By rethinking how their medical labs relate to health insurers, physicians, and patients, a handful of progressive lab companies are enjoying increased revenue while also lifting patient and payer satisfaction
There is widespread agreement across the clinical laboratory industry that it is becoming ever more difficult to have health plans reimburse claims for common tests, molecular assays, and genetic tests in a reliable and consistent manner. Many lab companies report that they are experiencing high rates of denied claims. Moreover—even for claims reimbursed by payers—the amount paid will vary on claims for the same type of lab test.
“Essentially, on this point, the consistent theme we hear from many lab companies—particularly those labs with a menu of proprietary, specialized molecular and genetic tests—is that it is now almost a crap-shoot to submit lab test claims to many payers and see timely and predictable reimbursement for those claims,” stated Robert L. Michel, Editor-In-Chief of Dark Daily’s sister publication, The Dark Report. “One could say that, today, the function of billing patients and payers for clinical lab testing has become financial quicksand for most labs. By following traditional coding, billing, and collection practices, in today’s healthcare market, they find themselves sinking steadily deeper in this financial quicksand.”
How Clinical Laboratories Are Improving Collection Rates
Here is where patients come into the picture and offer both an obstacle and an opportunity for labs that want to improve their collection rates. The obstacle and the opportunity exist because tens of millions of patients are now enrolled in high-deductible health plans, or the Affordable Care Act’s health insurance exchange plans with their large annual deductibles. The hurdle is when clinical labs must, as they bill the health insurers, also collect large deductibles or out-of-pocket payments directly from those patients.
The opportunity is for clinical laboratories to view the patient as a true customer and design a price schedule and a menu of services that fully meets or exceeds the expectations of those patients. Already, a handful of innovative lab companies have adopted this approach. And the good news is that, after making this transition, they report increased collection and higher levels of satisfaction—not only of their patients, but also from their physician clients!
The challenge for medical laboratories serving patients with HDHPs is that they need to collect a big chunk of money from the patient. That is true whether the lab test is a simple chemistry panel that may cost about $30 or a sophisticated genetic test that might cost $2,000. Most labs are not set up to collect these fees at the time of service, when a patient shows up to provide a lab specimen.
Challenge for Medical Laboratories to Collect Payments from Patients
An equally big challenge when collecting payments from patients with HDHPs is the situation where the lab bills the patient’s insurance. Then, when the claim is paid by the insurer 60 days or longer, the lab must then send a bill to the patient to collect the required deductible. This bill—which can arrive as long as six months after the lab test was performed—is often a total shock to the patient, particularly if it is for several hundred or several thousand dollars. And this story gets worse. It is common for patients, when they get these lab bills months after their lab test, to call their physicians and complain. When this happens, the clinical laboratory has two unhappy customers: the patient and the patient’s physician!
Collectively, the trends described above are one major reason why many labs are experiencing declines in revenue while at the same time facing a steadily-growing number of complaints from very angry patients, as well as their irate physicians. Seen from this perspective, the clinical lab industry is finding itself in a no-win scenario. Payers are unhappy with the billing practices of many labs, patients are unhappy at having to pay huge deductibles based on lab bills that often come months after service, and physicians are unhappy anytime a lab makes their patients unhappy.
However, the news is not all bad. There is good news from a handful of innovative clinical lab companies that decided to adopt a different philosophy in how they price, bill, and collect for their lab testing services.
Proven New Strategies to Get Paid for Clinical Laboratory Test Claims
Two examples of clinical lab companies innovating in this area demonstrate that it is possible to successfully increase revenue using a pricing and billing strategy that is both payer-friendly and patient-friendly:
1. In one case, the lab company continues to participate in managed-care networks, and bills payers and patients in a manner that results in a high rate of settled claims and patient payments.
2. In the other case, the lab company ceases to submit claims to any health insurer. Instead, it revamps its prices and billing practices to make them patient-friendly and now relies 100% on payments from patients.
The lab company enjoying solid success with its approach to contracting with health insurers is Counsyl, Inc., based in South San Francisco, California. It reports a high rate of settled claims with health insurers and an enviable collection rate from patients. It backs up these claims with impressive results from its customer satisfaction surveys.
Counsyl’s Genetic Test Program Gets Good Reception from Payers, Patients
In an interview with The Dark Report, Counsyl’s Chief Commercial Officer, Tom Schoenherr, said that the company’s gene screening tests were designed to support prenatal and oncology patients. What is noteworthy here is that Counsyl offers advanced genetic testing that is well-received not just by physicians and patients, but also by a large proportion of the nation’s largest health plans.
As part of its interview with the Counsyl executive team, The Dark Report described the pricing and billing strategies Counsyl uses to such good effect. The following elements are key to the financial benefits it enjoys from its strategy for managed-care contracting, billing, and collections:
• Counsyl says that it prices its test menu at a reasonable level, averaging about $1,500 each. Health insurers recognize clinical benefit at an acceptable cost.
• Based on the clinical benefit of its assays and the moderate cost, Counsyl says that it has managed-care contracts representing upwards of 180 million beneficiaries nationwide. Thus, it can bill the right health plan for just about any patient it serves.
• To meet and exceed patient (and physician) expectations, Counsyl offers a quick and easy-to-use patient test pricing tool. At the time when the physician is about to order the lab test, patients can use the tool to determine exactly how much they will pay, based on their health insurance benefits.
Why Kailos Genetics Stopped Billing All Health Insurers
In Huntsville, Alabama, Kailos Genetics has gone “cold turkey” and stopped billing health insurers. Instead, it now sends all bills for its lab tests directly to patients and consumers. However, in order to do that, it had to become both “patient friendly” and “patient-centric.”
In brief, like many start-up lab companies, Kailos launched with a strategy of billing payers. Following the advice of consultants, it set prices for its genetic tests on the high side under the expectation that health insurers would be discounting claims by significant amounts.
Indeed, Kailos did see payers remit amounts that were much lower than what had been billed on the claim. However, two bigger problems emerged. First, Kailos found it increasingly tougher to get paid any amount for a growing proportion of the claims it was submitting. It was also incurring substantial billing and collection costs as it followed up claims denials by different payers.
Patients Unhappy When Asked to Pay Their Deductibles for Genetic Tests
The second problem was equally significant. Kailos quickly learned that patients were unhappy when they received bills from Kailos for the significant amount of money that represented the difference between the price of the genetic test and the much lower amount that was reimbursed by the payer. Not only was it tough to collect from these patients, but many contacted their physicians to complain about the high bills for these lab tests.
In response to this situation, the executive team at Kailos made two bold decisions:
1. First, they would cease sending claims to all health insurers. Instead, Kailos would bill patients directly for the tests.
2. Second, in order to make it easier for patients to pay 100% of the cost of the lab test themselves, Kailos slashed the prices for its genetic tests down to just a couple of hundred bucks each.
Clinical Laboratory Shifted from Payer-Focused to Consumer-Focused
What made this radical lab business strategy succeed was a simple fact: Kailos shifted from being a “payer-focused” lab to a “consumer-focused” lab. Not only did it lower the prices of its lab tests to a level where patients considered them to be fair for the clinical value they provided, but Kailos redirected the staff formerly devoted to billing and collections to patient service and consumer education.
“To make this change in our billing policies, we had to shift from receiving regular test orders from physician groups, to the need to educate patients about our lab test offerings,” explained Troy Moore, the Chief Scientific Officer of Kailos, in an interview with The Dark Report. “This was a considerable challenge. We found that, when we are successful in getting in front of patients, they definitely respond.”
The good news at Kailos is that the strategy to drop billing health insurers and orient all services directly to patients and their physicians is paying off. “Yes, while revenue did drop precipitously during the changeover last year,” stated Moore, “today we see an exciting growth trend in front of us as each month more patients take control of their own genetic healthcare information.”
Both Tom Schoenherr of Counsyl and Troy Moore of Kailos Genetics will be discussing their labs’ success in increasing revenue and improving patient satisfaction during a special webinar that happens this week on Thursday, May 26, 2016, at 1:00 PM EDT. It is titled, “Getting Paid for Lab Tests in Today’s Tough Managed Care Marketplace: Real-World Success Strategies to Increase Lab Revenue, Deliver More Value, and Achieve Higher Patient Satisfaction Scores.”
Both speakers will explain the lessons learned from adopting pricing strategies that are patient-friendly and directly contributed to increased revenue. They will explain how they were able to collect more money with less effort and cost.
Participants at the webinar will also learn how to design and implement pricing tools that patients love and that help them understand—in advance of the test order—what their exact out-of-pocket payment will be. Schoenherr and Moore will also explain the types of strategies and protocols to offer molecular and genetic tests directly to consumers at price-points they find attractive.
There is still time to register for this invaluable webinar by visiting this link http://darkdaily.com/getting-paid-for-lab-tests-in-todays-tough-managed-care-marketplace-real-world-success-strategies-to-increase-lab-revenue-deliver-more-value-and-achieve-higher-patient-satisfaction-scores.
—By Michael McBride