Is CMS about to Create New Lab Winners, Losers?

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FROM ITS INCEPTION IN 1966, THE MEDICARE PROGRAM WAS DESIGNED to give beneficiaries easy access to healthcare services while allowing any qualified provider to provide those clinical services. That is about to change for the worse for many patients and the clinical laboratories that serve them in communities throughout the United States.

That bold statement is based on how the federal Centers for Medicare & Medicaid Services is moving to implement lab test market price reporting as mandated under the Protecting Access to Medicare Act (PAMA). Simply said, CMS has crafted a rule that will produce significant cost savings from the Part B Clinical Laboratory Fee Schedule, but at the expense of many community labs.

Assuming that the final rule, as issued by CMS on June 17, is implemented without change, then Medicare officials will have put in place a scheme that will favor certain types of clinical labs while having a punitive financial effect on other types of clinical labs. This is inevitable, given the economics of lab testing. Labs with small volumes of specimens have a higher cost per test than labs with high volumes of specimens. Yet, these smaller labs serve smaller communities and rural towns that larger lab companies consider uneconomical. Thus, smaller labs have an essential role in the American healthcare system by providing both physicians and Medicare beneficiaries with access that otherwise does not exist in their towns—at a price that has always been considered reasonable.

Both the PAMA law itself and the final rule on lab test market price reporting issued are examples of that oft-quoted insight by Otto von Bismark, the Chancellor of Germany from 1862 to 1890. He once said, “Laws are like sausages, it is better not to see them being made.” His point was that lawmakers and bureaucrats are subject to vested interests and complicated negotia- tions when lawmaking.

These factors have been in play, both during the time when Congress was writing the PAMA law and when CMS was interpreting the statute as it crafted the rules needed to implement the law. At every step in the process, different vested interests in the clinical lab industry have attempted to shape the law in ways that favor their interests. Now, with a final market price reporting rule, the clinical lab industry is about to journey into an unknown, using a flawed process that some expect to create new lab winners and losers.

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