FL Medicaid Lab Bid Gets Slammed By Foes

Opposition builds to the planned award of a three-year, $100 million lab test contract

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CEO SUMMARY: Florida laboratories were caught by surprise last month when state Medicaid officials announced a 28-day process to award one lab with the state’s non-hospital Medicaid testing. To fight this RFP, a growing coalition of laboratories, lab industry trade groups, and the Florida Healthcare Coalition has taken swift steps to hire a lobbyist, gain press coverage on the issue, and meet with state policy-makers.

THINGS ARE HEATING UP in Florida. The state’s proposal to place all Medicaid laboratory testing into a single contract with a single laboratory is generating growing opposition.

The laboratory industry was startled to learn last month that Florida’s Agency for Health Care Administration (AHCA), which administers the Medicaid program in Florida, wanted to award a single laboratory the sole right to do all non-hospital Medicaid testing in the state. The contract would be for three years and is worth an estimated $100 million. (See TDR, April 5, 2004.)

“Each week brings new developments in this story,” stated Philip Chen, M.D., Ph.D., CEO of Cognoscenti Health Institute, a laboratory based in Orlando, Florida. “At this moment, the process of accepting bids and selecting a winning laboratory is still officially under way. But protests and other efforts to stop this RFP are causing delays in the original timetable. AHCA will not meet an April 28 deadline for submissions, and that deadline was extended from March 28.”

At least 160 laboratories currently provide testing for Florida’s Medicaid beneficiaries. Many of these labs state publicly that losing access to Medicaid patients will cause them to close their doors.

Only Three Lab Bidders?

On the other hand, Florida lab executives believe only three laboratory companies are in a position to bid for the contract and have a reasonable chance of developing the statewide network required to service Medicaid patients. They are ESRD Laboratoryin Fort Lauderdale, a lab which does testing for its parent company’s dialysis patients, Laboratory Corporation of America, and Quest Diagnostics Incorporated.

“In Florida, a coalition of interested parties is working to oppose this RFP process,” said Chen. “Included in the coalition are at least 30 Florida laboratory companies, with more expected. The Florida Coalition on Healthcare, representing employers with over two million employees in Florida, is involved. We’ve also gotten support from the American Clinical Laboratory Association (ACLA) in Washington, DC.

“We’ve engaged John Thrasher, former Speaker of the Florida House of Representatives, to be our lobbyist,” continued Chen. “Meetings have also taken place with Alan Levin, Deputy Chief of Staff to Florida Governor Jeb Bush. With such short deadlines before ACHA’s scheduled award of the RFP, we’ve had to scramble to get our message out.”

Interest in Joint Ventures

Opponents to the proposed Medicaid lab testing RFP are united around key concerns. “For example, there are no requirements in the RFP that adequately address quality in all dimensions: integrity of lab test results, patient access to collection centers, stat lab testing capabilities, turnaround time requirements, IT reporting functions, and the like,” explained Chen.

“There are also concerns that the entire RFP process is a consequence of well-intended, but misguided beliefs about how a sole-source lab contract might lower lab testing costs—but without giving equal consideration to other costs related in shifting this testing away from existing labs that may add cost to the Medicaid program,” Chen said.

FL Medicaid Officials Explain the Lab RFP

FLORIDA’S MEDICAID BUREAUCRATS ARE beginning to explain the reasons why they favor awarding a single laboratory the exclusive right to do all Medicaid testing in the state of Florida for three years.

Cutting costs is the primary driver. In an interview in the Miami Herald, Florida Medicaid Director Robert Sharpe stated that budget projections indicate that Florida’s Medicaid program will spend $108 million in laboratory tests during the next three years. His department, the Agency for Health Care Administration (AHCA), estimates that the statewide lab testing RFP will come in at about $100 million. That would be savings of $8 million, or about 7.2%, over the life of the contract.

Sharpe declared that another reason for selecting a single laboratory is to gain “real-time reports on lab tests to Medicaid [beneficiaries], so that information can be compared to a patient’s use of prescription drugs, to see what’s working and what isn’t.” That data is essential if we are going to cut down our drug spending,” declared Sharpe.

Short Fuse Before Award

As of press time for this issue of THE DARK REPORT, the deadline for submitting RFPs was April 28 and the scheduled date for announcing the contract award is May 27, 2004. Opponents of this proposal recognize there is not much time to argue their position and stop or alter the RFP in beneficial ways.

“In Florida, laboratories are learning a painful lesson,” observed Chen. “There has never been a statewide laboratory association comparable to the New York State Clinical Laboratory Association (NYSCLA) or the California Clinical Laboratory Association (CCLA). At a minimum, the need to have such a trade group to communicate with our elected officials has become obvious.”

Florida Medicaid’s attempt to implement a sole-source, statewide laboratory services contract should be a warning flag to laboratories in other states. So long as the quality of laboratory testing is considered “equal” from any accredited laboratory, healthcare bureaucrats can conclude that only price differentiates one lab from another. That gives them the incentive to direct their state’s Medicaid lab tests to labs offering the lowest price.

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