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Molecular Diagnostics Denial and Appeal Trends: The Power of a 3-Phase Appeal Approach (Part 2 of 3)

November 18, 2024

The XiFin team analyzed recent denial and appeal trends based on aggregated data from claims processed on the XiFin platform representing the hospital outreach and clinical laboratory, molecular diagnostics, and pathology segments. The dataset analyzed includes more than twenty million claims with 2023 dates of service. In the first part of our series on payor denial impact, we focused on hospital and clinical laboratory denial trends, strategies for mitigating denials, and patient engagement’s vital role in maximizing revenue capture.

In this second blog, we will explore molecular denial trends and the importance of a three-phase appeal approach. The complete findings can be accessed by reading the 2024 Payor Denial Impact Report.

Molecular diagnostics laboratories face high denial rates, with approximately 35.3% of billed CPT® codes being denied. This segment faces unique challenges due to the high cost and complexity of molecular tests and inconsistent payor coverage. Understanding denial trends and adopting a comprehensive appeal strategy is crucial for molecular laboratories to recover revenue and optimize their revenue cycle management (RCM) processes.

Common reasons for molecular denials include:

  • CO197 – Prior Authorization Required: Many molecular tests require prior authorization, and payors often deny claims due to missing or incomplete prior authorization documentation. This is particularly challenging because obtaining the necessary clinical documentation from ordering physicians can be difficult.
  • CO55 – Experimental/Investigational Denials: Many new molecular tests lack sufficient coverage guidelines, leading to denials based on their experimental status.
  • CO96 — Non-covered Services: Payors may deny coverage when they do not recognize the medical necessity of specific genetic tests.

Adding to these challenges is the prevalence of timely filing denials for complex tests, such as genome sequencing. These tests can take several weeks to complete, pushing the limits of payor filing deadlines, which can be as short as 90 days. Navigating these challenges requires a well-coordinated approach to appeals.

The following chart shows molecular denials by denial type and compares 2023 data to 2021 and 2018, respectively, to illustrate recent trend changes. Of note is the 24% increase in prior authorization denials, making this denial the most frequent denial type in 2023. Procedure Not Paid Separately denials rose from the fifth most frequent type in 2018 to the third most frequent in 2023 for this segment. In all, six denial types increased as a percent of total denied over the period. There is some good news, however, as denial rates for 11 denial types decreased during that time.

Source: XiFin data

The Importance of a Strategic, 3-Phase Appeals Process

Front-end edits and configurations help mitigate backend denials. Proactively capturing potential denial-related issues is the most effective way to maintain a manageable AR and improve the propensity to pay. That said, some level of denials are unavoidable, as not all known issues can be addressed on the front end of the RCM process.

Molecular laboratories must adopt a structured, multi-phase appeal approach to maximize their chances of overturning denials. It is essential to note that more than a single appeal attempt is needed to maximize revenue, particularly in the molecular segment, where the average claim value is significantly higher than in hospital outreach, clinical laboratory, or pathology segments. As seen in the table below, while the volume of appeals paid decreases with each appeal attempt, the success of collecting additional revenue with each round of appeal attempts is impactful. At $1,583, the average payment per appeal for molecular testing is significant.

Source: XiFin data

Medical necessity appeals account for 25% of the total appeals filed in 2023 in the molecular segment and has an average success rate of 12.8%. Another 23% of appeals are for claims denied for additional information, and prior authorizations are 11.3% of total appeals filed. Prior authorization appeal volumes have remained consistent year-over-year in this segment, averaging 11.3% in 2021 and 10% in 2020, despite higher prior authorization requirements than pathology or clinical laboratory. While smaller in volume, timely filing, underpayment, and out-of-network appeals are still fruitful in recovery, particularly in the second and third attempts.

The following is a summary of the 3-phase appeal approach:

  1. First-Level Appeals: At this stage, organizations submit a high-level appeal letter detailing the test performed and its medical necessity. Supporting documents, such as pathology reports, are typically included. If the first appeal is unsuccessful, laboratories may need to resubmit the appeal with additional information.
  2. Second-Level Appeals: This phase involves submitting a more comprehensive appeal with evidence from a genetic counselor or pathologist, demonstrating that the patient meets the criteria for the test under the payor’s policy. Laboratories may include additional medical records or documentation to strengthen the appeal.
  3. Third-Level Appeals: If the second-level appeal fails, the case may be escalated to an Administrative Law Judge. While this can be a more aggressive approach, it is often necessary for high-value claims. Laboratories should evaluate the potential costs and benefits before taking this step.

Leveraging Automation in the Appeal Process

Automating parts of the appeal process can streamline workflows and increase the likelihood of success. For example, automation can pull the necessary clinical documentation, generate appeal letters, and submit them through the appropriate channels. This reduces manual effort and ensures consistency in the appeals process.

XiFin-Recommended Practices for Molecular Diagnostics Laboratories:

  1. Explore amending payor contracts to extend timely filing limits on complex molecular and genomic tests.
  2. Staff payor relations teams with individuals with deep relationships within the payor marketplace. This can yield higher ROI when negotiating an in-network status.

Additionally, integrating automation with prior authorization vendors allows laboratories to expedite the prior authorization process, reducing the risk of denials due to missing authorizations. This is especially important for high-cost tests like whole exome sequencing.

Building strong relationships with payors can also enhance appeal outcomes. Providers that maintain open communication with payors may be more successful in negotiating timely filing extensions or securing in-network agreements. Payor relations teams can work on amending contracts to account for the unique challenges associated with molecular testing.

The high denial rates in molecular diagnostics necessitate a proactive approach to RCM. Molecular diagnostic laboratories must implement robust appeal strategies and consider automation to improve their denial management processes. Investing in payor relations can also improve coverage and appeal outcomes.

Read the XiFin 2024 Payor Denial Impact Report to see how adopting a 3-phase appeal approach provides a clear framework for addressing denials, ensuring that every opportunity for reimbursement is pursued. By streamlining the appeal process and leveraging automation, molecular laboratories can reduce the administrative burden and improve financial outcomes.

HospitalLaboratoryMolecularPathology

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