Originally Published IVD Technology November/December 2005
INDUSTRY NEWS
Competitive bidding looms on the horizon
The Centers for Medicare and Medicaid Services (CMS; Baltimore) is moving forward with its planning of a demonstration project for competitive bidding of clinical laboratory services. While CMS is still working on the design and implementation of the demonstration, industry analysts believe that this competitive-bidding project will have a detrimental effect on IVD manufacturers.
"Competitive bidding changes Medicare's basic premise from providers and beneficiaries having access to any willing providers to a selection process that over time by its very nature will significantly reduce the number of entities to which Medicare providers and beneficiaries will have access," said Stephanie Mensh, vice president of payment and policy at the Advanced Medical Technology Association (AdvaMed; Washington, DC).
"This change, its implications for future competition, and issues raised by earlier demonstration projects lead AdvaMed to oppose competitive bidding. A competitive-bidding demonstration project for clinical laboratory tests raises many serious questions relating to cost, access, administrative and logistical concerns for the practitioners ordering the tests, beneficiary protections, and fairness."
Mandated by Congress under the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA), CMS has budgeted to conduct the competitive-bidding project at two demonstration sites. While CMS has not yet decided where the demonstrations will be held and when the project will begin, it is scheduled to last for three years.
CMS recently held an open-door-forum public meeting. During this meeting, RTI International (Research Triangle Park, NC), CMS's research contractor, presented a summary of the draft demonstration design for the competitive-bidding project.
According to CMS officials, CMS's objective is to demonstrate whether or not competitive bidding can work for clinical laboratory services. Officials added that by going through this process, clinical laboratory services will hopefully be provided in a more efficient and higher quality way.
Despite such hopeful assessments, industry analysts remain skeptical that any positive results could come out of competitive bidding and are convinced that any such project will reduce IVD manufacturers' revenues.
"If CMS were to move forward with competitive bidding, without a doubt some labs are going to go out of business," says Vince Stine, director of government affairs at the American Association for Clinical Chemistry (AACC; Washington, DC). "Those labs that go out of business will no longer be purchasing medical devices, reagents, etc. Thus, the IVD industry would lose customers, primarily smaller labs.
"Also, by reducing laboratory payments through competitive bidding, the profit margins would be much tighter for the remaining labs, which would make them less able to purchase newer technologies. While these problems would affect the demo area, it would probably have a limited impact on the IVD industry nationwide since it would be targeted to narrower areas. However, full-fledged competitive bidding could be a serious problem for IVD companies seeking to make sales."
Other analysts concur that competitive bidding will have negative long-term effects by discouraging IVD manufacturers from continuing to develop new technologies.
"In addition to compromising quality and Medicare beneficiaries' access to care, competitive bidding will present disincentives to the diagnostic industry for making incremental improvements of existing products and investing in the development of significant technological innovations," says Linda Ivor, associate director of government affairs at Gen-Probe Inc. (San Diego). "The bidding process will be blind to the long-term savings and health benefits of new technologies, as it considers only immediate costs. It is paradoxical that this demonstration project comes at a time when FDA and stakeholders acknowledge that a new laboratory payment system is needed to better recognize the value provided by these tests."
Additional information may be accessed via the CMS Web site at www.cms.hhs.gov/researchers/demos/clinicallabdemo.asp
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