In today’s shifting healthcare environment, lowering cost of care and increasing reimbursements are more important than ever. For laboratories in particular, finding the best ways to increase both revenue and operating margins is of critical importance.
The complexity of lab revenue cycle management (RCM) is unmatched in all of healthcare, as labs routinely perform thousands of tests – and that number is continuously growing. Each of these tests brings its own coding and billing challenges, which are exacerbated by constantly changing requirements and rules for coverage and reimbursement by third party payors. With all of these challenges, RCM is an important way that lab leaders can increase the profitability and valuation of their business in the near term.
Challenges abound in the lab market No one can say for certain how the healthcare landscape will evolve over the next few years, let alone the next decade, but several things are clear. Insurance companies will continue to look for ways to cut costs. Therefore, the already small profit margins of some labs will evaporate unless proactively managed. Volume of tests will continue to go up, but economies of scale will be necessary to take the greatest advantage of this growth. Even the largest labs are likely to see reductions in profit margins, meaning labs of all sizes must find ways to maximize the returns of every claim.
The good news is that RCM is one of the fastest routes not only to financial improvement, but to successful navigation of the financial and regulatory challenges of today’s market. Some of the main challenges facing labs that RCM can address include compliance, coding issues and manual workflow inefficiencies. Here’s why addressing these areas is so critical:
• Avoid costly penalties through compliance – Many labs do not fully realize how serious non-compliance can be. In the eyes of the Office of Inspector General (OIG), a mistake by the billing staff is not distinguished from fraud – and there are serious penalties. For example, an average lab testing claim that might originally cost around $50 could result in potential damages in the amount of $30,000 due to a single incorrect procedure code. Reporting around the Protecting Access to Medicare Act (PAMA) is another challenge for labs. Under PAMA, there are strict penalties for non-reporting, and labs can face up to $10,000 in penalties per day for failure to report, or misrepresentation or omission in reporting applicable information.
