News, Analysis, Trends, Management Innovations for
Clinical Laboratories and Pathology Groups

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News, Analysis, Trends, Management Innovations for
Clinical Laboratories and Pathology Groups

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Clinical Laboratories Still Struggle with Write-offs and Establishing Patient Relationships

Potentially increasing the revenue write-off burden for clinical laboratories, HRSA changes, insurance contracting, policy and coverage questions for genetic and genomic testing, and patient relationship disconnects will expose cracks in lab test claim generation and billing processes

Last year it was estimated that collection agencies held $140 billion in unpaid medical bills, in addition to the amount of unpaid bills in pre-collection status, according to a New York Times report. More recently, the American Hospital Association showed that hospitals have provided upwards of $700 billion in uncompensated care since 2000, with over $40 billion in 2019 alone.

Because strategies to collect the unpaid can be complicated and time-consuming, many healthcare organizations, including clinical laboratories, choose to write off these uncollectible bills. Dark Daily and The Dark Report have covered clinical laboratory revenue challenges for many years. In considering the paths forward, software-as-a-service (SaaS) provider FrontRunner Healthcare (FrontRunnerHC) recently provided snapshots into the how and where of improved collections.

Fixing Data Issues that Lead to Forfeited Clinical Laboratory Revenue

The underpinnings of unpaid lab tests are many. In a recent interview with Dark Daily, FrontRunnerHC CEO and Founder John (JD) Donnelly estimated that about one-third of claims (prior to submission) include incorrect or missing patient information, such as insurance policy identification or demographics. These gaps undermine an organization’s ability to get paid. Donnelly estimates that bad-debt write-offs for commercial payer claims average over 15% of charges. To address these challenges, the company’s clean claims SaaS provides “instantaneous” patient insurance, demographic, and financial information.

Whether lower-dollar accessions such as routine testing, or the higher-dollar accessions of genetic tests, uncollected payments add up. Donnelly said that, in 2021, almost one-third of the company’s clients uncovered revenue ranging from $1 million to over $90 million using the software. Donnelly also estimated that the return for clients averages eight times the value of the investment in using the automated solution.

In one example, Sonora Quest, a joint venture between Banner Health and Quest Diagnostics, reported a 10-15% decline in write-offs due to aged claims, a savings of over $1million annually, as published in a case study. “As an aside, in a presentation at the Executive War College last November, they also attributed improvements in patient satisfaction measures to the software, including a 65% decrease in abandoned calls, 28% improvement in their call service factor, and 19% decrease in patient call volumes,” stated Donnelly.

Questions About Cost of Care Likely Cause Stress for Patients

As many know, nonpay issues are problematic not only for lab businesses and anatomic pathology practices but also for patients and their families who have little predictability with their cost of care in the midst of stressful health events. “From the time a patient is registered to the time the claim is paid, there are more challenges than people realize that jeopardize the patient’s experience as well as the provider’s ability to get reimbursed,” Donnelly explained. Medical laboratory administrators have struggled to respond, often by using traditional manual methods such as call centers, or more recently by considering the use of data automation tools.

From the patient payment perspective, Donnelly said, a good strategy is having the ability, on demand, to understand each patient’s specific financial situation and likelihood to pay. For example, using FrontRunnerHC’s software to gauge patients’ propensity to pay and determine financial disposition strategies, lab administrators may choose to offer payment plans or hardship discounts to those falling under the federal poverty level (FPL). Or they may choose to send a collection agency only the past-due accounts for patients who have a low likelihood to pay rather than sending them all past due accounts and focus in-house efforts on the others. One genetics lab client who recently started leveraging these software capabilities “is already seeing more than 5% in incremental net collections,” according to Donnelly.

Further, an estimated 2 million people switch insurance plans each month, reported Axios. “That velocity of change is tough for providers to manage, but it’s critical as insurance eligibility and registration issues are the number one reason for claims denials,” Donnelly said.

For a sense of the magnitude of the problem, “Between 25 and 33 cents of every dollar you spend on medical care pays for health care’s back office,” wrote Dana Miller Ervin in September 2021 for a series of investigations called “The Price We Pay,” published at WFAE 90.7 news in Charlotte, North Carolina. “Every medical provider and laboratory in the country has to negotiate with insurance companies. And since there are 900 health insurers, 6,000 hospitals and more than 100,000 physician practices—many of which are independent of larger systems—there are hundreds of thousands of negotiations.”

New Clinical Laboratory Business Challenges Making News Now

All these issues affecting revenue cycle management (RCM) for independent clinical laboratories, hospital and health system laboratories, and physician office laboratories could be compounded by three emerging issues.

First is the recent action by the Health Resources and Services Administration (HRSA) to stop accepting claims for COVID-19 testing and treatment for uninsured people as of March 22, 2022. The reason? Funding for HRSA’s COVID-19 Uninsured Program dried up.

Donnelly said that many lab clients have yet to be reimbursed for COVID tests they have performed, despite their HRSA-required due diligence prior to submitting the claims before the deadline. To avoid additional reimbursement risk, many labs have made the decision to stop testing the uninsured or charge them for it, ABC News reported in late March. As of early April, however, Congress was in discussions to re-fund at least some of the Uninsured Program, reported Politico.

Secondly, and also daunting, are the questions surrounding payer coverage and reimbursement for genetic tests and genomic testing. Thanks to high-deductible health plans (HDHPs), clinical laboratories and anatomic pathology groups increasingly must collect deductibles that may be the full amount of the test – and directly from patients rather than from insurance companies. Therefore, there is more demand from patients to understand their expected cost before the test, Donnelly added.

Problems can arise, for both labs and patients, if they don’t know whether a test has been preauthorized for medical necessity or if they lack accurate insurance information such as in-network or out-of-network. “Getting all the needed and accurate info upfront prior to it going into the LIS [Laboratory Information System] can be a reimbursement game changer,” stated Donnelly.

“For a high complexity, high-throughput diagnostic lab, an efficient workflow is critical,” stated Kyle Koeppler, President of nuCARE Medical Solutions Inc., a FrontRunnerHC client. “Capturing the correct patient demographics and insurance information at patient intake increases the accuracy of every order and makes every process involving patient information much more efficient,” Koeppler shared. “It’s simply too costly to risk having inaccurate information at intake.”

And lest we forget, the Protecting Access to Medicare Act (PAMA) is looming with its reimbursement cuts planned through 2026, and requirements of many labs to report private payer rates on a test-by-test basis. While delayed again, the 2023 PAMA reporting requirements and payment cuts must not be ignored, and planning is needed in order to ensure appropriate reimbursement, Donnelly added.

Addressing Long Payment Cycles for Claims, Dead Ends, and Decreased Collection Rates

The CAQH report cites that data automation resulted in efficiency savings of $122 billion annually for the US healthcare system in 2020 yet “meaningful opportunities for additional savings remain.”

Data automation can reduce the burden of labor-intensive functions in coding, billing, filing appeals, and collecting from payers and patients and, therefore, reduce overall RCM costs. The Council for Affordable Quality Healthcare’s (CAQH) 2020 Index reported, “Considering the millions of times these transactions occur every day, the savings potential across the healthcare economy [from streamlining administrative processes] is significant.”

“One way to avoid potential write-offs is by reworking a claim, but the rework is often left undone,” stated John (JD) Donnelly (above), CEO and Founder of FrontRunnerHC. “The better way to avoid a potential write-off is to ensure you’ve got a clean claim in the first place.” (Photo copyright: FrontRunnerHC.)

The intended outcome is an increase in the total amount of revenue collected from the same number of claims.

To that end, FrontRunnerHC’s software links critical data within its partner ecosystem. This ecosystem includes the well-established credit reporting agencies as well as data available through connected healthcare payers and providers equipped with electronic data interchange (EDI) capabilities. “While an employee may be able to manually work about six accessions in an hour, clients can process approximately 40,000 patients in an hour through software automation, leaving staff to work on more value-added initiatives,” stated Donnelly.

Ideally, missing and inaccurate patient information or insurance verification, which are crucial for producing prompt payments and clean claims, should be corrected before a specimen is collected, Donnelly said. However, if the laboratory is nursing aging accounts receivable (AR), Donnelly advises an audit and cleanup of the AR backlog as a first step to quickly fix information errors and reduce write-offs. “In your AR bucket of $10 million, you may have $3 million that’s collectible or $9.8 million that’s collectible. By leveraging software to clean up what can be collected, clients can go after the money they deserve.”

Improve Collections Through Data Automation While Assisting in the Patient Financial Journey

With the rise of telehealth/telemedicine, healthcare consumerism, and care delivered to nontraditional sites, it makes sense that the idea of the clinical laboratory as a silent partner in healthcare could be changing.

“Could we one day see patients asked for not only their preferred pharmacy but their preferred clinical laboratory as well?” Donnelly pondered and added, “I think the answer is yes, and it’s sooner than many think.”

Understanding the patient’s experience is a key step in providing patient-centered care. Therefore, patient experience programs that originate at clinical laboratories where specimens are processed, but before specimens have been collected, could make these labs more visible in their markets and enable them to capitalize on the advantages of data automation to sustainably improve revenue cycle management.

“The patient’s financial journey which runs in parallel to their clinical journey can get pretty bumpy, and those bumps impact their overall experience as well as the provider’s bottom line,” added Donnelly. “Getting accurate patient information upfront and catching any changes to the information as needed throughout the process helps clients create a smoother patient journey by enabling them to quickly manage through the bumps or eliminate them altogether.”

—Liz Carey

This article was produced in collaboration with FrontRunnerHC.

Related Information:

New Trends Reshaping Healthcare, Lab Testing

Millennials Set to Reorder Healthcare and Lab Testing

Congress Votes a One-Year Delay in Implementation of the Next Round of Fee Reductions to Medicare CLFS

HRSA Important Update Regarding Submission of Claims

Free COVID-19 Tests Ending for Uninsured Americans

CMS Billing and Coding: MolDX: Testing of Multiple Genes

U.S. Health Care Administration Costs Are Responsible For At Least 25% Of Medical Bills

Fact Sheet: Uncompensated Hospital Care Cost

Millions Already Lose or Change Health Plans Every Year

Americans’ Medical Debts Are Bigger Than Was Known, Totaling $140 Billion

FrontRunner Healthcare

New Trend in Use of Real-Time Management Dashboards Gives Clinical Laboratories Ability to Achieve Improved Quality and Faster Test TAT

Evidence is emerging that medical laboratories using the ‘daily management’ approach can outperform other labs, even those using Lean methods

Clinical laboratories and anatomic pathology groups are information-rich environments. Yet, there is irony in the fact that—in response to financial pressures and incentives to improve the quality of medical laboratory testing services—most of the nation’s clinical labs cannot tap that rich vein of information to support performance improvement goals.

Those financial pressures have shrunk lab budgets and caused price cuts to medical laboratory test prices. These two factors are behind the trend of clinical labs and pathology groups buying middleware solutions that produce real-time data feeds on all aspects of lab operations, from phlebotomy and specimen transport, to accessioning, testing, reporting, client services monitoring, and billing/collections. (more…)

Innovative Labs Combining Lean and Automation in Clever Ways

There’s a hot new trend emerging among a handful of the nation’s more sophisticated and tightly-managed laboratories. These innovators have hit on a “lab operation home run!” They are combining Lean process improvement methods with the latest-generation automation solutions and highly-automated analyzers. As a result, they are achieving mind-blowing, amazingly fast turnaround times while simultaneously boosting med tech productivity and slashing operational costs. At the same time, such labs are avoiding the pitfall of “automating bad work practices.”

These pioneering laboratories are demonstrating that laboratory automation has come of age-particularly when the laboratory uses Lean Six Sigma methods to configure an instrument footprint and specimen flow through the lab, thus taking maximum advantage of automated systems and analyzers. This is a radical change from just five and eight years ago, when lab automation was less capable and most labs knew very little about Lean and Six Sigma approaches.

At the University of Texas Medical Branch (UTMB) in Galveston, Texas, the hematology department was among the first labs to explore the benefits of digitized images, produced by automated systems. It was a beta site for the early automated microscope that is now often seen in hematology labs. Process improvement methods, including Lean techniques, were used to re-engineer work flow so that the performance of automated analyzers and digitized slide images was moved to a very high level of throughput and quality. At this year’s Lab Quality Confab in Atlanta on September 24-25, UTMB Automation Supervisor Laurie Emanuel will present a case study on how her laboratory has combined automation, middleware, digital imaging, and process improvement methods to deliver faster, higher-quality results, even as the number of med techs needed in the department’s analytical line declined from three to just one.

Combining new, sophisticated automation systems with the Lean mindset is transforming the histology laboratory at Avera McKennan Hospital and University Health Center in Sioux Falls, South Dakota. Exciting new automation solutions are arriving in histology and this laboratory, proficient in Lean techniques, is developing unique work flow and work process approaches that are already exceeding industry norms for turnaround time, productivity, quality, and cost-effectiveness. Leo Serrano, Director of Laboratory Services at Avera, will be sharing these secrets at Lab Quality Confab.

Another area where automation is beginning to alter long-standing work processes is microbiology. At BC Biomedical Laboratories in Surry, British Columbia, the microbiology laboratory installed a new automated specimen processing/preparation system, then watched in dismay as work backed up at the instrument (Proving the truth of that industrial engineering adage: “Don’t automate bad work processes.”). According to Scott Henwick, M.D., Clinical Director, Microbiology at BC Biomed, the micro team then turned to the help of an experienced veteran of Lean. Microbiology workflow was reconfigured to incorporate the best applications of “pull,” takt time, and small batch/single piece workflow. Those simple changes unlocked the productivity of the automated system and the micro lab is posting continuous improvements in all important metrics. Dr. Henwick will discuss this case study at Lab Quality Confab in a session titled: “Why Automation Bollixed Efficient Workflow in Microbiology and How Lean Fixed It.”

These three examples embody this new trend of innovative laboratories combining, blending, and integrating automation solutions with Lean, Six Sigma, and process improvement principles. Laboratory managers, pathologists, and others wanting to understand this powerful new opportunity in lab management will find the second annual Lab Quality Confab on Quality Management in Diagnostic Medicine to be a comprehensive resource. Lab Quality Confab will take place on September 24-25, 2008 at the Hilton Hotel in Atlanta, Georgia.

More than 50 sessions and topics will be presented, covering the full range of laboratory and pathology operations, ranging from specimen collection and courier logistics to using Lean with automation in the high-volume core laboratory. Poster sessions will take place, and national awards and prizes totaling $6,000 will be awarded. To see topics, speakers, and all the events at Lab Quality Confab, visit http://www.labqualityconfab.com.

To register for Lab Quality Confab, visit http://www.labqualityconfab.com.

Finally, laboratory vendors are waking up to this highly-productive intersection of matching their automated systems and sophisticated analyzers with Lean, Six Sigma, and similar process improvement techniques. At Lab Quality Confab, management master classes will be conducted on these topics by experts from Ortho-Clinical Diagnostics , Siemens Diagnostics , Sysmex , BD Diagnostics , Abbott Diagnostics , and Beckman Coulter , among others.

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1. Register ONLINE
2. Call 800-560-6363. Our friendly staff can register you quickly and easily, as well as answer any questions you may have.

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