Defining a Path to Clinical Laboratory Best-in-Class via Benchmarks

Introducing the concept of a universal ‘Laboratory Value Pyramid’

CEO SUMMARY: With the American healthcare system undergoing a major transformation, it is essential that all clinical laboratories and pathology groups recognize this transformation and effect the right strategies to meet the needs of physicians, patients, and payers. A group of lab collaborators proposes a four-level laboratory value pyramid as an effective roadmap to guide labs from their current state to a future state that delivers the right value to stakeholders.

Part One of a Series

ACCEPT THE PREMISE that healthcare in America is at a significant, once-in-a- lifetime crossroads, then it is logical to assert that the clinical laboratory profession is at an equally significant once-in-a-life- time crossroads of its own.

After all, clinical laboratories serve every type of provider, such as hospitals, physicians, and nursing homes, to name a few. Given the transformation now happening to the health system, it is necessary for clinical labs to shift their operations and clinical service orientation so as to meet the changing diagnostic needs of providers.

“Once-in-a-lifetime” certainly describes three major paradigm changes happening in healthcare and medicine:

  • Healthcare is transforming from a reactive medical service to a proactive medical service. (Keep patients well and keep patients out of hospitals.)
  • Healthcare is transitioning from primarily fee-for-service reimbursement to primarily value-based and budgeted payment. (Change how an organization is paid and you change how it organizes to deliver its services.)
  • Healthcare is moving away from medicine based on the average (as determined in clinical studies) to “personalized medicine” and “precision medicine” as new knowledge in the fields of genetics, proteomics, metabolomics, and microbiomics are swiftly incorporated into daily medical practice. (Labs will perform tests that allow physicians to identify and understand the elements of health and disease that are unique to their individual patients.)

With the healthcare world as we know it now undergoing these fundamental changes to long-standing paradigms, it is no surprise that hospitals and physicians are responding in a variety of ways. For example, physicians are selling their medical practices to hospitals, health systems, and insurers and becoming employees. Similarly, hospitals and health systems are consolidating in cities across the United States by creating ever larger and more deeply-integrated health delivery organizations.

Lab administrators and pathologists who understand these once-in-lifetime changes in the paradigms of healthcare and laboratory medicine are faced with their own unique challenge: What is the next paradigm in laboratory medicine? What should change in how laboratories are organized and how they deliver clinical lab testing services?

Although forecasting the future is an imprecise science, it is relatively simple to assess current developments in the healthcare and lab testing marketplaces. These insights can then guide the strategic direction of clinical labs and pathology groups.

On this point, THE DARK REPORT is working at a strategic level to identify what attributes of a lab organization will make it successful going forward. Collaborators in this effort include a veteran lab industry executive and a team within a major in vitro diagnostics company.

Working At A Strategic Level

Since the lab industry lacks a true think tank like the Rand Institute or the Battelle Memorial Institute, innovative thinking in laboratory medicine will spring from guerilla initiatives like the collaboration described above.

What is emerging from this work is a framework for how labs should organize themselves to be responsive to medicine’s new paradigms in patient care, reimbursement, precision medicine, and genetic/molecular medicine. This framework is grounded in the common attributes seen today by best-of-class labs, particularly those labs owned and operated by the nation’s most progressive hospitals and health systems.

What THE DARK REPORT will present in this series is the concept of a value pyramid for laboratory organizations. It has four levels and is intended to guide the administrative team and the lab staff in moving their lab organization from its existing current state (today’s healthcare reality) to an ideal future state offering laboratory testing Our proposed Laboratory Value services that deliver the added value expected by providers in the transformed healthcare system.

Defining A Vision For Labs

The goal of this four-level pyramid is to give the strategic leaders of lab organizations a vision and an ideal that can be attained by their lab team. Of equal importance, this vision and ideal will complement the future state of the providers served by the lab. This is essential because labs undergoing their transformation need the full support of the parent hospital or organization.

One challenge is to give this lab performance pyramid a name that accurately communicates what it represents. Given the fact that this is a guerilla effort and that input will be forthcoming from many different collaborators in coming months, THE DARK REPORT will suggest this as a preliminary working name: “Laboratory Value Pyramid.”

Yes, we agree it is not imaginative, but it does call attention to the core element of tomorrow’s healthcare system: success for any provider will require it to deliver recognizable value to clinicians, to patients, and to payers. This will be as true for clinical labs and pathology groups as it will be for office-based physicians and hospitals.

Moving Past Cost Basis

This philosophy is different from the cost-based laboratory mindset that dominates in many lab organizations today. Remember the insight of W. Edwards Deming, a seminal thinker in modern quality management. He said that only the customer can define quality (and value). Thus, it is necessary for an organization to regularly ask its customers to define quality, then use that information to develop services that add value and meet (and exceed) the expectations of its customers.

Pyramid is intended to be consistent with Deming’s concept of quality and value. The pyramid provides lab managers with a framework to move from a traditional model of lab management and operations that is in common use today to the desired future state. In this series, THE DARK REPORT will present each level of the pyramid as a separate intelligence briefing. This is intentional. The collaborators involved in creating the concept of a Laboratory Value Pyramid want each level to be fully understood before introducing the next level in this four-step progression.

Universal Concepts

Keep in mind that the Laboratory Value Pyramid represents abstract concepts that we believe to be universal. The collaborators on this project recognize the difficulty in describing these abstract concepts so that everyone “gets the picture” and shares a common understanding of the characteristics and attributes that would be true of each laboratory that progresses from level one of the pyramid to level four.

In its current configuration, the Laboratory Value Pyramid puts an internal emphasis on level one and level two. An external emphasis is put on level three and level four. By way of explanation, every clinical laboratory must first put its own house in order. Only then can it begin the journey to deliver greater value externally to physicians, patients, and payers while, as part of this journey, achieving “best in class” in its operations and service delivery.

THE DARK REPORT invites your comments as each level of this four-level laboratory value pyramid is described. The challenge of mapping what laboratories should look like in the future is great, but the rewards for getting it right are worthwhile partially in the long term.


Introducing the Laboratory Value Pyramid

Pyramid 9 22 14

Understanding Level 1:

Achieve Normalcy & Predictability

One primary purpose of the laboratory value pyramid is to provide a step-by-step process by which any laboratory can assess its current state, then, in a deliberate manner, work to evolve into a “best practices” organization that is justified because the lab’s metrics can be benchmarked favorably against world class labs. Level one represents the foundation for the lab’s journey to excellence. Level one emphasizes bringing work processes under control, establishing the needed real-time metrics, and establishing the culture of change and continuous improvement with the lab staff that is necessary for the lab to move to the higher levels of the laboratory value pyramid.

  • Shift the lab organization away from system of inspection and adopt the system of prevention.
  • Shift to a system that incorporates real-time, visible performance metrics of lab processes alongside traditional QC data.
  • Shift to the mindset of continuous improvement.
  • Shift to a culture that regularly engages outside experts to help lab staff understand key issues and develop appropriate solutions for further improvement throughout the lab.



Level One: (Lab Focus Is Internal)
Achieve Normalcy & Predictability

IN THE LAB VALUE PYRAMID, no laboratory can deliver exceptional value to external customers and users until it has its internal house in order. That is why level one and level two of the four-level pyramid concentrate on the internal performance of the lab organization.

What will be true of the lab value pyramid at all four levels is that it incorporates the concepts of quality management as found in the world’s top-performing corporations and organizations. Lab leaders should familiarize themselves with these concepts in preparation for guiding their lab through the four progressive levels of the lab performance pyramid.

Planning The Transition

This is a necessary step to prepare a laboratory to meet healthcare’s once-in-a-life- time transition into new paradigms of medicine and care delivery. Senior administrators must be prepared to help lab staff understand and accept the fact that continuing to operate a lab with the management models of the 1970s, 1980s, and 1990s is to handicap that lab from achieving its full potential—while putting it at high risk of failure, meaning bankruptcy or merger into a stronger lab organization somewhere down the road.

The point here is every laboratory organization is at a true crossroads. Success is dependent on choosing the correct road. The path of the laboratory value pyramid is one choice that offers the highest potential for clinical success and financial stability going forward.

With this introduction, we can move forward with the description of level one. To achieve success in meeting the characteristics of a level-one lab, the organization must achieve a constant state of normalcy and predictability.

The end state for level one of the value pyramid is achieved when the lab organization can show its:

  • shift from system of detection/failure to system of prevention.
  • shift to a system that incorporates real- time, visible lab process performance metrics alongside traditional QC data.
  • shift from a state of “don’t fix it till it breaks” mindset by both employees and administration to the mindset of continuous improvement.
  • shift to a culture that is open to engaging outside subject matter experts to help understand how lab test data is used by clinicians and healthcare stakeholders, then contribute to using this knowledge to improve the value of this lab information to end users.

These four attributes or characteristics are a starting point for describing a laboratory organization that has achieved level one of the laboratory value pyramid.

As one collaborator on this project said, “You will know when you are competent at this level when your lab: a) performs according to your panel of specifications 95% of the time or greater; b) when you have a growing list of identified improvement projects that happen regularly; and, c) when you know how and where your data is being stored and how it can be accessed and analyzed.”

Recognizing Level One

Keep in mind that the goal here is to describe, in a clear objective manner, the attributes of a lab that has achieved normalcy and predictability. By meeting that goal, it becomes easy for anyone—inside the lab or outside the lab—to recognize normalcy and predicability as they observe the lab’s daily performance of its operational requirements and clinical services.

To help better describe the attributes of a laboratory that has achieved normalcy and predicability, one collaborator included the following:

  • Staff in the lab have an unmistakable positive attitude toward change.
  • Lab staff are aligned with the vision and with a set of measurable objectives defining quality and performance.
  • Entire lab operates with full accountability for individual and collective achievement in meeting or exceeding the metrics that validate normalcy.

The next three levels of the lab value pyramid will be presented in future issues. All comments are welcome!


More Detailed Descriptions about the Attributes of a Laboratory Working to Achieve Level One

TO PROVIDE FURTHER INSIGHT into the recognizable attributes of a level one laboratory, the collaborators offer the following general points.

One example of a system of prevention mindset involves the lab consciously aligning itself with instrument suppliers that have remote monitoring of critical performance parameters. These suppliers can predict when an instrument will go down or will need adjustment. This capability allows them to dispatch a service tech to fix or adjust the instrument before failure occurs, consistent with a system of prevention.

Next, the lab’s transition to a system that incorporates real-time, visible process performance metrics alongside traditional QC data requires several elements. First, the lab’s process performance metrics are accessible in real time, as are the traditional QC data.

Second, the lab regularly engages subject matter experts (SME’s) in lab process control and has these experts work with lab staff to identify and establish a core group of performance metrics unique to that lab’s successful operation. These metrics establish baseline performance and set expectations.

Third, the lab fully characterizes each metric and develops a real-time visible tracking process. Such tracking could include dashboards on mobile device apps, digital display boards throughout the lab, red/yellow/green lights on specific instrument modules, and other methods.

During its transition away from an employee/management mindset of “don’t fix it till it breaks” to the continuous improvement mindset, the lab will be seen to involve employees in daily huddles to review performance metrics from the last 24 hours. These same employees are empowered to make the improvements required to keep things running to specifications.

Another element of continuous improvement is that lab managers at all levels engage employees in Lean and Kaizen events that produce immediate improvement. This activity is always visible and is rewarded in positive ways.

The fourth attribute is regular and open access to subject matter experts to directly support the lab staff in achieving and surpassing goals. In preparation for the lab’s move to higher levels in the laboratory value pyramid, one particularly important use of SMEs is in how the lab’s end product—lab test results—is stored, managed, retrieved, and utilized in support of improved patient outcomes and cost-efficient clinical care.

Self-assessment of the lab’s performance is based on multiple factors: a) achievement of the key metrics 95% of the time; b) a growing list of improvement projects within the laboratory that are successfully implemented; and, c) the lab team knows how and where lab test data is stored and, of equal importance, how it can be accessed and analyzed in support of the lab’s creation of more value for all its stakeholders.




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