Laboratories Enter The Era Of Big Government

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You will read in this issue of THE DARK REPORT how federal prosecutors have now taken all three of the national laboratories to the woodshed. SmithKline Beecham Clinical Laboratories was the latest to make the trip, paying $325 million to settle a wide variety of allegations and violations of Medicare regulations.

However, there is something more important than the news of SmithKline’s huge settlement. Federal regulators are about to change virtually every aspect of how the clinical laboratory industry conducts business. In the process, they are going to make laboratory directors and managers personally liable for criminal charges should investigators decide that a laboratory did not correctly comply with new rules.

Clinical laboratory executives are about to learn a new management skill: government compliance. It will be expensive. It will be time consuming. In the foreseeable future, I expect HCFA to introduce a steady flow of guidelines, test panel revisions, national directives and similar initiatives. Laboratories will watch operating profits steadily shrink, as one motive in these efforts is to cut Medicare/Medicaid costs.

Although I am sympathetic to the plight of the industry, I must point out that none of the issues raised by Medicare/Medicaid officials seem to trouble private payers. This is the difference between the government and the private sector. As government regulators begin implementing a slew of new guidelines, regulations, model compliance programs and the like, clinical laboratories will groan under the burden of compliance.

These developments now bring laboratories into an age of big government. So long as they accept Medicare/Medicaid funding, they will have to play the government’s game. Universities and colleges went through this as a result of accepting federal grants and other types of funding, the most recent examples of government influence being the introduction of females into The Citadel and Virginia Military Institute. Easy solutions to problems and common sense are not normally associated with government programs.

As the government prepares to go after 5,000 hospitals for alleged violations of laboratory billing regulations, small independent labs should be preparing for their own shakedown. Now that government investigators have acquired both knowledge and legal precedents in their investigations of the national laboratory chains, it would be foolish to think that they will ignore the 1,000 plus independent laboratories still in business around the country.


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