IS IT REASONABLE, AT THIS TIME, TO ASK IF THE LAB INDUSTRY IS FACING a potential collapse in lab testing pricing? Were I to have asked that question several years ago, most of you would probably have responded with skepticism.
But how the times have changed! Take the Protecting Access to Medicare Act (PAMA) of 2014. Language in that law requires certain labs to report mar- ket prices to CMS in 2016. Then Medicare officials will use that market data to set prices for the Medicare Part B Clinical Laboratory Fee Schedule, starting in 2017. PAMA allows Medicare officials to cut the price of a single test by as much as 75% during the years 2017 through 2022.
I don’t need to point out that, should the Medicare program cut Part B lab test prices like that, it won’t take long before private payers take the same steps.
Let me also offer the example of 2013’s introduction of the new CPT codes for molecular and genetic tests. By the time the dust cleared from that battlefield, many labs saw less revenue overall from claims they submitted with these CPT codes. THE DARK REPORT chronicled the closing of several genetic test labs in the wake of these payer actions. And that’s not to mention the sur- prising number of “no coverage” determinations that the Medicare Administrative Contractors made for proprietary assays that were formerly paid under the old system of code stacking. This also cut lab revenue.
Next, I would call your attention to our intelligence briefing on pages 10-15. We report on the initiatives of clinical pathologist Michael L. Astion, M.D., Ph.D., and his lab team at Seattle Children’s Hospital to improve utilization of expensive send-out molecular and genetic tests. Not only does their program involve lab scientists in helping physicians select the best test for the patient- thus improving patient care-but it also reduces the cost of send-out testing.
I was surprised to find that, overall, payers are reimbursing expensive send- out tests at an average of about 35% of the amount that Seattle Children’s paid the reference lab that performed the test. If this is a common experience at other hospital labs-and Astion says that it is-this does not bode well for the budgets of hospitals labs going forward. These are a few examples of how pub- lic and private payers are actively reducing their reimbursement for lab tests. Maybe “collapse of prices” is too strong a phrase, but it is certainly not far from today’s marketplace reality.