Billing and RCM for Medical Labs: Keys to Success
Billing for medical labs
How to create systems so you get reimbursed on time, every time
Billing and revenue cycle management in medical labs is basically a complex accounting process, with many unusual details and quirks. In our experience, most lab operators, in all specialties, underestimate what is required to navigate the billing and RCM process successfully.
Since many medical labs are independent, billing and RCM take on additional urgency. Providing essential and timely diagnostic analysis is vital for patients’ lives, even more so in the post-COVID era.
The Mindset of an Independent Business owner
Understanding the steps of RCM IN SPecialty Medicine
Obtain referral from Physician
Determining medical necessity
Documenting and verifying medical necessity
Performing the tests
Waiting for claims to be paid
The ROle of a Medical Billing Service
The Mindset of an Independent Business Owner
As an owner or partner in an independent lab, billing and RCM are ultimately your responsibility. But of course, that doesn’t mean doing the work yourself. Rather, you need to assemble a team of skilled people on your team, whether in-house or an outside partner. It’s usually most efficient to establish a relationship with a medical billing company, preferably one that specializes in billing for medical labs, or at least has substantial experience working with medical lab clients.
Each specialty has its own unique challenges.
While physicians often struggle to bridge the gap between the clinical and business aspects of their practice, we find this is somewhat less of an issue for medical labs. In many specialties, its surprisingly common for practitioners to let billing & RCM get to a very bad state. We have several clients in other specialties who, before they began working with us, were losing several thousand dollars daily to billing issues, that were completely avoidable! They knew they were losing money, but they were so focused on caring for patients that they didn’t feel like they had time to address it.
For many of our new clients, the first thing we have to address is business mindset. However, for medical labs this is often less of a problem, since many medical lab operators have been independent business owners for much of their careers already.
Understand the Steps of RCM in Specialty Medicine
In medical labs, probably more than almost any other area of medicine, patient encounters follow a predetermined sequence, with each subsequent step dependent on those that come before it. Practitioners need to understand the significance of each step for billing and RCM, as well as from a clinical perspective.
STEP 1: OBTAIN REFERRAL FROM PHYSICIAN
Most patients’ healthcare coverage is through an HMO. In these cases, whether they need a CMP, a CBC with differential, a urinalysis, an iron panel, or anything else, their initial step will be to visit wither their PCP or specialist. If the PCP or specialist determines that their condition requires a test, they refer the patient to your team.
In the HMO scenario, referral from the primary care practitioner or the specialist is the first step of your billing process. Once you receive the referral, you share it with your biller, and they record and track it.
Remember, every step of the RCM process depends on what comes before it.
The referral hinges on the physician’s evaluation of medical necessity, and each lab test requires both demonstration and documentation of medical necessity. If the patient’s insurer determines that the criteria for medical necessity are either not met, or not documented, that will usually be enough for them to deny the claim, and not pay for the test.
STEP 2: DETERMINING MEDICAL NECESSITY
In theory, it would seem like the “medical necessity” of care should be exclusively, or at least primarily, determined by the physician. In reality, however, the patient’s insurance company has an independent process for evaluating the medical necessity of each test..
Each insurer has its own specific definition of medical necessity, both in general and for specific procedures and courses of treatment. These definitions are somewhat different for different types of practitioners. In real life, you’ll never be able to keep track of all the minute changes. Rather, it’s your biller’s job to keep up with changing requirements, ideally in a proactive manner.
From the insurance company’s perspective, a claim of medical necessity usually rests on a number of different criteria, such as:
The patient having insurance for at least a minimum period of time
The patient experiencing their health issue for a minimum period of time
The patient’s health issue being the result of an underlying condition
The physician having attempted other interventions, which have not resolved the patient’s issue thus far
The above are some examples, and there may be others, depending on the specific course of treatment for each specific patient. In terms of demonstrating and documenting “medical necessity,” the key thing to understand is that the tests you perform must specifically fulfill all of the insurance company’s criteria for approving that specific test. On the insurance company’s side, an auditor, rather than a physician, is most likely responsible for making these evaluations of medical necessity, although physicians will certainly be involved in setting the parameters for such evaluations.
For a good a general overview of this topic, the AAFP has a good guide to the concept of medical necessity. Although published some time ago, it still covers the essential concepts very well.
STEP 3: DOCUMENTING AND VERIFYING MEDICAL NECESSITY
If the patient’s insurance company reviews your notes, and for some reason determines that a test doesn’t meet their criteria for “medical necessity,” your claim will be rejected. Often, you will have already done the tests, and incurred your expenses, before you learn the claim has been rejected.
Often, claims are rejected due to issues with the clinical notes in the physician’s initial evaluation. Different insurance companies have different requirements for what information must be included in that note to demonstrate medical necessity. By itself, this might seem confusing. What’s more, insurers may change these requirements may change at any time.
In practical terms, it’s impossible for physicians, and even the best billers, to keep up with changing requirements of individual insurance companies related to medical necessity the full range of possible procedures. Nevertheless, a robust billing process will ensure you get paid despite changing requirements.
You should work with your biller to ensure the following:
Use detailed and comprehensive, customized templates in your EHR notes, to ensure you include all required information and meet criteria of different insurers
If a claim is rejected, your biller should immediately contact the insurance company to determine the specific reason for the rejection
Your biller should ensure you make edits and updates to your clinical notes ASAP, so the claim can be rebilled
Once you understand the insurance company’s new requirements, should update the global template in your EHR to include any necessary information
In practice, you can update your notes and rebill each claim as many times as necessary. However, each rejection causes a delay in payment, and requires more work from you and your team, so you should strive for efficiency.
STEP 4: PERFORMING THE TESTS
From a clinical perspective, it’s extremely important that billing issues don’t hinder you from performing a test. From the time a patient is referred to you, you should be free to fulfill the physician’s request and deliver results as soon as possible. However, it must be noted that this involves a significant up-front expense on your part, for both the labor and expense of diagnostics.
Your biller must ensure that the demands and urgency of providing test results do not conflict with the necessity of getting paid for this care. You should never find yourself wondering whether you’ll be paid for a procedure or course of treatment. If the patient is covered, you should be able to proceed with full confidence that the billing process will be managed successfully. If for some reason the patient is not covered, you must be made aware of this in advance, so you can choose the best course of action.
STEP 5: WAITING FOR CLAIMS TO BE PAID
If your billing service is doing its job, you should receive payment within a predictable time frame.
What does this mean exactly?
As much as possible, you should try to quantify the effectiveness of your billing process. Some key reports to review include:
If your billing service is doing its job effectively, these numbers will reflect it.
The Role of an Effective Billing Service
A skilled and diligent medical billing partner will dramatically reduce and often eliminate unpaid claims from insured patients.
As we mentioned, in our experience many medical labs often perform procedures without full confidence that they’ll be paid. This may be less common as opposed to some other areas of medicine, but it does happen. Patients need to know their test results to determine their course of treatment, and the humanitarian imperative to help them overrides concerns about billing and insurance. This is understandable, even noble, but for a business owner it’s not a sustainable business practice.
We always emphasize to our clients that physicians should not bear the financial burden of billing issues. Insurance providers exist for the purpose of paying health expenses. You should never have to wonder whether you’ll get paid, especially not due to internal billing issues.
If you have questions about your current billing situation, we offer a free, no-obligations revenue analysis to help you better understand your revenue and collections. Get in touch with us to learn more