In a federal lawsuit, seven healthcare organizations and hospitals systems allege HHS exceeded its statutory authority and clinical laboratories will want to watch how this court case unfolds
There is quite a brouhaha over the final new federal rule requiring hospitals to allow patients and the public to see the prices they charge for services—including clinical laboratory and anatomic pathology prices. Some very influential hospital associations and healthcare systems are opposing implementation of this rule.
For more than a decade, Dark Daily has
reported on the federal government’s efforts to enact pricing transparency in
healthcare. In many e-briefings, we advised pathologists
and medical
laboratory leaders that the outcome of those efforts will likely affect
clinical laboratory workflows and bottom lines, and that many clinical laboratories
are not prepared to negotiate directly with customers over the price of their
services.
Now, the federal Centers for Medicare and Medicaid Services
(CMS) has passed a final
rule (CMS-1717-F2) that expands on an earlier rule mandating pricing
transparency for hospital procedures—including medical
laboratory and anatomic
pathology services. This new rule requires hospitals to disclose not only
their chargemaster
prices, but also prices negotiated with payers.
Hospital leaders are not pleased by this, and though the
final rule does not go into effect until January 1, 2021, they are already
pushing back through representative organizations such as the American Hospital Association (AHA), which has
brought a lawsuit to federal court that seeks to overturn the new rule.
New Transparency Rules Include Rates Negotiated with Health
Insurers
Beginning Jan. 1, 2019, CMS required hospitals to disclose chargemaster prices to customers. These are essentially the “list prices” for hospital procedures. However, as Dark Daily reported in “California Healthline Report Finds Hospital Chargemaster Prices Fluctuate Dramatically Even Among Hospitals Located Near Each Other,” June 12, 2019, there were problems. Chargemaster prices typically do not reflect the actual fees charged to patients or payers. Thus, consumers still found it problematic to price shop before committing to healthcare.
In an effort to remedy this, the
new 2020 final rule expands the pricing information hospitals are required to
provide and includes several categories of prices negotiated with health insurers.
Simultaneous to this final rule, CMS also announced a
proposed rule (CMS-9915-P) titled, “Transparency
in Coverage,” that if passed, will require health insurers to disclose
pricing for healthcare services as well.
In a federal Department of Health and Human Services (HHS) press
release, the Trump Administration stated that both rules will “increase
price transparency to empower patients and increase competition among all
hospitals, group health plans, and health insurance issuers in the individual
and group markets.”
“Under the status quo, healthcare prices are about as clear
as mud to patients,” said CMS Administrator Seema Verma in the HHS press
release. “This final rule and the proposed rule will bring forward the
transparency we need to finally begin reducing the overall healthcare costs.”
AHA Sues HHS in Federal Court
In response, four hospital organizations and three health
systems filed a
lawsuit in federal court against the HHS. The suit alleges the final rule
“exceeds the agency’s statutory authority,” and violates the First Amendment by
requiring public disclosure of prices negotiated with payers. This information,
they say, is “highly confidential and commercially sensitive.”
In court
documents, the plaintiffs argue that “the Final Rule is arbitrary and
capricious and lacks any rational basis. The agency’s explanation for the Final
Rule runs counter to both logic and evidence. In fact, it is belied by the
agency’s own research regarding what patients care about most when selecting a
hospital: their own out-of-pocket costs. The agency’s justification for the
Final Rule therefore does not stand up to even the barest of scrutiny. That is
the epitome of arbitrary and capricious agency action.”
A brief
filed by the plaintiffs contends that patients’ actual out-of-pocket costs
are determined by a complex set of factors and aren’t reflected in negotiated
rates. In addition, the brief states, “the sheer burden of compliance with the
rule is staggering, and way out of line with any projected benefits associated
with the rule.”
Charles N. Kahn III (above), President and CEO, Federation of American Hospitals (FAH), said in an AHA press release that, “CMS’ final rule fails to offer patients easy-to-understand information regarding their out-of-pocket obligations for care, so we feel obligated to contest the regulation. We contend the agency exceeded its authority and should go back to the drawing board.” (Photo copyright: FAH.)
Details of the Final Rule on Hospital Price Transparency
If it goes forward, starting Jan. 1, 2021, the final rule
requires hospitals to disclose five types of standard charges, according to the
HHS and AHA press releases:
The chargemaster rate, also known as the gross
charge;
The discounted cash price, which CMS defines as
the amount the hospital will accept from self-paying patients;
The payer-specific negotiated charge, defined as
“the charge that the hospital has negotiated with a third-party payer for an
item or service.” This would be the charge that applies if a patient uses an
in-network provider;
The maximum charge negotiated with payers; and
The minimum charge negotiated with payers.
Hospitals must list these charges for all billable “items
and services,” including medical laboratory and pathology services, in a
machine-readable format, such as a CSV file that
can be opened in a spreadsheet program.
In addition, they must provide a “consumer-friendly” list of charges for at least 300 “shoppable services,” defined as services that consumers can schedule in advance. Each list would include 70 services specified by CMS and an additional 230 services selected by the hospital.
The CMS-specified shoppable services include 14 laboratory
and pathology tests. They include:
Basic metabolic panel
Blood test, comprehensive group of blood
chemicals
Obstetric blood test panel
Blood test, lipids (cholesterol and triglycerides)
Kidney function panel test
Liver function blood test panel
Manual urinalysis test with examination using
microscope
Automated urinalysis test
PSA (prostate specific antigen)
Blood test, thyroid stimulating hormone (TSH)
Complete blood cell count, with differential
white blood cells, automated
Complete blood count, automated
Blood test, clotting time
Coagulation assessment blood test
Blood Brother Clinical Laboratories Also Affected by
Price Transparency
Price transparency is also at the center of two federal
lawsuits involving Laboratory Corporation of America (LabCorp) and Quest
Diagnostics. The Dark Report, Dark Daily’s sister publication, reported
on these suits in “Lawsuits
Alleging Overcharges to Proceed in Two Courts in 2020,” December 16, 2019.
The plaintiffs in those cases are uninsured or underinsured
customers who claim they were charged far more for medical laboratory tests
than customers covered by insurance. In both cases, customers were charged at
the chargemaster rates. The plaintiffs contend that the medical laboratories
should have disclosed their rates in advance.
Whichever way this all goes, clinical laboratories will need
to monitor the multiple efforts by the states and the federal government to
make it easy for patients to see the prices of hospital, physician, and other
medical services in advance of treatment. This has the potential to be a disruptive
trend, particularly for hospitals.
While clinical laboratories may not be directly affected by copay accumulators, anything that affects patients’ ability to pay for healthcare will likely impact lab revenues as well
Here’s a new term and strategy that some big employers are
deploying in an attempt to control the choice of health benefits provided to
their employees. The term is “copay accumulator” and it is intended to offset
efforts by pharmaceutical companies to minimize what consumers must pay
out-of-pocket for expensive prescription drugs.
Clinical laboratory managers and pathologists will have a front row seat to watch this next round in the struggle between industry giants for control over how patients pay for drugs and treatment regimes.
Pharmaceutical companies on one side and health insurers and employers on the other side have played brinksmanship over medication copays for years. Now at the center of this struggle are copay accumulators, a relatively new feature of plans from insurers and pharmacy benefit managers (PBMs) on behalf of the large employers they serve.
More than 41-million Americans use copay accumulators, and about nine million use similar though limited copay maximizer programs, Zitter Health Insights, a New Jersey-based pharma and managed care consultancy firm, told Reuters.
Now, big employers are getting in on the game. Walmart
(NYSE:WMT) and Home Depot (NYSE:HD) are among a growing number of companies using
copay accumulators and copay maximizers to keep their healthcare costs down and
encourage employees to seek lower-cost alternatives to expensive brand
prescriptions (generic drugs).
About 25% of employers currently use such programs, and 50% of employers are anticipated to be doing so in just two more years, the National Business Group on Health told Reuters.
What Are Copay
Accumulators and How Do They Work?
In response to popular drug company discount cards,
insurance companies developed the “copay accumulator.” Here’s how it works.
Typically, patients’ insurance plan deductibles can be thousands
of dollars. Thus, even after plan discounts, patients often pay hundreds, even
thousands of dollars each month for prescribed medications. Insurance companies
see a beneficial side to this, stating the cost encourages patients to be aware
of their medications and motivates them to try lower-cost non-branded
alternatives (generic drugs), all of which saves insurance plans money.
However, many patients with high-deductibles balk at paying
the high cost. They opt to not fill prescriptions, which costs pharmaceutical
companies money.
To encourage patients to fill prescriptions, drug companies
provide discount cards to help defray the cost of the drugs. The difference
between the discounted payment and the full price of the drug is paid by the
pharmaceutical company. But these discount cards interfere with insurance
companies’ ability to effectively track their enrollees’ drug usage, which
impacts the payers’ bottom lines.
When a patient uses a drug discount card at the point-of-sale, the sale is noted by the patient’s health insurer and the insurer’s copay accumulator program kicks in. It caps the total accumulated discount an enrollee can take for that medication and prevents any patient payments to apply toward the plan’s deductible. Once the drug company’s discount card threshold is reached, the patient bears the full cost of the drug, a ZS Associates Active Ingredient blog post explained.
Critics of copay accumulators point out that patients could
end up paying full price for extremely expensive prescriptions they previously
accessed with discount cards, while simultaneously making no progress toward
fulfilling their insurance deductibles. Or, they will simply stop taking their
medications altogether.
“A medication which previously cost $7 may suddenly cost hundreds or even thousands of dollars because the maximum amount of copay assistance from the [drug] manufacturer was reached,” noted Ken Majkowski, Pharm.D, Chief Pharmacy Officer at FamilyWize (a company that offers its own prescription savings programs), in a blog post. “Since the health plan will no longer allow the copay amounts to contribute to the patient’s deductible, the cost of the medication remains very high.”
Major Employers Implement
Their Own Copay Accumulator Programs
Enter the next goliath into the fray—the large employer. Executives
at Walmart and Home Depot say discount drug coupons drive up healthcare costs
and give their employees and their family members no incentive to explore lower
cost alternatives, Reuters reported.
Walmart’s pharmacy benefits are managed by Express Scripts, a prescription benefit plan provider that fills millions of prescriptions annually, according to the company’s website. Meanwhile, Home Depot’s pharmacy benefits are operated by CVSHealth, which focuses on therapies for cystic fibrosis, hepatitis C, cancer, HIV, psoriasis, pulmonary arterial hypertension, and hyperlipidemia, Reuters noted.
Insurance Associations
Weigh-In
Health insurance company representatives say the need for copay accumulators begins with the high price of pharmaceuticals. Insurers are not the only ones concerned about these costs. The American Hospital Association (AHA), the Federation of American Hospitals (FAH), and the American Society of Health-System Pharmacists (ASHP) recently released a report showing total drug spending per hospital admission increased by 18% between 2015 and 2017, and some drug categories rose more than 80%.
“The bigger question is why do we need copay coupons at all? It’s very important to recognize the problem starts with the [drug] price. This is the real underlying problem,” Cathryn Donaldson, Director of Communications, America’s Health Insurance Plans (AHIP), told the Los Angeles Times.
In their blog post, ZS Associates advised drug companies to
“push-back” on the copay accumulators. The Evanston, Ill.-based consultancy
firm recommends pharma executives change the way they run the discount cards—such
as paying rebates directly to patients instead of working through pharmacies.
Medical laboratory leaders need to be aware of programs,
such as copay accumulators, and the associated issues that affect patients’
ability to pay for their healthcare. Because large numbers of patients struggle
to pay these high deductibles, it means clinical laboratories will be competing
more frequently with hospitals, physicians, imaging providers, and others to
get patients to pay their lab test bills.
Issue does not directly affect clinical laboratories and pathology groups, but puts spotlight on some hospitals and physicians who frequently use these codes.
Could increased use of electronic health records (EHR) systems be causing more hospitals and physicians to commit fraud because of upcoding? That’s the assertion of certain federal health officials. They attribute the increased proportion of Medicare claims for more complex and more expensive services by some providers to be, in some part, acts of fraud.
Most pathologists and clinical laboratory managers will notice the irony in these allegations that providers are upcoding services to Medicare patients in fraudulent ways. After all, the federal government is currently paying billions of dollars in financial incentives to encourage providers to implement and use certified EHR systems with the goal of lowering healthcare costs, while improving patient outcomes.
OIG Audit Findings Are Source of Fraud Allegations
Insinuations of provider fraud came after the public learned of findings of an audit done by Health and Human Services’ Office of Inspector General (OIG). The OIG determined that payments for more complex Level 5 E/M services increased by 21% between 2001 and 2010. During that same period, payments for medium-complexity patient services decreased by 11%.
For all of 2010, the Centers for Medicare and Medicaid Services (CMS) paid out $33.5 billion for E/M billings. This was about one-third of Medicare Part B payments for physician services. These numbers were part of a story published in Modern Healthcare.
Now that much larger numbers of physicians and hospitals are using electronic health record (EHR) systems, Medicare has noticed a steady increase in the proportion of claims submitted at higher and more complex codes, increasing reimbursement. In response to one federal government audit, Kathleen Sebellius, Secretary of Health and Human Services (r) and Attorney General Eric Holder (l) held a joint press conference to announce to healthcare providers that there would be stricter audits of providers who are using billing codes for complex patient visits with greater frequency. (Photo by Manuel Balce Ceneta, copyright Associated Press.)
Private payers taking first steps on a path toward value-based purchasing that could eventually include clinical pathology laboratory testing services
Pay-for-performance just took a leap forward with news that one of the nation’s largest health insurers will link hospital reimbursement to specific quality measures. This development could be a precursor to similar payer initiatives that involve how private payers reimburse clinical laboratories and anatomic pathology groups.
Indianapolis-based WellPoint, Inc. (NYSE: WLP) will revamp the way it reimburses about 1,500 hospitals across the country. In a news story published by Bloomberg Businessweek, Rick Wartzman, Executive Director of the Drucker Institute at Claremont Graduate University, explained that, going forward, WellPoint wants to base annual payment increases to hospitals using a formula that incorporates the health insurer’s quality criteria, rather than to the quantity of services delivered. (more…)
CIOs across America are concerned that their hospitals might not make the 2015 meaningful use deadline
For all the excitement about hospital and physician adoption of electronic health record (EHR) systems, many CIOs of the nation’s leading health systems and hospitals are pessimistic about their organization’s ability to meet “meaningful use” (MU) requirements by the year 2015.
This is probably not news to most pathologists and clinical laboratory managers working in hospital laboratories. Generally, members of their medical laboratory team are usually part of every hospital’s EHR implementation task force, since clinical laboratory test data makes up a significant portion of the typical patient health record.
