November 2007 Newsletter

Medicare Competitive Bidding

By: Laboratory Account Executive

Section 302(b) of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) (P.L. 108-173) requires the Centers for Medicare & Medicaid Services (CMS) to conduct a demonstration project on the application of competitive acquisition for clinical laboratory services that would otherwise be paid under the Medicare Part B fee schedule.

The objective of the demonstration is to determine whether competitive bidding can be used to provide Part B clinical laboratory services at fees below current Medicare payment rates while maintaining quality and access to care. A Draft Bidders Package that outlines the entire project can be found on Medicare’s Web site.

The Competitive Bidding parameters are listed below:

• There will be two demonstration sites, also referred to as Metropolitan Statistical Areas (MSAs). The demonstrations will last three years and will have staggered starts.
• The sites will be chosen based on beneficiaries who live within competitive bidding areas (CBAs) and not based on a laboratory’s location.
• The project excludes hospital inpatient and outpatient testing, as well as physician office lab (POL) testing.
• The project will include tests offered by independent labs, as well as non-patient testing by hospitals and POLs.
• Demonstration tests must be provided by entities that do not have face to face encounters with the patient.
• The project will cover all laboratory tests paid for under Medicare Part B clinical lab fee schedule, with the exception of Pap smears, colorectal cancer screening tests, and new tests added to the lab fee schedule during the course of the demonstration.
• Laboratories that have more than $100K in annual Medicare Test payments in CBA are required to bid.
• Laboratories that have less than $100K in annual payments are not required to bid, but will be paid for demonstration tests provided to beneficiaries residing in the CBA at the competitively bid fee schedule. Annual payments are capitated.
• Labs that participate in bidding but do not win will not be eligible for Medicare reimbursement for demonstration tests provided to beneficiaries residing in the CBA.
• Laboratories that are required to bid but do not participate in the bidding will be ineligible for Medicare Part B reimbursement for demonstration tests provided to beneficiaries residing in the CBA.
• Winning laboratories will be paid under one competitively set demonstration Medicare Part B clinical laboratory fee schedule for lab tests provided to beneficiaries living in the demonstration area.

Additional criteria used in selecting the winning laboratories are:

• Ownership
• Quality
• Financial stability
• Demonstration test bid price
• Capacity and geographic coverage
• Ability to subcontract and refer tests
• Antitrust issues.

The primary criticism of the Competitive Bidding Project is that quality would be compromised because the delivery of laboratory services is significantly more complex than other industries. There are currently two bills in Congress, H.R. 3453 and S.2099, to repeal the demonstration.

The first demonstration site was announced as the San Diego-Carlsbad-San Marcos, California MSA.  A Bidders Conference was planned for 10/31/07 in San Diego-Carlsbad-San Marcos, CA, but was postponed due to the State of Emergency in California.

To review the latest information, see Details for Medicare Medical Home Demonstration on the CMS Web site.