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Consolidate or Outsource: Which Approach Is Right For Your Lab?

Consolidate or Outsource: Which Approach Is Right For Your Lab?
Operational

Article highlights:

  • Labs can offer value directly to patients by helping them use their lab results to manage their health
  • Labs can play a role in helping patients interpret and use genomic data
  • Both labs and health system top management must make fundamental culture changes to increase the lab's value to patients

As healthcare organizations struggle with escalating costs and declining reimbursement, many are reevaluating their on-site laboratories and considering the merits of either consolidating or outsourcing. Outsourcing the lab work, the thinking goes, could lead to immediate and significant savings, and free up cash for investing elsewhere. Consolidation, on the other hand, would keep laboratory services under organizational control, while also driving improvements in overall efficiency. But there are possible downsides to either tactic: The impact that outsourcing might have on quality of service, for example, or potential challenges associated with standardization in the case of an organization that decides to build a core lab.

So which approach, if either, is the best? Here's a closer look at the pros and cons of each, with key insights from two industry leaders.

Outsourcing: Cost Reduction, But at a Cost

 

While C-suite leaders often think outsourcing will be a quick and easy path to financial success, that's not the way it usually works out, says Eyas Hattab, MD, MBA, AJ Miller professor and chair of pathology and laboratory medicine at the University of Louisville School of Medicine. The main driver for outsourcing is cost-savings, Hattab notes, and many do realize savings at first. Over the long haul, however, those gains tend to disappear, and consolidation brings greater returns. “You have to look at this as a marathon, not a sprint."

Jeffrey Myers, MD, director of anatomic pathology and MLabs, and vice chair of clinical affairs and quality at the University of Michigan, agrees. Outsourcing may unload the bulk of your testing burden to a high-volume reference lab that can easily handle the work. But it also takes away a measure of control, and that can lead to problems down the road, including reduced clinician and patient satisfaction. “The best approach to cost improvement is within your own laboratory," Myers says.

Eyas M. Hattab, MD, MBA

AJ Miller Professor and Chair

Department of Pathology at University of Louisville

Jeff Myers

Vice President Consulting Services

Accumen Inc.

Consolidation: A Significant Investment That Gets Results

 

If outsourcing comes with its various drawbacks, what's in store for those who choose to consolidate? According to Hattab, you'll face hurdles here, as well, whether it's in the space you'll need for a new facility or the technologies required for efficient testing. “Laboratory consolidation efforts that are focused solely on moving pieces around without making significant investments are misguided and doomed to fail."

Still, Hattab and Myers agree that consolidation comes with a number of advantages that ultimately outweigh the challenges it presents. When an organization maintains a central lab, for example, it puts that facility and its pathologists in a unique position to identify care gaps and care variation. Pathologists can work closely with the organization's physicians to ensure each analysis includes exactly what is needed so that testing doesn't have to be repeated. Communication between lab staff and clinicians is made easier, so misordered tests are kept to a minimum. The gains in efficiency made possible through standardization translate into gains in care-quality. Costs are reduced as testing leads to better patient outcomes, as well as shorter hospital stays and fewer readmissions.

In the end, some organizations will choose to outsource because it allows them to focus their limited resources on other areas. And others will decide that consolidation makes sense—and turn those limited resources into their biggest strength.

Eyas M. Hattab, MD, MBA

AJ Miller Professor and Chair

Department of Pathology at University of Louisville

Contributing Lab Leaders

Jeff Myers

Vice President Consulting Services

Accumen Inc.

Eyas M. Hattab, MD, MBA

AJ Miller Professor and Chair

Department of Pathology at University of Louisville

 

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