If 2008 to 2013 was the Golden Age of the reference lab industry, 2018 is at least the Bronze Age. With toxicology confirmations generating reimbursements as high as $250 per sample and all-in costs at less than $50 per sample, it’s no surprise that I often get approached by people looking to start their own reference lab.  They’re ambitious, they see a great opportunity, and they can’t wait to get involved in the industry.  But they want to do it the right way and need someone who knows the tricks of the trade, which is why they call me (for those of you who don’t know me, before I founded Elite, I was the President and COO of a reference lab generating $150 million a year in revenue). 

After transitioning to become one of the top laboratory consultants in the country, I quickly became known for my willingness to speak honestly and openly with my clients rather than just tell them what they want to hear. And with that in mind, I am here to tell you that these days, success in reference laboratory business takes sophisticated planning and disciplined execution.  So for those just starting out, here are four of the most common business mistakes I’ve seen in my years in the industry – and four solutions that can work for you and your team.

MISTAKE #1: Forgetting about payor contracts and chasing every sample in America

Solution #1: Pick a distinct geographic area and stick to it until you’re the dominant player in the market

There are samples everywhere and of course you want them all.  But keep in mind that samples are worthless without the payer contracts.  Actually, they’re worse than worthless because you’ll spend money finding them, running them, and reporting them with no realistic expectation of revenue.

And, getting payor contracts in 2018 is a lot more challenging than it was in 2008.  Most networks are closed, so getting in-network contracts takes persistence, focus, and time.  Focusing on dozens of contracts simultaneously in many diverse states with different political environments is tricky. 

Narrow your focus and execute on the contracts you truly want and need.  Payor contracting needs to be an early focus of every owner of the business. If your co-owners don’t understand this, find new co-owners.

MISTAKE #2: “Saving Money” By Hiring the Cheapest Billing Company Out There

SOLUTION #2: Hire a competent billing company with lab experience that understands the denial and appeals process

Getting third party payors to pay consistently takes a refined approach.  Reference labs need to be experts in billing.  You’d be surprised how many companies change billing companies multiple times in their first 2 years (my first lab was one of them…). 

Partnering with an experienced billing team that knows the landscape and understands the denial/appeals process can be the difference between debt and dollar signs.  Good billing companies stand by their results.  Their compensation is typically paid on a contingent basis because reputable billing companies must deliver the goods.

Keep in mind, even the worst billing company should be able to collect the easy money, so what you want is someone who knows how to properly work through challenging claims.  A good billing company will cover their 5 or 6% fee many times over.  And once you feel confident you understand the process, utilization, and medical necessity requirements, you can start demoing the billing software packages out there and consider bringing it all in-house.    

MISTAKE #3: Waiting Until “Go-Live” to Ramp Up the Sales Effort.

Solution #3: Spend the 90 days leading up to “Go-Live” pre-selling your services and honing your sales operation.

The lab business is a volume business.  The first few hundred paid samples cover your overhead. It’s the additional paid samples where your profit begins to build.  Start early and lay the groundwork for as many early bedrock customers as possible.  Open many sales channels early on until you see what is going to ultimately generate consistent business.


MISTAKE #4: Burning Through Cash

Solution #4: Keep Expenses Low-Low-Low from the Start

Unless you made a killing in Bitcoin and can’t wait to find ways to spend it, keep your operations lean and your expenses as low as possible while payor contracting and sales generation efforts are in process. 

These days, the runway can be long, and the last thing you want is to face an early liquidity crunch. The first time you have to tell a sales rep that their paycheck is going to be (i) smaller than it should be, or (ii) delayed for a week or two is the last time you’ll have that sales rep’s full loyalty and motivation. 

That’s why cash flow management and running lean is something we at Elite focus on during all of our engagements.  Building efficient programs early on will be key to success.  Every dollar saved is an extra dollar that can be put towards growing your business. 

Stay focused. Stay lean. Stay credible. Do these three things, and you’re well on your way to successfully avoiding the business mistakes that your competitors are out there making as we speak.

Want to learn more?  Fill out this form and I’ll personally reach out to schedule a call with you in the next 24 hours.


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"Elite has added so much value to my practice that I don’t even know where to start.  They sourced all of my lab equipment, supplies, and employees in just over a month.  I rely on their expertise every single day in my lab so that I can spend my time focusing on my practice."

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