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

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‚Äôs largest revenue cycle¬†managers serving labs reported that‚ÄĒover the four weeks¬†beginning in the second week of March‚ÄĒrevenue 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.

‚ÄúStarting in the third week of March,¬†we saw labs suffer a sharp drop in routine¬†testing,‚ÄĚ Fetter said. ‚ÄúBut at about the¬†same time, many labs began to offset those¬†revenue losses with testing for the novel¬†coronavirus.‚Ä̬†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

‚ÄúThe outbreak of COVID-19 caused providers¬†to shift away from business as usual,‚Ä̬†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.

‚ÄúThe changes physicians and hospitals¬†made showed up in the number of lab¬†transactions we saw,‚ÄĚ said Fetter. ‚ÄúOver¬†four weeks beginning March 9, we saw a¬†cumulative drop in test volume from all of¬†our lab clients of just over 40%.

‚ÄúThe effects are being felt widely and¬†depend on what type of testing each laboratory¬†does,‚ÄĚ he commented. ‚ÄúIn 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%.‚ÄĚ

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.

‚ÄúPrivate payers have mostly failed to¬†respond to labs‚Äô questions about payment¬†denials,‚ÄĚ he said. ‚ÄúOne 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.‚ÄĚ

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.

‚ÄúWe track volume for our lab clients¬†daily and weekly,‚ÄĚ Fetter explained. ‚ÄúOn¬†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.

‚ÄúThose numbers showed us not only¬†the decline but also a slight increase in¬†testing volume when labs started getting¬†requisitions for coronavirus testing,‚ÄĚ 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

‚ÄúThe requisitions for virus testing arrived¬†just before the week ending March 15,‚Ä̬†Fetter noted. ‚ÄúThat coincided with when we¬†saw the early shelter-in-place orders going¬†out in the major populated areas.¬†‚ÄúThis is right at the time when the¬†material decrease in testing volume became¬†visible,‚ÄĚ he added. ‚ÄúFor the week ending¬†March 14, we saw test volume from our lab¬†customers drop by about 4.5%.

‚ÄúDuring the week ending March 22,¬†volume dropped an additional 14% from¬†the previous week,‚ÄĚ he reported. ‚ÄúThen, in¬†the week ending March 29, volume dropped¬†by 21% over the previous week‚Äôs numbers.

‚ÄúCollectively, these data show a drop in¬†testing volume among all of our lab customers¬†of about 40% during those three weeks,‚Ä̬†he noted.

‚ÄúThat was the average across all segments¬†of the lab industry‚ÄĒmeaning some¬†labs might have had a steeper drop in test¬†volume and some labs might not have¬†dropped that far,‚ÄĚ Fetter said.

‚ÄúThen during the week ending April 5,¬†lab test volume was down about another¬†3% to 4%,‚ÄĚ he added. ‚ÄúSince then, the daily¬†numbers from April 6 through 12 have been¬†basically flat.

Cumulative Drop of 40%

‚ÄúThe cumulative decline in lab test volume¬†across all client labs for those four weeks was¬†just over 40%,‚ÄĚ he said. ‚ÄúBut in that time,¬†some of our lab customers were hit with a¬†decline of maybe 50% to 60% in test volume.

‚ÄúSince then, labs bringing up COVID-19 tests have seen those tests add back¬†maybe 15% to 20% of volume,‚ÄĚ 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.

‚ÄúTesting that originates from a patient¬†visiting a doctor for routine work‚ÄĒsuch¬†as blood testing‚ÄĒmay have been affected¬†the most,‚ÄĚ Fetter explained. ‚ÄúThose patients¬†stopped seeing their doctors. That also¬†affected the downstream testing that would¬†normally result from those visits‚ÄĒsuch as¬†biopsies.

‚ÄúIn fact, biopsies is one category of¬†lab tests that has declined the most,‚ÄĚ he¬†added. ‚ÄúSome labs have seen a 70% to¬†90% reduction in those referrals. The correlated¬†testing from those visits is being¬†kicked down the road.‚ÄĚ

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

On March 18, President Trump signed¬†the multibillion-dollar Families First¬†Coronavirus Response Act that included¬†free diagnostic testing for the virus.¬†‚ÄúSome payments for COVID testing¬†started to come in during the first week¬†or so of April,‚ÄĚ Fetter reported. ‚ÄúWe‚Äôve¬†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%.

‚ÄúMost commercial payers weren‚Äôt ready¬†to process COVID payments until the first¬†week of April,‚ÄĚ he noted. ‚ÄúMedicare 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.‚ÄĚ

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

‚ÄúEven when labs do get paid for the manual¬†test, they mostly just cover their direct¬†costs,‚ÄĚ he reported. ‚ÄúAnd, in some cases¬†they were probably losing money.‚ÄĚ

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‚Äôs 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. ‚ÄúOur lab customers are¬†working to set up these new platforms as¬†fast as possible,‚ÄĚ Fetter commented. ‚ÄúThat¬†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‚Äôre probably swamped in terms¬†of that type of work.

Work-from-Home Challenges

‚ÄúMaking this work more burdensome is¬†the fact that some lab staff are working¬†from home,‚ÄĚ he noted. ‚ÄúMany labs didn‚Äôt¬†have the technology to support remote¬†work, or their staff didn‚Äôt have the equipment¬†they needed at home.¬†‚ÄúWorking 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,‚ÄĚ 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. ‚ÄúThat‚Äôs the good news,‚Ä̬†Fetter commented. ‚ÄúSpecifically, labs are¬†running their own LDTs, and that‚Äôs obviously¬†good because those tests have high¬†specificity and sensitivity.

‚ÄúSome labs will progress to higher¬†throughput by using automated tests that¬†IVD companies introduced,‚ÄĚ he concluded.¬†‚ÄúIn addition, labs may begin running a large¬†volume of serological testing.‚ÄĚ

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                                Р58%                                    + 33%

Hospital Outreach Labs          Р61%                                    + 13%

Molecular Labs                         Р52%                                      + 31%

Anatomic Pathology               Р44%                                      +< 1%

AP Dermatology
Other AP subspecialties      Р70%- 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

‚ÄúPayments to labs that submit claims on¬†paper will be slower than those to labs¬†submitting claims electronically,‚ÄĚ said Kyle¬†Fetter, Executive Vice President and General¬†Manager of Diagnostic Services for XIFIN.

‚ÄúDelays are noticeable whenever a lab sends¬†paper claims to health insurers, or insurers¬†send paper responses to labs.¬†‚ÄúPayers‚Äô explanations on paper usually¬†go to one location and the lab might have¬†trouble retrieving those notices,‚ÄĚ he added.

‚ÄúIf checks go to a lockbox, for example,¬†the lab might have a problem because‚ÄĒin¬†some cases‚ÄĒthe banks that process those¬†checks may not even be open.‚ÄĚ

Most payers that have automated¬†claims processing get paid sooner. ‚ÄúFor¬†labs electronically interfaced with payers,¬†those capabilities have gone on unhindered¬†and issues with claims have been¬†fairly straightforward,‚ÄĚ Fetter noted.

Manual Processing Delays

‚ÄúAlso experiencing delays are molecular¬†lab testing companies that do large numbers¬†of proprietary genetic tests which¬†often require manual review of claims,‚Ä̬†he said. ‚ÄúManual review already takes¬†time, and when staff work from home¬†much of that manual review is not happening‚ÄĒat least not quickly.

‚ÄúAlso, many labs that run expensive¬†genetic tests send in paper documents,‚ÄĚ he¬†continued. ‚ÄúBut 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.‚ÄĚ

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