CEO SUMMARY: By now, most pathologists and clinical laboratory administrators recognize that effective use of information technology will be a critical success factor as healthcare systems transform to do population health management and to use “big data” with value-based payment models. As the provider of laboratory information systems to hundreds of the nation’s major hospitals, health systems, and academic systems, Sunquest Information Systems is engaged with its clients to add functionality in support of these goals. Editors Robert Michel and Joseph Burns conducted an interview with Sunquest President Matthew Hawkins to learn more about what market trends are driving lab test services, how hospitals are leveraging lab test data, and how labs can prepare for the coming market transformation.
AS PART OF HEALTHCARE’S ONGOING TRANSFORMATION, clinical laboratories and anatomic pathology groups will need to become more sophisticated in their use of information technology. Supporting interconnectivity with hospitals, physicians, and payers is just the starting point. Labs will have greater roles in helping clinicians improve patient outcomes.
To provide perspective on the informatics trends in healthcare and the clinical laboratory and pathology markets, THE DARK REPORT spoke with Matt Hawkins, President of Sunquest Information Systems, based in Tucson, Arizona. Sunquest sells laboratory information systems (LIS) and related informatics services. Hundreds of clinical labs, hospitals, health systems, and anatomic pathology groups use these systems.
EDITOR: Matt, thank you for taking the time to discuss these issues with us. Let’s start with what you see as the most significant trends unfolding in the healthcare system today?
HAWKING: Three macrotrends are driving change and having the biggest impact. The first macrotrend is the tremendous amount of market consolidation taking place among hospitals and health systems. The second is the need to offer patient-centric care. The third trend is the shift away from fee-for- service in favor of value-based and budgeted payment arrangements.
EDITOR: Would you explain trend one, the consolidation of hospitals and health systems. Why is this consolidation happening now?
HAWKINS: We see three factors motivating hospitals to consolidate. One is to achieve larger scale that enables these hospitals to have more leverage when they negotiate with payers. The second is to add the resources needed to provide more clinical services for their patients. The third is to improve geographical coverage to better serve the outpatient market, which is growing more than twice as fast as the inpatient market.
EDITOR: Would you speak to the second macrotrend, that of patient-centric services?
HAWKINS: Hospitals and health systems are taking steps to get closer to patients. For example, consolidation of hospitals helps to achieve this goal within the community or the metropolitan area they serve. This consolidation is consistent with the progress hospitals and physicians are making to create integrated clinical delivery systems that are specifically designed to deliver patient-centric care.
EDITOR: Would you discuss patient-centered care in more detail?
HAWKINS: The message is getting through to hospitals, physicians, insurers, and others that the patient—the consumer—will be front-and-center in tomorrow’s healthcare system. To prosper in this environment, health systems must learn from the banking, retail, and travel industries, for example, to identify patients’ expectations and then to meet and exceed those expectations with higher quality, improved timeliness, and lower costs.
EDITOR: How is Sunquest responding to this patient-centric trend in healthcare?
HAWKINS: Sunquest believes that consumerism will influence the way clinical care is provided in the future as patients become more and more responsible to directly pay their providers, including medical laboratories. The trend is definitely to require patients to have higher deductibles and to take a more active role in their healthcare.
EDITOR: What do you see happening with the third macrotrend?
HAWKINS: This trend is related to the shift to value-based care. Your readers are aware that the transition from fee-for-service reimbursement to value-based and budgeted payments is accelerating. That requires every clinical service—including the clinical lab—in every health system to adopt a razor-sharp focus on cost reduc- tion and quality improvement.
EDITOR: Could you add some detail to this, please? As this macro trend involving the transition to budgeted payments plays out, what do you see providers doing differently in response?
HAWKINS: Hospitals and health systems are recognizing that there are significant direct costs that can be reduced. Indirect costs are also getting scrutiny.
EDITOR: This makes sense. If a hospital is getting paid a fixed sum for patient care, similar to a Medicare DRG, then everything becomes a cost.
—Matthew Hawkins
HAWKINS: Yes. Most of our hospital customers are already devoting more resources to identifying unnecessary costs, then working to reduce or eliminate those costs. Don’t overlook the fact that, to succeed in providing value-based care, the provider must add services in support of population health management. Both smart cost-cutting and population health management require sophisticated data collection and information systems to optimize care delivery. That is why providers are spending more in information technology, which is essential to support these activities.
EDITOR: Obviously these three healthcare macrotrends are critically important trends to clinical laboratories. What are the drivers and primary trends changing today’s market for clinical labs and pathology practices?
HAWKINS: In the clinical lab market- place, consolidation is ongoing. In the independent lab sector, there continues to be plenty of buyers for any lab company that comes up for sale. As hospitals consolidate, they will take the obvious steps to consolidate lab test services, then use that critical mass to boost their outreach lab programs.
EDITOR: What other market forces are reshaping the clinical lab marketplace?
HAWKINS: What doesn’t get much attention, but is a powerful trend is the much faster growth of the outpatient service market. Revenue from inpatient admissions is shrinking. Thus, as healthcare systems buy more hospitals, clinics, and primary care practices, they put more attention into serving patients in outpatient and ambulatory settings.
EDITOR: That is an interesting answer. Would you explain in more detail?
HAWKINS: The statistics tell a compelling story. Since 2007, there’s been a cumulative 33% increase in outpatient procedures even as inpatient procedures declined by a cumulative 17%! What this means for hos- pital-based clinical labs and pathology practices is that they need to reach outside the hospital setting and into the community to build volume and market share.
EDITOR: What are your lab customers doing to improve their outreach programs?
HAWKINS: One need is for them to bring their basic customer service levels up to a level that equals how the national labs serve office-based physicians. For example, we see more hospital lab outreach programs improving specimen collection and tracking of those specimens to ensure accuracy and to prevent errors.
EDITOR: This reflects the reality of where most lab errors originate, correct?
HAWKINS: Yes. Decades of clinical studies demonstrate that labs are excellent at the analytical stage. It is in the pre- and post-analytical activities where most errors affecting lab tests occur. Therefore, labs need to ensure order accuracy on the inbound side. Then, on the post-analytic side, they need to ensure the physicians are interpreting the results they send them correctly.
EDITOR: How is this changing clinical lab operations?
HAWKINS: In the post-analytical stage, we see labs investing in informatics tools that make it easier for physicians to understand the test results. This often includes creating capabilities that allow lab professionals and pathologists to regularly interact and consult with providers to ensure that all ordering physicians understand the test results labs sent to them.
EDITOR: What other trends in the marketplace are affecting clinical labs and pathology groups?
HAWKINS: One big factor is that our lab clients now see increased competition from lower-cost patient service centers and labs that do testing at very low rates. Theranos is a well-known example. This lab company entered Arizona and offers very low prices for lab testing. Who knows if those low rates are sustainable or if Theranos will be successful outside of Arizona? What is true is that Theranos has stirred up more interest among consumers for low-cost testing—particularly if they have no health insurance or high deductible health plans.
EDITOR: If you see falling lab test prices as a trend, do you also see cost-cutting in labs as a trend?
HAWKINS: Yes, that is definitely true. Many of our client labs now put greater emphasis on finding ways to lower costs of basic and complex tests as much as possible. They do this while at the same time making changes designed to improve the patient care experience.
EDITOR: Can you provide examples?
HAWKINS: To improve the patient care experience, labs are moving to faster turnaround times for reporting results. Another strategy is to upgrade patient portals so that patients can access their lab test results in an easy-to-understand dashboard or report.
EDITOR: As a trend, how do you see the trend of steady growth in the use of molecular diagnostics and genetic testing playing out for clinical labs and pathology groups?
HAWKINS: That question strikes to the heart of a bigger trend we see unfolding in the lab testing marketplace. Yes, increased genetic testing is happening. However, this trend is interwoven with healthcare’s ongoing movement toward personalized medicine and precision medicine. Using genetic tests in support of precision medicine is having a profound impact on how the nation’s most innovative laboratories think about how they can add value to their parent hospitals, physicians, and payers.
EDITOR: By that, are you saying that you already see some clinical laboratories, in order to deliver more value to physicians and payers, moving to a new model of care delivery?
HAWKINS: Yes, absolutely! That’s a very important issue to address today. Labs must become proficient at collect- ing lab test data, storing it, and analyzing in ways that contribute to improved patient outcomes and patient safety.
EDITOR: This is also consistent with the trend toward the patient-centric delivery of healthcare, right?
HAWKINS: You are correct and we also find that one of the most important variables in the delivery of care for any patient is time. By that I mean, how much time is required for an integrated health system to either prevent disease or to cure disease. So if you want to take costs out of the healthcare delivery process, we believe that more care coordination will be accompanied by faster diagnoses of patients. That is consistent with the goal of preventing illness.
EDITOR: Taken together, your comments are that the successful lab of the future will deliver fast and accurate lab test results, offer an appropriate menu of genetic tests, and have the informatics capabilities to analyze large amounts of data in support of both population health management and precision medicine.
HAWKINS: That captures much of what we see in the healthcare marketplace today.
EDITOR: Then this is a good place to shift our conversation away from the trends you are tracking with the healthcare system and the clinical laboratory marketplace. Instead, let’s talk about what your most innovative LIS customers are doing to be ahead of these trends. Can you explain how your LIS clients are building the infrastructure for value-based care and population health? By that, I mean, what is the role of the clinical lab in fostering these trends?
HAWKINS: When you think about the role of the lab, much of the critically important clinical information that ends up in a patient’s health record comes directly from the lab. So, as large health systems think about how to care for populations of patients, they are starting to see the value of that information.
EDITOR: Do you have examples of health systems moving down this path?
HAWKINS: The University of Pittsburgh Medical Center and the Henry Ford Health System (in Detroit) are two examples of innovative health systems that are using diagnostic laboratory information to serve their patients. Partners Healthcare (in Boston) and Carolinas HealthCare System (in Charlotte) are two other examples of health systems that have been innovative in connecting physician offices to lab test data. Both health systems asked us for information systems that will help them manage populations of patients.
EDITOR: What are the hurdles to achieving this?
HAWKINS: What these health systems want is a richer flow of data, which already exists in our LIS. Sunquest’s challenge, then, is to help our clients manage that tremendous volume of rich clinical, HIPAA-compliant data so it can be used to control costs, identify patients who need more intensive care, and to improve the quality of care. By bringing that together, our LIS can contribute enhanced value to our clients.
—Matthew Hawkins
EDITOR: Do you have examples of the innovations taking place at these health systems?
HAWKINS: It would not be appropriate to discuss what these individual health systems want from data. But I can tell you that, in general terms, they now use lab orders and test results to determine how to optimize care and how to reduce duplicate orders. Thus, they have a common goal of optimizing the ordering of tests.
EDITOR: Do you see these health systems working to improve utilization of lab tests?
HAWKINS: Yes, and this is just the first goal with lab testing that the systems are pursuing. As you know, there is much over-use of lab tests and significant under-use of tests. One job we have is helping our LIS clients to eliminate both over-use and under-use by getting to optimal use. In addition, they want laboratory information systems and companies like Sunquest to collect and store all that data in a way that is useful for identifying methods to improve care going forward, not just for today.
EDITOR: Is this so the health systems can add richer sets of lab test data to contribute to their “big data” efforts?
HAWKINS: Yes, but don’t overlook the practical use of data from the lab that can help the parent hospital improve through- put in the emergency department. We also see hospitals using lab test data to assess what is happening in the primary care clinics that they own. The health systems want to know if physicians are following up on their patients appropriately and if the primary care clinics are moving patients efficiently.
EDITOR: So there is a dual use of lab test data. One use is to improve patient flow. The other use is to better support physicians at selecting the right test for the right patient at the right time.
HAWKINS: Better utilization of lab tests is especially true for diagnoses for high-risk patients in certain disease states. Our clients are asking for more detailed information from the lab about specific disease states.
EDITOR: Do you have examples?
HAWKINS: I’ve seen that, once one of these innovative health systems begins feeding a richer stream of lab test data into their EHRs, there is more focus on ensuring that appropriate follow-up actually happens. Health systems want to know that any treatment that was prescribed was appropriate based on the lab test results, or that the lab results were used to correctly diagnose the patient’s condition.
EDITOR: Is it becoming more common to see the parent hospital electronically match diagnoses, like ICD-10 codes, with the lab test results that would be appropriate for patients, then alert physicians to gaps in the care of patients?
HAWKINS: That is happening, yes. In other words, if a patient has diabetes, the health system wants to know that there are hemoglobin A1C test results in the EHR and that the doctor is taking appropriate steps to manage that patient’s care.
EDITOR: Is this evidence that more health systems are getting “data savvy” in how they assemble clinical information, including lab test results, then analyze it to identify the best ways to help physicians improve patient care?
HAWKINS:Yes, that’s exactly right! This is a significant development relative to the macrotrend we discussed earlier about how a growing number of institutions want a richer flow of data from the lab back to the health system’s information system. This makes it possible for the health system to drive population health initiatives while also helping physicians identify the most appropriate lab tests required to support the practice of precision medicine.
EDITOR: Matt, to close this interview, what recommendations would you make to lab executives and pathologists who want to keep their labs in the forefront of clinical care going forward?
HAWKINS: I have two key suggestions. First, leverage data to quantify not just the cost of laboratory operations, but also the reimbursement and revenue that laboratory services contribute. The ability to quantify value will help laboratory executives have a much different conversation with their leadership teams with regards to investments for the laboratory. Second, closely align laboratory strategies with the broader organization’s strategic priorities. With approximately 80% of physicians’ diagnoses resulting from lab tests, every laboratory can uniquely impact priorities associated with care quality and population health.
Contact Stephanie Clohessy at 520-570-2599 or Stephanie.Clohessy@sunquestinfo.com.
