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Hidden Landmines in Revenue Cycle Management: Industry Challenges, Patient Engagement, and Denial Trends (Part 1)

This is the first post of a three-part blog series focused on key areas of business performance management for pathology practices, hospital outreach programs, diagnostic laboratories, and molecular diagnostic providers. The other blog posts in this series can be found here:  Part 2 and Part 3

A number of trends in payor behaviors and reimbursement go unnoticed due to outdated RCM management practices. Additionally, even known areas of reimbursement deficiency, such as medical necessity denials or increasing patient bad debt, can be easily neglected due to lack of resources or knowledge of an effective resolution.

During the 2019 Executive War College in New Orleans, I presented on the key areas of performance management and potential revenue loss to help laboratories and pathology practices to circumvent obstacles to success. Here are highlights from my presentation:

Patient Bad Debt

With patient balances suddenly accounting for more than 30% of revenue generated in healthcare, it’s important to consider the impact this has on revenue. Historically, total bad debt in the pathology and laboratory industry has steadily fallen within a range of 8% to 12% — much of which was comprised of patient write-offs. Typically, an upward trend in bad debt directly correlates with an increase in patient responsibility. Within the last two to three years we’ve seen the true calculation of bad debt increase to 10% to 15%, depending on location, payor mix, and patient demographics where the pathology practice or laboratory serves. Patient engagement, covered later in this blog post, is key to improving patient-driven revenue, reducing bad debt, and improving customer service.

Another increasing influencer of bad debt has become the uptick in payor denials. Monitoring the denials your pathology practice or laboratory receives drives the functions you implement on the front-end to help prevent them out of the gate. Additionally, measuring successful appeals processes associated with those denials becomes a quantitative method for improving payment outcomes and shortening the payment cycle. At XIFIN we routinely study these trends in order to partner with clients so they can adapt to their individual climate. Measuring variances from 2015 to 2018, we studied the increases across all clients, split into two segments:

Anatomic Pathology and Clinical Laboratory

  • Total Medical Necessity (PR50) procedure denials increased from 0.4% to 5.2%/>
  • Health Saving Account (PR187) Payment denials increased from 0.3% of the total to 6.7%
  • The denial rate for procedures deemed experimental or investigational (PR55) increased from 0.6% to 12.7%/>

  • Medical Necessity (CO50) denials increased from 4.8% to 14.1%
  • Non-Covered Charge (PR96) increased from 6.1% to 8.0%
  • Non-Covered Charge (CO96) increased from 4.3% to 5.4%

It’s important to note that non-covered charges can be denied by contractual obligation or patient responsibility. It’s pertinent that pathology practices and laboratories understand what drives the type of write-off and if policies (such as ABN) can drive a PR vs a CO, and therefore dictate whether the balance can be billed to the patient.

Prior Authorizations

While not identified above, prior authorizations are an increasing requirement for pathology practices, clinical laboratories, and molecular laboratories. From 2016 to 2018 XIFIN client data reflects an overall increase in Prior Authorization denials of 311%. While these denials have leveled out over the last year, and appealing these denials are somewhat successful, we’re facing a new reality of significant workflow challenges. We’ve had to consider the best method of resolving this issue proactively and intelligently, all the while understanding that this is a moving target.

Approximately 40% of prior authorizations are abandoned by ordering physicians purely out of the complexity of trying to acquire a PA number. XIFIN’s partnership with Glidian provides XIFIN customers with a fully integrated solution to help the laboratory try to resolve prior authorization requirements. Some payors allow prior authorization numbers acquired after the time of service and XIFIN’s clients are able to leverage that in tandem with our partnership with Glidian to help streamline a very complex process.


Commercial carriers also started adopting their own version of PAMA cuts, further impacting the bottom lines of clinical labs across the country. Aetna, Cigna, BC/BS, and UHC are all offering 20% to 25% below 2018 Medicare rates. Additionally, payment models with ordering physicians are shifting. Bundled payments, alternative payment models, and coordinated care models have existed since the 1990s; however, today they’re being incentivized (and penalized) through MACRA like never before.

All of these factors drive the new idea of consumerism in healthcare. Patients, having a lot more direct responsibility for the cost associated with care, are pushing for change. As younger generations become more accountable to their healthcare interactions they’re pushing for shared-service models. Roughly 41% of millennials request a cost estimate before undergoing treatment. Additionally, they believe shared savings, bundled payment, and partial capitation plans grant greater accountability from their healthcare providers. In other instances, we’ve heard more frequently that patients are requesting to participate in their tumor boards and have conversations directly with the pathologist assigned to their case. As an industry that is in most-part non-patient facing we have to face the reality WE have to shift our own philosophies and practices to adopt and accommodate the growing need for transparency. That all starts by leveraging technology and by doing so, we have the opportunity to embrace the new expectations of patients while improving their propensity to pay.

Patient Engagement

Patient engagement strategies have been largely the focus of XIFIN’s management and product development teams the last year and half. We have been working with our clients and vendors to build more informative patient statements, we’ve implemented automated patient courtesy letters (received prior to the patient receiving a bill), added outbound Interactive Voice Response (IVR), and modified dunning cycles based on internal response rate studies. That said, we wanted to take it a step further and develop fully integrated solutions to accommodate these changes, such as:

Insurance and address discovery: When all other methods of finding correct coverage or demographic information are exhausted, Frontrunner’s integration into the XIFIN platform lets clients leverage their database for corrected information. For XIFIN clients, Frontrunner has successfully returned a correct address on 49% of cases when no address was available, and 42% of cases submitted have resulted in billing coverage not previously found. 

Patient Responsibility Estimator: XIFIN’s direct connection to 90% to 95% of the payors we submit claims to lets us leverage real-time eligibility checks within RPM to return information on patient deductibles. This means XIFIN is directly connected with a payor or a clearing house that is directly connected to the payor electronically. Pairing that systematically with the loaded contract allowable (or an estimate) associated with the service rendered, we can provide patients with an estimated expected responsibility at time of service. If the lab desires, in the case of a Patient Service Center, they can potentially accept credit card payments for the estimated patient out of pocket cost. 

Pre-Payment: Patients can make a pre-payment at time of service prior to the accessioning process. 

Outbound IVR Phone Calls and Text: Inserted between the distribution of paper statements within the dunning cycle, internal studies on XIFIN clients show that the average payment for automated outbound phone calls range from $3 to $9, and outbound texts range from $7 to $14. By engaging the patient in a method other than mail, we’ve been able to lower days outstanding for patient payments, reduce patient-related bad debt, and decrease the cost associated with paper statement processing and postage.

Billing in the pathology and laboratory space has become a labyrinth of rules, regulations, payment models, policies, and the unique challenges driven by your individual marketplace. Regardless of its complexity, managing the billing process and its performance doesn’t have to be daunting. Implementing the appropriate platforms and technologies (whether it’s in-house or outsourced), driven by automation, integration, and backed by a well-rounded team of experts, can prove to make the process not only more cohesive but also more fruitful to the bottom-line.

Continue reading the "Hidden Landmines in Revenue Cycle Management" 3-part blog series:

Published by XIFIN
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