As federal and state officials ease many regulatory requirements to speed new COVID-19 serology tests to market with minimum data about performance, labs are left with important questions to answer on their own
Every day, elected officials at all levels of government call for a huge expansion of COVID-19 serology testing. But, as most clinical laboratory managers and pathologists know, it is a complex undertaking for a lab to select any serological test, validate it, then run it daily in support of patient care, and have confidence that the results are accurate and reproducible.
Clinical laboratories across the United States understand the volume of testing will be in the tens of millions—even hundreds of millions—of COVID-19 serology tests. That is an important financial opportunity because it gives clinical labs the opportunity to generate some cash flow to offset the 60% decline in daily routine specimens they have experienced since most states enacted shelter-in-place orders in early March.
But this big opportunity to serve physicians and patients with COVID-19 serology testing also comes with equally big risks. There are three major risks a COVID-19 serology testing program that clinical labs must successfully address, otherwise the consequences can be devastating.
Three Major Serology Testing Risks for Clinical Laboratories
Risk one comes during the time when medical laboratories shop for COVID-19 serology tests. As of this writing, about 20 such tests have an emergency use authorization (EUA) with the Food and Drug Administration (FDA) and more are expected to obtain an EUA. As is true with everything in life, not all of these tests will perform equally. The risk to the lab is that it purchases a COVID-19 assay that later proves to be unreliable, despite the lab’s rigorous validation process.
Risk two derives from the fact that new diagnostic methods are being incorporated into the serology tests that companies are submitting to the FDA for an EUA. Although the data submitted to the FDA may indicate acceptable performance to the federal agency, in actual clinical use many unexpected or unknown factors could be recognized which lower confidence that the new method utilized by this particular assay is producing accurate results. That risk would only be recognized downstream from validation and the lab would find itself dealing with unhappy physicians, patients, and employers (who were using the test to check the health of their employees).
Risk three is supply chain risk. Will the manufacturer of the COVID-19 serology test be capable of supplying all of its clinical lab customers with adequate supplies to meet each lab’s demand for this testing? New manufacturers have an unknown track record in their ability to supply their lab customers. But even the largest in vitro diagnostics (IVD) manufacturers may need to ration kits, reagents, and other consumables to the large number of medical laboratories they serve. This happened with the rapid molecular tests for COVID-19. Community laboratories capable of performing these tests could not obtain adequate supplies to serve their client physicians.
Millions Lost on Faulty COVID-19 Serology Test Kits
If there is a fourth major risk to clinical labs performing COVID-19 serology tests for physicians, patients, and employers (who are screening employees in their workplace) it is the negative publicity that can result if a lab’s choice of a COVID-19 serology test ends up generating inaccurate or unreliable test results.
The most recent example is here in the United States. On March 27, Abbott Laboratories announced that the FDA had issued an EUA for its Abbott ID NOW platform and its point-of-care rapid molecular test for COVID-19 that could produce results in less than 15 minutes. This made national news and was hailed regularly during the daily White House COVID-19 Task Force briefings.
What is important with the examples of Spain, United Kingdom, and a major IVD manufacturer is that news outlets are ready to pounce on any evidence that COVID-19 tests are returning inaccurate or unreliable results. This is a source of risk which every clinical laboratory wants to avoid.
How Clinical Laboratories Can Minimize Risk When Buying COVID-19 Serology Tests
During their upcoming webinar, James Westgard, PhD (above), and Sten Westgard of Westgard QC will address how clinical laboratory leaders can evaluate different serology COVID-19 tests by: understanding the testing architecture and intended medical use of COVID-19 testing, taking inventory of lab resources; navigating EUA, LDT, and non-EUA regulatory approval; assessing the expected performance of test methods; understanding the critical performance characteristics for COVID-19 testing; and much more. (Photo copyright: Dark Daily.)
This is an exceptional opportunity to gain an inside perspective of how your lab can address the three major risks identified above when selecting a COVID-19 serology test for use in patient care. You’ll gain essential insights about how to assess the public data on tests with an EUA.
This webinar presentation will also discuss how your lab should view all of its COVID-19 testing as a single program. That’s because your lab may test the same patient with a rapid molecular test, then later do serology tests in the days after the patient may have cleared the infection.
Register now for this critical educational opportunity by clicking here or by entering this URL in your web browser (https://www.darkdaily.com/webinar/quality-issues-your-clinical-laboratory-should-know-before-you-buy-or-select-covid-19-serology-tests/).
Limited availability of COVID-19 clinical lab tests is major topic at federal briefings and news stories, yet many of nation’s labs are laying off staff and at point of closing
Cash flow at the nation’s clinical laboratories has crashed, with revenues down by more than $5 billion since early March. This is the biggest financial disaster for the nation’s clinical laboratory industry in its 100-year history and it couldn’t come at a worse time for the American public and the US healthcare system.
At the precise moment when the nation needs clinical laboratories to begin performing millions of tests for SARS-CoV-2, the coronavirus that causes the COVID-19 illness, those same labs are watching their cash flow collapse.
Data from multiple sources gathered by The Dark Report, sister publication of Dark Daily, confirm that—beginning in early March and continuing through last week—clinical laboratories in the United States saw incoming flows of routine specimens decline by between 50% and 60%. During this same time, lab revenue fell by similar amounts.
Clinical Lab Industry Currently Losing $800 to $900 Million Weekly
To give this decline context, the healthcare system spends about $80 billion annually on medical laboratory testing. Thus, labs across the US generated about $1.5 billion in revenue each week during 2019 and into 2020. By April 5, the decline in routine lab specimen volumes reached 55% to 60%. Since then, the clinical lab industry now loses between $800 million and $900 million each week. Total revenue loss from previous levels is already estimated to be $5.2 billion, and it is growing by an additional $800 million to $900 million every week that patients stay away from hospitals and physicians’ offices.
In the eight weeks since the COVID-19 pandemic caused patients to cease coming to hospitals and visiting their doctors, incoming routine specimens and revenue fell by 60%, causing cumulative lost routine revenue of $5.2 billion for the clinical laboratory industry in the United States. Each week that the existing shelter-in-place directives are effective, labs lose another $800 million to $900 million. The Dark Report based these estimates on data provided by multiple companies working with lab billing/claims, middleware analytical solutions, and customer relationship management (CRM) and electronic health record (EHR) products. (Chart copyright: The Dark Intelligence Group, Inc.)
The recent dire financial condition of labs small and large has gone unremarked by federal healthcare officials at the daily White House COVID-19 Task Force briefings. National news sources have yet to report on this development and its implications for successfully expanding the availability and numbers of COVID-19 tests in response to the pandemic.
The rapid and deep decline in specimens and revenue is not limited to clinical laboratories. Biopsy cases referred to anatomic pathology groups have declined by 50% to 60%. Some subspecialty pathology labs saw case referrals drop by 80% or more.
The nation’s two biggest clinical laboratory companies confirmed similar declines in their normal daily flow of routine specimens. Both companies recently reported first-quarter earnings (which included the month of March).
Quest Diagnostics, LabCorp Each Disclose Volume Declines of 50% to 60%
During its Q1 2020 earnings conference call, Chairman, President, and CEO of Quest Diagnostics (NYSE:DGX), Steve Rusckowski, stated, “In April, volume declines continue to intensify as we are seeing signs that volume declines are bottoming out at around 50% to 60%.”
The drop-off in routine lab test referrals was the similar at LabCorp (NYSE:LH). “In our diagnostics business, at the end of the quarter, we experienced reductions in demand for testing of 50% to 55% versus the company’s normal daily levels,” explained Glenn Eisenberg, Executive Vice President and CFO during LabCorp’s Q1 2020 earnings call. “This reduction in demand impacted testing volume broadly but was more heavily weighted towards routine procedures.”
Interviews with independent clinical lab owners and the administrative directors of hospital and health system labs further confirm this rapid and dramatic decline in the number of routine specimens arriving in their labs. Fewer specimens mean fewer claims, which means less revenue to laboratories.
Two Different Financial Futures for ‘Have’ Labs and ‘Have Not’ Labs
What happens next to the clinical laboratory industry in the United States—and to its ability to continue ramping up the availability of adequate numbers of COVID-19 tests in major cities, small towns, and rural areas—will be a story of “haves” and “have nots.”
The “haves” are clinical labs that have access to money. These are publicly-traded lab companies, academic medical center labs, and the sophisticated labs of health networks that operate multiple hospitals. In each case, these organizations have capital reserves and access to loans that will probably enable them to sustain COVID-19 lab testing services at the large volumes required to respond to the pandemic.
clinical labs operated by community hospitals and rural hospitals that were not financially robust before the onset of the pandemic; and,
specialty lab companies that perform a specific number of proprietary diagnostic tests (and for which demand has collapsed as patients stopped seeing their doctors).
Medicare Led Payers in the ‘Lab Test Price Race to the Bottom’
Prior to the onset of the SARS-CoV-2 pandemic, the finances of the “have-not” labs were already shaky, with many on the verge of filing bankruptcy, closing, or selling to a bigger lab company. Much blame for the deteriorating finances at a large proportion of community lab companies, community hospital labs, and rural hospital labs can be attributed to the deep, multi-year price cuts to the Medicare Part B clinical laboratory fee schedule as mandated by the Protecting Access to Medicare Act of 2014 (PAMA).
Medicare’s multi-year cuts to lab test prices were immediately copied by most state Medicaid programs. During this period, private payers followed Medicare’s lead and enacted their own deep cuts to the prices they paid labs for both routine tests and molecular/genetic tests.
That is why—when the pandemic intensified in early March—the 50% to 60% drop in specimens and revenue that hit these labs starved them of essential cash flow. When polled, the owners and directors of these labs acknowledge layoffs of the majority of their staff in all departments. They also reported substantial delays—both in submitted lab test claims and in getting payment for those claims—because claims-processing departments at the labs and private health insurers are understaffed due to shelter-in-place directives.
COVID-19 Test Revenue Helps Only Labs Performing Those Tests
Revenue from COVID-19 testing is helping certain labs offset the revenue loss from fewer routine specimens. XIFIN, Inc., a San Diego company that provides revenue cycle management (RCM) services for clinical laboratories and pathology groups, analyzed the lab test claims for COVID-19 rapid molecular tests. It determined that labs performing these tests are generating enough revenue from these test claims to equal about 20% of their pre-pandemic revenue.
The chart above was prepared by XIFIN, Inc., of San Diego and is based on the changes XIFIN observed in the volume of routine clinical laboratory test claims generated by client labs on a weekly basis. In the first two months of 2020, routine lab test claims ran at expected levels until the first week of March. During the rest of March, routine lab test claims declined by 60%. During April, incoming routine lab test claims remained 55% to 60% below pre-pandemic levels. The shaded area shows the number of COVID-19 test claims coming into clinical labs. XIFIN says COVID-19 test claims make up about 20% of the decline in routine test specimens for those labs performing COVID-19 tests. The Dark Report estimates that the clinical laboratory industry has lost $800 million to $900 million in routine test revenue each week since March 23. Weekly revenue losses will continue at this rate until patients begin visiting their physicians and hospitals again perform elective services. (Chart copyright: XIFIN, Inc.)
Many CLIA-certified community laboratories and hospital labs have the diagnostic instruments and experience to perform rapid molecular tests for COVID-19. But when contacted, they tell us that their suppliers do not ship them even minimal quantities of the COVID-19 kits, the reagents, and the consumables. Thus, they cannot meet the needs of their client physicians. Instead, they watch as these physicians refer COVID-19 tests to the nation’s largest labs. The supply shortage prevents these smaller labs from doing larger numbers of COVID-19 test for the patients in the communities they serve. It also prevents them from earning the revenues from COVID-19 testing that currently helps the nation’s “have” labs offset the decline in revenue from routine testing.
Congress, national healthcare policymakers, and state governors need to immediately address this situation. Each week that passes during the COVID-19 pandemic and the shelter-in-place directives drains another $800 million to $900 million in revenue from routine lab testing that previously flowed into the nation’s clinical laboratories.
‘Have-not’ Clinical Labs in Small Towns Will Quietly Shrink and Disappear
Without timely intervention and financial support, the nation’s network of ‘have not’ labs, which have so capably served towns away from big metropolitan centers and rural areas, will quietly begin shrinking. One at a time, labs in small towns will close or sell. Local lab facilities will be shuttered and specimens from small-town patients will be transported to big labs hundreds or thousands of miles away.
It is also true that the financial disaster besetting the nation’s clinical laboratory industry will have comparable dramatic consequences for the in vitro diagnostics (IVD) manufacturers that sell them automation, analyzers, reagents, and other supplies. Since early March, IVD manufacturers watched as the pandemic caused orders for new instruments to collapse. During these same weeks, their clinical lab customers ceased ordering routine test kits at pre-pandemic levels. Dark Daily will cover the challenges confronting the IVD and other diagnostics industries in future e-briefings.
Announcing Free COVID-19 STAT Intelligence Briefings for Clinical Labs
With the COVID-19 pandemic creating chaos in nearly every aspect of healthcare, business, and society, clinical labs and their suppliers need timely intelligence and analysis about the innovations and successes achieved by their peers. This week, Dark Daily and The Dark Report are launching COVID-19 STAT Intelligence Briefings (Copy and paste this URL into your browser: https://www.covid19briefings.com). This comprehensive service is free and will cover four basic areas of needs for clinical laboratories as they ramp up COVID-19 testing:
Daily and weekly COVID-19 testing dashboards to guide every lab’s short-term planning;
Proven steps for labs to introduce and validate COVID-19 tests (both rapid molecular tests and serology tests);
Getting paid for COVID-19 testing to ensure every lab’s financial stability and clinical quality; and
Legal and regulatory updates for labs doing COVID19 tests to ensure full compliance.
Also, to help clinical laboratory leaders deal with the coming wave of COVID-19 serology tests, we are producing a free webinar led by James O. Westgard, PhD, FACB, and Sten Westgard, Director of Client Services and Technology, of Westgard QC, Inc.
Each week that the SARS-CoV-2 pandemic continues, and strict shelter-in-place directives are in place, the clinical laboratory industry loses another almost $900 million in revenue from lower volumes of routine testing. No industry can survive when its incoming revenue collapses by 50% to 60% for sustained periods of time.
Will Congress Recognize the Need for a Financial Rescue of ‘Have-not’ Labs?
Thus, it is incumbent on Congress, elected officials, and healthcare policymakers to recognize the financial consequences of the pandemic to the nation’s clinical laboratories. That is particularly true of the ‘have-not’ clinical labs. They do not have the same access to decisionmakers in government as billion-dollar lab companies.
And yet, these labs located in small communities and rural areas often are the only local labs that can do STAT testing in a couple of hours, and where clinical pathologists are personally familiar with local physicians and patients.
These “have-not” labs are vital healthcare resources. They should receive the help they need to get through this unprecedented crisis that is the COVID-19 pandemic.
