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.
Client Bill Pricing Policy Rises To Medicare Level
CEO SUMMARY: Within the laboratory industry, there has been a decade-long debate over whether offering discount prices in client bill states could violate some Medicare regulations. UroCor, Inc. decided that an OIG opinion issued in December to a pathology company signaled a potential cha…
Finally: Respect for Cytyc As Aetna OKs ThinPrep®
CEO SUMMARY: Here’s an important development in the battle to get the healthcare community to accept new technology for the preparation of Pap smears. Aetna/U.S. Healthcare announced that it would cover the monolayer preparation tests offered by Cytyc and AutoCyte. Aetna’s decision ma…
New Trend Threatens Pay For Pathology Part A Services
CEO SUMMARY: Each year, more hospitals adopt an aggressive stance and attempt to eliminate or greatly reduce the compensation paid to their pathology groups for Medicare Part A technical services. There is a surprising reason why an increasing number of hospital administrators suddenly ha…
Medicare Refund Request Issued To AmeriPath, Inc
CEO SUMMARY: Regulators believe AmeriPath’s Ft. Lauderdale laboratory submitted claims during 1996 which were based upon improper procedure codes or lacked adequate documentation. AmeriPath “vigorously” disputes the situation. It is still uncertain as to whether this action represen…
Legislators May Repeal New York Lab Surcharge
CEO SUMMARY: On January 1, New York State began to tax lab tests performed by free-standing laboratories with an 8.18% surcharge. The New York State Clinical Laboratory Association took its message directly to the public. Laboratories in New York State created enough consumer protest that…
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Proposed Monthly Test Limit Defeated By United Lab Action
PROPOSALS TO CAP laboratory tests at no more than six per month for MediCal patients in California alarmed clinical laboratories throughout the state. The California Clinical Laboratory Association (CCLA) took immediate steps to counter the proposals. “This was a budget issue init…
New York Labs Sue State To Overturn Surcharge
CEO SUMMARY: With the new laboratory test surcharge in place since January 1, 1997, clinical laboratories already see negative financial effects. Administration and collection of the tax is a nightmare. Some managed care companies moved swiftly to reduce reimbursement to laboratories in o…
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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