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Using cost-effectiveness analysis to weigh testing decisions.

While the debate over the value of the centralized versus the decentralized laboratory is not new, the proponents of both sides have argued their cases with increased fervor in the past few years. Underlying this changed environment is the relatively recent availability of technology that permits high-quality analyses to be performed in a wide variety of locations.

Decisions about the use of health care technologies were historically based principally on considerations of clinical safety and efficacy. Spiraling health care costs are now forcing decision makers to allocate their scarce resources more carefully than ever among many choices. This multiplicity offers laboratorians (providers) and clinicians (users) the great, yet to some extent onerous, opportunity of reviewing the entire process of care and the laboratory's role within it.

Close examination of hospital workflow and of the delivery of patient care reveals several practices that became entrenched in response to the previously existing limitations of diagnostic technology, many of which are falsely presumed to persist. Consider, for example, these relatively common practices: First, blood is drawn in intensive care units at 4:00 or 5:00 a.m. so that the test results will be ready for morning rounds. Second, patients must wait for hours in emergency departments and outpatient clinics for laboratory results to be reported. The implications of acting upon these presumptions for workflow and patient management are extremely serious.

Although many medical circumstances warrant emergency diagnosis utilizing Stat laboratory testing, such requests represent a disproportionate number of all laboratory requests. This dangerous yet common situation disrupts routine laboratory workflow while raising the cost of patient care. The inevitable result of laboratory turnaround time (TAT) that is actually inadequate (or merely perceived to be) is the phenomenon of Stat abuse, in which an unnecessarily high percentage of potentially routine work is labeled Stat by users simply to achieve the desired speed of service.

* Value of information. The immediate product of the testing process is information. This information, which has a variable but finite value, plays an integral role in the ultimate product: the outcome of the episode of care. A laboratory analysis can thus be regarded as a subprocess within the entire process of care.

Information converts certain inputs to outputs - that is, information and the stream of consequences - each with its associated costs. Outputs include decisions and interventions initiated from the information received. These empiric input and output concepts are fundamental to performing cost-effectiveness analysis of laboratory testing. It is especially important to capture all costs, thereby accounting for the total cost of an episode of care. At the same time we must bear in mind that the testing process itself has many components.

The value of information, which is the immediate product of the testing process, depends on the relevance (that is, the medical necessity) of the test in question as well as on the timeliness of the information, whether or not needed for management or monitoring. Frequently the value of information degrades as time passes.

The same advances in instrumentation that permit point-of-care testing can provide timely, accurate information toward enhancing patient care. Use of such technologies should be considered as an alternative to centralized testing in all critical care areas of the hospital.

Turnaround time and clinical utility may often be inversely proportional. This is the concept that underlies the expression biological half-life of information.

* Socioeconomic evaluations. Socioeconomic evaluations are becoming an extremely useful tool to enable decision makers to make systematic comparisons of health care technologies - in this context, various laboratory configurations. Contributing factors to be assessed include individual effects, namely the direct impact of the technology on patients and on specific types of episodes of care; social effects, or the impact on general workflow in the clinical unit and in the central laboratory; and economic effects of various kinds.

Most laboratorians have had limited formal training in economics and the social sciences. Nevertheless, once the basic techniques of socioeconomic analysis have been demystified for us, we can combine them with our considerable on-the-job experience and make more perceptive evaluations. To perform such evaluations clearly, we must understand the costs and consequences of generating laboratory information.

Following several steps enables us to make recommendations about where instruments might be placed to optimize input and outcome.[1] First, we must determine the costs of generating information (testing) at a particular site for a given set of clinical parameters. Second, we must comprehend the costs and consequences of waiting for that information and using it. Finally, we must compare these costs and consequences with those that would prevail if the same laboratory information were available sooner, later, or not at all.

Socioeconomic evaluations break down into four main types: cost-benefit analysis (CBA), cost-effectiveness analysis (CEA), cost-utility analysis (CUA), and cost-minimization analysis (CMA). Unfortunately, these terms are often used imprecisely. Using them more accurately helps them work better for us, particularly when they are being applied to difficult decisions regarding the allocation of resources. CBA and CEA, which are particularly useful in such a context, will be discussed here.

* CBA and CEA. Cost-benefit analysis compares two or more technologies, such as a central laboratory instrument versus a decentralized instrument, expressing inputs (costs of generating information) and outcome (impact on patient care) in monetary terms. CBA may have limitations when all outcomes are not easily expressed in monetary terms; for example, improved quality of life or patient satisfaction. CEA also measures inputs in monetary terms but measures outcomes in natural units, such as quality of care or number of lives saved.

The choice of which socioeconomic evaluation to perform should be guided by a number of factors: the technology or intervention under consideration, the clinical problem for which the technology is required, the data available, and the units for measuring and valuing outcomes.

Some examples:

[paragraph] Point-of-care testing in the operating room can be measured in terms of minutes of OR time saved, where OR minutes are amenable to CBA.

[paragraph] The ability to analyze blood gases or hematocrit in the ER can potentially improve management in major trauma and save lives. CEA is thus an appropriate format for evaluating the technology.

[paragraph] Point-of-care testing in a walk-in clinic can decrease time and improve patient satisfaction (nonmonetary output) while improving workflow and productivity (monetary output). CEA is a suitable tool to use for this purpose.

* Dwell time. The optimal situation would probably consist of a hybrid of interlinked centralized and decentralized instruments that reflect highly disparate needs regarding clinical information, decision making, and workflow. Emergency departments, remote outpatient settings, operating rooms, and intensive care units present fine opportunities for information generation in the decentralized mode. Decision making in such locations is highly time-sensitive, whether the critical decision affects the management or monitoring of patients or workflow in general.

Waiting for information or patient dwell time has a significant and measurable cost, especially in the ER and OR. For example, the American Heart Association and the Emergency Care Research Institute strongly recommend that blood gas results in open heart surgery be available within five minutes.[2] To achieve this turnaround, many institutions have placed dedicated instruments run by trained perfusionists in their operating rooms. This arrangement has reduced dwell time and improved patient care.[3]

Underlying all cost-benefit or cost-effectiveness analysis that laboratorians may conceivably perform is guiding principle: We must take care to evaluate all choices in a clinical setting, neglecting none of them prematurely until one has proved to be clearly preferable.

* Total cost. The multicomponent nature of laboratory testing has been acknowledged both inside and outside the clinical laboratory. It is now widely appreciated that the costs of producing a piece of analytic information go far beyond the incremental reagent expenses and allocated overhead. Just as specimen procurement, transportation, analysis, and data presentation represent components of turnaround time, each contributes to laboratory cost as well. The process must be regarded as spanning the entire interval "from vein to chart" - that is, from the time the specimen is procured to the time the test result is recorded on a chart or in a computer. It is essential to account for the cost of every component of the testing process when comparing technologies or organizational alternatives.

In order that total cost may contribute to adequate CBA or CEA, however, it must reflect the full episode of care, of which the direct costs of laboratory information generation may constitute only a small percentage. Hidden costs, such as those borne by the patient - transportation and lost wages, for example - ideally should be included in the equation. Doing so helps to avoid shifting costs from one functional area to another, such as from the laboratory to the operating room, or from one sector of society to another, such as from the health care system to the patient.

In virtually every situation, labor costs represent the highest percentage of total cost. It is well recognized that 60% to 70% of all hospital operating expenses are directly or indirectly related to the cost of labor.[4] Unless productivity is managed, total laboratory costs cannot be managed. As the cost of health care continues to rise, pressures for improved lab services have risen despite shortages of laboratory personnel. This dilemma has forced many labs to seek alternative practices in delivery of service. The example under scrutiny here is point-of-care instrumentation run by nonlaboratory personnel in critical care areas of the hospital.

* Economic analysis. Two concepts are fundamental to all economic analysis: opportunity cost and marginal analysis. In the laboratory context, the true cost (opportunity cost) of any laboratory test is the value of alternative interventions (perhaps including other tests) that could have been performed instead with the same resources. For example, when capital is allocated for the emergency room, the opportunity cost of a hematology analyzer for use in cases of overt or occult bleeding might consist of the value (clinical utility) of an ultrasound machine that might otherwise have been purchased in that budget cycle. Similarly, in a resource-constrained environment, determining the opportunity cost of a blood gas versus a hematology instrument might require analysis to help assess potential clinical impact and clarify competing choices.

CBA and CEA are useful tools for the laboratorian making decisions in conjunction with the clinician and administrator. In marginal analysis, one considers the additional cost of performing one more test in relation to the additional benefit potentially to be derived from that test. As such, marginal analysis is particularly help in resource-constrained environments, where it can be used to develop practice and test ordering guidelines based on convincing data.

Marginal analysis assists in reducing the much-lamented phenomenon of Stat abuse. Not every patient in an emergency department necessarily requires an immediate hematocrit determination. The cost of disposables for the point-of-care instrument may be higher than the cost of reagents and related supplies for other equipment. With this in mind, it might be decided to perform some tests in the ER, where the impact on acute patient management and blood product ordering would clearly be beneficial, and others in the central lab, where advantages include economies of scale and potentially lower marginal costs. It should be borne in mind, however, that even for the non-emergency patient, the substantial reduction in turnaround time and physician "switching time" to be derived from obtaining results at the point of care may have as great an impact on patient "dwell time" as does swift test processing in the ER.

Health care providers in an ER or clinic environment usually see several patients while diagnostic data are being generated. The provider must switch back and forth both physically and mentally between patients while awaiting laboratory information; then, as soon as the data become available for a particular patient, the provider must reverse gears to concentrate on that patient again. Although the costs in "switching time" and the implications for quality of care may be high, they are too seldom recognized.

Here again, point-of-care testing can make many contributions: heighten ER productivity, reduce the potential for error, virtually eliminate preanalytical error associated with specimen transport, hasten turnaround, and reduce total cost for the entire episode of care. Such gains could easily offset any increased marginal cost of reagents.

* Total cost and total consequence. Let us again consider the direct and indirect costs - that is, total cost - of an episode of care, emphasizing the impact of the production of laboratory information. Direct costs are subdivided into fixed costs, including the price of the analyzer and of staff time to operate it, neither of which can be saved in the short run, and variable costs, such as for reagents. Indirect costs pertain as well; these, which are, not directly expended in the production of the laboratory information, include such elements as the number of minutes of operating room time during which all assembled must wait for the platelet count or another vital determination before proceeding.

The quality, speed, and appropriateness of laboratory information has several notable consequences:

[paragraph] Clinical. Patient management may be improved and clinicians' confidence in previous purely empiric decisions increased.

[paragraph] Psychosocial. A patient's anxiety may be allayed thanks to reduced laboratory turnaround time. Productivity in the patient's home and work life may be enhanced if the person is allowed to be discharged from the hospital sooner.

[paragraph] Economic. Ordering a blood product more appropriate for a given situation saves money, resources, and time. In contrast, "spending" unnecessarily in any number of ways, such as testing more than might be necessary under other circumstances, costs money, resources, and time.

Despite the complexity of data collection required to produce a powerful and clinically useful analysis, CBA/CEA can be readily performed in scenarios of various kinds. The examples in Figure II demonstrate three such settings with which we are all familiar: a hematology analyzer in the OR, a blood gas analyzer in the ER, and a rapid bacterial immunologic test for a clinic or physician's office. (Figure I shows the overall framework of CBA/CEA, focusing for our purposes on laboratory diagnostics as the pivotal health care intervention.)

* The CBA/CEA team. Increasingly, third-party payers are reimbursing for complete episodes of care, often in diagnosis related groups (DRGs). This powerful trend reflects the concept that hospitals and other providers produce a health care package or disease management process and that bundling together the various components is likely to control charges. Consequently, a consortium of providers, including clinicians and laboratorians, must collaborate on determining the composition of these "packages." The group must reach consensus on the appropriate level of consumption of resources while providing high-quality patient care.

In addition to prospective payment, certain trends affect the financial management of hospital laboratory services. The first is increased competition for limited resources by laboratories and other hospital departments. Budget reductions have become the rule rather than the exception. The second is a severe shortage of clinical laboratory personnel. Recent surveys indicate that more than 80% of laboratories encountered a shortage of technical personnel. To make matters worse, 40% of the accredited technology training programs in the United States have closed since 1983.[5]

* Coping with imperfection. No CBA/CEA is inherently perfect. The recent explosion in the literature of CBA/CEAs may well reflect the growing cost-containment pressure in health care delivery and the need for a tool, albeit an imperfect one, to promote efficiency.

Basic principles of CBA/CEA methodology, articulated succinctly by Warner and Luce[6] will be paraphrased here. To take the basic steps applicable to all rational choices, one must:

1. Define the general problem and the objectives to be sought in addressing it.

2. Identify alternative means of considering the problem.

3. Identify, measure, and rank the preeminent costs and benefits of each alternative.

4. Compare all choices on the basis of predetermined criteria; when possible, identify the dominant alternative.

5. Present and interpret findings clearly and comprehensively.

In the very real world of health care, this methodologic framework may be applied to the examples in the flowcharts presented here as well as to countless others. Furthermore, these techniques may offer an opportunity for those who provide and use test information to join together with fresh objectivity in a rational revisiting of the facets of structural service. Familiar to us all are the turf issues and the aggressive and defensive postures that have colored the point-of-care debate. Technology has provided us with the potential to do old things in new ways. We are obligated to consider these opportunities and to facilitate the diffusion of new technology wherever and whenever it becomes appropriate.

[1.] Sibbald, W.J.; Escaf, M., and Calvin, J.E. How can new technology be introduced, evaluated, and financed in critical care? Clin. Chem 36(8B): 1604-1611, 1990. [2.] Emergency Care Research Institute, Risk analysis: Cardiopulmonary perfusion equipment. J. Extracorporeal Technol. 19: 238, 1987. [3.] Davis, Z.; Pappas, P.; and Foody, W. Meeting the special needs of the open heart surgery patient. MLO (Special Issue) 23(9S): 12-15, September 1991. [4.] Roberts, R.D. Preparation of the budget and the flexible operating plan Topics in Health Care Financing 5(4):155, 1979. [5.] Statland, B., and Brzys, K. Evaluating Stat testing alternatives by calculating annual laboratory costs. Chest 97(5): 1985-2035, 1990. [6.] Warner, K., and Luce, B. "Cost-Benefit and Cost-Effectiveness Analysis in Health Care: Principles, Practice, and Potential," chap. 3, pp, 59-60. Ann Arbor, Mich., Health Administration Press, 1982. [7] Lieu, T.; Fleisher, G.; and Schwartz, J. Cost-effectiveness of rapid latex agglutination testing and throat culture for streptococcal pharyngitis. Pediatrics 85(3): 246-256, March 1990. Suggested reading: Salem, M.; Charnow, B.; Burke, R.; et al. Bedside diagnostic blood testing: Its accuracy, rapidity, and utility in blood conservation. JAMA 266(3): 382-389, July 1991. Tydeman, J.; Morrison, I.; Draginja, K.; et al. The cost of laboratory technology A framework for cost management. Med. Instrumentation 17(1): 79-83, January 1983.
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Title Annotation:Special Supplement: Point-of-Care Testing
Author:Popper, Caroline
Publication:Medical Laboratory Observer
Date:Sep 1, 1992
Previous Article:The hybrid laboratory: shifting the focus to the point of care.
Next Article:A collaborative approach to managing risk.

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