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Pre-election flurry leaves lab interests scrambling.

Pre-election flurry leaves lab interests scrambling

The flush of activity just prior to this month's elections sent officials of clinical laboratory organizations scurrying to sort out implications contained in a host of proposals and counterproposals affecting the industry. Members of Congress engaged in lengthy sessions of wheeling and dealing prior to leaving Washington for the campaign stump back home.

Some of the most sweeping changes will come from tax reform legislation approved in late September. Most association officials were still interpreting the meaning of the complex tax bill, which is expected to come in for additional tinkering and fine-tuning in the months and years ahead.

Perhaps the greatest impact will be noticed in provisions influencing the equipment purchases of hospitals and independent labs. "A lot of people are already upset because the reforms are anti research and development, anti capital investment, and anti inventory,' comments one tax attorney familiar with the health industry. "This has created incentives not to buy new equipment, primarily because of the elimination of the investment tax credit.'

As approved in final form, that investment tax credit--which previously subsidized up to 10 per cent of new equipment purchases --will be repealed retroactively to Jan. 1, 1986. There is, however, a "transition' rule in effect for contracts entered into prior to that date.

The tax package also changes depreciation schedules from a five-year to a five- to seven-year write-off period. But some tax analysts believe new methods for calculating depreciation may offset the effect of the longer schedules.

With regard to the individual interests of many laboratorians, Congress approved stricter limits for three types of tax-deferred savings plans that are popular with hospital employees. They are: 401(k) plans, 403(b) plans, and unfunded deferred compensation plans.

Employers are prohibited from starting any new 401(k) savings plans, although plans in operation as of July 1, 1986, may continue to operate. Congress also agreed to limit worker contributions to the plans to $7,000 per year-- down from the previous cap of $30,000. The limit would be allowed to increase at the rate of inflation, but early withdrawals would be subject to a 10 per cent penalty.

Further, 401(k) deferrals for certain high-salaried employees will be monitored to see whether the plans favor one segment of the work force over another.

Voluntary employee contributions to 403(b) plans would be limited to $9,500 per year beginning in January, compared with the current $30,000 cap. However, the current annual limit would be kept in cases where the 403(b) is an employer's primary retirement plan.

Deductions for contributions to Individual Retirement Accounts will be fully available only to taxpayers not covered by an employer plan, and to married taxpayers with adjusted gross income of up to $40,000 and singles earning below $25,000. Persons with income of up to $10,000 more than those amounts could deduct a portion of those contributions prorated on income. All taxpayers could continue to earn tax-deferred interest on IRA accounts.

At this writing, most other legislative initiatives directly affecting laboratorians were wrapped up in budget reconciliation conferences. Perhaps the biggest surprise leaking out of the negotiations was an 11th-hour proposal to extend the moratorium on the field trial of HCFA's laboratory competitive bidding project.

The delay proposal, a one-year extension of the ban set to expire Jan. 1, 1987, was reportedly pushed through by Sen. Dave Durenberger (R-Minn.), chairman of the Senate Finance Committee's health subcommittee. Indications were that opposition by a coalition of professional laboratory and other medical groups prompted Durenberger's action.

The HCFA contractor on the project, Abt Associates, has completed meetings with its technical advisors and is preparing its final design proposal for the agency. The field tests were scheduled to begin in six sites across the country, possibly as early as next spring.

Various "bootleg' versions of Abt's draft proposals circulating in Washington indicate the trials would put out for bid approximately 60 of the most common diagnostic tests that account for nearly 80 per cent of Medicare's allowable charges for outpatient testing.

Abt still intends to present a "nonexclusionary' bidding model that will permit both "winners' and "losers' to participate in Medicare test business at different reimbursement levels.

Providers who come within 105 per cent of the median of bids received (and below current Medicare prices) would be judged the winners. Losing bidders would receive less than the winning price, but no less than 80 per cent of the average winning bid. Other details of the design proposal await the finishing touches at Abt offices in Cambridge, Mass.

An extension of the moratorium would put the fate of the project in question. HCFA would likely be unwilling to abandon a project it still believes in (and has paid good tax dollars for already), but a delay would give the lab industry additional time to mount opposition/alternatives. At press time, Abt Senior Economist Stephen Mennemeyer was holding off on any predictions. "It really depends on what language might emerge from Congress, and what HCFA's desires and interpretations might be,' he explained.

Congressional sources were under strict orders not to discuss what deals or compromises were being struck in budget reconciliation meetings. But they did say lawmakers wanted to have the entire process completed by this month's elections, so as to avoid coming back for a lameduck session.

Other activities and initiatives adding to the pre-election flurry in Washington included:

Development of standards for physician office testing. A first draft of a report on the subject is currently making its way through the various bureaucratic levels within the Health and Human Services Department. Congress ordered the study last spring in response to growing concerns over quality assurance.

No action on the report appears imminent, which is probably good news for lab associations attempting to develop private-sector guidelines. The College of American Pathologists is close to releasing its final report on quality assurance for physician office, bedside, and home testing, and continues to lead the intersociety Committee on Laboratory Assessment (COLA) on similar efforts.

Further, the Credentialing Commission of the International Society for Clinical Laboratory Technology (ISCLT) has established a new certification category for Physician Office Laboratory Technicians (POLT). To be certified, candidates must meet certain educational, training, and experience requirements, and pass a POLT examination.

Drug testing for Federal employees. President Reagan signed an executive order for mandatory drug testing of Federal employees in "sensitive' positions. The President also asked Congress to allocate some $900 million in new antidrug spending.

There was no official estimate as to how many of the Government's 2.8 million workers would be subject to the order. But the Administration has already commissioned a project to study the accuracy and reliability of drugabuse screening.

The entire entidrug sentiment sweeping Washington is likely to generate a tremendous new influx of drug testing business for laboratories. Building on a theme presented in a nationally televised address, President Reagan said his latest order is "the Federal government's way of just saying no to drugs.'

Hospital capital-related expenses. Whatever the effect of the new tax law on hospital lab equipment purchases, at least such labs won't have to worry right now about capital expenditures under the Medicare prospective payment system.

When the DRG system was enacted in 1983, language provided that capital-related expenses would be exempt until Oct. 1, 1986. But this deadline was extended to Oct. 1, 1987, by the just-approved Urgent Supplemental Appropriations Act (P.L. 99-349).

The extension means such costs/ investments will continue to be reimbursed under the reasonable charge methodology, thus giving the Administration more time to study ways of incorporating high-ticket hospital purchases into the prospective payment system.
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Publication:Medical Laboratory Observer
Article Type:column
Date:Nov 1, 1986
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