The Clinical Laboratory Sector and the Impact of Recent Medicare Cuts

1. The Clinical Laboratory Sector and the Impact of Recent Medicare Cuts March 19, 2012

2. Clinical Laboratories Guide Critical Medical Decisions at Low Cost Lab Test Results Inform 70% of Doctors’ Treatment Decisions But Represent Only 1.6% of Medicare Spending UK Department of Health Pathology Modernisation Team. Modernising Pathology Services, 2004. Available at www.dh.gov.uk.

3. Clinical Labs Received Zero or Negative Updates to Fee Schedule Rates in 14 of the Last 22 Years Positive Updates Zero or Negative Updates

4. Clinical Lab Fee Schedule Updates Have Consistently Lagged Updates for Other Provider Types Cumulative Change in Provider Updates, 1995 - 2011 Cumulative Change in CPI-U, 1995 - 2011 = 42% Cumulative Percent Change in Fee Schedule or Market Basket Updates, by Provider Type, 1995 - 2011

5. MedPAC’s October 2011 Report and Lab Cuts • Rationale for latest round of cuts is a “suggestion” by MedPAC; according to conference report, labs were fortunate to get a 2% cut, not 10% • MedPAC’sOctober 14, 2011 proposal to cut the Clinical Lab Fee Schedule by 10% was made within the artificial construct of a total repeal of the Sustainable Growth Rate (“physician fix”) formula– which has not occurred. • MedPAC stated that, “Offsetting the cost within Medicare compels difficult choices including…offsets in other sectors that the Commission may not support outside of the context of repealing the SGR.” • In fact, MedPAC’s presentations and letter regarding this proposal repeatedly stated that they do not necessarily recommend cutting Medicare to pay for the entire cost of repealing the SGR, noting that Congress has the ability to find offsets in other parts of the federal budget. • Most importantly, MedPAC states that the Commission has not voted on each individual cut, “and their inclusion should not be construed as a recommendation.”

6. Impact of Recent Cuts on Clinical Laboratory Medicare Payments Test Paid at $10 in 2010 17% Cut Medicare Payment for a Hypothetical Clinical Lab Test

7. Impact of Recent Cuts on Clinical Laboratory Medicare Payments Test Paid at $10 in 2010 23% Cut Medicare Payment for a Hypothetical Clinical Lab Test

8. Labs Disproportionately Cut by the The Middle Class Tax Relief & Job Creation Act of 2012 Clinical Laboratories Cut by $9.38 for every $1.00 Cut to Other Providers 15% of Medicare Cuts 1.6% of Medicare Spending

9. The Lab Medicare Market: Smaller Laboratories Comprise the Backbone for Delivery of Medicare Lab Services