Billing headwinds grow stronger for labs

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.