From Mid-March, Labs Saw Big Drop in Revenue

Labs and billing companies report a cumulative drop in specimen volume of 50% to 80% or more

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CEO SUMMARY: In response to the coronavirus outbreak, patients stopped seeing their doctors for routine care and hospitals ceased doing elective services. With fewer test referrals, clinical labs and pathology groups were hit with a substantial decline in revenue. One of the nation’s largest revenue cycle managers serving labs reported that—over the four weeks beginning in the second week of March—revenue for clinical labs and anatomic pathology groups dropped precipitously.

IN THE SECOND HALF OF MARCH, clinical laboratories and pathology groups experienced a sharp decline in daily lab testing volume and revenue that was unprecedented in American history. The drop in routine test volume ranged from a low of 44% for some AP groups to almost 60% for some clinical labs, according to data from XIFIN, a company in San Diego that provides revenue cycle management services for clinical laboratories and pathology groups.

Fewer Patient Visits

As the COVID-19 pandemic widened, government officials issued shelter-in-place orders in cities and states nationwide. In response, patients stopped making routine visits to physicians and hospitals canceled elective procedures. Beginning about Monday, March 9, the volume of routine tests and regular anatomic pathology specimens dropped sharply.

At the same time, the SARS-CoV-2 pandemic also required labs to run large volumes of virus tests. Payment for these tests has helped to offset some of the revenue lost from the decline in routine test volume, even though those payments were slow to arrive and initially barely covered lab costs, reported Kyle Fetter, XIFIN’s Executive Vice President and General Manager of Diagnostic Services.

“Starting in the third week of March, we saw labs suffer a sharp drop in routine testing,” Fetter said. “But at about the same time, many labs began to offset those revenue losses with testing for the novel coronavirus.” The steep decline in routine testing led to a fall-off in revenue that ranged from 44% for some AP specimens to 70% to 80% for some specialty AP work, Fetter said. Clinical labs had a drop in routine testing volume of 58%, hospital outreach testing declined by 61%, and molecular lab volume went down by 52%.

Not Business as Usual

“The outbreak of COVID-19 caused providers to shift away from business as usual,” noted Fetter. As physicians sought to reduce the risk of exposure to the virus, they limited office visits when possible, and hospitals stopped elective surgeries and routine inpatient and outpatient care.

“The changes physicians and hospitals made showed up in the number of lab transactions we saw,” said Fetter. “Over four weeks beginning March 9, we saw a cumulative drop in test volume from all of our lab clients of just over 40%.

“The effects are being felt widely and depend on what type of testing each laboratory does,” he commented. “In anatomic pathology, testing has decreased across the board by about 50%. But for labs serving dermatologists or doing Pap tests, the volume may be down closer to 70% to 80%.”

Big Losses, Some Gains

Since the beginning of April, testing volume for clinical labs began to tick up due to an increase of requisitions for COVID-19 tests. That increase allowed labs performing those tests to recoup just under half of the volume they lost, he said. Clinical laboratories and AP groups also had trouble getting health plans to address problems with payment, according to Fetter’s analysis.

“Private payers have mostly failed to respond to labs’ questions about payment denials,” he said. “One reason is because so many staff members at billing companies, health insurers, and some clinical laboratories are working from home. The result is slower payments.”

By tracking specimen volume and revenue from hundreds of laboratories and pathology groups, XIFIN can show, in detail, how much lab test volume declined over each week beginning during the week of March 9 to 15.

“We track volume for our lab clients daily and weekly,” Fetter explained. “On our side of the billing transaction, we have a delay of one day or several days from when a lab gets a specimen and when we can see the billing report from the lab. So, for clinical lab testing, we can see that drop either the same day or within a couple of days. With genetic or other long-term tests, it can take a week or two for us to see those reports.

“Those numbers showed us not only the decline but also a slight increase in testing volume when labs started getting requisitions for coronavirus testing,” Fetter reported.

XIFIN’s data show the steep drop in routine test volume came approximately in mid-March, at about the same time that some clinical labs saw a slight increase in coronavirus testing.

Tracking the Volume Drop

“The requisitions for virus testing arrived just before the week ending March 15,” Fetter noted. “That coincided with when we saw the early shelter-in-place orders going out in the major populated areas. “This is right at the time when the material decrease in testing volume became visible,” he added. “For the week ending March 14, we saw test volume from our lab customers drop by about 4.5%.

“During the week ending March 22, volume dropped an additional 14% from the previous week,” he reported. “Then, in the week ending March 29, volume dropped by 21% over the previous week’s numbers.

“Collectively, these data show a drop in testing volume among all of our lab customers of about 40% during those three weeks,” he noted.

“That was the average across all segments of the lab industry—meaning some labs might have had a steeper drop in test volume and some labs might not have dropped that far,” Fetter said.

“Then during the week ending April 5, lab test volume was down about another 3% to 4%,” he added. “Since then, the daily numbers from April 6 through 12 have been basically flat.

Cumulative Drop of 40%

“The cumulative decline in lab test volume across all client labs for those four weeks was just over 40%,” he said. “But in that time, some of our lab customers were hit with a decline of maybe 50% to 60% in test volume.

“Since then, labs bringing up COVID-19 tests have seen those tests add back maybe 15% to 20% of volume,” he added.

Before mayors and governors issued shelter-in-place orders, patients were continuing to book appointments for routine blood work and other screening tests and were scheduled for elective or other surgeries as usual.

“Testing that originates from a patient visiting a doctor for routine work—such as blood testing—may have been affected the most,” Fetter explained. “Those patients stopped seeing their doctors. That also affected the downstream testing that would normally result from those visits—such as biopsies.

“In fact, biopsies is one category of lab tests that has declined the most,” he added. “Some labs have seen a 70% to 90% reduction in those referrals. The correlated testing from those visits is being kicked down the road.”

At about the same time, Fetter noticed that testing for coronavirus patients began to rise but the payment lagged. “Even though they were running those tests in March, the majority of labs started to get paid for COVID testing in April,” he noted. “Payers were simply not prepared to pay for those tests.”

On March 18, President Trump signed the multibillion-dollar Families First Coronavirus Response Act that included free diagnostic testing for the virus. “Some payments for COVID testing started to come in during the first week or so of April,” Fetter reported. “We’ve got examples where our laboratory clients would be down about 55% to 60%, but when their COVID-19 test volume is added back, then their revenue is down only by 33% to 38%.

“Most commercial payers weren’t ready to process COVID payments until the first week of April,” he noted. “Medicare started making payments for virus testing after April first. Based on normal turnaround times, more COVID-19 payments from Medicare were likely to show up during the week of April 13 or so.”

Early in March, the federal Centers for Medicare and Medicaid Services (CMS) said it would pay $35.91 for each CDC test and that labs could begin billing in April for tests run after Feb. 4. Also, labs using non-CDC tests would be paid $51.31 per test. These rates for tests done manually did not cover the typical lab’s cost to perform such tests.

Virus Tests Come Online

“Even when labs do get paid for the manual test, they mostly just cover their direct costs,” he reported. “And, in some cases they were probably losing money.”

On March 30, CMS said it would pay new specimen collection fees for COVID-19 testing, and then two weeks later, CMS raised what it pays for certain SARS-CoV-2 tests that use high-throughput machines to $100, effective April 14 and through the duration of the emergency.

While most labs are running fewer tests overall, the workload remains high because there’s a demand for testing for the new virus. At the same time, the need to validate new tests and the equipment for such tests takes time. “Our lab customers are working to set up these new platforms as fast as possible,” Fetter commented. “That process requires them to address different issues that arise when introducing new tests, and when receiving new requisitions that arrive with varying levels of information. They’re probably swamped in terms of that type of work.

Work-from-Home Challenges

“Making this work more burdensome is the fact that some lab staff are working from home,” he noted. “Many labs didn’t have the technology to support remote work, or their staff didn’t have the equipment they needed at home. “Working from home is not a big problem for some labs because they use our web-based platform and that gives them the revenue cycle tools they need to work from home,” he said.

While much of the news about lab testing has been grim, there was a glimmer of hope in recent weeks that virus testing volume would rise. “That’s the good news,” Fetter commented. “Specifically, labs are running their own LDTs, and that’s obviously good because those tests have high specificity and sensitivity.

“Some labs will progress to higher throughput by using automated tests that IVD companies introduced,” he concluded. “In addition, labs may begin running a large volume of serological testing.”

Contact Kyle Fetter at kfetter@xifin.com or 866-934-6364.

 

Cash Flow Crashes at Labs, Path Groups

From March 9 to April 6, routine test volume (and cash collections) declined for clinical, molecular, and hospital outreach labs and for anatomic pathologists.

Over the same period, testing increased for the new coronavirus at these same labs, but virus testing for AP groups was flat to negligible, according to data from XIFIN.

Lab Specialty                             Routine Volume            COVID-19 Testing

Clinical Labs                                – 58%                                    + 33%

Hospital Outreach Labs          – 61%                                    + 13%

Molecular Labs                         – 52%                                      + 31%

Anatomic Pathology               – 44%                                      +< 1%

AP Dermatology
Other AP subspecialties      – 70%- 80%

Working from Home Affects Health Insurer and Billing Company Response Times

SINCE THE CORONAVIRUS BEGAN TO SPREAD NATIONWIDE, groups have suffered a one-two punch to revenue.

First, since the middle of March, most labs saw routine lab test referrals drop by 44% or more. Second, the outbreak has disrupted most health plans’ normal operations, causing extensive delays in payments to labs and pathology groups.

Electronic Submission

“Payments to labs that submit claims on paper will be slower than those to labs submitting claims electronically,” said Kyle Fetter, Executive Vice President and General Manager of Diagnostic Services for XIFIN.

“Delays are noticeable whenever a lab sends paper claims to health insurers, or insurers send paper responses to labs. “Payers’ explanations on paper usually go to one location and the lab might have trouble retrieving those notices,” he added.

“If checks go to a lockbox, for example, the lab might have a problem because—in some cases—the banks that process those checks may not even be open.”

Most payers that have automated claims processing get paid sooner. “For labs electronically interfaced with payers, those capabilities have gone on unhindered and issues with claims have been fairly straightforward,” Fetter noted.

Manual Processing Delays

“Also experiencing delays are molecular lab testing companies that do large numbers of proprietary genetic tests which often require manual review of claims,” he said. “Manual review already takes time, and when staff work from home much of that manual review is not happening—at least not quickly.

“Also, many labs that run expensive genetic tests send in paper documents,” he continued. “But now there may not be anyone at the payer to review them or to put them into the system for review. The more manual parts there are involved in health plan review, the longer it takes, even during normal times. When staff are working from home, that just adds time to the process. And, those claims are among the most expensive that labs submit.”

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