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Hospital Outreach and Clinical Laboratory Denial and Appeal Trends: The Power of Patient Engagement in Revenue Capture (Part 1 of 3)

November 4, 2024

The XiFin 2024 Payor Denial Impact Report underscores how revenue cycle management (RCM) is increasingly challenging for diagnostic providers, with rising denial rates and stringent payor policies impacting financial outcomes. The paper details the most recent denial and appeal trends based on aggregated data from claims processed on the XiFin platform. The dataset analyzed includes more than twenty million claims with 2023 dates of service.

Hospital outreach laboratories and independent clinical laboratories experience significant pressure as denial rates continue to rise. This blog, the first in a three-part series, will focus on hospital and clinical laboratory denial trends, strategies for mitigating denials, and patient engagement’s vital role in maximizing revenue capture.

Hospital Outreach and Clinical Laboratory Denial Trends

Hospital outreach and clinical laboratories face a considerable challenge in managing denials. Approximately 19.3% of CPT® codes billed are denied across the hospital outreach and clinical laboratory segment. These denials result from increasingly restrictive payor policies and behavior, inconsistent policies and behavior across payors, and evolving regulatory requirements. Some of the most common denial reasons for laboratory claims include:

Icon for CO151 - Payment adjusted because the payor deems the information submitted does not support this many/frequency of services

CO151

Payment adjusted because the payor deems the information submitted does not support this many/frequency of services
Icon for CO52 - Claim will be reconsidered when additional claim information is received

CO252

Claim will be reconsidered when additional claim information is received
Icon for CO96 - Non-covered charges

CO96

Non-covered charges
icon for CO50 - Non-covered services because this is not deemed a 'medical necessity' by the payor

CO50

Non-covered services because this is not deemed a ‘medical necessity’ by the payor
icon for CO55 - Experimental/Investigational, when a procedure code is billed with an incompatible diagnosis for payment purposes, and the ICD-10 code(s) submitted is/are not covered under an LCD or NCD

CO55

Experimental/Investigational, when a procedure code is billed with an incompatible diagnosis for payment purposes, and the ICD-10 code(s) submitted is/are not covered under an LCD or NCD

In addition to extending the time in accounts receivable, denials increase bad debt for services rendered where expenses are already incurred. Denials also require more attention from staff—increasing the total cost of billing. Hard denials, such as medical necessity, are the most challenging revenue to collect.

The following chart shows hospital outreach and clinical laboratory denials by denial type and compares 2023 data to 2021 and 2018, respectively, to illustrate latest trends. Procedure Not Paid Separately, already the most frequently used denial type in 2018, increased over 50% over the period 2018-2023, making the denial type accountable for nearly 50% of all denials in 2023 for this segment.

Adding to the complexity of increasing denials is the popularity of Medicare Advantage plans, which now cover 51% of Medicare beneficiaries. These plans tend to deny more claims than traditional fee-for-service (FFS) Medicare, with clean claim payment rates as low as 85%, compared to traditional FFS Medicare’s 98%. As Medicare Advantage plans are expected to grow in coverage over the next decade, the administrative burden for laboratories will likely continue to increase.

The Importance of Addressing Denials Proactively

Hospital outreach and clinical laboratories must focus on clean claims to prevent revenue loss. Proactively addressing denials through front-end configurations and edits can significantly reduce the frequency of denied claims. Robust RCM systems with intelligent workflows can help identify potential denial triggers before submitting claims. For example, workflows that flag discrepancies in the National Correct Coding Initiative (NCCI) edits can prevent common errors from reaching the payor.

Another critical strategy is automating denial management. Automation helps ensure that follow-up processes are efficient, reducing the time and effort required from billing teams. Automating the appeals process can also speed up reimbursement and increase the chances of success. For example, automating the attachment of necessary documentation removes administrative burden from the billing team and accelerates the appeals process.

Engaging Patients to Maximize Revenue

While denial prevention and efficient appeal management are crucial, hospital outreach and clinical laboratories must also engage patients to optimize revenue capture. This is especially important as patient financial responsibility for healthcare services continues to rise. Patient engagement is essential in facilitating the correction of payor information for covered charges and collecting patient payments. Patient engagement is shown to help maximize cash collection and accelerate payments.

Patients are receiving healthcare services from a broader, more disparate set of providers and expect to be able to share diagnostic data across providers to optimize their care. Patient engagement tools play a vital role here through dynamic portals that enable communication regarding claim denials and patient financial responsibility estimates. Patients expect transparency and ease of information access from all healthcare encounters. Because many diagnostic services originate through an ordering physician, these encounters are not directly patient-facing, and patient engagement tools are especially crucial.

One XiFin customer collected 26.6% more patient payments in the first 30 days after implementing a text reminder between the first and second paper statements.

XiFin customer data show that after integrating texting and automated calls into the traditional dunning process, patient payments received in the first 30 days of the cycle significantly increase. One XiFin customer for example, collected 26.6% more in the first 30 days after implementing a text reminder between the first and second paper statements. Another XiFin customer reports that 32% to 38% of patient payments received in a single month result from a text, and statement printing and postage expenses have decreased by 36% to 38%.

Healthcare providers—including hospital outreach and clinical laboratories—that integrate patient engagement strategies into their RCM processes can dramatically improve payment timelines and reduce collections costs. When patients receive clear and timely communication about their financial responsibilities, they are more likely to pay their bills on time, reducing the need for extensive follow-up and manual collections efforts.

Moreover, hospital outreach and clinical laboratories can optimize billing cycles by examining patient behavior and customizing communication strategies. For instance, adjusting the timing of text reminders based on patient response patterns can further accelerate payment collection.

Read the XiFin 2024 Payor Denial Impact Report to see how combining patient engagement strategies with robust RCM processes maximizes revenue and ensures healthcare providers remain resilient despite mounting challenges.

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