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The Importance of Lab-Specific Revenue Cycle Management for Hospital Labs

  • AVP Health Systems, XIFIN

As a laboratory leader, you understand the value and impact of the patient care data you generate for hospital and community patients. On the business side of things, however, you aren’t always provided with the appropriate tools and visibility to position the lab to also be a profitable business entity. 

The time is now to challenge your current revenue cycle situation, including system and services, to ensure your outreach lab can gain influence and pull its weight among hospital and health system executives.

To ensure your lab claims are getting the proper attention and level of visibility needed to increase your revenue and cash and grow your business, start by asking your revenue cycle team the following key questions about write-offs and reimbursements:

Bad Debt and Automated Write-Offs

  • Are my lab claims subject to automated write-offs based on a dollar amount threshold set in the system?
  • Are automated write-offs of my lab claims categorized as bad debt since no effort to collect has been attempted?
  • What percentage and dollar amount of my claims end up automatically written off?

Performance of Tests and Ordering Clients

  • What is my average reimbursement by payor XYZ for test XYZ?
  • How does my actual reimbursement for CPT xxxxx for payor XYZ compare against my expected/contracted reimbursement rate for that payor and CPT combination?
  • Which ordering physicians and ordering clients are causing the most issues in the billing process due to providing missing or invalid information needed for the claim?

Hospital revenue cycle systems and staff are frequently instructed to concentrate efforts first on working high dollar claims (i.e., inpatient surgeries). Often, resource constraints lead to a policy of automatic write-off of any claim below a certain threshold that requires any additional effort. We’ve seen this threshold frequently set at $100, but $500 and higher is not uncommon at many health systems. This means that if your lab claim is below the threshold and has missing or invalid information on the front end or receives a denial on the back end, the revenue cycle team is NOT working to collect on your behalf, and instead, an automated write-off occurs.  These write-offs can be a substantial amount of your outreach business, and paint an inaccurate view of your business. Further muddying the financial picture is the fact that it is common for hospitals and health systems to incorrectly categorize the write-offs as revenue adjustments rather than bad debt, thereby implying the write-offs were not collectible.

To grow and run a profitable business, you need easy access to your lab-specific data. Many revenue cycle systems are unable to provide quick answers to the example questions above, as well as any lab-specific KPIs. You need to understand the profitability of specific tests and clients to ensure your growth is focused in the proper areas. 

Outsourcing Your Lab's RCM

If your current RCM team can’t quickly answer your questions in a satisfactory manner, the time is right to push for a change and consider a new outsourced laboratory RCM partner.

When selecting a vendor for your lab’s billing, you should look for:

A billing partner and lab billing expert, not just a vendor

You will want lab billing-specific expertise and lab industry knowledge that will help you optimize your revenue and billing performance.

An automated and efficient system

Simply hiring more staff is not the solution to successful laboratory billing. The system used should capture rules-driven workflow automation at the payor-specific level and have portal connectivity with the hospital and outside clients, including referring physicians, patients, and payors.

Comprehensive business intelligence and reporting functionality

You want to have visibility into how your operation is performing and its contribution to the hospital and health system. Make sure you’ll be getting dashboards that show essential data immediately, such as your KPIs and information to manage your lab outreach business. Additionally, you need to be able to delve into the data and analyze it with easy-to-use business intelligence tools.

A partner that offers flexibility

You want to have visibility into how your operation is performing and its contribution to the hospital and health system. Make sure you’ll be getting dashboards that show essential data immediately, such as your KPIs and information to manage your lab outreach business. Additionally, you need to be able to delve into the data and analyze it with easy-to-use business intelligence tools.


Learn more about how lab-specific systems and outsourcing solutions can improve laboratory financial performance, augment EHR efforts, and deliver key information and capabilities to the hospital and health system at large in this white paper, "Making a Case for Purpose-Built RCM: How Actionable Data and Lab Visibility Benefits Health Systems."
Read Now

Published by XIFIN
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