Clinical Laboratory Testing:
Providing Clinical Evidence for
Diagnosis and Treatment
Alan Mertz
President
American Clinical Laboratory Association
Most Medicare Beneficiaries Receive Lab Services from Hospitals or Independent Labs
National Labs Make Up Only 20% of Total Medicare Spending
Medicare Spending on Clinical Lab Fee Schedule in 2010 ($8.1B Total)
Hospitals
$3.20 Billion
40%
Quest Diagnostics
Inc
$0.90 Billion
11%
LabCorp
$0.73 Billion
9%
Physician Office
Labs
$0.32 Billion
4%
Other Independent
Labs
$2.94 Billion
36%
Data Sources: MedPAC, 2011 Data Book. G2 Intelligence, Lab Industry Strategic Outlook 2011 Market
Trends and Analysis. ACLA internal analysis.
2
Medicare Beneficiaries Living in Rural Areas are
Primarily Served by Small Clinical Laboratories
Urban Counties:
Rural Counties:
Laboratory Market Share in 2006
Laboratory Market Share in 2006
All Other
Labs
79%
Quest &
LabCorp
21%
All Other
Labs
89%
Quest &
LabCorp
11%
Source: The National Market for Clinical Laboratory Testing, Medicare & Medicaid Research Review, 2012
Laboratory Test Reimbursement
• Most lab services are reimbursed under the
Clinical Laboratory Fee Schedule (CLFS)
– Small subset that require physician interpretation
reimbursed under Physician Fee Schedule
• CLFS allows direct billing of labs for laboratory
services
– Separates ordering clinician from entity getting
paid for the test
• Protects beneficiaries and health care system from
incentive-driven overutilization of lab services
Clinical Lab Fee Schedule (CLFS) Created in 1984 with Annual Update for Inflation…
But Payments Have Increased Only 7 Times in Past 30 Years
$25.00
$21.81
$20.00
Updated for Inflation
$15.00
$10.00
$10.00
Medicare Payment for Lab Test
($10 in 1984)
$5.00
$8.32
$1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010
1984
Year
2010
Congress Passed Cuts to CLFS in 2010, 2011 and 2012…
Current Law Calls for 8% Cut Over Next 5 Years*
Cuts to CLFS Payments
Productivity
Adjustment (2010)
-3% on1/1/2013
-5% on 4/1/2013
-8% over
5 years
-1.75%
Cut to Labs
(2010)
-2% “ReBasing” (2012)
Sequestration
(2011)
* Includes impact of sequestration
Projected Payments, Next 10 Years… With Inflation Updates
$13.00
$12.87
$12.50
Test Paid at $10 in 2010
Updated Annually for Inflation
$12.00
$11.50
$11.00
$10.50
$10.67
$10.00
$10.00
$9.50
$9.00
$8.50
$8.00
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
Projected Payments, Next 10 Years… NO Inflation Updates
$13.00
Projected Payments for a Test Paid at $10 in 2010
2010 Baseline, pre-ACA
$12.87
$12.50
2013 Baseline, 2% Rebasing + Sequestration
$12.00
$11.50
$11.00
$10.50
$10.00
$10.00
$9.88
$9.50
$9.00
$8.50
$8.00
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
Proposals for Combined Deductible & Uniform Coinsurance: Lab Test Payments Cut 20%
$13.00
Projected Payments for a Test Paid at $10 in 2010
$12.87
2010 Baseline, pre-ACA
$12.50
2013 Baseline, 2% Rebasing + Sequestration
$12.00
CBO Uniform Cost-Sharing, Restrict Medigap
$11.50
$11.00
$10.50
$10.00
$10.00
$9.88
$9.50
$9.33
$9.00
$8.50
$8.00
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
20% Lab Coinsurance: Even Bigger Cuts, Since No Catastrophic Coverage
$13.00
Projected Payments for a Test Paid at $10 in 2010
$12.87
2010 Baseline, pre-ACA
2013 Baseline, 2% Rebasing + Sequestration
CBO Uniform Cost-Sharing, Restrict Medigap
20% Lab Coinsurance
$12.50
$12.00
$11.50
$11.00
$10.50
$10.00
$10.00
$9.88
$9.50
$9.33
$9.00
$8.98
$8.50
$8.00
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
When Compared to Payments Adjusted for Inflation,
Coinsurance Proposals Could Cut by Additional 20 – 30% Over Next 10 Years
$13.00
2022
-27% to -30%
Projected Payments for a Test Paid at $10 in 2010
2010 Baseline, pre-ACA
$12.50
$12.87
2013 Baseline, 2% Rebasing + Sequestration
CBO Uniform Cost-Sharing, Restrict Medigap
$12.00
2015
-20% to -24%
20% Lab Coinsurance
$11.50
2013
-12%
$11.00
$10.50
$10.67
$10.00
$9.88
$10.00
$9.50
$9.33
$9.00
$8.98
$8.50
$8.00
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
Sources of Supplemental /Secondary Coverage for Medicare Beneficiaries
Medicaid,
6.4M, 16%
Other Public,
0.4M, 1%
Employer,
13.9M, 35%
None, 4.4M,
11%
Medigap, 7.2M,
18%
Medicare
Advantage,
7.6M, 19%
Source: Examining Sources of Coverage Among Medicare Beneficiaries, Kaiser Family Foundation 2009