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Patient Rights Group Says Too Many Hospitals Are Not Complying with CMS Price Transparency Rules

Only about a third of the hospitals surveyed are in full compliance with giving public access to prices, the watchdog group contends, but the AHA disputes its methodology

It’s been almost four years since the Centers for Medicare and Medicaid Services (CMS) enacted its Hospital Price Transparency rule which requires hospitals—including their medical laboratories—to make their prices available and easily accessible to the public. But according to a 2024 report from PatientRightsAdvocate.org (PRA), just 34.5% of reviewed hospitals are fully compliant with the transparency rule. That’s a slight decrease from the 36% compliance rate the PRA listed in its 2023 report, the watchdog group stated in a blog post.

Released on Feb. 29, this was the group’s sixth semi-annual hospital price transparency report since the CMS rule took effect in 2021.

The rule “requires hospitals to post all prices online, easily accessible and searchable, in the form of (i) a single machine-readable standard charges file for all items, services, and drugs by all payers and all plans, the de-identified minimum and maximum negotiated rates, and all discounted cash prices, as well as (ii) prices for the 300 most common shoppable services either as a consumer-friendly standard charges display listing actual prices or, alternatively, as a price estimator tool,” the report states.

The required viewable prices are to be for, among others, medical imaging, clinical laboratory testing, and outpatient procedures such as a colonoscopies, etc.

“With full transparency, consumers can benefit from competition to make informed decisions, protect from overcharges, billing errors, and fraud, and lower their costs,” the report states. “Employer and union plans can use pricing and claims data to improve their plan designs and direct members to lower cost, high-quality facilities. However, continued noncompliance impedes this ability.”

At any time, the US Department of Justice (DOJ) could decide to file charges against a hospital or a clinical laboratory for not posting their prices on their websites in compliance with the federal rule. Such an action by DOJ officials would be to specifically put the entire industry on notice that there will be consequences for non-compliance.

The PRA’s report provides hospitals and clinical laboratories with a reminder that consumer watchdogs are also monitoring compliance.

“Our comprehensive study of 2,000 hospitals indicates nearly two-thirds (65.5%) of hospitals reviewed continue failing to fully comply with the rule, yet the Centers for Medicare and Medicaid Services (CMS) has only fined fourteen hospitals for noncompliance out of the thousands found to not be meeting all of the rule’s requirements. When hospitals don’t post their prices, they can charge whatever they want,” wrote PRA Founder and Chairman Cynthia Fisher (above) in a letter to President Biden. Hospital medical laboratories are also required to post their prices for tests. (Photo copyright: PatientRightsAdvocate.org.)

Increasing Penalties for Non-compliance

In a March 18 Health Affairs blog post on price transparency, two healthcare policy experts—David Muhlestein, PhD, JD, Chief Research Officer at Leavitt Partners, Washington, DC, and Adjunct Assistant Professor of The Dartmouth Institute (TDI) at the Geisel School of Medicine at Dartmouth College; and Yuvraj Pathak, PhD, Associate Director at West Health—argued that CMS should increase penalties for non-compliance, so the dollar amounts are greater than the cost of compliance.

To compile their report, PRA analysts examined the websites of 2,000 US hospitals between September 3, 2023, and January 13, 2023, and found that 1,311, or 65.5%, were not in full compliance, mostly due to “missing or significantly incomplete pricing data,” the report states.

More than 6,000 licensed hospitals operate in the US, the report notes. The group said it focused on hospitals owned by the largest US health systems.

Among the notable findings:

  • The 2023 report found that 98% of Kaiser Permanente’s 42 hospitals were in full compliance with the rule, but in the 2024 study, none were compliant because the hospitals began posting multiple files instead of a single file.
  • In total, 103 hospitals rated as noncompliant in the previous report were found to be compliant in the new analysis. Conversely, 135 hospitals previously rated as compliant were listed as noncompliant in the 2024 report.

The report lauded three hospitals for posting “exemplary files” that were “easily accessible, downloadable, machine-readable, and including all negotiated rates by payer and plan.” Those were Cape Cod Hospital in Hyannis, Mass.; Christus Santa Rosa Medical Center in San Antonio; and UW Health University Hospital in Madison, Wis.

In its discussion of the findings, PRA called on CMS to step up enforcement of the pricing transparency rule. The group also wants the government to close what it describes as the “estimator tool loophole,” which allows hospitals to list non-binding price estimates and price ranges instead of concrete prices.

“Price estimator tools do not achieve the goals of price transparency policy and fundamentally undermine the intent of the regulations,” the PRA’s report contends.

AHA Pushes Back on PRA Assessment

The American Hospital Association (AHA) took issue with PRA’s methodology, as Dark Daily reported in “CMS Proposes New Amendments to Federal Hospital Price Transparency Rule That May Affect Clinical Laboratories and Pathology Groups.”

In response to the 2023 PRA report, AHA Group Vice President for Public Policy Molly Smith issued the following statement, “Once again, Patient Rights Advocate has put out a report that blatantly misconstrues, ignores, and mischaracterizes hospitals’ compliance with federal price transparency regulations. The AHA has repeatedly debunked point-by-point Patient Rights Advocate’s intentionally misleading ‘reports’ on price transparency.”

Citing CMS data, Smith said that as of 2022, 70% of US hospitals had complied with two key federal rules:

  • One requiring hospitals to post machine-readable files with pricing information.
  • The other mandating a list of prices for at least 300 “shoppable” services.

More than 80% of hospitals had complied with at least one of the rules, she contended in an AHA press release.

Speaking to the New Orleans Times-Picayune, PRA Founder and Chairman Cynthia Fisher said her group performs a more in-depth study of pricing data compared with CMS.

“They did not do a comprehensive review,” she told the publication. “We do a deep dive for full compliance.”

The PRA study came on the heels of a January report from Turquoise Health that offered a rosier assessment of hospital compliance, albeit with different criteria. According to the Turquoise report, as of Dec. 15, 2023:

  • 90.7% of 6,357 US hospitals had posted machine-readable files,
  • 83.1% posted information about negotiated rates, and
  • 77.3% posted cash rates.

The Turquoise Health end-to-end price transparency platform uses a 5-point system to rate the quality of hospitals’ machine-readable files and said that more than 50% scored five stars. Clinical laboratory managers and pathologists may find it timely to review their lab organization’s compliance with this federal price transparency rule.

—Stephen Beale

Related Information:

Just 34.5% of Reviewed Hospitals Fully Compliant with Federally-Mandated Price Transparency Rule

Sixth Semi-Annual Hospital Price Transparency Compliance Report

Improving Hospital Compliance with Price Transparency Rules

Only Half of LA Hospitals Publish Prices as Required by Law, Hindering Patient Choice

34.5% of Hospitals Complying with Price Transparency Rule, Report Says

Little Progress Made with Hospital Price Transparency Compliance

CMS Releases Tool to Validate Price Transparency File Compliance

Hospital Price Transparency Compliance Dips: Report

Hospitals Backslide on Price Transparency Test

Moving into 2024: State of Price Transparency

Hospitals Finally Reached Widespread Price Transparency Compliance in 2023

More Hospitals, Payers Compliant with Price Transparency Laws

Oregon Health and Science University Announces Program to Provide Patients with Hospital-Level Care in the Comfort of Their Home

As the number of Hospital at Home programs increase, clinical laboratories will want to develop programs for collecting samples from patients where they live

Shortages of nurses and hospital staff, combined with pressure to lower the cost of care, are encouraging more institutions to implement hospital-in-the-home programs. One such project involves Oregon Health and Science University (OHSU), which last November began a Hospital at Home (HaH) program that enables certain patients to receive hospital-level care in the comfort of their own homes. Clinical laboratories servicing these programs will need to develop specimen collection and testing services in support of these patients.

The OHSU program can provide healthcare for eight patients simultaneously, and it has treated more than 100 patients at home since its inception. Although this number is only a small segment of OHSU’s 576 bed capacity, it does affect the overall healthcare provided by the hospital.

Under the program, basic services, such as the monitoring of vital signs—as well as some clinical laboratory work and routine imaging studies—are performed in the patient’s home. Individuals are transported to OHSU for more complex imaging or other procedures.

Matthias Merkel, MD, PhD

“Every patient we have in Hospital at Home is one who is not waiting in the emergency room or a hallway for a bed to become available in the hospital,” said Matthias Merkel, MD, PhD (above), Senior Associate Chief Medical Officer, Capacity Management and Patient Flow at OHSU, in a press release. In the same way clinical laboratories support telehealth programs, medical laboratories will need procedures for collecting specimens and testing patients participating in Hospital at Home programs as well. (Photo copyright: Oregon Health and Science University.)

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Better Patient Experience, Increases Hospital Capacity

OHSU’s HaH program utilizes advances in technology to connect at-home patients with physicians and nurses around the clock via a smart tablet. In addition, participating patients receive real-time monitoring and at least two daily in-person visits from nurses and paramedics that have been contracted by OHSU.

“It’s a better experience for patients, plus it increases our system’s capacity to provide care for all the people who need it,” said Darren Malinoski, MD, Chief Clinical Transformation Officer and Professor of Surgery at OHSU in the press release. “It allows us to make good on our promise to take care of the state as best we can.”

The current eligibility criteria to participate in OHSU’s Hospital at Home program include:

  • Patient must be over the age of 18.
  • Patient’s primary residence must be within a 25-mile radius of the OHSU hospital.
  • Inpatient hospitalization is initially required.
  • Patient must have a diagnosis that can be managed remotely, such as COVID-19, pneumonia, cellulitis, congestive heart failure, urinary tract infections, or pyelonephritis.

Malinoski feels that OHSU’s HaH program is ready to expand. In fact, he is so confident in it he enrolled his own 83-year-old mother as one of its first patients. While undergoing treatment for lung cancer, a routine clinical checkup exposed evidence of toxicity in her blood. Typically, she would have been directly admitted to the hospital for monitoring, but instead she was entered into the HaH program.

“It was unbelievable,” stated Lesley Malinoski in the press release. “I had the feeling of being well taken care of. I was in my own home. I could cook, I could rest—anything I wanted and still have all this care.”

“They didn’t just come in and run out,” she continued. “I felt like a celebrity.”

COVID-19 Pandemic Drove Remote Healthcare Programs

HaH programs around the country were made possible through a federal waiver granted by the federal Centers for Medicare and Medicaid Services (CMS) in November 2020 in response to the COVID-19 pandemic.

According to the American Hospital Association (AHA), “this care delivery model has been shown to reduce costs, improve outcomes, and enhance the patient experience.”

Prior to the waiver, there were only about two dozen hospitals across the US that had HaH programs. However, as of May 20, 2022, 227 hospitals in 35 states had received a HaH waiver from CMS. This number represents nearly 4% of all hospitals in the country, according to Health Affairs.

Dark Daily has published many stories about Hospital at Home programs in the past. In “Hospital-in-the-Home Shows Promise for Reducing Acute Care Costs; Medical Laboratories Face Uncertainties Concerning Expanding Services to In-Home Environments in Support of Care Providers,” we described an example of an HaH model of clinical care implemented at Brigham and Women’s Faulkner Hospital in Boston where, despite initial reservations from staff, their testing of hospital-at-home care was well received.

In “Two US Studies Show Home-based Hospital Care Lowers Costs while Improving Outcomes and Patient Satisfaction,” we reported on a hospital-based home care program that involved 323 patients at Presbyterian Healthcare Services in Albuquerque, N.M. We surmised that significant growth in the number of patients treated in home-based hospital care programs would directly affect hospital-based clinical laboratories and pathology groups. Among other things, it would reduce the volume of inpatient testing while increasing the number of outpatient/outreach specimens.

And in “Australia’s ‘Hospital in the Home’ Care Model Demonstrates Major Cost Savings and Comparable Patient Outcomes,” Dark Daily saw that wider adoption of that country’s Hospital in the Home (HITH) model of patient care would directly affect pathologists and clinical laboratory managers who worked in Australia’s hospital laboratories. We reported that more HITH patients would increase the need to collect specimens in patient’s homes and transport them to a local clinical laboratory for testing, and that because they are central to the communities they serve, hospital-based medical laboratories would be well-positioned to provide this diagnostic testing.

OHSU’s overall experience with their Hospital at Home program demonstrates that such a model can be a highly successful and cost-effective method of providing patient care. It is probable that in the future, more medical institutions will create similar programs in an effort to effectively serve as many patients as possible while ensuring shorter hospital stays and rendering better healthcare outcomes. As this happens, it will give hospital-based medical laboratories an opportunity to deliver value in home-based patient care. 

JP Schlingman

Related Information:

Hospital at Home: Amid hospital Capacity Crisis, OHSU Offers an Alternative

Given Regulatory Uncertainty, Hospital-at-Home Models Are Losing Momentum

The Benefits of Treating Patients at Home Instead of in the Hospital

AHA: Extending the Acute Hospital Care at Home Program Beyond the End of the COVID-19 PHE

Hospital at Home Is Not Just for Hospitals

What We Learned from the Acute Hospital Care at Home Waiver—and What We Still Don’t Know

Hospital-in-the-Home Shows Promise for Reducing Acute Care Costs; Medical Laboratories Face Uncertainties Concerning Expanding Services to In-Home Environments in Support of Care Providers

Two US Studies Show Home-based Hospital Care Lowers Costs while Improving Outcomes and Patient Satisfaction

Australia’s ‘Hospital in the Home’ Care Model Demonstrates Major Cost Savings and Comparable Patient Outcomes

Demographic Shift Means Lower Birthrates and Aging Populations around the World, Suggesting Big Changes for Global Healthcare, Pathology Groups, and Clinical Laboratories

Demographic shifts are most acute in Europe and East Asia but could be a harbinger of things to come for US healthcare as well

Across the globe, major shifts in many countries’ demographics are starting to drive notable changes in how healthcare is delivered in these nations. Having fewer pediatric patients and more senior citizens is fundamentally altering what types of tests are in greatest demand from the medical laboratories in these countries. It is the population trend writ large on a global scale.

For example, in countries as diverse as Sweden, Hungary, Japan, and South Korea, birthrates are declining as fewer young people decide to have kids, or they choose to have smaller families. Thus, demand for pediatric care is declining in those countries.

Meanwhile, populations around the world continue to age as greater numbers of people reach their retirement years. Not only does this create the need to expand medical services designed to serve the elderly, but there are important economic consequences. That’s because each wave of retirees leaves fewer people in the workforce to support the healthcare of ever-growing numbers of senior citizens.

According to The New York Times (NYT), this trend is likely to accelerate. In “Long Slide Looms for World Population, with Sweeping Ramifications,” the paper reported that “All over the world, countries are confronting population stagnation and a fertility bust, a dizzying reversal unmatched in recorded history that will make first-birthday parties a rarer sight than funerals, and empty homes a common eyesore.”

The NYT added that, “With fewer births, fewer girls grow up to have children, and if they have smaller families than their parents did—which is happening in dozens of countries—the drop starts to look like a rock thrown off a cliff.”

In countries such as the US, Canada, and Australia, this is partially mitigated by immigration, the NYT reports. However, some nations, such as Germany and South Korea, have instituted programs aimed at boosting birthrates, though with varying degrees of success.

According to demographer Frank Swiaczny, Dr. rer. nat., Senior Research Fellow at the Federal Institute for Population Research in Germany, countries around the world—especially in Europe and East Asia—“need to learn to live with and adapt to decline.”

“A paradigm shift is necessary,” he told the NYT.

An Aging Nation

The graphic above, taken from the US Census Bureau’s 2018 report, “The Graying of America: More Older Adults than Kids by 2035,” illustrates the rate at which America’s elder population is catching up with the rest of the world. It will soon exceed younger portions of the population, thus shifting demand for healthcare from pediatrics to geriatrics. Anatomic pathology groups and clinical laboratories will be impacted by this trend. (Graphic copyright: US Census Bureau.)

Elder Population Growth: Academics Take Notice

Healthcare scholars also have been looking at the topic of demographic shift. A recent commentary in Health Affairs, titled “Actualizing Better Health and Health Care for Older Adults,” focused on the policy implications for senior care.

The authors, which included Terry Fulmer PhD, RN, FAAN, and John Auerbach, Director of Intergovernmental and Strategic Affairs at the CDC, noted that in 2018, adults 65 or older were 15.6% of the population. This will rise to 20% by 2030, when, according to the authors, seniors will outnumber the portion of the population that is younger than age five.

Fulmer is President of the John A. Hartford Foundation, which is dedicated to improving care for older adults, and until May, Auerbach was President and CEO of Trust for America’s Health (TFAH).

They recommended six broad policy goals:

  • Foster an “expanded and better-trained workforce” to care for older adults, through enhanced training as well as “scholarships, loan forgiveness, and clinical internships.”
  • Adapt the public health system to account more for the needs of an aging population, such as by “improved coordination and collaboration with Area Agencies on Aging and key healthcare providers.”
  • Address disparities and inequities in healthcare access, such as social isolation “caused or exacerbated by social, economic, and environmental conditions.”
  • Facilitate advances in telehealth and other technologies to improve care delivery. “The lack of access to technology, low digital health literacy, and design barriers in patient portals and apps have disproportionately affected older adults, especially those in underserved communities,” the authors wrote.
  • Improve palliative and end-of-life care. “Many older adults are living with serious illness,” the authors wrote, and “most will live for years with their illnesses, resulting in a high burden of physical and psychological distress, functional dependence, poor quality of life, high acute care use, loss of savings, and caregiver distress.”
  • Reform long-term care, by improving conditions in long-term care facilities and making it easier for older adults to stay at home.

The authors also urged a move away from “traditional fee-for-service Medicare” through “policy changes such as bundled, capitated, and other value-based payments.”

A perspective in the journal NPJ Urban Sustainability, titled “Ageing and Population Shrinking: Implications for Sustainability in the Urban Century,” notes that these trends have led some cities or countries to adopt technological innovations in healthcare, such as “socially assistive robots and virtual entertainment for mental health, roadside AI services for healthcare, and a series of innovations for house-based healthcare, digital nursing, and monitoring.”

Aging population of Italy vs. Nigeria

The graphic above, taken from PopulationPyramid.net, illustrates the stark differences in the age of populations in two countries at opposite ends of the progressing demographic shift. Italy’s population pyramid (left) shows how the senior population makes up a substantial proportion of total population, while Nigeria’s 2030 population pyramid (right) shows the classic pyramid of a wide base of younger people trailing off to a small number of the elderly at the top of the pyramid. Medical laboratories in those nations will continue to be affected by how these demographic shifts taking place worldwide are changing the type of healthcare in highest demand. (Graphic copyright: PopulationPyramid.net.)

Impact on Pediatrics

At the other end of the age spectrum, a recent presentation from the American Academy of Pediatrics noted a 13% decline in the US birthrate between 2007 and 2019. But a white paper from physician search firm Merritt Hawkins suggests this has not necessarily resulted in reduced demand for pediatric services, at least not in the US.

Despite the decline, “there are still about four million births in the US annually, and immigration adds to the number of children in the population,” the white paper notes. Even rural areas with aging populations “have far fewer pediatricians per capita than they require.”

However, according to The New York Times, in South Korea, “expectant mothers in many areas can no longer find obstetricians or postnatal care centers.” And the town of Agnone, Italy, no longer has a maternity ward because the number of births—just six this year—is below the national minimum.

This is important to note. If there are developed countries around the world where demographics point to a steady decline in population, then the type of healthcare provided will be different than what is currently used. Clinical laboratories and pathology groups in those regions can expect changes and should prepare for them.

Stephen Beale

Related Information:

Long Slide Looms for World Population, with Sweeping Ramifications

Aging and Population Shrinking: Implications for Sustainability in the Urban Century

Actualizing Better Health and Health Care for Older Adults

US Birth Rate Falls to Lowest Point in More than a Century

Opioid Epidemic is Latest Healthcare Fraud ‘Hot Spot’ as Some Unethical Clinical Laboratories, Physicians, and Service Providers Attempt to Cash-in

It’s critical that medical laboratory leaders prepare for increased scrutiny and pressure from DOJ fraud investigations

Recent efforts by federal investigators to ferret out and prosecute healthcare fraud have shown that certain clinical laboratory companies are guilty of fraud and abuse. And as Dark Daily covered in “Preparing Clinical Laboratories for Invasive Federal Enforcement of Fraud and Abuse Laws, Increased Scrutiny by Private Payers, New Education Audits, and More,” November 13, 2019, the US Department of Justice (DOJ) and other federal and state regulators are becoming more aggressive in their hunt for bad actors.

Thus, clinical laboratory leaders must constantly be on guard against being drawn into potentially fraudulent activities. For example, schemes involving substance-use disorder (SUD), which are the latest healthcare-related scams to draw the attention of the DOJ.

Lack of Oversight in Substance-Use Disorder (SUD) Leads to Fraud

According to four experts who co-authored a blog post in Health Affairs, America’s opioid epidemic has affected more than 20 million lives and become a “hot spot” for healthcare fraud.

“Substance-use disorder (SUD) treatment was a $9 billion per year industry in 1986 and is now a $35 billion industry that is expected to reach $42 billion in 2020,” they wrote. Thus, it has given rise to escalating opioid-related scams by unethical clinical laboratories, healthcare providers, and recovery-house operators.

Anuradha Rao-Patel, Lead Medical Director Government Programs at Blue Cross and Blue Shield of North Carolina; Michael Adelberg, Principal and Healthcare Strategy Lead at Faegre Baker Daniels Consulting; Samantha Arsenault, Vice President of National Treatment Quality Initiatives at Shatterproof; and Andrew Kessler, JD, Founder and Principal of Slingshot Solutions, explained in Health Affairs how lack of oversight led to the increase in fraud.

“While current regulations around SUD treatment aim to protect patient safety instead of criminalize addiction treatment, they vary by state—and in some states, patient protections are limited,” they explained. “This lack of oversight invites deceptive business practices, insurance fraud, patient neglect, and ultimately, treatment malpractice that can damage lives and tear families apart.”

In December 2019, the US Department of Health and Human Services (HHS) Office of the Inspector General (OIG) released its Semiannual Report to Congress. The report details the $5.9 billion HHS recovered from healthcare fraud investigations during fiscal year 2019, more than double the amount of the prior year.

Included in that amount was a $17 million settlement with Acadia Healthcare (NASDAQ:ACHC), and its subsidiary, CRC Health, LLC, which allegedly defrauded Medicaid out of $8.5 million from 2012 to 2018. According to a DOJ press release, the clinical laboratory testing reimbursement scheme ended in the largest healthcare fraud settlement in West Virginia history.

“Medicaid fraud is not a victimless crime,” US Attorney Michael Stuart (above) said in the DOJ press release. “In [the Acadia Healthcare] case, every dime in false billings was doubled for a total settlement that represents twice the harm caused. This is a strong message and a massive penalty. The message is clear—if you are cheating the system and we find you, you’ll not only pay for the damage done, but far more.” (Photo copyright: Wikipedia.)

The Health Affairs authors focused on the major players in addiction treatment-related fraud that were highlighted in a 2018 Government Accountability Office (GAO) report. They are:

  • SUD treatment providers who take advantage of “gaps in regulations and quality assurance to offer substandard and fraudulent care that endangers patients and wastes money.”
  • Unlicensed patient brokers who SUD providers pay to transport addicts to them, often from hundreds of miles away.
  • Disreputable recovery house or “sober home” operators who are subsidized financially by fraudulent SUD providers.

One example the GAO report outlined involved SUD providers in Florida who funded their illegal operations by billing patients’ insurance hundreds of thousands of dollars in unnecessary drug testing over the course of several months.

“At the very moment that ethical healthcare providers are working harder than ever to address the opioid crisis, unethical actors—such as providers engaged in fraud—pose a growing problem,” the Health Affairs authors stated.

Opioid Crisis Turns Urine Screening into ‘Liquid Gold’

Kaiser Health News (KHN) reported that many doctors who prescribe opioids began making drug screenings routine in their practices after being persuaded that doing so would keep them in good standing with licensing boards and law enforcement, while also reducing their liability and preventing patient abuse of prescription pills.

In some instances, doctors opened their own clinical laboratories, KHN stated.

KHN described the nation’s painkiller addiction as turning urine screening into “liquid gold,” particularly for doctors who operate their own clinical laboratories. In 2014 and 2015, Medicare paid $1 million or more for drug-related tests billed by healthcare workers at more than 50 pain management practices in the US, KHN reported.

“It was almost a license to steal. You had such a lucrative possibility, it was tempting to sell as many [tests] as you can,” Charles Root, PhD, Senior Consultant at consulting firm CodeMap, told KHN. CodeMap provides publications, tools, and services that help healthcare professionals navigate the federal Medicare program and has tracked the increase in medical testing laboratories in doctors’ offices, KHN noted.

The graphic above is built on data from CodeMap. It illustrates the “explosive” growth in certain urine tests to “detect and quantify a variety of drugs,” according to KHN. This has led some providers to open clinical laboratories in their offices to capture the increasing revenue generated by this testing. (Image copyright: Kaiser Health News.)

Federal officials have taken notice of physicians whose priority is testing patients, not treating them. Jason Mehta, JD, who at that time was Assistant US Attorney in Jacksonville, Fla., told KHN, “We’re focused on the fact that many physicians are making more money on testing than treating patients. It is troubling to see providers test everyone for every class of drugs every time they come in.”

Clinical laboratories have an important role to play in identifying fraud and solving the opioid epidemic. Not only are lab leaders ideally positioned to help providers better understand drug test ordering and interpretation, but also to help develop value-based interventions within the continuum of care for this national health crisis.

—Andrea Downing Peck

Related Information:

Fraud’s Newest Hot Spot: The Opioid Epidemic and the Corresponding Rise of Unethical Addiction Treatment Providers

U.S. Department of Health and Human Services Office of Inspector General: Semiannual Report to Congress: April 1, 2019-Sept. 30, 2019

United States Attorney Announces $17 Million Healthcare Fraud Settlement

Substance Use Disorder: Information on Recovery Housing Prevalence, Selected States’ Oversight, and Funding

Liquid Gold: Pain Doctors Soak Up Profits by Screening Urine for Drugs

National Health Care Fraud Takedown Results in Charges Against Over 412 Individuals Responsible for $1.3 Billion in Fraud Losses

10 Popular Health Care Provider Fraud Schemes

Preparing Clinical Laboratories for Invasive Federal Enforcement of Fraud and Abuse Laws, Increased Scrutiny by Private Payers, New Education Audits, and More

Administrative Costs Highest in US, According to NEJM and Health Affairs Studies; Reduction Efforts Will Impact Clinical Laboratories

Clinical laboratory test claims make up a substantial proportion of all claims filed each year. Thus, any effort to streamline or reform claims adjudication and administration in the US will alter how labs and pathologists conduct business

Clinical laboratory managers and anatomic pathologists know how costly and complex the US healthcare system can be. However, expenses associated with care and treatment are only part of the total picture. Resources devoted to paperwork and administrative costs apparently increase overall expenditures associated with healthcare to a much higher degree than is generally known.

That’s according to several studies The New York Times reported on in July.

US Administrative Costs Higher than All Other Nations

One study conducted by The New England Journal of Medicine (NEJM) in 2003 estimated administrative costs account for approximately 30% of all healthcare expenditures in the US. The researchers examined data from 1999 to reach those conclusions. In today’s economy, those numbers are higher. On average, $5,700 of every $19,000 that US workers and their employers pay for family coverage each year goes towards administrative costs.

A 2014 study published by Health Affairs compared administrative costs for US hospital expenditures to those of seven other countries: Canada, England, France, Germany, the Netherlands, Scotland, and Wales. This study evaluated data from 2010/2011 and found that hospital administrative costs in the US far exceed rates in other nations. According to the study, administrative costs accounted for:

  • 25.3% of total hospital expenditures in the US;
  • 19.8% in the Netherlands;
  • 15.5% in England; and,
  • 12% in Canada and Scotland.

According to the Health Affairs study, more than $150 billion could have been saved in 2011 by reducing per capita spending for administrative costs to the levels observed in Canada and Scotland.

“The extraordinary costs we see are not because of administrative slack or because healthcare leaders don’t try to economize,” Kevin Schulman, MD, Professor, Department of Medicine, Duke University, and co-author of the Health Affairs study told The New York Times. “The high administrative costs are functions of the system’s complexity.” (Photo copyright: Duke University.)

Complexity of Payer System Partly to Blame

One reason for the costliness in the US healthcare system is the myriad of payers that healthcare organizations have to grapple with to receive payment. Private health insurers and public health programs like Medicare and Medicaid, each have their own procedures, regulations, and forms that need to be submitted to receive payments. This translates to more employee time devoted to billing.

Another factor driving costs is the staff time devoted to the collection of debts. A 2017 Health Affairs study examined medical claims data from 88,000 healthcare providers contracted with Athenahealth to determine the percentage of bills paid within one year from the initial service.

The study found that 93.8% of patient bills under $35 were paid within a year. However, that percentage decreased as the patient obligation increased:

  • 90.5% of patients paid bills between $35 and $75 within one year;
  • 83.7% paid bills between $75 and $200 in the same time period; however,
  • When bills increase to $200 or more, just 66.7% were paid within a year’s time.

Providers wrote off approximately 16% as abandoned or bad debts, with an additional 17% going to collection agencies.

Another study, published in Health Affairs in 2009, surveyed 895 physicians about the time they spent dealing with administrative tasks. On average, physicians reported spending 43 minutes per workday interacting with health plans. This number is the equivalent of three hours/week and almost three weeks/year. Those numbers have reportedly increased since then.

EHRs Do Not Reduce Administrative Costs, Contrary to Belief

Efforts have been made to reduce administrative costs in the US healthcare industry. One such measure involved increased use of certified electronic health record (EHR) systems, which the federal government spent billions of dollars promoting and incentivizing providers to adopt on the claim that EHRs would reduce healthcare costs, in part by removing most of the paperwork.

However, a 2018 study published in the Journal of the American Medical Association (JAMA) reported the adoption of EHRs did not reduce administration costs. Researchers at Duke University and Harvard Business School utilized a cutting-edge accounting method to determine the administrative costs within a large academic healthcare system that was using a certified EHR.

Their study determined the administrative costs for processing a single medical bill ranged from $20 for a doctor visit to $215 for an inpatient surgical procedure. These costs accounted for 3%-25% of total professional revenue for the provided services.

“We need to understand better how complexity is driving these enormous costs within the system, costs that do not add value to patients, employers, or providers,” noted Barak Richman, JD, PhD, Duke University School of Law and Margolis Center for Health Policy, one of the study’s authors.

Clinical Lab Test Claims a Major Portion of Administrative Costs

Nevertheless, administrative costs are a necessary part of doing business and not always as negative as perceived. An article published by Health Affairs in 1992 divided administrative costs in the healthcare industry into four categories:

  • Transaction-related: claims processing, billing, admissions, and tracking employee hiring/terminations;
  • Benefits Management: quality assurance, plan design, statistical and internal analyses, and management information systems;
  • Selling and Marketing: strategic planning, underwriting, and advertising; and,
  • Regulatory and Compliance: waste management, licensing requirements, and discharge planning.

“We hope that this work is the first step toward informing policy solutions that could reduce these non-value-added costs largely hidden within the healthcare system,” Schulman stated in a Duke University news release.

The issue of costly paperwork and administrative expenditures is significant for the clinical laboratory profession as lab test claims make up a substantial portion of all medical claims filed annually. Efforts to streamline or reform claims adjudication and administration will have an impact on the way clinical labs and anatomic pathology groups conduct business in the future.

—JP Schlingman

Related Information:

Hidden from View: The Astonishingly High Administrative Costs of U.S. Health Care

NEJM: Costs of Health Care Administration in the United States and Canada

Heath Affairs: A Comparison of Hospital Administrative Costs in Eight Nations: US Costs Exceed All Others by Far

Heath Affairs: Inside the Black Box of Administrative Costs

Heath Affairs: As Patients Take on More Costs, Will Providers Shoulder the Burden?

Heath Affairs: What Does It Cost Physician Practices to Interact with Health Insurance Plans?

Electronic Health Records Don’t Reduce Administrative Costs

Simplifying Administration of Health Insurance

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