North Carolina Providers Slow State Effort to Impose Reference Pricing They Claim Could Remove Hundreds of Doctors and Medical Service Providers from the State’s Healthcare Network

North Carolina turned to reference pricing to reduce employee health costs, but hospitals in the Tarheel State fought back

Efforts by North Carolina’s State Health Plan to adopt reference pricing for its state employees have largely failed, due to united opposition to the reimbursement model by the state’s hospitals, Modern Healthcare reported.

Clinical laboratory leaders are aware that reference pricing is a tool employers and health insurer can use to reduce the wide variation different providers charge for the same clinical service. In 2016 our sister publication, The Dark Report, devoted an entire issue to the subject of reference pricing. (See TDR, “The Newest Threat to Lab Revenues: Reference Pricing in Healthcare,” September 6, 2016.)

The Dark Report wrote about the reference pricing pilot conducted by Safeway, the grocery chain, in collaboration with Anthem, Inc. (NYSE:ANTM), the large health insurance company. The reference pricing program had these elements:

  • When Safeway employees and their beneficiaries chose a lab that priced its tests below the 60th percentile, the patient qualified for the health plan’s benefits. But if the patient chose a lab with test prices above the 60th percentile, that patient was responsible for the full cost of the test.
  • Safeway employees and their beneficiaries were given a real-time price checking tool that they could access by web browser and smart phone. This app, developed by Castlight Health, Inc., of San Francisco, showed the prices each lab in the Safeway/Anthem network charged for the same lab test, along with the percentile price of that test.

As reported in JAMA Internal Medicine, Safeway introduced reference pricing into its health insurance design for 15,000 employees in 2011. Three years later, the company and its employees were spending 32% less for clinical laboratory tests and saved $2.57 million during the years 2011 to 2013.

The reference pricing program at Safeway, which focused primarily on clinical laboratory testing, succeeded because of the large variability in how different labs price the same tests. For example, as TDR reported:

  • For a basic metabolic panel, which was the most commonly prescribed test, prices among different labs ranged from $5.75 to $126.44; and
  • Prices for a lipid panel ranged from $8.85 to $74.92.
A screenshot of a cell phone

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The graphic above, taken from the Safeway/Anthem observational study of “changes in laboratory pricing and selection by employees … before and after a reference pricing policy for laboratory services,” illustrates the wide range of prices Safeway paid for the 10 most common clinical laboratory tests. (Graphic copyright: American Medical Association/JAMA Internal Medicine.)

Typically, a reference pricing arrangement is done to lower costs, decrease disparities in pricing for similar medical services, and make health plans more attractive to employers. This is why state health plans are looking at implementing reference price reimbursement models as a way to reduce healthcare costs for state employees and other beneficiaries.

North Carolina Providers Respond Negatively to State Reference Pricing Plan

North Carolina’s State Health Plan encountered resistance from the state’s medical community when it attempted to implement a similar reference-price reimbursement model.

The state’s health plan covers more than 727,000 beneficiaries, including teachers, state employees, retired employees, and their dependents. It is overseen by the State Treasurer and administered by BlueCross BlueShield of North Carolina (Blue Cross NC).

In October 2018, North Carolina’s state health plan board of trustees unanimously approved the Clear Pricing Project, a reference-pricing program championed by State Treasurer Dale Folwell. A 2019 Blue Cross NC State Health Plan Network Master Reimbursement Exhibit document states, beginning in 2020, most hospitals would get 160% of the Medicare rate for inpatient services and 230% for outpatient services; rural providers would get more.

Pricing for medical lab and pathology services also was set at 160% of the Medicare rate. The document states, “Except for services identified by Medicare as CLIA Excluded or CLIA Waiver, In-Office Laboratory Service fees will be limited to those services for which you have provided Blue Cross and Blue Shield of North Carolina with evidence of CLIA certification.”

North Carolina’s healthcare providers had no choice but to agree to the pricing to be included in the state’s provider network, but they were not happy about the arrangement.

NCHA Warns Hundreds of Providers Could Be Pushed Out of Network

Hospitals countered with a public relations and lobbying campaign through the North Carolina Healthcare Association (NCHA). Soon after Folwell’s announcement, the NCHA issued a statement claiming that his plan “could force hundreds of providers out of the State Health Plan network or out of business.” The NCHA estimated the potential losses to hospitals and health systems at “upwards of $400 million.”

In the statement, NCHA President Steve Lawler said, “We believe the treasurer is not being transparent about what this proposal will do to state health plan members and their families.”

As an alternative, the NCHA proposed that the state examine value-based approaches such as “case management, outcomes-based payment models, and member education as ways to manage costs.”

The organization established a web page explaining its opposition to the state’s plan and pushed for legislation that would delay its implementation. House Bill 184, which sought to delay implementation of the state’s healthcare reimbursement plan, passed the state House of Representatives in April, before stalling in the Senate in May, North Carolina Health News reported.

Many providers simply refused to sign the necessary contracts, Modern Healthcare reported, even after Folwell agreed to increase the average rate to 196%. In August, he relented and announced that for 2020, the provider network will consist of the North Carolina State Health Plan Network—28,000 providers that had signed on to the Clear Pricing Project—plus the Blue Options PPO Network, which includes providers that had not agreed to the new pricing.

That makes for a total of more than 68,000 providers, states a news release from the treasurer’s office. After the change was announced, providers in the State Health Plan Network were permitted to revert to the Blue Options PPO Network rates.

States may approach implementing reference pricing in different ways, which will likely lead to a distinct disparity in outcomes. Nevertheless, whatever approach is used, medical laboratories and pathology groups will want to understand how reference pricing works and how it may be implemented in their states.

Armed with that understanding, they may want to pursue a proactive strategy of aligning the prices of their lab tests to be at the 50th percentile or lower to avoid being the highest-priced labs in their communities and regions.

—Stephen Beale

Related Information:

NC Aims to Tie Reimbursement to Medicare for State Employees

N.C. Walks Back Reference-Based Pricing Plan for State Workers

Association of Reference Pricing for Diagnostic Laboratory Testing with Changes in Patient Choices, Prices, and Total Spending for Diagnostic Tests

Association of Reference Pricing for Diagnostic Laboratory Testing with Changes in Patient Choices, Prices, and Total Spending for Diagnostic Tests

State Health Plan Proposed Changes Threaten Healthcare Access for All

North Carolina’s Healthcare Leaders Send Open Letter to NCGA Senators

NCHA Statement on Revised State Health Plan Proposal

NC Healthcare Providers Renew Call for Collaboration on State Health Plan

No Change for State Health Plan Members in 2020

NC State Health Plan Announces Network for 2020

NC State Health Plan Network Increases Payments to Hospitals and Reopens Sign-Up Period

NC State Health Plan Network Contracts Now Available to Medical Providers as Part of Clear Pricing Project

Bill Filed to Stop State Health Plan from Making Health Care Affordable for State Employees

State Health Plan Board of Trustees Unanimously Supports Provider Reimbursement Initiative That Lowers Health Care Costs

State Health Plan Launches New Provider Reimbursement Effort

Plan to Peg State Employee Health Plan Prices to Medicare Rates May Face Legislative Opposition

No More Negotiations: State Health Plan Wants Clearer Process, Lower Prices

On State Health Plan Changes, Folwell Hits Gas While Lawmakers Threaten to Tap Brakes

Treasurer Moves Forward with Health Care Pricing Plan Despite Uncertainty

Lawmakers Derail State Treasurer’s Plan to Change State Health Plan Reimbursement

North Carolina State Health Plan Network Master Reimbursement Exhibit April 2019

Are Recent Predictions Regarding the Future of Healthcare Positive or Negative for Clinical Laboratories?

Medical laboratories that develop appropriate clinical strategies may find opportunities to leverage several new technologies expected to have a big impact on providers

Industry experts often speculate how developing technologies will impact healthcare. However, clinical laboratory leaders may be surprised by how much blockchain, medical malls, and Uber Health are expected to alter healthcare delivery in the next decade.

An article in FierceHealthcare states that “Healthcare is on the cusp of a technology revolution. Technology is primed to disrupt healthcare more explosively than it has any other industry.”

Medical advancements certainly impact clinical laboratories and anatomic pathology groups, and any acceleration in these developing technologies applied to healthcare will certainly be of interest to lab leaders who want to ensure their labs are ready.

Blockchain Provides Healthcare Security, Privacy, and Interoperability

Authored by Sloan Gaon, CEO, PulsePoint, the FierceHealthcare article predicts that blockchain will be an important feature in the future of healthcare. It will allow patients to have an online, accurate health record that is accessible only to necessary parties in real time. Consumers will be able to maintain, control, and share their data as they wish while increasing the security, privacy, and interoperability of their health information.

“A primary care physician could access a complete medical history of the member, while the radiologist could be limited to only the specifics he or she needs to perform the task at hand. For each, it’s about accessing the right data at the right time, and the blockchain technology could enable this type of specific ‘need-to-know’ medical history access,” wrote Bruce Broussard, President and CEO of Humana in a LinkedIn article.

The blockchain records can be shared among a network of computers and kept secure via cryptography. And the technology allows for easy transferability among different networks, improving performance and outcomes for patients. Broussard also stated that blockchain technology will provide more efficient payment for insurance claims.

“With transparency and automation, greater efficiencies will lead to lower administration costs, faster claims, and less money wasted. Blockchain enables claims to be paid without an intermediary, since health plan members are connecting directly with their providers. These consumers can also access their permanent electronic health records in a secure fashion, enabling them to have a real-time understanding of their health,” he wrote.

Should blockchain achieve widespread adoption as a platform for patient health information, the clinical laboratory industry will need to address the problem of different test methodologies and different reference ranges for test results. If blockchain makes it feasible to bring all pieces of a single patient’s cumulative health data into a single record, then clinical labs will need to address that problem in an effective way.

In his FierceHealthcare article, Sloan Gaon, CEO of PulsePoint, said “Technology will drive innovation, automation, transparency and efficiency, rendering the current healthcare landscape unrecognizable. As technology garners healthcare’s gold seal of approval, its effects will upend the industry, shrinking costs and improving outcomes.”

Medical Malls a Win-Win for Healthcare Providers and Retail Locations

With big shopping malls dying due to economic recessions and the emergence of online retail destinations, property owners are seeking new tenants. In the summer of 2017, there were still about 1,100 malls remaining in the US, however, a quarter of them were at a risk of closing within five years, Time noted that year.

As healthcare organizations expand, there is an overwhelming need for suitable space that is accessible for consumers at a reasonable price. Fading shopping malls with their convenient locations, sturdy foundations, and large parking lots could fill that gap.

In February of 2017, Avita Health System opened a boutique hospital in a space once occupied by an anchor store in a mall located in Ontario, Ohio. The healthcare provider purchased a 185,000 square-foot space that was formerly a Lazarus department store.

Mansfield News Journal reported that when the hospital opened, it included a walk-in clinic, an emergency room, surgical suites, pre-operative and post-operative areas, an onsite pharmacy, imaging services, a clinical laboratory, and 30 acute care beds.

Other services, including a Level II Cath lab, a maternity center, and the installation of a 3T Magnetic Resonance Imaging (3T MRI) machine, have been added since the facility opened. And there’s room for more expansion at the site.

Vanderbilt Medical Group (VMG) now occupies the entire second level of One Hundred Oaks Mall, in Nashville, Tenn. Their services at the once-struggling retail shopping center include 22 specialty clinics in 450,000 square feet of space designed by architecture firm Gresham Smith.

Patients can pick up a pager at the VMG facility and then shop on the lower level while waiting to be paged to see a healthcare professional or receive test results.

“More important than the significant increase in our available clinical space is the overall concept and design which is focused on providing our patients, faculty, and staff with a new paradigm for health and wellness. The convenience, accessibility, and innovative ways of providing care for our patients are a true transformation of both the architecture and the way our patients experience healthcare,” said Cyril Stewart, former Director of Facility Planning for Vanderbilt University Medical Center (VUMC) in a testimonial on the Gresham Smith website.

Non-Emergency Medical Transportation and Uber Health

Kaiser Family Foundation (KFF) reported in 2016 that “Medicaid’s non-emergency medical transportation (NEMT) benefit facilitates access to care for low income beneficiaries who otherwise may not have a reliable affordable means of getting to healthcare appointments. NEMT also assists people with disabilities who have frequent appointments and people who have limited public transit options and long travel times to healthcare providers, such as those in rural areas.”

The Hospital and Healthsystem Association of Pennsylvania (HAP) reported that an average of 3.6 million Americans miss their healthcare appointments annually due to lack of or unreliable transportation. These missed appointments can cause an avalanche of future problems, including increased visits to emergency rooms, extended hospital stays, and higher costs for providers.

Uber Health is positioned to become a major player in the field of non-emergency medical transportation (NEMT). The Verge reported in 2018 that independent research organization Transit Cooperative Research Program (TCRP) estimated that the NEMT market was worth more than $3 billion.

“If there are people who are missing their appointments because they’re using an unreliable bus service to get to and from their healthcare provider, this is a great solution for them,” Christopher Weber, General Manager and Senior Project Manager at Uber Health, told The Verge. “The types of individuals this is valuable for really is limitless.”

Uber health’s mobile device application (app) enables patients and healthcare providers to schedule non-emergency medical transportation for medical appointments within a few hours or up to a 30-day notice. It is also available both as an online dashboard and as an application-programming interface (API) for software developers to integrate the service into their proprietary healthcare tools.

An Uber (NYSE:UBER) account is not required, as notifications about rides can be sent to patients via text messages.

Clinical laboratory leaders may want to develop strategies around these three predictions to increase business and maximize profits. Since more healthcare organizations will soon be linked via blockchain, and an increased number of consumers could start using non-emergency medical transportation, such as Uber Health, to get to medical appointments, becoming familiar with these technologies could prove to be beneficial to labs.

In addition, medical facilities cropping up in former mall spaces will require medical laboratories to be onsite to support care and provide lab test results within an acceptable turnaround time.

—JP Schlingman

Related Information:

Industry Voices—How the Future of Healthcare Will be Shaped by the Likes of Uber, CVS

Blockchain: Transformational Technology for Health Care

Why the Death of Malls is about More than Shopping

Avita Ontario Hospital Poised to Open

Mall Landlords Welcome Medical Clinics as Retail Ails

Fighting the Blight: Reinventing Retail space for Vanderbilt Health

Uber is Driving Patients to Their Doctors in a Big Grab for Medical Transit Market

Association of Rideshare-Based Transportation Services and Missed Primary Care Appointments: A Clinical Trial

Study Finds Missed Medical Appointments Not Affected by Free Ride Services

Medicaid Non-Emergency Medical Transportation: Overview and Key Issues in Medicaid Expansion Waivers

Study Finds Occupying Hospital Bed Previously Used by Patient Receiving Antibiotics Increases Odds of Developing C. diff Infection

Latest research provides new opportunities for clinical laboratories to demonstrate how testing can help curb hospital-acquired infections

Pathologists, microbiologists, and other healthcare providers have long been aware that hospital patients taking antibiotics are at higher risk of contracting the potentially deadly Clostridium difficile infection (C. diff). But new research adds an interesting twist to this issue.

Recent research indicates that being a “second user” of a bed may be another risk factor for acquiring the disease. This will give clinical laboratory professionals, microbiologists, and others on the front lines of hospital infection control programs another factor to consider when working to halt the spread of hospital-acquired infections (HAIs).

The recent study was published online in JAMA Internal Medicine. It shows that patients put in a hospital bed previously occupied by someone given antibiotics are 22% more likely to develop the C. difficile infection, even if they do not themselves receive antibiotics. (more…)

Hospitals with Lowest 30-Day Readmission Rates Succeed at Reducing Rates by Improving Care Coordination and Monitoring of Patients After Discharge

Recent studies indicate that high readmission rates often may be due to patient demographics, giving clinical laboratories an opportunity to use lab test results in ways that minimize the need for specific patients to be readmitted

Medicare’s efforts to reduce hospital readmission rates have left most hospitals facing reductions in Medicare payments. However, a recent ranking of hospitals by the Modern Healthcare Data Center indicates that influences other than inferior care—such as patient demographics—can affect 30-day readmission rates.

These findings are noteworthy for pathologists and clinical laboratory managers operating medical laboratories in hospitals and health systems. That’s because readmission rates impact a hospital’s budget. Thus, less revenue can cause hospital administrators to reduce spending for clinical laboratory and anatomic pathology services. (more…)

Higher Deductibles and Co-Insurance Costs Squeezing Healthcare Consumers’ Wallets; A Reasons for Clinical Labs to Make Lab Test Prices Easy to See

Two new studies show patients are being increasingly burdened with a greater share of healthcare costs, which requires providers, including medical labs, to collect more money from patients at time of service

Although wage increases remain stagnant, consumers now pay a steadily increasing share of their healthcare costs. That’s because of rising deductibles, co-insurance, and other out-of-pocket costs. Not only will this cost-sharing trend continue to stretch patients’ budgets, it also will apply more pressure on clinical laboratories and pathology groups to increase price transparency for patients.

A recent study at the University of Michigan (UM), published in the Journal of the American Medical Association (JAMA), highlighted the growth in out-of-pocket insurance costs for hospitalized patients. For the average consumer with private health insurance, costs rose from $738 in 2009 to $1,013 in 2013—a 37% increase. During that same 4-year period, overall healthcare spending grew at 2.9% per year and health insurance premiums went up 5.1% annually.

Two types of health insurance plan charges were responsible for the biggest change in out-of-pocket spending: deductibles and co-insurance. During the same period, deductibles rose by 86%! Co-insurance costs increased 33% over the same period. Co-payments (a flat fee) were used in fewer hospitalizations. (more…)