Powerful Lab Market Forces Impacting the Industry

Three market forces now pressure labs, hospitals; ranging from staffing and inflation to poor finances

This is an excerpt of a 1,584-word article in the August 8, 2022 issue of  THE DARK REPORT. The full article is available to subscribers.

CEO SUMMARY: These are challenging times for the nation’s hospitals, health systems, and clinical labs. A perfect storm of three lab market forces involving unprecedented shortages of lab staff, nurses, and other professionals with inflation-fueled cost increases and deteriorating hospital finances was a major topic of discussion by lab leaders and lab vendors at last month’s annual meeting of the American Association of Clinical Chemistry (AACC). In many candid conversations, attendees discussed these three developments.

IN THE WORLD OF WALL STREET, “HEADWINDS” IS THE CODE WORD used when a company or industry faces difficult challenges going forward. In today’s market, it may be more appropriate to use the term “gale-force winds” to describe multiple negative lab market forces confronting the nation’s hospitals and their clinical laboratories. 

Three gale-force factors are now pushing against hospitals, clinical laboratories, and anatomic pathology groups. Lab administrators and pathologists are acutely aware of two of these factors. One is the severe shortage of lab professionals across all types of positions. The second is the impact of inflation and rising prices on already-shrinking lab budgets. 

More Hospitals Losing Money

However, it is the third factor that may have greater long-term consequences for the clinical labs operated by hospitals and health systems throughout the United States. It is the deteriorating finances and operating losses being reported by a growing number of these acute care institutions.

Although The Dark Report has tracked and described these three lab market forces for many months, new insights about the serious impact they are having on clinical labs was front and center in conversations with lab leaders during last month’s annual meeting and exhibition of the American Association of Clinical Chemistry (AACC) in Chicago.

This intelligence briefing provides more context to each of the three lab market forces which can be described as “besieging” the nation’s laboratories. It is recommended that lab administrators and pathologists use this information to update their lab’s strategic plans, as well as to develop solutions to improve staff recruitment and retention and deal with the dual challenges of shrinking lab budgets even as inflation causes the cost of labor, instruments, tests, and lab supplies to increase at the fastest rate in 40 years. 

Lab Market Force 1

Acute Shortage of Lab Staff

There has been widespread recognition and reporting about the shortage of workers to staff the nation’s clinical laboratories. Conversations with lab leaders at AACC provided more detail as to how the lack of adequate staff is altering the way affected laboratories operate and deliver lab testing services to physicians and their patients. 

For example, in numerous regional markets, the lack of adequate phlebotomists is forcing labs to close patient service centers (PSCs) and shift patients who regularly use those sites to other PSCs in their network. 

Similarly, in order to keep more PSCs open, some labs are spreading a lesser number of phlebotomists across all their PSCs. However, when a phlebotomist at one site fails to show up for work in the morning—with a line of fasting patients ready to provide specimens—that PSC remains closed and the lab must swiftly act to redirect patients to open PSCs. 

“In our community, we’ve been offering $20 per hour for phlebotomists,” noted one lab administrator. “But we get no response, even at that wage rate. In these times, we are unable to attract and recruit enough people who want to train and work as a phlebotomist. Consequently, we’ve closed a number of PSCs and have tried to encourage more of our client physicians to provide venipunctures for their patients who need lab tests.”

‘Great Resignation’

There are equal challenges in hiring needed numbers of couriers, accessioners, client service reps, and similar operational positions. The “Great Resignation” phenomenon was mentioned often as a reason for the inability to fill open positions. 

Much has been reported about the shortages of medical technologists and clinical laboratory scientists. One lab director stated that her lab was understrength by 100 positions, across all job types. She noted that her med techs and other lab scientists were at the stage of burnout because they have worked so much overtime to meet turnaround times and sustain lab operations. 

Staffing woes exist everywhere. Another lab manager described how his health system was offering $100 per hour to nurses and getting no takers. One lab leader said his hospital was benefiting by recruiting nurses from an unlikely source. In states where it was mandated that healthcare workers be vaccinated, there were nurses who either were terminated or quit, then took the opportunity to relocate to a state without a vaccine mandate for healthcare workers. In that state, they now make more money, particularly if they are serving through a temp agency. 

Is it possible that some med techs relocated to states without the vaccination requirement for the same reason? The Dark Report has not heard of such examples, but would welcome hearing from labs that either lost or gained med techs because of this situation. 

Lab Market Force 2

Inflation and Lab Budgets

Since early this year, the annual rate of inflation has climbed steadily with each passing month. The latest numbers for June 2022 showed a year-over-year increase in the Consumer Price Index (CPI) of 9.1%. This is the highest rate of inflation in the United States since 1981. 

Lab executives report that prices for most of the products and services they purchase are increasing. Compounding the effect of inflation are continuing supply chain shortages for lab automation, analyzers, test kits, and similar supplies. Sellers, themselves fighting their own supply chain challenges, are pushing increased prices onto their clinical laboratory customers. 

The increasing rate of inflation has another insidious effect on clinical laboratories and hospitals. New hires must be offered higher salaries or hourly wages before they will accept job offers. This is a financial double-wammy on labs. 

One lab manager at AACC summarized how inflation was distorting her lab’s salary base. “First, inflation forces us to spend more on labor over the original budget,” she explained. “Second, it creates problems with existing staff doing the same work as the new hires. They know they are being paid less for doing the same work as the new hire. It’s a big morale problem at our lab.” 

Lab Market Force 3

Deteriorating Hospital Finances

Particularly since the onset of the pandemic in March, 2020, the financial health of many hospitals and health systems in the United States has deteriorated. What was revealing in conversations that took place at AACC last month was how many lab administrators confirmed that their parent hospitals and health systems were failing to cover expenses with current revenue. 

How is your lab coping with these three lab market forces? Please share your thoughts with us in the comments below.