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.
Quest Diagnostics to File Regular Reports with DHCS
CEO SUMMARY: Pathologists, clinical lab executives, and lawyers in California are going to find some surprises when they study the “Settlement Agreement and Release” that was recently signed by the California Attorney General and Quest Diagnostics Incorporated. Quest Diagnost…
Medi-Cal Deal Raises Interesting Questions
CEO SUMMARY: From the perspective of the average citizen, it would appear that Quest Diagnostics scored two major “wins” over the California Attorney General in the negotiations as to how the whistleblower lawsuit was to be settled. Language in the settlement agreement would …
What Comes Next in Battle Over Discount Lab Prices?
CEO SUMMARY: Now that the settlement involving Quest Diagnostics Incorporated and the California Attorney General has been announced, attention turns to what comes next with the four remaining defendant lab companies in the whistle-blower lawsuit. There are several different scen…
G-Men Mistakenly Raid Pathology Lab in Calif.
CEO SUMMARY: On February 10, 15 armed agents from the Department of Justice (DOJ) arrived at a pathology laboratory in Chico, California, to serve a search warrant and seize billing records, computers, and other evidence believed to be associated with fraudulent billing for CPT c…
Time to Think About ACOs And Medical Homes
CEO SUMMARY: In less than nine months—on January 1, 2012—the new health reform legislation mandates that Medicare commence value-based purchasing. Medicare must also begin contracting with accountable care organizations (ACO). Experts say these two developments will initiate …
Labs Hope to Renegotiate 1.75% Medicare Fee Cuts
CEO SUMMARY: As Congress crafted its reform of the nation’s healthcare system last year, it asked healthcare providers to contribute substantially to the cost of the Patient Protection and Affordable Care Act. The lab industry will see a 1.75% cut in reimbursement for Medicare …
Pathology Records Found At Massachusetts Dump
CEO SUMMARY: Pathologists at four Massachusetts hospitals got a powerful reminder recently that a breach of protected health information (PHI) can occur at any time for the most unexpected reason. Earlier this month, the Boston Globe reported that the pathology reports and patien…
Pathologists Not Enrolled In PECOS By July 6 Risk Denial of Medicare Claims
JULY 6, 2010, IS THE NEW DEADLINE for pathologists to enroll in the Provider Enrollment, Chain and Ownership System (PECOS) or risk being denied payment for Medicare claims. The federal Centers for Medicare & Medicaid Services (CMS) recently issued a statement that it will not p…
Using Performance-Based Part A Hospital Path Contracts
CEO Summary: One of pathology’s greatest challenges is adequate reimbursement for hospital Part A Pathology Services. Over the past two decades, ever more hospitals took steps to reduce or eliminate payment to pathologists for these services. Now several innovative pathology gr…
AG Jerry Brown Settles With Westcliff Med Labs
CEO SUMMARY: In California, Attorney General Jerry Brown is making progress in the whistleblower lawsuit alleging that seven lab companies in California violated state law by not giving Medi-Cal, the state’s Medicaid program, the same lowest lab test prices they extend to physi…
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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