UnitedHealthcare has issued new fee schedules to a number of Texas pathology groups in recent months, raising concerns that a broader effort to lower payment rates could be coming.
The UHC action follows moves over the past year and a half by insurer Anthem to significantly cut payment rates for many pathology practices across the country and fits within a broader and long-term trend of public and private payors putting downward pressure on lab reimbursement.
Joe Saad, chairman of pathology at Dallas-based Methodist Health System said that his practice received a letter this week from UHC laying out its new rates. He did not provide the new pricing but said that the insurer was "proposing a fee schedule that is very significantly different from the one that we had, and obviously much lower."
Saad said that he first heard about the new UHC rates from other Texas pathology practices about a month ago.
The notices have raised alarms among some pathologists as they come in the wake of a wider move by Anthem to introduce lower rates that has played out over the last year.
"Right now, we are really just seeing [the UHC cuts] in Texas," said Ann Lambrix, VP of client relations at lab consulting firm Vachette Pathology. "But I would argue that that is how it started with Anthem. We started see it with some states and then it became a national policy across the board."
Anthem rolled out its first cuts in Missouri in November of 2018 and then introduced cuts to pathology groups in more than a dozen additional states over the next 12 months, including some cuts that represent drops in reimbursement of as much as 70 percent for some providers.
The insurer said that the fee changes were part of an effort to equalize payment rates across facility types.
Insurers have, in many cases, given favorable pricing to smaller independent and hospital labs which typically don't enjoy the efficiencies and volume of large reference labs like Quest Diagnostics and Laboratory Corporation of America.
The Anthem cuts and now the UHC cuts in Texas are "happening to many of what we would call legacy contracts," Lambrix said. "Contracts that have been in place for many, many years." Under many of these contracts, lab providers "get paid really well," she said. "Back in the day we could negotiate 300%, 400% of Medicare."
However, Lambrix said that since then, "reimbursement has been significantly driven down for multiple reasons," including the Protecting Access to Medicare Act and a narrowing of lab networks by private payors.
Anthem is the second largest health insurer in the country with around 40 million covered lives. UHC is the largest, covering around 70 million people.
Saad said that in addition to the UHC situation, his practice was also in the middle of a dispute with Aetna over that insurer's decision to end payments of professional component charges for clinical pathology and a proposed lowering of rates for anatomic pathology.
He said that he believed his group had "reached a reasonable accommodation," with Aetna over that dispute. "It's not great, but I think it's a reasonable accommodation."
He said that UHC had stopped paying for the professional component of clinical pathology years ago but that it had agreed to raise his lab's anatomic pathology rates to compensate. The insurer's recent move, he said, would cut back these anatomic pathology rates.
Matthew Schulze, director, center for public policy, at the American Society for Clinical Pathology said that the organization would likely be writing a letter to UHC to outline its concerns about the payment cuts.
He noted that the UHC notices were coming at a time of particular vulnerability for the lab industry as the SARS-CoV-2 pandemic has significantly reduced test volumes as patients forego non-essential procedures (though volumes have been on the upswing in recent weeks). Anatomic pathology, which both the Anthem and UHC cuts have primarily targeted, has been the lab segment most impacted by the declines in volume.
"You've seen a lot of labs have their revenue just completely shattered because the old mix of what kind of tests you did is just kind of gone because of the loss of elective medical procedures, etc.," Schulze said.
"You saw volume significantly dip [during the pandemic] because the only things the pathologists were seeing were things that were considered emergent care, life threatening," Lambrix said. "It shut down, I would say, 70% to 80% of pathologists' volume."
According to figures from revenue cycle management and lab informatics firm Xifin, pathology has seen a significant bounce back in recent weeks, with routine testing volumes for the company's clients at around 90% of baseline as of June 7, 2020. The Xifin figures indicate, though, that pathology labs have not benefited from SARS-CoV-2 testing, which currently makes up only 5% of volume for these labs compared to half or more of testing for other segments including molecular and pain and toxicology labs.
In April, the College of American Pathologists called on Anthem to reverse the fee schedule cuts that it implemented over the last 16 months, citing the challenges presented by the pandemic.
The Anthem situation provides a look at how Texas pathology labs might confront the proposed UHC cuts and what sort of success they might have.
Lambrix said that while the ultimate outcome in negotiations with Anthem depended on factors like what a lab's previous rates were and what sort of leverage it had given its particular market, she "did not see anyone who was successful in renegotiating a rate that was budget neutral. Some cuts were made."
Some providers managed to get increases over what the insurer initially offered, but the new rates were still "much lower than what they were getting paid in the past," she said.
Historically, labs have used the threat of going out-of-network with an insurer to gain leverage in reimbursement disputes, but Lambrix said that this had not proved very effective in the case of the Anthem cuts.
"Many groups in Ohio just ended up going out of network," she said. In the past, "most times the payor, especially depending on your presence in the market, would come back. They didn't want you to go out of network. In Ohio, that typical negotiation play was not met as it had been in the past. It was, 'Ok, fine, go out of network.'"
Saad said he suspected that such refusals to negotiate, as well as the efforts to introduce lower reimbursement rates, were being driven in part by new balance billing legislation being proposed or passed at the state and federal level. Balance billing can occur when patients use an out-of-network lab for testing.
If the patient's insurer refuse to pay the lab's fee, the lab can then bill the patient directly for the unpaid portion. Because balance billing makes for unhappy insurance customers, labs and other providers have been able to use it as leverage in negotiations.
Recently, though, high profile cases of patients receiving large "surprise" bills have led lawmakers to take up legislation restricting balance billing. Several pieces of surprise billing legislation have been introduced at the federal level, though none have yet become law. This year, new balance billing laws went into effect in Texas that prohibit providers from balance billing patients and require that they settle payment disputes with payors through arbitration.
Saad said the arbitration process is more favorable to labs than other proposed payment dispute mechanisms such as using median in-network rates as a benchmark, but he said it still put small practices at a disadvantage in their negotiations with large insurers. He added that he suspected the timing of the UHC letters were related to the new balance billing regulations.
"What they are trying to do is force the market downward and either force everyone to go in network at their low rates or force arbitration [over out-of-network bills], which we can't afford," he said. "I can't stand up with my practice of nine pathologists to United Healthcare… and their army of lawyers and their army of administrators."
Saad said he had not yet gone through the new arbitration process over a bill, though he noted "that may change if we're forced to go out of network."
While reimbursement cuts are perhaps the most direct way insurers have of forcing labs to accept lower prices, UHC has also been using less direct approaches to influence providers. Last year, for instance, it launched its Preferred Lab Network. While UHC customers can still use labs that are not part of the PLN, the insurer has eliminated out-of-pocket charges for many of its members when they use a PLN member for their lab testing.
This sort of arrangement gives insurers leverage in situations where they might not otherwise have it. For instance, if an insurer came to a major hospital system and told them it was going to drastically cut lab reimbursement rates, the system might be successful in pushing back since the insurer couldn't afford having the dominant provider in that region go out of network. An arrangement like UHC's PLN, on the other hand, allows the insurer to incentivize the system's patients to move to lower-priced testing while avoiding a direct fight over reimbursement it would likely lose.
In reponse to questions about the rate cuts a UHC spokesperson said "we routinely review and update our laboratory fee schedules to ensure the rates are current and competitive."
This story first appeared in our sister publication 360Dx, which provides in-depth coverage of in vitro diagnostics and the clinical lab market.