Hospital Labs Produce Moderate Cost Increases

ALL PATHOLOGISTS AND HOSPITAL LAB ADMINISTRATORS who feel beat up about endless budget cuts should take heart. During the period 2000-2002, the cost of laboratory services in hospitals increased by 18%. That is something to brag about—and here’s why!

The lab services cost increase was less than diagnostic imaging (up 36%), operating rooms (up 32%), intensive care (up 27%), medical supplies (up 26%), and even drugs (up 22%). The information was produced by Solucient, one of the nation’s more respected healthcare consulting firms. The database tapped by Solucient included 20 million discharges per year from nearly 2,500 hospitals.

I can make a couple of important observations from this information. First, pathologists and lab directors in the nation’s hospitals are doing an excellent job of controlling costs, harvesting efficiencies, and judiciously introducing new diagnostic technologies. The comparative data from other hospital services bear this out.

Second, I find the diagnostic imaging cost increase to be significant. At 36%, it rose at twice the rate of laboratory testing over the same time period. I can speculate that two interesting factors might be at play. For example, could the economic effectiveness of new diagnostic assays be significantly better than the economic effectiveness of new diagnostic imaging procedures? If this is true, comparative advantage will accrue to anatomic pathology and clinical laboratory services.

Or could the dramatic costs of diagnostic imaging in hospitals during the 2000-2002 period be attributed to increased utilization—utilization driven by incentives that encourage radiologists to recommend more procedures because of beneficial reimbursement? Like many of you, I am picking up lots of comments in the healthcare press about concerns that physician groups establishing their own radiology and imaging services are driving utilization rates—and the amount reimbursed for imaging services—through the roof. Both public and private payers are starting to zero in on this problem. That can only end up badly for radiologists.

However, lab medicine seems to be facing a brighter future. Solucient’s findings provide solid evidence that pathologists and lab managers are ahead of their peers in controlling costs. That bodes well for the future.