Understanding and Addressing Revenue Cycle Management Challenges in Hospital Outreach Laboratories

Hospital outreach laboratories provides a crucial healthcare service to local communities by enabling physicians and healthcare organizations to offer vital diagnostic services on an outpatient basis. However, economic and regulatory pressures are impacting revenue cycle management (RCM), reimbursement and financial viability for many outreach labs.

This post reviews some of the top revenue cycle management challenges facing outreach laboratories today. Learn more about our hospital laboratory management solutions here.

Lack of access to lab-specific data to accurately measure financial performance

Outreach labs are an often-overlooked revenue contributor within a hospital or health system, with the ability to bring in significant new revenue streams through community-based diagnostic services. That said, outreach labs frequently face the challenge of lacking complete data to accurately measure their fiscal performance and contribution. In addition, many outreach labs have limited control over their revenue cycle management (RCM) process, which can decrease their reimbursement by as much as 20 to 50 percent and prevent the ability to evaluate the lab as an independent profit center.

Laboratory services are so broad in nature and have such narrowly defined coverage criteria that many of the medical billing products being employed do not have the configurability and payer connectivity required to maximize reimbursement. To truly understand their business’ financial performance, outreach labs need access to better reporting tools with precise data and metrics that help them accurately evaluate operating performance, demonstrate profitability, identify areas for improvement, and guide better decision-making.

With the ability to routinely monitor and evaluate costs, revenue, and other performance indicators, outreach labs can apply a new level of business discipline to managing their operations. As healthcare reform initiatives continue to gain momentum, access to timely business intelligence will be essential to help establish the outreach lab as a revenue center, and demonstrate the lab’s importance to both the organization and community. Labs that understand their business metrics well also gain a competitive advantage in pricing and contract negotiations.

Declining reimbursement

If the draft 2018 PAMA reimbursement rates are implemented in January, many laboratories, including hospital outreach labs, will face severe consequences. This will likely result in reimbursement reductions for the highest-volume tests performed including services like metabolic panels, prostate-specific antigen blood tests and complete blood count tests. The impact on lab operating margins could be substantial. This is not a situation that labs can cost-cut their way out of. Rather, increasing profitability through maximizing reimbursements plays a key role.

With reimbursement pressures arising from regulatory changes of all types, RCM systems become the backbone to ensuring financial health. One of the most significant capabilities needed is the ability to track and extrapolate financial data to evaluate the relationship between test costs and reimbursements based on each patient indication. Outreach labs need to understand average reimbursement per test, and evaluate test costs versus reimbursements across all payers to develop sound strategies for growing the outreach business. Reliable reimbursement data is key for negotiating pricing and effectively demonstrating the value of the outreach lab.

Lack of automated claims workflow

A major factor contributing to improved financial performance and staff productivity is an automated workflow that tracks the claim closely throughout the RCM lifecycle to reduce errors and improve efficiency. A critical area of focus is having access to rules-based system functionality and alerts to reduce front-end errors and ensure clean claims submission. An automated workflow is designed to flag problem areas and perform up front edits so that missing or incorrect data can be corrected as soon as possible prior to submitting the claim. Due to continually evolving standards and payer rules, RCM systems must be agile and system information updated in real time to ensure compliance and help avoid denied claims due to missing or inaccurate information.

Failure to monitor discrepancies between paid and expected reimbursement

Another major RCM challenge for labs is the inability to track billed amount, expected reimbursement, and paid amount as part of the claims adjudication process. Accurate billing detail is very important when there is a discrepancy between paid and expected reimbursement from a payer because staff need a way to easily determine if there is a remaining balance to collect. Most RCM software fails to track at this level of detail, and the laboratory may not even be aware they have received a partial payment.

The combination of lack of visibility and inadequate tools for segregating and following up on balance owed results in clerical staff accepting partial payments as payments in full, which artificially inflates contractual allowance adjustments. This has a direct impact on cash collected, and erroneously gives the laboratory the belief it collected all monies owed, when there may actually be more dollars to pursue.

With outreach lab services becoming more and more critical to healthcare delivery models as testing availability increases, and with impending Medicare payment reform for laboratories in 2018, this is an optimal time to evaluate your RCM system’s ability to help you sustain the challenges and opportunities ahead.

Register to attend our December 6, 2017 webinar “Optimizing Your Hospital Outreach Lab’s Financial Performance” to learn more.