Making the pediatric office laboratory available and profitable

May 2007

The demise of the office laboratory in general pediatrics began when managed care began to deny reimbursement to office labs for hematology, complete blood counts, rapid diagnostic tests for viral illnesses and some serological tests, including tests for infectious mononucleosis.

At about the same time, Clinical Laboratory Improvement Act (CLIA) laws mandated certification of laboratories by national certification organizations; established demands to prove participation in quality control programs in bacteriology, serology, hematology, urinalysis and chemistry (with the exception of CLIA-waived lab tests) and required oversight by a knowledgeable licensed individual, such as a physician, as well as scrupulous record keeping.

Beyond the additional expense, CLIA resulted in a shift from inexact record keeping and less accurate but commercially available test kits to an office laboratory with allegedly higher quality and precision.

Periodically, CLIA-certified office laboratories have to undergo a fairly rigorous inspection by CLIA inspectors. Office labs, while assisting the pediatrician to improve diagnostic skill and offering the convenience of on-site rapid results testing, became a financial drain on the practice.

Today, few general pediatric offices have an on-site laboratory that is CLIA-certified because of the financial burden of the initial set-up and maintenance costs coupled with inadequate or poor reimbursement.

With that said, we have demonstrated that a well-managed office laboratory can succeed and actually be in the black at the end of the year, even for a small pediatric practice. Of course, that will not occur in the first year or two because of the cost of setting up the office lab and purchasing costly instruments, such as an automated analyzer for complete blood counts and a bilirubin instrument. For larger primary care practices, there should be a larger volume of annual laboratory tests performed and faster depreciation of the expensive equipment.

Our office demographics

Advanced Pediatrics has 3.5 full-time equivalent pediatricians and has approximately 7,000 active pediatric patients from predominantly middle-class families. In addition to the practice itself, there is a separate LLC corporation entity for a supporting pediatric laboratory that addresses potential changes in rules by the health maintenance organizations that forbid waivers. The separate corporate entity may help us in the event of a dispute.

The goal of the pediatric laboratory is to support clinical decision making and in-office research on site while keeping in the black as far as annual net income is concerned. The laboratory has CLIA approval for a moderately complex medical office laboratory. It periodically receives and identifies unknowns in microbiology, hematology, chemistry, urinalysis and serology.

Immediate oversight is performed by a licensed and degreed laboratory technologist with more than 20 years of experience in hospital and office medical laboratory analysis. CLIA-waived tests are performed by our nursing staff, and CLIA-non-waived tests are performed by our lab technologist.

Each time a test is ordered for a symptomatic child, the accompanying parent who verbally assented to having our lab perform the test is required to read, date and sign a waiver form forgoing their right to submit the bill to their medical insurance company. Money is immediately collected for many lab tests prior to the departure from the office suite. This step works for us and may well work for your pediatric practice, as well. Without consideration and implementation of this critical step, read no further.

This article will outline some of the ideas that we use to maintain profitability at a time when most pediatric office labs or services have dwindled because of financial losses.

A short menu of tests performed and income received include complete blood counts (CBCs), bilirubin, C-reactive protein (CRP) and rapid antigen tests.

The most frequent laboratory test performed on site is, of course, the rapid streptococcal antigen test.

Our office policy is to use confirmatory overnight throat cultures using un-enhanced 5% sheep blood agar and a weak bacitracin disk (0.04). When overnight culture grows BHS inhibited by A disk and a sample of the BHS colonies is still negative with a second rapid strep test, we believe that the likelihood of symptomatic group C or G strep is high (based on many such cultures we grouped in our office during a five year period when we had a research interest in group c or G strep. We submit charges for each of these tests to our managed care organization (MCO) panel, including Blue Cross/Blue Shield of the National Capital Area (Care First), Aetna, United Health Care and MDIPA (Optimum Choice). Last year we collected $30,233.00 for 2,603 rapid streptococcal antigen tests and $16,865.00 for 2,519 throat cultures.

Between October 2006 and March 2007, we ran 1,508 rapid streptococcal tests, averaging 58 per week. During peak streptococcal season, we average between a 25% and 30 % positive rate.

We learned that we always pair the streptococcal antigen test with an overnight throat culture. Reasons include detection of discrepancies between both methods and detection of non-group A (group C or group G beta-hemolytic streptococcus) that can cause sporadic or epidemic pharyngotonsillitis.

Financial reasons seem obvious to us. We believe that any pediatric office that outsources rapid streptococcal antigen tests is financially unwise, unless the office is in a state where MCOs do not reimburse for these tests.

Bilirubin test

Parents of neonates, as well as our office staff, appreciate the rapidity of an accurate bilirubin determination while the parent waits. We charge $15 for the test, which includes the charge for specimen collection. We bill to the MCO but the parent must also sign a waiver that they guarantee payment of the entire charge.

Our bilirubin instrument is the System Vitros DT60 chemistry analyzer (Ortho Chemical Diagnostics), which cost $2,250. A box of 25 bilirubin tests cost $83.25. We use some non-reimbursed tests for calibration.

In 2006, we performed 548 tests for bilirubin and collected $2,541 from MCOs. We believe that not performing lab tests, such as bilirubin tests, is yet another reason why some pediatric practices operate with marginal profitability.

Acute phase reactant tests

Our office lab also is able to perform CBCs with or without a manual differential white blood cell count. We use a Coulter Counter Model ACT 10, which cost us $18,000 in 2000. The individual reagents for CBC tests cost $1.25 per test. Monthly operating costs for the Coulter, which includes controls, calibrators, proficiency testing and the monthly cost of a comprehensive maintenance contract, is about $325. Annual gross income has repaid the basic cost of the instrument, maintenance contract for the Coulter Counter and the reagent supplies.

In the year ending Dec. 31, 2006, the lab performed 415 tests. Gross income for all CBCs was $6,340 in our practice with only 3.5 full-time equivalent pediatricians. During the period between October 2006 and March 2007, we performed 198 CBCs, or approximately eight per week.

For febrile children we usually order a combination of CBC and C-reactive protein. For the CRP, we use a NycoCard Reader II instrument (Axis-Shield PoC), which now costs $1,400, and a similar Orion CRP desktop instrument (QuikRead 101) that costs $1,500. CRP kits cost us $96 for each box of 24 tests. Our charge for the CBC/CRP pair is $30 or $12 for the CRP test alone. Last year we collected $2,275 for the CRP tests.

Rapid viral detection tests

Advanced Pediatrics Laboratory offers rapid viral detection tests for respiratory syncytial virus (RSV), influenza virus A and B and rotavirus.

During the RSV season (mid-fall through April) we order RSV tests liberally; during winter season we order influenza tests frequently. We conducted 163 for the new peak season, and of those, 52 were positive.

For each of the viral detection tests, parents are given the option of having the test performed on-site or at either a Quest Diagnostics or LabCorp laboratory collection center. Results are available within 10 minutes for the on-site testing vs. the next day, at the earliest, for the reference laboratories.

Although there will be differences in philosophy regarding usefulness of rapid viral detection tests, we believe that results help guide us to specific symptomatic therapy. For example, RSV-induced bronchospasm may be alleviated more with the use of nebulized racemic epinephrine rather than albuterol, and RSV mucoid plugging may not be alleviated much by the addition of an oral steroid medication. We currently use CLIA-waived QuickVue RSV (Quidel) at a cost to us of $10 per test. During 2006, our office laboratory performed 120 RSV rapid viral detection tests, which earned a gross income of $2,431.

We perform individual tests for influenza A and B and then submit the charges to MCOs for influenza A and B as a pair of tests. We currently use Quidel’s QuickVue A plus B influenza tests, which costs $400 for a box of 25 tests. We have been gratified to make a profit on these influenza tests.

For a six-month period over the winter months (October 2006 to March 2007), we performed 445 flu tests, with 64 being positive; we received $3,844 reimbursement using modifier -91 with the 87804 CPT procedural code for three of those months. This compares favorably to the 276 tests for influenza A, which returned $3,682 in the 12-month period before we purchased individual influenza A and B tests.

Screening audiometry

Although these are not strictly laboratory tests, we include them in this article as adjunctive tests that improve diagnostic precision and the net income of our pediatric practice. We have a Welch Allyn MicroTypm 2 for tympanometry, which costs $1,895. Our office policy is to obtain a tympanogram or acoustic reflectometry result for each complaint of earache, hearing decrease, stopped-up ear, diagnosis of acute otitis media or otitis media with effusion or follow up evaluations for these issues.

Between October 2006 and March 2007, we conducted 135 ear checks, which is approximately five per week, and 497 tympanograms — or 19 per week. Some may say that this is excessive and wasteful, and there is some truth to that statement.

On the other hand, many pediatric otolaryngologists use the same guidelines and thereby verify the otoscopic diagnosis and increase the reimbursement for an office visit. Last year (ending December 2006) our office performed 885 tympanograms/acoustic reflectometry examinations and received $19,777 in payments from MCOs for these tests.

For our colleagues in private practice who do not own and optimally use tympanometry/acoustic reflectometry, you are missing out on significant annual revenue for your practice. In addition, you are possibly over-confident in your otoscopic ability without the constant verification by an objective method of the presence of liquid in the middle ear space.

We maintain that our office laboratory is profitable and extremely valuable to help in medical decision making.

Our predominantly middle-class parents appreciate while-you-wait laboratory results and are willing to pay out of pocket for it.