CEO SUMMARY: In response to the many changes now unfolding in the U.S. healthcare system, labs are investing their scarce capital in different ways. Five trends in lab spending can be identified. They range from expanding the informatics capabilities of a lab organization to acquiring the hottest new diagnostic technologies. For lab industry vendors, some of these trends are welcome and mean more business. But other trends are negative and represent fewer orders.
MANY LAB ADMINISTRATORS report that the rate of change is accelerating in the healthcare communities and regions served by their lab organizations. Large lab industry vendors affirm this fact.
Lab organizations are reacting to this quickening pace of change in at least five primary ways. These are visible in the form of the strategies and actions clinical labs and pathology groups take to respond to change and keep their lab positioned as a provider of choice for the physicians and hospitals they serve.
In recent weeks, I have participated in several site visits and strategic sessions with a variety of lab industry organizations—both providers and vendors. Collectively, the vendors are serving several thousand hospitals and pathology groups with their products and services. Thus, region-by-region, they see the best and worst of what individual labs are doing to meet the challenges caused by various changes in the healthcare system.
1 TREND ONE
Expanding IT Capabilities
The first interesting trend involves the willingness of lab administration to invest money and management resources to buy and deploy information technology capabilities needed to keep their labs fully-integrated with the information systems of their parent hospitals and health systems.
At the same time, labs are spending the money required to build and maintain interfaces external to their parent organizations. Most frequently, this involves both LIS-to-EHR interfaces with their physician clients and interfaces with the health information exchanges in their regions.
The second, third and fourth trends center upon how clinical labs and pathology groups are purchasing and using lab instrumentation and lab automation differently than in past years.
2 TREND TWO
Longer Replacement Cycles
Trend number two is the willingness of labs to extend the replacement cycle for their instrument systems. A lab that traditionally replaced instruments every three years is now stretching that to five years. A lab that typically went five years may now extend that to seven years.
3 TREND THREE
Standardizing Lab Testing across All System Sites
Trend number three is a bit contradictory to trend two because it represents more sales for the IVD manufacturers. Trend number three is associated with increased activity to standardize laboratory testing across a health system. Thus, in both physician office labs and within system laboratories, there are projects to equip each site with the same instruments and the same test methodologies. A similar thing may be unfolding across all the pathology groups serving an integrated health system.
4 TREND FOUR
Acquiring New Diagnostic Technologies
Trend number four represents another growth opportunity for instrument vendors. During the private strategic meetings and conferences that I attended in recent weeks, there was a consensus that many labs are generally willing to invest in new diagnostic technology that advances their clinical mission and may contribute to reduced costs and improved productivity.
Several examples were regularly mentioned. Automation in microbiology is an active segment of the lab instrument market. Similarly, there is growth in the number of labs acquiring mass spectrometry instruments, including MALDI-TOF systems. There is a willingness to invest in these new diagnostic technologies because they help labs deliver added value to clinicians, thereby improving their competitive position.
5 TREND FIVE
Use of Business Intelligence Software Solutions
The fifth trend can be called “business intelligence middleware.” In the past few years, various companies have entered the lab marketplace with software products and services designed to give lab managers detailed data on lab operations, customer service performance, and financial metrics. These vendors offer solutions that allow lab managers to build customized dashboards that allow them to manage their lab’s performance in real time.
Several of these vendors have enjoyed a steady increase in the number of lab customers who use their services. This demonstrates that—even during a time when budgets are shrinking and money is tight—smart lab administrators will invest scarce capital dollars when they believe an ample return on investment will result.
Investing In Their Labs
These five trends demonstrate that, across the entire lab testing industry, a significant number of laboratory organizations continue to invest in their business in order to maintain their clinical quality while positioning themselves as added value providers for their clients.
What is noteworthy is that their investment dollars are going into different priorities today than, say, three years ago. That is a rational response to shrinking lab budgets. These trends will be the topic of sessions at the upcoming Executive War College in New Orleans on April 29-30.