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.
Blue Cross Execs Discuss Reasons for New Policies
CEO SUMMARY: In recent months, officials from the Blue Cross and Blue Shield Association (BCBSA) have responded to the concerns about new billing protocols for services provided as part of the BlueCard program and voiced by such clinical lab associations as the California Clinical Laborat…
Form 5010 Changeover Causing Payment Delays
CEO SUMMARY: Even after testing compliance with HIPAA Form 5010 for more than a year, one out of four payers is not ready to pay claims using this new form. Claims payment experts are telling clinical labs to expect some shortfall of revenue in coming weeks as payers struggle to program t…
ACLA Has its Say Regarding Molecular Dx Proposals
CEO SUMMARY: It is not known how many public comments have been submitted to Palmetto GBA, the big Medicare carrier, in response to its published proposals to change how code stacked claims for genetic and molecular tests will be handled, effective February 27, 2012, for labs in Medicare …
Palmetto Execs Explain Molecular Test Policies
CEO SUMMARY: To create more transparency in the process clinical labs use to submit claims for genetic tests, molecular diagnostic tests, and for laboratory-developed tests (LDT), the nation’s largest Medicare Administrative Contractor (MAC) has proposed two new local coverage determina…
Palmetto GBA Announces Molecular Test Registry
CEO SUMMARY: Palmetto GBA, the nation’s largest Medicare Administrative Contractor (MAC), is asking labs in the J1 jurisdiction to submit applications for each molecular test they run. Molecular assays will receive a unique five-digit alpha-numeric identifier (Z-code) that will be enter…
Medicare Carrier Plans to Reject Molecular Claims
CEO SUMMARY: In September, Palmetto, a Medicare carrier serving California and seven other states, made public two draft local coverage determinations (LCDs) that revamp its coverage guidelines for molecular diagnostic tests (MDT) and laboratory-developed tests (LDT). All labs su…
Congress Likely to Pass Deep Cuts in Lab Test Fees
CEO SUMMARY: All signs point to a potentially dismal financial outcome for the clinical lab testing industry as Congress tries to trim spending by $1.2 trillion over the next 10 years. At least three proposals to significantly cut lab test reimbursement are in active debate by fe…
LabCorp Inks Agreement In Medi-Cal Pricing Case
CEO SUMMARY: In its “Settlement Agreement and Release” with the California Attorney General (AG), Laboratory Corporation of America has negotiated terms that essentially match the agreement that exists between Quest Diagnostics Incorporated and the California AG. These settle…
Congress Again Considers Co-Insurance for Lab Tests
CEO SUMMARY: Congressional cost-cutters are putting the 20% patient co-pay/coinsurance requirement for lab testing back on the table. The added complication this year is that the new Joint Select Committee on Deficit Reduction is mandated to produce its own list of cuts to the Me…
Understanding the Deal With Medi-Cal and Quest
CEO SUMMARY: It is now possible to see the specific language in the “Settlement Agreement and Release” document executed by the California State Attorney General and Quest Diagnostics Incorporated. For those clinical lab managers—and the attorneys who represent their labora…
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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