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.
Nine Lab Groups Say New NCCI Policy Is Inconsistent
CEO SUMMARY: By its name alone, the National Correct Coding Initiative (NCCI) Policy Manual implies that it will be accurate and consistent with other coding initiatives. But nine groups representing various clinical laboratories say NCCI guidelines that the federal Centers for Medicare a…
Best Ways to Gather, Access, Report PAMA Price Data to CMS
CEO SUMMARY: All clinical labs required to report their private payer lab test price data are now in the midst of collecting that data. One big change in PAMA reporting is that the federal Centers for Medicare and Medicaid Services now defines most hospital and health system labs as “ap…
Useful Lessons for Labs That Report PAMA Data
CEO SUMMARY: Will clinical labs heed the lessons learned from the first PAMA private payer market price reporting cycle that CMS conducted in 2017? One major difference is that the definition of applicable laboratories now includes most hospital labs. This creates the opportunity for a la…
Senator Asks: Are Lab Test Payments Too High?
CEO SUMMARY: It is ironic that, after the federal Centers for Medicare and Medicaid Services (CMS) enacted the deepest price cuts to the Part B Clinical Laboratory Fee Schedule in more than 50 years, a U.S. Senator now asks CMS why it will pay billions more for lab testing. The question f…
Lower Prices, More Data in UHC’s New Lab Network?
CEO SUMMARY: It’s been a common strategy among managed care payers to seek the lowest prices for clinical laboratory testing when negotiating contracts with labs. However, lower prices may become less important over time as the health system moves away from fee-for-service payment towar…
In PAMA Appeal, ACLA Says Federal District Court Erred
LAST MONTH the American Clinical Laboratory Association (ACLA) filed an appeal in its case against the federal Department of Health and Human Services (HHS). In its court filing, the ACLA said that a federal district court judge erred in her ruling against the lab as…
NILA, ACLA Respond to CMS 2019 Final Lab Rule
CEO SUMMARY: On Nov. 2, the federal Centers for Medicare and Medicaid Services released its Physician Fee Schedule for 2019. It says it will expand the number of labs from which it collects data about the lab test prices paid by private health insurers. While some labs may welcome these c…
Medicare Data Makes Pathology Prices Public
CEO SUMMARY: Each year since 2015, Medicare officials have posted the prices charged by every physician. That now makes it possible for pathology group practices to conduct a price study of their region and state to learn how their group’s prices compare with other pathology providers. …
Boston Heart Case Ruling Raises Questions for Labs
CEO SUMMARY: Is it a violation of federal healthcare laws when clinical labs pay physicians to mail specimens and/or forgive all or part of patients’ copayments and deductibles? A federal judge’s ruling in a lawsuit against Boston Heart Diagnostics last month dealing with these two ac…
ACLA Lawyer Says Judge’s PAMA Ruling Is Narrow
CEO SUMMARY: Many lab professionals were disappointed at the news that a federal judge dismissed the American Clinical Laboratory Association’s arguments in its lawsuit against the federal Department of Health and Human Services (HHS). In an interview, the ACLA’s lead lawyer on the ca…
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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