CEO SUMMARY: Evidence grows that workstation automation and modular automation can be cost-effective solutions in the clinical laboratory. But the newest generation of automation technology presents lab administrators with a new challenge. Financial analysis and workplace reengineering are now essential skills for success. Lab managers who fail to upgrade their capabilities will find themselves at a disadvantage.
SEVERAL TRENDS IN HEALTHCARE will soon converge and create a new set of challenges for hospital laboratory directors.
This convergence will require successful hospital laboratory administrators and clinical pathologists to become more proficient at three skills: 1)workflow reengineering; 2) productivity and financial analysis; and 3) ability to effectively implement change in the clinical laboratory.
These skills will complement the experience in clinical medicine needed to manage a laboratory. But the successful hospital lab manager will learn to use business management skills in concert with scientific knowledge to effect continuous operational change in the lab organization.
Three Basic Trends
THE DARK REPORT identifies three basic trends about to converge and cause this change. First, ongoing improvements to laboratory automation technology and point-of-care testing will make it feasible, even mandatory, to reconfigure hospital core laboratories in new ways. These technologies will make it possible to perform testing faster, more accurately, and at lower cost.
Second, hospital CEOs and senior administrators are increasingly frustrated with the inertia and inability of many lab directors and clinical pathologists to “get with the program” and continuously improve lab operations. To combat this inertia, hospital CEOs are retaining outside experts to bring change to their laboratories.
Three, the evolving American healthcare system now requires providers to be skilled at assessing the economic benefits of new technologies and services and competent at introducing them into clinical use. This means that skills in financial analysis and management implementation will be just as important as skills in medicine and science.
These trends were identified by THE DARK REPORT in earlier intelligence briefings for its clients. The recent interview with LAB-InterLink, Inc.’s President and CEO, Jack Holthaus, brings further evidence that these trends are exerting greater influence.
“Recently several statistically-valid surveys of hospital system CEOs were conducted,” said Holthaus during his exclusive interview with THE DARK REPORT. “The goal of the survey sponsors was to learn what these CEOs thought about their hospital laboratory management.”
Willingness To Outsource
In this survey, hospital system CEOs were asked about their willingness to outsource hospital laboratory services. One surprising conclusion of this survey was that remarkably high numbers of CEOs are dissatisfied with the existing management of their clinical laboratory organization.
The survey concluded that one reason for this dissatisfaction was not unhappiness about the quality of lab testing, but rather the lack of initiative by lab directors to speedily adopt improvements to the lab’s cost structure and capabilities.
The results of this survey must be considered in tandem with another phenomenon. “It is common knowledge among diagnostic vendors and commercial laboratory companies that the number of senior hospital system administrators willing to discuss joint laboratory ventures is on the rise,” noted Holthaus. “Add these two developments together, and it’s obvious to see that a period of significant change to hospital laboratory organizations is about to commence.”
New Automation Tools Provide Opportunity
One major difference between the lab automation tools hitting the marketplace today, and the TLA (total lab automation) systems of the mid-1990s is their flexibility and relatively lower cost.
Workstation automation and modular automation address the needs to mechanize and automate rote steps in the laboratory testing process. For example, at ARUP Laboratories in Salt Lake City, Utah, the decision was made to automate the accessioning process first.
This would solve a major operational roadblock at ARUP and facilitate additional automation in subsequent years. Charles D. Hawker, Ph.D., who directs ARUP’s automation efforts, will be at the upcoming Executive War College in New Orleans on May 16-17 to discuss this project and report on its performance.
Hospital CEOs Dissatisfied
The observation by Holthaus about these two healthcare trends complements observations made by THE DARK REPORT. One conclusion from the survey of hospital system CEOs is that their dissatisfaction with laboratory directors stems from the lack of professional management skills. It validates the findings done by Premier, Inc. in 1998, when they studied the reasons why hospital laboratories took years to pursue obvious cost-saving opportunities that commercial labs had rapidly adopted, such as consolidation and regionalization. (See TDR, June 15, 1998 and July 6, 1998.)
Holthaus had an opinion on why this situation exists. “Hospital system CEOs are consistently driven by the equation between economic cost and clinical benefit,” he observed. “From their perspective, a proposition to consolidate lab testing, or acquire automation technology, is basically a business and financial decision. It is not clinical.
“These hospital CEOs want their ancillary services administrators to be both ready and willing to make tough decisions,” he added. “Yet lab medicine has always been slow to change.
“For example, it is common for us to meet with lab managers who proudly tell us ‘We cut lots of cost and people from our lab. We are lean and mean’,” continued Holthaus.
“They may have 16 people per day handling eight to ten large instruments,” he continued. “We demonstrate to them how, by installing our automation solutions, two people at one control point can do the same work. After studying how our automation solution makes that attainable, they hesitate to commit. For them, it seems safer to keep the status quo.”
Holthaus’ example has a familiar ring. There is a stereotype that hospital lab managers are “reluctant to change and would prefer to keep the status quo in their lab.” Most clinical labora- torians agree on the validity of this lab industry stereotype.
The results of the recent hospital system CEO survey offers evidence that hospital CEOs are increasingly dissatisfied with lab administrators who fit this stereotype. CEOs are demonstrating, by their willingness to discuss outsourcing laboratory functions, that they are ready to correct this unacceptable situation.
The laboratorians to be hardest hit when these healthcare trends finally converge will be those hospital lab directors who fail to heed the warning signs.
THE DARK REPORT offered examples of this in our last issue. The emerging trend of shared laboratory service organizations, organized between hospital systems, certainly is proof. Spectrum Laboratory Network in Greensboro, North Carolina was organized by three different |hospital systems. Carolina Laboratory Network in Charlotte, North Carolina is another example.
The recent announcement that Aurora Health Systems of Milwaukee would pool its laboratory services with those of Advocate Health Care in Chicago followed on the heels of news that CEOs at Chicago’s Rush-Presbyterian-St Luke’s Medical Center, University of Illinois at Chicago Medical Center, and Cook County Hospital are launching discussions to start a shared laboratory organization.
All of these marketplace developments point to an obvious conclusion: hospital lab managers who consciously attempt to preserve the status quo will increasingly be seen as a problem.
Their hospital CEO generally does one of several things to resolve the situation: 1) replace the laboratory manager; 2) outsource the laboratory or bring in outside experts to implement changes in the lab; 3) joint venture with a commercial lab company; or 4) enter a shared laboratory services arrangement with other hospital systems and put the lab under the direction of someone with experience in business and financial management.
In general, clients and regular readers of THE DARK REPORT already recognize these changes and are striving to proactively bring positive change into their laboratory. Their initiative is a big reason why they will survive this next cycle of lab industry evolution.
The laboratorians to be hardest hit when these healthcare trends finally converge will be those hospital lab directors who fail to heed the warning signs. Hospital CEOs, finally impatient at the lack of progress in the laboratory, will take direct action to place their laboratory in the hands of individuals who will change the lab.