Fee changes take a toll on lab testing industry


Many healthcare providers agree that Washington has rightfully gotten serious about unsustainable cost growth in healthcare and, specifically, in Medicare.

Yet when cost cutting is taken to its extreme, with proposals that would result in below-cost reimbursement for Medicare providers, policies become penny-wise and pound-foolish.

As the head of a clinical laboratory specializing in cancer testing for more than 20,000 patients in south and central Florida, recently proposed efforts to reduce payments for critical diagnostic lab testing that Medicare cancer patients rely on to receive life-saving treatment are deeply troubling.

This July the Centers for Medicare & Medicaid Services (CMS), the federal agency that oversees Medicare, announced intentions to cut payments for anatomic pathology services. These testing services help doctors and patients detect breast, colon, ovarian and other potentially deadly cancers. The tests are essential for physicians to choose the most appropriate treatment to increase patients’ probability of survival and quality of care.

However, proposed cuts to payments for vital cancer tests are so severe — nearly 75 percent in some cases — it would reduce payment to below the cost of laboratories to buy necessary materials to provide these services.

The basis of the proposal — which would take effect in January 2014 — is a flawed attempt to reduce payments for cancer-testing services accessed by patients from their local physician by using data from hospital outpatient services, which have completely different cost and payment structures. Independent labs offer specialized services in a competitive market, and comparisons based on hospital outpatient data are apples to oranges. CMS’ approach makes even less sense considering some services facing cuts are provided in the hospital outpatient setting only 5 percent of the time.

Interestingly, the cost of these tests is minuscule when compared to the crushing cost of prescribing incorrect cancer therapy. The wrong therapy can come in many forms for a patient: failing to treat a malignant tumor; choosing a costly yet ineffective chemotherapy, putting the patient through months of side effects for no gain; even overtreating an otherwise benign tumor. Inappropriate therapy wastes millions of dollars and leaves patients with worse health.

Only through timely access to high quality clinical laboratory diagnostic services — including anatomic pathology — can doctors and patients have the knowledge and opportunity to choose the most appropriate therapy. In its shortsighted attempt to cut costs, this effort will in fact increase the costs and the quality of cancer care will dramatically worsen for Medicare beneficiaries.

Clinical lab services have already faced massive changes in recent years that threaten the very existence of America’s laboratory industry. My company, NeoGenomics, has managed to navigate changes in technology, markets and reimbursement for 12 years to continually improve quality while reducing costs of testing and keeping 180 of our bright health professionals in Florida employed.

However, a tipping point has been reached. The impact of changes to Medicare payments and difficult challenges to the anatomic pathology industry have already begun to take its toll on Florida labs. One lab in central Florida let go of 90 workers last year. Another is being consolidated and could likely cause even more trained, skilled technologists and pathologists to lose their jobs and livelihood. The proposed CMS changes will accelerate this devastating impact. No business can offer products or services for sale at rates below its costs to provide those products or services. No business can withstand an abrupt reduction of 70 percent to 80 percent in its revenue.

The effort by the federal government to abruptly, arbitrarily and severely reduce payment levels will result in the absence of essential tests for critically ill cancer patients, less innovation in the treatment of cancer, more closures of businesses and more people out of jobs. It completely ignores longstanding consequences for services so critical to the health industry.

In the interest of patients, labs, and the practice of medicine, our policymakers should not move forward with this proposal.

Doug VanOort serves as the chairman of the board and chief executive officer of NeoGenomics.

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