CEO SUMMARY: All clinical labs required to report their private payer lab test price data are now in the midst of collecting that data. One big change in PAMA reporting is that the federal Centers for Medicare and Medicaid Services now defines most hospital and health system labs as “applicable labs”and requires them to report private payer price data. However, few hospital CEOs are aware of this federal requirement. In 2017, Healthline Laboratory Network reported its data to CMS and now shares its lessons in how to collect complete and accurate price data.
FOR THE SECOND TIME IN THREE YEARS, clinical laboratories defined as “applicable laboratories” under the Protecting Access to Medicare Act of 2014 (PAMA) are collecting data on what private health insurers pay them for lab tests. Once the data are compiled, labs will submit the data next year to the federal Centers for Medicare and Medicaid Services (CMS) on what they’re paid and on the volume of tests they run.
During this data-gathering and reporting cycle, it is essential that hospital laboratory administrators and pathologists—as well as hospital CEOs and CFOs—understand two important features that make this reporting cycle different from what happened during the first PAMA reporting cycle in 2016 and 2017.
First, CMS expanded the definition of applicable laboratories in such a way that most of the nation’s hospitals and health networks are now required to report their private payer lab test price and volume data to CMS. While PAMA has been in place since 2014 and this is the second reporting cycle under the law, it is significant that many hospital CEOs, CFOs, and clinical laboratory administrators remain unaware that the current PAMA final rule requires their organizations to report their labs’ private payer test price and volume data to CMS.
Second, lab industry experts tracking these developments say that the odds are higher this time that CMS will assess penalties against some applicable labs that fail to comply with the requirements to report price and value data accurately. In that first data-collection and reporting period in 2016 and 2017, CMS did not assess penalties against any applicable labs.
Penalties of $10,000 Per Day
The penalties are substantial. Under PAMA, Congress set penalties of as much as $10,000 per day for any applicable laboratory that fails to report or that reports inaccurate or incomplete data.
Thus, hospital and health system laboratories that now meet the definition of applicable labs—but remain unaware of their legal requirement to report their private payer lab test price data to CMS—are at risk for such penalties.
Labs Now Collecting Data
Meanwhile, across the nation, applicable laboratories are collecting those data. The key requirements of this data-collection period are:
- Between Jan. 1 and June 30 of this year, applicable labs must collect the data on the payments and test-volume amounts they get from private (non-public) health insurers.
- Then, the applicable laboratories must submit their price and volume data from this six-month data collection period to CMS in the first quarter of next year (2020).
Clinical laboratories will see a difference in this PAMA private payer price reporting cycle versus what happened in the first cycle, in which applicable labs collected price and volume data from Jan. 1 to June 30, 2016, and reported that data between Jan. 1, 2017 and May 30, 2017.
That difference is how CMS expanded the definition of “applicable laboratories” to include all hospitals that bill for clinical laboratory tests using the Form CMS-1450 14x Type of Bill (TOB) and which bill Medicare more than $12,500 in one year for non-patient laboratory services.
In addition to these differences, there is another issue under PAMA that labs need to know: There is a widespread lack of practical knowledge about how to comply with the PAMA price reporting requirement.
In December, Quest Diagnostics and Modern Healthcare Custom Media reported the results of a survey of hospital executives. It showed that almost 80% of respondents were not at all familiar, or only somewhat familiar, with PAMA and its effect on hospitals. In addition, 45% of hospital executives responded that they were not at all familiar with PAMA and 33% said they were only somewhat familiar with the law.
To help clinical laboratories understand their requirements under the law, officials at CMS have issued documents, guidance, and information to explain PAMA price reporting and how labs must comply.
But government guidance and commentary are carefully crafted to be neutral about how clinical laboratories are to respond to the various requirements in the PAMA final rule. Also, government guidance generally avoids going into detail on those key issues that might be subject to regulatory challenge or litigation in federal courts.
Guidance from CMS
Consequently, applicable labs have many questions about what steps to take to gather private payer lab test price data, then properly analyze and verify the data, package the numbers correctly, and submit these data to CMS. Applicable labs need to know how to comply confidently with the PAMA statute and the final rule of private payer lab price reporting and thus avoid federal penalties.
To understand how one clinical lab faced the challenges of collecting and reporting private payer data under PAMA, The Dark Report interviewed Dean Hoppes, MBA, Chief Financial and Administrative Officer for Health Network Laboratories, in Allentown, Pa. His lab reported its data to CMS during the first PAMA reporting cycle in 2017 and is collecting data now in this second data-collection cycle.
Independent, Regional Lab
Founded in 1983, Health Network Laboratories (HNL) is an independent regional laboratory that does more than eight million billable tests each year, 99% of which it performs in-house. The seven-hospital Lehigh Valley Health Network is one of its chief sources of volume.
HNL has some 1,000 employees throughout the lab system, including 35 board-certified pathologists and scientific directors and more than 400 certified lab scientists and phlebotomists. It operates multiple labs. One is a 100,000 square foot facility in Allentown.
Also, HNL has 60 patient service centers and draw sites in Pennsylvania and in New Jersey. The lab’s clients include physician offices, hospitals, long-term care facilities, employers, and industrial accounts.
“The Lehigh Valley Health Network (LVHN) represents about 50% of our work and the other 50% comes from our outreach program,” Hoppes said. “We’re the exclusive laboratory for LVHN.
“In addition to serving the Lehigh Valley area, we also go out to Central Pennsylvania as far west as Chambersburg,” he noted. “We have one patient service center in New Jersey, along with quite a few clients, including physicians’ offices, hospitals, nursing homes, and long-term care facilities.”
Lessons from 2017 Reports
When HNL submitted its data under PAMA in 2017 during the first reporting cycle, its management team learned important lessons—some painfully. “Just the sheer volume of the data we needed to report made this a major challenge,” admitted Hoppes.
“At the same time, we did have the proper systems in place and a highly-skilled billing staff,” he noted. “These resources helped us work through all the serious issues of collecting the data and reporting those numbers accurately.
“Also, throughout this entire reporting cycle, our clinical laboratory team was aware of the steep federal fines that could result,” he added. “We understood the need to submit complete, accurate data that was documented in the event that officials from CMS might do a detailed review or audit of our data.”
HNL did the job so well in 2017 that Hoppes and the billing staff were fully confident the numbers were accurate and thorough for three reasons:
- HNL worked with XIFIN, a company in San Diego that helps clinical labs improve their billing and collection processes and has assisted its lab clients in complying with PAMA.
- HNL uses electronic billing and payment systems that speed the payment process and improve the accuracy of both claims submitted and payments received from payers.
- HNL has dedicated billing specialists who find and correct errors in payments and ensure that the data are accurate. This team pays close attention to how allowed amounts are reported.
In 2017, HNL’s lab team recognized that a key to collecting and reporting PAMA data smoothly and accurately was its relationship with and use of a third- party billing system, Hoppes said.
“We use the XIFIN billing system, and XIFIN was proactive in recommending ways for us to develop an effective, systematic method to collect the data we needed to report to CMS,” he added.
HNL’s Bank Lends a Hand with Payments
ONE EFFECTIVE METHOD THAT HEALTH NETWORK LABORATORIES uses to speed up the management of payments is by working closely with its bank to handle patients’ payments.
When a patient sends a check to cover a deductible, HNL’s bank will create an electronic remittance for the lab, explained Dean Hoppes, MBA, the lab’s Chief Financial and Administrative Officer.
“Prior to establishing the process, it was a nightmare when the team had to manually post every single patient payment that arrived,” he said. “But now, when a patient sends a check to our lockbox, the bank converts each patient’s remittance statement into an electronic file so that it posts automatically and generates an electronic summary report for our lab.”
This one bank service eliminates almost all of the manual processing of patients’ payments that HLN’s billing staff previously did manually.
Two Years of Experience
“Therefore, during the reporting year of 2017, HNL had the experience of working with XIFIN for almost two years,” stated Hoppes. “This meant that our lab had a history with the XIFIN team, and they had a good understanding of our operation.”
Most of HNL’s private-payer data were collected electronically, but not all. “There were many exclusions that we had to go through, and most of these needed a manual review,” explained Hoppes. “For example, we had to exclude accounts that the payer did not fully adjudicate with a denial or in an appeal. Also, of course, we had to exclude all payments from government sources, such as those from Medicare and Medicaid.
“In addition, our billing team had to exclude all of the payments HNL gets through capitation,” he added. “That’s because those contracts reimburse our lab on a per-member-per-month basis and not with a fee-for-service payment for each individual test.
“All of this work took time in our billing department, where we have about 37 full-time employees,” commented Hoppes. “HNL has a skilled billing team that fully understands all of our insurance contracts down to the individual plan level. That helps when identifying which numbers need to be reported and which do not.
“For example: HNL has a contract with one particular insurance plan in which our lab gets a capitated payment,” he said. “For those payments, we have a specific payer identification number in our billing system. That allows us to isolate any capitated payments based on that ID number.”
Another challenge that all labs face when reporting private-payer data under PAMA is understanding the allowed amounts. “The allowed amount is what health insurers will pay for a test under the contracted arrangement,” said Hoppes. “The payment amount is not used since many patients are responsible for the allowed amounts.”
Most labs know well that many patients today have high-deductible health plans (HDHPs) and thus are responsible for most or all of their medical costs until the annual deductible is met. While these patients are responsible for such payments, many labs have found that patients with HDHPs often pay nothing or a small percentage of their patient portion of the allowed amount.
Payer’s Allowed Amount
Determining the allowed amount can be difficult for any provider, but Health Network Laboratories collects most of its payments electronically—a factor that simplifies the process.
“When a health insurer pays HNL, we get paid with an electronic remittance advice called an EDI 835,” he noted. “This explains what our lab was paid and why.
“One advantage we had in collecting our private payer price data is that we have electronic data interfaces with about 99% of our payers,” commented Hoppes. “Thus, all claims go out electronically. We only send paper claims for a small proportion of our test volume.
“Plus, when the remittance comes back, about 90% of our claims are posted electronically,” he noted. “Those amounts automatically post into our system, based on the explanation of benefits (EOBs). We get the allowed amount from these EOBs.
“If part of the allowed amount is related to a deductible, that amount gets flipped over to be the patient’s responsibility,” he explained.
“Of course, often that patient-responsibility amount becomes bad debt because patients simply default on what they owe our laboratory. In about 10% to 15% of our cases, patients default and so we know we won’t be paid for the full allowed amount the payer showed on the EOB.
Included in PAMA Report
In the PAMA data we submit to CMS, we report the allowed amount,” stated Hoppes. “But we don’t report any amounts if a claim is denied.”
Another key lesson HNL learned during the first data-collection and reporting period is that getting paid electronically improves accuracy significantly.
“Because 90% or more of our payers use electronic remittances, we don’t have to post payments manually from a paper EOB,” Hoppes explained. “That’s a significant advantage because when your lab must do manual interventions, it reduces quality and accuracy.
“If one of our team members posts payments manually, there’s a chance that we could make errors in terms of the allowed amount,” he added. “If the allowed amounts are wrong, that would obviously affect the amounts we report to CMS as being paid.
“As we did in 2017, in this reporting cycle we are using a team approach to gather and validate the data,” he said. “For example, we have a billing analyst in our billing department who helps extract all the data and make sure those numbers are accurate. Our billing analyst works with the cash posters because they see any anomalies that need to be included or excluded.
“Another lesson we learned during the 2017 PAMA reporting period is that not all payers are alike,” emphasized Hoppes. “Each one adjudicates claims differently.
“Some payers will actually allow an amount based on a quantity of tests. But other payers don’t seem to care about quantity,” he noted. “Payers in this second group will assign a quantity of, say, one to a number of tests. When they do that, it drastically changes the allowed amount.
“In these cases, we must be extremely careful because one payment in this manner for a large number of tests could skew the data,” Hoppes advised. “During the 2016-2017 data collection period, our billing analyst was validating payments.
“However, in this current PAMA reporting cycle, we’ll have him work more closely with our cash posters because they’re familiar with the idiosyncrasies of our individual payers and how each one adjudicates claims,” he continued. “The cash posters in our billing department recognize which health plans are tricky in that way and which ones are usually fine.”
Validating the Data
In 2017, before HNL reported the data it collected, the billing analyst and other staff validated the data. “Once we had all the payment data together, we reviewed the allowed amounts based on the quantities the payers used and found discrepancies,” Hoppes explained. “That meant we had to reconcile the payment against the allowed amounts. We know what we billed for each test, and we had to match the billed amount to the quantity and the allowed amount as remitted by each payer.”
During its analysis of the collected data, the billing staff did what any auditor would do—it reviewed a sample of data. “Because we process more than one million claims a year, it would be impossible to validate all those claims,” observed Hoppes. “Instead, we take a sample and then look for anomalies.
“That’s where the cash posters play a valuable role because they know how to spot errors in the EOBs,” he added. “Plus, they know which payers typically code the quantities wrong every time.”
Once the validation was complete during the first PAMA reporting cycle, Hoppes met with the billing staff to assess their comfort level with the accuracy and completeness of the numbers before sending the data to CMS.
“Before we submitted the data, we circled back with the team to ask everybody how comfortable they were with the data,” commented Hoppes. “All the team members said they were confident that the data was as accurate as we could possibly get it.
“Moreover, CMS did not get back to us to ask any questions,” he recalled. “This is why I didn’t have any concerns about the first data reporting and I don’t have concerns for this current PAMA price reporting period either.”
Workshop Teaches How To Report PAMA Data
DURING THIS PAMA PRIVATE PAYER PRICE REPORTING CYCLE, thousands of hospital and health system laboratories are required to report their price data to the federal Centers for Medicare and Medicaid Services. Failure to report can result in penalties of $10,000 per day.
To help hospital CFOs and lab administrators meet this federal reporting requirement, on May 2 there will be a special one-day workshop on PAMA lab price reporting at the Executive War College in New Orleans.
This comprehensive workshop features presentations by CFOs who reported their data in 2017, attorneys knowledgeable about the requirements of PAMA, three billing companies and consultants, and a web session with CMS officials.
Visit www.executivewarcollege.com to register.
Contact Dean Hoppes at 484-425-8151 or firstname.lastname@example.org.