April 2008 Clinical Laboratory News: Regulatory Profiles

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April 2008: Volume 34, Number 4

Judge Rejects Labs’ Lawsuit to Stop Competitive Bidding Demo

A federal judge has dismissed the lawsuit brought by three San Diego, Calif. labs to stop the federal government from moving forward with CMS’s competitive bidding demonstration project. The lawsuit, filed by Sharp Healthcare, Scripps Healthcare, and Internist Laboratory, sought to stop the upcoming project that the labs say was developed in violation of the Administrative Procedures Act.

In its decision, the court denied a temporary restraining order based on papers filed by the government 2 days earlier. In those papers, the government argued that any challenge to the Lab Project was premature because no winners or losers had yet been decided upon and therefore none of the labs has suffered any harm. The government further argued that the court is precluded from reviewing the legality of the project due to factors that are, in part, jurisdictional and unique to the Medicare program.

Before the lawsuit was dismissed, the ACLA wrote to HHS Secretary Michael Leavitt, requesting that the project be suspended for at least 180 days, citing concerns that Medicare beneficiaries living in the demonstration area might be denied access to laboratory testing services, especially innovative new tests. But in a reply, CMS stood firm on its commitment to the project, stating, “We also believe that it is appropriate to continue to carry out the requirements of the law to operate the competitive bidding demonstration in order to obtain the benefits of market-based prices for the Medicare program.”

Another letter to Secretary Leavitt from the House Committee on Small Business, chaired by Nydia Velázquez (D-N.Y.), urges postponing the project, saying the proposal could lessen the diversity of currently competing labs by forcing smaller labs out of business, and ultimately creating monopolies. The result of small laboratories going out of business, the letter says, would compromise access to laboratory testing for the Medicare beneficiaries whom small laboratories serve—typically nursing home residents and home care patients.

The letters can be viewed at www.clinical-labs.org.

Budget Cuts Miss Labs

Clinical labs have escaped the initial list of provider payment cuts in the fiscal year 2009 budget released by President Bush. The $3 trillion budget proposes to cut Medicare and Medicaid spending by more than $200 million, particularly by slashing provider payments, to reduce the growing federal deficit projected to exceed $400 billion in 2009.
But labs need to keep a close eye on the physician payment system. Physician reimbursements—not dealt with in the President’s budget—will be cut by 11% starting July 1. Congress estimates it will take $12 billion to postpone the cut by one year and potentially tens of billions to correct it. This could potentially lead to new cuts in Medicare payments, and it could also mean an extension of the current freeze on the laboratory CPI update, which expires in December 2008.

CMS Recruiting Communities for EHR Project

Through May, communities can apply to become one of 12 sites for a new demonstration project that provides Medicare incentive payments to physicians for using certified electronic health records (EHRs). CMS expects that the demonstration will start with four communities in 2008, with the remainder beginning in 2009. The project will be open to small and medium-sized primary care physician practices.

Once CMS has selected communities, the agency will work with them to recruit physician practices for participation. Recruitment will focus on locations where the demonstration may enhance existing or planned private sector projects related to health information technology and quality reporting initiatives.

Over 5 years, as many as 1,200 physician practices that use certified EHRs will receive financial incentives. In addition, the practices also may be eligible for bonus payments. Total payments during the 5 years may be as much as $58,000 per physician or $290,000 per practice.

For more information about this project, go to the CMS Website.

Study Says Patent Reform Legislation Increases Costs, Undermines Innovation

Patent reform legislation before Congress would sharply increase patient costs and risks, and undermine innovation with potentially serious consequences for the U.S. economy, according to a report released by the Biotechnology Industry Organization (BIO).

The analysis suggests that elements of the patent reform legislation now before Congress would put the value of U.S. intellectual property—estimated to be worth more than $5 trillion—at risk by raising the costs and uncertainties of the patent system. BIO says that changing the rules for apportioning damages would increase the cost of patent litigation and undermine innovation. In addition, “inequitable conduct provisions” in the bill would undermine the commercialization of innovative research.

The analysis was conducted by economist and Clinton Administration official Robert J. Shapiro and healthcare policy expert Aparna Mathur. It is “The Economic Implications of Patient Reform: The Deficiencies and Costs of Proposals Regarding the Apportionment of Damages, Post-Grant Opposition and Inequitable Conduct.”

To read the report, go to BIO Website.

GINA Passes in the House

The Genetic Information Nondiscrimination Act (GINA) passed in the House as a section of the Paul Wellstone Mental Health and Addiction Equity Act of 2007—H.R. 1424—introduced by Rep. Patrick Kennedy (D-R.I.). It will now move to the Senate.

The 2007 version of GINA passed overwhelmingly in the House when it was last introduced in 2007, but the Senate version was stalled when Sen. Tom Coburn (R-Okla.) put a legislative hold on the bill, citing concerns about complications involving the definition of “genetic testing” and with the need for legal protection for employers.

To read more about the bill, go to the Congressional Website.

AACC Endorses Wired for Health Care Quality Act

The AACC has endorsed the Wired for Health Care Quality Act(HR 3800) sponsored by Rep. Anna Eshoo (D-Calif.)—that proposes a variety of stimuli to create interactive medical record (EMR) networks. AACC believes the creation of such networks is vital to reducing medical errors and eliminating duplicative and unnecessary services.

To read the bill, go to http://thomas.loc.gov/.  

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