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.

OIG 2020 Plan of Work to Review Billing for Medicare Part B Tests

Since October, the federal Department of Health and Human Services Office of Inspector General (OIG) has published two versions of its plan of work for 2020. In both versions, the inspectors highlighted OIG’s efforts to review compliance with Medicare Part B billing requirements for clinical labora…

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Insurers Are Rejecting Many PLA, MAAA Codes

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New UnitedHealthcare Policy For Hospital Reference Tests

>CEO SUMMARY: Under a new policy UnitedHealthcare will start in May, hospital laboratories will no longer be allowed to bill for reference testing for members who are not hospital patients. The policy is likely to affect clinical lab testing for patients whose testing goes …

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Labs Get Less Revenue as Billing Shifts Offshore

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In LabCorp Case, Judge Upholds Some Claim

CEO SUMMARY: In a federal lawsuit against Laboratory Corporation of America, plaintiffs who were uninsured or underinsured charged the lab company with engaging in “business practices that trick and harass customers into paying excessive prices.” Plaintiffs made this and other claims …

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Judge Issues Split Ruling on Quest’s Motion to Dismiss

CEO SUMMARY: There have been significant developments in the case against Quest Diagnostics for allegedly overcharging uninsured patients for clinical laboratory tests. This second section covers the federal judge’s most recent decisions, along with an assessment of how the plaintiffs a…

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Lawsuits Alleging Overcharges to Proceed in Two Courts in 2020

CEO SUMMARY: Two lawsuits filed in federal courts against Laboratory Corporation of America and Quest Diagnostics may have consequences for the entire lab industry. The plaintiffs are patients who allege that the two defendant lab companies charged them as much as 10 times more than what …

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DOJ Charges 35 Individuals In Genetic Testing Scam

CEO SUMMARY: Federal prosecutors said those charged illegally lured elderly patients nationwide into giving cheek swabs for fraudulent genetic tests. The indicted individuals allegedly paid kickbacks and bribes to medical professionals working with telemedicine companies in exchange for r…

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ASCP, CAP Ask Anthem to Roll Back Price Cuts

CEO SUMMARY: One association representing pathologists says new payment rates that Anthem, Inc., is introducing in 14 states do not cover the costs of performing anatomic pathology and clinical lab testing for the tests in question. Another association says the steep payment cuts threaten…

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ACLA Gets Procedural Win in Its Appeal of PAMA Case

IN A SIGNIFICANT WIN for the American Clinical Laboratory Association (ACLA) and other groups suing federal Department of Health and Human Services (HHS), the U.S. Court of Appeals for the District of Columbia ruled in the ACLA’s favor on July 30. Ruling on the ap…

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