Clinical laboratories are being squeezed on both sides as rising healthcare costs affect their patients while increasing health plan costs impact their employees’ health coverage
When UnitedHealthcare CEO Brian Thompson was murdered on Dec. 4, the nation’s attention focused on the negative impact ever-increasing costs of healthcare coverage is having on the average American. Clinical laboratories and anatomic pathology groups experience this trend firsthand as annual increases in the cost of health plans affect their employees.
To understand just how raw the public is feeling about health insurance, consider that in a recent Emerson College poll, 41% of respondents ages 18-29 stated that Thompson’s murder was “completely” or “somewhat” acceptable.
While the majority of the country believes that such violence is not an acceptable way to solve one’s problems, the message is clear that Americans’ waning trust in health insurance companies has reached unhealthy levels.
“Health insurance costs are far outpacing inflation, leaving more consumers on the hook each year for thousands of dollars in out-of-pocket expenses. At the same time, some insurers are rejecting nearly one in five claims. That double whammy is leaving Americans paying more for coverage yet sometimes feeling like they’re getting less in return,” CBS News reported.
Twenty-five years of increases from the insurance industry make it clear why the relationships between healthcare consumers and insurance companies has soured.
“Employers are shelling out the equivalent of buying an economy car for every worker every year to pay for family coverage,” said Kaiser Family Foundation President and CEO Drew Altman (above) in a news release. “In the tight labor market in recent years, they have not been able to continue offloading costs onto workers who are already struggling with healthcare bills.” Clinical laboratories and pathology groups are among those employers struggling to provide affordable health coverage for their employees. (Photo copyright. Kaiser Family Foundation.)
People Are Frustrated
The cost of living in America has risen dramatically in the past decade. So much so that people are increasingly becoming frustrated and lashing out against companies that appear to be making record profits while their customers struggle to pay for their products and services.
A recent Kaiser Family Foundation (KFF) Health Tracking Poll found that “About one in five adults (19%) say they have difficulty affording their bills each month and about four in 10 (37%) say they are just able to afford their bills each month, while a little over four in 10 (44%) say they are both able to pay their bills and have some money left over.”
Simultaneously, according to KFF, “Employees’ share of their [health insurance] premiums are also on the rise, with a worker with family coverage typically paying premiums of $5,700 per year in 2017, the most recent year for that data, up from about $1,600 in 2000. … The average family deductible—the amount paid out-of-pocket before insurance kicks in—has increased from $2,500 in 2013 to $3,700 in 2023.”
This double-whammy in costs has a growing number of American’s worrying about unexpected healthcare bills and the overall cost of keeping their families adequately covered for the future.
“We’ve gotten to a point where healthcare is so inaccessible and unaffordable, people are justified in their frustrations,” said Céline Gounder, MD, a CBS News medical contributor and editor-at-large for public health at KFF Health News.
The chart above taken from a KFF Health Tracking Poll (Jan. 30-Feb. 7, 2024) shows participants’ answers when asked, “How worried, if at all, are you about being able to afford each of the following for you and your family?” Results indicate, according to KFF, that three in four people polled are worried about paying future healthcare bills and covering increasing insurance costs. (Graphic copyright: KFF.)
AI and Coverage Denials
Coverage denials is another sore spot for many people, impacting nearly one in five claims in nongroup qualified health plans in 2021, KFF found. This ranged from 2% to 49% depending on the company.
“When you are paying for something, they don’t give it to you, and they keep raising prices … you will be frustrated by that,” Holden Karau, a software engineer and creator of Fight Health Insurance, a free online service that helps people appeal their denials, told CBS News. Karau’s company uses artificial intelligence (AI) to help customers create appeal letters.
But the use of AI in healthcare coverage has also drawn criticism. Insurance companies are increasingly using AI to review claims and issue denials, and the lack of transparency has led to lawsuits. Last year, CBS News covered lawsuits brought by the families of two deceased individuals who accused UnitedHealthcare of “knowingly” using a “faulty” AI algorithm to deny the patients medically necessary treatments.
Karau noted, “With AI tools on the insurance side, they have very little negative consequences for denying procedures,” CBS News reported. “We are seeing really high denial rates triggered by AI. And on the patient and provider side, they don’t have the tools to fight back,” she added.
“Unhappiness with insurers stems from two things: ‘I’m sick and I’m getting hassled,’ and the second is very much cost—‘I’m paying more than I used to, and I’m paying more than my wages went up,’” Rob Andrews, CEO of Health Transformation Alliance, a company that helps healthcare providers and other self-insured companies improve coverage for their employees, told CBS News. “A lot of people think they are getting less,” he added.
Effects on Clinical Laboratories
Even as individuals and families pay more money each year in healthcare premiums, deductibles, and out-of-pocket expenses, clinical laboratories have seen payers cut reimbursement for many lab tests. Thus, labs are dealing with a double-squeeze on their finances. On the income side, reimbursement for tests is under pressure, while on the cost side, the cost of health benefits for employees climbs annually.
Clinical lab and pathology managers will want to stay aware of these trends and take advantage of any opportunity to lower costs and pass on those savings to their patients.
Healthcare industry watchdog Group Leapfrog says that if CMS suppresses the data “all of us will be in the dark on which hospitals put us most at risk”
For some time, hospitals and clinical laboratories have struggled with transparency regulation when it comes to patient outcomes, test prices, and costs. So, it is perplexing that while that Centers for Medicare and Medicaid Services (CMS) pushes for more transparency in the cost of hospital care and quality, the federal agency also sought to limit public knowledge of 10 types of medical and surgical harm that occurred in hospitals during the COVID-19 pandemic.
And even though the CMS announced in its August 1 final rule (CMS-1771-F) that it was “pausing” its plans to suppress data relating to 10 measures that make up the Patient Safety and Adverse Events Composite (PSI 90), a part of the Hospital-Acquired Condition (HAC) Reduction Program, it is valuable for hospital and medical laboratory leaders to understand what the federal agency was seeking to accomplish.
According to USA Today, medical complications at hospitals such as pressure ulcers and falls leading to fractures would be suppressed in reports starting next year. Additionally, CMS “also would halt a program to dock the pay of the worst performers on a list of safety measures, pausing a years-long effort that links hospitals’ skill in preventing such complications to reimbursement,” Kaiser Health News reported.
The proposed rule’s executive summary reads in part, “Due to the impact of the COVID-19 PHE on measure data used in our value-based purchasing (VBP) programs, we are proposing to suppress several measures in the Hospital VBP Program and HAC Reduction Program … If finalized as proposed, for the FY 2023 program year, hospitals participating in the HAC Reduction Program will not be given a measure score, a Total HAC score, nor will hospitals receive a payment penalty.”
In a fact sheet, CMS noted that its intent in proposing the rule was neither to reward nor penalize providers at a time when they were dealing with the SARS-CoV-2 outbreak, new safety protocols for staff and patients, and an unprecedented rise in inpatient cases.
“We want the public to have complete trust in the data and will only be providing data we have determined has a high confidence of credibility and accuracy,” said CMS Chief Medical Officer Lee Fleisher, MD (above), Director of the CMS Center for Clinical Standards and Quality in a statement, Axios reported. Clinical laboratory leaders would find it more difficult to compare the performance of their hospitals against peer hospitals, should this proposed rule take effect as written. (Photo copyright: Lee Fleisher.)
Groups Opposed to the CMS Proposal
Like healthcare costs, quality data need to be accessible to the public, according to a health insurance industry representative. “Cost data, in the absence of quality data, are at best meaningless, and at worst, harmful. We see this limitation on collection and publication of data about these very serious safety issues as a step backward,” Robert Andrews, JD, CEO, Health Transformation Alliance, told Fortune.
The Leapfrog Group, a Washington, DC-based non-profit watchdog organization focused on healthcare quality and safety, urged CMS to reverse the proposal. The organization said on its website that it had collected 270 signatures on letters to CMS.
“Dangerous complications, such as sepsis, kidney harm, deep bedsores, and lung collapse, are largely preventable yet kill 25,000 people a year and harm 94,000,” wrote the Leapfrog Group in a statement. “Data on these complications is not available to the public from any other source. If CMS suppresses this data, all of us will be in the dark on which hospitals put us most at risk.”
Leah Binder, Leapfrog President/CEO, told MedPage Today she is concerned the suppression of public reporting of safety data may continue “indefinitely” because CMS does not want “to make hospitals unhappy with them.”
AHA Voices Support
Meanwhile, the American Hospital Association noted that the CMS “has made this proposal to forgo calculating certain hospital bonuses and penalties due to the impact of the pandemic,” Healthcare Dive reported.
“We agree with CMS that it would be unfair to base hospital incentives and penalties on data that have been skewed by the unprecedented impacts of the pandemic,” said Akin Demehin, AHA Senior Director, Quality and Safety Policy, in a statement to Healthcare Dive.
Though CMS’ plans to limit public knowledge of medical and surgical complications have been put on hold, medical laboratory leaders will want to stay abreast of CMS’ next steps with this final rule. Suppression of hospital harm during a period of increased demand for hospital transparency could trigger a backlash with healthcare consumers.
Despite high-hopes and much fanfare, the collaboration failed to transform healthcare and lower healthcare costs for everyday Americans as many anticipated it would
Another anticipated “disruptor” to today’s healthcare market is closing its doors. Three years ago, in 2018, Amazon (NASDAQ:AMZN), Berkshire Hathaway (NYSE:BRK.A), and JPMorgan Chase (NYSE:JPM) announced a joint venture to enter into the healthcare market and use their combined market leverage to secure lower-cost healthcare for their 1.2 million employees. At that time, healthcare business experts suggested Haven Healthcare (Haven), as the non-profit joint venture was named, might become a transformative healthcare model other companies could follow.
But that was not to be. In January, the companies announced Haven would close its doors in February. Why did it fail to accomplish its goals? And how will its demise affect the healthcare benefits provided to the thousands of people employed at these companies? The answers to these questions should be of interest to pathologists and medical laboratory managers who want to position their clinical labs as high-quality, added-value contributors to patient care.
One Expert’s Opinion on Demise of Haven Healthcare
In an article he penned for Harvard Business Review, titled, “Why Haven Healthcare Failed,” John S. Toussaint MD, an internist, former healthcare CEO, and founder and Executive Chairman of Catalysis, a non-profit healthcare educational institute, outlined three major reasons for Haven’s closing:
Insufficient Market Power: According to Toussaint, the three companies simply did not have the market power to dominate a large enough share of any local market. In addition, with a combined 1.2 million employees, the companies did not have enough employees to incentivize providers into lowering prices.
Perverse Incentives: In the current healthcare environment, US insurers and providers make huge profits from treating disease. This means there is little incentive to keep people out of hospitals or accept the risks associated with fixed-price capitation.
Poor Timing: The COVID-19 pandemic forced providers to focus on and manage the crisis, which, in turn, caused them to postpone or even cancel elective and non-emergency medical procedures, resulting in financial hits and the unwillingness to take on the uncertainty associated with new, possibly dubious arrangements.
Why Is It Hard to Disrupt Healthcare?
Jeff Becker, Principal Analyst, Healthcare, CB Insights, told Quartz, “Haven is yet another cautionary tale to outsiders [who] hope to disrupt the industry that their ambition is likely unrealistic and that solving key industry problems proves to be far more difficult than most anticipate.”
Other experts point to a vague plan, an overly ambitious strategy, difficulty retaining top talent, a lack of visible progress, and the divergence of interests between the three companies as potential reasons for Haven’s demise, Quartz reported.
“Haven’s decision to cease operations proves just how hard it is to disrupt the healthcare system in America,” Robert Andrews, JD (above), a former US Congressman for the state of New Jersey, and CEO of Health Transformation Alliance, told Forbes. “Even three of the largest and most influential employers in the country found the challenge a very steep one. We share with Haven’s founders the conviction that employer sponsorship is key.” (Photo copyright: United States House of Representatives.)
Did Haven Healthcare Demonstrate Any Innovation?
It is unclear what the collaboration accomplished or what exactly led to its demise, but it does seem that some positive developments were created through the venture.
According to Forbes, Haven Healthcare stated on its now-defunct website, “In the past three years, Haven explored a wide range of healthcare solutions, as well as piloted new ways to make primary care easier to access, insurance benefits simpler to understand and easier to use, and prescription drugs more affordable. Moving forward, Amazon, Berkshire Hathaway, and JPMorgan Chase and Co. will leverage these insights and continue to collaborate informally to design programs tailored to address the specific needs of their own employee populations.”
At least one of the three partners may have anticipated Haven’s closure and taken proactive steps. In January of 2020, Dark Daily reported that Amazon Care launched a pilot program which offers virtual primary care to its Seattle employees, and features both telehealth and in-home care services, including clinical laboratory testing.
At that time, we noted the similarities with Haven Healthcare.
And in “Amazon Building Labs to Do COVID-19 Testing,” Dark Daily’s sister publication The Dark Report covered how, as a result of the COVID-19 pandemic, Amazon built and now operates multiple clinical laboratories for testing its employees.
Amazon has a history of entering an industry and successfully disrupting it. Its willingness to build lab testing facilities to do its own COVID-19 testing may be the first step in a multi-year strategy to enter the clinical laboratory industry and disrupt it by offering better quality lab testing services at a cheaper price.
Thus, it is likely these medical laboratories will continue to deliver clinical testing even after the pandemic has officially ended and will compete with local independent clinical laboratories.
