Meeting an Increased Demand for Laboratory Services as Healthcare Evolves

Cardin, Virginia A., Dr.P.H.
Senior Healthcare Consultant
Frost & Sullivan North America
San Antonio, TX
Also by this Author 

Increasing volumes, declining reimbursement and added cost pressures are just some of the challenges facing the hospital laboratory today. What strategies can laboratories pursue to meet these challenges and enhance the value they contribute to patient care and to their organization?

Virginia Cardin, Dr.P.H., Senior Healthcare Consultant, Frost & Sullivan, discusses findings from a recent survey on hospital laboratory services, which provides insights into how laboratories are adapting to succeed in an environment shaped by competitive forces, changing provider dynamics and healthcare reform.

A Valuable Service, Not A Commodity

“From the laboratory director’s perspective there’s no doubt the laboratory provides a critical and essential service,” says Dr. Cardin. “The laboratory provides approximately 75% of the information on which physicians base their inpatient treatment decisions.” 1

While clinicians share this view, placing great value on their relationship with a clinical director or pathologist, hospital leadership at times does not. “C-level executives often look upon the lab as expensive ‘real estate’ with low revenue generation” notes Dr. Cardin. Certainly, some tests laboratories perform are reimbursed at below cost, which feeds the perception that the service provided by the lab is a commodity.

“In fact, the opposite is true,” counters Dr. Cardin. “Laboratory test services are labor-intensive in varying degrees, requiring expert analysis by a laboratory/medical technician, a pathologist or a clinical director. This involves the interpretation of values, often a range of values, combined with review of a patient’s history and clinical presentation. Like the practice of medicine, it is both an art and a science. The challenge is to have hospital leadership recognize ‘total value of laboratory services’ in a similar fashion as ‘total return on investment’.”

Clinical Expertise

One illustration of the value provided by laboratory staff is the clinical expertise applied to not only identify abnormalities, but to make follow-up recommendations based on the degree or stage of abnormality that will influence the clinician’s decision on appropriate therapy or intervention. This expertise is linked to knowing the natural history of the disease or condition including progression and regression characteristics on one hand, and the ability to provide an analysis on sometimes less-than-optimal specimens. Expertise is related to the volume of tests performed. As Dr. Cardin notes, in some instances, the recommendation may be “wait and see, patient follow-up in two to three months” as opposed to recommending a medical procedure or a higher level diagnostic.

Clinical expertise also extends to collaborative consultations in more unusual cases where the incidence of disease is rare and test results are not conclusive. “For a number of test services, results are reported within a range of normal values. In a hospital setting, more than one physician will order tests for a patient. If different test panels yield borderline high values in some instances and possibly conflicting normal values in others, further investigation and a collaborative consult with the pathologist or clinical director will be needed.” This contributes to better, and more deliberate, patient care.

Helping the Organization Achieve Its Strategic Goals

A laboratory can contribute to a hospital’s ability to differentiate itself as a center of excellence. Hospital executives should consider how the laboratory can help them achieve their strategic goals within the community and populations it serves. In the Frost & Sullivan survey, laboratory directors openly discussed new directions they have explored, says Dr. Cardin. “Scarce resources, predicting demand for more costly diagnostic and esoteric tests, and the expediency of inpatient test turnaround time can cause havoc in laboratory management.  Stat tests must be given top priority and laboratories may have external contracts with commercial labs to meet their needs. Others have strategically built an outreach/outpatient program to generate new revenue streams.” Should hospital laboratories build capacity or partner externally? There is no single approach.

The ability to offer a broader test menu was also reported as an important consideration in the decision to partner with a reference laboratory. “Hospital laboratories will often go to a reference laboratory for esoteric tests - specialty tests such as fertility tests, molecular tests, or oncology related testing,” notes Dr. Cardin. “In our study, 70% of hospital laboratories indicated they have agreements with more than three reference laboratories that could support their outreach marketing activities.”1

There is also an economic rationale for supplementing testing through an external partnership. In addition to increasing the cost efficiency of low-volume tests, the laboratory can benefit from access to and savings from laboratory information system (LIS) and hospital information system (HIS) connectivity.1

An Essential Role in Improving Healthcare

As the healthcare environment evolves, a strong case can be made that the hospital laboratory - the information it provides and stores – should be viewed as an asset to its organization. While laboratory tests may be seen as transactional, interpretation is based on patient history and the care received along the continuum of services.  Access to comprehensive, meaningful information is vital to achieve better health outcomes and a sustainable health system. Laboratories, as an information provider, are going to play a critical role.

“Our ultimate goal, as healthcare providers, is wellness and health maintenance,” concludes Dr. Cardin. “We want to ensure people are functional and contributing to society as best they can. And to achieve this hospitals and laboratories need to determine how best they can provide the right service, to the right person, at the right time. This is the call to action. Laboratories should step back, take a look and assess where they are today and where they want to be in the future.”

How does your laboratory compare?

Would you like to see how you compare to your peers? Just complete a short online survey on your laboratory’s trends and test referral practices. Results will be presented in the upcoming webinar “Dollar $ense…Positioning Hospital Laboratories to Succeed” on August 16, 2012

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  1. Data on file. Quest Diagnostics Inc.

Released on Thursday, July 19, 2012