News, Analysis, Trends, Management Innovations for
Clinical Laboratories and Pathology Groups

Hosted by Robert Michel

News, Analysis, Trends, Management Innovations for
Clinical Laboratories and Pathology Groups

Hosted by Robert Michel
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Nation’s Smaller Community Medical Laboratories Have Major Concerns about Financial Survival Once Medicare Officials Implement Deep Price Cuts to Lab Test Fees in 2018

In vitro diagnostic manufacturers and medical distributors share concerns, along with other types of medical labs in nation’s small cities and hinterlands that include rural hospital labs and physician office labs (POLs) because, along with financial erosion, there is the potential of reduced access by Medicare beneficiaries to clinical lab tests where they live

SAN ANTONIO, TEXAS—Owners and managers of community and regional independent lab companies and community laboratories gathered here last week at a lab conference to assess what many believe is a bleak future. That’s because, in less than 11 months, medical laboratories across the United States will be dealing with unprecedented price cuts to the Medicare Part B clinical laboratory fee schedule (CLFS) and how those price cuts erode the financial stability of these essential labs, often the only local medical laboratory serving smaller communities and rural areas throughout the nation.

The number one financial threat of concern to these community and regional lab owners is how the Protecting Access to Medicare Act (PAMA) rule for private-payer market-price reporting will be used by the Centers for Medicare and Medicaid Services (CMS) to make fee cuts—effective on January 1, 2018—that will be financially devastating to the nation’s small and mid-sized community and regional labs, rural hospitals, some individual and group physician practices, and community hospitals—while causing increased market concentration that benefits the nation’s two dominant publicly-traded lab companies. (more…)

Sustained Growth in Medicare Advantage Plans Threatens Financial Health of Smaller Pathology Groups and Local Medical Laboratories

Surging enrollment in Medicare Advantage moves patients out of Medicare Part B and thus reduces the ability of regional clinical labs to have access to these Medicare beneficiaries

Smaller clinical laboratories and pathology group practices are facing an inauspicious trend. It is the fast growth of enrollment in Medicare Advantage plans that has reached record high numbers each year since 2010.

This is not a positive development because it moves Medicare Part B patients out of the fee-for-service program and shifts them into Medicare Advantage plans. These plans tend to sign contracts with the national laboratory companies, such as Quest Diagnostics Incorporated (NYSE: DGX) and Laboratory Corporation of America (NYSE: LH) because of their lower lab test prices while excluding most local medical laboratories and pathology groups from their provider networks. The net effect of this trend is that local labs lose access to those patients who were formerly in the Medicare Part B program, but are now enrolled in Medicare Advantage. (more…)

Theranos Selects Phoenix Metro to Plant Its Flag and Enter the Competitive Market for Clinical Pathology Laboratory Testing

As predicted by Fortune Magazine in its coverage of Theranos, with its expansion into Phoenix, the lab company is getting its closest scrutiny from pathologists and medical technologists

Recent developments in Phoenix, Arizona, make it clear that Theranos has chosen this desert metropolis to be the launching pad for its much-publicized proprietary clinical laboratory testing business.

The highly-secretive company, which claims to have more market value than either Quest Diagnostics Incorporated (NYSE: DGX) or Laboratory Corporation of America (NYSE: LH), is now building the infrastructure needed to operate as a local medical laboratory company in Phoenix.

Theranos Has CLIA Laboratory in Scottsdale

The April 20 issue of The Dark Report presented two exclusive intelligence briefings about Theranos and its business plans. The company now has its “wellness centers” operating in about 41 Walgreens pharmacies throughout the Phoenix metropolitan area. It has opened a clinical laboratory facility in Scottsdale and is currently working to acquire its CLIA certification. When certified, this lab facility will allow Theranos to perform testing locally, eliminating the need to transport all specimens to its CLIA lab in Fremont, California. (more…)

Class Action Lawsuit Filed in California Names Quest Diagnostics Incorporated as Defendant and Alleges Violation of Antitrust Laws involving Medical Lab Testing

Quest has not yet commented on the lawsuit, which was filed by three individuals who had clinical laboratory tests performed by the nation’s largest public lab company

In California last Thursday, three California residents filed a class action lawsuit charging Quest Diagnostics Incorporated (NYSE: DGX) with acquiring competitor medical labs, paying kickbacks to physicians, and developing exclusionary agreements with health insurers to monopolize the market for clinical laboratory testing in Northern California.

Filed in U.S. District Court for the Northern District of California, the complaint cites violations of the federal Sherman Act and the California Unfair Competition Law, Unfair Practices Act, and the Cartwright Act on behalf of California residents Christi Cruz of San Jose, Colleen Eastman of Hollister, and Carmen Mendez of, Milpitas. All three plaintiffs have used Quest laboratories and paid Quest Diagnostics Incorporated of Madison, New Jersey, for those testing services, the complaint says.

Lawsuit About Clinical Lab Testing Services Filed in Federal Court

The complaint was filed in the court’s San Francisco Division. In the court papers, lawyers for the three plaintiffs explain that injury to competition is manifest in three ways: above-competitive prices, inferior quality of testing, and reduction in choice among providers of routine diagnostic testing. “There is ample evidence that Quest has controlled prices in the relevant market in Northern California since at least 2011,” the complaint explains. (more…)

LabCorp Spends $5.6 Billion to Acquire Covance, Challenging Quest Diagnostics for Position as Largest U.S. Diagnostics Company

With clinical laboratory acquisition candidates dwindling in number, Laboratory Corporation of America Holdings (LabCorp) (NYSE: LH) looked outside the medical laboratory industry and agreed to acquire Covance, Inc. (NYSE: CVD), a major player in clinical trials testing, for approximately $6.1 billion in cash and stock.

By taking this action, LabCorp will have bragging rights as the world’s largest laboratory testing company. Upon completion of this transaction, financial analysts point out that the two companies have combined annual revenue of $8.4 billion as of the period ending September 30, 2014. By comparison, annual revenue at Quest Diagnostics Incorporated (NYSE: DGX) was $7.1 billion for year ending 2013.

Covance Involved in Clinical Trials

Covance is a contract research company in Princeton, New Jersey, with annual revenues of $2.5 billion and 12,500 employees in more than 60 countries. In February of this year, Covance sold its Covance Genomics lab in Seattle, Washington, to LabCorp, per the company’s press release. Terms of this transaction were not announced. (more…)