Disclosures, mandated by the Affordable Care Act, provide a limited snapshot of claim denials
Claim denials have created financial headaches for virtually all healthcare providers, including clinical laboratories and anatomic pathology groups. Reliable data about denials is hard to come by, but a recent analysis by KFF (formerly the Kaiser Family Foundation) revealed that insurers selling plans on HealthCare.gov denied 19% of claims for in-network services in 2023, the latest year for which data is available.
This is the highest rate since 2015, when KFF began tracking the data, according to the analysis. Claim denials for out-of-network services were even higher, amounting to 37%.
Patients and doctors “are saying that it’s become an even bigger hassle in recent years than it has been in the past,” said Kaye Pestaina, JD, co-author of the report, in a video report from CNBC. Pestaina is a KFF vice president and director of the organization’s program on patient and consumer protection.
The analysis, released Jan. 27, noted that the Affordable Care Act (ACA) requires insurers to provide data about health plans to state and federal regulators as well as the public. “However, federal implementation of this requirement has so far been limited to qualified health plans (QHP) offered on the federally facilitated Marketplace (HealthCare.gov) and does not include QHPs offered on state-based Marketplaces or group health plans.”
“One thing that we’ve seen [when] surveying consumers across different insurance types is that they simply don’t know that they have an appeal right,” said Kaye Pestaina, JD (above), VP and director of KFF’s program on patient and consumer protection, in a video report from CNBC. “If appeals were used more often, it might operate as a check on carriers. From what we can see now, so few are appealed, so it’s not operating as a check.” Clinical laboratories and anatomic pathology groups don’t often see data about the rate of claims denials by payers made public. (Photo copyright: KFF.)
Scarce Information
The federal marketplace covers 32 states, which means that the data does not include the 18 other states or the District of Columbia, all of which have their own exchanges. Nor does it include employer-sponsored plans, Medicare Advantage plans, or Medicaid Managed Care plans.
“In the big picture, we’re still operating from a scarce amount of information about how carriers review claims,” Pestaina told the Minneapolis Star-Tribune.
Within this limited dataset, KFF found wide variation in denial rates among the parent companies of health plans. The companies with the highest rates were as follows:
Rates also varied by state, from a high of 34% in Alabama to a low of 6% in South Dakota. However, the report noted that these averages sometimes obscured wide variations within each state. For example, in Florida, the statewide average was 16%, but denial rates for individual insurers ranged from 8% to 54%.
In most cases, in-network denial rates did not vary much based on plan levels. Rates were 15% for Platinum plans, compared with 18% for Silver and Gold plans, and 19% for Bronze plans. The rate for catastrophic plans was 27%.
The data offered only limited insights about the reasons for claim denials. The federal Centers for Medicare and Medicaid Services (CMS), which administers the rules, requires plans to report denial reasons, but it allows for an “Other” category that accounts for the largest number of denials:
Other reason not listed – 34%
Administrative reason – 18%
Service excluded – 16%
Enrollee benefit limit reached – 12%
Lack of referral or prior authorization – 9%
Not medically necessary (excluding behavioral health) – 5%
Member not covered – 5%
Not medically necessary (behavioral health only) – 1%
“We hear anecdotal stories about certain treatments that are denied, that arguably should not have been denied,” Pestaina told the Star-Tribune. “How often is that happening? It’s difficult to come to a conclusion with the kind of ‘reason’ information we have here.”
Health Insurers Pushback
In addition to claim denials, CMS requires insurers to report the number of appeals once a claim has been denied.
“As in KFF’s previous analysis of federal claims denial data, we find that consumers rarely appeal denied claims and when they do, insurers usually uphold their original decision,” the report states.
In total, insurers on the federal exchange denied 73 million in-network claims. Among these, less than 1% (376,527) were appealed internally to the insurers, which upheld 56% of the denials.
The report notes that, in some cases, consumers have a right to an external appeal in which a third party reviews the claim. However, in a separate survey, KFF found that only 40% of all consumers, and 34% of Marketplace enrollees, were aware of that right.
Health insurers pushed back on KFF’s analysis. In a statement reported by the Star-Tribune, UnitedHealth Group described the numbers as “grossly misleading” because the dataset represents only 2% of total claims.
“Across UnitedHealthcare, we ultimately pay 98% of all claims received that are for eligible members, when submitted in a timely manner with complete, non-duplicate information,” the company stated. “For the 2% of claims that are not approved, the majority are instances where the services did not meet the benefit criteria established by the plan sponsor, such as the employer, state or Centers for Medicare and Medicaid Services.”
Medical laboratories today struggle to submit clean claims and be promptly and adequately reimbursed as health insurers institute burdensome requirements and audit more labs
Across the nation, clinical laboratories and anatomic pathology groups of all sizes struggle to get payment for lab test claims. Veteran lab executives say they cannot remember any time in the past when medical laboratories were challenged on the front-end with getting lab test claims paid while also dealing on the back-end with ever-tougher audits and unprecedented recoupment demands.
These issues center upon the new policies adopted by the Medicare program and private health insurers that make it more difficult for many clinical laboratories to be in-network providers, to obtain favorable coverage guidelines for their tests, and to have the documentation requested when auditors show up to inspect lab test claims. This is true whether the audit is conducted by a Medicare Recovery Audit Contractor (RAC) or a team from a private health insurer.
Source of Financial Pressure on Medical Laboratories in US
Another source of financial pressure on medical laboratories in the United States today is the ongoing increase in the number of patients who have high-deductible health plans—whether from their employer or from the Affordable Care Act’s Health Insurance Marketplace (AKA, health exchanges). The individual and family annual deductibles for these plans typically start at around $5,000 and go to $10,000 or more. Many labs are experiencing big increases in patient bad debt because they don’t have the capability to collect payment from patients when they show up in patient service centers (PSCs) to provide specimens.
Some of these developments make it timely to ask the question: Is it a trend for payers to gang up on clinical laboratories and pathology groups and make it tougher for them to be paid for the lab tests they perform? Multiple factors can be identified to support this thesis.
“Is it a coincidence that, in recent years, so many payers are initiating numerous requirements that add complexity to how labs submit claims for lab tests and how they get paid?” asked Richard Faherty of RLF Consulting LLC. Faherty was formerly Executive Vice President, Administration, with BioReference Laboratories, Inc. “I can track four distinct developments that, collectively, mean that fewer lab claims get paid, expose clinical laboratories to extremely rigorous audits with larger recoupment demands, and heighten the risk of fraud and abuse allegations due to use of contract or third-party sales and marketing representatives who represent independent medical lab companies.”
Faherty described the first of his four developments as prior-authorization requirements for molecular and genetic tests. “Health insurers are reacting to the explosion in molecular and genetic testing—both in the number of unique assays that a doctor can order and the volume of orders for these often-expensive tests—by establishing stringent prior-authorization requirements,” he noted.
More Prior-Authorization Requirements for Molecular, Genetic Tests
“At the moment, many clinical lab companies and pathology groups are attempting to understand the prior-authorization programs established by Anthem (which became effective on July 1) and UnitedHealthcare (which became effective on November 1),” explained Faherty. “Just these two prior-authorization programs now cover as many as 80 million beneficiaries. There are plenty of complaints from physicians and lab companies because the systems payers require them to use are not well-designed and quite time-consuming.
“One consequence is that many lab executives complain that they are not getting paid for genetic tests because their client physicians are unable to get the necessary prior authorization—yet the lab decides to perform the test to support good patient care even though it knows it won’t be paid.”
Richard Faherty (left), CEO, RLF Consulting LLC, and formerly with Bio-Reference Laboratories, Inc., will moderate this critical webinar. Joining him will be Rina Wolf (center), Vice President, Commercialization Strategies, Consulting and Industry Affairs, XIFIN, Inc., and Karen S. Lovitch (right), JD, Practice Leader, Health Law Practice, Mintz Levin, PC, Washington, DC. The webinar takes place Wednesday, December 6, 2017, at 2 p.m. EST; 1 p.m. CST; 12 p.m. MST; 11 a.m. PST. Click here to register. (Photo copyright: Dark Intelligence Group.)
Payers Checking on How Clinical Laboratories Bill, Collect from Patients
Faherty’s second trend involves how medical lab companies are billing and collecting the amounts due from patients. “Most payers now pay close attention to how clinical laboratories bill patients for co-pays, deductibles, and other out-of-pocket amounts that are required by the patients’ health plans,” he commented. “Labs struggle with this for two reasons.
“One reason is the fact that tens of millions of Americans currently have high-deductible health insurance plans,” said Faherty. “In these cases, medical laboratories often must collect 100% of the cost of lab testing directly from the patients. The second reason is the failure of many independent lab companies to properly and diligently balance-bill their patients. This puts these labs at risk of multiple fraud and abuse issues.”
Many Medical Lab Companies Undergoing More Rigorous Audits by Payers
Faherty considers trend number three to be payers’ expanding use of rigorous audits of lab test claims. “In the past, it was relatively uncommon for a clinical lab company or pathology group to undergo audits of their lab test claims,” he observed. “That has changed in a dramatic way. Today, the Medicare program has increased the number of private auditors that visit labs to inspect lab test claims. At the same time, private health insurers are ramping up the number and intensity of the audits they conduct of lab test claims and substantially increasing their demands for recoupment without audit.
“One consequence of these audits is that medical laboratories are being hit with substantial claims for recoupment,” noted Faherty. “I am aware of multiple genetic testing companies that have been hit with a Medicare recoupment amount equal to two or three years of the lab’s annual revenue. Some have filed bankruptcy because the appeals process can take three to four years.”
Are Contract Lab Sales Reps More Likely to Offer Physicians Inducements?
Faherty’s fourth significant trend involves the greater use of independent contractors that handle lab test sales and marketing for clinical lab companies. “This trend affects both labs that use third-party lab sales reps and labs that don’t,” he said. “Labs that use contract sales and marketing representatives do not have direct control over the sales practices of these contractors. There is ample evidence that some independent lab sales contractors are willing to pay inducements to physicians in exchange for their lab test referrals.
“This is a problem in two dimensions,” noted Faherty. “On one hand, clinical lab companies that use third-party sales contractors don’t have full control over the marketing practices of these sales representatives. Yet, if federal and state prosecutors can show violations of anti-kickback and self-referral laws, then the lab company is equally liable. In certain cases, government attorneys have even gone after executives on a personal basis.
“On the other hand, I am hearing lab executives complain now that a substantial number of office-based physicians are so used to various forms of inducement offered by third-party sales representatives that the lab’s in-house sales force cannot convince those physicians to use their lab company without a comparable inducement. If true, this is a fundamental shift in the competitive market for lab testing services and it puts labs unwilling to pay similar inducements to physicians at a disadvantage.”
These four trends describe the challenges faced by every clinical laboratory, hospital laboratory outreach program, and pathology group when attempting to provide lab testing services to office-based physicians in a fully-compliant manner and be paid adequately and on time by health insurers.
Why Some Labs Continue to Be Successful and What They Can Teach You
These four trends may also explain why many medical lab companies are dealing with falling revenue and encountering financial difficulty. However, there continue to be independent lab companies that have consistent success with their coding, billing, and collections effort. These labs put extra effort into aligning their business practices with the requirements of the Medicare program and private health insurers.
Three esteemed experts in the field will provide you with the inside scoop on the best responses and actions your clinical lab and pathology group can take to address these major changes and unwelcome developments. Presenting will be:
· Moderating will be Richard Faherty of RLF Consulting LLC, and formerly with Bio-Reference Laboratories, Inc.
Special Webinar with Insights on How Your Lab Can Collect the Money It’s Due
To register for the webinar and see details about the topics to be discussed, use this link (or copy and paste this URL into your browser: http://pathologywebinars.com/how-to-prepare-your-lab-for-2018-essential-insights-into-new-payer-challenges-with-lab-audits-patient-billing-out-of-network-claims-and-heightened-scrutiny-of-lab-sales-practices/).
This is an essential webinar for any pathologist or lab manager wanting to improve collected revenue from lab test claims and to improve lab compliance. During the webinar, any single idea or action your lab can take away could result in increasing collected revenue by tens of thousands even hundreds of thousands of dollars. That makes this webinar the smartest investment you can make for your lab’s legal and billing/collection teams.
