Technology, economics, and patient convenience are driving clinical laboratory testing services to point-of-care locations such as clinics, outpatient centers and especially physician offices. Office-based labs can provide results while the patient is in the office, which increases efficiency, contributes to faster diagnoses and treatment and improves patient satisfaction. Keeping overhead costs low and avoiding specimen transport costs can often yield lower costs-per-test than are possible with hospital or reference laboratories if the test menu and equipment are carefully chosen.
On one hand, regulatory requirements from the Occupational Safety and Health Administration and CMS’ Clinical Laboratory Improvement Amendments have added expense and hassle to physician office laboratories, while managed care has siphoned off revenues to mandated reference labs. On the other hand, new technology has significantly reduced equipment and reagent costs, and greatly expanded the range of tests that can be performed profitably in office labs.
With the proper investment in equipment and qualified personnel, many tests can be performed profitably. The trick is to determine what testing is reasonable based on each practice's resources, testing volumes and patient needs. Profits can be maximized by performing only those tests that the practice orders in high volume and that are less expensive for the office to perform. Other tests can be sent out to reference labs.
Practices with a large percentage of Medicare patients can benefit from the ability to bill for and capture the profit from tests that would otherwise be billed directly to Medicare by reference laboratories. If a practice meets any one of the following criteria, then it is possible to increase profitability.
1. More than 40% of patients are covered by Medicare fee-for-service plans;
2. Tests are ordered by two to four full-time internal medicine physicians;
3. More than 3,000 individual tests are ordered each month; or
4. Reference lab charges are more than $3,500 per month.
The first step is to analyze current lab volume. Next, talk to vendors about available testing systems, being sure to ask about supplies and reagents needed to run the tests as well as training required. Once armed with that information, evaluate or optimize the existing lab, project the economics of opening or closing a lab, and evaluate performing lab services for others. ACP members can download the newly revised Office Laboratory Check Up for free; click on Practice Management, then Financial Management, then Office Lab Check Up.