Oakwood Healthcare

A Case Study in Laboratory Integration and Sales Growth

Situation

Oakwood HealthCare, Inc. (OHI) is a four-hospital IDN in southeast Michigan. OHI consists of 1,334 licensed beds with over 48,000 annual admissions. Each hospital had separate on-site inpatient laboratories which perform 4.5 million tests annually, in addition to an outreach facility with $8 million in net annual revenue.

OHI contacted Chi Solutions, Inc. (Chi) to provide transition consulting to combine the inpatient laboratories and the outreach laboratory into a single facility. Since, Chi has contract managed the OHI laboratory system and has provided laboratory outreach marketing management and sales representatives.

Challenge

The challenge was to integrate the four separate hospital laboratories and outreach laboratory into a single core production facility with Rapid Response Laboratories (RRL) at each hospital. This effort included:

  • Reducing the laboratory space at each hospital
  • Standardizing:
  • STAT test offerings
  • Equipment platforms
  • Test methodology and normal ranges
  • Installing new laboratory information system (LIS)
  • Reducing expenses and increasing outreach revenues to improve profit margins

Strategy

A thorough analysis determined the strategic direction OHI should take. It was to be a major project, both in scope and complexity, and demanded a successful outcome. OHI contracted with Chi to manage the project and provide the outreach marketing team. Chi provided:

  • A Laboratory Manager whose hospital laboratory technical experience, LIS expertise, and management skills were a fit with the hospital inpatient and outreach programs.
  • A regulatory Compliance Advisor.
  • A Chi Marketing Expert designated to implement a strong sales and marketing program within a 30-mile radius of the core facility.
  • Three Sales Representative to grow the laboratory outreach business.
  • The Courier Supervisor for the outreach program.

Chi also had capability to provide specialized consulting expertise when needed.

This approach resulted in a successful outcome with a 45% testing volume growth while at the same time reducing the actual operating expenses by 11% and laboratory operations unit costs by 37%.

SIDE BAR:

This strategy has yielded these results:

  • Test volume growth of 45%
  • Actual expense cut of 11%
  • Per testcost reduction of 37%
  • Laboratory outreach growth of 115%

Phase I:

Changes were geared towards creating a single facility with four RRLs. The consolidation of laboratories, for the core laboratory, would compress 28,000 sq. ft. into 18,000 sq. ft. A core laboratory was created to enhance services to hospitals and outreach clients. Standardization of personnel requirements included:

  • Job descriptions.
  • Salary ranges.

This helped to create a stable work environment and reduce employee attrition.

In addition, standards were created throughout the OHI system for:

  • Equipment platforms.
  • Test methods.
  • STAT test offerings.
  • Normal ranges.
  • Satellite test menus.

The new Sunquest LIS system was installed under deadline pressures. Further, a prime vendor relationship was developed with a unique risk/reward partnership.

Phase II:

Phase II of the engagement included:

  • Automation.
  • New equipment.
  • Core laboratory redesign.
  • Reduced blood banking costs.

Chi negotiated with Beckman Coulter to connect automated chemistry and immuno-chemistry to an automated line and provide online refrigerated specimen storage retrieval. Negotiations were also conducted for OHI to become an alpha test site for new Beckman Coulter DA-800s, to replace five immuno-chemistry analyzers.

A capital budget was set up to redesign:

  • Non-technical areas.
  • Flow cytometry areas of the core laboratory.

This action helped to improve workflow and increase technical processing space.

Since blood banking costs doubled in the last two years, Chi is working with the pathologists and medical staff to reduce utilization.

Results

As a result of these operational improvements, the OHI laboratories have achieved a superior benchmarking performance. A benchmarking performance analysis, employing the Chi Benchmarking service, demonstrates OHI’s high ranking versus its appropriate peer group.

In this project, Chi has provided laboratory management and technical knowledge to consolidate and reduce expenses and the marketing skills for growing the business. Improving service levels, creating capacity, and adding all the “bells and whistles” of a commercial laboratory type operation will help in the future to expand the outreach coverage while better competing with the national laboratories.

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