Blood and money: pay gap could derail blood safety
Hospital billing and Medicare reimbursement for blood products and services lag
so far behind the actual costs of ensuring a safe, adequate blood
supply that they threaten to hobble future development and adoption
of safety measures, the Advanced Medical Technology Association
(AdvaMed) declared Oct. 15.
"We have been concerned that blood reimbursement policy is really affecting blood safety
and patient care," said Paul Ness, MD, director of transfusion medicine
at Johns Hopkins University, at a press conference to release a
report commissioned by AdvaMed on this issue.
Prepared by the Lewin Group, the report, "Ensuring blood safety and availability in the
U.S.: technological advances, costs, and challenges to payment,"
concludes that flaws in reimbursement—especially in Medicare’s
prospective payment system, the biggest payer for hospital inpatient
care—threaten the development and deployment of new medical
technologies. As it’s managed now, blood reimbursement places hospitals
in a financial bind and could pose disincentives for companies to
invest in innovations.
Low reimbursement isn’t unusual in itself, but blood reimbursement is especially handicapped
by a startling fact: More than half of all hospitals don’t bill
at all for blood products or administration. This means hospitals
are telling Medicare they aren’t recording charges, yet Medicare
is adjusting payment levels based on hospital charges, said Cliff
Goodman, PhD, senior scientist with the Lewin Group and lead author
of the report.
He termed this finding "disappointing and astounding." Coupled with routine undercharging
for blood-related products, he said, "this obvious under-reporting
compounds the problem of updating the prospective payment system
that is intended to provide appropriate payment for services."
The report identified four major causes of improper billing: selecting the wrong reimbursement
code when billing Medicare; failing to charge adequately for blood
products; failing to submit blood-related charges on Medicare claims;
and misunderstanding the rules for how much, or even if, hospitals
are permitted to charge for blood products.
Under prospective payment, the Centers for Medicare and Medicaid Services uses hospital charge
data as an input for recalibrating diagnosis-related groups, Dr.
Goodman said. "But hospital charges generally reflect the cost of
all kinds of products and services, plus a fair share of administrative
costs. However, if you look at the markups for blood-related services,"
he said, "they are much lower than for other hospital products and
services." In 1999, the national average hospital charge for blood-related
costs was 73 percent, far less than half the average charge for
medical supplies (182 percent) and for ancillary services (167 percent).
Across the United States, these markups vary widely, Dr. Goodman said. "In North Dakota, average
hospital charges were actually 30 percent lower than cost, while
in Pennsylvania, the average markup of 156 percent was still below
the average markup for medical supplies."
The disproportionately low markup for blood represents a staggering shortfall, charge the
authors of the report. In addition, the producer price indexes,
which are used each year to adjust the hospital "market basket"
of products and services used to represent overall changes in hospital
costs in the prospective payment system, until recently placed blood
in an inappropriate product category: industrial chemicals. That
was changed as of Oct. 1 to blood and blood derivatives. "That sounds
a lot better," Dr. Goodman said, "but it’s still questionable whether
that index will track changes in costs associated with improved
quality or shifts in type of blood products used."
Hospitals that do bill for blood are inconsistent in how they bill. "Eighty-one percent
of hospital claims show no blood billing at all," Dr. Goodman noted.
"That might be believable, except that it departs so much from the
estimate of America’s Blood Centers that 30 percent of these claims
ought to show blood billing."
The DRG system, he said, is inherently insensitive to changes in all component technologies—not
just for blood—because it is subject to a two-year lag time
and depends on the quality of the hospital charge data reported
to CMS. "There is much new technology [to improve blood safety]
that has evolved rapidly, but we’re always going to be behind and
off the mark because of these built-in lag times."
Despite the blood supply’s overall safety, blood products can still be contaminated with known
or new viruses, bacteria, and parasites. There is an incomplete
and evolving array of technologies to screen for or inactivate these
threats—but they risk foundering on the poorly constructed
reimbursement program. "We continue to demand a virtually risk-free
blood supply. But these technologies are not free," Dr. Goodman
The more than 30 significant blood products, processes, tests, and systems in the pipeline can
increase the safety, quality, and quantity of the blood supply and
help blood centers improve their operational efficiencies. But the
challenges for companies are the time to bring them to market and
the money to do so, said David Perez, president of Gambro BCT, a
Swedish company that specializes in the separation and handling
of blood components.
"Even though nucleic acid testing had a fast-track approval process, it still took five
and a quarter years from the time the project was initiated until
it was available in the marketplace," Perez said. "Product development
in the field of blood banking is extremely competitive, very costly,
and very complex from a regulatory and reimbursement perspective."
Gambro BCT has developed a method of inactivating a variety of viruses, bacteria, and parasites,
including West Nile virus, but, Perez asked, "If this technology
is in the marketplace and approved, how will our reimbursement system
address this new added cost? It is a huge issue because the existing
reimbursement system does not necessarily capture the cost of all
Why do many hospitals not charge for blood?
"Some hospitals may believe, incorrectly, that because most blood is donated, they cannot
charge more for the processing of a unit of blood than their blood
suppliers charge," the Lewin report says. In the past, some blood
supplier contract language may have been interpreted as prohibiting
hospitals from marking up the cost of processing blood units. Many
hospitals apparently avoided having to account for differences in
contracts and simply chose not to mark up any blood furnished to
But even though blood products account for less than one percent of total hospital costs,
they can amount to millions of dollars for many hospitals, the report
says. The greatest technology-related contribution to recent price
increases for blood appears to be leukoreduction. An unpublished
survey by the AABB found that in 2000, a unit of leukoreduced blood
cost $131.89 to produce, compared with $99 for non-leukoreduced
blood. Two large hospitals each reported paying an additional $600,000
annually for this safety technology. "To the extent that payment
systems do not account for such additional costs to already financially
strapped hospitals, an additional $600,000 in nonreimbursed or under-reimbursed
costs is significant," the survey says.
Nucleic acid testing, currently charged at an artificially low rate because of NAT’s previous
status as an investigational technology, will bring another significant
increase in blood costs now that the FDA has approved it for marketing.
Even larger increases may lie ahead. For example, the Lewin report
says that one pathogen reduction technology, Inactine, could add
as much as $150 to $200 to the cost of a unit of red cells, according
to the manufacturer.
What should be done? The Lewin report calls for four main reforms:
- More accurate hospital coding and billing practices for blood, blood products, transfusions, and related services.
- Ongoing educational and training programs for hospital blood banking, coding, and financial staff.
- Periodic examination of existing coding systems to determine whether they should be modified to reflect changing technology.
- Consolidation and clarification of CMS’ inpatient billing procedures and allowable hospital charge practices for blood, blood products, and related procedures, including a more appropriate producer price index to reflect changes in blood costs.
AABB general counsel Theresa Wiegmann said that even when fairly reimbursed, blood will
remain a bargain in comparison with many other therapies. "The lifesaving
value of blood transfusions far outweighs their relatively small cost,"
she said. "AABB understands the billing process is very complex. We
recognize the difficulty facing our hospital members and we are working
to educate them." AABB will soon distribute a blood billing guide
to hospitals across the country and will supplement the guide with
online information in coming years.
"It is imperative that the public continue to be educated about the
value of blood and the importance of maintaining an adequate supply
through voluntary donation," Wiegmann said, noting that AABB is
soliciting the federal government’s support for its multi-year project
to reinforce this message. "We must all fight to ensure that the
health care system fairly and finally pays for state-of-the-art
blood and transfusion services. Only with fair payment can we guarantee
patients will have the highest quality care."
Anne Paxton is a writer in Seattle. Lewin’s report on blood product reimbursement is available at www.advamed.org/publicdocs/blood-safety-report.pdf.