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What do I need to know before starting a diagnostic lab in NY?

On Behalf of | Mar 3, 2023 | Diagnostic Testing And Reference Labs |

Medical professionals who are interested in starting a diagnostic lab can benefit from the following tips:

  • Check the market. This is pretty foundational to any business. Check to make sure this market makes sense for your lab. If not, look elsewhere.
  • Spread the word. Let people know that you are starting the lab. The power of networking can serve as a powerful marketing tool.
  • Know the rules. The medical marketplace is a unique niche and has a complex web of regulations. Know these rules before opening or you could face allegations of a violation. Even an unintentional violation can come with serious consequences.

This final point, knowing the rules, is arguably the most difficult obstacle when it comes to opening a diagnostic lab. The rules are complex and evolving. When it comes fraud and abuse laws a violation can led to harsh financial penalties and exclusion from the ability to file claims with federal systems like Medicare and Medicaid. Two of the more common fraud and abuse laws to become familiar with are discussed below.

#1: The False Claims Act (FCA)

The FCA basically makes it illegal to bill the government for false or fraudulent services. Billing for services that were never provided or medically unnecessary could constitute an FCA violation.

Penalties can be triple the claim plus an additional $11,000 penalty for each individual violation.

#2: The Antikickback Statute (AKS)

Lawmakers intended this law to prevent physicians and other medical professionals from self-dealing. In this scenario, a physician who either starts their own diagnostic lab or has a family member who owns or has interest in a lab could face allegations of an AKS violation if they refer their patients to that lab. There are some nuances, such as the service being payable by a federal health care program like Medicare, but the scenario gives the basic idea of the broad reach of this law.

Violations can come with criminal penalties including steep financial penalties and potential imprisonment.

These are only a few of the regulations your lab will need to comply with to operate in the United States. Additional local regulations can also apply. Although potentially overwhelming and, again, a formidable obstacle, know that you do not have go through this on your own. You can seek legal advice to better ensure understanding and compliance.

Attorney John Rivas is responsible for this communication

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