Funding is always an issue. However, this year, the nation’s budget challenges—caused primarily by the cost of the Iraq war and the series of devastating hurricanes that hit the United States—have lowered expectations for governmental funding for the clinical laboratory industry as Congress goes through the painful process of creating a budget.

Things are so bad, in fact, says Elissa Passiment, executive vice president, American Society for Clinical Laboratory Science (ASCLS), that, “There’s no hope for any additional funding for laboratory services reimbursement or education programs after the hurricanes. Congress is cutting even more, and they absolutely refuse to rescind the tax cuts. There’s no recourse but to slash and burn. We hope to stay low on the radar screen for cutting, but the possibility of getting any new funding for the laboratory personnel shortage or to ‘unfreeze’ the Consumer Price Index update is gone. There’s only so much money available.”

Of course, other legislative and regulatory challenges are facing the industry, but the budget is key. Passiment’s gloomy assessment is shared by Jeff Jacobs, vice president, public policy, American Society for Clinical Pathology (ASCP). Jacobs agrees that budget problems in Congress are making things challenging, and, “The current budget challenges are even more difficult than they were a year ago because of such factors as the war, the hurricanes, and the deficit.”

Tighter Congressional purse strings can be seen in other areas as well. Passiment says that Titles VII and VIII of the Allied Health Projects Grants, which fund nursing and allied health education, have traditionally been cut by the House but restored by the Senate. This year, the Senate restored only a small portion of the funding, and it isn’t clear yet how this will be resolved, she says. ASCP notes that as the end of the 2005 Federal Fiscal Year (FY) drew to a close, the House of Representatives on September 28 considered a continuing resolution (CR) meant to keep Federal agency operations functioning until Congress can pass FY 2006 appropriations. While the move was not unusual, ASCP says, it does exacerbate financial troubles for Title VII allied health professions training programs, which provide funding for the establishment, maintenance, or expansion of medical-technology programs. The CR allows Federal agencies to continue running, but only with the lowest amount of money allocated in either the House or Senate versions of the 13 appropriations bills. The House version of the Labor, Health and Human Services and Education appropriations bill, which provides funding for Title VII programs, zeroed out funding for allied health training this year. In response to this omission, ASCP issued an advocacy alert in October, urging members to contact their Congressional representatives to restore the funding.

  Robin Stombler, president of Auburn Health Strategies LLC, agrees that priorities have changed: “It’s highly unlikely the Allied Health Projects Grants will be funded this year,” she says. The program is intended to help entities meet the costs associated with expanding or establishing programs that will increase the number of individuals trained in allied health professions. Funding would go to such school programs as medical-technology courses. She explains that less government money is being allocated for health-profession programs; more money is going into health technology.

The good news, according to Vince Stine, director of governmental affairs for the American Association for Clinical Chemistry (AACC), is that no additional cuts, at least so far, have been made in lab reimbursement. He says that Congress is not inclined this year to reduce Medicare payments, which is a plus for the laboratory community. “There’s always concern about copayments, but we have repeatedly explained to Congress that increasing copayments won’t work. The bad news is we are still living under the past budget agreement, so labs won’t get any fee-schedule update this year.”

However, the outlook is a little brighter in other areas. Passiment notes that on the regulatory side, new FDA guidelines “are better than we thought they would be.” She says the question is whether or not the public will want change enough to come out to the ballot box in 2006 and change the makeup of the current Congress.

Preventing Further Cuts
To combat shrinking funding, ASCP is being proactive at the grassroots and grasstops levels (with advocacy efforts to leaders in Congress and the administration). Jacobs says the association has an effective advocacy strategy that includes sending thousands of messages to Congress each year.

“We’re in danger of losing all our funding, both short- and long-term, for medical-technology programs,” Jacobs says. It’s a relatively small amount, earmarked for training technicians and technology training under Title VII of the Allied Health Professions Program. Jacobs says the House eliminated the funding, but the Senate restored it, and ASCP wants to make sure the Senate prevails. With the budget process well under way, this matter should be resolved this month.

Jacobs also notes the sustainable growth rate formula for Medicare. Reimbursement for pathologists is due to decrease by 4.4% for all physicians. ASCP is fighting for a proposal to fix this permanently, but it has been told that the best it should expect is a 1% increase, “which is better than nothing,” Jacobs says. “We’re hopeful for better than 1%, but it’ll be tough.”

Patient Safety
Jacobs notes that President Bush signed a patient-safety bill in early August to form patient-safety organizations to report on medical errors by providers. This is expected to help labs reduce errors and develop best practices. The bill goes into effect over the next few years and is a big victory for ASCP, Jacobs says. In addition, the Senate just passed a health information technology bill to help hospitals modernize their infrastructures. “This will help us track the quality of care patients receive, and we hope the House will pass a similar bill. It’s related to the push for electronic medical records,” he says.

Stombler points out that labs are in the forefront of quality issues. Stombler is also CEO of the Institute for Quality in Laboratory Medicine, a recently formed organization that conducts research and provides data on industry issues, provides a forum for those involved in the industry, and aims to promote improvements in laboratory testing and services to benefit the health of the public. The IQLM includes users, providers, and payors who are all involved in making improvements in laboratory tests and services. Its advisory council includes clinicians, manufacturers, lab groups, patient organizations, and other interested parties. “IQLM doesn’t lobby; its aim is to provide quality information to all laboratories and to disseminate quality information on best practices,” Stombler says.

It’s in line with reports from the Institute of Medicine that say the best way to approach problems is systematically. “Improving quality and utilization is one way to address funding issues. Working together and finding better ways to utilize laboratory tests will mean a more efficient way of managing limited funds,” Stombler says. IQLM is not looking at legislation in this area, she says; instead, it is looking to conduct research and provide information even before it is asked to do so.

Competitive Bidding
Another issue is competitive bidding as part of the Medicare Modernization Act. Jacobs says it was in the design phase, but Centers for Medicare and Medicaid Services will now implement it in two areas of the country. “We’re monitoring it very closely. We think it’s a terrible idea that they’re mandated by law to do this,” he says. Stombler says the competitive bidding issue is being addressed within the Administration. For example, it was discussed at a meeting last summer hosted by the CMS. Competitive bidding has not yet been implemented on a large scale, but it is intended to be eventually. There is concern among laboratories about who will be allowed to compete, how winners and losers will be handled, and whether it will function in a way that will not hurt the industry or patient access, Stombler says.

Stine notes that the next step is for CMS to deliver a report to Congress outlining how it plans to implement the demonstration project. Stine expects it will be a few years before any project is completed and results are seen. “We continue to look for opportunities to provide input into the process, so that we can ensure that regulators and legislators alike understand the impact competitive bidding could have on labs and patient care,” he says.

Also, there’s a freeze for reimbursement until 2008 for medical lab programs. “We’re working with Congress on that,” says Jacobs.

Passiment says that the administration is trying to respond to physicians’ lobbying efforts. “Doctors need to have their fee schedules updated. They’ve already taken cuts, and they’re definitely struggling. There’s just not enough in the Medicare pie.” However, CMS announced in November that it will not adjust the physician practice expense (PE) component of the Medicare Physician Fee Schedule (PFS), as it had proposed earlier this year. According to ASCP, the announcement was a blow to pathologists and independent clinical laboratories, which were counting on the PE adjustments to, at least partially, offset proposed reimbursement cuts caused by the flawed sustainable growth rate (SGR). As noted earlier, CMS has announced that average physician reimbursement will be decreased by 4.4% in 2006, and Congress is currently working on legislation to avert this decrease and instead provide a 1% increase. ASCP is continuing to urge Congress to fix the SGR so that pathologists receive reasonable annual updates. CMS declined to implement its proposed change to PE relative value units in 2006 because of comments raising concern that the agency had not provided sufficient information on the proposed changes to the methodology used to calculate practice expenses. The agency indicated that it plans to provide additional information in January 2006 to begin the process of ensuring that the data and methodology are better understood by the medical community prior to the 2007 proposed rule next summer.

“Midterm elections are in a year. The probability is that there are some congressmen and senators who will talk to us who would not have a year ago. The Republicans, including the President, have lost popularity, and we will have the opportunity to promote our issues, but it remains to be seen how long their memory is,” Passiment says. “We just hope to avert any more cuts to funding and keep an eye on the competitive bidding initiative because it has the potential for even greater harm than the funding cuts. We want to see if there are opportunities to present alternatives to it. Competitive bidding, mandated by the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, hasn’t started yet, but modeling of it has.”

Stombler notes that champions of the clinical lab industry are on both sides of the aisle, pointing to favorable legislation cosponsored by Rep John Shimkus (R-Ill) and Rep Jesse Jackson, Jr (D-Ill). But she acknowledges that these are difficult financial times, and cuts have come throughout.

What should labs do? “Don’t just argue for the status quo,” Stombler says. “Work on new solutions, decide on what the industry needs, and be united in pursuing it.”

Pay for Performance
Another issue on the radar screen is Pay for Performance. In July 2000, the Integrated Healthcare Association formed a high-level working group of purchasers, health plan medical directors, and physician group executives and medical directors to work on the concept of a new statewide initiative for California that would pay physician groups for documented performance.

The official announcement of Pay for Performance was made on January 15, 2002. Six California health plans agreed to launch the collaborative initiative: Aetna, Blue Cross of California, Blue Shield of California, CIGNA HealthCare of California, Health Net, and PacifiCare.

Under the Pay for Performance plan, common performance measures for physician groups are developed collaboratively by health plan and physician group medical directors, researchers, and other industry experts. Significant health plan financial payments are made based on that performance, with each plan independently deciding the source, amount, and payment method for its incentive program. The first full year for Pay for Performance involves 2003 data and health plan payments in mid-2004.

Stine says Congress is currently addressing this issue. Although labs are not specifically focused, they are part of the equation because they would provide much of the data used by the government and payors. “Any data requirements could mean extra costs to labs, so we want to be part of the process,” Stine says. It is not yet completely clear how this issue will play out, but AACC will continue to monitor the issue closely and participate in the process where appropriate, according to Stine.

Another issue is that of health information technology. Electronic medical records legislation overlaps with the Pay for Performance issue because both seek quick access to quality data. “They’re integrated issues, which need to be addressed concurrently,” Stine says.

Other Issues

Other legislative issues that will impact the clinical lab industry are worth noting. The Clinical Laboratory Management Association is asking members to contact Congress and ask them to cosponsor HR 1175, the Medical Laboratory Personnel Shortage Act. It seeks to amend the Public Health Service Act by providing—among other things—scholarships and loan repayment in exchange for service commitments from recipients in areas with a shortage of laboratory personnel, creation of public service announcements to advertise and promote careers in laboratory science, and grants to provide training specifically to increase the number of cytotechnologists.

The Healthcare Information and Management Systems Society (HIMSS) offers the HIMSS National Legislation Crosswalk, a tracking tool introduced in June for HIMSS members, federal decision-makers, and the media to receive regular updates and compare and contrast provisions of legislation.

Two existing bills have been combined into the Wired for Health Care Quality Act (S.1418), which combines portions of the Health Technology to Enhance Quality Act (S.1262) and the Better Healthcare Through Information Act (S.1535). The legislation would establish the Office of the National Coordinator for Health Information Technology, create a process for adopting health care standards, authorize grants, and set quality standards.

In late September, ASCP, in collaboration with the American Medical Association and other medical specialty groups, wrote Congress to ask that cuts in Medicare physician payments be stopped. While there is broad support in Congress for preventing further cuts to physician payments and for providing a positive payment update to the SGR formula by which physicians are reimbursed for Medicare services, no real action has taken place on the topic since the new Congress began in January 2005. Without action, Medicare physician payment rates will be cut by 4.4% on January 1, 2006.

Also in September, the US Food and Drug Administration (FDA) issued new draft guidance on waived test criteria. This new guidance calls for more stringent test-evaluation standards and provides recommendations for device manufacturers submitting applications, allowing them to more easily determine whether the device meets Clinical Laboratory Improvement Amendments of 1988 waiver standards. When finalized and approved, this guidance will replace the previous “CLIA Criteria for Waiver,” dated March 1, 2001. ASCP, along with other laboratory organizations, discussed the proposed guidance and formulated more recommendations at an FDA round-table forum in November.

The industry is also rallying to preserve the essential functions of the Armed Forces Institute of Pathology (AFIP). The US Senate Health, Educations, Labor and Pensions Committee recently marked up S.1873, the Biodefense and Pandemic Vaccine and Drug Development Act. The bill includes a provision that would save the key functions of the AFIP by creating a National Pathology Center in the National Institutes of Health. ASCP believes that this legislation would not only provide for the uninterrupted flow of pathology services from the AFIP to a new national center, but would raise the profession’s profile on a national level.

ASCP also notes such state legislation as Massachusetts’ HB 3655—the Clinical Laboratory Science Practice Act, introduced by the ASCLS-Central New England society—and its position on the licensure of laboratory personnel, through a letter to members of the Joint Committee on Public Health of the Massachusetts General Court, which ASCP supports. And in September, the North Carolina Governor signed into law a bill discouraging physicians from marking up the costs of anatomic pathology services. The bill, unanimously approved by both the Senate and House of Representatives, would require clinicians to disclose to patients or third-party payors the cost of pathology services paid by the clinician if the amount billed exceeds the amount charged by the laboratory. In addition, public efforts to call attention to the shortage of laboratory professionals paid off in Minnesota. Rather than closing, the medical technology (MT) program at the University of Minnesota has been moved from the medical school to a newly created Center for Allied Health. Administrators of the MT program performed a self-study in the fall of 2005, and this month, an external review committee will begin to evaluate the program’s short- and long-term needs. Donna Spannaus-Martin, PhD, MT program director, says political activity and public support helped save the program.

Gary Tufel is a contributing writer for Clinical Lab Products.