Suren Avunjian explains how combining RCM with LIS increases lab revenue
No matter what type of service a laboratory specialises in, it takes money to keep things going. Unless you’ve found a generous benefactor with never-ending resources, getting compensated for the services your lab provides is essential. But oftentimes, managing the revenue cycle is easier said than done. This is especially true for molecular, clinical and anatomic pathology laboratories that work within healthcare environments.
What makes medical labs unique is that beyond patients and providers (physicians and other healthcare organisations), much of their compensation is dependent upon the approval of government entities and insurance companies. Unfortunately, these payers can use a host of reasons to deny payment. On top of this, medical labs also face reduced reimbursement rates, ever-changing payer rules and a growing population of uninsured and underinsured patients. Not to mention, large fluctuations in patient volume and unprecedented staffing shortfalls.
These challenges combined make it difficult for lab managers to keep their organisations financially healthy. Yet despite this, some labs are hesitant to change the way they operate. Some are willing to spend money on two disparate systems – a laboratory information system (LIS) for operations and testing, and a revenue cycle management (RCM) system for all billing functionality – and others don’t even go that far as they continue to rely on mostly manual processes for billing. Both scenarios represent a lost opportunity for laboratories that remain unwilling to invest in a singular solution that improves both LIS and RCM simultaneously.
That’s unfortunate, especially when you consider that a recent report has found that healthcare companies saved US$122 billion in administrative expenses by using RCM software in 2020 alone. The same report identified a further US$16 billion in savings that could be achieved by automating just nine common RCM administrative tasks.
Based on this report, it’s clear that investing in RCM software can save laboratories money. Now imagine the savings a lab can realise when investing in a fully integrated system, one that supports all LIS and RCM functionality from a single database and software infrastructure.
Real-World Case Study
US-based Northwest Pathology (NWP) is a perfect case study for what can be accomplished by upgrading to one fully integrated software solution.
NWP employs a talented group of pathologists who have served the northwest portion of the state of Washington for over 25 years. To increase both efficiency and transparency throughout all of its operations, including billing, NWP switched from a “LIS only” solution to a fully integrated LIS and RCM solution about three years ago.
Soon after deploying this comprehensive, fully integrated solution, NWP enjoyed unprecedented revenue growth, with net collections going up 31%. Even more impressive, the lab’s explosive growth rate came without added operating costs, and the growth was sustained over time.
Improved Patient Collections
Powered by automation, the flexibility to schedule and distribute statements, fully customisable statement templates and better patient engagement, NWP’s patient-related net collections experienced 30% growth from January 2019 to January 2020. The lab, equipped with efficient tools created by the shared LIS & RCM capabilities, was able to send patient bills on average three weeks faster than before, and that early outreach accelerated laboratory cash flow. The platform also provided a more patient-centred payment experience, making it easier for patients to pay their bills via an online portal that automates posting. Patients received regular notifications through email and SMS, and 36% of them took advantage of the online portal option to pay their bills.
NWP’s client net collections (hospitals, businesses, and government organisations) also grew thanks to the automation, integration, customisation and convenient payment management built into the platform. In this area of its operations, NWP experienced an impressive 45% increase in revenue. The added efficiencies also led to a big reduction in the need for manual labour, resulting in fewer clerical errors (human errors account for the lion’s share of billing and claims issues).
Another added benefit was the platform’s client notification functionality, an automated process that gave NWP clients the ability to review charges daily instead of going through a lengthy document at the end of the month. Clients could call in advance of their monthly invoice to report errors, dispute a charge or ask a question. This led to fewer concerns post-receipt, resulting in faster payments.
In addition, after deployment of this LIS and RCM solution, net collections from insurance companies increased by 27% as NWP’s real-time access to patient demographics, insurance discovery and insurance eligibility led to optimised clean claims and a first-pass resolution rate of 95%, much higher than the year before and the national average. Automated coding and real-time rejection and denial queues were other key elements that contributed to the significant growth in this category. NWP also benefited from key performance indicators that can be directly traced back to full LIS and RCM integration and improved efficiency. For example, NWP’s percentage of annual net collections per employee went up 31% because the lab’s full-time equivalents didn’t change year-over-year and total net collections went way up, reflecting growth without added operating costs.
Lastly, thanks to the improvements provided by this all-in-one platform, NWP was able to increase its operational output dramatically. The lab submitted 22% more claims (adjusted for growth) than the previous year.
Don’t Wait!
The reality is that several industry challenges and pressures exist, so the time to evaluate your lab’s RCM solution is now. The right solution can unlock a lab’s true potential to not only survive but also grow and thrive despite the present threats. But the platform should be carefully selected. It should be integrated with the lab’s LIS, easily accessible with open architecture, comprehensive, transparent and secure, providing vital real-time data at the beginning of the billing process through deep third-party integration and automation. The solution should also propel the lab to a near-perfect clean claims percentage on the first-pass, while also scoring much higher than the national average of 91% for claims accepted after only one submission, and dramatically decrease the need for expensive and time-consuming manual processing of claims.
The right laboratory billing system solution should include automatic coding and billing and secure payment processing via an online portal. It should be able to handle vast amounts of data and turn that data into currency as the platform teaches itself in real-time and gradually becomes more efficient.
As the NWP case study clearly shows, a modern and integrated LIS and RCM can put a lab in a position to efficiently scale due to a spike in net collections that will come as a result of this optimised software solution, one that has been engineered to meet the complex and specific needs of all laboratories, no matter their size.
Suren Avunjian is the co-founder and CEO of LigoLab
