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Access to lab services a CLIA concern.

Access to lab services a CLIA concern

Whatever other concerns professionals may have over implementation of the Clinical Laboratory Improvement Amendments of 1988, continued patient access to lab services appears to be an issue galvanizing disparate segments of the industry.

What's more, those concerns may emerge as the single most powerful argument for changes in the proposed regulations have drawn May. the regulations have drawn an estimated 43,000 public comments. Gail Wilensky, Ph.D., head of the Health Care Financing Administration, has acknowledged that making alterations seems to be necessary.

Ironically, the patient access issue runs as a common thread among the groups that often line up on opposite sides in regulatory debates. Even those who might stand to gain from a near-certain reduction in physician office laboratory (POL) testing concede that the regulations' additional compliance costs create a burden that may be impossible to bear.

One of the most powerful assessments of the economic impact has been filed by the Health Industry Manufacturers Association (HIMA), whose membership includes the principal providers of clinical lab equipment and supplies. Naturally, these companies have a vested interest in protecting the huge POL testing market, but their analysis, assembled with consultants at the Delphi Group, Ltd., presents a dramatic picture of the potential regulatory effects.

HIMA limited its assessment to POLs, but while acknowledging that physician offices are only one segment of the industry, officials say the analysis could be extrapolated to other test sites with similar conclusions.

HIMA's findings hinge in part on a survey by the American Academy of Family Physicians, which shows that 93 per cent of its 40,000 members perform at least some in-office testing.

The data show that physicians' net revenues from testing currently average about $10,200 a year for solo practices and up to more than $200,000 for groups of at least 10 doctors.

Against those basic revenue figures, officials projected additional costs of CLIA, specifically focusing on QC/QA, personnel, validation, proficiency testing, structural remodeling and office modifications, and computer costs. The results indicate that solo practices attempting to continue Level II testing would operate at a loss of $79,000, while larger groups would still net $69,000. Level I laboratories would face a post CLIA operational loss of $26,600, although bigger groups' net revenue would not be significantly affected.

The upshot of these cost projections, according to HIMA, is that up to 95 per cent of all POLs currently performing Level II testing would either halt operation altogether or cut back to a more limited test menu. Estimated distribution of all POLs before CLIA: 20,292 in the waivered category, 30,500 in Level I, and 57,645 in Level II. After CLIA: 80,184 waivered, 25,351 in Level I, and 2,912 in Level II.

Assuming an exodus from Levels I and II among POLs, HIMA projects the additional costs from sending out tests to hospital or independent labs could total $1.2 billion annually. POLs that attempt to continue current testing face estimated aggregate costs of $3.7 billion a year for personnel and $420 million for proficiency testing.

Such estimates have not gone without notice at the American Medical Association, which lined up a last-minute membership push prior to the Sept. 21 comment deadline. In an open letter to his colleagues, chairman of the AMA board of trustees Joseph T. Painter said doctors "must convince HCFA that implementation of regulations in the current form would be a disaster of national proportion, affecting many patients from all geographic regions."

The Maryland Department of Health and Mental Hygiene estimates the total POL market at 500 million tests a year with revenues of $5 billion. Even a portion of that market share would represent a tidy windfall for hospital and independent labs, but they too would be hard pressed by CLIA compliance costs.

Recent projections by the American Hospital Association show that if costs to the average hospital increased by only 3 per cent, the aggregate expense would be $300 million. Additionally, the College of American Pathologists estimates that proposed quality control rules would increase proficiency testing costs for small hospitals by nearly 140 per cent annually.

Many of these smaller hospitals are, of course, in rural areas and already financially strapped. AHA data indicate that hospital closures in these areas reduced the number of available beds by almost 15 per cent between 1978 and 1988. During the same period, manpower grew at a rate slower than that in urban centers, partly due to severe shortages of trained individuals.

"Even a simple analysis of the costs of personnel, quality control, and validation to a Level II rural hospital makes it difficult to understand how such labs would be able to continue in an atmosphere of already shrinking revenues," the HIMA analysis stated. "Because CLIA impacts a number of sites and not just the physician office laboratory, its potential for restricting both the access and the quality of care in rural situations is considerable."

If money were not an issue, providers would still confront problems with personnel shortages. In its comments to HCFA, the American Society of Clinical Pathologists said the proposed "stringent requirements for Level II tests, which make up the majority of tests performed, would jeopardize medical laboratory staffing in rural hospitals." Other analysts say the proposals would also constrain inner-city hospitals, as well as screening programs for cholesterol and sexually transmitted diseases.

Clearly, not all the testing needs now being handled by physician office labs would go unmet after CLIA. But it is less certain who the market winners might be. In a rich-get-richer scenario, financial analysts are predicting that the eight largest national laboratory chains would lead a charge toward increased industry consolidation.

Those same observers say that while the testing industry as a whole is growing by 5 to 10 per cent annually, the large independent labs will grow by 20 per cent or more during the next few years.

A recent report by the New York brokerage firm Shearson Lehman Brothers says the eight major chains (SmithKline Beecham, Roche Biomedical Labs, National Health Labs, Nichols Institute, Unilab, and Allied Clinical Labs) increased their market share among independents from 41 per cent in 1988 to 47 per cent in 1989. Their revenues climbed from about $2.0 billion to $2.5 billion during that period. Conversely, the market share of local/regional labs slipped from 59 per cent to 53 per cent, with revenues dropping from nearly $3.0 billion to $2.8 billion.

Additional shifts seem certain to hinge on the tack HCFA selects to protect patient access to services. Various interest groups have bombarded the agency with ideas, such as HIMA's recommendation that any tiering of controls (that is, levels) should be applied to clinical laboratories, not to tests.

At a briefing with reporters, HCFA chief Wilensky hinted that officials are considering such changes as additional categories of tests and revised personnel requirements. It appears unlikely, however, that the agency will create differentiations based on whether a lab is located in a rural versus urban setting or in a physician's office.

Medicare releases

`model' MD fees

In the Sept. 4 Federal Register, HCFA unveiled what it stressed are only "model" payment rates under Medicare's impending physician fee schedule.

Based on a resource-based relative value scale, the preliminary estimates were presented to prepare doctors for the changes that will take effect Jan. 1, 1992. More precise numbers will be available late this year when Harvard University researchers complete a revised report.

Most significantly, the model rates include estimates for pathology services. Current law calls for Medicare to establish a separate pathology fee schedule that would take effect Jan. 1, 1991. But the House Ways and Means Committee recently approved a provision to pathology back in with all other physician fees for the 1992 schedule. HCFA announced it has stopped all work on the separate schedule in anticipation of final legislative approval, which is supported by the CAP.

Under the model schedule, each of the three relative value components (work, overhead, and malpractice costs) is multiplied by corresponding geographic values.

Mostly rural areas will generally see their lower practice costs translate into lower reimbursement rates. For example, the fee for HCFA billing code 80500, a lab pathology consultation, would be $20.92 in Manhattan, compared with $17.67 in Des Moines, Iowa. Pathologists may consult the Federal Register for a complete analysis of payment for services in HCFA's 80000 series of billing codes.
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Title Annotation:Clinical Laboratory Improvement Amendments of 1988
Publication:Medical Laboratory Observer
Date:Nov 1, 1990
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