Understanding Trends in Denials & Patient Responsibility

A XiFin analysis of aggregated client data and denial trends reveals billing policy changes are impacting laboratory financials and patient out-of-pocket expenses. Without proper workflow automation, increased denials are also impacting back-office productivity.

Over the last eight years, the diagnostics industry has realized a significant decrease in revenue due to numerous reimbursement cuts. For pathology, financial impacts were initially amplified by the sunset of the Technical Component (TC) Grandfather provision in 2012 and TC cuts to CPT code 88305 in 2013. Since that time, growth and enforcement of new billing policies such as MACRA, Medically Unlikely Edits (MUE), more specific coding requirements related to medical necessity, and reductions in timely filing windows have further increased the time and resources required to bill both compliantly and cleanly for a broad array of diagnostics, including pathology and molecular diagnostic testing.

In addition to challenges in billing workflow and reimbursement, patients are now responsible for more than 30%¹ of the overall revenue dollars generated in the healthcare system. With the industry undergoing such significant changes, it is important to understand the impact to the revenue cycle and consider how non-patient facing physicians can improve patient engagement.

XiFin studied the shifts in the volume of denials associated with changes in billing and reimbursement policies, including medical necessary requirements. In this study, XiFin utilized aggregated client data, as well as other industry studies, to demonstrate the impact payor policies have on revenue, with a specific focus on denials, and the impact on patient financial responsibility. Finally, this study explored patient payment behavior when technology automation was used. This study shows that billing policy changes are impacting laboratory financials and patient out-of-pocket expenses, and that technology automation will be essential to managing demanding policies driving the evolution of patient billing and engagement.

According to a Laboratory Economics forecast, the fastest-growing subspecialty is molecular diagnostics, having grown 23% from 2016 to 2019². It is also the subspecialty with the highest per-capita denial frequency. With a shift towards molecular testing becoming the standard-of-care, success rates of collecting on the services rendered will be heavily dependent on payors’ timely adoption of relevant coverage policies. In the meantime, molecular diagnostic providers need the ability to manage appeals processes and patient collections effectively.

The most challenging and fastest-growing denial types for anatomic pathology laboratories are medical necessity with a 202.8% increase and prior authorization with a 65.4% increase since 2015. Depending on the nature of the denial, as well as the payor, success rates of appeals are as low as 24%. However, providing medical records increases the likelihood of reimbursement by 60%. UHC and Cigna have the highest appeal success rates, ranging between 16% and 30%. While Aetna and BCBS Federal have the lowest success rates, ranging from 5% to7%, relative to appeal type.

Additionally, anatomic pathology practice patients have experienced an increase in out-of-pocket expenses from 2015 to 2018. For insured patients, the percent of payments received directly from the patient for anatomic pathology procedures increased from 11% in 2015 to 13% in 2018. In contrast, patients with bills from molecular diagnostic tests have been positively impacted by a significant decrease in their payment responsibility. For molecular tests, this reduction in patient payments was due to two main factors: (1) cuts to payor fee schedules associated with molecular testing, lowering the revenue that each test generates, and (2) the increase in tests covered by third-party insurance (82% of revenue generated in 2015 was from third-party insurance, as compared to 91% in 2018).

For a pathology practice collecting $25M annually, the 2% increase in anatomic pathology shifts $500,000 of annual revenue from payors to patients³. Higher patient balances drive longer days in accounts receivable (AR) as well as higher bad debt. Therefore, engaging patients early and often is instrumental to successful collection.