Economics of Lab Testing to Be Challenged

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BY ANY MEASURE, 2012 IS SHAPING UP TO BE A YEAR OF MAJOR CHANGE for healthcare and the clinical laboratory testing industry. Unfortunately, an early reading of the tea leaves indicates that the outcomes are not likely to be favorable for most clinical laboratories and anatomic pathology groups.

Let’s start with one bright spot in laboratory medicine. Recent years have seen a slew of new molecular and diagnostic tests with capabilities that allow pathologists and clinical laboratory scientists to make a more accurate diagnosis of disease earlier, and then help the physician select the best therapy for the patient.

Certainly this is true for infectious disease testing, one of the first major success stories associated with expanding clinical use of genetic and molecular technologies in diagnosis. Similarly, oncology is benefitting from the more precise diagnostic tools that incorporate analysis of DNA, RNA, and proteins.

But there is a big downside to the acceptance and widening use of genetic and molecular assays in clinical diagnostics. It is the growing cost of such testing. Payers, both government and private, believe they must take active steps to control growth in this sector and better manage what they consider to be budget-busting costs associated with genetic and molecular diagnostics.

As you will read on pages 3-6 of this issue of THE DARK REPORT, Medicare’s biggest carrier, Palmetto GBA, recently issued two draft LCDs (Local Coverage Determinations). Essentially, if enacted on February 27, 2012, Palmetto would begin rejecting claims for molecular diagnostic tests and laboratory-developed tests (LDTs) that lack a local or national coverage decision by Medicare—unless these assays meet a specific set of regulatory and coding criteria. That is certainly a threat, particularly if Palmetto ends up implementing a more restrictive policy on molecular diagnostics and LDTs on that date and other local Medicare carriers and private payers adopt similar reimbursement policies.

At the same time, don’t forget that there are at least three separate proposals circulating in Congress that would significantly reduce funding for Medicare Part B laboratory test fees. Given the cumulative impact of all the decisions to be made next year by legislators, Medicare carriers, and private payers, it is safe to predict that much less money will be paid to labs as a result of new policies and new Congressional budget decisions.

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