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Why is this hospital administrator smiling?

Why is this hopsital administrator smiling? MLOmet a chipper hospital administrator recently. He was discussing clinical laboratory costs and smiling. "I feel less concern about pathology now than about almost anything we do here," he said.

What exactly had to pleased Robert G. Newman, M.D., president of 916-bed Beth Israel Medical Center in New York City?

Damon Clinical Laboratories, the reference testing network, was taking over management of the hospital laboratory's day-to-day technical operations and assuming all operating costs. It would charge Beth Israel on a fee for service basis.

That was only phase one, however. The agreement aims eventually at a joint venture, operating and selling clinical laboratory services in the New York metropolitan area. Joseph C. Isola, president of Damon Clinical Laboratories, estimates the area holds an annual market of more than $200 million for such services, including send-outs from physicians' offices, clinics, health maintenance organizations, and hospital labs.

These developments are worth noting in this space because we plan to explore different kinds of laboratory ventures and consolidations in coming months. And we also plan to sound out hospital administrators on their views of the clinical laboratory. That will be the subject of a major article in our May issue.

Damon has placed Beth Israel's nonmedical laboratory management and supervisory personnel on its payroll and installed a new general manager, Alan L. Portnoy, Ph.D. Readers of MLO will recall our July 1986 cover story on emergency room lab services that Dr. Portnoy coauthored while he served as chief of clinical biochemistry at Queens Hospital Center, Jamaica, N.Y.

At the start, Beth Israel's lab will gain some savings through combined purchasing power with Damon, and also receive new management support from the reference lab's data processing personnel, analysts, and technical directors.

In a few months, Damon will bring its own New York area work into the Beth Israel lab--work currently performed at the reference network's Philadelphia facility. These tests will be done in the evening and at night when the hospital lab stands largely idle except for Stat orders. It will mark the return to testing within New York City by a major independent clinical laboratory. The city has been without such a lab since the 1970s.

With the economies of scale achieved by Damon's sharing of facilities and expenses, Beth Israel's test costs should come down significantly.

The final phase, in perhaps two years, will be an equity-based partnership, with Damon and Beth Israel building a larger offsite laboratory. Damon already has such a partnership in the Chicago area with MacNeal Hospital, Berwyn, Ill.

One advantage that Damon and Beth Israel will have in marketing reference testing services to other hospitals is the unionized status of Beth Israel's lab staff, according to Dr. Newman. He says unionized hospitals in the city cannot subcontract their lab work to non-union labs.

Calvin Strand, M.D., is associate director of clinical pathology at Beth Israel and medical director of the clinical laboratory. He and other laboratory physicians will retain their responsibility for the quality of laboratory services. Dr. Newman notes that 85 to 90 per cent of Beth Israel's patients come from the hospital's voluntary medical and dental staff. "If our physicians were to perceive laboratory quality diminishing, it would be catastrophic. This arrangement gives us an opportunity to reduce costs without firing a whole bunch of people and undercutting quality."

So we leave Dr. Newman beaming, confident that the laboratory is going to be one part of his hopsital that will thrive. As I said before, we'll soon hear what other hospital administrators have to say about their labs. It should be interesting.
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Copyright 1987 Gale, Cengage Learning. All rights reserved.

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Title Annotation:signed joint venture agreement to contract out lab work
Author:Fitzgibbon, Robert J.
Publication:Medical Laboratory Observer
Date:Feb 1, 1987
Words:607
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