This is an excerpt of a 1,209-word article in the June 1, 2020 issue of THE DARK REPORT (TDR). The full article is available to members of The Dark Intelligence Group.
CEO SUMMARY: Every day, national news headlines scream about the shortage of SARS-CoV-2 lab tests needed to manage the COVID-19 pandemic. Recently, national news coverage has begun focusing on concerns about inaccurate or unreliable COVID-19 serology tests. But the story being missed by the national news media is the steady deterioration of the finances of the clinical laboratory organizations that are essential in the nation’s management of the COVID-19 pandemic.
CLINICAL LABORATORY TESTING FOR COVID-19 continues to be a major topic in the daily national news cycle. These news stories seem to emphasize two aspects of lab testing for COVID-19, but ignore a more fundamental consequence of the pandemic on the nation’s clinical laboratory industry.
The important and, unreported consequence of the pandemic is the deteriorating financial stability at many of the nation’s clinical laboratories, including labs operated by hospitals and health networks. As this pandemic continues, eventually many labs will lack the cashflow and capital required to continue even basic, routine testing operations.
The pandemic has blown a big hole inthe daily cash flow of almost every clinical lab organization in the United States. How big is this financial hit? The Dark Report calculates that during the first 12 weeks of the COVID-19 outbreak the nation’s labs lost $6.8 billion in revenue, compared to pre-pandemic levels.
The Dark Report’s calculation is based on data provided to us by multiple sources, including several vendors that each serve hundreds of lab organizations. At the peak of the pandemic, clinical labs were losing $900 million in cash flow per week, compared to the first two months of 2020. In recent weeks, the lab industry has lost about $600 million weekly in cash flow.
Meanwhile, the nation’s news media seem oblivious to the cash flow crisis crippling the very clinical lab organizations it regularly castigates for being slow to increase the number of COVID-19 tests needed to manage the pandemic. This is the first aspect of lab testing that gets prime coverage by the news media.
The gap between the demand for COVID-19 lab tests and the volume of such tests that labs can perform is a daily topic in national news accounts. It was true at the start of the outbreak in February and it is true today, three months later.
The second aspect of lab testing that currently gets daily national news coverage involves COVID-19 serology tests. A flood of these news reports question the accuracy of serological tests for SARS-CoV-2, and they warn the public that serological test results can be inaccurate or unreliable.
Unfortunately, many of the reporters writing these stories do not understand the complexity of testing for antibodies and antigens. Nor are most news reporters aware of the significant challenges involved in creating any antibody assay for a novel infectious agent, especially on the rush basis needed to address the current pandemic.
Shrinking Lab Cash Reserves
Meanwhile, each week that the COVID-19 pandemic continues and patients do not visit doctors for routine care or show up in hospitals for needed elective treatment, the cash flow at many labs is inadequate to sustain ongoing operations. These labs are using their up capital reserves—and even going into debt—to sustain daily testing operations.
If there is a bright spot in this situation, it is that clinical lab organizations performing rapid molecular tests for COVID-19 can submit claims for these tests and be paid by Medicare, Medicaid, and private health insurers. For the nation’s largest commercial laboratory companies, this source of revenue has been enough, in some cases, to fully offset the declines in their normal daily volume of routine specimens.
But that is true only for a limited number of independent lab companies. Most academic center labs, hospital labs, health system labs, and community laboratories report that they cannot get the amount of supplies they need to collect COVID-19 specimens, and to test those specimens. We report here on the experiences of both academic medical center labs and health system labs that are members of the Joint Venture Hospital Laboratory Network (JVHL) and the Great Lakes Laboratory Network (GLLN).
Supply Chain Failures
The lab directors that were interviewed all stated that, from the earliest days of the SARS-CoV-2 outbreak, their laboratories have been unable to obtain adequatequantities of supplies, test kits, and reagents. That is why these labs have unused COVID-19 testing capacity.
The supply chain problems range from vendors who are unresponsive or who simply allocate supplies and tests to their largest customers, to the Federal Emergency Management Agency (FEMA) directing that specimen collection supplies and COVID-19 reagents and tests not go to some labs, but instead be diverted to labs of its choosing.
In both circumstances, smaller labs located in cities, towns, and smaller communities are denied the supplies needed to be contributors on the frontlines of the COVID-19 mitigation effort, despite their ability to perform COVID-19 tests with same-day turnaround.
Irony in Supply Distribution
There is additional irony in this situation. The nation’s largest lab companies state publicly that they have huge daily test capacity to perform COVID-19 tests. However, only a portion of this test capacity is used by the daily incoming flow of SARS-CoV-2 specimens.
For example, rumors float throughout the clinical laboratory industry that one national lab company can do between 70,000 and 90,000 COVID-19 molecular tests per day, but that it only gets about 15,000 to 20,000 specimens per day. That means a large volume of collection supplies, kits, and reagents are going unused at this lab—even as hospital, academic medical center, and independent labs are complaining that they have doctors ready to submit large volumes of specimens, but that they lack the supplies to perform those tests for local providers.