Risk, compliance, pay—a juggling act for labs

Not all of her clients are convinced. They ask her, Who cares about this? Will the payer ever find out? Will it really matter?

It does matter, says Wood. Payers do find out. And those who care—it may not be who you think—are driven folks.

She should know. When the situation has come up, “Many times I actually represent both labs,” she said. “I’ll have both of them calling me to complain about the other side, so I get to hear both sides of the story.” The story boils down to competitiveness and sales reps who lose compensation because of sketchy marketing and billing techniques. Don’t kid yourself, Wood said: Sales reps who lose compensation are motivated to “squeal on you.”

“That’s primarily where the complaints are coming from—sales and marketing people who are losing the work based upon a competitor’s billing activities,” she said.

Health savings accounts present their own enigmas. Oftentimes patients will want to negotiate after the third-party administrator has paid the bill. Wood is sympathetic: “These are their dollars.” But even if you agree to reduce the amount, not all third-party administrators will take the HSA balance back from the lab once the bill has been paid, arguing that the books have been closed. That leaves the labs to return the money directly to the patient.

Again, labs need to steer clear of collusion. If you agree to reduce the amount, send a letter to the patient and copy the third-party administrator, letting everyone know that you’ve reduced the price and that you suggest the patient return the money to the HSA. That way the lab is on record that the HSA won’t accept the balance. “Just a way to protect yourself there,” Wood said.

Wood had no shortage of billing strategies to help labs, which she readily shared.

Labs can, for instance, notify payers in advance that they don’t intend to bill patients the copay amounts or that they intend to cap the amount they bill patients.

It’s not a sure bet. It’s possible, she said, that some payers would respond by reducing the amount they pay the lab. (In fact, several of her clients explained their patient caps on their Web sites—and a large payer responded by saying it considered the entire charge, and therefore payment, to be reduced accordingly. With the attached printouts from the Web site, she said, echoing her earlier warning, it was “very difficult to argue against that one.”)

But it’s also possible that such a letter will get lost in a pile of paperwork. The lab at least has some documentation that it advised the payer. If you go this route, send the letter via certified mail, with return receipt requested. Wood says labs in New Jersey are starting to adopt this strategy, and so far payers have been quiescent.

What about billing strategies when you can’t get in-network?

Sharing success stories from her clients—but acknowledging they won’t work in every scenario—Wood offered the following guidance.

One option: Perhaps you know a lab or referring clinicians who are in-network. Would it be OK to sell or subcontract the testing to the in-network lab, which would then bill for the work?

“Maybe,” said Wood, who concedes that clients despise answers that contain the phrase, “It depends.” But it’s worth parsing the details, she said.

First, does your state prohibit client billing or restrict selling of lab services? Many states won’t allow physicians to buy and rebill laboratory testing, and they vary on whether their laws limit clinical lab work or anatomic pathology; moreover, some limit only professional AP, others global AP. “Some are antimarkup, some are disclosure states.” State laws, she said, are a “mishmash.”

It’s not just the labs that are bound by these laws. Prospective purchasers might be constrained as well, depending on who the purchaser is. Most state restrictions exempt hospitals, Wood said. Many exempt other independent laboratories. But not all states do. And physicians often aren’t exempt. Prospective purchasers also need to consider state laws regarding Medicaid.

Payers matter, too. In the case of the Medicare Advantage Plan, default Medicare rules apply—and those rules don’t permit physicians to buy Medicare clinical lab testing and rebill it.

Look at your payer contractors as well. There’s a good chance that if you’re an in-network lab, your contract doesn’t allow you to subcontract work without the payer’s permission.

True, independent labs have purchased work from others and rebilled private payers for decades, “and with a few exceptions, no one’s cared.” But Wood has started to see these laissez-faire attitudes becoming less laissez, as evidenced by a trickle of, “It has come to our attention. . . .” letters now coming to her clients. The words “in violation of your contract” aren’t far behind. And nine times out of 10, she said, the contract in question does indeed prohibit this type of billing. Such cases are cropping up in Florida, New York, California, and New Jersey.

How are payers finding out? As with the discounted deductibles, disgruntled sales reps appear to be the ones sounding the alarm. And again, the billing laboratory risks having those dollars recouped. Labs need to be aware that if payers audit claims, it’s easy to determine, through the CLIA number on the report, if the testing was done elsewhere, she added.

If all these caveats sound petrifying, there’s a reason. Wood, being an attorney, doesn’t mind pointing out dire possibilities. But subcontracting arrangements aren’t forbidden. Just be aware of—and, of course, avoid—the aforementioned snares, she said.

Not bad advice overall. Labs need to compete and accept risk, but not to the point of acting foolishly. After all, no one wants to start getting scary letters in the mail.

Karen Titus is CAP TODAY contributing editor and co-managing editor.