Description

Current Medicare payment policy for outpatient laboratory services is outdated. Future reforms, such as competitive bidding, should consider the characteristics of the laboratory market. To inform payment policy, we analyzed the structure of the national market for Medicare Part B clinical laboratory testing, using a 5 percent sample of 2006 Medicare claims data. The independent laboratory market is dominated by two firms, Quest Diagnostics and Laboratory Corporation of America. The hospital outreach market is not as concentrated as the independent laboratory market. Two subgroups of Medicare beneficiaries, those with end stage renal disease and those residing in nursing homes, are each served in separate laboratory markets. Despite the concentrated independent laboratory market structure, national competitive bidding for non patient laboratory tests could result in cost savings for Medicare.

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