Study findings highlight financial impact underinsured have on healthcare providers, including clinical laboratories and pathology groups
Commonwealth Fund’s 2024 Biennial Health Survey released in November shows that not only are Americans underinsured, but many are swimming in medical debt. This is not good news for clinical laboratories. Simply put, labs must collect deductibles, copays, and out of pocket amounts from insured patients. If the patient is underinsured, that means the lab probably has to collect more—even 100%—of total charges directly from the patient.
The study conducted between March and June of 2024 collected data from 8,201 respondents ages 18-64, and despite two of every three respondents carrying health insurance through their employers, one of every four is underinsured, according to a Commonwealth Fund news release.
A further 44% of respondents have medical debt, with one of every four calling their out-of-pocket payments “nearly unaffordable,” the news release notes. Additionally, one out of five had a gap in coverage during the year.
“Congress, employers, insurers, and healthcare providers all play a role in lowering costs and making care more affordable, so families can avoid debt and get the care they need to stay healthy,” said Sara R. Collins, PhD, lead study author and Commonwealth Fund Senior Scholar and Vice President for Health Care Coverage and Access and Tracking Health System Performance, in the news release.
Astute laboratory managers will look beyond the study’s face value and consider the profound impact such findings could have on their own labs.
“While having health insurance is always better than not having it, the findings challenge the implicit assumption that health insurance in the United States buys affordable access to care,” the Commonwealth Fund said of its 2023 study. This sentiment rings true in the Funds’ latest findings as well.
“The Affordable Care Act has covered 23 million people and cut the uninsured rate in half. But high costs are a serious problem for many Americans, regardless of the kind of insurance they have,” said Sara R. Collins, PhD (above), lead study author and Commonwealth Fund Senior Scholar and Vice President for Health Care Coverage and Access and Tracking Health System Performance, in a news release. Clinical laboratories and anatomic pathology groups are greatly affected by underinsured patients. (Photo copyright: Commonwealth Fund.)
Labs Often Must Collect Payments Upfront
Many patients are in high deductible health plans and may forgo or delay ordered lab tests. Labs collect patient deductibles, copays, and out-of-pocket expenses directly from patients. However, underinsured patients may be required to pay for 100% of the services they receive, requiring the lab to collect these payments upfront.
Underinsured patients already facing a mountain of debt may struggle to pay for lab services. The debt many owe is substantial. “Nearly half (48%) of all adults with medical debt owe $2,000 or more; one of five (21%) carry a staggering $5,000 or more in debt,” Commonwealth Fund noted in its study.
Thus, collecting money owed is proving to be a problem for healthcare providers. Patient collection rates are plummeting to 48%, with “providers writing off more bad debt from patients with insurance,” TechTarget reported.
“Lower patient collection rates left providers facing bad debt. The analysis showed that 1.54% was the bad debt write-offs as a percentage of total claim charges in 2023. Researchers note that the percentage may be small, but the total cash amount equated to over $17.4 billion last year,” TechTarget added.
Having some rather than no insurance is not the safety net for patients previously thought. When it comes to the insured, their debt “accounts for 53% of the estimated $17.4 billion that hospitals, health systems, and medical practices wrote off as bad debts in 2023,” Business Wire noted, citing data from Kodiak Solutions’ quarterly revenue cycle benchmarking report.
Delaying Critical Lab Tests
The challenges the insured face with debt impacts labs in the long run. A staggering 57% of survey respondents reported passing on needed care because they could not afford it, and of those, 41% said their health concerns worsened when they denied themselves that care, Commonwealth Fund noted.
Increasingly poor health means patients might struggle to collect sufficient income to pay for their now added expenses, further causing them to struggle to pay for anything insurance might not cover, such as doctor ordered lab tests.
The affect this has on hospitals and medical laboratories casts light on the healthcare marketplace as a whole. It’s a trend that needs to be further studied.
“Most hospital bad debt is associated with insured patients, and nearly one in three hospitals report over $10M in bad debt,” are two of the top five financial healthcare statistics reported by Definitive Healthcare in a 2023 report.
“Expanding patient collection strategies may be key to maximizing revenue and avoiding losses,” TechTarget suggested.
Possible Solutions
The Commonwealth Fund study made clear that employer-covered healthcare does not guarantee affordable care or that ample care will be provided. Possible solutions from the study called on policymakers to “expand coverage and lower costs for consumers.” It added that “extending enhanced premium tax credits and strengthening protections against medical debt could make coverage more protective and affordable.”
Until a solution can be found, it’s wise to stay abreast of this trend and how it can impact the bottom line of clinical laboratories and anatomic pathology groups nationwide.
Are ongoing protests and federal investigations into health plan practices evidence that customers have reached a tipping point?
It is not common for beneficiaries to get arrested in front of their health plan’s headquarters. But that is what happened in July, when protesters gathered outside of UnitedHealth Group (UHG) in Minnetonka, Minn., to stress their dissatisfaction with the health insurer. More than 150 protesters participated in the demonstration. Eleven were arrested and charged with misdemeanors for blocking the public street outside of the headquarters.
Their main complaint is that the insurer systemically denies care for patients. This is a situation that probably resonates with hospitals, physicians, clinical laboratory professionals, and pathologists, who often see their own claims denied by health plans, including UnitedHealthcare.
“UnitedHealth Group’s profiteering by denying care is a disgrace, leaving people across Minnesota and all of the United States without the care they desperately need,” wrote members of the People’s Action Institute in a letter to UHG’s CEO Sir Andrew Witty. People’s Action organized the protest as part of its Care Over Cost campaign.
“Health insurance coverage has expanded in America, but we are finding it is private health insurance corporations themselves that are often the largest barrier for people to receive the care they and their doctor agree they need,” Aija Nemer-Aanerud, campaign director with People’s Action told CBS News.
“We have asked UnitedHealthcare for systemic changes in their practices and they have refused,” he told Bring Me The News.
Nemer-Aanerud told CBS News that UnitedHealth Group leadership has “refused to acknowledge that prior authorizations and claim denials are a widespread problem.”
“Our mission is to help people live healthier lives and help make the health system work better for everyone,” said UnitedHealth Group CEO Sir Andrew Witty (above) during a Senate Finance Committee hearing in May, NTD reported. “Together, we are working to help enable our health system’s transition to value-based care and are empowering physicians and their care teams to deliver more personalized, high-quality care that delivers better outcomes at a lower cost.” (Photo copyright: The Business Journals.)
People’s Action Institute Demands
In the letter, the changes People’s Action urged UHG to make include:
Ceasing to deny claims for treatments recommended by medical professionals.
Overturning existing denials for recommended treatments.
Stopping the practice of using Artificial Intelligence (AI) and algorithms to deny claims in bulk.
Executing a publicly shared audit and reimbursing federal/state governments for public money diverted by claims and prior-authorization denials within Medicare and Medicaid systems.
Expediting payment of claims.
Making public the details of denied claims and prior authorizations by market, plan, state, geography, gender, disability and race.
A spokesperson for UnitedHealth Group told CBS News that the company has had several talks with People’s Action and has settled some of the organization’s issues. That spokesperson also confirmed that UHG tried to discuss specific cases, but the issues People’s Action brought up had already been resolved.
“The safety and security of our employees is a top priority. We have resolved the member-specific concerns raised by this group and remain open to a constructive dialogue about ensuring access to high-quality, affordable care,” UnitedHealthcare said in a statement.
Profits over Patients?
The People’s Action Institute is a national network of individuals and organizations who strive to help people across the US overturn medical care denials made by insurance giants. Its Care Over Cost campaign aims to influence insurers to initiate systemic changes in their practices.
The recent protest occurred as UnitedHealth Group released its second-quarter financial report claiming $7.9 billion in profits. The company provides health insurance for more than 47 million people across the country and took in $22.4 billion in profits last year.
“UnitedHealth Group’s $7.9 billion quarterly profit announcement is the result of a business model built on pocketing premiums and billions of dollars in public funds, then profiting by refusing to authorize or pay for care,” said Nemer-Aanerud in a press release. “People should not have to turn to public petitions or direct actions to get UnitedHealthcare to pay for the care they need to live.”
“UnitedHealth Group made a decision to spend billions of dollars on stock buybacks, lobbying, and executive pay instead of paying for care people need,” Nemer-Aanerud told Bring Me The News. “They are harming people for profit and should be held accountable for that choice.”
“We all pay for this convoluted system, whether it is in our health insurance premiums or in our public programs. UnitedHealth Group is making billions of dollars in profit by denying people care, including in privatized Medicare and Medicaid plans, to the point that it has prompted a federal investigation … Still, we left the meeting with hope,” they added.
Protests like this one against UnitedHealth Group serve as evidence that the current system of commercial health insurance plans could be deteriorating. This descent may cause customers of these plans to take unprecedented actions to fight for necessary medical care.
As noted earlier, hospitals, physician groups, clinical laboratories, and anatomic pathology groups that see their own claims often denied by health insurers without a clear reason for the denials are probably sympathetic to the plight of patients who are frustrated with how UnitedHealthcare denies their access to care.
Theranos founder and former CEO continues down the path she began by defrauding her investors and lying to clinical laboratory leaders about her technology’s capabilities
As a result of the ban, Holmes is “barred from receiving payments from federal health programs for services or products, which significantly restricts her ability to work in the healthcare sector,” ARS Technica reported.
So, Holmes, who is 39-years old, is basically banned for life. This is in addition to her 11-year prison sentence which was paired with $452,047,200 in restitution.
“The exclusion was announced by Inspector General Christi Grimm of the Department of Health and Human Services’ Office of Inspector General,” ARS Technica noted, adding that HHS-OIG also “excluded former Theranos President Ramesh “Sunny” Balwani from federal health programs for 90 years.” This is on top of the almost 13-year-long prison sentence he is serving for fraud.
“The Health and Human Services Department can exclude anyone convicted of certain felonies from Medicare, Medicaid, and Pentagon health programs,” STAT reported.
“Accurate and dependable diagnostic testing technology is imperative to our public health infrastructure,” said Inspector General Christi Grimm (above) in an HHS-OIG statement. “As technology evolves, so do our efforts to safeguard the health and safety of patients, and HHS-OIG will continue to use its exclusion authority to protect the public from bad actors.” Observant clinical laboratory leaders will recognize this as yet another episode in the Elizabeth Holmes/Theranos fraud saga they’ve been following for years. (Photo copyright: HHS-OIG.)
Why the Ban?
“The Office of Inspector General (OIG) for the Department of Health and Human Services (HHS) cited Holmes’ 2022 conviction for fraud and conspiracy to commit wire fraud as the reason for her ban,” The Hill reported.
“False statements related to the reliability of these medical products can endanger the health of patients and sow distrust in our healthcare system,” Grimm stated in the HHS-OIG statement, which noted, “The statutory minimum for an exclusion based on convictions like Holmes’ is five years.
“When certain aggravating factors are present, a longer period of exclusion is justified,” the statement continued. “The length of Holmes’ exclusion is based on the application of several aggravating factors, including the length of time the acts were committed, incarceration, and the amount of restitution ordered to be paid.”
Rise and Fall of Elizabeth Holmes
Readers of Dark Daily’s e-briefs covering the Holmes/Theranos fraud saga will recall details on Holmes’ journey from mega success to her current state of incarceration for defrauding her investors.
In November 2022, she was handed an 11-year prison sentence for not disclosing that Theranos’ innovative blood testing technology, Edison, was producing flawed and false results. Theranos had “raised hundreds of millions of dollars, named prominent former US officials to its board, and explored a partnership with the US military to use its tests on the battlefield,” STAT reported.
To get Holmes physically into prison was a journey unto itself. At one point, evidence showed her as a potential flight risk. “In the same court filings, prosecutors said Holmes and her partner, William Evans, bought one-way tickets to Mexico in December 2021, a fact confirmed by her lawyers,” Dark Daily’s sister publication The Dark Report revealed in “Elizabeth Holmes’ Appeal Questions Competence of CLIA Lab Director.”
Drama around her move into prison continued. “The former CEO’s attorneys are making last-minute legal moves to delay her prison sentence while she appeals her guilty verdict,” Dark Daily reported.
At the same time, Holmes appeared to be on a mission to revamp her public image.
In the Times piece, Holmes talked about her plans to continue to pursue a life in healthcare. “In the story, Holmes contended that she still thinks about contributing to the clinical laboratory field. Holmes told The Times that she still works on healthcare-related inventions and will continue to do so if she reports to prison,” The Dark Report covered in “Elizabeth Holmes Still Wants ‘To Contribute’ in Healthcare.”
In the meantime, her legal fees continued to mount beyond her ability to pay. “Holmes’ prior cadre of lawyers quit after she could not compensate them, The Times reported,” The Dark Report noted. “One pre-sentencing report by the government put her legal fees at more than $30 million,” according to The New York Times.
Apparently, this closes the latest chapter in the never-ending saga of Elizabeth Holmes’ fall from grace and ultimate conviction for defrauding her investors and lying to healthcare executives, pathologists, and clinical laboratory leaders.
In a handful of cases, health insurers reversed denials after physicians or patients posted complaints on social media
Prior authorization requirements by health insurers have long been a thorn in the side of medical laboratories, as well as physicians. But now, doctors and patients are employing a new tactic against the practice—turning to social media to shame payers into reversing denials, according to KFF Health News (formerly Kaiser Health News).
Genetic testing lab companies are quite familiar with prior authorization problems. They see a significant number of their genetic test requests fail to obtain a prior authorization. Thus, if the lab performs the test, the payer will likely not reimburse, leaving the lab to bill the patient for 100% of the test price, commonly $1,000 to $5,000. Then, an irate patient typically calls the doctor to complain about the huge out-of-pocket cost.
“There are times when you simply must call out wrongdoings,” she wrote in an Instagram post, according to the outlet. “This is one of those times.”
In response, an “escalation specialist” from BCBSIL contacted her but was unable to help. Then, after KFF Health News reached out, Nix discovered on her own that $36,000 in outstanding claims were marked “paid.”
“No one from the company had contacted her to explain why or what had changed,” KFF reported. “[Nix] also said she was informed by her hospital that the insurer will no longer require her to obtain prior authorization before her infusions, which she restarted in July.”
“I think we’re on the precipice of really improving the environment for prior authorization,” said Todd Askew, Senior Vice President, Advocacy, for the American Medical Association, in an AMA Advocacy Update. If this was to happen, it would be welcome news for clinical laboratories and anatomic pathology groups. (Photo copyright: Nashville Medical News.)
Physicians Also Take to Social Media to Complain about Denials
Some physicians have taken similar actions, KFF Health News reported. One was gastroenterologist Shehzad A. Saeed, MD, of Dayton Children’s Hospital in Ohio. Saeed posted a photo of a patient’s skin rash on Twitter in March after Anthem denied treatment for symptoms of Crohn’s disease. “Unacceptable and shameful!” he tweeted.
Two weeks later, he reported that the treatment was approved soon after the tweet. “When did Twitter become the preferred pathway for drug approval?” he wrote.
Eunice Stallman, MD, a psychiatrist from Boise, Idaho, complained on X (formerly Twitter) about Blue Cross of Idaho’s prior authorization denial of a brain cancer treatment for her nine-month-old daughter. “This is my daughter that you tried to deny care for,” she posted. “When a team of expert [doctors] recommend a treatment, your PharmD reviewers don’t get to deny her life-saving care for your profits.”
However, in this case, she posted her account after Blue Cross Idaho reversed the denial. She said she did this in part to prevent the payer from denying coverage for the drug in the future. “The power of the social media has been huge,” she told KFF Health News. The story noted that she joined X for the first time so she could share her story.
Affordable Care Act Loophole?
“We’re not going to get rid of prior authorization. Nobody is saying we should get rid of it entirely, but it needs to be right sized, it needs to be simplified, it needs to be less friction between the patient and accessing their benefits. And I think we’re on really good track to make some significant improvements in government programs, as well as in the private sector,” said Todd Askew, Senior Vice President, Advocacy, for the American Medical Association, in an AMA Advocacy Update.
However, KFF HealthNews reported that Kaye Pestaina, JD, a Kaiser Family Foundation VP and Co-Director of the group’s Program on Patient and Consumer Protections, noted that some “patient advocates and health policy experts” have questioned whether payers’ use of prior authorization denials may be a way to get around the Affordable Care Act’s prohibition against denial of coverage for preexisting conditions.
“They take in premiums and don’t pay claims,” family physician and healthcare consultant Linda Peeno, MD, told KFF Health News. “That’s how they make money. They just delay and delay and delay until you die. And you’re absolutely helpless as a patient.” Peeno was a medical reviewer for Humana in the 1980s and then became a whistleblower.
The issue became top-of-mind for genetic testing labs in 2017, when Anthem (now Elevance) and UnitedHealthcare established programs in which physicians needed prior authorization before the insurers would agree to pay for genetic tests.
Dark Daily’s sister publication The Dark Report covered this in “Two Largest Payers Start Lab Test Pre-Authorization.” We noted then that it was reasonable to assume that other health insurers would follow suit and institute their own programs to manage how physicians utilize genetic tests.
At least one large payer has made a move to reduce prior authorization in some cases. Effective Sept. 1, UnitedHealthcare began a phased approach to remove prior authorization requirements for hundreds of procedures, including more than 200 genetic tests under some commercial insurance plans.
However, a source close to the payer industry noted to Dark Daily that UnitedHealthcare has balked at paying hundreds of millions’ worth of genetic claims going back 24 months. The source indicated that genetic test labs are engaging attorneys to push their claims forward with the payer.
Is Complaining on Social Media an Effective Tactic?
A story in Harvard Business Review cited research suggesting that companies should avoid responding publicly to customer complaints on social media. Though public engagement may appear to be a good idea, “when companies responded publicly to negative tweets, researchers found that those companies experienced a drop in stock price and a reduction in brand image,” the authors wrote.
However, the 2023 “National Customer Rage Survey,” conducted by Customer Care Measurement and Consulting and Arizona State University, found that nearly two-thirds of people who complained on social media received a response. And “many patients and doctors believe venting online is an effective strategy, though it remains unclear how often this tactic works in reversing prior authorization denials,” KFF Health News reported.
Federal Government and States Step In
KFF Health News reported that the federal government is proposing reforms that would require some health plans “to provide more transparency about denials and to speed up their response times.” The changes, which would take effect in 2026, would apply to Medicaid, Medicare Advantage, and federal Health Insurance Marketplace plans, “but not employer-sponsored health plans.”
KFF also noted that some insurers are voluntarily revising prior authorization rules. And the American Medical Association reported in March that 30 states, including Arkansas, California, New Jersey, North Carolina, and Washington, are considering their own legislation to reform the practice. Some are modeled on legislation drafted by the AMA.
Though the states and the federal government are proposing regulations to address prior authorization complaints, reform will likely take time. Given Harvard Business Review’s suggestion to resist replying to negative customer complaints in social media, clinical labs—indeed, all healthcare providers—should carefully consider the full consequences of going to social media to describe issues they are having with health insurers.
As a result, health system-based clinical laboratories likely saw a decline in test orders as well a decrease in outreach revenue
Bad financial news continues in the hospital industry. According to an August 2023 National Hospital Flash Report from consulting firm Kaufman Hall, hospitals’ financial performance deteriorated in July, partly due to declines in inpatient and outpatient volumes and rising bad debt and charity care.
The implication from these findings is that hospital-based clinical laboratories saw a drop in test volume and any lab revenue associated with inpatient testing.
In an analysis of data from more than 1,300 hospitals, Kaufman Hall noted a dip in hospitals’ median calendar year-to-date operating margin from 1.4% in June down to 1.3% in July. The data also showed “a greater pullback in volume on the outpatient side, which may be attributed to patients choosing not to pursue elective procedures during the summer,” a Kaufman Hall news release stated.
Kaufman Hall’s National Hospital Flash Report by Erik Swanson, Senior Vice President, Data and Analytics, and Brian Pisarsky, Senior Vice President, Strategic and Financial Planning, is an analysis of actual and budget data—sampled from Syntellis Performance Solutions—which is representative of hospitals of various sizes and areas in the US.
“It’s clear that today’s challenging financial environment is here to stay, and hospital leaders must be proactive in seeking out opportunities to refine their operations and remain competitive,” said Erik Swanson, Senior Vice President, Data and Analytics, Kaufman Hall, in a news release. Clinical laboratory leaders would be wise to follow the same advice. (Photo copyright: Kaufman Hall.)
Expenses Declined, Bad Debt and Charity Care Rose
Here are other national data Kaufman Hall reported for July 2023 as compared to June 2023:
Adjusted discharges per calendar day dropped 7%.
Operating room minutes per calendar day declined 13%.
Emergency department visits per calendar day fell 1%.
Bad debt and charity care as a percentage of hospitals’ gross operating revenue was up 7%.
Purchased service expense per adjusted discharge was down 3%.
Labor expense per adjusted discharge also fell 3%.
Even though expenses slightly declined during July, patient volume decreases “pulled down” the margins, Healthcare Innovation reported, which called the report “a gloomy one.”
Also, the uptick in bad debt and charity care while volumes decreased created a “difficult situation for hospitals,” Medical Economics observed.
Here are the report’s “key takeaways,” according to Kaufman Hall:
All volume indicators were down, but operating margins were still better than 2022.
Outpatient volume decreased more than inpatient, possibly due to patients choosing not to have elective procedures during the summer.
The decline in expenses was “not enough to offset revenue losses,” and inflation will continue to take its toll on labor expenses.
Medicaid has been “disenrolling” members in 30 states during June and July, and bad debt and charity care have increased.
The report also called out need for improvement in providers’ discharge of patients to skilled nursing facilities. “Hospitals that prioritize care transitions to skilled nursing facilities are performing better than institutions [that] do not,” Swanson said in the news release.
“Identifying steps that can ensure a smooth transition, such as obtaining pre-authorizations and planning discharge early, will help organizations reduce expenses and improve patients’ experience,” he continued.
For Hospitals, 2023 Not as Bad as 2022
MedCity News pointed out that though July’s operating margin index decline followed four months of growth, hospitals are still way ahead of 2022 performance when median operating margins were -0.98% in July 2022.
Still, it appears hospitals are struggling to secure financial footing after 2022, an overall bad financial year for the hospital industry.
More recently, a 2023 Becker’s Hospital CFO Report compiled a list of 81 hospitals that had cut jobs since the start of the year in response to “financial and operational challenges.”
Included was Tufts Medicine in Burlington, Massachusetts. In August, the hospital “eliminated hundreds of jobs” in an outsourcing of lab outreach services to Labcorp. The Becker’s report noted that “[Tufts] said it will work with Labcorp to have the majority of affected employees transition to a similar position with Labcorp.”
Tips for Clinical Lab Financial Viability
Medical laboratory leaders need to help ensure financial health of their labs as well as quality and efficiency of services. Advice from Kaufman Hall may be applicable.
The report writers advised providers to secure payer authorizations before a “patient comes in the door.” For clinical labs, this is comparable to the need to secure insurance company authorizations for expensive genetic tests before samples are taken and tests performed.
Another tip from Kaufman Hall is to “collect and use data to inform process improvement” and “make change.” Along those lines, medical laboratories could leverage patient data to guide launch of new services, entry to markets, workflow improvement, and costs reduction.
