In 2022, a wide range of factors have converged placing increased pressure on clinical laboratories to streamline operations, reduce costs, and increase revenue capture. As the American Clinical Laboratory Association (ACLA) states:
“While payments for lab services are being slashed, the costs associated with providing critical laboratory services — including labor, supplies, and transportation — continue to climb.”1
Regulatory and reimbursement changes
From a regulatory perspective, U.S. clinical labs came extremely close to Medicare cuts, beginning in January 1, 2022, that would have slashed reimbursements up to 15% for nearly 600 commonly ordered clinical laboratory tests. While a one-year delay of these cuts came in December 2021 with the passage of S. 610, the “Protecting Medicare and American Farmers from Sequester Cuts Act,” the threat remains on the horizon.2
“Labs continue to face an environment of complex payer requirements, which vary by payer and are continually changing,” said Harley Ross, Chief Commercial Officer, XIFIN. “For COVID testing, for instance, we saw the payor requirements changing on nearly a daily basis. Then, too, there has been a significant uptick in added requirements for prior authorization and medical necessity documentation. Keeping up with the sheer number of changes is a significant challenge for labs.”
Nick Trentadue, Product Manager, Beaker Laboratory, Epic, says a combination of lower reimbursement rates and increased competition from large labs is putting the squeeze on smaller labs, stating:
“Clinical labs have seen a reduction in reimbursement for testing they perform; for example, the Centers for Medicare & Medicaid Services (CMS) lowered payment rates and the Health Resources and Services Administration is no longer accepting claims for uninsured patients’ COVID-19 tests. Clinical labs have also seen a decrease in their outreach business with payers increasingly directing patients to large reference labs (e.g., Quest, LabCorp, Mayo).”
The Great Resignation
Staffing shortages are hitting clinical labs hard at a time when test volumes are increasing, while at the same time, there is a pressing need for experienced lab professionals who can navigate the complexities of coding and billing.
“The Great Resignation has hit revenue cycle staff the same as it has elsewhere in healthcare,” said Ross. “Specifically, we’re seeing that it’s taking longer to fill positions, and once in those positions, people are not staying as long as they once did. It boils down to a huge turn and burn in revenue cycle departments.”
Ross references a recent survey from AKASA, a developer of AI for healthcare operations, which revealed that it is taking nearly three months on average to fill an entry level position and more than twice as long for senior level positions.3
“In this environment, it is difficult to resolve revenue cycle issues by simply throwing bodies at them because those bodies have become much harder to find,” Ross added. “With a greater need for dealing with things like prior authorizations or appeals, many labs may encounter staffing difficulties just as their demands for staff are going up.”
Lisa-Jean Clifford, COO and Chief Strategy Officer of Gestalt Diagnostics, points out how the challenge isn’t just in filling open laboratory positions, but training and retaining staff members.
“For many labs today the processes around revenue cycle management are largely manual,” said Clifford. “It is a huge lift when processes are not automated, from validating the accuracy of information, to keying data into systems, to updating it when changes occur. Staff members are placing phone calls to ordering physicians, insurers, employers, and patients to get the right information, then manually chasing down claims on the back end to get paid. Therefore, it is devastating when a lab invests significant time and money to train new staff only to see them resign a month or two later.”
Competition from the experience economy
The shift to patient-centric healthcare delivery is impacting not only frontline care providers but also service providers behind the scenes, including clinical labs. Labs are finding they must invest in digital technologies and capabilities that enable them to deliver the experience patients expect today, at a time when costs are high and budgets are tight.
“Many laboratories that we work with are expanding their outreach services within their communities by promoting better customer service and faster turnaround times than national chains and offering value-added services like providing in-home draws, sending staff to long-term care and skilled nursing facilities, and marketing their diagnostic management teams,” noted Trentadue.
“Patient consumption of healthcare has changed dramatically, necessitating a host of requirements to provide patients with enhanced digital engagement options for scheduling, reminders, obtaining results, viewing pricing, making payments, etc.,” said Ross. “Increased consumerism has led to increased demand for personalized medicine, and an expectation that information is being tapped for the greater good. These become even more important as patients continue to become more responsible for a larger portion of their medical bills.”
“Nontraditional providers are putting competitive pressure on conventional services, including new entrants such as Amazon, and the increased focus on telehealth services that COVID has triggered,” he added. “With retail pharmacies expanding their clinical services offerings (and patients growing increasingly comfortable with them doing so), laboratories are faced with both additional challenges as well as new opportunities.”
How to shift from a cost-center to a revenue-driver
Within the current environment, Clifford is hearing that clinical lab payment cycles have surged from an average of 90 days to well over 8–10 months, stating:
“This can have a significant impact, not only on an organization’s month-to-month payment cycle, but also performance on a quarterly or annual basis as those cycles can cross over from one annual billing cycle to the next.”
“When it comes to revenue cycle management platforms, many organizations don’t want to invest in what they consider non-value-added software,” she added. “But considering how reimbursement for testing or any medical fees is a high priority, this is one of the areas where a lab can have the biggest impact on its bottom line.”
Ross comments on why automation is key:
“Optimizing processes and workflow with intelligent automation, including making maximum use of electronic information, reduces demand on staff. Essentially, you’re able to do more and generate better results even when faced with staffing shortages. Additionally, automation frees up staff members’ time to work on difficult or unusual instances where human intervention is required, which in turn improves revenue cycle performance.”
Trentadue explains how challenges to recruit and maintain staff can be eased by finding opportunities to automate workflows,” stating:
“A laboratory information system that offers functions such as automatic verification for qualified results and integrated revenue cycle capabilities can free lab staff from manual tasks like verification, charge entry, and charge review while also improving turnaround times and increasing the likelihood of accepted claims.”
The essentials of intelligent automation
Clifford, Ross, and Trentadue offered their insights on automation of lab revenue cycle management, including best practices for success and factors for consideration.
Start with a clean and accurate source of truth
Clifford stresses the importance to starting with a clean, accurate, and timely source of truth for billing and revenue capture information, stating:
“Validating the accuracy of patient, testing, and insurance information is the tip of the iceberg. If this information is incorrect, everything falls off from there. Through automation, your lab can integrate with other systems to receive real-time feeds with updated data vital to billing and reimbursement success. If information that is already stored in your database changes, such as when an existing patient switches insurers, the updated data comes over automatically to the lab’s system so the new payer is already in their system the next time the patient presents.”
Extend automation to clients
Reimbursement is dependent not only upon effective laboratory workflows, but the workflows of the healthcare providers ordering the tests as well. That’s why Ross recommends extending automation and optimization to ordering physicians. She states:
“Laboratories are not the only part of healthcare struggling with staffing shortages, and client support tools that reduce work on their end is important not only for improved client satisfaction but also for improved efficiency and timeliness. Client portals that are integrated into revenue cycle systems provide labor-saving capabilities, such as automating missing/invalid information collection, invoice delivery and payment, and price inquiry support. These help physician offices to provide necessary information to labs and reduce customer service inquiries. But more importantly, they directly improve laboratory financials by helping ensure a higher percentage of claims with front end issues get fixed and paid rather than falling into a write-off bucket.”
“Something as simple as providing accurate online lookup of price and test information will significantly reduce the number of incoming phone calls into the lab each week, which again frees up staff to focus on more pressing issues,” Ross added.
Gain visibility and optimize revenue management through analytics
A key benefit of system integration and automation of clinical lab revenue cycle management workflows is the ability for the lab to access accurate, real-time analytics on their performance.
“Hand in hand with this automation is access to meaningful and accurate data and analytics that help you understand your business and point to areas of concern or improvement,” said Ross. “KPIs [key performance indicators] are critical to measuring success, identifying opportunities to improve, and substantiating any need for additional resources. Moreover, the ability to quantify the lab’s financial contributions back to the health system is a critical first step to running a lab as a revenue center.”
Clifford says that while getting payment and reimbursement under control is the highest priority for the finance department, the “brass ring” of analytics is the lab’s ability to generate reports, identify trends, and prioritize areas of focus for continuous improvement.
Ross notes how the ability to correct errors within a revenue cycle management solution can help labs understand which ordering physicians are causing errors in the billing process. A lab can then focus its efforts on educating specific providers to avoid errors going forward.
“Tying analytics to addressing up front errors and backend denials is key to being able to optimize processes, particularly in the face of ever-changing payer plan edits,” said Ross. “And that means understanding lab payments at the procedure code level and reviewing them against contract or expected reimbursement rates for that specific procedure code.”
According to Ross, posting payments at the encounter level rather than the procedure code level makes accurate tracking next to impossible and prevents labs from acting on underpayments and holding payers accountable to any contracted fee schedules. She urges labs to monitor data for trends related to denials and write-offs so they can determine if these issues can be easily remedied through an edit or consolidation rule.
“With payer denials due to lack of medical necessity documentation or prior authorization, and requests for additional information on the upswing, ensuring automation is in place to deal with these issues and with appeals will be a critical success factor for many labs,” she explained. “A data-driven appeals strategy combined with automated appeals processes and high visibility is essential to recovering laboratory revenue. The value of this approach will continue to become more impactful as these denial trends continue, and reimbursements continue to put pressure on laboratories’ bottom line.”
Is an in-house or outsourced approach right for your lab?
When a clinical lab decides the time is right to optimize revenue cycle management, there are two paths it can take. One is to purchase a software application that the lab will manage internally and the other is to outsource management to a service provider.
“A self-managed software application is a capital investment with a lower, ongoing operational expense,” said Clifford. “Organizations tend to like the immediate return on investment (ROI) from this approach because it can have a very quick impact on both collections and payment rates. A lab considering this path must determine whether it has the necessary IT resources, knowledge, and bandwidth internally to deploy and manage the solution.”
“By offloading revenue cycle management to a service provider, a lab avoids capital costs in exchange for higher ongoing operational expense,” Clifford added. “The key here is for the lab to evaluate potential vendors in this category and understand not only their capabilities and costs, but also what they can guarantee to deliver in terms of revenue capture. Specifically, ask them to show you evidence of how they have impacted the bottom line of an organization similar to your lab’s size and scope.”
“A technology platform that enables and supports the capabilities outlined above, whether it is used by in-house staff or by an outsourced billing partner, is critical for any laboratory’s success,” said Ross. “It is foundational to becoming a revenue (not a cost) center, and it provides the tools for laboratories to monitor, measure, and act in the face of ongoing challenges.”
References
- Reimbursement & coverage. American Clinical Laboratory Association (ACLA). Accessed May 24, 2022. https://www.acla.com/reimbursement-coverage/.
- Congress passes PAMA relief, safeguards seniors’ access to critical lab tests ahead of January deadline. American Clinical Laboratory Association (ACLA). Published December 9, 2021. Accessed June 1, 2022. https://www.acla.com/congress-passes-pama-relief-safeguards-seniors-access-to-critical-lab-tests-ahead-of-january-deadline/.
- AKASA. Survey: Recruitment costs, long hiring timelines negatively impact healthcare finance teams. PR Newswire. Published January 26, 2022. Accessed June 1, 2022. https://www.prnewswire.com/news-releases/survey-recruitment-costs-long-hiring-timelines-negatively-impact-healthcare-finance-teams-301467993.html.
Kara Nadeau has 20+ years of experience as a healthcare/medical/technology writer, having served medical device and pharmaceutical manufacturers, healthcare facilities, software and service providers, non-profit organizations and industry associations.
