NEW YORK – The upcoming termination of the COVID-19 public health emergency (PHE) will likely spell headwinds for clinical laboratories' COVID-19 testing businesses.
Scheduled for May 11, the end of the PHE will bring with it decreases in reimbursements along with tighter rules around test ordering and, most likely, medical necessity requirements. For some labs, it could also mean the end of payor contracts established specifically for COVID-19 testing.
These are unwelcome, if not unanticipated, developments for clinical labs, but their sting is lessened by the fact that COVID-19 test volumes have been declining for more than a year, meaning they are a much smaller source of revenue than at the peak of the pandemic.
"It's not going to be as much of a financial impact as it might have been had that spigot been turned off prior to [test] volumes going down," said Ann Lambrix, VP of revenue cycle management solutions at lab consulting firm Lighthouse Lab Services.
Numbers from lab consulting and revenue cycle management firm Xifin show that since the start of the year COVID-19 tests have averaged around 5 percent of total lab test volumes, well below volumes at the height of the pandemic during which COVID-19 testing often accounted for more than half of all lab volume.
Nonetheless, COVID-19 testing remains a substantial business for labs. For instance, in Q4 2022, Quest Diagnostics reported COVID-19 testing revenues of $184 million.
Perhaps the most obvious impact of the PHE ending will be reimbursement cuts for COVID-19 testing. When the PHE ends, Medicare payments for high-throughput molecular COVID-19 testing will drop from $100 per test to $51 per test. The expectation is that private payors will also lower COVID-19 test reimbursement, though the exact rates will vary across labs and insurers.
During Quest's Q4 2022 earnings call, Jim Davis, the company's president, chairman, and CEO, said that in its discussion with private payors it is targeting the $51 benchmark set by Medicare.
"It is a new test that should be treated as such," he said. "Some [payors] may have a slightly different opinion on that … so that's where we negotiate."
Susan Van Meter, president of the American Clinical Laboratory Association, which represents Quest and other large laboratory firms, said that based on negotiations between ACLA members and payors, some private insurers are looking to offer less than the Medicare rate.
"We can't speak on behalf of all of our members' experiences, but we do understand that there is continued downward pressure and that Medicare is not the floor," she said.
The end of the PHE also means the end of additional reimbursement for COVID-19 sample collection, for which labs doing collection have been receiving an additional $23.46 or $25.46 per test, depending on the patient and collection site.
"You had the issues with purchasing [personal protective equipment], you had the risk involved with going out and swabbing patients, and so this [fee] was an incentive for laboratory personnel to go and collect [specimens]," Lambrix said. "Now if labs are performing collection, most likely it will just be bundled into that test" reimbursement.
She added that labs that were able during the PHE to win insurer contracts for COVID-19 testing may see those contracts end.
"If [a lab] was able, due to the public health emergency, to get into a network with a payor that normally has a closed network, you may see that contract get taken away because they only needed [the lab] for COVID testing," she said.
In addition to impacting reimbursement rates, the end of the PHE will also affect how COVID-19 tests must be ordered and when they are considered medically necessary. During the PHE, individuals have been able to get COVID-19 tests without a physician order. After the expiration of the PHE, COVID-19 lab tests will require an order from a doctor or non-physician provider.
Additionally, with the end of the PHE, pharmacists will no longer be allowed to order lab-based COVID-19 tests. Instead, pharmacy ordering of COVID-19 tests will revert to state-level regulations governing pharmacy practice, said Michael Klepser, a professor of pharmacy at Ferris State College of Pharmacy.
There is also the matter of whether payors will cover testing for asymptomatic individuals or for people following a potential COVID-19 exposure, Van Meter said.
"Insurers will indeed be able to be more restrictive in their coverage policies than they have been during the PHE," she said. "Is everyone going to be able to avail themselves of covered testing in the same cases where they have been thus far?"
Quest's Davis said during the company's Q4 call that in its negotiations with insurers, coverage policies including "asymptomatic versus symptomatic testing" coverage still needed "to be worked out."
"There is going to be more of a requirement of medical necessity," Lambrix predicted. "There are going to have to be signs and symptoms. A person is going to have to go to their doctor and their doctor is going to have to order a COVID test."
Lambrix said that labs will likely shift toward offering respiratory panel testing to make up some of the revenue, if not the volume, lost with the end of the PHE. She said that Medicare currently pays around $142 for molecular respiratory panels covering three to five targets and that these panels are widely covered by private payors, as well.
Lambrix noted that while coverage has been an issue for larger respiratory panels, three to five targets "is the sweet spot for reimbursement. Anything greater than five targets is going to be a problem with payors."
"I'm seeing more labs that were doing COVID now going to these respiratory panels," she said. "Strategically, it makes sense, if you are going to still offer COVID, to look at your clientele and see if they can order the respiratory panel as opposed to just straight COVID."
That's particularly the case given that after the end of the PHE, molecular COVID-19 tests will require a doctor's order and that payors are likely to require patients be symptomatic to cover COVID-19 testing, Lambrix said. She noted that the same symptoms required to support medical necessity for a COVID-19 test should also support medical necessity for a respiratory panel.
That said, "the volume isn't going to equal [peak] COVID levels," she said. "It just won't."