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Laboratory 101: Improving the Laboratory Billing Process To Prevent Common Errors
July 12, 2024
Medical laboratories (clinical labs and pathology practices) generate large volumes of tests annually, so it’s no surprise they also experience some of the highest denial rates in the healthcare sector.
Years ago, armed with robust budgets and sizable margins, laboratories didn’t feel the need to invest in highly functional laboratory revenue cycle management (lab RCM) technology and often wrote off these denials, believing the effort to resubmit wasn’t worth the time and resources required to work the claims.
They weren’t overly concerned about leaving money on the table because they were profitable and of the belief that denials were just a daily part of doing business.
Unfortunately, those days are gone, and every dollar counts. Today’s laboratories face several market pressures and challenges forcing them to look inwardly and evaluate laboratory billing system shortcomings while identifying areas where improvement needs to be a priority.
Laboratory billing (in-house or with an external lab RCM service) has traditionally been viewed throughout the industry as a backend process rather than one that begins on the front end at order origination.
Case Study: Leveraging LIS System & Lab RCM Integration to Improve the Laboratory Billing Process
However, a backend RCM process represents a missed opportunity because the reality is that the best laboratory billing process starts when the order comes into the laboratory, not when the report is final.
Fortunately, lab operators are beginning to realize this need to proactively improve RCM lab workflow to protect themselves against continuing trends like payer reimbursement cuts, custom payer requirements, staffing shortages, fast-changing rules, increased regulations, and the continued growth of patient payment responsibility.
Learn More: The LigoLab Difference: Demonstrating the Power of Lab RCM Automation in the Clinical Laboratory
Missing patient demographics account for most laboratory denials. Laboratories that recognize this and take the time to implement a laboratory billing system that captures the patient’s name, address, and phone number on the front end of the lab billing cycle will experience immediate improvement.
Learn More: Reduce Denials and Stop Revenue Leakage With Integrated Laboratory Billing Management
Actionable Steps To Improve the First-Pass Resolution Rate:
The First Pass Resolution Rate (FPRR) is a key performance metric that measures the percentage of claims processed and paid on the first submission without rework or resubmission.
A high percentage indicates a laboratory billing process with proper coding and claim submission leading to fewer denials.
If a lab’s FPRR is higher than 90 percent it's not only benefitting from reduced denials but also faster reimbursement, and enhanced use of resources and reputation, two important considerations in a competitive environment featuring a shortage of qualified help.
Here is a list of upstream steps a lab billing department can take to push their FPRR to 90 percent and beyond.
- Maintain Accurate Files - Verify demographics and insurance information for each patient visit. Insurance carriers change often and so do coverage limits.
- Insurance Discovery - Call the client or provider to obtain missing or incomplete patient data. This will help you find commercial and government insurance coverage that’s billable.
- Check Eligibility - Visit the payer portal or call the payer to confirm that the patient insurance you’ve identified is active.
- Whitepages Lookup - Log on to Whitepages.com to check and verify the patient’s name and telephone number.
- USPS Address Validation - To check and verify the patient’s address, log on to USPS.com.
- Don’t Be Late - Establish a laboratory billing process that ensures the claim is filed on time and confirms that the payer received the claim.
- Analyze Results - Take the time to learn why a claim was denied to identify and resolve negative patterns and trends.
- Stay Current- Rules and regulations are in constant flux. Take the time to educate and train lab billing staff members to stay current.
- Close The Gaps - Identifying patterns and trends does a laboratory no good if the findings aren’t communicated effectively to front desk staffers, lab billers, and physicians. Put everyone on the same page and work from the same playbook.
By going through these steps on the front end of the lab billing cycle, medical enterprises will enjoy more clean claims and a boost in net collections.
This short-term fix will help stabilize struggling labs, allowing them the time to work with providers that offer billing software for labs and identify and implement long-term laboratory billing solutions that will increase their ability to collect all claims with full visibility while minimizing labor costs.
Once armed with the proper RCM tools, laboratories can do more than just meet the challenges of today and the future, they can become more profitable, gain an edge over the competition, and steadily scale up their operations and go after new business opportunities.
Adding Automation to Laboratory Revenue Cycle Management
It’s abundantly clear that the key to long-term laboratory success is tied to laboratory billing automation, and a recent study from CAQH, a nonprofit group that works with providers to streamline healthcare businesses, reinforced the importance of automation as part of any lab RCM solution.
CAQH identified eight common administrative tasks costing the healthcare industry $13.3 billion annually. The group then attached a cost per transaction value to each task while accounting for the volume of each transaction plus the cost of time and manual labor spent on each activity.
Average Cost Per Administrative Task When Performed Manually
1. Claim status inquiry: $10.13
2. Prior authorization: $14.24
3. Eligibility and benefit verification: $8.77
4. Attachments: $5.06
5. Claim submission: $4.22
6. Remittance advice: $4.22
7. Claim payment: $3.18
8. Coordination of benefits: $1.05
Modern Lab RCM Cuts Costs and Increases Margins
Not surprisingly, the costs associated with administrative manual tasks add up quickly and serve as a drag on a laboratory’s bottom line.
On the other hand, this is timely news for laboratory operators across the country motivated to cut costs and increase margins while improving lab revenue cycle management performance.
Learn More: How Billing and Coding Automation Increases Laboratory Revenue
Inquire HERE to see how the LigoLab platform can automate all these steps and help your lab business avoid losing money and time.
