Coding, Billing & Collections

Alert for Labs: Medicare Carriers Rejecting Large Number of Claims Since May 23

Medicare carriers are now rejecting a larger than normal number of claims from pathologists and other physicians nationwide. The effect could amount to less income in the coming weeks. New rules recently took effect for claims payments that require pathologists to use National Provider Identifier (NPI) numbers.

This Dark Daily provides an early alert for laboratories and pathology group practices. Medicare carriers are responding to the new NPI rules which took effect on May 23, 2008 by denying claims which fail to include the appropriate NPI data. One consequence of the new rules is that some pathology group practices are likely to see a large number of their Medicare claims held up. Sources tell Dark Daily that the problems will be so great at some pathology groups that they may have severe cash flow problems until the Medicare system catches up processing resubmitted claims that were originally unpaid because of non-compliance with the NPI requirements.

One Medicare claims processor reported that 24% of claims (representing about $26 million in claims) have been rejected since May 23, the day when the new NPI requirement became effective! Normally, about 6% of claims (or about $10.6 million) would be rejected, said the claims processor, Emdeon Business Services, of Nashville, Tennessee.

It can take 30 to 60 days to resubmit a rejected claim, said Lâle White, Founder and Executive Chairman of XIFIN, Inc., a company in San Diego that specializes in laboratory accounts receivable and financial management operations. While a laboratory is working to resubmit rejected claims, cash flow slows, she said.

The first hint that cash flow will be affected is the so-called front-end rejection, White explained. "This is like the canary in the coal mine," she commented. "Your first information about rejection of a claim is that front end report." White could not estimate how many laboratory or pathologist claims have been rejected as a result of the implementation of the new NPI rules.

Eddie Miller of the claims processing division of McKesson, Inc., in San Francisco, California, said Medicare carriers are sending rejections to many laboratories. "Carrier notifications are going out to virtually everyone," he said. "The problem is that some laboratories may not be aware of these carrier notifications if they are not closely studying the front-end rejections of their Medicare claims." McKesson's pathology division manages accounts receivable for more than 280 pathology groups and laboratories in hospitals and outreach laboratories nationwide.

Miller explained that the new NPI rules require labs to adjust quickly. "All of this went into effect on May 23," he said. "That means it is still a bit early to predict how enforcement of the new NPI rules will impede cash flow from Medicare claims. It is also a bit early to predict whether a majority of labs and pathology groups across the country will experience a significant interruption in cash flow.

The Health Insurance Portability and Accountability Act (HIPAA) of 1996 required all physicians and provider organizations to use NPI on claims. Providers and provider organizations implemented NPI numbers months ago, but the federal Department of Health and Human Services (HHS) delayed implementation of NPI for individual physicians until May 23.

More details and analysis on this issue will be featured in the June 16, 2008 issue of The Dark Report . Pathologists and laboratory directors will want to follow up with their financial teams to determine if enforcement of the new NPI requirements may be triggering a reduction in the lab's cash flow from Medicare claims. 

For more information:

• The NPI is here. The NPI is now. Are you using it? 
• Claims processors see rejections spike with NPI