Getting paid in today’s tricky reimbursement landscape requires a savvy business strategy. The following six best practices, which include automated software options as well as third-party assistance from revenue cycle management companies, can lead to better reimbursement.
By Ann H. Carlson
No matter how you slice it, reimbursement for clinical laboratories is a complicated process—and the challenges are increasing as payors demand more documentation to support medical necessity. With denials on the rise, even little mistakes in filing claims can seriously impact your bottom line.
“There’s a large administrative burden on clinical laboratories,” says Aaron Liston, CEO of AIMA, a revenue cycle management company based in Cary, NC. “In order to get paid now, there’s a significant increase in the hoops that you have to jump through.”
To succeed in today’s challenging reimbursement climate, consider the following best practices.
Best Practice #1: Seek support. With so many unique billing requirements, the reimbursement process is labor-intensive.
“The biggest challenge that laboratories face is compliance regulations that are ever-changing in the industry,” says Gayane Haroutyunyan, billing specialist for LigoLab, an informatics platform provider based in Glendale, Calif. “Keeping up to date with them is difficult for both small and large-scale laboratories.”
A truly effective reimbursement management process requires a skilled team with deep knowledge about individual payor policies and painstaking attention to detail when it comes to coding and billing compliance.
“Staying informed about coding and payor policy changes, maintaining efficient billing processes, and investing in adaptive billing software are crucial steps,” says Karis Ahlberg, vice president of marketing for TELCOR, a healthcare software solutions provider in Lincoln, Neb. “Simultaneously, maintaining up-to-date credentials with payors, negotiating favorable contracts, ensuring thorough documentation, and systematically tracking and analyzing claim denials form integral components.”
If that sounds like a lot for laboratories to juggle in house, it is—especially with current staffing shortages. To help alleviate that burden, third-party revenue cycle management services offer laboratories access to experienced personnel who can help manage every aspect of the revenue cycle.
“I don’t think labs can consider their revenue cycle operations as a cost center,” says Teri Gatchel-Schmidt, vice president of consulting and business development for SYNERGEN Health, a Dallas-based revenue cycle management company. “They really need to think of it as a strategic asset. It’s going to help them to succeed and drive revenue and get paid for what they do.”
Best Practice #2: Invest in automation. When it comes to claims, automation has become a game changer for both providers and payors.
“Payors are very savvy,” says Gatchel-Schmidt. “They’re using automation to flag certain codes to automatically require medical records, for example.”
On the laboratory side, today’s revenue cycle management software options can help reduce the administration burden. However, not all software is equally effective.
“Many labs rely on outdated software, often more than a decade old, which may lack the functionalities required for contemporary laboratory billing,” Ahlberg notes. “This can result in convoluted processes that are difficult to update and manage.”
Another problem is inputting incorrect data into the system. “If your panels are not coded correctly in the first place, then you’re going to be submitting high levels of inaccurate claims to payors,” Liston says.
Busy laboratories can often overlook areas where automation can be useful in replacing cumbersome manual processes in their billing cycle.
“Automation streamlines the claim submission process, making it quicker and more accurate,” Haroutyunyan says. “Without this, laboratories risk the inefficient use of staff resources, leading to delayed submissions and potentially reduced reimbursement rates.”
Automation can also help laboratories collect useful analytics to help detect denial frequencies and patterns—as well as to uncover which tests are profitable in their areas.
“You have to have the analytics to tell you what is being denied and what is getting paid,” Gatchel-Schmidt says. “If you’re not looking at that, then you’re not able to make any improvements.”
Best Practice #3: Be vigilant throughout the reimbursement process. Laboratories benefit from streamlining the ordering process for tests on the front-end, paying particular attention to proof of medical necessity and prior authorization requirements, as well as the patient’s insurance coverage versus out-of-pocket expenses.
“Knowing those unique and specific requirements at the time of service is really important,” says Harley Ross, chief commercial officer of XiFin, a San Diego-based healthcare information technology company. “Labs constantly need to be thinking about how to create a frictionless ordering process.”
Recently, UnitedHealthcare and Cigna, two of the leading payors in the country, moved to reduce the number of prior authorization requirements by up to 25%1,2. While this simplifies the ordering process for physicians and patients, it will not necessarily ease the onus on laboratories.
“That burden is going to transition from your front-end to your back-end,” says Clarisa Blattner, senior director for revenue and payor optimization at XiFin. “We actually think that you’ll see prior authorization denials on the back end. Also, requests for additional medical records are coming in before they even adjudicate the claim.”
It is also important to stay current on testing payment trends and discrepancies to help negotiate fairer rates with payors. To support transparency, XiFin maintains an online Payor Rate Transparency Monitor.
“I think the only way to get better is with transparency,” says Ross. “Commercial payors have now been mandated to start making their information publicly available. Transparency allows labs to start talking more openly about how reimbursements are impacting them negatively or positively.”
Best Practice #4: Be prepared for denials on newer tests. Laboratories tend to have successful payment turnarounds for tried-and-true laboratory diagnostics, including clinical blood tests, urinalysis, and preventive screenings. It is more challenging to secure payments for advanced molecular techniques or genetic analysis, such as infectious disease testing, Ahlberg notes.
“New and experimental tests may encounter reimbursement difficulties until they gain broader acceptance and evidence of clinical utility,” she says. “Tests not covered or with limited coverage by insurance companies also present financial challenges for laboratories. Lastly, tests affected by frequent coding changes, such as toxicology testing, may experience administrative complexities and potential reimbursement fluctuations.”
Reimbursements also lag significantly behind technology advancements in healthcare. For example, digital pathology, which streamlines turnaround times for laboratories, is not yet directly reimbursed. In a move toward that goal, the American Medical Association has introduced more than 40 Category III CPT codes for digital pathology in the past year.
“The momentum is accelerating,” says Nathan Buchbinder, co-founder and chief strategy officer of Proscia, a Philadelphia-based provider of digital pathology solutions. “It’s true that these codes don’t carry additional compensation; however, they are enabling laboratories to finally provide payors with a wealth of data to understand the utilization and impact of digital pathology.”
It is also uncertain how reimbursement for laboratory-developed tests (LDTs) will be affected if the Verifying Accurate Leading-Edge IVCT Development (VALID) Act is approved by Congress.
“The FDA’s persistence in regulating LDTs is of material impact to innovation and getting new testing to market,” Ross says. “That definitely is one of the big challenges we see—not just to reimbursement, but to continuing to provide care and innovation.”
Best Practice #5: Partner with payors. Laboratories often inadvertently leave money on the table by accepting denials without pushback.
“The prevalence at which claims are being denied is increasing,” Liston says. “We see it all the time where hundreds of thousands of dollars of claims are just left outstanding.”
Having a conversation with payors about denials can be an important step toward getting paid.
“I think labs need to have the confidence to have that open dialogue,” says Liston, who adds that laboratories should not fear reprisals over asking for these conversations. “We facilitate dialogues with payors all the time, and we have seen success from that in the form of payments.”
The relationship between laboratories and payors is also becoming more collaborative, notes Ross, especially as payors look to partner with providers to promote more preventive care and screenings. He recommends cultivating a positive, long-term relationship.
“Don’t be antagonistic with your payors,” Ross says. “View them as a customer rather than an enemy. If you do that, you won’t always be happy, but you’re going to get a lot farther in your reimbursement efforts.”
Best Practice #6: Be prepared for big changes. The next few years promise to bring a lot of rapid changes to the way laboratories get paid—and the role they play in the larger healthcare ecosystem.
“Once we’ve responded to that change and been able to find those standardized processes, then I think there will be a settling and some stability to grow,” Liston says. “The use of testing and the scientific advances in our field are exponentially increasing, and that’s exciting.”
Ross sees the industry becoming much more consumer-driven, with an emphasis on transparency, equity, and point-of-care access for patients and other stakeholders.
“The reality is that laboratories are medical providers,” Ross says. “Your payor is a customer, your physician is a customer, your patient is a customer. So, thinking about how consumer-driven healthcare impacts that paradigm is really important.”
The industry is also moving away from fee-for-service toward value-based care, which emphasizes improved outcomes for patients, as well as early detection and intervention for health conditions, such as colon cancer.
“Payors are looking for health outcomes to improve based upon testing,” Ross says. “If you can show value in creating a quality test that allows for prevention way ahead of time, you will have a stronger chance at success with advocating for your test with payors.”
As precision medicine comes to the forefront, expect more regulation and payor requirements along the way. You should also make sure to be transparent with patients about what their insurance will cover.
“The interest in expensive genetic testing is going to continue to outpace the payor systems’ ability to create further reimbursement policies,” Gatchel-Schmidt says. “It’s always better if you can have those conversations with patients earlier.”
Laboratories should also be mindful of broader market trends, such as consolidations in the healthcare industry. “Larger entities may have greater negotiating power with payors, which could influence overall market rates,” Haroutyunyan says.
Technology will also play a much bigger role in healthcare going forward. “Whether it’s your collection effort, payor transparency on pricing, or your appeals process on the back-end, there are tangible ways for AI to play a role in all that we see,” Ross says.
To keep current with the rapid changes ahead, it is crucial for laboratories to stay informed and agile.
“In 10 years, we’re not going to be doing the same thing we’re doing today,” Ross predicts. “We just aren’t.”
SALSA Update: Taking Action on Reimbursement
Last November, Congress once again deferred payment cuts of up to 15% cuts for about 800 laboratory services, as required under the Protecting Access to Medicare Act (PAMA) of 2014. While this fifth reprieve is a welcome one for U.S. clinical laboratories, these cuts are now scheduled to go into effect on Jan. 1, 2025—meaning the industry is once again asking Congress to act before the end of the year.
In an effort to break this cycle and reach a more moderate solution, the bipartisan, bicameral Saving Access to Laboratory Services Act (SALSA) has been floated as a potential long-term fix that would allow for sustainable reimbursement rates based on more representative data from laboratories across the country.
“We’re talking about some very significant, deep cuts on reimbursement if PAMA is actually going to get enacted,” says Harley Ross, chief commercial officer of XiFin, a San Diego-based healthcare information technology company. “We’ve been able to hold it off, but SALSA really needs to come to the forefront once and for all. It’s good for everybody to know exactly what is happening instead of continuing to run around not knowing what the end game looks like.”
According to the American Clinical Laboratory Association (ACLA), which has been leading the grassroots effort to enact SALSA, the bill gained nearly 60 sponsors in Congress last year and is endorsed by more than 70 patient and provider organizations, including the American Medical Association, the American Hospital Association, and the Association of American Medical Colleges.
Congress has had some legislative process to date on SALSA, and Susan Van Meter, president of the ACLA, is optimistic that it will be part of a larger, catch-all bill to address other pressing healthcare issues later this year. This could include items such as renewing access to telehealth services, which expires on December 31.
“Congress has recognized that PAMA is faulty,” Van Meter says. “We believe that there’s a very strong chance that Congress is going to be looking to pull together a broader healthcare package at the end of the year, and we think that we’re very well situated with the support for SALSA for that to be included in that larger package.”
To ensure a vote on SALSA legislation, Ross believes it will take a united, well-funded lobbying effort from laboratories across the country. “There’s still not enough advocacy within the industry,” he says. “There’s too much that is left to chance. From a reimbursement perspective, get involved at the state and federal level, contact your representatives and your senators, and know what’s going on.”
To stay abreast of relevant legislation and find out how to play a more active role, Van Meter recommends that laboratorians become involved in their national and regional laboratory associations as well as other professional societies. ACLA also offers the StopLabCuts.org website to help laboratorians stay current on this issue and send messages promoting SALSA to their U.S. representatives and senators. ACLA’s Stop Lab Cuts campaign plans to offer advertising in key states, communicationg the value of laboratory services and why it is imperative for Congress to act on SALSA this year.
“Our message to Capitol Hill has been that data from lab results is the backbone of informed clinical decision making,” Van Meter says. “It’s the engine that is driving precision and personalized medicine. We can’t underscore enough how important laboratorians and clinical laboratories across the country are to day-to-day health, and especially in times of emergency.”
Ann H. Carlson is a regular contributor to CLP.
REFERENCES
- “UnitedHealth insurance unit to cut use of prior authorization process.” Roy, Sriparna. Reuters. March 29, 2023. www.reuters.com/business/healthcare-pharmaceuticals/unitedhealth-insurance-unit-cut-use-prior-authorization-process-2023-03-29/
- “Cigna Healthcare Removes 25 Percent of Medical Services From Prior Authorization, Simplifying the Care Experience for Customers and Clinicians.” Cigna Healthcare. August 24, 2023. https://newsroom.cigna.com/2023-08-24-Cigna-Healthcare-Removes-25-Percent-of-Medical-Services-From-Prior-Authorization,-Simplifying-the-Care-Experience-for-Customers-and-Clinicians]
