News, Analysis, Trends, Management Innovations for
Clinical Laboratories and Pathology Groups

Hosted by Robert Michel

News, Analysis, Trends, Management Innovations for
Clinical Laboratories and Pathology Groups

Hosted by Robert Michel
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Employers Can Save Money by Adopting Self-funded Healthcare Models, and Clinical Laboratories Have Opportunities to Support These Plans

By negotiating directly with healthcare providers, employers cut health insurers out of the loop, at least for certain specified healthcare conditions and surgeries

It’s a new trend in how employers provide healthcare benefits for their employees. In order to save money, a growing number of employers are going to low-cost hospitals, physicians, and other providers to contract directly for their services. This may be the opening that allows some clinical laboratories to approach larger employers in their region and negotiate pricing and contract terms without the need to involve a health insurer.

What’s motivating more employers to reach out and contract directly with low-cost healthcare providers is the realization that their health insurance plan typically pays much more than Medicare to hospitals, physicians, clinical laboratories, and other ancillary providers. This fact is supported by a study conducted by the Rand Corporation that found “large employers generally lack useful information about the prices they are paying for healthcare services,” and that of the 1,600 hospitals in 25 states that Rand surveyed, “employer-sponsored health plans paid hospitals an average of 241% of what Medicare would have paid for the same inpatient and outpatient services in 2017,” which is up from 236% of Medicare in 2015, Modern Healthcare reported.

Thus, to better control the skyrocketing cost of healthcare, and the health benefits plan they offer their employees, employers are increasingly turning to self-coverage and implementing company benefits plans that reward employees for price shopping and for selecting the lowest costs healthcare services.

This trend is another reason why clinical laboratory leaders should be tracking changes in federal price transparency requirements, along with the increased consumer interest in accessing healthcare prices in advance of service.

Employers Negotiate Directly for Healthcare Services

Over the past decade, Dark Daily has repeatedly covered expanding federal price transparency legislation and the trend among large employers to self-insure and negotiate with hospital networks for discounted healthcare services for their employees. Most recently in, “Ohio Healthcare Network Serving Amish and Anabaptist Communities Could Provide Blueprint for Hospital Price Transparency,” and “Amazon Care Pilot Program Offers Virtual Primary Care to Seattle Employees; Features Both Telehealth and In-home Care Services That Include Clinical Laboratory Testing.”

Innovative employer plans to decrease healthcare costs include:

  • Contracting directly with medical providers,
  • Opening primary care clinics within their corporate facilities,
  • Referring employees to contracted providers for certain procedures, and
  • Creating bundled-payment deals with select providers.

Modern Healthcare reports that both public and private employers in five states (Colorado, Connecticut, Michigan, Montana, Texas, and Wisconsin) are “considering or launching group purchasing initiatives with narrow- or tiered-network plans, onsite primary-care clinics, and contracts with advanced primary-care providers,” as well as “direct-contracting with providers, such as referring employees to designated centers of excellence for some procedures and conditions under bundled-payment deals with warrantied results.”

Cheryl DeMars, CEO of The Alliance, a Wisconsin healthcare purchasing cooperative, says there is a movement afoot. “I’m seeing a level of boldness on the part of our members that I haven’t seen before in my 27 years here,” she told Modern Healthcare.

“Almost 100 million employees covered through self-insured plans not only represents a staggeringly large market for healthcare cost containment, it is an extraordinary opportunity for America to meaningfully reduce our national healthcare bill,” Kirk Fallbacher (above), President and CEO of Advanced Medical Pricing Solutions (AMPS) told Healthcare Finance News. (Photo copyright:

Self-insured Employers can Reduce the Nation’s Healthcare Bill, says KFF

A 2018 US Census Bureau report states that more than 181 million people in the US were enrolled in employer-sponsored health plans in 2017, and that the estimated average premium for employer-sponsored family coverage increased at an annual rate of 4.5% from 2008 to 2019.

That increase was approximately twice the rate of overall inflation and growth in average hourly earnings during the same time period, according to the report, which also states that the surge in premiums was driven by price increases for medical services and that use of most healthcare services among employees has actually been declining.

For US employers, “the steep increase in their healthcare cost crowds out financial resources that could be used for employee wage increases, capital investments, and other spending priorities, such as retirement plans,” the report notes.

However, an estimated 94 million of the 156 million workers in the US—approximately 61%—are currently covered under a self-insured medical plan through their employer, the KFF Employer Health Benefits 2019 Annual Survey states. defines the self-insured health insurance plan as a “type of plan usually present in larger companies where the employer itself collects premiums from enrollees and takes on the responsibility of paying employees’ and dependents’ medical claims. These employers can contract for insurance services such as enrollment, claims processing, and provider networks with a third-party administrator, or they can be self-administered.”

Kirk Fallbacher, President and CEO of Advanced Medical Pricing Solutions (AMPS), told Healthcare Finance News (HFN) that the self-insured approach to employee medical coverage saves employers between 20% and 30% over a traditional Preferred Provider Organization (PPO), and that the savings total about $2,800 per person annually. 

“It doesn’t signal the end of the insurance industry,” he said. “On the cost side of the equation, the PPO approach is beginning to come to an end. The costs are outstripping inflation and wages.”

Moving to self-insurance is another part of the current trend for price transparency in the healthcare industry and may offer opportunities for clinical laboratories to increase profits. Clinical laboratories and anatomic pathology groups might want to contact the Human Resources Departments of local major employers to educate them on the costs and quality value of their labs. Such a proactive and innovative move could encourage employers to include those labs in the provider networks of their self-insured health benefit plans.   

—JP Schlingman

Related Information:

Self-insured Employers Go Looking for Value-based Deals

Self-insured Employers Are Playing An Increasing Role in Taking on The Status Quo to Lower Costs

Self-insured Employers Have More Leverage than They Think

Health Insurance Coverage in The United States: 2017

The Kaiser Family Foundation Employer Health Benefits 2019 Annual Survey

Ohio Healthcare Network Serving Amish and Anabaptist Communities Could Provide Blueprint for Hospital Price Transparency

Amazon Care Pilot Program Offers Virtual Primary Care to Seattle Employees; Features Both Telehealth and In-home Care Services That Include Clinical Laboratory Testing

McKinsey Reports That Consumers Will Find Fewer Options under the ACA in 2017 while Fewer Health Plans Means Less Access for Clinical Laboratories

Local medical labs and pathology groups are often excluded from narrow networks. Thus, another round of “network provider reduction” is a serious issue

Total enrollment in health insurance products may be increasing, but in its recently-issued study, McKinsey and Company determined that the Health Insurance Marketplace (Health Exchange) is shrinking even as the number of enrollees continues to rise.

The development is unfavorable to the nation’s clinical laboratories and pathology groups because fewer health plans on the exchange means less access to patients. It also means that the remaining health insurers are taking steps to further narrow their existing networks in order to curb expenses by limiting options.

The new report published by McKinsey and Company reveals that insurers are moving towards plans that offer fewer options for consumers, mostly due to losses suffered on the health exchanges. The report, titled, “2017 Exchange Market: Plan Type Trends,” states that in 2017 a majority of the healthcare plans (about 75%) available to consumers under the Affordable Care Act (ACA) will be Health Maintenance Organizations (HMOs) and other similar limited-option plans, such as Exclusive Provider Organizations (EPOs).

EPOs are a hybrid of HMOs and PPOs and share some common options from both. Of the states investigated, McKinsey found that about 15% of customers eligible for ACA exchanges will have no PPOs available to them. (more…)

Aetna is Sued by California Medical Societies and Doctors over Its Out-of-Network Policies

It is not known whether any clinical laboratories or pathologists are plaintiffs in this unusual lawsuit of providers versus health insurer

When it comes to out-of-network policies, clinical laboratories clinical laboratory are not the only unhappy class of providers. In California, a coalition of healthcare organizations, physicians, and providers is suing the nation’s third-largest health insurer for its policies and practices relating to out-of-network providers.

It was in July when the Los Angeles County Medical Association (LACMA), California Medical Association (CMA), and various healthcare organizations and providers filed a lawsuit against Aetna Health of California, Inc. (Aetna CA). Aetna CA is a division of Aetna Health Management (NYSE:AET), based in Hartford, Conn. (more…)

HEDIS Data Provides Evidence that Physicians Are More Effective in Using Clinical Pathology Laboratory Tests Improve Patient Care

NCQA published annual report showing increased rates of screening for most of its HEDIS quality measures and medical laboratory testing often plays a role in these screening activities

For almost a decade now, clinical laboratories and pathology groups have been asked by many private payers to provide laboratory test data for a number of clinical services. In turn, these private health insurers annually submit this data to the Healthcare Effectiveness Data and Information Set (HEDIS) program managed by the National Committee for Quality Assurance (NCQA).

Although their medical laboratories regularly feed this data to payers, few pathologists or lab administrators track how HEDIS data is used by NCQA. Thus, it is useful to know that, over the years, HEDIS data provides evidence that better utilization of certain clinical laboratory tests by physicians directly contributes to measurable improvements in patient outcomes across the United States.

Behavioral Economics Likely to Push Up Utilization of Clinical Pathology Laboratory Tests

Wellness Programs Require Appropriate and Timely Use of Medical Laboratory Tests

Pathologists and clinical laboratory managers know that smoking, obesity and unnecessary utilization are major factors in the skyrocketing cost of healthcare. These are primary reasons behind the desired transition from reactive and acute care to a health system organized to deliver proactive care.

Consumer cooperation will be essential for this transition to succeed. Each year, the number of employer-funded or insurer-funded health and wellness programs increases. That trend is consistent with the federal government’s interest in promoting its own health and wellness programs as one way to lower the total cost of healthcare.