Stop Leaving Money on the Table: A/R Recovery Strategies for High-Volume Reference Labs
The economic model for high-volume reference labs is not like that of other care settings or even clinical labs. A reference lab processes thousands of claims on a daily basis. And a large number of those claims bring relatively low individual reimbursements.
The problem is explicitly more related to small-ticket claims that get denied. Payers deny an amount of under $15 dollars by declaring it the patient's responsibility. Now, the labor required for recovery here often exceeds the denied amount. In addition to this, some claims never get attended as revenue teams deliberately push them to the bottom of the processing queue. All this leads to piled up accounts receivable. And eventually, they altogether stop pursuing these ARs.
But is this the right thing to do?
No it’s not. It is more like leaving money on the table. You are not following up on those accounts just because you do not have better workflows to secure the denied amount without spending a larger amount on rework. If you truly want to protect your profit margins, you must ensure that you have a proactive billing posture, which is possible only with a tech-driven recovery strategy in place.
In this blog, we are going to discuss how you can optimize your A/R recovery for the maximum yield from your lab.
The High-Volume, Low-Dollar Situation In The Lab Billing Process
The reason lab RCM is so complex is its strange dynamic where revenue teams have to deal with an influx of low-cost claims. This situation is radically different from specialty practices where a few claims per week bring significant revenue without a major risk of a bottleneck in the back-end RCM.
Lab billing teams find it most feasible to work on the easiest claims first. When they do this, they sometimes push complex claims down the queue. In most cases, these unattended ARs age well beyond their filing deadlines. Even if their deadline hasn’t approached yet, their potential profit decreases due to the cost to collect.
But this dynamic is not something that labs must live with or work around. They can strategize the A/R triage process to ensure no account sits on the to-do list just to age and then eventually get abandoned.
Triage Strategies For Aging Lab Accounts Receivable
The number one rule for managing claims in a high-volume lab environment is never to get lost in random processes. Instead, you should integrate a mechanism into your RCM that triages those claims based on their profitability and likelihood of recovery. The strategies below explain how you can do this.
Arranging AR Work Queues By Reimbursement Yield
Most labs perform AR follow-ups by working on accounts based on their chronological arrangement within aging brackets (30/60/90/120+ days). The problem with this approach is that it ignores denial prioritization based on better value.
The viable option here is to use your billing system to arrange unworked accounts by denial type and reimbursement value. This will prioritize high-value denials regardless of the dates they were created. Billing teams can then work on those high-priority denials instead of the ones that do not offer much of a payout.
Automating Claim Status Checks Through Clearinghouse Data
A billing team member calling payers to ask about claim statuses is a serious waste of time and A/R resources. What you need here is automation, which you can achieve through clearinghouse data. You will have the system set up to ping the clearinghouse for claim status checks in bulk. The clearinghouse will pull information directly from the payer and update the account status in your practice management system. The biggest benefit of this automation is that your AR team will be able to focus only on denials and underpayments.
Patient Balance Automation For Small-Ticket Lab Bills
With the rise of high-deductible health plans, patients now owe a large portion of their lab service charges. This makes fee collection more challenging and financially unviable against small-ticket lab bills using conventional methods. The only way to protect margins here is to bring in automation. But automation should be based on the following protocols.
Cost-To-Collect Evaluation For Small-Balance Claims
This measure helps set up write-off thresholds for claims that do not bring any value. Let’s elaborate on this using an example. Let’s suppose you spend around $12 in labor, paperwork, and postage to collect patient balances. With this expenditure, you won’t be able to save anything on a claim that is worth $15. You may even lose money if the patient has a low propensity to pay. An automation system that triages claims based on these parameters will save you and your team from working for nothing.
Setting Up Digital Payment Gateways And Automated Statements
Automation is particularly beneficial for small-balance claims. More specifically, you want digital payment gateways and patient portals integrated into your RCM infrastructure. The greatest advantage of such integrations is that they generate digital or automated email statements for patients with one-click payment option. Not only does this increase the likelihood of payment, it also saves the cost of manual handling of small-ticket claims.
Identifying And Appealing Underpayments On Lab Claims
Denials are a significant cause of revenue loss for labs. But what causes an even bigger revenue leakage are underpayments. The reason is that labs send a lot of complex claims to payers. Payers adjudicate those claims incorrectly and reimburse a lower amount than the contracted rate. And labs accept the payment as they are too overwhelmed to appeal.
Again, automation makes it possible to recover the underpaid portion of the payment. Here is how it works.
Auditing ERAs Against Payer Contracts And Fee Schedules
Modernized RCM analytics can automatically compare the allowed amount on the ERA and EOB against your contracted fee schedules. These systems accurately identify and flag contractual variance. And you get the notification and enough time to appeal.
Building An Appeal Workflow
Identifying an underpayment does half of the job. A workflow for appealing that underpayment is what matters the most. This workflow is essentially based on a mechanism that routes underpaid claims to specialized work queues automatically. From there, the staff can generate automated appeal letters that contain:
- Patient’s lab test CPT/HCPCS codes
- A copy of the payer contract fee schedule
- The corresponding ERA
The system incorporates these elements automatically into the appeal letter. This way, not only does the appealing process become cost effective even for small underpayments, but its algorithmic accuracy increases the likelihood of payment recovery.
Tracking Recovery Success With Laboratory RCM Analytics
You won’t be able to optimize any of the aforementioned strategies if you do not have the right analytics in place. This is why you must ensure that your lab RCM analytics are thorough and accurate.
To be precise, ensure your analytics system works on the following KPIs for lab A/R recovery:
- Days in accounts receivable (DSO) to measure the average number of days it takes for revenue collection
- Net collection rate (NCR) to calculate contractually owed revenue that is recovered
- First-pass revolution rate to determine the percentage of claims paid correctly in a single submission
Importance of Partnering with Specialized AR Laboratory Billing Services
You cannot achieve success in lab RCM without a comprehensive AR management system that essentially features:
- Triage workflows
- Clearinghouse automation
- Payment gateways
- Underpayment analytic
But let’s not ignore the fact that the deployment of these features is a significant undertaking for in-house revenue teams. Also, you won’t be able to scale this infrastructure without significant investment.
A better way to handle your lab RCM is to partner with specialized lab billing services. These third-party infrastructures have everything, including automation, analytics, and dedicated workflows, to keep your lab RCM fully optimized for maximum profitability.
AltuMED is a specialized RCM technology company and a strategic asset you can trust for your complex lab revenue operations. We combine a dedicated workforce with the latest tech to help you get complete, fast payments for your lab services.
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