CEO SUMMARY: Across the United States, clinical labs, histology labs, and pathology groups are experiencing both a much longer payment cycle for claims and a decreased gross collection rate. Blame can be placed on several trends. One trend is the steady increase in the number of patients with high-deductible health plans. Another trend involves payers implementing detrimental changes to their out-of-network payment policies. Collectively, these facts are making it tougher for labs to get paid.
IT IS A FACT THAT DURING 2014, collecting money is tougher for histology labs, clinical labs, and pathology groups. Labs are not only experiencing a longer payment cycle for their claims, but their gross collection rates for these claims is decreasing.
These two trends were confirmed by executives at McKesson Corporation’s Business Performance Services unit. It provides services in practice management, billing, and collection to more than 374 laboratories and pathology group practices throughout the United States.
Multiple factors are responsible for slower payment and the reduced gross collection rate that many labs and pathology group practices experience. One trend is the substantial increase in the number of patients enrolled in high-deductible health plans (HDHPs).
A related, but distinct trend, is that more health insurance plans require patients to be responsible for a larger portion of the total payment. Consequently, laboratories now spend much more time and resources to collect money directly from patients.
“Clinical labs and pathology groups are receiving lower reimbursement plus they are being paid more slowly than in years past because of the aforementioned factors,” explained Eddie Miller, Vice President of Pathology Operations for McKesson Business Performance Services.
Larger Patient Deductibles
“Clinical labs and pathology groups are seeing the effects of these increased deductibles,” noted Miller. “In some cases, patients are responsible for as much as half of the allowed amount for services rendered,” he noted. “Also, when trying to pay their healthcare bills, it appears that many patients with these higher deductibles are struggling or finding themselves with limited resources.
“Under the exchange plans, there is a range of what the insurers will pay and what individuals will pay,” he stated. “The ACA-mandated exchanges offer Bronze, Silver, Gold, and Platinum health plans. Under the best plans, insurers pay 90% of the costs and individuals or families will pay 10%.
“Other exchange plans within the man- dated ranges are set at an 80/20 split, 70/30 split, or 60/40 split,” said Miller. “Another alarming trend we see with some commercial payers is the offering of plan products that have a 50/50 split.
“Higher patient responsibility means that medical providers will have to go through multiple billing cycles to collect larger amounts of dollars from patients,” he said. “Currently, more patients are opting for HDHP plans that have lower premiums without possibly understanding the impact that the higher co-insurance per- centage (30% or 40% or more) will have. When these high deductibles are not met, then the total allowable amount will shift to the patient.
“The irony is that patients are selecting plans that have the lowest premiums. But those health plans require the highest deductibles” observed Miller. “Patients with such plans are responsible for their deductibles first before the insurer covers the patient’s medical costs.”
Kaiser Health News reported that, during 2014, the maximum out-of-pocket that consumers will pay this year for most plans will be $6,350 for an individual and $12,700 for a family.
Out-Of-Network Pay Changes
Miller identified another trend that is causing slower claims settlement and decreased gross collections for labs throughout the nation. “Most carriers are now changing their reimbursement for out-of-network providers,” he noted. “Historically, out-of- network providers could expect to receive a higher rate than in-network providers that would typically be an allowable of up to 100% of the billed charge. Today, we see a trend of carriers reducing their out-of-net- work benefits to zero.
“All of these factors have the inevitable effect of reducing payments and requiring labs and all healthcare providers to chase patients for a larger percentage of their revenue,” concluded Miller. “In turn, this mandates that revenue cycle managers modify their processes to accommodate the renewed focus on patient collections.”
High-Deductible Health Plan
Percentage of individuals under 65 with private health insurance and enrolled in an HDHP
EARLIER THIS YEAR, the AFLAC Workforces Report was released. According to BenefitsPro.com, responses were gathered from 1,856 benefits decision-makers and 5,209 employees. Of companies surveyed, 56% increased copayments and/or shares of premium between 2013 and 2014.
Of interest to lab executives was the survey findings about the ability of individuals to pay these high deductibles. As reported by BenefitsPro.com, the findings explain why labs are having a tough time collecting high deductibles from patients:
- 53% would use a credit card and/or borrow from their 401(k)s to cover the costs;
- 49% have less than $1,000 on hand to cover out-of-pocket expenses associated with a serious illness or accident;
- 27% have less than $500 on hand to cover those costs;
- 42% say they’re not prepared at all or are not very prepared to pay such out-of- pocket expenses;
- 13% have been contacted by a collection agency about outstanding medical bills.