Put your money where your money is:
choosing the right billing/AR system

July 2007
Feature Story

Selecting the best billing system for your laboratory is not a black-and-white process, but it can mean the difference between operating in the black or operating in the red. To this end, CAP TODAY asked billing system vendors to weigh in on the value of stand-alone versus integrated systems and how pathology practices can determine if their system lets them achieve maximum profitability. Here’s what they had to say.

CAP TODAY: What are the pros and cons of purchasing a stand-alone billing and accounts receivable system versus an integrated system?

Janet Chennault, MT(ASCP), vice president, Schuyler House, Valencia, Calif.: The advantages of a stand-alone system versus an integrated system depend on the product’s ability to receive data and manage the output.

With regard to data input, a stand-alone system that is seamlessly interfaced with a laboratory information system is equivalent to an integrated system. On the flip side, an LIS that has an integrated billing system that directly outputs to Medicare, Medicaid, insurance companies, and billing consolidators and has sophisticated accounts receivable management is equivalent to a traditional stand-alone billing system.

Stand-alone billing systems traditionally required laborious manual entry of claim information, while integrated billing systems offered primitive output and auditing capabilities. These distinctions largely began to wane with the industry standardization of interfaces to the HL7 format, eliminating the need for manual data entry for stand-alone systems, and with the strengthening of capabilities for LIS billing systems. The latter resulted in direct output to payers and accounts receivable analysis in integrated systems.

The question, therefore, shifts from whether a system is stand alone or integrated to whether it eliminates such tasks as double entry of data and can bill directly to payers and provide accounts receivable information.

It’s not the label of stand alone or integrated that matters, but rather your billing system’s ability to accomplish specific tasks.

Stan Gordon, president, Cortex Medical Management Systems, Seattle, Wash.: An integrated system provides optimum flexibility in determining specimen and data process workflow, which saves expensive labor time and expedites the reimbursement process. The ability to enter or correct patient demographic information and verify insurance information, either at order entry or as the specimen is processed and reported, can reduce the time required for billing staff to submit a claim for payment.

An integrated system also eliminates redundancy and data errors. An address change need only be entered once—either in the lab/pathology module or billing module, but not in both, as an integrated system shares common files. The process of adding or updating clinicians and insurance payers need only be handled once as well. Furthermore, an integrated system shares dictionary and reference files, which makes ongoing verification of data integrity and maintenance easier to manage.

A laboratory that is considering installing two systems should analyze its workflow issues and interfacing capabilities. Is the lab/ pathology system or the billing system the master? Where in the workflow process do you update and change such information as address and insurance, and which staff members are responsible for handling this task? An integrated system allows for immediate updates, while interfaces may require a batch-mode process.

Jim Schroeder, director of product development, MediSolution, Mesa, Ariz.: It’s important to understand what an integrated system means in today’s market. Many vendors are demonstrating various levels of integration, some more seamless than others. A truly integrated system shares tables across each application, does not duplicate data, and does not transfer data from one table or area to another. That said, there are few, if any, vendors who provide truly integrated systems.

Unlike a typical integrated system, a stand-alone, or best-of-breed, billing A/R system will meet all of your requirements. Whether you acquire a new company or a new line of business or add additional services, most best-of-breed systems can be reconfigured to minimize downtime and maximize productivity.

Furthermore, vendors who provide stand-alone billing solutions can focus more of their attention on developing a full-featured billing A/R system than can vendors of integrated systems.

CAP TODAY: How can a practice determine if its billing and accounts receivable system lets it achieve maximum profitability?

Jim Schroeder (MediSolution): There are a number of key design features in a modern billing A/R system that will help a company maximize its profitability. The system should be able to do the following:

Automatically bill for all services without requiring manual entry or intervention. A rules-based engine should bill for all services allowed by each payer’s contract without manual intervention or entry. Only those charges or claims that fail a specific edit should be reviewed manually.
Bill all payers, whether primary, secondary, client, or patient, without additional effort and automatically cycle to secondary, tertiary, and patient billing.
Automatically check to determine that each claim passes the CCI (Correct Coding Initiative) edit rules or other payer-specific billing rules, such as medical necessity.
Calculate net payment rates to ensure proper reimbursements, then capture and create alerts when underpayment occurs.
Provide a full-featured, automated collections process so account collections can be handled in-house, without the need for outside collection agencies.

Stan Gordon (Cortex): Billing and accounts receivable, also known as revenue cycle management, systems can be used to monitor and achieve maximum revenue levels. You must be able to answer the question, “How can I tell how many days it takes to collect the cash for services performed?” It should be easy for you to obtain the number of days in accounts receivable. Effective laboratories average 30 to 50 days—obviously, the lower the number of days the better.

To determine if you are being paid correctly, review on a quarterly basis reports that compare by insurance company and CPT (Current Procedural Terminology) code the amount billed and the amount paid. Denials management, or reviewing why claims were denied, is also an important step. If a significant number of claims are denied because patients do not have insurance coverage, then staff probably should re-examine the workflow process. You should be able to verify insurance coverage or check eligibility before sending a claim.

A billing system that is part of a larger accounting system, such as Microsoft Dynamics SL, which includes general ledger, accounts payable, payroll, and inventory modules, can combine billing and cost data to achieve maximum profitability.

Janet Chennault (Schuyler House): You can determine the effectiveness of the system you own by assessing the time involved in production billing, tasks that need to be performed external to the system, and cost of errors.

Production billing refers to all tasks that occur from the moment your accession becomes billable. How long does it take for you to review the claim, transmit it to a payer electronically or on paper, and receive payment and post remittance?

Tasks external to the system refers to such actions as producing reports, auditing, and accounting. For example, if you spend hours each week typing into an Excel spreadsheet to produce reports, then you must add that time into the cost of running your billing system. Ask yourself, “How effectively does my billing system produce the reports I need to run my practice?”

Cost of errors involves failing to bill a claim automatically or submitting incorrect or illegal claims. Failure to bill a claim because of lack of information, such as a missing ICD-9 code, happens routinely. Such cases should be easy to find and correct. Submitting incorrect information on a claim makes you vulnerable to liability and fines. Your system should prohibit duplicate billing for a procedure, incorrect ICD-9/ CPT crosswalk, and billing for a procedure that was not performed.

Production billing time, auditing and accounting, and errors and omissions factor into the cost of your laboratory services as much as does the cost of reagents.