FL Medicaid Gives Up On Statewide Lab Contract

For the moment, laboratories in Florida have stopped a “bad” contracting proposal

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CEO SUMMARY: With the withdrawal of the December 13, 2004 “Invitation to Negotiate” (ITN), Florida’s Medicaid bureaucrats seem to have thrown in the towel—at least for the moment—on the effort to give a single laboratory company an exclusive three-year contract to provide laboratory testing services throughout the state. Labs in Florida are relieved, but remain wary that this contract proposal may resurface.

IT WAS A VICTORY. But it remains to be seen whether it was a victory of common sense over a bad idea—or just another pause before Florida’s Medicaid bureaucrats make another attempt to award a single lab company with a three-year statewide laboratory testing contract.

The news was made official on February 18, 2005. Florida’s Agency for Health Care Administration (AHCA) posted a “Notice of Withdrawal” stating that it had withdrawn AHCA ITN (Invitation to Negotiate) 0508, issued on December 13, 2004, for Medicaid Independent Laboratory Services.

“This is a welcome development,” said Alan Mertz, President of the American Clinical Laboratory Association (ACLA), based in Washington, DC. “ACLA had filed a challenge on several issues improperly addressed in the ITN. We had confidence that we would prevail if a hearing before an administrative judge was to take place.”

Neither Mertz nor any lab manager in Florida has been told by AHCA officials why the ITN was pulled and what might come next. “ACLA has had no direct contact with AHCA and so we have no knowledge about how and why this decision was made,” said Mertz.

There is still bad news for clinical laboratories in Florida. The appropriations bill passed by the Florida legislature which authorized that a statewide laboratory testing contract be awarded by Medicaid has another clause. Effective April 1, 2005, if AHCA has not awarded the laboratory testing contract, it is to institute a 10%, across-the-board, reduction in reimbursement paid for outreach laboratory tests.

Twist In The Story

However, there is a twist in this story. The enabling legislation which authorizes this fee reduction expires on July 1, 2005. That is the end of Florida’s current fiscal year. One laboratory executive told THE DARK REPORT that he believed it would be difficult for AHCA to implement this lab test fee reduction during the 120 days remaining before the statutory authorization expires.

Another complication could result if the Florida legislature, set to convene its next session on Tuesday, March 8, 2005, were to pass a law that extended the fee cut mandate—or even deepened it. In fact, it is believed at least one Florida legislator has spoken out in favor of instituting an arbitrary 20% reduction in current Florida Medicaid lab test reimbursement schedules.

Such comments reinforce the belief by many Florida laboratory executives that AHCA’s withdrawal of the ITN for the statewide lab test contract is not a significant event. Labs will need to fight an ongoing battle to protect both access to Medicaid patients by “any willing lab- oratory provider” and reasonable reimbursement for outreach lab services.

Ridiculous Battle

THE DARK REPORT would like to point out what a ridiculous battle AHCA, and the Florida State Legislature have decided to fight over the cost of Medicaid outreach laboratory testing services. Florida Medicaid officials acknowledge that the program currently spends approximately $37 million per year on outreach laboratory testing (excluding testing performed by hospital laboratories). It was their hope that the proposed, three-year, statewide lab testing contract, after its award to one lab company, would cut these costs by at least 10%, or $3.7 million per year.

What is never discussed is that Florida’s Medicaid spending is currently $14 billion per year. In percentage terms, the Florida legislature and AHCA have targeted outreach laboratory testing as a way to achieve a potential total savings of 0.03%!

At the same time, elected government officials and state bureaucrats overlook the simple fact that laboratory testing costs average 5¢ of every $1 spent on healthcare. Yet laboratory tests play a key role in 70% of the decisions to treat a patient.

Can’t Cover Lab Test Costs

A Florida pathologist observed to THE DARK REPORT that Florida Medicare currently pays around $14.50 for a liquid prep Pap test. After the 10% fee reduction, that would leave a reimbursement of $13.05, from which the laboratory would need to pay for the liquid prep kit (at about $9.00), cytotechnologist and pathologist review, amortization of instruments, logistics, IT, and billing/ collection costs. And that doesn’t include overhead expenses.

Intelligent managers know that, to maximize their effectiveness, they must put their limited resources to work paring down the largest cost items. Certainly any management consultant worth his/her salt, reviewing the actions of Florida’s legislature and AHCA, would make the obvious observation that laboratory testing services should be enhanced in ways that help physicians with early detection and proactive patient monitoring.

That would easily generate savings to exceed $3.7 million per year in this $14 billion program, while improving outcomes for Medicaid patients in Florida. And isn’t improving healthcare a major goal of Medicaid?

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