Ever found yourself scratching your head when it comes to billing for lab tests sent to outside facilities?
You’re not alone.
Handling reference lab billing can be tricky.
But getting it right is crucial for your practice’s revenue cycle and compliance.
This guide will help you understand how to bill for lab tests performed by external laboratories correctly.
Why Send Tests to an Outside Lab?
Sometimes, you can’t perform lab tests within your facility, office, or even hospitals, and need to send samples to an outside lab for analysis.
Here are the main reasons:
Limited Equipment: Your facility might lack specialized equipment for complex tests like genetic panels or advanced diagnostics.
Lack of Trained Staff: You may not have trained staff to perform specific high-complexity testing.
Quality Requirements: Some tests need pathologist oversight or exceptional quality control that only reference labs provide.
Resource Management: Many facilities use contracted labs to handle overflow testing or specialized analyses.
Remember, when a provider sends a lab test outside, the billing process changes a little bit.
So, it is essential for every provider who usually sends tests to a reference lab to know how to bill these tests to receive accurate and timely reimbursements from the insurance provider.
Modifier 90: A Key Player in Outside Lab Testing
Before moving towards the outside lab billing process, you must understand a key player.
The Modifier 90.
This modifier plays an essential part in this process.
Let’s understand.
Modifier 90 is used to indicate that a laboratory test was sent to an outside facility for analysis.
When you send a specimen to a reference (outside) lab, you need to attach the modifier 90 to the CPT code.
The reference laboratory is an outside lab that performs the test.
Let’s say a doctor orders a complete blood count (CBC) and sends the blood sample to a specialized lab for analysis; the doctor would bill for the CBC with modifier 90 to indicate an outside lab performed it.
For more details about modifier 90, read this guide.
What Not to Bill with Modifier 90
Knowing when not to use Modifier 90 is crucial:
❯❯❯❯ CPT 36415 (venipuncture/blood draw): Never apply Modifier 90 to this code. The fee for drawing blood stays with the provider who performed the venipuncture, even if they sent the sample out.
❯❯❯❯ Handling codes: Don’t use Modifier 90 on codes like 99000 (specimen handling) or 99001 (specimen transfer). These codes aren’t eligible for reference lab billing.
❯❯❯❯ Anatomic pathology codes: Avoid using Modifier 90 for these codes, as they follow different billing rules.
How to Bill Labs Performed by an Outside Lab?
So, you have an understanding of the basics of outside/reference lab billing. Now, let’s see how to bill the labs performed by an outside or reference lab.
1). Confirm Test Location
First, you need to include the location where the lab test is performed. This usually consists of the lab and diagnostic center name and address, as well as other crucial details.
For this:
- Confirm the location where the lab test was conducted.
- Double-check where the test was performed.
- Did your practice only collect the specimen or order the test?
- Confirm that the actual lab work (the analysis) was done by a separate lab—not your facility.
2). Charge the Patient or Insurer
Now prepare a medical bill for the lab test:
- Use the correct CPT code for the test performed by the outside lab.
- Add Modifier 90 to that code.
This tells the payer the test was done by a reference lab (and not by you).
Modifier 90 alerts the insurer that you’re billing on behalf of another lab.
Without it, the claim may be denied or flagged.
3). Complete the CMS 1500 Claim Form
When filling out the CMS 1500 form (the standard claim form), pay special attention to these sections:
- Item 20 – Mark “Yes.” This shows the test was sent to an outside lab.
- Item 32 – Enter the outside lab’s full information:
- Lab name and address
- NPI (National Provider Identifier) number
- CLIA (Clinical Laboratory Improvement Amendments) number
You’ll need two CLIA numbers:
- One for your facility
- One for the reference lab
Using both helps avoid confusion and makes your claim more complete.
4). Include Actual Cost
Next, make sure your charges are accurate:
Bill the actual price you paid the reference lab to perform the test.
This is called “pass-through” billing—you paid the lab, and now you’re passing that cost to the insurance company or patient.
Because overcharging or undercharging can trigger audits, using the real cost of tests keeps you in compliance.
5). Submit Claims Correctly
Finally, you will submit the claim form to the insurance provider.
When submitting your claim, separate your services.
Here’s how:
- Line 1: Bill the lab test with Modifier 90
- Line 2: Bill your services (like collecting the sample) without Modifier 90
This separation of the services ensures that the payer reimburses adequately.
You’ll receive payment for the lab’s work and your work.
Billing Responsibilities for Different Entities
Different healthcare providers have specific responsibilities:
👉 Independent Clinical Laboratories
Independent labs can use Modifier 90 if they meet CMS rules.
CMS limits referring labs based on ownership, volume, or rural status under OBRA 1989 rules.
If more than 30% of tests go to labs outside their system, Medicare may restrict billing.
👉 Physician Offices or Hospital Outpatient Departments
Don’t submit Modifier 90 if a reference lab bills directly.
If your practice paid the external lab and is billing, you must follow documentation rules and apply Modifier 90.
Some payers prohibit pass-through billing altogether, meaning Modifier 90 claims may be denied.
Ensure Accurate Documentation and Stay Compliant
Proper documentation prevents denials and supports compliance:
- ICD-10 codes: Always include appropriate diagnosis codes to justify medical necessity. Missing or incorrect codes can lead to denials.
- Payment records: Keep copies of invoices from the reference lab as proof of services and costs.
- Tracking logs: Maintain logs showing which tests were sent out versus done in-house. These help during audits.
Follow these tips to ensure compliance and proper reimbursement:
- AAPC guidance: AAPC training emphasizes correct modifier use, billing compliance, and documentation. Their resources offer valuable information on coding practice.
- CMS regulations: The Medicare Claims Processing Manual (Chapter 16, Section 40) provides detailed instructions on Modifier 90 and CLIA documentation. These rules remain in effect through mid-2025
Important Considerations for Healthcare Providers:
No separate billing for handling: CPT codes like 99000 and 99001 (handling fees) are generally not eligible for separate reimbursement when modifier 90 is used, according to Medisys Data Solutions Inc..
Modifier 90 does not bypass clinical edits: If some lab procedures are done in-house and others are sent out with modifier 90, CPT 36415 (venipuncture) may not be eligible for separate reimbursement, according to Medisys Data Solutions Inc.
One lab bills for referred services: Only one laboratory should bill for a referred service. The referring lab is responsible for ensuring the reference lab does not also bill for the same service.
Conclusion
Billing for lab tests performed by outside laboratories requires attention to detail and proper use of Modifier 90.
By following the steps in this guide and adhering to the guidelines, you can ensure accurate billing and reimbursement.
Remember that good documentation and clear communication with reference labs are essential.
Stay informed about regulatory updates to maintain compliance and optimize your lab billing practices.