Laboratory Medical Billing: Best Practices for Faster Payments & Fewer Denials

Why Lab Billing Is Different

Laboratory medical billing is not the same as billing for a physician’s office or hospital system. 

Labs face unique challenges: complex test panels, frequent payer policy changes, bundled codes, and reimbursement rates that are often under constant pressure. On top of that, labs operate on tight turnaround times and high volume, meaning every denied claim or payment delay directly impacts both cash flow and patient satisfaction.

At ADS, we’ve spent decades helping laboratories transform billing from a headache into a growth engine. The labs that thrive are those that treat their billing process as a strategic function, not a back-office afterthought. Below, we’ll walk through best practices that lead to faster payments, fewer denials, and a stronger bottom line.

1. Start at the Front: Eligibility and Benefits Verification

One of the top reasons claims get denied in laboratory billing is simply because a patient wasn’t eligible for coverage at the time of service. Another common reason? The test wasn’t covered under the plan’s medical necessity rules.

To avoid this, labs should:

• Run real-time insurance eligibility verification before testing begins.
• Confirm deductible, co-pay, and co-insurance requirements.
• Check if prior authorization is needed for advanced diagnostics or molecular testing.
  
  

Eligibility checks and getting prior authorizations used to take hours or even days, but with today’s technology, they can happen in seconds. ADS integrates real-time verification into our MedicsPremier platform and has an automated prior authorizations option. ADSRCM, for outsourced billing services/staffing, has these as well. Your team will know exactly what’s covered before a claim is ever submitted.

🔗 Learn more about how ADS and ADSRCM automate eligibility in our Medical Billing & RCM Services Guide.

2. Keep Pace with the Clinical Laboratory Fee Schedule (CLFS)

Each year, CMS updates the Clinical Laboratory Fee Schedule (CLFS), which sets reimbursement rates for lab tests. Missing these updates or failing to configure them into your billing software can mean thousands of dollars in lost revenue. 

For example, the Protecting Access to Medicare Act (PAMA) introduced significant changes in lab reimbursement, and those updates continue to ripple through the industry today. A forward-looking billing team doesn’t just download the CLFS once a year; they implement processes to:

• Review quarterly CMS updates.
• Adjust fee schedules across all payers.
• Reconcile expected reimbursements against actual payments to spot underpayments.
  
  

Labs that ignore CLFS updates end up writing off revenue they’re rightfully owed.

🔗 Check out our Laboratory Billing Solutions strategies for more detail on reimbursement best practices.

3. Aim for a High First-Pass Resolution Rate

The first-pass resolution rate (FPRR) measures how many claims get paid the first time they’re submitted. In general practice billing, an 80–85% FPRR is considered good. For labs, you should aim for 90% or higher.

Why does this matter? Every resubmission costs time, increases administrative burden, and delays cash. To improve your FPRR:

• Standardize coding procedures for common test panels.
• Train billing staff regularly about payer-specific rules.
• Use an AI-driven rules engine (like ADSRCM or ADS) that flags potential denials before claims go out the door.
  
  

This combination of human expertise and automation ensures you’re not leaving money on the table.

4. Master Documentation and Coding Accuracy

Laboratory billing often gets tripped up by documentation gaps. Payers want to see evidence that the test was medically necessary, tied to a diagnosis, and ordered appropriately. A single missing element can turn into a denial.

Best practices include:

• Linking every test to a valid ICD-10 diagnosis code.
• Using the correct CPT or HCPCS code for each test, including panels.
• Documenting the ordering provider’s notes clearly in the patient’s record.
• Auditing coding practices quarterly to catch patterns before payers do.
  
  

The American Medical Association (AMA) provides updated coding guidelines each year; labs should make it standard practice to review them, and so should their billing partner.

5. Track Denials and Learn from Them

Denials aren’t just a nuisance—they’re data. Each denial is a signal about what’s not working in your billing process. The key is to analyze patterns:

• Are denials clustered by payer?
• Do certain tests or codes get denied more often?
• Is the problem at intake (eligibility), documentation, or coding?
  
  

At ADS and ADSRCM, we build denial analytics directly into dashboards so labs can see trends in real time. This allows billing teams to fix root causes, not just resubmit claims. Perhaps most importantly, they provide the means for denial avoidance in advance by producing proactive alerts on claims likely to be denied so they can be edited prior to submission.

6. Embrace ERA/EFT for Faster Cash Posting

Electronic Remittance Advice (ERA) and Electronic Funds Transfer (EFT) are not optional anymore. They’re essential. Labs that still rely on paper checks and manual posting are slowing down their own revenue cycle.

With ERA/EFT:

• Payments hit your bank account faster.
• Remittance details flow directly into your billing system.
• Cash posting and reconciliation become same-day tasks.
  
  

CMS has long encouraged ERA/EFT adoption, and most payers now require it. The labs that embrace it see faster cash flow and fewer errors in payment posting.

7. Build Compliance into Your Billing

Labs are highly regulated environments. From CLIA requirements to HIPAA privacy rules to 42 CFR Part 2 (for substance use disorder testing), compliance must be baked into your billing processes. That means:

• Role-based access to billing systems.
• Secure data handling for sensitive lab results.
• Regular audits to ensure documentation aligns with payer and federal requirements.
  
  

Compliance isn’t just about avoiding penalties; it’s about protecting patient trust and ensuring long-term financial stability.

Turning Lab Billing into a Strategic Asset

Laboratory medical billing will always be complex. But complexity doesn’t have to mean chaos. With the right systems, automation, and expertise, your lab can achieve:

• Faster, more predictable cash flow.
• Fewer denials and less administrative rework.
• Stronger compliance and reduced risk.
• A billing operation that scales as your lab grows.
  
  

At ADS and ADSRCM, we help labs nationwide put these best practices into action every day. Whether through our MedicsPremier platform for in-lab automation, or by outsourcing, our goal is simple: help you get paid faster, with fewer denials, and with more peace of mind.

🔗 Want to learn more? Explore our AI-powered laboratory billing solutions or request a live demo.