For most clinical laboratories looking to improve their payer network, reimbursement challenges aren’t an abstract business concern; they’re existential. For independent and small- to mid-sized reference labs/POLs, one reality remains consistent: laboratories fail for two primary reasons. Either they cannot get enough samples in the door, or they cannot get paid for the work they perform.
Unfortunately, many labs face both problems simultaneously. It is not uncommon for laboratories to receive reimbursement for only 60–70% of the testing they perform, effectively providing the remaining services for free. At the center of this problem lies a growing industry obstacle: limited or closed payer networks.
During a recent Lighthouse webinar, our reimbursement experts were joined by Dr. Sherry Dadgar of the Fair Healthcare Access Coalition to explore how payer network restrictions affect patient care, innovation, and lab sustainability, and what laboratories can do to improve their leverage and access.
The Payer Network Problem: More Than a Financial Issue
Payers frequently deny laboratories in-network access using familiar language:
- “The network is closed.”
- “We already have a contracted laboratory.”
- “We do not credential additional vendors.”
While these decisions are often framed as administrative or cost-based, their downstream effects are significant and extend far beyond laboratory balance sheets.
The Patient Impact
Clinical laboratory testing informs approximately 70% of medical decisions, yet diagnostics account for only a small fraction of total healthcare spending. When laboratories with advanced capabilities are excluded from payer networks, patients bear the brunt of the impact, noted Dr. Sherry Dadgar, CEO of Personalized Care Diagnostics in Maryland.
Excluding independent labs from networks limits patient access to essential diagnostics and can lead to delayed diagnosis, avoidable utilization, and widening disparities, particularly for underserved populations, rural communities, and rare disease patients, Dr. Dadgar said.
In many cases, advanced diagnostic testing exists, but patients cannot access it because the performing laboratory is excluded from the payer’s network.
Narrow Networks and the Innovation Gap
One recurring note was that payer networks often favor large national laboratories through exclusive or semi-exclusive arrangements. While these laboratories provide essential services at scale, they may not offer:
- Whole exome or whole genome sequencing
- Specialized next-generation sequencing (NGS) panels
- Pharmacogenomics
- Advanced molecular infectious disease diagnostics
Independent and mid-sized laboratories are frequently the drivers of innovation in these areas. When these labs are blocked from networks, innovation slows, and patients lose access to diagnostics that could significantly improve outcomes and reduce long-term costs.
Understanding Your Payer Landscape: A Foundational Step
From a revenue cycle perspective, laboratories must begin with a clear-eyed assessment of their payer environment. This includes understanding:
- Payer mix (commercial, Medicare Advantage, Medicaid MCOs)
- Network structure (open vs. closed networks)
- Reimbursement methodology
- Percentage of Medicare
- Proprietary fee schedules
- Carve-outs or ancillary service structures
- Out-of-network implications, including patient cost-sharing and collection challenges
Without this visibility, labs risk pursuing contracts that are either unattainable, or financially unsustainable.
As noted by Lambrix, it’s important to get insight on payer contracting and payer credentialing with an expert during the process in order to identify the best path forward.
Reframing the Conversation: Selling Value to the Payer
One of the most practical takeaways from the webinar was a mindset shift: Payers are customers.
“View the payer as a client,” advised Lambrix. “You’re selling your laboratory to the payer.”
To gain network access, laboratories must clearly articulate the value they provide, not just to ordering providers, but to the payer’s membership and cost structure.
Effective payer outreach should answer:
- What does your lab offer that the current network does not?
- How does your testing improve turnaround time or diagnostic accuracy?
- How does earlier or more precise diagnosis reduce downstream costs?
- How does your lab improve patient access locally or regionally?
This approach often takes the form of a robust letter of intent or appeal, supported by data, provider endorsements, and patient impact narratives.
Appealing Network Denials: Best Practices for Labs
Many labs submit a simple participation request and stop when they receive a denial. Successful labs take the process further by:
- Submitting detailed appeal letters outlining clinical differentiation
- Escalating beyond credentialing staff to medical directors or network leadership
- Including provider and facility endorsements, especially when testing supports in-network hospitals
- Highlighting patient harm caused by out-of-network limitations
- Documenting repeated denials to support broader advocacy efforts
Legal counsel may be appropriate in certain states, particularly where “any willing provider” statutes exist, but most appeals should focus on clinical value and patient outcomes rather than legal threats.
“Don’t just say, ‘I want to be in your network.’ Instead, submit a detailed appeal that documents the strengths of your laboratory, what separates you, and why it is important for inclusion,” said Lambrix.
State-Level Models That Are Working
The webinar highlighted encouraging examples where state policy has improved laboratory network access:
- Tennessee: Passed legislation requiring payers to allow any qualified laboratory into the network under equal terms
- Kentucky: Recognizes independent laboratories as healthcare providers rather than vendors, improving contracting leverage
By contrast, in states where laboratories are classified solely as vendors, network access remains significantly more difficult.
Reclassifying laboratories as providers rather than vendors can be one of the fastest state-level paths to improving network participation, while broader legislative reform may take longer, Dr. Dadgar noted.
A Call for Collective Advocacy
Addressing network access barriers cannot fall on individual laboratories alone. Systemic change requires collective action from labs, providers, patients, and policymakers.
One such effort is the Fair Healthcare Access Coalition, which was formed to:
- Advocate for fair payer network practices
- Elevate patient access concerns
- Support independent laboratory innovation
- Promote regulatory modernization aligned with today’s diagnostic landscape
Efforts like these depend on real-world examples (denials, patient delays, and provider frustration) to build the case for reform.
“Record your denial instances,” Dr. Dadgar said. “Those are going to be part of how we make that case and show unfair practice.”
Practical Action Steps for Laboratories
Labs seeking to improve their position today can begin by:
- Mapping payer mix and network types (know your top targets)
- Building a payer-ready value narrative (clinical + economic + access)
- Creating a robust letter of intent / appeal packet
- Leveraging facility and provider relationships
- Documenting denials and compiling an evidence dossier
- Joining coordinated advocacy efforts (especially at the state level)
Even incremental efforts contribute to a broader movement toward fairer access.
Conclusion: Access First, Then Reimbursement
While reimbursement rates remain a critical issue, network access is the gatekeeper. Without access, even the best diagnostics cannot reach patients. By reframing payer conversations around value, leveraging state-level precedents, and working collaboratively across the industry, laboratories can begin to shift the balance.
At Lighthouse Lab Services, we continue to work with laboratories nationwide to navigate payer strategy, credentialing, and revenue cycle challenges because sustainable labs are essential to sustainable healthcare.
Contact us today for a complimentary consultation to learn more.
