In their letter, the Representatives wrote, “As you are aware, the recently enacted Paycheck Protection Program and Health Care Enhancement Act (PPPHCE Act) invests $25 billion in the [Public Health and Social Services Emergency Fund (PHSSEF)], including $11 billion for states, localities, territories, and tribes, to enhance all aspects of COVID-19 testing capacity. This funding is in addition to the funds already appropriated to the PHSSEF under the CARES Act.
“While laboratories are eligible, along with other providers, for these funds,” they continued, “there have been no federal funds specifically designated for the laboratories that have stepped up in this public health crisis and have made significant investments to expand access to COVID-19 testing despite 40-60 percent reductions in regular commercial volume due to the economic lockdowns.
“As laboratories work to maintain their investments in critical resources for testing platforms, reagents, swabs, and PPE, as well as hiring, training, and overtime pay for the laboratory workforce, we urge HHS to direct a portion of funding that has not already been allocated towards these efforts. These funds will ensure that labs can continue to rapidly scale up diagnostic and antibody testing, particularly for healthcare workers, first responders, and other Americans on the frontlines of this pandemic,” concluded the Representatives.
ACLA President Made Similar Plea for Direct Funding to Clinical Laboratories
“In order to deliver accurate, reliable results for patients at a national scale, we must allocate funding to support [clinical laboratories’] expanded efforts,” she said in a statement following an April 27 meeting at the White House.
In her letter, Khani wrote, “It is essential that HHS allocate $10 billion from the fund to support labs’ further expansion of testing capacity to fulfill the testing needs of all of the states and to protect the lives and livelihood of all Americans.
“Further,” she continued, “HHS should note that investing in the nation’s laboratories will not only enhance testing capacity in the short-term, but it also will allow the country to benefit from a robust testing infrastructure for the duration of the COVID-19 pandemic and beyond.”
President Trump signed H.R.266 into law on April 24. It includes $25 billion earmarked for research, development, validation, manufacturing, purchasing, administering, and expanding capacity for COVID-19 testing. According to the language of H.R.266, that includes, “tests for both active infection and prior exposure, including molecular, antigen, and serological tests, the manufacturing, procurement and distribution of tests, testing equipment and testing supplies, including personal protective equipment needed for administering tests, the development and validation of rapid, molecular point-of-care tests, and other tests, support for workforce, epidemiology, to scale up academic, commercial, public health, and hospital laboratories, to conduct surveillance and contact tracing, support development of COVID-19 testing plans, and other related activities related to COVID-19 testing.”
“As the demand for testing continues to grow, clinical laboratories need dedicated funding to plan for challenges that lie ahead. Strong federal coordination and leadership is essential, and we’re looking forward to working with HHS to ensure that laboratories have the resources necessary to continue to expand our role at the forefront of the nation’s response,” said Julie Khani (above), President of the American Clinical Laboratory Association (ACLA), in a press release following the June 8 letter sent to HHS by 30 members of Congress requesting funds from H.R.266 be sent directly to clinical laboratories. Khani will be speaking on federal policies now impacting clinical laboratories at the upcoming 25th annual Executive War College on Laboratory and Pathology Management in New Orleans on July 14-15. (Photo copyright: ACLA.)
Financial Struggles for Hospitals and Clinical Laboratories
This new round of stimulus funding comes at a time when many providers and clinical laboratories are struggling financially, despite the influx of COVID-19 patients.
“Across the country, laboratories have made significant investments to expand capacity, including purchasing new platforms, retraining staff, and managing the skyrocketing cost of supplies. To continue to make these investments and expand patient access to high-quality testing in every community, laboratories will need designated resources. Without sustainable funding, we cannot achieve sustainable testing,” said Khani in an ACLA statement.
As the COVID-19 coronavirus pandemic evolves, federal regulations, as well as emergency funding for COVID-19 testing that is provided by federal legislation, will evolve in unexpected ways. For that reason, clinical laboratory leaders will want to closely track announcements by such federal agencies as the Department of Health and Human Services, the Centers for Medicare and Medicaid Services, the Food and Drug Administration, the Centers for Disease Control and Prevention, and the Federal Emergency Management Administration as decisions are made about how to assign the $25 billion authorized in H.R.266 for “testing.”
Operational efficiencies, strong management teams, and successful outreach business are key clinical laboratory success in today’s era of mergers and acquisitions
Fierce economic headwinds are taking aim at the entire pathology industry, as shrinking Medicare reimbursement rates, shifting federal regulations and compliance requirements, and changing care models squeeze profit margins and threaten valuations of most clinical laboratories and anatomic pathology groups.
The reimbursement rate changes mandated by the Protecting Access to Medicare Act of 2014 (PAMA), which took place January 1, 2018, loom as the most immediate danger to the long-term financial health and viability of medical diagnostic laboratories.
“Medicare reimbursement rates to labs providing essential testing services are estimated to drop by $670 million this year, and additional reductions scheduled for 2019 and 2020 will cut payments by nearly 30% for many tests critical to caring for Medicare beneficiaries,” noted Julie Khani, President of the American Clinical Laboratory Association (ACLA), in “Patient Care Is Put to the Test as Clinical Laboratory Services Are Hit With a One-Two Punch in Rate Cuts,” an article she penned for the ACLA website.
“For some labs, such as rural hospitals and labs serving patients in skilled nursing facilities—which already have significantly higher operating costs—this could be a death knell that would precede a devastating loss of patient access to necessary testing services,” she concluded.
Assessing Financial Solvency to Survive Impending Mergers and Acquisitions
The ACLA has filed a lawsuit against the U.S. Department of Health and Human Services (HHS) for what it called a “flawed and misguided” implementation of the law. For now, however, the roll out of reimbursement rates cuts will continue, an ACLA blog post reports.
As a result, post-PAMA pressures combined with other factors are forcing clinical laboratory leaders to consider their strategic options, including:
Reorganizing;
Restructuring;
Merging/consolidating with another laboratory; and,
Selling.
As GenomeWeb pointed out prior to PAMA’s implementation, “All clinical labs in the U.S.—from the largest reference labs to in-hospital labs to physician-practice labs—will be touched by the changes to varying degrees.” The future, GenomeWeb predicts, “may be a market with fewer independently operated small and regional labs, as well as fewer outreach labs owned by hospitals. Instead, such operations could become part of [Quest Diagnostics’] and LabCorp’s networks.”
This changing landscape means laboratories need to be assessing their financial solvency and maximizing their valuation even if they are not currently candidates for either side of the merger and acquisition equation. Failing to anticipate and respond to unfolding changes could leave laboratory executives courting a financial reckoning.
One speaker is Vicki DiFrancesco, Chief Strategy Officer, XIFIN, San Diego. DiFrancesco has an insider’s understanding of mergers and acquisitions and 25 years of executive leadership experience. Prior to joining XIFIN, DiFrancesco served as President and CEO of Pathology Inc., the West Coast’s premier women’s health laboratory, which was acquired by LabCorp in March 2016.
The other speaker is David Nichols, Founder and President at Nichols Management Group (NMG) in York Harbor, Maine. NMG provides laboratory consulting services for healthcare organizations. Since its founding in 1988, NMG has provided expertise in improving overall effectiveness and in implementing such strategies as sales force development, market planning, compliance/financial auditing, and in selected cases, hands-on management responsibilities by working onsite with senior personnel in each area of need.
During their 90-minute presentation, you will learn:
Market factors creating financial challenges for your laboratory;
How revenue compression and compliance issues are driving merger and acquisition activity;
Steps to optimizing your lab’s reimbursements, a key to improving financial performance;
Revenue cycle management’s importance as a valuation driver;
Strategies to significantly improve your market position;
Components of an effective compliance program and why compliance is so important to laboratory valuation;
Value drivers that attract buyers, such as profitable growth, a strong compliance program, competent management teams, EBITDA, cash flow and gross margins; and,
Specific challenges that should be addressed in any merger or consolidation plan.
David Nichols (left), Founder and President at Nichols Management Group (NMG); and Vicki DiFrancesco, Chief Strategy Officer, XIFIN, will share vital insights and share critical strategies that clinical laboratories can immediately use to drive valuations and prepare for current and future financial challenges. (Photo copyright: Dark Daily.)
To register for this critical webinar, use this link (or copy and paste this URL into your browser: https://www.darkdaily.com/product/the-pathway-to-driving-valuation-for-your-laboratory-your-roadmap-to-achieving-success-and-how-to-sustain-growth-despite-a-changing-lab-environment/.)
Despite the financial pressure on many existing laboratories, the medical laboratory industry continues to play a vital role in the healthcare system, with clinical laboratory tests guiding more than 70% of all medical decisions made by healthcare providers, according an ACLA fact sheet.
The industry also contributes more than $100 billion in annual economic impact and produces more than 622,400 jobs. While the role of diagnostic laboratories will continue to grow in an era of personalized medicine, only laboratories that optimize their strategic position in response to the changes taking place may be left standing when the predicted industry consolidation is complete.
In filing Monday, lawsuit seeks to force HHS to comply with PAMA’s statutory requirements and to withhold applying the new Clinical Laboratory Fee Schedule until HHS has revised the final rule appropriately
Many clinical laboratory executives will welcome the news that a lab industry trade association has filed a lawsuit in federal court in an effort to delay and fix the final rule for Protecting Access to Medicare Act of 2014 (PAMA) private payer lab test market price reporting that Medicare officials used to lower prices on the Medicare Part B Clinical Laboratory Fee Schedule (CLFS) that is scheduled to take effect on Jan. 1, 2018.
The ACLA asked the US District Court for the District of Columbia to force HHS to comply with PAMA’s statutory requirements, to withhold applying the new CLFS until HHS has revised the final rule appropriately. The CLFS is due to take effect on Jan. 1.
Final Prices for the 2018 Part B Clinical Laboratory Fee Schedule
Last month, the federal Centers for Medicare and Medicaid Services (CMS) issued the final CLFS rates and said at the time that it did so in compliance with the 2016 final rule implementing changes to the Medicare clinical laboratory fee schedule under PAMA section 216.
“We have repeatedly advised CMS that there are significant, substantive deficiencies in the final rule, which fail to follow the specific commands of the PAMA statute,” said ACLA President Julie Khani in an ACLA press release. “Contrary to Congress’ intent, instead of reforming Medicare reimbursement rates to reflect the broad scope of the laboratory market, the Secretary’s final rule will disrupt the market and prevent beneficiaries from having access to the essential laboratory services they need.”
Shown above is Julie Khani, President of the American Clinical Laboratory Association (ACLA) speaking at the Executive War College on Laboratory and Pathology Management last May in New Orleans. In a press release announcing ACLA’s lawsuit against the Department of Health and Human Services, Khani emphasized that many clinical laboratories had advised officials at the federal Centers for Medicare and Medicaid Services (CMS) about the “significant, substantive deficiencies in the final rule” for private payer market price reported that CMS designed. (Photo copyright: The Dark Report.)
22 Healthcare Organizations Opposed Cuts to Clinical Laboratory Test Prices
The ACLA, the American Hospital Association (AHA), and more than 20 other organizations had urged CMS to suspend implementation of the new CLFS rates, which are scheduled to take effect Jan. 1. The organizations cited concerns over the data-collection process used to establish the rates, and the fact that the rates would cause clinical laboratories to struggle financially and possibly close. If the rates set under PAMA affect Medicare beneficiaries’ access to clinical lab testing, the law would have the opposite effect of its intent.
To bring the lawsuit, ACLA retained Mark D. Polston, JD, of the Washington, DC, law firm of King and Spaulding. A specialist in representing healthcare systems seeking to navigate Medicare regulations, Polston is the former Chief Litigation counsel for CMS and specializes in complicated Medicare reimbursement litigation. Recently, he successfully challenged Medicare’s so-called “two-midnight” rule that imposed a 0.2% rate cut on hospitals billing for some patients.
Medicare Program Prohibited Most Medical Laboratories from Reporting
Contrary to Congress’ directives, most laboratories were prohibited from reporting private payer data under CMS’ market-rate data-collection process, ACLA said in a prepared statement. “As a result, CMS failed to protect access to laboratory services for Medicare beneficiaries. This flawed process could cause serious financial harm to potentially thousands of hospitals, independent and physician office laboratories, and make it harder for Medicare beneficiaries to get access to medical testing, particularly in remote rural areas and in nursing homes that depend on laboratory testing services,” ACLA said.
In the lawsuit, ACLA alleged that more than 99.3% of hospitals were prohibited from reporting their market-rate data. It is believed that this is the first time this figure has been reported. In 2015, the lawsuit charged, more than 261,500 entities received Medicare payment for laboratory services but only 1,942 laboratories reported market-rate information in 2016 under the PAMA final rule. The 1,942 labs that reported market-rate data is about 0.7% of the total number of laboratories that serve Medicare beneficiaries, the lawsuit said.
Only 21 of 7,000 Hospital Laboratories Reported Data
“Moreover, contrary to Congress’ intent, the laboratories that did report information are not representative of the market as a whole,” the lawsuit added. “For example, although approximately 7,000 hospital laboratories billed Medicare for laboratory services in 2015—accounting for 24% of the Medicare payments made under the Clinical Laboratory Fee Schedule—no more than 21 hospital laboratories (and probably even fewer) reported information to the secretary, leaving hospital laboratories effectively unrepresented in the data collected by the secretary.
“Hospital laboratories are often the only laboratories available to patients in certain areas of the country, and the private payer rates they receive are often much higher than other laboratories, due to differences in competitive markets, volumes of services, and other factors,” the lawsuit charged.
The Dark Report, Dark Daily’s sister publication, provided a compelling example of the serious flaws in the market price study conducted by CMS. Writing about the state of Michigan, The Dark Report noted: “At Joint Venture Hospital Laboratory Network (JVHL), CEO John Kolozsvary said Michigan’s hospitals serve 70% of the office-based physicians in the state with outreach lab testing services. Included among these hospitals are the 120 JVHL member laboratory facilities.”
“Since our network, plus the outreach programs of another 25 or 30 hospitals, hold a significant share of outreach lab testing in Michigan, how can CMS conduct an accurate, representative market study of what private insurers pay for lab tests in Michigan if it doesn’t collect data on what private payers reimburse hospital lab outreach programs in Michigan?” stated Kolozsvary in his interview with The Dark Report.
Did CMS ‘Disregard and Violate’ PAMA Statute?
In the ACLA’s announcement of the lawsuit, Polston said, “CMS clearly disregarded and violated the statute’s specific, unambiguous directives requiring commercial rate information to be reported and collected from a broad, diverse group of market participants. Instead, information was collected from less than 1% of US laboratories.”
In the press announcement, ACLA Board Chair Curt Hanson, MD, Chief Medical Officer of Mayo Medical Laboratories said, “This lawsuit reflects our obligation to those who are providing critical testing services, and to those millions of Americans who rely on the services our industry provides.” Others supporting the lawsuit include Laboratory Corporation of America and Quest Diagnostics.
Compliance with PAMA Law’s Statutory Requirements
In the lawsuit, ACLA seeks to require HHS to comply with the statutory requirements and to set aside the provisions in the final rule, “that unlawfully exempts thousands of laboratories from the reporting obligations that Congress imposed” under PAMA. A central feature of PAMA Section 216 is that laboratories must report market rate data so that HHS can ensure that Medicare reimbursement rates closely reflect the rates laboratories receive from private payers, the lawsuit said.
“ACLA was a strong supporter of Congress’ market-based reforms, which resulted in the most extensive changes to the system for reimbursing clinical laboratories since 1984,” the lawsuit said.
In challenging the final regulations, the lawsuit said HHS disregarded and violated, “the statute’s specific, unambiguous directives requiring that all applicable laboratories report relevant data.”
Congress Specified Which Medical Laboratories Are Obligated to Report
“In imposing these requirements, Congress took care to specify which laboratories would be obligated to report market data to ensure that information would be collected from a broad, diverse group of market participants,” the lawsuit said. “Congress made clear that any ‘laboratory’ would be required to report data if, ‘with respect to its revenues under [the Medicare program], a majority of such revenues are from’ the Physician Fee Schedule or the Clinical Laboratory Fee Schedule,” the lawsuit charged.
In promulgating the regulations, however, HHS, disregarded Congress’ instructions and “unreasonably and arbitrarily exempted significant categories and large numbers of laboratories that meet the statutory definition from the reporting requirements that Congress imposed,” the lawsuit said.
“The secretary’s final rule fatally undermines one of PAMA’s purposes, which is to require a broad spectrum of Medicare-participating laboratories to report market information to the secretary. Instead, in ultra vires (Latin for “beyond the powers”) fashion, the secretary has carved out large categories of laboratories—ultimately resulting in the exclusion of some 99.3% of the laboratory market—from the statutory reporting requirements,” the lawsuit charged. Ultra vires acts fall outside the authority of the organization in question.
In the lawsuit, the ACLA claims under:
count 1: ultra vires agency action not in accordance with law, in excess of statutory authority;
count 4: violation of the Administrative Procedure Act, injunctive and declaratory relief.
Seeking an Injunction to Have HHS Secretary to Withhold or Suspend Final Rule
In its final section, “Prayer for Relief,” the lawsuit asks the court to vacate, “any agency action found to be arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law;” to require the Secretary of HHS to comply with the statutory requirements, “including faithfully implementing the statutory definition of ‘applicable laboratory;’” and enter an “injunction that (1) directs the Secretary to withdraw or suspend his final rule until such time as it can be brought into compliance with the statute, and (2) directs the Secretary to withhold applying the new Clinical Laboratory Fee Schedule until such time as the Secretary has made appropriate revisions to his final rule.” The lawsuit also asked the court to award to the ACLA “costs and disbursements of this action and reasonable attorneys’ fees.”
CMS Director speaks at ACLA meeting; acknowledges that labs are alerting the agency to problems with Protecting Access to Medicare Act (PAMA) private payer market reporting, but did not say whether a delay in implementing either reporting or lab test fee cuts would be possible
WASHINGTON, DC—Last week, it was symbolic that, as members of the American Clinical Laboratory Association (ACLA) assembled for their annual meeting, members of the House of Representatives were preparing to vote on the first of several bills intended to “repeal and replace” the Affordable Care Act.
The symbolism comes from the fact that the nation’s medical laboratories and the United States Congress find themselves at major crossroad. For medical laboratories, the issue is the substantial cuts to Medicare Part B clinical laboratory test fees that are scheduled to take effect on January 1, 2018. Predicted by the federal Centers for Medicare and Medicaid Services (CMS) to be a total cut of $400 million in 2018 alone, many expect these Medicare fee cuts to be the single most financially-disruptive event to hit the medical laboratory profession in 25 years.
There’s a similar make-or-break issue unfolding in Congress. Republicans in the House and Senate are caught up in battles to design and pass a series of bills intended to “repeal and replace” the ACA. At their respective crossroads, it remains unclear which path forward each group will follow. (more…)
Researchers suggest FDA approvals be based on more rigorous clinical studies before and after medical devices get approved to market
Do regulators consistently get it right when reviewing medical devices and clinical laboratory tests as part of the market-approval process? New findings provide credible evidence that government regulators have their own problems when reviewing submissions for market clearance.
Essentially, if these researchers can find obvious flaws in how the FDA reviews a relatively limited number of medical devices, as identified by this study, then how would the FDA cope with the need to review thousands of LDTs in a timely, cost-effective, and rigorous manner? (more…)
