News, Analysis, Trends, Management Innovations for
Clinical Laboratories and Pathology Groups

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News, Analysis, Trends, Management Innovations for
Clinical Laboratories and Pathology Groups

Hosted by Robert Michel
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Health Systems Putting Imaging Services, Such As MRIs, In Strip Malls and Shopping Centers To Help Patients with Cost and Convenience

Recognizing the need to serve patients with high-deductible health plans, hospital systems are opening healthcare centers in outpatient settings where patients can receive care and undergo procedures—including clinical laboratory tests—more conveniently and for less cost

Health systems are putting medical imaging services, such as MRIs, in strip malls and shopping centers as a way to make it easier for patients. Such locations can also offer lower-cost procedures because of lower overhead compared to imaging centers located in hospitals. This trend to offer patients more convenient service at a lower cost is something that clinical laboratory managers and pathologists should watch and understand.

One driver behind this trend is the growing number of Americans enrolled in High Deductible Health Plans (HDHPs), where deductibles can exceed $6,000 for individuals and $12,000 for families. With such high deductibles, patients are now keenly focused on the cost of their healthcare. Medical laboratories and anatomic pathology groups have been impacted by this trend, as more patients shell out cash to pay for walk-in procedures and providers must collect full payments for services rendered.

Hospitals and health systems recognize the increased demand for outpatient, lower-priced medical services, along with price transparency. Patients with HDHPs are one reason why hospital bad debt is growing.

Healthcare Shopping Drives Lower Costs and Convenience

Price shopping on the Internet for medical services also is becoming more popular due to the availability of online doctor and facility ratings and easily-accessible price comparisons.

There are more than 7,000 stand-alone imaging centers in the US that operate independently of hospitals. About 70% of diagnostic imaging services occur in hospital settings with the other 30% performed in outpatient facilities.

According to Amino, a healthcare transparency company based in San Francisco, the cost for an MRI can vary significantly depending on where a patient lives and what type of facility is utilized for the test. Their research found that the cost of a limb MRI can range from hundreds of dollars at a freestanding facility to as much as $4,000 at a hospital. In some states, the price difference between getting an MRI at a hospital versus a stand-alone facility was almost $2,000. The average cost of having an MRI performed in a hospital setting is $2600.

Based on data from Amino, the graphic above illustrates the wide range of prices for MRIs throughout the country, and the cost disparity between hospital and free-standing medical imaging centers. In the future, pathologists and clinical laboratory managers can expect to see the publication of similar graphs that show the variation in the cost of clinical laboratory tests and anatomic pathology procedures, not just by state, but by individual laboratories. (Graphic copyright: MBO.)

Smart Choice MRI, based in Mequon, Wis., charges a maximum price of $600 for an MRI. The company now has 17 locations in Illinois, Minnesota, and Wisconsin, but plans to have 90 facilities within the next three years.

“The rise of high deductible health plans has fueled consumers who understand their options and demand a higher level of service from their providers,” Rick Anderson, Chief Executive Officer of Smart Choice MRI told the StarTribune. “Quality, service-focused care at a fair, transparent price has never been more important.”

Anderson added that his company can handle 94% of MRI procedures in their convenient, freestanding imaging facilities.

“I think the quality is very good, but we’ve combined the cost and quality, and most importantly the convenience of being in the neighborhood where people are shopping,” Anderson said. “If you look at our Richfield (Minnesota) location, we’re literally next to SuperTarget, Caribou Coffee, Noodles and Company, and Qdoba.”

Public and Private Health Insurers Shift Payments to Free-standing Facilities

Anthem recently announced they will no longer pay for outpatient MRIs and CT scans performed at hospitals in almost all of the states where the health insurer does business. They are requiring patients to have the tests performed in free-standing imaging facilities in an effort to cut costs and lower premiums. This change could affect 4.5 million people in 13 of the 14 states Anthem serves, with New Hampshire being the exception.

Diagnostic imaging is not the only medical service transitioning to outpatient facilities.

In July, the Centers for Medicare and Medicaid Services (CMS) announced that it is considering payment approval for total hip and knee replacements performed in outpatient settings. This change could go into effect as early as next year.

According to Steve Miller, Chief Operating Officer at Ambulatory Surgery Center Association, an estimated 25-50% of joint replacements could be performed on an outpatient basis.

“There’s more and more comfort among surgeons who are coming out of residencies where they trained to do surgeries on an outpatient basis,” Miller told Modern Healthcare. “The volumes are doubling year over year.”

Surgeons Approve of Free-standing Surgery Centers

There are currently more than 5,500 ambulatory surgery centers in the country and upwards of 200 of those facilities are performing outpatient joint replacement procedures. Three years ago, there were only around 25 facilities providing these services.

In 2015, there were more than 658,000 total hip and knee replacements performed on Medicare beneficiaries, according to CMS data. In 2014, the government paid more than $7 billion for the hospitalization costs of these two procedures. The CMS estimates that the cost for uncomplicated knee replacement surgeries in 2018 will be $12,381 for an inpatient procedure and $9,913 for the outpatient rate.

Physicians feel that performing joint replacements in outpatient facilities could reduce costs by up to 50%.

“I could do maybe 20% of my Medicare patients on an outpatient basis, as long as they have the support and structure at home to help them recover,” said Matthew Weresh, MD, a physician at Des Moines Orthopedic Surgeons (DMOS) in the Modern Healthcare article. “It’s a great move by Medicare.” DMOS plans to begin performing joint replacements at an ambulatory surgery center later this year.

Pathologists would be wise to monitor this trend and anticipate how anatomic pathology services might shift towards lower-cost settings. For clinical laboratories, this trend further illustrates the need to prepare for more consumers paying cash for their medical services and seeking cost-effective, high-quality options.

—JP Schlingman

Related Information:

Coming Soon to a Strip Mall Near You: An MRI Provider

MRI Competition Heats up in Twin Cities

Anthem’s New Outpatient Imaging Policy Likely to Hit Hospitals’ Bottom Line

Free Standing Imaging Center and Hospitals

Need an MRI? It Pays to Shop Around. Big Time.

Hospitals Leery of CMS Proposal to Pay for Joint Replacements in ASCs

Collecting from Patients May Get Tougher When New ACA Financial Rules for Non-profit Hospitals Became Effective January 1, 2014

The IRS is authorized to strip tax-exempt status from ‘willful and flagrant’ violators of ACA financial rules; pathologists and clinical laboratory managers should take notice

Hospitals and other providers already find it more difficult to collect larger amounts of money from patients who have high deductible health plans (HDHPs). That degree of difficulty increased on January 1, 2014. That’s the date when new regulations of the Affordable Care Act (ACA) kicked in that govern how hospitals can collect money from patients or extend financial aid to them.

Non-profit hospitals need to pay attention to the new requirements set forth by the ACA law. It is likely that these new rules will affect most hospital laboratory managers and hospital-based pathology organizations. That’s because these new rules will affect six out of 10 of the nation’s hospitals. (more…)

Medical Device Companies May Pass New 2.3% Federal Excise Tax Along to Healthcare Providers, Including Clinical Pathology Laboratories

Lots of controversy is associated with this new tax levy that was mandated by the Affordable Care Act

Will it be medical device manufacturers or their customers—including medical laboratories—who pay the new 2.3% medical device tax that became effective on January 1, 2013? That question is being asked by healthcare policymakers and experts, as well as pathologists and clinical laboratory administrators.

This new tax is mandated by the Affordable Care Act on medical device sales to healthcare providers. It taxes gross receipts of more than $5 million for manufacturers and importers of medical devices and is unpopular within the medical device industry, including in vitro diagnostics (IVD) manufacturers. (more…)

IRS Memorandum Clarifies How Hospitals and Hospital Labs May Provide EHRs to Medical Staff

To hasten the day when all Americans have an electronic health record (EHR), last year, on August 8, 2006, the U.S. Department of Health and Human Services (“HHS”) issued regulations that would allow hospitals to provide certain software and technical support services to physicians without violating federal antikickback law. Because many physicians have been slow to invest in electronic health record systems, this new regulation is designed to encourage hospitals and health systems to step into the gap and offer software and services that support EHR systems.

This is a significant development for hospital-based laboratories. It creates new opportunities to build relationships with referring physicians. But it also creates new compliance exposure for laboratories which fail operate within the parameters of the law.

Recently the IRS weighed in on issue to provide further clarification. Titled “Hospitals Providing Financial Assistance to Staff Physicians Involving Electronic Health Records”, the IRS memo spells out the circumstances necessary to meet the safe harbor requirements of the HHS policy on the provision of software and technical support services by a hospital to physicians on staff.

Since the IRS lingo is complicated, to say the least, we asked Jane Pine Wood, attorney for McDonald Hopkins and a specialist in clinical laboratory and anatomic pathology legal matters, how this change would affect hospital laboratories. Wood responded, saying:

“The IRS memorandum offers greater assurance to tax-exempt hospitals that they can provide EHRs to members of their medical staffs, in compliance with the applicable Stark exception and the applicable safe harbor under the Medicare and Medicaid anti-kickback law, without jeopardizing their tax-exempt status. It is important to note that this memorandum provides approval only to those arrangements which comply fully with the numerous criteria of the Stark exception and anti-kickback law safe harbor.”

We also asked Wood if hospital laboratories should take any special steps to react to this memo. “For many laboratory clients, particularly gastroenterology and endoscopy providers, EHRs are increasingly important,” said Wood. “So,this IRS memorandum is of significant benefit to those tax-exempt hospitals who wish to make EHRs more accessible for their clients.”

And there you have it. Hospital laboratories that want to take advantage of the memo should carefully study the Stark exception and the applicable safe harbor under Medicare and Medicaid anti-kickback law to ensure full compliance. Once this due diligence is complete, hospital laboratories can safely make EHRs more accessible to their medical staff.

Related Articles:

Hospitals Providing Financial Assistance to Staff Physicians Involving Electronic Health Records