Government Shutdown...
Hey, everyone. Welcome to LabReflex. There's a big set of headlines that I wanted to go over real quick here live, and I think it's important that we discuss it. There's a lot of talk about the government shutdown and lab impacts and I think that it's kind of a little tricky, so I want to sort of make clear or at the very least explain a little bit about what's going on. About ten years ago, this PAMA was enacted and the idea behind PAMA was that we would be reducing costs for healthcare, specifically on the clinical lab fee schedule.
Speaker 1:And what we're going do is we're going to baseline the expenses to this fee schedule based on private payer data. In theory that should have reflected market rates, but of course in practice it over weighted large reference labs and sort of skipped out on hospital and community labs. And so as a result, the reductions in cost were going to be pretty draconian like 15% for a large number of pretty bread and butter lab tests. I think it's 800 tests or so. So every couple years, congress has sort of kicked the can down the road, passed different legislation that has postponed this PAMA, never repealed it properly but and so this year, in its latest iteration, was gonna be called the Results Act and it was introduced in bipartisan way in September, which is okay, probably make it in time.
Speaker 1:But unfortunately, since the government shut down, everything was delayed by, you know, a month and a half. And so the problem with that is that there's some major piece of legislation that's gonna happen in the November, December time frame, appropriations, you know, debt financing, military spending. And so the results act is like kind of on the back burner. Specifically, what the results act was gonna do is cap the cuts from PAMA at 5% instead of 15% luckily. It's gonna freeze or slow reductions altogether out to 2028 and then it's gonna broader use a broader independent database like community and outreach labs that will count.
Speaker 1:So now the actual baseline costs are going be the same, know, reasonable. So it's going to add some stability and give the labs in the community a lot more predictability which is great because we've been lacking direction from the federal government for a long time. Everybody's sort of on pins and needles for the last ten years and it's it's been terrible. The problem is that if we don't get this passed before January 1, then the PAMA reductions go into effect. Luckily this weekend, the Senate adopted a thirty day delay and that's gonna apply to these Medicare cuts.
Speaker 1:So right now instead of everything happening in January 1, we're going to have a little bit of delay or a little bit of reprieve. So theoretically, if we can get the results passed, results act passed prior to January 30, then we could, in fact, stave off some of the I guess it's thirty first, stave off some of the impact of these reductions. Think that it's very likely that we're gonna see some set of reductions just because I I just don't think that it's very likely that the results act is high priority for government right now. However, I I could be wrong, obviously, but I think that it's it's a it's a wonderful reprieve right now, but we really need to get legislation passed so that we don't have to have this, you know, can kicking forever. So I think that, you know, keep your eyes peeled for the end of the year legislation.
Speaker 1:I suspect that if it's gonna pass before this deadline runs out, that you'll see it as part of a larger appropriations or maybe a larger health bill. As important as we think the lab is to the world, and it is, the world doesn't necessarily appreciate how big of an impact the clinical lab has on healthcare of all Americans and so its priority is a little bit lower. And so I suspect that it will get snuck on to something else that is a little bit more politically palatable. So let's keep our eyes peeled, cross every finger, cross every toe that you can that this gets done because if it doesn't then I think we're going to see some pretty drastic reductions in our compensation. And that brings me to the second headline that I think is kind of interesting.
Speaker 1:It's a little bit, you know, further out but there's this vendor slowdown in supply chain. You may have noticed that there's a large number of major diagnostic vendors Bio Rad, BD, Thermo Fisher, etcetera, etcetera that that have had, you know, slower growth, reduced forecasts, restructuring, consolidation, a bunch of other things going on. And I think it's it's part of a larger picture. With inflation rising, r and d budgets cut, a lot of these companies, that's sort of like, a big part of their, you know, financial portfolio. And so hospitals are reducing costs and R and D and is reducing costs.
Speaker 1:And so these companies have to look for growth somewhere. So they are spinning off some of their business units, they are projecting slower growth. And I think that in the short term, we might see some real deals. Right? You might you might see that over the short term, some of the vendor units, they might be trying to move product and and sell devices because it's hard to sell devices right now.
Speaker 1:Hospitals are just tightening their belts. But I think in the long term, you're gonna see some of these companies going after consumables and selling of of those kinds of products. And so I'm sort of negatively predicting here that we may see some impact. Now, again, like I said, this is this is pretty long term out. Usually, financial projections for some of these vendors is, you know, something that, you know, Wall Street focuses on, not us.
Speaker 1:But I think that we may need to pay attention now. Because if you think about it, we've got this first quarter, maybe the second quarter could be impacted by these PAMA cuts. And even if results gets passed, there's a lot of uncertainty in that first one or two quarters. And then if in six months hospitals are still belt tightening and vendors aren't selling analyzers and they try to recoup their costs some other way, the way that they're gonna be able to do it is selling commodities and so those prices are gonna go up and they're gonna go up more than inflation which is already going up too much. So I just see that the first couple quarters, we're probably gonna be worried about PAMA and the last couple quarters, we're gonna be worried about inflation and prices increasing on our commodities like our reagents.
Speaker 1:And so I'm just worried that over the course of the year, we're gonna have some negative impacts here. But, anyway, that's that's all I really have. I I I think what we're gonna do here at LabReflex is, keep an eye on it. These are not, you know, set in stone predictions, but I suspect that they're gonna be driving a lot of the narrative over the course of 2026. So let's stay tuned.
Speaker 1:Thank you very much, and see you next time.
