CEO SUMMARY: Lab executives and pathologists have long read about the deteriorating finances at many rural hospitals, along with their struggles to recruit and retain enough skilled laboratory staff. Now the closure of the laboratory at 37-bed E.J. Noble Hospital in Gouverneur, New York, can be considered a sign that these long-discussed trends are becoming reality. In response to the lab’s problems, the laboratory director resigned and notified state officials, who closed the lab after an inspection.
IN UPSTATE NEW YORK, state health officials recently ordered a rural hospital to close its laboratory due to operational deficiencies and at least one patient error involving blood products. In response to the closure of the lab, the hospital ceased accepting patients and shut down.
In the normal course of events, this story attracted little attention in the news media and these events are unknown to pathologists and clinical laboratory professionals. After all, what can be significant about the closure of a financially-troubled, 37-bed hospital located in a rather remote rural town of 3,938 people that is located in a thinly-populated region just 40 miles from the Canadian border?
For both the clinical laboratory industry and the pathology profession, there is much national significance to this story, a conclusion which may surprise many in the lab industry. THE DARK REPORT believes that the problems of the clinical laboratory at the non-profit E.J. Noble Hospital in Gouverneur, New York, are the tip of a much larger iceberg.
Essentially, what happened at E.J. Noble Hospital may be a story that is about to be repeated at other rural hospitals throughout the nation, and even at other financially-struggling community hospitals in larger towns and cities.
That is because the laboratory at E.J. Noble Hospital appears to represent the “perfect storm” where several long-predicted trends converged at the same moment in time. These trends include acute lab staffing shortages, deteriorating hospital finances, expensive clinical lab technology, heightened legal risk for pathologists serving as laboratory directors, and deteriorating lab reimbursement.
Ask yourself this: is your laboratory or its parent hospital or health system experiencing any two of the above listed trends and issues? If the answer is “yes,” then the reasons why the New York State Department of Health (NYSDOH) closed the clinical laboratory of E.J. Noble Hospital on September 28, 2012, may be instructive as to how ongoing legal risks and levels of compliance exposure may be intensifying within your own lab and hospital organization.
Closure of Noble Hospital
A basic understanding of why problems in the laboratory contributed to the closure of E.J. Noble Hospital can be found in press accounts and from officials of the NYSDOH. THE DARK REPORT presents this information on pages 6-8.
Two issues seem to dominate this case. First, the hospital was struggling to hire and retain the minimum number of medical technologists (MT) and lab scientists required to operate the laboratory with acceptable quality and safety.
Second, the hospital’s weak financial condition directly contributed to the lab’s problems. NYSDOH officials noted that, because vendors were owed money by the hospital, vendors were withholding shipments of reagents to the lab. In turn, that meant Noble’s lab was unable “to perform critical testing due to lack of reagents.”
Absolute Shortage of MTs
It is common knowledge across the clinical laboratory industry that there is an absolute shortage of medical technologists and other laboratory scientists. The inability of E.J. Noble Hospital to recruit and retain the minimum number of MTs and trained staff it needed can be considered an early warning. It is evidence that the lab industry’s long-discussed manpower shortage is now poised to become reality.
Further, the report of the NYSDOH regulators after their inspection of the Noble Hospital lab supports this conclusion. The regulators determined that the combination of inadequate staff in the laboratory and poor finances of the hospital were reasons why this hospital laboratory was unable to sustain an acceptable quality of lab testing services.
In fact, this situation caused the laboratory director to terminate services with the hospital and notify the New York State Department of Health of that fact. With this notification from the former laboratory director, the NYSDOH also received a copy of the termination letter that had been sent to Noble Hospital’s administrators.
It is this aspect of the Noble Hospital case that should catch the serious attention of every laboratory director of a CLIA-licensed lab. In a true sense, this laboratory director was the “whistle- blower” who triggered the NYSDOH inspection of the Noble Hospital laboratory on August 25, 2012.
Within four weeks of this inspection, the NYSDOH determined that the hospital was unable to correct the lab’s deficiencies. It was on September 28 that state regulators revoked the lab’s license, causing the hospital to shut down. As of last Friday, NYSDOH lifted that order and the hospital is to reopen with a limited lab test menu.
THE DARK REPORT believes these events must be interpreted within the framework of the well-accepted laboratory trends mentioned earlier. The shortage of med techs has been visible in many regions of the United States for two decades now.
“Recruiting medical technicians is a real challenge,” said Noble Hospital administrator Charles B. Conole to a local newspaper. “There are no medical technician [medical technologist] schools in Northern New York.”
At the same time, the deterioration of hospital finances is well-documented. Longtime clients and readers will recall THE DARK REPORT story titled “New Report Says Half Nation’s Hospitals Have Financial Woes.” (See TDR, May 26, 2008.)
At that time, the healthcare consulting firm of Alvarez & Marsal, LLC, studied the financial operations of 3,861 of the 4,900 acute-care hospitals operating in the United States. Out of the total 3,861 hos- pitals studied, Alvarez &Marsal said 2,044 don’t make a profit on patient care! It also noted that 744 hospitals in the study earn so little that they cannot fund day-to-day operations, make needed repairs, or support basic capital expenditures.
We are now almost five years further down the path of deteriorating hospital finances—with significant cuts in Medicare reimbursement still to come. It is reasonable to assume that the problems that caused the closure of E.J. Noble Hospital will be seen in a growing number of other hospitals.
These circumstances predict a tougher future for lab administrators as well as the laboratory directors who are on the lab’s CLIA license. On one hand, these lab leaders will be required to sustain a compliant and high quality laboratory with shrinking resources. That means reduced budgets from the parent hospitals, more difficulties in recruiting adequate numbers of med techs and skilled lab staff, and the challenge of acquiring more expensive and complex lab testing equipment.
Ethical Dilemma in the Lab
On the other hand, in situations where the hospital is financially strapped, lab administrators and laboratory directors will face the very real ethical dilemma of how to handle situations similar to E.J. Noble Hospital. In that case, hospital administration was unwilling or unable to provide the leadership and the financial resources the laboratory needed to correct ongoing deficiencies and restore compliance to the acceptable level.
That created the moment when the laboratory director decided the right thing to do was to terminate his service contract with the hospital. Also, as the law requires, the laboratory director notified the proper lab authorities in his state about these issues.
Every lab administrator and laboratory director—particularly those working in hospital laboratories where such deficiencies are already visible—should study the public facts of the E.J. Noble Hospital laboratory closure. In the pages that follow, THE DARK REPORT provides information about these events, as well as an overview of these issues by an experienced attorney.
Peninsula Hospital Closed Because of Lab Problems
IT WAS IN APRIL OF THIS YEAR when the New York State Department of Health revoked the certificate of another hospital laboratory, an action that led to the closure of the hospital.
This time it was the laboratory of the 173-bed hospital Peninsula Hospital, located in the Far Rockaway section of the Borough of Queens. The department sent inspectors to the lab on February 20 and 21. Days later, on February 23, the department issued the order to close the laboratory for 30 days. (See TDR, March 12, 2012.)
This action was taken after a NYSDOH inspection found that the hospital laboratory “failed to meet accepted standards, which put patient safety at risk.” In its report, the NYSDOH noted that some reagents were outdated and that a lack of other reagents meant the lab was unable to perform certain types of tests. Another issue was the lack of proper supervision across all shifts and in different departments of the laboratory.
As in the case of E.J. Noble Hospital, it appears that the poor financial condition at Peninsula Hospital played a significant role in the inadequate lab staffing and problems with maintaining inventories of essential reagents and laboratory supplies.