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Clinical Laboratories and Pathology Groups

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Clinical Laboratories and Pathology Groups

Hosted by Robert Michel
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Utah Public Employees Receive Transportation and a $500 Cash Bonus to Purchase Prescriptions in Mexico

Pharmaceutical tourism, like medical tourism, casts light on healthcare’s true costs and identifies patient populations that bear the brunt of growing drug prices

You’ve heard of medical tourism, where patients travel to other countries to receive low-cost, high-quality medical care. Now the State of Utah is introducing “pharmaceutical tourism” to state employees, who will be paid to make trips to Mexico to purchase certain prescription drugs.

The State of Utah is not alone in its use of this strategy. Prescription medication costs are skyrocketing for many critical drugs. To reign in those costs, several organizations are incentivizing their employees to purchase those drugs less expensively outside of the US. Clinical laboratories and anatomic pathology groups that perform companion diagnostic tests associated with certain high-priced therapeutic drugs might see more of their patients decide to cross international borders to access the drugs they need.

This pharmaceutical tourism highlights how complex US laws hide the true cost of prescription drugs from patients and their employers. It also raises the question: how might pharmaceutical tourism impact retail pharmacies in this country?

Saves Patients Money, but at What Cost?

The Public Employees Health Plan (PEHP) for Utah state employees recently announced a pharmacy tourism program. Its members can receive free air travel and $500 in cash to fill 90-day prescriptions in Mexico for certain higher-cost medications.

“The prescription drugs received in Mexico are the same quality and from the same manufacturer as those sold in the US,” said Travis Tolley, Clinical Management Director at PEHP Health and Benefits, in a news release. “The difference is the price you pay. For example, a 90-day supply for the average cost of an eligible drug in the US is over $4,500 per month and is 40-60% less in Mexico. The substantial savings allow us to reward our members for seeking lower-cost options.”

Participants in the program receive round-trip airfare from Utah to San Diego for themselves and a companion, followed by transportation to a clinic in Tijuana where their prescriptions are filled. They also can receive a taxable $500 cash bonus for each trip—up to four trips/year. The airfare from Salt Lake City to San Diego typically costs around $300. 

Health Insurance Right to Shop Amendments
In 2018, Utah passed the “Health Insurance Right to Shop Amendments” bill (H.B. 19), which requires PEHP to offer incentives and a savings reward program to members who seek out and utilize low-cost options for healthcare. State Representative Norman Thurston (above right) sponsored the bill. “Why wouldn’t we pay $300 to go to San Diego, drive across to Mexico, and save the system tens of thousands of dollars? If it can be done safely, we should be all over that,” he told Becker’s Hospital Review. (Photo copyright: Daily Herald.)

PEHP, which covers 160,000 public employees and family members, offers the pharmacy tourism program for 13 specific medications where a vast disparity in cost exists between the US and Mexico.

The drugs that qualify for the program along with the most common illnesses they treat are:

One of the more expensive drugs on the list, Avonex, costs approximately $6,700 for a month’s supply in the US compared to only about $2,200 at the contracted clinic in Tijuana. That’s a savings of approximately $13,500 for a three-month supply, which compensates for the program’s $500 cash reward and transportation costs. 

Not the First Time PEHP Tried Medical Tourism

PEHP previously offered free airfare to members willing to fly to other countries for medical procedures and prescriptions. However, without the cash incentives, participation was low. The health plan hopes the lure of $500 per trip will increase participation rate. 

UnitedHealthcare (UHC) also is experimenting with ways to lower prescription drug costs. Last year, they introduced My ScriptRewards. The program incentivizes members to opt for less expensive medications. Participants in this program receive up to $500 in prepaid debit cards to help defray their medical costs.

Currently, My ScriptRewards can only be used for select antiviral medications (Cimduo plus Isentress or Cimduo plus Tivicay) to treat human immunodeficiency virus (HIV). And, it’s only available to UHC commercial plan members who are covered by group plans. However, UHC plans to expand the program to include other high-cost specialty medications in the future.

According to the Centers for Disease Control and Prevention (CDC), prescription medications account for 9.8% of national health expenditures. And in 2017, Quintiles and IMS Health, Inc. (now IQVIA), a company that compiles data for the pharmaceutical industry, estimated that prescription spending in the US will reach an annual cost of $580-$610 billion by 2021.

Medical tourism is not new. Dark Daily has covered the trend many times in e-briefings such as, “Medical Tourism Continues to Flourish as U.S. Patients Seek Lower Cost Healthcare in Overseas Countries.” Opportunities still exist for pathology groups and medical laboratories in the US to provide reference or esoteric diagnostic services to healthcare providers in other countries.

And, with prescription costs soaring, it’s likely insurance providers will continue to seek new ways to curtail costs. In an era when many medical laboratory companies are charging sky-high prices for their proprietary tests and test panels, might “clinical laboratory tourism” be the next trend to emerge?

—JP Schlingman

Related Information:

UnitedHealthcare to Pay Patients to Choose Cheaper Drugs

To Fight High Drug prices, Utah Will Pay for Public Employees to go Fill

Prescriptions in Mexico

PEHP Health and Benefits Offers Cash Back for Using Low-Cost Healthcare Providers and Prescription Drugs

US Prescription Drug Spending as High as $610 Billion by 2021Medical Tourism Continues to Flourish as U.S. Patients Seek Lower Cost Healthcare in Overseas Countries

Rebates, Pharmacy Benefit Managers, and ‘Gag Clauses’ Under Fire as Pricing Transparency Concerns Rise Surrounding Drug Prices

Growing interest in more transparency for the prices of prescription drugs is reflected in a study published in the Journal of the American Medical Association (JAMA) that highlights disparities in pharma prices for patients, pharmacies, and payers

Consumer demand for increased transparency in the prices patients, health insurers, and others pay for healthcare services continues. The Kaiser Family Foundation (KFF) reports that patients are facing higher deductibles, higher premiums, and increasingly complex—and opaque—pricing for everything from medical laboratory tests and routine checkups to prescriptions and out-of-network care. (See Dark Daily, “KFF Study Finds HDHPs and Increased Cost-Sharing Requirements for Medical Services are Making Healthcare Increasingly Inaccessible to Consumers,” April 20, 2018.)

However, while reference pricing and pricing databases help savvy patients compare prices across a range of procedures, much about pharmaceutical pricing remains shrouded in mystery. This is why calls for greater transparency in how prescription drugs are priced are increasing as well.

The Trump administration, state governments, and advocacy groups have each targeted drug costs as a problem in the current healthcare system. And a March 2018 study published in the Journal of the American Medical Association (JAMA) may further fuel the fires facing big pharma.

Overpayments and the Silence Behind Them

Analyzing 9.5 million claims from Optum’s Clinformatics Data Mart over the first half of 2013, researchers found that approximately 23% of all claims involved overpayments—situations in which the co-pay charged to the patient exceeded what the insurer paid the pharmacy to fill the prescription.

While data from 2013 might not reflect the current state of pharmaceutical pricing, the study brings exposure to trends in both politics and media coverage surrounding the industry.

The study authors found that overpayments totaled $135-million in 2013. Generic medications saw a higher portion of overpayments with more than one in four generic prescriptions costing patients more than what payers paid the pharmacy. However, in the 6% of claims involving branded medication, overpayments were nearly twice as high with an average overpayment of $13.46 per claim.

The researchers also cited data from a National Community Pharmacists Association (NCPA) survey of 628 pharmacies in which 49% claimed to have seen 10-50 occurrences of “clawback fees” in the past month. A further 35% reported seeing more than 50 clawback fees in the past month. These “fees” are part of contractual obligations that payers can use to recoup such overpayments to pharmacies.

Other contractual arrangements, such as “gag clauses” (AKA, non-disclosure agreements), wherein pharmacists cannot disclose to patients when their copay exceeds the cost of filling the prescription without coverage, have garnered coverage in the media.

The Hill recently outlined efforts from senators to stop this practice for both traditional insurance plans and Medicare Advantage and Part D participants. “Americans have the right to know which payment method—insurance or cash—would provide the most savings when purchasing prescription drugs,” Senator Susan Collins (R-Maine) told The Hill.

Rebates, Secretive Deals, and Red Tape in Government Crosshairs

Rebates are another contested aspect of current pricing models. Traditionally, pharmacy benefit managers (PBMs) serve as a middleman between pharmaceutical companies and pharmacies to negotiate prices and maintain markets. PBMs negotiate deals for insurers in the form of rebates. Insurers, however, are using these savings to offer lower premiums, rather than forwarding the savings directly to the customer.

UnitedHealthcare unveiled plans to pass these rebates directly to consumers in early March, The Hill reported.

In a press release, Department of Health and Human Services (HHS) Secretary Alex M. Azar II stated, “Today’s announcement by UnitedHealthcare is a prime example of the movement toward transparency and lower drug prices for millions of patients that the Trump Administration is championing. Empowering patients and providers with the information and control to put them in the driver’s seat is a key part of our strategy … to bring down the price of drugs and make healthcare more affordable.” (Photo copyright: Washington Post.)

The Trump Administration also recently outlined their new “American Patients First” plan for reducing drug prices and out-of-pocket costs for patients.

Key elements of their proposed approach include:

  • Eliminating gaming of regulations, such as the Risk Evaluation and Mitigating Strategies (REMS) requirements manufacturers use to avoid sending samples to creators of generics;
  • Promoting biosimilars;
  • Allowing greater substitution in Medicare Part D;
  • Including list prices in pharma advertising;
  • Restricting rebates through Anti-Kickback Statue revisions; and,
  • Eliminating gag clauses or clawback fees.

However, pharma industry coverage of the plan is mixed. MarketWatch sees little to worry about, predicting, “[the plan] isn’t expected to hurt drug makers or pharmacy-system middlemen.” Meanwhile, Forbes claims, “[the plan] represents a sea of change in pharmaceutical pricing policy, one that will have a significant effect on drug prices in the future.”

Anatomic pathology groups, medical laboratories, and other diagnostics providers can view this as yet another example of healthcare providers trying to shore up financials and protect profits by protecting sensitive pricing information, as the industry faces increasing scrutiny. Nevertheless, regardless of the outcome, these latest trends emphasize the role that transparency is likely to play—and how clinical laboratories will be impacted—as healthcare reform progresses, both in terms of public relations and regulatory requirements.

—Jon Stone

Related Information:

Frequency and Magnitude of Co-payments Exceeding Prescription Drug Costs

Impact of Direct and Indirect Remuneration (DIR) Fees on Pharmacies and PBM-Imposed Copay Clawback Fees Affecting Patients

Copay Exceeds Drug Cost in 23% of Claims: JAMA Research

You’re Overpaying for Drugs and Your Pharmacist Can’t Tell You

Oregon, the Latest State to Tackle High Drug Prices, Pushes through Transparency Law

Governor Brown Signs HB 4005, Creating New Transparency in Drug Pricing

UnitedHealthcare Will Pass Drug Rebates Directly to Consumers

Senators Target ‘Gag Clauses’ That Hide Potential Savings on Prescriptions

FDA Commissioner Says ‘Rigged’ System Raises Drug Costs for Patients, Discourages Competition

FDA Puts Drug Supply Chain on Notice

The FDA Commissioner Just Laid Out How ‘Everybody Wins’ in the US Healthcare System except the Patients

Your Guide to the Trump Drug Price Plan: Who It Affects and How

The Trump Plan to Reduce Prescription Drug Prices Will Have a Major Impact

American Patients First: The Trump Administration Blueprint to Lower Drug Prices and Reduce Out-of-Pocket Costs

Secretary Azar Statement on UnitedHealthcare Drug Discount Announcement

Reference Pricing and Price Shopping Hold Potential Peril for Both Clinical Laboratories and Consumers

Consumers Now Use Medical Cost Websites to Price Shop for Clinical Pathology Laboratory Tests and Other Medical Procedures

KFF Study Finds HDHPs and Increased Cost-Sharing Requirements for Medical Services Are Making Healthcare Increasingly Inaccessible to Consumers

With Reduced Reimbursement from Medicare, Anatomic Pathology Groups and Clinical Laboratories Must Learn to Optimize Collections from Managed Care Payers to Stabilize Financials and Survive the Industry Shift

As PAMA brings estimated Medicare reimbursement cuts of up to 30% over the next three years to a range of typically high-volume tests and diagnostics, medical laboratories that wish to stay competitive must understand the needs of managed care payers and learn how to optimize collections, reduce denials, and communicate value effectively or risk their financial health

In what experts have called the biggest financial upheaval for the healthcare industry in three decades, the onset of new Medicare Part B Clinical Laboratory Fee Schedule (CLFS) reductions based on the Protecting Access to Medicare Act (PAMA)—and their continued decrease over coming years—places the financial integrity of clinical laboratories and anatomic pathology groups of all sizes in peril.

Recent years have seen major shifts in consolidation, automation, and efficiency analysis to help streamline both workflows and cashflows. However, the threat from the current and coming cuts to Medicare lab test prices will be particularly acute for smaller independent laboratories and hospital/health system lab outreach programs. These labs will continue to feel added strain due to reduced reimbursement across 25 of the most common tests billed to Medicare.

The Centers for Medicare and Medicaid Services (CMS) and the Office of the Inspector General (OIG) predict that the cuts enacted on January 1, 2018, alone will result in Medicare payments to labs falling by a total of $670 million just in 2018. This amount is almost 70% greater than the $400 million in fee cuts the federal agency had predicted in statements it published last year. (See Dark Daily, “For Top 20 Tests, CMS to Cut Payment by 28% in 2018-2020,” October 9, 2017.)

And, that doesn’t account for subsequent cuts, which are estimated to reach nearly 30% over the next three years.

Cost of Service Disparities/In-Network Status Further Impact Clinical Labs

If the CLFS reductions weren’t enough, labs face another threat—managed care and commercial payers aligning with big national laboratories and narrowing networks in an attempt to lower costs and provide maximum return for both patients and shareholders. For smaller and independent laboratories, this represents a double threat.

In the first situation, larger laboratories can offer services at lower costs due to increased automation, batch processing, and other scale advantages. This means that while the lower CLFS rates will impact the financial integrity of larger labs, the actual margin lost is less than that of smaller laboratories and facilities that face higher costs to perform tests and provide services.

Compounding the situation, commercial and managed care payers searching out the best value for their patients and shareholders tend to narrow their networks by excluding many independent clinical lab companies and hospital lab outreach programs, amplifying this inherent disparity and skewing the advantage away from independent providers yet again.

Higher cost providers without a clear understanding of promoting their value to payers could have trouble obtaining in-network status. Yet, failing to obtain in-network status may reduce overall test quantities, further raise prices, and make smaller labs less competitive with larger national laboratories—a dangerous cycle with today’s competitive laboratory landscape.

Shifting Focus and Optimizing Managed Care Reimbursements

As the financial stability of Medicare reimbursements wanes, it is imperative that laboratories look to new methods to further increase efficiency and stabilize cashflows. Once a smaller portion of laboratory revenue, managed care organizations and commercial payers will be of increased importance as overall reimbursement rates continue to shrink in the face of healthcare reform and value-based care.

Unfortunately, many laboratories assume that by simply providing requested services they are due reimbursement from commercial payers. In the age of value-based care this is no longer the case and considered an outdated mindset—one that can lead to endless audits, increased recoupment costs, and which could drastically impact successful collection from managed care and commercial payers. (See Dark Daily, “Payers Hit Medical Laboratories with More and Tougher Audits: Why Even Highly-Compliant Clinical Labs and Pathology Groups Are at Risk of Unexpected Recoupment Demands,” October 16, 2015.)

Special June 26 Webinar: Improving Managed Care Reimbursement Efficiency

Understanding not just what these payers are attempting to achieve for their organization—but also how they structure requirements and processes to support their goals—is an essential element of succeeding in this previously smaller share of the marketplace.

For those interested in learning more about critical concerns regarding managed care payers in the post-2018 CLFS landscape, Pathology Webinars is hosting a 90-minute webinar on Tuesday, June 26, 2018, at 2:00 PM Eastern.

The webinar will include presentations from two experts on a range of topics including:

  • Actionable steps to absorb the loss of Medicare revenue due to the impact of the 2018 CLFS reductions;
  • How managed care payers process network status and payments;
  • Who in the managed care chain of command should receive your value proposition;
  • How to better align your value propositions, policies, and workflows with the requirements of managed care and commercial payers; and,
  • Understanding the roles managed care payers expect clinical laboratories and anatomic pathologists to play in managing and reducing unnecessary testing.

The first speaker, Frank Dookie, MBA, will provide an inside look at:

  • How managed care payers function;
  • Their requirements and workflows; and,
  • What they look for when considering network status for a laboratory.

Dookie is a laboratory professional who has worked on the payer side for 28 years. He is passionate about the role that diagnostics play or can play in healthcare, and has spent his career working for instrumentation providers, clinical laboratories, the intermediary space between laboratories and managed care companies, and managed care companies.

The second speaker, Michael Snyder, will bring the entire payment process into sharp focus. He will cover:

  • Optimizing the collection process;
  • Identifying the purpose of each step, each review, and each team member involved; and,
  • Critical points laboratories must address to ensure payment.

Snyder is the Senior Vice President of Network Operations for Avalon Healthcare Solutions, LLC, a firm that provides comprehensive benefit management services to the health plan industry and has more than 30 years’ experience in clinical laboratory management.

Frank R. Dookie, MBA (left), Contracting Executive with a major managed care company in Woodbridge, N.J.; and Michael Snyder (right), Senior Vice President with Avalon Healthcare Solutions in Flemington, N.J., will provide critical insights and actionable details for clinical laboratory and anatomic pathology group leaders who want to ensure future revenues.

An Essential Opportunity to Improve Your Reimbursements

This critical webinar offers anatomic pathology groups and medical laboratory managers essential information and actionable next steps to immediately leverage the potential of managed care payers. Additionally, it provides insider insight to laboratories straining to retain financial integrity as reduced reimbursements and increased regulatory burdens strain budgets and cashflows.

To register for the webinar and see further details about discussion topics, use this link  (or copy and paste the URL into your browser: https://pathologywebinars.com/current/managed-care-an-insiders-guide-to-improving-your-reimbursement-efficiency-with-strategies-that-work-626/).

As further Medicare payment reductions over the next three years drive reimbursements even lower, understanding how to capture the positive attention of payers—while working within the rules and policies driving their reimbursement decisions—will be an essential element of successful laboratory management and growth. Register now!

—Jon Stone

Related Information:

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

Payers Hit Medical Laboratories with More and Tougher Audits: Why Even Highly-Compliant Clinical Labs and Pathology Groups Are at Risk of Unexpected Recoupment Demands

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

Coming PAMA Price Cuts to Medicare Clinical Lab Fees Expected to Be Heavy Financial Blow to Hospital Laboratory Outreach Programs

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

Medicare Clinical Laboratory Price Cuts and Cost-cutting Predicted to be 2018’s Two Biggest Trends for Medical Laboratories in the United States

Are Payers Ganging up on Clinical Laboratories and Pathology Groups? Is this a Trend or Simply a Sign of Tougher Financial Times?

Medical laboratories today struggle to submit clean claims and be promptly and adequately reimbursed as health insurers institute burdensome requirements and audit more labs

Across the nation, clinical laboratories and anatomic pathology groups of all sizes struggle to get payment for lab test claims. Veteran lab executives say they cannot remember any time in the past when medical laboratories were challenged on the front-end with getting lab test claims paid while also dealing on the back-end with ever-tougher audits and unprecedented recoupment demands.

These issues center upon the new policies adopted by the Medicare program and private health insurers that make it more difficult for many clinical laboratories to be in-network providers, to obtain favorable coverage guidelines for their tests, and to have the documentation requested when auditors show up to inspect lab test claims. This is true whether the audit is conducted by a Medicare Recovery Audit Contractor (RAC) or a team from a private health insurer.

Source of Financial Pressure on Medical Laboratories in US

Another source of financial pressure on medical laboratories in the United States today is the ongoing increase in the number of patients who have high-deductible health plans—whether from their employer or from the Affordable Care Act’s Health Insurance Marketplace (AKA, health exchanges). The individual and family annual deductibles for these plans typically start at around $5,000 and go to $10,000 or more. Many labs are experiencing big increases in patient bad debt because they don’t have the capability to collect payment from patients when they show up in patient service centers (PSCs) to provide specimens.

Some of these developments make it timely to ask the question: Is it a trend for payers to gang up on clinical laboratories and pathology groups and make it tougher for them to be paid for the lab tests they perform? Multiple factors can be identified to support this thesis.

“Is it a coincidence that, in recent years, so many payers are initiating numerous requirements that add complexity to how labs submit claims for lab tests and how they get paid?” asked Richard Faherty of RLF Consulting LLC. Faherty was formerly Executive Vice President, Administration, with BioReference Laboratories, Inc. “I can track four distinct developments that, collectively, mean that fewer lab claims get paid, expose clinical laboratories to extremely rigorous audits with larger recoupment demands, and heighten the risk of fraud and abuse allegations due to use of contract or third-party sales and marketing representatives who represent independent medical lab companies.”

Faherty described the first of his four developments as prior-authorization requirements for molecular and genetic tests. “Health insurers are reacting to the explosion in molecular and genetic testing—both in the number of unique assays that a doctor can order and the volume of orders for these often-expensive tests—by establishing stringent prior-authorization requirements,” he noted.

More Prior-Authorization Requirements for Molecular, Genetic Tests

“At the moment, many clinical lab companies and pathology groups are attempting to understand the prior-authorization programs established by Anthem (which became effective on July 1) and UnitedHealthcare (which became effective on November 1),” explained Faherty. “Just these two prior-authorization programs now cover as many as 80 million beneficiaries. There are plenty of complaints from physicians and lab companies because the systems payers require them to use are not well-designed and quite time-consuming.

“One consequence is that many lab executives complain that they are not getting paid for genetic tests because their client physicians are unable to get the necessary prior authorization—yet the lab decides to perform the test to support good patient care even though it knows it won’t be paid.”

Richard Faherty (left), CEO, RLF Consulting LLC, and formerly with Bio-Reference Laboratories, Inc., will moderate this critical webinar. Joining him will be Rina Wolf (center), Vice President, Commercialization Strategies, Consulting and Industry Affairs, XIFIN, Inc., and Karen S. Lovitch (right), JD, Practice Leader, Health Law Practice, Mintz Levin, PC, Washington, DC. The webinar takes place Wednesday, December 6, 2017, at 2 p.m. EST; 1 p.m. CST; 12 p.m. MST; 11 a.m. PST. Click here to register. (Photo copyright: Dark Intelligence Group.)

Payers Checking on How Clinical Laboratories Bill, Collect from Patients

Faherty’s second trend involves how medical lab companies are billing and collecting the amounts due from patients. “Most payers now pay close attention to how clinical laboratories bill patients for co-pays, deductibles, and other out-of-pocket amounts that are required by the patients’ health plans,” he commented. “Labs struggle with this for two reasons.

“One reason is the fact that tens of millions of Americans currently have high-deductible health insurance plans,” said Faherty. “In these cases, medical laboratories often must collect 100% of the cost of lab testing directly from the patients. The second reason is the failure of many independent lab companies to properly and diligently balance-bill their patients. This puts these labs at risk of multiple fraud and abuse issues.”

Many Medical Lab Companies Undergoing More Rigorous Audits by Payers

Faherty considers trend number three to be payers’ expanding use of rigorous audits of lab test claims. “In the past, it was relatively uncommon for a clinical lab company or pathology group to undergo audits of their lab test claims,” he observed. “That has changed in a dramatic way. Today, the Medicare program has increased the number of private auditors that visit labs to inspect lab test claims. At the same time, private health insurers are ramping up the number and intensity of the audits they conduct of lab test claims and substantially increasing their demands for recoupment without audit.

“One consequence of these audits is that medical laboratories are being hit with substantial claims for recoupment,” noted Faherty. “I am aware of multiple genetic testing companies that have been hit with a Medicare recoupment amount equal to two or three years of the lab’s annual revenue. Some have filed bankruptcy because the appeals process can take three to four years.”

Are Contract Lab Sales Reps More Likely to Offer Physicians Inducements?

Faherty’s fourth significant trend involves the greater use of independent contractors that handle lab test sales and marketing for clinical lab companies. “This trend affects both labs that use third-party lab sales reps and labs that don’t,” he said. “Labs that use contract sales and marketing representatives do not have direct control over the sales practices of these contractors. There is ample evidence that some independent lab sales contractors are willing to pay inducements to physicians in exchange for their lab test referrals.

“This is a problem in two dimensions,” noted Faherty. “On one hand, clinical lab companies that use third-party sales contractors don’t have full control over the marketing practices of these sales representatives. Yet, if federal and state prosecutors can show violations of anti-kickback and self-referral laws, then the lab company is equally liable. In certain cases, government attorneys have even gone after executives on a personal basis.

“On the other hand, I am hearing lab executives complain now that a substantial number of office-based physicians are so used to various forms of inducement offered by third-party sales representatives that the lab’s in-house sales force cannot convince those physicians to use their lab company without a comparable inducement. If true, this is a fundamental shift in the competitive market for lab testing services and it puts labs unwilling to pay similar inducements to physicians at a disadvantage.”

These four trends describe the challenges faced by every clinical laboratory, hospital laboratory outreach program, and pathology group when attempting to provide lab testing services to office-based physicians in a fully-compliant manner and be paid adequately and on time by health insurers.

Why Some Labs Continue to Be Successful and What They Can Teach You

These four trends may also explain why many medical lab companies are dealing with falling revenue and encountering financial difficulty. However, there continue to be independent lab companies that have consistent success with their coding, billing, and collections effort. These labs put extra effort into aligning their business practices with the requirements of the Medicare program and private health insurers.

To help pathologists and managers running clinical laboratory companies, hospital lab outreach programs, and pathology groups improve collected revenue from lab test claims and to improve lab compliance, Pathology Webinars, LLC, is presenting a timely webinar, titled, “How to Prepare Your Lab for 2018: Essential Insights into New Payer Challenges with Lab Audits, Patient Billing, Out-of-Network Claims, and Heightened Scrutiny of Lab Sales Practices.” It takes place on Wednesday, December 6, 2017 at 2:00 PM EDT.

Three esteemed experts in the field will provide you with the inside scoop on the best responses and actions your clinical lab and pathology group can take to address these major changes and unwelcome developments. Presenting will be:

·       Rina Wolf, Vice President, Commercialization Strategies, Consulting and Industry Affairs, XIFIN, Inc. in San Diego; and,

·       Karen S. Lovitch, JD, Practice Leader, Health Law Practice, Mintz Levin, PC, in Washington, DC;

·       Moderating will be Richard Faherty of RLF Consulting LLC, and formerly with Bio-Reference Laboratories, Inc.

Special Webinar with Insights on How Your Lab Can Collect the Money It’s Due

To register for the webinar and see details about the topics to be discussed, use this link (or copy and paste this URL into your browser: http://pathologywebinars.com/how-to-prepare-your-lab-for-2018-essential-insights-into-new-payer-challenges-with-lab-audits-patient-billing-out-of-network-claims-and-heightened-scrutiny-of-lab-sales-practices/).

This is an essential webinar for any pathologist or lab manager wanting to improve collected revenue from lab test claims and to improve lab compliance. During the webinar, any single idea or action your lab can take away could result in increasing collected revenue by tens of thousands even hundreds of thousands of dollars. That makes this webinar the smartest investment you can make for your lab’s legal and billing/collection teams.

—Michael McBride

Related Information:

How to Prepare Your Lab for 2018: Essential Insights into New Payer Challenges with Lab Audits, Patient Billing, Out-of-Network Claims, and Heightened Scrutiny of Lab Sales Practices

Risk, Compliance, Pay—A Juggling Act for Labs

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

Threats to Profitability Causing Clinical Laboratories, Pathology Groups to Take on Added Risk by Entering into ‘Problematic’ Business Relationships and Risky Pricing Plans

Payers Hit Medical Laboratories with More and Tougher Audits: Why Even Highly-Compliant Clinical Labs and Pathology Groups Are at Risk of Unexpected Recoupment Demands

‘Death by 1,000 Knives’ Could Be in Store for Clinical Laboratories, Pathology Groups Not Prepared to Comply with New Medicare Part B Regulations

Up to 50% of Aetna, UnitedHealth Group, and Anthem Reimbursements Go to Value-Based Contracts; Clinical Laboratories Must Implement Value-Based Strategies to Remain Competitive

Aetna expects 75% to 80% of its medical spending will be value-based by 2020

Many pathologists and medical laboratory executives may be surprised to learn how quickly private health insurers are moving away from fee-for-service payment arrangements. According to Forbes, the nation’s largest health insurance companies now associate nearly 50% of reimbursements they make to value-based insurance initiatives.

This is a sign that value-based managed care contracting continues to gain momentum. And that interest remains strong in this form of reimbursement, which associates payment-for-care to quality and rewards efficient providers.

UnitedHealth Group (NYSE:UNH) and Aetna (NYSE:AET) are the fastest adopters of value-based payment models, with Anthem (NYSE:ANTM) close behind, the Forbes article noted.

Moreover, UnitedHealth and Aetna intend to increase their percentage of value-based contracts. For example, Aetna, which now ties 45% of its reimbursements to value, says its goal is to have 75% to 80% of its medical spending in value-based relationships by 2020, Healthcare Finance News pointed out.

These compelling data should motivate pathology groups and medical laboratory leaders to adopt strategies for value-based contracting. That’s because payment schemes based on clinical laboratory performance will likely grow quickly, as compared to traditional fee-for-service reimbursement models, which are being phased out.

Aetna: Lowering Acute Admits

Aetna and other insurance companies are rewarding in-network hospitals, medical laboratories, and physicians who help them keep their customers healthy.

“One way we measure our success is by how well we are able to keep our members out of the hospital and in their homes and communities,” stated Mark Bertolini, Aetna’s Chairman and Chief Executive Officer, in the Healthcare Finance News article.

“I think value-based contracting is going to continue to be encouraged by even the current [federal] administration as a way of getting a handle on healthcare costs,” he continued. In fact, Aetna lowered acute admissions by 4% in 2016 and reduced readmission rates by 27%, reported Healthcare Finance News.

UnitedHealth: Outpatient Care a Focal Point

Meanwhile, UnitedHealth Group spends $52 billion (or about 45%) of a $115 billion annual budget on value-based initiatives, Forbes noted.

In March, UnitedHealth Group joined Optum, its health services company, to Surgical Care Associates, an ambulatory (outpatient) surgery provider with 205 sites nationwide.

As surgical cases (such as total joint replacements) continue their migration to ambulatory surgery center sites, UnitedHealth Group expects this merger to offer value to patients, payers, and physicians, a statement pointed out.

“We’ve been able to drive down on a per capita basis inpatient, and inside that we’ve focused a lot in those early years around the conversion of inpatient to outpatient. And I think this is sort of the continued evolution as we focus more on the side of service to how do we get that outpatient into the ambulatory setting,” said Dan Schumacher, UnitedHealthcare Chief Financial Officer, in the Healthcare Finance News story.

 

The graphic above is from a slide presentation given by Eleanor Herriman, MD, MBA, Chief Medical Informatics Officer with Viewics, a provider of big-data management solutions for hospitals and clinical laboratories. Because of healthcare’s drive toward value-based payment models, clinical labs must focus on “operational efficiencies” and “testing utilization management,” and be prepared to “demonstrate value of testing to payers and health organizations,” Herriman’s presentation notes. (Image copyright: Viewics, Inc.)

Also, in 2016, OptumRx (pharmacy benefit management) announced partnerships with Walgreens and CVS Pharmacy. The joint pharmacy care agreements are intended to improve patient outcomes, connect platforms for health data leverage, and address costs of care, UnitedHealth Group stated in dual press releases (Walgreens and CVS) announcing the strategic partnerships.

Anthem: Planning for 50% Value-Based Care by Next Year

For its part, Anthem now has 43% of its operating budget focused on shared savings programs. Furthermore, the company reportedly has a plan to associate at least 50% of its budget with value-based care by 2018.

“When you combine this with our pay for performance programs, we will have well over half our spend in collaborative arrangements over the next five years,” Jill Becher, Anthem Staff Vice President of Communications, told Forbes.

Clinical Laboratories Need Value-Based Strategy

The rise of value-based care should motivate clinical laboratory leaders to create and implement novel and responsive strategies as soon as possible. Without a focus on value, labs could be denied entry into provider networks.

In a Clinical Laboratory Daily News article, Danielle Freedman, MD, noted that value-based clinical laboratory strategies could entail the following:

  • Working with physicians on appropriate retesting intervals;
  • Adding clinical decision support tools; and
  • Vetting testing requests.

Freedman is Director of Pathology at Luton and Dunstable University Hospital NHS Foundation Trust in the United Kingdom (UK).

Clinical laboratory executives and pathology practice administrators should take note of the fact that some large healthcare insurers already have nearly half of their reimbursement under value-based contracts, with plans to grow their investment in value-based relationships in the future.

Already facing the challenges of narrowing healthcare networks, it is imperative that lab leaders also get their lab team to focus on value (and not just volume). It can be expected that, as health insurers look to partner with labs in different regions and communities, they will want medical laboratories that are creative in developing high-value diagnostic testing services.

—Donna Marie Pocius

 

Related Information:

United Health, Aetna, Anthem Near 50% of Value-Based Care Spending

Aetna, UnitedHealth Show Increasing Appetite for Value-Based Care Contracts

Aetna Premier Care Network Plus Helps Reduce Costs for National Employers and Members Through Simple Access to Value-Based Care

Surgical Care Associates/OptumCare to Combine

OptumRx and Walgreens to Expand Consumer Choice, Reduce Costs, and Improve Health Outcomes

OptumRx and CVS Pharmacy to Expand Consumer Choice, Reduce Costs, and Improve Health Outcomes

“V” is for Value, Not Volume

Advanced Laboratory Analytics—A Disruptive Solution for Health Systems

 

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