Diagnostics Labs Research Report by Myndshft

Diagnostics Lab Execs Reveal Their Biggest Revenue Cycle Challenges

We asked revenue cycle professionals at diagnostics labs to share their biggest pain points. Find out what they told us.

 

 

 

 






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DIAGNOSTICS LAB EXECS 
REVEAL THEIR BIGGEST 
REVENUE CYCLE CHALLENGES

Published July 2019








Diagnostics Labs Pain Points

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We asked revenue cycle professionals at 
diagnostics labs to reveal their biggest pain 
points. Here’s what they told us.

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Diagnostics Labs Introduction

INTRODUCTION

Revenue cycle departments at diagnostics labs face unique challenges when it comes 
to managing increasingly complex prior authorization, eligibility and patient financial 
responsibility requirements.

We wanted to get a better understanding for the billing-related pain points that they face 
on a day-to-day basis, so we commissioned a market research firm to conduct a series of 
interviews with revenue cycle professionals from across a spectrum of lab services types. 
These included large national diagnostics labs with a broad portfolio of services, as well 
as more specialized labs focused on areas such as oncology, radiology, and genomics. To 
maintain confidentiality, we have removed any personally identifying information regarding 
the findings.

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Diagnostics Labs Pain Point 1

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The typical patient interactions that are common at 
hospitals, health systems or physicians’ offices are largely 
absent at most lab and diagnostics providers. Physician 
offices and hospitals communicate with patients in person 
prior to service when it is most timely to run eligibility 
checks and field prior authorization requests. Doing so at 
the point of care allows the administrative staff to verify 
whether the patient has adequate health insurance and to 
gather any missing patient information.

“When working for a hospital or doctor’s office you have 
direct access to the information you need. You can call 
the patient, print your own medical records or access the 
EHR,” said the Director of Revenue Cycle for a diversified 
commercial laboratory.

In contrast, lab and diagnostic providers rarely interact 
directly with patients, especially prior to a visit. Instead, 
they commonly receive specimens from a referring 
hospital or physician along with a paper or electronic order 
containing patient demographics, procedure codes and 
diagnosis codes—some of which may be inaccurate or 

incomplete. This can create a “garbage in, garbage out” 
scenario. Diagnostics labs are reliant on the referring 
provider to furnish complete and correct data; if the 
data is flawed from the start the lab is likely to have the 
corresponding claim be denied when it submits it to the 
payer. When this happens it sets off a cascading series of 
time-wasting events for the lab, payer and patient.

The Director of Revenue Cycle for a national diagnostics 
service said, “Patient information comes over in either 
paper form or electronically. If there’s a problem with 
insurance information or the patient’s name is misspelled, 
then incorrect information is carried through the entire 
lifecycle. That’s a major pain point in the process.”

Because diagnostics labs don’t communicate directly with 
patients, they have to work through the referring hospital 
or physician’s office to track down any missing information 
or correct any errors so that they can resubmit a claim 
that has been previously denied. As you can imagine, this 
requires a lot of back and forth between the two parties. 
Emails get exchanged. Phone calls go to voicemail. Faxes 

POOR PATIENT VISIBILITY

PAIN POINT 1

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Diagnostics Labs Pain Point 1

pile up. If the dollar amount for a specific accession isn’t 
significant enough, it doesn’t make financial sense for 
the revenue cycle team to expend the effort and they are 
often forced to write it off as bad debt.

Since diagnostics providers also have limited visibility 
into a patient’s insurance coverage, they don’t always 
have a good sense for what tests he or she is eligible. Nor 
do they understand the patient’s financial responsibility 
for the accession. As a result, when a patient receives 
a bill from the lab, they may be frustrated to learn that 
the procedure isn’t covered by their health plan. Since 
the charge is an unwelcome surprise, the patient may be 
reluctant to pay the bill. That reluctance may turn into 
full-scale resistance that leads the lab to write off the 
charge.

“Every claim has multiple variables. If we don’t get 

all the correct information, it becomes what we call 

‘unbillable.’ The claim is not a clean claim that can go 

out the door. At that point we reach back out to the 

entity to see if we can get the missing or the invalid 

information prior to submitting the claim.”

Associate Vice President of Revenue Cycle at a global clinical laboratory

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Diagnostics Labs Pain Point 2

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Unacceptable levels of claim 
denials and an escalating number 
of prior authorization requests 
were identified as significant 
pain points for all of the revenue 
cycle management professionals 
interviewed.

Claim Denials

For lab and diagnostic providers, 
the complexity and scope of claim 
denials is one of the biggest issues 
in denials management. The sheer 
volume of health plans—which can 
number in the thousands for national 
labs—and the corresponding price 
schedules, make it very difficult for 
billing teams to keep everything 
straight. The problem compounds 
further because each payer has its 
own rules for denied claims, including 

the reasons behind a denial and how 
it is communicated to the provider. 
It’s difficult to develop a consistently 
successful claims denial strategy 
based on so many variables.

“Most payers now have restrictive 
policies on certain tests, but when 
you go to their website, those 
policies are not listed like they are 
under CMS,” said an Associate Vice 
President of Revenue Cycle at a 
global laboratory. “It’s been a very 
big challenge for our revenue cycle 
team.”

“Our organization is nationwide. 
Instead of being a regional facility 
and dealing with only a handful of 
large payers, we deal with thousands, 
which really opens up an opportunity 
for leakage if we’re not careful 

CLAIM DENIALS AND

PRIOR AUTHORIZATIONS

PAIN POINT 2

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Diagnostics Labs Pain Point 2

and if we’re not understanding 
what we’re doing,” said a Director 
of Revenue Cycle for a national 
diagnostics service. “You have to 
address problems quickly. If I find a 
problem today, I need to address it. 
By tomorrow, I’m going to have 1,000 
more instances of it. And then the 
next day, 1,000 more. The volume is 
unbelievable.”

Whereas hospital billing generally 
deals with a lower volume of high 
dollar claims, diagnostics labs must 
cope with a significantly higher 
volume of low dollar accessions. As 
a result, the revenue cycle team at 
these labs are not able to work all the 
denials. It simply doesn’t make sense 

to scale up a billing staff to pursue 
low dollar collections, so revenue 
cycle personnel are thrust into triage 
mode to follow up on claims with 
more meaningful dollar amounts and 
write off claims with more negligible 
sums. This make-do strategy leads 
some labs to write off as much as 15-
20% of their revenue due to denied 
claims. 

“Claim rework is very labor intensive. 
You have to get somebody on the 
phone and providers don’t want to 
talk to you about more than five 
patients,” said a Senior Director 
of Revenue Cycle for a national 
radiology provider. “Sometimes, we 
send out somebody with a list to 

talk to providers about why we keep 
getting bad information.”

Lack of automation also hinders 
a lab or diagnostic provider’s 
ability to check claims for errors or 
missing information before they 
are submitted for reimbursement. 
The reimbursement process as 
currently designed, and regardless 
of outcome, costs lab providers 
an unacceptable amount of time, 
money, and resources to manage. 
This uncontrolled drain on cash and 
resources inevitably leads to greater 
inefficiencies, administrative burdens 
and lower collection recoveries. 

To complicate things further, because 
of the limited time between when 
an order is placed and when  testing 
must begin, there is often little 
opportunity to conduct an electronic 
eligibility check or to assess whether 
a prior authorization is needed. 
Oftentimes, the revenue cycle team 
is required to “fly blind” and submit 
a claim that hasn’t been fully vetted 
and therefore has a higher than 

“Most payers now have restrictive policies on certain tests, but when 

you go to their website, those policies are not listed like they are 

under CMS. It’s been a very big challenge for our revenue cycle team.”

Associate Vice President of Revenue Cycle at a global laboratory

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Diagnostics Labs Pain Point 2

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average likelihood of being denied by 
the payer. 

Prior Authorizations

Most of the revenue cycle 
management professionals 
interviewed cited the surge in prior 
authorization requirements as a 
significant challenge. According to a 
2017 survey by the American Medical 
Association (AMA), 84% of providers 
consider prior authorizations to 
be overly burdensome, and 91% 
say they negatively impact patient 
outcomes.

A lot of things have to go right for 
a prior authorization request to be 
resolved quickly and accurately. 
The rendering diagnostics lab, 
referring provider, payer and patient 
are all involved in the intricate 
choreography that makes up the 
prior auth dance; the number of 
participants and steps increases 
the potential for errors, delays, and 

redundant work. Often, the referring 
hospital or physician isn’t even aware 
that pre-authorization is required. 
Request-and-review requirements 
vary by health plan and provider too, 
which only magnifies the complexity. 

If there is a single misstep in the prior 
authorization process — a denial 
triggered by incomplete patient data, 
for instance — then the diagnostics 
lab is put in the untenable position of 
having to work through the referring 
provider as an intermediary and 
rely on them to resolve the issue 
with the payer.  Because rendering 
providers depend on referrals from 
the originating providers, they know 
that they can only push the referring 
hospitals and physicians offices so 
hard or risk losing future business. 

Cost is the primary driver that 
dictates the level of review rigor that 
labs can apply to prior authorization 
requests. “We do not have the 

“Hospitals sometimes have 

claims that are worth $300,000. 

If somebody has to fix that claim, 

it’s worthwhile. The juice is worth 

the squeeze. When you start doing 

that in the lab or radiology world, 

your profit margin goes way down, 

your cost to collect relative to your 

revenue goes way up.”

Director of Revenue Cycle for a national 

diagnostics service

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Diagnostics Labs Pain Point 2

manpower as prior auth continues 
to be a bigger and bigger issue, 
especially as more genetic testing is 
added to the mix,” said an Associate 
Vice President of Revenue Cycle at a 
global laboratory.

Prior authorizations are increasingly 
common for molecular diagnostics 
and genetic testing, given their high 
average unit cost and growing usage. 
For specialized lab panels that require 
prior authorization, if just one of 
the CPT-based services in the panel 
is considered inappropriate, it is 
common for the entire panel to get 
denied.

The incremental processes, people 
and systems that support prior 
authorization appeals and claims 
adjustments also add a degree of 

uncertainty to final claims disposition 
for the lab service under question.

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Diagnostics Labs Pain Point 3

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BAD DEBT

PAIN POINT 3

As a result of the growing popularity of high-deductible 
health plans, patients are now collectively the largest non-
governmental payer in the nation. However, as more of 
the monetary burden is transferred to patients, many of 
whom struggle to meet their financial obligations or fully 
comprehend the invoices they receive, providers have found 
themselves crushed under billions in bad debt. Few providers, 
whether hospitals or lab providers, have had the tools to make 
billing more transparent.

“Oftentimes, patients don’t know who the testing company 
is. You have to send out a letter to explain the testing and 
the billing—and the patient balances are often very high,” 
explained an Associate Vice President of Revenue Cycle at a 
global laboratory. “Companies have to decide what they want 
to do as far as what they will take payment on, or if they’ll 
process them as in-network, or process them as out-of-
network which often leaves patients very upset.”

Revisiting the first pain point—poor patient visibility—many 
lab and diagnostic providers remain in the dark about a 
patient’s financial situation, propensity to pay and insurance 
benefit coverage. Patients themselves often don’t understand 
their financial responsibility with regard to the lab services 
performed, nor are they aware of the payment options 
available to them that could affect their out-of-pocket liability. 

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Diagnostics Labs Pain Point 3

More often than not, they are not even aware of what lab 
conducted their tests. Since invoices from the rendering 
lab provider may not be delivered for weeks or months 
after testing is performed, there can be confusion among 
patients in trying to identify what procedure the invoice 
correlates to, which only serves to make patients more 
reluctant to pay. 

If the ordering provider doesn’t offer a specific lab service, 
it might have trouble referring to a cost-competitive 
alternative beyond one that it is financially tethered or 
with which it is already familiar. Less-advanced healthcare 
organizations or lab service organizations may be unaware 
when payment for prior services are aging into bad-debt 
risk. Transparency into past-due bills, especially on non-
emergent labs, would at least trigger further review to 
avoid another bill going unpaid.

“Oftentimes, patients don’t know who the 

testing company is. You have to send out a letter 

to explain the testing and the billing—and the 

patient balances are often very high. Companies 

have to decide what they want to do as far as what 

they will take payment on, or if they’ll process 

them as in network, or process them as out-of-

network which often leaves patients very upset.”

Associate Vice President of Revenue Cycle at a global laboratory

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Diagnostics Labs Pain Point 3

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First-hand interviews with revenue 
cycle management executives 
revealed that billing complexity was 
also a significant pain point. There 
are several hand-offs that happen 
between stakeholders, systems, 
processes and contracts that are 
ripe for errors that lead to payment 
leakage. For example, certain 
procedures need to be rolled up into a 
bundle or panel before a claim is sent 
to the payer. Additionally, payers have 
differing requirements related to 
billing processes which creates a lack 
of consistency in how to successfully 
submit claims from health plan to 
health plan. 

“The billing systems don’t really 
offer an interface from the 
physician’s office to the billing 
system,” explained the Director of 
Billing Process Improvement for a 
diagnostics and pharma services 

company. “Some companies will not 
run the test until they get a prior 
auth. But in oncology testing, you 
don’t want to do a biopsy and then 
say, ‘Sorry, we can’t run this test.’ So, 
until you start losing a lot of money, 
that’s what you do.”

Interviewees noted that while new 
lab offerings are introduced to the 
market at a steady, regular clip,  
payers respond to how they will 
cover these new services differently. 
The process is highly unpredictable 
and generally includes a lag of a few 
months.

Even when a payer makes a 
coverage determination on a new 
lab service, it may take weeks for 
claims adjudication systems to 
properly accommodate all the rules. 
Provider and lab service staff often 
keep “cheat sheets” that detail the 

BILLING COMPLEXITY

PAIN POINT 4

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Diagnostics Labs Pain Point 4

particular rules for each of the large 
payers, but because these rules are 
continuously changing, these cheat 
sheets quickly become outdated. 

Inconsistencies in how each payer 
reimburses for services creates 
complexity and chaos for the 
providers and labs that must track 
across these entities. Contracting 
that determines covered services 
and payment levels for members 
and providers, respectively adds to 
the complexity. The process grows 
even more complex if dealing with 
patients who are covered by multiple 
insurance plans.

“The billing systems don’t really offer an interface from the 

physician’s office to the billing system. Some companies will not 

run the test until they get a prior auth. But in oncology testing, you 

don’t want to do a biopsy and then say, ‘Sorry, we can’t run this 

test.’ So, until you start losing a lot of money, that’s what you do.”

Director of Billing Process Improvement for a diagnostics and pharma services company

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Diagnostics Labs Pain Point 5

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The constant stream of claims that must be managed, the 
increasing frequency of prior authorization requests that 
must be addressed, and the sheer complexity of the billing 
process combine to make revenue cycle management at 
diagnostics labs an order of magnitude more challenging 
than traditional hospital settings. Revenue cycle staff 
must be able to manage all the nuances relative to payer 
changes, reimbursement cuts and the move from fee-
based billing to value-based billing. So, it is perhaps no 
surprise that it can take even a seasoned healthcare billing 
professional an extended period of time to ramp up and 
fully grasp the intricacies of RCM at diagnostics labs. 

“It’s a complex system. Even if you have a revenue cycle 
and billing healthcare background, training and proficiency 
take at least six months to get fully acclimated into the 
laboratory because it is different than working in any other 
healthcare system,” said the Director of Revenue Cycle 
for a national diagnostics service.

One interviewee mentioned that in order to ensure 

“You have to be really smart about how you 

tackle things. You just can’t print out all of 

your outstanding bills over $50,000 and have 

somebody work it. You are dealing with a large 

volume of low dollar charges, and trying to 

make sense of that.” 

Director of Revenue Cycle for a national imaging provider

TECHNOLOGY AND PERSONNEL

PAIN POINT 5

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Diagnostics Labs Pain Point 5

that prior authorizations were obtained, significant 
technology and customer service investments were 
needed to communicate with ordering physicians to alert 
them that a prior authorization was missing and that the 
test would be held.

Due to the difficulty in finding skilled revenue cycle 
personnel, labs often resort to outsourcing. But a growing 
number of the nation’s larger laboratories are leveraging 
health IT to automate management of the laboratory 
revenue cycle.

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Diagnostics Labs Conclusion

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CONCLUSION

Feedback from our interviews indicated a desire by revenue cycle professionals for a 
technology solution that automates many of their most manually-intensive administrative 
tasks, and does so in real-time at the point of care. There was also a preference for solutions 
that can integrate directly with their existing workflow and systems rather than require 
them to log in and out of payer portals. Additionally, those interviewed expressed interest 
in solutions and platforms that can provide critical insights into specific patient needs, 
identify coordination opportunities among stakeholders, simplify billing and mitigate risks to 
reimbursement.

Solutions driven by process automation and artificial intelligence capabilities present an 
enormous opportunity for lab and diagnostic providers. For example, tedious, error-prone 
prior authorization and claims-filing workflows that are currently handled manually can be 
automated to accelerate operations and improve accuracy. Artificial intelligence can identify 
and eliminate common errors that contribute to costly claims rejection, rework and appeals.

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About Myndshft Technologies

Myndshft commissioned this research. We are a software-as-a-service 
that automates and simplifies time-consuming healthcare administrative 
tasks associated with prior authorization, eligibility verification, and patient 
financial responsibility, freeing providers and payers to concentrate more 
fully on patient care again. Myndshft was founded in 2015, and works with 
leading providers, payers, and health information exchanges. For more 
information, visit myndshft.com.

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About Myndshft Technologies

© 2019 Myndshft Technologies, Inc. All Rights Reserved.