Clinical OMICS

NOV-DEC 2017

Healthcare magazine for research scientists, labs, pathologists, hospitals, cancer centers, physicians and biopharma companies providing news articles, expert interviews and videos about molecular diagnostics in precision medicine

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Page 36 of 47 November/December 2017 Clinical OMICs 35 "You're going to end up picking their price even though there are another 20 to 30% of labs that have submitted at much higher prices that could have boosted the average," White said. Despite this, LabCorp and Quest both criticized CMS' proposed rates. "The result is proposed rates that will neg- atively impact Medicare beneficiaries, restrict access to necessary and life-saving lab testing, and stifle innovation in the research and development of new diagnostic tools," LabCorp Chairman and CEO David P. King said. Added Steve Rusckowski, Quest's chairman, president and CEO: "We are deeply disappointed that CMS has issued draft 2018 Medicare payment rates that are not mar- ket-based and derived from flawed market data collection that excluded key components of the lab market." White said CMS' preliminary rates would negatively impact smaller labs, especially those that serve rural com- munities, lower-income communities, and senior citizens, such as nursing-home labs. "For labs serving the population that is either elderly or in lower income groups on Medicaid, these labs are specifically going to take a full 10% hit in year one and subsequent years," she said. "It is absolutely going to put them in the red in terms of their profit margins." Those margins are below 10% for most smaller indepen- dent labs—as low as 5% or less for some rural labs, White said. "They already have very low margins to begin with. This is just really going to put them in a very bad position." Many smaller labs, she predicted, can expect to face pay- ment cuts with private payers as well, which often hold the labs to take-it-or-leave-it contracts tied to Medicare fees. Further Consolidation The challenges the 2018 rates pose for smaller and rural lab- oratories would create further consolidation, White added. That consolidation would differ from what the industry has traditionally seen, where labs offering esoteric or proprietary tests get absorbed into corporate giants. Where such consoli- dation has been among nationally-focused labs, smaller labs focus on serving communities and niche populations. White noted that XIFIN supports the American Clinical Laboratory Association (ACLA)'s call to delay implementa- tion of the 2018 rates until CMS and stakeholders can move toward a market-based payment solution. The proposed rates, if adopted, "will devastate many of our members and create severe disruptions in access to laboratory services, particularly for the most vulnerable Medicare bene- ficiaries," Julie Khani, president of ACLA, said in a statement. Not so, countered the Coalition for 21st Century Medi- cine (C21), whose more than two dozen members include diagnostics developers, clinical labs, researchers, physi- cians, venture capitalists, and patient advocacy groups: "C21 believes the PAMA system will establish transparent, predictable and market-based pricing for laboratory tests." White said essentials of a market-based approach include: • Basing rates on weighted average rather than weighted median (would require legislative change). • Prospective rather than retrospective data collection, allowing labs to arrange to collect data accurately and in totality. • Changing the definition of applicable labs to all labs, including all hospital labs that perform fee-for-service testing on CLFS services, and all physician office labs. Hospital and physician labs accounted for only 8.5% of the reported lab volume used by CMS to calculate its rates, according to Quest. However, Klein questioned whether more reporting by hospital and physician labs would lead to higher rates. "Because the environment has become so competitive and so many hospital payments are bundled, I am skeptical that hospital reporting would impact the weighted median much. Most hospitals would likely have been unable to meet these highly granular reporting requirements in any event," he said, as would most physician labs. Those labs were hobbled, White pointed out, by CMS setting the data collection period for the first half of 2016, though the agency's rules didn't come out till months later. By then, the labs didn't have the ability to retrieve data needed for submission to CMS—namely electronic data often discarded after it is posted into their billing systems. "They probably would have kept that data because that's where they would have had to go to be able to provide the detail level that CMS needed," White said. "Many hospi- tals labs would have had a hard time getting this data had they been included in the applicable lab definition, because sometimes they post in bulk, and not at the detail level." "For labs serving the population that is either elderly or in lower income groups on Medicaid, these labs are specifically going to take a full 10% hit in year one and subsequent years." —Lâle White, Executive Chairman and CEO, XIFIN

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