Healthcare Reform: Dumping on Medicare Part B

Feb. 1, 2011

Total revenues for the clinical-laboratory industry in 2009 were estimated to be $59 billion. That includes revenues from all sources — Medicare, non-Medicare, private, and government.

Of that total, approximately $7.8 billion, or 13%, came from Medicare Part B. That means that 87% came from other sources. President Obama and the Democratic leaders in Congress explicitly stated that all healthcare providers would be asked to help underwrite the cost of Healthcare Reform — either through fees or cuts in payments — and implied that these lost revenues would be recouped over time from higher test volumes generated by an expansion of healthcare coverage.

How much money did the congressional leadership want from the clinical-laboratory industry? About $10 billion over 10 years. Originally, half ($5 billion) was to come from a “productivity adjustment” to Medicare’s Part B Clinical Laboratory Fee Schedule (CLFS), and the other half ($5 billion) from a fee on each laboratory’s gross receipts from all sources.

After many in the laboratory community objected to a fee on gross receipts, which was viewed as a tax, congressional leaders scrapped that proposal and replaced it with five consecutive cuts to Medicare’s Part B CLFS of 1.75% each year from FY 2011 to FY 2015.

The end result was that the entire $10 billion to fund Healthcare Reform was taken out of the Medicare Part B fee schedule, which accounts for only 13% of overall laboratory revenues. The message was clear: Laboratories that receive a small percentage of revenues from Medicare Part B will pay little for Healthcare Reform, while laboratories that receive a high percentage of revenues from Medicare’s Part B CLFS will bear a disproportionate share of the cost of Healthcare Reform. Some laboratories were winners and some were losers. The following chart tells the tale.

The largest, publicly traded corporate laboratories fared much better than community hospital and independent clinical laboratories. A community-hospital laboratory that receives 30% to 60% of its revenues from Part B will end up paying three to six times the amount (percentage-wise) as the largest, wealthiest, publicly traded laboratories. There is even one large regional reference laboratory that receives no Medicare Part B revenues because it refuses to bill Medicare Part B, requiring cash payments from referring laboratories (the referring laboratory itself must then bill Part B).

Most of the clinical-laboratory industry, understanding the basic unfairness of taking all of the $10 billion for Healthcare Reform from Medicare Part B, wrote the leaders of the Senate and House on Jan. 7, 2010, objecting to the five consecutive 1.75% Part B cuts in the Senate’s Healthcare Reform bill (which was the bill eventually adopted), warning that these cuts would “very seriously jeopardize” clinical-laboratory services for the “most vulnerable members of our population” (i.e., Medicare Part B beneficiaries). That letter was signed by the following organizations and laboratories:

  • American Association of Bioanalysts
  • American Association for Clinical Chemistry
  • American Medical Technologists
  • American Society for Microbiology
  • American Society for Clinical Pathology
  • American Society for Clinical Laboratory Science
  • Clinical Laboratory Management Association
  • National Independent Laboratory Association
  • Sonic Healthcare USA
  • Advanced Medical Technology Association (AdvaMed)
  • Becton Dickinson
  • Siemens Healthcare Diagnostics

Even the trade association for the largest, publicly traded laboratories, the American Clinical Laboratory Association, which did not sign the Jan. 7, 2010, letter, pledged to work with the rest of the clinical-laboratory industry to seek a legislative “fix” that lessens the burden on laboratories that receive a high percentage of revenues from Medicare Part B. Several ideas are being considered, including spreading the cuts out over a longer period of time and modestly increasing the Part B specimen-collection fee.

In the best interests of Medicare patients and to promote unity and fairness within the clinical-laboratory industry, I urge all laboratorians to support this effort.

Additional information will be posted on as events unfold.

Mark S. Birenbaum, PhD, is administrator of the American Association of Bioanalysts (AAB) and the National Independent Laboratory Association (NILA). He holds a degree in microbiology from Washington University in St. Louis, MO.