Chief Medical Officer, Dr. John Daly summarized in his online video in August about the current
practice of small, financially challenged hospitals that contract with Medical Service
Organizations (MSO) to perform laboratory marketing services for the hospital laboratory
(referred to as Hospital Outpatient Department or HOPD).
Both insurers and the federal and state governments are questioning this relationship which
allows hospitals to bill ALL procedures as done as in network regardless where they were done.
The MSO contracts with medical practices and rehab facilities to perform their testing. The
hospital in network rate bill at a significantly higher reimbursement rate. The hospital receives
money for the tests actually performed and a percentage of the receipts for the MSO. The
bottom line asserted by Dr. Daly is that the hospital is billing for all tests regardless of where
performed. The insurers contend that this practice violates the contract with the hospital. The
hospitals are offering the referring provider some form of remuneration; shares in MSO,
providing a MSO employee to collect and process the sample, or even cash reimbursement per
The concern is that theses practices run counter to the insurance agreement. This practice may
be considered fee splitting, kickbacks, and self referral violations. Some insurers such as Blue
Cross Blue Shield of Mississippi, Anthem Blue Cross Blue Shield Affiliates and United Healthcare
have begun challenging this practice in court. As an physician or laboratory owner be aware in
particular of laboratories that are being billed by an out of state hospital or any inducements
being offered to your practice.