Experts blame insurance regulators for not ensuring the adequacy of healthcare networks that include hospital-based physicians, such as pathologists and radiologists
According to a recent study, clinical laboratories, anatomic pathologists, radiologists, and anesthesiologists top the list of providers who bill patients for the difference between what they charge for their services and a hospital’s contracted reimbursement rates.
This so-called “balance-billing” not only causes hardship for patients and consumers already shouldering a larger portion of their healthcare costs, but poses a public relations concern for service providers across the US healthcare industry as well.
Following public outcry from patients who received care at
what they believed to be in-network medical facilities, only then to be surprised
by bills from their care providers for the remaining balance not covered by
their insurance, the practice of balance billing has drawn increased scrutiny from
state and federal officials.
Medical Laboratory
Charges Top Reason for Surprise Bills
In their report, NORC notes that of those surveyed, 57% (567 individuals) acknowledged receiving a surprise medical bill they thought would be covered by their health insurance.
When asked about the network status of the doctor who
provided care during the episode related to the surprise bill, 79% responded
that charges were not for doctors being out-of-network for their insurance
plan. Medical laboratory-related charges were near the top of reasons patients
received surprise bills, with 51% of individuals receiving bills related to “a
laboratory test, like a blood test.”
Such surprise medical bills received frequent coverage in
2018. This has led many states to enact or discuss legislation to address the
practice and offer cost protections for patients.
Thus far, however, little change to existing regulations and
contract systems has been enacted to protect patients or help laboratories and
other service providers offer alternative payment solutions for patients.
There also are few requirements for insurance providers to verify
that plans include sufficient numbers of in-network service providers when
offering plans to consumers.
“Many news stories on ‘surprise’ billing blame physicians, because the bill is sent from the doctor’s office or billing company. But the insurance industry is the real culprit, in concert with insurance regulators who have not acted to require network adequacy,” R. Bruce Williams, MD (left), President, College of American Pathologists (CAP), and Geraldine B. McGinty, MD (right), Chair of the American College of Radiology Board of Chancellors, wrote in STAT. (Photos copyrights: College of American Pathologists/Geraldine McGinty.)
States Move to Change
Trends While Patients Continue to Experience Bill Shock
States are beginning to address surprise billing concerns ahead of action by insurance regulators and the federal government. In December, the Arizona Department of Insurance issued a news release outlining the agency’s plan to allow for arbitration questions for surprise out-of-network bills.
And, California effectively banned out-of-network billing from groups within in-network facilities in 2017 with Assembly Bill 72. However, the state only finalized reimbursement rates for service providers and patients affected by surprise bills in January of this year according to Capital Public Radio.
Many of these state-level regulations do not account for the complexity of creating rules based on emergency or non-emergency care or the insurance providers in question. For example, Assembly Bill 72 does not apply to “Medicare, Medi-Cal, out-of-state plans, self-insured employer plans, or other products regulated by federal law,” according to a news release from the California Society of Anesthesiologists.
Finding Fair
Solutions for Both Patients and Care Providers
Speaking with Kaiser Health News about a report of a man in Texas receiving a $109,000 surprise bill related to treatment after a heart attack, Rep. Lloyd Doggett of Texas said, “This is a nationwide problem, and we need a nationwide solution. We have a system where the patient, the most vulnerable person of all those involved, is caught between the insurer and the healthcare provider … these problems are solvable.”
Modern Healthcarerecently covered how some hospitals are now requiring physicians to go in-network as a provision of their contracts. However, they also note this approach disadvantages physicians and shifts reimbursement negotiation power to insurers. Should hospitals take a similar approach with medical laboratory specialists, it could create similar concerns.
While surprise medical bills create added hardship for
patients and pose reputational and reimbursement concerns for clinical laboratories
and healthcare providers, creating regulations that establish effective
protections while also protecting the financials of service providers continues
to prove difficult.
Speaking with Modern Healthcare, Dan Sacco, Vice President for Strategic Affairs and Payer Relations at Boca Raton Regional Hospital, summarized concerns concisely, saying, “We’re trying to protect [consumers], but we’re also trying to be reasonable business partners as well.”
As the public gains awareness of the role clinical laboratories play in modern healthcare, increased engagement and understanding of the technology underlying many of these advances could create risk for labs without transparent reporting protocols to both patients and the public
In recent years, consumers have continually raised the bar in their expectation of quality when they interact with the healthcare system. Not only do patients expect providers—including clinical laboratories and anatomic pathology groups—to improve regularly over time, but the public has even less tolerance for medical errors of any type. Thus, a recent NPR story is one more warning to the medical laboratory profession that it should be devoting resources and effort to improving quality.
Today’s healthcare consumers and patients are more educated about and involved in the care process than ever before. While the exact science and skills may not interest the general public, the technologies underpinning much of the shift toward personalized medicine (AKA, precision medicine) are the same technologies that created the always-connected, digital lifestyles seen around the world.
With this, comes a level of scrutiny and questioning from the public that clinical laboratories or anatomic pathology groups would not have experienced even just a decade ago.
Mounting Scrutiny of Medical Laboratories and Healthcare Professionals
A recent segment on NPR’s “All Things Considered” highlighted this trend and questioned the quality control standards behind many of the procedures powering current testing. The segment also questioned the impact quality control has on the quality of biobanks used to research and create future technologies and tests.
Atul Butte, PhD (above), Director of the Institute of Computation Health Sciences at the University of California-San Francisco, presents an alternate side to Compton and Friedberg’s views in the NPR article. “I am not a believer in garbage-in, garbage out at all,” he said. “I know that no one scientist, no one clinician or pathologist is perfect … But, I’d rather take 10 or 100 so-called mediocre data sets and find out what’s in common, then to take one who says they’re perfect at doing this kind of measurement.” (Photo copyright: Santiago Mejia/San Francisco Chronicle.)
When data and previous research powers much of the innovation taking place across the modern healthcare landscape, the accuracy of said data would seem critical. Yet, without standards in place, there’s not always safeties by which to verify sample integrity and other critical concerns.
Late last year, Dark Daily reported on a study published in PLOS ONE from Radboud University in the Netherlands questioning the accuracy of more than 30,000 published scientific studies that contained misidentified or contaminated cell lines. Guidelines, such as those created for IHR and FISH HER2 testing, provide standards intended to prevent such issues from occurring or detecting them when they do occur.
Quality versus Quantity: A Gamble Worth Taking?
Apart from challenges with healthcare reform and the regulatory landscape surrounding precision medicine, medical laboratories also must struggle with the challenges of gleaning and maintaining useful, accurate information from an ever-growing trove of data produced by analyzers and assays.
Yet, these mediocre datasets include the results of tests that carried a potentially significant impact on patient lives. In the first two weeks of February alone, both the St. Louis Post-Dispatch and The Telegraph published stories related to erroneous testing related to cancer and the potential impact on the clinical laboratories involved and the patients tested.
Increased coverage shows that the world is watching what goes on in medical laboratories, hospitals, and data centers as healthcare continues to evolve. Clinical laboratories must move forward with this in mind or risk pushback and questioning from the public. Transparency regarding standards, and reporting information to patients surrounding testing or concerns, might effectively address this rising trend.
“We are moving faster and faster and faster as this whole precision medicine train is moving down the track,” Tim Allen, MD, Laboratory Director at the University of Texas Medical Branch Department of Laboratory Services, told NPR. “I suspect standardization of these things is going to become a reality much quicker than I would have expected even a few years ago.”
That quality control issues in anatomic pathology are considered newsworthy by no less than NPR is a sign of increased public attention to the quality of lab testing. The story was written to educate the public about the gap that exists in the quality control of anatomic pathology testing. All of this is consistent with the trend for providers to be transparent and report their quality metrics to the public, including patients.
Liquid biopsy tests hold much promise. But inconsistencies in their findings provoke scrutiny and calls from researchers for further development before they can be considered reliable enough for diagnostic use
Many commercial developers of liquid biopsy tests tout the accuracy and benefits of their diagnostic technology. However, there are an equal number of medical laboratory experts who believe that this technology is not yet reliable enough for clinical use. Critics also point out that these tests are being offered as Laboratory Developed Tests (LDTs), which are internally developed and validated and have not undergone regulatory review.
Dark Daily has published several e-briefings on researchers who have sent the same patient samples to different genetic testing labs and received back materially different test results. Now, a new study by Johns Hopkins University concludes that liquid biopsy technology “must improve” before it should be relied upon for diagnostic and treatment decision making.
‘Certification for Medical Laboratories Must Improve’
Liquid Biopsy is the term for drawing whole blood and looking for cancer/tumor cells circulating in the blood stream. This is one factor in the imprecision of a liquid biopsy. Did the blood sample drawn actually have tumor cells? After all, only a limited number of tumor cells, if present, are in circulation.
Gonzalo Torga, MD (above left), and Kenneth J. Pienta, MD (above right), are the two Johns Hopkins Medicine doctors who conducted the recent study into the efficacy of liquid biopsy laboratory developed tests (LDTs) offered by different medical laboratory companies. They published their findings in JAMA Oncology. (Photos copyright: Johns Hopkins.)
In reporting the DNA findings and results from the two medical laboratory companies, researchers discovered that the results completely matched in only three of the 40 patients! The Johns Hopkins researchers are concerned that patients could be prescribed certain cancer treatments based on which lab company’s liquid biopsy test their physician orders, instead of an accurate identification of the unique mutations in their tumors.
“Liquid biopsy is a promising technology, with an exceptional potential to impact our ability to treat patients, but it is a new technology that may need more time and experience to improve,” Gonzalo Torga, MD, Postdoctoral Fellow and Instructor at Johns Hopkins, and the lead author of the study, told Forbes. “We can’t tell from these studies which laboratory’s panel is better, but we can say that certification for these laboratories must improve.”
Unlocking New View of Tumors
Two commercial tests were used for the study:
Guardant360 from Guardant Health, Inc., uses digital sequencing to analyze genomic data points at the single molecular level. It examines 73 genes, including all National Comprehensive Cancer Network (NCCN) listed genes. The test searches for DNA fragments among billions of cells and digitally tags each fragment. This process unlocks a view of tumors that is not seen with tissue biopsies, which helps doctors prescribe the best treatment options for a particular patient.
“As a simple blood test, it provides physicians with a streamlined, cost-effective method to identify genomic alterations that can comprehensively influence a patient’s therapy response,” Helmy Eltoukhy, PhD, co-founder and Chief Executive Officer at Guardant Health, told MDBR.
“The only way of keeping ahead of those diseases and tracking those mutations has been through surgery, through doing a tissue biopsy and physically cutting a piece of the tumor out and sequencing it,” Eltoukhy noted in an interview with Xconomy. “What we’re able to do is essentially get the same, or sometimes better performance to tissue biopsy, but through two teaspoons of blood.”
According to the Guardant Health website, it takes just 14 days for a full report from Guardant360 to reach the ordering physician. In addition, the blood test provides samples with an adequate level of cell-free DNA to test 99.8% of the time and reduces errors and false positives found in standard sequencing methods by 1,000 times. It is common for samples used for tissue sequencing to have insufficient DNA for testing 20% to 40% of the time.
“We believe that conquering cancer is at its core a big data problem, and researchers have been data-starved,” explained Eltoukhy in VentureBeat. “Our launch of the world’s first commercial comprehensive liquid biopsy sparked a boom in cancer data acquisition. Every physician who orders one of our tests, and every patient whose tumor DNA we sequence, adds to this larger mission by improving our understanding of this complex disease.”
PlasmaSELECT-R64, manufactured by Personal Genome Diagnostics (PGDx), evaluates a targeted panel of 64 genes that have biological and functional relevance in making treatment decisions. PGDx announced the expanded version of its PlasmaSELECT assay in March of 2017.
“We are proud to launch the revolutionary PlasmaSELECT 64 expanded assay just six months after we introduced the most accurate, clinically actionable liquid biopsy tumor profiling assay to the market,” said Doug Ward, Chief Executive Officer at PGDx, in a press release. “This update is the first liquid biopsy assay that includes MSI (microsatellite instability) testing as a biomarker for high tumor mutational load, thereby providing cancer patients and their oncologists with information on whether they might be candidates for immuno-oncology therapies. The ability to generate DNA tumor profiling non-invasively using blood or plasma offers many advantages and makes genomic testing more accessible and usable.”
Regulations of LDTs Could be Needed to Improve Liquid Biopsy Tests
There are pathologists and clinical laboratory professionals who believe the technology behind liquid biopsies is not yet reliable enough for clinical use. The tests are being offered as LDTs, which are internally developed and validated, and the Food and Drug Administration (FDA) allows LDTs to be sold without regulatory reviews at this time. However, there are discussions regarding if and how to regulate LDTs, the outcome of which could impact how clinical laboratories are allowed to market the LDTs they develop.
Clearly, liquid biopsies are still in their relatively early stages of development. More testing and evaluation is needed to determine their efficacy. However, their potential to revolutionize cancer detection and care is obvious and a strong motivator for LTD developers, which means there will be future developments worth noting.
To offset the loss of revenue from the price cuts to Medicare Part B clinical laboratory tests, labs will need to aggressively—but wisely—slash costs to balance their budgets
Many experienced industry executives expect this to be the single most financially disruptive event to hit the clinical laboratory profession in more than 20 years. This will not only have a substantial negative financial impact on all labs—large and small—but two sectors of the clinical lab industry are considered to be so financially vulnerable they could cease to exist.
At Greatest Risk of Financial Failure are Community Laboratories
The first sector is comprised of smaller community lab companies that operate in towns and rural areas. These labs are at the greatest risk because they are the primary providers of lab testing services to the nursing homes and skilled nursing facilities in their neighborhoods. And because they have a high proportion of Medicare Part B revenue.
Thus, the expected Medicare price cuts to the high-volume automated lab tests—such as chemistry panels and CBCs (complete blood count) that are the bread-and-butter tests for these labs—will swiftly move them from minimal profit margins to substantial losses. Since these labs have a cost-per-test that is significantly higher than the nation’s largest public lab companies, they will be unable to financially survive the 2018 Medicare fee cuts.
The second sector at risk is comprised of rural hospitals and modest-sized community hospitals. What officials at CMS and their consulting companies overlooked when they created the PAMA (Protecting Access to Medicare Act) private payer market price reporting rule is that these hospitals provide lab testing services to nursing homes and office-based physicians in their service areas.
Because of the low volumes of testing in these hospital labs, they also have a larger average cost-per-test than the big public labs. Thus, the 2018 cuts to Medicare Part B lab test prices will erode or erase any extra margin from this testing that now accrues to these hospitals.
Rural and Small Community Hospitals Rely on Lab Outreach Revenue
The financial disruption these Medicare lab test price cuts will cause to rural and community hospitals is a real thing. These hospitals rely on outreach lab test revenues to subsidize many other clinical services within the hospital. One rural hospital CEO confirmed the importance of lab outreach revenue to her organization. Michelle McEwen, FACHE, CEO of Speare Memorial Hospital in Plymouth, N.H., spoke to The Dark Report in 2012 about the financial disruption that was happening when a major health insurer excluded her hospital’s laboratory from its network.
Speare Memorial is a 25-bed critical access hospital in the central part of the state between the lakes region and the White Mountain National Forest. McEwen was blunt in her assessment of the importance of clinical laboratory outreach revenues to her hospital. “The funds generated by performing these [outreach] lab tests are used to support the cost of providing laboratory services to all patients 24/7, including stat labs for emergency patients and inpatients,” McEwen explained. “These funds also help support other services in the hospital where losses are typically incurred, such as the emergency room and obstetric programs.” (See “Critical Access Hospitals Losing Lab Test Work,” The Dark Report, April 2, 2012.)
All Medical Laboratories Will Suffer Financial Pain from Medicare Price Cuts
But it is not just community lab companies and rural hospitals that are at risk of financial failure as the Medicare Part B cuts are implemented by CMS on Jan. 1, 2018. Any clinical laboratory serving Medicare patients will experience a meaningful drop in revenue. Many larger hospital and health system laboratories are recasting their financial projections for 2018 to identify how big a drop in revenue they will experience and what cost-cutting strategies will be needed to at least break even on their lab outreach business.
This explains why the first big trend of 2018 will be substantial revenue cuts from the Medicare program. It also explains why the second big trend of 2018 will be smart cost-cutting as labs attempt to balance their books and lower spending proportional to the reduced income they project.
Labs Have a Decade of Successful Cost-Cutting, More Cuts are Difficult
Aggressive cost-cutting, however, puts the nation’s medical laboratories at risk for a different reason. For the past decade, most well-run labs have already harvested the low-hanging fruit from obvious sources of cost reduction. They installed latest-generation automation. They re-engineered workflows using the techniques of Lean, Six Sigma, and process improvement.
During these same years, most medical laboratories also reduced technical staff and trimmed management ranks. That has created two new problems:
First, there are not enough managers in many labs to both handle the daily flow of work while also tackling specific projects to cut costs and boost productivity. Basically, these labs are already at their management limit, with no excess capacity for their lab managers to initiate and implement cost-cutting projects.
Second, technical staffs are already working at near peak capacity. Increased use of automation at these labs has reduced lab costs because labs were able to do the same volume of testing with fewer staff. However, the reduced staffs that oversee the lab automation are now working at their own peak capacity. Not only are they highly stressed from the daily routine, they also do not have spare time to devote to new projects designed to further cut costs.
Each Year Will Bring Additional Cuts to Medicare Part B Lab Prices
This is why all clinical laboratories in the United States will find it difficult to deal with the Medicare Part lab test fee cuts that will total $400 million during 2018. And what must be remembered is that, in 2019 and beyond, CMS officials will use the PAMA private payer market price reporting rule to make additional fee cuts. Over 10 years, CMS expects these cuts will reduce spending by $5.4 billion from the current spending level.
Taken collectively, all these factors indicate that many medical laboratories in the United States will not survive these Medicare fee cuts. The basic economics of operating a clinical laboratory say that less volume equals a higher average cost per test and higher volume equals a lower average cost per test.
Medical Labs with Highest Costs Most at Risk of Failure from Price Cuts
What this means in the marketplace is that labs with the highest average cost per test make the least profit margin on a fee-for-service payment. The opposite is true for labs with the lowest average cost per test. They will make a greater profit margin on that same fee-for-service payment.
Carry this fundamental economic principle of medical laboratory operations forward as Medicare Part B lab test fee cuts happen in 2018. Labs with the highest average cost per test will be first to go from a modest profit or break-even to a loss. As noted earlier, the clinical lab sectors that have the highest average cost per test are smaller community labs, along with rural and community hospitals. That is why they will be first to go out of business—whether by sale, bankruptcy, or by simply closing their doors.
Learning How to Cut Lab Costs While Protecting Quality
Every pathologist and lab administrator seeking the right strategies to further cut costs in their lab, while protecting quality and enhancing patient services, will want to consider sending a team from their laboratory to the 11th Annual Lab Quality Confab that takes place in New Orleans on October 24-25, 2018.
Anticipating the greater need for shrewd cost-cutting that also protects the quality of the lab’s testing services, this year’s Lab Quality Confab has lined up more than 51 speakers and 39 sessions. Of particular interest are these extended workshops that come with certifications:
Lab Quality Confab is recognized for its use of lab case studies—taught by the nation’s early adopter lab organizations. Certification classes are available to gain proficiency in the use of Lean methods and Six Sigma tools, such as:
Developing single-piece and small batch workflow to cut TAT and lift productivity.
Given the strong interest in smart ways to cut costs, boost productivity, and balance revenue-versus-cost, registrations for this year’s Lab Quality Confab is running at a record pace. The full agenda can be viewed at this link (or copy this URL and paste into your browser: http://www.labqualityconfab.com/agenda).
Of special interest to lab leaders preparing to stay ahead of the financial impact of the Medicare Part B fee cuts, Lab Quality Confab offers deep discounts for four or more attendees from the same lab organization. This allows your lab’s most effective cost-cutters to see, hear, and learn together, so that when they return they can get a flying start helping you align your lab’s costs to the expected declines in revenue that will happen on Jan. 1, 2018.
Experts point to the challenges: not only is there a lack of consensus in how to best measure patient satisfaction, but there are also different opinions as to what are the right steps providers should take to improve the patient experience
In today’s healthcare industry, “Patient Satisfaction” is high on the list of phrases likely to be heard in any medical facility, including in pathology groups and clinical laboratories. With recent and ongoing changes to the way that providers are paid, patient satisfaction as a measure of quality will only gain in importance.
But if there is consensus that it is important to monitor patient satisfaction and use that data to guide efforts to improve how patients view their care, there is certainly no consensus on the most effective ways to measure patient satisfaction. Nor is there much consensus on how providers, including medical laboratories, should use patient satisfaction data to improve the patient experience.
This challenge is addressed by Deirdre Mylod, PhD, who pointed out in a PatientEngagementHIT article, “The exercise is not to make consumers happy. The exercise is to reduce patient suffering.” Mylod is Executive Director of the Institute for Innovation, a nonprofit research collaborative that publishes relevant and practical findings concerning patient satisfaction that help healthcare organizations deliver better care. (more…)
