NY Labs Achieve Repeal Of Onerous Surcharge

Lengthy effort to gain legislative repeal of laboratory test surcharge finally succeeds

CEO SUMMARY: Clinical laboratories in the state of New York demonstrated that the lab industry can effectively influence legislation when the state legislature finally repealed the onerous laboratory test surcharge first enacted in 1997. Lab industry leaders should apply the lessons learned from the New York experience to improve the laboratory industry’s track record in working with Congress.

CLINICAL LABORATORIES in New York state won a major victory at the close of 1999. Legislation was passed and signed by the governor to repeal the 8.18% tax surcharge assessed on laboratory tests.

“This is a major victory for clinical laboratories in New York,” stated Thomas R. Rafalsky, President of the New York State Clinical Laboratory Association (NYSCLA).

“Not only did we succeed in getting this unwarranted 8.18% surcharge repealed,” he explained, “but our ability to generate sustained public response against this tax surcharge has made state legislators, officials and regulators respect us and pay attention to our needs.”

The tax surcharge was first assessed on January 1, 1997. It was slipped into state legislation that reformed hospital financing arrangements. Its passage caught New York laboratories by surprise. “Since clinical labs have never been part of the old hospital financing scheme, we didn’t expect to be included in the reform legislation,” recalled Rafalsky.

As first reported in THE DARK REPORT, laboratorians hit upon a clever way to get the attention of state legislators and government officials. Laboratories printed a notice to patients on their lab bill, and requested that they contact their elected official and demand a repeal of the tax surcharge. (See TDR, December 16, 1996 and February 17, 1997.)

1,000 Phone Calls Per Day

At its peak, this lab-inspired campaign was generating 800 to 1,000 telephone calls per day just to the Department of Health! The Governor’s Office and state legislators were also inundated by calls from irate constituents. They couldn’t ignore the message from their voters.

“There were two phases in our campaign to repeal this tax surcharge,” noted Rafalsky. “During the first phase, we were aggressive. Participating labs sent out patient bills asking them to directly call and request the repeal of this tax. As part of this effort, we established a toll-free 800 telephone number. When patients called this number, we connected them directly to their particular state senator or assemblyperson.

Attention Of Legislators

“Once it was clear we had the attention of both the state legislature and state regulators, we moved to a more educational phase,” he added. “This involved having patients contact us, and we then sent a fax, in their name, to their elected representative.”

Several times during 1997 and 1998, the lab industry was promised by state officials that the tax surcharge was definitely scheduled for repeal. “It was clear that they wanted to be done with us,” Rafalsky stated. “But each time we were close to repeal, something would happen to the political scene that bottled up our particular piece of legislation.

“However, we never stopped the flow of constituent messages going to state legislators,” he said. “They always knew we were there and not going away. During 1999, as the reform legislation expired under its sunset clause, the laboratory tax surcharge was the only ancillary surcharge dropped from the new hospital financing bill.”

Labs Can Work Together

THE DARK REPORT believes that clinical laboratories in New York have demonstrated how the national lab industry can work together to get the attention of Congress and regulators on issues affecting laboratory medicine and pathology. Rafalsky concurs.

“There is no reason that what we did in New York cannot be accomplished on a national basis,” he declared. “We developed a lobbying plan that included personal contacts by laboratory executives with state officials and state legislators. This was supported by having participating laboratories educate their patients about the tax surcharge, using patient bills as the method.

“Just in New York State, we estimate than more than 100,000 patient bills are mailed daily,” continued Rafalsky. “On a national basis, that number probably exceeds 1,000,000 per day. This demonstrates the extraordinary reach that clinical laboratories have within the general population. We used that as an asset throughout the entire lobbying campaign.”

Rafalsky does have a word of advice about the lobbying process. “You must be prepared for the long haul,” he said. “When it comes to politicians and regulators, nothing happens overnight. The process almost seems designed to wear people down, and government officials know this.”

Proven Blueprint For Action

THE DARK REPORT observes, as it has during the course of the lab tax surcharge repeal campaign, that the New York experience gives the national commercial laboratory industry a proven blueprint for accomplishing legislative change. This change came about because the majority of commercial laboratories in the state worked together for a common purpose. This demonstrates that concerted action can get the right kind of attention from legislators.

In fact, the lab tax surcharge repeal was mostly due to grass roots efforts by independent lab owners. This is a powerful message to a segment of the lab industry which frequently feels powerless to influence legislation affecting the industry. There is a way to get the attention of Congress. But it will require unified action. The question is, will traditionally independent lab owners be willing to work together for common cause?

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