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Clinical Laboratories and Pathology Groups

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Federal EKRA Law Continues to Cause Uncertainty in Clinical Laboratory Sales Compliance

Healthcare attorneys advise medical laboratory leaders to ensure staff understand difference between EKRA and other federal fraud laws, such as the Anti-kickback Statute

More than four years have passed since Congress passed the law and yet the Eliminating Kickbacks in Recovery Act of 2018 (EKRA) continues to cause anxiety and confusion. In particular are the differences in the safe harbors between the federal Anti-Kickback Statute (AKS) and Stark Law versus EKRA. This creates uncertainty among clinical laboratory leaders as they try to understand how these disparate federal laws affect business referrals for medical testing.

According to a news alert from Tampa Bay, Florida-based law firm, Holland and Knight, “EKRA was enacted as part of comprehensive legislation designed to address the opioid crisis and fraudulent practices occurring in the sober home industry.” However, “In the four years since EKRA’s enactment, US Department of Justice (DOJ) enforcement actions have broadened EKRA’s scope beyond reducing fraud in the addiction treatment industry to include all clinical laboratory activities, including COVID-19 testing.”

It is important that medical laboratory leaders understand this law. New cases are showing up and it would be wise for clinical laboratory managers to review their EKRA/AKS/Stark Law compliance with their legal counsels.

David Gee

“Keeping in mind that [EKRA is] a criminal statute, clinical laboratories need to take steps to demonstrate that they’re not intending to break the law,” said attorney David Gee, a partner at Davis Wright Tremaine, in an exclusive interview with The Dark Report. “[Lab leaders should] think about what they can do to make their sales compensation program avoid the things the government has had such a problem with, even if they’re not sure exactly how to compensate under the language of EKRA or how they’re supposed to develop a useful incentive compensation plan when they can’t pay commissions.” David Gee will be speaking about laboratory regulations and compliance at the upcoming Executive War College in New Orleans on April 25-26, 2023. (Photo copyright: Davis Wright Tremaine.)

How Does EKRA Affect Clinical Laboratories?

The federal EKRA statute—originally enacted to address healthcare fraud in addiction treatment facilities—was “expansively drafted to also apply to clinical laboratories,” according to New York-based law firm, Epstein Becker and Green. As such, EKRA “applies to improper referrals for any ‘service,’ regardless of the payor. … public as well as private insurance plans, and even self-pay patients, fall within the reach of the statute.”

In “Revised Stark Law, Anti-Kickback Statute Rules Are Good News for Labs,” Dark Daily’s sister publication The Dark Report noted that EKRA creates criminal penalties for any individual who solicits or receives any remuneration for referring a patient to a recovery home, clinical treatment facility, or clinical laboratory, or who pays or offers any remuneration to induce a referral.

According to Epstein Becker and Green, EKRA:

  • Applies to clinical laboratories, not just toxicology labs.
  • Has relevance to all payers: Medicare, Medicaid, private insurance plans, and self-pay.
  • Is a criminal statute with “extreme penalties” such as 10 years in prison and $200,000 fine per occurrence.
  • Exceptions are not concurrent with AKS.
  • Areas being scrutinized include COVID-19 testing, toxicology, allergy, cardiac, and genetic tests.

“For many clinical laboratories, a single enforcement action could have a disastrous effect on their business. And unlike other healthcare fraud and abuse statutes, such as the AKA, exceptions are very limited,” Epstein Becker and Green legal experts noted.

“Therefore, a lab could potentially find itself protected under an AKS safe harbor and still potentially be in violation of EKRA,” they continued. “The US Department of Health and Human Services (HHS) and the DOJ have not provided any clarity regarding this statute (EKRA). Without this much needed guidance clinical laboratories have been left wondering what they need to do to avoid liability.”

EKRA versus AKS and Stark Law

HHS compared AKS and the Stark Law (but not EKRA) by noting on its website prohibition, penalties, exceptions, and applicable federal healthcare programs for each federal law: 

  • AKS has criminal fines of up to $25,000 per violation and up to a five-year prison term, as well as civil penalties.
  • The Stark Law has civil penalties only.
  • AKS prohibits anyone from “offering, paying, soliciting, or receiving anything of value to induce or reward referrals or generate federal healthcare program business.”
  • The Stark Law addresses referrals from physicians and prohibits the doctors “from referring Medicare patients for designated health services to an entity with which the physician has a financial relationship.”

EKRA is more restrictive than AKS, as it prohibits some compensation that AKS allows, healthcare attorney Emily Johnson of McDonald Hopkins in Chicago told The Dark Report.

“Specifically, AKS includes a safe harbor for bona fide employees that gives an employer wide discretion in how employees are paid, including permitting percentage-based compensation,” Johnson wrote in a Dark Daily Coding, Billing, and Collections Special Report, titled, “Getting Paid for COVID-19 Test Claims: What Every Clinical Lab Needs to Know to Maximize Collected Dollars.”  

EKRA Cases May Inform Clinical Laboratory Leaders

Recent enforcement actions may help lab leaders better understand EKRA’s reach. According to Holland and Knight:

  • Malena Lepetich of Belle Isle, Louisiana, owner and CEO of MedLogic LLC in Baton Rouge, was indicted in a $15 million healthcare fraud scheme for “allegedly offering to pay kickbacks for COVID-19 specimens and respiratory pathogen testing.”
  • In S-G Labs Hawaii, LLC v. Graves, a federal court concluded the laboratory recruiter’s contract “did not violate EKRA because the recruiter was not referring individual patients but rather marketing to doctors. According to the court, EKRA only prohibits percentage-based compensation to marketers based on direct patient referrals.”
  • In another federal case, United States v. Mark Schena, the court’s rule on prohibition of direct and indirect referrals of patients to clinical labs sent a strong signal “that EKRA most likely prohibits clinical laboratories from paying their marketers percentage-based compensation, regardless of whether the marketer targets doctors or prospective patients.”

What can medical laboratory leaders do to ensure compliance with the EKRA law?

In EKRA Compliance, Law and Regulations for 2023, Dallas law firm Oberheiden P.C., advised clinical laboratories (as well as recovery homes and clinical treatment facilities) to have EKRA policies and procedure in place, and to reach out to staff (employed and contracted) to build awareness of statute prohibitions and risks of non-compliance.

One other useful resource for clinical laboratory executives and pathologists with management oversight of their labs’ marketing and sales programs is the upcoming Executive War College on Diagnostics, Clinical Laboratory, and Pathology Management. The conference takes place on April 25-26, 2023, at the Hyatt Regency in New Orleans. A panel of attorneys with deep experience in lab law and compliance will discuss issues associated with EKRA, the Anti-Kickback Statutes, and the Stark self-referral law. 

Donna Marie Pocius

Related Information:

The State of EKRA

Four Years After EKRA: Reminders for Clinical Laboratories

Revised Stark Law and AKS Rules Are Good News for Labs

Comparison of the Anti-Kickback Statute and Stark Law

Getting Paid for COVID-19 Test Claims: What Every Clinical Lab Needs to Know to Maximize Collected Dollars

EKRA Compliance, Law and Regulations for 2023

HHS Office of Inspector General Report Finds ‘Steep Decreases’ in Medicare Beneficiaries Receiving Clinical Laboratory Testing During COVID-19 Pandemic’s Early Months

OIG warns that without adequate clinical laboratory testing healthcare organizations could see more deaths and increased spending

Clinical laboratory leaders and pathologists know that lab test volume decreased dramatically during the early months of the COVID-19 pandemic. That was primarily because community lockdowns stopped people from seeing their doctors for the standard range of chronic health conditions, many of which require clinical laboratory tests for diagnosis and chronic disease management.

This early and substantial drop in the volume of medical laboratory testing done in the early months of the pandemic has been confirmed and quantified in a recently published report by US Department of Health and Human Services (HHS) Office of Inspector General (OIG). The report describes the  “steep decreases” in the number of Medicare beneficiaries receiving Medicare Part B lab tests in early 2020, by month, as follows:

• 24% reduction in Medicare Part B test volumes in March
• 53% in April
• 30% in May

The decline of Medicare patients visiting clinical laboratories continued through the balance of 2020. During the first 10 months of the pandemic—March through December 2020—Medicare beneficiaries who pursued lab testing decreased by about 9% compared to the same 10-month period in 2019, according to a news release.

This is a strong indicator that the government’s response to the pandemic had a measurable effect on clinical laboratory testing volume among all age groups, especially among the elderly.

Kyle Fetter

“The cumulative decline in lab test volume across all client labs for [March 9 to April 12] was just over 40%. But in that time, some of our lab customers were hit with a decline of maybe 50% to 60% in test volume,” Kyle Fetter (above), COO, XIFIN, told The Dark Report in 2020. Clinical laboratory testing that originates from a routine patient visit to a doctor—such as blood testing—may have been affected the most, Fetter explained. (Photo copyright: XIFIN.)

Clinical Laboratory Tests Key to Well-being of Patients with Chronic Conditions 

The OIG study was limited to Medicare beneficiaries and thus did not provide information about testing fall-off among people who have private health insurance. But in “From Mid-March, Labs Saw Big Drop in Revenue,” Dark Daily’s sister publication The Dark Report reported early in 2020 on a 40% decline in test volumes and the pandemic’s varying effects on clinical labs, anatomic pathology (AP) groups, and AP subspecialties.

The OIG’s Report in Brief on its study recognized that medical laboratory testing is critical to helping healthcare providers manage chronic conditions that affect patients’ well-being and increase their healthcare costs.

“Lab tests are important for beneficiaries with chronic medical conditions, which are associated with hospitalizations, billions of dollars in Medicare costs, and deaths,” the OIG said.

The OIG audit collected data on the numbers of Medicare beneficiaries receiving all lab tests as well as specific lab tests for Type 2 diabetes mellitus, Chronic kidney disease, and Chronic ischemic heart disease during the period March through December 2020, as compared to the same months in 2019.

According to the OIG’s report:

  • Beneficiaries receiving clinical laboratory tests in general decreased 9%.
  • Beneficiaries with type 2 diabetes receiving lab tests declined 14%.
  • Beneficiaries with chronic kidney disease getting lab tests fell 11%.
  • Beneficiaries with chronic ischemic heart disease receiving lab tests decreased 19%.

“The information may be useful to stakeholders involved in ensuring that beneficiaries avoid the potential bad outcomes that may result from missing or delaying appropriate care,” the report noted.

Overall, 23.7 million Medicare beneficiaries received medical laboratory tests during the first 10 months of the pandemic, down 2.4 million from 26.1 million in 2019, the OIG reported.

Overall Medicare lab test volume and spending also declined during the reported period:

  • Part B clinical laboratory tests for Medicare beneficiaries decreased 15% from 419.9 million tests in 2019 to 358.4 million tests in the first 10 months of the pandemic.
  • Medicare spending for these tests decreased 16% from $6.6 billion in 2019 to $5.5 billion during the first 10 months of the pandemic.

“OIG’s audit of Part B clinical laboratory tests, reimbursed under the Clinical Laboratory Fee Schedule (CLFS) is a useful benchmark for how Medicare beneficiaries received fewer lab tests during the pandemic, especially during the early months,” said Robert Michel, Editor-in-Chief of Dark Daily and The Dark Report.

Medical Laboratory Tests That Were Down Most During COVID-19

The following 10 clinical laboratory tests experienced a 10% or more decline in Medicare beneficiaries seeking them during the pandemic period as compared to pre-pandemic, according to the OIG report:

  • Basic metabolic panel down 18% to 4.8 million Medicare patients.
  • Urinalysis with microscope analysis down 13% to 4.6 million Medicare recipients.
  • Automated urinalysis down 16% to 3.4 million Medicare beneficiaries.
  • Vitamin B12 decreased 11% to 3.4 million Medicare patients.
  • Complete blood count (CBC) down 13% to 3.2 million Medicare beneficiaries.
  • Comprehensive urine culture test fell 16% to three million Medicare patients.
  • Uric acid level blood down 13% to 1.9 million Medicare beneficiaries.
  • Evaluation of antimicrobial drug decreased 17% to 1.74 million Medicare patients.
  • Folic acid level down 12% to 1.73 million Medicare beneficiaries.
  • Urinalysis manual test plunged 28% to 1.4 million Medicare patients.

Beyond Medicare, Clinical Laboratory Test Volume Dropped 40%

OIG was not the only organization to analyze medical laboratory testing volume during the pandemic’s early phase.

The Dark Report correlated data tracked by XIFIN, a San Diego-based health information technology (HIT) company providing revenue cycle management services to clinical laboratories and pathology groups. XIFIN’s collected data showed a steep drop in routine test volume as COVID-19 testing ramped up.

“Starting in the third week of March, we saw medical laboratories suffer a sharp drop in routine testing. But at about the same time, many labs began to offset those revenue losses with testing for the novel coronavirus,” Kyle Fetter, XIFIN’s then Executive Vice President and General Manager of Diagnostic Services told The Dark Report in 2020. Fetter is now XIFIN’S Chief Operating Officer.

“Over four weeks beginning March 9, we saw a cumulative drop of over 40% in test volume from all of our lab clients,” he added.

According to XIFIN’s data, lab specialty organizations experienced the following drop in routine testing during the period March 9 to April 16, 2020:

  • 58% at clinical laboratories.
  • 61% at hospital outreach laboratories.
  • 52% at molecular and genetic testing laboratories.
  • 44% at anatomic pathology (AP) groups.
  • 70% to 80% at AP dermatology and other AP subspecialties.

Many medical laboratories are still recovering from the COVID-19 pandemic’s effects on testing volume.

Notably, the OIG’s report acknowledges the importance of adequate clinical laboratory testing and declares that—without these essential lab tests to manage some healthcare conditions—the healthcare industry could see increased morbidity, deaths, and Medicare spending.   

Donna Marie Pocius

Related Information:

Full Report: The Number of Beneficiaries Who Received Medicare Part B Clinical Laboratory Tests Decreased During the First 10 Months of the COVID-19 Pandemic

Press Release: The Number of Beneficiaries Who Received Medicare Part B Clinical Laboratory Tests Decreased During the First 10 Months of the COVID-19 Pandemic 

Report-in-Brief: The Number of Beneficiaries Who Received Medicare Part B Clinical Laboratory Tests Decreased During the First 10 Months of the COVID-19 Pandemic

From Mid-March Labs Saw Big Drop in Revenue

CMS Pauses Plans to Limit Public Knowledge of Medical and Surgical Harm at Hospitals During COVID-19 Pandemic

Healthcare industry watchdog Group Leapfrog says that if CMS suppresses the data “all of us will be in the dark on which hospitals put us most at risk”

For some time, hospitals and clinical laboratories have struggled with transparency regulation when it comes to patient outcomes, test prices, and costs. So, it is perplexing that while that Centers for Medicare and Medicaid Services (CMS) pushes for more transparency in the cost of hospital care and quality, the federal agency also sought to limit public knowledge of 10 types of medical and surgical harm that occurred in hospitals during the COVID-19 pandemic.

And even though the CMS announced in its August 1 final rule (CMS-1771-F) that it was “pausing” its plans to suppress data relating to 10 measures that make up the Patient Safety and Adverse Events Composite (PSI 90), a part of the Hospital-Acquired Condition (HAC) Reduction Program, it is valuable for hospital and medical laboratory leaders to understand what the federal agency was seeking to accomplish.

COVID-19’s Impact on Measure Data

Within its lengthy 2023 Hospital Inpatient Prospective Payment System and Long Term Care Hospitals Proposed Rule (CMS-1771-P), the federal agency cites the COVID-19 public health emergency (PHE) as a reason for the adjustment in public access to certain data.

According to USA Today, medical complications at hospitals such as pressure ulcers and falls leading to fractures would be suppressed in reports starting next year. Additionally, CMS “also would halt a program to dock the pay of the worst performers on a list of safety measures, pausing a years-long effort that links hospitals’ skill in preventing such complications to reimbursement,” Kaiser Health News reported.

The proposed rule’s executive summary reads in part, “Due to the impact of the COVID-19 PHE on measure data used in our value-based purchasing (VBP) programs, we are proposing to suppress several measures in the Hospital VBP Program and HAC Reduction Program … If finalized as proposed, for the FY 2023 program year, hospitals participating in the HAC Reduction Program will not be given a measure score, a Total HAC score, nor will hospitals receive a payment penalty.”

These 10 measures include:

  • PSI 03-Pressure Ulcer Rate
  • PSI 06-Iatrogenic Pneumothorax Rate
  • PSI 08-In Hospital Fall with Hip Fracture Rate
  • PSI 09-Perioperative Hemorrhage or Hematoma Rate
  • PSI 10-Postoperative Acute Kidney Injury Requiring Dialysis Rate
  • PSI 11-Postoperative Respiratory Failure Rate
  • PSI 12-Perioperative Pulmonary Embolism or Deep Vein Thrombosis Rate
  • PSI 13-Postoperative Sepsis Rate
  • PSI 14-Postoperative Wound Dehiscence Rate
  • PSI 15-Abdominopelvic Accidental Puncture/Laceration Rate

The measures would not be accessible to the public or appear on the CMS Hospital Compare website, MedPage Today added.

“Those 10 events account for 25,000 preventable deaths and 94,000 incidents of patient harm in the US annually, according to recent analyses,” Fortune reported.

In a fact sheet, CMS noted that its intent in proposing the rule was neither to reward nor penalize providers at a time when they were dealing with the SARS-CoV-2 outbreak, new safety protocols for staff and patients, and an unprecedented rise in inpatient cases.

Lee Fleisher, MD
“We want the public to have complete trust in the data and will only be providing data we have determined has a high confidence of credibility and accuracy,” said CMS Chief Medical Officer Lee Fleisher, MD (above), Director of the CMS Center for Clinical Standards and Quality in a statement, Axios reported. Clinical laboratory leaders would find it more difficult to compare the performance of their hospitals against peer hospitals, should this proposed rule take effect as written. (Photo copyright: Lee Fleisher.)
 

Groups Opposed to the CMS Proposal

Like healthcare costs, quality data need to be accessible to the public, according to a health insurance industry representative. “Cost data, in the absence of quality data, are at best meaningless, and at worst, harmful. We see this limitation on collection and publication of data about these very serious safety issues as a step backward,” Robert Andrews, JD, CEO, Health Transformation Alliance, told Fortune.

The Leapfrog Group, a Washington, DC-based non-profit watchdog organization focused on healthcare quality and safety, urged CMS to reverse the proposal. The organization said on its website that it had collected 270 signatures on letters to CMS.

“Dangerous complications, such as sepsis, kidney harm, deep bedsores, and lung collapse, are largely preventable yet kill 25,000 people a year and harm 94,000,” wrote the Leapfrog Group in a statement. “Data on these complications is not available to the public from any other source. If CMS suppresses this data, all of us will be in the dark on which hospitals put us most at risk.”

Leah Binder, Leapfrog President/CEO, told MedPage Today she is concerned the suppression of public reporting of safety data may continue “indefinitely” because CMS does not want “to make hospitals unhappy with them.”

AHA Voices Support

Meanwhile, the American Hospital Association noted that the CMS “has made this proposal to forgo calculating certain hospital bonuses and penalties due to the impact of the pandemic,” Healthcare Dive reported.

“We agree with CMS that it would be unfair to base hospital incentives and penalties on data that have been skewed by the unprecedented impacts of the pandemic,” said Akin Demehin, AHA Senior Director, Quality and Safety Policy, in a statement to Healthcare Dive.

Though CMS’ plans to limit public knowledge of medical and surgical complications have been put on hold, medical laboratory leaders will want to stay abreast of CMS’ next steps with this final rule. Suppression of hospital harm during a period of increased demand for hospital transparency could trigger a backlash with healthcare consumers.

Donna Marie Pocius

 

Related Information:

CMS Final Rule CMS-1771-F

CMS Announces Continued Public Reporting of PSI 90 and Commitment to Transparency

Patient Safety Advocate Cheers CMS’ Reversal on Quality Reporting, But Hospitals Say the Data Are No Good

Medicare Ditches Plan to Bury Hospital Safety Data Next Year

FY 2023 Hospital Inpatient Prospective Payment System and Long-Term Care Hospitals Proposed Rule (CMS-1771-P)

Groups Object to Medicare Push to Suppress Reporting of Harm Done to Patients at Hospitals

CMS Proposal to Suppress Hospital Safety Data Angers Advocates

Fact Sheet: FY 2023 Hospital Inpatient Prospective Payment System and Long-Term Care Hospitals Proposed Rule (CMS-1771-P)

Biden Administration Seeks to Suppress Hospital Safety Data

Lives Lost, Lives Saved: An Updated Comparative Analysis of Avoidable Deaths at Hospitals Graded by The Leapfrog Group

Patient Safety Indicators (PSI) Benchmark Data Tables, v2021

Hospitals Have Become Less Safe During the Pandemic; So Why Does the Government Want to Suppress Hospital Safety Data?

We Need Your Help: Don’t Let CMS Suppress 25,000 Deaths a Year in Hospitals

Leapfrog Raises Concerns About CMS Proposal to Suppress Patient Safety Data

CMS Ready to Add Three More Items to Never Events No-Pay Policy for Medical Errors

Despite the Coronavirus Pandemic, Medicare Officials Continue Push for Price Transparency by Pressuring Hospitals to Disclose Rates Negotiated with Private Payers

New Study on Hospital Pricing by Houston Business Group Highlights Gaps Between Medicare and Private Insurance Payments

Employer group in Houston plans to use the numbers to pressure lawmakers for policy changes involving how hospitals and health plans price their services

Clinical laboratory leaders will probably not be surprised to learn that wide disparities exist between what Medicare pays hospitals and what is paid by private insurers and employers. That’s according to analysis by the Houston Business Coalition on Health (HBCH) which examined costs and billing practices at four of the region’s top hospitals, each a flagship for its respective health system.

This study—by a business group concerned about the spiraling cost of healthcare for their employees—is significant because it indicates that some large employers are willing to become more aggressive in driving down healthcare costs. In the Houston study, three of these hospitals—Houston Methodist, Memorial Hermann, and HCA Houston Medical Center—charged more than 250% over Medicare, noted a press release, which stated the group plans to use the numbers to lobby Texas lawmakers for policy changes.

“The prices employers paid to hospitals are unsustainable and negatively impact business growth, family quality of life, and resources needed for other critical community social needs,” said HBCH executive director Chris Skisak, PhD, in the press release. “Our intent in sharing and publicizing these resources is to facilitate direct discussions with health systems and employers to better understand the ramifications to Houston businesses and the greater community.”

The HBCH describes itself as a resource for local employers and healthcare providers seeking to promote cost-effective healthcare delivery and health benefits. It has 60 members that collectively provide healthcare coverage for 500,000 area residents.

Chris Skisak, PhD
“We’re entering a new age of transparency and it’s clear from these tools that pricing is not directly correlated with quality, but rather on what the market will bear,” said HBCH executive director Chris Skisak, PhD (above), in a press release. “While this is cause for concern, there are opportunities for change and these resources will enable employers and health plans to negotiate future contracts to select health systems that offer the best value—the highest quality at the lowest costs.” (Photo copyright: Houston Business Journal.)

Hospital Claims Medicare Reimbursement Flawed

A spokesperson for Memorial Hermann disputed the HBCH’s analysis, telling the Houston Chronicle that “Medicare reimbursement is a flawed and an inappropriate benchmark to use for commercial payments, as Medicare payments do not cover the cost of services provided.”

But the HBCH analysis also disclosed that each hospital was charging private insurers more than double the breakeven, defined as the amount needed “to make up for any shortfalls from public sector payers such as Medicare and Medicaid and uninsured patients.” And they “achieved a commercial profit margin of more than 45%” over the breakeven.

The fourth hospital, Baylor St. Luke’s, charged 216% over Medicare and had a commercial profit margin of close to 20%.

The HBCH based its analysis on publicly available data and tools from RAND Corporation, The National Academy for State Health Policy (NASHP), and Sage Transparency, an interactive, customizable dashboard which uses both public and proprietary data to compare and display hospital prices and quality.

The Medicare claims data came from a RAND study, titled, “Prices Paid to Hospitals by Private Health Plans.” The 53-page report is accompanied by a downloadable spreadsheet with details on prices at more than 4,000 hospitals in 49 states plus the District of Columbia. Released in May, it covers data from 2018 through 2020.

The HBCH analysts combined data from this report with data from the NASHP Hospital Cost Tool (HCT), which was released in April. The HCT allows anyone with a web browser to look up cost metrics for 4,600 hospitals in the US. The numbers, available through 2019, include revenue, profitability, and breakeven points. It also incorporates an earlier set of the RAND Medicare claims data.

An NASHP press release notes that the breakeven calculation “accounts for a hospital’s operating costs, profit or loss from public coverage programs, charity care and uninsured patient hospital costs, Medicare disallowed costs, and a hospital’s other income and expense.”

The HBCH press release notes that hospitals need only 127% of Medicare to break even.

National Numbers

Nationally, the RAND study found wide variations in prices paid by private health plans from state to state. “In Texas, prices paid to hospitals for privately insured patients by employers averaged 252% of what Medicare would have paid,” the HBCH press release noted.

But that places Texas around the middle of the pack compared with other states. According to a Rand press release, prices charged to commercial payers were over 310% of Medicare in Florida, West Virginia, and South Carolina. But in Arkansas, Hawaii, and Washington, the numbers were below 175% of Medicare. The overall national average was 224%, the study found.

The RAND report’s downloadable spreadsheet breaks out the numbers by state and for individual health systems by name.

Numbers like these could have policy ramifications as employers seek to reduce the costs of providing health benefits. “The data is already being used to guide a new path forward,” states the HBCH press release. “As an example, HBCH and its members are working to demand transparency and change policies in the upcoming Texas 88th Legislative Session to eliminate anti-competitive language between hospitals and health plans.” 

Clinical laboratory managers and pathologists working in hospitals and health systems will want to watch how employer groups respond to future studies of hospital pricing compared to the Medicare program. Employers increasingly are dissatisfied with the status quo in how hospitals and doctors price their services to health insurers.

It is reasonable to expect more studies to be published that compare what hospitals charge private health insurers versus what they are paid by the Medicare program.

Stephen Beale

Related Information:

Houston Employers Pay Hospitals More than Twice the Medicare Rate, Needlessly Reaping Large Profits from Commercial Payers

Understanding NASHP’s Hospital Cost Tool: Commercial Breakeven

Private Health Plans During 2020 Paid Hospitals 224% of What Medicare Would

Prices Paid to Hospitals by Private Health Plans

Understanding Hospital Costs—New Tool Makes Data More Transparent and Accessible

Sage Transparency

Some Houston Hospitals Are Charging Private Insurers Up To 3x What Medicare Pays as Deductibles Rise

Employers Paying Hospitals More than Double Medicare Prices

Employers Pay Hospitals Billions More than Medicare

Private Labs in South Africa Voluntarily Agree to Lower Prices for COVID-19 PCR Tests following Investigation by Country’s Competition Commission

In an out-of-court settlement, two commercial clinical laboratory companies also agreed to reduce their prices for rapid antigen tests as well

How clinical laboratory companies were pricing their COVID-19 tests caught the attention of government authorities in South Africa. Government agencies in that country are establishing what they view as fair clinical laboratory pricing for private COVID-19 PCR (polymerase chain reaction) and rapid antigen tests without turning to litigation or fines.

The Competition Commission (Commission) is an organization charged with reviewing and acting on business practices in South Africa. In a December 11, 2021, news release, the Commission said it had reached a “ground-breaking agreement” with two private laboratories—Ampath and Lancet—to reduce their COVID-19 PCR test prices from 850 South African rand (R850) to R500 (from US$54.43 to US$31.97).

As of December 12, a third private laboratory company that also had been investigated, PathCare, had not agreed to the court settlement, Daily Maverick reported.

Also effective are lower prices for rapid antigen tests, the Commission said in a separate December 23 news release.

COVID Test Prices ‘Unfairly Inflated’

The changes in PCR test prices in South Africa followed a formal complaint by the Council for Medical Schemes which alleged the private pathology labs [the term for clinical laboratories in South Africa] were “supplying” COVID-19 PCR tests at “unfairly inflated, exorbitant, and/or unjustifiable” prices, Daily Maverick reported.

Tembinkosi Bonakele

The clinical laboratory companies “exploited consumers by earning excessive profits on essential products or services,” Tembinkosi Bonakele (above), Commissioner of the South Africa Competition Commission, told the Daily Maverick. “It is always encouraging for companies to voluntarily consider reducing prices, especially where the public is detrimentally affected by the prices, as to avoid protracted litigation,” he added. (Photo copyright: Sowetan Live.)

According to the Daily Maverick, as part of the investigation, which began in October 2021, the Commission asked the private clinical laboratory companies for financial statements and costs of COVID-19 testing.

“We did, then, further interrogation in order to strip out what we saw was potentially padding the costing and unrelated costs. And on the basis of that, we came to the figure of R500,” James Hodge, told the Daily Maverick. Hodge is Chief Economist, Economic Research Bureau, and Acting Deputy Commissioner at the Competition Commission South Africa.

 For its part, Lancet, Johannesburg, said in a statement that it “Appreciates the spirit of constructive engagement with the Commission which has resulted in an outcome that best serves the people of South Africa as they confront the fourth COVID wave. We are sensitive to the plight of the public and agree that reducing the COVID-19 PCR price is in best national interest.”

Clinical Laboratory Test Prices: Market Dynamics

So, were the prices too high? In the US, clinical laboratories are reimbursed considerably more by Medicare for COVID-19 testing (about $100), as compared to the South Africa private clinical lab prices.

Also, the Centers for Medicare and Medicaid Services (CMS) said in a statement that effective January 2021 it included in that rate an incentive of $25 to labs that provide results within 48 hours.

Medical laboratories are reimbursed $75 for a high throughput COVID-19 test when results are reported beyond 48 hours, CMS added.

Antigen Tests Prices Also Reduced

The Commission said that during its review of COVID-19 PCR test pricing it received a Department of Health Republic of South Africa complaint about prices for rapid antigen test pricing as well.

After another Commission review, PathCare, Lancet, and Ampath agreed to reduce prices for rapid antigen tests to a maximum of R150 or $9.74 (from a range of R250 to R350 or $16.28 to $22.79), a news release noted.

By comparison, Abbott’s BinaxNOW COVID-19 Antigen Self Test is priced at $23.99, on Abbott’s website as well as online at Walgreens.

“The reduction of COVID-19 rapid antigen test prices will help alleviate the plight of consumers and widen accessibility and affordability of COVID-19 rapid antigen testing, which is a critical part of the initiatives to avoid escalation of the pandemic,” said Bonakele in the news release, which also stated that the Commission would receive financial statements from the three labs every few months.

The Commission also is reviewing a “large retail pharmacy chain’s” rapid antigen prices, which “follows a complaint lodged by the Department of Health (DOH), on December 14 2021, against service providers delivering COVID-19 Rapid Antigen tests in South Africa to consumers,” Cape Town Etc reported. The specific pharmacy chain was not identified.

Data Show COVID Plight in South Africa

More than 21.6 million COVID-19 tests have been offered by healthcare providers in South Africa, and 3.5 million cases were detected, according to the Department of Health, Republic of South Africa.

In January, The New York Times reported:

  • 28% of South Africans are fully vaccinated.
  • 33% of residents have had one vaccine dose.
  • One in 17 people was diagnosed with COVID-19.
  • One in 632 had died from the infection.
  • COVID-19 deaths total 92,830.

Considering those data, one wonders if the South African government acted fast enough on test pricing.

For medical laboratory leaders, it’s important to recognize that not only are lab services in the spotlight during the COVID-19 pandemic, business practices and prices also are being monitored by officials in this country.

Donna Marie Pocius

Related Information:

Urgent Media Briefing on the Announcement of a Ground-Breaking Agreement on PCR Test Prices

PathCare Also Agrees to an Immediate Price Reduction of COVID-19 PCR Tests

Big Three Private Pathology Groups Agree to Another Price Reduction

Major Pathology Labs Agree to Lower Price of COVID-19 PCR Tests to R500

Lancet Laboratories Agreement with Competition Commission of South Africa

CMS Changes Medicare Payment to Support Faster COVID-19 Diagnostic Testing

Private Pathology Groups to Reduce COVID-19 Rapid Antigen Test Price to No More than R150

Tracking Coronavirus in South Africa: Latest Case Count

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