This is a massive undertaking, but getting the billing department right from day one is the difference between a profitable lab and one that closes in six months due to cash flow issues. Assuming you already have CLIA and DOH approval, you have the "license to drive," but now you need the "engine" to get paid.

Here is a comprehensive, step-by-step guide to building a laboratory billing department from scratch.

Phase 1: The Administrative Foundation

Before you hire anyone, you must establish the laboratory's identity in the financial ecosystem.

1. Obtain National Provider Identifiers (NPI)
You likely have an NPI for the Medical Director, but the laboratory itself needs an NPI Type 2 (Organizational NPI). This is the number that will be billed under. Do not bill under the Medical Director’s individual NPI Type 1 unless specifically required by a niche payer, as this can cause tax and liability issues.

2. Register with CAQH ProView
The Council for Affordable Quality Healthcare (CAQH) is the universal portal used by almost all commercial insurance companies to verify credentials. You must create a profile for the laboratory and the Medical Director. Keep this updated quarterly; if it expires, payers will stop processing your applications.

3. Set Up a Lockbox and Dedicated Bank Account
Laboratory billing involves a high volume of small checks and Explanation of Benefits (EOBs). Set up a bank lockbox service where payers mail checks directly. The bank scans the checks and EOBs, allowing your future billing team to post payments digitally without handling physical cash.

Phase 2: Credentialing and Contracting (Start Immediately)

This process takes 90 to 180 days. Do not wait.

4. Enroll with Medicare (CMS-855B)
Submit the CMS-855B application via the PECOS system to become a Medicare provider. Medicare is the baseline; many commercial payers base their fee schedules on Medicare rates. You will need to pay an application fee and undergo a site visit.

5. Enroll with State Medicaid
Each state has its own portal. Medicaid is critical for toxicology and many screening labs.

6. Commercial Payer Contracting
Identify the top 5 major payers in your region (e.g., BCBS, UnitedHealthcare, Aetna, Cigna, Humana). Contact their "Network Management" or "Provider Relations" departments to request a contract.

• Note: Many large payers have "closed networks" for labs. You may need to apply as an "out-of-network" provider initially or prove "network adequacy" (showing you offer a test no one else does) to get in.

Phase 3: Technology Infrastructure

7. Select Revenue Cycle Management (RCM) Software
You need billing software. Do not use a generic medical billing system; use one designed for laboratories.

8. Choose a Clearinghouse
The clearinghouse is the digital bridge between your software and the insurance companies. They scrub claims for errors before they reach the payer. Popular options include ClaimMD, Waystar, Availity, or Change Healthcare.

Phase 4: Financial Strategy

9. Develop the Chargemaster (Fee Schedule)
You need to set your "Gross Charges" (the sticker price for your tests).

• Strategy: A common practice is to set the fee at 200% to 300% of the Medicare fee schedule. This ensures you capture the maximum allowable payment from high-paying commercial insurers.
• CPT Codes: Determine exactly which CPT codes you are performing. Are you doing panels? (e.g., Comprehensive Metabolic Panel 80053). Ensure you are not "unbundling" codes, which is fraud.

Phase 5: Staffing the Department

You need three distinct skill sets. In a startup, one person might wear two hats, but these are the functions you need:

10. The Certified Professional Coder (CPC) or Specialist

• Role: They review the doctor's order to ensure the diagnosis codes (ICD-10) support the medical necessity of the tests ordered (CPT).
• Requirement: Look for certification from AAPC or AHIMA. Experience in pathology or clinical lab coding is non-negotiable. General medical coding is very different from lab coding.

11. The Medical Biller / A/R Specialist

• Role: They submit the claims, fix rejections from the clearinghouse, and most importantly, work the "Denials."
• Focus: If a claim is denied, they are the ones calling the insurance company to fight for payment.

12. The Verification Specialist (Front End)

• Role: Before the specimen is even tested (if possible), this person checks if the patient has active insurance and if the test requires "Prior Authorization."
• Why: 30% of lab denials happen because the patient's insurance was terminated or the policy doesn't cover the test.

Phase 6: Compliance and Policies

13. Create an Indigent Care / Financial Hardship Policy
You cannot routinely waive copays or deductibles (this is illegal under the Anti-Kickback Statute). However, you can waive them if a patient proves financial hardship. You need a written policy and a form for patients to sign to document this.

14. Draft an Advance Beneficiary Notice (ABN) Process
For Medicare patients, if a test is not considered medically necessary for their diagnosis, they must sign an ABN before the test, agreeing to pay if Medicare denies it. Without this signed form, you cannot bill the patient if Medicare denies the claim.

15. Establish a Compliance Plan
Appoint a Compliance Officer (can be an existing leader). You need written policies on how you handle overpayments (refunding them within 60 days) and how you audit your own coding to prevent fraud.

Summary Checklist for Launch

1. NPI Type 2 obtained.
2. Bank Lockbox active.
3. Medicare Application submitted.
4. RCM Software connected to LIS.
5. Clearinghouse enrolled.
6. Chargemaster loaded with prices.
7. Coder and Biller hired.

Once these are in place, you are ready to process your first specimen.