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Controlling reference testing costs; group purchase discounts and computerized test audits helped this lab slash send-out costs.

It was a frustrating situation. From 1979 to 1982, the cost of reference laboratory service to our 340-bed acute-care hospital rose more than 123 per cent. In each of those years, we had negotiated successively deeper discounts with our principal reference lab. Yet our reference costs were spiraling despite an actual drop in cost per test, as shown in Figure I.

With New York State's own complex version of prospective payment on the horizon, we knew we had to do something. Reference work was growing at a much faster rate than in-house testing, which rose some 12 per cent a year. Send-outs constituted less than 1 per cent of the laboratory's total volume, while eating up roughly 10 per cent of its gross costs. Furthermore, these fees were almost never fully reimbursed, dollar for dollar, by third-party payers.

We began to look for strategies to cut reference testing costs and improve utilization. Our first step was to switch to a reference laboratory that offered us a better deal. At the time, the hospital lab was actively involved with the Joint Purchasing Corporation of New York, an intermediary organization for hospital service providers, in developing a group buying contract with major reference laboratories. Under the JPC's guidance, a committee of physicians, lab administrators, and clinical chemists developed criteria, terms and conditions for a proposed contract.

The effort paid off in early 1983, when a number of area hospitals signed a highly economical group purchasing contract with one major regional reference lab. This contract alone, with its 60. per cent discount off list price, would have reduced our reference test costs for the year, even without a cut in send-out volume.

Utilization control, our second tactic, began with a thorough review of ordered reference tests and studies. It was soon clear that our log books were not organized to provide easy access to the data we needed.

If our busy pathologist/laboratory director was to participate fully in the review process, we would need a mechanism for retrieving data rapidly in a variety of formats. Under our existing system, one had to flip through a sheaf of test request slips to assemble meaningful information on individual physician ordering patterns, including redundant, excessive, or inconsistent orders, and other possible utilization problems.

A microcomputer appeared the most likely solution to storing, organizing, and printing our reference test data. In late 1982, we purchased a Radio Shack Model II, and began recording data in the beginning of 1983. Once the system was implemented, it involved no additional clerical work, since the computer took the place of our regular manual log of reference tests. As for software, any good data base management system or flexible filing program that allows the user to sort data by various parameters is adequate for this purpose.

During the first month of computer monitoring, we did nothing out of the ordinary to influence the ordering behavior of attending, consulting, or house staff physicians. When the month ended, we prepared a cumulative printout. To identify ordering patterns or heavy reference lab users, the report arranged the send-out list by physicians' last names, and separated the house staff orders from those of attending and consulting physicians. Figure II shows an abbreviated version of one of these reports.

In one stroke, the neatly labeled printout solved two of our main hurdles: It clearly showed the volume and test mix of each physician using reference lab services, and capsulized the extent and costs of such testing in an easily readable form.

We presented a copy of the report at the next meeting of the medical board. Attendees received it with interest and recognized the need to cut these costs. We deliberately refrained, however, from using the meeting as a forum to establish ordering policies or guidelines.

Instead, we opted for an approach that we believe is the key to the program's success. Rather than make a unilateral attempt to change ordering habits, we focused on offering the laboratory's services for test ordering consultation. After the meeting, we discussed the data with the director of medicine and various attending phsicians, individually or in small groups. We suspected from a review of the literature that this one-on-one method would prove more effective than any mandated change. So far, experience has proven us right.

Over the next two months, all reference tests requests--some 10 per day on average--were entered into the computer, a task that takes about 10 minutes daily. Each day's activities were printed in accession log format and reviewed by the laboratory manager, who alerted the director to any unusual or unlikely-looking requests. The director then called physicians immediately to check out such orders.

These calls, which usually took about two minutes, stressed the following points: the clinical need for the test ordered; less costly alternatives, where appropriate, that yielded equal or better information than the test requested; correction of occasional clerical or other errors; and cost containment, a topic discussed frequently with clinicians to reinforce their sense of responsibility in this area.

In some 90 per cent of all cases where the laboratory director intervened, the ordering physician voluntarily canceled or changed the test in question. The other 10 per cent justified their choices or simply remained adamant. Almost every cancellation due to erroneous ordering resulted from one of the following: improper test selection by inexperienced house staff; improper clerical transcription of physicians' orders; or simple lack of knowledge of a test's medical value in relation to its cost-effectiveness.

In the following months, referred laboratory fees began to drop. Part of the savings arose from the new reduced fee schedule, of course. But the actual number of tests ordered in the survey months also declined slightly from the same period in the previous year. In addition, test mix appeared to be shifting somewhat from very costly procedures to more moderately priced tests.

The monthly summary serves as a guide for the laboratory director's review and follow-up, while the laboratory manager uses it for statistical and record-keeping purposes. These concise reports, which present data in several formats, allow selective intervention when indicated.

The computer can produce reports to monitor compliance with laboratory guidelines or identify specific procedures for review. We soon learned, for example, that physicians were routinely ordering several different panels, containing some expensive and often redundant tests, to rule out pheochromocytoma on hypertensive patients. The director discussed alternative diagnostic approaches with clinicians most likely to use the procedures. As a result of these discussions, we selected VMA and total metanephrines as our panel of choice for this screening, and the hospital's physicians readily accepted it. We discovered and stopped other irregularities as well--such as extensive esoteric tests ordered by a staff physician out of intellectual curiosity.

The laboratory director's close involvement is the most important element in our utilization program. His status as a physician and colleague enables him to present alternate choices to the medical staff without arousing resistance or resentment; he has the best information at hand, and the patient's welfare in mind. Most clinicians, in fact, have been grateful for "free consultations" to learn the latest consensus on cost-effective ordering.

The computer-generated reports, in turn, have become the laboratory's most valuable utilization tool. They provide a vital element of objectivity to discussions on a highly sensitive subject. These reports make clinicians instantly aware of their reference laboratory ordering activities for the entire month, and remind them that an efficient monitoring method is in ongoing use. Since the computer performs all the searches, sorts, and collations, the pathologist can afford the time for regular participation, which usually requires no more than five to 10 minutes a day.

The results have been impressive. In the first year, the combination of our computerized audit and group buying contract reduced reference testing costs by 31 per cent, or $27,000 less than our 1982 expenses.

The laboratory and the hospital have done more than save money. We have improved service and enhanced diagnostic efficiency. Our review system stimulates consultation between the pathologist and the ordering physician, resulting in performance of tests that gives us the most for our money. Everyone gains--the hospital, the physician, and the patient.
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Author:Schraft, William C.; Carniato, Donald E.
Publication:Medical Laboratory Observer
Date:Oct 1, 1984
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