Media reporting on disparities in COVID-19 test billing sparks renewed calls for increased transparency in medical laboratory test charges
Recent media reports of massive disparities in the prices charged for COVID-19 lab tests throughout the United States have citizens and law makers alike again calling for increased transparency in clinical laboratory test charges.
One recent example involves the New York Times (NYT), which after learning that Austin-based Gibson Diagnostic Labs (GDL) of Irving, Tex., billed a patient $2,315 for one COVID-19 test, questioned the disparity in coronavirus testing charges. The article, titled, “Most Coronavirus Tests Cost About $100. Why Did One Cost $2,315?” brought unwanted attention to the Texas clinical laboratory.
On July 16, the NYT reported that GDL, “has run some of the most expensive coronavirus tests in America.” In addition, the paper reported that health insurance companies have paid GDL $2,315 for individual COVID-19 tests, but that in “a couple of cases,” the price rose to $6,946. However, that higher amount resulted “when the lab said it mistakenly charged patients three times the base rate.”
In response to the NYT report, GDL released a statement that said, “In April 2020, a commercial insurer doing business with Gibson Diagnostic Labs inquired about the company’s pricing practices regarding COVID-19 testing. In response to the inquiry, the company conducted an internal review and identified commercial claims that were billed incorrectly by the company’s third-party biller. Because this incident did not meet our standards of quality, service, and compliance, the company terminated its relationship with the third-party biller.”
Gibson Diagnostic Labs (above) in Irving, Texas, recently drew the attention of the New York Times after, according to GDL, its third-party biller accidentally used an incorrect CPT code causing one COVID-19 test customer to receive a bill for $2,315. Further, the NYT reported that “[GDL] billed 117 tests at that price and had 23 of the claims paid in full. Some insurers paid partial reimbursements or sent back no money at all.” In a statement, GDL said it has corrected the mistake and reimbursed all affected parties. (Photo copyright: Dylan Hollingsworth/The New York Times.)
GDL Blames Third-party Biller for Errors
Responding to questions from Dark Daily, GDL provided details that were not previously reported. In an email, GDL said it worked closely with a NYT reporter by providing information about the incident, but that the reporter left out key information.
GDL also said that after the NYT’s inquiry, the lab reviewed its billing systems and learned that the CPT code for 23 COVID-19 commercial claims were transposed as a result of human error, resulting in payments totaling $53,255. The review also showed that the lab’s third-party biller had insufficient systems in place to prevent such errors.
“Upon learning this, we made the decision to terminate our contract with our third-party biller,” GDL said. “Finally, within 24-hours of identifying the billing error—and prior to the story being published—we rebilled all the claims, refunded payments to the respective payers, and followed up with each payer to ensure receipt of the corrected claims.
“Immediately after the claims were rebilled, we contacted all 205 patients who may have received an incorrect EOB [explanation of benefits], explained what happened, and apologized,” GDL stated.
Going forward, GDL said it will require its new biller to conduct regular audits each quarter and to maintain certain levels of automation and staffing to manage higher volume without disruption. GDL also said it regrets the disruption and inconvenience the billing error caused to its clients and patients.
Lessons for Clinical Laboratories
For clinical laboratories, there are at least four lessons that can be learned from GDL’s experience:
First, labs should be aware of how their own charges for all tests compare with what other labs charge, particularly when charging patients for high-profile tests, such as those for the new coronavirus. What Medicare and other payers charge for these tests has been reported widely, so that many patients are likely aware of the reasonable and customary charges for such tests.
Second, clinical labs may want to note that charging high prices for these tests could lead health insurers to increase their scrutiny of lab charges. The NYT article quoted Angela Meoli, a senior vice president at Aetna, saying, “We’ve seen a small number of laboratories that are charging egregious prices for COVID-19 tests.”
Third, coverage in the NYT often leads other publications to cover the same story. In this case, Kaiser Health News (KHN) and other news organizations have reported on what GDL charged and linked that story to their coverage of surprise medical bills.
Fourth, GDL recommends responding appropriately to journalists’ inquiries. However, lab should be aware that, even then, the news media may not report the facts as labs would prefer.
All of these lessons are important during the COVID-19 pandemic, because newspapers and other news organizations have encouraged consumers to submit copies of their lab tests and other bills. Such examples of charges above normal rates often generate unwanted coverage for hospitals, health systems, healthcare providers, and in this case, a clinical diagnostic laboratory.
All of this may be academic for those clinical laboratory managers and pathologists who scrupulously follow appropriate laws and guidelines for coding, billing, and collecting for clinical lab tests of all types—not just the COVID-19 test. But, year after year, there are individuals who operate certain clinical laboratories and who are willing to push their compliance with long-established laws and regulations for short-term profit. When these abusive lab practices surface and attract the attention of both federal prosecutors and national news media, it is the entire clinical laboratory profession that gets characterized in negative ways.
Certainly, many medical laboratory professionals would agree that the system of enforcing federal and state laws and pursuing obvious cases of fraudulent practices involving clinical lab testing leaves much to be desired. However, there are already several examples of federal prosecutors charging lab owners and managers for violating fraud and anti-kickback statutes in their marketing of COVID-19 tests. Hopefully the national news media will be effective in spotting illegal practices involving COVID-19 testing and bring more transparency to the lab testing marketplace.
Price shopping for clinical laboratories and other healthcare services and surgical procedures creates a ‘healthy competitive environment,’ an Optum executive noted
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:
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.
Contrary to CMS and Joint Commission programs implemented in 2017 to reduce them, incidents of hospital-acquired infections have risen for the past few years
Nevertheless, a recent Leapfrog Group report indicates hospitals are finding it increasingly difficult to remove infections all together. This has many healthcare leaders concerned.
The report, which was analyzed by Castlight Health, states that the number of hospitals reporting zero infections has declined significantly since 2015, according to a news release. According to the Leapfrog Group’s report:
Two million people acquire HAIs every year;
90,000 people die annually from HAIs;
HAI costs range from $1,000 to $50,000 depending on the infection.
Hospitals spend $28 to $45 billion annually on HAI costs, Healthcare Finance reported.
“I think it’s far too easy to let something slip, so it’s clear that there really needs to be a renewed focus on getting back to zero. We do still see some hospitals that are getting to zero, so it’s clearly possible,” Erica Mobley (above), Leapfrog Group’s Director of Operations, told Fierce Healthcare. (Photo copyright: LinkedIn.)
Regressing Instead of Progressing Toward Total HAI Elimination
Leapfrog Group’s report is based on 2017 hospital survey data submitted by 2,000 providers. The data indicates that in just two years the number of hospitals reporting zero HAIs dropped by up to 50%. The reported HAIs include:
Central line-associated bloodstream infections (CLABSI) occurring in Intensive Care and other units: 12.7% of hospitals reporting zero CLABSI infections in 2017, down from 25% in 2015;
The remaining infection measures studied by Leapfrog Group had less dramatic decreases over the same time period, according to Fierce Healthcare. Nevertheless, they are significant. They include:
Surgical site infections (SSI) following colon surgery: 19% zero infections compared to 23% previously;
Clostridium difficile (C. difficile) inpatient infections: 3% zero inpatient infections in 2017, compared to 5% in 2015.
Joint Commission Studies Antimicrobial Program Progress
Hospitals have revised their antimicrobial programs, which originally operated on a “top-down” structure, to programs that include clinicians from throughout entire provider organizations;
Health information technology (HIT) can enable real-time opportunities to launch antimicrobial therapy and treat patients; and,
Some barriers exist in getting resources to integrate technology and analyze data.
“These programs used expansion of personnel to amplify the antimicrobial stewardship programs’ impact and integrated IT resources into daily workflow to improve efficiency,” the researchers wrote. “Hospital antimicrobial stewardship programs can reduce inappropriate antimicrobial use, length of stay, C. difficile infection, rates of resistant infections, and cost.”
What Do CMS and Joint Commission Expect?
According to Contagion, while the Joint Commission program is part of medication management, CMS places its requirements for the antimicrobial stewardship program under “infection prevention.”
CMS requirements for an antimicrobial stewardship program include:
Developing antimicrobial stewardship program policies and procedures;
Implementing hospital-wide efforts;
Involving antimicrobial stakeholders for focus on antimicrobial use and bacterial resistance;
Setting evidence-based antimicrobial use goals; and,
Reducing effects of antimicrobial use in areas of C. difficile infections and antibiotic resistance.
Leapfrog Group’s data about fewer hospitals reporting zero infections offers opportunities for hospital laboratory microbiology professionals to get involved with hospital-wide antimicrobial program teams and processes and help their hospitals progress back to zero HAIs. Clinical laboratories, both hospital-based and independent, also have opportunities to contribute to improving the antimicrobial stewardship efforts of the physicians who refer them specimens.
While multiple studies show reference pricing is an effective approach to reduce the cost of testing and procedures, medical laboratories and consumers alike must continue to focus on quality to ensure positive outcomes
The Dark Report in its September 2016 issue highlighted how reference pricing is positioned to become one of the biggest contributors to price erosion medical laboratories and pathology groups have faced in more than a decade. The issue featured details of a 2016 study published in JAMA Internal Medicine outlining how Safeway’s use of reference pricing for clinical laboratory tests decreased laboratory spending for itself and employees by 32% between 2011 and 2013—a total savings of more than $2.5-million.
That issue of The Dark Report also highlights a similar use of reference pricing by CalPERS (California Public Retirement System) that involved hip and knee replacement surgeries. CalPERS saw a 30% reduction in the cost of these surgeries after 12 months.
These highly publicized efforts have fueled interest in how reference pricing might work for other businesses, insurers, and the US government. The 2014 Protecting Access to Medicare Act (PAMA) is already collecting private payer rates paid to laboratories for tests. This data will then be used to create new rate-based fee schedules in 2018.
Speaking with Joseph Burns, Managing Editor of The Dark Report, about the outcome and potential rise of reference pricing, study author James C. Robinson, PhD, of University of California Berkeley noted that, “Any discussion about how to contain inappropriate healthcare utilization is challenging. By contrast, significant price variation is the low-hanging fruit. Employers would much rather save money by having patients travel to cheaper clinical labs than get into some esoteric discussion about whether a clinical procedure is appropriate or not.”
Quality is Key to Both Avoiding Price Erosion and Improving Patient Outcomes
There’s no question that reference pricing has forever changed the landscape of clinical laboratory pricing. Paired with increased pricing transparency and easier access to pricing information through platforms such as Castlight Health, Healthcare Blue Book, and Change Healthcare Corporation, consumers and businesses can quickly compare prices across a range of service providers.
However, in April, Leah Binder, President and CEO of The Leapfrog Group, published an article in Forbes that highlights the potential downsides to price shopping for laboratory testing and medical care.
“Differences among providers in quality can eliminate any cost advantages,” stated Binder in the Forbes article. “Some purchasers assume they can get around this problem by targeting reference pricing only for procedures that don’t vary in quality. When quality is all the same, decisions can pivot on price alone. Unfortunately, no such procedures exist. Extreme variation is the hallmark of our healthcare system.”
As reference pricing continues to force more consumers to shoulder a portion of medical laboratory testing costs, prices for more expensive laboratories are likely to continue eroding unless they can convince consumers that their services are higher quality or produce better results. (Graphic copyright: California Public Retirement System.)
Binder cites a study in Spine Journal’s April 2017 issue regarding diagnostic error rates for magnetic resonance imaging (MRI). The study involved a 63-year-old woman seeking relief from low back pain. Over a three-week span, she received 10 different scans. These scans resulted in 49 different findings. Of these findings, none were repeated across all 10 scan reports provided to her physician.
“As a result,” the study’s authors concluded, “where a patient obtains his or her MRI examination, and which radiologist interprets the examination, may have a direct impact on radiological diagnosis, subsequent choice of treatment, and clinical outcome.”
Binder reinforced this, stating, “Purchasers should still pursue reference pricing and try to incorporate considerations of utilization and quality to the extent they have the data. Never assume any procedure is like a commodity—largely the same quality everywhere.”
High-Cost Medical Laboratories Likely to Face a Decision Between Volume or Price Erosion
A 2016 study by Health Care Cost Institute found the average pricing of 240 common medical services varied by as much as 200% between states. Within states, prices fluctuated as much as 300%.
Thus, for pathology groups and medical laboratories in the upper percentiles for their region, referencing pricing is likely to impact volume. Even if adoption of reference pricing by payers or self-insured business groups remains stable, price cuts due to PAMA loom on the horizon. As reported by Dark Daily in December 2016, price cuts to the Part B clinical laboratory fee schedule could add up to $400 million in reduced Medicare payments in 2018 alone.
This is particularly troublesome for hospital laboratory outreach programs, where Medicare patients commonly represent 40% to 70% of outreach lab volumes. The combination of reduced volume and reduced Medicare pricing could have dire financial consequences.
It will remain essential for medical laboratories to differentiate their services from those of lower-cost competitors to avoid volume and price erosion. Continuing to optimize test utilization, improving laboratory efficiency, and emphasizing the value of services rendered will help to further strengthen lab positions and reduce the impact of coming change.
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…)
