CEO SUMMARY: Consolidation and regionalization of hospital laboratory testing are not isolated phenomenons. Beginning in the late 1980s, individual provinces in Canada began to rationalize lab testing services by building core labs and consolidating lab services across multiple hospitals. By 1995, the same process of lab consolidation across multiple hospitals began mushrooming across the United States. Now it’s the United Kingdom’s turn. Serious planning for what’s known as “pathology modernization” has reached the point where implementation of core labs and consolidated lab testing is about to begin.
DURING THE 1990S, Canada, followed by the United States, experienced hospital lab consolidation on a vast scale. Now the United Kingdom is planning an ambitious modernization program which includes several regional lab consolidation projects.
“The British government established the National Health Service (NHS) over 50 years ago and it is now the largest health organization in Europe,” stated Professor Christopher Price, Vice President, Global Clinical Research, Bayer Diagnostics, Stoke Court, Stoke Poges, U.K. “The World Health Organization recognizes it as one of the best health services in the world, but there are significant improvements to be made to cope with the demands of the 21st century.
“To better utilize changing technology and meet the expectations of patients and providers, the NHS recently developed a ten-year strategy,” noted Price. “Big changes are planned and several teams are spearheading the effort.
“First is the Modernization Board, a group of task forces working on priority areas that include cancer, cardiology, mental health, information technology, quality and related fields,” Price explained. “Another is the Modernization Agency. Because patients and citizens have a vested interest in changes to the NHS, they are included in these teams.”
When it comes to pathology modernization (as used in the UK, the word pathology includes both clinical lab testing and anatomic pathology services), Professor Price has first-hand experience. Until December 2001, he was Director of Pathology for the Royal London and St. Bartholomew’s Hospitals. In this position, he was heavily involved in orchestrating changes in the laboratory environment of East London.
“The NHS considers pathology modernization as a key component to improvements in the health system,” observed Price. “Laboratory testing services underpin other parts of the program and are essential in delivering fast, accurate diagnoses for patients.
“In 1999 and 2000, the first two years, the pathology program directed about US$30 million for 35 local laboratory initiatives throughout the country,” Price said. “This supported local rationalization of lab services, as well as technology upgrades to laboratories. It included innovations that, if successful at a local level, could be implemented by labs in other regions of the country.
“The biggest changes are coming in the second phase of the pathology modernization program,” he added. “In 2001 another US$12 million was invested to fund the planning and implementation of four large-scale pilot projects aimed at reconfiguring and rationalizing pathology services.”
As a single-payer health system, the UK government is the source of funding. Money for healthcare services is disbursed to trusts. In simplest terms, each trust is a provider organization providing secondary and tertiary healthcare for between 100,000 and 300,000 people.
Lab Regionalization Goals
“In consolidating and regionalizing laboratory testing services, the goals are to better manage the way lab tests are performed within a region with an eye to reducing costs and eliminating service redundancies that were allowed to exist in prior years,” stated Price.
“I should add that efforts by the previous government to improve the healthcare system included private sector incentives and more competition,” he recalled. “That led to some unproductive situations, like a local general practitioner in Southeast England who sent lab work across the country to South Wales; it made no sense. Small labs were running complex tests with limited staff and limited knowledge.
“Within the private sector, Quest Diagnostics Incorporated and Unilab, Inc. operated two hospital laboratories,” he said. “Yet, due to the limitations of the business arrangements, several aspects of lab services, such as interpretation and training of physicians, remained the responsibilities of pathologists employed by the NHS.
“Developing closer relationships with both our physicians and patients is a basic premise in our laboratory regionalization projects…”
“Another area of cultural difference became noticeable in those two hospitals,” Price stated. “Within NHS, we operate differently than labs in the United States. For example, within our health system, laboratorians will stop clinicians from doing tests if they are the wrong tests. Another example is that our labs will perform extra tests if they are applicable to the diagnosis and test results. UK labs operate differently from the United States in this respect. For reasons like these, the two hospital labs are now managed by the public sector.”
Lab Regionalization Goals
Efforts to restructure laboratory testing services are part of the current government’s drive to improve the quality of healthcare and patients’ access to this care. “One difference is that, compared to past years, primary care physicians are now the major decision makers in the commissioning of hospital and laboratory services, not local health authority administrators,” observed Price.
“The modernization plan is beginning to make a big difference and will bring significant changes to the laboratory sector,” he added. “Plans are to expand the size of laboratories and their testing capabilities. Core labs are being designed to serve more than one million patients in their service area.
“Lab testing services will be organized in a multidisciplinary fashion and the work force will be multitasking,”? stated Price. “There is to be a greater emphasis on collaboration, rationalization, lab automation, POCT, new technology, and improvement in the management of labs.
“Professional staff will undergo mandatory re-accreditation every five years. This includes physicians, scientists, and the medical technologists,” he said. “There is still a political desire to involve the private sector in the provision of laboratory services, but clear plans to allow this have yet to be developed.
“Developing closer relationships with both our physicians and patients is a basic premise in our laboratory regionalization projects,” continued Price. “This will be accomplished by better integrating clinical labs to provide faster turnaround times, easy access to results, and more comprehensive lab services. Lab performance in all areas will be rigorously measured.”
These goals can be seen in the specific regionalization projects. Price explains. “Take the East London project as an example. It involves six hospitals that are only about five miles apart. Two are teaching hospitals, two are district general hospitals, one was a children’s hospital (now closed), and the London Chest Hospital, which will be integrated into St. Bartholomew’s.
“To date, we’ve already consolidated microbiology, virology, histopathology, and cytology across these hospitals, generating immediate benefits,” explained Price. “Histopathology was probably the biggest success.
“We brought 18 histopathologists together from the six hospitals and created teams of three, each team specializing in certain areas, such as urology, brain, or heart,”? he said. “Each team has a lead pathologist for every specialty, along with a backup. This allows them to specialize and this high-level expertise is equally available to all clinicians in the region.
Generating Large Savings
“Such arrangements improve patient care and create a better working environment for the pathologists,”? declared Price. “Besides boosting clinical training and research, it’s generated large savings in real estate [facilities]. The East London laboratory regionalization project is now a model for other large urban areas.”
“Prior to the East London modernization project, the six hospitals, representing about 1,000 beds, were run independently with separate management arrangements,” noted Price. “These hospitals serve some 700,000 people. Their labs employed 295 med techs and 42 scientists, and were performing about eight million tests annually. That’s now changed. Today we have a unified laboratory organization that runs in tandem with the hospitals.
“In fact, a new hospital is under construction in this region. It will offer rapid diagnosis and treatment. To support this, a US$52 million core laboratory is being built because it is recognized that the laboratory plays a key role in delivering better patient service.
Increased POC Testing
“In recognition of this, the laboratory is designed to ‘go to the patient’ rather than the other way around,” revealed Price. “This directly translates into more point-of-care testing (POCT). Its effectiveness is measured by evaluating the cost per encounter. Large trauma units are making good use of POCT to better triage patients.”
“In the East London pathology modernization project, the next step will be to establish a core laboratory at the Royal London Hospital and have satellite labs at the other locations,” said Price. “These rapid response labs will perform rapid chemistry and hematology tests that require results in less than three hours.
“All test requests will be electronically entered at point of origin,” he continued. “The core lab will have a single reception area for all samples, where they will be bar-coded. Tests will then be forwarded to multidisciplinary areas for automation (chemistry, hematology, immunology and virology), flow cytometry, mass spectrometry and molecular diagnostics.
“More complex or esoteric types of tests will be handled in specialty lab sections. Interestingly, these specialized labs are seen as vital to ensuring that the specialist knowledge is retained in a multidisciplinary environment,” commented Price.
“In recognition of this, the laboratory is designed to ‘go to the patient’ rather than the other way around.”
“Within the East London area, the goal is to ensure that there is an expert in all areas at the clinical, scientific and MT level to support the clinical staff and development of services. The laboratory organization will be served by a US$3.5 million information system, but I am convinced there will be cost overruns, as this includes links to all primary care physicians, clinics and wards for both lab test ordering and results reporting access.”
According to Price, there is some debate about the potential savings that will come from the different lab regionalization projects. “At one point, the Audit Commission estimated that, if all labs got their cost-per-test down to that of the lowest quartile, then the NHS would save over £40 million per year,” he noted. “Despite the obvious savings in estate [facilities] and staffing, I believe the increased cost of logistics required to make these restructured lab organizations work properly have been underestimated.”
Lab Regionalization Goals
Whereas East London is an example of an urban lab regionalization project, there are rural lab projects planned. “Lincolnshire is a good example of rationalizing and modernizing lab services in a rural setting,” stated Price. “Lincolnshire has seven hospitals, which are as much as 35 miles apart. By American standards, that’s not much distance, but it’s a logistical nightmare on the narrow country roads of the UK.
“The laboratories are organized into a single network with a horizontal management board,” he explained. “There was some consolidation of lab testing and a single information system network was implemented, along with procurement and a very complex transportation system.
“Logistics is proving to be more expensive than expected,” he said. “Due to transportation limitations, each lab site must do more testing to provide necessary services in a timely manner.”
Same Goals For Rural Labs
Price states that goals for rural pathology modernization projects are the same as for the urban lab projects—improved outcomes, faster turnaround times, enriched service menu, and lower overall cost-per-test. Because of the more limited ability to create a core lab, overall savings from rural lab consolidation
are expected to be proportionately less than from urban lab projects.
Not unlike the experience of Canada and the United States, laboratory consolidation and regionalization in the U.K. has struggled to gain buy-in by laboratory professionals. “Although there is a vacancy rate as high as 25% in some areas, the MT’s feel threatened,”? commented Price. “One goal of these lab rationalization projects is to more highly automate the labs, thus freeing up the med techs so they can become more involved in the clinical aspects of lab services.
“Post-implementation, the expectation is that med techs can become more involved in boosting the quality of testing in the automated lines. Another important aspect is to retain the link with the clinician, by providing education, auditing of services and proving knowledge for the clinical protocols,” said Price.
Using Lab Expertise
“This is actually where laboratory professionals should want to use their expertise,” he continued. “After all, the laboratory is a knowledge provider as well as a result producer. Our staff should have the ability to help physicians use tests more effectively.
“This is a more holistic approach to laboratory medicine, and helps move us away from the long-standing ‘cost per test mentality.’ We need to take a broader view and go to cost/stay, cost/episode, cost/life-year-gained, or cost/quality. Such approaches may increase lab costs, but they reduce the overall cost of healthcare.
Laboratory regionalization is happening even as changes are coming to the way NHS manages patient data. “Although somewhat behind schedule, implementation of a new patient data system is occurring,” said Price. “Soon each NHS patient will have a unique identifier and every GP will have a terminal that allows the physician to electronically order lab tests and receive lab test results. This will provide continuity in our system.”
Because the modernization program has a reporting schedule, Price has a way to track the ongoing progress of pathology consolidation and regionalization. “The most recent report issued by the Department of Health on pathology regionalization is now available at www.doh.gov.uk/pathologymodernisation,” offered Price. “It provides overall guidance notes and suggested approaches to the needed changes, along with lessons learned in the process so far.”
Has the United Kingdom looked at hospital lab consolidation in Canada and the United States for insights about the opportunities as well as the pitfalls? Price doesn’t think so. “Not many laboratorians here are looking at the American or Canadian lab consolidation models,” he said. “That may be because of poor reports on what happened, particularly in Canada.
“In the United Kingdom, laboratories will be accountable through quality indices and benchmarking for staff, budget, productivity and efficiency,” he continued. “Because of the unique factors between countries, it is difficult to get data that offers a meaningful comparison.”
Help From Canada & USA
Price offered several concluding thoughts about lab consolidation in the United Kingdom. “We still have many questions to be answered on this modernization path. What are the optimal service models? What services should be planned nationally, supra-regionally and regionally?
“On the other hand, in the UK, laboratories now get positive attention from the media because of great value they provide in the clinical decision-making process. Such public recognition is a big step forward; public pressure often follows and that often leads to funds for additional improvements to the process.
“In our country, pathology modernization will be far-reaching,” he added. “We have a population of around 60 million people and each regional lab organization is designed to serve between one and two million people. That means up to 40 regional lab consortia may eventually be established.”
Possible Lessons For USA
For lab administrators and pathologists in North America, laboratory regionalization efforts in the United Kingdom may provide unexpected benefits. Although lots of lab consolidation is already complete in the United States and Canada, not every consolidation project was well-designed to capture all potential savings. There is still unrealized opportunity for further gains.
Thus, the more comprehensive perspective taken by the NHS modernization boards in executing lab consolidation may generate unappreciated benefits in how lab services can improve the overall quality per episode of care while reducing unnecessary costs.
The UK may also be a potential source of additional valuable experience for labs here in the United States and Canada. Rural pathology modernization projects represent a laboratory regionalization model which has been seldom tried in North America. Should the UK have considerable success at restructuring lab testing services in rural settings, this experience could have direct application in a number of regions around the United States.
However, as Dr. Price noted earlier, there is little transfer of laboratory management experience and thinking between countries. For that reason, the UK is bound to repeat some of the same basic mistakes in lab consolidation and regionalization that were made in North America.