Nation’s smaller independent medical laboratories and pathology groups provide clinical lab testing services in many under-served communities
Nov. 21, 2012, WASHINGTON, DC—Last Thursday, owners of independent clinical laboratory companies fanned out across Capitol Hill to meet with their respective Senators and Representatives. Probably the number one concern of these lab owners was further cuts to the Medicare Part B Clinical Laboratory Test Fee Schedule.
Congress is preparing to tackle a host of spending issues, not the least which is the Medicare Sustainable Growth Rate sustainable growth rates(SGR). Earlier this year, in February, Congress raided Medicare Part B Clinical Laboratory Test Fees by $2.7 billion over 10 years to provide a source of funding to temporarily fix SGR. (See Dark Daily, “In Fixing Physician Medicare Pay, Congress Enacts Yet Another Cut in Clinical Laboratory Test Fee Schedule,” February 20, 2012.)
Independent Clinical Laboratory Owners Meet with Elected Officials
Owners of independent clinical laboratory companies are legitimately concerned that members of Congress may enact another round of cuts to medical laboratory testing fees. For fiscal year 2013, lab test fees are scheduled to be reduced as follows:
- Consumer Price Index (CPI) +1.70% (Change from 7/1/2011 to 6/30/2012)
- Productivity Adjustment -0.90% (PFS Final Rule)
- Reduction from health reform (ACA) -1.75% (3rd of 5 annual reductions)
- Reduction from short-term SGR fix -2.00% (Passed February 2012)
- TOTAL -2.95% (To take effect on January 1, 2013)
- Sequestration -2.00% (Maximum possible cut)
- Updated Total -4.95% (Total cut with Sequestration)
It was the National Independent Laboratory Association (NILA), based in St. Louis, Missouri that organized last Thursday’s program of visits to the offices of Senators and Representatives. According to Pat Lanza, Director of NILA, the owners and principals of as many as 25 independent clinical laboratory companies were in Washington, DC, to meet with their elected officials.
NILA members were armed with a just-completed survey of independent clinical laboratory companies that was conducted by researchers at George Washington University. For purposes of the visits to Capitol Hill, there were three particularly significant findings.
First, independent clinical laboratory companies are filling a medical laboratory testing niche generally not served by larger lab organizations. This niche includes nursing homes, skilled nursing facilities, and home health care. Further, many independent clinical laboratory companies are located in smaller cities and rural regions. These are service areas that were abandoned by public lab companies back in the 1990s.
Second, a significant portion of the medical laboratory testing done by these independent clinical lab companies is for Medicare patients. Medicare patients typically represent between 20% and 80% of the total patients served annually by this class of independent laboratories.
Third, the annual net profit margins for a major proportion of independent clinical lab companies surveyed by George Washington University researchers is typically under 10%. Half of the small to medium sized independent community laboratories estimated their average annual profit margins to be between zero and 3%.
Thus, NILA members were prepared to educate elected officials and their staff how the cuts to Medicare Part B Clinical Laboratory Test Fees already scheduled for fiscal year 2013 will push some independent clinical laboratory companies into negative operating margins. Any additional cuts that Congress makes as it deals with SGR, the fiscal cliff, and similar financial problems will compound these financial woes.
NILA Clinical Laboratory Owners Hit Capitol Hill
Your Dark Daily editor, Robert L. Michel, tagged along with a team of the NILA members during their early morning visits on Capitol Hill. The team, which included Pat Lanza, NILA’s Director; David W. Bryant, CEO of Austin, TX-based Sonic Healthcare USA; and Michel, met with Senator John Cornyn (R-Texas).
This was particularly notable because, on the previous day, Cornyn had been elected Senate Minority Whip by his Republican colleagues. This is the number two position for the minority party in the Senate. Because the lame-duck Congress had only just returned from the national election the previous day, Cornyn said he was unable to offer much insight as to how events may unfold in coming months, as both the House and Senate take up a number of pressing issues.
Small Medical Laboratory Companies Often Serve Rural Areas
Cornyn and his healthcare legislative aide were attentive listeners to points offered by Lanza and Bryant. With its expansive geography and large population, Texas is a place where many hospitals and nursing homes are located in small towns and cities, some hundreds of miles from a metropolitan center like Houston or Dallas. So it is essential that Medicare beneficiaries have ready access to medical laboratory testing services.
This same message was communicated during visits with health legislative aides working in the offices of Representatives from Texas. Your Dark Daily team followed Pat Lanza in meetings throughout the day in the offices of the following Representatives:
- Representative Lamar S. Smith, (R-Texas)
- Representative Sam Johnson, (R-Texas)
- Representative Michael T. McCaul, (R-Texas)
- Representative Michael C. Burgess, M.D., (R-Texas)
What will be of interest to Dark Daily readers is that, among the visits to five different Congressmen, a direct link between their offices and the laboratory medicine profession was identified on two occasions. In one case, a representative’s health legislative aide is close friends with a pathologist (and former medical laboratory owner) in the Southeast. In another case, the brother of one representative is a pathologist who practices in Texas.
Finally, it was a most educational experience to spend a day speaking with a Senator and the health legislative aides for several Representatives. Few of these individuals realized that medical laboratory testing represents just 1.6% of the Medicare Part B spending, but plays a key role in helping physicians to accurately diagnose disease and develop appropriate therapies for their patients.
Certainly the efforts of NILA members demonstrate why it is important for clinical laboratory professionals and pathologists to contact their elected officials to help them better understand the consequences of budget decisions.
Your Dark Daily Editor,
Robert L. Michel
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