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The impact of DRGs: after five years, coping comes naturally.

A Many laboratories have costs under control and are seeking

more revenue from outpatient testing.

Basic training is over for hospital laboratories that have spent the last five years becoming adjusted to the rigors of life under prospective payment. Now costand time-cutting measures are second nature within labs, and on the revenue side, exploration of new outside marketscontinues.

Most respondents noted benefits to laboratory operations that are directly traceable to DRGsincluding an increase in efficiency-but fully one-third of those surveyed feel the prospective payment system has provided no benefit whatsoever.

This concluding part of our special report looks at the ways laboratories have changed operations, how they continue to cope with DRGs, and what their outlook is for the coming years under prospective payment.

As Table I shows, since DRGs were introduced, laboratories have increasingly offered computerized test ordering (29 per cent this year), altered their test request forms (44 per cent), and reduced or eliminated mandatory admission tests (63 per cent). Findings on computerized result reporting were inconclusive: The trend was upward in 1986 and 1987 (36 and 40 per cent), but it tumbled to 25 per cent with this year's survey group.

In every year since 1985, about the same proportion of labs have expanded preadmission testing (69 per cent average), cut routine ordering for certain tests (52 per cent average), required medical department approval for some tests (18 percent average), and instituted automatic follow-up testing (14 per cent average).

Labs have also tried a number of steps to ease pressures on their finances (see Table 11). In the last five years, an average of 71 per cent of laboratories sought competitive bids from reference laboratories, and an average of one out of two labs have joined other hospital labs for price breaks when purchasing supplies. Use of one tactic seems to have diminished: One-quarter or more of the labs surveyed in 1984-86 said they shared in-house testing with another laboratory, but in 1987 and this year, the proportion dropped to about 15 per cent.

Along with test volume, which continued to rise in 1988 (see Part I of this report), test charges have gone up in most labs. Seventyseven per cent increased test charges during the last year, 6 per cent decreased charges, and 17 per cent held charges steady.

Marketing outpatient tests has become big business. As noted in Part 1, outpatient testing-up this year at 92 per cent of the labs serving outside clients, by an average 22 per cent-is a key reason overall test volume is rising.

About three-quarters of all hospital laboratories have tried to market outpatient testing since DRGs were introduced. The proportion in MLD surveys fluctuated from a low of 63 per cent in 1985 to a high of 77 per cent in 1986 (see Table III); this year, it was 71 per cent. Physicians' offices most commonly are the target of such marketing, followed by nursing homes, ambulatory care centers, and veterinarians.

An assistant laboratory administrative director at a large hospital in the South told us his hospital had begun testing for local diet centers, providing chemistry profiles, thyroid tests, CBCs, and general health screening. Dieters are periodically tested during the course of their weight-loss regimens. He said his lab is also beginning to perform drug screens for regional industries and to sponsor health fairs with cholesterol screening in shopping malls.

Business-building strategies in the outpatient testing arena include courier services (offered by 76 per cent of the laboratories in this year's survey), phlebotomy at client sites (44 per cent), installation of computer terminals at client sites for faster tumaround time (32 per cent), area drawing stations (19 per cent), and satellite labs (19 per cent).

Facsimile machines have speeded results from the laboratory at the Cherry Hills, N.J., division of 607-bed Kennedy Memorial Hospitals. "Our laboratory has a Fax machine, as do a number of our home health agency and physicians' office clients," said Kay Blake, administrator of laboratory services at the institution.

John Stevenson, laboratory manager at 200-bed Midland (Tex.) Memorial Hospital, said his laboratory expanded off-site with the 1985 purchase of a small reference lab. "We staffed it so that we can handle our 250 clients, which include other hospitals, nursing homes, and physicians' offices. Our actual number of billed procedures-and we count a profile as one procedurehas gone from 176,000 in 1983 to 325,000 for the current year."

Of the laboratories in this year's survey that have not attempted outpatient marketing, 36 per cent said they plan to do so in the coming year.

With test volume going up steadity in most hospitals, it is not surprising that two-thirds of the laboratories we polled use microcomputers or a laboratory information system or both. Of these, 76 per cent use their computers as pan of a network interfacing with computerized instruments or the hospital computer, 9 per cent use the computers to monitor clinician test ordering per DRG or patient case, and 7 per cent use the computers to monitor lab cost per DRG or case. Fifty-nine per cent of the respondents in computerized labs say their systems will eventually perform more or all of these functions.

"Our old charting system was awful," Ed Bush, laboratory manager at 422-bed Bristol (Tenn.) Memorial Hospital, said. "We tried doing a number of things to improve the manual charts, including sectioning the information. But our test volume increased due to sicker patientsa higher acuity level-and the physicians just could not follow the manual charts. So basically the medical staff helped us justify a new computer. Now we don't think we can survive without it."

The laboratory, which is linked with the hospital computer as part of a network, can call up orderentry information and generate computer-printed, chartable reports.

Only 6 per cent of the laboratories surveyed this year have purchased DRG-related computer software, and only 3 per cent have developed their own DRG-related computer programs.

Forty-five per cent of laboratories in the 1988 survey monitor clinicians' test ordering per DRG, with or without the help of a computer (Table IV). This was down from a range of 53 to 61 per cent in the four preceding annual DRG impact surveys.

As Table IV also shows, hospitals have deployed an arsenal of weapons against unnecessary test ordering by physicians, the most popular of which are hospital committees. Other means of regulating test orders: a DRG coordinator, hospital administration, computerized audits, medical department heads, peer pressure, and pathologists.

In all, only a little more than half the panelists surveyed this year think their labs have been very successful (8 per cent) or somewhat successful (47 percent) in stemming wasteful ordering; 45 per cent said their labs were unsuccessful. In the four preceding surveys, 63 to 70 per cent of the panelists claimed a very successful or somewhat successful record against unnecessary test orders.

To induce physicians to order more thoughtfully, the laboratory at 28-bed St. Mary's Hospital in Cottonwood, Idaho, began showing them patient bills and corresponding payments from Medicare. "We had a new doctor who ordered one of practically everything on anybody who came in," lab supervisor Cynthia Glover said. "Medicare asked why all the tests were ordered and refused to reimburse us. The physician had not understood that Medicare was not paying for the tests. When we showed her the discrepancy, she stopped overordering right away. It was the only way we could think of to demonstrate the problem. We had frequently told physicians about the unnecessary orders, but you really have to show them."

Cannen P. Adams, laboratory manager at 30-bed Audubon County (Iowa) Memorial Hospital, discussed the struggle of keeping physicians on track, ordering only the tests they need. "Some doctors order a whole bunch of tests on a dally basis. They don't pay attention to the fact that the hospital gets a flat DRG fee for the patient regardless of which lab tests are done. For example, physicians will order cardiac enzymes for the day the patient is admitted and for the next three days. If on the second day, the diagnosis of a myocardial infarction has been ruled out, they still don't stop the cardiac test orders.

"Sometimes the physicians choose to ignore our requests to stop ordering because they don't have adequate liability insurance. They keep ordering to cover themselves in case of a malpractice suit. And the hospital must eat the difference."

Adams added that the hospital's weekly medical record reviews have helped curb some extra testing. "Physicans are made aware when they are asked why they did not change the patient status to extended care or transfer the patient if the hospital was not able to provide necessary care."

A laboratory manager at a small California hospital said her lab had virtually no pathologist backing to challenge unnecessary test orders. The hospital's utilization review process is run by the nurses, and the laboratory is left outside these activities. It is rarely asked for input.

The biggest problems survey respondents now face or anticipate as managers under the DRG system are loss of revenue (cited by 29 per cent), staff reductions or overworked employees (23 per cent), further cost containment or budget cuts (20 per cent), problems in hiring replacement employees (14 per cent), and capital budget cuts (10 per cent).

"As far as reimbursement goes, the biggest problem with Medicare's plan is CPT coding," John Stevenson said. "Very few people understand the codes and can use them to optimize reimbursement from Medicare. The prospective payment system saves money that way."

A laboratory manager at a small hospital in the Midwest said that rural hospitals are in the worst position because they receive about 10 per cent less Medicare money, on average, than urban hospitals of the same size. "They use the excuse that it costs more to run an urban hospital than one in a rural setting, and that's balderdash." The disparity, based on a formula that takes into account employee wages and factors such as whether the hospital is a teaching facility or a sole community provider, "hurts small hospitals in rural areas appreciably," this lab manager said.

Another lab manager said reduced reimbursement to his proprietary hospital may cause it to close becau"continual nonprofitability and increasingly high losses each year."

When asked to list benefits of Medicare's prospective payment system, 35 per cent of the panelists could think of none. On the bright side, 28 per cent reported their laboratories are more effi

cient and productive thanks to DRGs, 16 per cent mentioned upgraded instrumentation as a result of DRGs, and 7 per cent said their labs are getting more recognition and cooperation from hospital administration.

Many respondents said prospective payment had "forced" benefits on them: "forced to be more efficient," "forced an increase in quality,"forced hospital administration to approve a pneumatic tube system for specimen transport, "forced financial awareness of laboratory operations, "forced to increase outpatient testing," "forced the lab to look outside the hospital for more revenue, and therefore to examine the needs and concerns of the community at large,"

Susan Pellerin, assistant administrative director at 303-bed Manchester (Conn.) Memorial Hospital, felt strongly enough about the impact of DRGs on laboratory medicine to elaborate at length. She listed 12 major areas in which DRGs had affected laboratory science, including a reshaping of undergraduate curricula, a trend toward instruments requiring little maintenance, increased cost accounting, a regulatory push toward new personnel standards and laboratory standards, and development of sophisticated laboratory quality assurance programs.

Pellerin concluded: "Laboratories will be forced into creating highly cost-efficient and productive environments. At the same time, we as laboratorians must never lose sight of our commitment to quality."
COPYRIGHT 1988 Nelson Publishing
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1988 Gale, Cengage Learning. All rights reserved.

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Title Annotation:special report, part 2; diagnosis related groups
Author:Gore, Mary Jane
Publication:Medical Laboratory Observer
Date:Dec 1, 1988
Previous Article:The impact of DRGs: a five-year overview.
Next Article:Operational considerations in maternal serum AFP screening.

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