but falls far short of what’s needed. The posted prices are fanciful, inflated, difficult to decode and inconsistent, so it’s hard to see how an average person would find them useful,” Jeanne Pinder, Founder and Chief Executive of Clear Health Costs, a consumer health research organization, told the NYT in an article on how hospitals are complying with the mandate to publish prices.
In addition to the pricing information being difficult for
consumers to parse, it also may lead them to believe they would need to pay
much more for a given procedure than they would actually be billed, resulting
in patients opting to not get care they actually need.
Why Having a Strategy Is Critically
Important for Clinical Laboratories
Clinical laboratories are in a particularly precarious position in all of this pricing confusion. For one thing, most hospital-based medical laboratories don’t have a way to communicate directly with consumers, so they don’t have a way to explain their pricing. Additionally, articles and studies such as those in the NYT and from the HCCI, which describe drastic price variations for the same tests, tend to cast clinical laboratories in a somewhat sinister light.
To prepare for this, medical laboratory personnel should be
trained in how to address customer requests for pricing and how to explain
variations in test prices among labs, before such requests become problematic. Lab
staff should be able to explain how patients can find out the cost of a given
test, and what choices they have regarding specific tests.
In 2016, Dark Daily’s sister-publication, The Dark Report (TDR), dedicated an entire issue to the impact of reference pricing on the clinical laboratory industry. In that issue, TDR reported on how American supermarket chain Safeway helped guide their employees to lower-priced clinical laboratories for lab tests, resulting in $2.7 million savings for the company in just 24 months. Safeway simply implemented reference pricing; the company analyzed lab test prices of 285 tests for all of the labs in its network, and then set the maximum amount it would pay for any given test at the 60th percentile.
If a Safeway employee selected a medical laboratory with prices less than the 60th percentile, the normal benefits and co-pays applied. But if a Safeway employee went to clinical laboratories that charged more than the 60th percentile level, they were required to pay both their deductible and the amount above Safeway’s maximum.
Safeway’s strategy revealed wide variation in testing
prices, just as the HCCI report found. This means that employers can be added
to the list of those who are paying much closer attention to medical laboratory
test pricing than they have in the past. These are developments that should
motivate forward-looking pathologists and clinical laboratory executives to act
sooner rather than later to craft an effective strategy for responding to consumer
and patient requests for lab test price transparency.
Growing interest in more transparency for the prices of prescription drugs is reflected in a study published in the Journal of the American Medical Association (JAMA) that highlights disparities in pharma prices for patients, pharmacies, and payers
However, while reference pricing and pricing databases help savvy patients compare prices across a range of procedures, much about pharmaceutical pricing remains shrouded in mystery. This is why calls for greater transparency in how prescription drugs are priced are increasing as well.
The Trump administration, state governments, and advocacy groups have each targeted drug costs as a problem in the current healthcare system. And a March 2018 study published in the Journal of the American Medical Association (JAMA) may further fuel the fires facing big pharma.
Overpayments and the Silence Behind Them
Analyzing 9.5 million claims from Optum’s Clinformatics Data Mart over the first half of 2013, researchers found that approximately 23% of all claims involved overpayments—situations in which the co-pay charged to the patient exceeded what the insurer paid the pharmacy to fill the prescription.
While data from 2013 might not reflect the current state of pharmaceutical pricing, the study brings exposure to trends in both politics and media coverage surrounding the industry.
The study authors found that overpayments totaled $135-million in 2013. Generic medications saw a higher portion of overpayments with more than one in four generic prescriptions costing patients more than what payers paid the pharmacy. However, in the 6% of claims involving branded medication, overpayments were nearly twice as high with an average overpayment of $13.46 per claim.
The researchers also cited data from a National Community Pharmacists Association (NCPA) survey of 628 pharmacies in which 49% claimed to have seen 10-50 occurrences of “clawback fees” in the past month. A further 35% reported seeing more than 50 clawback fees in the past month. These “fees” are part of contractual obligations that payers can use to recoup such overpayments to pharmacies.
Other contractual arrangements, such as “gag clauses” (AKA, non-disclosure agreements), wherein pharmacists cannot disclose to patients when their copay exceeds the cost of filling the prescription without coverage, have garnered coverage in the media.
The Hill recently outlined efforts from senators to stop this practice for both traditional insurance plans and Medicare Advantage and Part D participants. “Americans have the right to know which payment method—insurance or cash—would provide the most savings when purchasing prescription drugs,” Senator Susan Collins (R-Maine) told The Hill.
Rebates, Secretive Deals, and Red Tape in Government Crosshairs
Rebates are another contested aspect of current pricing models. Traditionally, pharmacy benefit managers (PBMs) serve as a middleman between pharmaceutical companies and pharmacies to negotiate prices and maintain markets. PBMs negotiate deals for insurers in the form of rebates. Insurers, however, are using these savings to offer lower premiums, rather than forwarding the savings directly to the customer.
UnitedHealthcare unveiled plans to pass these rebates directly to consumers in early March, The Hill reported.
In a press release, Department of Health and Human Services (HHS) Secretary Alex M. Azar II stated, “Today’s announcement by UnitedHealthcare is a prime example of the movement toward transparency and lower drug prices for millions of patients that the Trump Administration is championing. Empowering patients and providers with the information and control to put them in the driver’s seat is a key part of our strategy … to bring down the price of drugs and make healthcare more affordable.” (Photo copyright: Washington Post.)
The Trump Administration also recently outlined their new “American Patients First” plan for reducing drug prices and out-of-pocket costs for patients.
Key elements of their proposed approach include:
Eliminating gaming of regulations, such as the Risk Evaluation and Mitigating Strategies (REMS) requirements manufacturers use to avoid sending samples to creators of generics;
Restricting rebates through Anti-Kickback Statue revisions; and,
Eliminating gag clauses or clawback fees.
However, pharma industry coverage of the plan is mixed. MarketWatch sees little to worry about, predicting, “[the plan] isn’t expected to hurt drug makers or pharmacy-system middlemen.” Meanwhile, Forbes claims, “[the plan] represents a sea of change in pharmaceutical pricing policy, one that will have a significant effect on drug prices in the future.”
Anatomic pathology groups, medical laboratories, and other diagnostics providers can view this as yet another example of healthcare providers trying to shore up financials and protect profits by protecting sensitive pricing information, as the industry faces increasing scrutiny. Nevertheless, regardless of the outcome, these latest trends emphasize the role that transparency is likely to play—and how clinical laboratories will be impacted—as healthcare reform progresses, both in terms of public relations and regulatory requirements.
Regardless of potential confusion, the bill’s passage is seen as a positive step toward greater transparency by high-level members of the state’s government
In an effort to promote price transparency in healthcare, Colorado legislators passed a new law requiring hospitals in that state to post self-pay prices for the most common procedures and treatments. Their hope is healthcare consumers who lack insurance will find it easier to price shop and, therefore, make informed healthcare decisions.
However, not all providers in that state think the bill is needed and some are concerned it could cause confusion. It remains to be seen how Colorado hospital medical laboratories and outpatient practices, such as anatomic pathology groups, will be impacted by the new transparency requirements.
Physicians’ practices and other providers also must post prices for their 15 most popular procedures under the new law, Healthcare Dive reported. In an issues brief, the Colorado Hospital Association (CHA) supported the bill “because it aligns with the Association’s transparency policy principles.”
But some Colorado healthcare providers have expressed concerns about the new requirements.
“Because of the complexity of pricing, it’s possible the self-pay prices we have posted on our website might increase confusion,” Dan Weaver, Senior Director of Public Relations for UCHealth, told Colorado Politics. “Patients who have insurance coverage, Medicaid or Medicare will have very different out-of-pocket responsibilities [from the posted price].” The article was later published in the Durango Herald.
Various points of potential confusion include:
Prices show what self-pay patients must pay and not what an insured patient would pay under their health plans, which would be much lower;
Even an “apple-to-apple” comparison by price is not so easy to do, reported Healthcare Finance based on its analysis of some Colorado hospitals’ price lists.
Christine Clark, Associate CFO Revenue Cycle (above), Denver Health, told Healthcare Finance, “We do have concerns that this will make the issue more confusing to patients as there is not a ‘one size fits all’ approach to providing patients estimates due to the wide variability insurance plans bring to the process. Providing a self-pay price for a service is probably the least complicated.” However, she added, “There is always some variability in the price of procedures due to different patient needs.”
Regardless of the potential confusion, however, some see passage of the bill as a step in the right direction.
Senate Republican Kevin Lundberg (above right) shaking hands with Colorado’s governor following signing of SB17-065, which Lundberg sponsored. In a statement, he noted, “Coloradans have a tough enough time navigating the complicated structure of our broken healthcare system without worrying about hidden healthcare costs.” (Photo copyright: Colorado Senate Republicans.)
Studies Show Consumers Not Highly Motivated to Shop for Healthcare
Ironically, consumers do not appear to be rushing to compare hospital prices, as they do for other products and services. And those who do shop around do not like the price data tools or understand the data, state and national studies found.
“Even with pricing data available, patients tend to rely more on their physician’s advice about where and from whom to seek medical care,” noted the Health Policy Institute of Ohio (HPIO). According the HPIO report, consumers say healthcare price data tools are not user-friendly.
And a national study, published in Health Affairs, that explored American’s views and habits when shopping for healthcare, noted:
Only 13% of 3,000 survey respondents who had out-of-pocket responsibilities sought cost information before their healthcare encounters; and,
Just 3% compared costs across possible providers before accessing care.
The researchers acknowledged the existence of price transparency tools, such as those offered by Colorado, Ohio, and on other state websites. Nevertheless, survey respondents still reported:
Lack of awareness about available price information;
Unwillingness to switch providers; and,
Network constraints and lack of providers available to patients.
“Simply passing price transparency laws or regulations appears insufficient to facilitate price shopping. Price information must be more accessible and comprehensible,” the study authors wrote in Health Affairs. “Even if information was more accessible, patients’ preference to maintain provider relationships and efforts to coordinate care would limit overall rates of shopping.”
Keeping it Simple Could Be the Key
Researchers suggested non-urgent services in quantity, such as a package of physical therapy visits, may best suit comparison price shopping.
Ultimately, it’s not enough that healthcare price data is simply made available to consumers, it also must be easily found and understood. Though transparency laws might not be directly aimed at clinical laboratories; lab leaders are nonetheless encouraged to ensure self-pay prices for procedures and diagnostic tests are accessible to the public.
Researchers find shopping for medical laboratory tests increased by nearly 50%, and people are saving more than a million dollars annually by shopping for blood tests
Each year, more consumers use online healthcare price-shopping tools to find hospitals, physicians, and clinical laboratories that have the lowest prices. And medical laboratory tests is among the top services on their lists!
Researchers at Vitals of Lyndhurst, NJ, a company that publishes online physician ratings, analyzed how consumers were using its price and quality transparency tools. They confirmed that shopping for medical laboratory tests/blood work is one of the top healthcare procedures checked by consumers.
According to a recent Vitals press release, approximately 46% more people shopped for blood tests in 2015 than the year before, and they saved $1,149,682 by doing so. That’s because their health plans reward them for selecting good quality and low-price providers, as well as adopting healthy behaviors, such as losing weight, exercising more, and lowering high cholesterol scores. (more…)
