Case Study
Reduce Denials and Increase Your Lab's Revenue and Net Collections
August 28, 2026
Editor’s Note: This case study was originally published on October 29, 2021, and has been updated since.
Missing or incomplete laboratory billing information remains a critical vulnerability in laboratory revenue cycle management (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, labs can reverse these trends. Advanced automation embedded within a fully integrated laboratory information system and laboratory 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.
Discover More: Laboratory Billing 101 - Improving the Laboratory Billing Process To Prevent Common Errors
Mitigating Risk & Bad Debt: Increasing Revenue & Medical Laboratory Profit
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.
Get Insight: Six Reasons Why You Should Choose an Integrated Laboratory Billing Solution for Your Medical Lab
Laboratory 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 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 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 organizations still rely on legacy lab revenue cycle management systems and outdated lab billing technologies, limiting 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. Labs must automate pathology and clinical lab workflows to attach required documentation and manage high-balance denials. At the same time, investing in modern lab billing analytics and artificial intelligence that can identify denial risk before submission and recommend corrective actions is also recommended.
Industry Insights: The AI Revolution in Laboratory Billing - A Game Changer for 2025 and Beyond
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 streamline operations, reduce errors, and maximize financial efficiency in medical laboratories.
- Accurate demographics capture
- Financial clearance/eligibility
- Coding
- Procedure pricing monitoring
Discover More: Why Integrated LIS System and Lab RCM Software is a Catalyst for Growth
Lab Billing Denials: Most Causes (90%) Are Preventable
Laboratory billing denials result from inaccurate 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 advanced laboratory billing software that improves data accuracy, ensures compliance with payer guidelines, and manages claims on time.
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 with the right lab RCM process and modern laboratory billing solutions. Here are some helpful hints that, once applied, will positively impact your lab's revenue generation.
- Determine where denials originate 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.
Discover More: Understanding the Real Costs of Non-Integrated Laboratory Billing Systems
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 and resolve issues before claims are submitted. AI can also support real-time eligibility verification to ensure accurate coverage details, 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. Moreover, AI can streamline prior authorization by flagging tests that require approval and automatically initiating authorization requests.
Get Insight: Workflow Tips to Help Manage Prior Authorization Requirements
Beyond prevention, advanced analytics optimize lab revenue cycle management by revealing inefficiencies and targeting high-impact areas for improvement. AI-powered RCM tools also ensure required documentation is attached to each claim and improve patient communication, both of which reduce avoidable denials.
When combined with effective RCM processes and the right laboratory billing software partner, these technologies can improve billing performance, reduce denials, accelerate reimbursement, and strengthen a laboratory’s overall financial health.
Get Insight: Laboratory Billing Automation - Boosting Efficiency & Clean Claim Rates
LigoLab: A Comprehensive LIS System with Embedded Laboratory Billing Solutions
LigoLab is a leading provider of innovative end-to-end LIS healthcare solutions and laboratory billing software for medical laboratories, servicing hundreds of facilities across the U.S.
As a comprehensive enterprise-grade clinical and pathology lab software application, LigoLab’s all-in-one Medical LIS & Lab Billing 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 lab organization software that supports every role, department, and case.
Ready to Elevate Your Laboratory’s Performance?
Learn how LigoLab empowers its customers to improve patient care, stand out in competitive markets, and grow profitably.
Act Now: Connect with a LigoLab Product Specialist!
Frequently Asked Questions About Reducing Laboratory Billing Denials
How much laboratory billing revenue goes uncollected industry-wide?
Studies indicate that 20 to 30 percent of laboratory billing revenue may go uncollected, largely due to missing or incomplete billing information and ineffective follow-up processes.
How much have denial rates increased in recent years?
Average denial rates rose 20 percent between 2016 and mid-2020, with more than 10 percent of claims denied on first submission in 2020, and initial nationwide denial rates exceeding 11 percent by Q3 2020.
How much does it cost to rework a denied claim?
The Healthcare Financial Management Association (HFMA) estimates the average cost to rework a denied claim at $25, on top of the $6.50 average cost to file the original claim, bringing the total cost of submitting, correcting, and resubmitting a claim to $31.50.
What percentage of denied claims are never reworked?
As many as 65 percent of denials are never reworked, representing a substantial and ongoing revenue drain for labs and hospitals.
What are the most common causes of laboratory billing denials?
The leading causes are inaccurate demographics capture and payer validation (26.6%), missing or invalid claim data (17.2%), inaccurate payer authorization or rendering facility (11.6%), out-of-network services (10.6%), requested medical documentation (9.2%), regulatory non-compliance (6.6%), and medical coding issues (4.8%).
What steps can labs take to reduce denials?
Labs should identify where denials originate and their root causes, prioritize remediation based on impact and revenue at stake, and consolidate their revenue cycle management technology with a single end-to-end billing vendor.
How can AI and advanced analytics help reduce denials?
AI can forecast potential denials from historical data, support real-time eligibility verification, assign accurate ICD and CPT codes, flag tests requiring prior authorization, and ensure required documentation is attached to claims before submission.
