Case Study
Reduce Denials and Increase Your Lab's Revenue and Net Collections
September 23, 2024
As we all know, following up on missing laboratory billing (lab revenue cycle management) information can be a challenge. In fact, a recent study noted that perhaps as many as 50% of hospitals and independent labs may have a follow-up laboratory billing process that is inadequate or non-existent.
Learn More: Laboratory Billing 101: Improving the Laboratory Billing Process To Prevent Common Errors
This represents 20-to-30% of the lab billing revenue that might not ever be collected!
Staggering lab RCM trends include:
From 2016 through 2Q 2020, the average denials rate was up 20%.
In 2020 alone, 10.8% of all claims were denied upon initial submission.
What’s more, the national denials rate topped 11% of claims denied upon initial submission in Q3 2020, bringing the total increase to 23% since 2016.
The good news is there’s a way to reverse these negative laboratory revenue cycle management trends, and it starts with powerful and highly integrated automation embedded in a sophisticated and intuitive all-in-one LIS laboratory information system and RCM lab billing informatics platform.
Learn More: Why Integrated LIS System and Lab RCM Software is a Catalyst for Growth
To learn how advanced laboratory billing solutions can reduce denials, stop leakage, and increase your lab’s revenue and profitability, we invite you to continue reading our report.
Revenue, Risk & Compliance Management - Mitigating Compliance Risk & Bad Debt: Increasing Revenue & Profit
Introduction
- We are living in evolving and turbulent times.
- Typically, with change comes caution.
- Caution instigates resistance and payer push back.
- In our industry, this resistance translates into payer denials.
- Increased denials negatively affect a lab’s bottom line.
- Now more than ever we need to better understand this impact and proactively counter it with advanced laboratory billing solutions.
Learn More: Six Reasons Why You Should Choose an Integrated Laboratory Billing Solution for Your Medical Lab
Lab Billing Denials Steadily Rising
- National medical denial rates are on an upward trajectory.
- While most providers have taken some steps to reduce the risk of denials, they are still putting significant revenue at risk each year.
- The average denial rate is up 20% since 2016, hitting 10.8% of claims denied upon initial submission.
- The average cost to rework a claim, per the Healthcare Financial Management Association (HFMA), is $25.
- Up to 65% of denials are never reworked, resulting in a substantial net revenue loss for providers.
Estimated Cost of a Denial
- The average cost to file a claim: $6.50
- The cost to resubmit a denied claim: $25.00
- The total cost to submit, correct, and resubmit a claim: $31.50
And note, this is in addition to the loss on 65% of claims never resubmitted after denial.Why Are Denials Rising?
- There is a lack of denial processing resources.
- Staff attrition and training are additional factors.
- There is a growing denial backlog throughout the industry.
- Despite the challenges, many lab providers continue to rely on legacy technology and outdated laboratory billing solutions.
Improved Automation Increases Lab RCM Productivity
Ongoing regulatory changes and the constant need to update laboratory revenue cycle systems (laboratory billing systems) means:
Clinical lab workflow needs to be automated and able to attach the necessary documentation and manage high balance denials.
Investment is needed for modern lab billing analytics and artificial intelligence that can flag denials pre-submission relative to payers and provide remedial actions.
Measuring Laboratory Billing System Denials: Performance & Outcome-Based KPIs
Ensuring accurate demographic capture, financial clearance and eligibility verification, precise coding, and vigilant monitoring of procedure pricing are critical components of a modern laboratory billing system. These elements work together to streamline operations, reduce errors, and maximize financial efficiency in medical laboratories.
- Accurate demographics capture
- Financial clearance/eligibility
- Coding
- Procedure pricing monitoring
Denial Causes – Most (90%) are Preventable
Lab billing denials are commonly caused by inaccuracies in patient demographics, eligibility and coverage issues, incorrect or incomplete coding, and missing required documentation. Although the cause of great frustration in our industry, the truth is that most denials are preventable when a proper laboratory billing process is supported by an advanced laboratory billing system that addresses these issues through improved data accuracy, compliance with payer guidelines, and timely claim management.
Below is a list of the most common reasons for denied claims and the percentage of their occurences.
- Inaccurate demographics capture and payer validation: 26.6%
- Missing or invalid claim data: 17.2%
- Inaccurate payer authorization/rendering facility: 11.6%
- Service not in network: 10.6%
- Medical documentation requested: 9.2%
- Rules and regulation non-compliance: 6.6%
- Medical coding issue: 4.8%
Steps to Reduce Laboratory Billing Denials
As noted earlier, most laboratory billing denials are preventable when using the right laboratory billing process supported by modern laboratory billing solutions. Here are some helpful hints that once applied, will make a positive impact on your lab’s revenue generation.
- Determine where denials are originating and their root causes.
- Prioritize remediation based on where and what actions will have the greatest impact.
- Prioritize denials based on revenue impact.
- Consolidate laboratory revenue cycle management (lab RCM) technology with a single “end to end” laboratory billing vendor.
Learn More: Reduce Denials and Stop Revenue Leakage With Integrated Laboratory Billing Management
Ways to Achieve the Benefit from Advanced Analytics and AI
Additionally, advanced analytics and AI-enhanced laboratory billing solutions have the power to identify patterns that lead to denials, can automate processes, and provide predictive insights.
For example, AI models can analyze historical data to predict potential denials, enabling labs to address issues before claims are submitted. AI can also support real-time eligibility verification to ensure patient coverage details are accurate, reducing errors that often cause denials. Automated ICD and CPT coding RCM tools powered by AI further help by assigning the correct procedure codes, minimizing errors and ensuring compliance with payer requirements. Additionally, AI can streamline prior authorization management by flagging tests needing authorization and automatically initiating requests.
The use of advanced analytics can optimize lab RCM by highlighting inefficiencies and targeting areas for improvement. AI-powered RCM tools also assist in attaching necessary documentation to claims, preventing denials due to missing information, and enhancing patient communication, reducing the likelihood of patient-related denials.
Overall, these technologies, when coupled with the right RCM process and the right lab RCM software vendor have the power to significantly improve lab billing success, reduce denial rates, and enhance financial performance for medical laboratories.
Learn More: Laboratory Billing Automation: Boosting Efficiency & Clean Claim Rates
Learn More About LigoLab and its Comprehensive LIS System and Laboratory Billing Solutions
LigoLab is a leading provider of innovative end-to-end healthcare LIS and laboratory billing software for pathology laboratories, servicing nearly 300 facilities nationwide.
As a comprehensive enterprise-grade pathology lab software application, the LigoLab LIS & RCM Laboratory Informatics Platform™ includes modules for anatomic pathology (anatomic pathology LIS), clinical laboratory (medical LIS), molecular diagnostics (molecular LIS), lab revenue cycle management (lab RCM), and direct-to-consumer lab testing (TestDirectly and TestDirectly.com), all on one powerful and integrated informatics platform that supports every role, department, and case.
To see how LigoLab empowers laboratories to serve patients better so they can differentiate themselves in the marketplace, scale their operations, become more compliant and profitable, CLICK HERE and start a conversation with a LigoLab product specialist.
