CEO SUMMARY: As physicians gain personal familiarity with the Internet and its potential to enhance their medical practice, they logically begin to want their clinical laboratory to offer web-based solutions. Physicians are driving this impending marketplace shift away from proprietary PC computer ordering/reporting systems to web-based products. Only labs willing to respond will maintain their position in the market.
PHYSICIAN DEMAND will be the force driving the wholesale transformation of how tests are ordered and reported between commercial laboratories and physician offices.
It is why THE DARK REPORT predicts that only 24 months will be required to convert virtually all doctors’ offices away from existing proprietary lab test ordering/reporting systems. Expect web-based solutions to be the norm for the lab industry by December 31, 2001.
This unfolding trend will directly impact two classes of clinical laboratories: commercial laboratories and hospital laboratory outreach programs. These are the laboratories which serve physician offices.
Physicians Drive Transition
It is the assessment of THE DARK REPORT that physicians will drive the transition from PC workstations and teleprinters to web-based lab test ordering/ reporting. It is important for laboratory executives and pathologists to understand this fact.
Simply put, it is the customers of the laboratory who will force this change upon laboratories. The ramifications of these fact are equally simple. Labs which are too slow to respond to the higher expectations of their client physicians will lose those accounts.
Laggard Labs Will Lose
Because this is a paradigm-shifting trend, the movement towards web-based test ordering/reporting represents an opportunity for aggressive laboratories to solidify and expand their share of the testing marketplace. Laggard laboratories will find themselves losing customers.
That is why this developing trend requires immediate action by any laboratory which provides testing services to physician offices. This is a trend which will create new winners and new losers within the laboratory industry.
Understanding this phenomenon is relatively simple. Two separate factors are combining to create this revolution in how clinical laboratories handle information. One involves demand, the other involves technology.
On the demand side, it will be physicians who drive this transition. This is a change from past technology introductions involving the clinical laboratory industry. Historically, labs were first to recognize the value of new technology that could help clinicians. But once a lab acquired new technology, it was necessary to educate physicians about the benefits of this technology.
Ordering Patterns
One example is the technology that automated chemistry and hematology. Before ordering patterns could change, labs needed to educate doctors about the benefits of this new technology. Similarly, when labs introduced PC computer workstations to physician offices in the early 1990s, it was necessary for labs to educate doctors on how these workstations could improve test ordering and results reporting.
What will be different for the clinical laboratory industry in this current technology cycle is that doctors will drive its implementation. This is a major reason why THE DARK REPORT predicts a total conversion of the marketplace in only 24 months.
Physician demand to have labs provide web-based ordering/reporting capability springs from marketplace dynamics. First, doctors are becoming personally familiar with the Internet.
80% Of Docs Using Internet
Studies show that, just within the last 12 months, upwards of 80% of the nation’s 600,000 physicians now use the Internet on a regular basis. They access the Internet from either their office or home, or both.
Once physicians gain experience about the Internet, they seek vendors and suppliers offering Internet features that might be useful. In other words, as physicians gain personal knowledge about the Internet, they begin to ask their suppliers to provide Internet-compatible solutions to their practice needs.
It is important for laboratory executives and pathologists to fully understand the ramifications of this development. It means their customers, the clinicians, are becomingly increasingly sophisticated about the potential of the Internet to enhance their medical practice and its administration.
It raises the expectations physicians have about the level of service they get from clinical laboratories. (A side note to pathologists: with each passing month, a greater number of clinicians will expect their pathologists, radiologists, and other physician referrals, to be Internet capable.)
Another significant element driving physician demand for web-based lab test ordering/reporting is the reality of today’s healthcare marketplace. In many cities, it is increasingly common for a physician’s office to regularly refer specimens to as many as four or five clinical laboratories, based on managed care provider panels.
Economic Benefits
In larger physician group settings, there may be two or three lab PCs, plus a couple of line printers. A web-based laboratory test ordering/reporting capability makes all that hardware and clutter disappear from the physician’s office. These are direct economic benefits motivating a physician to move his practice onto a web-based lab test ordering/reporting system.
Accept these two elements and it becomes easy to understand why physicians will drive the widespread implementation of web-based lab information capability. This reverses the traditional manner in which enhanced lab technology made its way into physicians’ offices.
The key business concept here is “customer expectations.” It is the laboratory customer, the clinician, who is changing his/her expectations about the quality of laboratory service which is desired.
Note that the two drivers behind the upcoming growth in physician demand for web-based lab test ordering/reporting services are independent of another well-established trend that remains influential. That trend is the desire of clinicians and other users of lab data for increasingly sophisticated lab information services.
Even patients themselves are going to demand that laboratories provide them with information that allows them to better understand why the test was ordered and what the results mean to them.
THE DARK REPORT already sees this trend at work. As payers get their own information house in order, they begin to request that laboratory data be made available in forms that make it easier to evaluate utilization, cost of care, outcomes, and physician practice patterns that involve diagnostic testing.
As users of lab data, physicians will increasingly want the laboratory to do more than simply report individual test results for individual patients. Cost pressures will give physicians the motivation to use clinical pathology to improve healthcare outcomes while reducing the cost of care.
Even patients themselves are going to demand that laboratories provide them with information that allows them to better understand why the test was ordered and what the results mean to them. Any laboratory which ignores the needs of consumers will find itself at risk in coming years.
On the technology side, rapid and ongoing improvements to software, hardware, and the Internet will continue at a break-neck pace during the next decade. This will give laboratories the technology tools to create added-value information services. With enhanced information management tools available, during the next few years, the marketplace will quickly separate laboratories into two categories: financial winners and financial losers.
Developing Technology
Winning laboratories will be those that proactively developed ways to apply this developing technology into the types of information products and services that users want, need, and demand.
Losing laboratories will be those that decided to wait for the market to identify the types of laboratory information services it wanted. By the time such labs can recognize these winning services, their innovative competitors will have already captured the business.
We believe these two factors, user demand and continually improving technology, are now poised to begin stimulating radical change in the marketplace for laboratory testing services. This was not true in the years leading up to 2000.
Accelerated Change
That is why this issue of THE DARK REPORT targets laboratory information system products. The clinical laboratory industry is now entering a period of accelerated change—driven by information technology.
With firm conviction, we recommend that every independent lab, every hospital lab, and every pathology practice immediately make laboratory information system service enhancements their number one busi- ness strategy. In so doing, laboratories will be prepared to meet the steadily increased expectations of their physician customers.
“It’s the Internet, Dummy!” Finally Hits the Clinical Laboratory Industry
SOONER OR LATER IT HAD TO HAPPEN to the clinical laboratory industry. The impending arrival of web-based laboratory services brings with it a new type of business cycle.
What will be different about this business cycle is that it accelerates, forever, the pace of change to the lab industry. From this point forward, industry-wide trends will take only months, not years, to transform laboratory operations.
Against this background, it is quite apt to state “It’s the Internet, dummy!” Laboratory executives and pathologists face the same business dilemma that confronted Bill Gates of Microsoft Corporation in 1995. Some of our more astute readers will recall the famous memo he wrote and distributed on May 26, 1995.
Bill Gates had realized that the future of the computer industry and information management was going to be based upon the Internet, not on customer-owned and maintained internal computer systems.
Immense Paradigm Shift
This was a paradigm shift of immense proportions. As Chairman of Microsoft, he needed to get the immediate attention of all employees, and direct their efforts away from existing projects and towards Internet-based products.
To accomplish this, Bill Gates wrote a widely-publicized memo, the gist of which said “Drop everything today. It’s the Internet!”
From the perspective of 1999, Bill Gates certainly got it right in 1995. He recognized, ahead of just about everyone else, how rapidly Internet-based goods and services would capture the marketplace.
The experience of Bill Gates and Microsoft has direct application for clinical laboratory executives and pathologists. It is a warning, and an encouragement, that it is essential to change the operational basis of a laboratory or pathology group in response to new market developments.
Business Strategy
In fact, proactive change is probably the only business strategy which supports a financially-viable business in today’s healthcare marketplace.
At Microsoft, Bill Gates was the canny leader who recognized the next business trend, and had the guts to lead his team in that direction, ahead of most competitors. Within the lab industry, are there comparable leaders?
As of publication time, a handful of laboratory organizations have committed to implementing web-based test ordering/reporting capabilities. These are the organizations led by practical visionaries.
Management teams at these labs recognize the fundamental changes now occurring in the marketplace. They also want to seize the opportunities such changes make possible. Certainly these will be the lab organizations that set the pace for the year 2000 and beyond!
