CLIA Accreditation Market: More Competitive Now?

Facing competition, deeming organizations may be ready to add more value to accreditation services

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CEO SUMMARY: It’s been three decades since compliance with the Clinical Laboratory Improvement Amendments (CLIA) became mandatory. During that time, there has been little competition among the major organizations with deeming status by the Medicare Program to accredit labs to CLIA. However, decisions by several major health systems to change the CLIA-accreditation provider they had used for years may be the catalyst for a new period marked by intense competition among the deeming organizations. If true, this will benefit labs that use these services.

CHANGE SEEMS TO BE HAPPENING IN THE ONCE-QUIET MARKET for CLIA accreditation services. This change may bring welcome benefits to all clinical laboratories that must comply with the requirements of the federal Clinical Laboratory Improvement Amendments (CLIA) of 1988 and thus use the accreditation services of one of several organizations granted deeming status by the Medicare program. 

Three System Labs Switched

It was The Dark Report that broke the news earlier this year that three of the nation’s large health systems had independently made a similar decision. Over the proceeding eighteen months, each health system independently decided to move its CLIA accreditation business away from the College of American Pathologists (CAP) and give that business to The Joint Commission (TJC). (See TDR, “CAP Loses Accreditation Clients to Joint Commission,” and “Why Are Health Systems Changing CLIA Accreditors?” Jan. 19, 2021.)

The only public announcement of a health system switch was on Sept. 14, 2020, when The Joint Commission issued a press release stating it had been “selected to provide Laboratory Accreditation Program services for the U.S. Department of Veterans Affairs (VA), effective September 15, 2020. Services include education on the accreditation process, on-site and post-survey reviews, ongoing monitoring activities, and data and measurement activities.”

In the following months, The Dark Report learned that Ascension Health and Providence Health had independently made similar decisions to move their respective CLIA accreditation business to The Joint Commission. 

These were important and significant developments in a critical area of lab management and operations. Since implementation of CLIA in 1992, the CAP has generally been considered to hold the largest market share of CLIA accreditation services in the United States. 

Yet here, in the space of less than 12 months, three major health systems had made independent decisions to begin using a new deeming organization for the CLIA accreditation of their clinical laboratories. The three health systems operate 372 hospitals, which shows the magnitude of the market change represented by these decisions. The number of hospitals operated by each health system is:

• Veterans Admin., 170 hospitals, 

• Ascension Health, 151 hospitals,

• Providence Health, 51 hospitals.

This is a significant shift in the market share of CLIA accreditation services. One way to estimate market share of CLIA accreditors is to compare the number of hospital labs switching their CLIA provider as a percentage of all community, acute care hospitals. Recent information from the American Hospital Association (AHA) shows that, in 2020, there were 5,198 community hospitals. Thus, the 372 hospitals involved in the switch represent 7.2% of all community hospitals in the U.S.

Magnitude of Market Shift

A second, possibly more relevant, way to understand the true magnitude of the market shift in favor of TJC is to subtract out the 1,821 rural hospitals reported by the AHA. The 372 hospitals switching their CLIA accrediting bodies thus represent 11% of 3,377 non-rural community hospitals.

Over the past seven months, The Dark Report has had conversations with a substantial number of clinical lab professionals and individuals within the major CLIA deeming organizations. The public disclosure that 372 hospital labs’ worth of CLIA accreditation business had decided to switch to another deeming organization caught the full attention of many lab leaders. 

What was common to all these conversations was a request for confidentiality. As long as it would be “off the record,” sources were willing to share some of the good, the bad, and the ugly of their experiences with the common process of a CLIA accreditation assessment of their clinical laboratories, regardless of which deeming organization they happen to use. This has enabled our editorial team to better understand the dynamics at play in CLIA lab accreditation. Some of these findings will be positive for those pathologists and lab administrators who spend substantial amounts of money with their choice of a CLIA accrediting organization. 

This intelligence briefing is to follow up the original reporting from January. To have as much as 11% of the CLIA accreditation market for non-rural community hospitals switch to the same deeming organization over an 18-month period was big news for the lab industry. 

One important positive development from the change in CLIA accreditation market share is how it signals that competition for lab accreditation business is intensifying. 

Improving CLIA Services

Clinical laboratory administrators and pathologists now have reason to hope that this intensified competition among deeming organizations will improve the CLIA accreditation services upon which they rely. Every deeming organization should want to devote consistent effort to learn whether or not it is meeting the minimum expectations of its lab customers if it wants to win new clients and expand its share of the CLIA accreditation market. 

A second positive development from these market-disrupting events is that labs may see lower prices from the deeming organizations. It is a long-standing complaint by labs that CLIA accreditation services are expensive for the benefits they provide. It is reasonable to expect that more competition among the major CLIA accrediting organizations may mean lower prices for labs. Or—if not lower prices—more value for the money. 

There may be a third benefit that follows from the independent decisions of three large health systems to move their CLIA lab accreditation business away from one organization and to another. In tandem with the disruption in CLIA accreditation lab inspections caused by the pandemic during 2020, the entire process of how labs are assessed for CLIA compliance may be reassessed and reconfigured to reflect the reality of today’s lab operations. 

This may happen because the deeming organizations now have an incentive to go to officials at the federal Centers for Medicare and Medicaid Services and argue that it is time to complete a comprehensive revision and update to the CLIA framework in place since 1992. 

Both Medicare officials and the CLIA accreditors have experience with remote lab assessments conducted during the pandemic. Lessons were learned about what parts of the 1992 CLIA requirements can be dropped as irrelevant or inappropriate to how labs operated in 2021. 

Meanwhile, it is important for pathologists and lab executives to have a better understanding of the types of issues that motivated three major health systems to independently decide to move their CLIA-accreditation business away from a deeming organization they might have used for decades and instead endure the disruptions needed to bring in a new CLIA accrediting organization. 

The lack of public announcements means that unnamed sources are needed to fill in some of the missing details. Those details include several complicating factors that led to the VA’s decision to use The Joint Commission, along with some of the political issues involved. 

There is also an unusual tale about a meeting in St. Louis that appeared to doom CAP’s chances of retaining Ascension’s accrediting business because of a failure to send enough members of CAP’s senior staff, according to an anonymous source. That source spoke to The Dark Report on the condition that the source’s name would not be revealed. 

Complicating Factors

One complicating factor behind the VA’s decision to use The Joint Commission instead of continuing to use CAP for its lab-accreditation services is that pathologists from VA labs have often been used to do CLIA assessments of the clinical lab facilities operated by publicly-traded companies. Those companies include Quest Diagnostics, Labcorp, BioReference Laboratories, and others. 

As a large federal agency, the Veterans Health Administration wants to avoid any hint of favoritism toward one vendor or another, the source explained. 

“For many reasons, the VA considers itself to be politically neutral,” the source commented. “For example, that is why, when a pathologist from a VA hospital lab visits a Quest or Labcorp site for an assessment, the VA pathologist would need to take a vacation day to fulfill the VA’s obligation to remain politically neutral in every possible way.

“That taking of a vacation day creates an awkward situation for the VA and perhaps for the publicly-traded lab company involved as well,” the source added. 

Another relevant factor about how the CAP would assess clinical laboratories that publicly-traded companies run is that if the CAP personnel doing the assessment did not have the technical expertise to assess complex aspects of a particular lab—such as molecular genetics—then the CAP would send a team to that lab from an academic medical center to do the more complex assessments, sources said. 

Is Saving Money a Factor? 

As with every issue in healthcare, saving money on services from outside vendors is critically important. A source told The Dark Report that one question that remains unanswered is why the VA would switch from the CAP to The Joint Commission. Could it be that the most likely reason is to save money? 

“No one in the lab business will ever tell you that the primary reason that a large health system changed from one CLIA accrediting authority to another is money,” the source told The Dark Report. “There is not a health system in the United States that will ever state publicly that it is considering making such a change to save money. No one in a health system would ever admit that they want to save money, because doing so implies that they are sacrificing quality to do so.

“Patients don’t want to be associated with health systems that do anything but promote quality healthcare,” the source noted. “Health system administrators will always say that they provide the best quality and that the best quality is worth every penny.

“That said, we all know that, in truth, if healthcare administrators can save money they will do so,” the source noted. “But if they make a change to save money, they will never say so.” 

Collectively, feedback from numerous sources indicates that this newly-intensified competition among deeming organizations may result in more value for CLIA accreditation services. This competition could even produce lower prices for CLIA accreditation services. Clinical labs would welcome these developments. 

CAP May Be Ready to Enhance CLIA Services

WITHIN THE COLLEGE OF AMERICAN PATHOLOGISTS (CAP), last January’s news report about the switch of three of its bigger and long-standing health system clients to another deeming organization appears to have triggered a significant assessment of the College’s CLIA accreditation program. Beyond one public statement provided to The Dark Report by CAP in January, the College has not commented further. 

Individuals with knowledge of some internal conversations say that the CLIA accreditation program now has the full attention of the CAP board and senior administrators. There is recognition of the need to be more responsive to the expectations of lab clients. The price of accrediting services is being reviewed. Another element is how the peer-assessment team is used for the on-site inspection of laboratories. 

If true, this may mean that labs using the CAP’s CLIA accreditation services might eventually see a more customer-responsive CLIA accreditation process, one that may even be less expensive than current services. 

Compass Group Labs Sent Letter to CAP

IN THE WEEKS FOLLOWING THE DARK REPORT’S STORY about how The Joint Commission had won the CLIA lab accreditation business of three major health systems that collectively operate 372 hospitals, at least one association of hospital lab leaders expressed their concerns in writing to CAP.

The Compass Group is an organization of 30 not-for-profit IDN System Laboratory leaders “who have established collaborative relationships to identify and share best practices and strategies to help ensure the survival of the not-for-profit laboratory industry.” Their leaders sent a letter to CAP expressing concerns about the College’s CLIA accreditation process and service. 

Given the timing of that letter following publication of the news that three other major health system laboratories had decided to move their CLIA accreditation business to another deeming organization, it can be assumed that Compass Group member labs probably had similar concerns about how the College priced and delivered its CLIA accreditation services.

When The Dark Report asked for a copy of that letter and for a comment, the representative of The Compass Group confirmed that a letter had been sent, but declined to provide the letter or offer a comment. 

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