CEO SUMMARY: Swift and positive changes at American Medical Laboratories (AML) came as a direct result of energetic management. AML provides lab executives with an outstanding case study of how to take an existing, somewhat tranquil lab organization and turn it into a high-performance revenue machine. In the process, clients become winners, employees gain job stability, and the community benefits.
Successful, dynamic business models for clinical laboratory operations are difficult to find in today’s healthcare marketplace.
For that reason, changes under way at American Medical Laboratories (AML) in Chantilly, Virginia represent an outstanding case study in laboratory management.
Despite the challenges of falling reimbursement, declining utilization, and consolidation of providers, AML is posting strong growth to specimen volume, revenues, and operating profits. AML’s performance demonstrates that clinical laboratories don’t have to be a place of shrinking resources, service cutbacks and operational losses.
Arrival Of New Owners
The AML story begins with the arrival of its new owners in the spring of 1997. President Tim Brodnik explains. “AML was a lab that was under-marketed and under-capitalized. Its former owners, who remain active at AML today, recognized the need for a change, both in management philosophy and leadership style. What’s happened since our arrival is not management rocket science—it is doing simple things well.
“We introduced four key changes upon our arrival,” noted Brodnik. “First, we measure everything in operations! This gives us performance benchmarks to monitor whether systems and people are improving.”
“Second, we instituted a customer service meeting each morning at 9:00 a.m.,” he continued. “This lasts under an hour and involves 40 to 50 department managers from every area of lab operations. We encourage swift action to resolve customer issues. More importantly, we use this meeting to revise internal systems and processes to prevent problems from recurring.
“Third, we expanded AML’s sales team and changed compensation plans to reward profitable new business,” said Brodnik. “This raised our visibility in the marketplace and stimulated a flow of new client accounts.”
Fourth,AML made big investments in information resources and staff. Information will be a critical component of value-added lab services in coming years.
Jack Bergstrom, Executive Vice President at AML, explained why these changes had a positive impact on staff. “Measuring processes allowed people to see how they were improving. People like to succeed, and with good information they know exactly how their work is affecting outcomes.
“The daily customer service meeting is an opportunity for AML’s team leaders to identify and respond to problems and communicate across all department boundaries,” said Bergstrom. “On a daily basis, this meeting reinforces our philosophy of taking swift action to fix things or seize opportunities. The enthusiasm from this daily meeting spills out into the entire laboratory.
“Expansion of the sales program is critical to our expansion plans,” he noted. “The market will not buy your services if they don’t know who you are and what makes you different. Our sales team delivers that message and is responsible for adding new clients.”
“Formerly, an AML sales rep was responsible for client service and new sales,” added Brodnik. “Now a client service team handles ongoing needs for a client. The sales rep is pointed primarily toward generating new business.”
“To reinforce this, we instituted a new sales compensation plan,” he said. “This rewards the sales rep for profitable new business. These changes made it clear to everyone at AML that the objective was to focus on the customer and grow the business!”
AML’s growth strategy is built upon the complementary execution of excellent client service and professional sales and marketing. The lab believes that if it can truly “outperform” competing labs with demonstrably better service, then it will scoop up more new business.
“Operating an error-free laboratory is a real challenge,” explained Brodnik. “Mistakes happen in every laboratory. What has changed at AML is the attitude towards responding to problems which affect the client. Most labs talk about good service, but don’t back it up with money, management time, and staff commitment. We are devoting significant resources to make sure that our service is recognizably better than that offered by competing laboratories.”
Commitment To Customers
AML’s commitment to a customer- focused organization is shared by its employees, and for good reason. “AML’s former owners, Ira Godwin, M.D. and C. Barrie Cook, M.D., were always concerned about the welfare of their employees. That is one reason why they did not sell AML during the big acquisition wave of the 1990s,” recalled Brodnik. “They didn’t want to see this laboratory dismantled, specimens shipped elsewhere, and the employees laid off.
“We share the view of Godwin and Cook that people are the true resource of AML. We spend as much time managing people and supporting their personal growth as we do with customers and new clients,” he said. “For a two-month period after our arrival, every employee in this organization was interviewed, individually or in groups, and invited to speak candidly about the company, their expectations, and their suggestions for improvement.
“These interviews, and the information gained from them, have been used to focus our efforts on building the type of company for which all employees can be proud,” continued Brodnik.
What went unsaid by Brodnik and Bergstrom during this exclusive interview with THE DARK REPORT was a discussion about the role of leadership and creating a shared vision.
It is no accident that American Medical Laboratories is now an energized, focused laboratory. It has an executive team that possesses competent leadership skills and uses them effectively.
Created A Vision
AML’s leadership has created a vision of what the laboratory can become. It is teaching each employee how to understand that vision and how to contribute their part in making the shared vision into reality.
This requires intense people- management skills. But the rewards are immense. In the past 20 years, look at the growth of Compaq Computers, of Microsoft, of Intel. These are companies where people are excited to come to work. They get support from management and share in the rewards of a successful, thriving business.
Only a handful of hospital laboratories and commercial laboratories operate along similar parameters today. Along with American Medical Laboratories, they understand the new paradigms for management, and are blessed with leaders willing to adopt these new paradigms.
In the case of AML, the ambitious goal of becoming a first-tier national reference laboratory can only happen if the combination of leadership, good management execution, and total employee commitment gel together. Any sustained success will be attributable to these factors.
Laboratory Sales and Marketing Costs $’s, But is the Source of Laboratory Stability
HOW DOES A $75 MILLION LABORATORY double in size in only 30 months? This is a remarkable accomplishment. Yet is it one that can be duplicated by other laboratories willing to invest in a professional sales and marketing program.
American Medical Laboratories (AML) understands the power of sales and marketing to sustain and strengthen a clinical laboratory. Since 1997, AML’s sales force has grown by more than 50%, increasing the number of sales staff from 22 to 33. With more sales people in the field, the volume of new business can increase significantly.
Although commercial laboratories have maintained active sales programs for years, it has only been lately that an increasing number of hospital-based laboratories have begun their own out- reach sales programs.
It is important to understand that a professional laboratory sales and marketing program requires significant investment, both of money and of management time. It is not an activity which “manages itself.”
Further, it is crucial that professionally-trained sales people be hired and put in the field. The best of these people have experience, training, and skills which reflect a lifetime of study, and contribute significantly to a successful sales effort.
Finally, it is important to let sales people sell, and not be distracted by customer service responsibilities. Their skills and attention should be focused on generating new client accounts for the laboratory.