Lab Innovators Point Way At Executive War College

Emerging trends point to more emphasis on lab service quality & physician satisfaction

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CEO SUMMARY: Now in its tenth year, this Executive War College attracted a record crowd, including laboratory leaders from Europe, Africa, South America, and Asia. The unexpected finding was that, along with the growing acceptance of Lean, Six Sigma and other quality management systems by the nation’s first-rank lab organizations, assertive surveying of physician and patient satisfaction is driving strategic progress.

SEVERAL OF THE NATION’S MOST INNOVATIVE LABORATORIES are actively raising their customer service levels as a primary strategic initiative.

This was one surprising insight from this year’s Executive War College on Lab and Pathology Management, conducted May 3-4, 2005 in New Orleans. Specifically, these laboratories are spending money to regularly survey referring physicians, patients, and their own employees. The survey results are used to drive improvements in the operational performance of their laboratories.

In hindsight, the emphasis on boosting customer service performance is a logical consequence of how these laboratories are implementing quality management systems within their operations. After all, one of the core principles of quality management systems is that the organization regularly ask customers to define quality and evaluate the performance of the organization.

Two other central themes in strategic laboratory management emerged from the presentations made at this year’s Executive War College. First was the growing acceptance by early adopter lab organizations of quality management systems like Lean and Six Sigma. Second was the finding that even laboratories known as “first movers” are taking a measured approach to how they establish and expand the molecular diagnostics they offer clinicians.

Another major insight gleaned from this year’s event was that the lab- oratory industry is enjoying a period of relative financial stability. This fact was gleaned from what was not discussed by the 40 speakers over the course of the Executive War College.

Financial Stability

Absent from their presentations were comments and examples of how their laboratories were operating with negative margins. This is in direct contrast to the general tone and tenor of many laboratories during the mid-and late-1990s, when negative financial pressures were at their peak.

I considered this to be strong evidence that the nation’s better-man- aged laboratories are taking advantage of this “financial calm” to advance their strategic initiatives. That conclusion is supported by the types of business initiatives discussed during case studies presented by NorDx Laboratories (Scarborough, Maine), Sonora Quest Laboratories (Phoenix, Arizona), and University Hospital Health System (Cleveland, Ohio.)

Docs Notice Improvements

Executives from these laboratory organizations described the types of management strategies they are using to push their laboratories ahead and maintain competitive market advantages they hold in their respective service markets. A common attribute from all these case study presentations was a management goal of improving daily service performance within the laboratory—by such an extent that these improvements are both noticed and valued by client-physicians using these labs.

Sonora Quest Laboratories (SQL) was a dramatic example of this trend. SQL is a laboratory joint venture between Banner Health and Quest Diagnostics Incorporated. It is considered the dominant lab competitor in the state of Arizona. COO Joyce Santis discussed how SQL regularly surveys its customers and its employees. SQL uses internationally-recognized survey firms to help it ask the right questions and respond effectively to the results.

Two examples illustrate how management at Sonora Quest Labs has used the information from these surveys. First, after the initial merger of two pre-cursor lab organizations into SQL, voluntary employee attrition was unacceptably high, running 38% in 1999. By 2001, voluntary employee attrition had dropped to 12.4% and most recently stood at 10.5% for 2004. Santis described how employee participation in the annual survey had initially been 33% in 1999. That figure had climbed to 94.8% in 2003, as employees saw how management was making positive changes, using information from these surveys.

Annual Customer Survey

The second example is how SQL uses the information developed from a survey of laboratory customers in its service area. This annual survey is conducted by an independent company. The results show that SQL’s high-quality services are recognized and preferred by a significant number of physicians in Arizona.

SQL regularly meets with managed care companies to share this information and build its credibility. It is obtaining better pricing because it has evidence that its service performance is above those of other commercial lab companies serving Arizona.

When it comes to the “wow” factor, Fleury Diagnostics of Sao Paulo, Brazil was a clear crowd favorite. Fleury Diagnostics is probably one of the world’s best examples of a high-service clinical laboratory organization. The presentation was conducted by Ewaldo Russo, M.D., Ph.D., CEO and Rogerio Rabelo, M.D., Ph.D., Product Manager, Core Lab and POCT.

As noted by Rabelo, healthcare in Brazil is basically a free market. That means both physicians and patients can choose their laboratories. Fleury decided to make itself into a high-service laboratory that would serve physicians and patients capable of paying for high quality laboratory testing.

Total Diagnostic Centers

Rabelo and Russo captured the crowd with their business strategy, photographs of their patient service centers and staff, and the financial/performance measures of their laboratory company. Fleury’s patient service centers offer a full range of diagnostic services. Besides a complete menu of laboratory tests, Fleury also provides diagnostic services in nuclear medicine, imaging, cardiology, endoscopy, cytogenetics, and nine other clinical specialties.

At its busiest patient service center (PSC) in Sao Paulo, Fleury draws blood from more than two thousand patients daily. Fleury’s goal is to achieve an average waiting time in all its PSCs of 2.2 minutes. It currently has an average of 3.14 minutes. Equally impressive, Fleury has the informatics capability which allows its managers to track this performance in real time.

Regular Patient Surveys

Like other case study laboratories presenting at the Executive War College, Fleury regularly surveys patients and physicians. It uses this information to help managers and employees “raise the service bar” on a continuous basis. When THE DARK REPORT conducted a site visit of Fleury Diagnostics in the fall of 2003, it saw a truly world-class patient service network and clinical laboratory operation.

For the Executive War College audience, it was a stunning vision of what laboratories can achieve. I might describe what Fleury has built as a “boutique” lab business on a large scale that is now considered the market leader by competing laboratories in Brazil.

This message resonated with the audience. Within the American healthcare system, the drive to improve patient safety, to improve healthcare outcomes, and meet patient expectations is creating new pressures on laboratory executives. Fleury’s presentation was a “best of breed” look into what might possibly evolve to be a service standard in the United States in future years.

Moving to the theme of molecular diagnostics, my primary conclusion from listening to the range of speakers is that the nation’s early-adopter lab organizations are moving cautiously. Speakers such as Stan Schofield, CEO of NorDx and Fredrick Kiechle, M.D., Chairman, Department of Clinical Pathology at the Beaumont Hospital in Royal Oak, Michigan, discussed the rigorous process used by their lab managers to introduce a new molecular assay to physician-clients.

Simple Admonition

The take-away message common to these presentations was a simple admonition: there continue to be any number of pitfalls associated with a molecular testing program, from clinical performance to inadequate reimbursement. Thus, it is absolutely essential to carefully evaluate every aspect of a new molecular test. And, erring on the side of excess caution is invariably a way to avoid unwanted problems that result if a lab launches a clinical molecular testing program “before its time.”

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