Overview

A leading laboratory client was initially offered a reimbursement rate of 100% Medicare for their commercial policies. Given that commercial payors typically reimburse significantly higher than Medicare rates, accepting this offer would have left substantial revenue on the table.

Recognizing an opportunity to optimize revenue, our client managers stepped in to leverage our knowledge of standard reimbursement benchmarks and strategic payer contract negotiation.

The Challenge

The client’s initial offer was below market expectations. First, we needed to validate the offer’s scope by confirming it applied strictly to commercial policies, followed by determining if the patient population would justify pursuing a higher rate. A review of existing contracts revealed that similar groups were receiving rates at or just above Medicare levels, suggesting significant untapped potential and negotiating room.

Our Strategic Approach

1. Data-Driven Analysis:
   • Our team confirmed that the offer was exclusively for commercial policies.
   • We analyzed industry benchmarks, noting that national commercial reimbursement averages around 190% of Medicare fee-for-service rates, with professional services typically at 143%.
   • A review of the client’s existing contracts revealed that most commercial agreements hovered at or slightly above Medicare rates, highlighting a clear opportunity for improvement.
2. Tailored Negotiation Tactics:
   • Using this data, we counter-offered at 150% of Medicare, positioning it slightly above the average for commercial carriers.
   • During negotiations, our team clearly outlined the potential revenue gains our client would realize by comparing current Medicare rates to the enhanced commercial rates. Ultimately, this approach persuaded the payer to raise their offer.

The Outcome

After a series of strategic discussions, the payer countered with an agreement at 131% of Medicare. Projected over the course of a full year, this new rate would result in a significant increase in revenue if the lab’s testing volumes remain consistent, powerfully illustrating the significant financial impact that proactive contract negotiation can have.

This is a clear-cut example of why it’s not typically in a provider’s or lab’s best interest to accept a payer’s initial offer unless they are simply trying to enter a new network.

“By leveraging industry benchmarks and advocating for our client, we secured a 31% increase in their reimbursement rate and turned an initial standard offer into a real financial win,” says Dyana Williams, Director of Lighthouse RCM Solutions. “It’s a great reminder that with the right expertise, laboratories can and should push for better terms that reflect the true value of their services.”

Conclusion

Our grounded and data-driven approach demonstrates how even a modest increase in reimbursement rates can greatly enhance revenue streams over time. If your organization is facing similar challenges with underperforming commercial contracts, our team is ready to help you unlock hidden value.

If you’re ready to improve reimbursement and billing for your laboratory, contact us today to learn how our revenue experts can advocate for your financial success.

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