"CHAPTER FOUR"

Summary and Overview of Lab Industry

Tough challenges and a call to action

If there is any common theme to the different chapters of this White Paper on the laboratory industry, it is probably this: in the next couple of years, clinical laboratories will continue to have one foot in the past and one foot in the future.

Simply put, lab administrators will continue to manage a laboratory originally designed to service the “fee-for-service” healthcare system of ten years ago, yet be under pressure to offer state of the art lab testing services to an increasing complex and integrated clinical environment.

This is one of the most difficult management challenges for any business. Executive leaders must help their teams accept new methods and new management systems even while asking them to abandon many tried-and- true practices. The laboratory industry is now fully engaged in a world of continuous change.

As the first three chapters of this White Paper demonstrate, the tension in the lab industry during the next 24-36 months will center around the need to properly deal with endemic structural problems of the lab industry at large, while still retaining the flexibility to acquire and offer new diagnostic testing tools to the clinical community it serves. In the face of this continual pressure for change, most laboratories already lack adequate middle and senior managers to do the job and few have sufficient capital to acquire and offer enhanced diagnostic services.

It’s a tough enough challenge to have to manage the transition from an old business model to a new business model. But there is an added factor to consider. Our world is in the midst of a true economic revolution. We are clearly leaving the industrial age and entering the earliest stages of an information age. Laboratory executives and pathologists should keep this fact in mind as they develop strategic plans for their laboratory.

The industrial age was centered on owning the assets that produced tangible products. Wealth flowed to those who owned natural resources or manufacturing plants or the retail infrastructure that delivered products to consumers.

Clinical laboratories are a creation of the industrial age. Wealth has flowed to those who own the laboratories which do the tests; who own the couriers who pick up and deliver specimens; who own the facilities that collect lab test data and then generate lab test reports and send out bills.

These are physical assets, and were the source of wealth in the industrial age. We are now evolving into the information age. Wealth will flow to those who control information. There will be precious little profit in owning physical buildings, diagnostic instruments, and courier cars. The significant rewards will come from converting raw data into useful information and valuable intelligence.

I would ask that you consider this to be the key strategic driver for the laboratory industry during the next few years. The shift of wealth, and value, from the assets of production to the assets of information is a primary force for change in our world economy and our healthcare system.

Once lab executives and pathologists fully comprehend this dynamic, it will simplify the process of making strategic decisions. It makes the job of evolving from the former “fee-for-service” core lab business model into the new “distributed” virtual laboratory business model much easier.

I would also like to point out that the process of transforming from an industrial age into an information age will be necessarily muddy and confusing. We will have our Luddites who want to attack the new business production models, just as they did to the textile mills in England only a few hundred years ago. But the process of change is unstoppable. The economics of the marketplace are rational (until the government steps in) and reflect the desires of consumers for products and services they deem valuable.

Speaking of the government, this will be the greatest source of confusion and obfustication. Government’s hand in healthcare, as well as “telecommunications” (already an outmoded term) will generally lag behind the market. Amidst all the talk of e-healthcare commerce, there are concerns about legal and regulatory hurdles. I believe that laws will be changed, albeit rather slowly, to enable the information age to blossom and flourish. Take the issue of direct access by consumers to their lab test results. Certainly there are laws forbidding this in several states. But how long will these laws stand once consumers grasp the problem and express their dissatisfaction to elected officials? Laws constraining telepathology and physician licensing will certainly end up in the dustbin.

Since brevity is a hallmark of THE DARK REPORT, it is time for me to make a final comment on this White Paper and its implications for laboratory managers. Our industry is certainly hamstrung by a number of market trends left over from the 1990s. But I would suggest that one untapped resource to meet these trends is the creativity, energy, and loyalty of the laboratorians now on the front lines. As demonstrated in this White Paper, laboratory executives have failed, in a collective sense, to develop the people resources in our industry and then unleash them on an unrestrained campaign to attack and solve the challenges of reducing lab costs, increasing productivity, and adding value to lab services. When this happens, our industry will have universal and widespread success.

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