Thoroughly understanding the cost structure of your lab is imperative to managing your costs.
By implementing advanced cost accounting (ACA) measures, all sources of costs and revenues are known, giving an accurate, real-time snapshot of financial performance, demonstrating both strengths and opportunities for improvement.
A number of factors determine the cost of lab testing unfortunately often driving the price of testing - and the bill to the patient – ever upward. These factors include:
Utilization issues: Over- and underutilization of lab testing rates run at an approximate (and astonishing) 30%. Fortunately, physician support tools are available to block unnecessary and redundant testing, realizing significant savings without adversely impacting patient care.
Lack of priority: Hospitals tend to pursue high-dollar-figure insurance claim denials, e.g., from radiologic studies, rather than the high-volume / low margin lab test denials.
Underutilized capacity and lack of outreach: It is estimated that 92% of hospitals own their own laboratory, most with a significant capacity to increase their volumes (i.e., via outreach), yet the number of hospitals and health care systems actually pursuing outreach dropped in the past year, from 80% to 76%.
Declining reimbursements: Due to regulatory pressures, high-volume lab tests have had their prices reduced, making tests more affordable for the consumer, but greatly reducing revenue coming into the lab.
Lack of robust revenue cycle management (RCM) techniques: Even existing outreach labs face significant challenges in tracking costs and revenue streams, often decreasing potential reimbursements by 30 – 50 % due to a lack of dedicated systems designed to maximize revenues. Likewise, metrics of performance, profitability, value, etc. are not obtainable due to lack of adequate resource management and billing products.
Poor claims workflow, and disparities between paid vs expected reimbursements: A lack of properly designed IT systems often means that financial performance, reimbursement rates, tracking of full- vs partial payments (which in turn distort contractual allowance adjustments) are not accurately tracked, which can drive up the cost of care while diminishing its quality.
Labs need to implement advanced cost accounting solutions in order to remain effective partners in the health care landscape. Traditional RCM techniques cannot keep up with real-time needs of error correction, legislative changes, availability and cross-checking of lab tests, clerical and factual errors, etc. Advanced cost accounting (ACA) methods and software offer significantly greater depth of understanding of a lab’s costs and revenue streams, including but not limited to:
True margins: Appropriate cost accounting takes into account all factors contributing toward operating margins – payor revenue projections, complete and appropriate costs, etc. to determine margins.
Cost reductions: The analytic tools involved in ACA keep track of labor and supply costs, allowing labs to ascertain proper utilization of these precious resources.
Continuum – of – care costs: It is imperative to account for outpatient as well as inpatient costs of care, integrating data from a "population health care" strategy rather than a hospital-costs-only paradigm.
Integration of financial and clinical outcomes: A major tenet of ACA is movement toward value-based and outcome-based care. Institutions have begun educating physicians on issues of cost and margin, toward a paradigm of appropriate test utilization.
Improved speed, accuracy, and transparency of costing data: Modern IT systems and ACA practices allow comprehensive processing of costing data with a speed, accuracy, and transparency that is unprecedented in the industry.
We can help you identify your true costs, inefficiencies in your staffing model, review your contractual relationships assist in identifying appropriate IT systems– even start you on your way toward creating an outreach component to your lab services. Contact an Ektelligen representative today!
