Oct 20, 2017 | Digital Pathology, Laboratory Management and Operations, Laboratory News, Laboratory Pathology, Laboratory Testing, Managed Care Contracts & Payer Reimbursement
New study analyzes the dramatic decline in the utilization of imaging diagnostics between 2008 and 2014 and suggests that reductions in imaging use could be the result of changes in federal policy, increased deductibles, and cost-cutting focuses
Anatomic pathologists have experienced sustained cuts to reimbursements for both technical component and professional component services during the past eight to 10 years. But what has not happened to pathology is a 33% decline in the volume of biopsies referred to diagnosis. Yet that is what some studies say has happened to imaging reimbursement since 2006.
Using Medicare data for Part B imaging procedures covering the years 2001 to 2014, researchers at a major university identified that, beginning in 2006, the total reimbursement for imaging procedures declined at a steady rate throughout the following eight years covered by the study. It is unclear what implications the finding of this study of imaging utilization might predict for the utilization of advance anatomic pathology services.
Routine Use of Imaging in Diagnostics is Slowing Down
The research into imaging utilization was conducted at Thomas Jefferson University and published in the journal Health Affairs. Led by David C. Levin, MD, Emeritus Professor and former Chair of the Department of Radiology at Thomas Jefferson University Hospital, the researchers examined imaging data from Medicare Part B (2001-2014) to determine the reason and rate of “slowdown” in routine use of imaging in diagnostics.
The researchers calculated utilization rates for “advanced” imaging modalities and component relative value unit (RVU) rates for all imaging modalities. They determined that trends in imaging rates and RVU rates rose between 2000 and 2008, but then sharply declined from 2008 to 2014. The researchers theorized that the reduction might have been due to changes in federal policy, increasing deductibles, and focus on cost-cutting by hospitals and healthcare providers.
Levin, along with Thomas Jefferson University associates Vijay M. Rao, MD, FACR, current Chair of Radiology, and Laurence Parker, PhD, Associate Professor of Radiology; and University of Wisconsin-Madison statistics Professor Charles D. Palit, PhD, argue that the decrease in imaging orders might reduce diagnostic costs, but also could negatively impact surgical pathologists, radiologists, medical researchers, and patients themselves.
In a Modern Healthcare article, Levin states that the reduction in utilization of imaging and radiology could be a slippery slope leading to decreased access to life-saving diagnostic tools that could leave patients “not getting the scans they probably need.”
What’s Fueling the Multi-Year Decline in Utilization of Imaging and Radiology?
In the Journal of American College Radiology, Levin, Rao, and Parker, attempt to “assess the recent trends in Medicare reimbursements to radiologists, cardiologists, and other physicians for non-invasive diagnostic imaging (NDI).”
Using data acquired from Medicare part B databases, the authors reported that total reimbursements for NDI peaked at $11.9 billion in 2006, but saw a steep decline of 33% to just over $8 billion in 2015. They attribute some of this decline as a result of the Deficit Reduction Act of 2005, which went into effect in 2007, as well as other cuts to NDI reimbursement funding. Reimbursement to radiologists, according to Levin et al, dropped by more than 19.5%, and reimbursement to cardiologists dropped nearly 45% between 2006 and 2015.
Surgical pathologists may see parallels in the total reimbursement for imaging during the years 2002-2015 compared to pathology technical component and professional component reimbursement during those same years. Taken from the Thomas Jefferson University study, the graphic above shows “total Part B payments for non-invasive diagnostic imaging to all physicians under the Medicare Physician Fee Schedule, 2002 to 2015. Vertical axis shows billions of dollars. The abrupt decline in 2007 was due to the Deficit Reduction Act. The declines in 2009, 2010, and 2011 were due largely to code bundling in, respectively, transthoracic echocardiography, radionuclide myocardial perfusion imaging, and CT of the abdomen and pelvis.” (Caption and image copyright: Thomas Jefferson University.)
In different Journal of American College Radiology article, Levin and Rao outline their concerns over another suspected cause for the decline in imaging utilization—the American Board of Internal Medicine Foundation (ABIMF) Choosing Wisely initiative.
According to Levin and Rao, the Choosing Wisely initiative was intended “to reduce the use of tests and treatments that were felt to be overused or often unnecessary.” Imaging examinations were included in the list of tests that were deemed to be “of limited value” in many situations. Levin and Rao suggested that there might have been a need to curtail testing pushed by payers, policymakers, and physicians at the time, but that the Choosing Wisely initiative could have added to a decline in imaging testing spurred on by the confusion physicians felt when attempting to access unclear scenarios and recommendations for the 124 imaging tests listed.
Imaging Decline Could Have Unintended Consequences for Providers and Patients
In a Radiology Business article, Levin outlined some of the unintended consequences facing healthcare due to the reduction in imaging utilization. He states that “private imaging facilities are starting to close down” and “MRI and other advanced imaging exams are beginning to shift into hospital outpatient facilities.” He predicts that the shift from private facilities to hospital facilities could cause imaging costs to increase for customers and healthcare providers.
Levin suggests that Medicare could “raise the fees a little and make the private offices a little more viable.” The profit margins, Levin argues, “are so low right now that you basically can’t run a business.” Medicare as a program might be seeing huge savings, Levin notes in several articles, but physicians, laboratories, and patients are feeling the pinch as a result.
In an interview with Physicians Practice, Rao echoed Levin’s concerns. “Policy makers lack understanding of the value of imaging and spectrum of the services provided by radiologists,” he declared. “On an institutional level, under the new payment models, radiology is transitioning to a cost center and radiologists often don’t have a seat at the table.”
Rao points out that this devaluing of radiologists’ work affects not only healthcare facilities, but patients themselves. Radiologists provide “major contributions to patient care by making accurate diagnoses, and doing minimally invasive treatments given many technological advances leading to appropriate management and improved outcomes,” he argues. How long before Pathology follows a similar track?
Balancing Cost and Quality in Testing Without Sacrificing Patient Needs
The fear seems to be that the push to lower costs by eliminating unnecessary imaging is inhibiting radiologists and diagnosticians from providing necessary imaging for patients. And that delaying diagnoses affects the ability of healthcare providers to provide adequate and timely patient care. Rao suggests, however, that physicians’ use of medical imaging could simply be evolving.
“There were other factors that also helped limit the rapid growth, such as greater attention by physicians to practice guidelines, concerns about radiation exposure to patients, and the Great Recession of 2007 to 2009,” Rao noted in a Thomas Jefferson University news release. “However, we expect that additional changes, such as the advent of lung cancer and other screening programs, and the use of computerized clinical decision support, will continue to promote and support appropriate use of imaging technology.”
The drive to reduce healthcare expenditures should not be dismissed. We may soon see parallels in the rise and fall of imaging utilization for genetic testing, surgical pathology, and other new and expensive clinical laboratory technologies as policymakers attempt to balance increased spending against the clinical value of these diagnostic tools.
— Amanda Warren
Related Information:
The Overuse of Imaging Procedures on the Decline Since 2008
After Nearly a Decade of Rapid Growth, Use and Complexity of Imaging Declined, 2008–2014
Reducing Inappropriate Use of Diagnostic Imaging Through the Choosing Wisely Initiative
The Recent Losses in Medicare Imaging Revenues Experienced by Radiologists, Cardiologists, and Other Physicians
Five Minutes with David C. Levin, MD: Outpatient Imaging Cuts and Unintended Consequences
Ten Questions with Vijay M. Rao, MD, FACR
Diagnostic Imaging Transitions from Volume to Value
Imaging Use Plunges as Coding, Reimbursement Tightens Up
Has the Time Come for Integration of Radiology and Pathology?
Reference Pricing and Price Shopping Hold Potential Peril for Both Clinical Laboratories and Consumers
Sep 29, 2017 | Coding, Billing, and Collections, Instruments & Equipment, Laboratory Instruments & Laboratory Equipment, Laboratory Management and Operations, Laboratory Operations, Laboratory Pathology, Laboratory Testing, Managed Care Contracts & Payer Reimbursement
Insurers might use blockchain technology to enable instantaneous verification and interoperability of healthcare records, which could impact clinical laboratory payment systems
Medical laboratories and anatomic pathology groups are keenly aware that connected, secure, interoperable health records are critical to smooth, efficient workflows. However, the current often dysfunctional state of health information technology (HIT) in America’s healthcare system often disrupts the security and functionality of information exchange between hospital and ancillary practice patient record systems.
One solution to this could be blockchain technology. With its big data and abundant touchpoints (typically: insurer, laboratory, physician, hospital, and home care), the healthcare industry could be ripe for blockchain information exchanges. Blockchain might enable secure and trusted linkage of payer, provider, and patient data. But what exactly is blockchain technology and how might it impact your laboratory?
Blockchains Could Transform Healthcare
Blockchain refers to a decentralized and distributed ledger that enables the interface of computer servers for the purpose of making, tracking, and storing linked transactions.
“At its core, blockchain is a distributed system recording and storing transaction records. More specifically, blockchain is a shared, immutable record of peer-to-peer transactions built from linked transaction blocks and stored in a digital ledger,” explained risk-management group Deloitte in a report, which goes on to state:
- “Blockchain technology has the potential to transform healthcare, placing the patient at the center of the healthcare ecosystem and increasing the security, privacy, and interoperability of health data. This technology could provide a new model for health information exchanges (HIE) by making electronic medical records more efficient, disintermediated, and secure.
- “Blockchain relies on established cryptographic techniques to allow each participant in a network to interact (e.g., store, exchange, and view information), without pre-existing trust between the parties.
- “In a blockchain system, there is no central authority; instead, transaction records are stored and distributed across all network participants. Interactions with the blockchain become known to all participants and require verification by the network before information is added, enabling trustless collaboration between network participants while recording an immutable audit trail of all interactions.”
Instant Verifications and Authorizations at Point-of-Care
In a Healthcare Finance News (HFN) article, insurers acknowledged blockchain’s potential for information verification and authorizations in real-time, fast payments, and access to patient databases that could fulfill population health goals.
“Everybody that is part of a transaction has access to the network. There’s no need for an intermediary. Blockchain allows for verification instantly,” noted Chris Kay, JD, Senior Vice President and Chief Innovation Officer at Humana, in the HFN article.
At clinical laboratories, blockchain could enable nearly instantaneous verification of a patient’s health insurance at time of service. Blockchain also could enable doctors to review a patient’s medical laboratory test results in real-time, even when multiple labs are involved in a person’s care.
“Everyone has to have a node on the blockchain and have a server linked to the blockchain. The servers are the ones talking to one another,” explained Kay. “What’s really transformative about this is it takes the friction out of the system. If I see a doctor, the doctor knows what insurance I have because it’s on the network. All this is verified through underlying security software.”
Healthcare Obstacles to Overcome
Breaking down data silos and loosening proprietary holds on information can help healthcare providers prepare for blockchain. However, in our highly regulated industry, blockchain is at least five years away, according to blockchain experts in a Healthcare IT News (HIT News) article.
“We’re hearing that blockchain is going to revolutionize the way we interact with and store data. But it’s not going to happen tomorrow. Let’s find smaller problems we can solve as a starting point—projects that don’t have the regulatory hurdles—and then take baby steps that don’t require breaking down all the walls,” advised Joe Guagliardo, JD, Intellectual Property/Technology Attorney and Chair of the Blockchain Technology Group at Pepper Hamilton, a Philadelphia-based law firm, in the HIT News article.
Healthcoin: Rewarding Patients for Improved Biomarkers
One company has already started to work with blockchain in healthcare. Healthcoin is a blockchain-based platform aimed at prevention of diabetes, heart disease, and obesity. The idea is for employers, insurers, and others to use Healthcoin (now in pre-launch) to reward people based on biomarker improvements shown in medical laboratory tests.
Healthcoin’s Chief Executive Officer Diego Espinosa and Chief Operating Officer Nick Gogerty, founded the company in 2016 after Espinosa, who had been diagnosed with diabetes, made diet changes to reverse it, according to an article in Bitcoin Magazine.
“When I saw my blood labs, the idea for Healthcoin was born—shifting the focus of prevention to ‘moving the needle’ on biomarkers, as opposed to just measuring steps,” Espinosa told Bitcoin Magazine.
Blockchain Provides Security
What does blockchain provide that isn’t available through other existing technologies? According to Deloitte, it’s security and trust.
“Today’s health records are typically stored within a single provider system. With blockchain, providers could either select which information to upload to a shared blockchain when a patient event occurs, or continuously upload to the blockchain,” Deloitte notes. “Blockchain’s security and ability to establish trust between entities are the reasons why it can help solve the interoperability problem better than today’s existing technologies.”
Should Clinical Laboratories Prepare for Blockchain?
It’s important to note that insurers are contemplating blockchain and making relevant plans and strategies. Dark Daily believes the potential exists for blockchain technology to both disrupt existing business relationships, including those requiring access to patient test data, and to create new opportunities to leverage patient test data in real-time that could generate new revenue sources for labs. Thus, to ensure smooth payments, medical laboratory managers and pathology group stakeholders should explore blockchain’s value to their practices.
—Donna Marie Pocius
Related Information:
Blockchain Opportunities for Health Care: A New Model for Health Information Exchanges
Blockchain Will Link Payer, Provider, Patient Data Like Never Before
Old Ways of Thinking Won’t Work for Blockchain, Experts Say
Blockchain-Styled Solutions for Healthcare on the Rise
Can Blockchain Give Healthcare Payers Better Analytical Insight?
Blockchain in Health and Life Insurance: Turning a Buzzword into a Breakthrough
Does Blockchain Have a Place in Healthcare?
Sep 22, 2017 | Coding, Billing, and Collections, Laboratory Management and Operations, Laboratory News, Laboratory Operations, Laboratory Pathology, Managed Care Contracts & Payer Reimbursement
Medical laboratories and pathology groups should expect point-of-service collection strategies to become increasingly important to their overall success
Not only is patient bad debt a growing problem for the nation’s hospitals, but it is now getting national attention within the hospital industry. This is bad news for clinical laboratories and anatomic pathology groups, because the same trends causing increased patient bad debt at hospitals are doing the same thing within the lab industry.
Much of the blame can be attributed to the increase number of patients with high-deductible health plans (HDHPs). The latest statistics reveal that patients’ out-of-pocket payments now make up 30% of hospital revenues. That is why hospitals desperately need strategies for successfully collecting payments from patients. And they’re not alone.
Kaiser Family Foundation (KFF) reported that more than half of all workers have deductibles and out-of-pocket liability of greater than $1,000. That is the reason why clinical laboratories and anatomic pathology groups also need a formula for collecting the total bill from their patients.
Jase DuRard, Chief Revenue Officer for revenue-cycle technology company AccuReg, told Modern Healthcare the increase in patient self-pay represents a seismic shift from roughly five years ago. At that time, patients paid only 10% of their hospital bills out-of-pocket and insurers paid about 90% of hospital claims.
Patient Responsibility to Blame for Revenue Loss at Nation’s Hospitals
A November 2016 study of 660 hospitals conducted by Crowe Horwath—an international public accounting, consulting, and technology firm—stated that “patient responsibility” was to blame for an overall managed care net revenue decline of 2.5% for outpatient care and 1.4% for inpatient care. Self-pay-after-insurance (SPAI) collection rates have improved slightly during the past 12 months—with the inpatient median rising 0.2% and outpatient median increasing 0.7%.
However, according to the Horwath report, “While seemingly a good sign for providers in the face of rising patient copays and deductibles, slight increases in patient collection rates are not enough to counter the larger increase in self-pay-after-insurance patient responsibilities.”
High-deductible health plans (HDHPs) are becoming the coverage of choice for healthcare consumers struggling to pay medical bills in full. The net effect is that revenues are declining at hospitals, clinical laboratories, and pathology groups, as well as other providers. (Graphic copyright: Consumer Reports.)
In a Modern Healthcare article, Crowe Horwath’s Managing Partner of Healthcare Services, Brian Sanderson, noted, “It’s imperative that healthcare organizations establish effective point-of-service collection programs by training and educating front-line staff.”
Complicating matters is that many patients faced with self-pay are unable to pay their medical bills at time of service.
“Higher deductibles and the increase in patient responsibility are causing a decrease in patient payments to providers for patient care services rendered,” John Yount, TransUnion Vice President for Healthcare Products, told RevCycle Intelligence. “While uncompensated care has declined, it appears to be primarily due to the increased number of individuals with Medicaid and commercial insurance coverage.”
Hospitals Offer Patients Financial Options for Paying Bills
Some hospitals are responding to this trend by rolling out programs that offer patients financing options for their out-of-pocket costs. A recent article in Modern Healthcare outlined the steps taken by Missouri hospital system Mosaic Life Care, as it realized the full impact that $23 million worth of self-pay patient care had on its bottom line. Though the hospital posted record census and gross revenue during the first four months of 2017, net revenue was flat because patient self-pay didn’t keep pace.
“We win all kinds of awards for patient quality, but our revenue cycle didn’t match that performance,” Deborah Vancleave, Mosaic’s Vice President of Revenue Cycle, told Modern Healthcare.
Since then, Mosaic has taken steps to improve the accuracy of information it gets at registration and how it makes determinations on patients’ ability to pay. In addition, it has joined forces with ClearBalance— a provider of patient loan programs to US hospitals and health systems—to offer zero-interest or low-interest revolving lines of credit to patients for their out-of-pocket medical costs.
According to Modern Healthcare, ClearBalance pays hospitals “upfront for the outstanding bills of patients who sign up for their financing program, but the hospital guarantees the money and repays lenders if patients default on their credit lines. The companies make their profit by getting a 10% to 15% fee for the outstanding amount of the loan.”
Medical Laboratories Slow to Respond to Consumer Demand for Price Transparency
As consumers shoulder more of the burden for their healthcare, they also will be demanding more price transparency from medical laboratories and anatomic pathology groups, which so far have been slow to respond to the trend.
“Patients expect cost estimates in every other retail industry, and are starting to demand them in healthcare as well. According to one recent study, for example, more than 90% of patients felt it was important to know their payment responsibility upfront,” TransUnion, a global risk information provider, stated in a white paper outlining the importance of precare cost estimates.
As hospitals struggle to collect from patients saddled with HDHPs, laboratory executives and other healthcare providers should take note. The change in payment mix means the ability to collect payments from patients at the point of service is becoming a critical success factor.
—Andrea Downing Peck
Related Information:
Hospitals Struggle with the Dilemma of Patients Hit by High Deductibles
Kaiser Family Foundation 2016 Employer Health Benefits Survey
The Impact of Consumerism on Provider Revenues
Patient Financial Responsibility On the Rise
Improve Revenue Cycles and Patient Engagement by Delivering Pre-Care Cost Estimates
68% of Consumers Did Not Pay Patient Financial Responsibility
Sep 20, 2017 | Coding, Billing, and Collections, Laboratory Management and Operations, Laboratory News, Laboratory Operations, Laboratory Pathology, Managed Care Contracts & Payer Reimbursement, Management & Operations, News From Dark Daily
To offset the loss of revenue from the price cuts to Medicare Part B clinical laboratory tests, labs will need to aggressively—but wisely—slash costs to balance their budgets
Any day now, Medicare officials will announce the Medicare Part B Clinical Laboratory Fee Schedule (CLFS) for 2018. Both the Centers for Medicare and Medicaid Services (CMS) and the Department of Health and Human Services Office of Inspector General (OIG) have issued reports indicating that these fee cuts will total $400 million just during 2018, which Dark Daily reported on in July.
Many experienced industry executives expect this to be the single most financially disruptive event to hit the clinical laboratory profession in more than 20 years. This will not only have a substantial negative financial impact on all labs—large and small—but two sectors of the clinical lab industry are considered to be so financially vulnerable they could cease to exist.
At Greatest Risk of Financial Failure are Community Laboratories
The first sector is comprised of smaller community lab companies that operate in towns and rural areas. These labs are at the greatest risk because they are the primary providers of lab testing services to the nursing homes and skilled nursing facilities in their neighborhoods. And because they have a high proportion of Medicare Part B revenue.
Thus, the expected Medicare price cuts to the high-volume automated lab tests—such as chemistry panels and CBCs (complete blood count) that are the bread-and-butter tests for these labs—will swiftly move them from minimal profit margins to substantial losses. Since these labs have a cost-per-test that is significantly higher than the nation’s largest public lab companies, they will be unable to financially survive the 2018 Medicare fee cuts.
The second sector at risk is comprised of rural hospitals and modest-sized community hospitals. What officials at CMS and their consulting companies overlooked when they created the PAMA (Protecting Access to Medicare Act) private payer market price reporting rule is that these hospitals provide lab testing services to nursing homes and office-based physicians in their service areas.
Because of the low volumes of testing in these hospital labs, they also have a larger average cost-per-test than the big public labs. Thus, the 2018 cuts to Medicare Part B lab test prices will erode or erase any extra margin from this testing that now accrues to these hospitals.
Rural and Small Community Hospitals Rely on Lab Outreach Revenue
The financial disruption these Medicare lab test price cuts will cause to rural and community hospitals is a real thing. These hospitals rely on outreach lab test revenues to subsidize many other clinical services within the hospital. One rural hospital CEO confirmed the importance of lab outreach revenue to her organization. Michelle McEwen, FACHE, CEO of Speare Memorial Hospital in Plymouth, N.H., spoke to The Dark Report in 2012 about the financial disruption that was happening when a major health insurer excluded her hospital’s laboratory from its network.
Speare Memorial is a 25-bed critical access hospital in the central part of the state between the lakes region and the White Mountain National Forest. McEwen was blunt in her assessment of the importance of clinical laboratory outreach revenues to her hospital. “The funds generated by performing these [outreach] lab tests are used to support the cost of providing laboratory services to all patients 24/7, including stat labs for emergency patients and inpatients,” McEwen explained. “These funds also help support other services in the hospital where losses are typically incurred, such as the emergency room and obstetric programs.” (See “Critical Access Hospitals Losing Lab Test Work,” The Dark Report, April 2, 2012.)
For the second consecutive year, Lab Quality Confab (LQC) is offering an extended session on clinical laboratory accreditation and certification in New Orleans on October 24-25. CMS has indicated it will participate in this year’s session. It was an historic first for the clinical laboratory industry when last year’s Lab Quality Confab convened a panel that included experts in CLIA laboratory inspection and compliance from the four deeming organizations. From left to right: Moderator Nora L. Hess, MBA, MT(ASCP), PMP, Senior Consultant, Operations Management, Chi Solutions, Inc., Ann Arbor, Mich.; Kathy Nucifora, MPH, MT(ASCP), Director of Accreditation, COLA, Columbia, Md.; Stacy Olea, MBA, MT(ASCP), FACHE, Executive Director of Laboratory Accreditation Program, The Joint Commission, Oakbrook Terrace, Ill.; Randall Querry, Accreditation Manager, Clinical, American Association for Laboratory Accreditation (A2LA), Frederick, Md.; Robert L. Michel, Editor-in-Chief, The Dark Report, Spicewood, Texas; and Denise Driscoll, MS, MT(ASCP)SBB, Senior Director, Laboratory Accreditation and Regulatory Affairs, College of American Pathologists, Northfield, IL. (Photo by Linda Reineke of Riverview Photography. Copyright: The Dark Report.)
All Medical Laboratories Will Suffer Financial Pain from Medicare Price Cuts
But it is not just community lab companies and rural hospitals that are at risk of financial failure as the Medicare Part B cuts are implemented by CMS on Jan. 1, 2018. Any clinical laboratory serving Medicare patients will experience a meaningful drop in revenue. Many larger hospital and health system laboratories are recasting their financial projections for 2018 to identify how big a drop in revenue they will experience and what cost-cutting strategies will be needed to at least break even on their lab outreach business.
This explains why the first big trend of 2018 will be substantial revenue cuts from the Medicare program. It also explains why the second big trend of 2018 will be smart cost-cutting as labs attempt to balance their books and lower spending proportional to the reduced income they project.
Labs Have a Decade of Successful Cost-Cutting, More Cuts are Difficult
Aggressive cost-cutting, however, puts the nation’s medical laboratories at risk for a different reason. For the past decade, most well-run labs have already harvested the low-hanging fruit from obvious sources of cost reduction. They installed latest-generation automation. They re-engineered workflows using the techniques of Lean, Six Sigma, and process improvement.
During these same years, most medical laboratories also reduced technical staff and trimmed management ranks. That has created two new problems:
- First, there are not enough managers in many labs to both handle the daily flow of work while also tackling specific projects to cut costs and boost productivity. Basically, these labs are already at their management limit, with no excess capacity for their lab managers to initiate and implement cost-cutting projects.
- Second, technical staffs are already working at near peak capacity. Increased use of automation at these labs has reduced lab costs because labs were able to do the same volume of testing with fewer staff. However, the reduced staffs that oversee the lab automation are now working at their own peak capacity. Not only are they highly stressed from the daily routine, they also do not have spare time to devote to new projects designed to further cut costs.
Each Year Will Bring Additional Cuts to Medicare Part B Lab Prices
This is why all clinical laboratories in the United States will find it difficult to deal with the Medicare Part lab test fee cuts that will total $400 million during 2018. And what must be remembered is that, in 2019 and beyond, CMS officials will use the PAMA private payer market price reporting rule to make additional fee cuts. Over 10 years, CMS expects these cuts will reduce spending by $5.4 billion from the current spending level.
Taken collectively, all these factors indicate that many medical laboratories in the United States will not survive these Medicare fee cuts. The basic economics of operating a clinical laboratory say that less volume equals a higher average cost per test and higher volume equals a lower average cost per test.
Medical Labs with Highest Costs Most at Risk of Failure from Price Cuts
What this means in the marketplace is that labs with the highest average cost per test make the least profit margin on a fee-for-service payment. The opposite is true for labs with the lowest average cost per test. They will make a greater profit margin on that same fee-for-service payment.
Carry this fundamental economic principle of medical laboratory operations forward as Medicare Part B lab test fee cuts happen in 2018. Labs with the highest average cost per test will be first to go from a modest profit or break-even to a loss. As noted earlier, the clinical lab sectors that have the highest average cost per test are smaller community labs, along with rural and community hospitals. That is why they will be first to go out of business—whether by sale, bankruptcy, or by simply closing their doors.
Learning How to Cut Lab Costs While Protecting Quality
Every pathologist and lab administrator seeking the right strategies to further cut costs in their lab, while protecting quality and enhancing patient services, will want to consider sending a team from their laboratory to the 11th Annual Lab Quality Confab that takes place in New Orleans on October 24-25, 2018.
Anticipating the greater need for shrewd cost-cutting that also protects the quality of the lab’s testing services, this year’s Lab Quality Confab has lined up more than 51 speakers and 39 sessions. Of particular interest are these extended workshops that come with certifications:
- Lean Six Sigma Yellow Belt Training and Certification, led by Maureen Harte, MT(ASCP), LSSBB, Master Black Belt, of HartePro Consulting.
- Mastering Strategic Leadership in Pursuit of Clinical Lab 2.0, led by Karan Arora, Senior Global Marketing Director, Digital Health, Abbott Laboratories.
- Getting More from Lean for Lab Leaders: Henry Ford Production System Lean Gold Certification, led by Richard J. Zarbo, MD, DMD, System Chairman, Pathology and Laboratory Medicine at Henry Ford Hospital.
Sessions will address proven ways to:
- Use real-time analytics to improve workflow in molecular laboratories;
- Introduce automation in microbiology; as well as
- New breakthroughs in core lab automation; and
- Success stories in reducing lab test utilization.
Lab Quality Confab is recognized for its use of lab case studies—taught by the nation’s early adopter lab organizations. Certification classes are available to gain proficiency in the use of Lean methods and Six Sigma tools, such as:
Given the strong interest in smart ways to cut costs, boost productivity, and balance revenue-versus-cost, registrations for this year’s Lab Quality Confab is running at a record pace. The full agenda can be viewed at this link (or copy this URL and paste into your browser: http://www.labqualityconfab.com/agenda).
Of special interest to lab leaders preparing to stay ahead of the financial impact of the Medicare Part B fee cuts, Lab Quality Confab offers deep discounts for four or more attendees from the same lab organization. This allows your lab’s most effective cost-cutters to see, hear, and learn together, so that when they return they can get a flying start helping you align your lab’s costs to the expected declines in revenue that will happen on Jan. 1, 2018.
Reserve your place today and register now http://www.labqualityconfab.com/register.
—Robert L. Michel, Editor-in-Chief
Related Information:
Information, Agenda, and to Register for Lab Quality Confab Taking Place on October 24-25, 2017
In 2017, to Offset Declining Reimbursement and Shrinking Budgets, Savvy Clinical Laboratories Are Using LEAN to Improve Service and Intelligently Cut Costs
Lean-Six Sigma Medical Laboratories Begin to Innovate in Ways That Add Value to Physicians, Payers, and Patients
An Interview with Robert Michel, Editor-in-Chief of The Dark Report
At Lab Quality Confab in New Orleans this Week, Speakers Addressed Major Issues Faced by Medical Laboratories, including the Need for Labs to Deliver More Diagnostic Value to Physicians
Sep 6, 2017 | Laboratory Management and Operations, Laboratory News, Laboratory Pathology, Managed Care Contracts & Payer Reimbursement, Management & Operations
Challenges getting paid likely to continue as high deductibles make patients responsible for paying much more of their healthcare bills
Rising out-of-pocket costs for healthcare consumers is translating into increasing amounts of red ink for hospitals and healthcare providers struggling to collect bills from patients with high-deductible health plans (HDHPs). Clinical laboratories and pathology groups are unlikely to be immune from these challenges, as increasing numbers of patients with smaller healthcare debts also are failing to pay their bills in full.
That’s according to a recent TransUnion Healthcare analysis of patient data from across the country. It revealed that 99% of hospital bills of $3,000 or more were not paid in full by the end 2016. For bills under $500, more than two-thirds of patients (68%) didn’t pay the full balance by year’s end (an increase from 53% in 2015 and 49% in 2014). The study also revealed that the percentage of patients that have made partial payments toward their hospital bills has fallen dramatically from nearly 90% in 2015 to 77% in 2016.
Increased Patient Responsibility Causing Decrease in Patient Payments
“The shift in healthcare payments has been taking place for well over a decade, but we are seeing more pronounced changes in how hospital bills are paid during just the last few years,” Jonathan Wilk, Principal for Healthcare Revenue Cycle Management at TransUnion (NYSE:TRU), said in a statement.
Millions of Americans are in high-deductible health plans. And, as the graphic above illustrates, that number has been increasing since the ACA was signed into law in 2010. (Graphic copyright: Reuters.)
While the Affordable Care Act (ACA) has increased the number of Americans receiving medical coverage through Medicaid or commercial insurance, TransUnion noted in its statement that hospitals still wrote off roughly $35.7 billion in bad debt in 2015. By 2020, TransUnion predicts that figure will continue to rise, with an estimated 95% of patients unable to pay their healthcare bills in full by the start of the next decade.
“Higher deductibles and the increase in patient responsibility are causing a decrease in patient payments to providers for patient care services rendered. While uncompensated care has declined, it appears to be primarily due to the increased number of individuals with Medicaid and commercial insurance coverage,” John Yount, Vice President for Healthcare Products at TransUnion, said in the TransUnion statement.
Collecting Patients’ Out-of-Pocket Costs Upfront
According to Reuters, hospitals in states that did not expand Medicaid under Obamacare have witnessed a more than 14% increase in unpaid bills as the number of people using health plans with high out-of-pocket costs increased. For hospitals in those states, HDHPs are impacting their bottom lines.
“It feels like a sucker punch,” declared Chief Executive Officer John Henderson of Childress Regional Medical Center, Texas Panhandle Region, in a Bloomberg Business article. “When someone has a really high deductible, effectively they’re still uninsured, and most people in Childress don’t have $5,000 lying around to pay their bills.”
A recent report from payment network InstaMed found that 72% of healthcare providers reported an increase in patient financial responsibility in 2016, a trend that coincides with a rise in the average deductible for a single worker to $1,478, more than double the $735 total in 2010.
In response to the increase in patient responsibility, hospitals and other providers are turning to new tactics for collecting money directly from patients, including estimating patients’ out-of-pocket payments and collecting those amounts upfront.
Hospital Systems Offer Patients Payment Options
Venanzio Arquilla is the Managing Director of the healthcare practice at The Claro Group, a financial management consultancy in Chicago. In an interview with Crain’s Chicago Business, he stated that hospitals are working overtime to get money from patients, particularly at the point of service.
“Hospitals have gotten much more aggressive in trying to collect at time of service, because their ability to collect on self-pay amounts decreases significantly when the patient leaves the building,” Arquilla noted. “You can’t say, ‘Give me your credit card’ to someone in the emergency room bleeding from a gunshot wound, but you can to someone going in for an elective procedure.”
Revenue loss due to unpaid medical bills among states that complied with Medicaid Expansion under the ACA has increase so dramatically, some hospitals are now offering patients prepayment discounts and no-interest loans to ensure payments. Clinical laboratories and anatomic pathology groups should develop strategies to respond to the increase collections from patients at the time of service. (Graphic copyright: Reuters.)
Richard Gundling, a Senior Vice President at the Healthcare Financial Management Association (HFMA), told Kaiser Health News that an estimated 75% of healthcare and hospital systems now ask for payment at the time services are provided. To soften the blow, some healthcare systems are providing patients with a range of payment options, from prepayment discounts to no-interest loans.
Novant Health, headquartered in North Carolina, is among those healthcare systems offering patients new payment strategies. Offering no interest loans to patients has enabled Novant to lower its patient default rate from 32% to 12%.
“To remain financially stable, we had to do something,” April York, Senior Director of Patient Finance at Novant Health, told Reuters. “Patients needed longer to pay. They needed a variety of options.”
Providers Must Adapt to New Patient Procedures
“Doctors need to understand the landscape has changed. A doctor’s primary concern use
to be whether a patient had insurance. Now, it’s the type of insurance,” Devon M. Herrick, PhD, a Senior Fellow at the National Center for Policy Analysis (NCPA) in Dallas, told Medical Economics.
While clinical laboratories and anatomic pathology groups traditionally have not collected money directly from patients, Herrick says healthcare providers must accept that the rules of the game have changed. “Patients are more cost-conscious now. That means patients will question their physicians about costs for procedures,” he adds.
Dark Daily has advised clinical laboratories in the past to develop tools and workflow processes for collecting payments upfront from patients with high-deductible health plans (See, “Growth in High Deductible Health Plans Cause Savvy Clinical Labs and Pathology Groups to Collect Full Payment at Time of Service,” Dark Daily, July 28, 2014). Not doing so can amount to millions of dollars in lost revenue to the medical laboratory industry.
—Andrea Downing Peck
Related Information:
Bad Debt Is the Pain Hospitals Can’t Heal as Patients Don’t Pay
Out of More Pockets
Patients May be the New Payers, But Two in Three Do Not Pay Their Hospital Bills in Full
Feel Like the Hospital Is Shaking You Down Over that Bill? It Probably Is
The Seventh Annual Trends in Healthcare Payments Report Is Here
Doctors and Hospitals Say, ‘Show Me the Money’ before Treating Patients
Ballooning Bills: More US Hospitals Pushing Patients to Pay before Care
Growth in High Deductible Health Plans Cause Savvy Clinical Labs and Pathology Groups to Collect Full Payment at Time of Service
Higher Annual Deductibles and Co-Payments Cause Hospitals to Intensify Efforts to Collect Directly from Patients; Medical Laboratories Now Feel Similar Financial Squeeze
Because of Sizeable Deductibles, More Patients Owe More Money to Clinical Pathology Laboratories, Spurring Labs to Get Smarter about Collecting from Patients
Sep 1, 2017 | Laboratory Management and Operations, Laboratory News, Laboratory Pathology, Laboratory Testing, Managed Care Contracts & Payer Reimbursement
Price transparency trend is altering decision-making in many aspects of healthcare and providing lesson for medical laboratory executives
Medical laboratory executives are well aware that price transparency is an increasingly powerful trend in healthcare. Now, as consumers increasingly opt for lower-cost options when making healthcare decisions, the 2010 Affordable Care Act (ACA) provides a notable example of this new reality, with consumers making cost, not choice, their top concern when selecting health plans through the federal health insurance marketplace exchanges.
A recent New York Times article reported that millions of people purchasing insurance in ACA marketplaces are motivated by how little they can pay in premiums, not the size of the physician and hospital networks, or an insurer’s reputation.
This economic reality may help explain why cost containment is a focus of healthcare reform bills currently under discussion in Congress. Whether you agree or disagree with the American Health Care Act (HR1628), the Republican Party’s plan to repeal and replace the ACA, it should be viewed in this broader context: Healthcare consumers are avoiding higher-priced healthcare plans in droves, and millions of younger Americans are finding the cost of coverage a barrier to entry. This is the challenge facing politicians of both parties, whether they will admit it publicly or not.
Obamacare Enrollee Numbers Dropping
A 2015 report by the Office of the Assistant Secretary for Planning and Evaluation in the Department of Health and Human Services, found that “the premium is the most important factor in consumers’ decision-making when shopping for insurance.” In 2014, 64% of people shopping in the marketplaces choose the lowest cost or second lowest cost plan in their metal tier, while 48% did so in 2015.
Perhaps more significantly, millions of people fewer than expected have enrolled in Obamacare. A CNN Money report noted that 10.3-million people enrolled in an ACA marketplace as of mid-March 2017, down from the 12.2-million who signed up for coverage when enrollment ended on January 31.
Mark T. Bertolini (left), Chief Executive of Aetna, and Joseph R. Swedish (right), Anthem’s Chief Executive, testified before a House committee hearing last fall. Major insurers are struggling to find a business model that works in the marketplaces created by the federal healthcare law. (Caption and photo copyright: New York Times/Jacquelyn Martin/Associated Press.)
Those numbers fall short of recent federal government projections for Obamacare and are dramatically less than original estimates. A 2015 report from Congressional Budget Office (CBO) projected marketplace enrollment would increase to 15-million in 2017, before rising to between 18-million and 19-million people a year from 2018 to 2026.
Shortly after Congress passed the ACA, the CBO projected that by 2016, 32-million people would gain healthcare coverage overall.
As a New York Times article pointed out, not only are young and healthy people selecting the cheapest ACA marketplace plans, but also many are opting to risk tax penalties and go without healthcare coverage.
“The unexpected laser focus on price has contributed to hundreds of millions of dollars in losses among the country’s top insurers, as fewer healthy people than expected have signed up,” the New York Times article noted.
ACA Marketplace Unsustainable, Says Anthem Chief Executive
Healthy younger people were expected to join the ranks of the insured and provide an essential counter balance that would offset insurers’ cost of care for newly insured unhealthy people. That prediction also has failed to materialize, forcing major insurance companies to re-evaluate their role in the marketplace or to exit Obamacare completely.
“The marketplace has been and continues to be unsustainable,” stated Joseph R. Swedish, Chairman, President and Chief Executive of Anthem, a Blue Cross and Blue Shield company, in the New York Times article.
In a CNN Money article, Anthem announced it would not participate in Ohio’s Obamacare exchange in 2018 and added that it was evaluating its participation in all 14 states where it currently offers plans.
“A stable insurance market is dependent on products that create value for consumers through the broad spreading of risk and a known set of conditions upon which rates can be developed,” Anthem stated in a press statement. “Today, planning and pricing for ACA-compliant health plans has become increasingly difficult due to the shrinking individual market as well as continual changes in federal operations, rules, and guidance.”
Inaccurate CBO Predictions Impact Clinical Laboratories and Pathology Groups
Anthem is not the only large insurer losing money selling insurance in the marketplaces. Humana and Aetna also this year scaled back their involvement with Obamacare, with Aetna citing $430-million in losses selling insurance to individuals since January 2014.
“Providing affordable, high-quality healthcare options to consumers is not possible without a balanced risk pool,” Aetna Chairman and CEO Mark T. Bertolini declared in an Aetna statement.
How this plays out may matter a great deal to the nation’s clinical laboratories and anatomic pathology practices. As noted above, in 2010, at the time that the Affordable Care Act was passed, the Congressional Budget Office estimated that as many as 32-million additional people would have health insurance in 2016 because of the ACA. The reality is much different. Less than a third of that number have health insurance policies because of the Affordable Care Act.
Pathologists and medical laboratory managers may want to consider how wrong that 2010 CBO estimate of coverage was. If the CBO’s estimate could be off by 66% in 2016, how reliable are CBO estimates when the federal agency scores the various “repeal and replace” bills that Republicans have proposed during the current Congress?
—Andrea Downing Peck
Related Information:
Federal Subsidies for Health Insurance Coverage for People Under Age 65: 2016 to 2026
Cost, Not Choice, Is Top Concern of Health Insurance Customers
Health Plan Choice and Premiums in the 2016 Health Insurance Marketplace
CBO’s Analysis of the Major Health Care Legislation Enacted in March 2010
Obamacare Enrollment Slides to 10.3 Million
Anthem Statement on Individual Market Participation in Ohio
Aetna to Narrow Individual Public Exchange Participation
