CEO SUMMARY: Health insurers appear to have stepped up their efforts to warn clinical laboratories not to waive patients’ fees in return for specimen referrals. Consultants also say that payers are increasing enforcement efforts. There are cases where, when insurers discover labs have not collected fees from patients, they have hit labs with automatic payment reductions. Other insurers have conducted audits months later, then demanded repayment as a result of the audit findings.
ONE TREND GAINING MOMENTUM in the area of managed care contracting is that health insurers are auditing more clinical laboratories that fail to collect all the money due from patients.
“When a payer finds that a clinical lab failed to collect patients’ copayments and deductibles, the payer demands repayment,” stated Rina Wolf, Vice President of Commercialization Strategies, Consulting and Industry Affairs for Xifin, a revenue cycle management company for labs. “Another development related to this issue is that insurers are reducing payments to labs that do not comply with rules to collect such fees from patients.
“For a number of years, managed care companies have warned clinical laboratories not to waive or cap patients’ fees,” she said. “Labs that do not comply may face payment reductions to their billed pricing that reflects what the insurer believes is their capped price. Insurers continually monitor lab websites to determine if a lab has these types of policies. Some insurers are demanding recoupment of the difference between the billed and capped price even years later!
“Payers, including UnitedHealthCare and Cigna, are sending warning letters to clinical labs that notify these labs that they could potentially be guilty of filing false claims,” noted Wolf. “Also, insurers could deny such claims by saying the services are not covered if labs do not follow the insurers’ rules to collect patients’ copayments and deductibles.
Letters from Health Insurers
“In presentations that I’ve done since 2013, I have letters from United, Cigna, and other payers that address the same issue of laboratories that routinely discount or waive patients’ share of costs,” she continued. “The issue of waiving fees is not new.
“Recently we have seen insurers take action, such as the civil cases filed by Aetna and Cigna against Health Diagnostic Laboratory, a now-bankrupt and closed laboratory that had operated in Richmond, Virginia,” noted Wolf. (See TDR, September 14, 2015.)
“In some cases, health insurers are doing audits 12 to 18 months after the date of service,” stated Wolf. “So a lab might think it got its money, but months later the lab learns it won’t get to keep those funds.
“Another problem is that health insurers look at a lab policy of capping the patient share of the lab test cost as, essentially, setting the price for that test,” explained Wolf. “For example, if a lab sent in a claim for $3,000 and the payer knows the lab has a policy stating that the maximum patient share of cost is $300, such a policy means that the lab has effectively reset its price of that test to $300.
Insurers Resetting Rates
“Then the insurers tell those labs, ‘We don’t want to see any more claims from you for anything above $300,’” she continued. “In addition, the insurer seeks recoupment of the difference between $3,000 that it was billed initially and the new ‘reset’ price of $300. In this case, the lab would get a bill from the insurer for $2,700 for each such claim! Plus, the insurer will apply the out-of-network penalty to the reduced amount.
“Labs that get audited can lose out in a big way,” noted Wolf. “These penalties are real. So, when a lab says it doesn’t believe there are any consequences to waiving copayments and deductibles, we can say we have seen what happens with insurers and it’s not good.
“Keep in mind that what patients have had to pay in terms of copayments and deductibles has risen significantly over the past few years,” stated Wolf. “In many cases, that means labs are now collecting a substantial sum from their patients. This is particularly true at the beginning of the year when many patients are responsible for the full payment because they have not yet met their deductibles for the year.
“We’ve had discussions with labs about waiving or capping fees and when we do, we hear from our lab clients that they want to see evidence that a health insurer or federal or state governments have taken action against labs that have these policies,” she continued. “These labs say, ‘Show me the case’ or ‘Show me the fine or the sentence that some lab got.’
Payer Worries: Rising Costs, Waiver of Patient Fees
HEALTH INSURERS ARE INCREASINGLY CONCERNED ABOUT TWO TRENDS regarding clinical laboratory tests: the rising costs of some genetic and biomarker tests, and the policy of some labs to tell physicians it’s okay to waive patients’ copayments and deductibles, stated Consultant Paul von Ebers, President of Prospective Health LLC in Fargo, N.D.
When a test costs $3,000, a patient paying a copayment of 20% would owe $600 at the time of service. “Not collecting that amount from the patient worries health insurers, particularly for genetic and biomarker testing,” stated von Ebers, the former President and CEO of Blue Cross of North Dakota. “These tests are usually expensive, meaning that waiving copays, coinsurance, or deductibles can be a significant factor in whether the patient agrees to pay for the lab test.
“When physicians or labs waive patient payment amounts, they have removed any financial incentive for restraint on the part of the patient or doctor,” he added. “Some genetic testing labs have clearly articulated charity or financial assistance policies to waive patient payments for people in significant financial need. As long as these policies are reasonable and applied consistently, the health insurers are not likely to come after the lab for waiving these payments.
“I’m aware of lawsuits that in the not-too-distant past were filed by Cigna and some Blue plans against hospitals, physicians, labs, and others who have tried to waive patient pay amounts,” he concluded.
“Some lab companies view fee waivers as one way to stay competitive,” she said. “They say, ‘Although this may not make compliance sense, if all my lab competitors waive or cap patient fees and we don’t do it, then we are not going to have a company.’ “That’s why you see some lab companies that absolutely insist on waiving patient fees,” she emphasized. “These labs even go to the extent that they leave materials behind in physicians’ offices and advertise on the web that—no matter what the payer pays—they will hold patients responsible only for $200 or $300 or something in that range.
“The only bona fide way to help manage patients’ share of costs is through a true financial assistance program that’s created and managed compliantly and consistently,” she explained. “Whenever a lab has a patient that gets some form of financial assistance from a lab or pharmaceutical company, it is essential to be able to document that patient’s qualification for financial assistance. In the event of an audit, the lab will need that documentation to show it followed a compliant and consistent policy involving that patient’s fees.”
One important factor when dealing with a health plan is the insurer’s benefit design, stated Paul von Ebers, former President and CEO of BlueCross and BlueShield of North Dakota.
“The ability of insurance companies to recoup payment or impose other penalties will be rooted in either the provider contract or the benefit contract that applies to the member,” explained von Ebers, President of Prospective Health, LLC, in Fargo, ND. “If the provider has a contract with the insurer, that contract may include rules for collecting co-pays, co-insurance and deductibles.
“If the provider is out of network, then no contract exists between the provider and the insurer,” he said. “In these situations, the insurer would look to the benefits contract. This contract might limit what the insurer will pay. Payment then could be limited to no more than the covered benefit portion or the lower of the provider’s normal charge or a fee schedule that applies to out-of-network care.
“In either case, the insurer may be working on an ‘implied charge’ logic,” noted von Ebers. “If the charge to the insurer is $3,000 and the consumer is supposed to pay 20% (or $600), but the co-insurance is waived, the insurer will say: ‘Well, if 20% of your normal charge is equal to zero, then 80% of the normal charge must also be zero.’
“Similarly, if the lab caps the consumer out of pocket at $300, the insurer might argue that if $300 is equal to 20%, then the full normal charge must be $1,500 not $3,000,” he noted. “I have not heard of situations where the insurer has claimed that the total charge is actually $300.
“When a payer does that, then the argument must be that if a provider would charge a patient only $300 regardless of whether the insurer pays anything, then the normal charge must be $300,” emphasized von Eber.
Different List Prices
“In all these cases, the insurer is saying that providers—including labs—can’t have different list prices for different customers,” he added. “A provider can have different negotiated fees, but not different standard prices for different people walking in off the street.
“The other way that a lab could get in trouble would be from violations of false claim acts,” said von Ebers. “If the patient is covered by a benefit plan from any local, state, or federal government entity, and lab bills $3,000 to that benefit plan, but routinely charges others only $300, I think a false claim act case could be made. I am not a lawyer, but I would worry about this situation if I were a lab.”
Contact Rina Wolf at email@example.com or 858-793-5700; Paul von Ebers at 701-306- 1579 or firstname.lastname@example.org.