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                  As the playing field gradually diminishes for independent labs,

                     hospitals labs are experiencing a surge in outreach sales.

        Laboratories that operate an independent lab rely      Labs who survive the deep price cuts from CLFS and
        on send-outs from nursing homes and long-term care     PAMA will continue to feel the effects through 2023.
        facilities acquiring 50% to 80% of their income from   To stay competitive labs should invest in outreach
        Medicare. Independent labs normally operate on a 3%    specific technology and financial reporting to monitor
        to 4% annual net profit margin, according to the National   their outreach progress. Management will also need to
        Independent Laboratory Association (NILA). Even with   be savvy enough to think out of the box and look for
        a 10% cut, laboratories doing high volume testing could   cost-effective ways to increase revenue. New revenue
        go from minimal net profits to a substantial loss in revenue.    stream to consider is genetic testing. As genetics
        Another direct effect that PAMA could have on the      continues to take center stage in modern medicine,
        laboratory industry would be its impact on the major   reimbursements for genetic tests are becoming more
        laboratory testing facilities. These billion-dollar labs are   lucrative. In the end, what percentage the outreach
        concentrating more on consuming 80% - 90% of the       business contributes to the hospital’s bottom-line profits
        market share that comes from office-based physician’s   will most likely be the deciding factor.
        referrals. This event would present challenges for the
        independent labs to compete on an economic scale.      Currently, CEOs are faced with the lack of financial
                                                               reports to know exactly how much the clinical lab is
        As the playing field gradually diminishes for independent   getting paid per test, per payers plan, and volume of
        labs, hospital labs are experiencing a surge in outreach   claims for reporting purposes. For health systems who
        sales. Healthcare executives are approached with       now thrive on value to survive, executive management
        attractive incentives from major laboratory vendors to   should take note and steer the outreach program
        sell the hospital’s outreach business simply because they   into acquiring the essential software to compete.
        lack the “applicable labs” classification for the next data   Lab management will need to stay informed and
        collection cycle required for PAMA price reporting.    develop a strategical response plan to meet the
        Hospital outreach programs have already faced deep     challenges confronting the reduction of test
        cuts since Medicare CLFS regulation prompting          reimbursements. New federal laws could have
        decision makers in the last two years to announce      punishing effects on patient care and perhaps in
        the sale of the hospital’s outreach.                   time erode the financial stability of many laboratories.

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