SIC 8071 Medical Laboratories
SIC 8071
This category covers establishments that provide professional analytic or diagnostic services to the medical profession or to patients upon prescription of their physicians.
621511
Medical Laboratories
The laboratories in this classification are independent, commercial enterprises that provide bacteriological, biological, histological, blood, chemical, and pathological analysis; urinalysis; and medical and dental X-rays. While demand is high due to the increased health care needs of the country's aging population and the outbreak of new and serious diseases, intense competition, cost-cutting measures implemented by managed care organizations, and a lack of skilled workers presented challenges to the industry's continued growth in the twenty-first century.
Laboratory companies have met these challenges by growing through mergers and acquisitions and by continually developing faster, cheaper, and less invasive testing procedures. One significant trend is toward more point-of-care testing, in which tests are performed in a doctor's officer—or in the case of home health care, at home—with testing, diagnosis, and treatment consolidated to one location. By 2001, more than half of all simple medical testing was completed in doctors' offices.
Medical laboratories are governed by the Clinical Laboratory Improvement Act of 1988 (CLIA '88). These regulations, implemented in 1992, increased requirements for proficiency testing, thereby raising costs. The cost of proficiency materials tests went up by 67 percent in the first eight months of 1992. While the new regulations caused the cost of materials to go up, the regulations also simplified administrative costs by unifying separate rules that had been established under previous programs.
National health care expenses more than doubled between 1980 and 1990, from $250 billion to $696 billion per year, and nearly doubled again by 2000, reaching $1.3 trillion. Because of these huge increases, employers and insurers sought to control costs. They took steps to substitute outpatient treatment for hospitalization when possible. Insurers and employers wanted to see laboratory tests and X-rays to determine if hospitalization recommended by physicians was really necessary. Hospitals also had a stake in making sure that unnecessary hospitalizations were not occurring. After 1983, hospitals were reimbursed for Medicare patients at a modest rate as determined by federal "diagnostic related groups (DRG)"—standard rates determined by a patient's diagnosis, age, sex, treatment modality, and discharge status. If costs exceeded DRG prices, the hospitals were required to absorb the cost. Ironically, the new emphasis on tests caused the cost of diagnostic procedures to skyrocket. Insurers and employers sought to hold down costs for these as well.
One of the most vigorous debates in medicine in the mid-1990s centered on clinical laboratories owned by doctors. In 1989, the federal government passed a law prohibiting doctors from referring Medicare or Medicaid patients to clinical laboratories in which they had invested, but critics wanted to ban doctors from referring any patients to such laboratories. Self-referral, they argued, leads to unnecessary diagnostic procedures. Government studies indicated that 10 percent of the nation's doctors had invested in a business to which they sent their patients and that these doctors made more such referrals than doctors who had not invested in the facilities to which they referred patients.
Other legal issues that haunted the industry during the early 1990s included fraud and charges of unsafe practices. In 1993 state and federal officials...
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