By negotiating directly with healthcare providers, employers cut health insurers out of the loop, at least for certain specified healthcare conditions and surgeries
It’s a new trend in how employers provide healthcare benefits for their employees. In order to save money, a growing number of employers are going to low-cost hospitals, physicians, and other providers to contract directly for their services. This may be the opening that allows some clinical laboratories to approach larger employers in their region and negotiate pricing and contract terms without the need to involve a health insurer.
What’s motivating more employers to reach out and contract directly with low-cost healthcare providers is the realization that their health insurance plan typically pays much more than Medicare to hospitals, physicians, clinical laboratories, and other ancillary providers. This fact is supported by a study conducted by the Rand Corporation that found “large employers generally lack useful information about the prices they are paying for healthcare services,” and that of the 1,600 hospitals in 25 states that Rand surveyed, “employer-sponsored health plans paid hospitals an average of 241% of what Medicare would have paid for the same inpatient and outpatient services in 2017,” which is up from 236% of Medicare in 2015, Modern Healthcare reported.
Thus, to better control the skyrocketing cost of healthcare,
and the health benefits plan they offer their employees, employers are
increasingly turning to self-coverage and implementing company benefits plans
that reward employees for price shopping and for selecting the lowest costs
healthcare services.
This trend is another reason why clinical laboratory leaders should be tracking changes in federal price transparency requirements, along with the increased consumer interest in accessing healthcare prices in advance of service.
Employers Negotiate Directly for Healthcare Services
Innovative employer plans to decrease healthcare costs
include:
Contracting directly with medical providers,
Opening primary care clinics within their
corporate facilities,
Referring employees to contracted providers for certain
procedures, and
Creating bundled-payment deals with select
providers.
Modern Healthcare reports that both public and
private employers in five states (Colorado, Connecticut, Michigan, Montana,
Texas, and Wisconsin) are “considering or launching group purchasing
initiatives with narrow- or tiered-network plans, onsite primary-care clinics,
and contracts with advanced primary-care providers,” as well as “direct-contracting
with providers, such as referring employees to designated centers of excellence
for some procedures and conditions under bundled-payment deals with warrantied
results.”
Cheryl DeMars, CEO of The Alliance, a Wisconsin healthcare purchasing cooperative, says there is a movement afoot. “I’m seeing a level of boldness on the part of our members that I haven’t seen before in my 27 years here,” she told Modern Healthcare.
Self-insured Employers can Reduce the Nation’s Healthcare
Bill, says KFF
A 2018 US Census Bureau report states that more than 181 million people in the US were enrolled in employer-sponsored health plans in 2017, and that the estimated average premium for employer-sponsored family coverage increased at an annual rate of 4.5% from 2008 to 2019.
That increase was approximately twice the rate of overall
inflation and growth in average hourly earnings during the same time period, according
to the report, which also states that the surge in premiums was driven by price
increases for medical services and that use of most healthcare services among
employees has actually been declining.
For US employers, “the steep increase in their healthcare
cost crowds out financial resources that could be used for employee wage
increases, capital investments, and other spending priorities, such as
retirement plans,” the report notes.
However, an estimated 94 million of the 156 million workers in the US—approximately 61%—are currently covered under a self-insured medical plan through their employer, the KFF Employer Health Benefits 2019 Annual Survey states.
Healthcare.gov defines the self-insured health insurance plan as a “type of plan usually present in larger companies where the employer itself collects premiums from enrollees and takes on the responsibility of paying employees’ and dependents’ medical claims. These employers can contract for insurance services such as enrollment, claims processing, and provider networks with a third-party administrator, or they can be self-administered.”
“It doesn’t signal the end of the insurance industry,” he
said. “On the cost side of the equation, the PPO approach is beginning to come
to an end. The costs are outstripping inflation and wages.”
Moving to self-insurance is another part of the current trend for price transparency in the healthcare industry and may offer opportunities for clinical laboratories to increase profits. Clinical laboratories and anatomic pathology groups might want to contact the Human Resources Departments of local major employers to educate them on the costs and quality value of their labs. Such a proactive and innovative move could encourage employers to include those labs in the provider networks of their self-insured health benefit plans.
Consumer demand and federal requirements for price transparency affect how clinical laboratories and anatomic pathology groups meet patients’ expectations while navigating complex payer agreements
Regardless of a clinical laboratory’s payer mix and revenue cycle management (RCM) system, the demand for greater price transparency impacts laboratory services just as it does other healthcare services. Addressing new federal policies that support price transparency may require medical laboratory managers to alter how they approach RCM and patient communications.
Patient access management (PAM) is what some early-adopter medical labs and pathology groups are using to respond to these new federal policies and changing patient expectations. PAM can be an effective tool to fulfill complex payer requirements and implement consumer-friendly healthcare services. Not only does this comply with federal guidelines, it helps independent laboratories increase revenue by lowering denial rates.
How
and When Clinical Laboratories Should Implement Patient Access Management
Revenue
cycle experts say clinical laboratories are in a position to take an active
role in the pricing transparency debate.
“If labs don’t control the pricing narrative, someone else will,” stated Walt Williams, Director of Revenue Cycle Optimization and Strategy for Quadax, a firm that has studied revenue trends in healthcare for more than 40 years, in an exclusive interview with Dark Daily.
He
says, given these new demands on clinical laboratories and pathology groups,
implementing patient access management practices ensures a satisfactory patient
and physician experience and reduces the financial risk related to trends in
uncollected revenue.
“In this
age of increasing consumerism—along with the complex challenges of navigating
the payer landscape and pre-empting administrative denials—it’s no wonder
independent labs are turning to new patient access technology solutions to
avoid leaving money on the table,” Williams said.
Patient
access management solutions allow clinical laboratories to:
obtain
accurate patient demographic information,
verify
insurance coverage and eligibility, and
gain
clarity on payer rules regarding prior authorization and medical necessity.
These
capabilities enable medical laboratories to secure appropriate reimbursement
closer to the date of service. PAM also can provide the ordering-physician with
financial counseling and guidelines on a patient’s financial obligation. This
would be shared with the patient to help prevent surprise billing.
New
Fact of Life for Labs: Patients Are the New Payers
Medical laboratory patient-access representatives must employ proper patient-liability collection techniques before, during, and after each date of service. This has become increasingly challenging as more patients join high-deductible health plans (HDHPs) and take on more financial responsibility. The problem for labs is that meeting the expectations of consumers requires a different toolset than meeting the needs of complex payer requirements.
Additionally, evolving policies in prior authorization, medical necessity, and coding (see, “Labs Get High Denial Rates Under New NCCI Rules,” The Dark Report) are resulting in potential payment traps for patients and known revenue traps for providers and suppliers.
While
the current high cost of healthcare will likely continue for some time,
publishing information about the lab’s policies can help consumers view choices
when it comes to selecting laboratory tests and anticipating potential payment
obligations.
Henry Ford Health System, for example, posted information about prior authorization as it relates to its pathology and laboratory services.
Consumer-Facing
Price Transparency and CMS Requirements
Rooted
in price transparency regulations issued in July 2018, the federal Centers for
Medicare and Medicaid Services (CMS) encouraged “all providers and suppliers of
healthcare services to undertake efforts to engage in consumer-friendly
communication of their charges to help patients understand what their potential
financial liability might be for services they obtain, and to enable patients
to compare charges for similar services. We encourage providers and suppliers
to update this information at least annually, or more often as appropriate, to
reflect current charges.”
How
should we define “standard charges” in provider and supplier settings? Is the
best measure of a provider’s or supplier’s standard charges its chargemaster,
price list, or charge list?
What
types of information would be most beneficial to patients … enable patients to
use charge and cost information in their decision-making?
How
can information on out-of-pocket costs be provided to better support patient
choice and decision-making? What can be done to better inform patients of their
financial obligations?
What
changes would need to be made by providers and suppliers to provide patients
with information on what Medicare pays for a particular service performed by
that provider or supplier?
These
considerations and more can help the development of patient access management
and consumer-friendly communication initiatives that are tailored to clinical laboratory
services.
Patient
Access Management for Clinical Laboratories
Patient
access management facilitates critical components of the revenue cycle.
However, it must be fine-tuned to fit each healthcare provider’s unique revenue
cycle process. This includes clinical laboratory and anatomic pathology
services.
“Having
business rules and workflows based on best practices to verify patient
demographics, support insurance discovery, and navigate prior authorizations
are now a minimum requirement for any healthcare provider to maintain financial
viability,” Williams notes.
To help clinical laboratories fulfill CMS’ patient access guidelines—including best practices for reversing the trend of uncollected revenue—a free white paper titled, “Patient Access Antidote: Retaining More Revenue with Front-End Solutions,” has been published by Dark Daily in partnership with Quadax.
The
white paper will provide useful insights regarding front-end patient access
management. And it will equip clinical laboratories and pathology groups with
the expert tools and solutions they need to optimize their cash flow and
successfully meet key revenue cycle objectives.
Though ACA reforms may have slowed healthcare spending, rapidly increasing deductibles and cost sharing requirements have many experts questioning if patients can afford care at all, despite the increased availability of insurance coverage
Much of the debate surrounding efforts to replace and repeal the Affordable Care Act (ACA) has centered on premiums as a central facet of out-of-pocket spending. However, new data from a Kaiser Family Foundation (KFF) survey reveals that premiums are only one factor affecting consumers’ ability to pay healthcare bills. High-deductible health plans (HDHPs) are another culprit. This directly impacts clinical laboratories and anatomic pathology groups that find revenues down as more American’s avoid costs by delaying or opting out of testing and treatments.
The KFF report highlights both the complexity of managing healthcare costs and how the current focus on premium prices might miss other important considerations that make healthcare inaccessible to many Americans.
High Deductibles and Consumers’ Lack of Savings
An increasing number of insurance plans now include high deductibles—particularly in the individual markets, though employer-based insurance plans are experiencing steady increases as well.
This leaves consumers facing larger bills and making tough decisions about whether their healthcare is affordable—even with insurance.
When healthcare consumers cannot afford the out-of-pocket costs of healthcare, they are less likely to schedule wellness visits, adhere to treatments, or follow through on physician-ordered clinical laboratory tests they don’t consider essential to their well-being or simply cannot afford.
Even when they follow protocols and recommendations, that does not mean patients will be able to pay medical laboratories for tests performed, or anatomic pathology groups for specialized services, when the bill comes due.
The Ever-Growing Deductible Dilemma
In its 2017 study, “Do Health Plan Enrollees have Enough Money to Pay Cost Sharing?,” the KFF compares median data on liquid assets from 6,254 single and multi-person households—spanning a range of incomes and age brackets—to the average cost of both standard employer-based insurance and individual market insurance deductibles.
They further note that their data modeling and estimates present a “conservative estimate,” because chronic conditions might cause an extended period of out-of-pocket spending, and that median assets might not be available at a single time or throughout the year.
Concerning a previous 2016 KFF study on high-deductible insurance plans, the authors noted in a press release, “In 2016, 83% of covered workers face a deductible for single coverage, which averages $1,478. That’s up $159 or 12% from 2015, and $486 or 49% since 2011. The average deductible for workers who face one is higher for workers in small firms (three to 199 employers) than in large firms ($2,069 vs. $1,238).”
In the press release following KFF’s 2016 survey, Drew Altman, CEO (above), Kaiser Family Foundation, noted, “We’re seeing premiums rising at historically slow rates, which helps workers and employers alike, but it’s made possible in part by the more rapid rise in the deductibles workers must pay.” (Image copyright: Kaiser Family Foundation.)
In their latest look at deductibles and out-of-pocket spending, the KFF study authors note, “About half (53%) of single-person non-elderly households could pay the $2,000 from their liquid assets towards cost sharing, and only 37% could pay $6,000, which … was less than the maximum out-of-pocket limit for single coverage in 2016. For multi-person families, 47% could pay $4,000 from their liquid assets for cost sharing, while only 35% could pay $12,000.”
This sets the stage for the grim picture now facing many Americans. Despite increased access to medical insurance, being able to use the insurance to obtain care can be a struggle for a sizeable part of the lower to middle class population.
Creating a More Affordable Future for Healthcare
Data from the Q1 National Health Interview Survey (NHIS) conducted by the Centers for Disease Control and Prevention (CDC) show that growth in high-deductible plans might skew these numbers further still. They found that the number of persons under the age of 65 enrolled in HDHPs increased from 25.3% in 2010 to 40.0% in the first quarter of 2016 despite uninsured rates dropping from 22.3% to 11.9% over the same period.
In the 2017 study, KFF outlines the complexity of the issue: “There are significant differences across the income spectrum … For example, 63% of multi-person households with incomes of 400% of poverty or more could pay $12,000 from liquid assets for cost sharing, compared with only 18% of households with incomes between 150% and 400% of poverty, and 4% of households with incomes below 150% of poverty.”
While there are no simple answers to address today’s increasing deductibles, KFF emphasizes the importance of looking at the bigger picture.
“Much of the discussion around affordability has centered on premium costs. A broader notion of affordability will have to focus on the ability of families,” they note. “To adequately address the issue of affordability of health insurance, reform proposals should be evaluated on the affordability of out-of-pocket costs, especially for low and moderate-income families, and be sensitive to the financial impacts that high cost sharing will have on financial wellbeing.”
In the meantime, lack of access to preventative care and regular checkups can increase long-term healthcare costs and health risks, creating a spiral of financial concerns for patients as well as the healthcare professionals and the clinical laboratories serving them.
Tight provider networks have some seniors dropping private plans after losing access to ‘preferred doctors and hospitals’ and experiencing issues with ‘access to care’
Thus, as Medicare patients shift from Medicare Part B (which pays any provider a fee-for-service reimbursement) to a Medicare Advantage plan (with a narrow network), labs in that community lose access to that patient.
Now a recent government study of the Medicare Advantage program has interesting findings. For seniors in poor health, the private healthcare plans can prove costly if they lose access to specialized healthcare and the freedom to go to any doctor or hospital.
High Turnover Could Mean Poor Quality Plans
A 2017 report by the Government Accountability Office (GAO) found that beneficiaries in poor health are more likely to disenroll from Medicare Advantage Plans—a sign that the quality of plans with higher than normal turnover may be poor. The agency reviewed 126 Medicare Advantage plans and found that 35 of them had disproportionately high numbers of sicker people dropping out. Many seniors cited problems with “coverage of preferred doctors and hospitals” and “access to care.” The GAO is urging the Centers for Medicare and Medicaid Services (CMS) to review disenrollment data by health status and disenrollment reasons as part of the agency’s routine monitoring efforts.
“People who are sicker are much more likely to leave [Medicare Advantage plans] than people who are healthier,” James Cosgrove, Director of Healthcare at the GAO, told Kaiser Health News.
“A Medicare Advantage plan sponsor does not have an evergreen right to participate in and profit from the Medicare program, particularly if it is providing poor care,” Lipschutz told Kaiser Health News.
David Lipschutz, JD (above), Managing Attorney for the Center for Medicare Advocacy, is calling for tighter oversight of Medicare Advantage Plans following a report by the Government Accountability Office (GAO) showing an exodus of sicker patients from some Medicare Advantage plans. (Photo copyright: Center for Medicare Advocacy.)
Threat to Regional Medical Laboratories by Narrow Networks
Dark Daily previously reported on how enrollment shifts from traditional Medicare to Medicare Advantage threaten the financial health of regional clinical labs, which typically lose access to Medicare Advantage beneficiaries. In 2017, one in three (33%) Medicare beneficiaries was enrolled in a private Medicare Advantage plan, reflecting 8% growth (1.4 million beneficiaries) between 2016 and 2017, according to a Kaiser Family Foundation (KFF) report.
Medicare Advantage’s private health plans are attractive to many seniors because of lower cost sharing and expanded benefits, such as hearing aid and eyeglass coverage and fitness club memberships. The tradeoff, however, requires forfeiting access to Medicare Part A (hospital insurance) and Part B (medical insurance) and accepting a narrower network of providers and hospitals.
An analysis by the Kaiser Family Foundation shows that more than three in 10 (35%) of Medicare Advantage enrollees in 2015 were in narrow-network plans. On average, Medicare Advantage networks included less than half (46%) of physicians in a county. The size and composition of Medicare Advantage Provider networks greatly impacts smaller clinical laboratories and anatomic pathology groups, which often are excluded from narrow-network plans. (Image copyright: KFF.)
Ron Brandwein, Health Insurance Information, Counseling and Assistance Program Coordinator at Lifespan of Greater Rochester, N.Y., believes consumers need to understand the limitations of Medicare Advantage plans.
“It’s very competitive, very dog eat dog,” he told the Democrat and Chronicle, adding that, once a person signs up with a Medicare Advantage plan, all their dollars for care are sent to that plan. “If they wind up going to a doctor or hospital that doesn’t accept it, they can’t fall back on Medicare because Medicare won’t pay their bills anymore because they’ve given their dollars to their chosen Advantage plan,” he said.
One in three Medicare Advantage enrollees in 2015 were in a plan with a narrow physician network (less than 30% of physicians in the county);
43% were in medium-sized networks (30% to 69% of physicians in the county); and,
Just 22% were in broad plans that included 70% or more of physicians in the county.
“Insurers may create narrow networks for a variety of reasons, such as to have greater control over the costs and quality of care provided to enrollees in the plan,” KFF reported. “The size and composition of Medicare Advantage provider networks is likely to be particularly important to enrollees when they have an unforeseen medical event or serious illness. However, accessing the information may not be easy for users, and comparing networks could be especially challenging. Beneficiaries could unwittingly face significant costs if they accidentally go out-of-network.”
But Kristine Grow, Senior Vice President, Communications, at America’s Health Insurance Plans (AHIP), contends most consumers are satisfied with their Medicare Advantage plans, as evidenced by the growth in Medicare Advantage enrollment. She told Kaiser Health News that patients in the GAO study mostly switched from one health plan to another to take advantage of a better deal or more inclusive coverage.
“We have to remember these are plans working hard to deliver the best care they can,” Grow said. Insurers compete vigorously for business and “want to keep members for the longer term,” she added.
Smaller Clinical Laboratories at Greatest Risk
The implications for anatomic pathology groups and medical laboratories is clear. As Dark Daily has reported, increasing reliance by insurers on narrow networks to stem raising costs limits the number of physicians ordering medical testing, reducing lab revenues and threatening the entire pathology industry—especially smaller clinical laboratories. And, since Medicare patients now represent more than 50% of all patients in the healthcare system, the impact of that aging population’s behavior increases each year.
Because many Americans are ‘concerned’ about how they would pay an unexpected medical bill, they now are seeking upfront information about treatment costs and financing options
Clinical laboratories and anatomic pathology groups that depend on reliable sources of patient and test referrals are being impacted by a reduction in patients seeking care due to rising costs. Evidence continues to mount that high deductible health plans (HDHPs) and the overall rising cost of healthcare are straining Americans’ finances. This is causing them to delay payments, question treatment costs, and investigate payment options.
These trends underscore the need for clinical laboratories and pathology groups to have point-of-service collection strategies in place or risk declining revenues.
Study Highlights Increasing Consumer Healthcare Costs
JPMorgan Chase Institute’s Healthcare Out-of-pocket Spending Panel (JPMCI HOSP) recently studied the healthcare cost burden on 2.3-million de-identified Chase checking account holders aged 18 to 64. In a report titled, “Paying Out-of-Pocket: The Healthcare Spending of 2 Million US Families,” Chase noted the following key indicators that predict continued decline in healthcare revenues as patients’ costs increase:
· “A clear correlation exists between timing of healthcare payments and an account-holder’s ability to pay, with the largest payments taking place in the years and months with increased liquid assets. This finding emphasizes the clear link between a family’s financial health and their access to healthcare services. The report found a clear spike in payments during the months of March and April, when nearly 80% of tax filers receive tax refunds.
· “There is significant variation of out-of-pocket expenses among and within states, emphasizing the important role of states in shaping healthcare policy. Colorado families spent the most out of pocket, while families in Louisiana spent the most as a percent of income. California was among the lowest in terms of both raw dollar amounts and payments as a share of income. As part of this report, the JPMorgan Chase Institute has created online data visualization assets to illustrate these disparities and is providing downloadable payment data with information broken down to metro and county levels.
· “Out-of-pocket payments grew each year since 2013, but have remained a stable share of income, also known as “burden.” However, women, low-income families and pre-seniors are bearing the highest cost burden. The finding merits further study to establish whether these higher payments represent broader healthcare utilization or a clear expense burden for populations that can afford it the least.
· “Families that are in the top 10% of healthcare spend in a given year tend to remain the highest spenders on a year-over-year basis, emphasizing the substantial cost of chronic conditions and long-term healthcare needs.
· “Doctor, dental, and hospital payments accounted for more than half of out-of-pocket payments. While doctor payments accounted for the greatest volume of expenditures, dental and hospital payments were much more significant in terms of expense.”
In a news release, Diana Farrell, President and CEO, JPMorgan Chase Institute points out that, “The reality is that many American families don’t have the cash buffer to withstand the volatility created by out-of-pocket healthcare payments, and we need to better understand the correlation between financial health and physical health.”
The JPMorgan Chase Institute report, released September 19, 2017, came on the heels of the Kaiser Family Foundation (KFF)/Health Research and Education Trust (HRET) 2017 Employer Health Benefits Survey. This annual benchmark survey indicates workers on average now contribute $5,714 annually toward their family premiums, which average $18,764, and that employees at firms with fewer than 200 workers contribute as much as $6,814 on average.
The findings of this survey will be useful for those clinical laboratories and anatomic pathology groups developing business and clinical strategies to serve the growing numbers of patients who are covered by high-deductible health plans. The KFF/HRET survey highlighted the impact growth of HDHPs is having on workers:
· 81% of covered workers were in plans with an annual deductible, up from 59% in 2007 and 72% in 2012;
· The average deductible amounts for workers with employer-based coverage also is increasing steadily, rising from $616 in 2007 to $1,505 in 2017.
A JPMorgan Chase Institute study of family healthcare spending (not including premium payments) shows out-of-pocket costs varied widely in the US in 2016, both across and within states. Average spending ranged from a low of $596/year (California) to a high of $916/year (Colorado) in the 23 states where there are Chase retail banking branches. (Photo copyright: JPMorgan Chase Institute/Business Insider.)
Jay Bhatt, DO, President of KFF/HRET, and Senior Vice President and Chief Medical Officer at the American Hospital Association, notes that while some cost increases appear to be slowing, policymakers should continue seeking ways to reduce the burden on healthcare consumers.
“This year’s findings continue a positive run of a slowing in premium increases and in the growth of healthcare costs overall,” Bhatt states in a KFF news release. “As policymakers and providers continue to work to improve healthcare, ensuring it remains affordable and accessible is critically important.”
Importance of Providing Pricing and Payment Options
These results help explain why 42% of respondents to HealthFirst Financial’s Patient Survey stated they are “very concerned” or “concerned” about whether they could pay out-of-pocket medical expenses during the next two years. For example:
· More than half (53%) of those surveyed were concerned about how to pay a medical bill of less than $1,000;
· 35% indicated they would find paying a bill less than $500 difficult; and,
· 16% were worried about paying a bill less than $250.
Such financial worries will likely impact revenues at clinical laboratories as well as medical doctor’s offices. They also explain why 77% of healthcare consumers who participated in the HealthFirst Financial survey responded that it’s “important” or “very important” to know their costs before treatment.
Additionally, 53% of those surveyed want to discuss financing options before receiving care. However, according to the survey, just 18% of providers discussed payment options.
The study also found 40% of millennials would likely switch to a different provider offering low- or zero-interest financing for medical bills.
“These findings highlight a huge gap in what patients want and what hospitals, medical groups, and other healthcare providers are delivering,” KaLynn Gates, JD, President and Corporate Counsel of HealthFirst Financial, said in a news release. “Providers that care for the financial as well as clinical needs of their communities are much more likely to thrive in this era of rising out-of-pocket costs and growing competition for patients among traditional and non-traditional providers.”
Clinical Laboratories and Anatomic Pathology Groups Are Particularly Challenged
In “Hospitals, Pathology Groups, Clinical Labs Struggling to Collect Payments from Patients with High-Deductible Health Plans,” Dark Daily reported that clinical laboratories and pathology groups face particular challenges because, as patients become responsible for more of their healthcare bills, many labs are not prepared for collecting full payments from patients on HDHPs. Nor are they prepared for reduction in test ordering, as patients opt to not follow through with prescribed tests and treatments to save money.
These recent reports are another strong indicator of how critical it is for medical laboratories and pathology groups to develop tools and workflow processes for collecting payments upfront from patients with HDHPs.