Now days most laboratories are struggling with a new financial sink, the spiraling volume and exponentially spiraling costs of send out testing. A large majority of that growth can be directly attributed to new Molecular Diagnostic tests. In 2009, the molecular diagnostics industry grew 35%. Testing can be divided into several categories including: infectious, inherited genetics (e.g., Cystic fibrosis), cancer genetics, and other biomarkers. Because these tests are complex and frequently have patents or proprietary algorithms, most labs cannot currently and may never be able to perform this testing in-house. These are expensive tests. A good example of this growth in send out testing is comparative genomic hybridization microarray (CGH array) testing. The volume in our lab went from zero five years ago to close to over five hundred in 2010. At $1500.00 per test, that’s money. In fiscal year 2009, our overall sendout costs were ~15% of our overall operating budget. This high-cost, high-growth area of testing threatens to consume the operating budget.

Labs are dealing with this explosive growth in a number of ways in the effort to curtail the spiraling costs. The most simplistic approach is an approval model where all send out tests over a specified dollar amount must be individually approved. The test approvers may be pathology residents or fellows, lab managers, and/or faculty. Another scheme is ‘pop-up’ pricing notices which appear as a window when a clinician is considering ordering an electronic test order. The ‘pop-up’ may contain test utilization information, or something as simple as one to four dollar signs ($–$$$$) letting the physician know that the test they are ordering is expensive. Third party billing is another way of addressing the problem. Third party billing in this instance refers to the outside reference lab billing the patient’s insurance or the patient directly. Finally, labs may consider bringing molecular testing in-house.

Each of these strategies has drawbacks. In an approval model, the laboratory may seem to be at best a nuisance and at worst a villain that inhibits the clinician’s ability to care for the patient. The pop-up pricing notification provides a small obstacle but does not actually regulate orders. Third party billing is a strategy probably best for expensive testing that has poor reimbursement. A switch to third party billing would result in a concomitant reduction in gross laboratory revenue and testing volume. Bringing molecular testing in-house may have prohibitively high start-up costs and require special expertise for validation and regulatory compliance.

As genetic testing continues to grow in utility (as well as cost), laboratories needs to consider an overall strategy for how to provide access to having patients tested as well as having results given to clinical care providers. Educating ourselves and our clinicians of the clinical role of these tests is probably the most important foundation for any strategy. If a test is critical in the diagnosis and treatment of a patient, then the patient will get access to it—even if they need to bypass the clinician and laboratory.


  1. Malone, Bill. How Can Labs Take Control? Clinical Laboratory News, Nov 2010
  2. Molecular Diagnostic Testing Presents $5 Billion Conundrum. Managed Care Magazine, Apr 200
  3. Reeling in expense of reference lab testing. CAP Today, Aug 2010
  4. Ardisson L, Iafrate J, Lewandrowski K. An analysis of reference laboratory Testing in a Large Urban Academic Medical Center: The Impact of New Molecular Diagnostic Technologies. LabMedicine, 38(8):472-5. 2007.