CEO SUMMARY: In the national market for reference and esoteric testing, Cleveland Clinic Laboratories (CCL) is preparing to expand its presence. It has just moved into a $75 million state-of-the-art laboratory facility and wants to increase its outreach reference testing by four-fold within five years. A doubling of the national sales force is in the works. CCL says it wants to work with hospitals and health systems while also competing against national specialty lab testing companies.
IT MUST BE BOOM TIMES in the esoteric and reference testing sector of laboratory medicine. Cleveland Clinic Laboratories (CCL) is actively expanding its national presence, backed by a new, state-of-the-art laboratory facility in Cleveland, Ohio.
“In January, our lab moved into a new $75 million building—a 138,000 square foot addition that doubles our laboratory space,” stated David Bosler, M.D., Head, Cleveland Clinic Laboratories. CCL is the outreach division of the Cleveland Clinic’s Pathology & Laboratory Medicine Institute. Moving to a new building positions CCL to support its planned double-digit year-over -year increases in reference testing volume.
This news from the Cleveland Clinic is mirrored by the announcement last month that ARUP Laboratories in Salt Lake City, Utah, also plans to increase reference testing volume. ARUP is introducing a new automation line designed to boost specimen-handling capacity by 60% within two years and could accommodate a capacity increase of 300% above current levels if needed.
These expansion plans by two major sources of reference and esoteric testing are a response to the robust demand for advanced diagnostic tests by the nation’s hospitals and health systems. CCL is now positioned to capitalize on this fast-growing sector of lab testing. Out of a total of 12 million tests that the Cleveland Clinic’s main campus lab runs each year, only about 1 million tests currently come from the clinic’s outreach program.
“We project that the number of total tests at our lab will rise by 3% to 5% annually,” noted Bosler. “However, the clinic plans to increase testing volume in the laboratory outreach program by double-digit percentages over each of the next three to five years. In that time, we project outreach lab test volume will grow to more than 3 million tests annually.”
New Lab Designed for Lean, New Technology
TO ACCOMMODATE PROJECTED GROWTH and new technologies, the newly-opened laboratory facility of Cleveland Clinical Laboratories (CCL) has incorporated Lean principles and lots of input from lab staff.
“Front line medical technologists offered design suggestions in multiple sessions to optimize their ideal workspace,” stated David Bosler, M.D., Head of CCL. “Lean methods were used to translate staff input and develop optimal work flow. They increased efficiency by identifying wasteful activities, inefficient walking patterns, and unnecessary waiting times.
“Another factor central to the design of the new lab is that it was constructed in a modular fashion,” he explained. “This increased flexibility was intentional. The casework is mobile and modular. Changing the configuration of workspaces won’t require a redo of the plumbing, utilities, and data lines. If market conditions change, we can allocate space in each of the four laboratories in the new building to take up more or less space. Everything is deployed in a flexible manner.
“Finally, it’s no secret that clinical laboratory science—and medicine in general— is evolving quickly,” he noted. “For example, informatics is being applied to clinical laboratory testing in the form of next-generation DNA sequencing and array-based technologies. Cleveland Clinical Laboratories is equipping itself to handle that type of testing and apply it to the personalized medicine that is becoming a big part of medicine today.”
“CCL will grow incrementally by adding to the sales team this year and then by adding more next year,” he said. “As we expand the sales staff, we will grow in the regions where we are actively soliciting business. In about 18 months, we could effectively double the sales staff.
“At Cleveland Clinic, the reference testing program has existed for more than 25 years, predominantly serving local hospitals here in Northeast Ohio,” Bosler commented. “With this new lab facility, a big part of our business plan relies on the growth of the reference laboratory. We see that growth occurring in two segments.
Serving National Market
“The immediate segment will involve the expansion of local outreach work to physicians in the Northeast Ohio region,” he said. “But long term—and ultimately much more significantly—we plan to expand our role as a reference laboratory for hospitals and commercial laboratories nationwide.
“Just to be clear, we are not planning to compete directly with hospitals,” Bosler added. “Our strategy is to grow by supporting the growth of local hospitals.
“To the extent that these hospitals are focused on outreach services, we would partner with them,” he continued. “Our lab can deliver value to these hospitals and hospital systems, particularly those just starting in the lab outreach business.
“We do plan to compete, however, with other specialized national laboratory outreach players,” Bosler noted. “It’s a competitive environment, but we believe there is space for us. In our health system, each of our 80-plus pathologists are subspecialty trained. By expanding the reference lab, we aim to make that breadth and depth of expertise—combined with advanced diagnostics—available to clinicians around the country.
“When you consider the types of companies that compete in this sector, we are a reference laboratory that’s affiliated with a major healthcare system,” explained Bosler. “We see ourselves as being more similar to ARUP and the Mayo Clinic than we are to Quest Diagnostics Incorporated or Laboratory Corporation of America.
“We aim to be a premium lab that lever- ages our quality and innovation to have a positive impact on patient care,” he empha- sized. “To compete at that level, we designed this new lab facility so that it could be very flexible—meaning that it is built for today, but the current design will support the changes that may be needed in the future.
“We moved four labs into the new building,” he commented. “They are immunopathology, microbiology, molecular pathology, and special chemistry (including our mass spec and proteomics core). We project that these labs are the ones likely to be expanded most based on growing our reference lab work.
“But that’s not the whole story,” stated Bosler. “Once we opened the new lab facility, additional space was available in the existing building. That gives us the capability to expand the lab testing activities that remain in this facility. In response to increased reference test volume, each of our laboratories in both buildings is expanding by anywhere from 40% to 200%.”
Putting Pathologists on the Front Lines of Healthcare Delivery May Boost Prospects
PATHOLOGISTS BELONG ON THE FRONT LINES of healthcare delivery where they can improve outcomes and cut costs, said pathologist David Bosler, M.D., who is Head, Cleveland Clinic Laboratories (CCL).
“Over the long term, being part of the Cleveland Clinic means we are well positioned within a major healthcare institution to drive the type of quality and value transformation that will be necessary under healthcare reform,” he explained. “In the coming years, there will be sustained pressure on all clinicians to make sure that patients are not in the hospital longer than necessary and that they are not admitted if they do not need to be admitted. To reach those goals, pathologists will be required to place the right diagnosis in the hands of clinicians with the right clinical relevance.
“Healthcare reform will be the source for much of the pressure to improve patient outcomes,” observed Bosler. “But that is not to discount the fact that hospitals, physicians, payers, and employers are—step-by-step—putting greater emphasis on improving quality and value.
“At the same, time, we predict continuing downward pricing pressure on all labs,” continued Bosler. “One source is the recent cuts made by Congress to Medicare payments and labs certainly took a hit there. Cuts to lab budgets taken by hospital administrators as they look for places to slash costs is another source of downward pressure.
“Considering that the cost of lab testing represents only about 3% of overall healthcare expenditures, by continually cutting off smaller slices of an already-small slice, the healthcare system will get diminishing returns,” Bosler added. “It is our long-term strategy to position lab testing to add substantial value. We want to leverage that 3% overall healthcare spend to provide better outcomes for patients and decrease costs within the episode of care.
“For pathologists, the current healthcare system offers big opportunities to get the right diagnosis done for the right patient at the right time,” emphasized Bosler. “By ensuring that all patients get the right therapy quickly and that they get the optimal level of care, lab tests can contribute to these improved outcomes.”