Lab Competitive Bidding Project Slated For Jan. 1

Medicare officials have yet to disclose which regions and zip codes will be involved

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CEO SUMMARY: In a rather quiet fashion, Medicare officials have disclosed timetable dates for implementing the laboratory competitive bidding demonstration mandated by the 2003 Medicare spending bill. Medicare intends to announce the names of participating laboratories by January 1, 2007. It also wants to implement demonstration pricing in the target regions by April 1, 2007.

IN JUST FOURTEEN WEEKS, the Centers for Medicare and Medicaid Services (CMS) plans to disclose the names of laboratories eligible to participate in the upcoming Medicare demonstration project for the competitive bidding of laboratory testing services.

By January 1, 2007, CMS intends to distribute to Medicare carriers the list of laboratories eligible to participate in the demonstration because of their bid. It is planning to implement the laboratory demonstration fee schedule by April 1, 2007.

These dates appeared in a document produced by CMS and dated July 28, 2006. It is titled “Subject: Laboratory Competitive Bidding Demonstration Project” in the CMS Manual System under “Pub 100-19 Demonstrations” (Transmittal 48, Change Request 5205).

The document lays out some procedures and steps to be taken to implement the Congressionally-mandated demonstration project. This project was authorized in the Medicare spending bill passed in 2003.

This news is likely to be a surprise to most pathologists and laboratory directors. CMS has made few public announcements about the laboratory competitive bidding demonstration project and has yet to disclose which regions of the United States will be involved in the demonstration.

Under this newly-disclosed timetable, CMS has little more than three months to announce the details of the bidding process, distribute forms to interested laboratories, hold public meetings on the specifics of the demonstration, accept bids, evaluate these bids, and designate which laboratories will participate in the demonstration.

One watchdog for the laboratory industry was first to get a copy of the July 28 CMS document and make its contents public. That was the American Clinical Laboratory Association (ACLA), based in Washington, DC. ACLA has closely tracked this demonstration project and the efforts by CMS and its contractors to establish the program parameters and implementation timetable.

“Given that laboratories do not know the demonstration site, the details of the design of the demonstration, or whether they will be required to bid,” observed Alan Mertz, ACLA’s Executive Director, “it’s unrealistic to think that they will be able to prepare and submit bids for virtually all the tests on the clinical laboratory fee schedule, and that CMS will be able to evaluate the bids, determine the demonstration fee schedule, and select winning bidders, all by the end of the year.”

Impending Train Wreck

THE DARK REPORT observes that the Medicare laboratory competitive bidding demonstration has all the characteristics of an impending bureaucratic train wreck. For starters, the Medicare program itself is a major source of distortions and inappropriate incentives within the American healthcare system. Critics of federal healthcare programs often characterize Medicare and Medicaid as operating like a Soviet-style bureaucracy, dictating prices and terms which are often disconnected from real costs and prices in the healthcare marketplace.

So, to embed a laboratory competitive bidding demonstration within the Medicare system means that this program starts from an unstable foundation.

Second, it is bureaucrats who must define the demonstration project and create a process by which this demonstration can be implemented. Although it is widely-recognized that most bureaucrats are well-meaning and want to do the right thing, experience teaches that the product of their effort is often unsatisfactory to consumers, industry participants, and Congress.

Discounted Pricing

There is another disturbing element to the laboratory competitive bidding demonstration. Although CMS named a panel of laboratory professionals specifically to offer advice and input, CMS has failed to utilize this panel. During the past 12 to 18 months, members of this panel have had minimal contact with CMS and its contractors. Thus, Medicare officials and their con- tractors are developing the demonstration policies and protocols without significant and timely input from the very panel of laboratory professionals selected for this purpose.

Moreover, this panel of laboratory professionals, if involved appropriately in the design and implementation of the demonstration, would have provided significant credibility for CMS. Given the implementation timetable described on July 28, it appears that CMS will proceed without this input and will be vulnerable to the inevitable criticism about flaws in the program’s design and implementation.

This laboratory competitive demonstration project has the potential to do much harm to the existing resource base of clinical laboratories. It appears that the next 14 weeks will, by necessity, be very eventful for the laboratory industry.

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