Medical Laboratories Can Add Value to Newly Consolidated Organizations with the Right Technology Platform

Manish Muzumdar, senior vice president, Product Development, Sunquest Information Systems; a HIMSS Emerald Corporate Member and National Health IT Week Partner

During National Health IT Week, champions from across the industry are uniting to share their voices on how health IT is catalyzing change in U.S. healthcare. The following post from a National Health IT Week Partner is one of the many perspectives of how information and technology is transforming health in America.

Manish Muzumdar

It may take a few years for hospitals to see a financial payoff after a merger, a recent study suggests.

But it is possible for hospital and clinical laboratory leaders, with the right technology platform that supports multi-lab environments, to provide value to a healthcare system early on.

During the two years after a merger, acquired hospitals experience a decline in operating margins, revenue and expenses, stated a report released by Deloitte and the Healthcare Financial Management Association (HFMA). “We found in the results that revenue per adjusted admission actually went down in the period after the transaction,” said Chad Mulvany, HFMA’s director of Healthcare Finance Policy, Strategy and Development.

Healthcare mergers, acquisitions, and consolidations have “been on tear” over the past few years, according to the publication, Healthcare Finance, which has compiled an online list of deals that have already occurred in 2018.

HFMA and Deloitte analyzed 750 hospital merger and acquisition deals between 2008 and 2014. They noted that the financial downturn after mergers usually levels off in organizations after two years.

The immediate financial hit for providers that consolidated is partly associated, researchers said, with investments in capital projects including health IT improvements (cited by 37 percent of executives in follow-up phone and online surveys).

Meanwhile, healthcare executives who led more successful mergers pointed to their key criteria: developing a strategic rationale for merging and testing value drivers for the transaction, according to Fierce Healthcare’s article on the report.

How Can Medical Labs Prepare for Mergers?

Hospital and lab leaders need to have a merger strategy at the ready. This strategy must include a plan to cost effectively coordinate medical diagnostics via a multi-lab network without dire effects on the capital budget or healthcare delivery.

Meanwhile, healthcare system executives often seek to consolidate IT suppliers. They may believe that one or a few vendors can serve all requirements across the enterprise. If medical lab leaders are not at the table voicing a strategy for the value clinical data brings to the system, the result for some labs may be ripping and replacing specialized technology such as the best-of-breed laboratory information system (LIS).

Replacing IT across the enterprise is an expensive and disruptive endeavor that can take three to seven years before coming to fruition. In a 2018 report published by HealthCatalyst, although many health systems opt to rip and replace their technology in an effort to integrate data, this method is an “incredibly expensive, complex and low-value option.” The report further explained that “the rip and replace process takes three to four years to complete, which translates to 74 percent over schedule, 59 percent over budget and 56 percent less value than predicted.” This further exposes the health system to added risk and sinking margins.

How can medical labs provide value to a healthcare system sooner? What do they need to do from a technology perspective?

“I think a lot of general processing is going to take place out of enterprise solutions,” said Bruce Friedman, MD, acting emeritus professor of Pathology at the University of Michigan Medical School and president of Pathology Education Consortium, during a recent webinar hosted by HealthLeaders. “That leaves things wide open for vendors in the lab world to prove their solutions that will allow labs to add value.”

Multi-Lab Networking Enables Value-Added Services for Labs

Multi-lab networking enables laboratories to optimize multi-lab test sharing and routing, seize opportunities for connectivity to more physician offices and other labs, and enter emerging markets such as molecular diagnostics.

Trivergent Labs Taps Multi-Lab Networking, Saves More Than $1 Million in First Two Years

For example, a multi-lab networking solution was chosen by the three separate hospital labs – running three different versions of an LIS. The medical laboratory leaders first came together to assess: What can do we do together? How will a relationship look?

Lab leaders articulated goals to:

  • Share tests
  • Send specimens between labs with instrument-ready barcode labels
  • Reduce reference-lab costs

Rather than require all three hospitals convert to the same LIS version (or LIS vendor), they used a multi-lab networking solution to route and direct tests via a third party to the appropriate hospital of integration with the LIS.

The solution provided a joint test catalog and powerful rules to route tests properly based on payer or other criteria (such as instrument location), helping ensure a higher level of efficiency and healthcare delivery and reducing duplicate testing and leakage outside their network. It should be noted that some multi-lab networking solutions also can integrate directly with the LIS, depending on an organization’s requirements and workflow needs.

The group accomplished dramatic reductions in reference lab costs: a $1.1 million reduction in year two, a $1.6 million reduction in year three, and a projected $1.8 million reduction in year four. The savings are based on 56,000 patient lab tests and insourcing 60 to 70 different tests. Each lab test costs, on average, $3.82 to process in house versus $13.85 at a reference lab. By end of year four, it’s anticipated they will save $4 million by bringing lab tests in house that were previously sent out to reference labs.

The views and opinions expressed in this blog or by commenters are those of the author and do not necessarily reflect the official policy or position of HIMSS or its affiliates.

National Health IT Week | October 8-12

Healthcare Transformation | Access to Care | Economic Opportunity | Healthy Communities

Share your story, provide insights and help develop healthcare policy during NHIT Week – focused on catalyzing actionable change within the U.S. health system through the effective use of health IT.

View this year’s calendar of events
Explore this guide on supporting #NHITWeek through social media
Submit an #IHeartHIT Story
Participate in the Virtual March
Explore 10 ways to celebrate in your hometown
See the 2018 NHIT Week partners list, and sign up today