In 1995 St. Francis Health System (SFHS), a multi-hospital integrated delivery system in Pittsburgh, operated four separately licensed clinical laboratories within its various acute hospitals and ambulatory care centers.
When market pressures on the healthcare industry pushed for cost containment through consolidation, St. Francis began looking at operations among its four laboratories. It found that during 1994 and 1995 test expenses incurred by these sites increased annually by about 2 percent. On the downside, each site had separate management teams, different processes and varying levels of service. None had a dedicated laboratory information system (LIS). On the upside, all were located within an hour’s drive of each other, and together they generated more than one million billed tests a year.
It was time to reorganize, and critical to its success would be the purchase of a new LIS with multi-facility functionality.
Planning began in earnest. The group in charge of implementing the lab consolidation at SFHS decided early on that all tests and services should be identical among all sites whenever possible. A single management group was selected to assume responsibility for all related processes and tasks. A financial analysis based on desired productivity goals was performed by the internal group with the help of Dr. Brad Hill of Group Hill, a consulting firm based in Aurora, Colo. Hill helped establish the financial parameters and benchmarks. The group used other labs in the Northeast region as a benchmark for efficiency and productivity. The goal was to have all four labs performing in the 90th percentile of efficiency and productivity. That outcome would be measured in billable test per FTE per quarter, and, according to Ronald Workman, M.D., medical director of SFHS, it took 11 quarters and a lot of heartache to reach. Fortunately, they were able to get there without a single lay-off.
"The ratio of economic benefit to LIS system expenses over the three-year period is greater than six to one." – Ronald Workman, M.D.
Laboratory vendor agreements were pursued to create system-wide uniformity and capture economies of scale. The lab standardized on a single manufacturer for chemistry (Roche), hematology (Sysmex), co-agulation (Dade Behring), point-of-care (Nova) and microbiology (Autoscan and Microscan). They went with a cost-per-reportable test agreement with all vendors in an effort to lower direct costs throughout the system. Facility remodeling plans were developed to create open laboratory spaces where employees with appropriate skill sets and cross-training could implement redesigned processes.
The first part of the redesign focused on determining best practices throughout the four labs and establishing a single management group that managed to a single performance standard. New and improved efficiency goals were established and met each quarter. “We were relatively aggressive about meeting our quarterly goals,” according to Michelle Lewis, administrative director of SFHS. “There came a point when we were not yet online with the new LIS, but we had achieved significant levels of increased efficiency. We were actually probably too productive for the level of computerization we were working with, because it was very stressful for our staff.”
St. Francis went live with its new LIS in the eighth quarter of its redesign project so the months leading up to that date were tough on morale, according to Workman. “It was a difficult time in the middle of this process, but we did not want to have to lay anyone off, and we didn’t,” Workman said.
Laboratory services were consolidated to create one core laboratory and three rapid service centers. “Any test that was not needed within four to five hours was a candidate to be consolidated into the core lab,” Lewis said. The rapid service centers are used for stat work and for morning inpatient testing within each facility. The core, or central, lab was expanded to handle a higher volume and greater assortment of tests, increasing productivity while reducing costs.
A screenshot from the Sunquest LIS system. (below) St. Francis Medical Center, one of the largest medical centers in western Pennsylvania, provides specialized care through its Centers of Excellence in cardiac care, addiction services, psychiatric services, laser and advanced surgery, critical care and physical rehabilitation as well as the fields of oncology, neurosciences, orthopaedics, ophthalmology, oral and maxillofacial surgery and pulmonary medicine. This 599-bed regional teaching hospital is located about four miles east of downtown Pittsburgh.
Within three years:
•laboratory test volume increased 22 percent.
•outreach volume and profitability tripled.
•cost-per-test fell 14 percent.
•direct and supply costs were reduced, without capital investment, through risk-sharing, cost-per-reportable test and vendor partnerships.
•full-time equivalent staff decreased 25 percent through attrition, re-training and outplacement within the health system.
The outreach testing program went from 5 percent of the workload before the redesign to 25 percent afterwards. That couldn’t have happened without an LIS implementation, according to Workman. The increased capabilities such as printing reports to physician offices and offering better customer service could not be achieved without an organized and reliable information system.
“We improved our financial performance by over $3 a test, according to Workman. “When you’re talking ROI, that’s a payback of 600 percent.”Total laboratory expenses include all management and staff compensation, capital equipment and remodeling depreciation, and direct and indirect operating costs. Between 1996 and 1998 SFHS reduced cumulative laboratory expenses by $2,374,000, while increasing cumulative profits from outreach testing by $1,221,000. This resulted in a total economic benefit of $3,595,000.
“This provides the basis for measuring our LIS return on investment, considering all equipment and facility costs relative to the redesign of laboratory services,” Workman said. “The ratio of economic benefit to LIS system expenses over the three-year period is greater than six to one. Looking forward, our investment will pay for itself many times over as we continue to improve the productivity and grow the services of our laboratory network.”
“In preparing for and carrying out this system-wide LIS implementation, our laboratories began to gain control of their operating expenses,” he said. “They were able to increase their workload without proportionate increases in production costs through advanced features of the host LIS and automated data handling capabilities.
Workman credits the system’s bi-directional interface and online quality control capabilities as the biggest productivity boosters. The bi-directional interface eliminates most of the manual entry of data while the online QC eliminates the bother and organizational headache of filling out and keeping track of reams of paper for quality control monitoring purposes.
LIS selection
“When looking for an LIS vendor, we went through the typical selection process, Workman said. The St. Francis group did a lot of networking and talking with peers at other institutions. They were looking for a company that had a respectable market share, a presence in the local market and was capable of supporting them throughout the implementation process and beyond. After-sale support and a track record of interfaces with other computer systems were also important. “We started with the six top companies then narrowed it to three. Most of these systems had parity, but we were looking for more — for a company that would facilitate the rolling redesign of our health system as we went along. That’s why we chose Sunquest,” Workman said.
“Having never consolidated a multi-facility healthcare network, our management team lacked experience, he says. “For instance, to improve speed and minimize errors during the pre-analytic testing phase, we looked at other Sunquest sites and developed a bar-code specimen tracking process. When we struggled with an issue, Sunquest, with its many installs, was very resourceful. It was able to step in and provide examples on how something similar was handled at another site.”
Catherine Behan is a freelance writer based in Denver.
