The audit: an annual physical for the laboratory.
Last year, on the eve of national introduction of prospective payment, we decided it was time for serious introspection. A fullscale departmental audit would tell us what kind of shape the laboratory was in. Such an analysis is routine in big business, but it is fairly uncharted territory for hospital departments.
It also can be time-consuming and nerve-cracking, yet it's worth the struggle. You end up with a very good handle on laboratory operations--how much of your resources are devoted to different activities--and guidelines for improvements. The exercise makes it easier to prepare annual budgets, possibly including changes in staffing and instrumentation as well as new charges for tests. Similarly, it provides a solid basis for long-range planning. Your proposals can be amply justified to administrators with data developed in the audit.
We examined the laboratory from every angle: staffing, productivity, and workload; test order patterns, department work flow, and patient demographics; cost per test, single-test versus batch cost, and instrumentation; and budget figures.
The audit had two facets. The first involved an analysis of the lab as a unit to look at overall productivity, efficiency, costs, and revenue. We planned to use external monitors--Ohio Hospital Management Services (OHMS), Monitrend, and CAP workload recording--to rate our performance internally, regionally, and nationally.
Ohio Hospital Management Services is an independent monitoring group that works with the Ohio Hospital Association. As part of a voluntary hospitalwide program, OHMS compares the laboratory's monthly workload with that of other hispital departments and with the workload in labs at hospitals of similar bed size. Our 406-bed hospital also participates in Monitrend, a computerized reporting system developed by the American Hospital Association to monitor the activities of different departments. In this program, we're compared with laboratories in institutions of similar size and case mix nationwide, with hospital laboratories of similar size in the state, and with hospital labs in our area.
The second facet of the audit was a concurrent analysis of the individual lab sections. By working with the section supervisors, I hoped to glean better information about workload and staffing and ultimately develop new standards for measuring efficiency.
Figure I outlines our basic audit goals. Generally, these were to assess lab management, determine the exact workload, rate our cost-effectiveness, and evaluate our sections' ability to meet service demands.
The project seemed fairly straightforward. As audit coordinator, I naively thought we could wrap things up in four weeks. Despite countless hours volunteered by a dedicated staff, the time frame eventually stretched to four months. Indeed, I spent an entire month just researching the feasibility of various kind of studies, finding out what information was available within the hospital, and along with other personnel, writing the programs for our CompuPro 816A minicomputer. Once the groundwork was laid, I charted what we hoped to accomplish and listed tentative completion dates.
Everyone in the laboratory helped gather data. Phlebotomists, for example, timed how long routine and Stat collections took. Technologists carried out time studies on the tests they performed. Supervisors determined direct costs for each test and reviewed many other aspects of section operations. In addition to the clerical staff, technologists and supervisors input data as time permitted and kept me informed so that I could keep track of who was doing what and what remained to be done.
The minicomputer performed more than 400,000 statistical combinations, and the final report totaled 300 pages, including graphs and tables. How many Stats chemistry ran by hour and shift would be a single combination.
In examining laboratory activity by type of patient, to take one example, we pulled requisition slips for a high-volume month, a low-volume month, and an "average" month during 1983. Data were entered on patient type (inpatient, outpatient, clinic, etc.); routine, ASAP, or Stat testing; number of tests requested; section performing the test; day of the week; time of day; turnaround time; and other factors. This single exercise generated 50,246 computer records.
We initially had hoped to look at each laboratory section as a separate functional cost center. The plan was to use standard cost accounting methods to allocate indirect costs to each section based on activity, space utilization, use of support services, and employee hours. But the information needed for this type of audit was not readily available; most hospitals don't use such parameters to allocate indirect costs. The method we settled on was to take the lab's percentage of hospital revenues and apply that to hospital expenses to determine our share.
We analyzed all test procedures in terms of direct and indirect costs, gross margin, and net margin. Our general goal was simply to improve administration's awareness of the lab's financial status. To accomplish this, we felt we needed to determine the contribution of the total laboratory operation (gross revenue minus total expenses) and the full cost per work unit generated within each lab section (total section expenses divided by total section work units). Direct costs were defined as salary expenses, supplies, reagents, consumables, equipment, and other costs generated solely from operating the lab.
All tests were evaluated singly and, where appropriate, as batch procedures. If more than one instrument was used for a specific test, both were evaluated. Backup methods and instruments used more than 10 per cent of the time were also evaluated. In this manner, we learned what the cost differences were in performing the same test on different analyzers. If technologists are aware of these diffrences, they can employ instruments more economically.
Over the three-week period, each of the more than 100 time studies was performed by at least five technologists to cover the various shifts and days of the week. On multichannel instruments, a single study would cover several tests. The resulting times, checked against CAP standards, generally were slightly better than the norm. To adjust for statistical variance on single tests, we added 4 per cent to the performance times. That figure was recommended to us by OHMS time management engineers. It might not apply to other labs.
After evaluating the test times, we used established laboratory test cost analysis methods of summarize the per-test cost of all supplies, reagents, and quality control. Collection time and collection supplies were handled separately to evaluate their costs in relation to batch and Stat procedures. The hospital's computer-generated department reports provided test volume and revenue figures. Technologist and phlebotomist costs per minute were based on the laboratory's average wage rates for each position.
Following several weeks of data gathering, we began feeding the numbers into the laboratory's computer, which was programmed to summarize direct costs, calculate indirect costs, gross margin, and net margin, and analyze patient types and work flow. The entire lab staff spent spare time over a two-month period entering all the data. It took 18 computer hours to run the statistical analysis that generated the 400,000 different data combinations mentioned earlier.
Meanwhile, supervisors reviewed their sections for ways to cut costs, speed up turnaround time, and improve efficiency. Using one of our programs, they calculated direct and total costs for all available tests by every method employed. This covered about 250 procedures in differing forms--single tests, batches, profiles, and panels.
Our new centrifugal analyzer proved to be a major cost-cutter. We had estimated it would yield $40,000 in annual savings. According to the audit, this goal was reached in eight months; for the full year, savings amounted to $60,000. The audit also confirmed that a new automated blood culture instrument had increased productivity to previously projected levels.
High-volume tests were further examined for direct cost/revenue and total cost/revenue ratios. We compared the cost of doing a single Stat test versus batching and then analyzed batching patterns and send-outs to see if specimens were handled as expediently as possible. All high-volume procedures were flow-charted from the time the physician wrote the order until the test result reached the nursing station. Turnaround times were, in fact, good. As for current send-outs, we determined that the volume and the instrumentation needed did not justify performing any of the tests in-house.
Workload was the next item on the audit agenda. We reviewed five years' worth of CAP workload statistics for each section and projected future growth rates. By tracing each section's changing annual workload as a percentage of the laboratory's total output, we were able to pinpoint shifts and trends. With the help of the computer, I could breadk down any section's patient population--percentage of inpatients, routine outpatients, and clinic, preadmission testing, and emergency room patients. Figure II shows simplified inpatient/outpatient worklod ratios for all of the lab sections.
Even more interesting were the percentages of routine, Stat, timed, pre-op, and ASAP requests received by each section (Figure III). We also plotted the volume of such requests in two-hour increments during the day (Figure IV). Another graph depicted total laboratory workload by day of the week. These kinds of analyses helped us compare normal staffing patterns with actual needs. Again, we found that for the mot part our staffing closely matched work volume on all shifts in all areas. By now, it may sound as if the audit didn't lead to any changes, but read on.
The supervisors' final task was to review instrumentation. This went beyond the kind of review conducted for annual budget preparation. We wanted a list of all instruments, including purchase price and date of acquisition, maintenance and replacement costs, service contracts, depreciation--and volume and revenue accounted for by the instruments. This status report would help us plan for future capital outlays. The volume and revenue figures might tell us whether the purchase was justified and how well we were evaluating new produts.
Assembling all this information gave us a clearer picture of each section. Many of our management procedures and standards were upheld. For example, the audit proved that our method for establishing the cost of new tests was valid and that criteria for batching generally hadn't changed.
The statistics further demonstrated that our utilization of personnel was good and that our productivity was exceptional. Flow-charting high-volume procedures showed that our test processing system works well, while the evaluation of instrumentation indicated that it is well maintained and often exceeds the estimated useful life expectancy.
Much of the data would please administration. Calculations based on Monitrend formulas revealed that our direct expenses per adjusted patient day were 22 per cent below the national average and 20 per cent less thant those of state and regional comparison groups. The lab's direct expenses and salary expenses relative to workload were about 16 per cent under the national average and 11 per cent below those of area comparison groups.
Although the audit results were largely favorable, we did pinpoint several areas that merited further study. Here are some of the changes that resulted during the past year:
* Test charges. Often in reviewing rates, the immediate inclination is to raise charges for high-volume tests as a means of maximizing revenue. But the audit disclosed that we weren't covering indirect costs on other tests, particularly longstanding assays in chemistry as well as some of the more esoteric procedures. So we first made sure all tests were at breakeven or better before raising any of them further.
* Staffing adjustments. The audit established the laboratory's productivity at 57.7 units per hour worked. That was a 96 per cent efficiency rate, compared with the 80s range that the CAP recommends. Indeed, we were too high. The only way we could attain such efficiency was by having supervisors working at the bench and consistently putting in more than 50 hours per week. Our data persuaded administration to approve the addition of three technical FTEs to the laboratory staff.
* Scheduling adjustments. Assumptions about the lab's busiest and slackest periods were corrected somewhat by the audit results. Like many other labs, ours earmarked the Thursday before or the Friday after weekend duty as a compensatory day off. These weekdays, however, turned out to be peak workload periods. Tuesday is now the compensatory day.
The data also indicated that when we scheduled the same employee into microbiology at 6:30 a.m. for an entire week, the early start proved to be wearing, and reports got out more slowly after several days. It was better to split the duty between two technologists or use part-timers.
Scheduling will have to change with the shift in ordering patterns under prospective payment. Traditionally, the day shift has done the majority of the work while other shifts covered the lab for Stat work. With DRGs, physicians are having their Medicare patients enter the hospital later in the day to trim part of the length of stay. They want the lab work started in the afternoon or evening and posted on the chart. This puts more pressure on the later shifts.
* Clerical services. Although the hospital has expanded considerably, we had done little to upgrade our clerical capabilities. A mush-rooming outpatient load further strained the staff and the system. The audit identified the lab office as one bottleneck for test reporting. We plan to streamline the filing system to speed up storage and retrieval, and we are reevaluating job descriptions, priorities, and staffing to bring the clerical service in line with current needs. We also have remodeled the front office.
Inadequate transportation of test requests and distribution and charting of laboratory reports require further investigation. The nursing staff's confidence in the pneumatic tube system must be bolstered, or it should be replaced with another transport system. A computerized order entry system would elminate several problems in this area.
* Patient processing. The audit made it clear that the laboratory's percentage of outpatient work was much higher than the norm and that we weren't processing these patients as efficiently as we could. Physicians' offices had to make separate outpatient appointments for laboratory work, x-rays, and ECGs. Now, with a centralized scheduling system, one phone call books a patient for all required hospital services. We also have expanded seating in the waiting room and eliminated overflow of outpatients.
On admissions for diagnostic workups, a new approach channels patients through the laboratory and other ancillary services before sending them to the floor. This minimizes the late-afternoon rush that always seemed to hit just as the day staff was leaving. Test requests are no longer held overnight, duplicate orders are down, and the laboratory is spared numerous follow-up telephone calls and phlebotomy trips to the floor.
* Outpatient marketing. We could do even more outpatient work. Our study found that the laboratory received outpatients from only 40 per cent of physicians with active staff privileges at the hospital. To gain a larger share of outpatient testing, the laboratory would need more competitive test charges, biling systems, and reporting practices; a professional courier service; and a marketing-oriented account representative.
We also learned lessons about auditing. Trial and error taught us that some of the statistics so painstakingly collected were irrelevant and superfluous. For example, in determining our indirect costs, we spent a lot of time working out depreciation rates for our instruments, but we made little use of these figures. It is important to keep your goals in mind.
Also recognize that there are usually several sources for the same kind of information and that their perspectives and answers may vary markedly. We spent a good deal of time trying to reconcile data and make certain that we were indeed comparing apples with apples and not with oranges.
It is equally important to keep the audit within the hospital's financial system and to work closely with its financial consultants. If the hospital uses zero base budgeting, that's the only methodology you can use. If you try to introduce statistics from another system, they won't mesh with hospital figures.
Set a realistic time frame. Future reviews--annual updates of key data and biennial full-scale audits--won't take four months now that we have baseline figures and a good idea of how to proceed. But the initial audit is time-consuming.
An independent test of our efforts came from an outside consulting group studying ways to cut hospital and medical expenses in our community. As part of their comprehensive study, the consultants presented the laboratory with a massive questionnaire, which we were easily able to complete, thanks to the availability of our audit results. After a review of our responses and the audit itself, the consultants concluded that they couldn't make a single recommendation for laboratory improvements.
We weren't surprised.
|Printer friendly Cite/link Email Feedback|
|Title Annotation:||1984 MlO Article Awards Contest prize winner; Middletown Regional Hospital, Middletown, Ohio, case study|
|Author:||Turner, Carol J.|
|Publication:||Medical Laboratory Observer|
|Date:||Nov 1, 1984|
|Previous Article:||The cloud over MT schools: can we justify their cost?|
|Next Article:||Streamlining blood counts with a microcomputer.|