CEO SUMMARY: For clinical laboratories and anatomic pathology groups, the day-by-day impact of the COVID-19 pandemic is unfolding much like Hurricane Katrina hitting New Orleans in 2005. Every 24 hours, labs get unwelcome news, along with uncertainty about whether it will get worse before it gets better. As of today, labs are watching their daily cash flow fall below operating costs, even as government and public health officials call on labs to increase COVID-19 test volumes.
SARS-CoV-2 IS A MAJOR FINANCIAL DISASTER MOVING ACROSS the entire clinical lab industry and anatomic pathology profession. Yet this consequence of the pandemic has yet to be recognized by federal and state lawmakers.
At the same time that labs throughout the United States watch their specimen volumes collapse and cash flow dwindle to unsustainably low amounts, the healthcare establishment—along with the President, state governors, and officials at the CDC—want the nation’s laboratories to do more in response to the SARS-CoV-2 pandemic, and do it with urgency.
The Dark Report has confirmed from multiple, credible sources that, over the four weeks from March 8 through April 4, the cumulative drop in specimen volume (and the revenue associated with these specimens) is about 60% for clinical labs and hospital outreach labs, compared to first quarter 2020 and the same time period in 2019. The average specimen decline for anatomic pathology groups is about 45% and some subspecialties have experienced as much as an 80% drop in biopsy specimens. (Detailed information about this situation is provided here.)
The unraveling finances at labs across the nation is happening with incredible speed. Understandably, government leaders and public health officials are focused on the COVID-19 outbreak itself and how to control spread of the disease. They may not yet recognize the extent of the revenue decline in the very labs they depend on to immediately deliver huge volumes of accurate, reproducible tests for an infectious agent of which little is known.
It is now an established fact, that, even as specimens and revenues are crashing for almost every lab in the United States, these same labs are being asked to acquire, validate, and offer large numbers of COVID-19 tests. To accomplish this, labs are digging deep into their financial reserves, even as incoming cash flow is inadequate to sustain operations.
Revenue from COVID-19 Tests
There has been some revenue benefit to performing these molecular tests in volume. As you will read, in recent weeks, clinical labs doing COVID-19 tests generated enough specimen volume and revenue to equal a 33% increase. But this is only true for labs performing rapid molecular COVID-19 tests.
It is important for lab administrators and pathologists to understand that COVID-19 testing will come in two waves. The first wave involved use of rapid molecular assays for SARS-CoV-2 to test individuals who were symptomatic for a respiratory virus. Those efforts started in earnest in February. By mid to late March, a growing number of labs were beginning to perform sizable numbers of these tests. This testing wave may soon crest and will extend at least into the summer months.
Now, the nation’s labs are poised to undertake the second wave of testing, which involves serology tests. By looking for antibodies to SARS-CoV-2, these tests are useful to understand how many people may have been infected with COVID-19, but showed minor or no symptoms.
Requests for More Tests
All levels of government and healthcare are calling on clinical labs to immediately deliver more of the testing needed to manage the COVID-19 outbreak. They want labs to build capacity to perform ever-greater numbers of rapid molecular COVID-19 tests. With equal urgency, they also want labs to acquire and validate test kits for COVID-19 serology testing, then swiftly add new instruments to deliver huge volumes of these antibody tests.
Meanwhile, the Food and Drug Administration (FDA)—stung by press criticisms for its slow response in getting rapid molecular tests cleared for clinical use—is accepting applications for serology tests for COVID-19 under its emergency use authorization (EUA) process. News reports say that upwards of 70 to 80 companies now have EUAs for their COVID-19 serology tests.
Some of the savvier news reporters are already writing stories with headlines touting the “Wild West of COVID-19 Testing,” because they understand that obtaining an EUA for a COVID-19 serology test is a different—and much lower—standard than if a test manufacturer was going through the FDA’s regular pre-market approval (PMA) process.
PAMA Price Cuts Delayed
If there is good news for the clinical lab profession in the midst of this pandemic, it is that Congress and federal agencies such as the Centers for Medicare and Medicaid Services (CMS) both recognized that implementing the next round of deep PAMA-mandated price cuts to the Medicare Part B Clinical Laboratory Fee Schedule (CLFS) would be counterproductive. Those price cuts were suspended as part of the new legislation.
How long this pandemic lasts remains an open question. During press conferences, no elected official or public health officer has been willing to associate the end of a typical influenza season as a possible time for the pandemic to ease. However, during these same press conferences, there is recognition that SARSCoV-2 could reappear “before the end of the year.” This is code-speak for the novel coronavirus reappearing as the 2020-21 influenza season commences sometime in October or November.
Seven Predictions for Clinical Labs about the Coming Wave of COVID-19 Serology Testing
THE DARK REPORT HAS SEVEN PREDICTIONS about the coming wave of COVID-19 serology tests, as described below.
One, the healthcare system will support running large numbers of these tests for months into the future. Public health officials and researchers need the test results so they can understand the true number of people infected with SARS-CoV-2. This information enables them to determine the actual rates of infection and mortality. This information will also be needed to understand whether people who were infected have immunity and to help develop vaccines for SARS-CoV-2.
Two, funding for these serology tests will be available. Hopefully, coverage guidelines for this testing will be written so labs can be reimbursed without difficulty or complications. What has yet to be determined is whether reimbursement for COVID-19 serology tests is “one price for all labs” and based on the economies of scale of the nation’s billion-dollar public lab companies, or whether the government and private payers are willing to set higher reimbursements for community labs and community hospital labs.
Quality Differences in Kits
Three, there will be great differences in the quality of the serology test kits for COVID-19 that come to market with an FDA emergency use authorization (EUA). Thus, many labs will buy COVID-19 antibody kits that quickly turn out to be inaccurate or unreliable. It is already widely reported that both Spain and the United Kingdom spent tens of millions of dollars on serology test kits for COVID-19 that didn’t work. The Dark Report advises, “Lab buyers beware!”
Four, as is true with every type of new lab test, expect to see fraud and abuse associated with COVID-19 testing. Generally, this will involve individuals from outside the profession of lab medicine who see the opportunity to ride the COVID-19 serology test wave to big riches. As we report on pages 22-23, federal prosecutors already filed criminal charges against an individual for paying illegal kickbacks to refer patients for COVID-19 testing reimbursed by federal health programs.
Five, a larger number of labs in this country will be able to perform serology tests because they already have immunoassay analyzers in use and these systems are automated and capable of large throughput. It will also be relatively simple to validate the COVID-19 test kit they want to use on their existing instruments.
Supplies, Sensitivity, Trust
Six, a large number of labs will struggle to get adequate supplies of COVID-19 seriology kits. The highest-quality kits will be manufactured by the major IVD companies and demand for these kits will outstrip manufacturing capacity. These IVD vendors will give priority to their biggest medical laboratory customers. Community laboratories and community hospital labs will have to fight to get enough kits shipped that allow them to serve all the testing needs of their client physicians in smaller towns and rural areas.
Seven, clinical labs running any manufacturer’s COVID-19 test kits will be challenged to perform quality control and trust that the sensitivity and specificity of the tests is at acceptable levels. Several experts have described this situation in a similar fashion. They point out that, as the FDA accepts a kit manufacturer’s data and application, it is effectively clearing that COVID-19 serology test kit as the equivalent of a “waived test”—in this case, only to be performed by a lab with a high-complexity CLIA certification.