Laboratory Outreach Financial Considerations: Performance Management-Part 7 in a Series

The three biggest opportunities for maximizing revenue in order of priority are:

  • Reimbursement as a hospital or independent laboratory.
  • Sales performance.
  • Billing efficiency.

Reimbursement and sales performance have been addressed in previous blog posts.  With regards to the third opportunity, there are six ways that you can reduce the amount of money left on the table by billing inefficiencies or just bad business practices.  In order of priority, they are:

  • Maximize the use of online order entry systems on the front end (to eliminate errors such as missing or incorrect information).  The most successful laboratories use online order entry for 80 to 90 percent of their client base.
  • Ensure that your billing service is working all denials.  A laboratory with 1,000 patients per day can have a denial rate as high as 30 percent.  Not working those claims has a material impact ($5.3 million annually).
  • Confirm that the laboratory follows through on missing billing information within 24 to 48 hours.  Collections are disproportionate to the length of time to follow up, and it is possible to miss filing limits (as little as 90 days for most commercial payers).
  • Use a low write-off balance for laboratory in the $3 to $5 range.  This is tenfold less than the typical write-off balance for general hospital services.
  • Do not take “cast off” business from the national laboratories!  If they dumped a client, it is likely because they were not profitable or too high maintenance.
  • Don’t be afraid to fire “bad” clients.  All business is not good business.  Do not confuse volume with profitability.  A client profitability analysis of a Midwestern outreach program revealed that eight of its highest volume clients were not profitable. 

Stay tuned to this blog series for information on additional financial issues that laboratory outreach program leaders must consider.  You can also learn more in my book, The Profit Machine in the Hospital Basement: Turning Your Lab Into an Economic Engine.


Kathleen A. Murphy, PhD
Senior Growth Advisor
Chi Solutions Inc., an Accumen Company

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