Tennessee BCBS Cuts Lab Fees to 52% of Medicare

Steep lab test fee cut is effective on Jan. 1, but providers are unsure which labs are affected

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CEO SUMMARY: Blue Cross Blue Shield of Tennessee has notified physicians that, starting January 1, it will reduce what it pays for lab testing to 52% of Medicare fees. Officials with the state medical association have been unable to get definitive answers to questions about what tests would be affected. Medicare officials have said consistently that no other payer should get a lower rate than the Medicare program for any service, including lab tests, and this situation raises questions about compliance.

IN THE VOLUNTEER STATE, Blue Cross Blue Shield of Tennessee (BCBST) has sent letters to all physicians announcing that, effective January 1, 2014, it will pay only 52% of the 2013 Medicare price for laboratory tests.

Since that letter was sent in the first week of November, physicians, pathologists, lab directors, and officials with the Tennessee Medical Association have been unable to get definitive answers to questions about which tests would be affected. This situation also raises compliance questions for lab test providers because Medicare officials have said consistently that no other payer should get a lower rate than the Medicare program for any service, including lab testing services.

At the same time, because BCBST is the state’s largest private health insurer, in-office physician labs, clinical laboratories, and anatomic pathologists in Tennessee are wondering if they will be able to survive financially if BCBST cuts all laboratory test prices to just 52% of Medicare rates.

Given the language of the BCBST letter, it was unclear if paying 52% of Medicare would be applied to all clinical laboratory testing or just to a segment.

“Officials from our hospital have met with officials from BCBST over this issue and we have yet to get a straight answer from this insurer,” explained a lab manager who asked not to be named for fear of retribution. “We don’t know if the price cuts are coming on the clinical laboratory fee schedule (CLFS), the physician fee schedule (PFS), or if they will affect all lab tests for inpatient, outpatient, and outreach testing. BCBST is not talking about this situation.”

No Response from BCBST

BCBST is the largest commercial payer in Tennessee. It serves 35% of patients in many rural areas. BCBST officials did not respond to requests for comment from THE DARK REPORT.

Yarnell Beatty, Vice President, Advocacy, for the medical association, said the society’s 8,000 members were concerned about the effect of the price cuts on patient care. After meeting with BCBST on November 11, society officials remained unsure about where the cuts will fall.

“We met with them in November and since then they have changed their stance,” stated Beatty. “Originally the cuts would have covered hospital-based labs but now they have backtracked on that and said the cuts would not affect hospital-based labs.

Uncertainty Over New Policy

“One BCBST official said the cuts would not affect independent labs, but our members have told us they understood the cuts would affect independent labs,” he added. “At the moment, it appears that physician-based labs would be affected but hospital-based labs won’t be cut.”

The Times Free Press of Chattanooga reported that the BCBST announcement does not affect hospitals or independent labs but that it will affect physicians’ in-office laboratories.

In its letter to physicians, Blue Cross Blue Shield of Tennessee said, “Our rates for physician labs are higher than national and local market levels.” To control these costs, BCBST would implement a new rate for currently contracted physician labs effective January 1, 2014, the letter said.

Beatty has three specific concerns about the cuts. “First, our physician members are receiving mixed signals about which labs will be affected and, as a result, they don’t understand the scope of the cuts,” he said. “Second, if the cuts go into effect, the labs will receive much less than what they are getting paid by other payers. However, the association doesn’t know what others are paying and we can’t collect rates from our members because that would be an antitrust violation.

Members Comment On Rates

“Our members who do know market rates, tell us that, if BCBST makes these cuts, it will be paying much lower than what others are paying,” he said. “Yet, BCBST claims these cuts will bring it in line with market rates. Our members should know.

“The third issue about these low lab test srates is that patient care could be affected,” stated Beatty. “It is possible that many patients would be inconvenienced if it turned out that physicians stopped performing lab services because they could not recover their costs. That would be a key impact.”

BCBS of Tennessee May Be Copying Its Medicaid Strategy

LAST YEAR, BLUE CROSS BLUE SHIELD OF TENNESSEE adopted an exclusive contract with Quest Diagnostics Incorporated to serve Medicaid patients.

“In that program, BCBST paid 52% of Medicare rates to labs serving state Medicaid patients,” said a hospital official who asked to remain anonymous. “When BCBST cut what it paid for testing for Medicaid patients, few providers stopped seeing Medicaid patients. Since most providers continued to see Medicaid patients, BCBST may be wanting to try the same strategy on a wide scale beginning January 1.”

Also, there is the example of Blue Cross Blue Shield of Mississippi. In recent years, it cut the amount it pays for clinical laboratory and anatomic pathology tests to 75% of what Medicare pays.

“Another factor that played a role in the reimbursement cuts for testing for Medicaid patients was that BCBST made an exclusive contract with Quest Diagnostics Incorporated,” continued this individual. “This meant no other labs could participate in serving Medicaid patients in Tennessee, even if they were willing to match the price BCBST paid to Quest Diagnostics.”

In September 2012, BCBST sent a letter to physicians in the state saying it was consolidating lab testing with Quest Diagnostics and that all testing for patients in its TennCare program should go to Quest. BCBST made exceptions only for “emergency-room-based lab services and outpatient observation lab services.”

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