CEO SUMMARY: In September, Alverno Laboratories, one of the largest networks of regional laboratories in the Midwest, added two Chicago hospital laboratories and six other hospital labs from the AMITA Health system to its network. The additional AMITA Health facilities joined Alverno as a result of health system consolidation. The consolidation of hospitals into health systems is an ongoing trend that contributes to the growth in both the number and size of regional lab networks.
REGIONALIZATION OF CLINICAL LABORATORY SERVICES continues to reshape the lab industry. In the latest example of this important trend, last month Alverno Laboratories in Hammond, Ind., added the labs from eight Illinois hospitals to its network.
Six of the new labs joining Alverno’s lab network are AMITA Health system hospitals, which serves Chicago and surrounding suburbs. Those six hospitals have 1,377 combined beds. The other two labs are in the 319-bed Mount Sinai Hospital and the 294-bed Holy Cross Hospital, both in Chicago, bringing the total number of beds added to the network to 1,990.
Eight Labs Join Alverno
The AMITA facilities joined Alverno Laboratories after AMITA merged with Presence Health. The Holy Cross and Mount Sinai hospitals joined due to Alverno’s ability to cut costs and improve care and outcomes for its hospital members, said Alverno Labs’ CEO Sam Terese.
Based in Hammond, Ind., Alverno Labs was already one of the nation’s largest regional networks of clinical laboratories. It now manages 34 system hospital labs, along with five contracted hospital labs, and a central laboratory serving those hospitals and hundreds of physicians and other healthcare providers in Illinois and Indiana.
“To accommodate the added test volume from these hospitals, Alverno will add 20 associates to its central lab in Hammond, raising the total number of lab staff to about 2,100 employees,” Terese said. “We project that billable test volume will increase by 30% to 35% and the total number of patients served will reach about 10 million this year. Before adding these eight hospitals, we were probably serving about seven million or eight million patients annually.”
Included among the test volume that Alverno acquired from these eight hospitals is a good portion of outreach testing, although Terese could not estimate how much of the volume was due to outreach testing. “The majority of outreach tests are acquired right along with the volume from the hospital labs joining the network,” said Terese. “We have all the tools to add in the appropriate billing processes and necessary customer relationship management capabilities.
“These days, the hospital laboratory outreach business is a challenging endeavor because reimbursement levels are not what they once were,” he commented. “Another reason is because hospitals are acquiring more and more physician practices and those employed physicians are now part of the hospital networks.
“The market for the traditional outreach business is shrinking, but we need to capture whatever outreach volume that is within reach because of the inherent value of patient data to support population health and other core efforts.”
In the 20 years since its formation, Alverno has grown steadily. “In the past 10 years, revenue has increased 20% annually,” noted Terese.
Nationwide, labs have seen revenue decline, in part because Medicare has reduced what it pays for clinical lab testing by 10% per year for the past two years under the Protecting Access to Medicare Act. In addition, health insurers have made deep cuts in what they pay for clinical lab tests and anatomic pathology services.
Despite these trends, Alverno’s experience has been much different. “Over the past 20 years or so, Alverno’s volume and revenue have continued to grow due to a number of reasons,” Terese said in an interview with The Dark Report. “One reason is the trend in which health systems form larger and larger networks. In response, regional laboratories have evolved to serve those health systems within certain geographies.
Several Joint-Venture Models
“In our case, we participate in several joint-venture models with multiple health systems so that we now serve 34 hospitals,” he said. “Across the country, there are not many integrated laboratory networks serving such a large number of hospitals.” In 2005, Alverno served 18 hospitals, just over half of the number it serves today.
“In addition to the laboratories we operate in our hospitals, Alverno also has partnerships in which we serve as the reference laboratory for some hospitals,” Terese commented. “In addition, we do the clinical and molecular lab testing for the physicians who are affiliated with or employed at those hospitals.
“Each hospital laboratory does all the on-demand testing onsite to support their needs,” Terese explained. “Those hospitals send the remainder of the lab tests to our central laboratory in Hammond.
“The largest volume of testing that we do in the central laboratory is for anatomic pathology, histology, infectious disease, and microbiology. Also in the central lab, we perform tests requiring advanced technology in molecular biology and precision medicine-related testing,” he said. “A courier service delivers those specimens to Hammond every day.
“We are firm believers in automation whenever possible,” Terese noted. “We use automation for general lab testing, and we are among the leaders in microbiology automation. In our central lab, we are introducing what’s called ‘robotic process automation,’ or RPA, moving beyond the traditional definition of laboratory automation. RPA allows automation to perform beyond what a lab can do with other forms of automation.
“Also, we are religiously focused on standardization across all of our sites,” he explained. “In our central laboratory, we have standardized equipment as much as possible. And we have standardized our test menus as well.
“In smaller lab facilities, we don’t have the identical analyzers, but we have the same brands so that we have analyzer standardization,” he said. “Also we have standard approaches to competency, scheduling, job descriptions, quality programs, and we use standard metrics in our hospital labs.
“The one area in which we are not standardized is our laboratory information systems (LIS),” Terese commented.
“We have Sunquest sites, Meditech sites, and Cerner sites, and our central laboratory supports SCC Soft.
“We serve 34 hospitals. Standardizing our LIS systems in all these hospital labs would be impractical. That said, all of our LIS systems are interfaced,” he added.
“The reality is, when serving labs in multiple health systems, it’s not feasible to have one health system dictate to another what the IT solution should be,” Terese explained. “It would be impractical to ask every new partner to convert to a new IT or LIS system. That’s not our call to make.
“Instead, we can connect each new hospital lab with a direct interface or through one of our interface partners,” he added. “Either way, we can achieve the same functionality.”
While much of its efforts to improve efficiency focus on the clinical laboratory, Alverno also seeks to improve turnaround time in anatomic pathology.
Last May, Alverno said it would be the first regional network laboratory in the nation to install the Philips IntelliSite Pathology Solution for anatomic pathologists interpreting histology specimens and diagnosing pathology cases.
When the system is fully installed next year, whole-slide imaging will improve quality, patient care, and cut turnaround time by as much as one day, said Brian Wellborn, Alverno’s Manager of Anatomic Pathology.
Terese commented that Alverno has long been relentless about growth and retaining each customer. “You can’t have one without the other,” he said. “Our success is a tribute to the dedicated folks working in our customer experience department.
“That relentless approach to create an outstanding customer experience allows us to deliver customer retention rates above 99%,” he added. “This is not to say that we don’t lose business, but often that happens when independent physicians become employed by hospital systems or medical groups.
“We are equally relentless in protecting margins by watching our expenses and our unit costs closely,” he added. “We are as tight with our unit costs as we can be.”
In closing, Terese commented that Alverno’s next goal is to investigate expansion into neighboring states by adding hospital labs wherever possible.
New Alverno Labs Serve Chicago and Suburbs
FROM ITS CENTRAL LABORATORY LOCATION in Hammond, Ind., Alverno Laboratories has steadily expanded its geographical coverage in Indiana and Illinois.
Last month, Alverno increased its presence in Chicago and the surrounding suburbs. The two Chicago facilities are Mount Sinai Hospital, which has 319 licensed acute care beds and provides medical, surgical, and other services; and Holy Cross Hospital, which is licensed for 264 beds and is a community hospital that provides inpatient and outpatient care including medical, surgical, intensive care, emergency, labor and delivery, primary care, and other services.
Alverno added the following AMITA facilities in the Chicago suburbs:
- AMITA Center Health Adventist Medical (134 beds), in Bolingbrook;
- AMITA Center Health Adventist Medical (138 beds), in Glen Oaks;
- AMITA Center Health Adventist Medical (261 beds), in Hinsdale;
- AMITA Center Health Adventist Medical (176 beds), in La Grange;
- AMITA Health Alexian Brothers Medical Center (354 beds) in Elk Grove Village; and
- AMITA Health St. Alexius Medical Center (314 beds), in Hoffman Estates.
Contact Sam Terese at 219-989-3814 or Sam.Terese@franciscanalliance.org.