Medicare Fees Less Than Lab Costs to Serve SNFs?

Even without PAMA price cuts, labs struggle to serve nursing homes, assisted-living facilities

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CEO SUMMARY: Anticipating the negative financial impact of the Medicare 2018 Clinical Laboratory Fee Schedule, a community lab company serving 24 nursing homes on the Jersey Shore stopped offering such services at the end of last year, a lab director told THE DARK REPORT. “The same forces driving this laboratory to close its nursing home business will cause many more nursing home laboratories to follow,” stated Aculabs CEO Peter Gudaitis during his interview with THE DARK REPORT.

NURSING HOMES AND LONG-TERMCARE FACILITIES are considered to be probably the most difficult healthcare sectors for clinical labs to serve efficiently. The costs to collect patients’ specimens and run the tests often are perilously close to the existing payment these labs get from Medicare, Medicaid, and commercial health insurers, lab directors say.

In his declaration supporting the American Clinical Laboratory Association’s lawsuit against the federal Department of Health and Human Services, Peter Gudaitis, President of Aculabs in East Brunswick, N.J., explained how his lab has served this market since 1972 and how the latest rates from Medicare threaten this segment of the clinical lab testing business.

“In fact, the tough finances and imminent cuts to Medicare Part B clinical laboratory test prices in 2018 caused at least one laboratory serving 24 nursing homes on the Jersey Shore to stop offering such services at the end of last year,” noted Gudaitis in a telephone interview with THE DARK REPORT. “The same forces driving this laboratory to close its nursing home business will cause many more nursing home laboratories to follow.

“If our lab and other labs like ours are not around to do this work, I have no idea who will step in to serve nursing homes and LTC facilities,” he commented. “To service our clients, my lab needs 200 people driving around to collect the samples from patients in the nursing homes and the assisted-living facilities we serve.”

Few Labs Serve This Market

Aculabs performs more than 10 million tests annually. It serves 750,000 patients each year in 320 skilled nursing and assisted-living facilities in New Jersey, Pennsylvania, Maryland, and Delaware. It runs these tests in two laboratory facilities, one in East Brunswick and one in Cherry Hill, N.J.

“Less than 100 lab companies provide services to the majority of skilled nursing and assisted living facilities nationwide,” observed Gudaitis. “Like Aculabs, these community lab companies are heavily dependent on Medicare beneficiaries for their customer base.”

Of those 100 labs, Aculabs is one of four that provide 30% to 40% of all lab testing services to nursing homes and LTC facilities nationwide, he added. All of Gudaitis’ comments below come from his declaration in the ACLA lawsuit.

Geography-Specific Work

“Each of the four [community labs] is concentrated in certain geographic areas with little overlap,” he said. “Because services to long-term care facilities are directly tethered to the location of each laboratory’s testing facilities and its ability to get specimens there within hours, these laboratories are unlikely to step into the shoes of another, should one [lab] exit the marketplace.

“Moreover, if one of these laboratories were to exit the marketplace, the likely reason is that the marketplace was no longer profitable for Medicare patients, making it unlikely that other [labs] would attempt to enter in its stead,” he explained.

The reason labs serving nursing homes and LTC facilities may exit the market is that they have much higher costs to provide laboratory test services to their patients than large commercial lab companies have.

“The vast majority of tests that Aculabs performs yield some of the lower reimbursement rates paid by Medicare,” Gudaitis said. He identified the following four basic tests as representing about 75% of Aculabs’ tests:

  1. Complete blood count (CPT code 80025),
  2. Prothrombin time (CPT code 85610),
  3. Basic metabolic panel (CPT code 80048), and,
  4. Comprehensive metabolic panel (CPT code 80053).

“Aculabs’ patient population does not require many of the costlier tests used for diagnosis, including molecular testing and advanced testing,” he explained.

In the declaration, Gudaitis further stated that, should labs serving nursing home and LTC facilities close, other labs are not likely to assume that work.

“Because of the unique medical needs of patients in long-term care facilities and the accompanying costs and challenges of providing clinical laboratory services to them, laboratories that operate in other sectors of the market—like independent laboratories or hospital laboratories—are unlikely to step in to provide services,” he said.

“If they did enter the long-term care market, other labs would provide significantly reduced services at the ultimate expense of patient health,” Gudaitis said.

“For example, a large independent laboratory—with limited direct specimen collection ability, specified travel routes, and less of an ability to provide quick turn-around test results—would not be able to provide the services demanded by long-term care patients without changing its business model,” he added.

Non-Complex Lab Tests

“Moreover, it is unlikely that the skilled nursing facility laboratories themselves, which typically provide only limited, simple, non-complex clinical laboratory testing, will be able to dramatically increase the services offered,” noted Gudaitis.

“To do so would require additional accreditation, staffing, and equipment which, given the small, fixed patient population at the facilities, is unlikely to be financially reasonable. This is the reason why these institutions typically contract with laboratories like Aculabs.

“If laboratories serving skilled nursing facilities, nursing homes, and other LTC facilities do not leave the marketplace (or if another type of laboratory were to enter the market), they will be forced to reduce the services they provide which, in turn, poses a very real and substantial threat to beneficiary health and safety,” he said.

Adverse Effects on Care

“For example, laboratories like Aculabs will not be able to send phlebotomists to the facility for direct collection as frequently and, as a result, patients will have to wait longer for test results,” Gudaitis said.

“There is a direct correlation between delayed laboratory results and poor health outcomes for people who rely on regular diagnostic testing for maintaining their chronic conditions,” Gudaitis explained. “The sick and elderly patient population is unlikely to be able to tolerate a slower service model.

“Many patients who require ‘STAT’ testing will not be able to wait for a phlebotomist to arrive, and the facility will have no other option but to request ambulance transportation for that patient to the hospital emergency room solely for the purpose of swift diagnostic testing that otherwise could have been provided by a phlebotomist on a ‘STAT’ run,” he said.

“Not only does this increase the cost of providing clinical laboratory services to those patients, it also increases the risks of collateral harm that could result from transporting frail and elderly patients to the emergency room (including exposing them to infection).” Patients in rural areas will feel the effects of such cuts in lab test rates hardest, he concluded.

Contact Peter Gudaitis at 732-245-5123 or

ACLA’s Lawsuit Lists ‘Flaws in CMS Data,’ Claim Is that CMS Did Not Meet PAMA Statute

CONTAINED IN THE LAWSUIT recently filed by the American Clinical Laboratory Association against the Department of Health and Human Services is a list of what ACLA alleges are flaws in how the Centers for Medicare and Medicaid Services conducted its market price study of the lab test prices paid by private health insurers.

Many pathologists and lab administrators are familiar with the well-publicized fact that CMS used data submitted by just 0.07% (or 1,942 labs) of the nation’s 261,500 lab entities that were paid Part B lab test reimbursement in 2016. They may also know that, of the 7,000 hospital labs that were paid for Part B lab tests in 2016—representing 26% of all Part B payments—no more than 21 hospitals provided data to CMS.

But there are some little-known facts about the CMS data collection process of equal interest. One is that 2.4 million data points were submitted by labs showing $0.00 prices! Another is that 3.7 million data points are “unlikely outliers,” being less than $1.00 and more than $10,000.

Here are seven flaws identified by ACLA that are described in the lawsuit, as follows:

• Hospital labs only contributed 1% of the data compared to 26% share of Medicare CLFS spending.

• Physician Office Labs (POLs) only contributed 7.5% of data compared to 18% share of Medicare CLFS spending.

• 2.4 million $0.00 prices were submitted as compared to 2.3 million data points from all reporting hospital NPls.

• 3.7 million data points are likely inaccurate outliers, creating questions of pricing errors which are not obvious as outliers (outlier defined as less than $1.00 and greater than $10,000).

• Alternative CMS simulations incorrectly assume additional hospital labs and physician office labs would report pricing volume and distribution identical to data already captured.

• CMS selectively corrected or omitted data that would have resulted in higher than expected weighted medians.


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