[House Hearing, 110 Congress]
[From the U.S. Government Publishing Office]
FULL COMMITTEE HEARING ON COMPETITIVE
BIDDING FOR CLINICAL LAB SERVICES:
WHERE IT IS HEADING AND WHAT SMALL
BUSINESSES CAN EXPECT
=======================================================================
COMMITTEE ON SMALL BUSINESS
UNITED STATES HOUSE OF REPRESENTATIVES
ONE HUNDRED TENTH CONGRESS
FIRST SESSION
__________
JULY 25, 2007
__________
Serial Number 110-38
__________
Printed for the use of the Committee on Small Business
Available via the World Wide Web: http://www.access.gpo.gov/congress/
house
36-112 PDF WASHINGTON DC: 2007
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HOUSE COMMITTEE ON SMALL BUSINESS
NYDIA M. VELAZQUEZ, New York, Chairwoman
HEATH SHULER, North Carolina STEVE CHABOT, Ohio, Ranking Member
CHARLIE GONZALEZ, Texas ROSCOE BARTLETT, Maryland
RICK LARSEN, Washington SAM GRAVES, Missouri
RAUL GRIJALVA, Arizona TODD AKIN, Missouri
MICHAEL MICHAUD, Maine BILL SHUSTER, Pennsylvania
MELISSA BEAN, Illinois MARILYN MUSGRAVE, Colorado
HENRY CUELLAR, Texas STEVE KING, Iowa
DAN LIPINSKI, Illinois JEFF FORTENBERRY, Nebraska
GWEN MOORE, Wisconsin LYNN WESTMORELAND, Georgia
JASON ALTMIRE, Pennsylvania LOUIE GOHMERT, Texas
BRUCE BRALEY, Iowa DEAN HELLER, Nevada
YVETTE CLARKE, New York DAVID DAVIS, Tennessee
BRAD ELLSWORTH, Indiana MARY FALLIN, Oklahoma
HANK JOHNSON, Georgia VERN BUCHANAN, Florida
JOE SESTAK, Pennsylvania JIM JORDAN, Ohio
Michael Day, Majority Staff Director
Adam Minehardt, Deputy Staff Director
Tim Slattery, Chief Counsel
Kevin Fitzpatrick, Minority Staff Director
______
STANDING SUBCOMMITTEES
Subcommittee on Finance and Tax
MELISSA BEAN, Illinois, Chairwoman
RAUL GRIJALVA, Arizona DEAN HELLER, Nevada, Ranking
MICHAEL MICHAUD, Maine BILL SHUSTER, Pennsylvania
BRAD ELLSWORTH, Indiana STEVE KING, Iowa
HANK JOHNSON, Georgia VERN BUCHANAN, Florida
JOE SESTAK, Pennsylvania JIM JORDAN, Ohio
______
Subcommittee on Contracting and Technology
BRUCE BRALEY, IOWA, Chairman
HENRY CUELLAR, Texas DAVID DAVIS, Tennessee, Ranking
GWEN MOORE, Wisconsin ROSCOE BARTLETT, Maryland
YVETTE CLARKE, New York SAM GRAVES, Missouri
JOE SESTAK, Pennsylvania TODD AKIN, Missouri
MARY FALLIN, Oklahoma
.........................................................
(ii)
Subcommittee on Regulations, Health Care and Trade
CHARLES GONZALEZ, Texas, Chairman
RICK LARSEN, Washington LYNN WESTMORELAND, Georgia,
DAN LIPINSKI, Illinois Ranking
MELISSA BEAN, Illinois BILL SHUSTER, Pennsylvania
GWEN MOORE, Wisconsin STEVE KING, Iowa
JASON ALTMIRE, Pennsylvania MARILYN MUSGRAVE, Colorado
JOE SESTAK, Pennsylvania MARY FALLIN, Oklahoma
VERN BUCHANAN, Florida
JIM JORDAN, Ohio
______
Subcommittee on Urban and Rural Entrepreneurship
HEATH SHULER, North Carolina, Chairman
RICK LARSEN, Washington JEFF FORTENBERRY, Nebraska,
MICHAEL MICHAUD, Maine Ranking
GWEN MOORE, Wisconsin ROSCOE BARTLETT, Maryland
YVETTE CLARKE, New York MARILYN MUSGRAVE, Colorado
BRAD ELLSWORTH, Indiana DEAN HELLER, Nevada
HANK JOHNSON, Georgia DAVID DAVIS, Tennessee
______
Subcommittee on Investigations and Oversight
JASON ALTMIRE, PENNSYLVANIA, Chairman
CHARLIE GONZALEZ, Texas LOUIE GOHMERT, Texas, Ranking
RAUL GRIJALVA, Arizona LYNN WESTMORELAND, Georgia
(iii)
C O N T E N T S
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OPENING STATEMENTS
Page
Velazquez, Hon. Nydia M.......................................... 1
Chabot, Hon. Steve............................................... 2
WITNESSES
PANEL I
Love, Timothy P., U.S. Department of Health and Human Services... 4
PANEL II
Bejgrowicz, Thomas S., M.S., L.N.H.A., American Health Care
Association (AHCA)............................................. 13
Bonifas, Mary Jo, Clinical Laboratory Management Association
(CLMA)......................................................... 15
Schild, Tod,National Independent Laboratory Association (NILA)... 17
Weiss, Dr. Ronald, American Clinical Laboratory Association
(ACLA)......................................................... 19
APPENDIX
Prepared Statements:
Velazquez, Hon. Nydia M.......................................... 33
Chabot, Hon. Steve............................................... 35
Altmire, Hon. Jason.............................................. 37
Clarke, Hon. Yvette.............................................. 38
Love, Timothy P., U.S. Department of Health and Human Services... 39
Bejgrowicz, Thomas S., M.S., L.N.H.A., American Health Care
Association (AHCA)............................................. 49
Bonifas, Mary Jo, Clinical Laboratory Management Association
(CLMA)......................................................... 66
Schild, Tod,National Independent Laboratory Association (NILA)... 71
Weiss, Dr. Ronald, American Clinical Laboratory Association
(ACLA)......................................................... 76
Statements for the Record:
NILA Attachment.................................................. 80
American Association for Clinical Chemistry...................... 81
American Medical Technologists................................... 83
American Society for Clinical Pathology.......................... 85
College of American Pathologists................................. 87
Laboratory Corporation of America Holdings (LabCorp)............. 90
(v)
FULL COMMITTEE HEARING ON
COMPETITIVE BIDDING FOR CLINICAL
LAB SERVICES: WHERE IT IS
HEADING AND WHAT SMALL
BUSINESSES CAN EXPECT
----------
Wednesday, July 25, 2007
U.S. House of Representatives,
Committee on Small Business,
Washington, DC.
The Committee met, pursuant to call, at 10:00 a.m., in Room
2360 Rayburn House Office Building, Hon. Nydia Velazquez
[Chairwoman of the Committee] presiding.
Present: Representatives Velazquez, Cuellar, Braley,
Ellsworth, Sestak, Chabot, Heller and Davis.
OPENING STATEMENT OF CHAIRWOMAN VELAZQUEZ
ChairwomanVelazquez. This hearing on competitive bidding is
now called to order. Clinical laboratory services are an
essential component of quality health care. They provide
physicians with objective data needed to help them diagnose,
treat and monitor diseases and other medical conditions. Often
laboratory testing is done on the same day the specimen is
received and the results reported on the following day.
As with many parts of our health care system, small
businesses play a critical role in this area. The laboratory
industry is dominated by small businesses who work with
hospitals, nursing homes and health facilities to provide care.
In fact, nearly 90 percent of the industry is made up of small
firms. The clinical lab industry is highly complex and
integrated structure. Numerous relationships exist between
diverse small and large firms which rely on one another to
ensure high quality lab services are provided.
The industry did not develop quickly and the market has
allowed for labs providing different services. Today we will
hear how CMS competitive bidding project threatens to dismantle
this system overnight. It seems that CMS has ignored
Congressional intent and moved forward with a project that
creates a cumbersome bureaucracy. As proposed, it could be make
impossible for small labs to survive.
CMS argues that small businesses are protected because labs
with less than $100,000 of Medicare business are exempted from
the project. This threshold will not save small businesses. To
suggest otherwise is disingenuous.
In particular terms, virtually all independent and most
hospital labs doing business in the demonstration area will
exceed the limit. Even the smallest labs have business revenue
of at least $1 million to $2 million annually and for those
that are below the threshold, the new payment structure will
mean that they are paid Medicare fees that simply won't cover
costs.
Despite pleas from labs both big and small, CMS has ignored
the concerns of these businesses. We heard a similar tale last
week. CMS failed to solicit input of small pharmacists when
developing the price formulation for generic drugs. The result
will be the same in that small health care providers cannot
survive. When small labs go out of business, they stay out of
business. Because of the investment in equipment and especially
trained personnel, a laboratory cannot shut its door
temporarily and start up again when circumstances change. This
will leave vulnerable patient populations with compromised
access to lab services. In short, instead of competition
deciding market share, CMS will determine market share winners
and losers and the losers are small local businesses.
It is apparent from the written testimony that the Agency
has not engaged them adequately. While CMS will say that
Congress mandated the action, it clearly never ordered them to
ignore the input of the stakeholders.
Competitive bidding for laboratory services in any form
could have wide-reaching implications for the health care
industry. Medicare beneficiaries receive over 250 million
laboratory tests each year and while these services account for
less than two percent of Medicare spending, they impact on
estimated 60 percent of all medical decisions.
Given this broad impact, an important question must be
answered today on whether this project will actually work. I
look forward to today's testimony and thank the witnesses for
their participation. I now yield to Mr. Chabot for his opening
statement.
OPENING STATEMENT OF MR. CHABOT
Mr.Chabot. Thank you, Madam Chair. Good morning and thank
you all for being here as we examine the Centers for Medicare
and Medicaid Services, Medicare Clinical Laboratory Competitive
Bidding Demonstration Project. It's a mouthful. I would like
thank Chairwoman Velazquez for holding this hearing and each of
the witnesses for taking the time to provide this Committee
with testimony.
On December 8, 2003, President Bush signed into law the
Medicare Prescription Drug Improvement and Modernization Act of
2003. The legislation produced the largest overhaul of Medicare
in the public's health program 38 year history. Among other
things, the legislation required CMS to run a demonstration
using competitive bidding and performance-based contracting
procedures when entering into contract for the administration
of benefits under Medicare Part B.
Before this legislation, Medicare contracting was not
subject to competition. Between 2005 and 2009, CMS will be
conducting full and open competitions to replace the
contractors that currently perform claims processing and
related functions for the Medicare program. The legislation
requires the competition and resulting contracts be in
accordance with the Federal Acquisition Regulation or FAR.
FAR Part 19 implements federal government policy to provide
maximum practicable opportunities in its acquisitions to small
businesses, veteran owned small business, service disabled
veteran small businesses, HUB Zone small businesses, small
disadvantaged businesses and women-owned small business
concerns. Such concerns must also have the maximum practicable
opportunity to participate as subcontractors in the contracts
awarded by any executive agency consistent with efficient
contract performance.
The legislation also requires CMS to conduct demonstration
projects on the application of competitive acquisition for
durable medical equipment, prosthetics, orthotics and supplies
and for payment for clinic laboratory diagnostic tests that
would otherwise be made under Medicare Part B, Clinical
Laboratory Fee Schedule. The latter competitive demonstration
project is the subject to today's fact-finding hearing to
acquire a better understanding of the CMS demonstration
project's definition and impact on small business clinical
laboratory.
In developing demonstration project procedures relating to
competitive bidding and the awarding of contracts, the CMS is
required by legislation to take appropriate steps to ensure
that small business clinical laboratories have an opportunity
to be considered for participation. Unlike the contracting for
administration of benefits under Medicare Part B, the
legislation does not require the demonstration of the subject
to the FAR.
Competition is the foundation of capitalization.
Competition stimulates innovation, encourages efficiency and
drives down prices savings taxpayer dollars. Small business has
historically been the engine of innovation and a catalyst for
competition. They also employ more than 50 percent of all
employees in this country.
While I support competition and the outcomes it normally
produces, I want to ensure that the demonstration project
design methodology meets the intent of the Small Business Act
by providing small business clinical laboratories the maximum
practicable opportunities to participate in the demonstration
as both prime contractors and sub-prime contractors.
It is also critical to the success of the demonstration
project that CMS' demonstration's project design maintains or
enhances the current competitive environment, service
accessibility and service quality. The demonstration's project
design should not result in fewer small business clinical
laboratories leading to increased prices, reduced service
accessibility and a deterioration of service quality over the
long run.
We have excellent witnesses here today to provide us with
insight into the rationale behind the demonstration project's
definition of a small business clinical laboratory and how the
demonstration project's competition methodology ensures maximum
practicable opportunities for that. We look forward to hearing
from all the witnesses here today and I want to again thank
you, Madam Chair, and I yield back the balance of my time.
ChairwomanVelazquez. Thank you. Our first witness is Mr.
Timothy Love. Mr. Love is the Director of the Office of
Research, Development and Information at the Centers for
Medicare and Medicaid Services. The Office of Research,
Development and Information at the Center of CMS, the main role
is to lead the agency in providing information on expertise to
shape the current and future directions of CMS programs or to
cooperate all demonstration activities including the project
being discussed today.
Mr. Love, you're welcome and you will have basically five
minutes and your entire testimony will be entered in the
record.
STATEMENT OF TIMOTHY P. LOVE, DIRECTOR, OFFICE OF RESEARCH,
DEVELOPMENT AND INFORMATION, CENTERS FOR MEDICARE & MEDICAID
SERVICES, U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES
Mr.Love. Thank you, Madam Chair.
Good morning, Madam Chairwoman and Distinguished Ranking
Member and Members of the Committee. I'm pleased to be here
today to discuss the clinical laboratory competitive bidding
administration mandated by the Medicare Prescription Drug
Improvement and Modernization Act of 2003, also known as the
MMA.
Mr.Chabot. Excuse me. Could you pull that even a little
closer?
Mr.Love. I'm sorry.
Mr.Chabot. That's all right. Just kind of hard to hear in
the room if you don't have--You have to speak right into it.
Mr.Love. I'll try to project a bit better, sir.
Mr.Chabot. Thanks.
Mr.Love. Certainly. As you know, the Medicare Program
expenditures are expected to grow significantly in coming
years. Medicare costs including clinical lab expenditures are
increasing much faster than the rate of inflation and our
program is particularly vulnerable because the number of
beneficiaries will spike with the impending Medicare
eligibility of baby boomers.
In the past three decades, Congress has directed our agency
to conduct demonstrations that have saved Medicare tens of
billions of dollars and extended the life of the trust funds.
The advantage of a demonstration is that we can learn something
on a small scale before going program wide. Of course, any
decision to go beyond the limited scope of this demonstration
would be up to the Congress.
Medicare payments to clinical laboratories are significant.
Madam Chairwoman mentioned that it is two percent of the
program, but that does translate into $6.7 billion a year and
Congress clearly saw this as an opportunity to investigate more
efficient payment in competitive market-based demonstration as
an alternative to the status quo which is a centralized, one-
size-fits-all administrative pricing program.
With regard to the particular interests of the House Small
Business Committee, I want to assure you that CMS has worked
diligently to implement the law while treating smaller
laboratories fairly. For example, we will choose multiple
winners and even the smallest, local clinical labs will be
allowed to participate in the demonstration as opposed to a
winner-takes-all approach favoring large national laboratories.
CMS will not require the smallest laboratories to bid,
though they will have that option. These non-bidding labs will,
however, have to accept competitively set market prices.
Bidders that are not selected will still be able to receive
Medicare payment for provision of services to Medicare outside
of the competitive bidding area and outside of the Medicare
fee-for-service program. This certainly doesn't affect any labs
that are providing services to beneficiaries under Medicare
Managed Care.
In response to comments from smaller labs, we have
simplified the bidding process so that only one-third of the
existing fee schedule still covering 99 percent of cost and
volume are up for bid. Our goal is to assure that small
businesses can participate in the demonstration on a level
playing field and have an equal opportunity to win a place in
the demonstration. Small laboratories that want to use the
demonstration as an opportunity to expand their market may do
so by competing for additional Medicare business.
In closing, I would like to make a final point regarding
the essential role of quality assurance in performing clinical
laboratory tests for Medicare beneficiaries in this
demonstration. We are not interested in conducting a
demonstration that establishes a more efficient price at the
expense of quality. In the law, Congress directed us to apply
all the current protections available under the Clinical
Laboratory Improvement Act, also known as CLIA. In the
demonstration design, however, we have gone beyond the CLIA
regulations. Winning laboratories will be required to supply
quality data throughout the demonstration in such critical
areas such as tests, turnaround time, log-in error rates and
unusable or lost specimens. At CMS, we think of quality
assurance as a stewardship issue, equal in importance to our
stewardship responsibilities to promote trust fund solvency.
I thank you again for inviting me to speak with you today
and, Madam Chairwoman, you've raised a number of points that I
didn't get to in my opening remarks and I will be happy to
answer any or all of those questions. Thank you.
[The prepared statement of Mr. Love may be found in the
Appendix on page 39.]
ChairwomanVelazquez. Thank you.
Mr. Love, CMS estimated the cost to small businesses of
submitting bids will be approximately $4,000. According to
numerous comments CMS received at the July 16, 2007 Open Door
Forum, potential bidders estimated that the cost will
significantly exceed that amount. Can you tell the Committee
how did you, CMS, estimated the cost to small businesses?
Mr.Love. The projection of demonstration participation
costs or bidding costs, we had established by our contractor or
our economic experts who developed the bidding schedule and
although I cannot provide you that technical detail, I would be
happy to submit that for the record.
ChairwomanVelazquez. But can you talk to us as to how did
you get to that figure of $4,000?
Mr.Love. It is a projection of the level of effort and
opportunity costs put into submitting a bid for consideration
in the competitive bidding process. There is a--We've actually
created a specific software--
ChairwomanVelazquez. Okay.
Mr.Love. --that is we think quite user friendly and we
really did try to limit the opportunity costs of the bidders
having to pull that information out.
ChairwomanVelazquez. So how could you explain such a
disagreement between those who participated in the Open Door
Forum and your technical experts?
Mr.Love. Madam Chairwoman, I would say that there are a
number of legitimate disagreements and you mentioned a number
of them in your opening remarks and this may be one of those
situations where we would have to agree to disagree on the
outcome. But we would be happy to support that methodology
establishing the $4,000 figure.
ChairwomanVelazquez. Can you tell us who was the contractor
who did the analysis?
Mr.Love. Yes. That is RT International, Research Triangle
International. It's a very well regarded economics research
firm.
ChairwomanVelazquez. Once the bidder's package is final,
will CMS re-estimate the actual cost of bidding? Will it
consult with the laboratories themselves on the true cost of
bidding?
Mr.Love. I'm sorry. I didn't understand the question.
ChairwomanVelazquez. Once the bidder's package is final,
will CMS re-estimate the actual cost of bidding.
Mr.Love. No Madam. We are going to evaluate the bids on
price and non price criteria. But we will evaluate it based on
the prices submitted.
ChairwomanVelazquez. Isn't the $4,000 an estimate?
Mr.Love. No. I think the $4,000 may be referring to the
logistical costs of assembling the bid where the actual price
bid to participate in the demonstration, that would be the
result of the bidding process that the bid evaluation panel
would establish and we will be happy for both the winning and
non winning labs to debrief them as to the process that
produces the demonstration participants.
ChairwomanVelazquez. The clinical laboratory industry
describes competitive bidding as a misguided approach to the
reimbursement of laboratory services. What are your thoughts
about this observation?
Mr.Love. I think it's important as you will know that our
job is to implement the law as decided by Congress and signed
by the President.
ChairwomanVelazquez. But we didn't tell you what type of
approach or model you would apply, did we?
Mr.Love. No, certainly--Excuse me. Certainly the Congress
gave us some --
ChairwomanVelazquez. Latitude, yes.
Mr.Love. --parameters. Exactly. Is your question relating
specifically to the competitive nature of it?
ChairwomanVelazquez. Yes.
Mr.Love. The competitive nature, and I heard some of these
arguments at last week's Open Door Forum among other places,
and I'm frankly a bit puzzled by it in that the status quo is
an administrative pricing system established by my very capable
colleagues in Baltimore, but it is an administrative,
centralized pricing system.
The demonstration has a market driven method for
establishing a price. But equally important, there are non
price features where I think really provides some opportunities
for smaller businesses and those opportunities are being able
to provide faster turnaround time, better customer service to
physicians, to beneficiaries, and certainly a level of market-
specific savvy that some of the larger labs simply will not
have.
ChairwomanVelazquez. Mr. Love, when you met with the
industry, especially those small labs, did they provide you any
other alternative in terms of input and why did you choose only
the competitive bidding as the only approach? Why did you
decide that was the best model?
Mr.Love. Well, on the competitive bidding, we had no
discretion there. Congress by law, we did have to do it in a
competitive bidding structure. It's how we configured the
competitive bidding within that overall structure that we did
have some discretion.
ChairwomanVelazquez. Okay, and did you get any input from
the industry as to how--
Mr.Love. Yes. Certainly we did.
ChairwomanVelazquez. And did you consider any of those? Let
me ask you. How many times did you meet with those
stakeholders?
Mr.Love. We met--Well, in differing categories, well over a
dozen times. We had four Open Door Forum. If I may, I could
give you a specific answer to that. We had the Open Door Forum
that you referred to last Monday, I believe. That was actually
the third Open Door Forum we've had which is a public forum for
interested parties to give input to the process.
In addition, shortly after becoming Director of the Office
of Research, Development and Information two years ago, I had
my first meeting with representatives of the lab industry. I've
since had two others. Former Administrator McClellan has met
with these representatives. Staff have spoken each year at
industry conferences to explain this and we have been very much
in the sunshine on this issue.
ChairwomanVelazquez. Just not to explain. I'm talking to
you about input.
Mr.Love. Yes. Input certainly, and I can give you several
examples of where we have accepted input from--
ChairwomanVelazquez. As a result of the Open Door last
week, are you planning to revise your model?
Mr.Love. We have--There are three issues, one of which was
addressed in the Open Door Forum last week and that is there
are, as you know, both the bidding lab itself and the referral
lab. You referred in your opening remarks to the interaction
between labs to produce their results and the referral labs in
our original design, we only had the bidding lab able to bill
Medicare and we got input from a number of stakeholders that
said, ``Logistically, this is just not how the industry
works.'' And as one modification, we are allowing either the
bidding lab or the referral lab to submit bills to Medicare.
We had some visits about a year ago, a meeting I attended
with representatives that included the ASRD Laboratory industry
who made a fairly compelling case, I think, for their
particular issues with the design of the demonstration and we
have created modifications in demonstration design for that as
well. A year ago (Inaudible.)
ChairwomanVelazquez. Okay. For small businesses to have a
real opportunity to compete, I think this is a fair questions.
What are the metrics for non price features of a competitive
bidding?
Mr.Love. The non price features will--The evaluation
features are going to be on quality, the quality and the
ability to perform the tests on access to ensure that Medicare
beneficiaries, particularly our most vulnerable beneficiaries
in nursing homes and rural areas who may otherwise have access
problems. That is a criteria we are going to consider very
carefully.
Gaming, quite frankly, and more specifically our economic
experts at RTI had some concerns that the larger labs could
low-ball and price some of the small labs out of the market and
that's something we're going to look at very carefully in the
business.
ChairwomanVelazquez. Okay. That's one of our concerns.
Because in 2000, the Institute of Medicine stated that the
nation's two largest laboratories, Quest and LabCorp, controls
61 percent. That was in 2000. Do you know what is the
percentage today that they control in 2007 between those two?
Mr.Love. Not offhand, Madam Chairwoman.
ChairwomanVelazquez. So then how can you effectively
guarantee that there is going to be competition?
Mr.Love. That really comes into the $100,000 price
threshold that you referred to and what we've done, had that
threshold been higher, it frankly would have left not quite a
monopoly, but certainly a very small number of large players
driving the bids. By lowering it, we will have at least ten
bidders competing for Medicare business in the market area and
that in our mind is fairly robust competition.
ChairwomanVelazquez. I'm going to get back to this question
again. But I am going to recognize Mr. Chabot.
Mr.Chabot. Thank you very much, Madam Chair. Mr. Love, just
a few questions. First of all, Congress told you to do a
demonstration project and the idea as you stated in doing a
demonstration project is perhaps learning, getting, the bugs
out before you do it broadly at which time it would have a
greater impact and cost a lot more and that sort of thing. Is
that correct?
Mr.Love. Yes sir.
Mr.Chabot. Now it's my understanding that the clinical
laboratory industry currently is composed of a few large
players that together have a very large market share and a
large number of smaller laboratories that together have a much
smaller market share. How was this addressed in the
demonstration project's design?
Mr.Love. We really looked at the markets under
consideration and we looked at the status quo and the markets
that are eligible for the demonstration based on the criteria.
For example, we are not looking at metropolitan service areas
that span states, for example, the New York Metropolitan
Service Area which includes New Jersey and Connecticut as well
as New York. That would not make sense in terms of the
participation in the demonstration.
So we looked at specific within state metropolitan service
areas, MSAs, and determined the number of bidders that would be
required for an authentic market competition and these are labs
that are viable and functioning in that market now, although
they may not be covering the entire market area, if that's your
question sir, regarding the market penetration, say, and the
market made up of inclusive zip codes.
And under the demonstration, they will not have to cover
that entire area. We will certainly make sure that in the
aggregate all winning bidders are able to cover that and ensure
access for our Medicare beneficiaries. But there will be
certainly opportunities for smaller labs to prosper or to bid
in their current market or, if they choose, expand into greater
service areas within the bidding area.
Mr.Chabot. And what outreach efforts are being done by CMS
and the clinical laboratory community to ensure that the
community is aware of the demonstration project?
Mr.Love. I would defer to the second panel to refer to
industry outreach. For CMS in addition to the Open Door Forum,
every document, again getting back to the demonstration
development and the sunshine issue, that we have been able to
make public is currently available on our web site.
Open Door Forum are either in person or by phone. Folks are
able to participate. We are going to have an ombudsman for the
project. We're working with the carriers who are associated
with paying the bills in these districts to make sure they are
informing beneficiaries as well as lab participants, bidding
labs, about the development of the demonstration.
Mr.Chabot. Okay. Let me ask one more questions. Has CMS
considered two partial small business clinical laboratory set-
asides for services they normally perform for the local
community?
Mr.Love. I'm sorry. There are two specific services that
Congress had exempted in the Medicare Modernization Act. I'm
not sure if that's what (Inaudible.)
Mr.Chabot. Okay. I'll yield back the balance of my time.
Thank you.
ChairwomanVelazquez. Mr. Cuellar.
Mr.Cuellar. No questions.
ChairwomanVelazquez. I do have more questions. Mr. Love,
you mentioned in your testimony that your multiple bid winner
approach will ensure small lab participation. Other than having
one more than, yes, one more bid winner, what are your
assurances or what assurances can you provide to this Committee
that small business or small labs will be winners?
Mr.Love. I'm sorry, Madam, if I used the word ``ensure.''
That was not my attention. We're going to offer them the
opportunity to compete with a number of the provisions that I
stipulated to ensure that it is a level playing field both on
price and non price criteria.
ChairwomanVelazquez. Would you agree that this method in no
way provides really real opportunities for small labs to
survive and isn't it true that many labs will be forced to
close their doors under this model?
Mr.Love. No, madam. I would not agree with that. We would--
The outcome of the demonstration, I didn't have an opportunity
to mention it, but we do have an rigorous evaluation in place
that will look to that among the several issues that you have
mentioned which would inform the Congress and other policy
makers before we went any further with this.
ChairwomanVelazquez. Were you at the Open Forum last week?
Mr.Love. Yes, madam, I was.
ChairwomanVelazquez. Okay. A number of lab providers
indicated that the $100,000 Medicare revenue threshold was
unreasonably low. How did CMS calculate the threshold and did
it reconsider the impact that it will have a small business
lab?
Mr.Love. Yes, we did consider quite carefully and there
really were two considerations. One is again ensuring a robust
market competition. If the threshold were set too high, you
would just have the big players driving a price quite frankly.
So when it's lower, there would be more opportunities for
bidders to participate making more robust competition.
But the other feature quite frankly was a small business
consideration. Those below the threshold have the option of
playing or being what we call passive labs. They still would be
subject to the fee schedule, but they would not be involved in
the bidding process. And our view was that for smaller labs to
really be playing in this demonstration, they should have every
opportunity to have a voice in the bidding process.
ChairwomanVelazquez. The Small Business Administration
defines a small business laboratory as generating revenue of
$12.5 million. Were you aware of that?
Mr.Love. Yes, madam, I was.
ChairwomanVelazquez. So given that Medicare usually
accounts for 40 percent of revenues for a small lab, it seems a
more reasonable threshold for a small lab will be near $4.8
million. How do you explain this enormous discrepancy?
Mr.Love. Again, within the market area, it is just Medicare
fee-for-service business in the market area, not necessarily
the Medicare fee-for-service business outside the market area
or Medicare managed care service within the market area. It
really doesn't have to do with the Medicare managed care part
of the program. But again, it really did come down those
features of how do we ensure robust competition which was our
understanding of the intent of Congress as well as allowing
these smaller labs to have a bid, a voice and the bid, rather
than just being swept along as the passive bidder.
ChairwomanVelazquez. As I mentioned to you before, a lot of
the people that participated, the small labs, they say that the
$100,000 Medicare revenue threshold was unreasonably low. Are
you planning to re-evaluate?
Mr.Love. No, madam, we're not. We have consulted and we
went back after our Open Door Forum last week and went back
with our economic experts and considered that very issue and we
ran into the same problem. By raising it, we are really
concerned that it will be too exclusive to the benefit of the
larger national labs.
ChairwomanVelazquez. My understanding is that you will be
contracting a research company to evaluate the success of the
demonstration project.
Mr.Love. Correct. There are actually--If I could, there are
three parties in the evaluation. That would be CMS, of course,
our economic experts at the Research Triangle Institute as well
as the folks at Palmetto which is a carrier that's responsible
for the operational end of the implementation.
ChairwomanVelazquez. Who will be writing the check for the
private research company?
Mr.Love. That is funded by the Center for Medicare and
Medicaid Services.
ChairwomanVelazquez. But do you think that some people will
call into question their findings?
Mr.Love. Our agency has a long, and I would argue,
distinguished record in the independence of our findings and
certainly, I've had no indication that it would be otherwise
and I'm speaking as the director of the agency's R&D shop right
now.
ChairwomanVelazquez. Yes.
Mr.Love. We live and die by the ability to be credible in
our findings.
ChairwomanVelazquez. Well, last week we held a hearing in
this Committee with CMS where we were discussing generic drugs
reimbursement and the IG and the General Accounting Office
called into question their finding. So that's why I'm asking
the question of questioning the company's research finding that
you are hiring. Let me ask you. Would you agree that a General
Accounting Office study requested by Congress may help ensure
more accuracy and independence?
Mr.Love. I'm certainly--and the GAO is a great source, I
think, for helping us better understand and improve our
programs and I would be very supportive of GAO looking into
this issue.
ChairwomanVelazquez. Very good. Any other member who wishes
to ask questions? Mr. Chabot.
Mr.Chabot. I don't have any more additional questions, but
if you--Are there any points that you think might have been
unclear or anything that you would like to expound upon to
clear up anything that you think wasn't perfectly clear?
Mr.Love. Just that I appreciate that this is very
sensitive. It is a bread-and-butter issue for a lot of small
labs and we appreciate that and we have tried to be sensitive
to that in the development of the demonstration. We are
implementing the law to the best of our ability considering all
stakeholder interests particularly those of small businesses.
Mr.Chabot. Thank you. I yield back.
ChairwomanVelazquez. I have two more questions.
Mr.Love. Yes madam.
ChairwomanVelazquez. Even though laboratories with less
than $100,000 in business are not required to bid, it is my
understanding that they must live with the bid, the winning
price. This will place a severe hardship on small laboratories
that service the more challenging areas of the local market
where operating costs can be higher. Why should they be
required to accept this price and how can labs be expected to
survive under those conditions?
Mr.Love. The small labs below the $100,000 threshold
actually have the option. They can bid if they choose to. They
may also, particularly if they're interested in expanding their
business beyond $100,000 during the three years of the
demonstration, they would be required to bid. But it is--I'm
sorry. I forgot the second part of your question.
ChairwomanVelazquez. Why should they be required to accept
this price?
Mr.Love. There essentially would really, I think,
eviscerate our ability to have competition in the market if you
really excluded a significant and important part of the market
and our understanding is that would be inconsistent with the
direction of Congress.
ChairwomanVelazquez. But you don't think that isn't fair if
they have no participation or input into the bidding process
and then they will have to accept whatever price is imposed.
Mr.Love. They do have the option to participate if they
choose. We just--We certainly have no indication from Congress
that we could accept or exempt participants from a market. It
is market-specific and inclusive.
ChairwomanVelazquez. Mr. Love, if winning bidders drop out
of the demonstration for quality or other reasons, what is CMS'
plan to recalculate that demonstration prices?
Mr.Love. I'm sorry.
ChairwomanVelazquez. If winning bidders drop out of the
demonstration for quality or other reasons, what is CMS's plan
to recalculation the demonstration prices?
Mr.Love. We actually will not recalculate the demonstration
prices. What we will do is as part of the bid evaluation panel
as well as the terms and conditions of the demonstration, we
will ensure that there is a safety net to provide access to
quality lab services for Medicare beneficiaries.
ChairwomanVelazquez. We're going to call--Do you have staff
here with you?
Mr.Love. Yes, madam, I do.
ChairwomanVelazquez. Who are they?
Mr.Love. I have with me the lead technical analyst who is
really the woman who has done much of the presenting at the
national conferences.
ChairwomanVelazquez. Okay, and she will be staying here to
listen to the other panel.
Mr.Love. I will be staying also. This is a very interesting
issue for me and I think an important one.
ChairwomanVelazquez. Okay. Thank you very much.
Mr.Love. Thank you.
ChairwomanVelazquez. You are excused.
And now I will ask that the witnesses of the second panel
to please come forward and take your seats.
(Pause.)
ChairwomanVelazquez. Our first witness is Mr. Thomas, and
I'm going to try very hard, Bejgrowicz.
Mr.Bejgrowicz. Perfect.
ChairwomanVelazquez. Thank you.
Mr. Bejgrowicz is the Client Account Manager for AccuLabs,
a laboratory services nursing homes in New Jersey. He has held
administrative positions at a number of facilities and is a
licensed nursing home administrator. AccuLabs has been in
business for over 35 years. Mr. Bejgrowicz is here testifying
on behalf of the American Health Care Association that is the
nation's leading long-term care organization representing
11,000 industry members.
Mr. Bejgrowicz, welcome and you have five minutes to make
your presentation and your entire testimony will be entered
into the record.
STATEMENT OF THOMAS S. BEJGROWICZ, M.S., L.N.H.A, CLIENT
ACCOUNT MANAGER, ACULABS,ON BEHALF OF THE CLINICAL LABORATORY
MANAGEMENT ASSOCIATION
Mr.Bejgrowicz. Thank you. Good morning. On behalf of
American Health Care Association, its nursing home members and
many small businesses throughout the country, I thank you,
Madam Chair, Mr. Ranking Member and other Members of the
Committee for giving me the opportunity to testify. My name is
Tom Bejgrowicz.
For as long as I can remember, I've always been drawn to
health care. The quintessential moment that I decided to
dedicate my life to helping others is when my grandfather was a
resident in a nursing home. Now I am a licensed nursing home
administrator and over the past 17 years, I have worked for
small facilities, large corporation and hospital-owned not-for-
profit centers.
American Health Care Association and I am concerned that
Medicare beneficiaries in nursing homes will no longer have
access to quality laboratory services if CMS continues to
implement competitive bidding. Quality of care could be
jeopardized and many residents like my grandfather could be
negatively impacted if competitive bidding comes to fruition.
At best, competitive bidding will put small labs out of
business. At worst, it will restrict access to quality health
care for Medicare beneficiaries, limit choice, disturb the
continuity of care and ultimately increase the cost to
Medicare.
Federal law requires nursing home residents to receive the
necessary care and services in accordance with comprehensive
assessment and plan of care. Many relatively small independent
clinical labs such as AccuLabs where I am currently employed
have supported nursing homes in meeting this requirement by
tailoring their services to go beyond that of simply analyzing
a blood specimen. Thus, nursing homes rely on these services to
provide the highest level of care.
For example, phlebotomists, the people who draw your blood,
very often travel many miles from facility to facility
collecting specimens from bed-bound patients. Often, these
laboratories will provide a testing menu that is highly focused
to ensure rapid turnaround time of critical testing, will often
develop normal ranges centered around specific age groups and
utilize certain testing methodology to ensure continuity of
care. Our experience is that why the larger labs will in some
cases in doing the test, they are not interested in providing
tailored services.
Continuity of care for patients at smaller nursing homes
may also suffer. Smaller labs that are not able to participate
in competitive bidding may be required to close due to
decreased business and nursing facilities will be required to
find another laboratory to provide services. Not only will the
facility and the patient have to adjust to a new laboratory
service provider, but it also may take some time to find an
alternative provider.
Should the small lab be forced out of the market by
competitive bidding, access to care will be severely hindered.
CMS assumes the winning labs are interested in servicing all
Medicare beneficiaries which is simply not the case.
Historically, the large laboratories have shifted their focus
from long-term care to the more lucrative physicians' offices.
As such, termination notices were issued to many long-term care
and assisted living facilities.
At present, there are two major labs that command nearly 70
percent of the market and once competitive bidding is in place,
they will likely have an even greater percent of the market in
that competitive bid area. Under those circumstances, it is not
likely that the large labs will have more motivation to service
the nursing home population than they have now.
Another area of concern is that not only will competitive
bidding create barriers to access to laboratory services, but
also it will cause a decline in the quality of laboratory
service.
CMS has not released detailed specification for the
indicators that it will use to measure laboratory service
quality of care, although it plans to implement this demo in
less than one year. The health care community has asked CMS
repeatedly for these performance measures, but CMS has not
developed them. On July 16, 2007, an Open Door Forum was held
during which CMS stated the quality measures will be
standardized across all laboratories. This one-size-fits-all
mentality does not apply to the dynamic field of laboratory
medicine.
In closing, with competitive bidding in place, CMS will tie
the hands of the facilities. The choice of which laboratory
provider a nursing facility can use will be limited. There will
fewer laboratories to choose from after the demonstration
project is implemented. Those that remain will be the larger
national laboratories that have focused their attention on
markets on other than nursing facilities.
It is with the best interest of all long-term care
residents and all Medicare beneficiaries that I ask Congress to
re-examine this ill-conceived plan and repeal competitive
bidding legislation. The potential impacts on access and
quality of care as well as the increases of Medicare costs go
against AHCA's mantra of performance excellence and commitment
to affordable, healthy and ethical long-term care.
Thank you for your consideration in this important matter.
[The prepared statement of Mr. Bejgrowicz may be found in
the Appendix on page 49.]
ChairwomanVelazquez. Thank you, Mr. Bejgrowicz. And now I
recognize Mr. Braley for the purpose of introducing his
constituent.
Mr.Braley. Thank you, Madam Chairwoman. It is my honor and
privilege to introduce one of my constituents, Mary Jo Bonifas,
who is here to share her testimony with us today. Mary Jo is a
certified medical technologist and has over 36 years of
experience in the clinical lab. She is currently the Manager of
Laboratory Services for United Clinical Laboratories, Inc., a
foresight joint venture laboratory system based in Dubuque,
Iowa. She has been with the Dubuque lab system for over 30
years and a laboratory manager for 26 years.
Mary Jo is a member of the board of directors of the Iowa
Chapter of Clinical Laboratory Management Association (CLMA)
and is also president of the board of directors for the
National CMLA Advocacy Group. It is my distinct privilege and
pleasure to welcome her to this hearing.
STATEMENT OF MARY JO BONIFAS, MANAGER OF LABORATORY SERVICES,
ON BEHALF OF THE CLINICAL LABORATORY MANAGEMENT ASSOCIATION
Ms.Bonifas. Thank you. Madam Chairwoman Velazquez,
Congressman Chabot and Congressman Braley, thank you for the
opportunity to testify today on behalf of Clinical Laboratory
Management Association on this very important issue.
CMLA's membership is comprised of approximately 4300
clinical laboratory managers serving in hospitals, independent
labs, skilled nursing facilities, physician offices, research
facilities as well as representatives from medical device
industry. While the majority of CMLA's members are hospital
based, we attempt to present a perspective that is shaped by
all sectors of the clinical lab industry.
My perspective on competitive bidding is shaped by my
current role as a lab manager and over 35 years of experience
at a small, community-based laboratory in Dubuque, Iowa,
serving hospitals and physicians within a 50 mile radius of
Dubuque. United Clinical Laboratories is a consolidation of
laboratory services at two Dubuque hospitals and a pathology-
owned independent laboratory.
We have built our business in a very competitive market,
not on lowest price, but on a recognized quality and service.
We are neither the cheapest nor the most expensive option, but
we have been deemed the best option for clinical lab services
by our almost 200 clients. The competitive bidding project as
designed by CMS is flawed and, if allowed to proceed, will be
devastating to the clinical lab industry especially the small
community labs like mine, many of which will be put out of
business.
I would like to focus on just what could happen to my lab
under competitive bidding. Because I receive at least $100,000
in revenue from Medicare B reimbursement, I qualify as a
required bidder, the only laboratory in Dubuque required to
bid. What concerns me is there will be drastic consequences if
I'm a bid loser and also significant consequences even if I'm a
bid winner.
If I am bid winner, I am guaranteed at least five to ten
percent less reimbursement for my Medicare work simply based on
the design of the demonstration. With already extremely small
profit margins, what will this do to my bottom line? Even if I
win, can I afford to do testing if reimbursement in some cases
is below my cost to do the test?
If I'm not a bid winner and local physicians and clinics
can't use my lab for Medicare testing, I will also lose their
non Medicare testing. It is just too difficult to divide work
between multiple labs based on payor and one-stop-shopping is
the name of the game. The bottom line is can my lab survive.
There is really a high possibility it cannot.
I currently use Mayo Medical Labs for specialized testing
that I am unable to do in my lab and my bid must also include a
bid for these tests. What if Mayo, my preferred reference lab,
is not a bid winner? This 30 year relationship with Mayo will
have to be severed. This 30 year relationship provides not only
testing services, but also consulting services to local
physicians. I will have to establish a relationship with a new
laboratory, arrange for courier service, perhaps pay for and
wait for a laboratory results interface to my computer system
and at the same time not allow service interruptions to any of
my clients.
Let's also look at quality and access. Quality cannot and
should not be assumed just because a lab has a CLIA
certificate. There is a difference in quality. Quality is not
just the quality of the test result, but the quality of the
service provided. A correct lab result reported hours after it
was critically needed by a physician is not a quality result
even if it is the right result.
If testing cannot be done by my community laboratory
because we are not a bid winner and must be sent out of town,
test results will be back the next day rather than in hours or
minutes and this impacts the quality of patient care. The
competitive bidding demonstration as designed guaranteeing
there will be bid loser means that this will happen and patient
care will be adversely affected.
Access. Access includes both the patients and a physician's
access to quality lab services and to testing results. If I am
not a bid winner and the Medicare patient has to travel to a
laboratory for services, how far are we willing to have them
travel before we say there is an access problem? In Iowa, a bid
winning lab may be 50 miles away. If the Medicare beneficiary's
physician collects a specimen and has to sent to a winning lab
out of town, how long is too long to wait for results?
And what about Dubuque nursing homes? My laboratory is the
only lab providing services to 20 local nursing homes. If I am
not a bid winner, who will provide their lab services?
Nursing home patients today are much sicker than in the
past. They require more lab tests and they require these
results within minutes or hours, not the next day. This is not
a Dubuque problem. It's a problem that will occur nationwide.
Access also includes physician access to lab results. My
laboratory has developed an inquiry program used community wide
that allows any physician with Internet access the ability to
access a patient's complete laboratory record whether that
testing was done in the hospital, at any UCL site, at a local
clinic or even Mayo. If I'm not a bid winner and testing has to
be done by another laboratory, this capability not available in
most cities the size of Dubuque will be lost.
To summarize as we look at quality and look at access,
isn't limiting access to laboratory services a quality issue
and isn't a physician's inability to have lab services
furnished by a laboratory they trust and are familiar with an
access issue? Quality and access are intertwined. It's clear to
me and to the lab community that this CMS demonstration project
cannot be carried out without guaranteed negative effect on
both quality and access.
CMS, if the competitive bidding demo saves the Medicare
program money at the cost of compromising a Medicare
beneficiary's access to quality lab services and ultimately
their health care, what have you really saved?
Madam Chairwoman and Committee Members, I thank you once
again for allowing me to be part of this hearing. It's
critically important that you, our members of Congress, hear
the voices of all stakeholders and that this competitive
bidding demonstration project be stopped. Thank you.
[The prepared statement of Ms. Bonifas may be found in the
Appendix on page 66.]
ChairwomanVelazquez. Thank you very much. Our next witness
is Mr. Tod Schild. Mr. Schild is representing Schild Medical
Laboratory as the Senior Vice President.
Schild Laboratories employs over 350 people and is located
in Brooklyn, New York. Mr. Schild is testifying here today on
behalf of the National Independent Laboratory Association.
Welcome.
STATEMENT OF TOD SCHILD, VICE PRESIDENT SALES & MARKETING,
SHIEL MEDICAL LABORATORY, ON BEHALF OF NATIONAL INDEPENDENT
LABORATORY ASSOCIATION
Mr.Schild. Thank you. Good morning. I want to thank the
Chair, the Ranking Member and the other Members of the
Committee for the opportunity to testify before you today. As
you mentioned, I am the Senior Vice President of Schild Medical
Laboratory headquartered in the Brooklyn Navy yard and an
active member of the National Independent Laboratory
Association. Schild employs 360 people. Our business provides
service to private physician practices and nursing home
throughout the New York metropolitan area.
I am not an expert in legislative matters, but I think
rarely in our history has been there been Congressional
legislation that although well intended was planned in such a
way as to devastate the industry that is critical to the health
and well-being of the American public.
The clinical laboratory project designed by CMS will
irrevocably alter the market for laboratory services, reduce
patient choice and limit access to quality testing. The program
has critical flaws and missing pieces. Rather than fostering
competition, it will create government sponsored oligopolies.
Instead of reducing laboratory costs for Medicare, it will
increase costs. Rather than improve the quality of health care,
it will diminish patient access and stifle life-saving
innovation. We all agree that overall Medicare costs reductions
are desirable, but this is not an appropriate way to achieve
that goal.
The CMS proposal is opposed by all major professional
groups involved in the clinical laboratory services industry.
It was strongly opposed at the most recent CMS Open Door Forum
by almost every person who commented on the proposed design.
Over 400 individuals tried to participate in that forum and
only a fraction of the questions asked were answered.
By its design, the effect of the demonstration will be to
reduce the number of labs permitted to perform Medicare work in
the demonstration area. Loss of the ability to perform and bill
tests to Medicare patients would most assuredly be a death
sentence for the vast majority of non-winning bidder
laboratories. Quality and service of the remaining labs will
decrease from the strain of their additional volume.
Medicare is just over 30 percent of Schild's work. For some
labs, the portion of Medicare work might be as high as 70 to 80
percent. Under the demonstration, there will only be a handful
of winners. Non-winners will be out of the program for three
years before they get a chance to bid again. Very few non-
bidders will survive. Schild operates at only a five to seven
percent profit margin. I know that we cannot survive beyond a
year with the loss of 30 percent of our revenue.
Given that the demonstration project is fraught with danger
for small labs, it had been our hope that CMS would have
consulted with representatives of the small business community
and the Small Business Administration to determine how to
design this project. Unfortunately, CMS did not do so. CMS did
not even use the established SBA definition of small
laboratories being classified as $12.5 million or less. The
technical expert panel selected by the Agency did not include a
single representative of the small community lab market.
The independent laboratory market while still competitive
is dominated by two national labs holding approximately 65
percent of the market. The extent of this concentration is
illustrated by the chart in my written testimony. The large
national labs can discount their bids in the demonstration zone
and compensated for these temporary discounts through their
work in other parts of the country. Labs like Schild that
operate in only one or two of the 22 metropolitan statistical
areas identified by CMS will not have that advantage. Schild or
other labs like us will be the losers in the bidding process.
Let me add that in no way do any labs large or small see
any benefit to the American public coming out of this ill-
conceived plan. We are all united in our objective to stop this
demonstration from proceeding. The difference is that large
labs in the demonstration are fighting for their bottom line
and the smaller labs are fighting for their existence.
Medicare competitive bidding for laboratories is the
opposite of what it purports to be. It is clearly anti-
competitive. The demonstration will permanently alter the
market of any metropolitan statistical area that has the
misfortune of being chosen. Long-time quality laboratories will
be forced out of business and new start-up laboratories will be
a thing of the past.
Nursing home residents are particularly vulnerable and will
suffer the most under this demonstration. Only local and
regional lab service nursing homes, the high cost of sending in
personnel to draw blood and deliver results within several
hours and the limited Medicare reimbursement for onsite
services and travel have driven many labs to seek higher profit
margins elsewhere.
Medicare's competitive bidding will eliminate the existence
of many of the labs that are willing to take on the high
operating costs to provide quality care for our aging
population in long-term care facilities. At last week's Open
Door Forum, CMS was not able to adequately respond to our
questions and concerns regarding how these facilities can
continue to receive the level of service required.
Additionally, the design complexity of the bidding process
and the reporting to CMS required of winning bidders will
require a large investment in personnel and infrastructure
potentially making it cost prohibitive for even the winners in
the demonstration area. CMS itself will have to take on
administration costs far beyond what they are anticipating. It
only takes a review of the bidder's package draft to see how
CMS is over-complicating an already expensive and complicated
process. Any savings that they would have hoped to realize by a
slightly reduced fee schedule will be consumed by their own
additional overhead.
In conclusion, there are no laboratory winners in the
Medicare competitive bidding demonstration, only losers and
bigger losers. Our industry and the American public will be
worse off and no savings will result. The only result will be
diminished quality, limited access, stifled innovation, lost
jobs, poorer health, lost lives and further crippling of our
already crippled national health care system.
On behalf of Schild Medical Laboratory, NILA and laboratory
professionals across the country, I urge you to repeal the
authority for CMS to move forward with this project. There are
simply too many unanswered questions and too many risks
associated with this ill-designed experiment.
[The prepared statement of Mr. Schild may be found in the
Appendix on page 71.]
ChairwomanVelazquez. Thank you, Mr. Schild.
Our next witness is Dr. Ronald Weiss, M.S., M.B.A. Dr.
Weiss is President and COO of ARUP Laboratories. Dr. Weiss is
Board certified in Anatomic and Clinical Pathology, Medical
Microbiology and Hematology.
ARUP Laboratories is a national laboratory and an
enterprise of the University of Utah and its Department of
Pathology. He is here today on behalf of the American Clinical
Laboratory Association, a group of national and regional
laboratories across the country.
Welcome sir.
STATEMENT OF RONALD WEISS, M.D., PRESIDENT & COO, ARUP
LABORATORIES, INC., ON BEHALF OF THE AMERICAN CLINICAL
LABORATORY ASSOCIATION
Dr.Weiss. Thank you.
Chairwoman Velazquez, Congressman Chabot, Members of the
Committee, I thank you for this opportunity to testify on an
issue as you've heard that has great importance and significant
ramification for our patients.
As you indicated, my name is Ronald Weiss. I am President
of ARUP Laboratories in Salt Lake City. I am a pathologist and
a physician practicing laboratory medicine and I've twice
served as chairman of the board of the American Clinical
Laboratory Association and it's my honor to testify on behalf
of ACLA and all of its members, small and large. More pertinent
to the subject at hand, I have also served on CMS's technical
expert panel for the demonstration project.
Madam Chairwoman, the concept of competitive bidding for
laboratory services is not a new idea. The Department of Health
and Human Services has struggled for almost two decades to
develop a competitive bidding demonstration project. It is not
an idea that has improved with time. Repeated attempts to move
in this direction have each failed because of the complexity of
that task because of the huge destabilizing and anti-
competitive effect it will have on the laboratory industry and
most importantly, because it would severely undermine the
quality and access of laboratory services to Medicare
beneficiaries.
The competitive bidding model being considered will take a
huge toll on small business as you've heard and on vulnerable
populations including nursing home residents and homebound
patients. This point of view has unanimity within the clinical
laboratory community, small laboratories, large commercial
laboratories, niche service laboratories and hospital based
labs and it speaks volumes that when the Centers for Medicare
and Medicaid Services released the 75 page bidder's package
last week there were over 80 people present at the Open Door
meeting and another 400 on the call-in line.
All of those who made statements at the Forum were opposed
to the demonstration project. This unanimity exists between all
sectors of the laboratory industry because all of these sectors
play a role in providing Medicare beneficiaries approximately
one million clinical laboratory tests every single day and they
understand that no competitive bidding design can accommodate
the complexities involved in keeping this service both seamless
and exemplary.
There is a clear contradiction in terms at work here and
this is called a competitive bidding model, but it is clearly
anti-competitive and it will drive a significant number of
clinical laboratories out of business. Competitive bidding when
done in the private sector establishes service commitments and
acceptable prices through a negotiation process. For laboratory
services, this depends upon a clear knowledge of the volume of
those needed services, a streamline submission and payment
process and consistency in laboratory to laboratory referral
arrangements, none of which exists in this demonstration
project.
Extensive analysis of the demonstration by the ACLA yields
a number of clear conclusions and I would like to briefly
mention five of the most striking ones now.
1. All laboratories especially small, local, independent
and hospital outreach laboratories with limited resources will
find it impossible to deal with the extraordinary complexity of
the bidding process. This flawed design will prove fatal to
them as they will likely lose their Medicare reimbursement and
be forced out of business.
2. Many of those small laboratories who are perhaps
fortunate to win the bidding process will actually lose because
they will be forced to accept bids well below their already
conservative profit margins, forcing them to close their doors.
3. As more labs have difficulty staying in business, the
vulnerable patient populations I've mentioned will find access
to laboratory services seriously compromised.
4. The demonstration could severely disrupt the existing
complex web of arrangements between the local laboratories that
service Medicare patients by performing many common laboratory
tests and reference laboratories such as ARUP that perform many
of the more complex tests for them.
Some of these high complexity esoteric reference
laboratories are thousands of miles from the demonstration
area, yet they will have to bid in the demonstration area if
they provide more than $100,000 in services. It's not even
clear that these labs will know that they are required to bid
and win in order to continue to be reimbursed by Medicare for
services provided in that area.
5. Other reference laboratories may choose not to bid or
may not be selected as winners if they do so. This would
disrupt existing complex laboratory to laboratory referral
arrangements, previously described by my colleague, Ms. Bonifas
and create a situation in which local laboratories simply
cannot put together a winning bid on all 358 tests specified in
the project leaving them out of business and beneficiaries
without access to these medically-important, complex tests.
In the final analysis, Madam Chairwoman, one has to ask the
question, is there really a compelling need for such a
demonstration project. Medical laboratory services account for
only 1.7 percent of Medicare spending and payments for those
services have already been reduced by roughly 40 percent in
inflation adjusted terms between 1984 and 2004. If the goal is
to seek savings, those savings have already been realized and
this model will only add a substantial and cumbersome
administrative burden for CMS while disadvantaging
beneficiaries and their health care providers.
America's clinical laboratories have one simple objective
and that is to provide accessible, quality medical services to
patients and to the health care community. Laboratory medicine
is a value proposition driving 70 percent of medical decision
making at two to three percent of total health care costs. As a
complex medical service provided by specialized physicians and
laboratory professionals, it is not a commodity product. This
demonstration project clearly does not help us achieve the goal
of preserving this service objective and should be repelled
before it is allowed to begin.
The Medicare physician fee schedule is not competitively
bid nor should it be and the clinical laboratory fee schedule
should not be either. I would not like to look back and take an
solace in the fact that Medicare beneficiaries' laboratory
services went to the lowest bidder while the true cost was poor
quality and limited access.
And if I may have a moment, I would like to clarify the
market size and share numbers that have been repeatedly
mentioned this morning. When you look at the entirety of
medical laboratory services, hospital laboratories provide
approximately 60 percent by volume of total laboratory
services, physician office laboratory is approximately ten
percent and independent laboratory is about 30 percent. The two
largest laboratories in that independent laboratory sector
account for 60 percent of that sector which is approximately 18
to 20 percent overall, not the 70 percent number that had been
mentioned.
Thank you for this opportunity and I look forward to your
questions.
[The prepared statement of Dr. Weiss may be found in the
Appendix on page 76.]
ChairwomanVelazquez. Thank you, Dr. Weiss. Dr. Weiss, you
mentioned that basically in the meetings that had been held
between the industry and CMS and the most recent one last week
on the Open Door Forum there was basically people were united
in terms of their objection to the use of the competitive
bidding to determine pricing for lab services. However, you
also indicated that it is important for CMS to gather
information on lab pricing. If competitive bidding is not an
effective mechanism for capturing information about market
pricing, what alternative exists to capture accurate data?
Dr.Weiss. Thank you, Madam Chairwoman. As I mentioned,
medical laboratory services is a professional medical service
and certainly competitive bidding is not the answer. The IOM
study looked at several different options when they published
their results in 2000. One of those was actually to just
continue to use the current clinical laboratory fee schedule
and in fact one recommendation was to set it at the national
limitation amount.
It's true that the CLFS is not a perfect system for
reimbursing for these services, but it's one that laboratorians
in the laboratory industry have worked with now for over 20
years and I think it would be far better to continue to try and
improve that system rather than to make a drastic change and do
something like competitive bidding which I believe is a flawed
concept.
ChairwomanVelazquez. Dr. Weiss, you mentioned that you took
part of the technical expert panel. Were there--Can you talk to
us about how much sensitivity there was in their discussion
regarding the impact that this will have on small businesses
represented by small labs?
Dr.Weiss. The technical expert panel that was established
by CMS and RTI we only met once face to face in Baltimore on, I
believe it was May 25, 2005. That was an all-day meeting. There
were no minutes from that meeting, but I can tell you that
there were far-ranging discussions that touched upon many of
the issues we've talked about this morning and including the
impact on smaller laboratories.
We only had one other interaction as the TEP and that was
on a conference call to review the draft bidder application
form and that was held almost to the day a year later in 2006
and we've not had any other request to provide input since
then.
ChairwomanVelazquez. Was there sharing information
regarding data collected or impact analysis based on--
Dr.Weiss. There was no impact analysis of the kind we've
talked about this morning, certainly, to look at the impact on
quality and access. No such analysis has been done to my
knowledge and at least published and shared with the TEP.
ChairwomanVelazquez. Thank you. Ms. Bonifas.
Ms.Bonifas. Bonifas.
ChairwomanVelazquez. A nationally-recognized accreditation
group has cited United Clinical Laboratories as a gold standard
laboratory and the best laboratory they have ever seen.
However, competitive bidding prices places an emphasis on
obtaining the best price over quality. How will a competitive
bidding program affect your gold standard service and will it
reward such a service?
Ms.Bonifas. The effect of competitive bidding on my
laboratory as I said in my remarks, even if I win, I'm going to
have to accept less Medicare reimbursement. That's going to
impact my already small profit margins. If I'm a bid loser,
there will be a significant community impact in Dubuque. Where
will Medicare beneficiaries? What about turnaround time? What
about nursing homes?
There will be a major impact on the service delivery system
that we have set up and that's one of the things we're
recognized for in that the Joint Commission Inspector when he
called us a gold standard laboratory. It has a chance to
jeopardize the system that we've put in place in Dubuque which
is recognized in the community as a very beneficial service to
the community. We've provided cost savings to all patients in
Dubuque because of the joint venture system that we've set up
and that's been in place for over 20 years and that whole
consolidated lab system is in jeopardy.
If I'm going to lose my outreach market, United Clinical
Labs is the merger of two hospital and the independent lab. We
service the local physicians. If I lose that outreach testing,
then it puts more of a burden on my inpatient and outpatient
costs because the outreach testing is what allows me to offset
some of the costs of my inpatient and outpatient work. So the
consolidated lab as we know it, I don't think, would survive
and that would have a significant impact on the community of
Dubuque.
ChairwomanVelazquez. Thank you. Mr. Bejgrowicz, one of the
problems with this project is that it doesn't account for the
highly unique nature of the tests required by skilled nursing
facilities. How confident are you that the bid demo will be
able to arrive at an accurate and fair price for the tests?
Mr.Bejgrowicz. First of all, Madam Chair, quality is what
drives nursing home care. So looking at price, looking at
quality, looking at the number of tests, a lot of the tests are
very, very specialized tests that the nursing home patients
require.
Physicians are looking for quick turnaround times. The
physicians are looking for results within six to eight hours.
These are the necessary goals to which the laboratories really
need to adhere in order to provide services to the long-term
care residents.
ChairwomanVelazquez. I would like to ask this question to
each one of you. Is it true that different labs may use unique
testing procedures for a specified lab test? Can lab tests be
fairly compared under the CMS demo if lab use different testing
procedures?
Mr.Schild. I would like to address that first.
ChairwomanVelazquez. Sure
Mr.Schild. There are often more than one way to perform the
same test and it was brought up today about continuity of care.
There are different methods and different reference ranges for
many of the tumor markers that are run like CA125 and CEA and
those are used to monitor patients who are being treated for
cancer. If a lab that a hematology/oncology uses does not win
the bid process and can no longer process Medicare specimens,
those physician practices will be forced to go another lab.
When, believe it or not, we obtain a new account from some
of our competition, they often don't shift over all of their
business because patients that they started testing at one lab
they don't want to move over to another lab. So, yes, it could
have a big impact. There is different equipment. There is
different methodologies. There are different reference ranges
and it will affect the continuity of care.
Ms.Bonifas. I would just like to echo what Mr. Schild has
said. What my laboratory has done when, for example, we brought
CEA testing, one of the tumor marks. We used to send it to
Mayo. We now do it in our lab.
Before we started releasing results to the physicians, we
did baseline studies on all their patients, both at Mayo and in
our lab so we could see if there was any difference in the
results and so that the physicians would be able to monitor
them and there was a difference in the reference range and the
difference in methodology. So there was a chance that there
would be some difference in interpretation of the results.
Now we didn't get paid for doing the test twice. We only
got paid once, but those are the things that we did in order to
make sure that the physician interpretation was correct and the
patients were correctly monitored and we could bring the
testing in-house. So, yes, different testing methodologies,
different reference ranges, can cause a difference in
interpretation and patients would have to be studied. Yes, it
will impact.
ChairwomanVelazquez. Let me recognize. Dr. Weiss, do you
want to--
Dr.Weiss. I just wanted to echo those comments and say that
we work in a very dynamic and innovative medical laboratory
community in the United States and inherent in your question is
the fact that there are constant endeavors to improve not only
the quality but the timeliness of individual laboratory tests
and the cost of doing those tests. So manufacturers of test
kits and test instruments are constantly trying to improve
that. So we do end up with a situation where for each
individual HCPCS Code on that list there may be several
different methodologies that have inherently different costs.
ChairwomanVelazquez. Thank you. Mr. Chabot
Mr.Chabot. Thank you very much, Madam Chair. Mr.
Bejgrowicz, I'll being with you if I can. Would you please tell
us again why you believe, or expound upon it, the CMS's
demonstration project's design will at best put smaller
laboratories out of business and at worst restrict access to
quality health care for Medicare beneficiaries and limit choice
and disrupt the continuity of care and ultimately increase the
cost to Medicare?
Mr.Bejgrowicz. Congressman, again, the first priority for a
nursing home owner, a nursing home operator, a nursing home
administrator, is quality of care. When we look at this
demonstration project, we look at the quality. We look at the
access to care. Nursing home residents, again, need specific
access. They need service.
For example, we're talking about laboratories that will
provide phlebotomy services. Again, I explained phlebotomy
services as the people that will come in and draw your blood. A
lot of times these larger laboratories don't have phlebotomy
services. They require the nursing staff to draw the blood.
Again, we're looking at the test methodologies, the test
ranges. The smaller independent laboratories specialize in
long-term care. The larger laboratories have pulled out of
providing care to the nursing homes.
Mr.Chabot. Thank you very much. Ms. Bonifas, let me turn to
you next if I can. If the demonstration project isn't ended or
stopped as you, I believe, had suggested that you would prefer,
what changes would you recommend in the demonstration project
that would make it fairer and would remedy some of the problems
that have been raised by the panel members?
Ms.Bonifas. Well, when I asked for the project to be
stopped, I meant to be stopped and not change it. I don't
think--I agree with Dr. Weiss. There are other ways if CMS and
Congress is looking to save money in the Medicare program in
clinical lab services. I think the competitive bidding demo is
not the way to do it and there are some alternatives to look
at.
I think the competitive bidding demo as presented is flawed
and I'm not sure there's anything that could be done to fix it
that would make it a successful demonstration project. I think
as Dr. Weiss said it's simply complex. It's been tried.
I mean, I've been in this industry a long time. We've been
talking about competitive bidding for over 20 years. It's not
something that has been tried and failed. It's been something
that can't even be tried because the issue is some complex we
can't even figure out how to try it. And to go forward with the
demo and saying that, ``Well, it's just a demo. Let's see what
happening,'' to proceed with a demo when there are these many
problems with it, what happens if you proceed with the demo
just because it's a demo and businesses like mine go out of
business. We're not going to be able to re-enter the market.
Let's stop looking at competitive bidding as a way to save
money in the clinical lab field for Medicare and look at some
other alternatives. The Institute of Medicine recommended a
revision to the clinical lab fee schedule. The clinical lab
industry is dealing with a Medicare fee schedule that was
developed in 1984. Everyone including CMS recognizes that it's
archaic, it's irrational and it's out of date. Other
physicians, radiologists, ambulance have all revised their fee
schedule. Let's take a look at that as an option and stop
competitive bidding.
Mr.Chabot. Thank you. Mr. Schild, would you explain how the
demonstration project that we're referring to here today would
irrevocably alter the market for laboratory service resulting
in reduced patient choice and limited access and resulting
market concentration?
Mr.Schild. Congressman, I think that's relatively easy to
answer. I could use the New York area as an example and I know
it was indicated that we wouldn't be the first, but there are
30 laboratories approximately operating in lower New York
serving New York Metro. Even if 15 laboratories were selected
as winners out of the 30 that had to bid, there are 15 labs
that will close.
Schild Medical Laboratory has a dozen patient service
centers throughout the boroughs of New York City and Long
Island and Lower Westchester. All of those would close and the
patients would have to seek having their blood drawn at another
patient service center. A lot of the larger labs, they have a
very, very big network, but there is no much need out there the
wait times there are already extremely long. If you limit the
number of labs in the marketplace, there is the answer to your
access question, where do they go.
What this demonstration project is all about is government
reshaping a free market and I really don't think that that's
what our country is about and I think it's going to have
devastating implications and labs will close and labs that
leave the marketplace will not be able to re-enter.
Again, we have very narrow margins, somewhere between five
and seven percent, depending on the year. Medicare is 30
percent of our revenue. Remove that. I don't think we could go
beyond the year in existence, plus it will stifle innovation
because new players can't enter into the market. How can
Medicare create a system that will stop new businesses from
forming and that's where we say it will irrevocably reshape the
marketplace. All you'll have is the existing player and they'll
just keep dwindling and dwindling down until everybody realizes
that this was a mistake and you start over again.
Mr.Chabot. And finally, Dr. Weiss, would you explain again
in your statement that you made in your testimony that the CMS
demonstration project will cause a huge destabilizing and anti-
competitive effect on the clinical laboratory community?
Dr.Weiss. Thank you, Congressman. As my other colleagues on
the panel have indicated, the complexity of what we are dealing
with in terms of the relationships between laboratories
functioning in communities is such that disrupting that will
create major impacts not only on those laboratories but the
patients they serve.
And if I can use my organization as an example, we have
recognized that a laboratory like ours is not suited to
providing clinical laboratory services to a number of the
segments of the patient population. It's truly the independent
and hospital based laboratories in communities and in regions
that could be affected by this demonstration project. Those are
the entities that are best suited to provide these services.
So we have this complex relationship between laboratories
at several different levels, all of us trying our best to
provide high quality services to patient populations like those
in Medicare and competitive bidding will throw a tremendous
monkey wrench, if you will, into that process and be extremely
disruptive in my opinion.
Mr.Chabot. Thank you, Doctor. I yield back the balance of
my time.
ChairwomanVelazquez. Mr. Braley.
Mr.Braley. Madam Chairwoman, Ranking Member Chabot, I have
only served on this Committee with you for six months, but I am
fairly confident in saying that only CMS could create a
competition where if you win you lose.
(Laughter.)
Mr.Braley. It's very disturbing to those of us who have
recently come to Congress to be sitting here week after week
talking about CMS driven decisions that have an adverse impact
on the people we represent in our districts.
And, Ms. Bonifas, I want to start to talking to you about
your comment that 20 local nursing homes in your area are
served only by your laboratory. Do you remember making that
comment? Last week, another one of my constituents from
Maqueketa, Iowa, a family pharmacist was here, talking about
some of the extraordinary things that people in his profession
had done above and beyond the call of duty to help people coup
with the new Medicare D requirements, that they received no
compensation for but felt that they were obligated to do as a
sense of professional calling.
And what I would like you to do is help us put a human face
on the type of services you and your employees provide above
and beyond what's normally expected just in order to get an
reimbursement from Medicare serving the needs of all the
patients who are currently in those 20 nursing homes. What type
of experiences are typical to the people who work in your
laboratory?
Ms.Bonifas. Thank you, Congressman Braley. I wasn't always
the only laboratory that provided services to the Dubuque
nursing homes. A large multi-physician clinic also used to send
phlebotomists to the nursing homes and after awhile, they just
stopped and basically United Clinical Labs was left with the
business.
We don't do nursing home business because we make money on
it. Most of it is out of a sense of obligation and if we don't
do this, who is going to do this? We have three phlebotomists
who go to the nursing homes. They used to go every day. As long
as the nursing home called, we would send them. Now they go--
The nursing homes have been put on a schedule. Certain nursing
homes are only visited on certain days. We've worked with the
homes to teach them how to draw their own blood. Our couriers
pick it up.
But our employees that are going out to the nursing homes
do that not because they get paid well for that because they
don't and the reimbursement to go out to the nursing home to do
that work is not much. But our employees that do that do it
because they like to do it. They enjoy working with the older
people and one of them in particular who has been a nursing
home phlebotomist for over 25 years said even when she retires
she would still do it and do it for nothing because she just
likes the people in the nursing homes.
So, as I said, we don't do it because we make money on it.
We feel there's a sense of obligation because if we don't do
it, I don't know who will.
Mr.Braley. Isn't it true that given the age of the patient
population in those nursing homes you're more likely to
encounter patients who have compromised immune systems where
these access to laboratory services can have a dramatic impact
on their health outcomes?
Ms.Bonifas. Yes, I think that would be true.
Mr.Braley. One of the things you talked about was some of
the innovative things you were doing with electronic management
of medical records and I guess my question for you is in this
competition that CMS set up were there any points or positive
awards made for people who were taking innovative approaches in
EMR like you described your laboratory was doing?
Ms.Bonifas. No, not to my knowledge. I don't think the
bidding demonstration even requires that you transmit results
electronically. But we were very innovative in Dubuque. I think
if you talk to any of the Dubuque physicians, they will tell
you one of the things they really like is this program that our
in-house computer programmers wrote that allows them anywhere
to access the result and it also saves money. Someone who is
being seen in the hospital who also may have just been seen in
the doctor's office rather than ordering the test again, they
can look and see ``Oh, this person had this test. We don't need
to order it. Here are the results.'' They can print that
result. They can chart that result. It is a very innovative
program and like I said, not available in most cities the size
of Dubuque.
Mr.Braley. If a competitive bidding program were to be
enacted in the Dubuque area, what can Medicare beneficiaries
that rely upon United Clinical Laboratories for lab service
expect to happen in terms of their care?
Ms.Bonifas. Well, it depends if we're a winner or a loser
or a winning loser maybe is the right.
Mr.Braley. I'm not sure if you win you really win.
Ms.Bonifas. Exactly. Medicare beneficiaries are used to
using our facilities and it's not just the Medicare
beneficiaries. It's their physicians who are used to using our
laboratory. If I'm a bid winner, then I'm going to get less
reimbursement. If I'm not a winner, I'm not sure where they're
going to go. I'm not sure where the physicians are going to
have to send their testing. All of those, that infrastructure
that we've built, that service delivery system, is going to be
lost.
And because of the consolidated lab in Dubuque, physicians,
even the large multi-physician clinic with over 100 physicians
and the large internal medicine practice, they rely on us. Most
of them don't do Medicare testing if they know we do it because
they would rather send it to us and not lose money on it.
Mr.Braley. Thank you for sharing those insights and thank
you for holding the hearing.
ChairwomanVelazquez. Mr. Davis.
Mr.Davis. Thank you, Madam chairwoman and I thank the
panelists for being with us today. I actually come out of the
background of health care before I came to Congress. I
understand CMS very well. I've dealt with them for almost 30
years either in the hospital setting or in an outpatient
setting. Thank you for what you do.
One thing that I found and I would like to know if this is
what you've seen in your experiences that bigger is not always
best, farther away is not always best. Do you see in your
judgment and experience having local access to physicians and
clinical lab and home health care and pharmacies and those
things that make for an integrated health system are done
better at the local level or is it better done at some far
away, out of sight resource and anyone could just answer that
for me.
Mr.Schild. I would like to respond because New York is a
unique market. Both the large players and the small players
provide local service. So in New York, that isn't as much of a
factor but the whole concept of just reducing the number of
laboratories will have a significant impact on an already very,
very crowded marketplace where access is key. We serve so many
millions of people that we can't afford to reduce the number of
players in the marketplace.
Mr.Davis. Anyone else?
Dr.Weiss. Health care is local and it's critically
important that health care be delivered to patients by
physicians and health care providers in the local areas. In our
circumstance, we're a laboratory located in Salt Lake City and
we provide services to hospital laboratories and independent
laboratories around the country. But we provide that in a very,
very narrow niche of very unusual testing.
We don't attempt nor should we to provide services that are
best delivered at the local level and to the populations in
particular that we've been talking about, nursing home and
homebound patients, it would be impossible for a laboratory
like ours if we were required to bid and to bid on those
services to provide those services in an effective way. It is
really most important that those services be provided locally.
Ms.Bonifas. I would also like to say that the service needs
to be local. There is a place for both. There is testing that
needs to be done in the community and it's the rapid turnaround
time, the things that are needed right away, the easier things
to do. That needs to be done in the community lab. Those tests
shouldn't be sent to a large national reference lab.
There is a place for all labs. We need the national
reference labs. We need the Mayos and the ARUPs and the Quests
and the LabCorps. We need them to do the esoteric tests that we
can't do because we don't have the technology or the expertise
or the volume to do effectively. So we need everybody. We need
the community-based laboratory and we need regional labs. We
need national labs. We need everybody and we don't need to
exclude anybody from that market.
Mr.Davis. In most industries in America, competition is a
good thing. If you have more competition, it breeds better
quality and it also breeds lower cost. Do you see that in
health care?
Mr.Schild. It's an absolute in health care. The more
players in the market, the more new ideas and concepts get
introduced and sometimes the smallest labs in the industry have
contributed technology that was adopted by all. So if you start
reducing the number of small clinical laboratories that will
disappear.
One example I could give you of technology that has
impacted the whole industry is one of my competitors, Sunrise
Medical Labs in Hophog Long Island, introduced the first
computer system that helped distinguish a patient's insurance
and which plan it had to go to because of some exclusionary
decisions that were made by managed care organizations. Schild
Medical Laboratory is working on introducing a new cardiac risk
assessment test that we think is going to revolutionize the
marketplace. So it is so important for there to be small
players in the market because they, too, can reshape health
care in a positive way.
Mr.Davis. Let me ask one last question. What will happen if
a physician orders a stat test and you've gone to a national
health system, basically what I see this coming to, and there's
not that local competition there available and for the other
members on the panel stat means immediate? Anyone like to take
that as to what would happen?
Mr.Bejgrowicz. Congressman, if I can. That resident would
be shipped to the hospital incurring large costs while if we
had that test performed in the nursing home, the physician then
could treat the resident. Frankly, I'm very worried about the
residents in the nursing homes. I really am.
Mr.Davis. Thank you. I yield.
ChairwomanVelazquez. Mr. Sestak.
Mr.Sestak. Thank you, Madam Chair. I probably only have one
question but a couple of observations. I think this hearing is
tremendous for a number of reasons. First, I was taken that CMS
has absolutely ignored the Institute of Medicine's
recommendation a few years ago that if it were to do this
competitive bidding it was to be focused on gaining accurate
information about market pricing by its purchase of service.
They completely ignored that recommendation.
Second, every hearing I've been to has always talked about
health care in terms of affordable, accessible, quality of
care. For some reason, they've decided to talk about the
affordability here. In lieu of the third point and missed so
much else where affordability could be gained, you brought it
up. One area would be preventive care. Heaven forbid if we ever
looked at preventive, early diagnosis. Twenty-two percent of
our payments out of Part B go to 67 percent of Medicare
recipients because they had five more chronic disease, fee for
service and you kind of looked at that management of that care
and early diagnosis and continuing to help prevent it from
getting worst, the savings would be enormous. And then we
narrow down in this small area instead of going for the big
prize.
And, finally, and most importantly is my own experience.
You said it so well. But for me when my four-year-old daughter
had her malignant brain tumor and was given three to nine
months to live a year and a half ago, I can't tell you how
helpful community-based system was and it was in the Navy.
Tragedy struck us and I have to tell you as we hunted for the
right labs because much of this stuff is done at home, you can,
the right place that can do the right blood tests for tumors.
Staying up throughout the night to administer stuff they give
us, but always there on call because they had a great
relationship with the patients and a great relationship with
the hospitals.
I am quite taken that the quality of affordable, accessible
health care goes a long way towards this type of community-
based approach. I don't have the statistics to prove it, but I
am quite taken as we came to know the small labs as we switched
from brain surgeries to chemo to radiation to work on future
hopefully quality of life. That's more of a comment.
But I was taken and if each of you would, in matter of
fact, if you don't, if one or two just might, this community-
based relationship you spoke about, I see it everywhere during
my exposure there. It prevented the seams in which so much
happens at the worst moment of time that if you have that kind
of community-based relationship things don't get dropped
through the crack. They can have some impact on your care.
Would you can expound on that if you care? I made more of a
statement because it was very personal to me. But there is
something more to add on this community-based I think will go
away with the focus upon larger rather than smaller.
Mr.Schild. I guess what I could add to that is our lab is
very often willing to take on work that is a little bit more
labor intensive and results a lower profit because we have to
survive. So sometimes a tiny, tiny profit is better than none
at all and we also recognize that we live in a community and
one of our contracts is with the visiting nurse service and we
have an army of phlebotomists that go out on a daily basis and
go to very homebound and ill patients and draw their blood and
we deliver a quality result the very next morning or if it's
stat, the same day and a lot of labs aren't willing to do that.
We agree with your statement and that's just why it's so
important that we maintain our current system and re-examine
other ways to reduce our Medicare expenditures.
Mr.Sestak. And there are other ways.
Mr.Schild. There are so many.
Mr.Bejgrowicz. Congressman, if I can just make a statement.
From a nursing home perspective, the residents' lives are very
scheduled and honestly the nursing home residents almost look
forward to that visit from that phlebotomist. They become
friends with that phlebotomist and that would disappear.
Mr.Sestak. People can dismiss that easily but there are
studies, statistical studies, that show the relationship that
someone can have doing health care goes a long way to their
health achievement. It's absolutely a fact. Thank you.
ChairwomanVelazquez. Mr. Love, I noticed that you're still
here and I'm glad that you decided to stay here. While I know
that it is the policy of CMS to not testify on panels with
industry, I just would like to ask you to please come to the
table to answer just one question. Would you please come
forward, Mr. Love? Fine.
Mr.Love. Yes madam.
ChairwomanVelazquez. Mr. Love, given what you heard here
today, will there be time for input by the industry before the
implementation of the demonstration and when will the
demonstration program start?
Mr.Love. Thank you. First, Mr. Sestak, I'm very sorry to
hear about that. We have taken extensive input, some of which
we got as recently as last week as you know from the Open Door
Forum and we are not at the point where we are actually
announcing a site and we are continuing to evaluate that input
not only from the Open Door Forum, but at our web site we have
received comments since the Open Door Forum, some of which I
was reading well into last evening. We will continue to
consider that information as we move forward.
ChairwomanVelazquez. Well, the Committee still has a number
of questions after we listened to the witnesses on the second
panel and I would like to ask unanimous consent that we are
going to send to you questions in writing and we expect those
questions to be submitted to the Committee before you implement
the program.
Mr.Love. We will certainly be responsive to the Committee's
questions.
Mr.Chabot. Madam Chairwoman.
ChairwomanVelazquez. Yes
Mr.Chabot. I assume you mean the answers to the questions.
ChairwomanVelazquez. Yes, the answers to the questions
before he implements the program.
Mr.Chabot. Thank you.
ChairwomanVelazquez. Thank you. And the gentleman is
excused.
Mr.Love. Thank you.
ChairwomanVelazquez. Let me just say that it is obviously
that this is a very complex issue and I think every witness had
provided compelling arguments here as why they feel that this
project, this demonstration project, could put them out of
business, compromising not only the free market system that we
have but the quality of care that we are providing to the
American people. So this is an issue that is important to this
Committee in the sense that we have to make sure that every
federal agency when they are creating rules, issuing rules, or
creating new demonstration projects that they really take into
account the impact that such a project will have on the small
businesses.
We will continue to monitor this situation. We will ask CMS
to continue to have meaningful meetings with the industry and
to take into account those input provided for those small
businesses that will impacted by this demonstration project.
I ask unanimous consent that members have five legislative
days to enter them into the record without objection. So order
and this hearing is now adjourned. Off the record.
[Whereupon, at 11:56 a.m., the Committee was adjourned.]
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