Can Labs Survive? The Impact of Reimbursement Changes in Medical Lab Billing

A quick guide to medical laboratory billing

In general, the medical laboratory billing cycle is a complex process of ongoing interactions between providers, labs, and insurance companies, or other payers who compensate for the time, labor, and materials used.

It’s a critical component in ensuring accurate patient diagnoses and treatment documentation and facilitating appropriate reimbursement from insurance companies. This multifaceted process involves the following:

• Patient registration.
• Confirmation of medical coverage
• Coding of services
• Claim submission
• Follow-up

Running a clinical lab means you have big shoes to fill. It comes with its list of challenges, the most significant of which is getting proper payment for services rendered.

Check out our Case Study: Diagnostics Lab’s Average Payment Increased by 60% with Synapse

Understanding the current reimbursement situation for labs

Here’s the thing: Reimbursement for laboratory services comes from two third-party payer sources, the government and the private sector. Despite its complexity, the main purpose of third-party payment is to allow patients access to laboratory services. This process considers many components, including coverage decisions, procedures and diagnoses, and payment methodologies.

However, under the Protecting Access to Medicare Act of 2014 (PAMA), 75% of the most commonly ordered laboratory tests had payment reductions, culminating in a nearly $4 billion decline in lab reimbursements for Medicare beneficiaries in 2018-2020. Now, PAMA pending reimbursement cuts between 2022 and 2024 are capped at 15%.

Serious discussions on the financial impact of PAMA’s implementation on the clinical laboratory industry revealed these challenges:

• Reducing service offerings: Some labs have turned house calls into homebound patients. They discontinued 24-hour emergency (STAT) testing.
• Reconsidering their client lists: Pressured by the price cuts, labs examined their costs, patient population, and location before performing their services.
• Less staff and workforce: To adapt to post-PAMA, they have reduced their workforce, leaving fewer people to handle increasing demands for lab tests.

As labs expressed in an impact survey in 2023, reimbursement rates significantly impacted their capacity to offer specific tests. They hesitate over tests whose costs need to be fully covered. Thankfully, the Saving Access to Laboratory Services Act (SALSA), a bipartisan bill, aims to prevent these challenges for labs and patients with a more accurate picture of current test reimbursement rates across all laboratory types. It proposes to cap payment reductions at 5 percent per year rather than 15%.

While we understand that changing the current test reimbursement rates across all laboratory types is difficult, Synapse believes you can use effective solutions to manage your reimbursements.

What can you do to survive recent reimbursement changes?

With SALSA on its way, this is a perfect time for your laboratory to invest in improved RCM operations. These come with the automation and rules utilities of laboratory software systems. Utilizing automation in claim submission, especially for standard test cases, can streamline the submission process, reducing the risk of human error and variability. This leads to more consistent and reliable data—no need to repeat testing.

Moreover, regular training and updates on coding standards are a must. Don’t fall prey to the same errors in coding and billing. Make it a habit to stay up-to-date about insurance policy and regulation changes, ensuring lab billing practices align with current requirements. Our professional coders and billers are always on top of their game with compliance regulations. See how we’re helping laps in our case studies.

From surviving to thriving: Grow with Synapse Lab Billing

At Synapse Lab Billing, we decrease the administrative burden of data collection and reporting, reducing the scale of year-on-year funding cuts. Our expected outcome for you? Your patients gain greater access to testing, and your practice is more willing to innovate or adopt new tests, increasing lab resilience. These are some of the effective solutions for your labs to thrive during times of change:

• In-depth knowledge of laboratory billing practices.
• Expertise in navigating payer requirements.
• Trustworthy resources to streamline billing operations effectively.

Connect with us to learn more about the Synapse difference. Contact us today!

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