Laboratory Billing
The laboratory billing process is the interaction between a clinical lab or pathology group and the insurance company (payer). The entirety of this laboratory billing interaction is known as the billing cycle, which can take anywhere from several days to several months to complete, and require several interactions before a resolution is reached. The entire process is the function of what is commonly known as the laboratory coding/billing/collections department.
Laboratory billing starts with laboratory coding. After a lab service is provided, diagnosis and procedure codes are assigned. These codes assist the insurance company in determining coverage and medical necessity of the services. The codes used for laboratory billing are the International Statistical Classification of Diseases and Related Health Problems, usually called by the short-form name International Classification of Diseases (ICD), and the Current Procedural Terminology (CPT) codes.
The ICD is the international “standard diagnostic tool for epidemiology, health management and clinical purposes.” The current version is ICD-9, with ICD 10 scheduled to become the new standard on Oct. 15, 2015. It is maintained by the World Health Organization, the directing and coordinating authority for health within the United Nations System.
The ICD is designed as a health care classification system, providing a system of diagnostic codes for classifying diseases, including nuanced classifications of a wide variety of signs, symptoms, abnormal findings, complaints, social circumstances, and external causes of injury or disease.
The CPT code set is a medical code set maintained by the American Medical Association through the CPT Editorial Panel. The CPT (copyright protected by the AMA) describes medical, surgical, and diagnostic services and is designed to communicate uniform information about medical services and procedures among physicians, coders, patients, accreditation organizations, and payers for administrative, financial, and analytical purposes.
Once the procedure and diagnosis codes are determined, the lab bill enters the laboratory collections/revenue cycle management phase. The payer is usually billed electronically by formatting the claim as an ANSI 837 file and using Electronic Data Interchange to submit the claim file to the payer directly or via a clearinghouse. The payer processes the claims usually by medical claims examiners or medical claims adjusters. For higher dollar amount claims, the insurance company has medical directors review the claims and evaluate their validity for payment using rubrics (procedure) for patient eligibility, provider credentials, and medical necessity.
Approved claims are reimbursed for a certain percentage of the billed services. These rates are pre-negotiated between the health care provider and the insurance company. Failed claims are denied or rejected and notice is sent to provider. Most commonly, denied or rejected claims are returned to providers in the form of Explanation of Benefits (EOB) or Electronic Remittance Advice.
Upon receiving the denial message the provider must decipher the message, reconcile it with the original claim, make required corrections and resubmit the claim. This exchange of claims and denials may be repeated multiple times until a claim is paid in full, or the provider relents and accepts an incomplete reimbursement.
Behind the Cat-and-Mouse Game of Lab Reimbursement
Financial relationships between clinical laboratories and commercial payers have evolved into a high-stakes, technological tug-of-war. For nearly a decade, the clinical laboratory industry has wrestled with the provisions of the Protecting Acce…
Expect RESULTS Act Vote by End of the Year
CEO SUMMARY: Evidence at the 2026 Executive War College suggests a coming push in clinical lab advocacy, focusing on the RESULTS Act to establish a permanent, database-driven reimbursement model. Simultaneously, federal regulators have floated the idea of heightened scruti…
Report Identifies Practices of Top RCM Performers
Revenue cycle management (RCM) can be a headache for all healthcare providers, including clinical laboratories and anatomic pathology practices. However, some organizations handle the challenges better than others. This was the key takeaway fro…
Payers Unleash AI to Dissect Outlier Billing Patterns
Diagnostic laboratories can follow every clinical guideline, employ the most talented clinical lab professionals, and provide life-saving data to patients, yet still find themselves in the crosshairs of a federal or payer audit. The culprit is …
Why Labs Must Rethink Audit Readiness in 2026
CEO SUMMARY: Doing everything right is no longer enough to ensure claims are paid. With AI-driven audits on the rise, lab leaders must ensure their organizations can prove compliance—quickly, clearly, and consistently. Based on commentary from RCM experts Ann Lambrix and…
RCM Automation Helps Lab Manage Billing Headaches
CEO SUMMARY: In an era where it is widely suspected that private payers are using artificial intelligence to review and deny diagnostic test claims, Southwest Labs in New Mexico decided to fight back. The organization worked with RCM firm Wuscott to figure out why claims w…
PAMA Cuts Averted Until ‘27; Labs Plan Next Move
CEO SUMMARY: Clinical laboratories have again avoided a potential financial disaster, at least for now, after Congress shifted PAMA cuts to test reimbursement rates until January 2027. However, the victory is temporary absent permanent PAMA reform. To that end, laboratory …
Cuts to Rural Labs Boost RESULTS Act Support
CEO SUMMARY: Two related legislative concerns should have the sharp attention of clinical laboratory leaders, particularly those in rural areas. On one end, PAMA cuts are scheduled to hit on Jan. 31 short of another reprieve from Congress. Meanwhile, lawmakers at a recent …
Labs Enter a Critical PAMA Reform Window
CEO SUMMARY: A reprieve of upcoming PAMA cuts to lab test reimbursement rates is official with an extension through Jan. 30, 2026. This, however, is not a lot of time and pressure is on the clinical laboratory industry to get the RESULTS Act passed to permanently reform PA…
Labs Directly Attack Upcoming PAMA Cuts
CEO SUMMARY: The clinical laboratory industry once again finds itself advocating on Capitol Hill for proposed legislation to deal with an old problem: test reimbursement rate cuts under PAMA. While Congress has delayed scheduled rate cuts for the last several years, PAMA c…
CURRENT ISSUE
Volume XXXIII, No. 8 – June, 2026
Congress Returns to CLIA Reform with Proposed LDT Framework, and the Newly Filed Enhancing CLIA Act seeks to modernize clinical laboratory regulations. A newly introduced federal bill could signal the next chapter in the long-running debate over how laboratory developed tests (LDTs) should be regulated in the United States.
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