American Association for Clinical Chemistry
Better health through laboratory medicine
August 2008 Clinical Laboratory News: The Status of Laboratory Medicine

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August 2008: Volume 34, Number 8

The Status of Laboratory Medicine
CDC Report Hit the Mark, But Will It Drive Change? 

By Phil Kibak 


The 200,000-plus CLIA-certified U.S. medical laboratories conduct about 7 billion tests annually. This significant contribution to healthcare, which accounts for only 2.3% of annual U.S. healthcare costs, has an enormous impact on clinical decision-making and health outcomes. But with ever growing pressures on labs to do more with less, a comprehensive analysis of key factors affecting laboratory medicine—and the attendant identification of practices that could reduce laboratory-related error rates or optimize use of laboratory testing—was missing. Now, a 2-year effort by the CDC Division of Laboratory Systems has given stakeholders, including policymakers, a snapshot of where the field stands today. “Laboratory Medicine: A National Status Report” was unveiled in May and describes the challenges and prospects that affect clinical labs in the U.S. The purpose of the report, according to the CDC, is to lay the groundwork for transforming laboratory medicine over the next decade.

In the 384-page report, the Lewin Group, a health and human services consulting firm based in Falls Church, Va., under subcontract to Battelle Memorial Institute, compiled and analyzed data from published and unpublished literature, government databases and reports, market research reports, and input from laboratory experts and government officials. While most lab leaders praise the report as an accurate overview of key factors that affect laboratory medicine today, how the document will drive improvements is uncertain.

The report is a welcome affirmation of the struggle that lab professionals face for recognition of their contributions and value to the U.S. healthcare system, notes AACC president Larry Broussard, PhD, professor of clinical laboratory sciences at Louisiana State University Health Sciences Center in New Orleans. “The report substantiates what laboratorians have been saying. But it really is a first step and needs to be followed up with specific recommendations to address the problems identified. The critical thing is: how will the report be followed up?”

Rodney Forsman, assistant professor of laboratory medicine and pathology at the Mayo Clinic College of Medicine in Rochester, Minn. agrees and hopes that policymakers will use the data to make much needed changes in reimbursement and regulation of lab tests. “This report does not break new ground, but it gives a credible snapshot of where we are today. The relevance of the report is that we now have a government-commissioned document that supports what we in the field have been saying. And as far as those responsible for making policy, this gives them something to turn to that highlights the right areas.”

“It’s quite valuable as a resource,” added Robert Murray, JD, PhD, technical consultant with Midwest Diagnostic Pathology in Park Ridge, Ill. “The Lewin Group did its homework, and the quantitative documentation is excellent. And it appears to be very supportive of the value of laboratory testing and shows that it has a favorable cost-benefit ratio within the healthcare system.”

A Comprehensive Scope

Concern that policymakers lack a firm understanding of the field of laboratory medicine was one of the factors that prompted the CDC to initiate a national effort to identify and evaluate best practices in lab medicine. “We have felt for some time that there needed to be a document that substantiates the scope of laboratory medicine in the United States,” explained D. Joe Boone, PhD, acting director of the CDC Division of Laboratory Systems and the administrator of the project. “Its primary focus is to help those who are not laboratory professionals—policymakers, for example—better understand the field as well as the nature of the constraints that influence or affect laboratory operations and practices. But we also hope that laboratorians find it useful.”

Boone noted that he was expecting something quite a bit smaller. “It kind of surprised me when I saw the actual magnitude of the document,” said Boone. “I was expecting something that was significantly less lengthy.” He added that the Lewin Group is still working on three additional chapters (See Box, below). Final drafts of these chapters are expected to be available for comment after August 30. The comment period for the previously finished chapters ended on June 30 with comments received from five organizations—the American Clinical Laboratory Association, the American Society of Microbiology, the College of American Pathologists, Auburn Strategies, and the Academy for Clinical Laboratory Physicians and Scientists—and two individuals. The entire report is expected to be finished by November 30.

Structure of Laboratory Medicine: A National Status Report

The posted report is divided into 14 sections that include eight chapters:

  • The Value of Laboratory Medicine to Health Care
  • Market Profile of the Laboratory Medicine Sector
  • Laboratory Medicine Workforce
  • Quality and the Total Testing Process
  • Quality Systems and Performance Measurement
  • Laboratory Information Systems
  • Federal Regulatory Oversight of Laboratory Medicine
  • Reimbursement for Laboratory Medicine

Three chapters still under development are:

  • Patient-Centered Care And Laboratory Medicine
  • Innovative Applications in Testing Technologies
  • Policy Issues and Their Implications for Stakeholders in Laboratory Medicine

To view the full report of Laboratory Medicine: A National Status Report, go to the CDC Web Site.

More Specifics, Please

While many laboratorians are pleased with the report, citing words like extensive and comprehensive, others believe that there’s a need for greater depth in some of the conclusions it draws, as well as the need for more concrete recommendations.

David Mongillo, vice president for policy and medical affairs at the American Clinical Laboratory Association in Washington, D.C., remarked that “the report really touched upon a fully integrated landscape of the very complex clinical lab industry, but we view this as a first step toward any additional considerations that might include recommendations.”

One example where more definition is needed is the chapter that deals with regulatory oversight, Mongillo noted. “In a few places in the report, a statement is made that a recent FDA guidance document clarifies its oversight of IVDMIAs. But what really happened is that the FDA released a draft document which, in our opinion, did not really clarify the agency’s role regarding oversight of IVDMIAs. Instead, what it really did was provide an opportunity for comment on the FDA’s role in oversight of IVDMIAs as laboratory-developed tests.”

Mongillo said that the report also states that the FDA has statutory authority to fully regulate all LDTs but has not done so because of resource constraints. “We think that has to be fully considered. We know there are some FDA officials who make the assertion that the agency has full authority to regulate all of these LDTs, but we don’t know if that has ever been fully, legally determined. At the ACLA, we think the FDA plays an important and positive interagency role in this respect but that the responsibility for oversight of LDTs falls under CLIA and CMS.”

Reimbursement Changes Needed

Low reimbursement rates have plagued labs for a number of years. In 2000, the Institute of Medicine issued a report, “Medicare Laboratory Payment Policy: Now and in the Future.” It stated, “Existing mechanisms for keeping payments up to date are inadequate.” Today, 8 years after the IOM report, the same issues still affect labs.

The IOM study took on the problem of reimbursement directly, noted Murray. “It created a flurry of interest within the lab community, but I can’t think of any objective consequences that came from it.”

Forsman agreed. “There was a lot of input from consultants, but what it came down to was 12 points that pretty much agreed with what everyone had been saying. For example, the IOM report indicated that the business of coding is flawed —which also was a conclusion of the new CDC report. The IOM report also said that competitive bidding wouldn’t work —which also was a finding in the new CDC report. So now, we have a restatement of things we’ve known but now can point to.”

According to the CDC report, CMS is proceeding with a competitive bidding demonstration project for laboratory services, with the expectation of substantial cost savings. Supporters of the CMS competitive bidding project believe that current prices on the fee schedule have no substantial relationship to actual costs. However, the demonstration project model is highly exclusive and could have significant detrimental effects on clinical labs that lose in the bidding process, as many depend on Medicare reimbursement for a sizable portion of their revenues.

The CDC report also states that the Medicare program exerts the strongest influence on U.S. laboratory services payment. All public payers and approximately 67% of private payers use Medicare’s payment methodologies as the basis for their own and as tools for negotiating discounts with providers. Redesign of the current Medicare payment system is needed to meet the growing scientific, technical, clinical, and economic challenges of the U.S. healthcare system.

For example, the report concludes that continued use of 56 different fee schedules nationwide is inefficient and unnecessarily complex. For certain commonly ordered tests, the multiple schedules result in large regional variations, while for other tests, national limitation amounts results in inadequate Medicare payments. In addition, the Medicare statute restricts payment for screening and other preventive technologies and services, unless otherwise specified by Congress. Adding these technologies and services to Medicare benefits on a case-by-case basis via legislation is cumbersome and impedes access to certain proven, beneficial tests.

“The chapter dealing with reimbursement is a reasonably fair representation of the current complexities of the payment and reimbursement system,” remarked ACLA’s Mongillo. “We believe that, yes, some reconsideration of payment for laboratory services, especially those that are new and sophisticated tests, may be necessary. And I think that was what the report’s overall conclusion was in this area—that the fee schedule should be re-examined in terms of how it could better accommodate some of the new diagnostic, molecular, and genetic tests that may not currently be adequately reimbursed.”

Forsman noted that there seems to be some uncertainty on the part of the lab community as it looks to CMS on reimbursement issues. “A few years ago, there were recommendations of this sort, and members of the lab community said, ‘Oh, they’ll never listen.’ But CMS did implement an open door policy and contributions were heard, and we did have the national limitations set differently for the 23 top tests.”

The problem, Forsman added, is that the coding structure can be ambiguous. “We all know that certain things are favorably reimbursed. But others, like new and emerging technologies, or testing for an esoteric disease, may not be favorably reimbursed. That doesn’t make the tests any less valuable. But they may not fit under current coding guidelines.”

Some tests, Forsman maintained, have no clinical validity or lead to other downstream costs associated with follow-up. On the other hand, he said, there are other codes that are highly useful and offer a tremendous return on investment in terms of avoiding inpatient stays and other procedures. “If the reward system was built along those lines, I think there would be enough money in the system and we would end up with more cost-effective health care and better physician and patient satisfaction.”

Lab Medicine: The Numbers

  • Approximately 6.8 billion lab tests are performed annually in the U.S.
  • Lab testing revenues in 2007 were a projected $52 billion
  • Hospital-based labs generate 54% of total testing revenue, projected at $28.4 billion for 2007
  • More than 4,000 lab tests are available for clinical use; of the 1,162 tests that are reimbursed by Medicare, about 500 are performed regularly
  • The number of CLIA-certified labs exceeded 200,000 in 2007; physician office labs represent 54% of clinical labs in this sector, 80% of which are certified to perform only waived and/or provider-performed microscopy tests, such as rapid streptococcal detection

Source: Laboratory Medicine: A National Status Report, May 2008

Laboratory Information Systems

The report notes that laboratory information systems (LIS) have evolved over the past few decades from simple systems designed to generate accurate reports to systems that can link laboratory data from one end of the total testing process to the other. However, the extent to which such systems have been adopted and their capabilities vary widely. Lack of harmonized data standards is the single greatest barrier to laboratories’ ability to integrate data within the lab as well as exchange information with other health care computer systems.

These external systems may well be driving changes within LIS. “My experience is that the needs of these other systems are making the LIS fit into the jigsaw puzzle that is the electronic health record, even though labs were far and away the first to use computers,” explained Murray. “Now, data from labs are reorganized by other systems. I’m in favor of anything to harmonize all these different systems, but I think it’s out of our hands—it’s not a lab issue now so much as an information processing issue.”

Making the Transformation

The laboratorians who spoke with CLN were cautiously optimistic about how the report will affect a transformation in laboratory medicine. “It will support change, but that change will come very, very slowly,” said Murray.

Boone noted that the vast amount of material covered necessitated adoption of broad conclusions as opposed to specific recommendations. “A long-term objective of the project is to see if there are particular areas where significant problems exist and how these should be addressed,” he said. He added that the CDC will periodically update the report depending on the need for information, and as resources permit.

Broussard expressed his optimism that labs may fare better in the future. “This is an excellent document for presenting the facts, which are now documented, to people who are in decisionmaking capacities. For example, when people talk about cutting healthcare costs, they always look to the lab. But the report shows that the amount of money spent on lab costs as a percentage of healthcare expenditures is so small that significant cuts to the lab will not significantly affect healthcare costs overall” (See Figure above).

Forsman agreed that the time spent developing the report was time well spent, but noted that “the government will make decisions without a report. The realities are that if changes to the lab industry require statutory remedies, we will need to continue to have a presence on Capitol Hill, and this report will be helpful in terms of providing us with much needed ammunition.”