Labacoeconomics: Expanding the role of clinical laboratories in value-based healthcare

Contributing lab leaders: Keith Laughman

The United States healthcare system is going through a period of disruption characterized by:1

  • noticeable shifts in patient preferences
  • increased venture investment
  • the emergence of diverse healthcare delivery models
  • the entrance of new competitors into the healthcare delivery space 

This transformation is a response to persistently low patient satisfaction with the United States healthcare system when it comes to affordability, convenience, and care access. It is also occurring due to elevated healthcare spending per capita and suboptimal outcomes from a life expectancy perspective compared to the United States' global counterparts.2,3

Amid change there is opportunity, and the clinical laboratory has the opportunity to play an expanded positive role in the transformation of the healthcare system.

Article highlights:
  • Labacoeconomics™, inspired by Pharmacoeconomics, is a strategic framework that helps drive the value in value-based care.
  • Clinical laboratories generate a large percentage of data in medical records and influence the vast majority of healthcare costs, meaning they have a central role to play in the successful delivery of value-based care.

  • Currently labs face challenges around both test under and over utilization, if this diagnostic variation were addressed there would be a positive impact on overall episode-of-care costs.

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Unlocking the laboratory's additional potential

Despite accounting for a modest fraction (3 to 4%) of the overall U.S. healthcare spend,4 clinical laboratories wield significant influence as they:5

  • generate 70% of objective medical data in the EMR
  • play a crucial role in population health because of the extensive data generated 
  • validate or trigger the majority of healthcare costs
  • engage with every patient's care across most community care settings

By fully leveraging these attributes, clinical laboratories can create greater value and satisfaction for patients and providers from a service perspective while improving the health system’s operating margins.

In the late 1980s, as the number of medications expanded, the pharmacists' role began evolving, and pharmacists started playing a more strategic role on patient care teams. Today, the clinical laboratory is poised in a similar manner to positively impact episode-of-care costs by guiding providers about how to make more efficient and consistent use of the lab’s extensive technology and its sophisticated and exploding diagnostic capabilities.6  

Labacoeconomics, a strategic framework inspired by Pharmacoeconomics, aims to unlock additional clinical laboratory potential through ongoing local diagnostic optimization programs. Initially centered on cost-effectiveness, Pharmacoeconomics evolved to encompass broader considerations, impacting healthcare decisions and elevating pharmacists to more strategic roles.7,8 Similarly, clinical laboratorians must actively influence episode-of-care costs and patient care. 

Labacoeconomics advocates a data-driven approach, fostering collaboration between clinical laboratory professionals and clinicians to standardize diagnostic processes and align with local patient care and treatment pathways. The key to a successful collaboration lies in active clinician engagement. Without this collaboration, progress, to the degree necessary, is less likely to occur. As described by Drs Zarbo and Sharma, to ensure successful collaboration, leaders should take the following five key recommendations into account:9

  1. Identify, “both willing and able” clinicians to partner on the laboratory utilization efforts”

  2. “Set monthly meetings… to maintain valuable momentum”

  3. Make it “convenient for clinicians and administrators to share information”

  4. Create “an appeals process, overseen by health system clinical leaders” for ordering tests that are off formulary.

  5. Ensure communication is open and decisions are shared with everyone.

This collaboration, if successful, promises heightened cost-effectiveness, improved care, more informed decision-making, better communication with payers, and increased satisfaction for both patients and providers. This shift aligns seamlessly with the broader transition toward value-based care.

Strategic influence of clinical laboratories

One area where collaboration between labs and clinicians can be optimized is the area of test utilization. Today, physicians are often ordering too many tests or omitting necessary tests, ultimately impacting patient care. When reviewing numerous U.S. healthcare systems, this variation in test ordering is seen consistently.

Test overutilization

Overutilization of clinical laboratory testing is a common occurrence in many hospitals. This occurs when providers, in the interest of time, order a large variety of tests in an attempt to expedite care. However, as described later, this approach to ordering clinical laboratory tests may delay hospital discharge rather than making hospital care more efficient. 

There are often significant discrepancies in test ordering patterns as the number of unique tests ordered for a given International Classification of Diseases-10 (ICD-10) Code greatly exceeds the average number of tests ordered for a specific patient’s episode of care.10

Taking a closer look at the results, we find that only 35% of these individual tests produced abnormal results.10 Given the more focused acute inpatient setting, this relatively low percentage indicates that current test order patterns are not as focused as they might be and likely include unnecessary tests. 

As described in the literature, there are two approaches to clinical laboratory testing. They consist of either, ordering specific laboratory tests based on an assessment of their predictive value in identifying a particular disease (the rifle approach) or a less discriminate ordering of large numbers of laboratory tests that may not have adequate predictive value in identifying the disease in question (the shotgun approach).11 To reduce the over-utilization issue, clearly, the rifle approach is preferred over the shotgun, and laboratorians working with clinicians will be critical in helping to make this transition.

Ordering too many tests can increase a patient's length of stay within the hospital due to false positive results from unnecessary tests leading to additional diagnostic tests and care cascades that require additional hospital time and resources to complete.12

Physicians often, out of habit, order the same battery of tests despite the low likelihood of clinical significance.11 Therefore, it is likely physicians would benefit from clinical laboratory assistance in determining the best tests to be ordered in a given clinical situation. This often occurs today in an ad hoc manner regarding unique testing and/or reference tests. It is recommended that the lab staff provide support in determining which clinical laboratory testing physicians should order in a systematic way to assist in implementing optimal test ordering patterns on a broader clinical scale.10

Based on conservative estimates, if we can address diagnostic variation, it could save hospitals millions per year in the form of reduced length of stay, and reduction in the testing and expense associated with care cascades.10 Hence, the need for the broader episode-of-care focus is advocated within Labacoeconomics initiatives to identify the total value of these efforts.

Test underutilization

Test overutilization is not the only problem concerning the use of the clinical laboratory; there are also cases of test underutilization. In this situation, physicians are not always ordering the appropriate tests to diagnose the patient efficiently and effectively. It is, therefore, important to consider diagnostic optimization rather than focusing solely on overutilization or underutilization.

Patients suffering from hyponatremia represent an example of underutilization. Hyponatremia occurs when blood sodium levels drop below the normal limits, it’s common in the inpatient setting and is linked to mortality, patient falls, and lengthened hospitalization.13 It can be a difficult condition to treat and is often mismanaged.14

Based on observed test ordering patterns in a sample of over 4000 care episodes the recommended serum and urine osmolality tests were ordered less than 20% of the time for patients with low sodium. In reviewing the top twenty ICD 10s in this sample, patients with low-sodium had a hospital length of stay that averaged 2.6 days longer than patients with the same ICD 10s, but without low-sodium values.10

It has been estimated that the mismanagement of hyponatremia costs health systems between $54 and $153 per admission.14,15 Resulting in possible benefits of millions per year if the recognition and treatment of this condition are improved. By leveraging reflex osmolality testing approaches, as an example, the clinical laboratory is in an excellent position to assist providers in achieving improved care for these patients.

It is important to note that these positive benefits concerning underutilization will require an increase in the clinical laboratory budget to perform the additional testing required. However, because the clinical laboratory is so efficient compared with institutional benefits, this budget increase will produce a significant return on investment for the health system.

The value of implementing Labacoeconomics

Integrating Labacoeconomic principles into daily laboratory medicine practice presents a crucial opportunity when it comes to optimizing health system resources and improving patient care. In addition, it will strengthen the local clinical lab’s role as an indispensable contributor to the patient care team and in the evolving value-based healthcare landscape. 

The importance of this role gains added significance because the healthcare landscape is evolving with increasing numbers of nonphysicians beginning to order tests. A recent report states that approximately 25% of patient visits involved nonphysician providers in 2023.16 The expanded non-physician role underscores the need for efficient and standardized local diagnostic processes to manage care variation and support staff in their use of clinical lab resources.

By embracing Labacoeconomics, laboratorians, like pharmacists, can strategically expand their impact on healthcare decision-making, and align diagnostic practices with local healthcare goals. This local focus is essential for achieving provider compliance with the desired changes in ordering patterns. 

Working with leaders in the health system, to help them see firsthand how labs deliver direct patient care improvements by making the health system more efficient and effective, will help to cement the role of the hospital lab as one that is fundamental in the shift towards value-based healthcare.

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