Aurora Diagnostics Is Feeling the Reimbursement Heat

Despite narrowing its losses significantly in 2013, Aurora Diagnostics, the Florida-based molecular laboratory, is the latest company in the sector to report ongoing struggles with maintaining revenue streams in the face of declining reimbursements. Aurora reported a net loss of $73 million on revenue of $248.2 million for calendar 2013. That’s less than half the $160.9 million loss it reported in 2012, but revenue declined 11 percent, from $277.9 million. Aurora’s March 25 10-K filing with the Securities and Exchange Commission blamed the revenue decline on “Medicare reductions, including changes to the 2013 fee schedule, the grandfather provision rule change and sequestration, as well as lower reimbursement from private insurance and the BlueCard Program.” However, total accessions were also on the wane, dropping 33,000 to 2.138 million. The average revenue per accession also declined 9.3 percent, to $116, compared to $128 in 2012. Based on Medicare’s ongoing changes to the Physician Fee Schedule, Aurora estimates that revenue from that stream will decline by $6 million in 2014, “before any change in conversion factor.” The company suggested that the Medicare cuts would not be the only headwinds it will face in the coming months. Aurora took noncash impairment charges of $53.9 million in late 2013. It included a write-down of $52.9 million in the carrying value of good will and another write-down of $1 million in the carrying value of intangible assets. “If we cannot offset the reductions in our reimbursement from governmental payers and potential reductions from our non-governmental payers by reducing our costs, increasing our accession volume, and/or improving our service mix, we believe it could have a material adverse impact on our revenue, profitability and cash flow,” Aurora said in its filing. The company also has $324.3 million in long-term debt—that’s more than a year of revenue at its current level—and just $1.4 million in cash on hand, down from $10.8 million at the end of 2012. Aurora appointed Daniel Crowley as chief executive officer in the spring of 2013, replacing Jon L. Hart, who was recently appointed as CEO of Medfusion. Crowley’s annual base compensation is $1.2 million, nearly triple Hart’s $450,000. Takeaway: Aurora Diagnostics, like many other medium-sized laboratories, is feeling the squeeze from ever-constricting reimbursements from government and commercial payers.