Q

With today’s difficulty in collecting reimbursements, reduced reimbursements, and the high costs of running a clinical laboratory, what measures can we take to maximize reimbursements and improve the overall financial environment for our lab?

A

The financial end of a laboratory business is often managed by a finance department, with little or no input from laboratory personnel. For most laboratorians, once a laboratory test is completed and reported, nothing more is considered. Billing is part of the post-post analytic process. But it is essential to maintaining financial security for a lab. And it must be remembered that billers and other finance people are not expert in laboratory procedures, and thus may not be aware of nuances of laboratory testing. Here are some things that whoever does the billing must keep in mind:

CPT codes: Ensuring that the correct Current Procedural Terminology (CPT) codes are used is essential. Each year the American Medical Association updates CPT codes, making changes, additions, and subtractions as deemed appropriate. Thus someone within the laboratory should review CPT codes on an annual basis. CPT codes that were once correct for a particular service may have been expanded to include newer codes that may have a different reimbursement. Consider how the molecular testing codes have changed over the past few years. In addition, periodic CPT reviews, in part, meet Laboratory Compliance initiatives.

Fee schedules: Reviewing the fee schedule is another key action. The cost of performing many routine laboratory tests may increase over time due to inflationary or supply cost increases. Also, consider tests associated with new technologies (e.g., molecular microbiology) that provide a higher level of diagnostic accuracy. Consider performing a test-cost analysis for these newer technology-based tests, as well as for the more complex, labor-intensive, and esoteric tests, to ensure that appropriate compensation is received.

Payer mix: Payer mix is important in understanding the rules of reimbursement for the many different third-party payers. In particular, understanding Medicare rules often serves as a basis for understanding private insurers, since many of them tend to follow Medicare’s practices. Further, Medicare and Medicaid generally generate more than fifty percent of total reimbursements.¹

Knowing your payer mix allows focus on those payers and their rules. You will do well to understand not only Medicare rules, but also those of the top four or five private insurers that your laboratory accepts insurance from. It is also important to obtain fee schedules from each of these top insurers to ensure that your charges are greater than what insurance companies are willing to pay. Note, some insurance companies will release only the top 15 or 20 CPT-based lab tests’ reimbursements at any given time.

Denials: Understanding the reasons for denials is also very important. Medicare and other insurance companies have sophisticated algorithms to sort, review, and accept or deny payments for all laboratory tests. The average laboratory may see up to 30 percent of its claims denied, for a variety of reasons.² Table 1 shows a few situations of denied claims and potential corrective actions to take in order to get paid. Note, Medicare posts explanations of edits on the CMS website (https://www.cms.gov/Outreach-and-Education/Medicare-Learning-Network-MLN/MLNProducts/downloads/How-to-Use-NCCI-Tools.pdf).