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Toxicology Labs – Not All Samples Are Created Equal

August 31, 2016

Toxicology LabsHartford, CT -PractiSource, LLC
Toxicolology reference laboratories get excited about increases in volume of samples or specimens being screened by their laboratories. And they absolutely should – after all, laboratories are dependent on testing samples as their only source of income. However, it is important to note that “more” does not always equate to “better”. Why? Because from a reimbursement standpoint, not all samples are created equal.

For example, some insurance plans do pay better than others. This is quite easy to figure out for in-network laboratories, but a bit more difficult (and even more important) for out-of-network laboratories. Before we continue, let’s stop for a moment to understand the difference between in-network and out-of-network.

“In-network” means the lab has a contract with the particular insurance payer, and has associated contracted rates.

“Out-of-network” means the lab does not have a contract with the payer, and is subject to the individual patients out of network benefits for the particular plan they have (not payer, but plan). Note: some plans have no out of network benefits at all.

How much does a specific insurance pay?

This is a question we get asked all the time. Many billing services will tell you some artificial number. For in-network labs, we can usually calculate the figures based upon past history or contracted rates –although each lab may have different contracted rates. Therefore, for in-network labs, the payment amounts are generally quite predictable. However, the truth is that with few exceptions, this is hard to predict for out of network labs. The difficulty lies with the number of plans within each individual insurance payer, coupled with the patient’s current status as it relates to out of network deductibles and co-insurance.
Let’s take another pause to understand the difference between insurance companies and insurance plans. We all know what an insurance company is (ie. Cigna, BC/BS, Aetna..etc.), but plan are different. Each insurance company may have hundreds, if not thousands of different plans. Some are employer-specific, others are offered in some states, not others..etc. Each plan has its own intricacies. Some are better than others in terms of benefits. Some, for example, some have no out-of-network benefits or have high deductibles. So if you are an out-of-network lab and perform tests for patients with an insurance plan with no-out-network benefits, you are likely not going to get paid. Furthermore, plans with high deductibles, or high co-insurance amounts, will also have a profound impact on the actual collected amounts, especially since much of the balance will be owed by patients who, often times, lack the resources to pay for such services (especially depending upon the source of the referrals).

It is important to understand that different plans within an insurance payer simply pay differently. A few months back, PractiSource held an informative webinar on the topic. Three examples of how claims were adjudicated (properly) by payers were given. One claim paid over $1000, then next about $300, and the last $0. What we didn’t tell attendees until later was that ALL of the claims were from the same insurance company, and were even presented in the same Explanation of Benefits (EOB). The difference was in the various plans within that insurance company to which the patients subscribed.

Why wasn’t this an issue a couple years ago?

There are a few reasons. First, a few years back, the amounts paid to toxicology reference labs for some of their claims were very high, which offset the zero or low pays. Laboratory executives often just looked at how much was flowing into their bank accounts, without regard to what was not getting paid. Incidentally, some of those artificially high payments were due to incorrect billing practices, and payers are now performing take-backs for overpaid claims, placing labs at tremendous risk. Second, as insurance companies scramble to provide services at rates which are attractive to consumers, the trend has been to increase out-of-network deductibles and co-insurance amounts. As healthcare costs climb, fewer people are selecting the “Cadillac” plans in favor of lesser, more restrictive plans often within the same company. Third, insurance payment amounts are trending lower for toxicology services. With Medicare leading the way (see our posts from earlier this year regarding the latest toxicology screening codes and insurance reimbursement rates), other insurances are following their lead and use CMS’ example as justification for the lower rates. This is not unique to the laboratory world as we have seen it happen in many medical specialties over the years.

Either way, the reality is clear. In order for toxicology reference labs to prosper, they must not only maximize revenue for the samples they get through proper billing practices, but also determine which sets of samples are profitable and which are costing them money.

What can be done?

First, as a billing and A/R management company, we of course have to promote the fact that you must maximize revenues through proper billing processes and protocols. That means billing correctly, following-up diligently (holding payers accountable), and creating process workflows that enable to the laboratory to run as efficiently as possible. Most of the billing companies that were “performing” well two years ago when they could do no wrong due to the high payment amounts, are beginning to struggle as they are simply not capable of the advanced processes engineering, scalability, and expertise required today. If you don’t know if are leaving money on the table or maximizing reimbursement, think about getting an analysis from a reputable firm like PractiSource. Now that we are done promoting ourselves, let’s look at a few other ways things labs can do to improve their bottom line.

Next, labs must get away from the notion that more samples always means better. This means taking a hard look at which samples are worth taking, and which are not. Some of this is quite simple. For example, if you have a medical practice that wants to send your lab hundreds of Georgia BC/BS urine toxicology samples, and you are out-of-network with BC/BS in GA – you may want to re-think that if they almost always pay to the patient (guarantor). Take another example in which a lab which came to us with nearly 7000 new samples per month. While this was exciting, nearly ALL of those sample were out of state Medicaid with no out of network benefits. And they are an out of network lab. Regardless of which billing company you choose, that’s a losing proposition. It’s not about the number of samples you process – it’s about the number you process for which you get paid.

While those are more extreme examples, the true difference is normally in the details and often overlooked. The answer to this is proper Business Analytics. Well-run laboratories constantly look over figures to evaluate specific payer mixes and related payments. For example, you should run financial analytics not just on the payer, but specifically to the referring physician or facility. This is important. It’s why PractiSource provides our laboratory clients with our Precision Business Intelligence (PBI) analytics suite. We did some programming to tailor the system specifically to toxicology reference laboratories. For example, we created dashboards which show how much revenue is being derived by referral source (or by sales person, or both…etc.). This provides a clear picture not only the volume of samples being tested for that referral source or physician, but also what the corresponding revenues are.

By looking at data analytics in this manner, it becomes easy to determine which referral sources are providing your laboratory with profitable samples, and which are referring less than optimal business. Such analytics allow laboratory executives to make key business decisions.

Some may argue that poor samples are essentially “loss-leaders” for the better business. While this may be true, it only stresses the fact that labs need the data and analytics to determine if such loss-leaders are indeed profitable in the long run, or if they represent just plain old losses. Again, proper analytics capabilities are the key to making these determinations.

Become more efficient. As a company which works with quite a few laboratories, we get to tour labs on a frequent basis. It is interesting to see the difference in efficiencies from one lab to the next. Interestingly enough, the highest volume laboratories with short turn-around times are not the ones with the most staff. Those just happen to be the most efficient labs which make the most of their systems and resources. We suggest looking into everything from LIS system performance to internal and external processes. If you don’t know how, find a good consultant who can assist. Don’t know one? Let us know and we can refer you to a few who we have worked with in the past. Laboratories must increase efficiency to gain greater profitability. Failure to do so not only leads to lower net revenues, but also in difficulty competing against more efficient laboratories.

In conclusion, labs which make themselves more efficient, utilize analytics to make proper long-term business decisions and which concentrate on maximizing revenue by having proper billing practices will set the stage to long term profitability or viability. And part of that success comes by the ability change the way we view samples – from a “quantity” perspective to the ”quantity of quality” specimens.

We hope this, along with our others in the series, have been helpful in making your laboratory successful. If you have any questions, would like more details about this article, or would like a free billing and revenue analysis for your laboratory or medical practice, please email PractiSource at or better yet, just give us a call at 860-840-2244. We are here to help!

About PractiSource

PractiSource, LLC is a full service medical billing and revenue cycle management (RCM) dedicated to maximizing medical provider reimbursement with the highest levels of concierge-style customer service and support. The company provides services to clinical laboratories, physicians and medical facilities. Headquartered near Hartford, Connecticut, PractiSource serves clients from coast to coast. Visit us

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