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Outreach Resource Center

Laboratory Issues: Regulatory

Everyone engaged in community laboratory outreach has been confronted by the imponderable question of whether any "legal" or regulatory challenge exists to the practice of outreach that was overlooked. When we receive these inquiries, the questions are often accompanied by a request to show me where it says the practice is legitimate. Loosely, these questions fall into the categories of discounting and billing practices. This page provides a compendium of documents containing language that may shed light on this subject. It is not intended to be a comprehensive listing, nor should it be your only guidance. At the very least it should help form the appropriate questions and assist you with seeking an interpretation that allows you to move forward.

We must emphasize that rarely do regulations or statutes create a bright line as to behaviors deemed acceptable in every instance. Instead, they often describe inappropriate or unlawful practices. It is then left to the legal structure to determine whether, when contested, a practice is inappropriate. The good, and bad news, is that very few specific examples of community laboratory outreach issues have been resolved to the point of becoming case law. What we are then left with is speculation over the interpretation of the occasional change to Medicare regulations, OIG opinions or enforcement actions. Each of you must ultimately arrive at a balance between having a definitive solution to every possible hypothetical scenario, and substantial comfort with preparation for the common circumstances encountered in your business model.


OIG ruling withdraws the proposed rule, June 18, 2007

OIG ruling withdraws the proposed rule from 2003 regarding charges. more »

Physician Self Referral "Stark Amendment"

"Phase I" Rules - FR January 4, 2001

"Nothing in section 1877 of the Act or these regulations is intended to require physicians to pass discounts on to the Medicare program." more »

De minimis non-monetary compensation totaling up to $300 per year. more »

Proposed "Phase II" Rules – FR March 26, 2004

"…we believe that legitimate discounts will fall within the range of values that is ‘fair market value.'" more »

Stark II Phase III, August 18, 2007

more »


Medicare Increase 2009

CMS Program Transmittal 1651 Pub 100-04

Medicare clinical laboratory fees to increase 4.5% January 1, 2009.

more »

Unrelated Business Income Tax

IRS Revenue Ruling 85-110

Performance of testing by non-teaching hospitals on referred specimens from private patients is unrelated trade or business if such services are otherwise available in the community (Revenue Ruling 85-110) more »

NOTE: Upon entering the above link, select year 1985. Then scroll to revenue ruling 85-110.

Medicare Cost Reporting

Medicare Provider Reimbursement Manual Publication 15-1 Chapter 22
Charges refer to the regular rates established by the provider for services rendered to both beneficiaries and to other paying patients. Charges should be related consistently to the cost of the services and uniformly applied to all patients whether inpatient or outpatient. All patients' charges used in the development of appointment ratios should be recorded at the gross value, i.e., charges before the application of allowances and discounts deductions. more »

Medicare Billing Procedures

Hospital and Intermediary Manuals provide definitions for inpatient, outpatient and nonpatient services. Hospitals are required to bill for referred testing.
more »

CMS Program Transmittal AB-02-027

SNFs must make arrangements under Part A and may make arrangements under Part B under which the SNF bill the intermediary and receives payment from the program. more »


Medicare Program Memorandum to Intermediaries and Carriers Transmittal AB-99-49 dated June 1999.
Calculation of reimbursement for specimen collection and transportation. more »

Shell Lab Provisions, Payment to Referral Labs, OBRA 89 & 90

Shell labs defined as performing less than 70% of tests for which Medicare bills or claims are submitted (OBRA 89), modified to 70% of all requisitions received (OBRA 90). Shell labs cannot bill referred tests. more »


Physician Signature Policy Retracted

As published in the November 28, 2011 Federal Register (Vol. 76, No. 228) 

“…we are finalizing our proposal to retract the policy that was finalized in the CY 2011 PFS final rule with comment period, which required a physician’s or NPP’s signature on a requisition for clinical diagnostic laboratory tests paid under the CLFS (75 FR 73483) and to reinstate our prior policy that the signature of the physician or NPP is not required on a requisition for a clinical diagnostic laboratory test paid under the CLFS for Medicare purposes.”

The complete text of the Federal Register is found at this link: 

(tip – search using the phrase “signature on requisition” to find the physician signature discussion and ruling)

The Physician Signature News Archive links to external material regarding the 2010 proposed physician signature rule.

Conflicts of Interest

1997 IRS Exempt Organizations Continuing Professional Education Technical
Instruction Program Textbook

The policy specifically requires that "the interested person leave the meeting during the discussion of, and the vote on, the transaction or arrangement that results in the conflict of interest." Additionally, it defines an interested person as a person who has a "compensation arrangement with any entity or individual with which the tax exempt healthcare organization is negotiating a transaction or arrangement." more »

Competitive Bidding

The Competitive Bidding News Archive links to external material regarding the Competitive Bidding Demonstration Project.