Laboratory > Physician Office Lab > Considerations for Expanding Laboratory Testing in Medical Practices

Considerations for Expanding Laboratory Testing in Medical Practices

The transition within healthcare to outcomes-based medicine is occurring at an increasingly rapid pace, leading physicians to assess their practices and their business models from a revenue standpoint as well as for patient population management. This white paper will address how expanding point-of-care laboratory testing or transitioning from CLIA-waived to moderately complex laboratory testing can help address some of the needs generated from an outcomes-based approach. Likewise, it will define the key differences between point-of-care and moderately complex testing. Finally, it will address key considerations for determining which approach to laboratory testing makes the most business sense for your practice. 

Lab testing beneficial for both patients and practices

Trends show that provider populations are stagnant or shrinking, yet patient populations are growing and are being pushed from the specialist's practice to the primary care setting. Practices must look at other areas of efficiency and quantify those to justify how they interact with various patient populations. Optimized solutions are being built for any given patient population to help manage bottlenecks with population growth areas. As we begin to transition to a more outcomes-based, payer-type marketplace, practices must become more efficient at population management. For example, this is already occurring with diabetic patient populations and for patients being treated with COUMADIN. Practices are instituting patient programs, office procedures and operational policies outside the standard exam visit specific to the needs of a particular subset of patients. These models will continue to grow with outcomes-based medicine, as practices strive to gain traction with groups that are increasingly problematic.

Although annual healthcare spend is more than 3 trillion dollars in the United States and laboratory testing only accounts for 2 to 3 percent of this spend, 70 percent of physician decisions rely on a lab test for diagnosis and treatment. Providing laboratory testing at the point of care can have multiple benefits for both patients and practices. For patients, it minimizes the time spent away from work or school and decreases the time it takes to receive test results, a diagnosis or treatment recommendations.

This time efficiency leads to increased patient satisfaction which now has a much greater impact on performance metrics for practices. For practices, providing laboratory testing in the office can help increase operational efficiency. And with results in had faster, diagnosis and treatment can begin more quickly leading to better patient compliance with treatment recommendations and, ultimately, better health outcomes. Managed appropriately, testing can also serve as an additional revenue stream for the practice.


Levels of in-office testing

In general, there are several levels of laboratory testing that a practice may adopt: CLIA-waived, moderately complex or highly complex. The Clinical Laboratory Improvement Amendments (CLIA) are federal regulatory standards that apply to all clinical laboratory testing performed on humans in the United States (with the exception of clinical trials and basic research). A clinical laboratory is defined by CLIA as any facility which performs laboratory testing on specimens obtained from humans for the purpose of providing information for health assessment and for the diagnosis, prevention, or treatment of disease.1 Prior to patient testing, every laboratory must have a CLIA license, which can be waived or non-waived.

Initiating point-of-care testing: Factors to consider

The CLIA application form, along with a listing of state offices and contact information, can be downloaded from the Centers for Medicare & Medicaid Services (CMS) website, Some states have additional licensure and may require an onsite inspection prior to issuance of a license, so it is important to know the requirements of the state in which your practice operates.

Within point-of-care testing, there are various levels of technology available. Rapid tests are generally visually read tests that are inexpensive, quick and easy to perform and provide quick results, but can potentially be the least reliable of the various options.

Another testing alternative, reader technology, reduces the possibility of human error in interpreting results. This technology involves analyzers that read and provide results to the clinician. These can be smaller, handheld or stationary analyzers that require minimal physical space. This technology is slightly more expensive initially, but the expense is balanced by the enhanced quality and reliability of the technology.       

The newest technology available on the market, with the highest degree of accuracy, is molecular technology. This technology has historically been available only with highly complex equipment but has recently been approved by the Food and Drug Administration (FDA) to receive CLIA-waived designation. Molecular technology allows for a high degree of reporting accuracy directly at the point of care and includes a quickly expanding, broad menu of tests with both rapid and reader technologies.   

CLIA-waived testing in your practice

Most practices do at least some CLIA-waived testing, such as dipstick urinalysis, glucose tests with a monitor or flu testing. To conduct CLIA-waived testing within a practice, there simply needs to be training by the test manufacturer or a review of the instructions provided within the FDA-approved package insert. It is important that the practice follows all manufacturer instructions in order to remain waived; if altered in any way, testing becomes highly complex.

No special certifications or degrees beyond a high school diploma are required. This flexibility allows most physician offices to perform some degree of HbA1c, strep or flu testing using the skills of a medical assistant or nurse. Some states have additional regulatory concerns more stringent than CLIA that may prohibit this testing as waived. Practitioners should contact their state offices for additional requirements. New Jersey, for example, only recognizes eight tests as waived by CLIA '88. All other tests require New Jersey state licensure and proficiency. The key here is to check with state regulatory bodies.

Several factors should be considered when making the decision to initiate point-of-care testing. These include the test volumes, what test menus meet the needs of the patient population and what insurance carriers reimburse the practice. Consider the percentage of patients covered by Medicare vs. HMOs or private insurance to determine the feasibility of having a laboratory within the practice and whether it will be financially beneficial. Medicare reimburses the entity conducting the test, so when physicians perform tests in their offices on Medicare patients, the physician is reimbursed directly on a fee-for-service basis, based on a published fee schedule. This fee schedule may be found at

Frequently, private payers (such HMOs) require physicians to send their patients with orders for lab tests to a reference lab, such as Quest or LabCorp. HMOs tend to have contracts with these reference lab entities, usually on a capitated basis. Tests that fall under this model might include Vitamin B or thyroid level testing. There are exceptions, however. Tests conducted as part of the standard of care for chronic disease management, such as HbA1c to monitor a diabetic patient, may be treated differently by the HMO. Thus, practices should consider how many and when patients would be referred out to determine the volume of testing that would be eligible for reimbursement.

Transitioning from waived to moderately-complex lab testing

Making the transition from point-of-care testing to moderately complex involves a shift in mindset from simply offering a service to running a business within the business. It typically starts with the realization that the test volumes have increased enough to justify moving from running tests individually to running them in batches using more sophisticated, and subsequently, more expensive equipment. With a large enough volume for a certain menu of tests, for example 12 or more patient samples per day for CBCs that are reimbursable based on the payer mix, the expense can be justified. One downside of moving to moderately complex testing is that turnaround time for results shifts from real time or within hours, to being available within days. Often this delay is addressed by using a combination of point-of-care and moderately complex testing based on the specific needs of the practice. Likewise, the value generated in operational efficiencies that comes with moderately complex testing often makes the tradeoff justifiable for high volume practices.

The test menu and volumes will factor into the determination of the analyzers, test systems and test kits. Analyzer selection is impacted by the complexity of your laboratory license, the technical capabilities of your laboratory staff and the available space and specifications of your laboratory. When selecting laboratory test systems, consider analyzers and test systems that:

  • Provide appropriate test menus
  • Provide adequate cost per test and time to test
  • Fit within the available physical space
  • Have acceptable specifications regarding physical space, electrical, plumbing, ventilation and internet capability when warranted
  • Adequate time to first test
  • Assure ease of use for laboratory personnel
  • Require little or no maintenance
  • Include a minimum of one year warranty
  • Require few additional consumables and supplies
  • Support HL7 capability if needed for additional integration of a laboratory information system2  

Following the selection of the analyzer, a contract is set up that includes terms and conditions, reagent pricing agreements, service contracts, warranties and leasing agreements. Following the completion of the contracts, training is scheduled for the personnel who will run the equipment, after which, personnel will be responsible for analyzers validation and the integration of a Laboratory Information System (LIS). Additionally, personnel must review all policy, procedure and quality assessment plans to ensure quality of testing and completeness of documentation review and retention.

The most substantial consideration in transitioning from waived to moderately complex testing generally involves the human resource commitment. The government stipulates more educational thresholds to become CLIA-moderate, and personnel requirements differ from CLIA-waived testing. Three specific roles are required. First is the lab director. Often the physician can fill this role by becoming qualified to oversee a moderately complex lab directly. Online lab director courses can be taken to meet the requirements to qualify as a lab director, are available from multiple entities and are generally worth 20 or more CMEs. A certificate of completion should be submitted to the state agency and CLIA to serve as record of qualification.

The second role for CLIA-moderate requires personnel adequately trained with a degree to run the equipment. It is typically best to have a person with analytical skills dedicated to this role. If a practice wants to onboard multiple instruments at one time, they will be more successful if they are able to hire one person dedicated to running the instruments full time.

The third personnel component for a moderately complex lab is a technical consultant who, at a minimum, must be a medical technologist with a four-year degree. This role can be challenging to fill due to the decreasing number of people with this expertise and training. Fewer and fewer schools graduate medical technologists today. This role is not required to be on-site in most states and can be set up as a contractor or consultant, which helps many practices overcome the hurdle of staffing a medical technologist. There are some states, like Nevada and Pennsylvania, which require the technical consultant to be on-site quarterly to review QC/QA if a physician is not on-site. The technical consultant that is hired should be licensed and have expertise in CLIA compliance, state regulatory concerns, licensure and integration of laboratory equipment. Many practices challenged by finding this resource turn to technical consultants such as MedSolSM , owned by McKesson Medical-Surgical, or COLA, however, they can also be found through local accreditation organizations or CLIA surveyors.

Important considerations for setting up a lab in your practice

Overall, practices should consider the following questions when thinking about setting up a laboratory and determining the right approach and financial feasibility: 

  • What are the goals of the practice?
  • What patient populations are expected to grow within the practice?
  • What patient experience is desired while they are present within the practice?
  • What are the human resource constraints?
  • What specific test menus are needed?
  • What is the daily or weekly volume of those tests?
  • What operational efficiencies need to be resolved?   

The answers to these questions could vary based on whether the primary goal is to recapture revenue or to address a specific growing patient population.

Your practice may want to shift the focus of human resources to drive more production. Needs are truly individualized from practice to practice. A sole proprietorship with a goal to stay independent may have very different ideas than health systems that are buying practices and want to have a standardized approach to running the business.

There are differences in populations that practices want to serve, opportunities for revenue growth, areas where bottle-necks exist within practices and what experience practices want their patients to have. In every case, there are clinical and diagnostic tools available to allow each of these distinct needs to be met by determining the appropriate approach.   

Download the complete white paper

Resources for additional information


2 Shudfelt, John, M.D., J.D., M.B.A., FACEP, The Textbook of Urgent Care Management Thank you to the contributors to this whitepaper: McKesson Medical-Surgical Laboratory Solutions Specialists David Gallo, Bob Wilsusen and Steve Saul who collectively have more than 65 years of experience helping medical practices assess their laboratory needs and manage through the evolution of their laboratory services.

Lynn Glass, B.S., M.T. (ASCP), Vice President of Laboratory Services and Business Development at McKesson Medical-Surgical, founder of MedSolSM and contributor to The Textbook on Urgent Care Management by John Shudfeldt.

All trademarks and registered trademarks are the property of their respective owners.

2015 McKesson Medical-Surgical Inc.

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