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Should lab managers be well versed in finance?

Q I am a clinically oriented person. That's not surprising, since I'm a lab manager. I never realized how much I would have to know about finance! Rapidly changing outpatient reimbursement mechanisms have put me in a spin. Medicaid rules in our state (New York) and others are awfully complex. How much do I have to understand about the details of both state and Federal reimbursement regulations? How much can safely be left to others - and to whom?

A More than ever before, says Ted Street, the proactive laboratory manager must be comfortable in finance, economics, and accounting. You can never learn too much about regulations, he asserts, particularly those related to reimbursement and licensure. A strong business background as an adjunct to clinical training prepares the laboratory manager for coping in today's changing environment.

At Marti Day's institution, the University of La Verne (Calif.), candidates for both bachelor's and master's degrees are required to take accounting and finance courses. Lab managers need to understand as much as it takes to manage an efficient and effective laboratory, says Day. Being clinically and technically expert no longer suffices for any supervisor or manager in today's health care environment, she believes. Take courses in school and through the professional societies. The presence or absence of such expertise often determines who will be hired - and fired.

Marti Bailey wouldn't go quite that far. "It is not my impression that a lab manager needs more than a broad working knowledge of reimbursement rules," she says. "Leave this to your hospital's financial management department, who do need to be intimately aware of these rules to make sure that regulations are being met, that the hospital is receiving 100% of what is due, and to provide budget (revenue) analysis."

Lab managers need to know only what will affect the bottom line of the laboratory's financial reports, Bailey continues. This includes the percentage and approximate reimbursement level of lab tests reimbursed by Medicare/Medicaid, the percentage of lab charges being written off as bad debts, and similar aspects. Having this information is useful when predicting real versus actual lab revenue and pursuing outpatient markets. Being aware of the payment policies of all third-party payers for highly specialized services (such as transplants, trauma, and in vitro fertilization) helps the lab manager determine the potential impact on lab revenue if any of these services are being considered or about to be implemented.

Panelist Lynne Garcia suggests that you need a grasp of at least the basics of the financial mechanisms that come into play when you consider new methods, instrumentation, use of personnel, and costing out of current and proposed procedures. She recommends that you thoroughly understand the DRG system, CAP workload recording, CPT codes, personnel salary structures, complete benefit costs, overhead, and direct versus indirect costs. You need to recognize how regulatory changes, such as CLIA '88, will affect your financial picture. You need to understand proficiency testing costs, including the cost to your lab of controls and repeat testing.

"You may not need to make every decision or plug in every figure yourself," Garcia warns, "but you'd better have someone good providing you math comprehensible data that make sense and that can be tracked from month to month or even more often. Understand the audit system and how coding errors could prevent you from receiving your fair share of reimbursement. Learn the ramifications of trying to cheat the system (not recommended). You must understand these issues even if you work with a large business office that regularly supplies data. You must see the whole picture in order to be able to interpret what's going on, particularly in this era of rapid change and serious financial disarray. In addition, you should serve as a reliable source of information for your staff; don't rely on someone else to do it. What you don't understand, you're liable to screw up!"

Betty Martin states flatly that a laboratory manager "must know all there is to know about financial management." Avail yourself of all possible avenues of continuing education in the business aspects of laboratory management, she strongly urges. The Clinical Laboratory Management Association (CLMA), for example, of which Martin is president, has received a number of requests for such programs from its members and accordingly presents national videoconferences on financial management.

Financial savvy will determine survival in the future, Martin concludes: "It is crucial to be able to forecast data and make appropriate trend analyses. This is one area that the manager does not want to delegate ... unless, of course, that individual is anxious to find employment elsewhere."
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Title Annotation:Management Q & A
Publication:Medical Laboratory Observer
Date:Sep 1, 1992
Previous Article:Interdepartmental cross-training: perils and pitfalls.
Next Article:Joining the technological evolution in health care.

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