News of mergers, acquisitions and consolidations are practically an everyday occurrence among manufacturers in the testing and diagnostics industry. In the past year, big players like Siemens and Hologic have swallowed up companies like Bayer, Dade Behring, and Cytyc, while smaller firms are merging so they can compete in a diagnostics field dominated by giants. The clinical lab industry, too, is consolidating. Recently, AmeriPath and Specialty Labs merged, and Sonic Healthcare took over Sunrise Medical Laboratories.
Such unions are good news for the big guys who acquire innovative technology usually developed in small enterprises. And it’s great news for the acquired little guys who often go into business in the first place with the purpose of getting purchased by larger companies.
Unfortunately, most small independent clinical labs are not trying to be acquired, and CMS, one of their major sources of revenue, is not a hungry giant looking to take worthy labs under its wing. In fact, the agency is doing just the opposite with its follow-through on the Clinical Lab Services Competitive Bidding Demonstration Contract, and the industry is loudly protesting.
ACLA opposes any effort to impose competitive bidding arrangements, saying, “Competitive bidding would threaten the quality of and access to laboratory services and create a substantial and cumbersome administrative bureaucracy.” The organization contends that small labs will be hurt most; they will have trouble dealing with the complexity of the forms, and even if they fill out the forms correctly, the competitive bidding testing prices may fall below their profit margins, and many will be forced out of business. When the small labs go, their customers, such as small nursing homes, will suffer.
- More information on competitive bidding, search our online archives.
When CMS conducted a conference call to address questions on the status of the competitive bidding demo, I was at the AACC show in San Diego and unable to tune into the call. But thanks to Robert Michel’s Dark Daily, I found out what the lab industry told CMS. Most who voiced opinions echoed that of ACLA President Alan Mertz, who said competitive bidding for clinical labs is opposed by all member companies, large and small. “The new bidding system is not competitive bidding at all,” he said. “It is government acting as a ‘monopsony’ power that actually drives competitors out of business, resulting in less competition, and lower quality and access for beneficiaries. CMS should report to Congress that their mandate for laboratory competitive bidding is unworkable and should be withdrawn.”
Lab industry witnesses told a House Small Business Committee hearing on July 25 that many small labs would go out of business if the competitive bidding system were put into place.
According to Congressional Quarterly, those who spoke at the meeting said that only big lab chains would remain, depriving nursing home patients who rely on small labs of the special services needed to keep them medically stable, or the bidding system would saddle the small labs with costs they couldn’t afford.
In her opening statement, Nydia M. Velazquez, D-NY, said: “It seems that CMS has ignored congressional intent and moved forward with a project that creates a cumbersome bureaucracy. As proposed, it could make it impossible for small labs to survive.”
She added that “instead of competition deciding market share, CMS will determine market share winners and losers, and the losers are small local businesses.”
After the hearing, Velazquez said she would write to the chairmen of the House Ways and Means and Energy and Commerce committees to warn them about the impact of the competitive bidding demonstration.
True to her word, on August 8, Velasquez introduced a bill to repeal competitive bidding for clinical labs. House Bill HR 3453, Community Clinical Laboratory Fairness in Competition Act of 2007, calls for the bidding demo to be abandoned. The bill states that competitive bidding would reduce the number of lab service providers in the market, lessening the diversity of labs currently competing by forcing smaller labs out of business, and ultimately creating monopolies.
I commend Velasquez for this bill and look forward to Congress slashing the proposed competitive bidding project for labs.