Anthem Makes Offer Indiana’s Hospital Labs Apparently Can’t Refuse

Anthem Blue Cross Blue Shield of Indiana has introduced a hospital reference laboratory network with uniform prices for patients, a move stirring concern that it could dramatically ratchet down reimbursements for laboratories elsewhere in the country. Anthem introduced the network in March, saying its impetus was a study released last year showing vast differences in pricing among hospital labs in California, where one lab might charge $10 for an assay for which another lab would charge $10,000. In a statement issued by the health plan, it said a test that may have cost $400 at an out-of-network laboratory would cost as little as $45 for a patient picking one of the reference labs, reducing their out-of-pocket costs from as much as $120 to $4.50. “Members have many choices when it comes to getting lab work done,” David Lee, M.D., vice president of provider solutions for Anthem Blue Cross and Blue Shield, said in a statement. “But they probably aren’t aware that some options may be significantly more cost effective. That’s the reason for our new reference lab network.” That Anthem is reorganizing its lab network in the Hoosier State could be seen as discomfiting news for hospital labs nationwide. A combination of factors, including state and federal regulations and greater negotiating leverage, often means that hospital labs are paid significantly more for performing the same test than standalone laboratories. The health plan and one of the new network’s participants, the Indiana University Health System (IU), positioned the change as a gain for consumers. “Joining the Anthem reference lab network assures both physicians and patients that there is easy access to the high quality IU Health lab services they have come to expect,” said Harold Berfiend, IU Health’s vice president of pricing and contracting, in a statement. “More patients are taking an interest in managing their healthcare dollars and services. This is another step toward transparency for consumers and physicians.” But Anthem—which operates plans in 14 states—and IU Health were both conspicuously quiet about how the new network would function and plans for future expansion. An Anthem spokesperson said Lee was unavailable and did not respond to a request seeking more details. An IU Health System spokesperson declined comment after written questions were submitted by Laboratory Industry Report. According to the Indianapolis Business Journal, 63 hospital labs are participating in the network. They have agreed to cut their rates for bloodwork and biopsies by between 50 and 80 percent. The publication said it is was a reduction “nearly unheard of” and suggested the hospitals were made a “Godfather”-like offer that they can’t refuse. Mark Birenbaum, administrator of the National Independent Laboratory Association, noted that some hospital labs are paid five to 10 times what commercial labs receive for the same work. He added that the response by Anthem is logical given the stark differences in reimbursement. “With these high-deductible health plans a lot of patients now have, many of them are just going to other labs directly and paying out of pocket,” he said. However, Birenbaum said such a shift could create dramatic downward pressures on Medicare prices after 2017, when the Protecting Access to Medicare Act (PAMA) goes into effect. PAMA dictates that Medicare’s reimbursement rates to labs would be based on commercial rates. Birenbaum expects Anthem to roll out new hospital lab networks to other states. “That is going to drive down the PAMA rate even further, and that could hurt everybody,” he said. Takeaway: Anthem is introducing a new reference lab network that could dramatically alter how much hospital labs are paid for services.