The challenge facing medical lab managers and pathologists is to intelligently cut costs in their labs without laying off med techs, histotechs, and other lab scientists
By any measure, this year’s budget season is a tough one for the nation’s clinical laboratories and pathology groups. Most labs are scrambling to adjust to reduced reimbursement and directives from their parent hospitals and health systems to shrink their lab budgets for 2015.
It’s why smart cost-cutting tops the list of challenges at all medical laboratory managers and pathologists. Lab leaders need effective approaches to trim spending in their lab without the need to lay off skilled medical technologists and other experienced lab scientists.
Lab Cost-Cutting Approaches of Past Years Not Effective Today
What’s different for the 2015 this budget cycle compared to previous years is that the typical cost-cutting tricks of the last decade no longer produce the savings needed. And, in many cases, these common cost-cutting tricks—which could range from purchasing lower-cost (and lesser-quality) reagents and consumables to cutting overtime—were often self-defeating.
“Staff layoffs and reduced spending on these items in the short term often led to increased expenses downstream due to the lack of trained lab staff at key times during the day and poorer quality consumables,” observed Patrick Maul, MBA, MT(ASCP). He is a Principal Consultant with Becton Dickinson and a Black Belt in Six Sigma and Lean. “That is even more true today, as labs, now in their 2015 budget planning cycle, must absorb deeper budget cuts than in past years and still function at today’s much higher standards for turnaround times, lab test quality and service integrity.”
Clinical Labs and Pathology Groups Need to Protect Key Staff Positions
Clinical labs and pathology groups have another key issue to address during the 2015 budget planning cycle. This issue presents the challenge of protecting the essential positions held by experienced medical technologists, microbiologists, histotechnologists, and lab scientists.
“Too often, when a lab manager is asked by the hospital administration to take 10% or 20% out of the lab budget for the coming year, the first reflex is to simply use staff layoffs,” explained Maul. “But the reduction-in-force strategy is false economy in most cases, since the lab staff members who are laid off frequently have years of experience and possess the best clinical skills in operating the lab instruments and dealing with the unexpected problems that crop up daily within the lab.”
It is a fact that, across the entire laboratory industry, even the most innovative and successful lab organizations must address the toughest financial conditions seen in the past two decades. In budget planning for 2015, the news is glum.
Most Hospitals Expect to Cut Medical Lab Budgets for 2015
Medicare is pressuring hospitals to prevent readmissions even as private payers reduce reimbursement. For many hospitals, this means fewer inpatients and less revenue-per-inpatient. These factors are why hospitals plan to cut their 2015 budgets for medical laboratory and other clinical service areas.
There are similar developments in anatomic pathology. Both Medicare and private payers have substantially reduced reimbursement for important CPT codes. For example, cuts in technical component (TC) procedures during the past 36 months have been so deep that many histology laboratories have gone from being reliable profit centers to barely break-even or money losers for their pathology groups.
Budget Planning for 2015 is High-Stakes for All Labs and Path Groups
That is why the budget planning cycle for 2015 is a high-stakes event for all labs. Labs that get their cost-cutting programs wrong over the next 12 months may not be able to recover if the financial pressures of the 2016 budget cycle are equal to or worse than those of this 2015 budget planning cycle.
“We feel all these pressures at my health system,” stated Dennis Sumwalt, Vice President of Sanford Health Integrated Laboratory Services in Fargo, North Dakota. “We are the nation’s largest rural, not-for-profit health system. Across our five-state region, we provide laboratory services from 65 CLIA-licensed laboratory sites in hospitals and clinics. We must be deliberate and selective, balancing our cost-cutting measures against our investment in new technology and additional service sites,” he said.
Lab Leaders Advised to Be Smart with Their Cost-Cutting Programs
Sumwalt recommended that lab managers and pathologists widen their horizons when seeking to identify useful ways to cut costs in their labs during the 2015 budget cycle. “Our goal is to be smart in how we reduce expenses,” he said. “Most lab managers do not realize how many cost-cutting tools are available for them to use. These cost-cutting initiatives can be implemented with a minimum of time and effort—and they deliver sustained savings across multiple budget cycles.”
Specific cost-cutting approaches that are effective and meet these criteria include:
- Right-sizing lab equipment
- Reviewing reference and esoteric testing costs
- Skillset matching and better alignment of staff skills in the lab
- Reviewing maintenance contracts for instrument systems and lab automation
- Shared testing opportunities with nearby labs
“One cost-control strategy that’s big on our list is helping physicians utilize clinical laboratory tests more effectively,” noted Sumwalt. “Eliminating the cost of running unnecessary lab tests has a major impact on helping our labs meet budget, not just in the target year, but in downstream years as well.”
Webinar Will Introduce Most Potent Lab Cost-Cutting Approaches
Maul and Sumwalt will share their cost-cutting expertise and budget cycle strategies at a special webinar titled: “Effective Lab Cost-Cutting and Budget Strategies for 2015.” It will take place on Tuesday, October 14, at 1 PM EDT, 12 PM CDT, 11 AM MDT, and 10 AM PDT. This is essential information for every lab manager who wants to cut lab costs in intelligent ways and sustain clinical excellence in his or her lab, even as budgets are squeezed.
Full details on this webinar, which is being presented by The Dark Report and Dark Daily, can be accessed at this link. (Or copy and paste this URL in your web browser: http://darkdaily.com/audio-conferences/effective-lab-cost-cutting-and-budget-strategies-for-2015-1014).
Expect high-value content and learning from this information-filled webinar. First, you’ll learn the pitfalls of attempting to cut costs in the wrong way. The webinar presenters have seen the best and the worst of cost control initiatives in labs large and small. This webinar will include essential insights on what cost-cutting approaches are counterproductive and only trigger bad morale among lab staff.
Learn the High-Yield, Simple-to-Implement Ways to Cut Lab Costs
The presenters will also explain cost-cutting opportunities that are high-yield, simple to implement, and easy for the staff to understand and accept. You’ll get case study examples that illustrate the best ways to implement these smart cost-cutting initiatives.
This special 90-minute webinar is particularly timely for another reason! It’s probably 2015 budget planning time at your parent organization. Your speakers recognize this fact and will include recommendations on the most effective ways for the lab to justify its 2015 budget requests during the give-and-take of the budget cycle activity at your hospital or health system.
This is essential information, delivered to you when you need it most. Make plans for you and your team to participate in this unique webinar. Register today by visiting this link.
For more opportunities to learn cost-cutting approaches in labs and pathology groups, check out the agenda for the 8th Annual Lab Quality Confab, to be held in New Orleans on October 21-22, 2014.