Today we ask how large gene-panel lab runs fit to "what's ordered, medically necessary, and billed." Surprise - The OIG was there in 1997-1998.
And, today we ask about pathologist orders to complete a case - reaching genomics such as in this MolDx article. OIG was already there, with concepts like in-office exception and its guardrails.
See the two-part essay below for both topics.
[AI Corner]
[The essay below is entirely AI-written; I have reviewed it carefully with minor edits.]
[Sidebar - The 1997-1998 OIG Guides here]
[Sidebar - The Rise of Multi Channel Analyzers here]
Remember Pod Labs?And Before That, Multi-Channel Analyzers
Two Regulatory Histories That Can Still Shape
Pathology and Molecular Testing Today
Modern debates about molecular panels, reflex testing, and pathologist-initiated ordering often feel new, but many of the underlying policy concerns are not.
In fact, two separate regulatory histories—one rooted in laboratory automation in the 1990s, the other in physician self-referral and Stark Law in the 2000s—continue to shape how these questions are approached today.
Each story begins in a different place, addresses a different risk, and arrives at a different kind of resolution. Keeping them distinct helps clarify what is actually permitted, what is merely scrutinized, and why.
Part I: Multi-Channel Analyzers, OIG Guidance 1997–1998, and the Primacy of Billing Integrity
The first story begins in the mid-1990s, when clinical laboratories were rapidly adopting multi-channel automated analyzers capable of running large numbers of assays simultaneously. At the time, this technology posed a practical problem for policymakers. Labs could efficiently run panels of tests even when only a subset of results was clinically indicated for a particular patient. The policy question was not whether the technology should be allowed—it was clearly here to stay—but how to ensure that its use did not lead to overbilling or inducement.
- OIG (1997) Model Laboratory Compliance. 62 Fed Reg 9435 (7pp), 3/3/1997. Here.
- OIG (1998) Laboratory Compliance Update. 63 Fed Reg 45076 (12pp), 82/24/1998. Here.
The Office of Inspector General addressed the new world of fast, multi-channel analyzers in a pair of major compliance guidance documents, issued in 1997 and 1998 (deep dive here). These were not marginal advisories; they were foundational statements reflecting OIG’s attempt to catch up, deliberately and somewhat slowly, to a new testing paradigm.
Importantly, OIG did not take the position that laboratories must physically restrict testing to only what was ordered. Instead, OIG focused on the downstream effects. Laboratories were permitted to run the panel's superset of tests, provided that each patient was billed only for exactly those tests that were medically necessary, ordered by the clinician, performed, and reported.
That principle was pragmatic and technology-neutral. OIG recognized that laboratories might legitimately design workflows around efficiency. What mattered was not what the analyzer did behind the scenes, but what ultimately appeared on the claim. Running additional tests was not itself the problem; billing for unnecessary tests was.
Insights for Modern Molecular Pathology
This framework maps remarkably well onto modern molecular pathology. A contemporary laboratory may find that genes A, B, and C are ordered together in the vast majority of cases. From an operational perspective, it may be sensible to run all three genes routinely. The compliance obligation, however, remains exactly what it was in 1997: if gene B or C is not ordered or medically necessary in a given case, it should not be reported or billed. The fact that the lab ran the assay internally is beside the point. OIG’s concern then, as now, is billing integrity, not analytical efficiency.
This first story ends here. It is fundamentally about automated testing platforms and billing discipline. Ownership, referral, and physician self-interest are not the central themes. The technology in large reference labs changed, but the logic did not.
Part II: Stark Law, Pod Labs, and the Re-Emergence of Self-Referral Concerns
A second, distinct story begins later, in the 2000s, with Stark Law and physician self-referral. This is the story most people associate with pod labs.
A fundamental policy in Stark law is that hysician practices—most visibly in urology—were prohibited from referring patients to laboratories they owned. But Stark included the in-office ancillary services (IOAS) exception. Some groups responded by installing small pathology labs inside their offices, sometimes used only episodically, and routing referrals internally. From a technical standpoint, some of these arrangements arguably satisfied the formal elements of the "IOAS" exception. Yet the pod labs also recreated the incentives that were banned by Stark - referral of lab tests to a lab the clinician had a financial interest in.
The response from regulators was ultimately decisive, though not immediate. The Office of Inspector General and the Department of Justice never issued a simple rule banning pod labs. Instead, through advisory opinions, enforcement actions, and evolving interpretation, they made clear that arrangements designed primarily to capture downstream revenue were inconsistent with the intent of the law—even if they appeared compliant on paper. Utilization spikes, lab design, compensation structures, and business narratives mattered. Over time, pod labs became indefensible not because they were per se illegal, but because the story they told about patient care was no longer credible.
This history matters because it frames how regulators think about who orders diagnostic tests and why, especially when ownership is involved.
Pathologists, of course, have always ordered additional tests as part of completing a case. This is explicitly contemplated in the Medicare Policy Manual and embedded in decades of practice. In some cases, stains like IHC may be ordered to solve unique problems raised by an odd case. Other times, routine immunohistochemistry—ER, PR, HER2 on every breast cancer case—is standardized, and universal. These have never been treated as abusive self-referral. The reason is straightforward: these tests are understood as integral to the diagnostic act, not as in the first place as separate revenue opportunities. They are bounded and driven by professional norms.
Insights for Pathologists and Genomics
[See the MolDx article, When Pathologists Can Order Genetic Tests, here.]
More complex questions arise when pathologists initiate larger diagnostic workflows, such as tumor genomic panels or standing molecular orders embedded in laboratory protocols. Here, the same Stark and IOAS concepts that doomed pod labs also provide the stabilizing framework. Pathologist-initiated ordering is permitted. It is anticipated by Medicare policy. And when performed within a group practice, it may fall within the in-office ancillary services exception. But, as the pod lab history teaches, formal permission does not end the analysis. The scope of such ordering is understood in light of medical necessity, clinical governance, and restraint.
The safe harbor for pathologists is not merely that they are allowed to order tests to complete a case. It is that their ordering occurs within a well-understood professional role, not driven by volume-based incentives, and aligned with established standards of care. IOAS does not give license for unlimited internalization of testing; it provides a structure within which legitimate diagnostic activity can occur without triggering self-referral abuse.
Two Histories, One Lesson
These two regulatory histories—the OIG’s response to multi-channel analyzers in the 1990s and its response to pod labs under Stark a decade later—address different problems. One is about automation and billing. The other is about ownership and referral. But together they illuminate the present moment. Modern molecular and diagnostic workflows raise both sets of issues simultaneously. Understanding where each concern comes from helps avoid conflating them.
The enduring lesson is not that laboratories should avoid efficiency, nor that pathologists should hesitate to order appropriate tests. It is that policy tolerates technology when billing is disciplined and professional judgment remains central. That principle has survived multiple technological revolutions, and it is still doing the work today.
