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Congress Misdiagnoses Healthcare Spending

Some in Washington want to make further cuts to reimbursement for diagnostics, but doing so could hurt the chances for long-term savings.

September 1, 2007

3 Min Read
Congress Misdiagnoses Healthcare Spending



It should come as no surprise that Congress is being shortsighted about something. But in this case, that “something” is reimbursement for imaging and other diagnostic tests, and a shortsighted stance could ultimately be dangerous. The House is proposing to cut imaging reimbursements for Medicare patients by 52%. This comes after another round of cuts came less than two years ago as part of the Deficit Reduction Act of 2005.

There is pressure on doctors and clinical laboratories to reduce the frequency of tests they order and perform, some of which can be costly.

Indeed, there is waste in the system. But the cost of failing to diagnose a condition properly is even greater. The perspective is best summed up by this statistic: Laboratory services make up 1.7% of Medicare spending, yet affect 70–80% of medical decisions.

For example, if type 2 diabetes is properly diagnosed early on—and the test to do so costs less than $15—the savings to the healthcare system can be as much as $95,000, says Alan Mertz, president of the American Clinical Laboratory Association (ACLA). “That's a very powerful message,” he says. “I don't know of many other things that have that kind of cost-benefit ratio.”

Furthermore, CMS has said that there is no empirical evidence to show that another round of cuts is justified. What the healthcare system needs are measures that would target areas plagued by waste specifically, not massive across-the-board cuts of needed services in the name of rooting out waste.

Another sign that diagnostic costs are under siege is the competitive bidding demonstration project for clinical laboratory services. According to ACLA, it appears not to be working. Instead, ACLA says, it has disrupted services to beneficiaries in exchange for very small savings. Again, it appears to have been a case of a good idea in theory having unintended consequences. Congress may yet fix this; Representative Nydia Velasquez (D-NY) has introduced legislation to repeal the project.

Why should the companies that make imaging and other diagnostic equipment care? Because less reimbursement or denial of access to diagnostic services means fewer tests performed. And ultimately fewer tests performed means less demand for new equipment, and fewer orders placed.

For several years AdvaMed has lobbied for changes in the reimbursement structure for diagnostic tests, which it says is outdated and provides a disincentive to innovate in the field. In 2005, the Lewin Group produced a white paper for AdvaMed that made the case for the value of diagnostics. (That paper can be viewed in the “Resources” section of AdvaMed's Web site, www.advamed.org.) Last winter, officials from AdvaMed and ACLA met to talk about why the diagnostics field is under siege and whether they should collaborate on lobbying to counteract it.

A few months ago, ACLA set up a nonprofit organization, Results for Life, to promote the benefits of diagnostic testing. The device industry should pay attention and perhaps join forces with the clinical lab industry on relevant issues.

“If reimbursement issues affect us, it will affect [diagnostic equipment manufacturers], because we are their end product,” says Marc Grodman, MD, CEO of Bio-Reference Laboratories Inc. (Elmwood Park, NJ) and a member of ACLA's board of directors. “We would like to have the equipment makers with us, because what we do goes hand in hand with what they do.”

AdvaMed has shown some leadership on this issue, but it is time for the device industry to take the message to another level. And the more allies the device industry can join forces with, the more likely the message is to be heard.

Erik Swain for the Editors

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