Payments for Clinical Laboratory Test Services Are Too High Gao ID: HRD-91-59 June 10, 1991

Pursuant to a legislative requirement, GAO reviewed the appropriateness of Medicare fee-schedule payments for clinical laboratory test services, focusing on laboratory costs and revenues.

GAO found that: (1) although four of the five largest independent laboratory companies in the United States suffered business losses with their discount customers, all five had substantial sales returns from Medicare and other retail customers; (2) the laboratories' average return on Medicare sales exceeded their overall rate of return, since Medicare paid substantially more for test services than did the laboratories' discount customers; (3) while laboratories incurred higher costs serving Medicare than discount customers, those higher costs were more than offset by Medicare fee-schedule payments; (4) taking into account Medicare payment reductions effective in January 1990 and 1991, Medicare profit rates would have been 11 percent higher than the companies' overall profit rates; and (5) operations at 11 smaller laboratory companies had profit patterns similar to large laboratories.


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