Charting Your Lab’s Course for 2014

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WITHOUT QUESTION, CLINICAL LABS AND PATHOLOGY GROUPS will be confronted with tough challenges during 2014. Across the nation, lab executives and pathologists tell us that it is no longer “business as usual.”

What I find most interesting about the feedback pouring into our offices is that the Affordable Care Act is not a factor for labs, at least not yet. We all know that health insurers are narrowing networks as they develop their health insurance exchange products to meet the specifications of the Bronze, Silver, Gold, and Platinum plans. Yet few labs are complaining that they have been excluded from the provider networks associated with these insurance plans.

Rather, the immediate source of pain is financial and is associated with the decline in reimbursement paid by Medicare and private payers. For many independent clinical labs and pathology groups, it is the reduced prices now paid for certain important CPT codes that creates financial pressure.

It is a similar story for hospital laboratories. Nationally, there is a cumulative decline in inpatient admissions. By itself, this is a troublesome trend for these institutions. But the declining inpatient admission problem is compounded by several Medicare initiatives, not the least of which are RAC audits and financial penalties associated with higher readmissions of Medicare patients.

On their own, hospitals are responding to these developments by classifying some incoming patients for observation under the OPPS fee schedule. The net effect is less money per patient bed per year. That directly affects the hospital laboratory because of cuts to the lab’s annual operating budget.

Equally troublesome is that 2014 will bring a new set of challenges for lab- oratories. For example, on pages 3-5 of this issue, you will read our first assessment of the final rules for the 2014 Medicare Fee Update. Medicare officials pulled back the most onerous elements of their proposed changes to pathology and clinical laboratory pricing. That’s the good news. But the Medicare program will move forward in ways that will reduce what pathologists and clinical labs get paid for important lab testing services.

That is why it is easy for me to predict that one trend we will see in 2014 in the clinical lab industry is lots of cost-cutting. With less money coming in the door, financial sustainability requires every lab organization to get better at eliminating sources of waste, trimming costs, and boosting productivity.

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