Transform System Strategies into Laboratory Action to Drive Long-Term Success
Strategies to improve revenue and customer satisfaction can be advanced through laboratory actions to build success and secure long-term goals
Tyler is from Green Bay, WI, and graduated from the University of Wisconsin-Oshkosh in 2012. He is an ASCP certified Medical Laboratory Scientist and the Directory of Laboratory & Pathology at Emplify Health. Tyler has been at Emplify Health since 2015, providing comprehensive oversight of multiple high and moderate complexity laboratories. He has an additional 9 years of experience as the Technical Supervisor of Microbiology, Molecular Microbiology, and Immunology. He also serves on the laboratory technical advisory group (LabTAG) for the Wisconsin Clinical Laboratories Network (WCLN), serving as the representative for Region 7.
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This year has brought ample confusion and jitters to many healthcare professionals as political landscapes change, causing angst and shakeups in day-to-day operations. From grant cuts to pauses in payor reimbursements, nobody can guess what future upheavals await.
Laboratories can still flourish by focusing on formulated system strategies like improving customer satisfaction and managing revenue resiliency. The challenge facing laboratory leaders is taking system strategies and converting them into tangible actions. To complement any action plan, leaders should also share why specific strategies were chosen.
Why is strategy so important?
Understanding “the why” behind supporting system strategies is as important as it is empowering. Aligning strategies to day-to-day operations will help to drive active participation toward the common goal.
REVENUE RESILIENCY
Revenue (and cost) are primary endpoints of most healthcare system strategies, with the intent to maintain sustainable margins. Like any business, the strategy of revenue growth and cost reduction are paramount to long-term success. A healthy margin serves as a pillar to support continued investment in infrastructure, equipment, and personnel. There is immense pressure to adapt and improve as science evolves and technology advances to remain competitive in the market or compliant with new guidelines.
CUSTOMER SERVICE
Though a patient’s choice in healthcare provider is limited, improving customer service continues to be an important strategy across many healthcare organizations. A primary reason is due to Medicare reimbursements being linked to Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS) scores. A second reason to focus on customer service is patients with different tiers of coverage with multiple healthcare options. Finally, a third reason is the growth of private holistic care offerings as an alternative option for outpatient care. Importantly, outpatient care is viewed as a growth pipeline for specialty services and is critical to downstream revenue generation in orthopedics and surgical services.
What does the reimbursement landscape look like?
The healthcare industry faces financial headwinds with an aging population that skews the payor mix toward government programs. This generates a double whammy of increased healthcare needs at reduced reimbursement rates. Don’t forget planned cuts to Medicare reimbursement rates as another pending financial headwind for laboratories.
Read more: Top Threats Facing the Clinical Laboratory Industry in 2025 and Beyond: What Leaders Need to Know
Also concerning is that uninsured or “self-pay” patients are projected to increase over the next decade. This can make collection for services more difficult as consumers struggle to meet other debt obligations, leaving medical bills unpaid or sent to collections.
Medicare advantage (MA) is an increasingly important source of revenue for healthcare systems. Contrary to Medicare, MA plans are generally more restrictive.
Commercial payors to the rescue? Not so fast. While inflation ran unchecked with increases to consumables, equipment, and personnel in health care, the corresponding commercial payments tended to lag. This is because agreements are inked with fixed payment rates and commercial payors can strong-arm healthcare systems into accepting lower payments as a reasonable alternative to no payments. Meanwhile, those same insurers look to pass on these cost increases directly to the consumer via higher premiums and deductibles.
Another concerning trend is the reported increase in commercial payors using artificial intelligence and machine learning tools to review and deny initial claims. According to a large national healthcare survey, nearly 15 percent of all claims submitted to commercial payors are initially denied. This complicates timely payment and requires additional health system resources to appeal the claim for payment.
What objectives and actions drive revenue resiliency?
Laboratory revenue is derived from three primary sources: Inpatient, outpatient, and non-patient revenue.
INPATIENT REVENUE
Inpatient revenue consists mostly of payments from government or commercial insurers based on the diagnosis-related group (DRG). In this model, inpatient reimbursement is a fixed payment amount based on the reason and complexity for hospitalization with the payment fixed to the average cost for treating patients in that DRG. Lab testing is covered within the DRG lump sum payment. Therefore, labs’ most effective contribution is through improving service utilization.
This is broadly applicable with many possible objectives and actions for laboratories, such as:
OUTPATIENT REVENUE
Outpatient revenue is the result of patients completing orders from their primary or specialty care provider. Payments for outpatient services generally result from a payment rate based off the clinical laboratory fee schedule.
Here are some actions that labs can take that support the revenue resiliency strategy:
Actions | Logic |
| 1. Establish appropriate use of advanced beneficiary notices (ABNs) | ABNs ensure providers and patients are appropriately utilizing healthcare resources and create a chain of accountability |
| 2. Target and reduce outpatient test leakage to third party laboratories | Primary care or specialty providers may unwittingly be sending patients to third party draw sites to have their labs collected, allowing revenue and patient data to escape from the system |
| 3. Implement medical necessity and prior authorization test alerts | Select tests prior approval to be covered by insurance. Review select national coverage designations and provider specific test policies (e.g., lipids, metagenomics, vitamin D, etc.) |
| 4. Improve test utilization | Outpatients may not necessitate large syndromic multiplexed panels that have restricted insurance coverage. Consider more affordable and covered single-plex or limited multiplex panels |
NON-PATIENT REVENUE
Non-patient revenue results from specimens collected external to the health system that are brought in through outreach programs. Laboratory outreach caters to a wide variety of clients and serves as accretive volume and revenue streams for clinical laboratories. The client population from outreach work is a blend of commercial, government, and direct client payors.
Often, client fee schedules can be set lower than commercial and government payor rates. This is because client billing result in more timely payment, fewer claim denial/rework issues, and therefore lowers overhead operational costs.
Additionally, the added volume from outreach can justify in-sourcing additional tests that previously were too costly to perform and reduce the overall cost per test. The added volume further dilutes the employee salary among all tests performed.
How can you improve customer service?
Highly satisfied customers are less likely to switch providers, contributing to revenue stream at present while building out long-term revenue resiliency when future services are needed.
However, keeping customers satisfied in the modern era of medicine is complicated by several variables:
- Navigation complexity
- Trust and clinical expertise
- Insurance coverage complexity
- Increases in individual deductible and patient responsibility
Laboratories can advance customer service strategies by implementing actions addressing the above variables. Labs can help patients avoid complications with insurance navigation and out-of-pocket costs by reviewing coverage guidelines from CMS and any commercial payors in the patient population.
Lipid testing is a good example of a test with a National Coverage Determination (NCD) from CMS that dictates when testing is appropriately covered.
Be aware that in some cases, the Medicare administrative contractor (MAC) may develop a local coverage determination (LCD) that is specific to the their service area. Work with IT/IS can also be leveraged to generate authorization alerts or diagnosis code reviews to ensure patient testing is appropriately covered. This can reduce patient responsibilities and associated patient complaints regarding billing.
Hospital experience surveys are another opportunity to target customer service improvement ideas. Labs can review the most recent HCAHPS survey questions to glean insight on areas that can be improved upon. In the current version, several patient questions are tailored toward the courtesy of staff, respectfulness, active listening, and updates regarding care. There is also a question regarding care teams working well together. That may present an opportunity for labs to evaluate conversations with nurses and providers on critical results, redraw needs, test necessity/utilization, etc.
Turning strategies into tangible actions
As system strategies are shared with frontline staff, be sure to explain the “why” behind the strategy to drive home the importance of the objective. Strategies not supported by staff are unlikely to be achieved, therefore, building support at the operational level is critical.
Putting system strategies into action can be a daunting task for any leader. Often, system strategies are open ended and encompass a state of utopia. However, lab leaders that can distill strategies into clear and defined actions for the team will drive long-term system success as goals are realized.
