A claim is denied for various reasons: incorrect patient information, coding errors, lack of eligibility, benefit limitations are reached, prior authorizations aren’t received or referral requirements. In the case where claims are denied because the documentation doesn’t adequately support medical necessity, your billing (or marketing) team goes looking for more information, someone contacts the provider, records are requested, an appeal gets written, and the claim gets resubmitted. Then everyone moves on to the next one.
None of this sounds particularly unusual in a laboratory, and that may be the strangest part.
Somewhere along the way, laboratories became remarkably good at managing reimbursement problems that perhaps shouldn’t be so routine in the first place. Teams developed processes, learned payer requirements, created spreadsheets and checklists, and figured out which providers reliably supplied documentation and which required three phone calls and a small act of God. The work got done, and gradually the workaround became the workflow.
Being Good at the Workaround Doesn’t Make It Free
There is a great deal of expertise involved in keeping laboratory reimbursement moving. Good billing and revenue cycle teams know how to investigate Claim Denials, find missing information, work with providers, respond to records requests and build an appeal. The question is how much of that expertise is being spent fixing something after the fact.
If a payer needs documentation supporting why a particular test was medically necessary for a particular patient, discovering that the documentation is insufficient after the test has been performed and the claim submitted is a remarkably late point in the process to address it. Yet that sequence has become familiar enough that we rarely stop to question it. The claim goes out, a problem comes back, and the team fixes it. Then the process starts again with the next claim.
“Labs don’t realize that the time their staff is spending on non-revenue activities (like gathering medical documentation, which often doesn’t exist) takes them away from revenue-generating activities like sales, marketing and client follow up”.
- Cellarian CFO, Mike Lu
The cost isn’t limited to claims that ultimately don’t get paid. There is staff time involved in retrieving records, contacting providers, responding to payer requests, resubmitting claims and preparing appeals. There is delayed reimbursement and, in some cases, money that is ultimately written off. There is also the less visible cost of having experienced people spend their time repairing the same category of problem over and over again.
Individually, each incident may simply look like part of running a laboratory. Collectively, they may deserve a closer look.
Are you people spinning their wheels? Or working on generating revenue for your lab?
What If the Documentation Came First?
That question is what led to Cellarian. What would happen if the documentation supporting medical necessity were created before the claim went out, rather than assembled after someone discovered it was missing or insufficient?
Cellarian creates patient-specific, payer-aligned medical necessity documentation and prior authorization support using clinical information from the laboratory workflow. The documentation is created upstream, while there is still an opportunity to address the requirement before it becomes a downstream reimbursement problem.
It is a relatively simple change in sequence, but sequence matters. There is a meaningful difference between documenting why testing is medically necessary and trying to establish that necessity after the payer has already questioned the claim.
Some Things Shouldn’t Become Normal
Denials aren’t going away. In fact, data shows that they are increasing year over year.
Neither are payer requirements, prior authorizations, records requests or audits. Laboratories will continue to need strong revenue cycle teams, and there will always be claims that require additional work.
The more useful question is whether we have become so accustomed to certain reimbursement problems that we have stopped asking why they happen where they do. How often does your team have to retrieve clinical information after testing? How often does a documentation requirement become apparent only after it has become a reimbursement problem? How much staff time is spent assembling support that could have existed earlier? And how much reimbursement is tied up in that process?
Those questions are worth answering before deciding that the current workflow is simply the cost of doing business.
We built Cellarian’s ROI calculator to help laboratories begin answering the financial part of that question. Using your monthly claim volume, average reimbursement and estimated denial rate, the calculator provides an estimate of the reimbursement currently at risk. It isn’t an assumption that every denial is preventable or every dollar can be recovered; it is a way to put a number around a process that can otherwise become remarkably easy to normalize.
Sometimes “normal” is simply a problem we’ve gotten very good at managing.
