Labs Serving Nursing Homes, Rural Areas to Suffer Most

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CLINICAL LABORATORIES WITH A HIGH percentage of Medicare Part B lab test reimbursement are expected to suffer the most under the Part B Clinical Laboratory Fee Schedule (CLFS) cuts that the Centers for Medicare and Medicaid Services proposed Sept. 22.

With the proposed rates scheduled to go into effect on Jan. 1, that leaves just 12 weeks for clinical labs to meet with legislators and government officials to argue that the 2018 Part B lab test price cuts could put a significant number of labs out of business. This would cause many Medicare beneficiaries to lose access to lab testing in their communities.

The proposed 2018 CLFS was established under the Protecting Access to Medicare Act (PAMA). Experts noted the irony that an act designed to protect Medicare beneficiaries may have the opposite effect because many clinical labs serving the most vulnerable Medicare beneficiaries could struggle financially under the lab test price cuts Medicare proposed.

$670 Million Fee Cut In 2018

The draft 2018 lab test prices would cut what CMS pays for clinical lab tests by $670 million, or about 10% of the $7 billion it pays for lab testing annually. This level of savings is a much deeper cut than CMS had estimated in 2016 when it said the market-based payment formula it developed under PAMA would cut about $400 million in 2018.

Although the average reduction in payment for all clinical lab tests will be 10% in 2018, the prices CMS pays for the 20 highest-volume lab tests will be cut by 28% over the years 2018, 2019, and 2020, according to an analysis from XIFIN, a healthcare IT company for clinical labs. Most of the labs serving small communities, rural areas, and nursing homes run the top 20 most common clinical lab tests every day. These 20 common tests make up the largest proportion of test volume at community and rural hospital labs.

A Death Knell For Many Labs

“These proposed rates will be the death knell for many labs throughout the United States and not just labs serving nursing homes and rural areas,” observed Mark Birenbaum, PhD, Administrator of the National Independent Laboratory Association. “The survivability of small to medium-sized and community and hospital labs and even some large regional labs will be threatened.”

“Labs that have a high percentage of Medicare Part B reimbursement are particularly vulnerable,” Birenbaum said.

“If you’re a small community lab doing $3 million to $5 million—and even if you’re a bigger regional lab doing $25 million to $50 million—and 50% of your revenue is from Medicare, then this Part B price schedule threatens your financial viability,” he added.

“If you have 50% Medicare, and you’re facing a cut of about 30% over the next three years for most of the high-volume tests you run for Medicare patients, then you’re facing a 15% cut to your bottom line,” he explained. “The majority of labs don’t have profit margins that exceed 15%. That’s why this proposal threatens a large number of labs of all sizes.

“Even labs that do less Medicare work will feel these cuts because private health insurers will key their future payments on the 2018 Medicare Part B clinical lab fee schedule and reduce their payments accordingly,” Birenbaum said.

“The only labs that will not be hurt by this proposal are specialty labs that do a small number of advanced diagnostic lab tests (ADLTs) or tests not paid by Medicare,” he explained. “Other labs that will be okay are those that have alternative revenue streams, or labs that do only lab-to-lab referral work and get paid cash. But even those labs could be affected in the coming years if their client laboratories reduce their referrals or go out of business because of the fee cuts.

“It’s hard to say when private payers will lower their rates for clinical lab tests,” he added. “It will probably be when contracts run out and then get renewed. But you would expect that most private payers will reduce what they pay for lab tests at the first opportunity.”

Contact Mark Birenbaum at 314-241-1445 or

Clinical Lab Professionals Need to Make Their Case Quickly to Members of Congress

“LAB DIRECTORS AND PATHOLOGISTS should tell their members of Congress that the proposed Clinical Laboratory Fee Schedule for 2018 will cause some labs to struggle financially and will be the death knell for many labs,” stated Mark Birenbaum, PhD, Administrator of the National Independent Laboratory Association.

“The implementation date is only 12 weeks away,” he said. “That is adequate time to write to members of Congress to explain the effect of these cuts,” he continued. “In these letters, lab professionals need to explain three important reasons to delay implementation of the Part B lab test fee cuts.

“First, the letter should discuss the negative financial impact these proposed rates will have on their labs,” he noted. “Second, the letter must describe how Medicare beneficiaries in the elected official’s district will lose access to high quality, local lab testing services. Third, the letter should explain their lab’s role in the senator’s or representative’s district or state and what will happen if those jobs leave the district.

“Labs need to ask their members of Congress to call on the acting secretary of the federal Department of Health and Human Services not to make these cuts,” he added. “The secretary or acting secretary should put a hold on this proposal administratively.

“Or, Congress could pass a bill anytime between now and December that would affect the implementation date,” he added. “The biggest problem for labs is that they have not yet made their voices heard collectively to members of Congress and to HHS. All the small, regional, hospital, and larger labs need to use their voices. When they have done so in the past, they have succeeded. But if lab professionals don’t contact their elected officials, the chance of getting something done is diminished.”

Some lab associations are considering challenging the CLFS in court. NILA is not doing so, Birenbaum said. “We’re not considering a court action at the moment but we will certainly listen to what the other groups are saying and telling their members what to say,” he added.

If labs that serve rural areas and nursing homes go out of business, it’s unlikely that large lab companies will step in to fill that need, experts predict. The consequence will be the loss of quality lab testing services locally, the loss of well-paid medical technologist jobs, and the loss of access for Medicare beneficiaries.


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