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Managing and reducing lab costs.

These days, many hospital administrators are considering consolidation as a response to cost containment pressures. But as we reported last month, a recent series of studies showed that large hospitals offer no relative cost savings over small hospitals--and in some circumstances are proportionately more expensive to run. (See "An Analysis of Test Costs vs. Hospital Size," MLO, January 1984.)

Those studies also revealed that hospital laboratories follow a similar cost pattern, achieving no greater economies in relation to increasing size. Rather, the cost per test and the number of tests per admission tend to rise sharply in proportion to a hospital's bed size.

Some of this increase is understandable, of course. Large labs with sophisticated equipment offer many more tests that small ones, and large hospitals generally treat a higher proportion of complicated, costly cases than their smaller counterparts.

These factors alone, however, don't wholly explain the phenomenon. A number of other variables affect a laboratory's costs. Lab management can control at least four of them: organization of resources, work flow, physician utilization of lab services, and level of technological sophistication. This concluding article will examine how careful attention to each of these factors enables us to run laboratories--large or small--more cost-efficiently.

* Managing resources. To some extent, the consolidation and reorganization of laboratory resources have grown naturally with the increasing sophistication of laboratory technology. Multiphasic chemistry profiles, for example, are replacing single- and dual-channel analyzers, cutting the amount of time and number of personnel needed to perform the same volume of testing. The development of specific glucose, BUN, and electrolyte analyzers paved the way for instruments that analyze all three or any combination of those analytes. These developments alone permit one technologist to perform the work formerly done by four. Discrete chemistry analyzers and automated hematology instruments have led to similar consolidation of laboratory work stations.

The impact of this trend has been enormous. One large New York hospital, for example, performed 213,567 tests in 1965 and 2 million tests in 1976--but decreased its number of work stations from 12 to 6 over the course of that decade. The lab's budget doubled for the same period, while cost per test dropped from $2.63 to $0.51.

Those savings, however, were due to more than a switch from manual to automated methods. The lab had to make several other choices in order to effect such economies. Productivity, labor, and reagent and disposable costs all have a direct effect on the optimal number of work stations and technologists for a given workload.

The laboratory in our 625-bed hospital, for example, realized significant savings from a chain reaction that began when we changed our large automated chemistry analyzer. Formerly, we had used the analyzer for routine discrete batch testing and surgical preadmission profiling. (An electrolyte panel for the profile was run on a smaller analyzer.) When we studied our costs, we found that the profiles cost $4.50 each for reagents and disposables and $0.90 for labor per patient. By replacing the analyzer with a model that offered us higher throughput and microchemistry capacility, we reduced our reagent and disposable costs by 50 per cent and cut labor costs to $0.20 per patient. We transferred some semi-automated bench procedures to the new analyzer as well, and made more effective use of the small analyzer by reserving it primarily for Stat electrolyte testing.

* Work flow. Analysis of work flow patterns has a broader objective than the consolidation of technical work into fewer functional units. It can also cut clerical costs and smooth out the peaks and troughs of lab activity.

It's not uncommon for workload analysis to uncover that up to 40 per cent of all testing in an acute care hospital is ordered Stat. Stat ordering usually follows a predictable pattern, rising sharply just before shift changes and teaching rounds.

One way to reduce Stat abuse is to provide regular specimen collections at two-hour intervals throughout the day and evening. The lab can also distribute workload more evenly by performing routine morning presurgical testing during the previous evening shift, and scheduling nonacute routine work during the evening as well.

By cutting Stats, collecting routine work more efficiently, and batching more scheduled tests, you can significantly lower nonbillable expenses such as clerical and quality control costs--while reducing the number of work stations needed during peak hours.

* Physician utilization. We recently reorganized our laboratory to handle greater responsibility for correlating services with medical needs. To accomplish this, we had to restructure the way physicians use the lab. The result of this effort has been a reduction in unnecessary tests and Stat orders, and a clearer link between our services and documentable patient benefits.

The first step in the process was to define Stats. We now limit these to Coulter profiles, platelet counts, electrolytes, and a few other procedures required for emergency care. Total CK is defined as a Stat only on admission, or when myocardial infarction is a suspected complication in a patient admitted for another condition.

Since CK-MB is a timed sequence of tests requiring analysis at the end of the evaluation period, we defined rigorous time requirements for its performance, and developed a utilization algorithm (Figure I) that was approved by the hospital's formal medical organization for clinical guidance. Apart from the obvious medical benefits of this approach, the analysis of serial CK-MB at appropriate sampling times can differentiate between complicate and uncomplicated cases of MI--information that relates directly to length of stay and reimbursement rates. This diagnostic accuracy is simply not possible when CK-MB determinations are performed randomly.

We have also influenced physician utilization by designing some new test request slips that relate laboratory services to specific medical requirements. The forms remind physicians of the medical indications, Stat requirements, and ordering limitations for various tests. Our request forms for CK-MB isoenzymes, shown in Figure II, feature specific indications for various testing intervals, and the report section organizes the results in a logical sequence.

Some ordering protocols were restructured to encourage efficiency. For example, we eliminated microscopic examinations of urine and blood as routine screening procedures. Clinicians can still request them specifically, of course, but the hospital can now audit these orders for appropriateness. This one step--eliminating unnecessary microscopics and a significant number of differentials--has enabled us to make better use of staff time.

* Technology. Systems analysis plays a growing role in our efforts to define the amount, quality, and effectiveness of laboratory utilization. Lowering costs is a primary objective, but even more is at stake. In the long run, we must redefine how the laboratory will operate in order to keep performing--and performing well--in the current medical and economic environment.

Selecting the right technology will be just as crucial to these efforts as managing the work flow. Technology assessment requires thoughtful analysis. Reagents for one system may costs more per test than those for another, yet the system may reduce total costs through savings in labor and disposables. The best decision can only be made in light of the other factors that we have discussed: resources, work flow, and utilization.

In the future, hospitals will depend increasingly on microprocessors and on mini- and microcomputers for efficient data flow. High labor costs and the inefficiency of even the best manual systems will force the change. It may just turn out to be the most exciting clinical lab development to result from DRGs, and a challenging chance to improve the existing management system.
COPYRIGHT 1984 Nelson Publishing
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Copyright 1984 Gale, Cengage Learning. All rights reserved.

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Author:Bernstein, Larry H.; Davis, Gustave; Pelton, Timothy
Publication:Medical Laboratory Observer
Date:Feb 1, 1984
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