Laboratory Reimbursement—Competitive Bidding and After

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Will 2008 be considered a watershed year for clinical laboratory Medicare reimbursement? Early in the year laboratories faced a dismal reimbursement future with a competitive bidding demonstration project scheduled to begin in San Diego in July, along with a soon-to-be announced second site. Fast forward to August and Congress has repealed CMS's authority to implement the demonstration, legislation has been introduced to re-engineer the laboratory fee schedule, and laboratories are poised to receive a 4.5% update beginning January 1, 2009. Let's look at how these paradigm changes occurred and the potential impact in the future.

The 2003 Medicare Modernization Act, best known for implementing a prescription drug benefit for seniors, also included a provision for a competitive bidding demonstration project for Medicare Part B clinical laboratory services to occur in two areas. Despite ongoing opposition from the entire clinical laboratory industry, the Centers for Medicare Services (CMS) has proposed competitive bidding for laboratory services multiple times in the past. The industry remains concerned that when a limited number of laboratories are selected to provide all testing in an area, primarily based on cost, significant incentives exist to bid below cost such that quality of testing may be compromised and beneficiary access is reduced. Competitive bidding came closer to fruition this time than previously—San Diego was named the first site and bids were submitted. The process was delayed shortly before winners were to be announced in April when a preliminary injunction was granted in response to a lawsuit against CMS, filed…