Case Study
Reduce Denials and Increase Your Lab's Revenue and Net Collections
January 22, 2026
Missing or incomplete laboratory billing information remains a critical vulnerability in laboratory revenue cycle management (lab RCM). Studies indicate that up to half of hospitals and independent laboratories lack an effective follow-up RCM process, placing a substantial portion of their revenue at risk.
The financial consequences are severe: 20 to 30 percent of laboratory billing revenue may never be collected.
Industry data highlights the scope of the problem:
- Average denial rates rose 20 percent between 2016 and mid-2020.
- In 2020, more than 10 percent of claims were denied on first submission.
- By Q3 2020, initial nationwide denial rates exceeded 11 percent.
Fortunately, these trends can be reversed. Advanced automation embedded within a fully integrated laboratory information system and lab billing platform provides the foundation to:
- Standardize follow-up
- Reduce denials
- Protect long-term revenue performance.
To learn how advanced laboratory billing solutions can reduce denials, stop leakage, and increase your lab’s revenue and profitability, continue reading our report.
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Introduction
We are navigating a period of rapid change and ongoing disruption. Change breeds caution, caution drives resistance, and resistance manifests as payer pushback. In the laboratory industry, this cycle results in higher denial rates and direct financial pressure. Today, more than ever, laboratories must clearly understand this dynamic and proactively address it with advanced laboratory billing solutions.
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Lab Billing Denials Steadily Rising
Medical claim denial rates are trending upward nationwide. While many providers have implemented measures to mitigate denials, substantial revenue is at risk. Since 2016, average denial rates have climbed 20 percent, with 10.8 percent of claims denied on first submission.
The Healthcare Financial Management Association (HFMA) estimates that the average cost to rework a denied claim is $25. Even more concerning, as many as 65 percent of denials are never reworked, creating a substantial and ongoing revenue drain for providers.
The financial impact adds up quickly:
- Filing a claim costs $6.50 on average
- Resubmitting a denied claim costs $25.00
- The total cost to submit, correct, and resubmit a claim reaches $31.50
This is in addition to the revenue permanently lost on the majority of denied claims that are never resubmitted.
Denials continue to rise due to several factors:
- Limited denial processing resources
- Workforce attrition and training gaps
- An expanding industry-wide denial backlog
Yet many laboratories still depend on legacy laboratory revenue cycle management systems and outdated lab billing technologies that limit their ability to reverse these trends.
Improved Automation Increases Laboratory Billing Productivity
Ongoing regulatory change and the constant need to update laboratory revenue cycle management and laboratory billing software systems demand a new approach. Clinical lab workflows must be automated to attach the required documentation and manage high-balance denials efficiently. At the same time, investment is needed in modern lab billing analytics and artificial intelligence that can identify denial risk before submission and recommend corrective actions.
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Measuring Laboratory Billing System Denials: Performance & Outcome-Based KPIs
Ensuring accurate demographic capture, financial clearance and eligibility verification, precise coding, and vigilant monitoring of procedure pricing are critical components of a modern laboratory billing system. These elements work together to streamline operations, reduce errors, and maximize financial efficiency in medical laboratories.
- Accurate demographics capture
- Financial clearance/eligibility
- Coding
- Procedure pricing monitoring
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Lab Billing Denials – Most Causes (90%) are Preventable
Laboratory billing denials are commonly caused by inaccuracies in patient demographics, eligibility and coverage issues, incorrect or incomplete coding, and missing required documentation. Although they cause frustration in our industry, most denials are preventable when a proper laboratory billing process is supported by an advanced laboratory billing system that addresses these issues through improved data accuracy, compliance with payer guidelines, and timely claim management.
Below are the most frequent reasons for claim denials (and their respective percentages).
- Inaccurate demographics capture and payer validation: 26.6%
- Missing or invalid claim data: 17.2%
- Inaccurate payer authorization/rendering facility: 11.6%
- Service not in network: 10.6%
- Medical documentation requested: 9.2%
- Rules and regulations non-compliance: 6.6%
- Medical coding issue: 4.8%
Steps to Reduce Laboratory Billing Denials
As noted earlier, most laboratory billing denials are preventable when using the right lab RCM process supported by modern laboratory billing solutions. Here are some helpful hints that, once applied, will positively impact your lab’s revenue generation.
- Determine where denials are originating and their root causes.
- Prioritize remediation based on where and what actions will have the greatest impact.
- Prioritize denials based on revenue impact.
- Consolidate laboratory revenue cycle management technology with a single “end-to-end” laboratory billing vendor.
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Ways to Achieve Lab Billing Benefits from Advanced Analytics and AI
Advanced analytics and AI-enhanced laboratory billing solutions can identify denial patterns, automate key processes, and deliver predictive insight across the RCM cycle. For example, AI models can analyze historical data to forecast potential denials, enabling laboratories to resolve issues before claims are submitted. AI can also support real-time eligibility verification to ensure coverage details are accurate, reducing one of the most common sources of errors.
AI-driven ICD and CPT RCM tools further improve accuracy by assigning correct procedure codes and ensuring compliance with payer requirements. In addition, AI can streamline prior authorization by flagging tests that require approval and automatically initiating authorization requests.
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Beyond prevention, advanced analytics optimize lab RCM by revealing inefficiencies and targeting high-impact improvement areas. AI-powered RCM tools also ensure required documentation is attached to each claim and improve patient communication, both of which reduce avoidable denials.
When paired with the right lab RCM processes and laboratory billing software partner, these technologies can significantly improve billing performance, reduce denial rates, and strengthen the financial health of medical laboratories.
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Learn More About LigoLab: A Comprehensive LIS System with Embedded Laboratory Billing Solutions
LigoLab is a leading provider of innovative end-to-end healthcare LIS and laboratory billing software for pathology laboratories, servicing hundreds of facilities nationwide.
As a comprehensive enterprise-grade clinical and pathology lab software application, the LigoLab LIS & RCM Laboratory Informatics Platform includes modules for anatomic pathology, clinical laboratory, molecular diagnostics, lab revenue cycle management, and direct-to-consumer lab testing (TestDirectly), all on a single integrated informatics platform that supports every role, department, and case.
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