Seeking Market Clout, Labs Form Networks

Shared testing networks are spontaneously emerging in several cities across the nation

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CEO SUMMARY: Meet “Test Exchange Networks!” These are shared laboratory testing networks that have spontaneously appeared in different communities across the nation. Typically two or more local laboratories come together and begin to collaborate by sharing any number of resources. These collaborative networks can include community hospital laboratories, local pathology group practices, and even physicians’ offices. One observer says that financial survival often motivates cross-town competitors to work together.

LOCAL CLINICAL LABORATORIES and pathology group practices are finding it advantageous to work together in ways unseen in past decades. One sign of this trend is the growth in shared lab testing networks.

Formation of shared laboratory testing networks is a way that local lab testing providers can collaboratively challenge the sales and marketing efforts mounted in their local communities by national laboratory companies. Shared lab testing networks mark another significant change in the lab testing marketplace.

New Trend With Momentum

“This trend is relatively new and continues to pick up momentum,” stated Lisa-Jean Clifford, CEO of Psyche Systems Corporation, a laboratory information systems (LIS) software provider in Milford, Massachusetts. “We became aware of it when clients in several different communities independently came to us and asked us to add features to our LIS that would support the specific way that several local clinical laboratories and pathology groups in their cities wanted to share resources.

“In many communities, there is a new attitude today among the various local labs serving that region,” explained Clifford. “Some of the old barriers are breaking down. In the past, it was common for labs in a community to consistently maintain their independence. Local labs regularly declined to participate in a shared competitive response to national labs entering their market.

“That is not the case today,” she added. “The lab testing marketplace is such that independent labs will take unusual steps to survive, to remain competitive, and to find ways to grow.

“Simply said, we see a number of cities where local labs—both clinical laboratories and pathology group practices—are willing to collaborate and share resources,” Clifford noted. “They will do this rather than let national lab companies move unchallenged into their markets.”

Clifford says there is another interesting dimension to these shared laboratory testing networks. Not only will the lab test network include, say, local hospital labs and community hospital-based anatomic pathology groups, but it is increasingly common for office-based physicians to participate in such networks. For a hospital-based pathology group, the network approach is one way its pathologists can continue to provide either or both technical component (TC) and professional component (PC) services to local physicians.

Filling a Market Need

For Psyche Systems, this fledgling movement in laboratory medicine is viewed as a desirable business opportunity. It sees a way to serve these shared testing networks by providing the customized services necessary to support test sharing across multiple laboratory organizations.

“We filed a trademark on the name ‘Test Exchange Network’ (TEN) to describe this functionality and menu of services,” Clifford said. “In essence, we use our connections and the informatics platform we’ve built over 34 years to help community-based hospitals respond when national pathology lab companies want to move into a market. This is an effective way for the small labs to come together and better compete against larger labs.

“We believe this trend of shared testing services developed spontaneously,” she continued. “It first came to our notice when selected customers approached us and we developed informatics solutions to support their particular shared testing arrangements.

Leveraging Lab Resources

“Now we regularly learn of other independent laboratories or health system laboratories which are looking to do something similar, typically by leveraging information technology investments, resources, or a geographic footprint,” noted Clifford. “And when I say ‘resources’ that would be anything at all, including monetary, human resources, instruments, or even facilities.”

Clifford says that these test exchange networks are quick to organize and regularly prove to be nimble competitors in the marketplace. “The concept works for two reasons,” said Clifford. “First, the shared services are kept to a basic and simple level. Second, it involves as few as two labs willing to work together.”

“The motivation to collaborate and work together is generally survival,” she continued. “For example, participating labs may want to counter a national laboratory company that is moving into their terri- tory. Or the labs may see collaboration as a way each participant can overcome budget cuts or budgetary constraints.

Motivation Can Be Survival

“Regardless of the specific reason, the pri- mary goal of each lab in these sharing arrangements is to survive,” she declared. “Once they start talking to each other they usually find ways to work together and serve a specific area by leveraging each others’ resources.

“For instance, one lab might offer a certain test menu that the other lab wants and doesn’t have,” Clifford continued. “Or there could be some overlap in their geog- raphy but less overlap in their test menus. There also could be overlap in the test menus and less overlap in the geography.

“It may be that one lab has a significant cost advantage when running certain tests due to its investment in equipment that allows that lab to produce results at a much lower cost than the second lab can,” she said. “By working together, the first lab can help the second lab meet a market demand quickly and effectively.

“In shared arrangements like these, the patient is generally free to visit a patient service center (PSC) operated by any of network labs to get blood drawn or a specimen taken,” Clifford said. “It is the lab with the equipment that runs the test.

Helping Labs Serve Patients

“For the patient, what goes on behind the scenes doesn’t matter,” she observed. “But the lab that doesn’t have the equipment will get the test results and it will send those results to that patient’s physician.

“For the two labs and for the patient, it’s just as if the patient’s laboratory used a reference lab for the patient’s tests,” she said. “The only difference is the two labs work together in an ad hoc manner. In this sense, they have formed their own little network. They commonly share or leverage their respective laboratory information systems as well.”

THE DARK REPORT considers it significant that Psyche Systems is regularly field- ing requests for help in linking together two or more local laboratories in the same community as a way to meet their goal of sharing services and resources. This is an early marketplace sign that local laboratories are becoming more creative in how they counter the sales campaigns of national lab companies coming into their communities.

At the same time, this nascent trend may also be a sign that long-standing bar- riers to regional collaboration may be falling. As noted earlier by Clifford, survival is often the major motive behind efforts to form formal and informal lab test sharing networks in different cities across the country.

New Interest In Lab Networks

Whatever the reason, this trend toward shared testing and service networks is a clear change from the past two decades, During the 1990s and 2000s, hospital laboratories and local pathology groups steadfastly maintained their independence and rebuffed regular efforts to create collaborative networks—whether for the purposes of negotiating managed care contracts or to reduce the cost of providing laboratory tests.

In an upcoming issue of THE DARK REPORT, we will provide an intelligence briefing about one of the Test Exchange Networks supported by Psyche Systems. This network consists of clinical labs, anatomic pathology groups, and physicians’ offices. Also, Lisa-Jean Clifford will be speaking about the trend of Test Exchange Networks at the upcoming Executive War College, which will take place in New Orleans on May 3-4, 2011.

Some Testing Networks Want to Share the LIS

“WHEN LABORATORIES involved in a test exchange network (TEN) want to share an LIS, that’s where we can play a role,” stated Lisa-Jean Clifford, CEO of Psyche Systems Corporation. “For example, one of our LIS customers decided it made sense to pay for several smaller laboratories in its network to use our LIS.

“In turn, that gave these smaller labs a way to access the unified database of lab test results,” Clifford commented. “Importantly, this unified database allows smaller labs to handle any type of test result data—whether it’s clinical, molecular, pathology, cytology, surgical, or Pap smears.”

Psyche Systems takes steps to restrict access to patient data in the unified LIS database. “Our IT staff installs the proper security rights for each lab to ensure full compliance with federal privacy laws,” noted Clifford. “It means that each lab is able to see its own tests, its own results, and its own patient information. But one lab can’t see data from any of the other labs in this shared testing arrangement.

“In our experience, the clinical labora- tories and pathology groups involved in a Test Exchange Network deal with the license issues of the unified LIS in one of two ways,” she explained. “In one approach, each lab purchases a license to use the LIS. In the other approach, we’ve seen a larger laboratory actually purchase and support the licenses for other labs in the network to access our LIS.”

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