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As the number of newly developed molecular and genetic tests skyrocket, labs face obstacles in determining which third-party payors cover which of the more than 1,500 diagnostic tests on the market. This can lead to 10 to 15 percent in lost revenue as labs find themselves writing off tests or performing costly billing tasks (e.g., resubmitting/appealing claims denials) while hospital labs that outsource esoteric tests end up saddled with reference lab bills that can't be collected from health plans or patients.

About three years ago, MuirLab in Walnut Creek, CA, like many clinical labs across the country, began confronting a surge of new molecular and genetic tests. While filled with promise for faster diagnosis and better treatment for patients, most of these tests were so new that neither physicians nor the lab completely understood medical appropriateness and coverage rules. That knowledge gap created problems in the reimbursement process.

Coverage and expected reimbursement is determined early in the lifecycle of an order. However, many labs are not aware of this and end up with costly write-offs or claim resubmissions. "We were getting far more denials on the back end than we really should because we haven't collected all the information that we needed to at the front end of the process," says Michael Tarwater, MuirLab's director of laboratory information systems. "Ensuring reimbursement becomes even more important since we handle and primarily send out costly molecular tests."

A Solution

So in 2007, MuirLab began working with a Web-based diagnostics management solution that provided informed test selection as well as electronic routing and automatic authorization capabilities based on centralized rules for coverage and orders. By implementing a billing optimization program, the company would shift much of the patient registration and eligibility determination from its back office operation to its 29 patient service centers, creating greater efficiency and financial savings as each test moves through the billing process.

MuirLab's decision to adopt such a system was driven by the recognition that its testing business would most likely grow significantly in coming years. In fact, the molecular and genetic testing market is already at more than $5.5 billion annually and projected to double by 2012.¹ New tests continue to arrive at a fast pace with costs ranging from $40 to thousands of dollars each.

"We didn't want to just replace what we're doing today, we wanted to change the entire process," Tarwater explains.

How It Works

Early in the lifecycle of an order, either at the point of order entry or before an order enters the laboratory information system, their solution, from McKesson, evaluates orders against clinical, payor and lab-specific requirements, flagging potential problems such as lack of eligibility or missing pre-authorizations. An industry trend toward greater transparency is enabling availability of this information at the moment it's most needed. More stakeholders are opening their individual decision processes related to pricing, coverage and treatment to attain better results for everyone. Labs no longer need to spend time and resources attempting to contact physicians or their patients to gather information needed to conduct and bill for tests. This reduces delays and helps ensure that health plans reimburse quickly.

Accelerating the process: McKesson's InterQual^® Molecular Diagnostics Criteria, which brings evidence-based clinical decision support to the point of care to support test selection and approval. Payors receive assistance in making medical service policy and authorization decisions, while labs and ordering providers get help during their ordering workflow. Criteria is based on a rigorous analysis of scientific literature, and covers close to 400 high-volume, high-cost molecular and genetic tests in areas such as infectious disease, oncology and inherited illnesses.

By automating coverage determination and removing obstacles to payment, MuirLab substantially reduced wasted resources. Staff members are shifted away from the mundane tasks of finding and correcting claims problems and into higher value activities. In an era of declining reimbursements and smaller margins, those efficiencies are vital to the success of clinical labs that are increasingly called upon to handle a complex and costly array of new tests and procedures.

Matt Zubiller is business leader for Advanced Diagnostics Management at McKesson Corp.

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