As U.S. health care costs continue to escalate nationwide, an important but often overlooked portion of those costs—along with insurance coverage issues—deserves to be examined: fees for clinical laboratory tests and other ancillary medical services, such as radiological imaging, physical therapy and outpatient surgical procedures.
All of the above services, when provided by accredited facilities—whether hospital-affiliated or not—are essentially the same. Regardless, there is a wide disparity in costs between services delivered by independent providers and those delivered by hospital-affiliated facilities. For example, a 2011 analysis of lab charges in Rhode Island (East Side Clinical Laboratory’s home state) shows that an independent clinical lab charged $33 for a complete blood count vs. a hospital-affiliated lab’s charge of $45, and:
• $53 for a comprehensive metabolic panel—which includes 14 basic chemistry tests—vs. $474.
• $52 for a thyroid-stimulating hormone test vs. $87.
• $52 for a prostate-specific antigen test vs. $66.
• $21 for a urinalysis vs. $40.
Consequently, the hospital-affiliated facilities receive higher per-service reimbursements from insurance companies. Moreover, hospitals receive their reimbursements at higher rates on charges than independent providers—an average of 70 percent vs. an average of just 40 percent.
Rising insurance reimbursements contribute to increasing premiums that employees and employers must pay—with increases of 7 percent to 12 percent for company plans approved by the insurance commissioner of Rhode Island for 2011. Moreover, these increases are for policies that typically offer low coverage levels and require high deductibles (and higher yet for many small-business plans).
Higher deductibles—resulting from the proliferation of more-affordable, lower-premium insurance plans—mean employees are paying, out of their pockets, increasingly larger portions of the costs of their ancillary services. This is an inherently complicated, confusing and exasperating situation for many employees as well as their employers but one that can be improved through education.
Insurance companies are not necessarily providing this education. Nor are all health care professionals and institutions. To its credit, the Rhode Island Department of Health attempted to help by requesting that all clinical laboratories submit their charge lists for publication on its departmental website to make comparative information available to the public. Unfortunately, most of the hospitals did not reply and the effort failed. In light of these challenges, it is critically important that HR and benefits managers take up the slack and assume some responsibility for this worthy mission.
Elements of an Employee Education Program
The goal of this educational effort is to ensure that employees and their families understand the way insurance coverage works and possess the knowledge and tools to take greater control over the cost of their clinical lab and other ancillary services. Collectively, this effort would help to slow the overall cost of health care.
Specifically, employees need to understand:
• Why, fundamentally, there is a disparity between the cost of services provided by independent facilities and the cost of comparable services provided by hospital-owned or -affiliated facilities, because hospitals have higher overhead or operating costs (at least when services are provided under the hospital’s roof and not at a separate, commercial “outreach” site in the community).
• How those costs are passed on to insurance companies in the form of higher reimbursement payments.
• That those costs ultimately are passed on to the employer and then to the employee in the form of higher premiums, co-payments and deductibles. In regard to deductibles, it is noteworthy that in April 2011, Blue Cross/Blue Shield of Rhode Island ceased offering a policy without a deductible when sold to groups of 50 or less, which constitute the majority of group plans in the state. This might be taking place in other states as well.
• How lower reimbursement payments to independent providers will help the bottom line of insurance companies and, ideally, help rein in the increases of group-plan premiums and deductibles.
• That using lower-cost health care service providers positively impacts the employees' deductible expenses by ensuring that they pay less out of pocket and possibly never have to “work off” the entire deductible amount in a given year.
• That covered employees can, at any time, exercise their right to choose their providers of clinical lab, imaging, physical therapy and other services by reviewing the options, comparing them and discussing them with their physicians and other health care providers as well as with their company’s HR and benefits managers.
• That employees can reduce their health care costs in other proactive ways, such as by participating in programs to sustain wellness and manage chronic conditions.
• How personal cost-efficiencies—beginning with the selection of low-cost independent service providers—can have a beneficial impact not only on personal health care costs but also on the organization's overall health care costs, with potential systemwide savings of millions of dollars annually.
Delivering Critical Information to the Workforce
Communications vehicles for conveying this information to employees could include:
• Display of pamphlets—especially from government health, labor and insurance departments and leading organizations devoted to the diagnosis and treatment of specific diseases—in the company’s offices, elevators, corridors and cafeterias.
• Postings on the employee-only section of the company’s website, with links to other useful sites.
• Inclusion or expansion in the employee handbook or manual.
• Lunchtime forums conducted jointly by representatives of employers, unions and/or employee organizations (if appropriate), insurance companies, health care institutions, and local and state government agencies.
This is a logical, straightforward and achievable educational program that HR and employee benefits managers can easily undertake, individually or in concert with their professional associations. It is a program they should undertake—in fact, expedite—to help ensure the physical, emotional and financial well-being of their employees and families.
Gary W. Sammarco is president, and Harold R. Caldarone is senior vice president of marketing, at East Side Clinical Laboratory, Inc. (East Providence, R.I.), a fully accredited, independent, medical testing company with more than 50 geographically dispersed patient service centers in Rhode Island and southeastern Massachusetts.
Health Care Consumerism Needs Transparent Cost, Quality Data, SHRM Online Benefits Discipline, April 2011
Information, Incentives Drive Behavioral Change, Cost Savings, SHRM Online Benefits Discipline, April 2011
Most Still Uninformed About Prescription Drug Costs, SHRM Online Benefits Discipline, December 2010
Health Care 'Transparency': Advances Noted; Work Remains, SHRM Online Benefits Discipline, October 2007
SHRM Online Benefits DisciplineSHRM Online Health Care Reform Resource Page