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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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