Over the past three decades, the Centers for Medicare and Medicaid Services (CMS) and Congress have discussed, on numerous occasions, the adoption of a competitive bidding system for determining Medicare payments for clinical laboratory services. The assumption is that competitive bidding would result in a more ‘rational’ fee schedule, which would reduce test utilization and government payments to clinical laboratories.
Most of the policy discussion has centered on conducting a demonstration project to determine the feasibility of such a payment system. In the late 1980s and early 1990s, Congress barred CMS from developing such a project. Congressional opposition dissipated by the mid 1990s, however, allowing CMS to hire Research Triangle Institute (RTI) to develop a competitive bidding model.
RTI completed and released a study outlining a competitive bidding system in 1997. However, the demonstration was put on hold after Congress placed new restrictions on the design. In 2003, Congress included language in the Medicare Modernization Act directing CMS to conduct a competitive bidding demonstration project on laboratory services. In October 2007, CMS announced that it planned to move forward with the demonstration, starting first in the San Diego-Carlsbad-San Marco Metropolitan Statistical Area (MSA) in California.
In response to CMS’ announcement, a number of Southern California laboratories filed a lawsuit in January 2008 against the agency questioning whether it had met the public notice and comment requirements set forth in the Administrative Procedures Act. In April 2008, a US District Court Judge granted the three laboratories a preliminary injunction stopping, temporarily, the demonstration. The judge stated that lawsuit raised credible concerns involving administrative and statutory issues pertaining to the demo and, according to the Judge, they have a reasonable expectation of winning on those points in a full trial.
During this lull in the trial, the House of Representatives, at the urging of the laboratory community, included a provision in H.R.6331, the Medicare Improvements for Patients and Providers Act, which repealed CMS’ authority to conduct a competitive bidding demonstration for laboratory services. This bill overwhelming passed the House on July 24, 2008, and the Senate on July 9, 2008. Although the President vetoed the measure, both Chamber voted to override the veto on July 15, 2008, thereby officially ending the demonstration project.
Information on San Deigo MSA Demonstration
Previous Documents on Competitive Bidding
Ongoing Competitive Budding Demonstration Project
Recent AACC Position Statements on Competitive Bidding