College of American Pathologists
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  Ratcheting up labs’ revenue cycle management


CAP Today




May 2010
Feature Story

Karen Wagner

What does a revenue cycle management system have to do with health care reform? Plenty.

Health care reform calls for reducing costs, in part, by not paying for ineffective care. And to differentiate between effective and ineffective care, the government needs data—lots of it. That’s where RCM systems come into play.

These financial systems can hold a variety of data, including information pertaining to such areas as test utilization and ordering as well as pricing. “Labs need to be very, very proactive in utilizing and sharing data with payers that provides this type of information,” says RCM expert Lale White. “As a first step, they need to accumulate data within their own system.”

White, CEO of the San Diego-based software company Xifin, gave a presentation last month at the Executive War College on maintaining labora-tory cash flow in the face of emerging federal policies.

Labs will be playing a key role in not only gathering and providing relevant data, White explains, but also using it to help develop value-based pricing—or pricing that is based on cost and outcomes rather than utilization—a key tenet of reform.

The message is simple: The days when RCM systems were used solely for billing and accounts receivable functions are long gone. Today’s RCM systems must perform numerous functions to meet regulatory and economic requirements.

So what specifically should RCM systems do? They should be able to address federal regulations resulting from the health care provisions of the Amer-ican Recovery and Reinvestment Act of 2009; identify test utilization and ordering patterns; analyze and establish pricing policies for lab tests; provide information to facilitate contract negotiations; and integrate with other types of information systems.

Federal regulations

Because RCM systems contain such codes as CPT, ICD-9, and the upcoming ICD-10, which represent tests ordered and their corresponding prices, they are valuable sources of data for the government and payers, White says. Data coordinated by the Federal Co-ordinating Council for Comparative Effectiveness Research, which was established under the American Recovery and Reinvestment Act, will be used to deter-mine which health services are most cost-effective.

An RCM system has to be able to identify the types of data that will be useful for these comparative effective research, or CER, requirements, White says. And labs should be prepared to provide a lot more of these data in their claims submissions to payers, particularly federal and state payers, because the latter are going to be asking for greater amounts of information to evaluate outcomes.

Labs need to understand that the time to make sure their RCM systems, and all components of their laboratory information systems, are capable of gathering and providing such data is now—before federal regulations kick in within the next few years, she emphasizes.

Pricing and utilization

As payers move toward value-based pricing, White says, labs need to recalculate how they use diagnostic tests. Labs get reimbursed for tests even when they’re used improperly, she continues, such as with redundant or defensive testing. But payers no longer want to pay in such situations, so labs have to take some responsibility for making sure physicians are ordering the right tests at the right time.

By using the data from an RCM system, labs can play a greater role in this process, White adds. “What we’re talking about here,” she says, “is the analysis required to develop coverage criteria retrospectively.” Labs use this information to negotiate reimbursement guidelines with the payer and then incorporate the information into a decision-support system for the practitioner. The decision-support system helps the physician select the most appropriate diagnostic test for the patient while providing enough data to prevent overutilization, she explains.

The advent of molecular diagnostics tests is a good example of why and how labs should work with payers to set reimbursement rates, White says. In contrast to typical reimbursements of around $20 for routine clinical tests, molecular tests can be reimbursed at $3,000 or more. However, there are only 21 CPT codes, representing about 1,500 services, related to molecular diagnostics, meaning the codes don’t offer much detail about the level of service. This often leads to delayed payments and claim denials, which labs can then appeal—a costly process for obtaining reimbursement.

It’s necessary to streamline the process for determining value for molecular and other high-cost tests, White says. Labs need to be proactive by discussing tests with payers prior to using them and by determining coverage criteria—or for what medical conditions the test can be performed—to guarantee reimbursement.

Data in the RCM system, such as test ordering patterns, can be of great value in developing such criteria. Payers also take into consideration the research-and-development costs associated with such tests. “But the bottom line is, payers really want to establish clinical utility at this time in order to [determine reimbursement for] a molecular diagnostic test and determine the circumstances under which the test should be covered,” she says. “That means establishing clinical care guidelines and evidence-based coverage criteria for the payer and a decision-support model for the ordering practitioner to ensure the test is ordered appropriately.”

Data mining

Other key components of a strong RCM system, says White, are a data warehouse that also contains information from the LIS and an effective report writer for data analysis.

Labs should be able to use data from an RCM system to negotiate better contracts with payers, she explains. These data are vital for gauging payer performance and comparing payers. For example, a robust RCM system should allow a lab to review data on reimbursement levels to see how well a payer is reimbursing a claim—is the payer generally reimbursing the claim at 100 percent or at a lower percentage? A lab should also review how many days it takes to receive reimbursement, how many times a claim is rejected, and the number of documents a payer requests for submitted claims.

A lab can use this information to compare the performance of various payers and as leverage to gain better rates or to get a payer to reimburse claims in a more timely manner.

Laboratories should also mine physician utilization data for contract negotiations, White says. These data can show how well a lab works with its physicians to make sure they’re not overusing certain tests, for instance.

“If the payer can see value in what is being provided by the laboratory, and they can see how they can control the rest of their health care dollar simply by working with a strong lab that has good policies in place, [that lab] can get paid more for its tests,” White says. “That is a good way to use contract negotiation statistics.”

Systems integration

It’s important that RCM systems be able to integrate easily with other information systems, whether it’s the payer’s system or an electronic health record system, White says. Billing data paired with diagnostic lab results provide most of the information required for outcomes data. Therefore, labs need to partner with payers to establish a means of electronic communication through which data can be shared and analyzed and used proactively to control costs.

Likewise, a patient’s personal electronic health record can serve as a repository of all coding and billing data for the tests the patient has under-gone, making it easier to transfer a complete history of health records, White says.

Web-based interfaces are the key to such integration, she continues. The “technology we have today can already accommodate many of the ana-lytical components we’re talking about.”

Karen Wagner is a writer in Forest Lake, Ill.

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