The report, Laboratory Medicine: A National Status Report (May 2008), is posted online at www.futurelab medicine.org and is open for comment until June 23.

A new report, commissioned by the Centers for Disease Control and Prevention and released late last month, presents an overview of key factors shaping clinical laboratory medicine throughout the United States, including changes needed in Medicare reimbursement and pathology quality performance.

Citing flaws in the current Medicare payment system, the report concludes that the program needs to be redesigned in line with growing scientific, economic, and business challenges in the health care market. The fee schedule method, based on historical charges, is out of date and bears no relation to current production costs or the cost-reducing effects of technological changes, the report says. This is especially true for new molecular diagnostics and other genetic testing. "The processes for establishing reimbursement rates for [them] remain archaic and inadequate."

The report is skeptical that lab competitive bidding will produce substantial Medicare savings and says the current demo model, blocked from a San Diego launch earlier this year after local labs filed suit, is "highly exclusive and could cause significant detriment to labs that lose in the bidding process, since many depend on Medicare for a sizable portion of their revenues."

Redesign of Medicare lab payment would ricochet throughout the national health care system, the report points out. All public payers and approximately 67 percent of private payers use Medicare’s payment methodologies as the basis for their own and as tools for negotiating discounts with providers.

The CDC requested the report "to lay the ground work for transforming lab medicine over the next decade." It discusses a wide range of issues in addition to payment, including workforce shortages, quality performance measures, lab information systems, and federal regulatory oversight, among others. The CDC intends the study to serve "as a reference point for improving quality in the future and as policy guidance for government agencies, professional groups, and others who provide, use, regulate, and pay for lab services."

The report was prepared by The Lewin Group (Falls Church, Va.), an Ingenix company, under subcontract to Battelle Memorial Institute (Columbus, Ohio) for CDC’s Division of Laboratory Systems (Atlanta) as part of its Improving Quality in Lab Medicine initiative.

• Lack of uniformity and standardization of clinical pathology test values among manufacturers hinders implementation of lab-based guidelines, which require method-dependent decision limits. Heterogeneity of test values also makes it difficult for clinicians to work in an integrated health system using more than one testing method or to address the needs of special patient populations.
• Laboratorian consultations are standard practice and reimbursed for anatomic pathology, but this is not always the case in clinical and molecular pathology. The primary barriers to interpretive consultations in clinical pathology are lack of reimbursement and the shortage of subspecialty expertise.
• Digital pathology systems require further advances in high-power computation, data storage capacity, image formatting, and processing algorithms to facilitate the shift from single-field images to whole-tissue processing.

• Spending for lab services accounts for 2.3 percent of U.S. health care expenditures and 2 percent of Medicare expenditures.
• Approximately 6.8 billion tests are performed annually.
• Lab testing revenues projected for 2007 total $52 billion.
• Clinical pathology comprises 66 percent of all lab tests and $32 billion in revenue.
• Anatomic pathology and cytology account for 23 percent of lab tests and $11 billion in revenue.
• Molecular and esoteric tests account for 8 percent of lab tests and $4 billion in revenue.
• More than 4,000 lab tests are available for clinical use. Of the 1,162 reimbursed by Medicare, about 500 are performed regularly.
• An estimated 1,430 diseases are now detectable using genetic testing. Of these, an estimated 287 are tested only in research settings.
• The number of CLIA-certified labs exceeded 200,000 in 2007. Physician office labs represent 54 percent of the total.
• Hospital-based labs account for 55 percent of total testing volume and 54 percent of total testing revenue, projected at $28.4 billion for 2007.

June 9, 2008 - Table of Contents

NIR June 9, 2008 (full PDF issue)

CMS to Increase Medicare Travel Allowance on June 30

CDC Report Takes a New Look at the Status of U.S. Lab Medicine

CMS Spells Out Policy on Assigning Providers to MACs

A Quick Guide to Medicare Travel Allowance Policy

CMS Takes Another Look at Stark ‘Stand in the Shoes’ Rules

Senate to Soon Take Up Medicare Physician Fee Fix

NPI Update