April 2024—In billing for pathology and laboratory services, the hurdles are only getting higher. Narrow networks, prior authorizations, claims denials. Payers “have deeper pockets and figure they can outlast us,” said Joe Saad, MD, chair of the CAP Council on Government and Professional Affairs, in a Feb. 14 roundtable led online by CAP TODAY publisher Bob McGonnagle.
He and others talked about AI, digital pathology codes and molecular Z-Codes, biomarker testing, and unity within the laboratory community.
CAP TODAY’s guide to billing/accounts receivable/RCM systems begins here.
During last year’s roundtable on billing systems we talked about three principal items that were top of mind: the No Surprises Act, the increase in demand for prior authorizations, and denial of payments. Joe Saad, are those still the most important items you think about when you think about pathology and laboratory billing?
Joe Saad, MD, chairman of pathology, director of anatomic pathology, president of medical staff, and medical director of laboratory, Methodist Health System and Methodist Dallas Medical Center: Yes. They’re interrelated because the No Surprises Act has emboldened many payers to pull certain tricks on us, like narrowing the networks, denying claims, and making us jump through hoops with laboratory benefit managers, prior authorization, et cetera. Payers are in the driver’s seat. They can challenge us, and if we don’t like it they don’t mind if we go out of network, which gives them the upper hand when it comes to payment. They know it’s time-consuming, laborious, and costly if we want to contest it, go through the negotiation period, and go to arbitration. They have deeper pockets and figure they can outlast us.
It’s important to press network adequacy laws in various states to limit their ability to sidestep us with inadequate networks, invoke the No Surprises Act, and challenge us to go out of network.
We talked last year too about the staffing shortages in laboratories and laboratory operations, such that there’s a disproportionate number of people wanting to deny versus people contesting denials. Sarah Stewart, are you seeing an increase in denials in the past year?
Sarah Stewart, vice president of revenue cycle services, Telcor: Yes. We continue to see more and more denials for prior authorization because of the lab being out of network with a payer and not allowed to get a prior authorization unless it’s in network. A lab we work with has encountered that with a Medicaid provider—you have to be in network to get authorization and the only way to get paid is to have the authorization, so the services they’re providing for those Medicaid patients will not be reimbursed.
That sounds like the ultimate catch-22.
Sarah Stewart (Telcor): Yes. And the network is closed, so they’re not bringing any more labs in network.
Harley Ross, give us a comment on current conditions.
Harley Ross, chief commercial officer, XiFin: This will continue to be a pendulum that we see move with the payers. They’ll move to the front end on the prior authorization, we’ll combat the prior authorization, and then we’re seeing more medical necessity on the back side. We’ll never have pockets as deep as those of the payers, so the labor shortage will come down to automation and figuring out a way to do as much as possible with workflow automation so we can focus on exceptions. You’re going to need to be in it for the long haul with the payers as their behavior changes.
I agree with Dr. Saad and Sarah about the trends we’re seeing, so we’re doubling down on focusing on automation to help our labs respond to these challenges.
Rebecca Simmons, is this familiar to you and your daily worries as an operating officer?
Rebecca Simmons, BSCT(ASCP), MBA, chief operating officer, NorDx and MaineHealth: It is. We’ve seen a large uptick in the requirement for preauthorizations, specifically for women’s health and genetic testing for prenatal care.
In Maine we have a population of patients who don’t have transportation, so we draw the blood at their visits, and preauthorizations require you to obtain authorization before collecting the specimen. We’re experiencing a disconnect—we’re not able to get the preauthorization in a timely manner and it turns into a billing nightmare.
I thought it was gloomy enough last year, but this sounds awful. Tom Scheanwald, do you have any cheerful news for our readers?
Tom Scheanwald, president and chief operating officer, APS Medical Billing: The billing situation is more challenging this year. One problem is that insurance companies are emboldened by the No Surprises Act. For example, it’s difficult negotiating a good fee schedule with payers today. A good contract today from a commercial payer means payment levels at or less than Medicare rates.
The prior authorization situation hasn’t changed much so far this year. However, there is hope on the horizon as insurance companies are beginning to streamline this process.
Payment denials continue to be a big problem. This has resulted in payment times being lengthened because you need to file primary, secondary, and tertiary denials. Denials can be challenged online, on a form, or over the phone, but in some cases you can only do one appeal at a time. This is a problem when following up on a high volume of denied laboratory claims.
Joe Saad, how is this affecting the overall market and the decisions laboratories and pathologists make about their future?
Dr. Saad (Methodist Health): It is driving a degree of consolidation in laboratories, although our practice would like to remain independent for as long as possible. The smaller practices can’t make it on their own and are having to consolidate or be bought out. Another worrisome trend is the private equity that’s coming into medicine in general, but the laboratory and pathology community isn’t immune to it.
Another trick payers have up their sleeves is regarding the Palmetto Z-Codes for molecular diagnostics and genetic codes. About 25 states are covered by the Z-Codes. Private insurers are starting to roll this out across the board and require that onerous codes be included on pathology reports to have the potential to get paid; it doesn’t guarantee payment. The Z-Codes are challenging and time-consuming to get. If you’re a hospital that uses multiple reference labs, you need to match your Z-Code to that of the reference lab you’re using. It’s getting very complicated and they’re throwing up obstacles in our ability to get paid for our legitimate work.
Rebecca Simmons (NorDx): The Z-Codes and the new digital pathology T codes—the add-ons to the 88 codes—have to be matched up appropriately, which adds an additional constraint.
Harley Ross, we hear a lot about automation and about AI in billing and collection. I worry the AI may be on the side of the payers much more so than the providers. What steps is XiFin taking to help providers with billing and collection?
Harley Ross (XiFin): We look at this as a four-pronged approach in terms of what the finance, revenue cycle, market access, and sales client service teams need. We first think about what we can do for the laboratory on the client service sales side to lessen the friction for clinicians and patients. The No Surprises Act puts the onus on us to enable this through extensibility and interoperability, whether it’s through application programming interfaces or around point of service.
We need to be able to flag for prior authorization, give a good faith estimate, work through a clean patient demographic and insurance information, and do it in a timely manner. Other provider types, such as the pharmacy, are used to this. You go into a pharmacy, and in 20 minutes your drug is dispensed. There are deep pockets in biopharma so they were able to accomplish that for the patient experience. They’ve built out many types of networks, so how do we better enable the lab industry in the same manner, because the points the other panelists have raised are valid—about closed networks, inconsistent and often unfair payer behavior, and the payers’ ability to leverage AI to stay ahead of providers.
We’re using AI in our software to help with automation in the middle and back end of the revenue cycle, but it still comes down to the payer trends analysis, the business intelligence and analytics aspect of reporting. We’re never going to be able to keep up with the payers because they have deeper pockets. But the question is, how quickly can the lab see the behavior changing and operationalize a process to address it? We’re focusing on how we can enable labs’ strategic growth and ability to continually move up and to the right in spite of the many headwinds they face here.
Sarah Stewart, is Telcor doing similar things, or something that hasn’t been mentioned?
Sarah Stewart (Telcor): Telcor is looking at many of the same things XiFin is because we’re working with similar customers. How we can get information up front and sooner and get it back to the customer and its clients to flag for prior authorization and also do the insurance discovery and good faith estimate—all so that when the claim goes through, there aren’t barriers or denials for simpler things and there’s time to deal with the medical necessity and other parts.
Smaller customers, startup labs, are coming to us for billing services. They have market access but don’t have staff who are experts in understanding what payers are looking for. They’re coming to us to have a team provide payer information and spot payer trends and issues even if they have only a handful of claims with those payers.
So scale is still an important part of the solution when it comes to billing.
Sarah Stewart (Telcor): Yes. Even if they’re not consolidating their businesses, they’re consolidating their billing. They’re coming to a team that can give them more knowledge rather than having one billing person handle their claims and try to understand prior authorization, Z-Codes, P codes, et cetera.
Tom Scheanwald, I’m struck by how tough it is to bill and get paid. Is this a universal problem?
Tom Scheanwald (APS Medical): It’s a problem but also an opportunity. You have to break it down into its components and start at the beginning of the revenue cycle. You have to look at it strategically and say, We have a learning curve in educating our referring clients because that’s where much of the data problems start. The responsibility for prior authorization, providing diagnoses that meet medical necessity, and validating a patient’s address and current insurance plan needs to be continually worked on. If bad data is being sent to us from the referring clients, then we’re billing bad data. There’s too much time wasted on maintaining and validating this information, which ultimately results in delayed payment.
Harley Ross (XiFin): We all know we’re not going to change payer behavior, but AI can help from a billing perspective by identifying the claims most likely to get paid and prioritizing them to be worked first, scrubbing for the dirty data that comes into the lab, and making sure we’re getting ahead of the claim and payer policy requirements to meet timely filing deadlines. We’re focusing on using AI to help ensure we get these types of claims paid in a consistent, timely manner and these issues don’t prevent labs from getting the cash pull through they expect and minimizing their bad debt.
We try hard to get work from someone who’s going to order work from us, so once we get it, we’re perhaps reluctant to say, Now that we have your business, here are 25 rules we think you need to adopt to help us get paid. Rebecca Simmons, that could lead to a bit of tension in the relationship, couldn’t it?
Rebecca Simmons (NorDx): Yes. We want them to choose our laboratory services, so we want to make it easy for them to do business with us. AI is important because it learns as it goes, versus automation. The landscape for billing requirements changes so frequently—we get new CPT codes every year, new bundles and add-on codes. AI can assist us in acquiring the appropriate billing data, which saves us from having to go back to the client and say, Do business with us, but by the way, you’re not doing this right and we can’t bill for it.
Joe Saad, the molecular Z-Codes are well known to be a nightmare, but the digital pathology codes are new. We’re urging people to use them even though they’re not necessarily pulling payments through. Can you expand on that?
Dr. Saad (Methodist Health): We now have 43 digital pathology codes—13 as of January 1, 2023 and another 30 as of January 1, 2024. They are category three CPT codes, unlike Z-Codes, which were developed independently of the CPT process. These add-on codes are meant to be added on one-on-one to the base service. For example, an 88305 has a certain add-on code for digital. We need people to use these if they’re doing digital pathology for primary sign-out only; they’re not eligible if you’re using them for teaching or archiving or anything else. Even though they’re currently not paid—they haven’t been through the RUC [American Medical Association/Specialty Society Relative Value Scale Update Committee] process to be valued—we need to demonstrate widespread use of this technology to move them to category one codes that can then be valued and put on the fee schedule to be paid. I can’t stress this enough: It is important for people who are doing digital pathology for primary sign-out to use these codes because we need to demonstrate widespread use.
Harley Ross, are your customers up to speed on the use of digital pathology codes?
Harley Ross (XiFin): There is still a disconnect. I’ll tie it back to health equity and access because we’re seeing a rural-versus-urban disconnect. Some larger systems are still putting their nose up to digital pathology because it requires such an investment, and there isn’t a pathology workforce issue in larger metropolitan areas. We are seeing potentially more adoption in rural areas, for equity and access purposes. Younger pathologists especially are willing to work the hours and read slides and are compensated accordingly.
It’s a multifaceted issue because of the cost. We’ve heard comments about how the manufacturing side can get creative and participate in a compliant way to reduce the capital expense and package it such that it’s more economically feasible. We are seeing laboratories that are vested in digital pathology bill out with these codes. We’ve seen some Medicare administrative contractors paying, but some have reconsidered because it is tier three versus tier one. We need the digital pathology codes billed so payers can see the utility and we can advocate for reimbursement.
The lab industry needs to come together at a system level from an equity and access perspective to drive the need for this, to create the opportunity in the right way, especially for those who are unserved and underserved in our health care deserts.
Matt Zaborski, can you comment on the point that we need to get everyone on the same page and have a universal approach?
Matt Zaborski, vice president of sales and marketing, APS Medical Billing: Reporting the codes and driving reimbursement is key to the overall adoption of digital pathology. It helps with labor issues and the pathologist shortage. Some health systems are not seeing what they consider a return on investment. That’s a major barrier.
You’re starting to see people take advantage of it with the nighthawk radiology-type models, where they are putting in digital scanners, even drumming up business for labs, and then reading and getting paid per click. There’s a lot of opportunity but it’s going to need the industry’s support as a whole if it’s going to do all the good it can.
Sarah Stewart, can you comment on digital pathology and its codes?
Sarah Stewart (Telcor): Customers are looking into it. There are barriers to getting in, such as the cost to set up. The billing piece isn’t hard, but getting the lab willing to invest and see the return on it is.
There have been presentations at the last few ASCO meetings on the disparity in patients receiving proper biomarker testing for their conditions. There was a thesis that academic medical centers did a good job and communities didn’t, but there’s emerging evidence that it’s a question of being willing to go through the prior authorization maze to justify this testing to land the plane on behalf of the patient. Joe Saad, do you run into this?
Dr. Saad (Methodist Health): It’s an issue for some underserved areas, and not necessarily rural—it can be urban areas as well. It is a problem to get access to biomarker testing and therefore the appropriate precision therapies. Adding additional barriers like Z-Codes, for example, is only going to exacerbate the problem multifold because it is onerous already to jump through the hoops of prior authorization. Having additional hoops and expenses will make it even more difficult and increase the gap in access and equity.
Tom Scheanwald (APS Medical): We have a situation where these tests are needed and the technology and medicine are there, but getting it delivered to rural areas in this country is pretty tough. Unfortunately, there are barriers in how these tests are ordered and paid for—they’re expensive and reimbursement is necessary.
We have clients who are using a digital pathology platform. These tests are coded as an add-on code and not with a CPT modifier and are getting paid. Our clients are interested in understanding if this new technology will pay for itself.
Harley Ross, some health systems have talked about dropping Medicare Advantage. Does that play into the world of billing? Those plans have a reputation of being pretty ferocious in terms of prior authorizations and payment.
Harley Ross (XiFin): The lab industry doesn’t carry enough weight to be able to dictate that we can potentially say no to Medicare Advantage. That said, and going back to the issue of biomarker testing, it adds another layer of complexity. We have MolDX, but the problem is Medicare Advantage and commercial plans don’t necessarily want to follow it. Then we have biomarker data, and you asked what we do in billing. If the lab is located outside of California but you have a non-MolDX MAC, where do you draw the line? Whether it’s Medicare Advantage in network or out of network, it’s becoming harder not to burden ordering clinicians and patients with their involvement in the decision process. If you decide to take a different billing policy for Medicare Advantage, there are enough labs out there that if you’re not the sole source of a test, you risk losing your clients referring business to you.
This is a hard, strategic discussion that has a domino effect on clients and patients. We, the lab industry, pride ourselves on technological innovation to make sure we can get ahead of cancer, for instance, and get the right type of test to the patient to help with the right treatment at the right time. The financials and the reimbursement associated with these highly advanced tests have become so complex that it’s harder to bill for the test than it is to run the test.
Rebecca Simmons, can you comment from NorDx’s perspective about patients being caught in the middle?
Rebecca Simmons (NorDx): From the laboratory perspective we rely heavily on billing data acquisition, either automation or AI, to not put the patient in the middle. We’re in the business of patient care so we put the patient’s needs first every time. If that means billing it back to the provider or eating that cost, that is our general practice.
It puts us in a tough situation because when we’re looking at being fiscally responsible, we come back to the patient being first.
Joe Saad, do you have a comment on Medicare Advantage? I know a lot of pathologists have felt on the outside when they come up against these types of plans.
Dr. Saad (Methodist Health): As physicians we always put the patient first. We always want to make sure the patient gets the appropriate test so they can get the appropriate treatment, regardless of the financials. The insurance companies know this and take advantage of it because they’re not constrained by ethical considerations, as we are. Their bottom line is money.
Hospital systems, physicians, et cetera, uniformly dislike Medicare Advantage because the margin is much smaller. If I talk about a hospital system, traditional Medicare versus Medicare Advantage, the reimbursement to the hospital is much smaller and there are more hoops to jump through. Unfortunately, it’s an increasing proportion of the Medicare business. It’s probably gone from 20 or 25 percent to 50 percent or more over the past few years. When you look at the advertising, it’s a perfect bait-and-switch opportunity for these companies to make money. They promise free vision and dental, grocery money, and transportation, and patients sign up and then are in for a surprise.
Would anyone like to raise another point?
Matt Zaborski (APS Medical): The Centers for Medicare and Medicaid Services released on Jan-
uary 17 the CMS Interoperability and Prior Authorization Final Rule [CMS-0057-F], which sets guidance and regulation on turnaround times for prior authorizations, so maybe we’re seeing steps in the right direction. It’s only going to regulate government-regulated payers; it’s not a commercial rule.
Going back to getting the patient involved, an example of what we’re up against is that 88360s—a service that has been provided for 15 years plus—are being deemed experimental by Blue Shield of California. They use denial code CO 55 [procedure or treatment is deemed experimental or investigational].
We do those additional studies to stage cancer, identify appropriate treatment, and provide prognosis and recommendations. We’ve been working with the California Society of Pathologists, among others, to try to get Blue Shield to reconsider that denial pattern because patients are not getting paid. The CSP has told us patients have to get involved and appeal.
Pathology and laboratory medicine is a disparate world—there are independent pathology groups, groups integrated into the systems that own them, self-standing laboratories, and others. Is there adequate unity to help solve some of these problems?
Tom Scheanwald (APS Medical): The pendulum has swung back and forth for the past 35 years that I’ve been doing this. There isn’t unity in one direction because providers operate under so many different circumstances and settings. Years ago most of our hospital-based pathologists and radiologists were employed by hospital systems. That became costly for hospitals and they released those physicians from that type of contract and said, “Go out on your own. We’ll contract with you and pay you accordingly, but we’re not going to pay you on a salary basis.” Fast forward to today—there’s a diverse mix of practice settings that pathologists and laboratories operate under. It will continue to be necessary for everyone involved to stay active in their professional organizations and make their voices heard.
Sarah Stewart, what are your comments about the industry as a whole and how it can improve to alleviate these problems?
Sarah Stewart (Telcor): We’ve seen our customers work together on things in the past to make a difference. Trying to band together to fight the payers and the payer rules and regulations that are coming out while keeping your own business and area of expertise is tricky. The more we can pull together, the better, even sharing information about “Are you seeing this, or are you doing this with this or that payer?” We have an active user group that talks about things we’re trying to connect on—What are you seeing? Is it just me, or is it bigger than me? Is there a way around it?
Harley Ross, it seems it would be important to be with a solid vendor and spend time talking to customers of that vendor, correct?
Harley Ross (XiFin): Yes. The alignment isn’t there. We need to be looking to the future, specifically at the FDA’s regulation of laboratory-developed tests. We’re falling on the side of the VALID Act to make sure we have guardrails because the FDA is going back to a half-century-old rule set that will stymie innovation in a way that will cripple the industry.
The problem for the lab industry is we have to fight the payer dynamic but now we’re fighting the regulatory and government dynamic as well. We would not have gotten through the pandemic without laboratories, and yet here we are with this headwind from a regulatory and government perspective. Many of our clients and labs are concerned about where this is going. How do you fund and fight these fronts in the laboratory space?
We have to stand up and have a unified voice. Look how quickly labs pivoted with the FDA when COVID hit. Look at what we can do in a collaborative way. If we don’t get ahead of this, it will hurt the industry in a dramatic way and will hurt patient care.
Joe Saad, what would you like to say about billing and the current state we’re in, in pathology and the laboratory?
Dr. Saad (Methodist Health): The laboratory and pathology community is pretty well aligned on the vast majority of issues when it comes to billing and insurance. We stand together in facing the problems related to the No Surprises Act and prior authorization. Several states have passed bills for biomarkers, et cetera, mandating coverage or reducing barriers to prior authorization. We support the AMA policies on prior authorization, and the CAP is working on a public policy regarding prior authorization.
We’re up against huge barriers and deep pockets in what we have to overcome to be able to provide appropriate patient care. The CAP will continue to work hard and fight for patients, pathologists, and laboratories.