Blue Cross NC Reduces Lab Service Costs, Unnecessary Testing

October 01, 2021 - Blue Cross and Blue Shield of North Carolina (Blue Cross NC) achieved $112 million in savings on lab service costs and better-quality lab services for members in 2020 after partnering with a laboratory insights company.

The payer improved member health outcomes by reducing unnecessary lab testing and increasing clinical guideline adherence.

Healthcare professionals administer around 13 billion lab tests each year, making it one of the most common healthcare services in the country, the press release noted. Lab services can also contribute to high healthcare spending.

The rate of misuse or overuse of lab testing has remained high, the payer indicated, which can lead to unnecessary spending.

Blue Cross NC first partnered with Avalon Healthcare Solutions in 2017. Since then, the payer has seen several improvements surrounding lab services. Blue Cross NC now provides 99 percent of all lab services within its network, compared to the 86 percent that the payer previously covered in-network.

The lab company also helped the payer improve its medical policy around lab services. The program offered automated support to help providers follow clinically accepted lab service guidelines.

Avalon provided a pre-service approval system for providers as well that helped reduce inappropriate lab services by ensuring that tests were necessary and under Blue Cross NC’s coverage policies, according to the press release.

“Our collaboration with Avalon has given us more insight into improving the quality and reducing the cost of lab services for our members,” Roberta Capp, MD, chief medical officer of Blue Cross NC, stated in the press release. “As these results show, Blue Cross NC members benefit from our ongoing efforts to make health care better, simpler, and more affordable.”

Lately, the healthcare industry has focused on making lab services more cost-effective. The COVID-19 pandemic has highlighted just how important lab testing can be and the demand for diagnostic tests has increased.

Blue Cross NC’s move to cover almost all of members’ lab tests in-network may help curb healthcare spending in a significant way.

Between 2008 and 2016, out-of-network healthcare spending decreased or remained stagnant for the most part, except in three areas: inpatient services, pathologist services, and lab testing, according to a Health Affairs study.

Experts noted two potential causes for high laboratory spending. High costs could be attributed to poor laboratory billing practices in pathology. The share of out-of-network pathology spending grew from 5.3 percent to 8.3 percent, but this growth was not tied to higher utilization trends.

The second potential cause of high laboratory spending was that providers often use out-of-network suppliers to administer lab testing for patients, the study explained.

These problems—and others—related to laboratory costs have been particularly evident during the coronavirus pandemic.

While most payers cover member costs for COVID-19 tests, an AHIP survey found that many providers were participating in price gouging. A large portion of individuals received tests from out-of-network providers and payers could not negotiate lower prices when the test prices were higher than the in-network cost, AHIP stated.

An in-network COVID-19 test in the commercial market costs around $130, according to the October 2020 survey. If patients go to an out-of-network provider, the provider may charge an additional $55 or more.

According to a Peterson-KFF Health System Tracker brief from April 2021, 29 percent of the two largest hospitals from each state charge between $100 and $149 for a COVID-19 diagnostic test.

The Coronavirus Aid, Relief, and Economic Security (CARES) Act required payers to cover COVID-19 testing with no cost-sharing. However, coverage can get complicated when out-of-network providers conducted the laboratory service.

The CARES Act requires payers to reimburse out-of-network providers at the price that the provider posted on her website for COVID-19 tests. Individuals may be subject to high testing costs if the provider has not posted a price or if the payer and provider cannot agree on a rate.

Individuals may also have to pay upfront for a COVID-19 test because out-of-network providers are not required to bill insurance directly for the tests, the brief noted. Individuals can submit a claim to their health plan for reimbursement after paying, but those who don’t know how or are unable to might see no reimbursement.

Offering lab services in-network, especially during the pandemic, as Blue Cross NC has done, may help members reduce their healthcare spending.