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

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

Hosted by Robert Michel
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UnitedHealth Group Says 50% of Seniors Will Enroll In Medicare Advantage Plans within 10 Years; Clinical Laboratories Soon May Have Less Fee-For-Service Patients

Clinical laboratories will want to develop value-based lab testing services as the nation’s largest health insurers prepare to engage with Medicare Advantage patients in record numbers

UnitedHealth Group (UNH), the nation’s largest health insurer, forecasts wildly impressive growth of Medicare Advantage plans and value-based care. If this happens, it would further shrink the proportion of fee-for-service payments to providers, including medical laboratories.

Changes to how clinical laboratories and anatomic pathology groups in America get paid have been the subject of many Dark Daily briefings—such as, “Attention Anatomic Pathologists: Do You Know Medicare Is Prepared to Change How You Are Paid, Beginning on January 1, 2017?” August 22, 2016—and many others since then.

Switching to a value-based care reimbursement system, administered through Medicare Quality Payment Programs (QPPs), is one of the more disruptive changes to hit physicians, including pathologists. And, given UnitedHealthcare’s predictions, healthcare system adoption of QPPs will likely accelerate and continue to impact clinical laboratory revenue.


“Within 10 years, we expect half of all Americans will be receiving their healthcare from physicians operating in highly evolved and coordinated value-based care designs,” stated David Wichmann, CEO, UnitedHealth Group (NYSE:UNH), during the company’s second-quarter earnings call in April. (Photo copyright: Minneapolis/St. Paul Business Journal.)

50% of All Americans in Value-based Care Systems by 2028

UnitedHealth Group also envisions more than 50% of seniors enrolled in Medicare Advantage plans within five to 10 years, up by 33% over current enrollments, Healthcare Finance reported.

“Where it can go, hard to tell, but I don’t think it’s unreasonable to think about something north of 40% and approaching 50%. It doesn’t seem like an unreasonable idea,” said Steve Nelson, CEO, UnitedHealthcare, a division of UnitedHealth Group, during the earnings call.

In light of UNH’s widely-publicized comments, clinical labs should consider:

  • Preparing strategies to reduce dependence on fee-for-service payments;
  • Developing diagnostic services that add value in value-based reimbursement arrangements.

For labs, more seniors in Medicare Advantage plans means fewer patients with Medicare Part B benefits, which cover tests in a fee-for-service style. In contrast, Medicare Advantage plans are marketed to seniors by companies that contract with Medicare. These insurance companies typically restrict their provider network to favor clinical laboratories that offer them the best value.

Why Insurers Like Medicare Advantage Plans

UnitedHealth Group is not the only insurer anticipating big changes in the Medicare Advantage market. Humana (NYSE:HUM) of Louisville, Ky., is reallocating some services from Affordable Care Act health insurance exchange plans to the Medicare Advantage side of the business, Healthcare Dive reported.

According to a Kaiser Family Foundation (KFF) report, these insurers are ranked by number of enrollees in Medicare Advantage plans:

  • UnitedHealthcare—24%;
  • Humana—17%;
  • Blue Cross Blue Shield affiliates—13%.

Healthcare Dive noted that, in a volatile healthcare industry, payers seem to prefer the stability and following benefits of Medicare Advantage plans:

  • Market potential, as evidenced by growing elderly population;
  • Good retention rate of Medicare Advantage customers; and
  • Favorable payments by the Centers for Medicare and Medicaid Services (CMS) to the insurers.

Cleveland Clinic Makes Deals with Humana, Blue Cross Blue Shield

Last year, Cleveland Clinic and Humana announced creation of two Medicare Advantage health plans with no monthly premiums or charges for patients to see primary care doctors, and no need for referrals to in-network specialists, according to a joint Humana-Cleveland Clinic news release.

And, along with Anthem Blue Cross and Blue Shield in Ohio, Cleveland Clinic also launched Anthem MediBlue Prime Select, a Medicare Advantage HMO plan with no monthly premium, a news release announced. For most of their care needs, members access Cleveland Clinic hospitals and physicians.

Control Costs as Medicare Advantage Plans Grows

These examples highlight the necessity for clinical laboratories to prepare as the Medicare Advantage program expands and accompanying networks narrow.

“Medicare Advantage plans will result in more pressure on providers [such as clinical laboratories] and hospitals to focus on the cost of care,” said Michael Abrams, Managing Partner at Numerof and Associates, told Healthcare Dive.

With an exploding elderly population, medical laboratories should analyze what the shift to value-based care and Medicare Advantage plans may mean for their revenues.

—Donna Marie Pocius

Related Information:

UnitedHealth Group’s David Wichmann on Quarter1 2018 Results, Earnings Call Transcript

UnitedHealth Group Grows First Quarter Profits Driven by Medicare Advantage

Medicare Advantage Will Have More Enrollment, Lower Premiums in 2018

Payers are Flocking to the Medicare Advantage Market

Medicare Advantage 2017 Spotlight on Enrollment Market Update Issue Brief

Medicare Advantage Benefits

UnitedHealth Group Predicts 50% of Seniors Will Choose Medicare Advantage

Medicare Advantage Plans Keep Growing

Cleveland Clinic and Humana Create Two New Zero Premium Medicare Advantage Plans

Anthem Blue Cross Blue Shield Ohio Collaborate to Deliver Integrated Care

Attention Anatomic Pathologists: Do You Know Medicare Is Prepared to Change How You Are Paid, Beginning on January 1, 2017?

Continued ‘Aggressive Audit Tactics’ by Private Payers and Government Regulators Following 2018 Medicare Part B Price Cuts Will Strain Profitability of Clinical Laboratories, Pathology Groups

Medical laboratory leaders must take steps to protect their lab’s financial stability and know how to prepare and respond to investigations and regulatory threats

Clinical laboratories and anatomic pathology groups may soon face a new normal that includes more frequent and tougher audits by both private payers and the government, resulting in larger monetary demands. The financial strain medical laboratories will experience from more aggressive audits will be compounded by the roll out on January 1, 2018, of new Medicare Part B price cuts.

Attorney Richard S. Cooper, Co-chair, National Healthcare Practice Group, McDonald Hopkins, LLC, in Cleveland, says audit activity has been “ramping up” during the past 18 months, but has accelerated in recent months.

“We are seeing a dramatic increase in the number of audits and the dollar amount the payers are trying to recoup as a result of those audits,” Cooper said in an interview with Dark Daily, noting monetary demands can reach “seven to eight” figures.

“We’re seeing that with both government payers as well as commercial payers and we’re seeing much more aggressive audit tactics being utilized than we have in the past.”

Payers Put Clinical Laboratories Under Increased Scrutiny

While toxicology/pharmacogenomics and molecular/genetic testing laboratories frequently are the targets of the increased scrutiny, Cooper says no medical laboratory is immune from questioning. The “medical necessity” of providing and billing for diagnostic tests or services, and laboratory waivers of “patient responsibility” for copays and deductibles, are the two most common compliance issues being cited, states Cooper, who points to Cigna, UnitedHealthcare and Blue Cross Blue Shield as among the most active commercial payers his firm encounters.

“There are large dollars at stake and they are going after those dollars,” Cooper explains.

In this new environment, Cooper maintains medical directors and lab executives must:

  1. Protect the lab’s financial stability in 2018 by considering operational changes and taking other steps to prepare for revenue losses due to PAMA (Protecting Access to Medicare Act).
  2. Get educated about practices that can trigger audits by commercial payers, or state and federal regulators, and consider conducting self-audits using an independent third-party.
  3. Know how to respond if a lab is charged with proficiency test violations, which can result in significant penalties from Centers for Medicaid and Medicare Services (CMS), such as loss of a lab’s CLIA license and revocation of the medical director’s license to operate a medical laboratory for two years.
  4. Expect scrutiny of “piggyback” arrangements with toxicology labs that could raise compliance concerns and violate commercial payer contracts. A “piggyback” arrangement is where a lab bills under the payer contract of another provider because it is unable to contract with the payer directly. This often involves “piggybacking” on lab or hospital (usually Critical Access Hospital) contracts. In many cases, the billing entity does not perform the lab services for which they are billing. The services are instead performed by the non-participating lab, and the billing provider pays most of the collections back to the non-billing laboratory, retaining a fee for using the contracts. There may not be disclosure to the payers about which entity actually performed the test.

Navigating Tougher Clinical Laboratory Laws and Regulations

To help medical laboratory and pathology group leaders prepare for the perils they face, and take proactive steps to navigate the tough lab regulations and legal issues that lay ahead, click here to register for Dark Daily’s upcoming webinar “Tougher Lab Regulations and New Legal Issues in 2018: More Frequent Payer Audits, Problems with Contract Sales Reps, Increased Liability for CLIA Lab Directors, Proficiency Testing  Violations, and More,” (or place this link into your browser:

Attorney Richard S. Cooper, Co-chair, National Healthcare Practice Group, McDonald Hopkins LLC, in Cleveland will be a featured speaker and moderator during a new Dark Daily webinar on the Medicare Part B price cuts, and the critical legal and compliance issues clinical laboratories and pathology groups face starting in 2018. (Photo copyright: McDonald Hopkins LLC.)

This crucial learning event takes place on Wednesday, November 8, 2017, at 1 p.m. EST.

Cooper, who will moderate the webinar, will be joined by David W. Gee, JD, a Partner at Davis Wright Tremaine LLP in Seattle, and Jeffrey J. Sherrin, JD, President and Partner, O’Connell and Aronowitz in Albany, New York.

These three attorneys are among the nation’s foremost experts in issues unique to clinical laboratories, pathology groups, hospital labs, toxicology/pharmacogenomics labs, and molecular/genetic testing labs. Following our speakers’ presentations, there will be a question and answer period, during which you can submit your own specific questions to our experts.

You can’t afford to miss this opportunity. Click here to get up to speed on the most serious regulatory, compliance, and managed care contracting issues confronting all labs today. This webinar will provide solutions to the perils facing labs now and in 2018 by helping you map a proactive and effective course of action for your clinical lab or pathology group.

—Andrea Downing Peck

Related Information:

Tougher Lab Regulations and New Legal Issues in 2018: More Frequent Payer Audits, Problems with Contract Sales Reps, Increased Liability for CLIA Lab Directors, Proficiency Testing Violations, and More

What Every Lab Needs to Know about the Medicare Part B Clinical Laboratory Price Cuts That Take Effect in Just 157 Days, on Jan. 1, 2018

Nation’s Most Vulnerable Clinical Laboratories Fear Financial Failure If Medicare Officials Cut Part B Lab Fees Using PAMA Market Price Data Final Rule

Could ‘Money Back’ Guarantees Become More Common for Medical Devices, Clinical Laboratory Tests, and Prescription Drugs as Manufacturers Strive to Prove Clinical Value?

Examples already exist of manufacturers agreeing to refund payments if their therapeutic drugs don’t benefit patients; Medical laboratories with proprietary tests may find this strategy effective at guaranteeing the clinical utility of their assays

If their medical devices, medical laboratory tests, or prescription drugs are not effective, will payers, patients, and doctors get refunds from the manufacturers of these products? Some experts predict that the increased emphasis on improved patient outcomes, and the need for healthcare enterprises to back up the clinical value of their services, could lead to money-back guarantees and reimbursements for treatment therapies.

Offering a refund for services if the patient does not benefit is a powerful and compelling way for a company to call attention to its confidence level in its products and services.     (more…)

Patient Healthcare Costs in High-cost States Can Be Double Those in Low-cost States; Clinical Laboratory Tests Are Among Procedures with Greatest Price Fluctuations

Findings of this HCCI study, may increase pressure for more transparency in clinical laboratory and pathology test prices

Consumers in states with high healthcare costs may spend more than twice as much for common medical procedures as patients in other states. That’s a surprise finding in a milestone report from the Health Care Cost Institute (HCCI). The report also revealed that pathology and clinical laboratory tests are among the services with the widest price fluctuations. Prices also were shown to vary significantly within individual states.

The HCCI study is the latest salvo in the battle to provide consumers with healthcare price transparency and likely will increase demands on clinical laboratories and pathology groups to make lab test prices easy to find and understand.

HCCI Report Identifies Wide Variance in Prices of Clinical Laboratory Tests (more…)

Sustained Growth in Medicare Advantage Plans Threatens Financial Health of Smaller Pathology Groups and Local Medical Laboratories

Surging enrollment in Medicare Advantage moves patients out of Medicare Part B and thus reduces the ability of regional clinical labs to have access to these Medicare beneficiaries

Smaller clinical laboratories and pathology group practices are facing an inauspicious trend. It is the fast growth of enrollment in Medicare Advantage plans that has reached record high numbers each year since 2010.

This is not a positive development because it moves Medicare Part B patients out of the fee-for-service program and shifts them into Medicare Advantage plans. These plans tend to sign contracts with the national laboratory companies, such as Quest Diagnostics Incorporated (NYSE: DGX) and Laboratory Corporation of America (NYSE: LH) because of their lower lab test prices while excluding most local medical laboratories and pathology groups from their provider networks. The net effect of this trend is that local labs lose access to those patients who were formerly in the Medicare Part B program, but are now enrolled in Medicare Advantage. (more…)