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.
PhyTest Assists Doctors With Lab Testing Revenue
CEO SUMMARY: PhyTest, Inc., created a unique business model upon its founding in 1998. It primarily specializes in handling laboratory test billing and collection services to office-based physicians. It also provides evaluation, consulting, and implementation services to help physicians i…
Three San Diego Labs Stop Competitive Bid Demo
CEO SUMMARY: Last Tuesday, a federal judge handed a big court victory to the three plaintiffs in their lawsuit seeking to delay or stop implementation of the Medicare Laboratory Competitive Bidding Demonstration pilot in the San Diego area. In his written opinion, the judge ruled in favor…
April 4 Fed Court Ruling Opened Door to Injunction
CEO SUMMARY: Federal Judge Thomas J. Whelan’s ruling on three key legal points on Friday, April 4, was the first court victory needed by three San Diego-area labs in their lawsuit to prevent the Medicare Laboratory Competitive Bidding Demonstration in San Diego from proceeding. Judge Wh…
Medicare Competitive Bid Lawsuit Heads toward a Judge’s Ruling
LOOK TO APRIL 7 FOR THE NEXT DEVELOPMENT in the federal court case filed by three San Diego-area laboratories challenging the Medicare Laboratory Competitive Bidding Demonstration Project. That’s when the judge is expected to rule on the case. The latest development was on March 14, when federal l…
Judge Rules Against Labs In Medicare Lab Bid Case
CEO SUMMARY: On February 14, Federal District Judge Thomas J. Whelan denied the request for a temporary restraining order (TRO) by three San Diego labs that would have stopped the Medicare Laboratory Competitive Bidding Demonstration pilot project until several legal challenges were adjud…
Mich. Dermatologist Gets 10.5 Years in Fraud Case
CEO SUMMARY: In a federal case involving billing improprieties and insurance fraud, a federal judge sentenced Michigan dermatologist Robert W. Stokes, M.D., to 126 months in prison and ordered him to pay $178,100 in fines and assessments, with the amount of restitution yet to be determine…
Labs Face “Coercive” Bid, Not Competitive Bidding
CEO SUMMARY: In the weeks since the December 5 bidders’ conference in San Diego, where Medicare officials took the wraps off the complete requirements for the Laboratory Bidding Demonstration Project, the Clinical Laboratory Coalition has begun to consider strategies to delay or cancel …
Michigan Derm Convicted On 31 Fraud Charges
CEO SUMMARY: Last year, dermatologist Robert W. Stokes, D.O., of Grand Rapids, Michigan, was indicted by the federal government for 72 counts relating to various offenses, including upcoding, and improper coding. Of this total, 35 counts against Stokes involved his billing payers for labo…
Lab Billing Indictments Underscore Docs’ Risks
CEO SUMMARY: Physicians should consider the precedent established recently when the U.S. Attorney for the Western District of Michigan obtained a 72-count indictment against a local dermatologist, including 35 counts of submitting fraudulent claims for lab tests he did not perform, as wel…
Path Group Responds to FBI Visits in Stokes Case
CEO SUMMARY: As the FBI launched its investigation of fraudulent billing by Michigan dermatologist Robert W. Stokes, D.O., two years ago, staff at several pathology labs found themselves “up close and personal” with federal healthcare fraud prosecutors. One pathology lab, based on wha…
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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