Pay cuts could wipe out labs, hurt nursing homes
James M. Berklan
When it comes to worries about how Medicare doctors will be paid, nursing home operators have thought they should stand at the front of a long and anxious line. Truth be told, they have some stiff competition for the “most nervous” title.
That might go to the clinical lab folks. Although many provider groups are worried about which will have to sacrifice the most to make up for the Sustainable Growth Rate fix, at least others have seen their pay rates change since 1984. Not so for at least a part of the formula used for the blood-checking crowd.
Many of the labs could be driven out of business if reimbursements are lessened, representatives say.
"So what?" might be nursing operators' defensive retort. The catch is that nursing facilities' own bottom lines could face significant damage if cuts currently being floated in Washington come to fruition.
Many of the concerned labs deal exclusively with nursing homes, thus tying the two providers' fates together.Bankruptcy would be a real possibility, emphasizes Peter Gudaitis, president of Aculabs, which serves 330 long-term care facilities in four Northeastern states.
“Large labs are not working in nursing homes because there's no profitability,” said Gudaitis, the son of the company's founder. “The worry is Congress is looking to trim the big guys and won't even realize they'll wipe out the smaller guys.”
Labs like Gudaitis' perform many of the most common blood tests in nursing homes, such as CBCs, metabolic profiles and protimes. These also happen to be the procedures the Centers for Medicare & Medicaid Services has said it will examine for possible reimbursement trims.
National lab chains make only about 10% of their revenues off of these Medicare Part B services, Gudaitis says. Meanwhile, his company collects about 90% of its business from nursing homes, making it much more vulnerable to Medicare reimbursement shifts.
Skilled nursing operators should be rooting for the smaller clinical lab companies to survive. They draw blood on-site and typically return test results quicker, all to the good for patient and cost-conscious administrator. If they leave the marketplace, it would necessitate many more costly ambulance rides for frail, elderly patients. And more nursing staff time away from the facility.
Everything could come to a head by the end of the month. The current Sustainable Growth Rate patch expires at the end of March, but the real timing marker may be when outgoing Senate Finance Chairman Max Baucus (D-MT) departs for his new job as ambassador to China. That could occur as quickly as about three weeks from now, which could put much of the progress he's made on the Sustainable Growth Rate fix in peril.
Gudaitis said he is hopeful that negotiators such as the American Clinical Lab Association are successful in persuading officials to adopt a modified reimbursement plan. Proposals include improving the travel allowance for these blood-drawing services, and an upward adjustment of the labor component reimbursement. The latter has not changed since the Clinical Laboratory Fee Schedule was created in 1984 on a cost basis, Gudaitis and others point out.
CMS officials, on the other hand, say “technological changes” should be taken into account, implying that improved technology has enabled provider costs to stay low. Providers, and certainly the lab operators, aren't buying it. They know of nobody else who has had a pay freeze for three decades — yet alone someone who could be knocked down from those stagnant levels.
“This is no fire drill,” warns one key observer. “Life as you know it is going to change dramatically if [clinical labs] cannot receive sufficient reimbursement to enable them to serve the patients in [nursing] facilities.”
Much like nursing home lobbyists who have been resigned to the fact that their industry will eventually pay for some of the “doc fix,” clinical lab advocates are prepared to give some — but just some.
“We completely understand that something's going to come out of our hide,” one lab proponent admitted to McKnight's. “But what we want to do is not eviscerate the sector. Cuts should be phased in and not go after all these tests at once.”
One thing we know will be sustained: until the "doc fix" and other payment schemes are sorted out, there will be more nervous times for clinical lab operators — and their long-term care partners.
James M. Berklan is McKnight's Editor. He can be followed @LTCEditorsDesk.