It’s a War, with armies of soldiers, heavy artillery, tactics and strategies. The fight is between medical laboratories and insurance payers where labs are trying to get paid for the work they have already done and insurance payers are trying to avoid paying using an impressive arsenal of over 250 “Adjustment Reason Codes”, “Provider-Level Balance Adjustments” and other advanced deadly weaponry.
It is the war that medical labs cannot win. One of my mentors, Wolfgang Pilon, who single-handedly developed and supported for 30 years one of the first advanced medical billing systems, once told me: “Remember, insurance companies recognize every payment under the insurance policy as a business loss on the books.”
This simple truth defines the rules of engagement, and the battlefield is tilted in their favor. The medical lab cannot refuse the test referred by the physician and has to do the work, but payer does not agree to pay for any given test upfront. Instead, it reviews the claim after the work is already done and can deny payment based on various changing complicated payment policies.
If you consider that large diversified reference lab has to deal with thousands of insurance payers, over 800 billing CPT codes, and 16 insurance plans while trying to collect on average $17 per test, you will understand that trying to track all the payment rules is a losing battle
The casualties are severe, mainly on provider and patient side. Clinical laboratories lose 20-40% of revenue due to claim denials, for genetic labs losses may be as high as 50%. For patients, medical bills is a number one reason for personal bankruptcy.
Insurance companies may lose one or two battles in courts, but they are still winning . In the meantime, the tremendous economic value is lost in this fight making US healthcare model the most inefficient among developed countries, in which we receive 4-6 times less medical services for every dollar spent.

Vitali Khvatkov

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