Last reviewed: October 2026
The laboratory billing process turns a test order into payment. It has more checkpoints than physician billing: the lab’s CLIA certificate, Medicare coverage rules for each test, Advance Beneficiary Notices (ABNs), the 14-day date-of-service rule and, for molecular tests, MolDX Z-Codes. This guide walks through each step and the CMS laboratory billing guidelines that apply.
The Laboratory Billing Process, Step by Step
1. Test order and requisition
Every claim starts with the order. The requisition should list the patient’s demographics and insurance, the ordering provider’s name and NPI, each test ordered, and the ICD-10 codes that explain why. Medicare requires the ordering provider’s documentation to support medical necessity, and the lab can’t add a diagnosis the provider didn’t give. If the diagnosis or signature is missing, query the ordering office before billing.
2. Eligibility check and ABN
Verify the patient’s coverage before testing, including whether the plan uses a lab benefit manager or requires prior authorization (common for molecular and genetic tests). For Medicare patients, check the test against the national or local coverage determination. If Medicare may deny it as not medically necessary, the patient signs an ABN before the specimen is collected.
3. Specimen collection and accessioning
Accessioning links the specimen to the order and the patient. Record the collection date and time; it usually becomes the date of service. If the lab or office draws the blood, routine venipuncture is billed as 36415 (see our guide to the CPT code for a lab draw).
4. Coding
Each test gets a CPT, HCPCS or PLA code. Panels (80047–80081) are billed only when every component test is performed. Drug testing uses 80305–80307 for presumptive screens and G0480–G0483 (Medicare) or 80320–80377 for definitive tests, and the diagnosis depends on why the test was ordered (see ICD-10 codes for drug screening). Molecular tests use 81105–81479 or PLA codes. Common modifiers include:
- QW: a test performed under a CLIA certificate of waiver, when the code requires it.
- 91: the same test repeated on the same day to get a new result (not to confirm the first result or fix equipment problems).
- 59 or XU: a distinct service that would otherwise bundle with another code.
- GA / GZ: a signed ABN is on file / no ABN was obtained and denial is expected.
5. Claim creation
Independent labs and physician office labs bill on the CMS-1500 (837P). The 10-digit CLIA number goes in item 23 on paper, or loop 2300, REF X4 electronically. Hospital labs bill outpatient and non-patient tests on the UB-04 (837I); specimens from non-patients use type of bill 14X. In MolDX states, add the test’s DEX Z-Code to molecular claims.
6. Claim scrubbing and submission
A clearinghouse checks the claim against payer edits before it’s sent: NCCI bundling edits, medically unlikely edits (MUEs) that cap units per day, frequency limits, diagnosis-to-test coverage and missing CLIA numbers. Fixing these before submission is faster than appealing them later.
7. Payment posting and reconciliation
Post each payment from the electronic remittance advice (835) and compare it with the expected rate. For Medicare, that’s the Clinical Laboratory Fee Schedule (CLFS) rate for the date of service. Underpayments are easiest to catch at posting.
8. Denials and appeals
Common lab denials include missing or invalid CLIA numbers, diagnoses that don’t support the test, frequency limits, missing prior authorization and bundling. Work each denial by its reason and remark codes, correct and resubmit or appeal with the order and results, and track denials by payer and test to fix the cause upstream.
9. Patient and balance billing
After insurance pays, bill the patient for deductibles, coinsurance and non-covered tests that have a signed ABN. Without a valid ABN, a lab generally can’t bill a Medicare patient for a test Medicare denied as not medically necessary.
CMS Laboratory Billing Guidelines
CLIA certification
Every lab that tests human specimens for health purposes needs a CLIA certificate that covers the complexity of its tests: a certificate of waiver, provider-performed microscopy (PPM), registration, compliance or accreditation. Medicare denies tests that fall outside the lab’s certificate.
Medical necessity: NCDs and LCDs
Medicare has national coverage determinations (NCDs) for common lab tests, such as blood counts, lipid tests and glycated hemoglobin, plus local coverage determinations (LCDs) from each Medicare Administrative Contractor. Each lists the diagnoses that support the test and any frequency limits. Screening tests are covered only when Medicare specifically covers them.
The 14-day rule (date of service)
For specimens collected during a hospital stay or outpatient visit, the date of service decides whether the hospital or the lab bills Medicare. Generally, a test ordered within 14 days of a patient’s discharge on a specimen collected during the stay is billed by the hospital. Molecular pathology tests and advanced diagnostic laboratory tests (ADLTs) that meet CMS’s conditions can be billed by the performing lab directly.
PAMA and the Clinical Laboratory Fee Schedule
Medicare pays most lab tests from the CLFS, which PAMA bases on private payer rates. The Consolidated Appropriations Act, 2026 delayed rate cuts through December 31, 2026. Labs reported private payer data from January 1 to June 30, 2025, between May 1 and July 31, 2026, and CMS will use it for new rates starting January 1, 2027. Under current law, cuts of up to 15% per year can resume from 2027.
MolDX
In MolDX states, Medicare decides coverage for molecular diagnostic tests through the MolDX program. Labs register each test in the DEX Diagnostics Exchange to get a Z-Code, and claims for those tests must include it.
How to Make the Laboratory Billing Process Faster
- Fix requisitions at the source: give referring offices order forms that require a diagnosis and signature.
- Check eligibility and prior authorization before high-cost tests are run.
- Keep your CLIA certificate, test menu and charge master in sync.
- Build payer edits (frequency, MUEs, diagnosis lists) into the claim scrubber.
- Review denials weekly by payer and test, not just claim by claim.
If your team would rather hand this off, see our laboratory billing services. For coding detail on one of the most common lab tests, see our guide to CBC CPT codes, and for denials, our denial management page.
FAQs
What are the steps in the laboratory billing process?
Order and requisition review, eligibility check and ABN, specimen collection and accessioning, coding, claim creation, claim scrubbing and submission, payment posting, denial management, and patient billing.
Where does the CLIA number go on a lab claim?
In item 23 of the CMS-1500, or loop 2300, REF X4 on an electronic 837P claim. Use the CLIA number of the lab that performed the test.
Can a lab bill a Medicare patient for a test Medicare denied?
Only if the patient signed a valid ABN before the specimen was collected and the claim carries the GA modifier. Without an ABN, the lab generally can’t bill the patient for a medical-necessity denial.
What is the 14-day rule in laboratory billing?
A Medicare rule that sets the date of service for tests on specimens collected during a hospital stay or outpatient visit, which decides whether the hospital or the lab bills. Molecular pathology tests and ADLTs that meet CMS’s conditions are an exception.
What form do labs use to bill?
Independent and physician office labs use the CMS-1500 (837P). Hospital labs use the UB-04 (837I).
