Supply and Demand for Lab Services and Pathologists

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IT SEEMS THE LABORATORY INDUSTRY HAS MANAGED to beat back the proposed 20% patient co-payment for Medicare Part B laboratory testing services. Kudos to the hard-working laboratorians and their lobbyists who devoted money and time to oppose this proposal.

But the news remains glum. Word is that lawmakers are considering a ten-year freeze on cost-of-living adjustments to laboratory services. That’s certainly not a welcome development. It seems that Part B lab testing is considered a ripe target for budget-shifting efforts to enrich other parts of the Medicare reimbursement structure. I believe the laboratory industry will see worse in the next few years than the current budget-cutting proposals in the Medicare program. Because government health programs represent a major part of our healthcare system, it is now a fact of life that bureaucrats, no matter how well meaning, make important decisions that affect all patients served by laboratories as well as those who work in laboratories.

Supply and demand for laboratory services is affected by these decisions. As our exclusive intelligence briefing about the demand for pathologists (pages 9-14) indicates, factors which affect the working environment for pathologists can increase or decrease the supply of new medical graduates over a fairly short period of time, say five to seven years. From the poor employment market for pathologists in the second half of the 1990s, we now see strong demand, particularly for those with subspecialist skills. The same is true of the supply of medical technologists (MT). In earlier issues, THE DARK REPORT has analyzed how liberal Medicare funding sparked a “tidal wave” in annual MT certifications, beginning in the early 1970s. This tidal wave crested in 1983 (after implementation of Medicare DRGs) and has stayed at relatively low levels ever since.

It is important for lab directors and pathologists to recognize that market forces do have significant impact on all aspects of laboratory operations. How many laboratories exist to compete, what salaries are paid to technical staff, whether adequate numbers of technical staff can be hired; all of these factors are greatly influenced by supply and demand forces in today’s healthcare marketplace. That is why I think one consequence of continued cutbacks in Medicare funding for Part B laboratory services will be to negatively affect the overall supply of laboratory testing services in coming years.

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