Leveraging Payer, Client Behavior Data to Maximize Lab Revenue

Health systems have access to testing and billing data from several different types of patient encounters — inpatient, outpatient, outreach, as well as independent or reference lab for specialty testing. Unfortunately, most health systems lack a unified view of this varied laboratory revenue cycle data, and as such, are not leveraging it to its full potential.

By keeping this data separate, ignoring some low-value data, and not taking a holistic view across all patient and lab types, health systems are missing out on opportunities to spot new trends or outliers quickly. Payer and client behavior analytics can prove especially useful.

Laboratories have been focused on the need for information and tools to provide a holistic view of their operational and financial performance for several years. This includes understanding what claims are being reimbursed, and at what value, as well as successfully managing appeals, and taking action to ensure maximum reimbursement. This disciplined approach has become even more critical as margin compression and reductions in fee schedules have forced labs to more deeply analyze performance at a business level.

To do so, labs have also focused on having accurate information, at the payer level, for both financial reporting and negotiating contracts, as well as strategically managing the lab business.

For example, when it comes to negotiating contracts with payers, it is important for lab leaders to monitor what each payer is allowing and compare that with the expected reimbursement. This discipline enables lab leaders to proactively evaluate whether they are, in fact, getting paid according to their contractual agreement and to go after the amount they are not. 

It is also a best practice for lab and outreach leaders to specifically segment their laboratory-related metrics on pricing, for example, and to move away from a “percentage of Medicare”-type approach. 

Not only is price-tracking an essential component of maximizing reimbursement, so is appropriately billing CPT/HCPCs codes and actively managing the coding rules by payer. Monitoring the ever-changing rules is key to ensure that the health system is being paid correctly and can appeal when appropriate. 

Consider for a moment if a payer releases a new coding rule (e.g., a new prior authorization rule) and then back-dates claims incorrectly. This could create an unnecessary loss for the health system if not discovered and brought to the attention of the payer. This can happen with CPT codes, DX codes, the order of DX codes, or a combination of these factors.

Payers are always implementing new reimbursement rules and enforcing more granular rules, especially around coding or medical necessity. Health systems need to be monitoring these closely to make sure they are not missing valid opportunities for reimbursement. Health system leaders should also know their average reimbursement to assist with renegotiating contracts. 

Health system EMRs are not designed for high volume and low-value claim processing, and as such can bury large volumes of laboratory claim denials in contractual allowances that are then written off. The lack of visibility into how payers are really adjudicating laboratory claims creates a blind spot.

The argument is sometimes made that it would cost more in labor to collect on these low-value claims. However, an advanced purpose-built laboratory revenue cycle management solution enables automation of most of the claims workflow, including some of the denials and appeals management. The result is minimal additional labor cost.

More importantly, having a specific understanding of denial trends and reimbursement by payer and CPT code and their resulting financial impacts can be beneficial to health systems regardless of the dollar value of the lab claims.

Health system leaders may be able to use laboratory payer analytics to their benefit to manage larger value inpatient claims that may be impacted by similar payer processing decisions. Utilizing enterprise-grade business intelligence software and properly structured datasets can provide more insight that can focus billing team efforts correctly and allow more informed and prioritized payer negotiations based on where they’ll have the most impact. 

Additionally, health system leadership can gain an understanding of profitability at the client level from their affiliated laboratory network. Outreach programs, for example, contribute to the development of relationships between the community and the health system, and in turn, drive more business into the health system. However, each client within that community has a different impact on the overall profit contribution of the outreach program. 

Health systems could actively track lab-specific client volume and profitability, including test volumes, patient volumes, top payers, and demographics. Much of what drives profitability for individual clients is their efficiency and compliance with requirements for billing and coding. It’s also important to note that a client that is running a strong operation is likely doing so within other areas of the health system, not just the outreach program. 

Client ordering patterns also matter to the health system, in terms of efficiency, test necessity, and cost. Health systems can evaluate if clients are ordering unnecessary tests and/or spending unnecessary money. 

In addition, health systems can determine whether there are clients ordering tests that are a net cost to the health system, as opposed to a profit. A lack of orders, either in terms of volume or profit, should prompt the hospital to look into all lines of business involving the client, not just the laboratory. 

Client ordering patterns and patient payments pertaining to laboratory work are also contributing factors for both payer contract negotiation and the way the health system bills for certain services. 

Having the right processes, systems, and tools for the health system leaders to deeply understand these dynamics can have a tremendous impact on the overall profitability of outreach programs and their financial contribution to the health system. Recognizing and being able to account for the complexity, rules, and denials related to a particular payer is paramount for maximizing reimbursements.

Advanced analytics, business intelligence, and visualization tools can shed new light on the operational and financial performance of health system laboratories.

And knowing, at a granular level, how a payer is operating with regard to testing and other laboratory services, can serve as a window into how that payer is acting with other health system services as well.

As payers continue to create opportunities to reduce reimbursements, it is more important than ever that health systems can analyze their performance at every level and in every service line.

The first step is gaining visibility into the data required to identify and correct systematic errors and take action with payers to maximum reimbursement on all of their eligible claims. This means that health systems must have access to accurate information at the payer level, which is something laboratories have been forced to undertake to stay competitive. Health systems have the ability to leverage those laboratory-derived insights elsewhere within their system.

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About the Sponsor

XIFIN is a San Diego, California-based health information technology company with solutions (XIFIN RPM, XIFIN LIS, XIFIN ProNet, and VisualStrata) that span the diagnostic RCM, laboratory information systems (LIS), precision medicine informatics, and digital pathology consultation spaces. XIFIN RPM is used by seven of the top 10 largest labs and supports four of the five largest integrated delivery networks in the United States.