Article

From Cost Center to Strategic Asset: Three Ways Labs Can Unlock Value for Their Organizations

Contributing Lab Leaders: Duane Fitch, CPA, MBA, FACHE; Paula J. Santrach, MD; Steven Zibrat, MS, MT(ASCP); and Eyas M. Hattab, MD, MBA

Financial

Article highlights:

Labs should provide their expertise to their organization's data and analytics teams
Labs should look for tests that provide meaningful metrics for measuring quality.
Labs should integrate their data for organizational data mining.

Cost centers are always in the cross hairs when an organization is trying to trim a budget. Strategic assets—revenue centers and functions central to the organization's mission—are a different story. Organizations will dig deep to preserve them in lean times and steer extra resources their way in times of plenty, because the payoff on those investments is always obvious.

How can you turn your lab from a cost center to a strategic asset? Lab leaders from top healthcare organizations say the industry-wide shift toward value-based reimbursement makes that transformation essential, but it's also in many ways easier than it used to be, because labs can harness the power of data and analytics to prove their worth and target their services more effectively.

"The lab is oftentimes thought of as a commodity, as a part of the organization that is high functioning, very important, but not very strategic," says Duane Fitch, Partner at top accounting firm Plante Moran. "[We] can really shine some light on just how much impact the lab can have on population health initiatives, on growth in market share, on all kinds of things that really command the attention of the C-suite."

Here are some tips on how to accomplish this:

1. Be an analytics resource.

To a greater extent than perhaps any other part of a healthcare organization, the lab's product is data. In this era of big data and analytics, a lab can leverage that product to prove its worth and improve the performance of the organization, but only if it shares its expertise with the analytics staff, says Steven Zibrat, Laboratories Manager of Quality, University of Chicago of Medicine.

"There's so much information, and if you don't have a laboratory background, it can often be difficult to pick out the relevant pieces and put them together in a meaningful and coherent manner," Zibrat says. Make sure your organization's analytics team has access to laboratorians who can help make connections between lab data and other sources, like the EHR or administrative systems.

2. Identify lab-based quality metrics.

Accountable care initiatives often hinge on tracking lab values. One common example is diabetes care. Protocols require regular A1C testing, and values above the normal range should trigger specific interventions. In that scenario, the lab's performance can determine whether the organization hits its quality targets and gets paid accordingly, says Paula Santrach, Associate Professor of Laboratory Medicine and Pathology, and Chief Quality Officer at the Mayo Clinic. She recommends that labs participate in developing monitoring systems to determine when patients are due for tests, and create convenient paths for them to get their blood drawn.

Moreover, labs should explore how they can extend that same type of impact to other diseases and conditions, Santrach says. "How can the lab help the practice be successful in their quality metrics?" she asks. "Are there metrics we can suggest, based on laboratory tests, that represent good clinical outcomes?"

On Laboratory Measures and Outcomes

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Paula J. Santrach, MD

Chair, Clinical Practice Quality

Mayo Clinic

3. Compete on value, not price, with outside labs.

When the lab is a cost center, it's easy for an organization to decide to outsource. "We cannot realistically expect a consolidated laboratory to achieve the same cost per test structure that a well-established commercial laboratory with a completely different mission has," says Eyas Hattab, Professor and Chair, department of Pathology and Laboratory Medicine, University of Louisville.

However, lab leaders can make a case for added value that overshadows a simple cost-per-test computation—and even goes beyond the appeal of keeping lab revenue in-house. "A robust data-mining and analytics system can contribute to the health of your population in a different way," and that data simply won't be available to the same degree from an outside lab, Hattab says. "There are other ways to derive value than just the cost per test."

"It's up to us to connect the dots," says Plante Moran's Duane Fitch. "The C-suite isn't going to get smarter about the lab unless we are proactive and educate them about what its impact is."

On Revenue Center or Cost Center

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Eyas M. Hattab, MD, MBA

AJ Miller Professor and Chair

Department of Pathology at University of Louisville

Contributing Lab Leaders

Duane Fitch, CPA, MBA, FACHE

Partner

Plante Moran