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The Connected Laboratory: A New Approach to Laboratory Billing

Shrinking margins are forcing labs to consider a new model that connects the laboratory information system and the revenue cycle management

Michael Kalinowski

Michael Kalinowski is the director of communications and media relations for LigoLab Information System, a leading provider of innovative end-to-end health care software that partners with laboratories, servicing more than 100 facilities nationwide.

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Published:Jun 26, 2020
|2 min read
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If you were to conduct a cross-country poll of clinical laboratory operators, you’d find that the majority of them still deploy two separate stand-alone software solutions: one for laboratory information (LIS), and one for revenue cycle management (billing).

That would be no surprise. Laboratories have traditionally handled billing this way, as a distinctly separate process from operations. 

Going even further, it’s a sure bet that most of these same siloed laboratories begin the billing process after the lab report has been finalized. This often results in a high number of denied claims because they were sent to the payer missing basic patient information.

It’s a common problem for all providers, not just laboratories that rarely interact with patients. In fact, across the US, an estimated 35 percent of insurance claims are denied annually due to missing or inaccurate patient data. 

The traditional wait-until-the-end approach to laboratory billing worked just fine when laboratories were more profitable, and margins were high enough to offset the denials and write-offs that accompany this back-end model. But downward market trends and shrinking margins are forcing labs to consider a new model—one that connects the laboratory information system and the revenue cycle management workflows onto one common database, one that produces end-to-end data integrity, and one that gives them a head start on the billing process. 

Bridging the Gap Between LIS and RCM

Still in its early stages, a much-needed paradigm shift within the laboratory industry has begun. The old and disconnected back-end billing process is being replaced with a new connected one that enables labs to begin the billing cycle as the order is received. This new model is supported by innovative tools that optimize cash collection and protect laboratories from reimbursement cuts, fast-changing payer requirements, growing patient responsibility for health care costs, and other external threats. 

Real-Time RCM at Order Entry

When RCM functionality is interwoven into an LIS workflow, labs can leverage integration with clearinghouses and other third-party billing services to automate administrative tasks. Automation can lead to revenue gains, as the laboratory billing team that was bogged down reworking claims becomes free to focus on and resolve the more difficult cases in a timely manner, unlocking what could have been lost revenue. An added benefit is the operational and financial insight gained through LIS and RCM integration. This integration allows for visibility of both workflows on one platform, which can help lab operators identify potential problems and bottlenecks and resolve them quickly.  

Short-Term Improvements to RCM Workflow

Deciding to go with an enterprise-level software solution that incorporates RCM functionality throughout the laboratory workflow is a sizable investment and a major change, so lab operators are encouraged to do the necessary research to find out if upgrading to a fully-integrated LIS and RCM platform makes sense for them and their businesses. In the meantime, there are actionable steps that any laboratory can implement today to help ensure more clean claims and less back-end work for the billing team. Putting together a simple RCM checklist of manual administrative steps to take at order entry can also quickly help improve the bottom line. 

With a change in mindset and by embracing the tools now available, laboratories can become more efficient and more profitable.