Medicare:

Payments for Clinical Laboratory Test Services Are Too High

HRD-91-59: Published: Jun 10, 1991. Publicly Released: Jun 10, 1991.

Additional Materials:

Contact:

William J. Scanlon
(202) 512-7114
contact@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

Pursuant to a legislative requirement, GAO reviewed the appropriateness of Medicare fee-schedule payments for clinical laboratory test services, focusing on laboratory costs and revenues.

GAO found that: (1) although four of the five largest independent laboratory companies in the United States suffered business losses with their discount customers, all five had substantial sales returns from Medicare and other retail customers; (2) the laboratories' average return on Medicare sales exceeded their overall rate of return, since Medicare paid substantially more for test services than did the laboratories' discount customers; (3) while laboratories incurred higher costs serving Medicare than discount customers, those higher costs were more than offset by Medicare fee-schedule payments; (4) taking into account Medicare payment reductions effective in January 1990 and 1991, Medicare profit rates would have been 11 percent higher than the companies' overall profit rates; and (5) operations at 11 smaller laboratory companies had profit patterns similar to large laboratories.

Matters for Congressional Consideration

  1. Status: Closed - Implemented

    Comments: OBRA 1993 implemented the recommendation.

    Matter: The Senate Committee on Finance, the House Committee on Ways and Means, and the House Committee on Energy and Commerce should propose legislation capping Medicare payments for clinical laboratory test services at a level that will reduce those payments so that Medicare's contribution to laboratories' profits do not exceed their overall profit rate. GAO data indicate that capping fees at 76 percent of the median of all fee schedules would accomplish this goal.

  2. Status: Closed - Implemented

    Comments: OBRA 1993 implemented the recommendation.

    Matter: The Senate Committee on Finance, the House Committee on Ways and Means, and the House Committee on Energy and Commerce should propose legislation capping Medicare payments for clinical laboratory test services at a level that will reduce those payments so that Medicare's contribution to laboratories' profits do not exceed their overall profit rate. GAO data indicate that capping fees at 76 percent of the median of all fee schedules would accomplish this goal.

  3. Status: Closed - Implemented

    Comments: OBRA 1993 implemented the recommendation.

    Matter: The Senate Committee on Finance, the House Committee on Ways and Means, and the House Committee on Energy and Commerce should propose legislation capping Medicare payments for clinical laboratory test services at a level that will reduce those payments so that Medicare's contribution to laboratories' profits do not exceed their overall profit rate. GAO data indicate that capping fees at 76 percent of the median of all fee schedules would accomplish this goal.

  4. Status: Closed - Implemented

    Comments: GAO made a similar recommendation in recent testimony and will follow up on that assignment.

    Matter: The Senate Committee on Finance, the House Committee on Way and Means, and the House Committee on Energy and Commerce should propose legislation giving the Secretary of the Department of Health and Human Services (HHS) the authority to adjust the cap rates for individual test procedures where relative rate inequities are apparent.

  5. Status: Closed - Implemented

    Comments: GAO made a similar recommendation in recent testimony and will follow up on that assignment.

    Matter: The Senate Committee on Finance, the House Committee on Way and Means, and the House Committee on Energy and Commerce should propose legislation giving the Secretary of the Department of Health and Human Services (HHS) the authority to adjust the cap rates for individual test procedures where relative rate inequities are apparent.

  6. Status: Closed - Implemented

    Comments: GAO made a similar recommendation in recent testimony and will follow up on that assignment.

    Matter: The Senate Committee on Finance, the House Committee on Way and Means, and the House Committee on Energy and Commerce should propose legislation giving the Secretary of the Department of Health and Human Services (HHS) the authority to adjust the cap rates for individual test procedures where relative rate inequities are apparent.

 

Explore the full database of GAO's Open Recommendations »

Sep 29, 2016

Sep 28, 2016

Sep 15, 2016

Sep 14, 2016

Sep 12, 2016

Sep 9, 2016

Sep 6, 2016

Looking for more? Browse all our products here