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.
Implementation Date Passes on Medicare Competitive Bid Project
YESTERDAY, APRIL 1, WAS THE DAY that the Centers for Medicare & Medicaid (CMS) was scheduled to implement the first sites for the Medicare Clinical Laboratory Services Competitive Bidding Demonstration project. It was good news for the laboratory industry that the day passed with…
Will OIG Reconsider Policy on Discriminatory Pricing?
HEIGHTENED COMPETITION in recent months for exclusive managed care contracts between the two blood brothers may trigger the law of unintended consequences. One such consequence could be renewed interest by Medicare regulators in what they call “discriminatory billing.” “In 2003, the federal …
Pumping Up Performance of Lab Billing & Collections
CEO SUMMARY: Coding, billing, collections, and compliance continue to grow in complexity, making management of the lab’s revenue cycle ever more difficult. One by one, a number of the nation’s largest laboratories are taking steps to automate management of their revenue cycle by utili…
CMS Gets Positive Results from Hospital P4P Demo
HOSPITALS IN THE FEDERAL PAY FOR performance demonstration project showed significant improvement in delivering quality in five clinical areas, according to a new report from the Centers for Medicare & Medicaid Services (CMS). CMS said the second-year results from its Premier Ho…
CMS Defers MUE Edits Until After Jan. 1, 2007
CEO SUMMARY: Medicare officials have granted a temporary respite on the troubling proposal to institute service restrictions per patient on some 80 pathology CPT codes and 1,100 clinical laboratory codes. These proposals are part of a new round of Medically Unbelievable Edits (MUEs). CMS …
Proposed Coding Edits May Restrict 88305 Use
CEO SUMMARY: When the Medicare contractor tasked with developing MUEs (Medically Unbelievable Edits) for this year’s Correct Coding Initiative work released the proposed list of edits to the AMA, it didn’t take long for the bad news to reach the pathology profession. Restriction on un…
Payers Begin Speeding Up Payment to Physicians
CEO SUMMARY: Labs and pathology groups have always found it tough to bill patients and collect a high proportion of those obligations. That situation is about to change, and fast! Payers recognize that, as more consumers are required to pay higher deductibles, co-pays, and out-of-pocket e…
Medi-Cal Abandons Lab Contract Scheme
CEO SUMMARY: Another threat to limit all laboratories’ access to Medicaid patients has ended. Just as the Medicaid lab contracting initiative proposed last year in Florida collapsed from its innate complexity, so also has a similar contracting initiative collapsed in California. In both…
WSJ Slams Client Bill For Lab Test Services
CEO SUMMARY: In a front-page story last Friday, the Wall Street Journal published an investigative story on the topic of client billing for laboratory testing and anatomic pathology services. It’s a “must-read” story for all pathologists and lab managers. For years, the lab industry…
Patient ABNs Can Save On Expensive Send-outs
CEO SUMMARY: Throughout the United States, the growing number of high-priced, patent-protected specialty tests is eating into the laboratory budgets of many hospitals. At Hospital Consolidated Laboratories in Southfield, Michigan, this budget-busting threat triggered an innovative respons…
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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