| R. Lewis Dark:
A Pricing Strategy Soon to Boomerang?
HAVE NATIONAL LAB COMPANIES CREATED A REIMBURSEMENT BOOMERANG that will
erode financial stability for the entire laboratory industry in the United States? I
ask that question because the Medicare Competitive Bidding Demonstration
Project for Laboratory Services has selected San Diego to be its first site. It was
ready to conduct a bidder’s conference until last week’s wildfires in Southern
California forced a change in plans. In taking these steps, CMS is likely to open a
Pandora’s box of unintended consequences.
Most of us are familiar with how national lab companies, beginning about 15
years ago, decided on a strategy of bidding for managed care work using marginal
cost pricing. The underpinnings of this strategy was a belief that gaining
exclusive contract access to a private health plan’s beneficiaries would make it
easier to access the discretionary, fee-for-service work referred by physicians. This was the “pull through” concept, and Medicare Part B fee-for-service reimbursement,
representing 30% to 40% or more of a large laboratory’s payer mix, was a
necessary component to provide the reimbursement dollars needed to offset the
losses from private payer contracts bid by the lab at marginal cost. The national
contracts based on marginal cost lab test pricing that UnitedHealth,WellPoint,
Aetna, and other large health insurance companies currently enjoy are widely
believed to be falling below 50% of Medicare Part B reimbursement levels.
So imagine this scenario. In the San Diego-Carlsbad-San Marcos SMA (statistical
metropolitan area), the competitive bid demonstration successfully meets
three goals: 1) the lowest bids Medicare accepts for the test mix in the SMA save
considerable amounts of money for what Medicare would pay for Part B lab tests
when extrapolated across the entire United States, 2) patient access is not affected
in negative ways, and 3) at least a few small labs in the demonstration site could
provide some testing at the lower prices. Based on these outcomes, Medicare
administrators then encourage Congress to enact fee-for-service reimbursement
levels comparable to what national laboratory companies currently offer as contract
pricing to the nation’s largest private health insurers.
That would be a pricing boomerang with devastating financial consequences
across the lab industry. As the Medicare program finally insists on paying the
same amount that national lab companies have voluntarily bid to private insurers,
it would be an economic shock that many labs may not withstand.
San Diego MSA Selected For Medicare Lab Demo
Site selection has interesting advantages
to success of Lab Competitive Bid Demo Project
CEO SUMMARY: Earlier this month, CMS revealed its selection
of the first of two sites for the Medicare Competitive Bidding
Demonstration Project for Laboratory Testing Services. It will be
the San Diego-Carlsbad-San Marcos MSA (metropolitan statistical
area). An assessment of this MSA reveals a number of reasons
why it is likely that CMS believes it can move expeditiously to
implement the competitive bidding demo in the San Diego MSA.
Docs Want EMRs to Match Lab Orders and Results
Physicians become more sophisticated in how they use EMRs to advance clinical care
CEO SUMMARY: At a national EMR users meeting, physicians
indicated a growing interest in having their EMRs do more
than electronically accept lab test results. On the want list are
direct electronic ordering of lab tests and automatic matching of
lab test orders and lab test results. Physicians are rapidly learning
how to use EMRs to boost their productivity and generate
operational efficiencies and cleaner claims that are paid quicker.
Full Pathology Digitization Is Becoming Feasible
Pathology Visions 2007 Conference attracts
pathologists, biotech, and pharma executives
Advances in computer hardware, software
and support systems such as scanners are bringing the era of
full pathology digitization closer to reality. Last week, in San
Diego, California, an enthusiastic crowd of several hundred
gathered to learn how laboratories, hospitals, and researchers
are taking the first steps to digitize different areas of pathology
services and laboratory operations. No single path toward digitization
emerged from the more than 39 sessions.
Phlebotomy Gets
Heightened Attention
For Patient Satisfaction
Decentralized Phlebotomy Falls from Favor
In the 1990s, many hospitals implemented decentralized
phlebotomy arrangements as a way to save costs. Now, a
decade later, centralized phlebotomy, managed by the laboratory, is
making a comeback. Motivation for this unfolding trend is the need for
hospitals to improve patient safety and increase patient satisfaction.
Because most patients are uncomfortable with venipuncture, phlebotomy
is often mentioned in satisfaction surveys and hospital administrators
are taking active steps to change that situation.
ISO 15189 Gains Favor
For Lab Accreditation
CLSI works with government in Tanzania
to accredit five regional labs in African nation
Volunteers for the Clinical and Laboratory
Standards Institute (CLSI) are in the midst of an 18-month project
to help five state-run medical labs in Tanzania gain ISO 15189
accreditation. The project shows how labs in Africa and other
countries are moving to adopt international accreditation standards.
A growing number of countries, including Australia,
Germany, France, and Canada, already use ISO 15189 in their
accreditation requirements.
Health Guru Predicts
End to Medical Errors
Patient safety expert Lucien Leape, M.D. says
hospitals and physicians can achieve zero defects
One of the most exciting developments in
patient safety is that it is now possible to begin eliminating
adverse events in healthcare, declared Lucien Leape, M.D.,
Professor of Health Policy at the Harvard School of Public
Health. Leape bases his prediction on how pioneer hospitals
have achieved a zero rate of infection in ICUs and other specific
areas of care. He believes the U.S. healthcare system is poised
to achieve new breakthroughs in the quality of care.
INTELLIGENCE: Late & Latent
PROBE LIGHTS UP
CANCER MOLECULES
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