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Surviving and flourishing in tough times.

"Test volume low, costs high" was the projection for 1991. The authors' large medical center took steps to compensate.

Baystate Medical Center, an 800-bed regional referral center in Springfield, Mass., works within a state hospital reimbursement system that is most charitably described as "challenging." By adapting to the constant pressure by state and local third-party payers to reduce expenses, length of stay, and ancillary service utilization, Baystate's laboratory serves as a role model for other labs faced with a difficult government bureaucracy.

Between 1982 and 1991 our laboratory's test volume increased from 1.3 to 2.29 million tests - a 76% rise. During the breakthrough nine-year period, expenses nearly kept pace, rising by 61%, from $8.6 to $13.8 million. In October 1990 (the beginning of our fiscal '91), however, came alarming projections. During fiscal 1991 there would be a twin calamity: Total test volume would grow by only 1.3% while expenses would rise by 6.3%.

To meet this looming quandary, the administrative director of laboratory services, in league with the managers of our 18 cost centers and the authors, initiated several cost containment strategies. Our efforts were successful. Expenses increased by only 3.5% during fiscal '91; test volume growth was indeed modest, 2.7%, though less dire than had been projected. This article explains what we did to ease the anticipated crunch.

* Reduced staff. The first step in staff curtailment was the elimination of vacant positions (Figure 1). An entire level of management was cut in some of our cost centers. On the lab staff, three supervisory positions, four phlebotomy jobs, and one technologist and one MLT post were removed from the payroll, resulting in a total annualized savings of $276,588. The remaining vacant positions were frozen; no new employees have been brought on board since October 1990. Positions that became available later were filled internally.

A reciprocal arrangement with nursing permitted cutting the phlebotomy positions, effectively eliminating the third-shift phlebotomy staff. Nursing agreed to absorb that responsibility within their IV team at a saving to us of 4.3 FTEs (approximately $100,000). In return, we cross-trained our phlebotomists to perform IV therapy, which had been done by nursing staff. A substantial saving in nursing personnel resulted: approximately four FTES, or $89,360, accompanied by improvements in productivity.

* Cut hours. Because of the overall staffing shortage and our nine-year pattern of increased volume, managers of all 18 cost centers had been able to hire per diem staff and increase the hours of part-timers as needed, at least through the end of fiscal '90. During the year that followed, section managers were asked to make a monthly comparison of statements of expense with personnel budget analysis reports to reduce hours worked. Our managers successfully reduced the excess hours (figures are not yet available). We strictly curtailed overtime by requiring preapproval from the administrative director except during emergencies.

Another attempt to reduce hours was a review of staffing in all cost centers. The resulting changes redistributed positions to reflect more accurately the actual coverage needed. One section might not require four full-timers, for example, but would benefit from having 10 part-timers whose hours could be distributed over the workday. The total saving after eliminating positions and reducing hours, including in nursing, was $366,000.

* Consolidated testing. Baystate Medical Center has two major campuses on opposite sides of town. The larger facility is an inpatient center; the smaller one mostly handles clinics and emergencies.

Before 1991, each campus had its own lab. The duplication of equipment and testing did not provide notable improvement in turnaround time. We severely curtailed use of the smaller, outpatient lab. In that way, we were able to eliminate three FTEs at an approximate saving of $100,000 per year, consolidate testing, and reduce other expenses without negatively affecting patient care.

* Sought support. Through meetings and other communications, we sought and received our medical staff's help in cutting back the outpatient lab and creating a courier system to shuttle specimens to the main laboratory. Physician involvement was vital in developing a limited menu of tests to be performed at the outpatient facility for urgent care patients. Our success in obtaining the doctors' support regarding the outpatient lab convinced us to seek their help in containing other costs as well:

[paragraph] Appropriate blood usage. We improved the utilization of phlebotomy services. Another appropriateness issue was identified during a recent JCAHO inspection. Intervention by the medical director of our blood bank was largely responsible for convincing the surgical staff to reduce the storage of blood in satellite locations.

[paragraph] Specialized testing. The medical staff assisted us in limiting specialized testing in immunology, anatomic pathology, fasting blood sugars, second- and third-shift lab requests, and renal studies.

* Retained staff. We wanted to retain current employees despite staffing reductions. One tactic was to offer tuition reimbursement for students at our school of medical technology on the condition that they work at our facility for a year after graduation. Other efforts to retain staff include regular staff meetings, open office hours by both the administrative director and the vice president of medical support services, and providing videotape inservices on safety instruction.

These retention efforts worked well. Our vacancy rate, greater than 10% in July 1989, dropped to 2.2% by the end of fiscal '91.

* Negotiated contracts. Our laboratory managers have historically played an important role in negotiating contracts and lease agreements for new equipment and re-agents. That role grew even more in 1990 and 1991 with the support of our purchasing department.

[paragraph] Hematology. The managers of the hematology section negotiated a five-year lease for a system that runs automated blood counts. Acquiring this instrument permitted us to eliminate one FTE and lowered the vendor's prices for other supplies throughout the laboratory. A value-added service - a fax machine - was included at no cost.

Hematology management negotiated the purchase of an automated on-line urinalysis system. Installed in the autumn of 1991, it eliminated manual entry of 600,000 urinalysis results a year. Hematology evaluated and bought a new coagulation system that reduced costs and increased productivity.

[paragraph] Histology. Managers of the histology section, about to buy a decalcifying solution, reviewed the cost of reagents and changed vendors. The switch saved about $600 a year. In negotiating for a new anatomic pathology embedding center, they obtained, at no cost, a knife holder valued at $675 that would otherwise have been requested in our 1992 capital budget.

[paragraph] Clinical chemistry. Managers negotiated the rental of a markedly upgraded therapeutic drug analyzer at no additional cost to the medical center.

[paragraph] Microbiology. Management negotiated a new contract for gene probe reagents, saving about $6,000 a year. As an incentive for renewing a two-year contract for culture media, the vendor provided disposables at no additional cost (annual saving: $4,080). Microbiology is testing a TORCH panel to determine whether these tests - Toxoplasma, other, rubella, cytomegalovirus, and herpes - should be brought in-house.

* Changed procedures. During fiscal '91 we accelerated the evaluation of test methods, hoping to reduce the number of assays sent to referral laboratories. New procedures saved a great deal of money:

[paragraph] Clinical chemistry. The conversion to a new monoclonal cyclosporine method increased in-house expenses by $6,700 and reduced referral lab fees by $30,700, for a net annual saving of $24,000. Discontinuing an old practice of sending immunochemical results on prenatal patients to a referral lab for confirmation saved $3,500 a year.

[paragraph] Histology. Our old practice was to send rhodanine copper stain to a referral lab for $42 per test. Our histology managers developed an in-house procedure and added it to our menu of special stains. A mundane change - revision of the schedule for changing processor reagents - saved more than $3,400.

We started a distillation program in histology that reduced alcohol use by 100 gallons between 1989 and 1990, saving $400. Similar savings were realized in 1991. Mandatory state and Federal regulations on the disposal of hazardous chemicals prompted our request for a formalin-recycling system in our fiscal '91 budget. Once installed, this equipment is expected to reduce our formalin purchases by $400 a year and eliminate our $6,000 annual expense for off-site disposal of formalin byproducts.

[paragraph] Endocrine lab. We acquired a semi-automatic robotic pipetting analyzer for performing [T.sub.3], [T.sub.4], free [T.sub.4], TSH, HCG, insulin, TBG, LH, FSH, and prolactin tests. The saving was $4,800 in disposables and approximately $2,400 through consolidating controls.

* Instituted programs. The diagnosis of Down syndrome through triple testing (AFP, [beta]-HCG, and estriol) is thorough but expensive. Our referral lab expenses for such triple testing were projected at $425,000 for fiscal '91. To reduce them, we acquired new capital equipment (two PCs with accompanying software) and 2.5 additional FTES at a total cost of $106,000. This allowed us to eliminate our send-out costs for triple testing. We recouped our expenditure in capital equipment and personnel in less than one year.

We expanded our blood donor program in fiscal '91 by increasing staff, renovating and expanding the physical space, and bringing in new donors to offset large increases in the cost of American Red Cross blood components. By generating 39% of the medical center's blood needs in-house, we enjoyed a net saving of $117,025 on blood costs during the first seven months of fiscal '91. In microbiology, developing and implementing a virology program brought testing of Chlamydia cultures in-house. This eliminated yearly referral lab charges of $57,600.

Other minor cost containment efforts have resulted in dollar savings. Restricting use of the photocopying machine in lab administration to daytime hours saved $1,200. Everyone who uses a PC was asked to salvage the paper ejected between batches of reports and use it for rough drafts or interdepartmental memos. That frugality reduced the purchase of paper from the stockroom. Clinical chemistry organized a single proficiency survey to be shared with the pulmonary lab and cardiac surgery. Annual saving: $436.

We continue to explore possibilities for savings. Whenever new construction is planned, we recommend that a pneumatic tube system be installed to transport specimens. Existing tubes operate between the lab and intensive care units and the lab and a newly opened obstetrics/newborn building. We are in the process of installing two new information systems: a hospitalwide network and a replacement of our outmoded LIS. A committee of managers and supervisors monitors productivity and reviews the workload statistics for every cost center annually.

Through controlling expenses and increasing productivity, laboratory services has documented dollar savings of about $500,000. Had we not taken steps to increase efficiency, our total expenses would have been higher. Figure II summarizes our success in a year that saw but a slim increase in test volume.

The laboratory services at Baystate Medical Center have met the challenge of an increasingly harsh fiscal environment through new programs and aggressive cost reduction. We retain a solid, well-trained staff while continuing to improve the quality of patient care.

Ingalls is financial data coordinator, department of laboratory services, and Brickman is vice president, medical support services, Baystate Medical Center, Springfield, Mass.
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Title Annotation:Baystate Medical Center of Springfield, Massachusetts
Author:Ingalls, Cheryl; Brickman, Jeffrey L.
Publication:Medical Laboratory Observer
Date:Apr 1, 1992
Previous Article:Enhance laboratory workflow to save steps and money.
Next Article:Quality of care calls for joy and compassion.

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