Less Money for Labs Is International Trend

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TOO OFTEN THESE DAYS, labs are asked to accept less money. This is true in the United States and in many developed countries around the world.

Many of you know that the latest version of the Senate health reform bill recently released by Max Baucus (D-Montana) calls for all providers to pay a “fee” as one source of revenue to fund the proposed expansion of healthcare services. In the case of laboratory testing, the Senate bill pencils in laboratory testing for $750 million in annual fees. That would be a unique new source of government revenue and would be assessed even as the same Senate bill mandates a reduction in fees paid for lab testing services. It presents clinical labs and anatomic pathology groups in this country with a revenue double-whammy. (See pages 7-8.)

However, compared to what’s happening to private laboratory testing companies in New Zealand, U.S. pathologists and laboratory executives should consider themselves fortunate that they still have the opportunity to provide laboratory testing services to patients and physicians. In New Zealand, the government health service, at both the national and local levels, is acting as if “profit” is an element that saps money out of available funding for health services.

Beginning early in this decade, at a regional level, district health boards in some regions began awarding exclusive, multi-year contracts. In these communities, to bid and win, competing private pathology labs had to join together and form a single lab provider company. In return, the government granted the new lab joint venture a monopoly in that market for the term of the contract.

Where it gets interesting is at the end of these monopoly contracts. In the case of Auckland, as that first lab testing contract ended, under questionable bidding circumstances the district health boards awarded the next eight-year contract to a brand new lab company—which had no laboratory and no staff in Auckland to service this contract! This new lab company offered a bid that was 20% lower than what was offered by the existing contract holder. (See Pages 3-6.)

As you read this, the patients and physicians in greater Auckland are experiencing the first consequences of this new money-saving lab testing contract, which became effective September 7. Critics will be watching to learn if the district health boards will truly realize the projected reduction in the cost of lab testing, without causing a serious decline in the quality of lab testing services.

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