Re-establishing the value of the lab

Lab tech enjoying walk-away automation with Roche molecular solutions

Understanding the value of the laboratory to a healthcare system

Laboratories play a critical role in today’s healthcare environment

Although they can typically inform up to 70% of clinical decisions, labs are only allocated 2-3% of a healthcare organization’s budget. Laboratories are vital to the implementation of population health initiatives, but their impact on patient care is not as readily apparent as medical intervention. This causes some in the lab to feel underappreciated and may cause others to undervalue the lab’s role in decision-making. In a healthcare environment that is often focused on expense reduction, might it make sense to actually invest more in hospital laboratories to improve the overall financial health of the healthcare system?

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What is most at risk as costs get cut?

Healthcare is in the middle of a wide-spread transformation, transitioning from a transaction-based business model to a value-based business model. Traditionally, the laboratory generated revenue by increasing testing volume—this too will need to change.

Healthcare service lines need to be strategic in how they pursue opportunities to avoid excessive spending. Many outside the lab think of laboratories as cost centers—a necessary and sometimes less innovative part of the broader healthcare landscape. This can be especially challenging for clinical labs, which are facing a continuous increase in test volumes with a seemingly endless decline in reimbursement rates. As the shift from volume to value continues, what will be the financial impact on the lab and its already modest budget?

Why battling perception is “business as usual”?

Increasingly, labs are being asked to deliver a higher level of service in addition to scaling up for additional testing volume. The challenge is due to the perception that not meeting the demands of health care providers (who care for patients), means not meeting the needs of patients themselves.

Reducing investment in the laboratory can have serious consequences that affect operating budget, outcomes, and patient safety. Focusing too narrowly on spending reductions can also lead to reductions in quality. Quality departments play a key role in risk management and remediation of nonconforming events. Budget cuts here can have far greater impact than what is recognized and can cost organizations more than money.

It’s time for labs to change their approach

On top of maintaining a high level of quality and ensuring speed of delivery, figuring out how to add value is the clinical lab’s next great challenge. But, what does laboratory value look like to the broader healthcare system?

Answers you might expect include, keeping the lab running like a machine, reducing the cost per test, and ensuring that accurate results are returned to patients in hours rather than days. Of course, these are goals that should be strived for, but would success here change perceptions of an entire health system?

Lab budgets account for only 3% of overall spend yet have the opportunity to impact the other 97%.1 These percentages reveal an important theme for a laboratory’s long-term success—innovation via efficiency. Labs can engage and influence a broad audience, yet they will need to (for now) operate within their currently allocated budget to do so.

It’s more important than ever that labs implement solutions that support cost-optimized, high-quality performance. In the future we may be able to show providers how to improve their use of clinical laboratory tests in ways that measurably improve patient outcomes, and embracing efficiency is a critical first step.

  1. Rohn UP, Binder C, Dieterle T, et al. The Value of In Vitro Diagnostic Testing in Medical Practice: A Status Report. PLoS One. 2016;11(3):e0149856.