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.
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…
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…
After Two-Year Battle with CMS, True Health on Verge of Collapse
CEO SUMMARY: In 2017, an auditor for CMS alleged that True Health filed fraudulent claims and the federal Medicare program cut all payments to the lab company and one month later reduced the cut to 35% of the billed amount. Two months ago, CMS ended all payments again. These facts became …
Dermatologists Say Anthem Cuts Affect Patient Care
CEO SUMMARY: Deep cuts in what Anthem pays pathologists for the professional component for certain AP services are having a harmful effect on the long-standing relationships that dermatologists have with dermatopathologists, some physicians say. By disrupting these relationships, Anthem i…
Aetna Ends Payment for Professional Component
CEO SUMMARY: As of Aug. 1, Aetna will stop paying out-of-network pathologists for the professional component review of certain clinical pathology tests. Until now, the health insurer has paid for the professional component when out-of-network labs billed for clinical lab tests using the m…
Anthem Rolling Out More Anatomic Path Price Cuts
CEO SUMMARY: Anthem is making big changes to its relationships with anatomic pathology groups. Getting most of the attention at the moment are the insurer’s letters announcing price cuts for anatomic pathology services of 50% to 70% of Medicare fees. But another major change may also tr…
CMS, Lab Groups Begin Talks About Issues with NCCI Edits
SERIOUS PROBLEMS WITH THE NEW GUIDELINES for the National Correct Coding Initiative (NCCI) that were implemented on Jan. 1 have caused nine clinical laboratory associations and groups to come together and voice their concerns to the federal Centers for Medicare and Medicaid Services…
What Labs Can Expect from PAMA in 2019
CEO SUMMARY: Attendees at the Executive War College learned that CMS has taken steps to expand the number of hospital labs required to report their private payer lab test price data under the Protecting Access to Medicare Act, but the unbundling of certain test panels could be problematic…
PAMA Price Cuts Now Delivering One-Two Punch to Labs’ Revenue
WHEN DISCUSSING THEIR EARNINGS with Wall Street analysts in February, executives from both Laboratory Corporation of America (LabCorp) and Quest Diagnostics explained that the lab test price cuts from the Protecting Access to Medicare Act of 2014 (PAMA) were not onl…
Improve Your AP Group’s Financial Performance
CEO SUMMARY: Across the nation, health insurers are paying less for anatomic pathology services. This shrinks pathology group revenue and reduces pathologist compensation. Savvy pathology groups are responding to this trend by reviewing long-standing processes in their coding, billing, an…
CURRENT ISSUE
Volume XXXII, No. 6 – April 21, 2025
Now that a federal judge has vacated the FDA’s LDT rule, The Dark Report analyzes the judgement and notes the various steps the FDA could take in response. Also, lab testing at pharmacies is proving to be less successful than was once anticipated.
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