Sep 10, 2018 | Laboratory Management and Operations, Laboratory News, Laboratory Operations, Laboratory Pathology, Laboratory Testing, Management & Operations
Clinical laboratory test claims make up a substantial proportion of all claims filed each year. Thus, any effort to streamline or reform claims adjudication and administration in the US will alter how labs and pathologists conduct business
Clinical laboratory managers and anatomic pathologists know how costly and complex the US healthcare system can be. However, expenses associated with care and treatment are only part of the total picture. Resources devoted to paperwork and administrative costs apparently increase overall expenditures associated with healthcare to a much higher degree than is generally known.
That’s according to several studies The New York Times reported on in July.
US Administrative Costs Higher than All Other Nations
One study conducted by The New England Journal of Medicine (NEJM) in 2003 estimated administrative costs account for approximately 30% of all healthcare expenditures in the US. The researchers examined data from 1999 to reach those conclusions. In today’s economy, those numbers are higher. On average, $5,700 of every $19,000 that US workers and their employers pay for family coverage each year goes towards administrative costs.
A 2014 study published by Health Affairs compared administrative costs for US hospital expenditures to those of seven other countries: Canada, England, France, Germany, the Netherlands, Scotland, and Wales. This study evaluated data from 2010/2011 and found that hospital administrative costs in the US far exceed rates in other nations. According to the study, administrative costs accounted for:
- 25.3% of total hospital expenditures in the US;
- 19.8% in the Netherlands;
- 15.5% in England; and,
- 12% in Canada and Scotland.
According to the Health Affairs study, more than $150 billion could have been saved in 2011 by reducing per capita spending for administrative costs to the levels observed in Canada and Scotland.
“The extraordinary costs we see are not because of administrative slack or because healthcare leaders don’t try to economize,” Kevin Schulman, MD, Professor, Department of Medicine, Duke University, and co-author of the Health Affairs study told The New York Times. “The high administrative costs are functions of the system’s complexity.” (Photo copyright: Duke University.)
Complexity of Payer System Partly to Blame
One reason for the costliness in the US healthcare system is the myriad of payers that healthcare organizations have to grapple with to receive payment. Private health insurers and public health programs like Medicare and Medicaid, each have their own procedures, regulations, and forms that need to be submitted to receive payments. This translates to more employee time devoted to billing.
Another factor driving costs is the staff time devoted to the collection of debts. A 2017 Health Affairs study examined medical claims data from 88,000 healthcare providers contracted with Athenahealth to determine the percentage of bills paid within one year from the initial service.
The study found that 93.8% of patient bills under $35 were paid within a year. However, that percentage decreased as the patient obligation increased:
- 90.5% of patients paid bills between $35 and $75 within one year;
- 83.7% paid bills between $75 and $200 in the same time period; however,
- When bills increase to $200 or more, just 66.7% were paid within a year’s time.
Providers wrote off approximately 16% as abandoned or bad debts, with an additional 17% going to collection agencies.
Another study, published in Health Affairs in 2009, surveyed 895 physicians about the time they spent dealing with administrative tasks. On average, physicians reported spending 43 minutes per workday interacting with health plans. This number is the equivalent of three hours/week and almost three weeks/year. Those numbers have reportedly increased since then.
EHRs Do Not Reduce Administrative Costs, Contrary to Belief
Efforts have been made to reduce administrative costs in the US healthcare industry. One such measure involved increased use of certified electronic health record (EHR) systems, which the federal government spent billions of dollars promoting and incentivizing providers to adopt on the claim that EHRs would reduce healthcare costs, in part by removing most of the paperwork.
However, a 2018 study published in the Journal of the American Medical Association (JAMA) reported the adoption of EHRs did not reduce administration costs. Researchers at Duke University and Harvard Business School utilized a cutting-edge accounting method to determine the administrative costs within a large academic healthcare system that was using a certified EHR.
Their study determined the administrative costs for processing a single medical bill ranged from $20 for a doctor visit to $215 for an inpatient surgical procedure. These costs accounted for 3%-25% of total professional revenue for the provided services.
“We need to understand better how complexity is driving these enormous costs within the system, costs that do not add value to patients, employers, or providers,” noted Barak Richman, JD, PhD, Duke University School of Law and Margolis Center for Health Policy, one of the study’s authors.
Clinical Lab Test Claims a Major Portion of Administrative Costs
Nevertheless, administrative costs are a necessary part of doing business and not always as negative as perceived. An article published by Health Affairs in 1992 divided administrative costs in the healthcare industry into four categories:
- Transaction-related: claims processing, billing, admissions, and tracking employee hiring/terminations;
- Benefits Management: quality assurance, plan design, statistical and internal analyses, and management information systems;
- Selling and Marketing: strategic planning, underwriting, and advertising; and,
- Regulatory and Compliance: waste management, licensing requirements, and discharge planning.
“We hope that this work is the first step toward informing policy solutions that could reduce these non-value-added costs largely hidden within the healthcare system,” Schulman stated in a Duke University news release.
The issue of costly paperwork and administrative expenditures is significant for the clinical laboratory profession as lab test claims make up a substantial portion of all medical claims filed annually. Efforts to streamline or reform claims adjudication and administration will have an impact on the way clinical labs and anatomic pathology groups conduct business in the future.
—JP Schlingman
Related Information:
Hidden from View: The Astonishingly High Administrative Costs of U.S. Health Care
NEJM: Costs of Health Care Administration in the United States and Canada
Heath Affairs: A Comparison of Hospital Administrative Costs in Eight Nations: US Costs Exceed All Others by Far
Heath Affairs: Inside the Black Box of Administrative Costs
Heath Affairs: As Patients Take on More Costs, Will Providers Shoulder the Burden?
Heath Affairs: What Does It Cost Physician Practices to Interact with Health Insurance Plans?
Electronic Health Records Don’t Reduce Administrative Costs
Simplifying Administration of Health Insurance
Sep 7, 2018 | Laboratory News, Laboratory Operations, Laboratory Pathology, Laboratory Testing, Managed Care Contracts & Payer Reimbursement
Healthcare revenue cycle consultant Jonathan Wiik suggests healthcare providers must prepare their organizations for patients who need help paying increasing medical costs
When patients cannot pay their bills, all of healthcare—including clinical laboratories and anatomic pathology groups—also struggle. And, according to experts, medical laboratories already complying with federal value-based payment programs and precision medicine directives should expect increased pressure from patients seeking ways to pay for their services.
A recent analysis of this issue by TransUnion Healthcare (NYSE:TRU) states, “patients experienced an 11% increase in average out-of-pocket costs during 2017, rising from $1,630 in Q4 2016 to $1,813 in Q4 2017.” It is a development that should send up red flags to clinical laboratory managers seeking ways to maintain and increase revenues.
“Given the increased payment responsibility, being able to determine a patient’s ability to pay is increasingly important for hospitals,” noted Jonathan Wiik, Principal, Healthcare Strategy at TransUnion Healthcare (TRU). “In order to allow patients to focus on getting the care they need healthcare providers need processes and tools in place to help patients meet their financial obligations and to establish funding mechanisms that will benefit both the patient and provider.” Obviously, this also applies to clinical laboratories.
According to a news release, “The [TRU] analysis also revealed that in 2017, on average, 49% of patient out-of-pocket costs per healthcare visit were below $500; 39% were $501-$1,000; and 12% were more than $1,000.”
For providers, patients’ swelling unpaid balances mean more uncompensated care, the analysis also showed. And that means more unpaid balances for clinical laboratories as well.
Patients Struggle to Pay Amounts Under $500
Each year, more healthcare consumers are forced onto high-deductible health plans (HDHPs) that make them responsible for thousands and even tens of thousands of dollars in upfront costs.
And according to another TRU news release, patients with commercial insurance plans experienced a 67% increase in their financial responsibility over five years. In other words, after insurance plans paid providers, patients still needed to pony up 12.2% of the total bill in 2017, as compared to 8% in 2012.
During the most recent year studied by TransUnion Healthcare, patients’ out-of-pocket costs increased 11%, rising to $1,813 in 2017 from $1,630 in 2016, a news release revealed.
And it doesn’t take a huge bill for patients to feel the pain. TransUnion’s data reveals that 68% of patients with medical bills below $500 did not fully pay what they owed, RevCycle Intelligence reported. This has major implications for clinical laboratories and anatomic pathology groups because many lab charges fall under $500 and TransUnion shows that almost 70% of patients do not pay the full amount of these bills.
According to TRU, medical specialties with the highest out-of-pocket estimated amounts due from patients include:
- Orthopedics, $1,663;
- Plastic surgery, $1,566;
- Urology, $1,415; and,
- Neurology, $1,241.
The average deductible was $1,200 in 2016, up from just $303 in 2006, a 176% increase, Healthcare Dive reported, citing a new Peterson-Kaiser Health System Tracker report.
And, as Dark Daily previously reported, affluent and self-employed people also feel the pinch, as deductibles can be as high as $5,000/year for individuals and more than $10,000/year for a families, whether plans are purchased through the Affordable Care Act (ACA) or employers.
What Happens When Patients Don’t Pay?
Dark Daily also reported on a 2017 TransUnion Healthcare analysis that showed 99% of hospital bills of $3,000 or more were not paid in full by the end of 2016. (See, “Hospitals, Pathology Groups, Clinical Labs Struggling to Collect Payments from Patients with High-Deductible Health Plans,” September 6, 2017.)
When patients cannot afford to pay their bills, hospitals’ bad debt and charity-care levels rise. Together, bad debt and charity care comprise a provider’s uncompensated care.
“A lot of patients can’t afford these bills, which is why uncompensated care has bounced,” Wiik told Modern Healthcare.
Indeed, uncompensated care was $38.3 billion in 2016, up $2.6 billion since 2015, according to an American Hospital Association (AHA) 2017 fact sheet.
Meanwhile, the Centers for Medicare and Medicaid Services (CMS) reported that Medicare bad debt (the effect of Medicare patients not paying deductibles and co-pays) increased to $3.69 billion in 2016 from $3.14 billion in 2012, a 17% bump, TransUnion Healthcare pointed out.
Consumers Say They Want Prices, Financing Plans
Consumers say healthcare providers are not transparent about costs for procedures, nor do they effectively offer financing options. That’s according to a HealthFirst Financial news release, which states, “More than three-quarters, or 77%, of healthcare consumers say it’s important or very important they know their costs before treatment and 53% want to discuss financing options before care. However, the vast majority of healthcare providers are not satisfying these consumer demands.”
And, according to a HealthFirst Financial Patient Survey of 1,011 adults nationwide:
- “53% voice concern about the ability to pay a medical bill of less than $1,000;
- “35% worried about the ability to pay a bill of less than $500; and,
- “16% are concerned about the ability to pay a bill of less than $250.”
These numbers fall well into the amounts clinical laboratories charge for services rendered.
What Can Medical Laboratories Do?
To help their customers pay their bills and improve revenue, Dark Daily suggest labs:
- Use software that enables ordering clinicians to process advanced beneficiary notices and prior authorizations for services;
- Inform the customer prior to specimen collection about their financial responsibility for the test;
- Ask for payment-due at time of the patient encounter;
- Share key lab test price data in easily accessible and understandable ways;
- Keep credit card information securely on-hand for agreed-to balances patients are responsible for paying; and,
- Offer payment options, such as e-billing and financing plans.
As we’ve pointed out many times, because clinical laboratories are dependent on the physicians and hospitals they service, they are particularly vulnerable when patients stop paying their bills.
—Donna Marie Pocius
Related Information:
TransUnion Healthcare Analysis: Fight Rising Uncompensated Care
Patient Balances Continue to Increase in 2018, Driving Bad Debt and Uncompensated Care
Patient Payment Responsibility Increases 11% in 2017
Patient Financial Responsibility Increased 11% in 2017
It’s Never Too Soon to Communicate Pricing and Payment Options
Deductibles, Coinsurance on the Rise, But Cost of Copays Are Down
Growing Bad Debt Problem Illustrates Broken Billing System
American Hospital Association Uncompensated Care Cost Fact Sheet, December 2017 Update
From Millennials to Boomers, Patients Want to Discuss Healthcare Pricing and Payment Options Before Treatment
Even Higher Income Americans Are Frustrated with High Health Insurance Costs and Many Drop Coverage and Switch to Concierge Care
Hospitals’ Pathology Groups and Clinical Labs Struggling to Collect Payments from Patients with High Deductible Health Plans
Oct 20, 2017 | Digital Pathology, Laboratory Management and Operations, Laboratory News, Laboratory Pathology, Laboratory Testing, Managed Care Contracts & Payer Reimbursement
New study analyzes the dramatic decline in the utilization of imaging diagnostics between 2008 and 2014 and suggests that reductions in imaging use could be the result of changes in federal policy, increased deductibles, and cost-cutting focuses
Anatomic pathologists have experienced sustained cuts to reimbursements for both technical component and professional component services during the past eight to 10 years. But what has not happened to pathology is a 33% decline in the volume of biopsies referred to diagnosis. Yet that is what some studies say has happened to imaging reimbursement since 2006.
Using Medicare data for Part B imaging procedures covering the years 2001 to 2014, researchers at a major university identified that, beginning in 2006, the total reimbursement for imaging procedures declined at a steady rate throughout the following eight years covered by the study. It is unclear what implications the finding of this study of imaging utilization might predict for the utilization of advance anatomic pathology services.
Routine Use of Imaging in Diagnostics is Slowing Down
The research into imaging utilization was conducted at Thomas Jefferson University and published in the journal Health Affairs. Led by David C. Levin, MD, Emeritus Professor and former Chair of the Department of Radiology at Thomas Jefferson University Hospital, the researchers examined imaging data from Medicare Part B (2001-2014) to determine the reason and rate of “slowdown” in routine use of imaging in diagnostics.
The researchers calculated utilization rates for “advanced” imaging modalities and component relative value unit (RVU) rates for all imaging modalities. They determined that trends in imaging rates and RVU rates rose between 2000 and 2008, but then sharply declined from 2008 to 2014. The researchers theorized that the reduction might have been due to changes in federal policy, increasing deductibles, and focus on cost-cutting by hospitals and healthcare providers.
Levin, along with Thomas Jefferson University associates Vijay M. Rao, MD, FACR, current Chair of Radiology, and Laurence Parker, PhD, Associate Professor of Radiology; and University of Wisconsin-Madison statistics Professor Charles D. Palit, PhD, argue that the decrease in imaging orders might reduce diagnostic costs, but also could negatively impact surgical pathologists, radiologists, medical researchers, and patients themselves.
In a Modern Healthcare article, Levin states that the reduction in utilization of imaging and radiology could be a slippery slope leading to decreased access to life-saving diagnostic tools that could leave patients “not getting the scans they probably need.”
What’s Fueling the Multi-Year Decline in Utilization of Imaging and Radiology?
In the Journal of American College Radiology, Levin, Rao, and Parker, attempt to “assess the recent trends in Medicare reimbursements to radiologists, cardiologists, and other physicians for non-invasive diagnostic imaging (NDI).”
Using data acquired from Medicare part B databases, the authors reported that total reimbursements for NDI peaked at $11.9 billion in 2006, but saw a steep decline of 33% to just over $8 billion in 2015. They attribute some of this decline as a result of the Deficit Reduction Act of 2005, which went into effect in 2007, as well as other cuts to NDI reimbursement funding. Reimbursement to radiologists, according to Levin et al, dropped by more than 19.5%, and reimbursement to cardiologists dropped nearly 45% between 2006 and 2015.
Surgical pathologists may see parallels in the total reimbursement for imaging during the years 2002-2015 compared to pathology technical component and professional component reimbursement during those same years. Taken from the Thomas Jefferson University study, the graphic above shows “total Part B payments for non-invasive diagnostic imaging to all physicians under the Medicare Physician Fee Schedule, 2002 to 2015. Vertical axis shows billions of dollars. The abrupt decline in 2007 was due to the Deficit Reduction Act. The declines in 2009, 2010, and 2011 were due largely to code bundling in, respectively, transthoracic echocardiography, radionuclide myocardial perfusion imaging, and CT of the abdomen and pelvis.” (Caption and image copyright: Thomas Jefferson University.)
In different Journal of American College Radiology article, Levin and Rao outline their concerns over another suspected cause for the decline in imaging utilization—the American Board of Internal Medicine Foundation (ABIMF) Choosing Wisely initiative.
According to Levin and Rao, the Choosing Wisely initiative was intended “to reduce the use of tests and treatments that were felt to be overused or often unnecessary.” Imaging examinations were included in the list of tests that were deemed to be “of limited value” in many situations. Levin and Rao suggested that there might have been a need to curtail testing pushed by payers, policymakers, and physicians at the time, but that the Choosing Wisely initiative could have added to a decline in imaging testing spurred on by the confusion physicians felt when attempting to access unclear scenarios and recommendations for the 124 imaging tests listed.
Imaging Decline Could Have Unintended Consequences for Providers and Patients
In a Radiology Business article, Levin outlined some of the unintended consequences facing healthcare due to the reduction in imaging utilization. He states that “private imaging facilities are starting to close down” and “MRI and other advanced imaging exams are beginning to shift into hospital outpatient facilities.” He predicts that the shift from private facilities to hospital facilities could cause imaging costs to increase for customers and healthcare providers.
Levin suggests that Medicare could “raise the fees a little and make the private offices a little more viable.” The profit margins, Levin argues, “are so low right now that you basically can’t run a business.” Medicare as a program might be seeing huge savings, Levin notes in several articles, but physicians, laboratories, and patients are feeling the pinch as a result.
In an interview with Physicians Practice, Rao echoed Levin’s concerns. “Policy makers lack understanding of the value of imaging and spectrum of the services provided by radiologists,” he declared. “On an institutional level, under the new payment models, radiology is transitioning to a cost center and radiologists often don’t have a seat at the table.”
Rao points out that this devaluing of radiologists’ work affects not only healthcare facilities, but patients themselves. Radiologists provide “major contributions to patient care by making accurate diagnoses, and doing minimally invasive treatments given many technological advances leading to appropriate management and improved outcomes,” he argues. How long before Pathology follows a similar track?
Balancing Cost and Quality in Testing Without Sacrificing Patient Needs
The fear seems to be that the push to lower costs by eliminating unnecessary imaging is inhibiting radiologists and diagnosticians from providing necessary imaging for patients. And that delaying diagnoses affects the ability of healthcare providers to provide adequate and timely patient care. Rao suggests, however, that physicians’ use of medical imaging could simply be evolving.
“There were other factors that also helped limit the rapid growth, such as greater attention by physicians to practice guidelines, concerns about radiation exposure to patients, and the Great Recession of 2007 to 2009,” Rao noted in a Thomas Jefferson University news release. “However, we expect that additional changes, such as the advent of lung cancer and other screening programs, and the use of computerized clinical decision support, will continue to promote and support appropriate use of imaging technology.”
The drive to reduce healthcare expenditures should not be dismissed. We may soon see parallels in the rise and fall of imaging utilization for genetic testing, surgical pathology, and other new and expensive clinical laboratory technologies as policymakers attempt to balance increased spending against the clinical value of these diagnostic tools.
— Amanda Warren
Related Information:
The Overuse of Imaging Procedures on the Decline Since 2008
After Nearly a Decade of Rapid Growth, Use and Complexity of Imaging Declined, 2008–2014
Reducing Inappropriate Use of Diagnostic Imaging Through the Choosing Wisely Initiative
The Recent Losses in Medicare Imaging Revenues Experienced by Radiologists, Cardiologists, and Other Physicians
Five Minutes with David C. Levin, MD: Outpatient Imaging Cuts and Unintended Consequences
Ten Questions with Vijay M. Rao, MD, FACR
Diagnostic Imaging Transitions from Volume to Value
Imaging Use Plunges as Coding, Reimbursement Tightens Up
Has the Time Come for Integration of Radiology and Pathology?
Reference Pricing and Price Shopping Hold Potential Peril for Both Clinical Laboratories and Consumers
Sep 6, 2017 | Laboratory Management and Operations, Laboratory News, Laboratory Pathology, Managed Care Contracts & Payer Reimbursement, Management & Operations
Challenges getting paid likely to continue as high deductibles make patients responsible for paying much more of their healthcare bills
Rising out-of-pocket costs for healthcare consumers is translating into increasing amounts of red ink for hospitals and healthcare providers struggling to collect bills from patients with high-deductible health plans (HDHPs). Clinical laboratories and pathology groups are unlikely to be immune from these challenges, as increasing numbers of patients with smaller healthcare debts also are failing to pay their bills in full.
That’s according to a recent TransUnion Healthcare analysis of patient data from across the country. It revealed that 99% of hospital bills of $3,000 or more were not paid in full by the end 2016. For bills under $500, more than two-thirds of patients (68%) didn’t pay the full balance by year’s end (an increase from 53% in 2015 and 49% in 2014). The study also revealed that the percentage of patients that have made partial payments toward their hospital bills has fallen dramatically from nearly 90% in 2015 to 77% in 2016.
Increased Patient Responsibility Causing Decrease in Patient Payments
“The shift in healthcare payments has been taking place for well over a decade, but we are seeing more pronounced changes in how hospital bills are paid during just the last few years,” Jonathan Wilk, Principal for Healthcare Revenue Cycle Management at TransUnion (NYSE:TRU), said in a statement.
Millions of Americans are in high-deductible health plans. And, as the graphic above illustrates, that number has been increasing since the ACA was signed into law in 2010. (Graphic copyright: Reuters.)
While the Affordable Care Act (ACA) has increased the number of Americans receiving medical coverage through Medicaid or commercial insurance, TransUnion noted in its statement that hospitals still wrote off roughly $35.7 billion in bad debt in 2015. By 2020, TransUnion predicts that figure will continue to rise, with an estimated 95% of patients unable to pay their healthcare bills in full by the start of the next decade.
“Higher deductibles and the increase in patient responsibility are causing a decrease in patient payments to providers for patient care services rendered. While uncompensated care has declined, it appears to be primarily due to the increased number of individuals with Medicaid and commercial insurance coverage,” John Yount, Vice President for Healthcare Products at TransUnion, said in the TransUnion statement.
Collecting Patients’ Out-of-Pocket Costs Upfront
According to Reuters, hospitals in states that did not expand Medicaid under Obamacare have witnessed a more than 14% increase in unpaid bills as the number of people using health plans with high out-of-pocket costs increased. For hospitals in those states, HDHPs are impacting their bottom lines.
“It feels like a sucker punch,” declared Chief Executive Officer John Henderson of Childress Regional Medical Center, Texas Panhandle Region, in a Bloomberg Business article. “When someone has a really high deductible, effectively they’re still uninsured, and most people in Childress don’t have $5,000 lying around to pay their bills.”
A recent report from payment network InstaMed found that 72% of healthcare providers reported an increase in patient financial responsibility in 2016, a trend that coincides with a rise in the average deductible for a single worker to $1,478, more than double the $735 total in 2010.
In response to the increase in patient responsibility, hospitals and other providers are turning to new tactics for collecting money directly from patients, including estimating patients’ out-of-pocket payments and collecting those amounts upfront.
Hospital Systems Offer Patients Payment Options
Venanzio Arquilla is the Managing Director of the healthcare practice at The Claro Group, a financial management consultancy in Chicago. In an interview with Crain’s Chicago Business, he stated that hospitals are working overtime to get money from patients, particularly at the point of service.
“Hospitals have gotten much more aggressive in trying to collect at time of service, because their ability to collect on self-pay amounts decreases significantly when the patient leaves the building,” Arquilla noted. “You can’t say, ‘Give me your credit card’ to someone in the emergency room bleeding from a gunshot wound, but you can to someone going in for an elective procedure.”
Revenue loss due to unpaid medical bills among states that complied with Medicaid Expansion under the ACA has increase so dramatically, some hospitals are now offering patients prepayment discounts and no-interest loans to ensure payments. Clinical laboratories and anatomic pathology groups should develop strategies to respond to the increase collections from patients at the time of service. (Graphic copyright: Reuters.)
Richard Gundling, a Senior Vice President at the Healthcare Financial Management Association (HFMA), told Kaiser Health News that an estimated 75% of healthcare and hospital systems now ask for payment at the time services are provided. To soften the blow, some healthcare systems are providing patients with a range of payment options, from prepayment discounts to no-interest loans.
Novant Health, headquartered in North Carolina, is among those healthcare systems offering patients new payment strategies. Offering no interest loans to patients has enabled Novant to lower its patient default rate from 32% to 12%.
“To remain financially stable, we had to do something,” April York, Senior Director of Patient Finance at Novant Health, told Reuters. “Patients needed longer to pay. They needed a variety of options.”
Providers Must Adapt to New Patient Procedures
“Doctors need to understand the landscape has changed. A doctor’s primary concern use
to be whether a patient had insurance. Now, it’s the type of insurance,” Devon M. Herrick, PhD, a Senior Fellow at the National Center for Policy Analysis (NCPA) in Dallas, told Medical Economics.
While clinical laboratories and anatomic pathology groups traditionally have not collected money directly from patients, Herrick says healthcare providers must accept that the rules of the game have changed. “Patients are more cost-conscious now. That means patients will question their physicians about costs for procedures,” he adds.
Dark Daily has advised clinical laboratories in the past to develop tools and workflow processes for collecting payments upfront from patients with high-deductible health plans (See, “Growth in High Deductible Health Plans Cause Savvy Clinical Labs and Pathology Groups to Collect Full Payment at Time of Service,” Dark Daily, July 28, 2014). Not doing so can amount to millions of dollars in lost revenue to the medical laboratory industry.
—Andrea Downing Peck
Related Information:
Bad Debt Is the Pain Hospitals Can’t Heal as Patients Don’t Pay
Out of More Pockets
Patients May be the New Payers, But Two in Three Do Not Pay Their Hospital Bills in Full
Feel Like the Hospital Is Shaking You Down Over that Bill? It Probably Is
The Seventh Annual Trends in Healthcare Payments Report Is Here
Doctors and Hospitals Say, ‘Show Me the Money’ before Treating Patients
Ballooning Bills: More US Hospitals Pushing Patients to Pay before Care
Growth in High Deductible Health Plans Cause Savvy Clinical Labs and Pathology Groups to Collect Full Payment at Time of Service
Higher Annual Deductibles and Co-Payments Cause Hospitals to Intensify Efforts to Collect Directly from Patients; Medical Laboratories Now Feel Similar Financial Squeeze
Because of Sizeable Deductibles, More Patients Owe More Money to Clinical Pathology Laboratories, Spurring Labs to Get Smarter about Collecting from Patients
Jun 23, 2017 | Laboratory Management and Operations, Laboratory News, Laboratory Operations, Laboratory Pathology, Management & Operations
Medical laboratory inpatient test volume may continue to decline as the Medicare hospital readmission reduction program expands in 2017 and state population health programs garner funding
We are now several years into the Medicare program that is designed to reduce hospital readmissions. Statistics from these years show encouraging progress in reducing the readmission rate of Medicare patients. This is a trend that has important implications for all hospital-based clinical laboratories.
Hospitals are the most expensive site of care in the entire healthcare system. In its ongoing battle to reduce healthcare costs, the Centers for Medicare and Medicaid Services (CMS) implemented a carrot-and-stick program called the Hospital Readmission Reduction Program (HRRP) aimed at lowering hospital readmission rates nationwide.
Established in 2013 by the Affordable Care Act (also known as Obamacare), the HRRP lowers reimbursements to acute care hospitals that have high rates of Medicare readmissions within 30 days of initial discharge, and increases reimbursements to hospitals that lower their readmission rates, a March 2017 Kaiser Family Foundation (KFF) Issue Brief explained.
And, according to the KFF, these programs are having an impact. Readmission rates dropped by 8% nationwide as hospitals found ways to avoid the stiff financial penalties and earn the financial rewards. Additionally, patients are increasingly choosing ambulatory care settings, or to receive care at home, rather than re-entering hospitals. This has lowered states’ readmission rates even further.
From a healthcare cost perspective, this is good news. However, these programs have had unintentional consequences as well. The federal initiatives and state population health programs responsible for lowering readmission rates also directly impact medical laboratories by simultaneously reducing the flow of inpatient testing volume.
At the same time, clinicians at the nation’s hospitals—in their efforts to avoid readmissions—have a motive to become more effective at ordering the right medical laboratory test at the right time, and to use the lab test results to more effectively treat the patient. Thus, for the nation’s hospital labs, the Medicare program to reduce readmissions has both an upside and a downside.
Programs, Data Mining That Help Providers Avoid Readmissions
Hospitals nationwide are operating programs aimed at attracting federal financial rewards for keeping people healthy, and from being admitted to hospitals due to conditions that could have been prevented, USA Today reported.
One such program involves Christiana Care Health System (Christiana Care) of Wilmington, DE. Christiana Care implemented CMS’ Care Link transitions program through the Center for Medicare and Medicaid Innovation (CMMI), also known as The Innovation Center, which, “supports the development and testing of innovative healthcare payment and service delivery models.”
The provider experienced a 20% drop in patients being readmitted within 30 days of surgery, due to its “bundled payment” plan for heart failure, the USA Today article noted. Hip and knee replacement readmissions were down 25% 30 days after discharge as well.
“Without the funding we got through CMMI, it’s hard to imagine we’d be in the position we’re in today,” stated Janice Nevin, MD, CEO of Christiana Care.
Janice Nevin, MD (above), CEO of Christiana Care Health System, Wilmington, DE, is concerned that the upcoming changes to the ACA will affect the funding the healthcare provider has received from the CMS Innovation Center. “I would strongly urge that we keep the commitment to CMMI (because) you have to innovate to learn,” she told USA Today. (Photo copyright: Christiana Care Health System.)
Changes to HRRP for Dual-Eligibles Could Affect Penalties
Some patients are more expensive than others. Patients who draw both Medicare and Medicaid funding simultaneously, for example. These “dual-eligibles” are disproportionately expensive for hospitals to treat, reported Modern Healthcare.
In fact, they are just 18% of CMS beneficiaries, but accounted for one-third of all Medicare fee-for-service (FFS) spending in 2013, according to a Medicare Payment Advisory Commission June 2016 demographic report.
CMS is proposing to adjust penalties in the HRRP to reflect the proportion of patients who are dual-eligible, presumably hoping the change will both lower costs and reduce penalties on healthcare providers.
Hospital Readmissions Data from 49 States
CMS data show that between 2010 and 2015 hospital readmission rates fell by 8%, reported Healthcare Finance News. Other key data recently released by CMS and reported by Healthcare Finance News:
· 49 states reduced avoidable hospital readmission rates since 2010;
· Vermont’s readmission rate rose slightly from 15.3% in 2010 to 15.4% in 2015;
· In 43 states, readmission rates fell by more than 5%;
· 11 states had a more than 10% drop in readmission rates;
· The fall in readmission rate translates to about 104,000 hospital readmissions avoided for Medicare beneficiaries in 2015 and 565,000 readmissions averted since 2010; and
· Avoidable admissions, occurring within 30 days of initial discharges, account for more than $17 billion in Medicare annual expenditures.
Action Steps for Clinical Laboratories
Pathologists and lab leaders need to efficiently work with colleagues, especially when caring for hospitalized patients with conditions relative to the HRRP. Clear and patient-friendly discharge instructions for diagnostics are important. And, the lab’s coordination with post-acute-care providers, such as skilled nursing facilities, on follow-up testing is key to avoiding unnecessary readmissions.
Regardless, medical laboratory inpatient test volume will likely continue to decline. As Dark Daily readers know, the decline in inpatient testing is associated with more than just the HRRP. The transition to new models of integrated care that has taken place over the last few years is also a factor, as Dark Daily reported in “Falling Inpatient Revenues at Many Hospitals is Sign of Healthcare’s Transition to New Models of Integrated Care and Changes in Medical Laboratory Test Utilization.”
Medical laboratory directors and sales teams are advised to continue their efforts at boosting outpatient volume to fill the inpatient void.
—Donna Marie Pocius
Related Information:
Hospitals Work to Keep Patients from Being Admitted
Aiming for Fewer Hospital U-Turns: The Medicare Hospital Readmission Reduction Program
49 States, DC Reduce Avoidable Hospital Readmissions
Dual-eligibles: The Next Target in Hospital Readmissions Penalties
June 2016 Data Book, Section 2: Medicare Beneficiary Demographics
Hospitals Mine Clinical Data to Help Reduce Costs and Avoid Readmissions, Creating Opportunities for Clinical Laboratories and Pathologists to Contribute to Improved Patient Outcomes
Falling Inpatient Revenues at Many Hospitals is Sign of Healthcare’s Transition to New Models of Integrated Care and Changes in Medical Laboratory Test Utilization
