With the advancement in diagnostics tests, the test volumes ordered by physicians for their patients are massive. Both molecular and genetic tests number above 40 million within the United States, and in a couple of years that volume is expected to double. With genetic tests comes an additional burden for medical and health care plan providers—ie, to apply the correct medical codes for each diagnostics test ordered, and to apply the appropriate billing for reimbursement.

The ICD system—or the International Classification of Diseases, as developed by the WHO—is in its ninth revision, and the 10th version is currently being implemented in the United States. These codes are alphanumeric designations applied to every diagnosis, symptom description, and cause of death attributed to humans. Developed, classified, and copyrighted by the WHO, in the United States, ICD is monitored by the National Center for Health Statistics (NCHS), which oversees all modifications to the ICD codes now that it is moving to ICD 10 from ICD 9.

According to the WHO, ICDs include “analysis of the general health situation of population groups and monitoring of the incidence and prevalence of diseases and other health problems in relation to other variables such as the characteristics and circumstances of the individuals affected, reimbursement, resource allocation, quality and guidelines.”

Developed in 1983, the ICD codes were adopted in the United States as ICD-1, with further modifications to it, such as ICD-9-CM for clinical modification. Additionally, since this is monitored by the WHO, these codes are used internationally and, hence, need to have cohesiveness for use among providers, clinicians, and insurance providers.

While most countries other than the United States have implemented ICD 10 codes, which were made available in early 2009 by the NCHS, the transition here has been slow and expensive. And as revenue cycle management moves toward using ICD-11, the increase in laboratory coding, billing, and collection, followed by compliance, is leading to most national large labs to train their accounts receivable (AR) team in automated software programs that manage the revenue cycle, effectively eliminating human error in billing and coding applications and variations.

The Need for ICD Codes

According to the American Health Information Management Association (AHIMA) Web site, there are multiple reasons for ICD codes designing payment systems for claims processing:

  • Measuring the safety, quality, and efficacy of medical care;
  • Providing health care consumers with data about their health and health costs;
  • Identifying, tracking, and managing public health risks and disease processes;
  • Recognizing and identifying abusive or fraudulent reimbursement practices and trends; and
  • Conducting health care research and clinical trials and participating in epidemiological studies.

Since the codes were getting obsolete, another version was necessary to include new rules for testing, monitoring, and treatment options leading to ICD-10-CM. Generally, ICD-10-CM incorporates greater specificity, clinical data, and information relevant to ambulatory and managed care encounters. In addition, the structure of ICD-10-CM allows for the possibility of greater expansion of code numbers, including diseases discovered since the most recent revision of ICD-9-CM. This detailed information is expected to help providers, payors, and policymakers in establishing appropriate reimbursement rates, improving the delivery of health care, and evaluating the overall quality of patient care.

Increasing Performance: SaaS

Since the essential functions of every clinical, pathology, and diagnostics lab are billing, coding, collections, and compliance, most software (and hardware companies) focused in this area work on improving the essential functions while the labs comply with the ICD codes.

According to Bill Taylor, vice president, marketing, of XIFIN, a San Diego-based provider of Software-as-a-Service (SaaS) for laboratory revenue cycle management via automated software for clients, “In this industry, if you can’t connect, you cannot collect.”

XIFIN, a SaaS provider, helps diagnostics service providers improve financial performance and improve operational efficiency. According to Taylor, “Our relationship with our clients starts with a strong base so we can build a partnership. We build their system from the ground up, and help improve collection and billing by providing these services as a Web-based program that balances each client to the penny.”

Being an Oracle database written in Java, XIFIN provides a revenue cycle software management solution that is a financial model-based system. This solution is easily Web-accessible by the lab staff via the Internet, with constant realtime system updates and monthly information on how to improve collection, billing, and compliance with the codes for each test or combined tests.

In January 2010, XIFIN announced that seven of the diagnostics industry’s 10 largest clinical labs, including Mayo Medical Laboratories, Lab Corp, and Sonora Quest, now use its software. In addition, Taylor pointed out that within a year, XIFIN customers who focus on determining billing error issues gain between 8% and 20% in their net collections. “We’ve had 100% client retention,” Taylor adds, “which says a lot about SaaS and our relationship with clients being that of advocacy and partnership.”

XIFIN provides a hosted model that is very attractive to many diagnostics labs. In fact, XIFIN processes nearly 60% of all claims submitted by labs such as Clarient, Genzyme Genetics, and Myriad, all of which specialize in molecular testing. Since this hosted model does not require any upfront fees, capital expense, or equipment or licenses, nor IT personnel or maintenance, with the added benefit of data security, this software is increasingly being adopted by many laboratories since they are guaranteed the latest version or updates to payor rules, along with regulatory compliance settings.

According to XIFIN’s CEO, Lale White, in a XIFIN news release earlier this year, “There is probably no other medical specialty—or even an industry outside health care—that has the revenue cycle complexity of clinical laboratories.” She also adds, “… coding and billing requirements (are) complex and different for everyone of the 2000 or so types of tests offered by most labs …” This, in turn, makes each payor have to constantly change its requirements to manage the coverage. Creating a domino effect, that action increases the possibility of mistakes, preventing the lab from collecting.

In order to improve billing and collections’ performance, both Taylor and White agree, “… while the lab industry represents only 2% of all health care spending, it generates about 30% of all the claims filed.” Therefore, in order to bill correctly, and collect accordingly, clinical labs need to intelligently automate all billing, coding, and compliance processes.

Billing and Coding for Genetic Testing

Another well-respected player in this arena is McKesson. The San Francisco-based company develops technology solutions that eliminate paper records. In 70% of hospitals with more than 200 beds, McKessonfs software and hardware is being used to help patients and health care providers.

The company has four product areas addressing lab revenue cycle management—Horizon Enterprise Revenue Management, which helps health systems manage the entire revenue cycle; Horizon Lab, an integrated LIS solution for all laboratory settings that automates the entire process to improve patient safety and test profitability; Revenue Management Solutions, a medical billing service and accounts receivable management solution; and Advanced Diagnostics Management, its latest offering, a shared framework that supports optimal point-of-care ordering decisions.

According to John Gaines, part of the corporate strategy and development department at McKesson, “Clinical lab billing is fraught with excess administrative cost and claims denials, due to a lack of information on whether a test is covered by a health plan before it is performed. Data as simple as member eligibility is almost never available in patient service centers or other entry points into the lab. To compound the problem, new advanced tests, such as genetic or molecular tests, often require payor preauthorization, based on a complex medical appropriateness rule—but labs are often unaware of specific health plan policies until billing follow-up begins. That’s after the test is performed, so is too late if it turns out the test is not covered.”

In addition, the coding of the tests is problematic, with 21 CPT codes now identifying now more than 2,000 tests (molecular and genetic). According to Gaines, these tests are often mistakenly denied or paid due to wrong coding.

McKesson’s Advanced Diagnostics Management is a revenue cycle management software and hardware system with a Web services platform that makes payor coverage rules available to both the ordering provider and the lab in real time, specific to the patient encounter, so that billing results in appropriate reimbursement.

“The platform includes a test ‘catalog’ that identifies every known advanced test with a special unique code, based on a new coding system McKesson has devised,” Gaines says. “We are working with the AMA, CMS, and other groups to help institute new, more specific coding standards to address the issue.”

The advantages of using this system are in the transparency of the codes leading to appropriate billing. Gaines adds, “We connect clinical labs with health plans, using a platform that automatically invokes payor coverage rules for specific tests, to support automatic preauthorization, eligibility inquiry, and other coverage-related information specific to a specific patient/physician order.” This enables effective communication between health plans, physicians, and labs with regard to tests’ coverage, eliminating any misleading or misstated documentation.

A 2009 McKesson press release stated that MVP Health Care and Blue Cross of Idaho started using McKesson’s Advanced Diagnostics Management to track patients in their plans getting genetically tested to confirm which tests they were reimbursing. This was primarily because sometimes payors reimburse for gene scans from direct-to-consumer genomics services without knowing it. This confusion is avoided by the McKesson software system.

According to Gaines, “We connect clinical labs with health plans, using a platform that automatically invokes payor coverage rules for specific tests, to support automatic preauthorization, eligibility inquiry, and other coverage-related information specific to a specific patient/physician order.” This eliminates any error in applying appropriate codes, and eligibility checks allow for quicker billing and reimbursement.

Encinitas, Calif-based HEX Laboratory Systems has been in business for nearly 3 decades. While working with IT support—allowing for rapid billing, patient data access, and compliance—the company prides in working closely with its clients to ensure success. HEXf Susan Bollinger says, “HEX creates new reports, features, and functionality as the market dictates, (based on) new regulatory requirements. Many of our laboratories have ideas for a feature that will make billing and financial analysis better. HEX works with them to develop and implement them.”

HEX supports lab billing with its LIS-based LAB/HEX Billing and Cash Management System. Features include a Medical Necessity module with imports of quarterly national and local coverage permitted diagnosis code files, required data checks, electronic billing and electronic remittance, acknowledgement, and rejections reports. Additionally, split billing feature allows the lab to bill tests that clear medical necessity while working on the remainder. Again, similar to XIFIN, the reports provided by LAB/HEX have financial reporting tools.

Future of Billing and Coding

Since billing and coding are the crux of the finances in a diagnostics lab, they need to be done in a timely and tracked manner with constant updates to changes in the system. Implementation of ICD-10 from ICD-9 will be in full force soon. The United States will replace the ANSI 4010 format with the ANSI 5010 format to support the transition. The diagnosis code base will explode in terms of numbers, and all software companies working in this arena are required to be aware of the changes.

According to Bollinger, “HEX is already working on the new ANSI 5010 and transition to ICD-10 codes as mandated by Medicare. HEX does system-to-system interfaces to interface our Billing System to other systems that don’t have a billing component providing a fully integrated system.” Taylor echoes the same sentiment: “We are working toward ICD-10 compliance, and toward more specificity in transaction data so there is even more transparency.”

Research billing and coding issues in our online archives.

According to White, in The Dark Report, “There are two basic outcomes that labs should look for from a revenue cycle management system, regardless of lab size. There should be a direct improvement (5% to 10%) in third-party cash flow in the first year. Second, it should produce labor efficiencies.”

By using XIFIN, White adds, the SaaS model allows for billing, coding, collections, and compliance to be software and Web-accessible. The future lies in making the software vendor the billing IT staff for the client/diagnostics lab that will apply the necessary checks and balances to bill, code, and collect while complying.

Madhushree Ghosh, PhD, is a San Diego-based science and health writer.

Recommended Reading

Clinical labs make money by using revenue cycle management. [removed]www.darkdaily.com/clinical-labs-make-money-byusing-revenue-cycle-management-1023[/removed]. Accessed July 23, 2010.

ICD-9-CM to ICD-10-CM: Implementation issues and challenges. library.ahima.org/xpedio/groups/public/documents/~. Accessed July 23, 2010.

Payors adopt McKesson’s automated InterQual Molecular Dx System to avoid inaccurate coverage decisions. www.mckesson.com/static_files/McKesson.com/MHS/Documents/GenomeWeb_11-18-09_MDx.pdf. Accessed July 23, 2010.