2016 Laboratory Market Report
Diagnostic testing makes up about 55% of the $52.5 billion diagnostic medical testing market (imaging services comprise the balance). Revenues are projected to grow at a 2.7% rate over the next five years as emphasis on prevention grows. Medicare is the largest payer for lab testing. Almost all tests reimbursed under Medicare Part B occur in one of three settings: independent labs at 57%, hospital-based labs at 24%, and physician office labs at 19%. About 60% of Medicare spending under the clinical lab fee schedule goes for 25 tests with thyroid tests, comprehensive metabolic panel, and a complete blood count test topping the list.
The laboratory market is driven largely by technological innovation. While just five years ago it was impossible to take an at-home genetics test and obtain the results in your own home, today’s technology allows for that and a great deal more. Molecular testing, genetic testing, and companion diagnostics are all growth areas. Testing also has the potential to play a major role in controlling or preventing epidemics.
The Protecting Access to Medicare Act of 2014 (PAMA) will bring about the biggest change in lab payments since 1984. Beginning in 2018, Medicare rates will be based on rates paid by private payers – which are generally much less than current rates. The change is expected to dramatically decrease Medicare payment amounts for most lab services; the Congressional Budget Office projects savings of $2.5 billion over 10 years. The law limits year-to-year reductions in payment rates to 10% a year from 2018 through 2020, and 15% from 2021 through 2023.
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