ICD-10 Gives Payers More Data About Lab Claims

Detailed procedure codes give health plans more reasons to question claims, deny coverage

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CEO SUMMARY: Evidence shows that adoption of ICD-10 diagnosis codes in 2015 made it possible for health insurers to track clinical laboratory testing more closely, ask more questions about those tests, and deny coverage. Increased detail about each patient’s condition has led to increased demands for medical-necessity documentation and to denied payments of as much as 20% of all testing, one expert said. In some cases, insurers pay claims, ask questions, and then demand repayment.

SINCE OCTOBER 2015, the United States’ adoption of ICD-10 diagnosis codes has disrupted laboratory test billing and collections, leading to rejected claims and increased demands from health insurers for medical-necessity documentation.

In the four years since the adoption of ICD-10 CPT codes, there has been little discussion or news reporting about the disruption that these diagnosis codes have caused for clinical laboratories and pathology groups. Some lab billing experts have said using the new codes has been challenging for labs because many payers are requiring labs to submit more data to support the test claims they submit for payment. Late in 2015, THE DARK REPORT predicted this outcome.

ICD-10 is designed to provide more clinical detail on each patient’s diagnosis to help health networks, hospitals, physicians, and health insurers deliver better care. When compared with ICD-9, ICD-10 codes have 19 times as many procedure codes and nearly five times as many diagnosis codes—a total of 71,932 codes in 2019. (See TDRs, June 22 and Dec. 28, 2015.)

This new level of detail may be useful on paper for tracking disease and patients’ outcomes, but since 2016 and continuing to this day, the detail insurers have from ICD-10 codes has created new challenges for clinical laboratories and anatomic pathology groups.

Armed with more data on patients’ disease states, health insurers have required clinical laboratories to provide more information on the tests physicians prescribe, said Kyle Fetter, Executive Vice President and General Manager of Diagnostic Services for XIFIN, a revenue cycle management company for clinical labs.

“Many times, those requests for more information lead to demands for more data on medical-necessity or to payment denials, or both,” he added. Health insurers have narrowed coverage by at least 20% for lab testing under ICD-10 when compared with those patients who would have been covered under ICD-9 codes, he estimated.

Specific Coverage Policies

“Not only do we see health insurers denying claims for testing more frequently, but they also use more specific coverage policies under ICD-10 as the basis for more requests for medical necessity documentation,” observed Fetter. The problem for labs trying to provide the supporting documentation is that physicians must provide patients’ medical records and often fail to do so. When requests for documentation go unfilled, insurers can deny the claims.

“Requests for documentation often lead insurers to seek refunds from labs if the original tests have been paid, but the insurer later finds reasons to claw-back the paid amount, either in full or in part,” Fetter commented.

“Since ICD-10 was implemented in 2015, we’ve seen a narrowing of coverage for many routine clinical lab tests and for many molecular tests that both specialty labs and anatomic pathologists do for patients,” he explained. The reduction in coverage for many lab tests started in 2016 and has continued since then, he added.

“All major health insurers are narrowing their coverage of a growing number of lab tests and they’re using the increased procedure and diagnosis information they have from the ICD-10 codes to their advantage,” he said.

Those insurers are Aetna, Anthem Blue Cross and Blue Shield, Cigna, Humana, and UnitedHealthcare. Among these five health insurers, Humana has been aggressive in requiring clinical laboratories to repay amounts it’s paid for these tests, Fetter added.

“The narrowing of coverage results directly from the higher specificity that insurers have with ICD-10 codes,” he explained. “The insurers use this increased information to challenge payments they’ve already made. They do so by saying to labs, ‘Well, this test was never meant for this patient. Instead it’s meant for only a smaller subset of patients. Once they challenge a lab test, they request medical-necessity documentation on the patient’s condition.

“The labs then need to request medical-necessity information from the ordering physicians and often the physicians don’t respond to such requests,” he commented. “The physicians are too busy or don’t have the staff to respond to medical-necessity requests.” After labs get a number of denials or requests for more medical information, they often need to begin educating those physicians who have ordered tests incorrectly.

Why Labs Don’t Get Paid

“In these educational efforts, the labs tell the doctors that ultimately, the physicians are responsible for ordering the tests, but there are guidelines that health plans and Medicare have put in place and, if physicians don’t follow those guidelines when ordering, labs don’t get paid,” he said.

“Since 2016, the increased attention that health plans place on labs using ICD-10 has been building each year,” Fetter said. “In 2019, for example, we’re seeing coverage narrow significantly for even routine clinical laboratory testing, compared with what payers allowed in the past. We also see narrower coverage for certain tests for infectious disease and many molecular tests.

“The molecular tests involve different areas of pathology such as molecular-based cytogenetics testing, next-generation sequencing, and proteomics, among others,” he added. “In that area, we see narrowing coverage where we didn’t see such narrow coverage before.

“For example, let’s say that, in the past, a physician would send a specimen out to a pathologist for a review of what the physician thought was a malignant neoplasm of the lung,” Fetter said. “Today, health insurers have much more specific information with ICD-10 and they can ask for more detail on that specimen. Insurers use that detail to establish additional coverage criteria.

“Additional coverage criteria could mean a patient needs to have failed on another diagnostic test or a procedure in the last number of weeks or months,” he added. “What ends up happening is that the insurer pays for the test because the ICD-10 CPT code matches the test request.

“But then the insurer uses retrospective requests on these cases to see if the underlying clinical information supports the clinical indications for coverage,” he said. “If the physician submits that information, it may show that the patient didn’t qualify for the test. In many cases, this is more of an issue with how the physician documents the test order, rather than the patient not meeting the criteria for coverage.

“Based on this review, the health insurer will seek to recoup what it paid for the test,” he noted. Also, if the physician fails to provide the documentation, the insurer will seek recoupment.”

About 20% of all tests are being denied coverage under ICD-10, even though health insurers paid for those tests when labs used ICD-9 codes, Fetter commented. “The changes in how payers reimburse labs mean that labs should think about holding a reserve of about 20% or so, in case health insurers decide to recoup what they pay.”

Although, to date, Fetter has seen evidence only that Humana has been seeking to recoup funds for denied tests, other insurers may do so as well, Fetter added.

Contact Kyle Fetter at kfetter@xifin.com; Ann Lambrix at alambrix@vachette-pathology.com.

Labs Can Respond to Insurers’ Demands

FOR CLINICAL LABORATORIES FACING INCREASED CLAIM REJECTIONS, the best way to respond is to fight back aggressively, said XIFIN’s Kyle Fetter.

Labs could fight back by monitoring payments and denials closely and by providing as much information to support medical necessity for testing as possible, suggested Fetter and other consultants. Also, labs need to continue to invest in systems to monitor payments, he said.

Ann Lambrix, Vice President of Client Services at Vachette Pathology, agreed that labs need more data on every test for every patient. “The problem for labs is that much of the diagnosis information needed to support a lab test must come from the ordering physician,” she said. “Consequently, labs are hindered by a lack of complete documentation to support the diagnosis code and so they don’t always have the most accurate information on the patient.

“It is essential for all ordering physicians to provide that information to labs because, when labs get denials, those denials are based on someone else’s information,” she added.

For rejected claims, labs need to decide how much to invest in fighting each rejection, she said. “If the rejected claim is for a $6 test, that’s a much easier decision to make than if the rejected claim is for a $600 test,” noted Lambrix.

“If the ordering physician is not providing the necessary information from the patient’s history, for example, then the lab won’t know how to submit that bill correctly,” she said.

“Therefore, that lab test claim may go unpaid. Then, the lab needs to decide how much effort to invest in getting the ordering physician to provide more accurate diagnosis information. But too often, labs just don’t have the staff to do that because of the large volume of lab test claims.”


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