Because of successive decreases in budgets for clinical laboratory testing, many Canadian medical laboratories are engaging their staffs to innovate and introduce new value-added testing services

TORONTO, ONTARIO, CANADA—Traditional operational and business models for clinical laboratory testing are under siege here in Canada, just as they are in other developed nations across the globe. That was one important trend identified by multiple speakers at Executive Edge 2013, that took place Monday and Tuesday of this week.

During Monday morning’s opening session, a common point of emphasis was that simply consolidating specimens into large medical laboratory facilities as a way to achieve economies of scale and lower the average cost per test is fast becoming obsolete. All pathologists and clinical laboratory managers understand why this is true: payers can lower reimbursement for lab tests faster than labs can cut the costs of performing those tests.

What Medical Laboratories Should Do Differently Going Forward

If the traditional economics of traditional lab organizations are being rapidly undermined by successive budget cuts, then what should medical laboratories do differently today to support the delivery of advanced diagnostic services in a financially sustainable manner?

“An analysis of the lab testing marketplace shows that current momentum supports predictions that there will be ongoing increases in lab test utilization,” stated James Tucker, Partner and Managing Director for the Boston Consulting Group in Toronto, Ontario. “Regular increases in the volume of lab tests to be performed must be considered when laboratories look at different ways to reduce their costs and keep expenses in line with declining revenue.”

At Executive Edge in Toronto this week, James Tucker (above) Partner and Managing Director of Boston Consulting Group, delivered a keynote address about the changes happening in the clinical laboratory marketplace and the strategies available to medical laboratories to meet these challenges. (Photo Nick Kozak)

At Executive Edge in Toronto this week, James Tucker (above) Partner and Managing Director of Boston Consulting Group, delivered a keynote address about the changes happening in the clinical laboratory marketplace and the strategies available to medical laboratories to meet these challenges. (Photo Nick Kozak)

Tucker identified four ways to improve the utilization of medical laboratory tests. They are:

  • Manage underutilization of lab tests by introducing protocols designed to help clinicians avoid acute incidents and improve patient outcomes;
  • Manage overutilization of lab tests by helping clinicians recognize when tests are inappropriate;
  • Improve chronic care management by helping patients with self-testing; and,
  • Eliminate obsolete or ineffective lab tests by shifting test mix to more clinically useful assays.

Tucker provided examples of programs in different countries that were successful in reducing utilization of clinical laboratory tests. For example, in a “gatekeeper” approach to lab test utilization, Tucker mentioned that Calgary Laboratory Services in Calgary, Alberta, had introduced an approval step for high-cost lab tests that resulted in a 30% to 40% decrease in the volume of targeted lab tests.

Program to Reduce Clinical Laboratory Test Utilization

Another program to reduce lab test utilization was enacted in The Netherlands, according to Tucker. This program used optimized requisition forms. Commonly miss-utilized medical lab tests were removed from the requisition form. By modifying how selected tests were presented on electronic ordering screens, utilization of these tests declined as much as 40%.

Another common trait for the speakers at this year’s Executive Edge is how their respective lab organizations are willing to innovate and continuously improve to increase the value proposition for physicians, patients, and their provincial health authorities. Leadership was front and center in several presentations.

For example, Stephen Raab, M.D., Clinical Chief of Laboratory Medicine at Eastern Health in St. Johns, New Brunswick, tackled what he called “Lean Leadership.” The goal at his laboratory organization was to align the collaboration of pathologists, lab administrators, and frontline lab staff by removing communication barriers. The benefits were improved mentoring and the increased capability of the lab team to produce continuous improvement.

Earning a ‘Canada 50 Best Managed Company’ Recognition

Similarly, at DynaLifeDx, in Edmonton, Canada, leadership was the hallmark of the lab’s cultural and operational transformations. In his presentation yesterday, Jason Pincock, CEO at DynaLifeDx, discussed how the lab had achieved recognition as a “Canada 50 Best Managed Company.” But it was an effort that required significant cultural change within the organization and enlightened leadership at all levels of management.

“Our managers needed to learn how to make strategy much more transparent,” noted Pincock. “We also instituted scorecards with our customers to show them—and our staff—how our laboratory was performing. Making our scorecard performance available to the public and all our stakeholders gives us a way to demonstrate our commitment to high levels of service.”

Executive Edge is conducted every second year in Toronto, Ontario. It brings together leaders from clinical laboratories, pathology labs, and provincial health authorities from provinces across Canada. This week’s program was sold out and the networking and professional exchange was at a high pitch throughout the event.

Recognition of Financial Challenges Ahead

Two primary themes emerged from all the presentations delivered during the two days of Executive Edge. First, clinical labs can expect to see an ongoing squeeze as lab budgets continue to shrink, even as the number of specimens to be testing continues to increase at substantial rates from one year to the next.

Second, innovation is alive and well within the clinical laboratory profession in Canada.  In response to the twin pressures described above, progressive laboratory organizations are actively restructuring lab operations to improve operational productivity. They are also shrewdly investing in automation, enhanced informatics, and new diagnostic technology as one way to handle increased volumes of specimens in a cost-effective manner.

One dynamic was ever-present throughout all the sessions. It is a recognition that the health systems in all the provinces of Canada are under their own financial pressure. Demand for healthcare continues to outpace the funding that is available to pay for those services. That is a primary reason why lab budgets in Canada are not keeping pace with the increased volume of testing.

Of course, this is not a new trend. Healthcare budgets have been tightly managed in the various provinces for more than two decades. What adds uncertainty to the future is that clinical lab managers and pathologists in Canada know that, at some point in time, lab budgets cannot be cut further without negatively affecting patient safety and patient outcomes.

From Toronto, your editor,

Robert L. Michel

Related Information:

In Canada, Clinical Pathology Laboratories Face Growing Lab Test Utilization and Shrinking Lab Test Budgets

Medical Laboratories in Toronto Move Forward with Digital Pathology and Clinical Lab Consolidation

Canada’s Clinical Pathology Laboratory Leaders to Discuss Trends of Lab Consolidation, Care Integration, and Genetic Testing during a Time of Shrinking Lab Budgets