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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Medical Laboratories, Hospitals, Doctors Turn to Zero-Interest Loans and Other Financing Options to Help Patients Pay Out-of-Pocket Medical Bills

To help patients pay their clinical laboratory test bills, Sonora Quest Laboratories partners with CarePayment to provide patients with no-interest loans

With tens of millions of Americans now covered by a high-deductible health plan (HDHP), hospitals, physicians, and clinical laboratories now share a common problem: how to collect the full amount due for a patient who may have an annual deductible of $5,000 (individual) or $10,000 (family).

This is a significant problem for healthcare providers and Dark Daily has reported on this trend several times, most recently in “Hospitals, Pathology Groups, Clinical Labs Struggling to Collect Payments from Patients with High-Deductible Health Plans,” September 6, 2017.

Thus, many pathologists and clinical laboratory managers will be interested in a new solution that the largest commercial laboratory company in Arizona is using to help cope with the need to collect larger amounts of money from patients with a high-deductible health plan. Recently, Senora Quest Laboratories announced an innovative collaboration with healthcare finance company CarePayment to ensure cost is not a barrier to clinical laboratory and pathology patients needing medical tests.

Sonora Quest Laboratories, which performs more than 60-million diagnostic tests per year in Arizona, has established a new partnership with CarePayment of Nashville to provide no-interest loans to any Sonora Quest patient whose testing bill exceeds $100.

David Dexter, Chief Executive Officer at Sonora Quest Laboratories, believes patients have a right to “affordable access to much-needed laboratory testing.” In a statement, Dexter notes, “Across Arizona, rising out-of-pocket medical costs are impacting families’ budgets, and ultimately, their health. No one should delay having clinical testing done because they are worried about costs.

“Sonora Quest Laboratories understands the importance of making healthcare services affordable to consumers,” he added. “We are working with CarePayment to do our part to provide affordable access to much needed laboratory testing. We believe this will help improve testing compliance and lead to better outcomes for patients managing chronic disease or monitoring their overall wellness.”

Annual Deductibles Rise 153% for Workers

The annual deductible that patients must cover is climbing, not just in Arizona, but nationally. According to the Kaiser Family Foundation 2016 Employer Health Benefits Survey, the average worker’s annual deductible has gone up 153% from 2009 to 2016. In addition, after meeting their annual deductibles, most workers face additional cost sharing for hospital admission or outpatient surgery.

To address the problem of collecting these larger deductibles from patients and to avoid racking up patient bad debt, Healthcare Finance News (HFN) points out that hospitals and healthcare providers are looking for financial solutions that “benefit both sides of the patient-provider relationship.”

As the graph above illustrates, more workers each year find themselves enrolled in high-deductible health plans (HDHPs) they can barely afford. That’s why hospitals, medical laboratory companies, and financial services organizations are partnering to develop programs patients can use to make affordable payments on their healthcare bills. (Image copyright: Kaiser Family Foundation/Obeo Health.)

To fill this need, a new type of company is popping up: third-party finance companies. CarePayment is one example. These new companies want to partner with hospitals and other healthcare organizations to identify patients who need assistance with out-of-pocket expenses. After a patient’s insurance company pays its portion of a bill, patients are referred to the healthcare finance company, which charges the hospital or provider a “discount factor” on the accounts it establishes.

Helping Clinical Laboratories, Pathology Groups Collect from Patients

According to CarePayment, enrollment in its programs is voluntary, requires no application, and has no impact on a patient’s credit score. CarePayment states that providers “double net collections on average” when patients use its financing solutions.

Craig Hodges, CEO of CarePayment, maintains innovative payment solutions are necessary because of the increased consumer responsibility for healthcare costs. “There’s evidence out there that asking a consumer to pay interest on top of their out-of-pocket expense is impractical,” Hodges stated in the HFN article. “Consumer responsibility for the [the total] bill has grown from sub 5% to 25%. There’s a lot of sticker shock out there.”

Third-party healthcare finance companies are not the only alternative financing option open to healthcare providers. Healthcare Finance News points out that Docpay offers automated clearinghouse payment plans, which require the patient to preauthorize a payment schedule from their bank account or credit card, guaranteeing payments are made each month. A service fee is charged to the patient that covers credit card processing fees as well as payment plan fees. According to the company’s website, a healthcare practice receives a higher net collection percentage than if they used a third-party financing company or processed credit card payments in-house.

Banks Get into the Act to Help Physicians, Hospitals, Medical Laboratories

NBC News adds that some hospitals are partnering with banks to offer patients no-interest or low-interest loans as well, with the goal of offering patients more affordable payment options while increasing payment rates.

David and Nicole Rayman of Chatham, Ill., told NBC News a zero-interest hospital loan saved them from high-interest financing after they were hit with an unexpected $2,800 bill to remove a benign growth from David’s neck. Under terms of the loan, they paid $80 a month for 36 months.

“That’s going out to dinner one time a month, so that’s definitely something we could cut out,” Nicole Rayman stated in the NBC News article.

Failure to Collect Bills Directly from Patients

While Hodges predicts that healthcare financing could potentially be a $70-billion industry, he also notes that growth has been fueled by providers’ difficulty communicating costs with consumers and collecting bills directly from them.

“As those high-deductible health plans grew over time, providers realized they didn’t have the infrastructure to deal with that,” Hodges noted in the HFN article. “The portion of the bill the patient was responsible for used to be small. As that grew, providers didn’t have the experience, in-house, to interact with the consumer in a consumer-like environment.”

While medical laboratories and other providers have been slow to embrace price transparency, Hodges believes simplified and transparent financial responsibility will fuel healthcare consumerism and improve the provider-patient relationship.

“My theory is that we have to evolve to total transparency,” he told Healthcare Finance News. “Here’s what the service is going to cost you from an out-of-pocket perspective—that’s the first step.”

This development is another sign HDHPs are creating financial challenges for clinical laboratories and pathology groups as more patients are unable to pay out-of-pocket cost for testing services. In this environment, medical laboratory managers and pathology practice administrators will need a strategy for collecting payments from patients at the time of service.

 

—Andrea Downing Peck

Related Information:

Sonora Quest Laboratories Partners with CarePayment to Help Patients Pay for Clinical Testing

Kaiser Family Foundation 2016 Employer Health Benefits Survey

Healthcare Turns to Zero-Interest Loans to Give Patients a Better Reason to Pay

Some Hospitals Will Now Offer You an Interest Free Loan

To Handle Increased Bad Debt by Patients in High-Deductible Health Plans, Hospitals Are Offering Loan Programs

Hospitals, Pathology Groups, Clinical Labs Struggling to Collect Payments from Patients with High-Deductible Health Plans

Because of Expanded Numbers of Patients with High-deductible Health Plans, Patients Are Now Responsible for 30% of Hospital Revenues

Medical laboratories and pathology groups should expect point-of-service collection strategies to become increasingly important to their overall success

Not only is patient bad debt a growing problem for the nation’s hospitals, but it is now getting national attention within the hospital industry. This is bad news for clinical laboratories and anatomic pathology groups, because the same trends causing increased patient bad debt at hospitals are doing the same thing within the lab industry.

Much of the blame can be attributed to the increase number of patients with high-deductible health plans (HDHPs). The latest statistics reveal that patients’ out-of-pocket payments now make up 30% of hospital revenues. That is why hospitals desperately need strategies for successfully collecting payments from patients. And they’re not alone.

Kaiser Family Foundation (KFF) reported that more than half of all workers have deductibles and out-of-pocket liability of greater than $1,000. That is the reason why clinical laboratories and anatomic pathology groups also need a formula for collecting the total bill from their patients.

Jase DuRard, Chief Revenue Officer for revenue-cycle technology company AccuReg, told Modern Healthcare the increase in patient self-pay represents a seismic shift from roughly five years ago. At that time, patients paid only 10% of their hospital bills out-of-pocket and insurers paid about 90% of hospital claims.

Patient Responsibility to Blame for Revenue Loss at Nation’s Hospitals

A November 2016 study of 660 hospitals conducted by Crowe Horwath—an  international public accounting, consulting, and technology firm—stated that “patient responsibility” was to blame for an overall managed care net revenue decline of 2.5% for outpatient care and 1.4% for inpatient care. Self-pay-after-insurance (SPAI) collection rates have improved slightly during the past 12 months—with the inpatient median rising 0.2% and outpatient median increasing 0.7%.

However, according to the Horwath report, “While seemingly a good sign for providers in the face of rising patient copays and deductibles, slight increases in patient collection rates are not enough to counter the larger increase in self-pay-after-insurance patient responsibilities.”

High-deductible health plans (HDHPs) are becoming the coverage of choice for healthcare consumers struggling to pay medical bills in full. The net effect is that revenues are declining at hospitals, clinical laboratories, and pathology groups, as well as other providers. (Graphic copyright: Consumer Reports.)

In a Modern Healthcare article, Crowe Horwath’s Managing Partner of Healthcare Services, Brian Sanderson, noted, “It’s imperative that healthcare organizations establish effective point-of-service collection programs by training and educating front-line staff.”

Complicating matters is that many patients faced with self-pay are unable to pay their medical bills at time of service.

“Higher deductibles and the increase in patient responsibility are causing a decrease in patient payments to providers for patient care services rendered,” John Yount, TransUnion Vice President for Healthcare Products, told RevCycle Intelligence. “While uncompensated care has declined, it appears to be primarily due to the increased number of individuals with Medicaid and commercial insurance coverage.”

Hospitals Offer Patients Financial Options for Paying Bills

Some hospitals are responding to this trend by rolling out programs that offer patients financing options for their out-of-pocket costs. A recent article in Modern Healthcare outlined the steps taken by Missouri hospital system Mosaic Life Care, as it realized the full impact that $23 million worth of self-pay patient care had on its bottom line. Though the hospital posted record census and gross revenue during the first four months of 2017, net revenue was flat because patient self-pay didn’t keep pace.

“We win all kinds of awards for patient quality, but our revenue cycle didn’t match that performance,” Deborah Vancleave,  Mosaic’s Vice President of Revenue Cycle, told Modern Healthcare.

Since then, Mosaic has taken steps to improve the accuracy of information it gets at registration and how it makes determinations on patients’ ability to pay. In addition, it has joined forces with ClearBalance— a provider of patient loan programs to US hospitals and health systems—to offer zero-interest or low-interest revolving lines of credit to patients for their out-of-pocket medical costs.

According to Modern Healthcare, ClearBalance pays hospitals “upfront for the outstanding bills of patients who sign up for their financing program, but the hospital guarantees the money and repays lenders if patients default on their credit lines. The companies make their profit by getting a 10% to 15% fee for the outstanding amount of the loan.”

Medical Laboratories Slow to Respond to Consumer Demand for Price Transparency

As consumers shoulder more of the burden for their healthcare, they also will be demanding more price transparency from medical laboratories and anatomic pathology groups, which so far have been slow to respond to the trend.

“Patients expect cost estimates in every other retail industry, and are starting to demand them in healthcare as well. According to one recent study, for example, more than 90% of patients felt it was important to know their payment responsibility upfront,” TransUnion, a global risk information provider, stated in a white paper outlining the importance of precare cost estimates.

As hospitals struggle to collect from patients saddled with HDHPs, laboratory executives and other healthcare providers should take note. The change in payment mix means the ability to collect payments from patients at the point of service is becoming a critical success factor.

—Andrea Downing Peck

Related Information:

Hospitals Struggle with the Dilemma of Patients Hit by High Deductibles

Kaiser Family Foundation 2016 Employer Health Benefits Survey

The Impact of Consumerism on Provider Revenues

Patient Financial Responsibility On the Rise

Improve Revenue Cycles and Patient Engagement by Delivering Pre-Care Cost Estimates

68% of Consumers Did Not Pay Patient Financial Responsibility

Kaiser Family Foundation Estimates Approximately 16% of US Population Uninsurable under Pre-ACA Underwriting Standards

As the latest attempts to replace the Affordable Care Act (ACA) generate increased debate over protections for pre-existing conditions, Kaiser Family Foundation highlights that using pre-ACA underwriting guidelines would result in an estimated 52-million Americans unable to obtain coverage

With the American Health Care Act (AHCA) clearing the House on the way to the Senate, the public and media are scrutinizing key points. One highly-contested topic is insurance availability for people with pre-existing conditions.

Unfortunately, as most pathologists and medical laboratory managers know, media coverage—whether from the left or the right—tends to play up points that are sensational and resonate with their core audiences, but often fail to provide a full and accurate picture of the subject being covered. Thus, it is refreshing when useful information and insights about aspects of healthcare in America are presented in a fair and measured way.

Biased media coverage is certainly true on the issue of health insurance coverage for individuals who are considered to have pre-existing conditions. However, as a December 2016 Kaiser Family Foundation (KFF) study highlights, protections for pre-existing conditions were not always guaranteed. In fact, if insurers currently used the medical underwriting practices in place prior to implementation of the Patient Protection and Affordable Care Act or ACA (also known as Obamacare), the study estimates that 52-million adults under the age of 65 would likely be denied coverage on the individual market.

According to US Census Bureau figures, at the start of 2017 there were 324-million Americans. Using KFF’s figures, this means that 16% of the population are considered to have pre-existing conditions.

Who is Impacted by the Individual Market?

KFF was quick to point out that many of the 52-million people with pre-existing conditions have always qualified for insurance through their employer or a public program such as Medicaid. The foundation’s estimates show that in 2015, only 8% of the non-elderly population relied on individual market insurance plans, such as those plans offered on the ACA healthcare exchange.

 graph above shows the percentage of American’s with pre-existing conditions who “most likely” would have been denied insurance in the Individual Marketplace

The graph above shows the percentage of American’s with pre-existing conditions who “most likely” would have been denied insurance in the Individual Marketplace prior to the Affordable Care Act (ACA). According to the Kaiser Family Foundation (KFF), while the proposed American Health Care Act (AHCA) does not enable insurance companies to deny coverage for these conditions, coverage premiums could increase if a state seeks a community rating waiver. (Image copyright: Kaiser Family Foundation.)

For many patients, obtaining health insurance through individual plans is often temporary and driven by a life event, such as job loss, divorce, marriage, or reaching the threshold of an age bracket for coverage through other programs. However, for some individuals—such as the self-employed, low wage earners, or early retirees—the individual market is the only option for obtaining health insurance. For this population, pre-ACA underwriting made coverage difficult to obtain and more expensive for patients with pre-existing conditions.

Pre-Existing Conditions Cover More than Just Conditions

Study authors also note that the estimate of 52-million individuals considered to have pre-existing conditions is conservative due to other factors considered in the underwriting process. Insurance companies also based denial and uprating on a range of other factors—such as:

  • Prescription medication;
  • Doctor visits or procedures;
  • Mental health conditions; and
  • Family history.

They list a table of 30 conditions, including pregnancy and eating disorders, that might qualify as a pre-existing condition along with a list of 40 medications that might also result in a denial of coverage.

Despite the already growing list of reasons for insurance denials, there’s yet another list with job occupations that might result in ineligibility. This means that even healthy individuals could find themselves without coverage due to how they earn their income.

Neither medications nor professions were considered in KFF’s estimates due to a lack of data.

Uncertainty and Instability in Individual Market Pricing

A 2001 KFF report showed yet another hurdle faced by enrollees in the individual market.

In this KFF study, researchers created seven hypothetical applicants and compared their conditions to the underwriting practices at major insurance companies. Even if applicants cleared the underwriting process, the premiums offered by the various insurance companies differed greatly. Prices for each applicant fluctuated between hundreds and thousands of dollars per month when coverage was available. Benefits changed between plans as well, with many plans exempting coverage for pre-existing conditions.

Even with insurance, coverage for maternity care, prescriptions, or mental health fell behind the options available through most group plans. Yet, these conditions are some that might facilitate the events mentioned in the 2016 study for entering the individual market.

In the study’s conclusion, the authors found, “Insurance carriers seek to avoid covering people who have pre-existing medical conditions, and when they offer coverage, often impose limitations on the coverage they sell. This can price insurance out of the reach of many consumers in poor health or create significant gaps in coverage that could result in being underinsured.”

Decreased Demand for Clinical Laboratory Tests

Both studies show similarities to many of the concerns cited for the new AHCA. Time Magazine recently published a list of pre-existing conditions under the new proposal. The list bears striking similarity to the list offered in the 2016 KFF study. Speaking with Time, Cynthia Cox, Associate Director at KFF said, “There are plenty of other conditions, even acne or high blood pressure, that could have gotten people denied from some insurers, but accepted and charged a higher premium by other insurers.”

If fewer people can access affordable preventative care, prescriptions, and medical laboratory services, disease diagnosis is delayed. In a 2013 KFF study into the impact a lack of insurance has on healthcare, study authors noted, “Consequently, uninsured patients have increased risk being diagnosed in later stages of diseases, including cancer, and have higher mortality rates than those with insurance.”

Supporters of the proposed AHCA legislation are quick to point out that it does not eliminate protections for people with pre-existing conditions. It simply provides a process for state governments to provide an alternative solution to the federal framework and regulations.

Regardless of the outcome, KFF’s studies make it clear that a decrease in access to insurance means patients skip medical procedures they do not see as essential or cannot afford. This could result in decreased demand for screening and prevention diagnostics, such as those offered by pathology groups and clinical laboratories.

—Jon Stone

Related Information:

An Estimated 52 Million Adults Have Pre-existing Conditions That Would Make Them Uninsurable Pre-Obamacare

50 Health Issues That Count as a Pre-existing Condition

The Uninsured a Primer 2013 – 4: How Does Lack of Insurance Affect Access to Health Care? 

How Accessible Is Individual Health Insurance for Consumers in Less-Than-Perfect Health?

GOP Health Bill Leaves Many ‘Pre-existing Condition’ Protections Up to States

Key Facts About the Uninsured Population

Gaps in Coverage Among People with Pre-Existing Conditions

 

Federal Judges Block Anthem-Cigna and Aetna-Humana Deals to Protect Market Competition and Healthcare Consumers

Mergers that would have reshaped the nation’s largest insurance companies would directly affect the provider networks independent medical laboratories rely on

For pathology groups and medical laboratories, the news about two thwarted deals involving mega insurance companies might be seen as a positive development.

The proposed deals—Anthem’s $48-billion bid to buy Cigna, and a proposed $37-billion AetnaHumana merger—would have reshaped the US health insurance industry had they not been blocked by federal judges who cited possible harm to market competition, Bloomberg reported.

For now, all four health insurance companies will continue to use their existing provider networks, which is good news for clinical laboratories. Experts had expected the bigger players in each deal—Anthem and Aetna—to possibly prune the provider networks of Cigna and Humana, respectively, which could have financially burdened thousands of healthcare organizations and independent medical laboratories. (more…)

Aetna CEO Declares Affordable Care Act in ‘Death Spiral’ in a Speech of Interest to Pathologists and Medical Laboratory Professionals

Aetna’s CEO Mark Bertolini highlights how the current system increases costs for both insurers and consumers

At the moment, probably no issue is more politicized than that of the Affordable Care Act (ACA), often called Obamacare. Because it controls the design of health insurance coverage, it also influences the way health plans pay hospitals, physicians, clinical laboratories, and anatomic pathology groups.

However, understanding the truth about what is working and what is not with the Affordable Care Act is a complex undertaking. That is because both the advocates and critics of this law are engaged in highly-partisan rhetoric, despite the fact that most have no intimate knowledge of how healthcare works in the United States. (more…)

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