Why I had to pay my patients' lab bills

December 9, 2002

This doctor was left holding the bag when a commercial lab didn't receive prompt payment.


Why I had to pay my patients' lab bills

Jump to:Choose article section... My legal education gets underway A costly lesson leads to changes

This doctor was left holding the bag when a commercial lab didn't receive prompt payment.

By Neal A. Pock, DO

I never wanted to be a collection agent for patients' lab bills. So several years ago, I decided to send patients who needed tests directly to a commercial lab. I armed them with requisition slips and told them to expect the lab to bill them. That should take some work off my shoulders, right? Boy, was I naive!

What I learned, too late, is that in filling out scripts for lab tests, a physician can be held liable for the cost of those tests. I recently shelled out more than $3,000 to settle a lawsuit filed against me by a large commercial lab for charges they couldn't collect from my patients or third-party carriers. I'm certain that many other doctors could find themselves in the same fix.

Here's what happened. The first bill I received from the company was a three-page computer printout. Pages 1 and 2 listed some internal "rebill comment codes." Page 3 logged a few more codes and an amount due.

Nowhere on that bill was there any indication of patients' names, dates of service, or types of tests performed. So I asked my office manager to contact the company's local representative and straighten it out.

That rep once worked at our hospital, and had always been personable and professional. When my office manager showed her the bill, she seemed genuinely confused. "Why would you receive a bill?" she asked. She was aware of our policy of never collecting money for lab work performed outside our office.

Over the next three years my office manager contacted the company's local and national billing personnel. Our frequent requests for an itemized notation of patients' names, dates of service, and procedures always elicited the same response: "I don't have that information in my computer database, but I'll try to find it and get back to you." No one ever did.

The hospital I'd been associated with for 30 years closed in August 2000, and a month later I began a one-year sabbatical. During that time, the bills from the lab kept coming. My office manager, who'd taken a new job, told me she'd talked with their billing department and that they were trying to straighten it out.

I decided not to pay the bills until I heard from the lab.

My legal education gets underway

My laid-back attitude about the matter evaporated when, three years after receiving the first bill, I was hit with a subpoena notifying me that I was being sued for $3,931 plus $1,000 in legal fees.

My lawyer informed me that my contract with the commercial lab included a clause stating that the company can charge referring physicians for procedures if the money can't be collected elsewhere. In legal jargon, it's called indemnification: The company is indemnified against any loss—by me. My attorney said that fighting the suit in court would cost me more than settling it.

I wasn't ready to give up yet, though—not before getting the elusive itemized statement.

A lawyer's letter quickly made that happen. It turns out the disputed charges involved 44 patients; 30 were Medicaid, and those bills—for a total of $2,502—could easily have been collected had the lab filed them on a timely basis. Another $1,069 involved private insurance companies and could still have been collected at the time the lawsuit against me was initiated. The remaining $360 were Champus/Tricare charges and private pay.

The lab contended that the physician is legally responsible for providing the information they needed to bill the third party or patient, and that my office had failed to provide this information. "But," I objected, "we always gave you everything you asked for." The company no longer had the original lab requisitions, but their "rebill comment codes" provided sufficient evidence to prove my negligence, they argued.

Unfortunately, although my front-office personnel routinely fielded requests from this and other labs and insurance carriers for missing data, many of the charts didn't contain original requisition forms. Telephone calls from the lab hadn't been documented, and papers requesting additional information hadn't been photocopied.

So I couldn't adequately document my side of the case. The legal issues and evidence came down to a "Yes, I did; No, you didn't" match. Common sense told me to settle the case. We did, for $3,200.

A costly lesson leads to changes

I think of the money I had to pay as tuition for a lesson learned the hard way. Here's how I changed the way I did business with commercial labs from that time until I retired.

I gave written notice that any past agreements were immediately cancelled and that I would not collect money for work performed by the labs. The notice also stipulated that I was not responsible for paying patients' lab bills or for making up the difference between labs' billing amounts and what a third-party payer allowed.

I also had office staff make sure that, in addition to accurately providing insurance or third-party information on original lab requisition forms, we attached a photocopy of the patient's insurance, Medicaid, or Medicare card. If patients were self-pay, we had them sign the requisition forms submitted to the lab, acknowledging their responsibility for paying any charges.

To document our responses to calls requesting additional information, we devised a form that showed the name of the lab, person requesting the information, date, time, and information provided. Following the phone conversation, a copy of the form was immediately faxed to the lab, and the fax transmittal sheet put in the patient's file along with the original requisition. Subsequent lab reports were stapled to these forms.

Settling the case was my penalty for not reading the fine print of a contract. That's a mistake I won't make again—in or out of medicine.

The author is a retired ob/gyn living in Tyler, TX.


Neal Pock. Why I had to pay my patients' lab bills. Medical Economics Dec. 9, 2002;79:54.