PAMA Fee Cuts a Factor in Outreach Lab’s Sale

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THROUGHOUT THE WORLD, THE UNITED STATES IS ENVIED for the quality and ready access to medical laboratory tests that it delivers to physicians and their patients. Yes, there are criticisms that healthcare costs too much in this country compared with costs in other nations. But few countries offer both convenient access to testing services and the full menu of state-of-the-art diagnostic tests that are common in this country.

Unfortunately, administrators at the federal Centers for Medicare and Medicaid Services (CMS) seem to be taking the first steps on a path that could cause this valued healthcare asset—convenient patient access to high-quality lab tests performed locally—to deteriorate and break apart. This consequence will result from their implementation of the private payer market price reporting rule under the Protecting Access to Medicare Act and the deep cuts to Medicare Part B fees they intend to enact on Jan. 1, 2018.

First evidence that the proposed Medicare lab test fee cuts will cause community labs and hospital lab outreach programs to go out of business surfaced last week. PeaceHealth of Vancouver, Wash., announced an agreement to sell its successful lab outreach business to Quest Diagnostics Incorporated. The outreach lab company, PeaceHealth Laboratories, provides services to communities throughout Oregon, Washington, and Alaska. It employs 906 people and PeaceHealth has already acknowledged that 500 people will be “affected” (translation: laid off) by the sale. Quest may rehire an unknown number of these individuals.

This sale is significant. The CEO of PeaceHealth Laboratories, Ran Whitehead, in an interview with THE DARK REPORT, describes how the PeaceHealth administration, following enactment of PAMA in 2014, began modeling the financial effect of cuts to Medicare lab test fees on the lab’s financial sustainability. As you will read on pages 3-9, the conclusion was that PeaceHealth’s lab outreach business would be unable to continue with the needed cash flow and capital to sustain clinical quality and lab test services at acceptable levels. Thus, the decision to sell the lab before CMS instituted cuts to Medicare lab test fees.

Officials at CMS should pay close attention to this hospital lab outreach sale. It is the first example of what could be a wave of closures, bankruptcies, and forced sales that will happen as the Medicare fee cuts cripple community labs and the lab outreach programs of small and rural hospitals.


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