Medicare Managed Care Is Poised to Double in Size

For local laboratories and pathology groups, this represents both a threat and opportunity

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MEDICARE MANAGED CARE PLANS are poised to double in size. This can be both a threat and an opportunity for regional laboratories.

The Center for Medicare and Medicaid Services (CMS) recently reported that it had received 141 applications for new local Medicare Advantage plans for 2005. The applications included 55 HMOs, 73 PPOs, and 13 private fee-for- service plans. At least 51 of the new applications are from insurers that currently offer no Medicare plan.

This is a significant development. If all the applications are approved, it would almost double the number of Medicare managed care plans in operation, from the existing 185 to 326. This is the largest number of plans since 1999. It would also increase the number of states with at least one Medicare Advantage plan from 35 to 39.

Congress Increases Funding

Medicare Advantage was formerly called Medicare+Choice. The current flood of new plan applications is a direct result of increased funding by Congress in the Medicare Modernization Act of 2003. Congress wants to reverse the decline in the number of Medicare managed care beneficiaries. In 1999, 16%, or 6.3 mil- lion, were enrolled in Medicare managed care plans. Currently that number is 11%, or 4.6 million Americans.

For local laboratories and hospital laboratory outreach programs, this development represents both a threat and an opportunity. THE DARK REPORT expects that, as payers establish a new Medicare managed care plan, they will sign an exclusive contract with their existing laboratory provider panel.

Local Labs Locked Out in FL

THE DARK REPORT has tracked this trend in recent years in Florida, where Medicare managed care has remained active. Lab directors there report that, whenever a new Medicare managed care plan is developed, the payer tends to award that business to its existing lab panel. As fee-for-service Medicare patients enroll in these managed care plans, local labs and pathology groups not on the panel lose access to those patients.

Balancing the threat of loss of access to existing Medicare fee-for-service patients is the opportunity for strong local labs and hospital lab outreach pro- grams to negotiate a contract to provide lab testing services for the new Medicare managed care plans. To accomplish this, such labs must identify health insurers in their area which are in the process of establishing such plans and begin building a business relationship.

Finally, local anatomic pathology groups have risk. With the national labs aggressively pursuing AP specimens, it is likely they will want to keep the AP specimens generated in Medicare Advantage plans and not contract this work to local pathology groups.

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