LabOratory – Shared Laboratories: What You Need To Know

Introduction

The concept of shared laboratories can be defined under two separate scenarios: one is where two or more sole practicing physicians or physician group practices, collectively pool resources to fund one laboratory operation. Under this arrangement, all billing for Medicare and Medicaid  use the same CLIA Number. The second scenario is one where two separate laboratories, each with their own identity and CLIA number, operate at the same physical location. 

As a result of dual definitions for the same term, there had been some confusion about the legal requirements for operating shared laboratories, including: 

  • Physicians involved in shared laboratories had registered in a variety of ways with CMS for CLIA purposes. 
  • Physicians involved in shared laboratories having registered separately, obtained their own CLIA numbers, and enrolled in proficiency testing (PT) multiple times for the same laboratory. 
  • Others filed jointly and requested that the laboratory be considered as a single site for CLIA certification purposes.  

Fortunately, a few years ago, the Centers for Medicare and Medicaid Services (CMS) released guidelines to its regional offices and state survey offices to clarify these requirements. Each type of shared laboratory is defined below, including information on CLIA requirements, operating principles and limitations:

Scenario 1:  Two or more independently practicing physicians share the costs of laboratory equipment and staff, with each physician billing separately for the tests they perform for their own patients.

Current CMS policy requires these shared laboratories to obtain a single CLIA number. These laboratories must designate one physician as the laboratory director. The laboratory will be subject to a single biennial inspection, it will pay one compliance fee, and it will only be required to enroll in proficiency testing one time for all non-waived laboratory testing .

In order to have this type of shared laboratory, these criteria must be met::

  • A shared laboratory is located in a common area.
  • Two or more sole practicing physicians or group practices share the expenses necessary to operate the laboratory.
  • Laboratory testing in a shared laboratory is directed by one qualified individual who is responsible for the overall operation, quality assurance and administration of the laboratory.
  • Independent practices sharing the certificate can only perform the test complexity or category allowed under the shared laboratory CLIA certificate.

You must also file an amended CMS – 116 Form:

To file an amended CMS-116 form for your shared laboratory, you must do the following:

1. Obtain and complete a new CMS-116 form on-line or from your state survey office.

2. Designate one physician as the laboratory director and use his/her CLIA number and federal tax identification number (if applicable) to complete “Section I - General Information” of the CMS-116 form. The designated laboratory director should sign the newly completed 116 form.

3. Attach a cover letter indicating the names and CLIA numbers of the additional physicians

involved in the shared laboratory arrangement.  

4. Send the amended form and cover letter to your state survey agency, as well as to your  accreditation organization if you are accredited, or in the process of obtaining accreditation.

Your laboratory will then receive a primary CLIA number for the shared laboratory to be used by all the physicians for billing Medicare and Medicaid. Your individual CLIA numbers will be terminated. It is important that you contact your PT program, and, if accredited, your accreditation organization to provide them with your primary CLIA number.

Shared laboratories which do not file an amended CMS-116 form will be asked to complete the form during their next biennial on-site inspection.

One clarifying point: physicians who perform testing in their own office in addition to utilizing the shared laboratory must also register their own laboratory for CLIA purposes. For example, if physicians perform waived testing in their own office in addition to utilizing the shared laboratory for more extensive laboratory work, they have to obtain a certificate of waiver.

Scenario 2:  Two separate laboratory entities, each with their own identity and CLIA number at the same site. 

 The following CMS requirements must be met in order for this type of shared laboratory to operate:

  • The times must be shown for each laboratory's operation.
  • Each laboratory must have a unique name and directed by a different laboratory director.
  • Each laboratory must maintain entirely separate records and demonstrate independent operation.
  • Each laboratory’s test reports must clearly identify the laboratory that performed the test.
  • Each laboratory must develop policies to prevent proficiency testing sample sharing or information between the two labs.
  • If applicable, each laboratory (CLIA number) should enroll in a separate proficiency testing program using different proficiency testing providers. 

Note: Billing issues regarding multiple providers at a single location sharing one CLIA certificate must be addressed directly to the reimbursement entities, such as Medicare or insurance carriers. CLIA will only address issues regarding the laboratory’s certification. 

The Stark Law and Shared Laboratories

The Stark Law: This law prohibits physicians from referring their patients to a laboratory with which they or an immediate family member has an ownership or compensation arrangement. 

Does the Federal Law Apply to All My Laboratory Referrals? No. The federal prohibition on referrals applies to Medicare and Medicaid beneficiaries only, not patients covered by other third-party private insurance. However, it would be prudent to check with local or state medical or specialty society organizations regarding any possible state laws which prohibit referrals to laboratories in which you have an ownership.

Are Any Referrals Exempt from the Ban? Yes, in-office ancillary testing. In 1989 Congress provided a key exemption from the ban on referrals when it established the law—the ban does not apply to “in-office ancillary laboratory services.” This exemption was written into the law so that solo-practicing physicians and group practices could continue to provide convenient in-office testing to their patients. 

What is the Definition of In-Office Ancillary Services? 

In-office ancillary services are defined by the law as services which are personally performed by one of the following: 

• The referring physician; or 

• A physician who is a member of the same group practice as the referring physician; or 

• An individual who is directly supervised by the referring physician or, in the case of group practices, by another physician member of the same group practice. “Directly supervised” is defined as on-site and immediately available during testing. 

In addition, to qualify for the in-office ancillary exemption, the laboratory services must be provided in the same building as the referring physician, or in the case of group practices, in the same building as the practice or another building that is used by the group practice for providing ancillary services. 

Finally, laboratory services billed to Medicare and Medicaid must be billed by the referring physician, the group practice of which the referring physician is a member or by an entity that is wholly owned by the physician or the physician’s group practice. 

What About Shared Labs? Although the Department of Health and Human Services (HHS) does not establish a specific exemption for shared laboratories, the Agency does clarify that certain shared laboratory arrangements could qualify for the general in-office ancillary exemption discussed above. To qualify for the in-office ancillary exemption each physician involved in the arrangement must comply with the location, direct supervision and billing criteria of the in-office ancillary exemption. 

HHS gives the following example of an arrangement that would qualify:

• Physicians A, B and C each have their own practices in the same building, 

• Each physician “directly” supervises the laboratory staff during testing for his or her patients, and 

• Each physician bills individually for the services provided. 

Conclusion

The decision about how you want to organize and manage your laboratory operation must take into account not only federal (CMS) technical requirements and regulations, but those of your local and state jurisdictions as well; the billing and reimbursement policies for Medicare/ Medicaid, as well as those for private insurance carriers;  and the logistics of being part of one shared laboratory operation under one CLIA number, or operating your own independent laboratory.

 

Irwin Z. Rothenberg is a Technical Writer/Quality Advisor for COLA’s Educational subsidiary, COLA Resources, Inc. (CRI), a leader in online continuing education for physicians, laboratory personnel, and allied health professionals.  CRI offers continuing education through online courses, informational products in both electronic and hard copy form, webinars on cutting-edge technology and regulatory issues, and CRI on-site Symposia for Clinical Laboratories, providing live educational sessions and interactive workshops with leading industry organizations. For more information, visit their website at www.criedu.org or call 1-800-981-9883.


Irwin Z. Rothenberg, MBA, MS, M.T. (ASCP)

Technical Writer/ Quality Advisor, COLA Resources, Inc.