Clinical
Under the new Centers for Medicare and Medicaid Services’ (CMS) fee schedule, clinical labs will face cuts of up to 30%. According to industry experts, only labs with diverse portfolios, healthy bottom lines and efficient operations will survive the cut, putting smaller labs at a disadvantage. The labs that receive most of their lab testing payments from CMS tend to be nursing homes, but with the new cuts, the fate of those labs is up in the air and many may eventually be forced out of business. For example, Aculabs, which conducts testing for over 320 nursing and assisted living facilities in 4 states, will record an estimated 30% cut in total revenues over the next 3 years, according to the company’s CEO. Other labs that may be negatively affected include rural hospitals, small health clinics and physician office labs.
The labs that will benefit from the cuts will be ones that have proprietary testing services. As an example, payment for the Oncotype DX Breast Cancer test by Genomic Health will increase 12% to $3,873. Advanced Diagnostic Laboratory Tests (ADLT), which is a new category of assays defined by the CMS as “tests developed and offered by a single lab that use a unique algorithm to analyze multiple DNA, RNA, or protein markers,” may also receive positive pricing, at least initially. After the initial period, payment for a new ADLT will depend on the weighted median private payer rate, like the other tests on the CMS fee schedule.
Many labs, especially smaller ones, are unable to determine data on testing volumes and contract revenues due to their inadequate financial systems. This is because these systems are mostly implemented by LIMS vendors or lab technicians as opposed to financial experts. With these new cuts in place, industry experts state that it would behoove labs to prepare and review contract pricing models to ensure they are receiving the proper payments.
The diagnostics sector is expected continue to undergo many transformations, with experts predicting that the changes will lead to greater industry consolidation and the shutting down of many labs. This change in landscape may also propel labs to collaborate with other labs to create networks, such as the Joint Venture Hospital Laboratories Network, which negotiates contracts for 120 hospital labs across 3 states.
