Many hospital outreach lab programs are dealing with the double whammy of successive reductions in Medicare Part B Clinical Laboratory Test fees and a shrinking budget by their parent hospitals
Over the past 24 months, all the painful cuts to lab test prices have made depressing news. These decreases in the prices paid to clinical laboratories by the Medicare program and major private health insurers mean that labs in 2014 will have significantly less revenue, even as the volume of specimens to be tested increases.
The logical response by many medical laboratory organizations has been to take active steps to decrease expenses. In fact, the price and revenue erosion experienced by labs of all sizes and types over the past two years is the reason why cutting unnecessary costs is now a primary management goal at clinical laboratories throughout the United States.
There is a similar story happening to hospital and health system laboratories. That’s because many hospitals are dealing with small declines in inpatient registrations. Combine that development with the fact that the first Obamacare-mandated cuts to hospital reimbursement (Part A funding) are slated to take effect in 2014, and it is understandable why that hospital administrators are decreasing budgets for all clinical service areas, including their clinical laboratories.
Flat or Declining Budgets at Many Hospital Laboratories
Simply put, independent labs and hospital laboratories across the United States are experiencing flat or declining revenue and shrinking budgets. This trend is validated by another interesting fact. Over the past twelve months, DarkDaily has fielded a growing number of inquiries from clinical laboratory managers who want information on ways to cut operational costs.
These lab managers are seeking published lab case studies on effective cost-reduction measures, along with referrals for vendors and consultants they can contact for help in cutting costs for their lab organizations. Collectively, these developments indicate that many more labs are feeling financial pain, compared to what was true in, say, 2011.
Lab Consultants Can Help Medical Labs Cut Operational Costs
To help lab managers in their search for effective ways to identify and eliminate unnecessary costs in their lab organizations, DarkDaily decided to do something different. With this e-briefing and several others to follow, it will provide information about consultants, in vitro diagnostic (IVD) manufacturers, and lab software vendors who specifically have a track record in helping clinical labs cut costs, boost productivity, and maintain quality.
Clinical laboratories across the nation are taking aggressive steps to cut costs. That is one reason for the keen interest in how the techniques of Lean, Six Sigma, and continuous process improvement can be deployed within the laboratory to eliminate waste and unnecessary costs, while improving quality and boosting the productivity of instrument systems and lab staff.
There are a few caveats to help readers understand why certain companies are included in these lists of resources and others are not. These caveats are simple to understand:
1. To the knowledge of DarkDaily, these are companies that are well-schooled in the W. Edwards Deming philosophy of quality management. Each firm is prepared to help clinical laboratories and pathology groups create a cultural transformation within the lab that is focused on continuous improvement and a system of prevention.
2. These are companies that, again to the knowledge of DarkDaily, were among the first-movers and early-adopters in the lab-testing industry to bring knowledge in the use of Lean, Six Sigma, ISO 9001/ISO 15189 to their customers.
3. Finally, for multiple years, these companies have actively supported the learning goals of the Executive War College, Lab Quality Confab, and similar laboratory management conferences by identifying those high-performing lab clients who were willing to share their successes and experiences with the broader lab industry in a public forum. This is significant because it is a public validation of the credibility of the lab consultants and lab vendors who helped these labs succeed in their cost cutting and quality improvement efforts.
Below are five clinical laboratory and pathology consulting companies that generally meet the above criteria. This list is by no means complete and DarkDaily would like to hear from other lab-consulting firms that are competent in quality management methods.
• Sprick Group, Charlotte, North Carolina, Website: www.sprickgroup.com
Principal: Leslie Sprick, who is Lean-certified through the University of Michigan, College of Engineering and Six Sigma Green Belt certified.
The company offers full strategic, management, and operational consulting services. This is one of the two firms created from the original consulting company known as Sprick Stegall & Associates. The two founders of this company were among the first lab management consulting companies not owned by an IVD manufacturing company to offer extensive services in Lean, Six Sigma, and process improvement.
• MS Stegall & Associates, Salem, Ohio, Website: www.msstegall-consulting.com
Principal: Susan Stegall (email: email@example.com), who is certified in Lean Manufacturing Techniques through the University of Michigan and holds a certificate of training completion for her
Green Belt and Black Belt from SixSigma.us. The company offers full strategic and operational consulting services. This is one of the two firms created from the original consulting company known as Sprick Stegall & Associates. The two founders of this company were also among the first lab management consulting companies not owned by an IVD manufacturing company to offer extensive services in Lean, Six Sigma, and process improvement.
• Argent Global Services, Oklahoma City, Oklahoma; Website: www.argentglobal.com
Principal for contact: Steve Stone
Argent Global Services was founded by industrial engineers. It describes itself as providing “industrial engineering, software, training, and management consulting solutions. For more than two decades, it has provided some of the world’s largest IVD manufacturers with expertise to improve how laboratory analyzers and automation systems support workflow in the pre-analytical, analytical, and post-analytical stages. During the same two decades, Argent Global has provided consulting services to clinical laboratories and pathology groups. The principals are skilled in the application of Lean, Six Sigma, and similar process improvement methods.
• Chi Lab Systems, Ann Arbor, Michigan; Website:
Principal: Kathleen A. Murphy, Ph.D.
A recognized lab-consulting company going back three decades, Chi Solutions is known as the source that provides A-to-Z consultancy in clinical lab strategy, management, outreach growth, and operations. Its dedicated consultants have deep experience in process improvement, workflow redesign, Lean, Six Sigma, and similar quality management methods.
• HartePro Consulting, Midvale, Utah; Email: firstname.lastname@example.org
Principal: Maureen Harte
This young lab consulting company was founded by one of the lab industry’s first Lean/Six Sigma practitioners. As early as 1999, while at Ortho-Clinical Diagnostics, Maureen Harte had extensive training in Lean and Six Sigma and was helping client laboratories understand and use the methods of continuous improvement and system of prevention. Harte is a Master Black Belt and has extensive consulting experience with many of the nation’s largest hospital and health system laboratories.
It is helpful for DarkDaily readers to know that these clinical laboratory-consulting companies have each actively supported educational programs that teach the techniques of Lean, Six Sigma, and process improvement to lab managers and pathologists going back 10 years or more. In this fashion, they have contributed to advances in the management and operations of medical laboratories.
In an upcoming DarkDaily e-briefing, we will provide information about some of the IVD manufacturers and lab informatics companies that are known to provide their lab customers with consulting services involving Lean, Six Sigma, and process improvement.
Finding Proven Ways to Cut Costs in Clinical Laboratories
Finally, lab managers, pathologists, and pathology practice administrators who are interested in achieving significant cost reductions in their laboratories before the end of the year should consider sending their process improvement team members to the upcoming seventh annual Lab Quality Confab. This will take place on October 1-2, 2013, at the Astor Crowne Plaza Hotel in New Orleans. Visit www.labqualityconfab.com to see the topics and speakers.
Lab Quality Confab brings together the lab industry’s best and brightest in cost management, workflow redesign, and quality improvement. There will be 50 speakers and 40 sessions, including lab case studies. Attendees will learn fast methods to achieve cost reductions, such as one-day and one-week kaizen events.
Medical Labs Face Unprecedented Revenue and Budget Squeeze
In summary, the entire clinical lab testing industry is experiencing a time without precedent. Reimbursement for clinical lab testing is falling across the board, as both government and private payers look for ways to save money. At the same time, specimen volume is increasing as physicians order more tests to improve patient outcomes.
With revenue declining and more lab testing to be done, medical laboratories have no choice but to cut costs. These are the fundamental reasons why cost cutting is now a primary strategy in clinical laboratories and pathology groups across the nation.