community lab members have a large
Medicare population (up to 60%)
with profit margins of only 3% to
4%. Thus, a 10% cut in income for
60% of their patient testing will no
longer be profitable, and future
reductions will only make the
situation more grim. Small and rural
hospital labs that depend heavily on
income from outreach testing for
Medicare patients may also feel the
PAMA cuts more deeply.
Aculabs, which performs testing for
more than 320 skilled nursing and
assisted living facilities in Maryland,
Delaware, New Jersey, and
Pennsylvania, estimates that its total
revenue will be cut by 30% over the
next 3 years. CEO Peter Gudaitis has
warned that the cuts are not
sustainable and could force the
company out of business. “As
laboratories exit this market segment,
skilled nursing facilities will be forced
to transport elderly and often frail
patients to nearby, more expensive
hospitals for lab testing—a logistical
nightmare which will create a host of
challenges, jeopardize timely access
to laboratory results, and ultimately
cost more,” Gudaitis said after the
2018 payment rates were announced.
For physician office laboratories
(POLs), the new rates are something
of a mixed bag. A few of the most
commonly performed waived tests,
such as HbA1c (CPT 83037) and
specimen cultures (CPT 87084), will
actually get increases in the next 3
years, while many other high-volume
tests, such as complete blood counts
(CPT 85025), will see a decrease in
Medicare payment.
“I believe some POLs will attempt
to offset their revenue loss in lab
testing by offering more customized
test profiles that Medicare will be
paying on an individual test basis in
2018,” Dennis Weissm an said.
Medicare announced last year that
tests bundled into automated testing
profiles would be paid individually
beginning January 1. As always, the
tests must be medically necessary, and
CMS will be carefully monitoring
claims to ensure proper utilization.
Strategies for Surviving with PAMA
The laboratories most likely to
survive the cuts are those that are
operationally efficient, financially fit,
and strategically diversified.
Operationally, process improvements
can lead to significant cost savings that
may help offset the PAMA cuts, said
Suzanne Carasso, director of business
solutions consulting at ARUP
Laboratories. “Labs need to take a
hard look at themselves,” she advised.
“Does your lab have the right
equipment, is it performing the right
tests, are you staffed appropriately, is
there redundancy in the system?”
Another way a laboratory can
strengthen its position is to diversify its
testing menu and expand specialty
testing capabilities. These tests overall
have demonstrated resiliency in their
pricing, and can serve to offset the
higher price cuts seen in many of the
routine clinical tests.
A key requirement for all laboratories
is a financial system in place that a)
enables accurate data capture both
to satisfy PAMA reporting needs and
b) enables optimized management of
the laboratory business, including
negotiating contracts, billing the
correct amount, and ultimately,
collection of monies owed. In fact,
laboratories fail to collect between
5-20% of their revenues simply due
to their billing systems deficiencies.
A strong financially-grounded
system will not only deliver the detail
needed for PAMA reporting, but will
also automate and optimize billing
for maximum reimbursement and
efficiency. Capturing revenues that
are left on the table is a laboratory’s
best defense against 10% per year
cuts to Medicare.
Finally, it is imperative to upgrade
financial systems sooner rather than
later because the next PAMA
reporting period is nearly upon us.
Labs need to prepare now, by
aggressively reviewing all their
contract pricing for adequacy and
working to ensure they are getting
paid at the right price.
Read this and other articles at
www.PhysiciansOfficeNews.com
7