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Opening a reference lab: 6 things to consider

December 10, 2021 | Daniel Doll
Opening a Reference Lab

Are you thinking about opening a reference lab? It's a challenging and competitive industry, but you can get a head start with this list of six major things to consider before you can turn your dream into a reality.

1. Your Business Plan

A thoughtful business plan is the best way to get started, and it's something that many start-up labs overlook. Your plan will contain everything from the personal decisions that led you here to a company description and market analysis.

Think about your strengths and your competitive advantage. How will your business stand out?

Funding will be your first major hurdle. You'll need a plan to come up with much of your own start-up money, because few banks are willing to issue a loan for what they consider a high-risk venture.

With funds in hand, staffing will be your most important investment. Think about your search for qualified personnel. You'll need a lab director, technical supervisor, general supervisor, and technicians to perform the testing. As you begin, will some of your team fill multiple roles? Consider credentials and certifications to select the best applicants for your staff.

2. IT for Your Reference Lab

As things become more tangible, you'll turn your attention to outfitting your lab with the hardware you'll need and the software for reference labs that will keep it all connected.

The first thing to think about is purchasing analyzers that suit your planned testing menu. Will you offer a wide range of services, or will you specialize in a specific, high-cost, esoteric type of testing? What are the costs vs. reimbursement potential for your proposed testing menu?

You'll need a server to store and back up your data, as well as workstations for your techs to access your laboratory information system, or LIS.

Many owners make an early mistake by overlooking the laboratory information system when they are opening a reference lab. CompuGroup Medical is the leading vendor for LIS software in the US. CGM offers two popular solutions and the pre-configured hardware that supports them.

CGM LABDAQ is the leading laboratory information system in the United States. Intuitive. Secure. Scalable.
CGM SCHUYLAB is a trusted lab management solution. Scalable for POLs and reference labs; perfect for labs with in-house billing and the international market.

The software that is best for you will depend on the specific needs of your laboratory, but with a reference lab, you should expect to consider the full range of software options for your LIS. This will help you meet the needs of your clients and provide the data analysis you'll need to make informed business decisions down the road.

You'll also want to have a web portal as part of your complete software solution. By offering providers a simple way to place orders and review results, you'll minimize the expense and time involved in trying to establish a direct EMR interface with each of your clients.

A direct EMR interface will be a valuable asset, but you might want to save that option for high-volume clients that will justify the investment.

Last, but not least, don't forget your labels, label printers, and barcode scanners. If your lab is going to have any chance of running quickly and efficiently, labels and barcode scanners are a must. This small detail represents a large step toward automation, and supplying providers with labels and label printers might be a useful part of your sales and marketing strategy, which we'll touch on soon.

3. Payors & Credentialing

All the analyzers and lab software in the world won't do you any good if you don't receive any reimbursements for the testing your lab performs.

Unfortunately, collecting reimbursements is more challenging for a reference lab than it is for a physician office lab. When a provider is in-network with an insurance company, they can bill easily for their own, in-house testing.

For your independent reference lab, however, you'll need to be credentialed with as many insurance companies as possible. Medicare is the easiest, but commercial insurance companies are often closed to new laboratories.

For this challenging and often frustrating process, consider ARIA Credentialing Services. By recruiting the specialists at ARIA, you avoid the hassles of credentialing on your own and realize better results with help from the experts.

Connected reference laboratory

The connected reference laboratory.

4. Billing & RCM

When it comes to your bottom line, selecting the best LIS for your lab has already given you a head start toward increasing lab reimbursements. Your LIS solution offers many tools for profitability:

  • Medical necessity checking
  • Billing system integration
  • Advanced revenue reporting

As for the billing process itself, many labs attempt to go it alone, and software such as CGM SCHUYLAB offers a fully integrated option to support this.

Alternatively, the best option for dealing with stingy insurance companies is often to refer the work to an established team of experts, and once again, ARIA is up to the challenge. ARIA RCM Services will do a lot of the work that other revenue cycle management companies refuse to do.

This means maximizing your reimbursements by:

  • Eliminating write-offs
  • Reducing aging claims
  • Finding missing claims information

Insurance companies don't like to make payments—this is probably why banks are hesitant to offer loans for reference labs—so any advantage you can get to maximize your profitability is a welcome one.

5. Licenses & Accreditation

In the US, CLIA is the legislation that governs the oversight and regulation of clinical labs. Enforcement agencies such as CMS and the FDA will inspect your lab for compliance, or you can choose a non-profit, private agency such as COLA or CAP.

The type of certification that you request will depend on the type of testing you intend to perform. If your lab will perform toxicology or molecular testing, you'll need a high-complexity license, which is a different license than if you were just doing blood testing.

6. Marketing Your Reference Lab

When you came up with your business plan to kick off this process, you identified some of the things that will help your lab stand out from the competition. Even before your doors open, it's important to build a sales team to recruit providers as clients and make sure you'll have specimens to test.

It's a challenging market with providers looking to consolidate the number of reference labs they use. To match this trend, promote your decision to perform a wide variety of tests or your focus on less common, esoteric testing.

Make sure your team is looking to bring in orders for which you will be reimbursed.

Marketing a new reference lab is a challenge, so your team should be ready to emphasize your quality of service. You can talk about how you're using a proven, sophisticated LIS with a web-based client portal. Talk about the different ways you can deliver results. Put across how easy it is for providers to place orders and view results, because providers are not looking for a process that means more work for them.

Some labs offer labels and a label printer to providers as a way to streamline the onboarding process. Remember to pick up some extra labels and printers when you set up your lab.

What's next for opening a reference lab?

Where you go from here is up to you, but remember that you're not alone. From software to services, a trusted partner like CompuGroup Medical can be an integral part of turning your vision into a reality. Our sales team may be able to refer you to a third-party lab consultant or distributor for even more guidance.

Starting a business involves risk and challenges, but if you have these six keys in mind from day one, then you're already on the right path.

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