DATELINE: Toronto, Ontario, Canada—This week, clinical laboratory and pathology leaders from across Canada gathered here at the fifth Executive Edge conference to assess the state of medical laboratory testing in Canada’s different provinces. One message in the provocative sessions was clear and consistent; ever more volumes of lab testing will continue to hit clinical laboratories, even as provincial health authorities squeeze lab testing budgets in coming years.
It means that, going forward, clinical laboratories in Canada will be asked to perform growing numbers of tests without a comparable increase in lab budgets or reimbursements. Most speakers recognized this primary trend. In her presentation, Tammy Hofer, Vice President of Laboratory Services for the Alberta Health System, observed that the number of medical laboratory tests performed across the province is increasing at approximately 6% per year. In the province, there are 133 clinical laboratories and they perform approximately 60 million tests per year for Alberta’s population, which currently numbers 3.7 million people.
Another speaker during Monday’s sessions that tackled the subject of growing utilization of clinical laboratory testing was James Tucker, Principal of the Boston Consulting Group. Tucker is based in Toronto. He described the medical laboratory testing industry as a “burning platform” because the demand for lab testing will continue to outpace payment and funding paid to the labs which perform this testing.
Demand and Reimbursement Trajectories for Clinical Laboratory Testing
“Clinical laboratories are caught in the juxtaposition of two trajectories,” explained Tucker. “One trajectory is the ever-increasing volume of medical laboratory testing. All factors predict that yearly increases in lab test utilization will continue at significant rates.
“The second trajectory is the amount of remuneration that health systems pay laboratories,” he continued. “There is broad consensus that the amount of money paid for laboratory tests will fail to keep pace with the increased demand for testing and may decline from one year to the next. This is true, not just for Canada, but also for most other developed nations across the globe.”
Tucker next identified the basic strategies that private lab companies and hospital laboratories currently use to cut costs in order to protect profit margins. These strategies range from growth by acquisition to achieve greater economies of scale to lab consolidation to similarly concentrate testing so as to generate lower lab test costs.
“But at some point, all of these strategies are short-term solutions which are destined to fail in the face of climbing demand for lab testing and reduced compensation for these tests,” observed Tucker. “Given the existing system, these outcomes are inevitable.”
Tucker has a solution to this dilemma facing clinical labs in most developed countries across the world, Canada included. He explained that system-wide changes are necessary. “The goal should be to right-size consumption of medical laboratory testing in ways that decrease system costs,” he stated. “Integrated demand management of clinical laboratory testing would be the guiding principle for developing the needed system-wide changes.
Integrated Demand Management for Medical Laboratory Testing
“There are four distinct demand management activities,” added Tucker. “They are:
- “One, manage under-utilization of lab tests to ensure the patient gets appropriate and timely care;
- “Two, manage over-utilization of lab test so that inappropriate or unnecessary laboratory testing is not performed;
- “Three, participate in improving chronic care management so that proper use of clinical laboratory testing contributes to improved patient compliance and fewer episodic events; and,
- “Four, eliminate those laboratory tests that offer little clinical value and those lab tests which are ineffective or obsolete.”
In Tucker’s view, these steps will be necessary for the clinical laboratory testing profession to participate in system-wide changes that create a clinically—and financially—sustainable environment within the parent health system.
One of yesterday’s most interesting sessions at Executive Edge was a “Great Debate” over the value of laboratory accreditation and licensure.” Unlike the United States, which has federal laws governing the licensing and accreditation of clinical laboratories and anatomic pathology laboratories, Canada allows each province to establish its own requirements for licensing and accrediting laboratories. For this reason, laboratory professionals are interested in how the implementation of more detailed accreditation requirements by some provinces may contribute to improved laboratory quality.
During this engaging debate, it was noted that several provinces had initiated accreditation requirements for medical laboratories in recent years. Leaders of labs in these provinces described how and why the implementation of province-wide laboratory accreditation had contributed to more consistent quality and improved patient safety.
Another notable feature of this year’s Executive Edge was that it was sold out and almost all provinces had clinical laboratory and pathology professionals in attendance. Many things are changing in healthcare across Canada and Executive Edge has quietly earned a reputation as the place to gather to understand the strategic drivers in health and lab testing, along with useful case studies of now the nation’s most innovative laboratories are responding to these trends in effective ways.
Your Dark Daily Editor,
Robert L. Michel
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