Industry Insights
Navigating the Coding Minefield: Labs Struggle with RCM Rejections Amid Rising Scrutiny from Payers
April 1, 2025
Clinical laboratories and pathology groups face mounting pressure as they navigate the increasingly intricate coding requirements tied to lab revenue cycle management (RCM) and laboratory billing for diagnostic tests. Constant regulatory updates, payer-specific rules, and the expanding use of automated claim review systems have driven up claim rejections, denials, and post-payment clawbacks - creating significant financial and operational strain across the industry.
“Every fiscal year, new coverage determinations are released, usually based on CMS guidelines, and many payers follow those closely,” said Aram Avakyan, a laboratory revenue cycle management expert with deep insight into the lab billing space. “Sometimes, it’s a drastic change. Other times, it’s minimal. Regardless, we’ve seen a tightening of the noose. It’s become harder to reach that low-hanging fruit.”
Learn More: ICD-10-CM Official Guidelines for Coding and Reporting
According to Avakyan and industry data, the most common causes for lab claim rejections include:
- Outdated or incorrect coding due to frequently updated CPT/ICD-10 codes
- Evolving medical necessity documentation requirements
- Missing or inaccurate patient and payer data (often from human error)
- Improper use of modifiers or units
- Errors in bundling/unbundling protocols
- Missing or unrequested prior authorizations
These long-standing challenges have escalated in recent years, particularly with the rise of automation and AI tools on the payer side.
“Payers are reviewing claims more closely than ever before,” Avakyan explained. “If the CPT code being billed doesn’t align with the diagnosis (ICD-10) code, it will likely be rejected. Even if a claim makes it through initially, they might claw it back months later.”
This post-payment scrutiny is a rising concern for labs, especially when the claims involve high-dollar tests like flow cytometry or advanced immunochemistry.
“Tests that cost more - say, $300 or $500 per unit - are much more likely to be scrutinized,” said Avakyan. “You won’t see 10 units of a CPT code getting reimbursed easily like you might have five or ten years ago.”
Some industry observers believe AI plays a significant role in the growing rate of denials, allowing payers to flag questionable claims that would have been too time-consuming for human reviewers.
“I can’t confirm it 100 percent, but it's an absolute possibility,” said Avakyan. “We're working on similar AI-driven tools, where the lab revenue cycle management module of the LigoLab Informatics Platform reviews combinations of ICD-10 and CPT codes and flags inconsistencies before submission. It’s reasonable to think payers are doing the same.”
Learn More: Reduce Denials and Stop Revenue Leakage With Integrated Laboratory Billing Management
Prevention is Key: Lab RCM Best Practices
Avakyan emphasized that preventing denials most effectively requires a proactive and well-structured laboratory billing process.
“The name of the game these days is to avoid clawbacks and denials altogether,” he said. “It’s about keeping that first-pass ratio as high as possible.”
Based on LigoLab’s internal data and client outcomes, Avakyan recommends the following strategies for labs to reduce rejection and denial rates:
- Regularly Update Lab Billing Systems: Ensure lab billing software reflects the latest CMS codes and local coverage determinations.
- Pre-Submission Audits: Review claims before submission to catch documentation errors and ensure coding alignment.
- Monitor Regulatory Changes: Stay up-to-date with CMS bulletins and payer policy shifts.
- Engage in Ongoing Education: Participate in CMS webinars and provide internal training for coding teams.
- Hire Certified Coders: Employ experienced staff who understand the nuances of CPT, ICD-10, and payer-specific requirements.
- Implement Smart Claim Review Systems: Use advanced laboratory billing solutions that apply hard stops or warnings if claims are likely to be denied.
Avakyan also described how his team has developed configurable revenue cycle management tools that allow medical labs to tailor their claim scrubbers to the specific requirements of different payers or payer groups.
“Our billing software for labs checks against updated NCD/LCD lists, monitors MUEs (Medically Unlikely Edits), and flags nonspecific diagnosis codes,” he said. “Our rule engine can be configured for any lab’s unique RCM cycle workflow. It’s all about giving the lab control and visibility before the claim leaves the system.”
White Paper: Maximizing Your Lab’s Profitability: The Case for In-House Lab Billing
As scrutiny intensifies and AI-driven audits become more common, clinical laboratories and pathology groups can no longer afford to treat lab billing and coding as a back-office function. It is now a frontline strategy for revenue preservation and profitability.
“The preemptive approach is essential,” Avakyan concluded. “Because once you’re in the back-and-forth of appeals or clawbacks, it’s already too late. That’s when it becomes expensive - both in time and dollars.”
Industry Insights: The AI Revolution in Laboratory Billing: A Game Changer for 2025 and Beyond
Unify, Automate, and Maximize: How the LigoLab Platform Transforms Laboratory Revenue Cycle Management
The all-in-one LigoLab Informatics Platform is a comprehensive, end-to-end pathology lab software solution designed to unify and optimize operational and financial aspects of clinical laboratory management. Built for scalability, compliance, and efficiency, the platform seamlessly integrates laboratory information system (LIS) functionality with advanced lab revenue cycle management (RCM) tools, enabling laboratories to streamline workflows, eliminate silos, and maximize reimbursement.
What sets LigoLab apart is its real-time, rules-based architecture that connects the diagnostic and billing sides of the lab, ensuring accurate coding, complete documentation, and clean claims from the start. By automating complex lab billing functions - such as CPT/ICD code validation, insurance eligibility checks, claim scrubbing, and MUE/NCD/LCD compliance - LigoLab significantly reduces denials, accelerates cash flow, and lowers administrative costs.
The platform also features customizable dashboards, audit trails, and pre- and post-billing analytics that provide unparalleled visibility and control over every step of the laboratory billing process. With built-in RCM tools for prior authorization management, payer-specific rules, and automated appeals workflows, LigoLab empowers labs with proactive revenue integrity management.
Whether you’re scaling an anatomic pathology practice or a growing reference lab, LigoLab’s modular, cloud-based solution adapts to your needs and supports your long-term success.
Ready to take control of your medical lab's financial performance?
Connect with a LigoLab Product Specialist today to see how a unified medical LIS and lab billing platform can transform your laboratory’s operations and boost profitability. See what’s possible when LIS and RCM work as one.
