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: Billing Code 81408 Is at ‘Risk of Improper Payment’
CEO SUMMARY: Clinical lab executives familiar with molecular test coding and billing will not be surprised to learn that billing code 81408—commonly used on genetic test claims—is at risk of fra…
With Z-codes, Will Other Payers Follow UnitedHealthcare’s Lead?
EDITOR’S NOT…
Technical Assessment Challenges for Z-Code Applications
CEO SUMMARY: Effective on Aug. 1, UnitedHealthcare will require Z-code submissions for many genetic tests. During a recent webinar, experts tackled a topic that may prove troublesome for labs seeking Z-codes: technical assessments. Key advice is to provide specific data about clin…
UnitedHealthcare’s Z-code Policy Starts on Aug. 1
CEO SUMMARY: UnitedHealthcare’s (UHC) response to the ever-growing number of unique genetic tests and the continuing growth in the volume of those claims is a new policy. Effective Aug. 1, UHC will require a Z-code with genetic test claims. This req…
Optum and Avalon Discuss Genetic Test Claims Review
CEO SUMMARY: With the ever-increasing number of genetic tests on the market, payers are understandably frustrated with genetic test claims that don’t clearly outline the medical need for a procedure or it…
Proposed Electronic Signature Rule Has Compliance Risks
CEO SUMMARY: Proposed HHS rule aims to define and standardize physician electronic signatures. For clinical laboratories, this is important because lab test claims require a signed requisition form. Given …
UnitedHealthcare Policy Change Requires NPI Numbers on Medicare Advantage Claims
ANOTHER NEW POLICY RECENTLY ANNOUNCED by UnitedHealthcare (UHC) sets a deadline for June 1, 2023, requiring clinical laboratories and other ancillary providers to include the …
Payers Request More Claims Documentation
CEO SUMMARY: Both anecdotal evidence from lab professionals and numbers-based data from XiFin point to a problem: More payers require clinical labs to produce more documentation that a test claim i…
Eight Macro Trends for Clinical Labs in 2023
CEO SUMMARY: Laboratory administrators and pathologists will want to carefully study eight important trends that will guide their business strategies in 2023. Many of these macro trends center on financial and operational difficulties and ways to steer around these obstacles. Anothe…
Congress Averts PAMA Cuts to Lab Test Rates for 2023
CONGRESS ENACTED LEGISLATION LAST MONTH that suspends implementation of the next round of price cuts to the Medicare Part B Clinical Laboratory Fee Schedule (CLFS) that was scheduled to take effect on Jan. 1. This is a welcome development for the medical laboratory industry….
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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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