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The impact of DRGs after year 3: doing more with less.

The impact of DRGs after year 3: Doing more with less

Three years into prospective payment, hospital laboratories are straining to keep ahead of costs and workload--and succeeding for the most part.

Test volume continues to climb, yet laboratory staffing is down from the days before Diagnosis Related Groups. That combination of trends, along with increasing automation, spells higher productivity.

But why, with shorter patient stays and shrinking occupancy rates, are hospital laboratories busier than ever? Among the major reasons: 1) hospital marketing is generating more lab work from physicians' offices and other outpatient providers; 2) testing was intensified on acutely ill inpatients in order to speed up their diagnosis and treatment; and 3) hospital labs now perform many tests that they used to send out.

Hospitals are operating more efficiently. A large majority of institutions on prospective payment expect to have a positive operating margin in 1986 despite the fall in patient census. Most hospital laboratory operating budgets are up this year or at least unchanged from 1985.

MLO mined these nuggets from its third annual survey of laboratory directors, managers, and supervisors on the impact of DRGs. Of the 174 members of the magazine's Professional Advisory Panel who responded, three-quarters worked at hospitals under the DRG system, the rest at other hospitals, clinics, or independent laboratories. Tabulated data in this report cover DRG hospitals only.

Of course, the impact of DRGs depends in part on Medicare caseload, which averaged 47 per cent at the surveyed institutions. Medicare patients accounted for 30 to 69 per cent of the cases at more than three-quarters of the hospitals; they outnumbered all other patients at 41 per cent of the hospitals.

Prospective payment is slowly spreading to other third-party payers. Nearly 30 per cent of the panelists report that other health insurers in their communities have adopted some form of prospective payment, up from 23 per cent last year. Blue Cross, Blue Shield, and Medicaid are cited most often.

Those are the highlights; now let's review the details. Table I shows how well the DRG system is meeting Washington's goal of shorter and fewer hospital stays. Patients were hospitalized an average of 5.1 days during the year to date, compared with 5.4 days in 1985 and 5.7 days in 1984. Average stay in 1986 broke down into 5.9 days at larger hospitals in the MLO survey--those with 300 or more beds--and 4.5 days at smaller hospitals.

Occupancy rates at panelists' hospitals also keep dropping, although the decline slowed a bit in 1986. The average proportion of beds filled was 65 per cent for the year to date, compared with 67 per cent in 1985 and 70 per cent in 1984. Last year's survey went back to 1983 and found a still higher occupancy rate for that year.

A wide gap separates occupancy rates at larger and smaller hospitals: This year's averages are 75 per cent and 58 per cent, respectively.

Nevertheless, the two groups of hospitals have a similar ratio of winners to losers in 1986 financial performance. Eighty-three per cent of the panelists say their institutions will have a positive financial margin by the end of the year--82 per cent at larger hospitals, 84 per cent at smaller hospitals (see Table II).

Test volume is up this year at 69 per cent of the labs, by an average of 12 per cent (see Table III). This is the biggest proportion of labs with testing increases since MLO began its DRG surveys three years ago. Volume is down at 11 per cent of the labs. The remaining 20 per cent of labs report no change in testing activity.

Sixty per cent of the labs in the current survey registered volume gains a year ago. Twenty-four per cent had decreases.

We asked panelists whether changes in test volume could be linked directly to prospective payment. Forty-three per cent saw a connection, 37 per cent did not, and 20 per cent had no idea if DRGs played a role in the rise or the fall of testing in their labs. Across all these categories, however, the most frequently mentioned contributor to increased volume was outpatient testing. More efficient utilization of the laboratory and declines in patient census appeared to be the strongest inhibitors of test growth.

Curbs on laboratory workups have their limits, a lab manager in Pennsylvania noted. "The initial response here was to cut back on testing. But that changed when they found that reduced testing caused many patients to remain in the hospital longer for diagnosis and treatment.'

Fully half the panelists--62 per cent at smaller hospitals, 40 per cent at larger hospitals--said their laboratories' test menus have expanded since DRGs were introduced. Menus were pared at 16 per cent of all labs and remained unchanged at 34 per cent (see Table IV). In last year's survey, 45 per cent of the labs added new tests, but in 1984, only 25 per cent had done so.

Reference lab use increased at 24 per cent of the laboratories since DRGs were introduced, decreased at 40 per cent, and stayed the same at 36 per cent. These figures did not differ much from data in last year's survey.

Austerity may be easing a little. Half the panelists' labs have a larger operating budget than a year earlier, compared with 46 per cent of those polled in 1985 and 36 per cent in 1984 (see Table V). Twenty-five per cent are working with a smaller budget than last year, and 25 per cent with the same budget.

The average increase at labs with larger budgets was about 9 per cent. Fifty-five per cent of the labs in smaller hospitals received more money this year, compared with 43 per cent of those in larger hospitals.

Forty-four per cent of the panelists reported that their lab had been turned down on a capital expenditure request since the advent of DRGs, up from 36 per cent in last year's survey. Again, labs in smaller hospitals fared better than those in larger hospitals--only 42 per cent of the former had a capital request rejected, versus 52 per cent of the latter. Eighty-six per cent of all panelists said manufacturers have made more attractive sales offers in the DRG era.

Faster laboratory response time is often an important goal under DRGs. Slightly more than one-quarter of large and small hospital labs alike have trimmed their average turnaround time since going on prospective payment.

But at almost the same proportion of laboratories, turnaround time has lengthene. This is occurring more in smaller hospitals (28 per cent) than in larger hospitals (17 per cent). Nearly half the panelists say turnaround time hasn't changed much one way or the other.

Laboratory management at Albuquerque's 535-bed Presbyterian Hospital had to rethink a trade-off that sacrificed turnaround time. "We have looked at all parameters since DRGs, and turnaround time was hardest hit because of decreased staffing and the decreased ability to respond to rapid changes in test volume,' David Huelsmann, administrative director of lab service, said. A study last summer of response time on CBCs and glucose tests, from receipt of specimens in the laboratory to result reporting, revealed lengthy delays, at least according to the standards of that tertiarycare hospital.

The laboratory had created a phlebotomy "sweep team' before the hospital's 1984 entry into the DRG system. Three lab assistants fan out and collect specimens all over the hospital every two hours from 5 a.m. until 9 p.m. A conveyor system delivers specimens to the lab as the collectors leave each floor. Certain floors--ICU, for example--and timed tests such as therapeutic drug assays are exempted from the sweeps. Additional phlebotomists are assigned to handle individual pickups and after-hours collections.

"Without the sweep team, we would have had to triple the number of phlebotomists to provide such comprehensive collection coverage,' Huelsmann said, noting that nearly 60 per cent of the hospital's specimens carry some form of priority status. After the study identified some significant shortcomings, the laboratory took remedial steps. For example, to improve the turnaround on CBCs, the hematology department polled the technologists and them implemented and evaluated various staffing assignments to "work smarter and more efficiently.' A follow-up study is in the works, and Huelsmann expects the results to show a marked improvement.

If turnaround time can take a turn for the worse with cost cutting and staff reductions, what's happening to quality control? Sixty-five per cent of the panelists say QC has not changed in their labs since prospective payment (compared with 70 per cent in 1985 and 80 per cent in 1984). Another 12 per cent say it has increased, and 23 per cent say it has decreased. "Decreased' doesn't necessarily mean a deterioration. In many cases, unnecessary QC has been eliminated.

And how about the general quality of laboratory service these days? "We were still doing manual CBCs when the hospital went on DRGs in 1983,' recalled Cindy Glover, assistant chief medical technologist at 28-bed St. Mary's Hospital in Cottonwood, Idaho. "Our overall quality increased quite a bit after the hospital purchased new equipment to speed up test results.'

At 290-bed R.E. Thomason General Hospital in El Paso, Texas, chief technologist James Klein said: "We're a county hospital with limited funding and a large proportion of indigent patients. We were efficient before DRGs, and we've stayed that way.'

Dana McVey, laboratory director at the 284-bed University of Health Sciences Hospital in Kansas City, Mo., makes prospective payment sound like a boon: "If anything, quality has risen because we're more aware of the consequences of our service. DRGs not only have given a boost to medical care but have also eliminated many of the "frills' and freed us to become better business people.'

Other panelists are not so sure. "So far quality has stayed the same, but because of reduced staff, we are sometimes skating on thin ice,' commented a blood bank supervisor from Virginia A Pennsylvania microbiology supervisor noted that newly hired employees are put to work too quickly, without adequate training because of staffing shortages.

"With all the emphasis on getting the results out, the temptation to let quality slide is certainly there,' a Midwestern panelist said.

Staffing and budget cuts have hurt morale and raised stress in the laboratory, according to a number of managers. "The quality of our testing is about the same, but the technologists' attitude is not,' an assistant lab director said, adding that salary ceilings and minimal pay raises may eventually damage service.

"I worry that not enough is being done to deal with the stress,' commented Paul Symons, director of diagnostic services at 400-bed Charlton Memorial Hospital in Fall River, Mass. When the laboratory lost 14 per cent of its staff in two separate reduction-inforce actions, management coped by upgrading instruments and sending more tests out, including all of the RIA work. Remaining technologists are still working harder because other tests are how performed more frequently.

Charlton Memorial has recognized the pressure on employees and is developing a full-scale stress management program. Employees will learn various stress-reduction exercises and receive counseling. The concept is very popular, which is its biggest drawback, according to Symons. "The hospital will only be able to handle a limited number of people at first, and it may be months before all who want and need help can get into the program.'

Forty-four per cent of the surveyed labs lost staff since DRGs, 16 per cent gained, and 40 per cent held fast (see Table VI). The trend toward reductions seems to be easing--59 per cent of the labs in last year's survey had to thin their staffs.

But deeper cuts were reported by the 1986 panel, an average of 16 per cent at affected labs, compared with 12 per cent last year. Normal attribution is the most common method of reducing staff, used by nearly 60 per cent of the labs that cut back. Selective layoffs according to job classification were instituted by 22 per cent of the labs, and across-the-board layoffs by 13 per cent.

Some panelists see a bright side to retrenchment. Jim Stacy, laboratory manager at 144-bed Huntsville (Texas) Memorial Hospital, said: "We are now at core-minimal staffing levels. However, because we kept all the medical technologists and reduced the aides, the quality of service is probably better. Basically we've brought the overstaffing of the 1970s back down to more realistic levels for the 1980s. And the fact that the lab now has fewer errors and better productivity helps our credibility with the doctors.'

Sixty-two per cent of the panelists reported productivity gains, compared with half of those participating in the 1985 survey and 42 per cent in 1984. Productivity remained unchanged at 30 per cent of the labs surveyed this year and slipped at just 8 per cent.

More than 70 per cent of the panelists said recently acquired instruments helped improve their laboratories' productivity. "Our paid CAP productivity has been at least 100 per cent for the past two years,' Ann Cole, laboratory manager at 226-bed Central Florida Regional Hospital in Sanford, said. "I am now trying to increase our automation as much as possible since I'm not allowed to hire more technologists.'

Overtime increased at 26 per cent of the surveyed labs, decreased at 31 per cent, and stayed the same at 43 per cent. Only 12 per cent of the laboratories in the 1985 survey had an increase in overtime, and only 10 per cent in 1984.

Nearly one-fourth of the laboratories expanded their hours of available service this year. Hours remained the same at 73 per cent of the facilities and were reduced at 3 per cent.

How tight can things get? According to a South Carolina laboratory manager, "We're so used to managing a service with no resources, we couldn't operate any closer unless we shut down.'

That can be avoided. In Part II of this special report, which follows, we will look at some strategies that are helping laboratories cope with DRGs.

Table: I Hospital occupancy declines . . .

. . . along with length of stay

Table: II Black ink for most hospitals

Does your hospital anticipate a positive financial margin in 1986?

Table: III How did test volume change in 1985?

How will '86 volume compare with '85?

Is this change directly related to DRGs?

Table: IV In-house testing vs. send-outs

Table: V How does the lab's 1986 budget compare with '85?

Since DRGs, has a capital request been rejected?

Have instrument manufacturers made better offers?

Table: VI How staffing has changed since DRGs
COPYRIGHT 1986 Nelson Publishing
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1986 Gale, Cengage Learning. All rights reserved.

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Title Annotation:diagnosis related groups, part 1
Author:Hallam, Kris
Publication:Medical Laboratory Observer
Date:Dec 1, 1986
Words:2432
Previous Article:Final budget reconciliation a mixed bag for health care providers.
Next Article:The impact of DRGs after year 3: how labs continue to cope.
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