Can Conducting a Billing Audit Increase My Lab’s Revenue Stream?
Audits can be helpful not just for compliance purposes, but for maximizing reimbursement and maintaining a healthy business.
Revenue audits are useful tools in many industries, although they can have a somewhat scary connotation. For laboratories, government entities such as the Centers for Medicare & Medicaid Services (CMS) and private insurers conduct audits to determine whether labs are complying with their billing rules and requirements. Being audited is a genuine fear of many, but proactively engaging in an audit doesn’t have to be triggering—it can instead potentially generate more revenue for your lab by identifying lost opportunities and/or inefficient practices.
What exactly is an audit?
At its core, a medical billing audit is a comprehensive review and evaluation of clinical documentation. Through auditing, the reliability, accuracy, and effectiveness of a healthcare practice’s recordkeeping is checked against the billing claims and documents submitted to CMS and private insurance payers. Such a practice assists in uncovering and addressing erroneous billing practices and in monitoring these efforts on a regular basis.
Conducting an independent billing audit for your laboratory can be helpful not only in ensuring that reimbursement revenue is accurate and appropriate so as to remain in compliance with CMS and private insurers, but also to confirm that the maximum allowed revenue for the services provided is received. This is essential in order to maintain a healthy business to continue serving your patient population.
“Most labs do not compare contractual allowed amount to actual payments,” adds Mick Raich, a laboratory and pathology revenue cycle management professional and principal at Mick Raich, LLC. “Year after year, we found labs and practices being paid incorrectly.” He cites identifying missed revenue from incorrectly paid claims as one major pro of a lab revenue audit, among others.
Generally, an audit serves to identify errors and inefficiencies in your billing practices. By identifying common billing errors that lead to claim denials, revenue loss due to reimbursement discrepancy and inconsistency can be avoided. Through enhancing accurate billing practices, laboratories can optimize their revenue collection cycle, reducing claim denials and the potential for clawbacks, and, ultimately, enhance their practice’s profitability.
Laboratories’ options for generating new streams of revenue are typically limited to adding more offerings to their test menu or building their patient population and overall visibility through marketing efforts.
Since there aren’t many additional paths to increase revenue, it is extremely important to ensure billing claims for existing patient services are submitted carefully, accurately, and in a timely manner. A comprehensive medical billing audit can uncover all potential issues and allow for reform to avoid further missed revenue due to denials and clawbacks.
Furthermore, through an audit, labs can ensure they are billing all applicable and appropriate Current Procedural Terminology (CPT) codes for the services provided, not missing codes that should allow for revenue collection, and obtaining the maximum allowed reimbursement. This is even more important in the current landscape due to artificial intelligence algorithms being utilized by payers to deny claims more often. Key reasons for denials include:
- missing information,
- information being provided out-of-sequence, or
- the claim not accurately providing a complete picture of the care or services that were provided to the patient, among other reasons.
Reducing the likelihood of errors and resulting denials by payers through accurate and careful completion of claims greatly assists in normal revenue cycle functioning, which the lab relies upon to maintain operations.
Ann Lambrix, vice president of RCM Solutions at Lighthouse Lab Services notes that, by identifying inefficiencies within the billing cycle, a lab can “decrease its ‘back-end’ problems that challenge the lab industry. A tight, efficient billing process means that leadership can focus on expanding client base, test menu, etc.” However, if the billing and collections are poor, “the lab can’t make money” and will then need to continue focusing efforts on the inefficiencies of billing and forego other efforts to identify additional revenue streams for the lab, she adds.
Revenue auditing 101
A billing audit can be conducted by internal staff, but there are also independent billers and consulting companies that offer this service to those facilities that don’t have the bandwidth to perform an audit. Many of these billers and consultants have developed proprietary software programs that examine your current billing codes and compare them against services provided to determine if mistakes have been made, incorrect codes billed, or codes missed that could be billed to increase revenue. That said, an internal independent review can offer the same benefits if your staff possess the knowledge, training, and bandwidth to conduct it. Regardless of how you achieve it, auditing is paramount to ensuring that your laboratory revenue is efficiently optimized.
Overall goals of a laboratory billing audit:
- Identify and correct errors in medical billing claims, especially under-coding/missed appropriate codes and mistakes that result in denials
- Ensure proper reimbursements
- Improve billing compliance, protect against fraudulent billing and over-coding practices, and avoid denials and costly penalties
- Gain insight into your lab’s billing performance to help with financial projections and planning
Benefits of an audit:
- Improved patient care
- Accurate coding
- Improved payer relations (insurance companies prefer accurately billed claims, which means your lab will have fewer problems obtaining reimbursement)
The final benefit listed above, compliance, includes that, after addressing any problematic practices that were uncovered, your lab will then be ready for an audit by CMS and/or private insurers should these entities initiate such an assessment.
Audit is the name, preventing financial losses is the game
A medical billing audit is designed to optimize revenue capture for the services being provided to patients and to prevent financial losses in the form of billing code errors, inconsistencies, and inefficiencies. In and of itself, it is not a plan for consistently increasing revenue; instead, it is a tool to ensure collection efficiency and accuracy. That being said, if an initial audit of your laboratory billing procedures uncovers many errors, you may enjoy the benefit of increased revenue when you implement appropriate changes; thereafter, if audits are repeated as recommended, you will maintain a consistently accurate billing practice that reduces the number of denials and thereby maximizes the profitability potential of the lab’s services going forward.
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