Labs, Pathology Groups Face Reduced Revenue

Law to protect patients from expensive bills will cause added scrutiny to out-of-network claims

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CEO SUMMARY: In recent years, certain clinical laboratories and pathology groups found they can generate more revenue by remaining out of network whenever possible. But when the No Surprises Act goes into effect Jan. 1, labs and pathologists may find advantages in being in network. The law bans certain out-of-network payments if they are higher than in-network charges. For revenue teams at labs and pathology groups, it’s time to review in-network statuses.

COME JAN. 1, THE NO SURPRISES ACT ironically may bring a few shocks to those clinical laboratories and pathology groups that are unprepared for the law’s new out-of-network (OON) billing restrictions. 

Laboratory and pathology revenue teams that haven’t developed strategies to address the consequences of submitting out-of-network claims need to do so quickly. Beginning New Year’s Day, all clinical laboratories and pathology groups will want to be in as many health insurers’ networks as possible to avoid facing penalties from the No Surprises Act, a lab revenue cycle adviser warned.

Congress wrote the No Surprises Act to protect patients from unexpected bills and excessive cost sharing if they receive services outside of their health insurers’ networks. The federal Centers for Medicare and Medicaid Services (CMS) says the bill:

  • Bans out-of-network co-insurance or copayments for services that cause a patient’s cost to be higher than what an in-network provider would charge.
  • Prohibits certain out-of-network charges without advance notice.
  • Requires providers to give good-faith estimates for lab tests for patients without insurance.
  • Establishes an independent dispute resolution process for patients.

Labs need to decide whether the benefits of being in-network for health plans outweigh the lower prices they may be paid for their lab tests. 

“Being in-network means lower prices, but also could protect lab providers from the most onerous requirements of the Act,” says Heather Agostinelli, VP of Strategic Revenue Operations at XIFIN, a technology company in San Diego that helps labs manage revenue cycles.

End of OON Advantages

Some pathology groups have found that being out of network can boost their revenue when compared with what insurers pay labs for being in network. But the No Surprises Act will penalize providers who choose to be out of network.

“Up until now, being out of network meant that labs and pathology groups were getting higher payments from some payers,” Agostinelli said. “That helped offset instances when payers either pushed payment responsibility to the patient via deductibles, or paid the patient directly. Either way, this makes it harder for the lab to get paid. Those higher OON payments helped offset labs when patients didn’t pay their bills.”

The difference between in-network and out-of-network payments can be big. “For pathology groups that are out of network, payment for certain specimen reviews can be two, three, or four times the physician fee schedule,” she added. 

Clinical labs also can get a higher rate from being out of network, but not as high as pathology groups can get, she added. 

Unusual Tests Are Vulnerable

Laboratories and pathology groups that aren’t affiliated with a hospital or healthcare system could struggle financially under the No Surprises Act. 

“For example, labs that are doing a lot of exome or other kinds of genetic sequencing may find that Medicare and Medicaid plans will not pay for those tests,” she warned. “Any tests that payers consider to be exotic in any way could be a problem because there is a lot of payer policy surrounding these tests.

“Some of those unusual tests don’t even exist on the traditional state Medicaid fee schedules,” she added. “If such tests don’t exist on a state Medicaid fee schedule, that means that those tests are not likely to be on the fee schedules of Medicaid managed care plans either.”

Some Labs Could Close

Out-of-network billing has become common among small and regional clinical laboratories, anatomic pathology groups, and other provider organizations that are not part of a hospital or health system, Agostinelli said. 

Some of these laboratories could close because of the financial ramifications of either being forced into lower in-network prices or into billing as patient responsibility, which has a lower collection rate, according to Agostinelli and other clinical laboratory experts. “I don’t expect that it will affect the national labs, but for all labs, contracting and being in-network is the key to success,” she added.

Contact Heather Agostinelli at (858) 793-5700 or hagostinelli@xifin.com.

Large Pathology Group Will Stay In-Network

ONE OF THE NATION’S LARGEST PATHOLOGY GROUPS aims to stay in all health plan networks rather than risk offending patients or running afoul of the No Surprises Act in 2021.

Cory A. Roberts, MD, the President, Chairman, and CEO of the pathology group ProPath, said the group’s aim is to operate exclusively as an in-network provider. 

“That is our goal, and it’s also one of our foundational core values because it shows that we are patient centered,” Roberts said in an interview with The Dark Report. “In my view and in the view of everyone here, being patient centered means doing the right thing for every patient diagnostically, of course. But also, that involves doing everything else right for the patient, including billing. 

ProPath is headquartered in Dallas with 550 employees, including sales and support staff in 11 states. Its 50 pathologists serve as medical directors in 26 Texas hospitals.

“We don’t want any patient to get an exorbitant bill,” he added. “That’s why we’ve always had an in-network strategy. That means we must stay in network here in Texas and in all the other 45 states where we operate. That’s just all part of being patient centered.” 

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