News, Analysis, Trends, Management Innovations for
Clinical Laboratories and Pathology Groups

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News, Analysis, Trends, Management Innovations for
Clinical Laboratories and Pathology Groups

Hosted by Robert Michel
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New Price Transparency Shopping Tools Help Healthcare Consumers Make Educated Choices and Save Money Using Smartphones and Other Devices

Price shopping for clinical laboratories and other healthcare services and surgical procedures creates a ‘healthy competitive environment,’ an Optum executive noted

With the threat of infection from SARS-CoV-2 (the coronavirus that causes COVID-19) on the minds of most Americans, price transparency for medical care is more critical than ever, and new smartphone applications (apps) are helping patients shop for the best prices and quality when selecting healthcare, including clinical laboratory services. 

One example, SmartShopper by Vitals (now known as Sapphire Digital) of Lyndhurst, N.J., is a pre-paid employer- or health plan-based program that lets people use mobile phone apps and go online using their computers to check prices and quality ratings for healthcare service providers in their area. The program may also incentivize members to prices shop by offering up to $500 per service for choosing lower-cost providers. 

“Today, there is no reason consumers shouldn’t know the price of routine, non-emergency care,” said Heyward Donigan, former President and CEO of Vitals who is now CEO of Rite Aid (NYSE:RAD), in a news release. “Putting consumers in the driver’s seat for making informed healthcare decisions will create a competitive healthcare marketplace that ultimately lowers costs for everyone.”

Does Price Shopping Create a ‘Healthy Competitive Environment’?

Individuals whose health plans or employers have signed up for SmartShopper can use it to seek out the best prices for routine exams, preventative exams, imaging scans, and to schedule surgeries. The program’s provider data is compared by cost and quality based on nationally recognized metrics and patient reviews.

Some of the largest health insurers in the country, such as Anthem and Highmark, provide price shopping tools to their clients. 

“Up to 7% of overall healthcare spent could be reduced through price transparency tools like SmartShopper,” Becca Lococo, PhD, Vice President, Customer Experience at Optum, told Modern Healthcare. This can create a really healthy competitive environment in an industry where costs are already rising.”

Employers Save Big with Price Shopping

Large companies can reap substantial savings when they provide their employees with price shopping tools. Employer savings can range from $1,810 for a round of physical therapy to $80 for a mammogram. Patients, on average, save $606 for each procedure with SmartShopper, reported Modern Healthcare.  

“Even just one person shopping can make a difference for that employer in terms of the claims they’d be paying out at the end,” Steve Crist, Vice President, Commercial Health Plan, Blue Cross Blue Shield of North Carolina, told Modern Healthcare. “Even though the employer is paying the incentive, the cost savings more than make up for it. The ROI on this program is very strong.”

The Vitals SmartShopper Book of Business Report 2017 notes that, between 2014 and 2017, the tool saved employers $40 million and paid out $4.6 million in cash rewards to individual consumers. In 2016 alone, SmartShopper saved employers $15 million and paid out $1.8 million in cash incentives with the average incentive check totaling $85.

The Vitals report also listed the top 10 procedures and the three-year total cost savings for employers that used SmartShopper. The list includes clinical laboratory testing as the fifth largest source of savings for employers that used price-transparency tools as part of their health benefits programs:

  • Colonoscopy ($6,592,719)
  • MRI ($5,382,440)
  • Physical therapy ($4,545,758)
  • Remicade therapy ($4,364,887)
  • Lab and blood work ($3,600,105);
  • CT scan ($2,001,602)
  • Upper GI endoscopy ($1,301,916)
  • Knee Surgery ($913,436)
  • Mammogram ($868,322)
  • Shoulder Surgery ($636,615)

SmartShopper has a configurable list of more than 200 medical procedures and services included in the tool. Sapphire Digital (formerly Vitals) uses claims data and collaborates with clients to develop the ideal combination of services to maximize savings for their customers. 

“We don’t have to boil the ocean to produce a sizeable reduction in healthcare costs for our employer clients,” said Heyward Donigan, former President and CEO of Vitals and now CEO of Rite-Aid, in the Vitals report. “Focusing on routine, shoppable procedures that are relevant to the demographics of a client’s workforce generates significant savings.” (Photo copyright: Wall Street Journal.)

Price Shopping for Surgery

In 2018, before changing its name to Sapphire Digital, Vitals sold its consumer services division to WebMD. The sale enabled Vitals to focus on enhancing and developing its price transparency tools. The company then launched Medical Expertise Guide (MEG), which uses advanced analytics to create “proprietary Composite Quality Scores for surgeons and facilities to help consumers find the best surgeon and facility combination for their surgery, at a predictable cost,” according to Sapphire Digital’s website.  

“MEG brings consumers information, powered by data and analytics and supported by personalized service, to help them make quality healthcare decisions with confidence,” said Donigan, in a news release. “MEG guides employees to the best care, while helping employers manage the overall cost-effectiveness of their healthcare program.”

Examples presented in the news release of the “savings per case” for people using MEG include:

In October 2016, Dark Daily reported on another example of using healthcare transparency tools from Castlight Health. That tool enables Safeway employees to check clinical laboratory prices on their smartphones or computers before selecting where to have tests performed. At that time, Safeway and its employees were able to reduce spending on clinical laboratory tests by 32% in only 24 months by selecting the labs with the lowest prices.

The examples presented above are evidence that price transparency is gaining a foothold in healthcare. These are early demonstrations that price shopping tools do help consumers make more informed decisions when choosing hospitals, physicians, or clinical laboratories. The trend is for ever-growing numbers of consumers to rely on pricing transparency tools when selecting their medical care.

Pathologists and clinical laboratories should not ignore this trend, as it could affect business workflow and revenue streams. 

—JP Schlingman

Related Information:

Encouraging Patients to Shop Around Amid High Healthcare Prices

Show ‘Em the Money: Paying Patients to Shop for Affordable Medical Care

Vitals SmartShopper Expands to Millions of Consumers in 2018

Vitals SmartShopper Book of Business Report 2017

Vitals Launches MEG, A Medical Expertise Guide for Health Care Shopping

Vitals Announces Company Name Change to Sapphire Digital

From Casting Light to Total Eclipse? Can a New CEO Turn Around Castlight Health?

Vitals Study Shows Consumers Using Cost Transparency Tools Select Clinical Laboratories with Low Test Prices

Using the Reference Pricing Strategy, Safeway and its Employees Reduce Spending on Clinical Laboratory Tests by 32% in Only 24 Months by Selecting Lab with Lowest Prices

Employers Can Save Money by Adopting Self-funded Healthcare Models, and Clinical Laboratories Have Opportunities to Support These Plans

By negotiating directly with healthcare providers, employers cut health insurers out of the loop, at least for certain specified healthcare conditions and surgeries

It’s a new trend in how employers provide healthcare benefits for their employees. In order to save money, a growing number of employers are going to low-cost hospitals, physicians, and other providers to contract directly for their services. This may be the opening that allows some clinical laboratories to approach larger employers in their region and negotiate pricing and contract terms without the need to involve a health insurer.

What’s motivating more employers to reach out and contract directly with low-cost healthcare providers is the realization that their health insurance plan typically pays much more than Medicare to hospitals, physicians, clinical laboratories, and other ancillary providers. This fact is supported by a study conducted by the Rand Corporation that found “large employers generally lack useful information about the prices they are paying for healthcare services,” and that of the 1,600 hospitals in 25 states that Rand surveyed, “employer-sponsored health plans paid hospitals an average of 241% of what Medicare would have paid for the same inpatient and outpatient services in 2017,” which is up from 236% of Medicare in 2015, Modern Healthcare reported.

Thus, to better control the skyrocketing cost of healthcare, and the health benefits plan they offer their employees, employers are increasingly turning to self-coverage and implementing company benefits plans that reward employees for price shopping and for selecting the lowest costs healthcare services.

This trend is another reason why clinical laboratory leaders should be tracking changes in federal price transparency requirements, along with the increased consumer interest in accessing healthcare prices in advance of service.

Employers Negotiate Directly for Healthcare Services

Over the past decade, Dark Daily has repeatedly covered expanding federal price transparency legislation and the trend among large employers to self-insure and negotiate with hospital networks for discounted healthcare services for their employees. Most recently in, “Ohio Healthcare Network Serving Amish and Anabaptist Communities Could Provide Blueprint for Hospital Price Transparency,” and “Amazon Care Pilot Program Offers Virtual Primary Care to Seattle Employees; Features Both Telehealth and In-home Care Services That Include Clinical Laboratory Testing.”

Innovative employer plans to decrease healthcare costs include:

  • Contracting directly with medical providers,
  • Opening primary care clinics within their corporate facilities,
  • Referring employees to contracted providers for certain procedures, and
  • Creating bundled-payment deals with select providers.

Modern Healthcare reports that both public and private employers in five states (Colorado, Connecticut, Michigan, Montana, Texas, and Wisconsin) are “considering or launching group purchasing initiatives with narrow- or tiered-network plans, onsite primary-care clinics, and contracts with advanced primary-care providers,” as well as “direct-contracting with providers, such as referring employees to designated centers of excellence for some procedures and conditions under bundled-payment deals with warrantied results.”

Cheryl DeMars, CEO of The Alliance, a Wisconsin healthcare purchasing cooperative, says there is a movement afoot. “I’m seeing a level of boldness on the part of our members that I haven’t seen before in my 27 years here,” she told Modern Healthcare.

“Almost 100 million employees covered through self-insured plans not only represents a staggeringly large market for healthcare cost containment, it is an extraordinary opportunity for America to meaningfully reduce our national healthcare bill,” Kirk Fallbacher (above), President and CEO of Advanced Medical Pricing Solutions (AMPS) told Healthcare Finance News. (Photo copyright: NextGenRBP.com)

Self-insured Employers can Reduce the Nation’s Healthcare Bill, says KFF

A 2018 US Census Bureau report states that more than 181 million people in the US were enrolled in employer-sponsored health plans in 2017, and that the estimated average premium for employer-sponsored family coverage increased at an annual rate of 4.5% from 2008 to 2019.

That increase was approximately twice the rate of overall inflation and growth in average hourly earnings during the same time period, according to the report, which also states that the surge in premiums was driven by price increases for medical services and that use of most healthcare services among employees has actually been declining.

For US employers, “the steep increase in their healthcare cost crowds out financial resources that could be used for employee wage increases, capital investments, and other spending priorities, such as retirement plans,” the report notes.

However, an estimated 94 million of the 156 million workers in the US—approximately 61%—are currently covered under a self-insured medical plan through their employer, the KFF Employer Health Benefits 2019 Annual Survey states.

Healthcare.gov defines the self-insured health insurance plan as a “type of plan usually present in larger companies where the employer itself collects premiums from enrollees and takes on the responsibility of paying employees’ and dependents’ medical claims. These employers can contract for insurance services such as enrollment, claims processing, and provider networks with a third-party administrator, or they can be self-administered.”

Kirk Fallbacher, President and CEO of Advanced Medical Pricing Solutions (AMPS), told Healthcare Finance News (HFN) that the self-insured approach to employee medical coverage saves employers between 20% and 30% over a traditional Preferred Provider Organization (PPO), and that the savings total about $2,800 per person annually. 

“It doesn’t signal the end of the insurance industry,” he said. “On the cost side of the equation, the PPO approach is beginning to come to an end. The costs are outstripping inflation and wages.”

Moving to self-insurance is another part of the current trend for price transparency in the healthcare industry and may offer opportunities for clinical laboratories to increase profits. Clinical laboratories and anatomic pathology groups might want to contact the Human Resources Departments of local major employers to educate them on the costs and quality value of their labs. Such a proactive and innovative move could encourage employers to include those labs in the provider networks of their self-insured health benefit plans.   

—JP Schlingman

Related Information:

Self-insured Employers Go Looking for Value-based Deals

Self-insured Employers Are Playing An Increasing Role in Taking on The Status Quo to Lower Costs

Self-insured Employers Have More Leverage than They Think

Health Insurance Coverage in The United States: 2017

The Kaiser Family Foundation Employer Health Benefits 2019 Annual Survey

Ohio Healthcare Network Serving Amish and Anabaptist Communities Could Provide Blueprint for Hospital Price Transparency

Amazon Care Pilot Program Offers Virtual Primary Care to Seattle Employees; Features Both Telehealth and In-home Care Services That Include Clinical Laboratory Testing

North Carolina Providers Slow State Effort to Impose Reference Pricing They Claim Could Remove Hundreds of Doctors and Medical Service Providers from the State’s Healthcare Network

North Carolina turned to reference pricing to reduce employee health costs, but hospitals in the Tarheel State fought back

Efforts by North Carolina’s State Health Plan to adopt reference pricing for its state employees have largely failed, due to united opposition to the reimbursement model by the state’s hospitals, Modern Healthcare reported.

Clinical laboratory leaders are aware that reference pricing is a tool employers and health insurer can use to reduce the wide variation different providers charge for the same clinical service. In 2016 our sister publication, The Dark Report, devoted an entire issue to the subject of reference pricing. (See TDR, “The Newest Threat to Lab Revenues: Reference Pricing in Healthcare,” September 6, 2016.)

The Dark Report wrote about the reference pricing pilot conducted by Safeway, the grocery chain, in collaboration with Anthem, Inc. (NYSE:ANTM), the large health insurance company. The reference pricing program had these elements:

  • When Safeway employees and their beneficiaries chose a lab that priced its tests below the 60th percentile, the patient qualified for the health plan’s benefits. But if the patient chose a lab with test prices above the 60th percentile, that patient was responsible for the full cost of the test.
  • Safeway employees and their beneficiaries were given a real-time price checking tool that they could access by web browser and smart phone. This app, developed by Castlight Health, Inc., of San Francisco, showed the prices each lab in the Safeway/Anthem network charged for the same lab test, along with the percentile price of that test.

As reported in JAMA Internal Medicine, Safeway introduced reference pricing into its health insurance design for 15,000 employees in 2011. Three years later, the company and its employees were spending 32% less for clinical laboratory tests and saved $2.57 million during the years 2011 to 2013.

The reference pricing program at Safeway, which focused primarily on clinical laboratory testing, succeeded because of the large variability in how different labs price the same tests. For example, as TDR reported:

  • For a basic metabolic panel, which was the most commonly prescribed test, prices among different labs ranged from $5.75 to $126.44; and
  • Prices for a lipid panel ranged from $8.85 to $74.92.
A screenshot of a cell phone

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The graphic above, taken from the Safeway/Anthem observational study of “changes in laboratory pricing and selection by employees … before and after a reference pricing policy for laboratory services,” illustrates the wide range of prices Safeway paid for the 10 most common clinical laboratory tests. (Graphic copyright: American Medical Association/JAMA Internal Medicine.)

Typically, a reference pricing arrangement is done to lower costs, decrease disparities in pricing for similar medical services, and make health plans more attractive to employers. This is why state health plans are looking at implementing reference price reimbursement models as a way to reduce healthcare costs for state employees and other beneficiaries.

North Carolina Providers Respond Negatively to State Reference Pricing Plan

North Carolina’s State Health Plan encountered resistance from the state’s medical community when it attempted to implement a similar reference-price reimbursement model.

The state’s health plan covers more than 727,000 beneficiaries, including teachers, state employees, retired employees, and their dependents. It is overseen by the State Treasurer and administered by BlueCross BlueShield of North Carolina (Blue Cross NC).

In October 2018, North Carolina’s state health plan board of trustees unanimously approved the Clear Pricing Project, a reference-pricing program championed by State Treasurer Dale Folwell. A 2019 Blue Cross NC State Health Plan Network Master Reimbursement Exhibit document states, beginning in 2020, most hospitals would get 160% of the Medicare rate for inpatient services and 230% for outpatient services; rural providers would get more.

Pricing for medical lab and pathology services also was set at 160% of the Medicare rate. The document states, “Except for services identified by Medicare as CLIA Excluded or CLIA Waiver, In-Office Laboratory Service fees will be limited to those services for which you have provided Blue Cross and Blue Shield of North Carolina with evidence of CLIA certification.”

North Carolina’s healthcare providers had no choice but to agree to the pricing to be included in the state’s provider network, but they were not happy about the arrangement.

NCHA Warns Hundreds of Providers Could Be Pushed Out of Network

Hospitals countered with a public relations and lobbying campaign through the North Carolina Healthcare Association (NCHA). Soon after Folwell’s announcement, the NCHA issued a statement claiming that his plan “could force hundreds of providers out of the State Health Plan network or out of business.” The NCHA estimated the potential losses to hospitals and health systems at “upwards of $400 million.”

In the statement, NCHA President Steve Lawler said, “We believe the treasurer is not being transparent about what this proposal will do to state health plan members and their families.”

As an alternative, the NCHA proposed that the state examine value-based approaches such as “case management, outcomes-based payment models, and member education as ways to manage costs.”

The organization established a web page explaining its opposition to the state’s plan and pushed for legislation that would delay its implementation. House Bill 184, which sought to delay implementation of the state’s healthcare reimbursement plan, passed the state House of Representatives in April, before stalling in the Senate in May, North Carolina Health News reported.

Many providers simply refused to sign the necessary contracts, Modern Healthcare reported, even after Folwell agreed to increase the average rate to 196%. In August, he relented and announced that for 2020, the provider network will consist of the North Carolina State Health Plan Network—28,000 providers that had signed on to the Clear Pricing Project—plus the Blue Options PPO Network, which includes providers that had not agreed to the new pricing.

That makes for a total of more than 68,000 providers, states a news release from the treasurer’s office. After the change was announced, providers in the State Health Plan Network were permitted to revert to the Blue Options PPO Network rates.

States may approach implementing reference pricing in different ways, which will likely lead to a distinct disparity in outcomes. Nevertheless, whatever approach is used, medical laboratories and pathology groups will want to understand how reference pricing works and how it may be implemented in their states.

Armed with that understanding, they may want to pursue a proactive strategy of aligning the prices of their lab tests to be at the 50th percentile or lower to avoid being the highest-priced labs in their communities and regions.

—Stephen Beale

Related Information:

NC Aims to Tie Reimbursement to Medicare for State Employees

N.C. Walks Back Reference-Based Pricing Plan for State Workers

Association of Reference Pricing for Diagnostic Laboratory Testing with Changes in Patient Choices, Prices, and Total Spending for Diagnostic Tests

Association of Reference Pricing for Diagnostic Laboratory Testing with Changes in Patient Choices, Prices, and Total Spending for Diagnostic Tests

State Health Plan Proposed Changes Threaten Healthcare Access for All

North Carolina’s Healthcare Leaders Send Open Letter to NCGA Senators

NCHA Statement on Revised State Health Plan Proposal

NC Healthcare Providers Renew Call for Collaboration on State Health Plan

No Change for State Health Plan Members in 2020

NC State Health Plan Announces Network for 2020

NC State Health Plan Network Increases Payments to Hospitals and Reopens Sign-Up Period

NC State Health Plan Network Contracts Now Available to Medical Providers as Part of Clear Pricing Project

Bill Filed to Stop State Health Plan from Making Health Care Affordable for State Employees

State Health Plan Board of Trustees Unanimously Supports Provider Reimbursement Initiative That Lowers Health Care Costs

State Health Plan Launches New Provider Reimbursement Effort

Plan to Peg State Employee Health Plan Prices to Medicare Rates May Face Legislative Opposition

No More Negotiations: State Health Plan Wants Clearer Process, Lower Prices

On State Health Plan Changes, Folwell Hits Gas While Lawmakers Threaten to Tap Brakes

Treasurer Moves Forward with Health Care Pricing Plan Despite Uncertainty

Lawmakers Derail State Treasurer’s Plan to Change State Health Plan Reimbursement

North Carolina State Health Plan Network Master Reimbursement Exhibit April 2019

Medical Laboratory Testing Company uBiome Raided by FBI for Alleged Insurance Fraud and Questionable Business Practices

Following the raid, the company’s co-founders resigned from the board of directors

Microbiome testing company, uBiome, a biotechnology developer that offers at-home direct-to-consumer (DTC) test kits to health-conscious individuals who wish to learn more about the bacteria in their gut, or who want to have their microbiome genetically sequenced, has recently come under investigation by insurance companies and state regulators that are looking into the company’s business practices.

CNBC reported that the Federal Bureau of Investigation (FBI) raided the company’s San Francisco headquarters in April following allegations of insurance fraud and questionable billing practices. The alleged offenses, according to CNBC, included claims that uBiome routinely billed patients for tests multiple times without consent.

Becker’s Hospital Review wrote that, “Billing documents obtained by The Wall Street Journal and described in a June 24 report further illustrate uBiome’s allegedly improper billing and prescribing practices. For example, the documents reportedly show that the startup would bill insurers for a lab test of 12 to 25 gastrointestinal pathogens, despite the fact that its tests only included information for about five pathogens.”

Company Insider Allegations Trigger FBI Raid

In its article, CNBC stated that “company insiders” alleged it was “common practice” for uBiome to bill patients’ insurance companies multiple times for the same test.

“The company also pressured its doctors to approve tests with minimal oversight, according to insiders and internal documents seen by CNBC. The practices were in service of an aggressive growth plan that focused on increasing the number of billable tests served,” CNBC wrote.

FierceBiotech reported that, “According to previous reports, the large insurers Anthem, Aetna, and Regence BlueCross BlueShield have been examining the company’s billing practices for its physician-ordered tests—as has the California Department of Insurance—with probes focusing on possible financial connections between uBiome and the doctors ordering the tests, as well as rumors of double-billing for tests using the same sample.”

Becker’s Hospital Review revealed that when the FBI raided uBiome they seized employee computers. And that, following the raid, uBiome had announced it would temporarily suspend clinical operations and not release reports, process samples, or bill health insurance for their services.

The company also announced layoffs and that it would stop selling SmartJane and SmartGut test kits, Becker’s reported.

uBiome Assumes New Leadership

Following the FBI raid, uBiome placed its co-founders Jessica Richman (CEO) and Zac Apte (CTO) on administrative leave while conducting an internal investigation (both have since resigned from the company’s board of directors). The company’s board of directors then named general counsel, John Rakow, to be interim CEO, FierceBiotech reported.

John Rakow (center) is shown above with uBiome co-founders Jessica Richman (lower left) and Zac Apte (lower right). In a company statement, Rakow stressed that he believed in the company’s products and ability to survive the scandal. His belief may be based on evidence. Researchers have been developing tests based on the human microbiome for everything from weight loss to predicting age to diagnosing cancer. Such tests are becoming increasingly popular. Dark Daily has reported on this trend in multiple e-briefings. (Photo copyrights: LinkedIn/uBiome.)

After serving two months as the interim CEO, Rakow resigned from the position. The interim leadership of uBiome was then handed over to three directors from Goldin Associates, a New York City-based consulting firm, FierceBiotech reported. They include:

Four testing products remain available for in-home testing on the uBiome website:

What Went Wrong?

Richman and Apte founded uBiome in 2012 with the intent of marketing a new test that would prove a link between peoples’ microbiome and their overall health. The two founders initially raised more than $100 million from venture capitalists, and, according to PitchBook, uBiome was last valued at around $600 million, Forbes reported.

Nevertheless, as a company, uBiome’s future is uncertain. Of greater concern to clinical laboratory leaders is whether at-home microbiology self-test kits will become a viable, safe alternative to tests traditionally performed by qualified personnel in controlled laboratory environments.

Dark Daily reported on the controversy surrounding this trend in “At-Home Microbiology Tests Trigger Concerns about Scientific Value and Impact from Microbiologists and Clinical Laboratory Scientists,” October 16, 2017.

It’s a trend worth watching.

—JP Schlingman

Related Information:

Insiders Describe Aggressive Growth Tactics at uBiome, the Health Start-up Raided by the FBI Last Week

FBI Investigating uBiome’s Billing Practices

Turmoil Persists at uBiome with New Management Overhaul Amid FBI Probe: Reports

uBiome Appoints John Rakow as Interim Chief Executive Officer

Another Shakeup at uBiome: Interim CEO Quits

Seven Updates on the Ongoing uBiome Investigation

Microbiome Startup uBiome Cofounders on Administrative Leave after Reports of FBI Raid

Microbiome Testing Startup Under Scrutiny for Billing Practices

At-Home Microbiology Tests Trigger Concerns about Scientific Value and Impact from Microbiologists and Clinical Laboratory Scientists

Health Systems Putting Imaging Services, Such As MRIs, In Strip Malls and Shopping Centers To Help Patients with Cost and Convenience

Recognizing the need to serve patients with high-deductible health plans, hospital systems are opening healthcare centers in outpatient settings where patients can receive care and undergo procedures—including clinical laboratory tests—more conveniently and for less cost

Health systems are putting medical imaging services, such as MRIs, in strip malls and shopping centers as a way to make it easier for patients. Such locations can also offer lower-cost procedures because of lower overhead compared to imaging centers located in hospitals. This trend to offer patients more convenient service at a lower cost is something that clinical laboratory managers and pathologists should watch and understand.

One driver behind this trend is the growing number of Americans enrolled in High Deductible Health Plans (HDHPs), where deductibles can exceed $6,000 for individuals and $12,000 for families. With such high deductibles, patients are now keenly focused on the cost of their healthcare. Medical laboratories and anatomic pathology groups have been impacted by this trend, as more patients shell out cash to pay for walk-in procedures and providers must collect full payments for services rendered.

Hospitals and health systems recognize the increased demand for outpatient, lower-priced medical services, along with price transparency. Patients with HDHPs are one reason why hospital bad debt is growing.

Healthcare Shopping Drives Lower Costs and Convenience

Price shopping on the Internet for medical services also is becoming more popular due to the availability of online doctor and facility ratings and easily-accessible price comparisons.

There are more than 7,000 stand-alone imaging centers in the US that operate independently of hospitals. About 70% of diagnostic imaging services occur in hospital settings with the other 30% performed in outpatient facilities.

According to Amino, a healthcare transparency company based in San Francisco, the cost for an MRI can vary significantly depending on where a patient lives and what type of facility is utilized for the test. Their research found that the cost of a limb MRI can range from hundreds of dollars at a freestanding facility to as much as $4,000 at a hospital. In some states, the price difference between getting an MRI at a hospital versus a stand-alone facility was almost $2,000. The average cost of having an MRI performed in a hospital setting is $2600.

Based on data from Amino, the graphic above illustrates the wide range of prices for MRIs throughout the country, and the cost disparity between hospital and free-standing medical imaging centers. In the future, pathologists and clinical laboratory managers can expect to see the publication of similar graphs that show the variation in the cost of clinical laboratory tests and anatomic pathology procedures, not just by state, but by individual laboratories. (Graphic copyright: MBO.)

Smart Choice MRI, based in Mequon, Wis., charges a maximum price of $600 for an MRI. The company now has 17 locations in Illinois, Minnesota, and Wisconsin, but plans to have 90 facilities within the next three years.

“The rise of high deductible health plans has fueled consumers who understand their options and demand a higher level of service from their providers,” Rick Anderson, Chief Executive Officer of Smart Choice MRI told the StarTribune. “Quality, service-focused care at a fair, transparent price has never been more important.”

Anderson added that his company can handle 94% of MRI procedures in their convenient, freestanding imaging facilities.

“I think the quality is very good, but we’ve combined the cost and quality, and most importantly the convenience of being in the neighborhood where people are shopping,” Anderson said. “If you look at our Richfield (Minnesota) location, we’re literally next to SuperTarget, Caribou Coffee, Noodles and Company, and Qdoba.”

Public and Private Health Insurers Shift Payments to Free-standing Facilities

Anthem recently announced they will no longer pay for outpatient MRIs and CT scans performed at hospitals in almost all of the states where the health insurer does business. They are requiring patients to have the tests performed in free-standing imaging facilities in an effort to cut costs and lower premiums. This change could affect 4.5 million people in 13 of the 14 states Anthem serves, with New Hampshire being the exception.

Diagnostic imaging is not the only medical service transitioning to outpatient facilities.

In July, the Centers for Medicare and Medicaid Services (CMS) announced that it is considering payment approval for total hip and knee replacements performed in outpatient settings. This change could go into effect as early as next year.

According to Steve Miller, Chief Operating Officer at Ambulatory Surgery Center Association, an estimated 25-50% of joint replacements could be performed on an outpatient basis.

“There’s more and more comfort among surgeons who are coming out of residencies where they trained to do surgeries on an outpatient basis,” Miller told Modern Healthcare. “The volumes are doubling year over year.”

Surgeons Approve of Free-standing Surgery Centers

There are currently more than 5,500 ambulatory surgery centers in the country and upwards of 200 of those facilities are performing outpatient joint replacement procedures. Three years ago, there were only around 25 facilities providing these services.

In 2015, there were more than 658,000 total hip and knee replacements performed on Medicare beneficiaries, according to CMS data. In 2014, the government paid more than $7 billion for the hospitalization costs of these two procedures. The CMS estimates that the cost for uncomplicated knee replacement surgeries in 2018 will be $12,381 for an inpatient procedure and $9,913 for the outpatient rate.

Physicians feel that performing joint replacements in outpatient facilities could reduce costs by up to 50%.

“I could do maybe 20% of my Medicare patients on an outpatient basis, as long as they have the support and structure at home to help them recover,” said Matthew Weresh, MD, a physician at Des Moines Orthopedic Surgeons (DMOS) in the Modern Healthcare article. “It’s a great move by Medicare.” DMOS plans to begin performing joint replacements at an ambulatory surgery center later this year.

Pathologists would be wise to monitor this trend and anticipate how anatomic pathology services might shift towards lower-cost settings. For clinical laboratories, this trend further illustrates the need to prepare for more consumers paying cash for their medical services and seeking cost-effective, high-quality options.

—JP Schlingman

Related Information:

Coming Soon to a Strip Mall Near You: An MRI Provider

MRI Competition Heats up in Twin Cities

Anthem’s New Outpatient Imaging Policy Likely to Hit Hospitals’ Bottom Line

Free Standing Imaging Center and Hospitals

Need an MRI? It Pays to Shop Around. Big Time.

Hospitals Leery of CMS Proposal to Pay for Joint Replacements in ASCs

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