The Benefits of Outsourcing Medical Billing for Outreach Labs

A step-by-step strategy to gain administrative buy-in

Whitepaper | Heather Agostinelli
Director of Laboratory Operations for Change Healthcare

Heather has more than 25 years of experience in revenue cycle management.

Hospital-based ‘outreach’ laboratories are operating in an era of intense competition, rising costs, and increasingly complex regulations. One of the keys to succeeding in this environment is efficient revenue cycle management (RCM)—which includes ensuring accurate billing and compliance.

Unfortunately, optimal RCM is not always attainable due to several limitations, including:

  • Traditional hospital billing platforms are often unable to handle multiple fee schedules. [This can also limit the outreach lab’s ability to compete with other reference laboratories]
  • Central billing office staff often has difficulty processing an outreach lab’s high volume of small-balance claims. The net result can be chronic write-offs that may snowball, endangering the lab’s financial health
  • Financial reporting specific to outreach labs is generally absent within hospital billing applications, a shortcoming that can further undermine client and sales management as well as hinder strategic planning for the lab’s growth

As a result of these challenges, a growing number of hospital laboratories are outsourcing their medical billing to third-party billing vendors. Outsourcing bypasses the technological limitations of legacy hospital platforms and brings lab-specific expertise and an accounts-receivable focus to billing and compliance processes. The combined effect can be a significant increase in collections, reduced billing costs, lower regulatory risk, and improved financial reporting.

By carefully identifying key decision makers, clearly articulating the benefits of outsourcing, and addressing all questions and concerns openly, lab leaders can often convince even the most hardened skeptic that outsourcing outreach billing is in the best interest of both the lab and hospital.

Convincing the C-Suite

Winning administrative support for outsourcing medical billing can be a major challenge. Internal resistance to change, turf battles, and a general lack of knowledge about the outreach lab business may derail the best-laid plans. That’s why it’s vital lab administrators develop a comprehensive strategy for securing C-suite buy-in.

By carefully identifying key decision makers, clearly articulating the benefits of outsourcing, and addressing all questions and concerns openly, lab leaders can often convince even the most hardened skeptic that outsourcing outreach billing is in the best interest of both the lab and hospital.

Crunch the Numbers and Emphasize Benefits

The first step in creating a successful buy-in strategy is to clearly document the limitations of the existing system and the resulting financial impact. This involves evaluating denials, quantifying small-balance write-offs, and analyzing bad debt. Then, present this information within the context of the lab’s existing financials to demonstrate how improved billing management could benefit the bottom line.

Next, work with an outsourcing vendor to develop a comprehensive overview of the full range of benefits. An experienced vendor will be able to assess current claims and provide estimates for both revenue gains as well as reductions in A/R days, bad debt, and billing expenses.

Look for a vendor that offers:

  • A proven ability to increase collections through a best-practices operational approach
  • Staff experienced in handling high-volume, small-dollar lab claims (to reduce write-offs)
  • Automated front-end rules engines capable of producing clean claims (to reduce back-end errors and denials)
  • Electronic claims submission and remittance
  • Receivables monitoring to ensure payers are reimbursing according to contract terms
  • Assistance with managed-care contract negotiations
  • Monitoring of client statistics to aid in physician education
  • Robust compliance monitoring to reduce regulatory risk
  • Comprehensive daily reporting, including a full range of practice metrics, denial-management data, revenue-by-clinician, and national comparative benchmarking

Make the Case

When preparing your presentation, be sure to include a description of the vendor’s scope-oftraining for billing staff and its experience with labs and payers across the country.

Next, use comparisons to illustrate the differences between the hospital’s current outreach-lab reporting capabilities (if any exist) and the range of detailed reporting available through the vendor. Today’s advanced laboratory billing applications produce a wealth of highly granular information that can help managers make more informed operational and strategic decisions.

Additionally, explain the ”24x7” web-based systems that allow administrators to monitor performance via dashboards, with the ability to drill down to assess a full range of key performance indicators. Managers can use the dashboards for benchmarking and customizable data mining, so they don’t have to wait for month-end reporting to explore and correct issues.

Finally, in developing a winning strategy, pay special attention to the vendor’s compliance tools and its knowledge in the laboratory regulatory arena. Given today’s complex and constantly changing regulatory environment, few laboratories—regardless of how capable—have the resources required to stay fully abreast of all compliance issues. In contrast, a national billing firm often has multiple individuals dedicated to carefully tracking both public and commercial compliance matters, which enables the vendor to alert laboratories to substantive changes or new rule interpretations. Because the penalties for federal and state non-compliance have never been higher, and enforcement activities never more aggressive, any steps that can reduce exposure are vital for both the lab and hospital.

For example, under the Protecting Access to Medicare Act (PAMA), applicable laboratories are required to report private payor data including the code, reimbursement per code, and volume per test for January 1–June 30, 2019. While affected labs have until March 31, 2020 to report the data, hospital outreach laboratories needed to have systems in place to capture this data at the CPT®/HCPCS 1 code level beginning January 1. To encourage labs to report full and accurate data, the PAMA law authorizes CMS to impose up to $10,000 2 per day in civil penalties on laboratories that fail to report, or for each omission or misrepresentation in reporting.

Target the Decision Makers

Once you have all relevant information assembled, the next task is to identify your organization’s key decision makers and construct a time line and process for presenting the data.

Generally, several individuals will want or need to be a part of the decision-making process. However, it’s essential to understand at the outset where the true ‘go/no-go’ power lies so you can focus your efforts. After identifying this authority, you can request decision criteria to ensure all points are addressed, then schedule a series of meetings to present the information.

Anticipate and Prepare

The key to a persuasive presentation is to not only present your case, but to also anticipate the questions you will receive and prepare your answers in advance. This will show decision makers you’re in tune with their concerns and you’ve done your homework, and ultimately, it will help to streamline the debate process.

Though it may seem counter-intuitive, if questions you’ve anticipated aren’t posed during presentations, it’s in your best interest to share them proactively. This enables you to cover all bases and reduces the possibility your strategy is later denied behind closed doors due to concerns you didn’t get a chance to address. You can further solidify your presentation by preparing an ‘FAQ’ document with the questions and answers for later reference; this will also keep your team on the same page with responses.

The key to a persuasive presentation is to not only present your case, but to also anticipate the questions you will receive and prepare your answers in advance. This will show decision makers you’re in tune with their concerns and you’ve done your homework, and ultimately, it will help to streamline the debate process.

Have a plan in place in case a question is posed that can’t be answered; designate a person to obtain the answer and respond. And make sure everyone is aware to whom future questions should be directed.

Finally, it’s critically important to identify a champion outside the lab who can continue to resell the benefits of outsourcing to colleagues and others on the decision-making team. This person helps keep the process moving and identifies areas of weakness that need further attention. Pick a champion who has enough knowledge about the vendor to aid in messaging outside of presentations to prevent the project from derailing.

Plan to Succeed

In today’s tough healthcare environment, outsourced billing represents the most logical path to financial stability for many hospital laboratories. Invest the time in developing a detailed strategy to win approval from C-level executives.

By identifying key decision makers, clearly articulating the shortcomings of the existing billing system and processes, and demonstrating the multitude of other outsourcing benefits, you’ll have made a case that’s difficult to reject.

1 CPT is a registered trademark of the American Medical Association.
2 Protecting Access to Medicare Act.

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