Laboratory Outreach: An Overview of Legal Issues

Abstract

Since the mid-1990s outreach clinical laboratory services provided by hospitals are the fastest growing segment of the clinical laboratory industry. Hospitals have moved in this direction due to consolidation within the independent clinical laboratory sector, which reduced the presence of independent clinical laboratories in many markets, while also perceiving an opportunity to reduce their per test costs by utilizing the excess capacity in their laboratories. Hospitals expanding their outreach services are establishing core laboratories that are independent of the hospital, entering into joint ventures with independent laboratories, or growing test volume in their outpatient departments through an expanded investment in a sales staff. As the trend towards expanding outreach services grows, there are a number of legal issues that must be addressed. This article will discuss the major issues that impact all hospitals expanding their outreach programs, while also identifying how some recent pronouncements by the Internal Revenue Service (IRS) may impact not-for-profit institutions seeking to enter into joint ventures with for-profit independent clinical laboratories. Finally, we will review the implication of federal fraud and abuse laws on some arrangements between hospitals and independent clinical laboratories.