How a laboratory certificate fee is actually set

The amounts are somewhere else on purpose

Anyone looking for what a laboratory certificate costs will not find a figure in the regulation. That is by design, and the design is the interesting part.

The regulation sets the method for determining fees, and directs that the amounts be published biennially as a notice in the Federal Register.

So the rule is stable and the numbers move. What a reader can learn from the rule is what the fee is measured against, and what makes one laboratory pay more than another.

The financing principle is stated at the top. "The total of fees collected by HHS under the laboratory program must be sufficient to cover the general costs of administering the laboratory certification program" under the governing statute.

This is a cost-recovery program. Every design choice below follows from that.

Five certificates, five different cost bundles

The certificate fee covers issuance, renewal, a change in certificate type, reinstatement of a terminated certificate with a gap in service, and other direct administrative costs.

What sits inside that fee differs by certificate, and each description names the work being paid for.

A registration certificate carries a flat fee covering issuance, fee collection, and evaluating whether the listed tests fall within what the certificate allows.

A waiver certificate adds a distinct task: "determining whether a laboratory test meets the criteria for a waived test."

A microscopy certificate adds evaluating whether the listed procedures meet the criteria for that subcategory.

An accreditation certificate adds "evaluating the programs of accrediting bodies", which is oversight of the accreditor rather than of the laboratory.

A compliance certificate adds "evaluating and monitoring proficiency testing programs".

Read as a list, that is a map of where the regulator actually spends its effort on each kind of laboratory.

What counts as a test

For every certificate except waiver and microscopy, the fee depends on test complexity, annual volume and the specialties performed. So the definition of a test decides the bill.

The regulation is explicit: "a test is a procedure or examination for a single analyte." Tests run for quality control, quality assessment and proficiency testing are excluded from the annual volume.

And a panel does not count as one. Each profile is counted as the number of separate procedures, with the rule giving its own example: "a chemistry profile consisting of 18 tests is counted as 18 separate procedures or tests."

That is worth knowing outside the fee context too. It is a federal regulation stating plainly that a panel is a bundle of individual tests, which is exactly how a patient should read a panel result.

The specialties counted are then listed: microbiology with five subspecialties, serology with two, chemistry with four, hematology, immunohematology with four, pathology with three, and radiobioassay, histocompatibility and clinical cytogenetics.

Eleven schedules, from very small to very large

"There are 11 schedules of laboratories for the purpose of determining the fee amount a laboratory is assessed." Each laboratory lands in one, based on scope and volume.

The smallest is defined by volume alone: "The laboratory performs not more than 2,000 laboratory tests annually."

The next two split the same volume band by breadth. Up to ten thousand tests in no more than three specialties is one schedule; the same volume across at least four specialties is another.

The pattern repeats between ten thousand and twenty-five thousand tests, again splitting on three specialties or fewer against four or more.

Above that, breadth stops mattering and volume alone decides: bands running to fifty thousand, seventy-five thousand, one hundred thousand, five hundred thousand, one million, and above one million tests annually.

So a small laboratory doing a little of everything can sit in a higher schedule than a larger one doing a single specialty. Breadth is priced, not just size.

The inspection fee, and who is exempt from it

A second fee applies to laboratories that get routine inspections. "a laboratory subject to routine inspections must pay a fee to cover the cost of determining program compliance."

Three certificate types are outside that fee for routine inspections: microscopy, waiver and accreditation.

What the compliance fee buys is itemized. Evaluating the qualifications of laboratory personnel, monitoring proficiency testing, and conducting onsite inspections including documenting deficiencies, evaluating correction plans, creating training programs, training surveyors, and administrative costs.

It is set biennially on the same complexity, volume and specialty basis, and assessed and payable biennially.

That itemization is useful on its own. It says what an inspection consists of, in the regulator's own accounting.

The fees that only some laboratories ever see

Four additional charges apply only when something has gone wrong or changed, and each is billed on actual cost rather than a schedule.

Follow-up visits after identified deficiencies are charged, and "The fee is based on the actual resources and time necessary to perform the follow-up visits."

Upgrading a certificate after adding services is charged where an inspection, personnel evaluation or proficiency testing monitoring is needed to determine compliance.

Complaint investigations, sanctions and hearings are charged. An important limit applies. "If a complaint investigation results in a complaint being unsubstantiated, or if an HHS adverse action is overturned at the conclusion of the administrative appeals process", those costs are not imposed on the laboratory.

Nor are they charged early. Costs are not assessed until the laboratory concedes the deficiencies or an administrative law judge rules for the government.

The fourth follows a failed proficiency test, where "it is necessary to conduct a desk review of the unsuccessful performance."

Each of the four carries the same consequence for non-payment: the certificate is revoked.

Accredited laboratories pay for inspections they may never have

Laboratories inspected by a private accreditor are still validated by the government on a sample basis, and the cost of that sampling is spread.

"All accredited laboratories share in the cost of these inspections." The share is stated as five percent of the same costs incurred inspecting non-accredited laboratories in the same schedule.

And it is paid "whether the accredited laboratory has a validation inspection or not."

That is an unusual and honest piece of design. The value of a validation program comes from the possibility of being selected, so everyone in the pool pays for it.

Follow-up visits after deficiencies are charged separately, on actual cost. The same complaint, sanction and hearing provisions apply to accredited, waiver and microscopy laboratories, including the protection where a complaint is unsubstantiated or an adverse action is overturned.

States are billed too

Where a state runs an approved laboratory program, the state is assessed rather than the laboratory.

Three items are named. The cost of federal inspections of that state's exempt laboratories, to verify standards are being enforced appropriately. The cost of substantiated complaint investigations against those laboratories. And "The State's pro rata share of general overhead" for administering the certification program.

The mechanics differ as well. The department estimates the cost of validation inspections in the state at least every two years and notifies the state by mail, and bills separately for substantiated complaint investigations.

For everyone else the rule is short and absolute. "The appropriate certificate is not issued until the applicable fees have been paid."

The inflation formula, and the clause underneath it

The last section is the one worth reading closely, because it is a rare published example of how a federal fee keeps pace.

Fees are subject to a biennial increase based on a two-part calculation.

The first part is inflation. "CMS calculates the inflation rate using the compounded CPI-U over 2 years" and, where the calculated rate is above zero, applies that increase to all fee amounts.

The second part is a catch-up. If the total fee amounts, including that inflation increase, do not match or exceed actual program obligations based on the previous two years, an additional increase is applied.

That second increase is not targeted. It is applied as "an additional across the board increase" to each laboratory's fees, calculated as the difference between total fees and actual obligations.

Increases compound rather than reset. Any increase applied "is incorporated into the baseline fee amounts for any subsequent biennial increase."

And it is visible. Any increase, including the calculation, is published as a notice in the Federal Register.

State program fees are excluded from this formula, which is why their costs are estimated and billed rather than scheduled.

What a reader can take from a fee schedule

The first useful fact is not about money. A federal regulation defines a test as a procedure or examination for a single analyte, and counts an eighteen-test panel as eighteen tests. That is the correct way to read a panel.

The second is about oversight economics. Accredited laboratories pay a share of the cost of validation inspections whether or not they are inspected, which means accreditation does not remove government sampling.

The third is a fairness feature worth noticing. Where a complaint is unsubstantiated, or where an adverse action is overturned on appeal, the government's costs are not charged to the laboratory.

The fourth is a warning about any published figure. Amounts live in biennial Federal Register notices, not in the regulation, so a fee quoted anywhere should carry the date of the notice it came from.

One limit on this article. Only the fee subpart was read in full. The certificate application sections, the validation inspection section it cross-references, and the sanction provisions were not read for this piece.

No fee amount appears here, because none appears in the regulation. Anyone needing a current figure should look to the most recent published notice.

Sources

Each document below is named as it names itself, with the date printed on that document rather than the day it was read.

1. Title 42 Code of Federal Regulations section 493.602, Scope of subpart, read in full — Electronic Code of Federal Regulations, Office of the Federal Register, April 1995
2. Title 42 Code of Federal Regulations section 493.606, Applicability of subpart, read in full — Electronic Code of Federal Regulations, Office of the Federal Register, January 1993
3. Title 42 Code of Federal Regulations section 493.638, Certificate fees, read in full for the cost-recovery principle, the five certificate cost bundles, the definition of a test, the specialty list and the eleven schedules — Electronic Code of Federal Regulations, Office of the Federal Register, December 2023
4. Title 42 Code of Federal Regulations section 493.639, Fees for revised and replacement certificates, read in full — Electronic Code of Federal Regulations, Office of the Federal Register, December 2023
5. Title 42 Code of Federal Regulations section 493.643, Additional fees applicable to laboratories issued a certificate of compliance, read in full for what the compliance fee covers and the four actual-cost charges — Electronic Code of Federal Regulations, Office of the Federal Register, December 2023
6. Title 42 Code of Federal Regulations section 493.645, Additional fees applicable to laboratories issued a certificate of accreditation, certificate of waiver, or certificate for PPM procedures, read in full for the shared validation inspection cost and the complaint survey provisions — Electronic Code of Federal Regulations, Office of the Federal Register, December 2023
7. Title 42 Code of Federal Regulations section 493.649, Additional fees applicable to approved State laboratory programs, read in full for the three assessed items — Electronic Code of Federal Regulations, Office of the Federal Register, December 2023
8. Title 42 Code of Federal Regulations section 493.655, Payment of fees, read in full for the notification process and the payment-before-issuance rule — Electronic Code of Federal Regulations, Office of the Federal Register, December 2023
9. Title 42 Code of Federal Regulations section 493.680, Methodology for determining the biennial fee increase, read in full for the two-part calculation, the baseline provision and the publication requirement — Electronic Code of Federal Regulations, Office of the Federal Register, December 2023