Laboratory News

San Diego Labs Sue Feds to Stop Medicare Lab Competitive Bid Demo

Three San Diego-based laboratories filed a lawsuit in federal court yesterday seeking to stop the Medicare Laboratory Competitive Bidding Demonstration Pilot Project which is to take place in the San Diego-Carlsbad-San Marcos SMA (Statistical Metropolitan Area). The lawsuit was filed in the United States District Court for the Southern District of California by Internist Laboratory of Carlsbad, Sharp Healthcare of San Diego, and Scripps Healthcare of San Diego.

The lawsuit was filed against the U.S. Department of Health and Human Services Secretary Michael Leavitt. Among other things, it requests that federal officials properly follow statutory mandates affecting competitive bidding, including requiring public notice and comment on the competitive bidding demonstration project.

What makes this development particularly interesting is that local laboratories in the San Diego MSA are the active litigants. In the case of Internist Laboratory, it is a modest sized laboratory business owned by a husband and wife that is the quintessential local laboratory that survives because of the high level of personal service it delivers to both patients and physicians in the community. Internist Laboratory believes that there is a high probability that the restrictive design of the Medicare laboratory competitive bidding demonstration pilot will exclude it as a provider for Medicare beneficiaries, thereby placing it at grave financial risk.

In the December 31, 2008 issue of The Dark Report, Internist Lab co-owner Gary Stevens stated "Currently 65% of our volume comes from serving Medicare patients. If we are not selected as a winning bidder, it will go badly for us. Not knowing where the price cuts are going to come or what percentage they're looking for, we just don't know what effect it would have right now. And since we're bidding against LabCorp and Quest Diagnostics, there's no way to know how we'll come out of this because this competitive bidding program removes service and quality out of the mix. We'd be living on 35% of our volume. That won't pay the bills."

Co-litigants with Internist Laboratory are Sharp Healthcare and Scripps Health. Their willingness to participate in the lawsuit against the federal government is interesting because both are integrated healthcare systems that own hospitals, primary care clinics, and specialty physician group practices. Thus, their care model is one of integrated care-providing the full spectrum of healthcare services to a patient. An essential element in this continuity of care model is that the Sharp laboratory and the Scripps laboratory will provide inpatient, outpatient, and outreach testing for the same patient. That means the patient's care team has access to all the patient's test results. The design of the Medicare laboratory competitive bidding demonstration pilot about to occur in the San Diego MSA will disrupt this care model if, based on how officials from the Centers for Medicare & Medicaid Services (CMS) select the winning laboratories, the laboratories of Sharp and Scripps find themselves excluded as a provider. It is probable that Sharp and Scripps will put forward the argument that the exclusion of their laboratories as providers in the San Diego bidding demonstration will negatively affect their model of integrated care to the Medicare beneficiaries they serve.

Leaders of professional associations in laboratory medicine were quick to respond to the lawsuit. In a press release distributed yesterday, Mark Birenbaum, Ph.D., Administrator for the National Independent Laboratory Association  and a member of the Clinical Laboratory Coalition (CLC) stated that "This lawsuit raises serious legal concerns and shows that something needs to be done to stop this reckless government experiment from moving forward. "The most vulnerable members of the community, the elderly, will feel the most impact from this experiment.  The government bureaucrats will decide where they have lab work done, leaving local residents with few options."

In the same press release, Alan Mertz, President of the American Clinical Laboratory Association (ACLA) declared that the "lawsuit hopefully pulls the plug on this unworkable and unfixable government project. "Laboratory services are not commodities. Ironically, the competitive bidding demonstration project will leave San Diego with less competition, not more."

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