How to Build an In-House Laboratory: The Ultimate Blueprint

Physicians in 2025 may be considering implementing a robust laboratory but are left with the daunting questions and challenges of how to build an in-house laboratory for their facility. Building and managing an in-house laboratory requires careful planning, regulatory compliance, and a strategic approach to ensure its success. If done correctly and efficiently with a team of laboratory management and operational professionals, your physician practice could enhance patient care and benefit from an additional revenue stream.

Our team has provided a comprehensive blueprint for physicians considering building their own in-house lab, covering everything from evaluating the readiness of your practice to collecting reimbursement for lab tests.

The Importance of In-House Laboratorys and Physician Owned Labs (POL)

In-house laboratorys, also known as Physician Owned Labs (POLs), are laboratories operated by physician practices to perform diagnostic tests and analyze patient specimens. These labs offer numerous benefits, including faster turnaround times, better control over the quality of testing, additional flexibility regarding test design, increased responsiveness, and increased revenue opportunities. They also enable physicians to provide more personalized and timely care, improving patient satisfaction and outcomes.

Patients benefit from a more streamlined experience by receiving tailored treatment plans during their office visit and avoiding a separate trip to an offsite laboratory. Their bills also reflect both in-office charges as well as their lab service charges making their statements easier to understand.  A practice owned laboratory also retains the network status of the physician group, which keeps all of the lab services performed at the facility in-network for the patient

Physicians will experience greater general operational efficiency as there is no longer a need for relaying specimens, patient health information (PHI), and test results between their practice and an outsourced lab.

Evaluating if Your Practice is Ready for a POL

Assessing Patient Needs and Potential Test Menu

Before establishing a POL, it’s crucial to assess the testing needs of your patient population. Consider the types of tests commonly ordered, the frequency of testing, and the potential fit for testing within the patient’s office visit. The most common tests performed in-office include:

• Urinalysis
• Lipid Panels
• Blood cell count
• Hemoglobin
• Red blood cell percentage
• Blood glucose levels
• Pregnancy tests

Larger, specialized physician group practices may be looking to offer more complex test menus such as:

• NIPT
• Hormone testing
• STI
• Women’s health panels
• Genetic testing

Consider sourcing feedback from your patients on the convenience of potentially including these common tests into their routine office-visits. Combine this feedback with the current frequency of your practice ordering these tests to begin planning a potential test menu.

Market Analysis

Conducting a market analysis can help you identify potential competition, demand for in-house testing, and opportunities for growth. Consider factors such as the demographics of your patient population, the presence of other labs in the area, and the types of tests that are in high demand. This information will help you develop a strategic plan for your in-house laboratory.

Financial and Legal Considerations

Building and operating an in-house lab may require significant financial investment. Physician practices must consider the costs of buildout, equipment, supplies, personnel, and ongoing maintenance. When considering initial up-front costs in building a lab, fully vet the options on where to source this funding. Self-funding, loans, and investors all present different challenges and expectations on how the laboratory will be structured. Working in collaboration with expert laboratory consultants can best help you understand which will be best for your practice.

Establishing a Business Plan and Laboratory Design

Planning and Pro Formas

Once you’ve assessed your practice’s market demand, readiness, and financial commitment, it’s time to develop a comprehensive business plan. This plan should outline your goals, target market, services offered, and financial projections.

Many providers researching to start a lab may reach out to laboratory management and consulting companies to get a pro forma. A pro forma is financial projections describing income/loss, cash flow, and balances over time. In our experience, many of these companies provide inflated numbers and projections in their pro formas, leaving physician groups with an inaccurate expectation on building their lab and how it will perform long-term.

When seeking the help of an outsourced laboratory consulting and management company, ensure that the company you partner with provides realistic projections and support before and after the laboratory is built. An experienced partner like PhytestDX will include realistic projections and ongoing services that accurately reflect the success of both the practice and the newly implemented laboratory business and team.

Laboratory Design and Layout

The design and layout of your in-house lab are crucial for efficiency, safety, and compliance. Consider factors such as workflow, ergonomics, and equipment placement. Finding the site location that will best serve your practice will also include consideration of future growth; determine if the space can allow increased volume, expanded test menus requiring new equipment, and physical facility growth if needed. Design the lab space to optimize efficiency and ensure compliance with regulatory requirements such as hand wash sinks, emergency shower stations, and floor drains.

Equipment and Technology Implementation

Avenues for Procuring Equipment

Selecting the equipment that your lab will utilize requires strategic thinking and research. Equipment should work to fit within your lab environment and only include features you intend to use now or down the road if you diversify your testing menu.

Laboratory stakeholders must decide if they will opt to buy new equipment straight from manufacturers to take advantage of warranty and service contracts. Alternatively, equipment can be purchased from third party vendors that offer discounts and may suit the needs of your clients better. Leasing both new and refurbished equipment is a third option to consider.

Maintenance and versatility of equipment should also be taken into consideration when shopping for a startup lab. Being informed on the life-span and requirements for properly functioning lab equipment can be crucial in the decision-making process.

Implementing Technology in the Lab

Integrating electronic medical record (EMR) systems and laboratory Information systems (LIS) with your in-house lab will facilitate seamless data for maintenance and billing and improve patient care.

Integration with EHR systems allows staff to fetch the necessary patient information and the prescribed tests by the doctors. They can also upload the results directly to the medical records for the providers and patients. This speed and convenience are beneficial for patients.

An LIS software removes the need for manual activities like data entry. With the growing adoption of automated healthcare solutions, implementing a LIS alongside an EMR reduces the number of manual tasks. This goes on to lower the number of errors and also accelerates workflows. As a result, a relatively smaller staff can carry out more work with greater efficiency within the in-office lab.

Regulatory and Compliance Requirements

CLIA Licensing

CLIA stands for Clinical Laboratory Improvement Amendments of 1988. This is a federal law that requires a certificate for any facility that collects human samples and performs tests for the purpose of diagnosis, treatment, or prevention. Even performing one test, including those that are waived, will require the facility to be certified. It can take anywhere between four and 12 weeks to get your CLIA certificate, depending on your local agency.

In most cases, you will be able to start testing after you receive your certificate. However, it is important to check with your local agency first. There are five different certification options your facility will consider:

• Certificate of Waiver (COW): Used only by facilities that perform waived tests.
• Certificate for Provider-Performed Microscopy (PPM) Procedures: Testing that includes microscopy during patient visits.
• Certificate of Registration: Allows facilities to perform non-waived tests until the lab is inspected and determined to be in compliance with CLIA regulations.
• Certificate of Compliance (COC) – For facilities that have passed inspection after performing non-waived tests.
• Certificate of Accreditation (COA) – Awarded to facilities that perform non-waived tests based on their accreditation by CLIA-approved organizations.

Inspections and Validations

Routine laboratory inspections support a safe work environment by helping to identify potential hazards. Both the lab group and Environmental Health and Safety agencies perform periodic documented inspections. It’s crucial to prepare for these inspections as well as receiving proper training on self-conducted inspections and ongoing regulatory compliance and safety protocols.

Laboratory Validation is a process that is employed to ensure that laboratory test data and results are consistent, accurate and precise. The validation process for test methods, as well as the instrumentation that is used to perform the analysis, should have well-established system of qualification phases:

• Installation qualification
• Operational qualification
• Performance qualification

Laboratory regulations require that performance for any new method be “verified” prior to reporting a patient’s test results. Precision and accuracy are specifically identified, along with analytical sensitivity, analytical specificity, reportable range, reference values, and any other applicable characteristic. The responsibility for method verification or validation can be handled internally by the laboratory, but can be best trusted with a professional laboratory management partner.

Staff Development and Training

Invest in your lab staff’s training and development to ensure they have the skills and knowledge needed to perform their roles effectively. Provide ongoing education and professional development opportunities to keep your staff up-to-date on the latest advancements in lab testing and technology.

Collecting Reimbursement for Your In-House Lab Tests

Understanding the reimbursement process for in-house laboratory tests is crucial for financial sustainability. Familiarize yourself with the billing and coding requirements for lab tests and ensure your practice is compliant with payer regulations. Develop strategies for maximizing reimbursement, such as negotiating contracts with payers and optimizing coding practices.

In-house laboratory stakeholders must decide what billing environment best suits the functionality and efficiency of their new lab before they begin testing. Many factors will play into this decision such as the efficiency of the workflow, staffing capabilities, expertise specific to laboratory billing, and overall transparency into the facility’s financial performance short and long term.

At Phytest DX, we offer comprehensive initial and ongoing services for laboratories that we help physician groups develop. Part of that service offering is built in revenue cycle management in collaboration with our sister company, Phytest, Inc.. Phytest specializes in providing expert laboratory billing services so that your new POL will not have to worry about seeking in-house or outsourced lab billing teams.

Learn more about RCM at: phytest.com

Consulting an Experienced Laboratory Management Company

Building an in-house lab is a significant undertaking, but with careful planning and strategic execution, it can be a valuable asset for your practice. By following the blueprint outlined in this article, physicians can begin to understand what it takes to create a successful in-house lab that enhances patient care, improves practice efficiency, and generates revenue opportunities. Contact the team of laboratory consultant, management, and operational professionals at PhytestDX to inquire about how we can assist you in building your in-house laboratory.