Revenue cycle management challenges in laboratory outreach

Laboratory outreach provides a crucial healthcare service to the local community by enabling healthcare organizations and physicians to offer vital laboratory services and precision medicine on an outpatient basis. However, numerous economic and regulatory pressures can impact revenue cycle performance, reimbursement and financial viability for these operations. Below are some of the top revenue cycle management challenges facing outreach laboratories. 

Lack of financial data to evaluate outreach business

Outreach labs are a frequently overlooked revenue center within a hospital or health system, with the ability to bring in significant new revenue streams through community-based services. But outreach labs may also face data constraints that prevent them from accurately measuring fiscal performance due to information system ties to a hospital environment. Often, outreach labs have less control over their RCM process due to deficient systems that decrease their reimbursement by as much as 20 to 50 percent and leave these operations without the ability to evaluate the lab as an independent outreach business.

The reality is that laboratory services are so broad in nature and have such narrowly defined coverage criteria, that many of the medical billing products being utilized do not have the configurability and payer connectivity required to maximize reimbursement for outreach services. And to truly understand their business, outreach labs need access to better reporting tools with precise data and metrics that help them accurately evaluate operating performance, demonstrate profitability and value, identify areas needing improvement and guide the best business decisions.

With the ability to routinely monitor and evaluate key cost, revenue and performance indicators, outreach labs can apply a business discipline to managing their operations. As healthcare reform initiatives continue to gain momentum, access to timely business intelligence will be essential to help establish the outreach lab as a revenue center, and demonstrate the lab's importance to both the organization and community. Labs that understand their business and are able to leverage financial data will also gain a competitive advantage in pricing and contract negotiations. 

Declining reimbursement

Labs continue to feel the pressure from declining reimbursement, and will be significantly impacted by CMS' upcoming implementation of the Protecting Access to Medicare Act. Beginning in January 2018, CMS will reduce fees for lab tests by using private market lab test prices paid for the same services to establish a new Part B clinical laboratory fee schedule. This will likely result in reimbursement reductions for the highest-volume tests performed including services like metabolic panels, prostate-specific antigen blood tests and complete blood count tests. The impact on lab operating margins could be substantial.

With reimbursement pressures arising from regulatory changes of all types, including PAMA and the Accountable Care Act, RCM systems become the backbone to ensuring financial viability. One of the most significant capabilities needed is the ability to track and extrapolate financial data to evaluate the relationship between test costs and reimbursements based on each patient indication. Outreach labs need to understand average reimbursement per test, and evaluate test costs versus reimbursements across all payers to develop sound strategies for growing the outreach business. Reliable reimbursement data is key for negotiating pricing and effectively demonstrating the value of the outreach lab.

Lack of automated claims workflow

A major factor contributing to improved financial performance and staff productivity is an automated workflow that tracks the claim closely throughout the RCM lifecycle to reduce errors and improve efficiency. A critical area of focus is having access to rules-based system functionality and alerts to reduce front-end errors and ensure clean claims submission. An automated workflow is designed to flag problem areas and perform up front edits so that missing or incorrect data can be corrected as soon as possible prior to submitting the claim. Due to continually evolving standards and payer rules, RCM systems must be agile and system information updated in real time to ensure compliance and help avoid denied claims due to missing or inaccurate information. 

Failure to monitor discrepancies between paid and expected reimbursement

Another major RCM challenge for labs is the inability to track billed amount, expected reimbursement, and paid amount as part of the claims adjudication process. Accurate billing detail is very important when there is a discrepancy between paid and expected reimbursement from a payer because staff need a way to easily determine if there is a remaining balance to collect. Most RCM software fails to track at this level of detail, and the laboratory may not even be aware they have received a partial payment.

The combination of lack of visibility and inadequate tools for segregating and following up on balance owed results in clerical staff accepting partial payments as payments in full, which artificially inflates contractual allowance adjustments. This has a direct impact on cash collected, and erroneously gives the laboratory the belief it collected all monies owed, when there may actually be more dollars to pursue.

With outreach lab services becoming more and more critical to healthcare delivery models as testing availability increases, and with impending Medicare payment reform for laboratories in 2018, this is an optimal time to evaluate your RCM system's ability to help you sustain the challenges and opportunities ahead.  

The views, opinions and positions expressed within these guest posts are those of the author alone and do not represent those of Becker's Hospital Review/Becker's Healthcare. The accuracy, completeness and validity of any statements made within this article are not guaranteed. We accept no liability for any errors, omissions or representations. The copyright of this content belongs to the author and any liability with regards to infringement of intellectual property rights remains with them.

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