Jury also heard testimony about Holmes’ claims that the Edison device was doing clinical laboratory testing for the military in overseas theaters
During the seventh week of ex-Theranos CEO Elizabeth Holmes’ criminal fraud trial, headline-making testimony continued nearly non-stop. A former Theranos product manager took the stand offering damning testimony that tied Holmes to questionable product demonstrations and exaggerated claims about the military’s use of the Edison blood-testing device. And a Pfizer scientist testified to alleged improper use of the Pfizer logo by Theranos in a report that went to Walgreen executives.
Those claims contributed to the federal Securities and Exchange Commission (SEC) charging Holmes in 2018 with fraud and stripping her of control of Theranos, the SEC stated in a news release.
CNN reported that former Senior Product Manager Daniel Edlin, who worked at Theranos from 2011-2016, acknowledged in court that the Edison device had never been used in a war zone or installed on a medivac helicopter. He also noted that Holmes had final say over his communications with the DOD.
According to CNN, “Edlin said he worked directly with Holmes to support the relationships with the military and Defense Department. He said, ‘the end goal’ for these discussions ‘was to start a research program that would compare Theranos’ testing to the testing available to the military at that time.”
Edlin testified that Holmes was ‘highly involved’ with these communications, CNN reported.
“I’d say any substantive communication I had with the military, I either discussed with her ahead of time … or email drafts were reviewed and approved before I sent them back out,” he testified.
Elizabeth Holmes, ex-CEO of now-defunct blood-testing company Theranos, is seen above leaving a San Jose, Calif., courthouse following a hearing. Holmes faces 10 counts of wire fraud and two counts of conspiracy to commit wire fraud for allegedly misleading investors, clinical laboratories, patients, and healthcare providers about Theranos’ proprietary blood-testing Edison technology. Holmes has pleaded not guilty. (Photo copyright: Reuters.)
During cross examination, Edlin walked back some of his damaging testimony. When asked by defense attorney Kevin Downey, JD, of Williams and Connelly, LLP, if he or anyone else at Theranos was intentionally trying to deceive investors or other visitors during the demonstrations, Edlin responded, “Of course not,” according to Palo Alto Online.
To counter the prosecution’s claims that Theranos’ Edison machines were unsuitable for military use because they could not operate in high temperatures, Downey introduced an email from an Army doctor at the US Command in Africa praising the Edison after examining it in high temperatures. The doctor also, according to court documents, proposed the Army provide more funding to test the Edison’s capabilities, Palo Alto Online reported.
Nevertheless, according to The Wall Street Journal (WSJ), the Edison was never sent to a US military laboratory in Afghanistan for study, nor was it used in Africa to run blood tests.
Former Pfizer Scientist Testifies to Misuse of Intellectual Property
In another broadside to the Holmes defense, former Pfizer scientist Shane Weber, PhD, testified Holmes used the Pfizer logo in investor materials without the company’s permission in order to pass off as credible a study aimed at validating the Edison device.
The WSJ reported Weber told jurors that in 2008 he had reviewed a 15-page Theranos study involving cancer patients, but that he had stated in his own internal report to Pfizer at that time that nine conclusions in the study—including a statement that the “Theranos system performed with superior performance”—were “not believable.” Pfizer eventually heeded Weber’s advice to not enter into a partnership with Theranos.
Prosecutors stated that as part of Theranos’ negotiations with Walgreens, which ultimately invested $140 million in the blood-testing company, Holmes had placed a Pfizer logo on the top of each page of the cancer study report before sending it to Walgreens executives, claiming it was an independent due-diligence report on Theranos technology.
Weber told jurors that he had not known about the altered report until he was shown the document by prosecutors. He stated the logo was added without Pfizer’s permission, the WSJ reported.
Unfortunately for Walgreens, the retail pharmacy chain entered into a business agreement with Theranos without extensively examining or testing the Edison device, which Theranos had claimed could quickly and accurately run 200 diagnostic tests using a finger-stick of blood. Instead, the company relied on the opinions of its own staff healthcare experts and outside experts, none of whom fully tested the technology either, the WSJ stated.
Testimony in the Elizabeth Holmes fraud trial is expected to continue through December. Therefore, clinical laboratory managers and pathologists should expect headline-making news to continue as well. Dark Daily will continue its coverage as the trial moves forward.
WSJ reporter affirms that the pathologist was his “first and most important source” in confirming the problems at the now-defunct medical lab testing company
During the federal fraud trial of Theranos Founder and former-CEO Elizabeth Holmes, no one has spent more days on the witness stand than ex-Theranos Laboratory Director Adam Rosendorff, MD, the pathologist who testified for the prosecution that he repeatedly warned Holmes about problems with Theranos’ flawed Edison blood-testing device.
Dark Daily’s previous ebrief on the ongoing Holmes’ fraud trial reported that Rosendorff, who is board certified in clinical pathology, had testified, “I told her that the potassium was unreliable, the sodium was unreliable, the glucose was unreliable, [and] explained why. She was very nervous. She was not her usual composed self. She was trembling a bit, her knee was tapping, her voice was breaking up. She was clearly upset.”
It should come as no surprise that in response Holmes’ lawyers attempted to paint Rosendorff as an “incompetent” lab director with a resume littered with failures at other biotech companies. According to court documents, Holmes faces 10 counts of wire fraud and two counts of conspiracy to commit wire fraud for allegedly misleading investors, clinical laboratories, patients, and healthcare providers about Theranos’ proprietary blood-testing technology.
But the many clinical laboratory professionals closely watching the Holmes trial will be equally interested to learn that outside of the courtroom former Wall Street Journal (WSJ) reporter John Carreyrou confirmed on Twitter that Rosendorff was the main source for his 2015 investigative reporting—which first called into question Theranos’ claim that it could run more than 200 blood tests using a finger-prick of blood—as well as for his subsequent book, “Bad Blood: Secrets and Lies in a Silicon Valley Startup.”
Carreyrou Declares Ex-Theranos Lab Director Adam Rosendorff a Hero
“So, I’ve been fielding queries from reporters asking me to confirm that former Theranos lab director Adam Rosendorff, who is currently testifying at Elizabeth Holmes’ trial, was my source. I can now confirm it. Alan Beam = Adam Rosendorff,” Carreyrou tweeted.
“I’ll add this: Adam was my first and most important source. Without him, I wouldn’t have been able to break the Theranos story. Hats off to his courage and integrity. He’s one of the real heroes of this story,” Carreyrou added in a subsequent Tweet.
Inside the San Jose, Calif., courtroom, pathologist Rosendorff took centerstage, completing six days on the witness stand as Holmes’ defense attorney Lance Wade, JD, sought to undermine Rosendorff’s earlier testimony for the prosecution and question his competence as a laboratory leader.
Former Wall Street Journal reporter John Carreyrou (above) has revealed via Twitter that ex-Theranos laboratory director Adam Rosendorff, MD, was the “first and most important source” for his 2015 investigative reporting on Theranos. “Hats off to his courage and integrity,” Carreyrou tweeted. “He’s one of the real heroes of this story,” (Photo copyright: Penguin Random House Speakers Bureau.)
Rosendorff Testifies About Another CMS Investigation at Lab Where He is Medical Director
Rosendorff acknowledged during cross examination that he risked losing his license as a lab director after the CMS inspectors uncovered testing deficiencies at PerkinElmer’s Valencia (California) Branch Laboratory as well, where Rosendorff currently serves as Laboratory and Medical Director.
According to the WSJ, Rosendorff testified that most of the CMS inspection involved reviewing documents. During cross examination, it was revealed that the same CMS inspectors who investigated Theranos also conducted the PerkinElmer lab investigation.
Defense attorneys also had hoped to question Rosendorff about his previous work at uBiome Inc., a startup that was the target of a 2019 federal probe into its lab test billing practices, CNBC reported.
The Mercury News reported that during an October 5 hearing to determine the extent to which Holmes’ legal team could cross examine Rosendorff about his past employment, Wade told US District Judge Edward Davila that Rosendorff had a failed record as a lab leader. The Holmes defense lawyer alleged a link between “unreliable test results” at the biotechnology company Rosendorff went to after leaving Theranos and claimed that Rosendorff’s work at PerkinElmer resulted in the CMS notice of “serious deficiencies” at the lab.
“[Rosendorff] pointed the finger at many other people, including my client,” Wade told Davila. “He appears to almost never have competently done his job. He was incompetent at Theranos, too, and that is the reason many of the failures happened. He’s the person who’s ultimately responsible in the laboratory,” he added.
Nevertheless, Judge Davila prohibited questions regarding Rosendorff’s employment at uBiome and limited the scope of questions about his current role at PerkinElmer.
The graphic above depicts Holmes’ defense attorney Lance Wade, JD, cross examining former Theranos CLIA laboratory director Adam Rosendorff, MD. During his testimony, Rosendorff claimed he warned Holmes about the unreliability of Theranos’ Edison blood-testing device. Pathologists and clinical laboratory leaders will recall that Walgreens had contracted with Theranos to place testing devices in its in-store pharmacies. (Graphic copyright: The Wall Street Journal/Vicki Behringer.)
Holmes’ Attorneys Challenge Rosendorff’s Testimony During Cross Examination
After leaving Theranos, Rosendorff’s LinkedIn profile shows he served as Laboratory Director at San Francisco-based Invitae from December 2014 to September 2017 before moving to Millennium Health in San Diego as Medical Director from December 2017 to January 2021. He joined PerkinElmer in January.
The WSJ reported that Rosendorff’s ties to uBiome showed up in Theranos court records.
The WSJ also noted that during the multiday cross examination of Rosendorff, the Holmes defense team scored points by “pointing to contradictions in his testimony and challenging his assertions that he wanted to expose Theranos’ testing practices to the government.”
In making his point, Wade read aloud from a deposition Rosendorff gave during a separate case in which he claimed that Theranos did not have a greater number of anomalous test results than other labs where he had previously worked.
“And that’s 180 degrees from what you answered in your direct testimony,” Wade said to Rosendorff during cross examination.
“Yes, it seems to be different,” Rosendorff replied, but also noted that Theranos should have fewer errors than a lab with a much higher volume of tests.
Wade also introduced a November 2014 email in which Rosendorff told a colleague he knew of only one time when Theranos provided to a patient an obviously incorrect test result. Rosendorff had previously testified that he alerted Holmes on numerous occasions about his concerns with ongoing testing errors.
Wade also questioned whether Rosendorff had a financial motive for considering a whistleblower lawsuit against Theranos, pointing out that Rosendorff would be entitled to a portion of any damages recovered. Rosendorff responded that he did not have a profit motive in mind when he forwarded more than 150 Theranos emails to his personal account.
Former WSJ Reporter Carreyrou May Be Called to Testify
Clinical laboratory managers and pathologists will be fascinated with another twist that surfaced as this trial continued. Former WSJ reporter Carreyrou became personally intertwined with the Holmes’ trial after it came to light that the investigative reporter—whose podcast “Bad Blood: The Final Chapter” spotlights the ongoing fraud trial—is on Holmes’ potential witness list.
The motion, The Mercury News reported, states that “Placing Carreyrou on the witness list was done in bad faith and was designed to harass him,” and calls his placement on the list “a cynical ruse” that violates Carreyrou’s First Amendment rights.
CNN reported that Carreyrou’s attorneys are asking that the exclusion order (which prevents some witnesses from being inside the courtroom during other witness testimonies) or the gag order (which allows witnesses to discuss their testimonies only with their attorneys) not be applied to Carreyrou.
For clinical laboratory scientists awaiting the next installment in the now six-week-old trial, former Safeway CEO Steven Burd (now founder and CEO of Burd Health) will continue his testimony on the failed partnership between the grocery store chain and Theranos.
The Theranos agreement with Safeway is not as well-known as the Theranos-Walgreens deal. This was another news story written by Carreyrou and published by the WSJ on Nov. 10, 2015, titled, “Safeway, Theranos Split after $350 Million Deal Fizzles.”
As part of that agreement, Safeway spent $350 million to remodel 800 of its grocery stores to have a patient service center (PCS) and laboratory space where the unproven Edison device would be used to perform the clinical laboratory tests.
The testimony in this next phase of trial about the Safeway agreement with Theranos, and Holmes’ role in convincing the Safeway executive team to invest a third of a billion dollars to build 800 PSCs and lab spaces in 800 stores, should be as interesting as the witness testimony given earlier in this trial.
Price shopping for clinical laboratories and other healthcare services and surgical procedures creates a ‘healthy competitive environment,’ an Optum executive noted
One example, SmartShopper by Vitals (now known as Sapphire Digital) of Lyndhurst, N.J., is a pre-paid employer- or health plan-based program that lets people use mobile phone apps and go online using their computers to check prices and quality ratings for healthcare service providers in their area. The program may also incentivize members to prices shop by offering up to $500 per service for choosing lower-cost providers.
“Today, there is no reason consumers shouldn’t know the price of routine, non-emergency care,” said Heyward Donigan, former President and CEO of Vitals who is now CEO of Rite Aid (NYSE:RAD), in a news release. “Putting consumers in the driver’s seat for making informed healthcare decisions will create a competitive healthcare marketplace that ultimately lowers costs for everyone.”
Does Price Shopping Create a ‘Healthy Competitive Environment’?
Individuals whose health plans or employers have signed up
for SmartShopper can use it to seek out the best prices for routine exams,
preventative exams, imaging scans, and to schedule surgeries. The program’s
provider data is compared by cost and quality based on nationally recognized
metrics and patient reviews.
Some of the largest health insurers in the country, such as Anthem and Highmark, provide price
shopping tools to their clients.
“Up to 7% of overall healthcare spent could be reduced through price transparency tools like SmartShopper,” Becca Lococo, PhD, Vice President, Customer Experience at Optum, told Modern Healthcare. This can create a really healthy competitive environment in an industry where costs are already rising.”
Employers Save Big with Price Shopping
Large companies can reap substantial savings when they
provide their employees with price shopping tools. Employer savings can range
from $1,810 for a round of physical therapy to $80 for a mammogram. Patients,
on average, save $606 for each procedure with SmartShopper, reported Modern
Healthcare.
“Even just one person shopping can make a difference for
that employer in terms of the claims they’d be paying out at the end,” Steve Crist, Vice
President, Commercial Health Plan, Blue
Cross Blue Shield of North Carolina, told Modern Healthcare. “Even
though the employer is paying the incentive, the cost savings more than make up
for it. The ROI on this program is very strong.”
The Vitals SmartShopper Book of Business Report 2017 notes that, between 2014 and 2017, the tool saved employers $40 million and paid out $4.6 million in cash rewards to individual consumers. In 2016 alone, SmartShopper saved employers $15 million and paid out $1.8 million in cash incentives with the average incentive check totaling $85.
The Vitals report also listed the top 10 procedures and the
three-year total cost savings for employers that used SmartShopper. The list
includes clinical laboratory testing as the fifth largest source of savings for
employers that used price-transparency tools as part of their health benefits
programs:
SmartShopper has a configurable list of more than 200
medical procedures and services included in the tool. Sapphire Digital
(formerly Vitals) uses claims data and collaborates with clients to develop the
ideal combination of services to maximize savings for their customers.
“We don’t have to boil the ocean to produce a sizeable reduction in healthcare costs for our employer clients,” said Heyward Donigan, former President and CEO of Vitals and now CEO of Rite-Aid, in the Vitals report. “Focusing on routine, shoppable procedures that are relevant to the demographics of a client’s workforce generates significant savings.” (Photo copyright: Wall Street Journal.)
Price Shopping for Surgery
In 2018, before changing its name to Sapphire Digital, Vitals sold its consumer services division to WebMD. The sale enabled Vitals to focus on enhancing and developing its price transparency tools. The company then launched Medical Expertise Guide (MEG), which uses advanced analytics to create “proprietary Composite Quality Scores for surgeons and facilities to help consumers find the best surgeon and facility combination for their surgery, at a predictable cost,” according to Sapphire Digital’s website.
“MEG brings consumers information, powered by data and
analytics and supported by personalized service, to help them make quality
healthcare decisions with confidence,” said Donigan, in a news
release. “MEG guides employees to the best care, while helping employers
manage the overall cost-effectiveness of their healthcare program.”
Examples presented in the news release of the “savings per case”
for people using MEG include:
In October 2016, Dark Daily reported on another example of using healthcare transparency tools from Castlight Health. That tool enables Safeway employees to check clinical laboratory prices on their smartphones or computers before selecting where to have tests performed. At that time, Safeway and its employees were able to reduce spending on clinical laboratory tests by 32% in only 24 months by selecting the labs with the lowest prices.
The examples presented above are evidence that price
transparency is gaining a foothold in healthcare. These are early
demonstrations that price shopping tools do help consumers make more informed
decisions when choosing hospitals, physicians, or clinical laboratories. The
trend is for ever-growing numbers of consumers to rely on pricing transparency
tools when selecting their medical care.
Pathologists and clinical laboratories should not ignore
this trend, as it could affect business workflow and revenue streams.
Clinical laboratory leaders are aware that reference pricing is a tool employers and health insurer can use to reduce the wide variation different providers charge for the same clinical service. In 2016 our sister publication, The Dark Report, devoted an entire issue to the subject of reference pricing. (See TDR, “The Newest Threat to Lab Revenues: Reference Pricing in Healthcare,” September 6, 2016.)
The Dark Report wrote about the reference pricing pilot conducted by Safeway, the grocery chain, in collaboration with Anthem, Inc. (NYSE:ANTM), the large health insurance company. The reference pricing program had these elements:
When Safeway employees and their beneficiaries chose a lab that priced its tests below the 60th percentile, the patient qualified for the health plan’s benefits. But if the patient chose a lab with test prices above the 60th percentile, that patient was responsible for the full cost of the test.
Safeway employees and their beneficiaries were given a real-time price checking tool that they could access by web browser and smart phone. This app, developed by Castlight Health, Inc., of San Francisco, showed the prices each lab in the Safeway/Anthem network charged for the same lab test, along with the percentile price of that test.
As reported in JAMA Internal Medicine, Safeway introduced reference pricing into its health insurance design for 15,000 employees in 2011. Three years later, the company and its employees were spending 32% less for clinical laboratory tests and saved $2.57 million during the years 2011 to 2013.
The reference pricing program at Safeway, which focused
primarily on clinical laboratory testing, succeeded because of the large
variability in how different labs price the same tests. For example, as TDR
reported:
For a basic metabolic panel, which was the most
commonly prescribed test, prices among different labs ranged from $5.75 to
$126.44; and
Prices for a lipid panel ranged from $8.85 to
$74.92.
The graphic above, taken from the Safeway/Anthem observational study of “changes in laboratory pricing and selection by employees … before and after a reference pricing policy for laboratory services,” illustrates the wide range of prices Safeway paid for the 10 most common clinical laboratory tests. (Graphic copyright: American Medical Association/JAMA Internal Medicine.)
Typically, a reference pricing arrangement is done to lower
costs, decrease disparities in pricing for similar medical services, and make
health plans more attractive to employers. This is why state health plans are
looking at implementing reference price reimbursement models as a way to reduce
healthcare costs for state employees and other beneficiaries.
North Carolina Providers Respond Negatively to State Reference
Pricing Plan
North Carolina’s State Health Plan encountered resistance
from the state’s medical community when it attempted to implement a similar
reference-price reimbursement model.
The state’s health plan covers more than 727,000
beneficiaries, including teachers, state employees, retired employees, and
their dependents. It is overseen by the State Treasurer and administered by BlueCross
BlueShield of North Carolina (Blue Cross NC).
In October 2018, North Carolina’s state health plan board of
trustees unanimously approved the Clear
Pricing Project, a reference-pricing program championed by State Treasurer Dale Folwell. A 2019 Blue
Cross NC State Health Plan Network Master Reimbursement Exhibit document
states, beginning in 2020, most hospitals would get 160% of the Medicare rate
for inpatient services and 230% for outpatient services; rural providers would
get more.
Pricing for medical lab and pathology services also was set
at 160% of the Medicare rate. The document states, “Except for services
identified by Medicare as CLIA Excluded or CLIA Waiver,
In-Office Laboratory Service fees will be limited to those services for which
you have provided Blue Cross and Blue Shield of North Carolina with evidence of
CLIA
certification.”
North Carolina’s healthcare providers had no choice but to
agree to the pricing to be included in the state’s provider network, but they
were not happy about the arrangement.
NCHA Warns Hundreds of Providers Could Be Pushed Out of
Network
Hospitals countered with a public relations and lobbying
campaign through the North Carolina Healthcare
Association (NCHA). Soon after Folwell’s announcement, the NCHA issued a
statement claiming that his plan “could force hundreds of providers out of
the State Health Plan network or out of business.” The NCHA estimated the
potential losses to hospitals and health systems at “upwards of $400 million.”
In the statement, NCHA President Steve
Lawler said, “We believe the treasurer is not being transparent about what
this proposal will do to state health plan members and their families.”
As an alternative, the NCHA proposed that the state examine
value-based approaches such as “case management, outcomes-based payment models,
and member education as ways to manage costs.”
The organization established a web page explaining its opposition
to the state’s plan and pushed for legislation that would delay its
implementation. House
Bill 184, which sought to delay implementation of the state’s healthcare
reimbursement plan, passed the state House of Representatives in April, before
stalling in the Senate in May, North
Carolina Health News reported.
Many providers simply refused to sign the necessary
contracts, Modern
Healthcare reported, even after Folwell agreed to increase the average
rate to 196%. In August, he relented and announced that for 2020, the provider
network will consist of the North Carolina State Health Plan Network—28,000
providers that had signed on to the Clear Pricing Project—plus the Blue Options
PPO Network, which includes providers that had not agreed to the new pricing.
That makes for a total of more than 68,000 providers, states
a news
release from the treasurer’s office. After the change was announced,
providers in the State Health Plan Network were permitted to revert to the Blue
Options PPO Network rates.
States may approach implementing reference pricing in
different ways, which will likely lead to a distinct disparity in outcomes. Nevertheless,
whatever approach is used, medical laboratories and pathology groups will want
to understand how reference pricing works and how it may be implemented in
their states.
Armed with that understanding, they may want to pursue a
proactive strategy of aligning the prices of their lab tests to be at the 50th percentile
or lower to avoid being the highest-priced labs in their communities and
regions.
Journalists, researchers, and a growing number of consumers now recognize the often huge variability in the prices different medical laboratories charge for the same lab tests
One step at a time, the Medicare program, private health insurers, and employers are putting policies in place that require providers—including clinical laboratories and pathology groups—to allow patients and consumers to see the prices they charge for their medical services. Recent studies into test price transparency in hospitals and health networks have garnered the attention of journalists, researchers, and patients. These groups are now aware of enormous variations in pricing among providers within the same regions and even within health networks.
Now that hospitals’ medical laboratory test prices are
required to be easily accessible to patients, researchers are beginning to compile
test prices across different hospitals and in different states to document and
publicize the wide variation in what different hospital labs charge for the
same medical laboratory tests.
Journalists are jumping on the price transparency bandwagon
too. That’s because readers show strong interest in stories that cover the
extreme range of low to high prices providers will charge for the same lab
test. This news coverage provides patients with a bit more clarity than
hospitals and other providers might prefer.
Shocking Variations in Price of Healthcare
Services, including Medical Laboratory Tests
The Health Care Cost Institute (HCCI) in conjunction with the Robert Wood Johnson Foundation (RWJF), examines price levels of various procedures and medical laboratory tests at healthcare institutions across the United States in the first release of a series called Healthy Marketplace Index. According to the HCCI website, “a common blood test in Beaumont, Texas ($443) costs nearly 25 times more than the same test in Toledo, Ohio ($18).”
In April, the New
York Times (NYT) made the wide variation
in how clinical laboratories price their tests the subject of an article titled,
“They Want It to Be Secret: How a Common Blood Test Can Cost $11 or Almost
$1,000.” The article discusses the HCCI findings.
The coverage by these two well-known entities is increasing the
public’s awareness of the broad variations in pricing at clinical laboratories
around the country.
Aside from the large differences in medical laboratory test
prices in different regions, the HCCI found that there are sometimes huge price
variations within a single metro area for the same lab tests. “In just one
market—Tampa, Fla.—the most expensive blood test costs 40 times as much as the
least expensive one,” the NYT notes.
In other industries, those kinds of price discrepancies are
not common. The NYT made a comparatively outrageous example using
ketchup, saying, “A bottle of Heinz ketchup in the most expensive store in a
given market could cost six times as much as it would in the least expensive
store,” adding, however, that most bottles of ketchup tend to cost about the
same.
The graphic above is taken from the New York Times article on test price discrepancies in healthcare. The range of prices for the medical lab test known as a comprehensive metabolic panel are for metropolitan areas only. The data is sourced from the Health Care Cost Institute study. It’s easy to see why patients would be confused by clinical laboratory pricing that varies so widely. (Graphic copyright. The New York Times.)
The CMS mandate designed to make the prices of medical services accessible to healthcare consumers has, in many ways, made things more confusing. For example, most hospitals simply made their chargemaster available to consumers. Chargemasters can be confusing, even to industry professionals, and are filled with codes that make no sense to the average consumer and patient.
“This policy is a tiny step forward but falls far short of what’s needed. The posted prices are fanciful, inflated, difficult to decode and inconsistent, so it’s hard to see how an average person would find them useful,” Jeanne Pinder, Founder and Chief Executive of Clear Health Costs, a consumer health research organization, told the NYT in an article on how hospitals are complying with the mandate to publish prices.
In addition to the pricing information being difficult for
consumers to parse, it also may lead them to believe they would need to pay
much more for a given procedure than they would actually be billed, resulting
in patients opting to not get care they actually need.
Why Having a Strategy Is Critically
Important for Clinical Laboratories
Clinical laboratories are in a particularly precarious position in all of this pricing confusion. For one thing, most hospital-based medical laboratories don’t have a way to communicate directly with consumers, so they don’t have a way to explain their pricing. Additionally, articles and studies such as those in the NYT and from the HCCI, which describe drastic price variations for the same tests, tend to cast clinical laboratories in a somewhat sinister light.
To prepare for this, medical laboratory personnel should be
trained in how to address customer requests for pricing and how to explain
variations in test prices among labs, before such requests become problematic. Lab
staff should be able to explain how patients can find out the cost of a given
test, and what choices they have regarding specific tests.
In 2016, Dark Daily’s sister-publication, The Dark Report (TDR), dedicated an entire issue to the impact of reference pricing on the clinical laboratory industry. In that issue, TDR reported on how American supermarket chain Safeway helped guide their employees to lower-priced clinical laboratories for lab tests, resulting in $2.7 million savings for the company in just 24 months. Safeway simply implemented reference pricing; the company analyzed lab test prices of 285 tests for all of the labs in its network, and then set the maximum amount it would pay for any given test at the 60th percentile.
If a Safeway employee selected a medical laboratory with prices less than the 60th percentile, the normal benefits and co-pays applied. But if a Safeway employee went to clinical laboratories that charged more than the 60th percentile level, they were required to pay both their deductible and the amount above Safeway’s maximum.
Safeway’s strategy revealed wide variation in testing
prices, just as the HCCI report found. This means that employers can be added
to the list of those who are paying much closer attention to medical laboratory
test pricing than they have in the past. These are developments that should
motivate forward-looking pathologists and clinical laboratory executives to act
sooner rather than later to craft an effective strategy for responding to consumer
and patient requests for lab test price transparency.
