LabCorp Reports First-Quarter Results

LabCorp Reports First-Quarter Results

LabCorp Reports First-Quarter Results

LabCorp reported a net loss of $317.2 million for the three months ended March 31, 2020, down from net income of $185.6 million in the same period a year ago; revenue was up 1.2% to $2.824 billion. A summary of key topics discussed by CEO Adam Schechter and CFO Glenn Eisenberg on an April 29 conference call follows.

Diagnostics Division
LabCorp’s Diagnostics Division reported a 1.2% decline in revenue to $1.702 billion. Volume decreased by 4.4%, including an organic volume decrease of 6.1%, partially offset by acquisition volume of 1.6%. LabCorp’s requisition volume is currently down by roughly 50% to 55% versus the company’s normal preCovid-19 crisis volumes.

Increased demand for Covid-19 testing is marginally offsetting the loss in routine test volumes, according to Schechter. He said that LabCorp is currently able to perform more than 60,000 PCR-based Covid-19 tests per day, or 1.8 million per month, and is seeking to expand to over 100,000 tests per day.

LabCorp’s primary PCR-based Covid-19 testing locations are Burlington, NC; Indianapolis, IN; Phoenix, AZ; and Raritan, NJ. LabCorp is performing the majority of its testing on analyzers from Thermo Fisher and Roche, in addition to the Hologic Panther Fusion System. “The issue that you run into is you need additional machines and you can imagine there’s lots of back orders and you know doing these RNA tests and the PCR test takes a lot of equipment. But we’re going to try to build to get to over 100,000 as quickly as we can,” said Schechter.

Home Sample Collection Kits
LabCorp launched its Covid-19 at-home self-collection kits through its branded Pixel service in late April. The kits allow patients to swab their own nasal passages and mail the samples back to LabCorp for PCRbased Covid-19 testing. The service is currently available only for healthcare workers and first responders who have Covid-19 symptoms. To obtain a collection kit, an individual must first fill out an online questionnaire, which is then reviewed and authorized by a physician. LabCorp will bill private insurance or utilize federal funds to cover the upfront cost of the test, while self-paying customers pay $119. LabCorp intends to make the collection kits available to all consumers in the coming weeks. However, the service is not available in MD, NJ, NY, and RI, due to state restrictions.

Covid-19 Antibody Testing
LabCorp can currently perform more than 50,000 Covid-19 antibody tests per day and expects to increase its capacity to over 200,000 tests per day by mid-May. LabCorp is using Abbott’s antibody test. “When you think about those numbers, over 200,000 tests today in serology and maybe 100,000 tests over time for PCR, it’s still a very small number compared to the 530 million or so tests that we do across all of our testing [pre-Covid-19]. So unless we start to see that come back, it will be hard for these tests to make up for the difference in what we’ve seen since the last weeks of March,” according to Schechter.

Accounts Receivable
LabCorp said that, as a result of increase in unemployment and the potential financial difficulties of medical practices from the impact of the Covid-19 crisis, it took a first-quarter charge of $17 million to increase its accounts receivable reserves.

Cost Cutting

Some of the actions that LabCorp has taken to help offset the impact of Covid-19 include employee furloughs, delays in new hiring, reducing temporary and contract workers, and suspension of merit pay hikes
and 401(k) plan contributions.

LabCorp received $56 million in April through the CARES Act, which the company is using to ramp up
its Covid-19 testing capacity

The CARES Act — Not Much In It For Labs

The CARES Act — Not Much In It For Labs

The CARES Act — Not Much In It For Labs

The enormous $2 trillion Coronavirus Aid, Relief and Economic
Security Act (CARES Act) was signed into law on March 27, but provides little in direct relief to the nation’s laboratories. The American Clinical Laboratory Assn. (ACLA) had lobbied for $5 billion in new federal funding designated specifically for labs performing Covid-19 testing to cover uncompensated testing services, staffing and the purchase of analyzers, reagents and collection kits. Instead, the cornerstone healthcare provision of the final law is an ambiguous $100 billion fund for entities “that provide diagnoses, testing, or care for individuals with possible or actual cases of Covid-19.” Below we summarize key provisions in the CARES Act that pertain to laboratories. 

$100 Billion Fund for Eligible Healthcare Providers
The single paragraph of the CARES Act that establishes the $100 billion fund is vague and leaves the Department of Health and Human Services (HHS) with a major role in distribution decisions.

Eligible healthcare providers, including hospitals, physician practices and laboratories, must submit an application to HHS that includes their tax ID number and “a statement justifying the need of the provider for payment.” Provider expenses that may be reimbursed include “personal protective equipment and testing supplies.” Lost revenues that are attributable to coronavirus are also eligible to be reimbursed, but the Act does not explain how this will be calculated.

It’s unclear how the $100 billion will be divvied up. Applications will be reviewed by HHS on a rolling basis, but there are no details on how or when the money will be disbursed. HHS says it will be providing additional information on how healthcare providers and suppliers can access these funds in the coming weeks.

Coverage of Covid-19 Testing
Health plans/insurers are required to provide coverage, without cost sharing (including deductibles, copays and coinsurance) or prior authorization to hospitals and labs for all Covid-19 testing. Reimbursement is set at the negotiated rate for contracted labs. Non-contracted labs will get paid their list price, but are required to publish their test price on their website. For comparison, the Medicare CLFS rate for Covid-19 testing (CPT 87635) is set at $51.33.

Medicare CLFS Rate Freeze
The Act freezes Medicare Clinical Laboratory Fee Schedule (CLFS) rates in 2021. Under PAMA, CLFS rates for most high-volume tests had been scheduled for cuts of 10% to 15% next year.

The Act also delays labs’ responsibility to report their private-payer data to CMS under PAMA by another year to January –March 2022. This follows a previous one-year delay achieved with the year-end spending package.

Medicare Sequestration Temporarily Suspended
The annual 2% cut, or “sequester,” in Medicare fee-for-service claims (including the Medicare CLFS and Medicare Physician Fee Schedule) has been temporarily suspended from May 1 through the end of this year. However, the sequestration policy has been extended by an extra year (through 2030) in exchange for this temporary suspension. The 2% reduction has been in effect since 2013 under the Budget Control Act of 2011.

Add-On Payment for Hospital Covid-19 Patients
Hospitals will receive a payment increase of 20% for patients diagnosed with Covid-19 and later discharged during the emergency period. The discharge will be identified based on diagnosis codes, condition codes or other necessary means. This means Medicare’s payment for these types
of hospital stays could go from $10,000 to $12,000, depending on the severity of the illness.

ACLA on Lack of Dedicated Funding
“For the third time, Congress has failed to provide the necessary funds to support ‘free testing’ for all Americans. Our members remain in an untenable situation, absorbing growing, uncompensated costs for testing specimens with no assurance that they will be appropriately or fairly reimbursed for the tests they are performing,” according to a March 26 statement from ACLA President Julie Khani.