CEO Summary: Once it was decided to replace an aging, five-year-old laboratory automation system at the laboratory of Ingalls Memorial Hospital in Harvey, Illinois, the administration at the hospital issued a challenge. It asked the laboratory team to deliver an immediate 10% cost savings upon implementation of its next-generation laboratory automation solution. Because of a rigorous RFP process, the laboratory met that goal and is on track to produce savings to 20% from its new lab automation during its first year of operation.
THROUGHOUT THE PAST DECADE, many clinical laboratories adopted laboratory automation, particularly in their high-volume core chemistry and hematology laboratories. Now it is time to replace this aging automation equipment.
This was the problem facing the laboratory at 563-bed Ingalls Memorial Hospital, in Harvey, Illinois. In a meeting with her boss late last year, Marilyn Nelson, Director of Laboratory & Cardiac Services, was authorized to replace an aging automated chemistry line—along with clear instructions to achieve significant and measurable operational savings.
“We’ve used lab automation since 2005, and it was time to move to the next generation system,” Nelson said during her presentation at the Executive War College on Laboratory and Pathology Management last April in New Orleans. “With our equipment contract expiring, it was time to consider changing to a new system.
“As with many other hospital labs, we are asked to stretch every dollar,” she said. “Our procurement process was started with a target goal my boss felt was achievable; that, after purchase and implementation, our lab’s goal was to achieve annual savings of 10% and that’s what we were to tell the vendors.”
Laboratory automation at Ingalls is not a simple proposition. The on-site core laboratory supports the 563-bed hospital and the four ambulatory family care centers in the nearby towns of Matteson, Tinley Park, Calumet City, and Flossmoor.
“We do 1.3 million billable tests each year,” stated Nelson. “About 2 million results represent the combined volume of chemistry and immunochemistry tests. Our full-time staff numbers 100 people and the laboratory’s gross revenues in 2009 were $82 million. This includes income from a robust laboratory outreach program.”
While the research and legwork were performed by a selection team, Nelson organized the request for proposal (RFP) process around five elements. “First, we identified the reasons why we would change our existing laboratory automation arrangement,” she noted. “We used these reasons to clearly define our goals for replacing our lab automation.
“Second, we involved as many of the staff in the process as possible,” explained Nelson. “Staff input is essential to incorporate our laboratory’s individual characteristics in the RFP criteria that must be met by the vendors. “Third, we used an approach that is definitely not common,” she continued. “From the beginning, we involved all necessary parties in the negotiations, particularly those members of other hospital departments who could assist us with the financials.
“Fourth, we planned a structured implementation that included the outlying Family Care Center labs as well as the core lab,” she noted. “Fifth, having established our success measures in advance, we intended to follow them diligently.”
Better control over laboratory costs was a primary goal. “In recent years, our laboratory at Ingalls Memorial Hospital has experienced strong growth in test volume and revenue,” observed Nelson. “However, like the laboratories at many other hospitals, our test volume has grown faster than laboratory revenue. This is why administration wanted the next generation automated laboratory to deliver substantial cost savings.
Seeing Volume Growth
“Projecting these trends forward, with our laboratory adding volume faster than revenue, our goal was to bring in a new generation automation solution that would help us keep lab costs flat or declining,” explained Nelson. “One of our assumptions is that reimbursement for laboratory testing will decline steadily from year to year.”
Nelson next described the situation within the laboratory. “It was 2005 when we installed automation in our laboratory,” she noted. “This was the Dade Behring Streamlab connected to two RXLs and two DPC (Diagnostic Products Corp.) 2000 Immulites. Both these companies are now owned by Siemens Diagnostics.
Time to Replace Automation
“After five years of use, our existing laboratory automation system had parts that needed replacement due to wear and tear,” she stated. “Downtime was becoming more frequent and our five-year contract had expired.
“Since 2005, we’ve watched the steady advances in software and in lab automation technology,” added Nelson. “We’ve also watched and listened to how innovative clinical labs use Lean and similar process improvement techniques to improve turnaround time, quality, and productivity.
“Our needs were clear,” she continued. “For example, the budget for supplies and reagents was in excess of 14% of the total laboratory total budget. That made it an obvious place to look for savings,” declared Nelson. “Further, based on the experience of our 2005 lab automation project, we knew there was the opportunity to combine new lab automation with new work flow redesign to achieve improvements in lab test turnaround time, improved quality, and better staff productivity.
Developing a Wish List
“We believed that our new laboratory automation solution could help us do better,” she continued. “Included on our wish list were: 1) faster and greater throughput, particularly during peak periods; 2) decreased turnaround times (TAT) for testing cardiac markers; and, 3) an expanded menu of tests performed in the automated laboratory.
“It was also important that this new lab automation support auto-calibration and enable further consolidation of testing,” said Nelson. “For example, a second centrifuge would help us to increase through- put, especially if the first centrifuge went down for maintenance or repair.
“The ability to connect additional instruments to the automated line was important,” she added. “After we got our Streamlab in 2005, we acquired a Centaur system to allow us to perform a hepatitis panel. This couldn’t be connected to the automated line, so we have always operated it as a stand-alone unit.
“It would also be advantageous to put coagulation on our new automated line— something we had not done in 2005,” she added. “Auto-calibration was another important feature. Currently, when we get a new reagent order, an extra med tech must handle the calibration.
Buy-In from Lab Staff
“To ensure staff buy-in, we created a selection committee made up of our lab staff,” stated Nelson. “The team and the vendors were given a defined list of rules for how communication was to occur throughout the process.
“Another clever twist was that we put our wish list into a grid in order of priority,” added Nelson. “This made it always easy for staff and vendors to see which components were most important, such as calibration or a second centrifuge. Each component or capability was assigned a weight.
“At the end of each phase, the grid gave us a point score for each vendor,” she recalled. “That grid showed which vendors were likely to move to the next round and which vendors would not.
“On this priority grid, although the selection team had a number of priorities, my prime directive was savings,” emphasized Nelson. “And don’t forget, my senior administrator insisted on realizing those savings immediately upon implementation of the new automation and laboratory workflow.
“These directives helped everyone— including the vendors—work to develop a solution that produced significant cost savings from the first day that the new automation solution went live,” she explained.
“Once the specifications were completed, we discussed six prospective vendors,” said Nelson. “The team quickly narrowed that number to four. This happened at the first team meeting. At that time, when everyone brought their scores together, it was clear that these four of the six vendors under consideration were the strongest matches for our defined list of goals and needs.
“The selection committee was then told to pare that number down to two vendors,” recalled Nelson. “The team could nominate a favorite, but our goal was to have two vendors go into the final phase of the RFP process. Obviously, with two vendors competing for our business, we expected to have improved leverage during negotiations.
“Here is where the time squeeze came into play,” she noted. “It was January when we had our two finalist vendors and our goal was to have the new laboratory automation line in full operation by May,” she continued. “The final two vendors had to give us confidence they could meet this deadline. Had each vendor ever done a job of this magnitude before? Had they ever replaced an entire system before? How quickly did they do it? What problems did they encounter?
“At this stage, the two proposals varied in terms of the financial options and potential hidden costs,” Nelson said. “For many years, our lab has preferred the reagent rental approach. Thus, our contract options were to continue with reagent rental, rent to own, or get a lease.
“We asked the hospital legal staff and the purchasing department to review all the various aspects of leasing. I had the vendors present all the options so that I could show the numbers to the administration. We considered whether to do a capital purchase, a direct lease, a bundled lease, or a rent-to-lease approach.
Identifying Hidden Costs
“With any purchase like this, labs need to be aware of any potential hidden costs associated with the acquisition, installation, and use of new laboratory equipment,” she noted. “Examples are construction or remodeling costs, the need to relocate utilities, and add-on charges for freight services
“Each different proposed configuration has unique hidden costs,” she continued. “Do we need all the pieces, such as the decapper, the resealer, the alliquoter, and the storage components? Could we connect any pieces that we have now? If we pulled a component out of one proposal, what would it look like if the other company pulled it out too?
“Another hidden cost can be in the interfaces required for the lab information system (LIS),” Nelson said. “Invariably the allotments for interfaces are not at all what interfaces cost. The vendors will say the interfaces cost $10,000, but often your LIS vendor will say it is double that number.
“Get quotes on the necessary interfaces before the contracts are written,” she noted. “Then negotiate that number so that it reflects the actual costs. Be sure to also include implementation team requirements and upgrades in the contract.
“Because we knew the laboratory staff would need training, we looked at the training schedule before we made our final decision,” explained Nelson. “We also allocated hours to the FTE budget and added time for installation and instrument validation. Then, we calculated the savings based on having each vendor meet our timeline.
“In the end, our lab selected a Dimension Vista system by Siemens,” Nelson said. “That meant we were choosing to stay with our incumbent vendor.
“When the decision was made, I credited the staff for a job well done and then we met for a final time with both vendors,” she concluded. “The winning vendor wants to know the reasons behind your lab’s decision—just as the vendor that wasn’t selected wants to know. Make the effort to maintain good relationships, since many things can change between now and when your lab is once again ready to purchase new equipment.
“Because we insisted on getting savings during the implementation year, some savings began as soon as the contract was signed,” she stated. “For example, the new contract had lower rates for the reagents used by some of the equipment our lab kept.
“The new laboratory automation system was installed in May, 2010,” Nelson observed. “We immediately began to measure the ways in which this new lab automation solution and workflow configuration were meeting our standards for success.
“We wanted to know if the staff and management expectations had been realized and when?” asked Nelson. “Did unexpected costs arise? Are the indicators moving in right direction? Was the support everything we expected? At year-end, and after one year, we will monitor our cost savings and watch for opportunities for additional in-house testing, particularly as we expand our in-house menu of tests.”
Nelson reported that the new lab automation system was not fully installed and connected until September 2010. “Some savings started this spring, based on new prices of reagents that went into effect at that time,” she said. “For a multitude of reasons, complete installation and operation of our new automated line took longer than planned.
“Despite this delay, we still realized savings and we anticipate saving about 20% in fiscal 2011, which began October 1,” noted Nelson. “It looks like our costs will be near 20% lower in 2011 versus 2009-10 and our turnaround time has improved dramatically as well. So, everything that we anticipated is occurring and then some.”
Because of careful planning and consistent execution, the laboratory at Ingalls Memorial Hospital expects to harvest annual savings in the range of 20% from its second-generation laboratory automation project. This demonstrates how other well-managed hospital and health system laboratories can also realize significant cost savings and quality improvement when they retire aging automation equipment and install next-generation automation solutions.
Moreover, the successful automation project at the Ingalls laboratory reinforces the importance of the continuous improvement mindset in the operation and management of clinical laboratories and pathology groups. A key element in the success of this new automation project was the use of Lean, Six Sigma, and simi- lar process improvement methods. These techniques do make major and ongoing contributions to a lab’s success.
Laboratory Staff and Lab Director at Ingalls Defined Success Criteria for New Automation
BEFORE ISSUING A REQUEST FOR PROPOSAL (RFP) for a next generation laboratory automation system, Lab Director Marilyn Nelson of Ingalls Memorial Hospital, involved the laboratory staff in defining the criteria for a successful new laboratory automation project. The staff’s input was combined with management’s requirements and used to prepare the RFP that was then distributed to interested automation vendors.
Criteria Identified by Lab Staff
- Minimal/ease of maintenance
- Adequate menu/open system
- No reagent prep
- Load/unload reagents at will
- Small sample volume
- Infrequent and easy calibration
- Handles multiple tube sizes
- Ease of troubleshooting
- Auto repeat and dilutions
- Minimal downtime
- In-house training
- Onboard sample integrity checking
- Plasma required for most tests
- Add on tests while running
Lab Management’s Objectives
- Achieve annual cost savings in excess of 10%
- Connect coagulation to automation line
- Solution must include family care center labs and core laboratory
- No hidden costs
- No LIS issues or information system issues
- Vendor must meet timeline
- Broader menu, faster throughput
- Auto calibration and controls
- Consolidation opportunities
- Seasoned implementation team
Laboratory Team at Ingalls Took Steps to Tap Vendors’ Expertise in Workflow Consulting
NOW THAT THE LABORATORY at Ingalls Memorial Hospital has installed a second-generation automated line, the laboratory has twice benefited from tapping the workflow consulting expertise provided by its lab automation vendor.
“When we installed our first laboratory automation system five years ago, we found that most vendors provide a work-flow report,” said Marilyn Nelson, Director of Laboratory & Cardiac Services at Ingalls Memorial Hospital, in Harvey, Illinois. “This workflow report can be extremely valuable.
“As part of their agreement, each participating vendor studies your lab’s workflow and prepares a report,” she explained. “It’s free consulting that tells me what’s going on in my lab through the eyes of an objective observer. Included are time studies and interviews with each staff member. The vendor’s consultant will gather information from phlebotomists, medical technologists, processing staff, and others involved in various work processes in the lab.
“Whenever they identify a problem— even without considering the changes you’ll make to accommodate a new system,” noted Nelson, “you have an opportunity to ask several important questions. Why is the staff following these procedures? How did we fall into these bad habits?
“This is useful information because it identifies opportunities for improvements at multiple points,” she noted. “These workflow improvement suggestions allow you to communicate solutions to the laboratory staff that might have otherwise gone unrecognized or unaddressed.
“Moreover, because these workflow improvement recommendations were identified by the outside experts provided by the vendors, the laboratory staff is more open to this input,” concluded Nelson. “That also helps make it easier for staff to then take the steps necessary to fix work-flow problems.”