Billing, business, win, lose: roundtable dives in

April 2021—A look at laboratories post-pandemic was at the heart of a revenue- and billing-focused roundtable led by CAP TODAY publisher Bob McGonnagle on Feb. 10.

With McGonnagle were Mick Raich, Vachette Pathology; Bob Dowd, NovoPath; Kwami Edwards, Telcor; Kyle Fetter, Xifin; and Tom Scheanwald and Matt Zaborski, APS Medical Billing. They talked about pathology groups investing strategically and for long-term efficiencies, a return to consolidation, and what residents and new-in-practice pathologists should know. “Specialize, and be the tip of the spear,” Raich advises. Their full conversation follows.

The CAP TODAY guide to billing/accounts receivable/revenue cycle management systems begins here.

Kyle Fetter, we know how COVID-19 has affected laboratories clinically. Tell us what financial impact it has had, the billing dilemmas, and what COVID has meant for this segment you’re all part of.
Kyle Fetter, chief operating officer, Xifin: When COVID kicked in last year, the drop-off in pathology specimens processed through us was 40 to 60 percent, and that was the initial dip for many of our pathology groups large and small. Many ramped back up slowly to a normal state. In some cases, backlogs were received at later points that created volume fluctuations in the summer. Many were in the 90 to 95 percent range in quarter four. Eventually some of the pathology groups with molecular instrumentation were doing almost as much COVID testing from a revenue perspective as they were doing pathology work. It became a huge part of all of the clinical laboratory business in general.

For the labs that are regional dominant, testing across the board rose by 100 percent, so COVID is making up the majority of their volume. For most laboratories we work with, what they had to do in terms of capital expenditure to get that volume was not cheap. They invested heavily with the knowledge that it would go away and they’d probably be left with an asset that was not depreciated at that point.

Bob Dowd, is this more or less in sync with your experience at NovoPath?
Bob Dowd, VP of strategic accounts development, NovoPath: Yes, that is exactly right. The AP work volume dropped and molecular work increased, and our position was aligned perfectly to take that additional data and marry it up with results to go with the billing information.

A lot of our clients took advantage of our capabilities with whole slide imaging, working remotely. We’ve taken it to the next level.

Matt Zaborski, we have had a volume rebound, but did we completely straighten out the dip in income that spanned three or four months, including not only anatomic pathology volume but also some of the other routine laboratory tests, which fell off the map a little?
Matt Zaborski, assistant VP of sales and marketing, APS Medical Billing: The dip we saw depended on the area. In Chicago, for example, we saw as much as an 80 percent reduction in anatomic pathology, but 40 to 80 percent was where most of our clients fell on the AP side. Most clients have returned to near normal, but I would venture to say most clients have not received full monthly volumes or ramped back up to their prior levels, and I don’t think most got any sort of catch-up, in essence. It’s not like we had double or triple AP volumes in July, August, and September to make up for lower volumes in March through May.

Clients that bill a professional component of clinical pathology mitigated the losses. This includes clients that were previously not billing for certain hospital locations but started to work with their hospital administration to clear the way to start billing that revenue that was otherwise being left on the table.

Mick, you have a wide-ranging view of this slice of life. What are your comments about COVID as it relates to the volumes and revenues being replaced, and some of the extraordinary COVID payments that were out there and what effect they may have as they winnow their way through in the next few months?
Mick Raich, founder, Vachette Pathology: The big question here will be when does the COVID payment change. We saw our pathology groups go up and down, and most are close to normal again. Lab clients went from billing 100 COVID tests a week to 1,000 COVID tests a week. A lot of them are at 5,000 COVID tests a week and still struggling to handle some of the gray areas in the billing world—whether you can bill screening tests or a collection fee. There is still ambiguity on how those things are paid.

The other big question is, at what point does Medicare say, “We’re going to lower the fee for this”? I am looking at July Medicare recommendations; will they come out and lower the high-volume tests to $35 versus $75, with the extra incentive for turnaround now, so you get an extra $25? Will they take that away? At what point do you stop following the money? Does this no longer become profitable, and do we see these tests drop off?

On the other side of that coin is the possibility that a COVID test might be required for domestic travel. If that happens, we will have a lab at an airport, and if so, we would still be ordering 100 million tests or more a year.

Kwami Edwards, what additional comments do you have on COVID?
Kwami Edwards, chief customer officer, Telcor: Labs that were doing 2,000 requisitions a day and then went to, say, 15,000 because they took on a large portion of COVID testing in their region had their ability to absorb that volume pressure tested. Even if they’ve made the investment, it is getting all the necessary information related to those patients, dealing with uninsured patients, having good processes, and so much more. It has changed the landscape and the question is, at what point does that volume dissipate?

We’ve seen a lot of new players set up COVID testing labs virtually overnight, and I would expect to see them begin to fold their tents as soon as the reimbursement hits the more typical laboratory reimbursement level. Would you agree?
Kyle Fetter (Xifin): That’s right. They’ll fold their tent voluntarily or someone else will chase them out of business, and there are a lot of regulatory things that we think people are looking at now, particularly the OIG. Some of the labs that popped up out of nowhere may not survive that. We saw that in toxicology several years ago, and we don’t see a reason why we will not see that here.

Bob Dowd, once we get back to normalcy, and I realize that’s a squishy concept in an ever-evolving story, do you see long-term consequences for laboratories and their financial health that might arise out of the effects of COVID?
Bob Dowd (NovoPath): Yes, I do. There were a lot of shortcuts given to allow all these other labs to pop up. The inspections, the diligence, may not have been there. Long term, as some of those labs fall out, people have tried to get more efficient on the front end.

Labs that qualified for the Payroll Protection Program and kept people employed might have had people doing other things to keep the staff so they did not have to go back out and recruit accessioners all over again. They positioned themselves well as they started picking up additional specimens and getting the molecular machines online to do COVID testing.

So long term, yes, we will find that efficiencies and processes that we have had to use in this emergency will be expanded. We’ll see a lot of front-end automation, a lot of things that we’re doing in the artificial intelligence space with structured input, with structured output, and working with people on that to try to reduce that handling. The investment for us on the AI machine learning piece will help all clients streamline, so you will see a lot of it. The work environment for all industries is changing.

Tom Scheanwald, you have seen the ups and downs in the lab business for a long time. Do you have a comment about what some of the long-term effects of COVID might be on the business?
Tom Scheanwald, president and chief operating officer, APS Medical Billing: Long term, we will see more clarification by payers on what they will pay for COVID testing. Right now, anyone involved in that can see that 100 percent of the insurance companies are not paying for COVID testing for one reason or another. The payers will, once we get through this period, establish medical necessity guidelines, as they do for other lab tests, and those will be followed in terms of their payment. And, as Mick said, a lot depends on the government and what it requires for COVID testing just to travel in this country. That will define things as well.

Some of the new legislation on surprise billing will better define for the labs clearer billing guidelines. Some of the laws will require a quick turnaround time from the time a test is run or service is provided and when it is billed to the insurance company or patient. And then once a claim has been filed to the insurance company, strict turnaround times are being proposed for insurers to adjudicate the claim. So a lot of things are going to change how the industry operates and we’ll see things pick up faster.

Mick Raich, what do you make of this line of discussion? Do you have your crystal ball ready?
Mick Raich (Vachette): The labs that will do best at this are the ones that follow the business model of Nucor Steel. Nucor Steel is a classic business model where in downtimes, they don’t lay people off. They retrench, they find a way to make a little profit, they save up money. Then during the uptimes they make two or three times margins. We’re going to see the same thing here.

Some labs will save all their COVID money, and their marketing, sales, service, and product will be five times better than those of some of the other people who take the money and run. And that is going to determine three or four years from now who is left in this marketplace and who isn’t.

That’s a nice segue to another topic I want to raise, and maybe the introduction there is the news about UnitedHealth acquiring Change Healthcare. That is to say, this is a question of ever-increasing consolidations, in part to answer those very pressures. Kyle Fetter, what do you make of the announcement, and do you see one effect here being increasing consolidation and even integration of many different functions?
Kyle Fetter (Xifin): There is a lot of consolidation in general in many health care IT areas. UnitedHealthcare through Optum for many years has been becoming a health care IT company. It has been a focus for them. When the Affordable Care Act was passed, the writing seemed to be on the wall for some commercial insurance carriers—they felt they needed to become more IT oriented and diversify their product portfolios. UnitedHealthcare via Optum has done that more than anyone.

It’s an interesting move to get into a business so heavily focused on clearinghouse, and some of the different things they’re focused on that make up the majority of their business, because Optum already has a fairly large clearinghouse business as well. So they’re trying to consolidate, and in general, to pick something up like that at that size for the multiple they picked it up is not unheard of in a market like this.

Whether it’s a surprise or not, the bigger problem you get with some of these larger companies is service deficits and things like that. They’re conglomerates. How do those things work in terms of engagement, in markets like pathology and complex clinical laboratories, specialty laboratories, and things like that? The historical answer has been not that well because it’s not that big a part of their business.

There is going to be in many ways fantastic technical infrastructure left behind by the pandemic—interchanges, interoperability, ability to deliver patient information directly, ability to handle things from a payment perspective digitally. All of it will be left behind for the laboratory industry to better deliver care to physicians, so that’s going to position diagnostic players who leverage technology and interconnectivity very well. Optum’s acquisition of Change seemingly makes strategic sense, but Optum’s focus has been on large, nonspecialized providers, not the groups we all cater to, like pathology and diagnostics.

Matt Zaborski, what are the thoughts of the groups that you and others on this call cater to as they look into the future? Are they worried about the need for increasing consolidation of lab providers, pathology providers?
Matt Zaborski (APS Medical): I don’t hear our current client base concerned that they need to consolidate based off this. Most of those that have moved over from Change Healthcare in recent years indicated they were pretty happy they made the change before this happened. They don’t feel it’s in their best interest for a company that owns a large national insurer to be in charge of their revenue cycle also. I have leaned more toward Kyle’s explanation—I think they’re a little more interested in pinning down the clearinghouse industry to begin with and growing that model of business. I am not sure where it will lead for revenue cycle management.

Bob Dowd, would you like to comment on this line of thought?
Bob Dowd (NovoPath): Whenever we see the combinations of large outfits merging disparate systems, it’s never seamless, so there will be issues. And United, as it gets bigger and as the big dog, starts to guide other things that are happening. It was one of the first companies to issue new coding for some of the molecular testing and some of the requirements around it and prior authorization. So they’re going to be at the forefront of doing that. They’re going to try to meld the industry somewhat.