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The Connected Laboratory: A New Approach To Laboratory Billing

(Note: This blog has also been published at Clinical Lab Manager)

If you were to conduct a cross country poll of clinical laboratory operators, you’d find that the majority of them still deploy two separate stand-alone software solutions: one for laboratory information (LIS), and one for revenue cycle management (billing).

That would be no surprise. Laboratories have traditionally handled billing this way, as a distinctly separate process from operations. 

Going even further, it’s a sure bet that most of these same siloed laboratories begin the billing process after the lab report has been finalized. This often results in a high number of denied claims because they were sent to the payer missing basic patient information.

It’s a common problem for all providers, not just laboratories that rarely interact with patients. In fact, across the US, an estimated 35 percent of insurance claims are denied annually due to missing or inaccurate patient data. 

The traditional wait-until-the-end approach to laboratory billing worked just fine when laboratories were more profitable, and margins were high enough to offset the denials and the write-offs that accompany this back end model. But downward market trends and shrinking margins are forcing labs to consider a new model - one that connects the laboratory information system and the revenue cycle management workflows onto one common database, one that produces end-to-end data integrity, and one that gives them a headstart on the billing process. 

Bridging the Gap Between LIS and RCM

Still in its early stages, a much-needed paradigm shift within the laboratory industry has begun. The old and disconnected back-end billing process is being replaced with a new connected one that enables labs to begin the billing cycle as the order is received. This new model is supported by innovative tools that optimize cash collection and protect laboratories from reimbursement cuts, fast-changing payer requirements, growing patient responsibility for healthcare costs, and other external threats. 

Real-Time RCM at Order Entry

With RCM functionality interwoven into the LIS workflow, labs are able to leverage integration with clearinghouses and other third-party billing services to automate administrative tasks and receive real-time validations for key patient information like address, demographics, insurance eligibility, insurance discovery, and prior authorization, all at order entry. This captured information is efficiently checked, verified, and instantaneously shared across the entire LIS & RCM platform, removing the need for synchronization and the headaches that come with inconsistent data transferred across multiple systems.

With several administrative tasks now automated, the percentage of denied claims going down, and the percentage of first-pass claims accepted by the payer on the rise, the immediate benefit comes in the form of net revenue gains for the laboratory shortly after implementation. Additionally, the laboratory billing team that was bogged down reworking claims is now free to focus on and resolve the more difficult cases in a timely manner, unlocking what could’ve been lost revenue. 

An added benefit is the operational and financial insight gained through LIS & RCM integration. This integration allows for full visibility of both workflows on one powerful and data-driven platform that can provide high-level views or drilled down snapshots of the business in real-time. Armed with this knowledge, lab operators can identify potential problems and bottlenecks and resolve them quickly.  

Short-Term Improvements to RCM Workflow

Deciding to go with an enterprise-level software solution that incorporates RCM functionality throughout the laboratory workflow is a sizable investment and a major change, so lab operators are encouraged to do the necessary research to find out if upgrading to a fully-integrated LIS & RCM platform makes sense for them and their businesses. In the meantime, there are actionable steps that any laboratory can implement today to help ensure more clean claims and less back end work for the billing team. Putting together a simple RCM Checklist of manual administrative steps to take at order entry can also quickly help improve the bottom line. 

With a change in mindset and by embracing the tools now available, laboratories can do more than just meet the challenges of today and the future, they can become more efficient and more profitable. 

Michael Kalinowski

Michael Kalinowski is the Director of Communications and Media Relations for LigoLab Information System, a leading provider of innovative end-to-end healthcare software that partners with laboratories, servicing 100+ facilities nationwide. The LigoLab LIS & RCM Laboratory Operating Platform™ goes beyond the core workflow and provides all the supporting modules a laboratory needs to thrive and grow. 

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