Dollars and Sense: Creating Cost Efficiencies in the Lab

Do more with less—that is the mantra of the medical community. The phrase is as annoying for its ubiquity as it is for its ambiguity. So CLP asked four experts for concrete ideas on how to make dollars from sense. Here are their money-saving tips.

Do Not Skimp on Human Resources
1) Hire the right people: Though there is no magic formula for hiring the best people, you should start with trained and experienced personnel. The American Society of Clinical Laboratory Science takes the position that, “Appropriately trained, competent laboratory professionals are essential for cost-effective, as well as quality, laboratory services. Unqualified testing personnel unnecessarily increase the cost of health care through errors in testing, repeat testing, false diagnosis due to false-positive test results, and undiagnosed conditions due to false-negative test results.”1

2) Use recruiting strategies: Of course, to hire good people, you must be able to find them. Frederick L. Kiechle, MD, PhD, past chairman of clinical pathology and medical director of the Beaumont Reference Laboratory at William Beaumont Hospital in Royal Oak, Mich, has used sign-on and reference bonuses, but he feels that one of the best methods for finding good staff is local educational programs. “We used to pay medical-technology interns a stipend during their internships, but now we give them a loan, which is considered paid if they stay on for 2 years. The cost is the same, but it encourages retention,” he says.

3) Maintain a good working environment: Dean Yoshimura, lab director of the Waianae Coast Comprehensive Health Center in Waianae, Hawaii, states that a good working environment will help to retain staff. He should know—his lab’s med techs have an average 20-plus years with the company.

4) Keep staff healthy: Good health is key to maintaining a good work environment. “You can’t be efficient if your staff is always sick,” says Yoshimura, who advises safety and ergonomic measures, such as wrist rests and corner protectors.

5) Match the job description to the job title: Do not waste your good med techs on tasks such as filing and data entry. “Make sure the technologist is doing work that requires a technologist’s thinking,” says Joseph Bergeron, MD, Boston-area pathologist and member of the College of American Pathologists. Kiechle recommends keeping the most complex activities for the highest-level professionals and reassigning others to support staff, such as medical laboratory technicians or even clerks. This is especially true higher up the professional ladder. Kiechle reassigned the performance of the bone marrow procedure from pathologists to residents and fellows, and finally to nurse practitioners.

6) Empower the staff to develop money-saving ideas: As the people who are the most intimate with the lab’s workings, they are the best poised to identify areas in which to save money.

7) Empower the lab supervisor to implement these ideas: “The lab head needs the freedom from administrative red tape to research, implement, and purchase items quickly so that ideas can be put into practice and savings realized,” Yoshimura says. He notes that his lab is small and that some of what works for him may not apply to a larger facility, but that having the freedom to make budget decisions has allowed him to save the center money.

8) Let the staff set their own schedule: Yoshimura thinks this freedom is one of the main reasons his staff is so happy. The lab employs a fixed schedule with no rotations. “Some people like nights and weekends, and by letting them set their own schedule, they increase their quality of life outside of the lab and are happier in the lab,” Yoshimura says. The center even allows 16- and 24-hour shifts.

9) Tweak the schedule: In larger facilities, it may not be so easy to allow personnel to set their own schedule, particularly when it can be altered to better suit the facility’s goals. “We are always looking at our staffing model and mix. For instance, we may not need two phlebotomists on an 8-hour shift. It may be more cost-efficient to have one work a 4-hour shift during the rush, and then head home,” says Don Newton, MSMT, lab director of Healthsouth Braintree (Mass). The best way to implement these changes is to give the staff lots of lead time and input. “Scheduling is created 4 to 8 weeks in advance, with time for input. And I will ask them for their suggestions on to how to solve a particular problem,” Newton says.

Embrace Technology
10) Introduce automation: “Automation is the only real workable strategy to introduce technology that requires fewer hands and feet to do the work,” Kiechle says. Technology can increase efficiency, improve turnaround time, and reduce errors, all of which create cost efficiencies both within the lab and the institution as a whole.

11) Automate the right processes: Determine where automation will really help the work flow. Kiechle has found that chemistry, hematology, and coagulation are areas where automation can save a significant amount of money and allow incremental growth without requiring additional human or technological resources. Kiechle has seen one lab go from performing 980 complete blood counts (CBCs) per day with three analyzers and one slide stainer/maker to performing 2,000 CBCs per day with no change in equipment or personnel 6 years later. At that time, an updated automated system consisting of four analyzers and two slide stainers/makers was purchased.

12) Use the right equipment: Consider the work flow and volumes of the lab to be sure the most efficient technology is purchased. Explore the available options to ensure you select the right product and vendor. And look at areas outside of the lab as well—computerized physician order entry and electronic medical records (EMR) can help increase efficiency and reduce errors.

13) Calculate cost of ownership: Do not just buy the cheapest equipment out there. Consider the cost of ownership throughout the instrument’s lifetime; in fact, do not forget to consider its life expectancy. Factor not only the initial expense, but also the cost for service, maintenance, reagents, quality control, and the like. “Make up a business plan, and create a cost analysis,” Yoshimura advises. Newton notes that it may be a huge up-front cost that will save significant money over time.

14) Make the smart acquisition: Once a decision is made, be sure to use the right purchasing plan. Should you buy or lease? Newton notes that an entire hospital team may need to be formed to properly analyze the purchase. “Engage the financial team as well as the techs,” Newton says.

15) Shop eBay: While this option does not work for everyone, Yoshimura has found quite a few deals on the site, including centrifuges, washers, pipettes, and even analyzers. “We had an old blood analyzer that was on its way out, so I purchased a backup on eBay that is worth $10,000 in parts alone,” Yoshimura says.

16) Choose the right service contract: Buying equipment in this way means the lab is not locked into a specific service agreement, so Yoshimura shopped around. “After acquiring a donated piece of equipment, we were offered a service contract that would have cost $18,700 a year over 6 years—a total of $112,200, but it didn’t make sense, so we passed. During the first 3 years, the machine needed no service. During the next 3, we spent $40,000 on maintenance and repairs, resulting in a savings of more than $72,000,” Yoshimura says. Again, he recognizes that such a solution may not work for everyone.

17) Consider the equipment’s footprint: As technology is miniaturized, footprint becomes a selling point. “If you are looking at two analyzers and one is a few thousand dollars more but is 30% smaller, it may be worth the extra money since savings will be realized in the physical work flow,” Newton says.

18) Reduce staff through attrition: One of the benefits of automation is the ability to get more done with fewer people, but reducing the staff can be controversial. Kiechle suggests that attrition can provide a way around the pain of letting people go.

Create Efficient Work Flow
19) Implement efficient work-flow practices: Kiechle suggests that lean techniques, Six Sigma, and even the ISO 9000 process can help improve work flow. “It may require mapping of the workflow and lots of documentation at first, but it provides a starting point for finding areas where processes can be improved, waste can be eliminated, and errors can be reduced,” he says.

20) Look at the big picture: This process also requires that administrators look back and consider the big picture. Once you get out of the day-to-day grind, you may have some startling discoveries. “You may not have realized that the scope of the lab business has grown 80%,” Newton says. Yoshimura thinks an even bigger picture—one that encompasses the facility as a whole—may show additional areas for efficiency. “How well does the lab fit into the foundation of the institution? Are its systems compatible with those of the institution? Does the LIS talk to the EMR? If the systems don’t work well together, it impacts efficiency,” Yoshimura says.

21) Centralize or decentralize: When stepping back, it may become obvious that a new architecture is needed. “It depends on the facility. Either will work as long as the work flow is smooth and there are no bottlenecks. I have seen labs reflowed with positive results,” Newton says.

22) Increase volume with outreach: “You can reduce the cost per test by increasing the volume that comes in. Good outreach can develop a profit center,” says Kiechle, who recognizes that an increase in volume may eventually also create a greater need for resources.

23) Simplify administrative tasks: Do what you can to reduce unnecessary paperwork.

24) Implement appropriate quality control: “Don’t repeat every abnormal test. Perform the appropriate quality control — do some duplicate testing. But trust the equipment,” Bergeron says.

25) Perform appropriate testing: For instance, Yoshimura notes that sometimes a spot test rather than a biochemical test will produce the needed result. “Does the physician need the specific identification or just the sensitivity to treat the patient? High specificity may not be needed for a particular patient, and the lab can save money on that test,” says Yoshimura, who believes microbiology is more flexible in this regard than other areas of the clinical lab.

26) Batch samples when possible: “You need to compare the turnaround and clinical needs against cost-efficient testing, but batching can help,” Bergeron says. One of the labs he works with completes thyroid-stimulating hormone and thyroid testing in batches 2 days per week.

27) Send tests out: Bergeron suggests that sometimes it may be even more cost-efficient to send a test out. “The cost of sending a test out may be less than the expense of performing the test in-house when factoring human resources, quality control, reagents, and other supplies,” he says. Kiechle agrees that in some instances, it is more cost-efficient to send a test out. He has analyzed expense versus reimbursement versus volume of some tests for a year to determine the economic impact of introducing a send-out test in the clinical laboratory.

28) Negotiate with small send-out labs: If a test is being sent out to a small, esoteric laboratory, Kiechle advises negotiating a reduced cost per test, especially if two vendors offer a similar clinical evaluation using different techniques. “They tend to be more flexible,” says Kiechle, who has found that larger labs can charge a handling fee from $10 to $30 per test sent to small esoteric labs. By analyzing the send-out tests and negotiating with smaller, esoteric labs, Kiechle saved $550,000 in 1 year.

29) Bring tests in-house: Conversely, it may make more sense to bring a test in-house. “You want to look at the ordering patterns and utilizations of doctors. If a referring physician finds the clinical value of a certain test has improved, he may go from requesting 15 to 20 tests a month to 30 to 45. As the test becomes routine, the lab should look at converting it from a send-out to an in-house test,” Newton says.

Shop Smart for Supplies
30) Get volume discounts: Bergeron advises buyers to ask about volume discounts when purchasing multiple instruments from the same company or lots of reagent. “Depending on the facility, you may want to have one contract or use a single delivery system,” Bergeron says.

31) Join a buying group: Freestanding clinics may want to consider joining a buying group to obtain these discounts. “Veterans’ affairs facilities and state labs can typically use state contracts or government-organized buying groups,” Bergeron says.

32) Keep options open: Newton agrees that labs will want to align with group purchasing, but also recommends keeping options open. “Be up front about your position, stating that you’ll buy the majority of your supplies from the one company, but will occasionally buy from others,” he says.

33) Shop around: Newton constantly reviews the cost of raw goods. “If vendor B sells a widget for $4 a box and vendor A for $6 a box, I’ll use vendor B. The cost will add up after 100 boxes,” Newton says. Yoshimura uses a similar strategy, although he avoids national contracts altogether.

34) Negotiate: Yoshimura is not afraid to tell his vendors that he has found something cheaper on eBay. In some instances, he has gotten them to match the online price. “If the lab is in a buying position, you can negotiate distributors down, even for items such as lab coats and gloves,” Yoshimura says. He feels the time spent creating these savings is worth it. “I shop as if it’s my own money, and I find that good shopping is worthwhile,” he says.

35) Buy the largest lot that works: Smart shopping is worthwhile, too. Bergeron buys lots of reagents, keeping in mind both the expiration date and quality control. “You don’t want your reagents to expire, but larger lots require less quality control,” he says.

Renee DiIulio is a contributing writer for Clinical Lab Products.

1. American Society for Clinical Laboratory Science. Health Care Reform Position Paper. June 1995. Available at: http://www.ascls.org/position/health.asp.  Accessed January 4, 2006.