CEO SUMMARY: One keynote speaker at this year’s Lab Quality Confab meeting tackled the sensitive subject of recurring bad quality within the lab and the costs associated with it. Lucia M. Berte, MA, MT(ASCP), showed a rapt audience how many sources of recurring bad quality exist and why lab staff must have adequate budgets to support the activities of prevention and appraisal. She then provided a road map of how labs can identify recurring sources of bad quality and fix them.
ONE-BY-ONE, LAB ORGANIZATIONS across the United States are learning that the cost of poor quality in their laboratories is unsustainable. But that’s just part of the story.
Progressive pathologists, lab directors, and lab managers are recognizing that declining reimbursement and shrinking lab budgets put their lab organizations at increased risk, in multiple ways.
First, when budgets shrink in an arbitrary manner, labs have less money to spend on maintaining the quality and the integrity of the lab test results they produce. This compromises patient care and diagnostic accuracy while exposing the laboratory to increased malpractice risk and regulatory enforcement.
Second, inadequate lab budgets can trigger a reduction in the laboratory’s use of controls and similar quality steps that are part of the normal daily workflow and often exceed the regulatory minimums specified by federal and state laws. This also has the potential to undermine the quality and reproducibility of the test results produced by the laboratory and that could lead to unwelcome consequences.
Third, poor quality in a laboratory can directly contribute to client dissatisfaction with the lab’s services. In turn, this can increase the number of lost clients, thereby further reducing the lab’s income.
Fourth, in absolute terms, ongoing decreases in lab test reimbursement and reduced lab budgets can undermine the financial sustainability of the laboratory organization if management does not respond with effective cost-cutting and revenue enhancement strategies.
All of these issues were front and center at the Seventh Annual Lab Quality Confab which took place earlier this month in New Orleans, Louisiana. Because of the financial pressures con- fronting clinical labs and pathology groups throughout the United States, a record crowd was keenly interested to learn effective ways to cut costs while sustaining and improving quality.
Recurring Bad Quality
For this reason, keynote speaker Lucia M. Berte, MA, MT (ASCP), captured the full attention of the attendees when she spoke about the true cost of recurring bad quality that exists in every laboratory. Berte is President of Laboratories Made Better! PC, based in Broomfield, Colorado.
“The lab services market has reached the point where no lab organization can ignore the costs and consequences of recurring bad quality,” noted Berte. “Recurring bad quality affects patient safety even as it undermines the financial integrity of clinical labs.
“Unfortunately, most laboratory directors and managers don’t know how to attack recurring bad quality using the latest methods,” she continued. “Their training and experience are rooted in traditional models of laboratory operations. But much has changed in this field over the past decade, including new methods for identifying and eliminating the sources of recurring bad quality.
Three Areas of Expertise
“Any lab that wants to deal effectively with recurring bad quality needs to have expertise in three distinct management skills,” she said. “One skill is in finding sources of recurring bad quality. The second skill is in fixing the causes of recurring bad quality. The third skill is to sustain the fixes that eliminate sources of recurring bad quality.”
Berte introduced the audience to the concept that the resources a laboratory spends on prevention and appraisal activities—some of which are required by federal and state regulators—are the foundation for identifying and eliminating the costs associated with recurring bad quality. They also backstop the integrity of the lab’s analytical processes.
“Here is where both lab management and hospital administrators are short-sighted,” observed Berte. “Too often, hospital administrators view the resources a lab devotes to appraising the integrity of internal operations and work processes as a place where the budget can be cut.
“This is not only false economy, it exposes the hospital to greater risk should the lab fail to detect such common occurrences as misidentified specimens or inaccurate test results,” she added. “We have examples of such failures. Recall the lab test failures affecting thousands of patients at Baltimore’s Maryland General Hospital that became national news in 2004.”
Hospitals Closed in New York
Another validation of Berte’s observation comes from the fact that, in 2012, the New York State Department of Health closed two hospitals—one permanently—due to problems with quality in their respective laboratories. In both cases, news accounts mentioned that deteriorating finances of the parent hospitals meant that their labs lacked adequate staffing and the necessary reagents and controls to sustain quality at an acceptable level, as revealed by state inspections of the laboratories.
“When it comes to costs, the lab spends money in four different ways,” explained Berte. “Two ways are easily visible and two ways are buried in the budget as overruns and unexpected expenses. “The first two ways are activities that involve prevention of errors and appraisal of testing activities,” she noted. “The second two ways involve failures that are internal and external to the lab.
“Everyone is familiar with the costs associated with failure,” observed Berte. “All the ‘re’s’ are examples of failure, including rework, reinspection, retesting, and repair.
“Other sources of recurring bad quality and failure are workflow errors, expired reagents, downgrading, and non-conforming material review,” Berte said. “All of these events are internal and occur before delivery of the test results to the referring clinician.
“External failure costs happen after the laboratory has delivered test results,” she noted. “This list of failures is made up of customer complaints, misdiagnoses, report recalls, and malpractice claims and lawsuits.
“Of course, all of these incidents of bad quality can incur costs to the lab that far outweigh the money spent on prevention and appraisal within the laboratory,” explained Berte. “Just one malpractice lawsuit can cost the laboratory and its parent organization millions of dollars, for example.”
Yet, as Berte acknowledged, across the nation, laboratories are experiencing reduced reimbursement and shrinking budgets. One common response to these developments is for hospital administrators to cut the lab’s budget for quality control and activities associated with prevention. Yet that is a false economy and a policy that can quickly turn out bad for both the laboratory and the patients it serves.
Prevention and Quality
“Lab managers at all levels must educate hospital administration about why the money spent on prevention and quality is essential if labs are to meet the expectations of their physician clients and patients for accuracy, reliability, and integrity,” noted Berte. “It is a failure of lab management at every level when hospital administrators are allowed to cut the lab’s spending on prevention, quality control materials, and quality assurance activities.”
On this point, Berte recommended that lab managers learn how to make a return-on-investment case to administration in defense of adequate funding for the activities of prevention and appraisal within the laboratory—exactly the activities that can identify recurring bad quality and eliminate it.
“Every lab manager in your organization should know the four types of quality costs,” she said. “They are prevention, appraisal, internal failures, and external failures. “It is smart to identify all costs on your laboratory’s budget associated with prevention and appraisal,” continued Berte. “Where possible, you should create line items in the budget to make these costs clearly visible.
Cost of Internal Failures
“Once this is done, the lab team should calculate costs associated with known internal failures and external failures in a report format to show administration,” she stated. “These reports become the basis for justifying adequate funding for the laboratory’s prevention and appraisal activities.
“Then, going forward, your lab’s prevention and appraisal efforts should reduce internal and external failures, thereby saving the costs associated with these sources of recurring bad quality,” commented Berte. “Detailed reports of these savings should be provided to administration.
“Remember, the language of every C- Suite is money,” concluded Berte. “When your laboratory team can document how increased spending on prevention and appraisal produces measurable savings from the elimination of sources of recurring bad quality, hospital and health system administrators understand why it is important to maintain adequate funding for these activities.”
Every Lab’s Costs of Recurring Bad Quality Are Substantial and a Major Cost-Saving Target
IN HER REMARKS AT LAB QUALITY CONFAB in New Orleans earlier this month, Lucia M. Berte, MA, MT(ASCP), President of Laboratories Made Better! PC identified the cost of recurring bad quality that can be found in every clinical laboratory and pathology group. Each of the items below is the source of recurring costs attributable to bad quality.
Berte explained that, in order to save money, labs will frequently cut the budget for activities associated with prevention and appraisal of the lab’s testing activities. Included are such activities as competence assessment, equipment calibration, quality control, proficiency testing, and method comparison testing. “These are false economies,” observed Berte, “because these are the activities within the laboratory that allow lab staff to identify recurring sources of bad quality and the often-substantial amount of wasted costs associated with them.”
Laboratory Path of Workflow: Failure Costs
- Wrong orders
- Wrong order entry
- Unacceptable samples
- Recollected samples
- Accessioning and processing errors
- Repeated tests
- Incomplete test runs (instrument issue)
- Invalid test runs (calibrator or control failures)
- Result recalls
- Reprinted reports
- Redelivered reports
- Remedial action on occurrences
- Complaint resolution
Laboratory Management Infrastructure: Failure Costs
- Foregone revenue from lost clients
- Lab safety accidents
- Staff turnover and replacement
- Expired reagents and supplies
- Equipment downtime
- LIS downtime
- TAT outliers
- Resolving document problems
- Confidentiality violations
- Resolving system interface issues
- Recurring NCE “corrective actions”
The two charts presented above were used by Berte to show how the “cost of failure”— or recurring bad quality—makes up a significant portion of every lab’s cost structure. Her recommendation was to use quality management methods to identify and eliminate all costs associated with failure and with recurring sources of bad quality.