In enacting the Eliminating Kickbacks in Recovery Act of 2018 (EKRA) late last year, the U.S. Congress approved an unprecedented expansion of federal anti-kickback authority. EKRA adds an all payor anti-kickback rule to the health care fraud law concerning improper remuneration for patient referrals to, or in exchange for an individual using the services of, a recovery home, clinical treatment facility or clinical laboratory.

The problem for clinical laboratories is that the language of the statute is very broad with the term laboratory not limited to just those facilities associated with substance abuse services but potentially extending to all lab services.

Moreover, EKRA seems to implicate engagement of sales and marketing representatives, as such individuals are compensated for inducing referrals.

In short, EKRA now enables the government to monitor provider arrangements intended to generate business for any laboratory service paid by a federal health care program or commercial health insurer. So what’s the big deal? Well, the ERKA hammer is that a violation is punishable by a fine of up to $200,000 and/ or imprisonment of up to 10 years for each occurrence.

Many Washington observers expect either Congress to amend ERKA to clarify that it implicates only those lab services provided in a recovery home or clinical treatment facility or HHS to clarify whether it believes payments to sales personnel now permitted under the anti-kickback law safe harbors are prohibited by ERKA.

But legal opinion is mixed regarding what labs should do until there is some official clarification on how ERKA impacts lab business arrangements. A good many lab companies including the national labs appear to be taking a “wait and see” attitude for now but others are following the counsel of some legal experts who advise labs to review current compensation arrangements with sales personnel, including both its employees and independent contractors to ensure compliance with ERKA.

Hospital outreach laboratories which escaped providing private payor data to Uncle Sam under The Protecting Access to Medicare Act (PAMA) during the first round of reporting in 2016 have now run out of luck as the next collection period starts this January and runs through June 30, 2019.

That’s because CMS has revised the definition of “applicable laboratory” which now encompasses most hospital outreach labs.

But a recent survey by Quest Diagnostics and Modern Healthcare Custom Media found that many hospitals are not even aware of PAMA and unprepared to mitigate its impact, including being subject to civil monetary penalties for those labs required to report data but failing to do so.

PAMA imposed reimbursement cuts for some 75% of lab tests billed to Medicare in 2018, taking nearly $670 million from labs in that year alone or about a 10% decrease from the previous fee schedule. A similar 10% cut for many tests is set to follow both in 2019 and 2020.

For the latest guidance from CMS and expert advice on what labs must do to comply with the PAMA data collection requirement, join me for a new national webinar I’m chairing on January 15 from 2:00 – 3:15 pm ET. The interactive program, Next PAMA Data Collection Period Starts in January: The Nitty Gritty on Labs Affected & What’s Required, will feature several PAMA experts to answer all your questions, For program details and registration information, visit laboratoryeconomics.com or call 1-845-463-0080.

Don’t look now but the upcoming 2018 U.S. midterm elections are shaping up as virtually the exact inverse of 2010 when widespread opposition to the Affordable Care Act (ACA) helped sweep Republicans into power from the local courthouse all the way up the political ladder to Congress.

Turning the tables in the current election cycle, Democrats running  everywhere from deep blue to ruby red states are forcefully putting health care at the center of their campaigns. Why so? Because virtually all polling has shown that Americans rank healthcare among their top issues ahead of the November elections. This new political reality follows GOP failed efforts last year to overhaul the healthcare system which proved to be deeply unpopular.

Call it kismet but the GOP failure to repeal the ACA combined with ongoing White House efforts to weaken the law’s protections including those shielding people with pre-existing conditions is now raising the strong possibility that the healthcare issue could propel a backlash strong enough to usher in the Democrats to power starting next year.

With many tech giants looking for openings to disrupt the healthcare industry, a recent survey of health professionals point to Amazon as the one tech player likely to have the biggest future impact on the healthcare sector. Yet it would foolish to discount the potential for Goggle becoming a disruptive force in healthcare in light of a series of recent high-profile investment, hiring and partnership initiatives.

Google’s parent Alphabet via its Verily Life Sciences unit has now invested $375 million in next-gen health insurer, Oscar Health (amounting to about a 10% interest) which will use the funding to jump into the Medicare Advantage market starting next year. Earlier investments included Clover Health, a healthcare technology company and Collective Health, an enterprise health insurance software and services company.

Given these moves, no one should be surprised to see Goggle make a play in the health insurance space and this was underscored when the company signaled its intention to hire a health plan executive. Importantly, the value potential for traditional health insurance companies is tied directly to care management, which, in turn, is largely dependent on data. And this is where access to Goggle Cloud storage and computing tools could become so indispensable.

Meantime, the latest well known healthcare executive hired by Alphabet’s is former Cleveland Clinic CEO Toby Cosgrove who was named executive adviser to the Google Cloud healthcare and life sciences team which, building on its data-processing expertise, is expected to develop products related to healthcare data and analytics as part of its push into the growing population health market.

Perhaps the quickest way for Google to have an immediate impact is by partnering with traditional healthcare players ranging from software vendors to health insurance companies where data management and analysis is so dependent on the cloud, Already, the National Institutes of Health is partnering on one of its biometric data initiatives with Google Cloud. Meantime, Verily is partnering with 3M to develop health population management solutions and is also working with Duke University and Stanford Medicine on a project to gather and analyze data from some 10,000 participants.

Just like the Zombie in popular folklore, the Affordable Care Act (ACA) refuses to die despite the best efforts of the Trump Administration to kill it off.

Despite GOP-led congressional action to axe the ACA’s individual mandate coupled with White House moves to torpedo the federal health law, more health insurers are signing up to sell coverage in 2019 while premium increases will be the lowest in years.

And even as the Administration acted to expand both the availability of short-term health plans and alternative coverage options for small businesses plus halt payments to insurers for low income customers and slash funds for ACA outreach, public support for the health law has reached its highest levels ever over the past year.

Most recently, CMS has resumed paying $10.4 billion in risk- adjustment payments to insurance companies with plans on the individual market after halting such payments last month based on a federal judge’s ruling that the agency had not adequately justified its payment methodology.

Having been stymied on Capitol Hill to repeal the ACA and running out of administrative actions to dilute the law, the Administration may now be pining its hopes to strike a clear knockout blow against the health law on a pending federal lawsuit in Texas. The White House has partially sided with the legal action filed by 20 Republican state attorneys general to strike down the ACA’s insurance premiums, including its prohibition on denying coverage with individuals with pre-existing conditions. Oral arguments in the case have been scheduled for September 10.

But make no mistake, the White House has largely succeeded in transforming the ACA into a weaker and more dysfunctional version of itself with enrollment among unsubsidized customers in the individual market shrinking nearly 30% between 2015 and 2017 as premiums rose according to the Kaiser Family Foundation.

So whose ox is being gored under the Trump Administration’s blueprint to lower prescription drug prices? Well, if you guessed the powerful and politically well-connected multinational pharmaceutical companies — surprise — you’re wrong! A close look at the myriad policy proposals and actions announced by the White House and its Department of Health & Human Services (HHS) point to a focus mainly on drug prices but not drug manufacturers.

While the Administration is tweaking how Medicare reimburses hospitals and physicians for certain drugs and is seeking feedback on the idea of passing drug rebates directly to seniors, the bottom line is that the various proposals under consideration mostly takes aim at some of the key players in the $450 billion U.S. drug market: pharmacy benefit managers, health plans and providers but largely spares the drugmakers themselves from suffering any real pain.

In terms of industry feedback to the blueprint, two consistent themes emerge from comments by the top players in the drug market: everyone generally opposes government price-setting which is already prohibited by law and all agree that drug prices are the fault of someone else. Pharma’s leading trade group takes its aim against PBMs while the other key players— PBMs, hospitals and health insurers — charge that its drugmakers\themselves which are blame for today’s problems with drug pricing.

Hospital laboratories nationwide are facing a challenging financial climate in the wake of sharp cuts in Medicare payment which became effective this year under the Protecting Access to Medicare Access (PAMA) of 2014 combined with ongoing market uncertainty in reaction to the Affordable Care Act (ACA) and the Trump Administration’s efforts to kill the federal law.

Overall, the hospital lab market consists of inpatient, outpatient and non-patient (i.e., outreach) work and represents the largest lab testing segment by revenue in the U.S. with an estimated market at around $47 billion

according to Laboratory Economics. Importantly, Medicare applies different prospective payment system (PPS) formulas for Part A hospital inpatient services ( via Diagnosis-Related-Groups or DRGs) and Part B outpatient services with some exceptions (via Ambulatory Payment Classifications or APCs.) Given that both inpatient and outpatient PPS applies to lab testing, the practical result is that labs have become cost centers for hospitals and have to compete for resources with other hospital departments.

This leaves the lab outreach market as the single remaining hospital segment permitted to bill Medicare directly under Part B. Beginning in 1984, Medicare paid for Part B lab services via a clinical lab fee schedule (CLFS) but this changed beginning in 2018 as a new market-based methodology required by PAMA took effect. This has resulted in reductions of 10% this year for virtually all high volume lab tests with the prospect of additional cuts of 10% per year set for 2019 and 2020.

Though there were some 3,000 hospital-based outreach labs that received $25,000 or more of Medicare CLFS payments in 2016 according to Laboratory Economics, virtually none of their payment data was represented in the government’s market-based rate calculations that ended up being based largely on private payor payments (often discounted) to the nation’s largest commercial independent labs. Yet today the nation’s outreach programs are subject to the severe cuts under Medicare’s new market-based payment approach.

In addition to Medicare’s steep payment reductions which are sure to impact Medicaid and commercial rates down the road, hospital lab executives must also develop strategies to deal with a range of other tough issues: ongoing pressure to reduce costs, billing and collection solutions, narrowing networks, prior authorization, and the need for more competitive pricing, service improvements and alternative revenue sources.

new financial challenges in the wake of deep Medicare reimbursement cuts that became effective this year and continuing market turbulence in reaction to the Affordable Care Act and the Trump Administration’s efforts to scuttle the federal law.
Particularly impacted by today’s unsettling climate is the $9 billion hospital outreach lab segment where to succeed labs must stay financially fit, operationally efficient and strategically nimble

Get strategic insights and tips on how to be successful in the outreach market from the industry’s leading experts during an interactive webinar that I’ll be moderating on August 7. For complete program and registration information please visit laboratoryeconomics.com and for more details about this timely topic go to my blog at weissmanassociates.com

Despite various actions by the Trump Administration to undermine the Affordable Care Act, nearly 11.8 million people ended up enrolled in coverage through the ACA’s health insurance exchanges for 2018, down only slightly from the 12.2 million who enrolled in 2017. Before accounting for tax credits, the average monthly premium across all consumers is $621, up 30.5% from $476 in 2017. This climate has been a positive for many of the nation’s health insurers (particularly the larger health plans) whose profits have been buoyed by several key factors: individual market premium increases, government-funded tax credits, state Medicaid expansion, and surging Medicare Part C (Medcare Advantage) enrollment.

When Congress passed the Affordable Care Act in 2010 it helped offset the cost by cutting payments to Medicare Advantage plans, offered by private insurers operating under contract with the government. Insurers and Republicans said the cuts — about $150 billion over 10 years — would “gut” the program, a major theme in the 2010 and 2012 elections. The Congressional Budget Office predicted that enrollment would fall about 30 percent
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In fact, more than 19 million people are enrolled in such plans this year, up from under 11 million in 2010. About one-third (33%) of Medicare beneficiaries have chosen private plans, offered by insurers like Humana and UnitedHealth Group, over the traditional fee-for-service Medicare program. In total, 2,317 Medicare Advantage plans are available nationwide for individual enrollment in 2018 – the largest number of plans available since 2009.

Overall, insurers’ stock prices rose 272% from Jan 1, 2014 through Jan 1, 2018, outperforming the S&P 500 index by 106% according to a recent White House Council of Economic Advisors’ report. Moreover, the lower federal tax rates now in effect will also make the insurers more profitable going forward. The report noted that while some insurers, including United Health and Humana, have exited the individual and small group markets, the plans that remain have raised premiums to account for older, sicker patients and ACA regulations. Those premium increases have been covered by federal premium subsidies, which now go to about 85% of exchange enrollees.

Ironically, many health care experts have said that, despite the Trump Administrations’s efforts to undercut the ACA exchanges, the exchanges are actually becoming more stable with each passing year (at least in certain geographical areas). We even see some insurers, such as Centene Corp and Oscar Health, actually expanding their footprints in the individual markets. Moreover, the White House report notes that many regional Blue Cross and Blue Shield plans are turning a profit or approaching profitability. One example is Highmark Health (a Blues-affiliated plan in Pittsburgh) which said earlier this year that it recorded a profit on the ACA individual market for the first time in 2017.

Not surprisingly, what the White House report didn’t mention was the Trump Administration’s continued efforts to undermine the ACA, such as cutting back the open enrollment period to 45 days slashing funding for outreach and advertising, and most importantly, ending the cost-sharing reduction payments the help reduce the out-of-pocket costs for low income enrollees. Health insurers last year cited the absence of cost0sharing subsidies and the continuing uncertainty in the future of the individual market as major reasons they hiked premiums by more than 30% on average according to several analyses.

Looking ahead t0 2019, it is expected that the ACA individual market to be further destabilized via implementation of a series of CMS rules allowing for the expansion of high-deductible, short-term and association health plans and providing states greater flexibility in determining the menu of essential health benefits plus eliminating the ACA individual mandate penalty.

With the White House and Congress now unlikely to implement policies or pass legislation this year to lower 2019 premiums, such as cost-sharing reduction payments or a reinsurance pool for high-risk consumers, it will be up to individual states to bolster their markets and this will result in widely varying outcomes in red vs. blue states. This generally is expected to raise ACA premiums again in 2019, with the Congressional Budget Office now projecting that premiums for the most popular silver plans on the ACA exchanges will jump an average of 34% in 2019. TheUrban Institute estimated that by eliminating the individual mandate penalty starting next year along with expanding short-term plans, would increase individual premiums 18.2% on average in states that don’t restrict short-term plans. That’s because by eliminating the mandate and allowing the proliferation of cheaper, skinnier plans is likely to take people away from the individual market, leaving behind the heavily subsidized and the sickest enrollees.

Right now Massachusetts is the only state that requires residents to enroll in health insurance but New Jersey just passed an individual mandate law taking effect in 2019 which will require all of its citizens to either pay for coverage or pay a , And, there are at least 9 other states that are considering a mandate to promote continuous coverage, including CA, CT, HI, RI, WA, MD, MN, VT, and DC. Moreover, some states are also considering restricting the sale of short-term insurance plans with MA, NJ and NY effectively banning short-term insurance plans by requiring extensive consumer protections. Other states, such as CO and OR limit the plans’ duration to 3 months while still other states including CO, MD and WI are looking to set up reinsurance funds to help subsidize high-cost patients. Meantime, other states including AK, MN and OR have already received Sec. 1332 waivers to establish reinsurance programs to bring down premiums of high-cost patients. At the other end of the spectrum, some states like IOWA and Idaho, are moving to sidestep ACA coverage rules by expanding plan choices on their exchanges.

The outlook for 2019 at the state level is a patchwork of changes to the ACA that will result in a hodgepodge of insurance laws and regulations across the 50 state landscape. The bottom line: even though the ACA was intended to create more uniform coverage and regulations nationwide,, we’re now moving on the exact opposite direction. And there are direct consequences to health insurers which can expect a patchwork of state laws and regulations to add to their administrative and cost burden.

Depending on the outcome of several state legislative initiatives and key governor’s races this November, look for Medicaid expansion in several states such as what just recently occurred in Virginia (400K eligible to be added to the rolls in 2019 with work requirements) — VA became the 33rd state (plus DC) to approve Medicaid expansion. Maine was the first state to approve an expansion of Medicaid through a ballot initiative to, and organizers are working on ballot initiatives in Utah, Idaho and Nebraska as well.

When the increase in the number of states expanding Medicaid under the ACA is combined with continuing growth next year of Medicare Advantage Part C enrollment, plus the expected premium increases expected in the individual plan market and finally the growth of newly allowed short-term insurance plan market (high deductible, skippy coverage plans), the 2019 financial outlook remains positive for the health insurance industry — I expect to see profit margins in the mid to high teens or higher for the biggest plans, somewhat lower for smallest insurers. The one variable is the velocity of changes approved at the state level in 2019 which could impose additional administrative burdens and higher costs on health insurers