Critical Access Hospitals Losing Lab Test Work

Rural hospitals across New Hampshire say less laboratory test volume may affect services

CEO SUMMARY: One consequence of a new “site of service” health plan instituted by Anthem Blue Cross and Blue Shield in New Hampshire is that community hospitals—particularly in rural areas—are being asked by patients to collect blood and lab specimens, then send them off to Anthem’s network laboratories. One New Hampshire hospital CEO explains how the site-of-service rules are reducing the clinical capabilities of hospitals in some towns. This dispute is about the higher cost of hospital lab tests versus the discounted prices from independent labs.

IT WAS ON JANUARY 1, 2010, when some hospitals in New Hampshire began to feel the effects of new rules by some private health insurance plans designed to steer members away from hospital labs and toward the payers’ network laboratory companies.

For example, Anthem Blue Cross and Blue Shield in New Hampshire introduced what it calls a new “site of service” benefit option for laboratory testing and ambulatory surgery. (See articles here and here.) When members in this plan use any of the three Anthem network laboratories— Quest Diagnostics Incorporated, Laboratory Corporation of America, and ConVerge Diagnostic Services, LLC—they pay zero out-of-pocket costs.

Should the patient in the site-of-service plan use a non-network hospital laboratory, then a copay is required and deductible requirements must be met. Patients can still use hospital labs but they would pay more to do so, Anthem said.

A number of hospitals in the Granite State are affected by these developments, particularly in rural areas. Michelle McEwen, FACHE, President and CEO of Speare Memorial Hospital in Plymouth, New Hampshire, said Speare has seen a spike in the number of patients who request that the hospital collect their blood and other laboratory specimens, but then direct the hospital to send those specimens to the independent lab companies in Anthem’s network for testing.

Patients Steered Away

“We have seen an increase in the number of patients requesting us to draw their blood and send those lab samples to one of the approved labs,” McEwen said in an email to THE DARK REPORT. “This recent increase is due to the fact that this is the only benefit plan that Anthem offers to its small employer groups and many of our local employers renewed their health insurance benefits on January 1. It is still too early to tell what the full impact of this new benefit option will be. Not only does this plan direct lab patients away from hospitals, it does the same with ambulatory surgery patients.”

“Hospitals may choose to draw specimens if they want to provide this service to their community, and then send these out to an approved network lab for testing and results,” she said. “Reimbursement for doing so is very low and the hospital may incur additional costs to establish the courier services necessary to get the specimens to the appropriate lab.

“The larger issue is on the impact of patient care,” she added. “The hospital is the middle man in this process. We draw the lab specimen and send it out. When patients and physicians are looking for results and turn to the hospital, we can’t help. We are not in the loop to know that the lab received the specimens, or to receive results when that lab testing is done.

“The healthcare industry is moving toward increased integration and coordination of care for purposes of decreasing overall healthcare costs and improving quality,” noted McEwen. “This benefit plan does just the opposite. This product virtually forces patients to seek care outside of their local community, due to the financial penalties involved, and further fragments their care.”

Under Anthem’s site-of-service benefit option, patients pay no out-of-pocket costs when they choose a lower-cost clinical laboratory or ambulatory surgery center that is part of Anthem’s provider network.

High-Volume Carve Out

The 25-bed Speare Memorial is a critical access hospital in the central part of the state between the lakes region and the White Mountain National Forest.

“There are many troubling points with this health insurance product,” McEwen wrote. “As a provider, it is disturbing to negotiate a contract with a large national organization such as Anthem for our full book of services, only to have them subsequently carve out high-volume services and send them elsewhere.

“The discount our institution negotiated with Anthem was based upon the expectation of obtaining a certain volume level, although they will not include these terms in their agreement,” she continued. “Once the deal was sealed, they made arrangements to send the volume elsewhere and still obtain the benefit of the volume discount.

“The funds generated by performing these lab tests are used to support the cost of providing laboratory services to all patients 24/7, including stat labs for emergency patients and inpatients,” McEwen explained. “These funds also help support other services in the hospital where losses are typically incurred, such as the emergency room and obstetric programs.

“While Anthem’s new product is pulling the lucrative outpatient services— such as lab and ambulatory surgery— away from hospitals, they still expect us to provide important urgent, emergency, and inpatient services to their patients without the revenues needed to do so,” she added.

“Anthem was invited to meet with the New Hampshire Critical Access Hospitals to address our concerns with this product offering,” continued McEwen. “We clearly outlined our concerns with regard to the impact this product will have on the sustainability of small rural hospitals and specifically our ability to meet their members’ emergency and inpatient care needs. Anthem did not share our concerns.

“Therefore, they have not offered any alternatives, concessions, or understanding of the issue,” she added. “Collectively we have also approached the New Hampshire Department of Insurance for guidance, but state officials don’t seem to be aware of the product or its impact on access to care in rural areas.

“Collectively we [rural hospitals] have also approached the New Hampshire Department of Insurance for guidance, but state officials don’t seem to be aware of the product or its impact on access to care in rural areas.”

“Anthem indicated that this was a business decision,” McEwen said. “They were simply responding to employer requests for lower premiums while maintaining their profitability.”

It is significant that the CEO of Speare Memorial Hospital wanted to speak out about the range of negative consequences that have surfaced after the “point-of-service” health insurance product was introduced by Anthem Blue Cross and Blue Shield in New Hampshire. As McEwen points out, small hospitals must carefully orchestrate the range of clinical services they provide in order to operate in a financially-sustainable manner.

New Hampshire has 13 critical access hospitals, of which Speare Memorial Hospital is one. Each of these hospitals recognizes a fundamental economic fact about clinical laboratories: an adequate volume of specimens is required in order to support a broad menu of in-house testing at an affordable cost.

Two Benefits for Hospitals

This is why losing access to the outreach and outpatient laboratory testing specimens can directly affect inpatient services at the rural hospital. Those additional volumes of outpatient and outreach lab specimens add the additional volume necessary for the hospital lab to set up and run those tests in-house. This has two benefits for the lab and its parent hospital.

First, it means the rural hospital lab can offer faster turnaround times for these lab tests to inpatients. That is a significant clinical benefit and contributes to better healthcare outcomes and a lower cost- per-healthcare encounter.

Second, access to additional lab specimens from outpatient and outreach settings increases the total volume of specimens flowing through the laboratory. In turn, this generates a lower average cost-per-test for the hospital, including inpatient testing.

Thus, McEwen is correct when she says that the loss of access to outpatient and outreach lab testing specimens does affect the mix of clinical services her hospital can offer. It also undermines the financial sustainability of her institution, since the revenue generated across all clinical services—including laboratory testing—is used to support the institution’s full range of clinical services it offers to physicians and patients in its rural community.

Anthem’s Website Explains $0 Out-of-Pocket Benefit

ON ITS WEBSITE, ANTHEM Blue Cross and Blue Shield in New Hampshire said its “site of service” benefit option lets members pay zero out of pocket.

“By using labs found on Anthem’s Provider Finder, which include all independent labs in New Hampshire and some hospital labs, you will not have a copay for your lab services,” Anthem said.

“You have the choice to use any lab you’d like, however, if you choose a lab not found on Provider Finder, you may be subject to a higher cost share,” Anthem said, adding that independent labs provide the same type and quality of service as hospital outpatient labs.

“If you use one of the labs located on Anthem’s Provider Finder, you pay $0 for services. Whether you need a blood, urine, or strep test, nothing comes out of your pocket. That means no deductible or coinsurance,” Anthem said.

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