The Dose

Welcome to The Dose, which tackles the finances behind local health care and life sciences and points to the most interesting national analysis. Your host is J.K. Wall.

Health Care & Life Sciences / Life Science & Biotech

There will be blood

June 26, 2014

Indianapolis-area hospitals are making a killing on blood testing.

That’s clear from a new study by the National Institute for Health Care Reform. That study found, using 2011 health insurance claims from the Big 3 automakers, that common blood tests performed by hospital-owned outpatient facilities in the Indianapolis area were six to nine times more expensive than the same tests at independent lab facilities.

Let me put this in clearer terms:

-    If you had a lipid panel test (which measures cholesterol and triglycerides) at a hospital-owned outpatient facility, you paid an average of 639 percent more than if you had gone to an independent facility, such as Mid America Clinical Labs.

-    If you had a complete blood count at a hospital-owned outpatient facility, you paid an average of 810 percent more than at an independent lab.

-    If you had a comprehensive metabolic panel (which tests kidney and liver function) at a hospital-owned outpatient facility, you would have paid 882 percent more than at an independent facility.

Now, a fair bit has changed since 2011. Some hospital systems, such as IU Health, have slashed prices on their imaging procedures, for example.

So I thought I’d check to see if anything similar has happened on blood tests. I went to the cost-comparison tool on Anthem Blue Cross and Blue Shield’s website, and looked up all of Anthem’s negotiated prices with blood-testing facilities within a 25-mile radius of downtown Indianapolis.

The results? Nothing's really changed.

Comprehensive metabolic panels were running at 1,400-percent higher prices, on average, at hospitals than at independent facilities. And the other common blood tests weren’t far behind.

Here is a summary of what I found:

Comprehensive metabolic panel
Hospital labs avg (18): $144.67
Non-hospital (6): $10.33
Price difference: 1,400 percent

Lipid panel
Hospital labs avg (15): $146.13
Non-hospital (20): $13.10
Price difference: 1,120 percent

Complete blood count
Hospital labs avg (16): $67.44
Non-hospital (20): $7.05
Price difference: 960 percent

So why is this happening?

It’s due to a wrinkle in health finance. The federal Medicare program and most private health insurers pay not only for the actual blood test, but also a facility fee for the use of the hospital facility. Independent clinicians don’t receive any facility fee.

That facility fees is designed to help hospitals cover the cost of being open 24-7 and stabilizing all emergency patients whether or not they can pay.

But lots of blood tests are performed in outpatient settings, nowhere near a hospital campus. Yet Medicare and private insurers allow these hospital-owned physician practices and outpatient offices to bill as if they were part of the hospital, so long as they disclose that fact to patients.

They do, but in language that is only understandable if you already know what they’re doing. Those notices also, in my experience, never say anything about the enormous cost difference that the hospital status produces. (Read how St. Vincent “informed” one patient of the fact that a physical therapy practice near Zionsville was actually part of the St. Vincent hospital campus on West 86th Street and, therefore, charged him twice as much per visit.)

Those facility fees are a big reason for these astronomical differences in price—not only in blood test, but also in imaging scans, colonoscopies and physical therapy. They were also a key reason hospitals were willing to employ so many physicians—and pay them handsomely too.

Physicians seeing patients in hospital-owned facilities could collect significantly more money for lab tests, imaging scans, colonoscopies and physical therapy.

Among Indianapolis hospital systems, Indiana University Health has built up a physician practice with 1,500 doctors. St. Vincent Health employs about 800 and Community Health Network employs roughly 500.

Now that hospital systems employ all those doctors, their bargaining power with insurers is much greater than any of the independent shops. That’s why, I would argue, these differences have gotten bigger, not smaller, in the past few years.

Medicare has been eyeing these differences, and may try to stamp them out. It will be interesting to see if Anthem or other private insurers follow suit. Because they and their customers have been taking a bloodbath.

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