Potentially increasing the revenue write-off burden for clinical laboratories, HRSA changes, insurance contracting, policy and coverage questions for genetic and genomic testing, and patient relationship disconnects will expose cracks in lab test claim generation and billing processes
Last year it was estimated that collection agencies held $140 billion in unpaid medical bills, in addition to the amount of unpaid bills in pre-collection status, according to a New York Times report. More recently, the American Hospital Association showed that hospitals have provided upwards of $700 billion in uncompensated care since 2000, with over $40 billion in 2019 alone.
Because strategies to collect the unpaid can be complicated and time-consuming, many healthcare organizations, including clinical laboratories, choose to write off these uncollectible bills. Dark Daily and The Dark Report have covered clinical laboratory revenue challenges for many years. In considering the paths forward, software-as-a-service (SaaS) provider FrontRunner Healthcare (FrontRunnerHC) recently provided snapshots into the how and where of improved collections.
Fixing Data Issues that Lead to Forfeited Clinical Laboratory Revenue
The underpinnings of unpaid lab tests are many. In a recent interview with Dark Daily, FrontRunnerHC CEO and Founder John (JD) Donnelly estimated that about one-third of claims (prior to submission) include incorrect or missing patient information, such as insurance policy identification or demographics. These gaps undermine an organization’s ability to get paid. Donnelly estimates that bad-debt write-offs for commercial payer claims average over 15% of charges. To address these challenges, the company’s clean claims SaaS provides “instantaneous” patient insurance, demographic, and financial information.
Whether lower-dollar accessions such as routine testing, or the higher-dollar accessions of genetic tests, uncollected payments add up. Donnelly said that, in 2021, almost one-third of the company’s clients uncovered revenue ranging from $1 million to over $90 million using the software. Donnelly also estimated that the return for clients averages eight times the value of the investment in using the automated solution.
In one example, Sonora Quest, a joint venture between Banner Health and Quest Diagnostics, reported a 10-15% decline in write-offs due to aged claims, a savings of over $1million annually, as published in a case study. “As an aside, in a presentation at the Executive War College last November, they also attributed improvements in patient satisfaction measures to the software, including a 65% decrease in abandoned calls, 28% improvement in their call service factor, and 19% decrease in patient call volumes,” stated Donnelly.
Questions About Cost of Care Likely Cause Stress for Patients
As many know, nonpay issues are problematic not only for lab businesses and anatomic pathology practices but also for patients and their families who have little predictability with their cost of care in the midst of stressful health events. “From the time a patient is registered to the time the claim is paid, there are more challenges than people realize that jeopardize the patient’s experience as well as the provider’s ability to get reimbursed,” Donnelly explained. Medical laboratory administrators have struggled to respond, often by using traditional manual methods such as call centers, or more recently by considering the use of data automation tools.
From the patient payment perspective, Donnelly said, a good strategy is having the ability, on demand, to understand each patient’s specific financial situation and likelihood to pay. For example, using FrontRunnerHC’s software to gauge patients’ propensity to pay and determine financial disposition strategies, lab administrators may choose to offer payment plans or hardship discounts to those falling under the federal poverty level (FPL). Or they may choose to send a collection agency only the past-due accounts for patients who have a low likelihood to pay rather than sending them all past due accounts and focus in-house efforts on the others. One genetics lab client who recently started leveraging these software capabilities “is already seeing more than 5% in incremental net collections,” according to Donnelly.
Further, an estimated 2 million people switch insurance plans each month, reported Axios. “That velocity of change is tough for providers to manage, but it’s critical as insurance eligibility and registration issues are the number one reason for claims denials,” Donnelly said.
For a sense of the magnitude of the problem, “Between 25 and 33 cents of every dollar you spend on medical care pays for health care’s back office,” wrote Dana Miller Ervin in September 2021 for a series of investigations called “The Price We Pay,” published at WFAE 90.7 news in Charlotte, North Carolina. “Every medical provider and laboratory in the country has to negotiate with insurance companies. And since there are 900 health insurers, 6,000 hospitals and more than 100,000 physician practices—many of which are independent of larger systems—there are hundreds of thousands of negotiations.”
New Clinical Laboratory Business Challenges Making News Now
All these issues affecting revenue cycle management (RCM) for independent clinical laboratories, hospital and health system laboratories, and physician office laboratories could be compounded by three emerging issues.
Donnelly said that many lab clients have yet to be reimbursed for COVID tests they have performed, despite their HRSA-required due diligence prior to submitting the claims before the deadline. To avoid additional reimbursement risk, many labs have made the decision to stop testing the uninsured or charge them for it, ABC News reported in late March. As of early April, however, Congress was in discussions to re-fund at least some of the Uninsured Program, reported Politico.
Secondly, and also daunting, are the questions surrounding payer coverage and reimbursement for genetic tests and genomic testing. Thanks to high-deductible health plans (HDHPs), clinical laboratories and anatomic pathology groups increasingly must collect deductibles that may be the full amount of the test – and directly from patients rather than from insurance companies. Therefore, there is more demand from patients to understand their expected cost before the test, Donnelly added.
Problems can arise, for both labs and patients, if they don’t know whether a test has been preauthorized for medical necessity or if they lack accurate insurance information such as in-network or out-of-network. “Getting all the needed and accurate info upfront prior to it going into the LIS [Laboratory Information System] can be a reimbursement game changer,” stated Donnelly.
“For a high complexity, high-throughput diagnostic lab, an efficient workflow is critical,” stated Kyle Koeppler, President of nuCARE Medical Solutions Inc., a FrontRunnerHC client. “Capturing the correct patient demographics and insurance information at patient intake increases the accuracy of every order and makes every process involving patient information much more efficient,” Koeppler shared. “It’s simply too costly to risk having inaccurate information at intake.”
And lest we forget, the Protecting Access to Medicare Act (PAMA) is looming with its reimbursement cuts planned through 2026, and requirements of many labs to report private payer rates on a test-by-test basis. While delayed again, the 2023 PAMA reporting requirements and payment cuts must not be ignored, and planning is needed in order to ensure appropriate reimbursement, Donnelly added.
Addressing Long Payment Cycles for Claims, Dead Ends, and Decreased Collection Rates
The CAQH report cites that data automation resulted in efficiency savings of $122 billion annually for the US healthcare system in 2020 yet “meaningful opportunities for additional savings remain.”
Data automation can reduce the burden of labor-intensive functions in coding, billing, filing appeals, and collecting from payers and patients and, therefore, reduce overall RCM costs. The Council for Affordable Quality Healthcare’s (CAQH) 2020 Index reported, “Considering the millions of times these transactions occur every day, the savings potential across the healthcare economy [from streamlining administrative processes] is significant.”
“One way to avoid potential write-offs is by reworking a claim, but the rework is often left undone,” stated John (JD) Donnelly (above), CEO and Founder of FrontRunnerHC. “The better way to avoid a potential write-off is to ensure you’ve got a clean claim in the first place.” (Photo copyright: FrontRunnerHC.)
The intended outcome is an increase in the total amount of revenue collected from the same number of claims.
To that end, FrontRunnerHC’s software links critical data within its partner ecosystem. This ecosystem includes the well-established credit reporting agencies as well as data available through connected healthcare payers and providers equipped with electronic data interchange (EDI) capabilities. “While an employee may be able to manually work about six accessions in an hour, clients can process approximately 40,000 patients in an hour through software automation, leaving staff to work on more value-added initiatives,” stated Donnelly.
Ideally, missing and inaccurate patient information or insurance verification, which are crucial for producing prompt payments and clean claims, should be corrected before a specimen is collected, Donnelly said. However, if the laboratory is nursing aging accounts receivable (AR), Donnelly advises an audit and cleanup of the AR backlog as a first step to quickly fix information errors and reduce write-offs. “In your AR bucket of $10 million, you may have $3 million that’s collectible or $9.8 million that’s collectible. By leveraging software to clean up what can be collected, clients can go after the money they deserve.”
Improve Collections Through Data Automation While Assisting in the Patient Financial Journey
With the rise of telehealth/telemedicine, healthcare consumerism, and care delivered to nontraditional sites, it makes sense that the idea of the clinical laboratory as a silent partner in healthcare could be changing.
“Could we one day see patients asked for not only their preferred pharmacy but their preferred clinical laboratory as well?” Donnelly pondered and added, “I think the answer is yes, and it’s sooner than many think.”
Understanding the patient’s experience is a key step in providing patient-centered care. Therefore, patient experience programs that originate at clinical laboratories where specimens are processed, but before specimens have been collected, could make these labs more visible in their markets and enable them to capitalize on the advantages of data automation to sustainably improve revenue cycle management.
“The patient’s financial journey which runs in parallel to their clinical journey can get pretty bumpy, and those bumps impact their overall experience as well as the provider’s bottom line,” added Donnelly. “Getting accurate patient information upfront and catching any changes to the information as needed throughout the process helps clients create a smoother patient journey by enabling them to quickly manage through the bumps or eliminate them altogether.”
—Liz Carey
This article was produced in collaboration with FrontRunnerHC.
Employers and consumers continue to pay more for health benefits from one year to the next, continuing a trend that is not auspicious for clinical laboratories and anatomic pathology groups
Most clinical laboratories don’t have the capability to collect payments from patients at time of service the same way patients pay doctors during office visits. Thus, Milliman’s annual report which details the increasing amounts patients are expected to pay out of their own pockets should be of interest to clinical laboratory managers and stakeholders. As this trend accelerates, labs will need to adopt new procedures and technologies to conduct business and remain profitable.
The Milliman Medical Index report (MMI) details how much consumers are predicted to pay for healthcare each year, as compared to previous years. Milliman, a Seattle-based independent actuarial and consulting firm with offices throughout the world, examines healthcare costs, property and casualty insurance, life insurance, financial services, and employee benefits.
Milliman released its first MMI in 2005. That year, the average annual medical cost for a family of four was $12,214.
Both Employees and Employers to See Increase in Healthcare Costs
The 2018 MMI report provides both good and bad news for the healthcare industry and patients. Milliman examined the costs for a typical family of four that participates in an employee-sponsored health insurance plan. For the report, a family of four consists of a 47-year old male, a 37-year old female, and two children under the age of five.
The MMI estimates a family of four will spend an average of $28,166 in healthcare expenditures in 2018. Included in this amount is the cost of the insurance paid by the employers and the employees, deductibles and out-of-pocket expenses. The figure represents an increase of $1,222 from 2017. The report found the amount families have been paying for healthcare has been increasing by an average of $100 per month over the last ten years.
The graphic above, taken from the 2018 Milliman Medical Index report, illustrates the increasing medical costs for a family of four. (Image copyright: Milliman.)
Both employers and employees will see an upsurge in costs from last year with employees experiencing an increase of 5.9% and employers seeing an increase of 3.5%.
The MMI found that employees will pay approximately 44% of their healthcare costs in 2018. By contrast, in 2008 employees paid less than 40% of their healthcare expenditures. In 2018, employers will pay about $15,788 of healthcare costs for a family of four, the employee will pay $7,674 via payroll deductions, with the remaining $4,704 being out-of-pocket expenses.
Costs Increasing While Growth Slows
The MMI also found that while the dollar amount families are spending on healthcare is increasing, the overall pace of the growth is slowing. The 4.5% rate of increase over last year is the slowest percentage growth in 18 years.
“We asked key stakeholders across the healthcare system what might be driving the decline in growth rates,” said Sue Hart, co-author of the MMI, in a Milliman news release. “Several common themes emerged, in particular provider engagement, more effective provider contracting, value-driven plan design, and spillover effects from public program initiatives.”
The reasons cited for this slowing trend include:
Involvement of healthcare providers to reduce costs;
More sophisticated contracting and provider consolidation;
Increased member cost sharing;
High deductible health plans;
Role of government and public programs; and the,
Impact of pharmacy initiatives.
“There are two ways of looking at this year’s MMI,” said Chris Girod, co-author of the Milliman Medical Index, in the news release. “On the one hand it’s heartening to see the rate of healthcare cost increase remain low. On the other hand, we’re still talking about more than $28,000 in total healthcare costs for the typical American family.”
The MMI graphic above breaks down healthcare costs into their constituent categories. (Image copyright: Milliman.)
To explore how costs have grown, the MMI examined five separate components of services. The typical family of four spends:
31% ($8,631) of their healthcare costs on inpatient facility care;
29% ($8,257) on professional services;
19% ($5,395) on outpatient facility care; and,
17% ($4,888) on pharmacy services.
The remaining 4% ($995) of costs are spent on other services, such as:
Home healthcare;
Ambulance services;
Durable medical equipment; and,
Prosthetics.
The MMI measures costs for a typical family of four, but certain families or individuals may have variations in costs depending on such factors as age, gender, health status, geographic area, provider variation, and insurance coverage.
Prescription drug costs is one such variance that is hard to predict. The 2018 MMI determined drug costs for a family of four increased by 6%, which represents the lowest percentage increase since 2015.
“Prescription drug costs have steadied, but this trend is volatile and hard to predict,” said Scott Weltz, co-author of the MMI in the news release. “High-cost drugs can have a big impact on trends, as we witnessed a few years ago when hepatitis C treatments hit the market. Alternatively, point-of-sale rebates could push a consumer’s costs in the other direction, particularly for people taking high-cost drugs. As the environment evolves, changes in drug prices can be deployed quite quickly.”
Scott Waltz (left), Christopher Girod (center), and Susan Hart (right) are Principles, Consulting Actuaries, for Milliman in Seattle. They co-authored the 2018 annual Milliman Medical Index report, which outlines the rising burden of out-of-pocket medical and insurance costs on patients, especially those on high deductible health plans. These costs are increasing and could impact clinical laboratories unprepared to collect fees at time of service. (Photo copyrights: Milliman.)
Preparing to Accept Payments
The results of this year’s MMI illustrate the impact increasing consumer costs could have on the way clinical laboratories conduct business and receive payments for services rendered. Studies have shown that patients with high deductible health plans (HDHPs), who frequently must pay 100% of lab costs, are especially affected by these trends. And the numbers of patients on HDHPs have increased each year since they were enacted.
Many clinical laboratories and anatomic pathology practices do not have the capability to collect fees from patients at the time of service. This lack of preparedness could threaten the survival of those labs and should be addressed.
Healthcare revenue cycle consultant Jonathan Wiik suggests healthcare providers must prepare their organizations for patients who need help paying increasing medical costs
A recent analysis of this issue by TransUnion Healthcare (NYSE:TRU) states, “patients experienced an 11% increase in average out-of-pocket costs during 2017, rising from $1,630 in Q4 2016 to $1,813 in Q4 2017.” It is a development that should send up red flags to clinical laboratory managers seeking ways to maintain and increase revenues.
“Given the increased payment responsibility, being able to determine a patient’s ability to pay is increasingly important for hospitals,” noted Jonathan Wiik, Principal, Healthcare Strategy at TransUnion Healthcare (TRU). “In order to allow patients to focus on getting the care they need healthcare providers need processes and tools in place to help patients meet their financial obligations and to establish funding mechanisms that will benefit both the patient and provider.” Obviously, this also applies to clinical laboratories.
According to a news release, “The [TRU] analysis also revealed that in 2017, on average, 49% of patient out-of-pocket costs per healthcare visit were below $500; 39% were $501-$1,000; and 12% were more than $1,000.”
For providers, patients’ swelling unpaid balances mean more uncompensated care, the analysis also showed. And that means more unpaid balances for clinical laboratories as well.
“Increasing healthcare costs and patient responsibility is a continuing trend that does not seem to be slowing anytime in the near future,” noted Jonathan Wiik (above) Principal, Healthcare Strategy, at TransUnion Healthcare and author of the new book “Healthcare Revolution: The Patient Is the New Payer,” during a HIMSS 2018 presentation. (Photo copyright: Colorado Managed Care Collaborative.)
Patients Struggle to Pay Amounts Under $500
Each year, more healthcare consumers are forced onto high-deductible health plans (HDHPs) that make them responsible for thousands and even tens of thousands of dollars in upfront costs.
And according to another TRU news release, patients with commercial insurance plans experienced a 67% increase in their financial responsibility over five years. In other words, after insurance plans paid providers, patients still needed to pony up 12.2% of the total bill in 2017, as compared to 8% in 2012.
During the most recent year studied by TransUnion Healthcare, patients’ out-of-pocket costs increased 11%, rising to $1,813 in 2017 from $1,630 in 2016, a news release revealed.
And it doesn’t take a huge bill for patients to feel the pain. TransUnion’s data reveals that 68% of patients with medical bills below $500 did not fully pay what they owed, RevCycle Intelligence reported. This has major implications for clinical laboratories and anatomic pathology groups because many lab charges fall under $500 and TransUnion shows that almost 70% of patients do not pay the full amount of these bills.
According to TRU, medical specialties with the highest out-of-pocket estimated amounts due from patients include:
And, as Dark Daily previously reported, affluent and self-employed people also feel the pinch, as deductibles can be as high as $5,000/year for individuals and more than $10,000/year for a families, whether plans are purchased through the Affordable Care Act (ACA) or employers.
When patients cannot afford to pay their bills, hospitals’ bad debt and charity-care levels rise. Together, bad debt and charity care comprise a provider’s uncompensated care.
“A lot of patients can’t afford these bills, which is why uncompensated care has bounced,” Wiik told Modern Healthcare.
Indeed, uncompensated care was $38.3 billion in 2016, up $2.6 billion since 2015, according to an American Hospital Association (AHA) 2017 fact sheet.
Meanwhile, the Centers for Medicare and Medicaid Services (CMS) reported that Medicare bad debt (the effect of Medicare patients not paying deductibles and co-pays) increased to $3.69 billion in 2016 from $3.14 billion in 2012, a 17% bump, TransUnion Healthcare pointed out.
Consumers Say They Want Prices, Financing Plans
Consumers say healthcare providers are not transparent about costs for procedures, nor do they effectively offer financing options. That’s according to a HealthFirst Financial news release, which states, “More than three-quarters, or 77%, of healthcare consumers say it’s important or very important they know their costs before treatment and 53% want to discuss financing options before care. However, the vast majority of healthcare providers are not satisfying these consumer demands.”
“53% voice concern about the ability to pay a medical bill of less than $1,000;
“35% worried about the ability to pay a bill of less than $500; and,
“16% are concerned about the ability to pay a bill of less than $250.”
These numbers fall well into the amounts clinical laboratories charge for services rendered.
What Can Medical Laboratories Do?
To help their customers pay their bills and improve revenue, Dark Daily suggest labs:
Use software that enables ordering clinicians to process advanced beneficiary notices and prior authorizations for services;
Inform the customer prior to specimen collection about their financial responsibility for the test;
Ask for payment-due at time of the patient encounter;
Share key lab test price data in easily accessible and understandable ways;
Keep credit card information securely on-hand for agreed-to balances patients are responsible for paying; and,
Offer payment options, such as e-billing and financing plans.
As we’ve pointed out many times, because clinical laboratories are dependent on the physicians and hospitals they service, they are particularly vulnerable when patients stop paying their bills.
Because many Americans are ‘concerned’ about how they would pay an unexpected medical bill, they now are seeking upfront information about treatment costs and financing options
Clinical laboratories and anatomic pathology groups that depend on reliable sources of patient and test referrals are being impacted by a reduction in patients seeking care due to rising costs. Evidence continues to mount that high deductible health plans (HDHPs) and the overall rising cost of healthcare are straining Americans’ finances. This is causing them to delay payments, question treatment costs, and investigate payment options.
These trends underscore the need for clinical laboratories and pathology groups to have point-of-service collection strategies in place or risk declining revenues.
Study Highlights Increasing Consumer Healthcare Costs
JPMorgan Chase Institute’s Healthcare Out-of-pocket Spending Panel (JPMCI HOSP) recently studied the healthcare cost burden on 2.3-million de-identified Chase checking account holders aged 18 to 64. In a report titled, “Paying Out-of-Pocket: The Healthcare Spending of 2 Million US Families,” Chase noted the following key indicators that predict continued decline in healthcare revenues as patients’ costs increase:
· “A clear correlation exists between timing of healthcare payments and an account-holder’s ability to pay, with the largest payments taking place in the years and months with increased liquid assets. This finding emphasizes the clear link between a family’s financial health and their access to healthcare services. The report found a clear spike in payments during the months of March and April, when nearly 80% of tax filers receive tax refunds.
· “There is significant variation of out-of-pocket expenses among and within states, emphasizing the important role of states in shaping healthcare policy. Colorado families spent the most out of pocket, while families in Louisiana spent the most as a percent of income. California was among the lowest in terms of both raw dollar amounts and payments as a share of income. As part of this report, the JPMorgan Chase Institute has created online data visualization assets to illustrate these disparities and is providing downloadable payment data with information broken down to metro and county levels.
· “Out-of-pocket payments grew each year since 2013, but have remained a stable share of income, also known as “burden.” However, women, low-income families and pre-seniors are bearing the highest cost burden. The finding merits further study to establish whether these higher payments represent broader healthcare utilization or a clear expense burden for populations that can afford it the least.
· “Families that are in the top 10% of healthcare spend in a given year tend to remain the highest spenders on a year-over-year basis, emphasizing the substantial cost of chronic conditions and long-term healthcare needs.
· “Doctor, dental, and hospital payments accounted for more than half of out-of-pocket payments. While doctor payments accounted for the greatest volume of expenditures, dental and hospital payments were much more significant in terms of expense.”
In a news release, Diana Farrell, President and CEO, JPMorgan Chase Institute points out that, “The reality is that many American families don’t have the cash buffer to withstand the volatility created by out-of-pocket healthcare payments, and we need to better understand the correlation between financial health and physical health.”
The JPMorgan Chase Institute report, released September 19, 2017, came on the heels of the Kaiser Family Foundation (KFF)/Health Research and Education Trust (HRET) 2017 Employer Health Benefits Survey. This annual benchmark survey indicates workers on average now contribute $5,714 annually toward their family premiums, which average $18,764, and that employees at firms with fewer than 200 workers contribute as much as $6,814 on average.
The findings of this survey will be useful for those clinical laboratories and anatomic pathology groups developing business and clinical strategies to serve the growing numbers of patients who are covered by high-deductible health plans. The KFF/HRET survey highlighted the impact growth of HDHPs is having on workers:
· 81% of covered workers were in plans with an annual deductible, up from 59% in 2007 and 72% in 2012;
· The average deductible amounts for workers with employer-based coverage also is increasing steadily, rising from $616 in 2007 to $1,505 in 2017.
A JPMorgan Chase Institute study of family healthcare spending (not including premium payments) shows out-of-pocket costs varied widely in the US in 2016, both across and within states. Average spending ranged from a low of $596/year (California) to a high of $916/year (Colorado) in the 23 states where there are Chase retail banking branches. (Photo copyright: JPMorgan Chase Institute/Business Insider.)
Jay Bhatt, DO, President of KFF/HRET, and Senior Vice President and Chief Medical Officer at the American Hospital Association, notes that while some cost increases appear to be slowing, policymakers should continue seeking ways to reduce the burden on healthcare consumers.
“This year’s findings continue a positive run of a slowing in premium increases and in the growth of healthcare costs overall,” Bhatt states in a KFF news release. “As policymakers and providers continue to work to improve healthcare, ensuring it remains affordable and accessible is critically important.”
Importance of Providing Pricing and Payment Options
These results help explain why 42% of respondents to HealthFirst Financial’s Patient Survey stated they are “very concerned” or “concerned” about whether they could pay out-of-pocket medical expenses during the next two years. For example:
· More than half (53%) of those surveyed were concerned about how to pay a medical bill of less than $1,000;
· 35% indicated they would find paying a bill less than $500 difficult; and,
· 16% were worried about paying a bill less than $250.
Such financial worries will likely impact revenues at clinical laboratories as well as medical doctor’s offices. They also explain why 77% of healthcare consumers who participated in the HealthFirst Financial survey responded that it’s “important” or “very important” to know their costs before treatment.
Additionally, 53% of those surveyed want to discuss financing options before receiving care. However, according to the survey, just 18% of providers discussed payment options.
The study also found 40% of millennials would likely switch to a different provider offering low- or zero-interest financing for medical bills.
“These findings highlight a huge gap in what patients want and what hospitals, medical groups, and other healthcare providers are delivering,” KaLynn Gates, JD, President and Corporate Counsel of HealthFirst Financial, said in a news release. “Providers that care for the financial as well as clinical needs of their communities are much more likely to thrive in this era of rising out-of-pocket costs and growing competition for patients among traditional and non-traditional providers.”
Clinical Laboratories and Anatomic Pathology Groups Are Particularly Challenged
In “Hospitals, Pathology Groups, Clinical Labs Struggling to Collect Payments from Patients with High-Deductible Health Plans,” Dark Daily reported that clinical laboratories and pathology groups face particular challenges because, as patients become responsible for more of their healthcare bills, many labs are not prepared for collecting full payments from patients on HDHPs. Nor are they prepared for reduction in test ordering, as patients opt to not follow through with prescribed tests and treatments to save money.
These recent reports are another strong indicator of how critical it is for medical laboratories and pathology groups to develop tools and workflow processes for collecting payments upfront from patients with HDHPs.
Push to expand the reach of health savings plans should help consumers pay for out-of-pocket medical laboratory services and other healthcare expenses
High-deductible health plans (HDHPs) continue to impact hospitals, clinical laboratories, and anatomic pathology groups due to the strain they put on healthcare consumers who struggle to pay their medical bills. Even worse, studies show patients are skipping doctor visits and scheduled medical laboratory tests to avoid paying the full costs of the visits. That’s why the market for Health Savings Accounts (HSAs) has grown in popularity. HSAs enable patients to take control of their healthcare and plan for the inevitable bills.
And grown it has! As of June 30, there were more than 21 million HSAs in the United States, with holdings of about $43 billion in assets. That’s according to a survey by Devenir, a healthcare account investment advisory and research firm. By the end of 2019, Devenir projects the HSA market will exceed $60 billion in assets held in nearly 30 million accounts.
This steep growth curve in HSA accounts is good news for medical laboratories and pathology groups because it indicates consumers are taking advantage of these tax-advantaged savings accounts to set aside funds needed to pay their high-deductible health bills.
HSAs Help Both Patients and Provider, including Medical Laboratories
According to the survey Devenir conducted in July 2017, which primarily reflected data from the largest 100 HSA providers, the typical HSA investment account holder has a $15,146 average total balance in deposits and investments.
“We continue to see impressive HSA growth, especially amongst those HSA assets held in investments as consumers begin to understand how HSAs can help them save for both their current and future healthcare expenses,” noted Jon Robb, Devenir Senior Vice President of Research and Technology, in a statement.
Under current law, HSA accounts must be paired with an HDHP. For 2017, the IRS has defined “high deductible” as any deductible higher than $1,300 for an individual or $2,600 for a family, so a health insurance plan must meet that threshold for a consumer to qualify for an HSA. In addition, annual contributions are capped at $3,400 individuals or $6,750 for families. Those over 55 can contribute an extra $1,000.
Devenir’s study, which drew on data from the period ending June 30, 2017, illustrates the steep growth in HSAs since 2006, and projects the growth to continue well into the decade. (Image copyright: Devenir.)
But a boom in HSA accounts may be on the horizon if Republicans succeed in replacing Obamacare. Provisions of the GOP-backed American Health Care Act (AHCA), which stalled this summer after passing by a narrow vote in the House of Representatives, would nearly double HSA contribution limits and introduce other changes that would spur growth.
“Whatever direction healthcare reform goes, it is clear that the HSA will be a key component of consumers’ financial decisions in healthcare,” wrote Steve Christenson, Executive Vice President at Ascensus, in 401K Specialist. “After all, HSAs and HDHPs were market-driven prior to the enactment of the ACA and continued to be with its passage. The economy will continue to drive this trend as employers seek to attract and retain employees in this tight job market.”
HSA contributions can be invested and grow tax free as long as withdrawals are used for qualified medical expenses. Because accounts move with healthcare consumers if they change jobs or insurers, HSAs are viewed as excellent investment options.
HSAs Great Opportunity for Elderly to Control Their Healthcare
Even if Republicans fail to revamp healthcare, HSA industry leaders are expected to continue to look for ways to expand into additional markets. According to a Kaiser Health News article, companies that manage HSA accounts are “eager to reach new markets, including baby boomers in Medicare and enrollees in the military’s Tricare system, for whom—under current law—HSAs are off-limits.”
Eric Remjeske, President and co-founder of Devenir, believes those over 65 would seize upon an opportunity to use an HSA account to help offset Medicare’s cost sharing expenses.
“That is a great population that has the potential to save and really take more control over their healthcare,” Remjeske told Kaiser Health News.
Industry officials are confident HSAs will continue their upward trajectory, attracting new customers and additional healthcare dollars.
“The political and economic winds are favorable and most definitely pushing HSAs,” Kevin Robertson, Senior Vice President and Chief Revenue Officer for HSA Bank, the industry’s third-largest company, told Kaiser Health News.
What’s good for the HSA industry also may prove to be good for medical laboratories. If more healthcare consumers turn to HSAs to pay their out-of-pocket medical costs, including clinical laboratory services, the fear that increased enrollment in high-deductible plans will cause a reduction in the utilization of clinical lab tests may prove to be unfounded.
