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FULL COMMITTEE HEARING ON COMPETITIVE

BIDDING FOR CLINICAL LAB SERVICES:

WHERE IT IS HEADING AND WHAT SMALL

BUSINESSES CAN EXPECT

COMMITTEE ON SMALL BUSINESS 

UNITED STATES HOUSE OF 

REPRESENTATIVES

ONE HUNDRED TENTH CONGRESS

FIRST SESSION

JULY 25, 2007

Serial Number 110-38

Printed for the use of the Committee on Small Business

(

Available via the World Wide Web: http://www.access.gpo.gov/congress/house 

HOUSE COMMITTEE ON SMALL BUSINESS 

NYDIA M. VELA ́ ZQUEZ, New York, Chairwoman 

HEATH SHULER, North Carolina 

CHARLIE GONZA ́ LEZ, Texas 

RICK LARSEN, Washington 

RAUL GRIJALVA, Arizona 

MICHAEL MICHAUD, Maine 

MELISSA BEAN, Illinois 

HENRY CUELLAR, Texas 

DAN LIPINSKI, Illinois 

GWEN MOORE, Wisconsin 

JASON ALTMIRE, Pennsylvania 

BRUCE BRALEY, Iowa 

YVETTE CLARKE, New York 

BRAD ELLSWORTH, Indiana 

HANK JOHNSON, Georgia 

JOE SESTAK, Pennsylvania 

STEVE CHABOT, Ohio, Ranking Member 

ROSCOE BARTLETT, Maryland 

SAM GRAVES, Missouri 

TODD AKIN, Missouri 

BILL SHUSTER, Pennsylvania 

MARILYN MUSGRAVE, Colorado 

STEVE KING, Iowa 

JEFF FORTENBERRY, Nebraska 

LYNN WESTMORELAND, Georgia 

LOUIE GOHMERT, Texas 

DEAN HELLER, Nevada 

DAVID DAVIS, Tennessee 

MARY FALLIN, Oklahoma 

VERN BUCHANAN, Florida 

JIM JORDAN, Ohio

MICHAEL DAY, Majority Staff Director 

ADAM MINEHARDT, Deputy Staff Director 

TIM SLATTERY, Chief Counsel 

KEVIN FITZPATRICK, Minority Staff Director

STANDING SUBCOMMITTEES 

Subcommittee on Finance and Tax

MELISSA BEAN, Illinois, Chairwoman 

RAUL GRIJALVA, Arizona 

MICHAEL MICHAUD, Maine 

BRAD ELLSWORTH, Indiana 

HANK JOHNSON, Georgia 

JOE SESTAK, Pennsylvania 

DEAN HELLER, Nevada, Ranking 

BILL SHUSTER, Pennsylvania 

STEVE KING, Iowa 

VERN BUCHANAN, Florida 

JIM JORDAN, Ohio

Subcommittee on Contracting and Technology

BRUCE BRALEY, IOWA, Chairman 

HENRY CUELLAR, Texas 

GWEN MOORE, Wisconsin 

YVETTE CLARKE, New York 

JOE SESTAK, Pennsylvania 

DAVID DAVIS, Tennessee, Ranking 

ROSCOE BARTLETT, Maryland 

SAM GRAVES, Missouri 

TODD AKIN, Missouri 

MARY FALLIN, Oklahoma

(II) 

Subcommittee on Regulations, Health Care and Trade

CHARLES GONZA ́ LEZ, Texas, Chairman 

RICK LARSEN, Washington 

DAN LIPINSKI, Illinois 

MELISSA BEAN, Illinois 

GWEN MOORE, Wisconsin 

JASON ALTMIRE, Pennsylvania 

JOE SESTAK, Pennsylvania 

LYNN WESTMORELAND, Georgia, Ranking 

BILL SHUSTER, Pennsylvania 

STEVE KING, Iowa 

MARILYN MUSGRAVE, Colorado 

MARY FALLIN, Oklahoma 

VERN BUCHANAN, Florida 

JIM JORDAN, Ohio

Subcommittee on Urban and Rural Entrepreneurship

HEATH SHULER, North Carolina, Chairman 

RICK LARSEN, Washington 

MICHAEL MICHAUD, Maine 

GWEN MOORE, Wisconsin 

YVETTE CLARKE, New York 

BRAD ELLSWORTH, Indiana 

HANK JOHNSON, Georgia 

JEFF FORTENBERRY, Nebraska, Ranking 

ROSCOE BARTLETT, Maryland 

MARILYN MUSGRAVE, Colorado 

DEAN HELLER, Nevada 

DAVID DAVIS, Tennessee

Subcommittee on Investigations and Oversight

JASON ALTMIRE, PENNSYLVANIA, Chairman 

CHARLIE GONZA ́ LEZ, Texas 

RAUL GRIJALVA, Arizona 

LOUIE GOHMERT, Texas, Ranking 

LYNN WESTMORELAND, Georgia

(III) 

C O N T E N T S 

OPENING STATEMENTS 

Page

Vela ́zquez, Hon. Nydia M. ....................................................................................... 1

Chabot, Hon. Steve .................................................................................................. 2

WITNESSES

PANEL I 

Love, Timothy P., U.S. Department of Health and Human Services .................. 4

PANEL II 

Bejgrowicz, Thomas S., M.S., L.N.H.A., American Health Care Association 

(AHCA) .................................................................................................................. 13

Bonifas, Mary Jo, Clinical Laboratory Management Association (CLMA) ......... 15

Schild, Tod,National Independent Laboratory Association (NILA) ..................... 17

Weiss, Dr. Ronald, American Clinical Laboratory Association (ACLA) .............. 19

APPENDIX 

Prepared Statements: 

Vela ́zquez, Hon. Nydia M. ....................................................................................... 33

Chabot, Hon. Steve .................................................................................................. 35

Altmire, Hon. Jason ................................................................................................. 37

Clarke, Hon. Yvette ................................................................................................. 38

Love, Timothy P., U.S. Department of Health and Human Services .................. 39

Bejgrowicz, Thomas S., M.S., L.N.H.A., American Health Care Association 

(AHCA) .................................................................................................................. 49

Bonifas, Mary Jo, Clinical Laboratory Management Association (CLMA) ......... 66

Schild, Tod,National Independent Laboratory Association (NILA) ..................... 71

Weiss, Dr. Ronald, American Clinical Laboratory Association (ACLA) .............. 76

Statements for the Record: 

NILA Attachment .................................................................................................... 80

American Association for Clinical Chemistry ........................................................ 81

American Medical Technologists ............................................................................ 83

American Society for Clinical Pathology ................................................................ 85

College of American Pathologists ........................................................................... 87

Laboratory Corporation of America Holdings (LabCorp) ..................................... 90

(V) 

(1)

FULL COMMITTEE HEARING ON 

COMPETITIVE BIDDING FOR CLINICAL 

LAB SERVICES: WHERE IT IS 

HEADING AND WHAT SMALL 

BUSINESSES CAN EXPECT 

Wednesday, July 25, 2007

U.S. HOUSE OF REPRESENTATIVES, 

COMMITTEE ON SMALL BUSINESS, 

Washington, DC. 

The Committee met, pursuant to call, at 10:00 a.m., in Room 

2360 Rayburn House Office Building, Hon. Nydia Vela ́zquez 

[Chairwoman of the Committee] presiding. 

Present: Representatives Vela ́zquez, Cuellar, Braley, Ellsworth, 

Sestak, Chabot, Heller and Davis. 

OPENING STATEMENT OF CHAIRWOMAN VELA ́ ZQUEZ 

ChairwomanVELA ́ ZQUEZ. This hearing on competitive bidding is 

now called to order. Clinical laboratory services are an essential 

component of quality health care. They provide physicians with objective data needed to help them diagnose, treat and monitor diseases and other medical conditions. Often laboratory testing is done 

on the same day the specimen is received and the results reported 

on the following day. 

As with many parts of our health care system, small businesses 

play a critical role in this area. The laboratory industry is dominated by small businesses who work with hospitals, nursing homes 

and health facilities to provide care. In fact, nearly 90 percent of 

the industry is made up of small firms. The clinical lab industry 

is highly complex and integrated structure. Numerous relationships 

exist between diverse small and large firms which rely on one another to ensure high quality lab services are provided. 

The industry did not develop quickly and the market has allowed 

for labs providing different services. Today we will hear how CMS 

competitive bidding project threatens to dismantle this system 

overnight. It seems that CMS has ignored Congressional intent and 

moved forward with a project that creates a cumbersome bureaucracy. As proposed, it could be make impossible for small labs to 

survive. 

CMS argues that small businesses are protected because labs 

with less than $100,000 of Medicare business are exempted from 

the project. This threshold will not save small businesses. To suggest otherwise is disingenuous. 

2

In particular terms, virtually all independent and most hospital 

labs doing business in the demonstration area will exceed the limit. 

Even the smallest labs have business revenue of at least $1 million 

to $2 million annually and for those that are below the threshold, 

the new payment structure will mean that they are paid Medicare 

fees that simply won’t cover costs. 

Despite pleas from labs both big and small, CMS has ignored the 

concerns of these businesses. We heard a similar tale last week. 

CMS failed to solicit input of small pharmacists when developing 

the price formulation for generic drugs. The result will be the same 

in that small health care providers cannot survive. When small 

labs go out of business, they stay out of business. Because of the 

investment in equipment and especially trained personnel, a laboratory cannot shut its door temporarily and start up again when 

circumstances change. This will leave vulnerable patient populations with compromised access to lab services. In short, instead 

of competition deciding market share, CMS will determine market 

share winners and losers and the losers are small local businesses. 

It is apparent from the written testimony that the Agency has 

not engaged them adequately. While CMS will say that Congress 

mandated the action, it clearly never ordered them to ignore the 

input of the stakeholders. 

Competitive bidding for laboratory services in any form could 

have wide-reaching implications for the health care industry. Medicare beneficiaries receive over 250 million laboratory tests each 

year and while these services account for less than two percent of 

Medicare spending, they impact on estimated 60 percent of all 

medical decisions. 

Given this broad impact, an important question must be answered today on whether this project will actually work. I look forward to today’s testimony and thank the witnesses for their participation. I now yield to Mr. Chabot for his opening statement. 

OPENING STATEMENT OF MR. CHABOT 

Mr.CHABOT. Thank you, Madam Chair. Good morning and thank 

you all for being here as we examine the Centers for Medicare and 

Medicaid Services, Medicare Clinical Laboratory Competitive Bidding Demonstration Project. It’s a mouthful. I would like thank 

Chairwoman Vela ́zquez for holding this hearing and each of the 

witnesses for taking the time to provide this Committee with testimony. 

On December 8, 2003, President Bush signed into law the Medicare Prescription Drug Improvement and Modernization Act of 

2003. The legislation produced the largest overhaul of Medicare in 

the public’s health program 38 year history. Among other things, 

the legislation required CMS to run a demonstration using competitive bidding and performance-based contracting procedures 

when entering into contract for the administration of benefits 

under Medicare Part B. 

Before this legislation, Medicare contracting was not subject to 

competition. Between 2005 and 2009, CMS will be conducting full 

and open competitions to replace the contractors that currently perform claims processing and related functions for the Medicare program. The legislation requires the competition and resulting conVerDate 0ct 09 2002 10:00 Dec 20, 2007 Jkt 033615 PO 00000 Frm 00008 Fmt 6633 Sfmt 6633 G:\CLERK SB\HEARINGS\TRANSCRIPTS\36112.TXT LEANN
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tracts be in accordance with the Federal Acquisition Regulation or 

FAR. 

FAR Part 19 implements federal government policy to provide 

maximum practicable opportunities in its acquisitions to small 

businesses, veteran owned small business, service disabled veteran 

small businesses, HUB Zone small businesses, small disadvantaged 

businesses and women-owned small business concerns. Such concerns must also have the maximum practicable opportunity to participate as subcontractors in the contracts awarded by any executive agency consistent with efficient contract performance. 

The legislation also requires CMS to conduct demonstration 

projects on the application of competitive acquisition for durable 

medical equipment, prosthetics, orthotics and supplies and for payment for clinic laboratory diagnostic tests that would otherwise be 

made under Medicare Part B, Clinical Laboratory Fee Schedule. 

The latter competitive demonstration project is the subject to today’s fact-finding hearing to acquire a better understanding of the 

CMS demonstration project’s definition and impact on small business clinical laboratory. 

In developing demonstration project procedures relating to competitive bidding and the awarding of contracts, the CMS is required 

by legislation to take appropriate steps to ensure that small business clinical laboratories have an opportunity to be considered for 

participation. Unlike the contracting for administration of benefits 

under Medicare Part B, the legislation does not require the demonstration of the subject to the FAR. 

Competition is the foundation of capitalization. Competition 

stimulates innovation, encourages efficiency and drives down prices 

savings taxpayer dollars. Small business has historically been the 

engine of innovation and a catalyst for competition. They also employ more than 50 percent of all employees in this country. 

While I support competition and the outcomes it normally produces, I want to ensure that the demonstration project design 

methodology meets the intent of the Small Business Act by providing small business clinical laboratories the maximum practicable opportunities to participate in the demonstration as both 

prime contractors and sub-prime contractors. 

It is also critical to the success of the demonstration project that 

CMS’ demonstration’s project design maintains or enhances the 

current competitive environment, service accessibility and service 

quality. The demonstration’s project design should not result in 

fewer small business clinical laboratories leading to increased 

prices, reduced service accessibility and a deterioration of service 

quality over the long run. 

We have excellent witnesses here today to provide us with insight into the rationale behind the demonstration project’s definition of a small business clinical laboratory and how the demonstration project’s competition methodology ensures maximum practicable opportunities for that. We look forward to hearing from all 

the witnesses here today and I want to again thank you, Madam 

Chair, and I yield back the balance of my time. 

ChairwomanVELA ́ ZQUEZ. Thank you. Our first witness is Mr. 

Timothy Love. Mr. Love is the Director of the Office of Research, 

Development and Information at the Centers for Medicare and 

4

Medicaid Services. The Office of Research, Development and Information at the Center of CMS, the main role is to lead the agency 

in providing information on expertise to shape the current and future directions of CMS programs or to cooperate all demonstration 

activities including the project being discussed today. 

Mr. Love, you’re welcome and you will have basically five minutes and your entire testimony will be entered in the record.

STATEMENT OF TIMOTHY P. LOVE, DIRECTOR, OFFICE OF RESEARCH, DEVELOPMENT AND INFORMATION, CENTERS FOR 

MEDICARE & MEDICAID SERVICES, U.S. DEPARTMENT OF 

HEALTH AND HUMAN SERVICES 

Mr.LOVE. Thank you, Madam Chair. 

Good morning, Madam Chairwoman and Distinguished Ranking 

Member and Members of the Committee. I’m pleased to be here 

today to discuss the clinical laboratory competitive bidding administration mandated by the Medicare Prescription Drug Improvement and Modernization Act of 2003, also known as the MMA. 

Mr.CHABOT. Excuse me. Could you pull that even a little closer? 

Mr.LOVE. I’m sorry. 

Mr.CHABOT. That’s all right. Just kind of hard to hear in the 

room if you don’t have—You have to speak right into it. 

Mr.LOVE. I’ll try to project a bit better, sir. 

Mr.CHABOT. Thanks. 

Mr.LOVE. Certainly. As you know, the Medicare Program expenditures are expected to grow significantly in coming years. Medicare 

costs including clinical lab expenditures are increasing much faster 

than the rate of inflation and our program is particularly vulnerable because the number of beneficiaries will spike with the impending Medicare eligibility of baby boomers. 

In the past three decades, Congress has directed our agency to 

conduct demonstrations that have saved Medicare tens of billions 

of dollars and extended the life of the trust funds. The advantage 

of a demonstration is that we can learn something on a small scale 

before going program wide. Of course, any decision to go beyond 

the limited scope of this demonstration would be up to the Congress. 

Medicare payments to clinical laboratories are significant. 

Madam Chairwoman mentioned that it is two percent of the program, but that does translate into $6.7 billion a year and Congress 

clearly saw this as an opportunity to investigate more efficient payment in competitive market-based demonstration as an alternative 

to the status quo which is a centralized, one-size-fits-all administrative pricing program. 

With regard to the particular interests of the House Small Business Committee, I want to assure you that CMS has worked diligently to implement the law while treating smaller laboratories 

fairly. For example, we will choose multiple winners and even the 

smallest, local clinical labs will be allowed to participate in the 

demonstration as opposed to a winner-takes-all approach favoring 

large national laboratories. 

CMS will not require the smallest laboratories to bid, though 

they will have that option. These non-bidding labs will, however, 

5

have to accept competitively set market prices. Bidders that are not 

selected will still be able to receive Medicare payment for provision 

of services to Medicare outside of the competitive bidding area and 

outside of the Medicare fee-for-service program. This certainly 

doesn’t affect any labs that are providing services to beneficiaries 

under Medicare Managed Care. 

In response to comments from smaller labs, we have simplified 

the bidding process so that only one-third of the existing fee schedule still covering 99 percent of cost and volume are up for bid. Our 

goal is to assure that small businesses can participate in the demonstration on a level playing field and have an equal opportunity 

to win a place in the demonstration. Small laboratories that want 

to use the demonstration as an opportunity to expand their market 

may do so by competing for additional Medicare business. 

In closing, I would like to make a final point regarding the essential role of quality assurance in performing clinical laboratory tests 

for Medicare beneficiaries in this demonstration. We are not interested in conducting a demonstration that establishes a more efficient price at the expense of quality. In the law, Congress directed 

us to apply all the current protections available under the Clinical 

Laboratory Improvement Act, also known as CLIA. In the demonstration design, however, we have gone beyond the CLIA regulations. Winning laboratories will be required to supply quality data 

throughout the demonstration in such critical areas such as tests, 

turnaround time, log-in error rates and unusable or lost specimens. 

At CMS, we think of quality assurance as a stewardship issue, 

equal in importance to our stewardship responsibilities to promote 

trust fund solvency. 

I thank you again for inviting me to speak with you today and, 

Madam Chairwoman, you’ve raised a number of points that I didn’t 

get to in my opening remarks and I will be happy to answer any 

or all of those questions. Thank you. 

[The prepared statement of Mr. Love may be found in the Appendix on page 39.]

ChairwomanVELA ́ ZQUEZ. Thank you. 

Mr. Love, CMS estimated the cost to small businesses of submitting bids will be approximately $4,000. According to numerous comments CMS received at the July 16, 2007 Open Door Forum, potential bidders estimated that the cost will significantly exceed that 

amount. Can you tell the Committee how did you, CMS, estimated 

the cost to small businesses? 

Mr.LOVE. The projection of demonstration participation costs or 

bidding costs, we had established by our contractor or our economic 

experts who developed the bidding schedule and although I cannot 

provide you that technical detail, I would be happy to submit that 

for the record. 

ChairwomanVELA ́ ZQUEZ. But can you talk to us as to how did 

you get to that figure of $4,000? 

Mr.LOVE. It is a projection of the level of effort and opportunity 

costs put into submitting a bid for consideration in the competitive 

bidding process. There is a—We’ve actually created a specific software—

ChairwomanVELA ́ ZQUEZ. Okay. 

6

Mr.LOVE. —that is we think quite user friendly and we really did 

try to limit the opportunity costs of the bidders having to pull that 

information out. 

ChairwomanVELA ́ ZQUEZ. So how could you explain such a disagreement between those who participated in the Open Door 

Forum and your technical experts? 

Mr.LOVE. Madam Chairwoman, I would say that there are a 

number of legitimate disagreements and you mentioned a number 

of them in your opening remarks and this may be one of those situations where we would have to agree to disagree on the outcome. 

But we would be happy to support that methodology establishing 

the $4,000 figure. 

ChairwomanVELA ́ ZQUEZ. Can you tell us who was the contractor 

who did the analysis? 

Mr.LOVE. Yes. That is RT International, Research Triangle International. It’s a very well regarded economics research firm. 

ChairwomanVELA ́ ZQUEZ. Once the bidder’s package is final, will 

CMS re-estimate the actual cost of bidding? Will it consult with the 

laboratories themselves on the true cost of bidding? 

Mr.LOVE. I’m sorry. I didn’t understand the question. 

ChairwomanVELA ́ ZQUEZ. Once the bidder’s package is final, will 

CMS re-estimate the actual cost of bidding. 

Mr.LOVE. No Madam. We are going to evaluate the bids on price 

and non price criteria. But we will evaluate it based on the prices 

submitted. 

ChairwomanVELA ́ ZQUEZ. Isn’t the $4,000 an estimate? 

Mr.LOVE. No. I think the $4,000 may be referring to the logistical 

costs of assembling the bid where the actual price bid to participate 

in the demonstration, that would be the result of the bidding process that the bid evaluation panel would establish and we will be 

happy for both the winning and non winning labs to debrief them 

as to the process that produces the demonstration participants. 

ChairwomanVELA ́ ZQUEZ. The clinical laboratory industry describes competitive bidding as a misguided approach to the reimbursement of laboratory services. What are your thoughts about 

this observation? 

Mr.LOVE. I think it’s important as you will know that our job is 

to implement the law as decided by Congress and signed by the 

President. 

ChairwomanVELA ́ ZQUEZ. But we didn’t tell you what type of approach or model you would apply, did we? 

Mr.LOVE. No, certainly—Excuse me. Certainly the Congress gave 

us some —

ChairwomanVELA ́ ZQUEZ. Latitude, yes. 

Mr.LOVE. —parameters. Exactly. Is your question relating specifically to the competitive nature of it? 

ChairwomanVELA ́ ZQUEZ. Yes. 

Mr.LOVE. The competitive nature, and I heard some of these arguments at last week’s Open Door Forum among other places, and 

I’m frankly a bit puzzled by it in that the status quo is an administrative pricing system established by my very capable colleagues in 

Baltimore, but it is an administrative, centralized pricing system. 

The demonstration has a market driven method for establishing 

a price. But equally important, there are non price features where 

7

I think really provides some opportunities for smaller businesses 

and those opportunities are being able to provide faster turnaround 

time, better customer service to physicians, to beneficiaries, and 

certainly a level of market-specific savvy that some of the larger 

labs simply will not have. 

ChairwomanVELA ́ ZQUEZ. Mr. Love, when you met with the industry, especially those small labs, did they provide you any other alternative in terms of input and why did you choose only the competitive bidding as the only approach? Why did you decide that was 

the best model? 

Mr.LOVE. Well, on the competitive bidding, we had no discretion 

there. Congress by law, we did have to do it in a competitive bidding structure. It’s how we configured the competitive bidding 

within that overall structure that we did have some discretion. 

ChairwomanVELA ́ ZQUEZ. Okay, and did you get any input from 

the industry as to how—

Mr.LOVE. Yes. Certainly we did. 

ChairwomanVELA ́ ZQUEZ. And did you consider any of those? Let 

me ask you. How many times did you meet with those stakeholders? 

Mr.LOVE. We met—Well, in differing categories, well over a 

dozen times. We had four Open Door Forum. If I may, I could give 

you a specific answer to that. We had the Open Door Forum that 

you referred to last Monday, I believe. That was actually the third 

Open Door Forum we’ve had which is a public forum for interested 

parties to give input to the process. 

In addition, shortly after becoming Director of the Office of Research, Development and Information two years ago, I had my first 

meeting with representatives of the lab industry. I’ve since had two 

others. Former Administrator McClellan has met with these representatives. Staff have spoken each year at industry conferences 

to explain this and we have been very much in the sunshine on 

this issue. 

ChairwomanVELA ́ ZQUEZ. Just not to explain. I’m talking to you 

about input. 

Mr.LOVE. Yes. Input certainly, and I can give you several examples of where we have accepted input from—

ChairwomanVELA ́ ZQUEZ. As a result of the Open Door last week, 

are you planning to revise your model? 

Mr.LOVE. We have—There are three issues, one of which was addressed in the Open Door Forum last week and that is there are, 

as you know, both the bidding lab itself and the referral lab. You 

referred in your opening remarks to the interaction between labs 

to produce their results and the referral labs in our original design, 

we only had the bidding lab able to bill Medicare and we got input 

from a number of stakeholders that said, ‘‘Logistically, this is just 

not how the industry works.’’ And as one modification, we are allowing either the bidding lab or the referral lab to submit bills to 

Medicare. 

We had some visits about a year ago, a meeting I attended with 

representatives that included the ASRD Laboratory industry who 

made a fairly compelling case, I think, for their particular issues 

with the design of the demonstration and we have created modiVerDate 0ct 09 2002 10:00 Dec 20, 2007 Jkt 033615 PO 00000 Frm 00013 Fmt 6633 Sfmt 6633 G:\CLERK SB\HEARINGS\TRANSCRIPTS\36112.TXT LEANN
8

fications in demonstration design for that as well. A year ago (Inaudible.) 

ChairwomanVELA ́ ZQUEZ. Okay. For small businesses to have a 

real opportunity to compete, I think this is a fair questions. What 

are the metrics for non price features of a competitive bidding? 

Mr.LOVE. The non price features will—The evaluation features 

are going to be on quality, the quality and the ability to perform 

the tests on access to ensure that Medicare beneficiaries, particularly our most vulnerable beneficiaries in nursing homes and rural 

areas who may otherwise have access problems. That is a criteria 

we are going to consider very carefully. 

Gaming, quite frankly, and more specifically our economic experts at RTI had some concerns that the larger labs could low-ball 

and price some of the small labs out of the market and that’s something we’re going to look at very carefully in the business. 

ChairwomanVELA ́ ZQUEZ. Okay. That’s one of our concerns. Because in 2000, the Institute of Medicine stated that the nation’s 

two largest laboratories, Quest and LabCorp, controls 61 percent. 

That was in 2000. Do you know what is the percentage today that 

they control in 2007 between those two? 

Mr.LOVE. Not offhand, Madam Chairwoman. 

ChairwomanVELA ́ ZQUEZ. So then how can you effectively guarantee that there is going to be competition? 

Mr.LOVE. That really comes into the $100,000 price threshold 

that you referred to and what we’ve done, had that threshold been 

higher, it frankly would have left not quite a monopoly, but certainly a very small number of large players driving the bids. By 

lowering it, we will have at least ten bidders competing for Medicare business in the market area and that in our mind is fairly robust competition. 

ChairwomanVELA ́ ZQUEZ. I’m going to get back to this question 

again. But I am going to recognize Mr. Chabot. 

Mr.CHABOT. Thank you very much, Madam Chair. Mr. Love, just 

a few questions. First of all, Congress told you to do a demonstration project and the idea as you stated in doing a demonstration 

project is perhaps learning, getting, the bugs out before you do it 

broadly at which time it would have a greater impact and cost a 

lot more and that sort of thing. Is that correct? 

Mr.LOVE. Yes sir. 

Mr.CHABOT. Now it’s my understanding that the clinical laboratory industry currently is composed of a few large players that together have a very large market share and a large number of 

smaller laboratories that together have a much smaller market 

share. How was this addressed in the demonstration project’s design? 

Mr.LOVE. We really looked at the markets under consideration 

and we looked at the status quo and the markets that are eligible 

for the demonstration based on the criteria. For example, we are 

not looking at metropolitan service areas that span states, for example, the New York Metropolitan Service Area which includes 

New Jersey and Connecticut as well as New York. That would not 

make sense in terms of the participation in the demonstration. 

So we looked at specific within state metropolitan service areas, 

MSAs, and determined the number of bidders that would be reVerDate 0ct 09 2002 10:00 Dec 20, 2007 Jkt 033615 PO 00000 Frm 00014 Fmt 6633 Sfmt 6633 G:\CLERK SB\HEARINGS\TRANSCRIPTS\36112.TXT LEANN
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quired for an authentic market competition and these are labs that 

are viable and functioning in that market now, although they may 

not be covering the entire market area, if that’s your question sir, 

regarding the market penetration, say, and the market made up of 

inclusive zip codes. 

And under the demonstration, they will not have to cover that 

entire area. We will certainly make sure that in the aggregate all 

winning bidders are able to cover that and ensure access for our 

Medicare beneficiaries. But there will be certainly opportunities for 

smaller labs to prosper or to bid in their current market or, if they 

choose, expand into greater service areas within the bidding area. 

Mr.CHABOT. And what outreach efforts are being done by CMS 

and the clinical laboratory community to ensure that the community is aware of the demonstration project? 

Mr.LOVE. I would defer to the second panel to refer to industry 

outreach. For CMS in addition to the Open Door Forum, every document, again getting back to the demonstration development and 

the sunshine issue, that we have been able to make public is currently available on our web site. 

Open Door Forum are either in person or by phone. Folks are 

able to participate. We are going to have an ombudsman for the 

project. We’re working with the carriers who are associated with 

paying the bills in these districts to make sure they are informing 

beneficiaries as well as lab participants, bidding labs, about the development of the demonstration. 

Mr.CHABOT. Okay. Let me ask one more questions. Has CMS 

considered two partial small business clinical laboratory set-asides 

for services they normally perform for the local community? 

Mr.LOVE. I’m sorry. There are two specific services that Congress 

had exempted in the Medicare Modernization Act. I’m not sure if 

that’s what (Inaudible.) 

Mr.CHABOT. Okay. I’ll yield back the balance of my time. Thank 

you. 

ChairwomanVELA ́ ZQUEZ. Mr. Cuellar. 

Mr.CUELLAR. No questions. 

ChairwomanVELA ́ ZQUEZ. I do have more questions. Mr. Love, you 

mentioned in your testimony that your multiple bid winner approach will ensure small lab participation. Other than having one 

more than, yes, one more bid winner, what are your assurances or 

what assurances can you provide to this Committee that small 

business or small labs will be winners? 

Mr.LOVE. I’m sorry, Madam, if I used the word ‘‘ensure.’’ That 

was not my attention. We’re going to offer them the opportunity to 

compete with a number of the provisions that I stipulated to ensure 

that it is a level playing field both on price and non price criteria. 

ChairwomanVELA ́ ZQUEZ. Would you agree that this method in no 

way provides really real opportunities for small labs to survive and 

isn’t it true that many labs will be forced to close their doors under 

this model? 

Mr.LOVE. No, madam. I would not agree with that. We would—

The outcome of the demonstration, I didn’t have an opportunity to 

mention it, but we do have an rigorous evaluation in place that will 

look to that among the several issues that you have mentioned 

10

which would inform the Congress and other policy makers before 

we went any further with this. 

ChairwomanVELA ́ ZQUEZ. Were you at the Open Forum last week? 

Mr.LOVE. Yes, madam, I was. 

ChairwomanVELA ́ ZQUEZ. Okay. A number of lab providers indi- cated that the $100,000 Medicare revenue threshold was unreasonably low. How did CMS calculate the threshold and did it reconsider the impact that it will have a small business lab? 

Mr.LOVE. Yes, we did consider quite carefully and there really 

were two considerations. One is again ensuring a robust market 

competition. If the threshold were set too high, you would just have 

the big players driving a price quite frankly. So when it’s lower, 

there would be more opportunities for bidders to participate making more robust competition. 

But the other feature quite frankly was a small business consideration. Those below the threshold have the option of playing or 

being what we call passive labs. They still would be subject to the 

fee schedule, but they would not be involved in the bidding process. 

And our view was that for smaller labs to really be playing in this 

demonstration, they should have every opportunity to have a voice 

in the bidding process. 

ChairwomanVELA ́ ZQUEZ. The Small Business Administration defines a small business laboratory as generating revenue of $12.5 

million. Were you aware of that? 

Mr.LOVE. Yes, madam, I was. 

ChairwomanVELA ́ ZQUEZ. So given that Medicare usually accounts 

for 40 percent of revenues for a small lab, it seems a more reasonable threshold for a small lab will be near $4.8 million. How do you 

explain this enormous discrepancy? 

Mr.LOVE. Again, within the market area, it is just Medicare feefor-service business in the market area, not necessarily the Medicare fee-for-service business outside the market area or Medicare 

managed care service within the market area. It really doesn’t have 

to do with the Medicare managed care part of the program. But 

again, it really did come down those features of how do we ensure 

robust competition which was our understanding of the intent of 

Congress as well as allowing these smaller labs to have a bid, a 

voice and the bid, rather than just being swept along as the passive 

bidder. 

ChairwomanVELA ́ ZQUEZ. As I mentioned to you before, a lot of 

the people that participated, the small labs, they say that the 

$100,000 Medicare revenue threshold was unreasonably low. Are 

you planning to re-evaluate? 

Mr.LOVE. No, madam, we’re not. We have consulted and we went 

back after our Open Door Forum last week and went back with our 

economic experts and considered that very issue and we ran into 

the same problem. By raising it, we are really concerned that it 

will be too exclusive to the benefit of the larger national labs. 

ChairwomanVELA ́ ZQUEZ. My understanding is that you will be 

contracting a research company to evaluate the success of the demonstration project. 

Mr.LOVE. Correct. There are actually—If I could, there are three 

parties in the evaluation. That would be CMS, of course, our economic experts at the Research Triangle Institute as well as the 

11

folks at Palmetto which is a carrier that’s responsible for the operational end of the implementation. 

ChairwomanVELA ́ ZQUEZ. Who will be writing the check for the 

private research company? 

Mr.LOVE. That is funded by the Center for Medicare and Medicaid Services. 

ChairwomanVELA ́ ZQUEZ. But do you think that some people will 

call into question their findings? 

Mr.LOVE. Our agency has a long, and I would argue, distinguished record in the independence of our findings and certainly, 

I’ve had no indication that it would be otherwise and I’m speaking 

as the director of the agency’s R&D shop right now. 

ChairwomanVELA ́ ZQUEZ. Yes. 

Mr.LOVE. We live and die by the ability to be credible in our findings. 

ChairwomanVELA ́ ZQUEZ. Well, last week we held a hearing in 

this Committee with CMS where we were discussing generic drugs 

reimbursement and the IG and the General Accounting Office 

called into question their finding. So that’s why I’m asking the 

question of questioning the company’s research finding that you are 

hiring. Let me ask you. Would you agree that a General Accounting 

Office study requested by Congress may help ensure more accuracy 

and independence? 

Mr.LOVE. I’m certainly—and the GAO is a great source, I think, 

for helping us better understand and improve our programs and I 

would be very supportive of GAO looking into this issue. 

ChairwomanVELA ́ ZQUEZ. Very good. Any other member who 

wishes to ask questions? Mr. Chabot. 

Mr.CHABOT. I don’t have any more additional questions, but if 

you—Are there any points that you think might have been unclear 

or anything that you would like to expound upon to clear up anything that you think wasn’t perfectly clear? 

Mr.LOVE. Just that I appreciate that this is very sensitive. It is 

a bread-and-butter issue for a lot of small labs and we appreciate 

that and we have tried to be sensitive to that in the development 

of the demonstration. We are implementing the law to the best of 

our ability considering all stakeholder interests particularly those 

of small businesses. 

Mr.CHABOT. Thank you. I yield back. 

ChairwomanVELA ́ ZQUEZ. I have two more questions. 

Mr.LOVE. Yes madam. 

ChairwomanVELA ́ ZQUEZ. Even though laboratories with less than 

$100,000 in business are not required to bid, it is my understanding that they must live with the bid, the winning price. This 

will place a severe hardship on small laboratories that service the 

more challenging areas of the local market where operating costs 

can be higher. Why should they be required to accept this price and 

how can labs be expected to survive under those conditions? 

Mr.LOVE. The small labs below the $100,000 threshold actually 

have the option. They can bid if they choose to. They may also, particularly if they’re interested in expanding their business beyond 

$100,000 during the three years of the demonstration, they would 

be required to bid. But it is—I’m sorry. I forgot the second part of 

your question. 

12

ChairwomanVELA ́ ZQUEZ. Why should they be required to accept 

this price? 

Mr.LOVE. There essentially would really, I think, eviscerate our 

ability to have competition in the market if you really excluded a 

significant and important part of the market and our understanding is that would be inconsistent with the direction of Congress. 

ChairwomanVELA ́ ZQUEZ. But you don’t think that isn’t fair if 

they have no participation or input into the bidding process and 

then they will have to accept whatever price is imposed. 

Mr.LOVE. They do have the option to participate if they choose. 

We just—We certainly have no indication from Congress that we 

could accept or exempt participants from a market. It is marketspecific and inclusive. 

ChairwomanVELA ́ ZQUEZ. Mr. Love, if winning bidders drop out of 

the demonstration for quality or other reasons, what is CMS’ plan 

to recalculate that demonstration prices? 

Mr.LOVE. I’m sorry. 

ChairwomanVELA ́ ZQUEZ. If winning bidders drop out of the demonstration for quality or other reasons, what is CMS’s plan to recalculation the demonstration prices? 

Mr.LOVE. We actually will not recalculate the demonstration 

prices. What we will do is as part of the bid evaluation panel as 

well as the terms and conditions of the demonstration, we will ensure that there is a safety net to provide access to quality lab services for Medicare beneficiaries. 

ChairwomanVELA ́ ZQUEZ. We’re going to call—Do you have staff 

here with you? 

Mr.LOVE. Yes, madam, I do. 

ChairwomanVELA ́ ZQUEZ. Who are they? 

Mr.LOVE. I have with me the lead technical analyst who is really 

the woman who has done much of the presenting at the national 

conferences. 

ChairwomanVELA ́ ZQUEZ. Okay, and she will be staying here to 

listen to the other panel. 

Mr.LOVE. I will be staying also. This is a very interesting issue 

for me and I think an important one. 

ChairwomanVELA ́ ZQUEZ. Okay. Thank you very much. 

Mr.LOVE. Thank you. 

ChairwomanVELA ́ ZQUEZ. You are excused. 

And now I will ask that the witnesses of the second panel to 

please come forward and take your seats. 

(Pause.) 

ChairwomanVELA ́ ZQUEZ. Our first witness is Mr. Thomas, and 

I’m going to try very hard, Bejgrowicz. 

Mr.BEJGROWICZ. Perfect. 

ChairwomanVELA ́ ZQUEZ. Thank you. 

Mr. Bejgrowicz is the Client Account Manager for AccuLabs, a 

laboratory services nursing homes in New Jersey. He has held administrative positions at a number of facilities and is a licensed 

nursing home administrator. AccuLabs has been in business for 

over 35 years. Mr. Bejgrowicz is here testifying on behalf of the 

American Health Care Association that is the nation’s leading longterm care organization representing 11,000 industry members. 

13

Mr. Bejgrowicz, welcome and you have five minutes to make your 

presentation and your entire testimony will be entered into the 

record. 

STATEMENT OF THOMAS S. BEJGROWICZ, M.S., L.N.H.A, CLIENT ACCOUNT MANAGER, ACULABS,ON BEHALF OF THE 

CLINICAL LABORATORY MANAGEMENT ASSOCIATION 

Mr.BEJGROWICZ. Thank you. Good morning. On behalf of American Health Care Association, its nursing home members and many 

small businesses throughout the country, I thank you, Madam 

Chair, Mr. Ranking Member and other Members of the Committee 

for giving me the opportunity to testify. My name is Tom 

Bejgrowicz. 

For as long as I can remember, I’ve always been drawn to health 

care. The quintessential moment that I decided to dedicate my life 

to helping others is when my grandfather was a resident in a nursing home. Now I am a licensed nursing home administrator and 

over the past 17 years, I have worked for small facilities, large corporation and hospital-owned not-for-profit centers. 

American Health Care Association and I am concerned that 

Medicare beneficiaries in nursing homes will no longer have access 

to quality laboratory services if CMS continues to implement competitive bidding. Quality of care could be jeopardized and many 

residents like my grandfather could be negatively impacted if competitive bidding comes to fruition. At best, competitive bidding will 

put small labs out of business. At worst, it will restrict access to 

quality health care for Medicare beneficiaries, limit choice, disturb 

the continuity of care and ultimately increase the cost to Medicare. 

Federal law requires nursing home residents to receive the necessary care and services in accordance with comprehensive assessment and plan of care. Many relatively small independent clinical 

labs such as AccuLabs where I am currently employed have supported nursing homes in meeting this requirement by tailoring 

their services to go beyond that of simply analyzing a blood specimen. Thus, nursing homes rely on these services to provide the 

highest level of care. 

For example, phlebotomists, the people who draw your blood, 

very often travel many miles from facility to facility collecting 

specimens from bed-bound patients. Often, these laboratories will 

provide a testing menu that is highly focused to ensure rapid turnaround time of critical testing, will often develop normal ranges 

centered around specific age groups and utilize certain testing 

methodology to ensure continuity of care. Our experience is that 

why the larger labs will in some cases in doing the test, they are 

not interested in providing tailored services. 

Continuity of care for patients at smaller nursing homes may 

also suffer. Smaller labs that are not able to participate in competitive bidding may be required to close due to decreased business and 

nursing facilities will be required to find another laboratory to provide services. Not only will the facility and the patient have to adjust to a new laboratory service provider, but it also may take some 

time to find an alternative provider. 

Should the small lab be forced out of the market by competitive 

bidding, access to care will be severely hindered. CMS assumes the 

14

winning labs are interested in servicing all Medicare beneficiaries 

which is simply not the case. Historically, the large laboratories 

have shifted their focus from long-term care to the more lucrative 

physicians’ offices. As such, termination notices were issued to 

many long-term care and assisted living facilities. 

At present, there are two major labs that command nearly 70 

percent of the market and once competitive bidding is in place, 

they will likely have an even greater percent of the market in that 

competitive bid area. Under those circumstances, it is not likely 

that the large labs will have more motivation to service the nursing 

home population than they have now. 

Another area of concern is that not only will competitive bidding 

create barriers to access to laboratory services, but also it will 

cause a decline in the quality of laboratory service. 

CMS has not released detailed specification for the indicators 

that it will use to measure laboratory service quality of care, although it plans to implement this demo in less than one year. The 

health care community has asked CMS repeatedly for these performance measures, but CMS has not developed them. On July 16, 

2007, an Open Door Forum was held during which CMS stated the 

quality measures will be standardized across all laboratories. This 

one-size-fits-all mentality does not apply to the dynamic field of 

laboratory medicine. 

In closing, with competitive bidding in place, CMS will tie the 

hands of the facilities. The choice of which laboratory provider a 

nursing facility can use will be limited. There will fewer laboratories to choose from after the demonstration project is implemented. Those that remain will be the larger national laboratories 

that have focused their attention on markets on other than nursing 

facilities. 

It is with the best interest of all long-term care residents and all 

Medicare beneficiaries that I ask Congress to re-examine this illconceived plan and repeal competitive bidding legislation. The potential impacts on access and quality of care as well as the increases of Medicare costs go against AHCA’s mantra of performance excellence and commitment to affordable, healthy and ethical 

long-term care. 

Thank you for your consideration in this important matter. 

[The prepared statement of Mr. Bejgrowicz may be found in the 

Appendix on page 49.]

ChairwomanVELA ́ ZQUEZ. Thank you, Mr. Bejgrowicz. And now I 

recognize Mr. Braley for the purpose of introducing his constituent. 

Mr.BRALEY. Thank you, Madam Chairwoman. It is my honor and 

privilege to introduce one of my constituents, Mary Jo Bonifas, who 

is here to share her testimony with us today. Mary Jo is a certified 

medical technologist and has over 36 years of experience in the 

clinical lab. She is currently the Manager of Laboratory Services 

for United Clinical Laboratories, Inc., a foresight joint venture laboratory system based in Dubuque, Iowa. She has been with the Dubuque lab system for over 30 years and a laboratory manager for 

26 years. 

Mary Jo is a member of the board of directors of the Iowa Chapter of Clinical Laboratory Management Association (CLMA) and is 

15

also president of the board of directors for the National CMLA Advocacy Group. It is my distinct privilege and pleasure to welcome 

her to this hearing. 

STATEMENT OF MARY JO BONIFAS, MANAGER OF LABORATORY SERVICES, ON BEHALF OF THE CLINICAL LABORATORY MANAGEMENT ASSOCIATION 

Ms.BONIFAS. Thank you. Madam Chairwoman Vela ́zquez, Congressman Chabot and Congressman Braley, thank you for the opportunity to testify today on behalf of Clinical Laboratory Management Association on this very important issue. 

CMLA’s membership is comprised of approximately 4300 clinical 

laboratory managers serving in hospitals, independent labs, skilled 

nursing facilities, physician offices, research facilities as well as 

representatives from medical device industry. While the majority of 

CMLA’s members are hospital based, we attempt to present a perspective that is shaped by all sectors of the clinical lab industry. 

My perspective on competitive bidding is shaped by my current 

role as a lab manager and over 35 years of experience at a small, 

community-based laboratory in Dubuque, Iowa, serving hospitals 

and physicians within a 50 mile radius of Dubuque. United Clinical 

Laboratories is a consolidation of laboratory services at two Dubuque hospitals and a pathology-owned independent laboratory. 

We have built our business in a very competitive market, not on 

lowest price, but on a recognized quality and service. We are neither the cheapest nor the most expensive option, but we have been 

deemed the best option for clinical lab services by our almost 200 

clients. The competitive bidding project as designed by CMS is 

flawed and, if allowed to proceed, will be devastating to the clinical 

lab industry especially the small community labs like mine, many 

of which will be put out of business. 

I would like to focus on just what could happen to my lab under competitive bidding. Because I receive at least $100,000 in revenue 

from Medicare B reimbursement, I qualify as a required bidder, the 

only laboratory in Dubuque required to bid. What concerns me is 

there will be drastic consequences if I’m a bid loser and also significant consequences even if I’m a bid winner. 

If I am bid winner, I am guaranteed at least five to ten percent 

less reimbursement for my Medicare work simply based on the design of the demonstration. With already extremely small profit 

margins, what will this do to my bottom line? Even if I win, can 

I afford to do testing if reimbursement in some cases is below my 

cost to do the test? 

If I’m not a bid winner and local physicians and clinics can’t use 

my lab for Medicare testing, I will also lose their non Medicare 

testing. It is just too difficult to divide work between multiple labs 

based on payor and one-stop-shopping is the name of the game. 

The bottom line is can my lab survive. There is really a high possibility it cannot. 

I currently use Mayo Medical Labs for specialized testing that I 

am unable to do in my lab and my bid must also include a bid for 

these tests. What if Mayo, my preferred reference lab, is not a bid 

winner? This 30 year relationship with Mayo will have to be severed. This 30 year relationship provides not only testing services, 

16

but also consulting services to local physicians. I will have to establish a relationship with a new laboratory, arrange for courier service, perhaps pay for and wait for a laboratory results interface to 

my computer system and at the same time not allow service interruptions to any of my clients. 

Let’s also look at quality and access. Quality cannot and should 

not be assumed just because a lab has a CLIA certificate. There is 

a difference in quality. Quality is not just the quality of the test 

result, but the quality of the service provided. A correct lab result 

reported hours after it was critically needed by a physician is not 

a quality result even if it is the right result. 

If testing cannot be done by my community laboratory because 

we are not a bid winner and must be sent out of town, test results 

will be back the next day rather than in hours or minutes and this 

impacts the quality of patient care. The competitive bidding demonstration as designed guaranteeing there will be bid loser means 

that this will happen and patient care will be adversely affected. 

Access. Access includes both the patients and a physician’s access 

to quality lab services and to testing results. If I am not a bid winner and the Medicare patient has to travel to a laboratory for services, how far are we willing to have them travel before we say 

there is an access problem? In Iowa, a bid winning lab may be 50 

miles away. If the Medicare beneficiary’s physician collects a specimen and has to sent to a winning lab out of town, how long is too 

long to wait for results? 

And what about Dubuque nursing homes? My laboratory is the 

only lab providing services to 20 local nursing homes. If I am not 

a bid winner, who will provide their lab services? 

Nursing home patients today are much sicker than in the past. 

They require more lab tests and they require these results within 

minutes or hours, not the next day. This is not a Dubuque problem. 

It’s a problem that will occur nationwide. 

Access also includes physician access to lab results. My laboratory has developed an inquiry program used community wide that 

allows any physician with Internet access the ability to access a patient’s complete laboratory record whether that testing was done in 

the hospital, at any UCL site, at a local clinic or even Mayo. If I’m 

not a bid winner and testing has to be done by another laboratory, 

this capability not available in most cities the size of Dubuque will 

be lost. 

To summarize as we look at quality and look at access, isn’t limiting access to laboratory services a quality issue and isn’t a physician’s inability to have lab services furnished by a laboratory they 

trust and are familiar with an access issue? Quality and access are 

intertwined. It’s clear to me and to the lab community that this 

CMS demonstration project cannot be carried out without guaranteed negative effect on both quality and access. 

CMS, if the competitive bidding demo saves the Medicare program money at the cost of compromising a Medicare beneficiary’s 

access to quality lab services and ultimately their health care, what 

have you really saved? 

Madam Chairwoman and Committee Members, I thank you once 

again for allowing me to be part of this hearing. It’s critically important that you, our members of Congress, hear the voices of all 

17

stakeholders and that this competitive bidding demonstration 

project be stopped. Thank you. 

[The prepared statement of Ms. Bonifas may be found in the Appendix on page 66.]

ChairwomanVELA ́ ZQUEZ. Thank you very much. Our next witness 

is Mr. Tod Schild. Mr. Schild is representing Schild Medical Laboratory as the Senior Vice President. 

Schild Laboratories employs over 350 people and is located in 

Brooklyn, New York. Mr. Schild is testifying here today on behalf 

of the National Independent Laboratory Association. 

Welcome. 

STATEMENT OF TOD SCHILD, VICE PRESIDENT SALES & MARKETING, SHIEL MEDICAL LABORATORY, ON BEHALF OF NATIONAL INDEPENDENT LABORATORY ASSOCIATION 

Mr.SCHILD. Thank you. Good morning. I want to thank the 

Chair, the Ranking Member and the other Members of the Committee for the opportunity to testify before you today. As you mentioned, I am the Senior Vice President of Schild Medical Laboratory 

headquartered in the Brooklyn Navy yard and an active member 

of the National Independent Laboratory Association. Schild employs 360 people. Our business provides service to private physician practices and nursing home throughout the New York metropolitan area. 

I am not an expert in legislative matters, but I think rarely in 

our history has been there been Congressional legislation that although well intended was planned in such a way as to devastate 

the industry that is critical to the health and well-being of the 

American public. 

The clinical laboratory project designed by CMS will irrevocably 

alter the market for laboratory services, reduce patient choice and 

limit access to quality testing. The program has critical flaws and 

missing pieces. Rather than fostering competition, it will create 

government sponsored oligopolies. Instead of reducing laboratory 

costs for Medicare, it will increase costs. Rather than improve the 

quality of health care, it will diminish patient access and stifle lifesaving innovation. We all agree that overall Medicare costs reductions are desirable, but this is not an appropriate way to achieve 

that goal. 

The CMS proposal is opposed by all major professional groups involved in the clinical laboratory services industry. It was strongly 

opposed at the most recent CMS Open Door Forum by almost every 

person who commented on the proposed design. Over 400 individuals tried to participate in that forum and only a fraction of the 

questions asked were answered. 

By its design, the effect of the demonstration will be to reduce 

the number of labs permitted to perform Medicare work in the 

demonstration area. Loss of the ability to perform and bill tests to 

Medicare patients would most assuredly be a death sentence for 

the vast majority of non-winning bidder laboratories. Quality and 

service of the remaining labs will decrease from the strain of their 

additional volume. 

18

Medicare is just over 30 percent of Schild’s work. For some labs, 

the portion of Medicare work might be as high as 70 to 80 percent. 

Under the demonstration, there will only be a handful of winners. 

Non-winners will be out of the program for three years before they 

get a chance to bid again. Very few non-bidders will survive. Schild 

operates at only a five to seven percent profit margin. I know that 

we cannot survive beyond a year with the loss of 30 percent of our 

revenue. 

Given that the demonstration project is fraught with danger for 

small labs, it had been our hope that CMS would have consulted 

with representatives of the small business community and the 

Small Business Administration to determine how to design this 

project. Unfortunately, CMS did not do so. CMS did not even use 

the established SBA definition of small laboratories being classified 

as $12.5 million or less. The technical expert panel selected by the 

Agency did not include a single representative of the small community lab market. 

The independent laboratory market while still competitive is 

dominated by two national labs holding approximately 65 percent 

of the market. The extent of this concentration is illustrated by the 

chart in my written testimony. The large national labs can discount 

their bids in the demonstration zone and compensated for these 

temporary discounts through their work in other parts of the country. Labs like Schild that operate in only one or two of the 22 metropolitan statistical areas identified by CMS will not have that advantage. Schild or other labs like us will be the losers in the bidding process. 

Let me add that in no way do any labs large or small see any 

benefit to the American public coming out of this ill-conceived plan. 

We are all united in our objective to stop this demonstration from 

proceeding. The difference is that large labs in the demonstration 

are fighting for their bottom line and the smaller labs are fighting 

for their existence. 

Medicare competitive bidding for laboratories is the opposite of 

what it purports to be. It is clearly anti-competitive. The demonstration will permanently alter the market of any metropolitan 

statistical area that has the misfortune of being chosen. Long-time 

quality laboratories will be forced out of business and new startup laboratories will be a thing of the past. 

Nursing home residents are particularly vulnerable and will suffer the most under this demonstration. Only local and regional lab 

service nursing homes, the high cost of sending in personnel to 

draw blood and deliver results within several hours and the limited 

Medicare reimbursement for onsite services and travel have driven 

many labs to seek higher profit margins elsewhere. 

Medicare’s competitive bidding will eliminate the existence of 

many of the labs that are willing to take on the high operating 

costs to provide quality care for our aging population in long-term 

care facilities. At last week’s Open Door Forum, CMS was not able 

to adequately respond to our questions and concerns regarding how 

these facilities can continue to receive the level of service required. 

Additionally, the design complexity of the bidding process and 

the reporting to CMS required of winning bidders will require a 

large investment in personnel and infrastructure potentially makVerDate 0ct 09 2002 10:00 Dec 20, 2007 Jkt 033615 PO 00000 Frm 00024 Fmt 6633 Sfmt 6633 G:\CLERK SB\HEARINGS\TRANSCRIPTS\36112.TXT LEANN
19

ing it cost prohibitive for even the winners in the demonstration 

area. CMS itself will have to take on administration costs far beyond what they are anticipating. It only takes a review of the bidder’s package draft to see how CMS is over-complicating an already 

expensive and complicated process. Any savings that they would 

have hoped to realize by a slightly reduced fee schedule will be consumed by their own additional overhead. 

In conclusion, there are no laboratory winners in the Medicare 

competitive bidding demonstration, only losers and bigger losers. 

Our industry and the American public will be worse off and no savings will result. The only result will be diminished quality, limited 

access, stifled innovation, lost jobs, poorer health, lost lives and further crippling of our already crippled national health care system. 

On behalf of Schild Medical Laboratory, NILA and laboratory 

professionals across the country, I urge you to repeal the authority 

for CMS to move forward with this project. There are simply too 

many unanswered questions and too many risks associated with 

this ill-designed experiment. 

[The prepared statement of Mr. Schild may be found in the Appendix on page 71.]

ChairwomanVELA ́ ZQUEZ. Thank you, Mr. Schild. 

Our next witness is Dr. Ronald Weiss, M.S., M.B.A. Dr. Weiss is 

President and COO of ARUP Laboratories. Dr. Weiss is Board certified in Anatomic and Clinical Pathology, Medical Microbiology 

and Hematology. 

ARUP Laboratories is a national laboratory and an enterprise of 

the University of Utah and its Department of Pathology. He is here 

today on behalf of the American Clinical Laboratory Association, a 

group of national and regional laboratories across the country. 

Welcome sir. 

STATEMENT OF RONALD WEISS, M.D., PRESIDENT & COO, 

ARUP LABORATORIES, INC., ON BEHALF OF THE AMERICAN 

CLINICAL LABORATORY ASSOCIATION 

Dr.WEISS. Thank you. 

Chairwoman Vela ́zquez, Congressman Chabot, Members of the 

Committee, I thank you for this opportunity to testify on an issue 

as you’ve heard that has great importance and significant ramification for our patients. 

As you indicated, my name is Ronald Weiss. I am President of 

ARUP Laboratories in Salt Lake City. I am a pathologist and a 

physician practicing laboratory medicine and I’ve twice served as 

chairman of the board of the American Clinical Laboratory Association and it’s my honor to testify on behalf of ACLA and all of its 

members, small and large. More pertinent to the subject at hand, 

I have also served on CMS’s technical expert panel for the demonstration project. 

Madam Chairwoman, the concept of competitive bidding for laboratory services is not a new idea. The Department of Health and 

Human Services has struggled for almost two decades to develop 

a competitive bidding demonstration project. It is not an idea that 

has improved with time. Repeated attempts to move in this direction have each failed because of the complexity of that task because 

20

of the huge destabilizing and anti-competitive effect it will have on 

the laboratory industry and most importantly, because it would severely undermine the quality and access of laboratory services to 

Medicare beneficiaries. 

The competitive bidding model being considered will take a huge 

toll on small business as you’ve heard and on vulnerable populations including nursing home residents and homebound patients. 

This point of view has unanimity within the clinical laboratory 

community, small laboratories, large commercial laboratories, niche 

service laboratories and hospital based labs and it speaks volumes 

that when the Centers for Medicare and Medicaid Services released 

the 75 page bidder’s package last week there were over 80 people 

present at the Open Door meeting and another 400 on the call-in 

line. 

All of those who made statements at the Forum were opposed to 

the demonstration project. This unanimity exists between all sectors of the laboratory industry because all of these sectors play a 

role in providing Medicare beneficiaries approximately one million 

clinical laboratory tests every single day and they understand that 

no competitive bidding design can accommodate the complexities 

involved in keeping this service both seamless and exemplary. 

There is a clear contradiction in terms at work here and this is 

called a competitive bidding model, but it is clearly anti-competitive and it will drive a significant number of clinical laboratories 

out of business. Competitive bidding when done in the private sector establishes service commitments and acceptable prices through 

a negotiation process. For laboratory services, this depends upon a 

clear knowledge of the volume of those needed services, a streamline submission and payment process and consistency in laboratory 

to laboratory referral arrangements, none of which exists in this 

demonstration project. 

Extensive analysis of the demonstration by the ACLA yields a 

number of clear conclusions and I would like to briefly mention five 

of the most striking ones now. 

1. All laboratories especially small, local, independent and hospital outreach laboratories with limited resources will find it impossible to deal with the extraordinary complexity of the bidding process. This flawed design will prove fatal to them as they will likely 

lose their Medicare reimbursement and be forced out of business. 

2. Many of those small laboratories who are perhaps fortunate to 

win the bidding process will actually lose because they will be 

forced to accept bids well below their already conservative profit 

margins, forcing them to close their doors. 

3. As more labs have difficulty staying in business, the vulnerable patient populations I’ve mentioned will find access to laboratory services seriously compromised. 

4. The demonstration could severely disrupt the existing complex 

web of arrangements between the local laboratories that service 

Medicare patients by performing many common laboratory tests 

and reference laboratories such as ARUP that perform many of the 

more complex tests for them. 

Some of these high complexity esoteric reference laboratories are 

thousands of miles from the demonstration area, yet they will have 

to bid in the demonstration area if they provide more than 

21

$100,000 in services. It’s not even clear that these labs will know 

that they are required to bid and win in order to continue to be 

reimbursed by Medicare for services provided in that area. 

5. Other reference laboratories may choose not to bid or may not 

be selected as winners if they do so. This would disrupt existing 

complex laboratory to laboratory referral arrangements, previously 

described by my colleague, Ms. Bonifas and create a situation in 

which local laboratories simply cannot put together a winning bid 

on all 358 tests specified in the project leaving them out of business 

and beneficiaries without access to these medically-important, complex tests. 

In the final analysis, Madam Chairwoman, one has to ask the 

question, is there really a compelling need for such a demonstration project. Medical laboratory services account for only 1.7 percent of Medicare spending and payments for those services have already been reduced by roughly 40 percent in inflation adjusted 

terms between 1984 and 2004. If the goal is to seek savings, those 

savings have already been realized and this model will only add a 

substantial and cumbersome administrative burden for CMS while 

disadvantaging beneficiaries and their health care providers. 

America’s clinical laboratories have one simple objective and that 

is to provide accessible, quality medical services to patients and to 

the health care community. Laboratory medicine is a value proposition driving 70 percent of medical decision making at two to three 

percent of total health care costs. As a complex medical service provided by specialized physicians and laboratory professionals, it is 

not a commodity product. This demonstration project clearly does 

not help us achieve the goal of preserving this service objective and 

should be repelled before it is allowed to begin. 

The Medicare physician fee schedule is not competitively bid nor 

should it be and the clinical laboratory fee schedule should not be 

either. I would not like to look back and take an solace in the fact 

that Medicare beneficiaries’ laboratory services went to the lowest 

bidder while the true cost was poor quality and limited access. 

And if I may have a moment, I would like to clarify the market 

size and share numbers that have been repeatedly mentioned this 

morning. When you look at the entirety of medical laboratory services, hospital laboratories provide approximately 60 percent by volume of total laboratory services, physician office laboratory is approximately ten percent and independent laboratory is about 30 

percent. The two largest laboratories in that independent laboratory sector account for 60 percent of that sector which is approximately 18 to 20 percent overall, not the 70 percent number that 

had been mentioned. 

Thank you for this opportunity and I look forward to your questions. 

[The prepared statement of Dr. Weiss may be found in the Appendix on page 76.]

ChairwomanVELA ́ ZQUEZ. Thank you, Dr. Weiss. Dr. Weiss, you 

mentioned that basically in the meetings that had been held between the industry and CMS and the most recent one last week on 

the Open Door Forum there was basically people were united in 

terms of their objection to the use of the competitive bidding to deVerDate 0ct 09 2002 10:00 Dec 20, 2007 Jkt 033615 PO 00000 Frm 00027 Fmt 6633 Sfmt 6633 G:\CLERK SB\HEARINGS\TRANSCRIPTS\36112.TXT LEANN
22

termine pricing for lab services. However, you also indicated that 

it is important for CMS to gather information on lab pricing. If 

competitive bidding is not an effective mechanism for capturing information about market pricing, what alternative exists to capture 

accurate data? 

Dr.WEISS. Thank you, Madam Chairwoman. As I mentioned, 

medical laboratory services is a professional medical service and 

certainly competitive bidding is not the answer. The IOM study 

looked at several different options when they published their results in 2000. One of those was actually to just continue to use the 

current clinical laboratory fee schedule and in fact one recommendation was to set it at the national limitation amount. 

It’s true that the CLFS is not a perfect system for reimbursing 

for these services, but it’s one that laboratorians in the laboratory 

industry have worked with now for over 20 years and I think it 

would be far better to continue to try and improve that system 

rather than to make a drastic change and do something like competitive bidding which I believe is a flawed concept. 

ChairwomanVELA ́ ZQUEZ. Dr. Weiss, you mentioned that you took 

part of the technical expert panel. Were there—Can you talk to us 

about how much sensitivity there was in their discussion regarding 

the impact that this will have on small businesses represented by 

small labs? 

Dr.WEISS. The technical expert panel that was established by 

CMS and RTI we only met once face to face in Baltimore on, I believe it was May 25, 2005. That was an all-day meeting. There 

were no minutes from that meeting, but I can tell you that there 

were far-ranging discussions that touched upon many of the issues 

we’ve talked about this morning and including the impact on smaller laboratories. 

We only had one other interaction as the TEP and that was on 

a conference call to review the draft bidder application form and 

that was held almost to the day a year later in 2006 and we’ve not 

had any other request to provide input since then. 

ChairwomanVELA ́ ZQUEZ. Was there sharing information regarding data collected or impact analysis based on—

Dr.WEISS. There was no impact analysis of the kind we’ve talked 

about this morning, certainly, to look at the impact on quality and 

access. No such analysis has been done to my knowledge and at 

least published and shared with the TEP. 

ChairwomanVELA ́ ZQUEZ. Thank you. Ms. Bonifas. 

Ms.BONIFAS. Bonifas. 

ChairwomanVELA ́ ZQUEZ. A nationally-recognized accreditation 

group has cited United Clinical Laboratories as a gold standard 

laboratory and the best laboratory they have ever seen. However, 

competitive bidding prices places an emphasis on obtaining the 

best price over quality. How will a competitive bidding program affect your gold standard service and will it reward such a service? 

Ms.BONIFAS. The effect of competitive bidding on my laboratory 

as I said in my remarks, even if I win, I’m going to have to accept 

less Medicare reimbursement. That’s going to impact my already 

small profit margins. If I’m a bid loser, there will be a significant 

community impact in Dubuque. Where will Medicare beneficiaries? 

What about turnaround time? What about nursing homes? 

23

There will be a major impact on the service delivery system that 

we have set up and that’s one of the things we’re recognized for in 

that the Joint Commission Inspector when he called us a gold 

standard laboratory. It has a chance to jeopardize the system that 

we’ve put in place in Dubuque which is recognized in the community as a very beneficial service to the community. We’ve provided 

cost savings to all patients in Dubuque because of the joint venture 

system that we’ve set up and that’s been in place for over 20 years 

and that whole consolidated lab system is in jeopardy. 

If I’m going to lose my outreach market, United Clinical Labs is 

the merger of two hospital and the independent lab. We service the 

local physicians. If I lose that outreach testing, then it puts more 

of a burden on my inpatient and outpatient costs because the outreach testing is what allows me to offset some of the costs of my 

inpatient and outpatient work. So the consolidated lab as we know 

it, I don’t think, would survive and that would have a significant 

impact on the community of Dubuque. 

ChairwomanVELA ́ ZQUEZ. Thank you. Mr. Bejgrowicz, one of the 

problems with this project is that it doesn’t account for the highly 

unique nature of the tests required by skilled nursing facilities. 

How confident are you that the bid demo will be able to arrive at 

an accurate and fair price for the tests? 

Mr.BEJGROWICZ. First of all, Madam Chair, quality is what 

drives nursing home care. So looking at price, looking at quality, 

looking at the number of tests, a lot of the tests are very, very specialized tests that the nursing home patients require. 

Physicians are looking for quick turnaround times. The physicians are looking for results within six to eight hours. These are 

the necessary goals to which the laboratories really need to adhere 

in order to provide services to the long-term care residents. 

ChairwomanVELA ́ ZQUEZ. I would like to ask this question to each 

one of you. Is it true that different labs may use unique testing 

procedures for a specified lab test? Can lab tests be fairly compared 

under the CMS demo if lab use different testing procedures? 

Mr.SCHILD. I would like to address that first. 

ChairwomanVELA ́ ZQUEZ. Sure 

Mr.SCHILD. There are often more than one way to perform the 

same test and it was brought up today about continuity of care. 

There are different methods and different reference ranges for 

many of the tumor markers that are run like CA125 and CEA and 

those are used to monitor patients who are being treated for cancer. If a lab that a hematology/oncology uses does not win the bid 

process and can no longer process Medicare specimens, those physician practices will be forced to go another lab. 

When, believe it or not, we obtain a new account from some of 

our competition, they often don’t shift over all of their business because patients that they started testing at one lab they don’t want 

to move over to another lab. So, yes, it could have a big impact. 

There is different equipment. There is different methodologies. 

There are different reference ranges and it will affect the continuity of care. 

Ms.BONIFAS. I would just like to echo what Mr. Schild has said. 

What my laboratory has done when, for example, we brought CEA 

24

testing, one of the tumor marks. We used to send it to Mayo. We 

now do it in our lab. 

Before we started releasing results to the physicians, we did 

baseline studies on all their patients, both at Mayo and in our lab 

so we could see if there was any difference in the results and so 

that the physicians would be able to monitor them and there was 

a difference in the reference range and the difference in methodology. So there was a chance that there would be some difference 

in interpretation of the results. 

Now we didn’t get paid for doing the test twice. We only got paid 

once, but those are the things that we did in order to make sure 

that the physician interpretation was correct and the patients were 

correctly monitored and we could bring the testing in-house. So, 

yes, different testing methodologies, different reference ranges, can 

cause a difference in interpretation and patients would have to be 

studied. Yes, it will impact. 

ChairwomanVELA ́ ZQUEZ. Let me recognize. Dr. Weiss, do you 

want to—

Dr.WEISS. I just wanted to echo those comments and say that we 

work in a very dynamic and innovative medical laboratory community in the United States and inherent in your question is the fact 

that there are constant endeavors to improve not only the quality 

but the timeliness of individual laboratory tests and the cost of 

doing those tests. So manufacturers of test kits and test instruments are constantly trying to improve that. So we do end up with 

a situation where for each individual HCPCS Code on that list 

there may be several different methodologies that have inherently 

different costs. 

ChairwomanVELA ́ ZQUEZ. Thank you. Mr. Chabot 

Mr.CHABOT. Thank you very much, Madam Chair. Mr. 

Bejgrowicz, I’ll being with you if I can. Would you please tell us 

again why you believe, or expound upon it, the CMS’s demonstration project’s design will at best put smaller laboratories out of 

business and at worst restrict access to quality health care for 

Medicare beneficiaries and limit choice and disrupt the continuity 

of care and ultimately increase the cost to Medicare? 

Mr.BEJGROWICZ. Congressman, again, the first priority for a 

nursing home owner, a nursing home operator, a nursing home administrator, is quality of care. When we look at this demonstration 

project, we look at the quality. We look at the access to care. Nursing home residents, again, need specific access. They need service. 

For example, we’re talking about laboratories that will provide 

phlebotomy services. Again, I explained phlebotomy services as the 

people that will come in and draw your blood. A lot of times these 

larger laboratories don’t have phlebotomy services. They require 

the nursing staff to draw the blood. 

Again, we’re looking at the test methodologies, the test ranges. 

The smaller independent laboratories specialize in long-term care. 

The larger laboratories have pulled out of providing care to the 

nursing homes. 

Mr.CHABOT. Thank you very much. Ms. Bonifas, let me turn to 

you next if I can. If the demonstration project isn’t ended or 

stopped as you, I believe, had suggested that you would prefer, 

what changes would you recommend in the demonstration project 

25

that would make it fairer and would remedy some of the problems 

that have been raised by the panel members? 

Ms.BONIFAS. Well, when I asked for the project to be stopped, I 

meant to be stopped and not change it. I don’t think—I agree with 

Dr. Weiss. There are other ways if CMS and Congress is looking 

to save money in the Medicare program in clinical lab services. I 

think the competitive bidding demo is not the way to do it and 

there are some alternatives to look at. 

I think the competitive bidding demo as presented is flawed and 

I’m not sure there’s anything that could be done to fix it that would 

make it a successful demonstration project. I think as Dr. Weiss 

said it’s simply complex. It’s been tried. 

I mean, I’ve been in this industry a long time. We’ve been talking 

about competitive bidding for over 20 years. It’s not something that 

has been tried and failed. It’s been something that can’t even be 

tried because the issue is some complex we can’t even figure out 

how to try it. And to go forward with the demo and saying that, 

‘‘Well, it’s just a demo. Let’s see what happening,’’ to proceed with 

a demo when there are these many problems with it, what happens 

if you proceed with the demo just because it’s a demo and businesses like mine go out of business. We’re not going to be able to 

re-enter the market. 

Let’s stop looking at competitive bidding as a way to save money 

in the clinical lab field for Medicare and look at some other alternatives. The Institute of Medicine recommended a revision to the 

clinical lab fee schedule. The clinical lab industry is dealing with 

a Medicare fee schedule that was developed in 1984. Everyone including CMS recognizes that it’s archaic, it’s irrational and it’s out 

of date. Other physicians, radiologists, ambulance have all revised 

their fee schedule. Let’s take a look at that as an option and stop 

competitive bidding. 

Mr.CHABOT. Thank you. Mr. Schild, would you explain how the 

demonstration project that we’re referring to here today would irrevocably alter the market for laboratory service resulting in reduced patient choice and limited access and resulting market concentration? 

Mr.SCHILD. Congressman, I think that’s relatively easy to answer. I could use the New York area as an example and I know 

it was indicated that we wouldn’t be the first, but there are 30 laboratories approximately operating in lower New York serving New 

York Metro. Even if 15 laboratories were selected as winners out 

of the 30 that had to bid, there are 15 labs that will close. 

Schild Medical Laboratory has a dozen patient service centers 

throughout the boroughs of New York City and Long Island and 

Lower Westchester. All of those would close and the patients would 

have to seek having their blood drawn at another patient service 

center. A lot of the larger labs, they have a very, very big network, 

but there is no much need out there the wait times there are already extremely long. If you limit the number of labs in the marketplace, there is the answer to your access question, where do 

they go. 

What this demonstration project is all about is government reshaping a free market and I really don’t think that that’s what our 

country is about and I think it’s going to have devastating implicaVerDate 0ct 09 2002 10:00 Dec 20, 2007 Jkt 033615 PO 00000 Frm 00031 Fmt 6633 Sfmt 6633 G:\CLERK SB\HEARINGS\TRANSCRIPTS\36112.TXT LEANN
26

tions and labs will close and labs that leave the marketplace will 

not be able to re-enter. 

Again, we have very narrow margins, somewhere between five 

and seven percent, depending on the year. Medicare is 30 percent 

of our revenue. Remove that. I don’t think we could go beyond the 

year in existence, plus it will stifle innovation because new players 

can’t enter into the market. How can Medicare create a system 

that will stop new businesses from forming and that’s where we 

say it will irrevocably reshape the marketplace. All you’ll have is 

the existing player and they’ll just keep dwindling and dwindling 

down until everybody realizes that this was a mistake and you 

start over again. 

Mr.CHABOT. And finally, Dr. Weiss, would you explain again in 

your statement that you made in your testimony that the CMS 

demonstration project will cause a huge destabilizing and anti-competitive effect on the clinical laboratory community? 

Dr.WEISS. Thank you, Congressman. As my other colleagues on 

the panel have indicated, the complexity of what we are dealing 

with in terms of the relationships between laboratories functioning 

in communities is such that disrupting that will create major impacts not only on those laboratories but the patients they serve. 

And if I can use my organization as an example, we have recognized that a laboratory like ours is not suited to providing clinical 

laboratory services to a number of the segments of the patient population. It’s truly the independent and hospital based laboratories 

in communities and in regions that could be affected by this demonstration project. Those are the entities that are best suited to 

provide these services. 

So we have this complex relationship between laboratories at 

several different levels, all of us trying our best to provide high 

quality services to patient populations like those in Medicare and 

competitive bidding will throw a tremendous monkey wrench, if 

you will, into that process and be extremely disruptive in my opinion. 

Mr.CHABOT. Thank you, Doctor. I yield back the balance of my 

time. 

ChairwomanVELA ́ ZQUEZ. Mr. Braley. 

Mr.BRALEY. Madam Chairwoman, Ranking Member Chabot, I 

have only served on this Committee with you for six months, but 

I am fairly confident in saying that only CMS could create a competition where if you win you lose. 

(Laughter.) 

Mr.BRALEY. It’s very disturbing to those of us who have recently 

come to Congress to be sitting here week after week talking about 

CMS driven decisions that have an adverse impact on the people 

we represent in our districts. 

And, Ms. Bonifas, I want to start to talking to you about your 

comment that 20 local nursing homes in your area are served only 

by your laboratory. Do you remember making that comment? Last 

week, another one of my constituents from Maqueketa, Iowa, a 

family pharmacist was here, talking about some of the extraordinary things that people in his profession had done above and beyond the call of duty to help people coup with the new Medicare 

27

D requirements, that they received no compensation for but felt 

that they were obligated to do as a sense of professional calling. 

And what I would like you to do is help us put a human face on 

the type of services you and your employees provide above and beyond what’s normally expected just in order to get an reimbursement from Medicare serving the needs of all the patients who are 

currently in those 20 nursing homes. What type of experiences are 

typical to the people who work in your laboratory? 

Ms.BONIFAS. Thank you, Congressman Braley. I wasn’t always 

the only laboratory that provided services to the Dubuque nursing 

homes. A large multi-physician clinic also used to send 

phlebotomists to the nursing homes and after awhile, they just 

stopped and basically United Clinical Labs was left with the business. 

We don’t do nursing home business because we make money on 

it. Most of it is out of a sense of obligation and if we don’t do this, 

who is going to do this? We have three phlebotomists who go to the 

nursing homes. They used to go every day. As long as the nursing 

home called, we would send them. Now they go—The nursing 

homes have been put on a schedule. Certain nursing homes are 

only visited on certain days. We’ve worked with the homes to teach 

them how to draw their own blood. Our couriers pick it up. 

But our employees that are going out to the nursing homes do 

that not because they get paid well for that because they don’t and 

the reimbursement to go out to the nursing home to do that work 

is not much. But our employees that do that do it because they like 

to do it. They enjoy working with the older people and one of them 

in particular who has been a nursing home phlebotomist for over 

25 years said even when she retires she would still do it and do 

it for nothing because she just likes the people in the nursing 

homes. 

So, as I said, we don’t do it because we make money on it. We 

feel there’s a sense of obligation because if we don’t do it, I don’t 

know who will. 

Mr.BRALEY. Isn’t it true that given the age of the patient population in those nursing homes you’re more likely to encounter patients who have compromised immune systems where these access 

to laboratory services can have a dramatic impact on their health 

outcomes? 

Ms.BONIFAS. Yes, I think that would be true. 

Mr.BRALEY. One of the things you talked about was some of the 

innovative things you were doing with electronic management of 

medical records and I guess my question for you is in this competition that CMS set up were there any points or positive awards 

made for people who were taking innovative approaches in EMR 

like you described your laboratory was doing? 

Ms.BONIFAS. No, not to my knowledge. I don’t think the bidding 

demonstration even requires that you transmit results electronically. But we were very innovative in Dubuque. I think if you talk 

to any of the Dubuque physicians, they will tell you one of the 

things they really like is this program that our in-house computer 

programmers wrote that allows them anywhere to access the result 

and it also saves money. Someone who is being seen in the hospital 

who also may have just been seen in the doctor’s office rather than 

28

ordering the test again, they can look and see ‘‘Oh, this person had 

this test. We don’t need to order it. Here are the results.’’ They can 

print that result. They can chart that result. It is a very innovative 

program and like I said, not available in most cities the size of Dubuque. 

Mr.BRALEY. If a competitive bidding program were to be enacted 

in the Dubuque area, what can Medicare beneficiaries that rely 

upon United Clinical Laboratories for lab service expect to happen 

in terms of their care? 

Ms.BONIFAS. Well, it depends if we’re a winner or a loser or a 

winning loser maybe is the right. 

Mr.BRALEY. I’m not sure if you win you really win. 

Ms.BONIFAS. Exactly. Medicare beneficiaries are used to using 

our facilities and it’s not just the Medicare beneficiaries. It’s their 

physicians who are used to using our laboratory. If I’m a bid winner, then I’m going to get less reimbursement. If I’m not a winner, 

I’m not sure where they’re going to go. I’m not sure where the physicians are going to have to send their testing. All of those, that 

infrastructure that we’ve built, that service delivery system, is 

going to be lost. 

And because of the consolidated lab in Dubuque, physicians, even 

the large multi-physician clinic with over 100 physicians and the 

large internal medicine practice, they rely on us. Most of them 

don’t do Medicare testing if they know we do it because they would 

rather send it to us and not lose money on it. 

Mr.BRALEY. Thank you for sharing those insights and thank you 

for holding the hearing. 

ChairwomanVELA ́ ZQUEZ. Mr. Davis. 

Mr.DAVIS. Thank you, Madam chairwoman and I thank the panelists for being with us today. I actually come out of the background of health care before I came to Congress. I understand CMS 

very well. I’ve dealt with them for almost 30 years either in the 

hospital setting or in an outpatient setting. Thank you for what 

you do. 

One thing that I found and I would like to know if this is what 

you’ve seen in your experiences that bigger is not always best, farther away is not always best. Do you see in your judgment and experience having local access to physicians and clinical lab and 

home health care and pharmacies and those things that make for 

an integrated health system are done better at the local level or is 

it better done at some far away, out of sight resource and anyone 

could just answer that for me. 

Mr.SCHILD. I would like to respond because New York is a 

unique market. Both the large players and the small players provide local service. So in New York, that isn’t as much of a factor 

but the whole concept of just reducing the number of laboratories 

will have a significant impact on an already very, very crowded 

marketplace where access is key. We serve so many millions of people that we can’t afford to reduce the number of players in the marketplace. 

Mr.DAVIS. Anyone else? 

Dr.WEISS. Health care is local and it’s critically important that 

health care be delivered to patients by physicians and health care 

providers in the local areas. In our circumstance, we’re a laboratory 

29

located in Salt Lake City and we provide services to hospital laboratories and independent laboratories around the country. But we 

provide that in a very, very narrow niche of very unusual testing. 

We don’t attempt nor should we to provide services that are best 

delivered at the local level and to the populations in particular that 

we’ve been talking about, nursing home and homebound patients, 

it would be impossible for a laboratory like ours if we were required to bid and to bid on those services to provide those services 

in an effective way. It is really most important that those services 

be provided locally. 

Ms.BONIFAS. I would also like to say that the service needs to be 

local. There is a place for both. There is testing that needs to be 

done in the community and it’s the rapid turnaround time, the 

things that are needed right away, the easier things to do. That 

needs to be done in the community lab. Those tests shouldn’t be 

sent to a large national reference lab. 

There is a place for all labs. We need the national reference labs. 

We need the Mayos and the ARUPs and the Quests and the 

LabCorps. We need them to do the esoteric tests that we can’t do 

because we don’t have the technology or the expertise or the volume to do effectively. So we need everybody. We need the community-based laboratory and we need regional labs. We need national 

labs. We need everybody and we don’t need to exclude anybody 

from that market. 

Mr.DAVIS. In most industries in America, competition is a good 

thing. If you have more competition, it breeds better quality and 

it also breeds lower cost. Do you see that in health care? 

Mr.SCHILD. It’s an absolute in health care. The more players in 

the market, the more new ideas and concepts get introduced and 

sometimes the smallest labs in the industry have contributed technology that was adopted by all. So if you start reducing the number 

of small clinical laboratories that will disappear. 

One example I could give you of technology that has impacted 

the whole industry is one of my competitors, Sunrise Medical Labs 

in Hophog Long Island, introduced the first computer system that 

helped distinguish a patient’s insurance and which plan it had to 

go to because of some exclusionary decisions that were made by 

managed care organizations. Schild Medical Laboratory is working 

on introducing a new cardiac risk assessment test that we think is 

going to revolutionize the marketplace. So it is so important for 

there to be small players in the market because they, too, can reshape health care in a positive way. 

Mr.DAVIS. Let me ask one last question. What will happen if a 

physician orders a stat test and you’ve gone to a national health 

system, basically what I see this coming to, and there’s not that 

local competition there available and for the other members on the 

panel stat means immediate? Anyone like to take that as to what 

would happen? 

Mr.BEJGROWICZ. Congressman, if I can. That resident would be 

shipped to the hospital incurring large costs while if we had that 

test performed in the nursing home, the physician then could treat 

the resident. Frankly, I’m very worried about the residents in the 

nursing homes. I really am. 

Mr.DAVIS. Thank you. I yield. 

30

ChairwomanVELA ́ ZQUEZ. Mr. Sestak. 

Mr.SESTAK. Thank you, Madam Chair. I probably only have one 

question but a couple of observations. I think this hearing is tremendous for a number of reasons. First, I was taken that CMS has 

absolutely ignored the Institute of Medicine’s recommendation a 

few years ago that if it were to do this competitive bidding it was 

to be focused on gaining accurate information about market pricing 

by its purchase of service. They completely ignored that recommendation. 

Second, every hearing I’ve been to has always talked about 

health care in terms of affordable, accessible, quality of care. For 

some reason, they’ve decided to talk about the affordability here. 

In lieu of the third point and missed so much else where affordability could be gained, you brought it up. One area would be preventive care. Heaven forbid if we ever looked at preventive, early 

diagnosis. Twenty-two percent of our payments out of Part B go to 

67 percent of Medicare recipients because they had five more 

chronic disease, fee for service and you kind of looked at that management of that care and early diagnosis and continuing to help 

prevent it from getting worst, the savings would be enormous. And 

then we narrow down in this small area instead of going for the 

big prize. 

And, finally, and most importantly is my own experience. You 

said it so well. But for me when my four-year-old daughter had her 

malignant brain tumor and was given three to nine months to live 

a year and a half ago, I can’t tell you how helpful community-based 

system was and it was in the Navy. Tragedy struck us and I have 

to tell you as we hunted for the right labs because much of this 

stuff is done at home, you can, the right place that can do the right 

blood tests for tumors. Staying up throughout the night to administer stuff they give us, but always there on call because they had 

a great relationship with the patients and a great relationship with 

the hospitals. 

I am quite taken that the quality of affordable, accessible health 

care goes a long way towards this type of community-based approach. I don’t have the statistics to prove it, but I am quite taken 

as we came to know the small labs as we switched from brain surgeries to chemo to radiation to work on future hopefully quality of 

life. That’s more of a comment. 

But I was taken and if each of you would, in matter of fact, if 

you don’t, if one or two just might, this community-based relationship you spoke about, I see it everywhere during my exposure 

there. It prevented the seams in which so much happens at the 

worst moment of time that if you have that kind of communitybased relationship things don’t get dropped through the crack. 

They can have some impact on your care. Would you can expound 

on that if you care? I made more of a statement because it was 

very personal to me. But there is something more to add on this 

community-based I think will go away with the focus upon larger 

rather than smaller. 

Mr.SCHILD. I guess what I could add to that is our lab is very 

often willing to take on work that is a little bit more labor intensive and results a lower profit because we have to survive. So 

sometimes a tiny, tiny profit is better than none at all and we also 

31

recognize that we live in a community and one of our contracts is 

with the visiting nurse service and we have an army of 

phlebotomists that go out on a daily basis and go to very homebound and ill patients and draw their blood and we deliver a quality result the very next morning or if it’s stat, the same day and 

a lot of labs aren’t willing to do that. 

We agree with your statement and that’s just why it’s so important that we maintain our current system and re-examine other 

ways to reduce our Medicare expenditures. 

Mr.SESTAK. And there are other ways. 

Mr.SCHILD. There are so many. 

Mr.BEJGROWICZ. Congressman, if I can just make a statement. 

From a nursing home perspective, the residents’ lives are very 

scheduled and honestly the nursing home residents almost look forward to that visit from that phlebotomist. They become friends 

with that phlebotomist and that would disappear. 

Mr.SESTAK. People can dismiss that easily but there are studies, 

statistical studies, that show the relationship that someone can 

have doing health care goes a long way to their health achievement. It’s absolutely a fact. Thank you. 

ChairwomanVELA ́ ZQUEZ. Mr. Love, I noticed that you’re still here 

and I’m glad that you decided to stay here. While I know that it 

is the policy of CMS to not testify on panels with industry, I just 

would like to ask you to please come to the table to answer just 

one question. Would you please come forward, Mr. Love? Fine. 

Mr.LOVE. Yes madam. 

ChairwomanVELA ́ ZQUEZ. Mr. Love, given what you heard here 

today, will there be time for input by the industry before the implementation of the demonstration and when will the demonstration 

program start? 

Mr.LOVE. Thank you. First, Mr. Sestak, I’m very sorry to hear 

about that. We have taken extensive input, some of which we got 

as recently as last week as you know from the Open Door Forum 

and we are not at the point where we are actually announcing a 

site and we are continuing to evaluate that input not only from the 

Open Door Forum, but at our web site we have received comments 

since the Open Door Forum, some of which I was reading well into 

last evening. We will continue to consider that information as we 

move forward. 

ChairwomanVELA ́ ZQUEZ. Well, the Committee still has a number 

of questions after we listened to the witnesses on the second panel 

and I would like to ask unanimous consent that we are going to 

send to you questions in writing and we expect those questions to 

be submitted to the Committee before you implement the program. 

Mr.LOVE. We will certainly be responsive to the Committee’s 

questions. 

Mr.CHABOT. Madam Chairwoman. 

ChairwomanVELA ́ ZQUEZ. Yes 

Mr.CHABOT. I assume you mean the answers to the questions. 

ChairwomanVELA ́ ZQUEZ. Yes, the answers to the questions before 

he implements the program. 

Mr.CHABOT. Thank you. 

ChairwomanVELA ́ ZQUEZ. Thank you. And the gentleman is excused. 

32

Mr.LOVE. Thank you. 

ChairwomanVELA ́ ZQUEZ. Let me just say that it is obviously that 

this is a very complex issue and I think every witness had provided 

compelling arguments here as why they feel that this project, this 

demonstration project, could put them out of business, compromising not only the free market system that we have but the quality of care that we are providing to the American people. So this 

is an issue that is important to this Committee in the sense that 

we have to make sure that every federal agency when they are creating rules, issuing rules, or creating new demonstration projects 

that they really take into account the impact that such a project 

will have on the small businesses. 

We will continue to monitor this situation. We will ask CMS to 

continue to have meaningful meetings with the industry and to 

take into account those input provided for those small businesses 

that will impacted by this demonstration project. 

I ask unanimous consent that members have five legislative days 

to enter them into the record without objection. So order and this 

hearing is now adjourned. Off the record. 

[Whereupon, at 11:56 a.m., the Committee was adjourned.]

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