Improve Laboratory Revenue Flow by Increasing Reimbursement Rates

Eliminate errors, reduce frustration, and improve transparency in the reimbursement process

Despite the interruptions to every facet of life globally, across virtually every industry, the laboratory testing industry has gained an important footprint in the healthcare industry during the last two years. As the services provided by independent laboratories continue to grow, the impact of COVID-19 has only heightened the awareness of the general public to the importance of testing and contact tracing in the face of a global pandemic. The rapid growth that is to be expected in the coming decade means getting reimbursement for services and tests rendered will become an important operational aspect of running an independent laboratory that will impact the bottom line for every provider.

The global reimbursement market is expected to grow from $4.75T in 2021 to $17.63T by the end of the decade. This rapid expansion of 15.7% CAGR for the next 8 years is expected to be driven by a rapidly aging population, prevalence of chronic illnesses within this expanding, aging population, and rising healthcare costs. As the reimbursement market growth is expected to outpace the growth of the independent laboratory testing market (6.83% based on market research by Mordor Intelligence LLP), it is more important than ever that independent laboratories deploy better practices in managing their reimbursement model to improve revenue flow.

Underpaid segment is the largest share of reimbursements

American Hospital Association (AHA) defines reimbursement underpayment as “the difference between the costs incurred and the reimbursement received for delivering care to patients.” For laboratories, this means the salaries paid to the laboratory technicians, cost of collection equipment, and the amortized cost of the actual testing equipment exceeds the reimbursement received from payors such as Medicare, Medicaid, or insurance.

Medicare and Medicaid alone combined for an excess of $100B in underpayment in 2020, a more than 30% increase. During the same period the underpaid segment accounts for more than 67% of all reimbursement from Medicare, according to “Fact Sheet: Underpayment by Medicare and Medicaid” published by the AHA.

What is leading to this segment becoming the bane and majority of reimbursed claims? A number of factors can result in a claim being underpaid by reimbursement:

• Incorrect data collection
• Unnecessary testing
• Extended time spent in negotiations
• Fake claims
• Human error

Managing diagnostic info is complicated

Why is getting reimbursement correct so challenging? Because healthcare is a complex issue, and managing diagnostic info is a difficult process. Errors in data, delays in reimbursement, and redundant testing is prevalent outlined above are common because there are three disjointed parties involved.

Reimbursement hurdles for independent labs

Most independent labs receive diagnostic orders two ways. Either through a paper-based order, where information needs to be entered into the LIMS manually, which leads to error rates between 5-10% and cost per assession to be $1-$2 more than electronic order entries, or electronic orders that come directly into the LIMS already containing errors, missing insurance information, or missing test information directly from the healthcare provider and their CPOE systems. Error in either manual entry or the electronic ordering process all results in delays in processing, billing, and reimbursement.

Moreover, different laboratories in the same network may be using different LIMS, or different versions of LIMS that do not communicate properly between each facility. And there’s no central dashboard to provide an easy overview of test orders and results across laboratories, resulting in delays in dissemination of data across facilities and parties.

The big challenge for labs regarding reimbursement, is that incorrect diagnostic information will likely trigger denial and/or delayed payments.

Payors, enterprise customers, and clinical providers can all contribute to the complexity of diagnostic information

For the payors the potential for multiple IT integrations with multiple labs using multiple LIMS can drive up costs, errors, time and resources – regardless of whether the order is entered electronically via a CPOE or by paper. Additionally, test results can come back in different formats, if electronically in PDFs, or text documents, or even faxes if the laboratory involved does not have a way to electronically transmit the test result.

Worst of all, there’s no way to track the test order on when the sample is collected, and when the results are available in case a follow up is needed with the patient. According to “Failure to Follow-Up Test Results for Ambulatory Patients: A Systematic Review,” a study published by Journal of General Internal Medicine, as many as 35.7% of radiology laboratory tests do not get proper and prompt follow-up, leading to potential missed cancer diagnostics.

Patients have the least visibility into diagnostic information, but the most impacted by errors

As the last leg in this reimbursement process, patients have the least amount of visibility and understanding of the diagnostic procedure. Since the general public usually have limited knowledge of the laboratory diagnostic process, any delays, mistakes in processing, or general mistrust of the handling of the collected samples leads to escalation and frustration in the process. The end result is additional cost in managing customer support, and can lead to poor customer satisfaction scores, decrease in net promoter scores, and underpaid reimbursement.

The bottom line is, the entire journey for the diagnostic information to travel through is complex and hard to navigate, even for seasoned laboratories with modern processes. Therefore, underpaid reimbursement remains a large portion of claims within the laboratory segment.

How can an independent laboratory reduce errors and complexity in the reimbursement process?

In order to reduce errors that lead to underpayment in reimbursement, the order entry, tracking, and information sharing between entities must be simplified. The best way to increase reimbursement is to improve data accuracy:

• Set up an easy ordering process
• Validate order entry using rule-based data flow, ensuring correct entries
• Provide a means to keep all stakeholders updated via secure log-in
• Set up real-time dashboards

With these automation improvements, paper order entry is eliminated in favor of one electronic order entry process, and each order entry is validated to improve accuracy, efficiency, and remove common errors. Each stakeholder of the diagnostic order is given a secure portal log-in so they can monitor, track, notify and correct errors during the process, and a real-time dashboard provide visibility into the order as well as connect multiple laboratory facilities and LIMS so delays in reimbursement can be eliminated, and underpayment can be reduced.

These types of process improvements have already been commonly deployed across a variety of industries. For example, take a look at the banking industry.  Most commercial banks have all but eliminated check writing in favor of an electronic payment transfer system between individuals and businesses. Likewise, an online portal is usually accessible for individuals and businesses alike to monitor transactions, check balance, and initiate transfer orders easily, accurately, and securely. Lastly, like healthcare, the financial and banking industry is heavily regulated and an increasingly complex system, and the ease of payment through third-party processing have contributed significantly to consumer confidence, market growth, and decreased payment disputes.

As emerging innovations and technologies continue to transform the landscape of healthcare and laboratory testing industry, it is vital that the reimbursement process be made easier, secure, and automated too.

1health helps independent laboratories grow revenue, expand into new markets, and retain more patients

1health has created a simple to use platform that combines turnkey solutions with cutting edge innovations. Its easy-to-deploy platform enables independent labs to reach additional customers, reduce accessioning cost, transmit patient and insurance data securely, and increase reimbursements by submitting accurate, properly documented claims.

1health helps independent labs save time, money, and the resources by deploying a new way to process diagnostic test ordering. 1health integrates with any LIMS in a fully compatible format, ensures security compliance in all aspect of the data transmission, and works with providers to integrate the ordering process to enable the laboratory, the payor, the provider, and the patient all have the information they need to ensure the test is ordered and processed accurately for reimbursement.