CEO SUMMARY: Expect the Internet to be a tool for leveling the competitive playing field. Ten rural hospital labs in New Hampshire are now connecting their labs and their outreach physician office clients with a Web-based lab test ordering and results reporting system. The goal is to increase shared testing of lab work among members, consolidate lab test reporting, and establish electronic links with outreach clients.
RURAL HOSPITAL LABS don’t intend to miss the Internet gold rush. In New Hampshire, a ten-hospital lab consortium is preparing to install Web-based lab test ordering and results reporting into its first sites.
Known as the Clinical Laboratory Alliance (CLA) of the New Hampshire Rural Health Coalition (NHRHC), its membership is limited to rural hospitals of less than 100 beds.
“Our group is on the brink of a major breakthrough,” stated Robert Ryan, Laboratory Director at Speare Memorial Hospital in Plymouth, New Hampshire. “Just a few months ago, we succeeded in getting our hospital administrators to understand the economics of our proposals and decide to support our efforts.
“Once we obtained the commitment of our administrators,” he added, “we began making speedy progress on several business objectives, including using the Internet to connect our laboratories.”
Ryan says the laboratory alliance has three main goals. “First and foremost, we want to drive down our cost per reportable,” he noted. “Since rural hospital labs don’t have the specimen volumes found in larger hospital labs, we knew that we had to work together to achieve this goal.
“Second, we are doing test bidding among ourselves,” Ryan continued. “It makes sense to maximize the amount of testing which stays in our region.
“Third, we want to link our laboratories electronically,” he said. “This allows us to share many resources, develop a consolidated laboratory test report, and provide the information system platform to electronically link our member laboratories with their physician outreach clients.”
Those are ambitious goals for any urban regional laboratory network, but Ryan believes the CLA is up to the challenge. “Over the years, our lab directors have regularly met to explore ways of working together. As the trust between us increased, these meetings led to several shared lab projects,” he explained.
“For example, we organized a shared courier service between our hospitals and labs,” explained Ryan. “We’ve already established the foundation for laboratory standardization by standardizing some of our instruments under a contract with Beckman Coulter.
“We showed our hospital administrators how these initiatives saved money,” he said. “We provided them with our business plan projections for the CLA. Once they understood the numbers and realized that enhanced lab services would benefit each hospital and its patients, the administrators gave us their blessing and support.”
Ryan says having the support of the administrators makes a big difference. “In earlier years, we made proposals to our hospitals in a somewhat piecemeal fashion,” he explained. “This time, we presented them with a comprehensive business plan. It laid out all our objectives, the money and resources required, and the type of benefits that would result.
Selection Of Reference Lab
“Our business plan was helped by the fact that we had already gone through an RFP process for a reference laboratory partner to CLA,” added Ryan. “The reference lab partner we selected is providing a variety of support services to CLA. It also helped us develop a convincing business plan that administrators felt confident in approving.”
One CLA business strategy is to use the business expertise of its reference laboratory partner. “Since our hospitals are all less than 100 beds, we have limited capital and management resources to devote to this lab network,” stated Ryan. “Thus, we needed to tap every available source of management know-how and help available to us.
“In particular, CLA doesn’t have much money available to fund CPU-to-CPU links between our ten hospital labs, let alone establish direct electronic links with each lab’s outreach physician office clients,” continued Ryan. “Most laboratorians know that anything involving LIS software is expensive and time-consuming.
New Internet Technology
“However, new Internet technology changes this economic equation,” he noted. “We recognized that a Web-based connection between our hospitals and doctors’ offices was the most cost-effective and feasible way for us to achieve this goal.
“That was one reason that we decided to select Specialty Laboratories of Santa Monica as our reference laboratory partner,” explained Ryan. “We liked their Web- based information system, which is called DataPassportMD™.
“We also liked how Specialty was willing to accommodate our particular business needs as a laboratory network,” he added. “After all, our ten hospitals are pretty far apart and there’s a lot of empty country here in upstate New Hampshire. We estimate a total population in our service area of about 350,000 people. Moreover, population growth is slow, averaging 1% to 3% per year.”
CLA’s first Web-based CPU is being installed at Lakes Region General Hospital in Laconia. “We are in the midst of competitive bidding among ourselves,” said Ryan. “Lakes will be one of the facilities taking in testing from CLA. It will act as the server site for CLA’s test dictionary and results.
Web-based Links To Labs
“Once our Web-based system is installed at Lakes, the other CLA sites can implement the Web-based software provided by Specialty and begin connecting it to other CLA hospital labs and their own outreach clients.”
One interesting aspect to CLA’s lab network is that AmeriNet will act as the messenger in evaluating the bids and offers for testing done among CLA members. “We were pleasantly surprised that AmeriNet was willing to provide this service for our labs,” mused Ryan. “They have solid experience with this function and we consider it another plus for our business plan.”
CLA will not initially incorporate as a limited liability corporation (LLC). “NHRHC is the umbrella business organization,” explained Ryan. “For six years, the various hospital members of NHRHC conducted business through this entity. So it will be our parent.
“CLA’s governing body is a steering committee made up of all ten member hospital labs,” he added. “Because we’ve been meeting for such a long time, there is trust and mutual respect among this group of charter members to CLA. But we are feeling our way. The lab network does require us to give up some independence and control, and we certainly don’t know what to expect when we admit new lab members.”
Prospective New Members
Ryan disclosed that news of the rapid progress at CLA has already caught the interest of other rural hospital labs. “Although many aspects of our lab network are in an embryonic stage, once we solidified our business plan and got the support of our hospital administrators, it caused other rural hospital labs to sit up and notice,” he said.
“Since December, we’ve had one hospital lab ask to join the network,” continued Ryan. “There’s another hospital lab that’s expressed interest. As we get our service infrastructure installed, we expect that several other hospital labs in this region will want to become part of CLA.”
One specific goal of CLA is to develop the outreach testing done by its member hospital labs. “Each of our ten members has an existing outreach program,” stated Ryan. “CLA intends to create a uniform laboratory ‘brand’ for our members.
Sales And Marketing
“CLA will provide literature and a common test catalog. We also intend to hire a sales and marketing rep, a first for this rural area, who will travel throughout our service region and develop outreach business for our CLA hospital labs,” he explained. “Building outreach business for our members is a major goal for CLA.”
Clinical Laboratory Alliance represents a good example of how rural hospitals laboratories can use the regional laboratory network business model to pursue aggressive goals.
Despite their somewhat remote location in the northern part of New Hampshire, these ten hospital laboratories have built the trust, and the business foundation, to pursue the market opportunities.
CLA’s first initiative is to create the information system linkages. These will give it the capability to provide more sophisticated information services between its member labs, as well as its outreach clients. CLA accurately perceives that lab information will be its added-value competitive advantage in the marketplace.
CLA’s business priorities demonstrate how the Internet makes it economical for all sizes of laboratories to offer competitive services…
The relatively inexpensive costs associated with installing and operating thin client/Web-browser based lab links make it affordable for CLA, as a regional lab network, to actually implement this as a first priority.
THE DARK REPORT observes that CLA’s business priorities demonstrate how the Internet makes it economical for all sizes of laboratories to offer competitive services in the healthcare marketplace.
Of equal importance, CLA also demonstrates that rural hospitals can profit from opportunities in their service area, if they will band together and combine resources.