CEO SUMMARY: Many hospital laboratories continue to endure non-stop cutbacks to staffing and funding. The success of the recently instituted laboratory testing outreach program at West Hills Hospital and Medical Center validates that the market continues to reward labs willing to offer added-value services. These are the laboratories which will emerge as winners in tomorrow’s managed healthcare marketplace.
HOSPITAL LABORATORY MANAGERS throughout North America face an identical challenge: how to lower testing costs while simultaneously increasing lab services and testing capability.
At West Hills Hospital and Medical Center (WHHMC) in West Hills, California, Laboratory Director Joseph McCauley and his hospital CEO used a time-proven formula to solve this problem: increase the volume of specimens processed by the lab.
Internally Financed Program
Two factors make their story unique. First, as a single community hospital operation, they were willing to launch an internally financed laboratory outreach program. Few hospitals around the United States have been willing to do the identical thing.
Second, these executives agreed that their business project would be best served by retaining the services of outside experts. This would avoid the unnecessary expense incurred when laboratory managers try to master the sophisticated skills of finance, strategic marketing, sales, billing, etc. Further, using outside experts to develop and launch the business plan accelerates implementation by a huge factor.
In less than 24 months from start-up, specimens from the outreach program now generate 28% of the monthly billable tests performed by the WHHMC laboratory. As a result, the lab is beginning to see a regular decline in the average cost per test.
WHHMC’s experience can teach other hospital laboratory administrators and directors some valuable lessons about today’s market.
Lesson One: Things can happen quickly. This hospital CEO made a commitment, then supported the lab director’s efforts to introduce the concept into the market on a fast-track basis.
Lesson Two: Don’t reinvent the wheel. As McCauley notes on page 3, he and his team are experts in laboratory testing and inpatient operations. They are not experts in finance, sales, strategic marketing, and commercial laboratory expertise. They retained specialists in these areas and listened to their advice.
Lesson 4: Physicians want their laboratory to be responsive to their practice needs. McCauley recognized this requirement. He and his team surveyed potential clients—before launching the program. They then designed their outreach program to meet the lab testing needs of office-based physicians.
Lesson 5: Managed care contracts are not essential for lab outreach success. This is one of the most interesting aspects of the West Hills story. WHHMC has physicians splitting specimens so it gets only their fee-for-service and Medicare work. Commercial lab competitors get the capitated and highly-discounted testing, as determined by the patient’s insurer.
Lesson 6: Hospital inpatient testing benefits from the outreach specimens. WHHMC now offers daily results on tests which it formerly could only do a couple of times per week. This improves the clinical services within the hospital. Further, because of the LIS system, doctors can access both inpatient and outpatient lab test results from their office.
Lesson 7: An effective outreach program builds valuable bridges between physicians and the hospital. As McCauley noted, WHHMC recognizes a different, and more positive, patient referral pattern from doctors who use their lab versus doctors who don’t.
Lesson eight: Employment stability and opportunity in the hospital lab is enhanced by an effective laboratory outreach program. Although WHHMC averages 50% occupancy with its 260 beds, its laboratory staff is fully utilized. The combination of inpatient testing and growing outpatient testing guarantees the productivity of the lab staff and its value to the hospital.
THE DARK REPORT believes that the lab outreach program at West Hills Hospital and Medical Center validates our prediction that labs which are closest to the point-of-care have the best opportunity to survive and thrive, but only if they are willing to integrate their services within the greater healthcare community.
Hospital-based laboratories are ideally situated at the point-of-care. They have an inherent advantage over commercial laboratory competitors. However, that advantage means little until progressive lab directors like Joe McCauley make the commitment to put their hospital into the laboratory outreach business!
Hospital CEO Likes Benefits From Lab Outreach Program
Our doctors love the services they get from the laboratory,” said Jim Sherman, CEO at West Hills Hospital and Medical Center. “I hear compliments about everything from better turnaround time and personalized service to instant reporting.”
West Hill’s laboratory outreach program has generated recognizable benefits in a number of ways. “For most hospitals, the laboratory is a fixed cost,” noted Sherman. “But our outreach program now brings in more specimens. This increased flow of specimens is helping us to both reduce lab costs and offer improved testing services to our doctors and patients.”
Sherman intends to use this asset to the benefit of West Hills Hospital and Medical Center. “Because the laboratory is in regular contact with physician offices, we plan to use it as an outreach tool for other hospital services,” he stated. “We believe it is a good way to educate the physician community about the hospital and its resources.”
Sherman recommends that other hospital CEOs explore the benefits of launching a laboratory outreach program. “Where appropriate, this type of laboratory