We all know that there has been a minor slip in net revenue per test for clinical laboratories over the last couple of years.  This is nothing new—it is consistent with a story of declining reimbursements in healthcare.Under the proposed Protecting Access to Medicare Actof 2014 (PAMA) rule, hospital laboratory reimbursement for outpatients and outreach could be reduced by 42 percent in 2017.  What is new is that under the proposed Protecting Access to Medicare Actof 2014 (PAMA) rule, hospital laboratory reimbursement for outpatients and outreach could be reduced by 42 percent in 2017.

At $19.79 per test on average based on our Fourteenth Comprehensive Laboratory Outreach Survey, hospitals are paid 36 percent more than Quest and LabCorp at $14.65 and $14.52, respectively.  Many know that hospitals are currently reimbursed on a different, higher fee schedule than independent laboratories based on the assumption that hospitals have a higher cost of operations.  Continue reading →

I just returned from the G2 Intelligence Lab Institute conference in Washington, DC, and was struck by the dedication and persistence of laboratory executives despite seemingly insurmountable odds.  Lab industry challenges grow each year, with impending PAMA reimbursement reductions now added to the mix of bundled payments, narrowing insurance networks, ACOs (accountable care organizations), and industry fragmentation.  Laboratory is involved in 70 percent of patient management decisions and represents only three percent of the costs, yet it is targeted for a disproportionate amount of cost reductions by the government and other payers.  It strikes me as a sort of modern existentialism. Continue reading →

One of the most common questions from our client base is, “What types of joint ventures or partnerships are available with outside entities, and what are the pros and cons versus going solo?”Let’s start with the most formal, a joint venture, and work our way down to management agreements.

There are less than 20 formal types of laboratory/hospital joint ventures today. The laboratory companies that enter joint ventures are very large regional (PAML), national (LabCorp, Quest Diagnostics), or international firms (Sonic).  Continue reading →

Yes, you read it right.  I am talking about the all-too-common rodent variety of chipmunk.  Chipmunks are a vegetable and fruit gardener’s worst enemy.  They secretly watch youas you watch your produce ripen.  Just as you decide you are going to pick your crop within the next couple days, they sneak out into your garden at night and have their fill.  My vegetable garden is big enough to share, but the berries are another story.  They are precious few! When chipmunks ate all my strawberries and blueberries for two consecutive years, I declared war! Continue reading →

Have you ever gone fishing thinking you had the right value proposition to catch fish and reach your limit? In order to ensure success, you have to make sure you have everything you need in your tackle box before you get to the lake. Other variablesoften come into play:ifthe lake is flat, the weather is ideal, you have enough comrades, enough poles in the water, the right equipment in terms of bait, spreaders, chum-you name it, the list goes on. You find that perfect spot and drop anchor only to discover that after multiple excruciating hours your cooler is empty, your fish finder is silent, and your fish counter is stuck at zero. Continue reading →

In the U.S., the federal government regulates laboratories under the CLIA (Clinical Laboratory Improvement Act) statutes. These regulations call for biannual, unannounced, onsite inspections of laboratories performing moderately or highly complex testing. Governmental agencies or private agencies approved by the government perform these inspections.

Working with many laboratories across the country, Chi consultants see facilities that maintain a culture of inspection readiness at all times. However, we also receive calls from laboratories that struggle with the process. We have divided the characteristics of these two types of laboratories into the “Ready” and “Or Not” groups. Continue reading →

The national laboratories would like you to believe that they have the advantage when it comes to managed care contracting—that they alone have negotiated “national exclusive contracts” with certain payers that require physician offices to send all patient insurance types to their laboratories. This is hogwash. Or perhaps brainwash is more apropos. They have brainwashed physicians and their office staff into believing they are contractually required to follow these “rules.” And, of course, no one wants the inconvenience of using multiple laboratories, so they might as well send all their work to the national laboratory, effectively cutting out the hospital laboratory altogether. Slick, right? That is their story and they stick with it, as shown in the cartoon below:

Continue reading →

The Financial Value of Clinical Laboratories is Disproportionately High:  5% of Cost Can Drive 50% or More of Margin

Here is one of healthcare’s best kept secrets–laboratory drives a disproportionate share of hospital profits. Five percent of hospital costs can drive over fifty percent of hospital profits. How? The answer is a robust laboratory outreach program. Outreach can be the proverbial “goose that laid the golden egg” providing a growing, recurring revenue stream at a time when hospitals are starved for new revenue and margin. Continue reading →