BUSINESS NEWS

Industry association AdvaMed (Washington, DC), the American Association for Clinical Chemistry (AACC; Washington, DC), and other laboratory groups are raising concerns regarding plans by the Centers for Medicare and Medicaid Services (CMS) to launch a clinical laboratory competitive bidding demonstration program.

In mid-October, CMS announced that the first of two planned demonstration sites would be the San Diego–Carlsbad–San Marcos region in Southern California. A bidders' conference for laboratories was originally planned for October 31, but was postponed due to wildfires in the area.

The demonstration project was mandated by the Medicare Prescription Drug, Improvement, and Modernization Act of 2003. It is designed to determine whether competitive bidding can be used to provide laboratory services under Medicare Part B at fees below current Medicare payment rates, while maintaining quality and access to care. Medicare paid nearly $6.7 billion to clinical laboratories in 2006.

"CMS is seeking to enhance its role as a prudent purchaser of clinical laboratory services, while maintaining a strong focus on beneficiary access and quality of care," said acting CMS administrator Kerry Weems. "This demonstration uses market-based competition to increase efficiency in Medicare. In this demonstration, Congress is building on the experience of CMS demonstrations for durable medical equipment, which found that competitive bidding can reduce spending, while assuring access and quality."

AACC contends that many laboratories could be forced out of business in regions where the demonstrations are conducted. And, if CMS deems the demonstration a success and effectively makes its case to Congress, a clinical laboratory competitive bidding program could be implemented nationwide.

"Only a few labs are likely to be selected by CMS to provide testing in the demonstration area," says Vince Stine, PhD, director of government affairs at AACC. "Those labs that lose can serve as reference labs for the winning labs—however, it's unlikely that the winning labs will need many of them.

"For IVD manufacturers, they may see a lot of their market disappear in the demo region since there likely will be fewer labs to purchase their products," Stine adds.

Members of the House and Senate have introduced legislation—the Preserving Access to Laboratory Services Act of 2007 (S 2099) and the Community Clinical Laboratory Fairness in Competition Act of 2007 (HR 3453)—in an effort to repeal CMS's authority to implement the project. AACC is rallying support for the legislation by urging other senators to sign on as cosponsors.

"Both the House and Senate bills are starting to pick up cosponsors," Stine says. "The laboratory community is working together through the Clinical Laboratory Coalition to increase support for the measure. The coalition has met with congressional representatives to discuss the measure and generated grassroots support for the bills. Hopefully, Congress will include the measure in a larger Medicare package that it is expected to take up at the end of the year."

In a press release regarding the planned bidding demonstration, AdvaMed noted that the clinical laboratory competitive bidding project is focused primarily on cost rather than quality, value, and patient benefit. "A competitive bidding scheme based primarily on cost may inadvertently sacrifice the value of clinical laboratory ser-vices in delivering high quality of care," the association stated. "It may also artificially reduce the number of clinical lab choices available to patients as smaller, specialized labs are unable to compete on cost factors with larger organizations."

AdvaMed reports that it plans to work closely with CMS to monitor the competitive bidding project. It also will continue working with Congress to secure passage of the Medicare Advanced Laboratory Diagnostics Act (HR 1321) to update Medicare reimbursement policies to encourage development and diffusion of new clinical diagnostic laboratory tests.

Stine says that AACC has not endorsed HR 1321. "Although we agree with some of the provisions in the bill--such as greater transparency in the CMS decision-making process and fixing the gap-fill problem--we have concerns about the potential impact of the molecular pathology fee schedule demo on the overall reimbursement rates for other laboratory tests," he says.

More information on the planned demonstration program is available at www.cms.hhs.gov/center/clinical.asp (click on "Demonstration").

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