A Brief Outline of Billing and Reimbursement Topics for Physician Office Laboratories


Physicians across the country operate in-office laboratories and do billing for certain types of lab tests.  For example, pain management physicians use this service to do drug testing on patients in order to get faster results while increasing their revenue per patient.  Urinalysis testing can be done using a simple dipstick, or it can be done more thoroughly using analyzer machines.  The dipstick method is cheaper, faster, uses no technology, but is also more likely to produce inaccurate results.  When using the analyzer machines, each sample is typically run twice, once to determine which drug classes are present in the sample (this is known as the qualitative test and is billed with code G0431), and the second time, if a positive result shows up in the first test, in a different type of machine to determine the amount of each drug class present in the sample (known as the quantitative or confirmation test). 

Reimbursement depends on the type of test being done, as follows:

-          The dipstick method is typically reimbursed around $10 per sample

-          The qualitative tests typically get billed using code G0431 and are paid around $100 to $140 per sample

-          The quantitative/confirmation tests can be paid at well over $250

We work with our clients to develop processes that make sure 100% of the samples get processed, billed, and paid appropriately and timely.
— Jonathan Marshall of RPM Billing

Medicare has been gathering data from certain in-office labs, and it has announced its intent to change its in-office lab reimbursement rates on January 1, 2018.  The new rates are expected to be announced in November 2017.  See https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/ClinicalLabFeeSched/PAMA-Regulations.html for more details.

In many cases, contracted private insurance companies do not require physicians to go through a full credentialing process to add this as an allowable service under your contract.  They simply require that you notify them which lab services are now available in your office, and submit your lab licensing information, and they will simply add it to your contract’s fee schedule so you can bill for the in-office lab services.  Incremental supply costs are primarily made up of testing chemicals and are approximately $10-20 per sample for qualitative testing.  The cost of the qualitative analyzer machine ranges around $50,000, while the cost of the quantitative machines typically cost around $250,000. 

Many physicians view the high cost of the quantitative analyzer machine as prohibitive, so they choose to provide and bill for the qualitative lab test in-office and then send the samples to an outside lab for confirmation and billing of the quantitative confirmation test.  The process of setting up a qualitative urinalysis laboratory in a physician office, complete with licensing and certification, takes approximately 90-120 days and consists of identifying, obtaining, and installing the correct equipment, hiring a lab tech to operate it, developing in-office forms, policies, and processes, and the use of a professional laboratory consulting service to help with all licensing and clinical oversight.  The American Academy of Family Physicians provides helpful information here http://www.aafp.org/practice-management/regulatory/clia.html and CMS publishes a guide here https://www.cms.gov/Outreach-and-Education/Medicare-Learning-Network-MLN/MLNProducts/Downloads/CLIABrochure.pdf but even with all of this helpful information available, a professional lab consulting firm is highly recommended.

When analyzing the potential financial impact to your business, physician offices should track their lab send-out volumes for a period of time, and then do a simple financial projection to estimate the expected monthly improvement in collections.  That analysis should include the expected monthly volumes and reimbursement rates to calculate expected revenues, the one-time cost of acquiring the analyzer machine, the fixed costs of space, staffing the lab, clinical oversight, and lab consulting costs, and also the variable costs of supplies, processing times, and office staff time.  We can help with this type of analysis.

Billing must be done carefully because different types of insurance accept different billing codes for physician in-office lab services.  For example, Medicare simply uses code one billing CPT code, which is G0431 with a quantity of “1” regardless of how many drug classes are tested.  Some Medicaid and Commercial insurance plans accept the combination of billing CPT codes 80101, 82055, 82570, and 83986.  Over time, it is anticipated that all payors will conform to Medicare’s billing code standards.

RPM Billing is a professional medical billing and consulting firm based in Las Vegas and Reno, Nevada, and serving clients nationwide.  We have an experienced lab billing team, and we work with our clients to develop processes that make sure 100% of the samples get processed, billed, and paid appropriately and timely.  We have helped numerous clients successfully implement strategies such as these.  Led by Jonathan Marshall, a leader with a Healthcare MBA and two decades of experience as CEO, CFO, and COO of hospitals and physician practices, RPM Billing was created as a commitment to excellent processes, results, and customer service for its clients.  To contact us for a free review of your company’s opportunities to improve revenues, call us at 775-501-9820, email us at jon@rpmbilling.com, or visit us at www.rpmbilling.com