February 22, 2025

How to Save Money in Labs and Imaging

John Dang M.D.

The short answer is: don’t use hospital based locations and make sure the ICD 10 code is correct. There are large chains of lab and imaging services in the U.S. which offer very cheap rates.

Sometimes patients may be stuck with a very large bill for imaging or lab services. Here are some common reasons:
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1. Insurance is denying payment. This is usually due to CPT and ICD 10 code mismatch and usually applies to labs more than imaging. For each lab test performed, there must be a reason for the test ordered (ICD 10 diagnostic code). If the code entered by the doctor does not match a list of “accepted” codes by the insurance company, the insurance company will refuse payment (classically, ICD 10 Z00.00 for Vitamin D levels).
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2. Insurance does issue payment, but the patient stuck with a large deductible or co-insurance bill. This is usually because the imaging or lab was performed at a hospital-based location.
   
   Hospital based imaging and lab services cost more and here’s why: place of location coding and facility fee. For the same service, CMS, which is a regulatory body for healthcare organizations in the US, allows for higher payments made to hospital-based locations (POS codes 21-23) as compared to office-based locations (POS code 11). Originally, it is thought that the overhead for a hospital is higher than that of an office, and so services rendered in a hospital should be compensated more. However, as hospitals acquire satellite locations, they retain the privilege of billing at hospital-based POS for their satellite centers. Additionally, some healthcare organizations are now charging a flat facility fee for services rendered, in addition to the cost of the service itself.
   
   What this means for many patients is significantly higher costs for labs and imaging. The same test performed in a healthcare organization like Stanford, El Camino Hospital, or Sutter/PAMF may cost many times compared to outside labs and imaging centers. Further, it should be noted that the hospitals are “in network” most of the time, just like outside lab and imaging centers; insurance companies just allow for higher payments made to the labs and imaging centers of hospitals and large healthcare organizations because of POS coding and higher contractual rates.
   Hospital based imaging and lab services cost more and here’s why: place of location coding and facility fee. For the same service, CMS, which is a regulatory body for healthcare organizations in the US, allows for higher payments made to hospital-based locations (POS codes 21-23) as compared to office-based locations (POS code 11). Originally, it is thought that the overhead for a hospital is higher than that of an office, and so services rendered in a hospital should be compensated more. However, as hospitals acquire satellite locations, they retain the privilege of billing at hospital-based POS for their satellite centers. Additionally, some healthcare organizations are now charging a flat facility fee for services rendered, in addition to the cost of the service itself.
   
   What this means for many patients is significantly higher costs for labs and imaging. The same test performed in a healthcare organization like Stanford, El Camino Hospital, or Sutter/PAMF may cost many times compared to outside labs and imaging centers. Further, it should be noted that the hospitals are “in network” most of the time, just like outside lab and imaging centers; insurance companies just allow for higher payments made to the labs and imaging centers of hospitals and large healthcare organizations because of POS coding and higher contractual rates.
   

So who are these outside imaging centers? Simon Med Imaging and Valley Radiology Imaging (VRI) are popular and commonly used imaging centers in the South Bay. VRI is slightly better, as it is compatible with EPIC software. Most doctors are able to send orders (digital or paper) to these organizations.

For labs, Quest, LabCorp, and BioReference are nationwide lab chains. Most doctors are, again, able to send paper or digital orders to these labs, with results coming back in EPIC.

As an additional, deeper level of discounted lab rates for patients, some doctors participate in GPO’s. Each lab test (TSH, CBC, CMP) are billed individually. Participating doctors in GPO’s have exceptionally low rates for each line of test performed. The doctor can therefore pay for the test at a steep discount for the patient, then be paid back by the patient. 

There are two caveats to note here:
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1. Certain insurance plans (Medicare and high premium all-inclusive commercial plans) have patients pay nominal fees for lab and imaging services, regardless of location. For patients with these types of insurance, it really makes no difference cost wise. Hospital based lab and imaging centers may offer better service or convenience.
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2. Hospitals labs and imaging may offer specific tests which cannot be obtained in the larger chains.