CEO SUMMARY: Two processes are transforming healthcare: managed care and quality management. Laboratory information systems must incorporate radically new features if they are to support changes to clinical laboratory operations. This makes it imperative that laboratory executives select an effective laboratory information system.
PARALLEL DEVELOPMENTS in the healthcare marketplace are shaping the design and function of laboratory information system (LIS) software. Radical changes to existing LIS programs will become obvious in the next generation of product releases.
Such radical changes are driven by two dominant influences. First, healthcare providers are quickly integrating clinical pathways. For laboratories, this increases the need to move both raw data and processed information from the laboratory to physicians, hospitals and other treatment centers within the integrated healthcare system or network.
Second, new technology inside the laboratory will require LIS to drive laboratory operations in totally unique ways. LIS will become an essential management tool for laboratory operations.
“These two trends raise the stakes for making the right LIS decision,” said Randall Spratt. “By choosing the correct LIS, you position your laboratory to provide ‘added value’.” This is because your LIS becomes the primary tool for continuous re-engineering in response to marketplace changes.”
Spratt has unique insight into the future of laboratory information systems. He is Vice President of Product Planning and Development for Advanced Laboratory Group (ALG), a division of HBO & Co. In this role, he is responsible for identifying specific product features that must go into future versions of LIS. He then develops the actual software product to provide such features.
“These two trends raise the stakes for making the right LIS decision,” said Randall Spratt. “By choosing the correct LIS, you position your laboratory to provide ‘added value’.”
“We must anticipate all changes to laboratory instruments, lab technology and the management organization of the laboratory,” he continued. “That’s not all. As we design new software to meet the laboratory’s needs, we must incorporate a bewildering variety of new, and frequently unproven, computer hardware and software technologies.”
Spratt believes that the laboratory industry is about to undergo a major revolution in business thinking and management philosophy. “When we first began designing laboratory information systems ten years ago, we considered clinical laboratories and factories to be virtually identical in purpose and process. We designed laboratory software from that perspective.
“We always believed that any laboratory which applied manufacturing process control features to clinical laboratory operations had a competitive advantage,” explained Spratt. “However, only in the last two or three years do we find an increasing number of laboratory directors sharing that view.”
Shift In Thinking
“This is an important shift in thinking. It means that economic and service pressures are forcing laboratory directors to look outside the clinical laboratory industry to find proven techniques which can lead to lower costs, improved quality and better laboratory services.
“Because industry has already demonstrated the power of manufacturing process control techniques to lower costs and improve quality,” stated Spratt, “it is inevitable that clinical laboratories will adopt those techniques. I predict that process controls will be an essential feature of all future LIS software.”
Along with process controls, future versions of LIS software must support integration of clinical data. “Clinical laboratories must recognize that integrated healthcare systems will be organized around full clinical integration. In that environment, the only financially successful laboratories will be those which can effectively contribute to sophisticated clinical integration.
“Although we see full clinical integration as the end game,” noted Spratt, “there are still three distinct healthcare models which exist today, and to which laboratories must provide services. Each model imposes different requirements on the laboratory serving that model. Accordingly, LIS needs for each model must have different capabilities.
“The first model is the community-wide managed care plan,” he explained. “This is generally an independent insurance plan which contracts for healthcare services across the community. It covers a sizable number of lives and plays a dominant role in that regional market. The various Blue Cross plans provide good examples of this model. Such plans are usually served by larger independent commercial laboratories such as Quest Diagnostics or Laboratory Corp. of America.
“In this model, competition among the clinical laboratories is mostly based on price. Geographical service coverage is an issue, but the insurance plan is primarily seeking the lowest price for laboratory services.
“The second model is the acute care organization,” Spratt said. “This model evolves from those integrated health systems organized by hospitals. There are two forms of this model. One form is comprised of the ‘cradle to grave’ system. This is a vertically integrated organization and all providers are generally owned by the system.
“The other form is horizontal. The hospital is acquiring other hospitals, but does not necessarily acquire and own other types of healthcare providers.
“Whichever form the integrated system takes,” noted Spratt, “laboratories within the system compete internally. There is the need to integrate data flows between the laboratory sites inside the system and laboratory functions are commonly organized around a ‘centers of excellence’ model.
“It is important to recognize that the first priority for laboratories within integrated systems is not to add value, but to reduce excess costs. At this stage in the laboratory’s evolution it is an ‘order filler.’ The strategic flow of information is still unappreciated within the integrated organization.
“The third laboratory model is that of the independent clinical laboratory. Such a laboratory serves a variety of medical service organizations,” Spratt remarked. “They can range from large laboratory chains such as Quest to local independent laboratories. Within this model, competition is primarily based on price and services provided to the physician clients.”
“We believe that laboratory information is the key to ‘value added’ for laboratories. In the three current marketplace models given above, there is a common evolution toward clinical integration. This clinical integration requires laboratories to pass data throughout the system.
“How important is the laboratory data?” asked Spratt. “You may be surprised to know that a Texas study in the late 1980s looked at the data collected by integrated delivery systems. It determined that, including a patient’s financial information, laboratory data was 60% to 70% of the total patient file!
“Further, physicians perceive laboratory data to be as much as 80% of the value in a patient’s clinical file,” he continued. “For example, diagnostic procedures such as ultra sounds and X-rays may only have value prior to, or immediately after, a (surgical) procedure. But even older laboratory test results probably have ongoing clinical value because they document the patient’s response over time to different disease states and therapies.”
What Spratt points out is a fact overlooked by laboratory directors. Compared to other forms of clinical data, laboratory test results have a long term value which exceeds most other clinical information. This is precisely the “value added” component which Spratt wants his next generation of LIS software to deliver.
“Market leadership will go to the health system which can move toward a strategic use of clinical data,” he predicts. “Only a limited number of reflexive testing pathways, such as hepatitis, are well explored and clinically accepted. In the integrated system of the future, it will be essential to answer the question ‘is it reasonable to order a test where you statistically do not know if it improves the clinical outcome?’
“Clinical studies will be used to identify the efficacy of both treatment pathways and laboratory tests. This is how the use of clinical information leads to added value and a competitive edge. I believe laboratories would be well advised to develop expertise and capability in that area now. Since ‘state of the art’ has not yet been defined, laboratories have an opportunity to develop a competitive edge.
“We also believe that the analysis and process of using this laboratory data will take place independent of the process of collecting and testing the specimens. For that reason, LIS software must easily integrate with the information system of the healthcare organization it serves.”
Having outlined the essential market forces driving the integration of clinical data, Spratt turned to the next major revolution in laboratory information systems: process controls. “There is a dichotomy in our view of the laboratory as factory. Two parallel trends shape how process control technology should be used in the laboratory.
“New instruments, automated transport lines, robotics and modular workstation systems are hitting the laboratory marketplace daily,” noted Spratt. “Increasingly these instruments and supporting components have data ports which increase the amount of information which can be passed to a laboratory information system.
“These data ports allow the instruments and equipment to report not just test results, but the operating condition of the equipment itself. Think of it like the self-diagnosing capability of car engines. Auto mechanics now plug a diagnostic computer into the engine’s data port. Instantly the computer verifies the status of all operating systems in the engine, whether functioning or not.”
“Yet, even as the actual testing takes place outside the traditional walls of the central laboratory, there is a continuing need to collect, integrate and report laboratory data…”
“All new generations of laboratory instruments will have the same capability. They will be able to tell a master computer program about their operational status. Is the instrument functioning? Is it calibrated and operating within expected ranges? Is any part of the instrument malfunctioning?
“It is this flow of operational information which enables the LIS to apply process control techniques to the flow of specimens through the laboratory.”
The concept of the centralized laboratory is integral to Spratt’s analysis of how LIS will incorporate process control functions with its traditional role of data collection and reporting. But Spratt also recognizes early signs of laboratory decentralization.
“Look at what alternative laboratory testing technology promises to offer the clinician: point-of-care, near-patient testing, even home test kits. Each is a technology which moves testing outside the central laboratory. Yet, as actual testing takes place outside the traditional walls of the central laboratory, there is a continuing need to collect, integrate and report laboratory test data to all locations within the healthcare system.
“That is why we are designing new capabilities into our next generation of software. The LIS must handle both process control tasks and data integration. For process control, LIS vendors will work with laboratories to develop ‘rule systems’ or ‘expert systems’ which are much more sophisticated that what is currently available.
“Existing software makes basic calculations and alerts the medical technologist for action. Future LIS software will permit more sophisticated action items,” he explained. “Where existing LIS now says either yes or no to the result, future LIS systems will automatically identify specimens which require a retest, locate and transport that specimen to the proper instrument, perform the retest and take appropriate steps to achieve a reportable result. Humans will probably only be asked to authorize the final results of any retested specimen.
“Such sophisticated interaction comes with a consequence. When LIS software begins making “decisions,” it crosses the line between a library system and a medical device. Now the Food and Drug Administration wants to scrutinize the function and impact of such capabilities. When the trend is for LIS not to simply report an achieved result, but to also provide interpretation, the line blurs and new regulatory requirements may result.
“Regulators will be a factor in the future development of LIS software,” stated Spratt. “The counterbalancing force comes from instrument vendors and manufacturers. This is market driven and centers around quality standards known as ISO-9000.”
Most readers of THE DARK REPORT are unfamiliar with ISO-9000. Because of international trade practices, ISO-9000 certification is becoming a requirement for manufacturers who want to sell their products throughout the world. Most large medical instrument manufacturers are already certified as meeting ISO-9000 standards. They will be introducing these management practices into clinical laboratories and other healthcare providers.
Spratt explained why ISO-9000 will influence LIS software. “We recognize that certified good manufacturing procedures, such as those described in ISO-9000, will be necessary preconditions to LIS software development to support each emerging generation of medical instruments, equipment and computers.”
“The inevitable convergence of medical software and medical devices into an interoperable, highly partitioned network dictates regulatory compliance at every level and with every component.”
Having described the dual trends of clinical information integration and process controls, Spratt predicted three basic differences between existing LIS software and the coming versions.
“First, there will be big changes to the product itself,” he said. “The interface engine of the LIS will become more sophisticated. It will permit an unparalleled degree of interaction between testing instruments, the data base repository and users of clinical data.
“Second, coming generations of LIS software will be partitionable. The software itself will follow point-of-care testing and near-patient testing to any site within the ‘virtual’ laboratory. It will achieve this through effective use of software components, or ‘applets.’ These are small application modules similar to the Java programs now used on the Internet.
“Third, LIS software will be organized to support quality management programs. It will permit management to reengineer laboratory processes on a continuous basis. It will support productivity improvement and cost-cutting initiatives. In this role, LIS will become an essential management tool.”
Spratt’s prediction that LIS will become an important management tool is probably his most significant. It means that successful laboratories must do two things. First, they must identify and acquire a truly effective laboratory information system. If the LIS is not effective, the laboratory’s ability to compete will be crippled.
Second, laboratory executives will need to develop knowledge and skill to use LIS as a management tool. Without such knowledge, the capabilities of the LIS to deliver lower costs, improved quality and enhanced service will remain untapped. Again, the laboratory will find itself to be at a competitive disadvantage.
Spratt articulates a precise vision of how coming generations of LIS software must support clinical laboratories. He acknowledges that the LIS industry still has many serious challenges to achieve future success. One area is software implementation.
“Anytime a clinical laboratory upgrades software or converts to a new software product, the cost of the conversion process equals or exceeds the cost of the software itself. Our goal is to develop an LIS software product which is easy to install, doesn’t create major disruptions, and where installation costs are significantly smaller than the cost of the software itself.”
Spratt correctly identifies the Achille’s heel of laboratory information system vendors. No company has a software product which is user friendly, meets customer expectations in all types of laboratory settings and is easy to install and operate. Any company which successfully designs such a product would dominate the market for LIS.
Because an LIS conversion or upgrade is probably the most painful activity that a laboratory can undergo, most knowledgeable observers are skeptical that such an LIS software product will hit the marketplace in the near future.
What is important about Spratt’s predictions is that laboratory executives have new insights to consider as they ponder whether to upgrade existing LIS or move to a new system. If just a small portion of what Spratt foresees were to become reality, the importance of LIS to laboratory success will increase.
This makes it critical that laboratory executives give LIS decisions greater attention than in the past. Wise decisions will bring competitive advantage.
ISO-9000 Standards Important To Industry
Even while managed care began transforming healthcare services in the United States during the late 1980s and early 1990s, the business world was undergoing its own revolution.
Inspired by Japanese success with robust manufacturing techniques, companies were learning how to create manufacturing systems that, by definition, could only fabricate products correctly. They were learning how to function with zero inventories, using Just-In-Time (JIT) techniques.
There was just one problem. If a company was working with zero inventories, how could they rely on a supplier to ship them parts which were free of defects and guaranteed to work properly? Any defective parts sent by a supplier would shut down a plant operating on zero inventories.
The answer was ISO-9000. These are standards administered by the International Standards Organization, based in Europe. When a company is certified to be in compliance with IS0-9000 standards, its products are acceptable to manufacturers throughout the world. Ideally, any ISO-9000 company can be trusted to deliver products of specified quality.
ISO-9000 certification is time-consuming and expensive. A small manufacturer may spend up to two years and $250,000 becoming certified. But that certification opens up worldwide markets that are closed to uncertified companies.
South Bend Med Foundation Installs Laboratory Automation
When Indiana’s largest laboratory completed installation of its automated laboratory project, it became the first operating site for Boehringer Mannheim Corporation’s automation product.
The system was installed last fall and became operational early this year. It is expected to be Boehringer’s “showcase” in the company’s efforts to sell additional installations.
South Bend Medical Center’s laboratory uses Boehringer’s system in the areas of chemistry, hematology, coagulation, immunochemistry and urinalysis testing.