Three Reasons Hospitals “Divorce” National Labs

A recent article by Robert Michel of the Dark Report highlighted two out of the three top reasons national laboratory partnerships with hospitals fail:
1. Service issues
2. Lack of local control

Over my consulting career, I have been called many times to help hospitals and health systems resolve “partnership issues.” The most common problem is physician dissatisfaction with turnaround times for results. This is no surprise since the lab partner has an incentive to consolidate testing at other owned facilities in the region to reduce cost. The trade-off is longer turnaround times for the local hospital.

This is often aggravated by the fact that the hospital no longer runs the lab. It has conceded local control to the national lab partner and is therefore unable to easily rectify service issues. It can take months to years of monitoring and negotiation.

The third reason that these partnerships fail is a dirty little secret. In fact, it is the common thread to why relationships, in general, fail. You guessed it—it’s about the money. How many marriages split up over different views about money? Lots! Money is one of the most common reasons for break-ups. The same is true with the national lab partnerships.

During the “dating” period, the national lab partner emphasizes its low cost structure and how it can save significant money for the health system. Over time, a different story emerges: “fee creep.” Health systems realize that they are paying more to outsource than to manage the lab on their own. In addition, they now must share profits for outreach. They start to ask themselves why they entered this relationship in the first place. So, if we’re not getting the same service, we’ve lost local control, and the relationship is no longer financially viable…


…that’s three strikes and you’re out!

Kathleen A. Murphy, PhD
Senior Advisor
Chi Solutions Inc., an Accumen Company

1Michel, Robert, “Quest Diagnostics Exits 31-Year-Old CompuNet Lab Venture.” The Dark Report, June 26, 2017.

What Do Operating a Clinical Laboratory and Sea Kayaking Have in Common?

One of the things on my bucket list—or as I prefer to call it, my “life list”—was to go sea kayaking. I’d been kayaking on inland bodies of water, and even on a river at the mouth of the ocean, but never out in the open sea. I checked that one off my list last week, and oh my, what an experience!

I went out of Essex, Massachusetts, with my local Audubon Society to see a heron rookery off the coast of Boston’s north shore. When we got to the site, I thought it looked a little windy and rough. This trip had been canceled twice due to thunderstorms. We were determined to make it that evening. How cool would it be to see herons (black-capped and small blue), ibis (glossy), and egrets (both snowy and great) fly back to their nests on Kettle Island at sunset? Nothing was stopping me.

We donned our gear and set off from shore, gradually getting the rhythm of paddling with some waves and small chop. It seemed quite manageable. We paddled to the island and stayed on the side closest to shore where the water was more protected and basked in the glow of the sunset while the birds flew overhead. Their nests were on the other side—the really rough side. Of course, we wanted to go over there to view the nests and chicks. Our leader decided we could “test the waters” (pun intended). They told us to keep paddling no matter what. We started around the far end of the island, and it was more than rough. The swells were so deep that I couldn’t see half of the kayaks in front of me. All of a sudden, this big wave came out of nowhere. It almost swamped me! I felt myself tipping, and I was sure I was going down. From all around me, I heard “keep paddling,” and I sat up straight and dug in with everything I had. A moment later, I had turned myself around and was actually surfing the waves back on the protected side of the island. Whew! The rest of the evening was beautiful, and I made it back to shore unscathed and happy that I finally tried and survived sea kayaking.

So, what does this have to do with running a clinical laboratory? Haven’t we all been in situations at work that we thought we could handle when the wind blew up and suddenly we were drowning, reaching for a life preserver that wasn’t there? Someone (or maybe that voice from within) told us to hold our own—to keep paddling (swimming or even treading water)—and we got through it.

The rate of disruption and change is the greatest we have experienced in our careers thanks to accelerated consolidation of hospitals and systems, accountable care, reimbursement declines (such as PAMA), and the most competitive outreach markets to date. It will not end at this. We must continue to find ways to offset declines in reimbursement, increase revenue streams, and deliver higher-quality, patient-centered care.

During even the most blissful of times we are bound to encounter some waves, but if we paddle through it, we will make it back to safety. We must believe in our capability to improve performance, seek expertise from outside resources to lower the risk of execution, accelerate the time to market, and keep paddling to increase speed to outcomes.

Kathleen A. Murphy, PhD
Senior Advisor
Chi Solutions Inc., an Accumen Company