The Lab as a Revenue Center

Cover Story

A laboratory can be one of two things: a money pit or a profit driver. While the first option comes all too easily in most facilities, the second is achievable with some tough introspection, smart strategies and consistent follow-through.

Meghan Shapiro, MHA, is director of clinical and academic operations, department of pathology and laboratory medicine, at Wake Forest Baptist Health in Winston-Salem, N.C. This large academic medical center lab-about 4 million billables per year-had morphed into a lab that never said “no.”

“Just like so many other labs, we did any test that a physician wanted, and in a specified turnaround time,” explained Shapiro. “Even if a test was done just once a year, we did it. But suddenly we were no longer in a healthcare state that allowed us to do that from a pay standpoint; we had to increase efficiencies, improve throughput, meet turnaround time demands-and really analyze the reasons why we do the things we do.”

It’s been a tall order, but chipping away at each component has meant millions in annualized savings to the bottom line.

Leaning the Lab

It started with a lean process that began several years ago, resulting in a fully automated clinical pathology lab and the reduction of six fulltime positions. “That was huge. And it did not require layoffs,” clarified Shapiro. “When positions came empty, we didn’t fill them. This was possible because automation allowed for spinning on the line, storing on the line, assays on the line . and we no longer had to manually load machines for every test.” In addition, middleware communicating with various instrumentations allowed just one technician to watch all of those instruments on different platforms at one time. Wasted manpower going back and forth between instruments was eliminated.

Remaining staff was cross-trained between hematology and chemistry in clinical pathology. “Everyone is in the same area in an open layout now,” said Shapiro, “and is involved in the larger lab. The staff has a bigger footprint.”

Next the physical lab went through a streamlining process, with great attention given to workflow and throughput. “Lab people tend to think they know everything, but sometimes we don’t have all the answers,” laughed Shapiro, noting that the lab’s automation partner (Beckman Coulter) was asked to help coordinate the effort. “Calling in experts meant having access to their Six Sigma folks, better solutions . greater profits down the road.”

Utilization Analysis

Key to improving profitability was the undertaking of an in-depth utilization project, coordinated by Chi Solutions consultants. “We learned that you can lean, and lean, and lean. But if you don’t really look at what you are doing and why you are doing it, you don’t make progress,” said Shapiro.

“For example, physicians may order a whole gamut of tests, yet sometimes not all are needed for a particular patient,” she said. So to encourage more thoughtful and targeted test ordering, the facility upgraded their electronic medical record and ordering component. “In our old ordering system, there was nothing that flagged an order and said, ‘this is contraindicated’ or ‘do you really need a CBC with Diff?’ So when we changed to a new Epic EMR system, we took advantage of the changes and made several ourselves. Now there is a lock on how many times things can be ordered. For standing orders the rule is three. After three orders, physicians must reassess – no more standing order for CBCs from here to eternity. There used to be patients in the hospital for 15 days getting 15 CBCs. That’s over. This was accomplished with support from the providers.”

The move has been instrumental in curbing inpatient ordering – and improving profits. “With inpatients, you get paid what you get paid,” said Shapiro bluntly. “The less you can do on a payment, the better off you are.” In addition, the lab has become involved with creating standard care plans that are being set up. “We make sure the right tests are being included – and not just a whole list of anything that could possibly be ordered,” Shapiro said. “Our vice chair of clinical pathology now has to sign off on the care pathway that will be implemented and maintain that the lab portion is appropriate.”

Blood Expense Reduction

Another expansive profit leak has been sealed up with an impressive blood expense reduction project. “We had a $15 million annual blood expense, so we decided to put in place a program to curb blood overutilization and waste,” said Shapiro. The program began by renegotiating contracts with blood suppliers, and hit stride with the hiring of a blood transfusion safety officer who works with all departments on the implementation of a “one unit and reassess” objective.

“The habit used to be to order two units automatically,” said Shapiro. “But we’ve changed that to one unit followed by careful consideration before ordering a second unit.” In addition, the hospital has implemented a system whereby blood is delivered to medical units in a temperature-monitored, tagged cooler. When blood has been on the unit for some time, and is beginning to lose optimum temperature, a new cooler with blood is delivered and the original blood is returned to be re-cooled. The initiative has taken wasted blood to a new minimum.

The blood project will continue with a soon-to-be-introduced web-based program that will allow physicians to go online to see their blood usage – units ordered, transfusions, outcomes – and compare them to other physicians and departments. “This will be a peer review process, to help each physician and each department be accountable for their own blood usage,” said Shapiro.

To date, the blood project has meant striking savings: $1 million in the first year alone.

Reference Lab Utilization

The next “big thing” attacked, said Shapiro, was reference lab utilization, “. a $6 million expense, most of which was not reimbursed. That was $6 million we were sending right out the door. If a physician ordered a test – even a highly expensive one -we’d find it, get it, send it out, pay the bill, and then just hope we’d recoup something. Most often we didn’t.”

As utilization analysis began, Shapiro realized they were sending tests out to 65 different labs. That changed when the facility sent a request for proposals to selected labs. “We said, ‘This is our book of business, now tell us what you would charge us to do as much of it as you possibly could,’” she explained. Once they received the price estimates from the labs, those prospective costs were weighed along with quality of work and turnaround time. In the end, a decision was made to go with one primary lab and one secondary lab for 98% of the send-out work. This had an important effect in paperwork and costs.

Next, Shapiro and team began to look at individual tests – particularly genetic tests which are becoming more popular yet are not necessarily reimbursable. “You just can’t keep doing business with non-reimbursable tests,” declared Shapiro. As a result, the lab has gone to a third-party billing system for such tests.

“We had to take a stance,” said Shapiro. “We’ve already had a conversation with outside labs that can do the tests. So when a physician and patient want a particular test, they can send it to those labs, and the labs, in turn, will bill and collect for those tests. We don’t do that anymore. For some tests, we will only proceed with a prepayment. We will tell the physician and patient: ‘This is where you can get your test, this is what the expense will be based on your insurance, and this is what you have to pay up front before we do the draw.’ In a good number of cases, we don’t even do the draws.’”

Shapiro said some of the prevailing genetic tests cost as much as “$15,000 a pop – more than an MRI. The reality is we have seen a curb in [nonessential] testing by making patients recognize that they are going to incur some expense.”

The lab utilization project has been another winner in the savings department: $1.7 million per year.

Lab Outreach

Wake Forest Baptist Health has evolved away from simply functioning. It now has purpose to its every move, because “. as reimbursement drops, you have to look not only at staffing but productivity,” said Shapiro. “You can’t just keep cutting staff when it is already at minimum.”

So their next push is for more outreach. Being within an academic center allows Wake Forest’s lab to trade on the fact that experts in the field are available in-house. “The faculty is involved, going out and presenting to various clinics,” Shapiro said. In addition, the lab is able to leverage other efficiencies with its courier system. She reminded that customer service and turnaround time are inextricably bonded, so both are a priority.

Wake Forest also hopes to grow outreach by expanding to the small hospital market, beyond the clinics where they already have reach, and are even hopeful of bringing community veterinary lab testing into their own veterinary department.

Shapiro offered a cost-saving tip to others involved in outreach efforts: Consider using a third-party billing group. “We use a billing group that is not hospital-based for lab outreach. Why? The hospital will write off claims up to $50, yet a lot of lab outreach bills are $50 or less. An outside agency recovers that money – and we are no longer writing off most of the money from our outreach business.”

Next Steps

The next generation of effort at Wake Forest will include expanding utilization projects from clinical pathology to anatomical pathology, creating and leveraging a molecular testing department, and expanding positive patients IDs currently used in the lab to the nursing department.

Shapiro summed it up: “We can grow profitability in the lab. People forget about labs and the impact of lab utilization. But healthcare needs to remember that everyone uses the lab, and there is a lot you can do with it. The lab can help position a facility for the future. We have to minimize efforts, maximize statistics and do it the right way for the patients.”

Valerie Neff Newitt is on staff at ADVANCE.