How will changes in physician payment by Medicare influence laboratory testing?

ABSTRACT

In-office laboratory testing offers physicians an opportunity to increase their incomes through the potential profit available from technical services. This financial incentive for in-office testing has been altered by Medicare limits on physician payment, legislative changes in physicians' ability to bill Medicare for laboratory tests, and technological advances in office laboratory equipment. While restrictions on payment may make laboratory testing relatively less profitable than other technical services offered in the physician's office, in-office laboratory testing still offers potential financial benefit to physicians, particularly if they can influence the demand for tests. Economic theory suggests that physicians may be able to increase the demand for their services, including laboratory testing, but empirical data are not conclusive. As Medicare and other third-party payers consider fundamental reform in physician payment, the effect of different payment schemes on physicians' use of laboratory tests may have important consequences for physicians' income, the quality of care, patients' access to care, and the cost of the Medicare program.