January 2025

January 28, 2025

A clinical laboratory strategy, like that of any industry, must adapt to change. Strategic planning has to consider changes in the workforce, in technology, and in demand. As a leader in clinical laboratory strategy, see the 5 steps hc1 + Accumen suggests for increasing profitability in your lab.

1. Optimize Lab Performance

The first step in optimizing a hospital’s lab performance begins with understanding the lab’s current position. At hc1 + Accumen, we recommend benchmarking to see the entire picture which will provide insight into financials, operations, and efficiencies. Once the benchmark is conducted and assessed, the next step is to identify resources that should stay the same or change. The result of optimizing lab performance should lead to lower costs, quicker turnaround, new partnerships, or changes in resource management.

2. Leverage Strategic Technology

Technology has provided innovation, efficiency, and structure to hospital labs. When used well, technology can decrease labor costs, and increase delivery time. But what does it mean to use technology well in a hospital lab?

As technology evolves daily, it is critical to assess the needs of today and the future. hc1 + Accumen has worked with countless labs to assess how technology can facilitate efficient workflows and processes. Making strategic decisions about technology in labs can make a difference for overall performance.

3. Streamline Lab Processes

Lab processes are ever-changing. With personnel and partnerships constantly evolving, it is crucial to have standard processes that reflect efficiency and adaptability. There are several questions that one may ask regarding streamlining processes in the lab. What resources will help? What is the critical path to success? Who are the key players?

All these questions can be answered after a benchmark has been conducted and reviewed.

4. Increase Personnel Productivity

When it comes to hospital labs, our hc1 + Accumen team believes that productivity is essential for understanding lab profitability. Increasing productivity of lab technicians and other personnel can lead to more work executed in a shorter amount of time. Who wouldn’t want that?

However, this is easier said than done. For team members to be more productive, they must be equipped with the right technology, clean data, and clear communication channels.

5. Provide Quality Service

Service is at the heart of hospitals and hospital labs. Patients and practitioners are reliant on lab results being delivered in a timely fashion. It goes without saying that the quality of service can directly impact profitability. To ensure continued growth, it is important to monitor patient and team satisfaction with the service provided.

If you’re interested in meeting with one of our lab experts to discuss ways to increase profitability in your lab, contact us today for a free consultation.

In Collaboration with Becker’s Healthcare.

In hospitals and health systems, patient blood management matters. Blood management affects patient outcomes and impacts healthcare organizations’ bottom lines. There are now opportunities to disrupt the status quo in blood management, with benefits for patients and provider organizations.

At a session sponsored by hc1 + Accumen at the Becker’s 10th Annual CEO + CFO Roundtable, BG Porter, former CEO of Accumen, facilitated a discussion on breakthrough technologies in healthcare with panelists:

Jason Carney, VP/GM, comprehensive Patient Blood Management
Gary Catarella, VP, enterprise lab, Atrium Health
Michael Harris, MD, founder, MTH Health

Three key takeaways were:

1. Identifying anemia prior to surgery improves health outcomes and equity.

Patient blood management is an often overlooked opportunity to improve health outcomes. The number one reason for hospital transfusions is anemia. Anemia is an independent modifiable risk factor associated with increased morbidity and mortality, longer length of stay, readmissions and extra PT visits for surgical patients. These factors all raise the economic burden of anemia.

Addressing anemia prior to surgery improves outcomes, lowers costs and can improve health equity. “To deliver equitable health care, you need to identify and treat anemia in all patients prior to surgery, giving everyone access to optimal outcomes,” Mr. Porter said.

2. Executive leadership buy-in is key to lasting change.

Anemia is a multidisciplinary issue with a lot of moving pieces for patients and providers. Having a standard workflow is key to identifying patients with anemia prior to surgery; however, changing existing processes can be a challenge, as new blood management programs often disrupt the status quo.

Strong change management skills and leadership are critical to any new program’s success. In one example, Dr. Harris approached change at Englewood Health in New Jersey by gaining the buy-in of both executive leadership and physicians by demonstrating clear cost savings and increased margins along with better outcomes. In addition, the program introduced new revenue opportunities focused on helping patients prior to surgery and enhanced Englewood’s reputation.

Similarly, at Atrium Health, a health system with more than 40 hospitals and 38 laboratory sites, implementing hc1 + Accumen’s blood management program offers the opportunity over four years to decrease red cell transfusions by 60,000, decrease costs by $50 million and improve revenues by $14 million.

The project just kicked off this year, but to drive executive physician support, rather than emphasize the cost benefits, Mr. Catarella used data and case studies to explain the value proposition and drive adoption.

“Your doctors want to do the right thing for their patients and they want to be better than their neighbors and ultimately drive growth in their hospitals,” Dr. Harris said. “It’s an extraordinary growth opportunity for your organization to be out in front of patient blood management.”

3. A strong partnership increases program success.

Understanding that a blood management and anemia program could get back much-needed clinician time, Atrium embarked on its patient blood management program at a time of severe workforce shortages. To accelerate the process and build a solid foundation to support success, Atrium needed a strong change management partner, which they found in hc1 + Accumen. “The hc1 + Accumen team . . . is boots on the ground. They are sitting across the table with you and your leaders and your physicians and nurses, face-to-face, helping you build that programmatic infrastructure,” Mr. Catarella said.

hc1 + Accumen’s MyBloodHealth® solution uses a high reliability, purpose-built process and a data-rich analytics platform. MyBloodHealth connects to your EMR and using proprietary algorithms, identifies anemic patients who can be treated before surgery, sends them to a virtual waiting room to triage the their severity of anemia, analyzes the time frame to surgery and determines whether treatment is recommended..

hc1 + Accumen clients see between a four to six times ROI on their investment, including a $1,250 per DRG savings and a $600 to $700 net margin increase for patients treated for anemia.

Patient blood management leads to better patient outcomes and results in substantial cost savings for healthcare organizations. However, any successful implementation requires strong change management skills and leadership and physician support. hc1 + Accumen combines people, process, and technology to disrupt health system processes for the better.

Learn more about how hc1+Accumen can design a Comprehensive Patient Blood Management program to meet the unique needs of your hospital or health system, ensuring a swift and efficient path to cost savings while elevating patient outcomes.

This article was originally published and written in Laboratory Economics Volume 19, No. 5 May 2024 issue.

Introduction

Most health systems and their labs remain under financial pressure due to rising employee costs and inflation. As a result, they are looking to cut costs anywhere they can, including reference (aka send-out) testing expenses. hc1+Accumen negotiates about 15-20 reference lab agreements per year for health systems and hospitals.

Below we summarize strategies for negotiating your lab’s next reference testing contract from Accumen’s Brent Bolton, VP/GM, Strategic Partnerships.

What is the average percentage of hospital lab budget spent on reference testing?

Lab department costs average about 4% of the total hospital operating cost budget. And about 30% of the lab budget is spent on lab supplies. Reference testing is around 20% of overall lab supplies cost. So, reference testing represents an average of roughly 6% of the hospital lab budget and less than 1% of the average hospital’s total expenses.

Who else besides ARUP, Labcorp, Mayo and Quest should an RFP go to?

Depending on where the hospital lab is located, it may also want to consider regional labs. A few examples include Wisconsin Diagnostic Labs (WDL), TriCore, Sonic Healthcare, BioReference and Cleveland Clinic.

In addition, it’s good to get pricing from some of the secondary/specialty labs that focus on esoteric testing, toxicology testing and other labs that do third-party testing. Some specialty tests will be lower-cost and have a quicker turnaround time when ordered directly from a secondary lab like NeoGenomics. As a result, it often makes sense to carve out certain specialty tests from the primary reference lab agreement.

What length of term should a new reference testing contract be?

Three years is generally the average reference lab contract duration. Five years is okay if you can get significant discounts. There should never be volume commitments with the reference lab agreement; it should be a fee schedule only with fixed pricing. Auto renewals are also acceptable as long as there is pricing protection.

How many tests should be included in an RFP?

All your send-out tests should be included. This might result in an RFP with 1,000+ tests.

Will FDA regulation of LDTs cause hospitals to send out more tests to reference labs?

Under the FDA’s initial proposed regulations, we thought the outcome was going to be catastrophic for some hospital labs. They would have had to send out all of their LDT testing to one of the national reference labs. With the final FDA ruling, there appears to be a lot more flexibility. It looks like hospitals will be exempt from having to file premarket applications with the FDA for their existing LDTs.

What about new esoteric tests that are introduced after a reference testing contract is signed?

Labs must consistently monitor and manage send-out testing to ensure new expensive testing does not fall through the cracks. For any tests with significant volume or high pricing, request multiple bids to compare with the primary reference lab pricing even after the primary reference lab agreement is signed. Many of the reference labs will allow for annual pricing reviews on the testing that was not included in the original RFP, especially if this new testing is increasing volumes and revenues to the reference lab. If the agreement is done well, this new testing can help to get rebates or volume discounts which will minimize the overall cost increase exposure.

What are some tips to help make sure that hospitals don’t overpay for reference testing?

Conducting an RFP with multiple reference labs that are legitimate options will help ensure hospitals are not overpaying for reference testing.

One cost that can sneak up on a hospital lab is miscellaneous testing. The physician may choose to send testing to the primary reference lab but specify that it is performed at a specialty lab (commonly known as a pass through). The primary reference will then mark up that testing and also charge handling fees. It will be reported on the hospital lab’s bill as a miscellaneous test. Hospital labs need to monitor these miscellaneous testing codes, descriptions and fees and see if that testing can be performed at the primary reference lab instead.

Could pricing for reference tests simply be set at a percentage of the Medicare CLFS rates?

Yes, it is possible, but the reference labs will never willingly change to this transparent pricing model on all testing without federal regulatory enforcement. Reference labs commonly set pricing based on several factors including total revenue projections and test volumes; and not necessarily on a test-by-test basis. As a result, the biggest determinant to pricing is the amount of reference lab competition available to each hospital lab client.

What are your thoughts on using benchmarking pricing in the RFP process?

Most benchmark pricing is just averages on top of other averages, and the data is often outdated. It generally does not account for market changes, rebates, or the hidden value adds that a vendor can provide. A health system may feel they are getting a good deal — even when they are not. The only truly accurate benchmark pricing comes from utilizing a third party (e.g., Accumen) that sees real time national market data from every reference lab, every GPO, and every size hospital.

Can you provide average pricing data on some commonly referred tests?

Average pricing per test is extremely subjective, as it is based on the performing testing lab and location, but most notably the pricing is based on the per test volumes sent to the reference lab. It is more important to look at the total cost of aggregated reference lab testing costs versus focusing on individual test codes, unless, of course, there are significant pricing outliers. Pricing for testing can range significantly given the variables I’ve mentioned. For example, a chlamydia trachomatis/ neisseria gonorrhoeae (CT/NG) amplified probe can range anywhere from $15-$40.

What kind of savings can hospitals expect when sending out an RFP for reference testing?

Savings are dependent on each situation and each hospital lab’s level of leverage. As I mentioned earlier, true competition is the best driver for aggressive savings (and that’s more than just sending out RFP’s). That said, we generally see savings of 10%+ for contract renewals with an incumbent reference lab and up to 25% if a reference lab vendor change is made (which can be a heavy lift for the hospital as it involves a lot of scarce IT resources).

What makes the IT transition to a new reference lab so difficult?

It’s difficult because health system IT resources are generally constrained, thereby creating a bottleneck. Every individual send-out test has to be built into the LIS, and there could be thousands of tests that the health system or hospital sends to the new primary reference lab. Each one of those tests will have a test code, description, reference range for each result, specimen collection information, etc. that needs to be added to ensure test orders and results are entered accurately.

Can’t hospitals simply take advantage of reference testing contracts through their GPO?

Yes. Hospitals can always utilize the GPO pricing tiers that they qualify for, and that will prevent them from overpaying on reference lab testing. But to maximize savings, value adds, and create favorable contract terms, the best way is to create an agreement between the hospital and the reference lab with a fee schedule that is custom tailored for the hospital. As mentioned earlier, the best way to do that is to have a competitive bidding process that looks at each hospital’s unique test mix, volumes, service level requirements, and consolidation/standardization opportunities. The GPO contract will not take all those particulars into account. It’s also worth noting that a reference lab fee schedule is one of the most important agreements that a hospital can negotiate, so it’s always worth the effort to do so.

Learn more about how hc1+Accumen can work alongside your organization to make sure you receive the best reference test pricing.

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Brent Bolton, MBA, CPSM is VP, Strategic Partnerships for hc1 + Accumen. Brent is a Supply Chain and Materials Management expert with over 20 years’ experience in the manufacturing and healthcare industry. He is results driven, and has a proven track record of cost reduction, continuous process improvement, and strategic partnerships. Brent has an MBA from Point Loma Nazarene University and a BS in Business Management with an emphasis in Supply Chain Management from Arizona State University. Brent is an Adjunct Professor for the College of Business at San Diego State University, teaching graduate courses in management of operations and supply chain systems. He is a Certified Professional in Supply Chain (CPSM), and a Lean Six Sigma Green Belt.