Understanding Reference Laboratory Billing: TOB 141 and Industry Practices

Reference laboratory billing refers to the process where a hospital or billing provider submits claims for laboratory tests performed on specimens that were referred to an independent or reference laboratory “under an arrangement,” according to the U.S. Department of Health and Human Services (“HHS”) Centers for Medicare and Medicaid Services (“CMS”).

In this arrangement, the referring entity, such as a Critical Access Hospital (CAH), bills the payer for the tests even though the actual testing may be conducted by another laboratory. This practice is widely accepted in the healthcare industry, allowing hospitals to provide access to specialized testing without maintaining all equipment in-house.1 Medicare explicitly defines reference laboratory billing as permissible, where a Medicare-enrolled laboratory receives a specimen from another referring laboratory for testing and performs the test, with billing handled by the appropriate entity. 2

The Type of Bill (TOB) 141 is a specific billing type code used on institutional claims to indicate laboratory services provided to non-patients of the hospital. This means the specimen is from a beneficiary who is neither an inpatient nor an outpatient, but whose sample is submitted for analysis without the patient being physically present at the hospital.3 TOB 141 explicitly signals reference laboratory billing, excluding details about the rendering provider (e.g., the actual lab) that might appear in other claim formats, informing the payer that a reference lab was utilized.4

Reference Laboratory Billing is Common Practice According to American Hospital Association Data

According to the American Hospital Association (AHA), using bill type 14X (which includes TOB 141) is a common practice, with millions of hospital claims submitted this way annually. In 2017, over 12% of all claims were TOB 14X, highlighting its role as a standard method for billing medical services.5

An in-network hospital may bill for reference laboratory services even if the underlying laboratories are out-of-network with the health plan. This is because the hospital acts as the billing provider under the reference lab arrangement, and historically, payers like Medicare and commercial insurers, including Blue Cross Blue Shield, often recognize these policies similar to Medicare’s guidelines, especially regarding ownership exceptions.6 State laws, such as those protecting against surprise billing, further ensure that patients are not balance-billed for such services when received at an in-network facility, treating the claim as in-network.7

Specimen Collection: Not Necessarily Performed by a Hospital

Specimen collection may be subcontracted in reference laboratory billing to leverage specialized expertise or equipment not available at the referring facility. Industry standards allow for purchased service providers, including subcontractors, to handle tasks like specimen processing, collection, handling, and conveyance. This is part of the ancillary billing guidelines, ensuring efficient access to care, particularly in rural areas where CAHs operate.8 Such arrangements align with the Balanced Budget Act of 1997, which supports patient referrals and transfers in rural health networks.9

A medical billing expert witness is essential in explaining reference laboratory billing due to the complexity of coding standards (e.g., HIPAA, LOINC, CLIA), reimbursement policies, and industry customs. Disputes often involve interpreting claim data, such as TOB 141 usage, medical necessity, and consistent application of payer policies. Experts provide specialized knowledge on generally accepted practices, helping courts understand whether billing followed standards or if inconsistencies, like arbitrary denials, occurred.10 For instance, in cases involving toxicology, pathology, or claim processing software, an expert can analyze remittance data and counterclaims regarding service areas or necessity.11

There are specific Medicare LCDs (“Medicare Local Coverage Determinations“) that address reference laboratory billing related to drug testing, and reflex testing. For more insights on pathology lab test billing, visit our Pathology Lab Test Expert page.12 Additional resources on medical billing expertise can be found here.13

Citations

  1. Expert Report of Michael F. Arrigo (contact for case experience)
  2. Medicare Claims Processing Manual, Chapter 16, Centers for Medicare & Medicaid Services, https://www.cms.gov/regulations-and-guidance/guidance/manuals/downloads/clm104c16.pdf.
  3. CMS Manual System – Pub 100-04 Medicare Claims Processing, Centers for Medicare & Medicaid Services, https://www.cms.gov/Regulations-and-Guidance/Guidance/Transmittals/downloads/R795CP.PDF.
  4. Expert Report of Michael F. Arrigo (contact for case experience)
  5. Expert Report of Michael F. Arrigo (contact for case experience)
  6. Expert Report of Michael F. Arrigo (contact for case experience)
  7. Surprise Medical Bills, New York Department of Financial Services, https://www.dfs.ny.gov/consumers/health_insurance/surprise_medical_bills.
  8. Expert Report of Michael F. Arrigo (contact for case experience)
  9. Expert Report of Michael F. Arrigo (contact for case experience)
  10. Medical Billing Expert Witness Hospitals & Surgery, No World Borders, https://noworldborders.com/expert-witness/medical-billing-expert-witness.
  11. Expert Report of Michael F. Arrigo (contact for case experience)
  12. Pathology Lab Test Expert, No World Borders, https://noworldborders.com/expert-witness/pathology-lab-test-billing-expert.
  13. Medical Billing Expert Witness, No World Borders, https://noworldborders.com/expert-witness/medical-billing-expert-witness.