Wake Forest Baptist Medical Center

A Case Study in Controlling Referral Test Cost and Utilization

Situation

Like many laboratories across the country, Wake Forest Baptist Medical Center (WFBMC), an academic medical center located in Winston-Salem, North Carolina, was experiencing rising reference laboratory expenses. After discovering from a Chi Solutions, Inc. (Chi) Performance Analytics (Benchmarking) report that its referral expenses were 16 percent of total expenses and its expense per referral reportable result was the highest of its peer group, WFBMC decided to focus on controlling reference test utilization and costs.

Strategy

WFBMC engaged Chi to develop and implement a defined and systematic approach to manage reference laboratory costs while working collaboratively with clinicians to ensure an outcomes-driven approach and alignment with overall organizational goals. The initial tasks were to reduce vendor reference test costs and ensure appropriate reference test utilization by clinicians. The major activities included:

  • Conducting a primarily vendor Request for Proposal (RFP).
  • Obtaining contracted fee schedules from reference laboratory providers.
  • Reducing the total number of reference laboratories.
  • Developing and implementing a defined “make vs. buy” analysis process.
  • Developing a third-party billing strategy as needed to control unreimbursed costs.
  • Educating and advising clinicians.
  • Revising common order sets, limiting the majority of standing orders to three days.
  • Forming a multi-disciplinary, clinician-based test utilization task force.

Challenge

Primary Challenge: Balancing clinician needs (patient diagnosis and treatment) with the needs of administration (cost reduction) while engaging internal resources (pathologists and staff) to manage utilization.

Secondary Challenge: Understanding the complexity of key activities that had to be executed, such as an innovative RFP process, a make vs. buy analysis, a third-party billing strategy, a test formulary, and test decision trees or algorithms.

Results

  • During fiscal Year 2 of working with Chi, WFBMC experienced a 15 percent reduction in referral costs due to the partial implementation of key strategies.
  • In fiscal Year 3, WFBMC will realize an additional 18 percent reduction in referral costs due to continued implementation of key strategies.
  • Further initiatives are planned to reduce referral costs by another five percent.

Value

  • WFBMC achieved a reduction in net referral expense of over 30 percent.
  • The laboratory strengthened management practices for referral laboratory testing by navigating a series of complex activities in less than twelve months.
  • The laboratory developed processes to manage clinician referral test utilization.
“We knew our referral costs were climbing each year and needed to manage the process much more closely, but until we began working with Chi, we did not realize how much we had to learn and the different strategies there are to control costs and utilization!”
Laboratory Medicine Leadership
Wake Forest Baptist Health