Declining Reimbursement in the Clinical Laboratory

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At the end of each year, the Dark Report presents the top 10 laboratory stories and major laboratory trends of the prior year.  This year, not unexpectedly, the top story was the financial impact on clinical laboratories of the second year of PAMA-related cuts in Medicare’s Clinical Laboratory Fee Schedule (CLFS).  The most common of the laboratory tests on the CLFS received sequential 10% reimbursement cuts in 2018 and 2019.  We are now experiencing another 10% reduction that began with the onset of the New Year.  This will represent an unprecedented 30% cut in CLFS payment rates for the most common laboratory tests over a three-year period.   In addition to the Medicare fee schedule changes, Medicaid programs at the state level, and national and regional health insurers have moved swiftly to reduce reimbursement rates for clinical laboratory services. 


Effect of Managed Care Laboratory Reimbursement Reductions

The laboratory impact of two major insurer changes are also discussed: “Managed Care Companies Continue to Cut Lab Prices, Restrict Networks.”  The first significant action discussed is UnitedHealthcare’s (UHC) creation of a Preferred Laboratory Network inclusive of seven laboratories.   UHC indicates in its information that these laboratories have “met higher standards for access, cost, data, quality and service”.  In its announcement UHC indicated “members can still use a Lab in United-Healthcare’s extensive network of over 300 Labs…..however, choosing a Preferred Network Laboratory may let the member schedule patient service center appointments online and may lead to shorter wait times for service, higher quality of care and lower cost.”   Their stated goal is to utilize clinical and anatomic pathology laboratories that support the triple aim of improving the health of the individual patient, improving health of populations and reducing the cost of care. 

Anthem, Inc. announced institution, on a state-by-state basis, of lower reimbursement for many of the pathology CPT codes.  In addition, they are moving pathology professional services to its ancillary services division.  In announcing its new fee schedule, the reimbursement for many of the anatomic pathology professional services experience significant rate cuts and now will be reimbursed at 50% to 70 % of the Medicare CLFS.   The movement of the fee schedule to the ancillary services division indicates Anthem intends to treat pathologists in the same manner they treat clinical laboratories. 

Together these two insurers cover approximately 80 million lives.  Clearly, the effects on the laboratory industry from the reduction in reimbursement will be significant.  Preliminary information from a current COLA survey of laboratories on the effects of the Medicare fee cuts shows that some laboratories have reduced the near patient testing services they offer and refer more testing to reference laboratories.  This can impact timely delivery of patient care.   As the third of the 10% Medicare reimbursement reductions for laboratory services is implemented in January 2020, and as more private insurers cut payments for clinical laboratory services, I think we can forecast when the results of the 2020 Dark Report are announced, among the top 10 stories will be the detrimental effects of continued reduction of laboratory reimbursements on near patient testing and patient care.


COLA Survey: Impact of Laboratory Reimbursement

COLA conducted a survey on the effect of the decreased laboratory reimbursements in 2018 and is conducting another survey on the effect in 2019.  The 2019 survey is open for input until January 31, 2020.  We would like to know the effect these cuts in payment rates have had on your laboratory.  The survey can be accessed COLA’s Near Patient Testing Website.  To participate in the survey, click here.   We very much welcome your input.


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About the author

Dr. John Daly

John T. Daly, M.D. received his MD degree at Weill Cornell University Medical College, performed his internship and residency in Anatomic and Clinical pathology at Duke University Medical Center and a residency in Forensic Pathology at the Office of the Chief Medical Examiner in Chapel Hill, N.C. He is board certified in anatomic, clinical and forensic pathology. Through the course of his career, Dr. Daly has had extensive experience directing and advising laboratories of all sizes including physician office practices, Federal Health Clinics, surgical centers, Community Hospitals and the integrated academic health system clinical laboratories of Duke Medicine. He retired as Director of Laboratories of Duke Medicine, and continues his affiliation as a member of the emeritus staff.


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