Effects of the Budget Cuts on the Clinical Lab Fee Schedule

What is the Budget Control Act of 2011?

In 2011, the Budget Control Act was signed into law by President Barack Obama. This Act had many provisions that affected the economy as a whole, but some of the cuts directly affected laboratories.

What programs are affected by these budget cuts?

The proposed budget cuts to laboratory fees were scheduled to go into effect in 2013. Fiscal year 2014 will include $371 million savings from Medicare, with a 1.75% reduction to the Clinical Lab Fee Schedule each year starting in 2016 until 2023. These changes to the annual fee schedule are made simultaneously with the Affordable Care Act of 2010, which is also cut 1.75% every year. These Acts will, combined, bring total cuts to the Clinical Lab Fee Schedule to approximately 40% over the next decade. While these cuts will make improvements to the Sustainable Growth Rate, these largely unexpected fee cuts are not ideal for laboratory economics. The industry has been expecting change, but many experts did not suspect cuts nothing of this scale.
Is your laboratory affected by these budget cuts?

Research and Development as an entire industry has been affected by these cuts, but what exactly do they mean for your laboratory? Laboratories who receive a majority of their revenue from Medicare will be most affected by these cuts. Laboratories who received less that 25% of their revenue from Medicare will see less changes, though they will still be affected. Because of the Budget Control Act of 2011, an automatic 2% was cut from the Clinical Lab Fee Schedule.

What other factors are affecting the Clinical Lab Fee Schedule?

· Medicare’s Clinical Lab Fee Schedule will now consistently go through an annual inflation update.

· The part B Clinical Lab Fee Schedule has been frozen since 2000.

· In 2013, the Clinical Lab Fee Schedule went through a 2% cut to cover a freeze in Medicare payment rates for physicians.

· The Affordable Care Act of 2010 requires a 1.75% decrease in the Consumer Price Index for 2011-2015.

· The Affordable Care Act of 2010 additionally requires Medicare and Medicaid providers to follow Part B of the lab fee schedule by reducing the inflation update. This is a “productivity adjustment” of 1.3% from 2011-2020.

· The most recent federal budget will extend the 1.75% cuts from the Affordable Care Act from 2016-2023.

For more information about our laboratory services at Colaborate, contact us today.

By Kevin Hunter