Humana Reduces Number of Labs in its Networks

Lab directors also report that some payers require copays from Medicare Advantage patients

CEO SUMMARY: In Ohio, a lab director said his lab was not informed directly about its exclusion from the Humana lab network. Lab officials got the word from their client physicians. In Texas, another lab director said Humana cut 35 lab contracts, reportedly because the insurer wanted to steer more test volume to its preferred national labs. In a related development, some payers are requiring their Medicare Advantage patients to pay copays for lab testing, a move that financially benefits the health insurers.

ANOTHER NATIONAL HEALTH INSURER has taken steps to narrow its network of laboratory providers. Physicians in Ohio report getting letters this summer from Humana, Inc., informing them that they could use only two national companies for clinical laboratory testing. Those two labs were Laboratory Corporation of America and Quest Diagnostics Incorporated.

Lab executives told THE DARK REPORT that Humana has taken steps to eliminate labs in other states from its lab provider network. “Humana terminated 35 contracts across the nation—not because they weren’t providing valued service or good patient care—but because Humana was trying to steer the volume to the national labs in order to keep spending at a certain level,” said one lab director in Texas who declined to be identified.

“This is what we heard from our own sales staff and others in the industry,” he added. “Even though our rates are as low as those of the national labs, Humana still terminated us from their network because they wanted to steer a larger volume of business to their national labs to keep their rates from increasing with LabCorp or Quest Diagnostics.”

A lab director in Ohio, who also asked not to be named, said no other labs besides Quest and LabCorp were allowed to serve Humana members in that state. “The letter Humana sent to physicians was dated June 30 and effective immediately,” the lab director said. “And we got no letter or any form of notice from the insurer. Humana sent it only to our physicians. We had to hear about it from them.”

Goal Is to Spend Less

The lab directors said they asked Humana’s lab contracting officials about why the labs were eliminated. They were told the decisions were made strictly to steer volume to the large national labs. “We even asked whether our proprietary tests might be included as a payable benefit and the Humana officials told us the decision had nothing to do with proprietary tests,” the Ohio lab director reported

For the Ohio lab director, the termination came with no notification and no transition. “I called Humana to ask about it and didn’t get very far,” the lab director said. “Humana simply sent a letter to physicians and said the change was effective immediately. Any lab director will tell you a transition period is needed. And, our contract calls for at least 30 days’ notice before the end date. But Humana did not do this.

“Plus, we wanted to know if our lab was being eliminated from all Humana plans or just some of the plans,” he continued. “These issues were never addressed. That left patients and their physicians to figure out how they could get lab testing done.”

In Ohio, Humana has a significant presence, particularly in Medicare Advantage plans, the lab director said. “Losing this Humana contract is a big deal for our lab,” he noted. “I estimate that it’s about 10% of our overall revenue, which is a lot.

Making Co-Pays Work

“And, about 7% to 8% of that 10% is in the nursing home business,” he continued. “We know Quest and LabCorp don’t want to do that nursing home work.

“So, now what do we tell our client nursing homes, given the changes Humana made?” he asked. “We must now explain to patients that our lab cannot do their lab work and that they may need to get other labs to do their lab work and possibly wait several days to get their lab test results. Or, the nursing home operators may have to take their patients to the nearest hospital.”

Another lab director explained that, in many communities, physicians serving nursing homes order lab tests on patients early in the day and often need to get results later the same day. Fast turnaround time allows them to adjust their patients’ medications if needed. Having same-day lab test results allows them to diagnose medical conditions or identify other patient needs.

“If a large lab must assume nursing home contracts, the turnaround time for lab test results often goes from one day to two to three days,” she said.

“Other service issues develop that negatively affect patient care,” he commented. “For example, in our region, we don’t see Quest Diagnostics and LabCorp sending out phlebotomists at 3:00 AM to collect blood and urine specimens from nursing home patients. That’s the only way we know that makes it possible for a lab to get the test results back to the nursing homes later the same day.”

Making Co-Pays Work

Lab executives and clinical lab directors identified another strategy health plans are using this year. This strategy is designed to take advantage of the rapid growth in enrollment in Medicare Advantage plans and creates a financial opportunity that some payers seek to exploit. (See sidebar on enrollment growth in Medicare Advantage plans.)

A managed care contracting executive for a regional laboratory told THE DARK REPORT that some health insurers are requiring patients enrolled in Medicare Advantage plans to pay copayments for laboratory tests as a way to increase profit.

“Under traditional Medicare, lab services are covered at 100%,” said the executive, who asked not to be named. “Under Medicare Part B, there is no copayment or out-of-pocket costs for clinical lab tests.

“Traditionally, labs must accept what the government pays for these lab tests, and no balance billing is allowed,” the lab executive noted. “Plus, Medicare pays electronically within 14 days and no bill goes to the patient. There’s no follow-up needed by the lab unless something goes wrong. Up until January, when it came to lab testing, most Medicare Advantage plans were operated in much the same way and any copays were very low. At least, that was the case here in Ohio.

UnitedHealthcare was the first payer to require a lab test copayment for patients enrolled in its Medicare Advantage plans,” stated the lab executive. “This copayment is between $10 to $25.

“Requiring a Medicare Advantage patient to make a copayment for lab tests can generate substantial revenue to the health insurer,” he continued. “For example, many Medicare Advantage patients need to have their prothrombin time (PT) tested to see how long it takes their blood to clot.

“These patients are on a blood thinner, usually warfarin, and this year these tests cost $5.37 for our lab to run,” the lab executive explained. “Now some—but not all—Medicare Advantage patients must meet a deductible or may have to pay copayments to the lab of $10 to $25. And by law, we cannot waive that copayment.

“When the Medicare patients heard they had to pay this copayment for their lab tests, they were upset,” he said. “They complained to us because, as Medicare patients, they were not previously required to pay anything out of pocket for a lab test. Now they’re paying $25!

“The health insurer directly benefits from this arrangement,” the lab executive added. “Each time the Medicare Advantage patient’s copayment is above the cost of the lab test, the health plan does not need to pay the lab for the test because the patient is paying for the entire cost. Therefore, the health plan saves money on these low-cost and high-volume tests.”

Looking Ahead

Despite the challenges of being excluded from the Humana contract, another Ohio lab director was optimistic about the future. “For 20 years, private payers have tried to put us out of business. It hasn’t worked yet and it isn’t going to work now because of the value we deliver to physicians in our community.

“Exclusionary deals are not new from health plans,” she concluded. “But Humana’s action to exclude our lab from its network is new. Going forward, we must be more diligent with innovation so we can deliver lab test services that make a difference for physicians and patients.”

Local Labs Losing Access to Medicare Advantage

Local labs losing access 10-13-14

NOT ONLY ARE LOCAL LABORATORIES being eliminated from the networks of many national and regional payers, but they are losing access to a growing proportion of Medicare patients because of the increase in the number of Medicare beneficiaries choosing to enroll in Medicare Advantage.

Health insurers offering Medicare Advantage plans are contracting almost exclusively with national laboratories in order to obtain rock bottom prices for lab tests. This excludes local labs as providers.

At the same time, seniors are enrolling in Medicare Advantage plans at a remarkable pace. Kaiser Family Foundation reports that Medicare Advantage enrollment topped 15.7 million people in 2014. This is 30% of all Medicare beneficiaries and represents three-fold growth in just 10 years! (Enrollment in 2004 was 5.3 million people).

These two factors, when combined, mean that community laboratories do not have access to one-third of Medicare beneficiaries. If existing trends continue into future years, an even larger proportion of Medicare beneficiaries will be enrolled in Medicare Advantage plans—and local labs are not guaranteed access to service these beneficiaries.

Local and regional laboratories and pathology groups will want to recognize these trends in their strategic business planning. In particular, they should develop high value-added lab testing services that much larger lab companies cannot match.


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