What are the Top Metrics for Success in a Clinical Laboratory Outreach Program?

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Performance metrics are crucial tools that hospital and health system leadership use to determine the overall effectiveness of the clinical laboratory and identify opportunities for performance improvement.  A successful laboratory outreach program must demonstrate profitability, transparency, good business practices, and overall effectiveness.  By establishing performance standards, the laboratory is able to justify staffing and infrastructure costs by benchmarking against peers.

With reimbursement cuts and healthcare reform greatly impacting the clinical laboratory segment, more emphasis has been placed on measuring and managing benchmarks and key performance indicators to highlight areas for cost savings as well as improve quality and service for patients and physicians.  Performance metrics can be developed from all departments within the laboratory.  While hospitals have lots of data, they often do not have enough information.

In an effort to implement best practices in the laboratory where I work, we focused on the main areas of management and business metrics.  The management metrics we chose to track included test volumes, cost per test, turnaround time, and quality.  Business metrics encompassed a more comprehensive set of measures such as patient and provider satisfaction, cost and revenue per test, telephone responsiveness, and patient wait times.

We also considered the audience to whom the metric is relevant, such as the patient, the customer, laboratory management, and senior leadership.  Once a metric was selected, we decided how and when to measure it and determined the best way to communicate the results.  As this process continues, not only is the metric examined on a recurring basis, but the trend of the metric and the category is closely monitored.

Today, data is king and provides power.  The most successful clinical laboratory outreach programs will consider a combination of external and internal benchmarks to improve existing processes and demonstrate success over many years.

Emily Adams, MT(ASCP)
Client Director of Outpatient Laboratory Services
Chi Solutions Inc.

Laboratory Outreach Financial Considerations: Unit Cost-Series Part 2

One of the big benefits of outreach is the impact of additional volume on unit costs.  We all understand the concept of efficiencies of scale.  Do you think the volume impact is seen early with modest increases in volume or only much later in the growth curve?  Most of us would guess the latter, but, counterintuitively, it’s just the opposite.  The graph below shows that the biggest impact to efficiency is seen in the early stage of growth.

 Economies of Scale for Productivity

 Economies of Scale

That means that everybody benefits from outreach volume, not just the big laboratories.  In fact, the very large laboratories may not benefit from scale; perhaps the infrastructure costs of securing far-flung business has become so high as to be a diseconomy of scale?

The same concept of economies of scale can hurt you if you elect to get out of the outreach business. There is a material impact on unit costs.  Last year, we performed a strategic options analysis for a three-hospital system on the West Coast.  They had a $42 million business and wanted advice on whether they should grow, maintain their base, or exit the business.  It turned out that there was a substantial growth opportunity, and they were leaning towards that option.  They did not need the cash from a sale.  What cemented the decision was the realization that they would incur a 52 percent increase in unit cost for inpatients and outpatients without the outreach volume.  Outreach comprised more than half of the laboratory volume and provided tangible economies of scale as well.

Stay tuned to this blog series for information on additional financial issues that laboratory outreach program leaders must consider.  You can also learn more in my book, The Profit Machine in the Hospital Basement: Turning Your Lab into an Economic Engine.

Kathleen A. Murphy, PhD
Senior Growth Advisor
Chi Solutions Inc.