Anew report by the Health and Human Services Office of Inspector General (OIG) concludes that the Medicare program could save nearly $1 billion a year by instituting double-digit payment cuts for laboratory services. It’s a recommendation that labs—battered by other payment reductions and the sequestration in recent years—have hardly found heartening. Medicare is the largest payer for laboratories, and any further cuts from the program would be felt acutely. Instead, representatives from the laboratory sector will be surveying their options and likely will lobby Congress to ensure lawmakers do not adopt the report’s recommendations. The OIG scrutinized lab payments for 20 different high-volume fee-for-service tests conducted on behalf of 50 state Medicaid programs and three federal employee health benefit plans. It concluded that Medicare paid between 18 percent and 30 percent more for tests than other payers. Were its payment methodology more in line with the other payers, it would save about $910 million a year, according to the report. Given that Medicare paid $8.2 billion for lab tests in fiscal 2010, that represents a reduction of 11 percent. As a result, the OIG recommended that the Centers for Medicare and Medicaid Services (CMS) “seek legislation that would allow it to establish lower payment rates for lab tests and consider seeking legislation to institute co-payments and deductibles for lab tests.” Should CMS follow the OIG recommendations, it could put laboratories in enough of a financial bind to seriously reconsider their business models. “I am concerned that labs won’t provide assays they can’t make their costs on,” said Jennifer L. Hunt, M.D., who is chair of the pathology department at the University of Arkansas. Hunt also serves as the president of the Association for Molecular Pathology. The American Clinical Laboratory Association (ACLA) declined to immediately comment on the impact of the study, saying it was too soon to tell. However, ACLA raised questions regarding the OIG’s methodology. It noted that there were 4,000 different price comparisons in the report, and in many circumstances Medicare was the lowest-priced payer. “There is a tremendous variation in those prices,” said ACLA President Alan Mertz. “There is an in-network component, and the question of whether there are there allowable charges on top of those rates, along with the actual amount the lab gets paid. There are all kinds of questions.” ACLA also noted that reimbursement reductions to labs have totaled more than 11 percent since 2010—including 5 percent this year alone. Moreover, labs “face double [that] amount of cuts already scheduled for the next nine years,” according to an association statement. Mertz said Congress should take those cuts “taken into consideration” regarding any deliberations it might make on the OIG’s recommendations. “We as an industry have to point this out to Congress. . . . [W]e need to educate them on that,” Mertz said. The report is available at http://oig.hhs.gov/oei/reports/oei-07-11-00010.asp.