Clinical Labs Step Up, But Serious Problems Are Ahead

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ACROSS THE UNITED STATES, CLINICAL LABORATORIES ARE LIVING a good news/bad news story. The good news is that the essential role every lab plays in enabling fast, accurate diagnoses is now at the top of the news cycle. Daily, citizens of this country hear from the President and health officials that it’s a clinical laboratory test for SARS-CoV-2 which is essential for managing every aspect of the COVID-19 pandemic.

The bad news is the collapse in the number of specimens coming into the nation’s labs since the week ending March 14. That decline is as much as 60%, averaged across all labs in this country. Fewer specimens mean fewer claims. Fewer claims mean less revenue.

Cash flow is now inadequate to sustain the ongoing operations of many labs. Further, this cash crunch is compounded by the fact that claims sent by labs to Medicare carriers and private payers are not being processed in a timely fashion, due to shelter-in-place orders in most states. This means claims processing staff for payers cannot come into their offices to verify claims and issue payment to labs, thus further delaying payments to labs.

Complicating the management challenges facing all clinical labs and pathology groups is the fact that every aspect of the SARS-CoV-2 pandemic has no precedent. There is no accepted playbook that hospitals, doctors, and labs can follow with confidence to bring the outbreak under control. Each day, there is a new and unexpected twist in the pandemic and society’s response to it. The biggest question of all is when the COVID-19 outbreak may burn itself out in ways similar to the outbreaks of SARS, H1N1, and MERS.

Related to that is another important question. At the end of the COVID-19 pandemic, will hospitals, physicians, and labs see a surge in patients who need to get the healthcare they deferred during the pandemic? If this happens, will clinical labs be ready to handle a big surge in daily routine testing? Will they have adequate cash to recall laid off and furloughed lab staff?

Not every lab organization will survive the SARS-CoV-2 pandemic. The multi-year cuts to lab reimbursement by Medicare and private payers left many labs in this country at the knife’s edge of insolvency. The financial consequences of this pandemic may push a significant number of laboratories into financial collapse.

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