Inside the Lab Industry: Finding the Value Equation in a Tough Environment

Opinions on the industry’s near future appeared as sharply etched at last month’s G2 Intelligence’s Volume to Value conference as measurements on a beaker. And few people present in Fort Lauderdale, Fla., Feb. 25-27 considered their laboratory glass half full. Instead, the overarching theme of the two-plus days of sessions was that if the nonmolecular portion of the industry is to experience healthy growth anytime soon, it must remake itself as a powerfully intuitive adjunct to health care delivery’s decisionmakers rather than an assembly line churning out results to any hospital, doctor, or patient in possession of a wallet. The equation that spelled out the sector’s relative lack of leverage was regularly repeated during the conference like a dark mantra: Although laboratory results influence approximately 70 percent of health care diagnosis and treatment, they comprise just 3 percent of overall health care expenditures—suggesting the labs’ vulnerability to cuts that would seem minor to the overall health care delivery equation would devastate the lab sector. Many of the presentations focused on reworking that equation so the beakers would at least seem half full. The Laboratory’s Role in ACOs The discussion of how labs can fully integrate themselves into accountable care organizations—the Patient Protection and Affordable Care Act (PPACA)-driven collaborations between hospitals and doctors to cut costs while improving patient outcomes—predominated the conference. “Laboratories have to be contributing collaborators so they can show their value to the system,” said John T. Daly, M.D., chief medical officer of the Commission on Laboratory Accreditation (COLA). The issue is how specifically to accomplish this. Daly noted that pathologists have been at the forefront of providing predictive personalized medicine, and this is the key role they can play in an ACO environment. “It is imperative that pathologists show their value by providing to clinicians interpretative data on those complex tests to give clinicians a pathway they can go on [when] treating their patient,” he said. That includes developing computerized physician order entry (CPOE) prompts for physicians as well as test-ordering algorithms—essentially, when and how clinicians should be ordering tests, as opposed to ordering them wholesale. “They need to be able to tell health systems what makes the most sense at a given location for a given population of patients,” Daly said. COLA has developed certifications and seals of excellence for laboratories wishing to participate in ACOs, Daly noted. Not only should the testing process be streamlined, there should be measurable results for the care that is derived, he stressed. “Patients often don’t get the care they need, and if we’re going to have an impact in an ACO, we have to find a way to make it go better,” said Conrad Schuerch, M.D., chairman of the department of laboratory medicine at Geisinger Health System in Pennsylvania, which operates its own ACO. In an ideal ACO environment, Schuerch observed that “if the lab is doing its job well, the patient will be doing well.” Schuerch presented the ACO challenge for labs as being contained within opposing triangles. The points on the first triangle represent quality, cost, and service. It is contained within a triangle posing the challenges of data integration and management, utilization management, and clinical effectiveness. According to Schuerch, laboratories should not only meet the objectives within the triangles but also help improve clinical efficiency throughout the continuum of care while making the overall experience of interfacing with a lab more seamless. That means more convenient methods of providing phlebotomy services, easier means to place orders, and quicker turnarounds. Along those lines, Geisinger’s labs are devoted to delivering blood gas reports on emergency room patients within 15 minutes, hospital stat tests within an hour, and ongoing testing for costly hospital-acquired infections such as MRSA and C. difficile. Patient-Centric Care In addition to working with providers, labs should also be able to help cater to the needs of specific patients, experts at the conferences agreed. Unfortunately, this may be in conflict with the need to streamline services and cut costs in order to satisfy providers, according to Paul Epner, a consultant who recently founded the organization Society to Improve Diagnosis in Medicine. Instead, the result has been what Epner said was the creation of an “increasingly factorylike experience” that focuses solely on inputs and outputs. That ultimately pulls the patient out of the equation even though they are ultimately the ones who will determine the value of such tests. One of the biggest problems for patients? The failure to follow up on test results, according to Epner. He cited the case of Rory Staunton, a 12-year-old who died at NYU Langone Medical Center from community-acquired sepsis because clinicians there did not closely examine his blood tests after an emergency room visit a day prior to his admission. “The opportunity to save this boy’s life was waiting there, and the health care system didn’t respond,” Epner said, adding that despite Staunton’s death being extensively reported in the New York Times, the failure to follow up on medical test results was satirized just a few months later in the New Yorker magazine. “Our product is being underutilized, and that leads to an undervaluing of us,” Epner said. This was borne out in a survey of 1,200 physicians and their responses when they faced uncertainties in test ordering. Asking a laboratory professional for advice was the course they took the least often. Meanwhile, in a survey of more than 300 closed medical malpractice cases, nearly half could be traced back to some issue in the laboratory: Either tests that were ordered were not performed, the tests were performed incorrectly, the result were incorrectly interpreted, or the results were not transmitted to the patient. Like Schuerch, Epner suggested a CPOE interface with the laboratories but also greater use of reflective and reflex testing. The former would create protocols for the sequential addition of tests based on prior results. The latter would empower lab physicians’ discretion to order additional tests based on their interpretations. He also recommended data mining—a retrospective look at results in order to improve and refine protocols. In an example, he noted that Kaiser Permanente’s Southern California division has used lab data from its electronic medical records to create follow-up protocols for patients suspected of but not diagnosed with prostate cancer and chronic kidney disease, as well as more effective medication monitoring. Meeting the Value Equation Parsing all these changes and managing the lab sector effectively enough to change the industry from a volume to value proposition will be a major challenge, said L. Eleanor J. Herriman, M.D., managing director for G2 Intelligence’s advisory services. Nevertheless, the role for laboratories is pretty clear: Hospitals and health care systems are facing “serious threats” in the coming years in terms of both the PPACA and planned cuts in reimbursement. “CEOs need to get 20 to 40 percent of costs out of the system. . . . [T]here is no way to do this with the traditional levers” of cutting costs and waste, she said. Instead, it will represent a redefinition of care delivery. How can labs assist with the redefinition? According to Herriman, it will include focusing on some of the collateral conditions in the hospital setting that are major cost drivers for care. That means providing such services as rapid molecular testing that would assist with such care as the targeted delivery of antibiotics for pressure ulcers and urinary tract infections; decision support for detecting and treating hyponatremia; locating biomarkers for victims of acute renal failure, strokes, and pneumonia; and providing support for diabetes care to avoid infections. But Herriman provided no illusions that such a transition for labs would be rapid or easy. She observed as part of a later discussion panel that pathologists and pathology groups—and by extension their laboratories—are far more likely to enjoy success in an ACO or a value-oriented care setting if they had been interacting with clinicians prior to its formation. “They had been going to the meetings with the physicians, they had been . . . interacting with the physicians outside of their lab,” she said. “You do have to get out of the lab.”