2019’s Top 10 Lab Stories Reveal Major Laboratory Industry Trends

It’s more bad news for the lab industry & pathology industry than positive developments, but opportunities do exist

This is an excerpt of a 3,163-word article in the Dec. 16, 2019 issue of THE DARK REPORT (TDR). The full article is available to members of The Dark Intelligence Group.

CEO SUMMARY: There was plenty of bad news in 2019 for clinical labs and pathology groups. Yet lurking inside this news are clear opportunities – from drones to rising volumes of all lab tests – uncovered by THE DARK REPORT for lab managers with foresight and strategic vision. 2019 proved to be a tough year for the laboratory industry in the United States financially, partly because Medicare and private payers continue to cut what they pay for lab testing services. The big question is when the collective year-after-year cuts to lab test fees reaches the point when many labs could lack the revenue needed to stay open.

NO SINGLE EVENT SHOOK the clinical laboratory industry in 2019. Rather, 2019 might be aptly described as the year that laboratory finances endured the proverbial “death by a thousand cuts.”

Stated differently, a review of the clinical laboratory industry’s top 10 biggest stories during 2019 shows that the repeating theme is how both government and private payers are actively cutting what they pay for clinical laboratory testing and anatomic pathology services. Payers do this by refusing to cover an ever-increasing number of lab tests while, at the same time, slashing the prices they pay for those lab tests they do cover.

Consistent with this multi-year trend is THE DARK REPORT’s pick for the number one story of its list of 2019’s Top 10 Lab Industry Stories. It is how the price cuts to the 2019 Medicare Clinical Laboratory Fee Schedule—enacted in accordance with the Protecting Access to Medicare Act (PAMA)—have opened the door for state Medicare programs and private health insurers to enact their own deep cuts to the prices they pay labs for testing.

This is how the Medicare cuts triggered 2019’s flood of price cuts for lab tests. The overall reduction in what labs are paid directly eats away at the financial stability of most of the nation’s independent laboratories and hospital/health system-based labs.

Reinforcing this year’s laboratory industry number one story—the overall impact of the PAMA lab test price cuts—are other stories that make the 2019 top-10 story list. Stories number three and number four highlight the wider impact of Medicare lab fee cuts and how flawed updates to National Correct Coding Initiative (NCCI) guidelines caused certain labs to go unpaid for many types of molecular and genetic tests.

Four Stories Have Bad News
More bad news for clinical labs and pathology groups is reflected in four of the 2019 top 10 laboratory industry stories. For example, the Centers for Medicare and Medicaid Services (CMS) issued a final rule that gives it new power to fight Medicare fraud and abuse. It requires providers to disclose affiliations—both current and going back five years—when providers apply to enroll or re-enroll. Attorneys tell THE DARK REPORT that the language of this new federal rule has the potential to ensnare even compliant labs.
Similarly, federal prosecution of an Arkansas pathologist for manslaughter and other criminal charges, along with the national news of patient deaths at three different Houston hospitals (each incident involving that hospital’s lab), shows that the public has much less tolerance for medical errors.

17.5% Fewer Pathologists?
One story that may have been unexpected within the lab industry during 2019 is the peer-reviewed study published in May by JAMA Network Open.
Titled “Trends in the US and Canadian Pathologist Workforces from 2007 to 2017,” the study describes how researchers determined that the number of active pathologists in the United States had declined by 17.5% between 2007 and 2017. That’s 2,728 fewer pathologists at the end of 2017.

The implications of this study need to be fully understood. One easy conclusion may be that, as Medicare and private health insurers pay pathologists less for professional services, it motivates working pathologists to retire early and encourages medical students to select other specialties. Pathologists may be debating the findings of this study for years to come, because it strikes at the financial health of their medical specialty.

Despite the important stories in 2019 that represent bad news for the clinical laboratory and anatomic pathology professions, there were several bright spots.

New Clinical Laboratories
For example, the annual growth in the volume of lab tests performed in the United States continues to be strong enough that a number of larger laboratory organizations are building huge, new, state-of-the-art laboratory facilities. THE DARK REPORT published information about these major lab construction projects. The facilities range in size from 36,000 square feet to 250,000 square feet.

Coming Soon: Drones!
Maybe the most unique laboratory industry story to make the 2019 list of the lab industry’s top 10 stories is the first pilot project in the United States that uses a drone to move specimens every day between a physician’s office and a health system lab facility. This happened this spring at WakeMed Health and the prime vendor is UPS, the international delivery company. Experts watching this and other drone pilot programs predict that drones will be moving lab specimens, prescription drugs, and other medical supplies on a surprisingly fast timeline.
As we do each year, THE DARK REPORT editors suggest lab administrators and pathologists use this top-10-stories list as the basis for strategic planning. The goal should be to alert the lab’s management team to the wide scope of influences actively shaping how lab testing services are reimbursed and how the delivery of lab testing is changing.

How will you use 2019’s laboratory industry developments to form your strategy for 2020? What do you think about these Top Ten lab stories of 2019? Please share your thoughts with us in the comments below.


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