Hospital Proposal Provides Labs With New Opportunities to Be Value Partners

Clinical laboratories may have new opportunities to partner with and provide added value to hospitals under a new Medicare proposal for hospital inpatients. On April 30, the Centers for Medicare and Medicaid Services (CMS) issued a proposed rule that would update fiscal year (FY) 2015 Medicare payment policies and rates for inpatient stays at general acute-care and long-term care hospitals. The rule was published in the May 2 Federal Register. The rule’s most significant changes are payment provisions intended to improve the quality of hospital care that reduce payment for readmissions and hospital-acquired conditions (HACs). The rule also includes proposed changes to the Hospital Inpatient Quality Reporting (Hospital IQR) program. Laboratories looking to increase their value to hospitals should see this as an opportunity to help hospitals reduce readmissions and HACs. As discussed in G2 Intelligence’s research report, Creating a Value-Driven Laboratory: Opportunities in the New Marketplace, molecular tests for HACs have been shown to control infection rates and thereby improve outcomes and lower costs. Private payers also are putting pressure on hospitals to reduce readmissions and HACs, thereby lowering overall cost of patient care. As hospitals face potential reductions in payment, they will look to laboratories to help improve outcomes and reduce costs. Key provisions of the proposed rule, and areas where labs can play an important role as a value partner, are discussed below. Hospital Readmissions Reduction Program. The maximum reduction in payments under the Hospital Readmissions Reduction Program will increase from 2 percent to 3 percent as required by law. For FY 2015, CMS proposes to assess hospitals’ readmissions penalties using five readmissions measures endorsed by the National Quality Forum. Already, CMS estimates that hospital readmissions in Medicare declined by a total of 150,000 from January 2012 through December 2013. Hospital-Acquired Condition Reduction Program. CMS proposes to implement the Affordable Care Act’s Hospital Acquired Condition Reduction Program. Beginning in FY 2015, hospitals scoring in the top quartile for the rate of HACs (i.e., those with the poorest performance) will have their Medicare inpatient payments reduced by 1 percent. This new program builds on the progress in this area achieved through the existing HAC program, which is currently saving approximately $25 million annually by reducing Medicare payments when certain conditions that are reasonably preventable are acquired in the hospital. Quality Reporting Programs. The proposed rule would revise measures for the Hospital IQR, Long-Term Care Hospital Quality Reporting, and PPS-Exempt Cancer Hospital Quality Reporting Programs. CMS proposes to align for 2015 and 2016 the reporting and submission timelines for clinical quality measures for the Medicare Electronic Health Record Incentive Program with the reporting and submission timelines of the Hospital IQR program. Lab Can Address Gaps According to research by G2 Intelligence, there are huge opportunities for laboratories to assist hospitals in controlling potentially avoidable complications (PACs). A study conducted using the Prometheus Payment Model, which details the cost of PACs for 21 conditions and procedures, found that PACs comprise anywhere from 20 percent to 50 percent of health care costs. Using advanced decision support, personalized diagnostics and risk guidance, and lab informatics, laboratories and pathologists can reduce these addressable PAC costs by 30 percent, thus generating 30 percent of a health system’s value, says Eleanor Herriman, director of advisory services for G2 Intelligence. For example, earlier diagnosis of sepsis using rapid molecular diagnostic testing can result in savings of $5 million to $23 million, depending on hospital size, according to the study. Testing decision support for hyponatremia can reduce avoidable costs by an estimated 42 percent, which represents $2 million to $3 million in annual savings for a midsized hospital. “As Medicare continues to move hospitals toward value-based payment, laboratorians should not miss the multiple opportunities to utilize their information and tools to assist hospitals in improving clinical performance and thereby avoiding these penalties,” says Herriman. Pricing Transparency The inpatient proposed rule also would require hospitals to release a standard list of prices for their medical services, including prices for laboratory services. Instituted as part of the Affordable Care Act (ACA), the requirement can also be fulfilled if hospitals allow the public access to the data after an inquiry. The ACA contains several policies to encourage greater price transparency in health care. Hospital pricing can vary widely, even within the same geographic area. As consumers are now shouldering a greater proportion of their health care costs, many want actual pricing information on what services will cost. According to CMS, hospitals can either make public a list of their standard charges or their policies for allowing the public to view a list of those charges in response to an inquiry. The proposal encourages hospitals to undertake efforts to engage in consumer-friendly communication of their charges to help patients understand what their potential financial liability might be for services they obtain at the hospital and to enable patients to compare charges for similar services across hospitals. Takeaway: Laboratories have an opportunity to provide added value to their hospital partners by helping them reduce readmissions and hospital-acquired infections. Hospitals are looking to labs to assist them in meeting quality goals as mandated by both federal and private payers.