College of American Pathologists
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Why the report and what CAP argued

February 2001

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Congress mandated that the Department of Health and Human Services arrange for the Institute of Medicine to study the laboratory industry; collect data on costs and payments for certain laboratory tests; assess Medicare payment policy; evaluate policy alternatives, including implementation costs; and make recommendations.

The IOM assembled a committee of 12 experts, including two CAP members, Eleanor Travers, MD, and John Matsen, MD. In January 2000, the IOM panel heard testimony from many laboratory groups, including the College. By August, the IOM committee had met for the final time.

CAP president-elect Paul Raslavicus, MD, testified last year to several concerns about the payment system. His testimony set forth the following:

  • Fee-per-test payment methodology should be preserved.
  • Medicare should not require that beneficiaries provide copayments for clinical laboratory tests.
  • The fee schedule needs a process for providing regular maintenance and updates to reflect changes in technology and resource consumption of particular tests, as well as other factors.
  • Fee schedule payments have been inappropriately constrained and, in some cases, reduced over the years, and fair pricing mechanisms should be determined.
  • There is no appropriate ongoing process to adjust the fee schedule for tests using highly sophisticated equipment or extremely skilled medical personnel.
  • Costs vary for providing clinical laboratory services across different laboratory settings, such as in emergency rooms and in situations where staffing is required for 24-hour testing. The fee schedule should reflect higher hospital-based costs.

The final report of the IOM committee clearly supported the first three points but was more ambiguous about the last three.

Dr. Travers says she and Dr. Matsen had to convince the committee, composed mostly of social scientists and nonphysicians, of the importance of laboratory tests to health care. Stephen Mennemeyer, an economist in the School of Public Health at the University of Alabama, also helped convince the committee with his statement: "Medical laboratory tests are like nails in a house: They don't cost very much, but their placement is critical to the stability of the house."

Dr. Matsen says the IOM report is an excellent introduction to reimbursement issues. The National Academy Press is selling copies of the full report, titled "Medicare Laboratory Payment Policy: Now and in the Future." To order, call 800-624-6242 or 202-334-3938. The full text also is available online at

Mary Jane Gore