Sale of respected laboratory information system company may be an early sign that investors believe clinical laboratories and pathology groups are ready to upgrade their LISs and add needed capabilities
In the past 10 years there has been little disruption to the
laboratory
information systems (LIS) market that clinical
laboratories and anatomic
pathology groups use. Yet, over that same 10-year period, almost every
hospital and physician group practice adopted an electronic
health system (EHR), primarily because of federal financial incentives that
encouraged such adoption.
For medical
laboratories and pathology groups, this widespread—nearly
universal—adoption of EHRs by the nation’s hospitals and physicians was
disruptive. Labs were required to expend resources building digital interfaces
to the EHRs of their parent hospitals and client physicians to support
electronic test ordering and test reporting.
However, because that wave of EHR adoption is now over,
clinical labs and pathology groups have an opportunity to assess the current
state of the health
information technology (HIT) that they use daily, primarily in the form of
the classic laboratory information system that handles nearly all the primary
functions needed to support testing and other operational needs.
This opportunity to help medical laboratories enhance and/or
upgrade the capabilities of their laboratory information systems may be one
motivation behind the recent sale of a well-known LIS company.
Private Equity Firm Buys Orchard Software
On Oct. 7, 2019, Orchard Software Corporation of Carmel,
Ind., announced its acquisition by Franciscan Partners, a private equity firm
based in San Francisco.
Orchard Software, founded in 1993, has grown steadily over
the past 20 years, primarily by serving physician office laboratories,
community hospital labs, and independent clinical laboratory companies. With each
stage of growth, Orchard added functionality to its LIS and related software
offerings and moved up-market to serve larger hospitals and larger labs.
The purchase price and the terms of the sale were not
announced. Orchard’s Founder, President and CEO, Rob Bush, will retire. The new
CEO is Billie Whitehurst, who came to Orchard from Netsmart Technologies, where she was Senior
Vice President. The remainder of Orchard’s management team will be kept in
place.
“Francisco Partners will provide capital and expertise to enable Orchard to grow at a faster pace and continue to develop its newer web-based products in an industry that has lagged behind in adoption of cloud-based software,” says Rob Bush (above), Orchard Software’s Founder and exiting CEO, in a press release. (Photo copyright: Twitter.)
Is the LIS Market Heating Up?
What makes the purchase of Orchard by a multi-billion-dollar
private equity company noteworthy is the fact that it is the first significant
transaction in the LIS sector probably since the mid-2000s, which saw several
significant mergers and acquisitions.
Other acquisitions or investments involving LIS companies
need to happen before it would be appropriate to say that investor interest in
the LIS sector is heating up. However, it is accurate to say that many
professional investors will be watching to see whether Franciscan Partners
succeeds with its investment in Orchard Software. If Orchard’s revenue and
operating profits increase substantially in the next few years, that may
encourage other investors to look for LIS companies and products that they can
buy.
If this were to happen, that would be a positive development
for both clinical laboratories and anatomic pathology groups, because these
investors would have a motive to add new functions and capabilities to their
LIS products. It would also wake up a sector of lab information technology that
has been relatively quiet for several years.
How medical laboratories can show value through process improvement methods and analytics will be among many key topics presented at the upcoming Lab Quality Confab conference
Quality management is the clinical laboratory’s best strategy for surviving and thriving in this era of shrinking lab budgets, PAMA price cuts, and value-based payment. In fact, the actions laboratories take in the next few months will set the course for their path to clinical success and financial sustainability in 2020 and beyond.
But how do medical laboratory managers and pathologists address these challenges while demonstrating their lab’s value? One way is through process improvement methods and another is through the use of analytics.
Clinical pathologists, hospital lab leaders, and independent lab executives have told Dark Daily that the trends demanding their focus include:
Ensuring needed resources and appropriate tests,
while the lab is scrutinized by insurance companies and internally by hospital
administration;
“Our impact on patient care, in many cases, is very
indirect. So, it is difficult to point to outcomes that occur. We know things
we do matter and change patient care, but objectively showing that is a real
struggle. And we are being asked to do more than we ever had before, and those
are the two big things that keep me up at night these days,” he added.
This is where process improvement methods and analytics are
helping clinical laboratories understand critical issues and find opportunities
for positive change.
“You need to have a strategy that you can adapt to a changing landscape in healthcare. You have to use analytics to guide your progress and measure your success,” Patricia Nortmann, System Director of Laboratory Services at St. Elizabeth Healthcare, Erlanger, Ky., told Dark Daily.
Clinical Laboratories Can Collaborate Instead of Compete
Prior to a joint venture with TriHealth in Cincinnati, St. Elizabeth lab leaders used data to inform their decision-making. Over about 12 years preceding the consolidation of labs they:
Implemented front-end automation outside the core area and in the microbiology lab.
“We are now considered a regional reference lab in the state
of Kentucky for two healthcare organizations—St. Elizabeth and TriHealth,”
Nortmann said.
Thanks to these changes, the lab more than doubled its
workload, growing from 2.1 million to 4.3 million outreach tests in the core
laboratory, she added.
Christopher Doern, PhD (left), Director of Microbiology and Associate Professor of Pathology at Virginia Commonwealth University Health System; Patricia Nortmann (center), System Director of Laboratory Services at St. Elizabeth Healthcare; and Joseph Cugini (right), Manager Client Solutions at Health Network Laboratories, will present practical solutions and case studies in quality improvement and analytics for clinical laboratory professionals at the 13th Annual Lab Quality Confab, October 15-16, 2019, at the Hyatt Regency in Atlanta, Ga. (Photo copyright: The Dark Report.)
Using Analytics to Test the Tests
Clinical laboratories also are using analytics and information technology (IT) to improve test utilization.
At VCH Health, Doern said an analytics solution interfaces
with their LIS, providing insights into test orders and informing decisions
about workflow. “I use this analytics system in different ways to answer
different questions, such as:
How are clinicians using our tests?
When do things come to the lab?
When should we be working on them?
“This is important for microbiology, which is a very delayed
discipline because of the incubation and growth required for the tests we do,”
he said.
Using analytics, the lab solved an issue with Clostridium
difficile (C diff) testing turnaround-time (TAT) after associating it with
specimen transportation.
Inappropriate or duplicate testing also
can be revealed through analytics. A physician may reconsider a test after discovering
another doctor recently ordered the same test. And the technology can guide
doctors in choosing tests in areas where the related diseases are obscure, such
as serology.
Avoiding Duplicate Records While
Improving Payment
Another example of process
improvement is Health Network Laboratories (HNL) in Allentown, Pa. A team there established an enterprise master patient index (EMPI) and implemented digital tools to find and eliminate
duplicate patient information and improve lab financial indicators.
“The system uses trusted sources of data to make sure data is clean and the lab has what it needs to send out a proper bill. That is necessary on the reimbursement side—from private insurance companies especially—to prevent denials,” Joseph Cugini, HNL’s Manager Client Solutions, told Dark Daily.
HNL reduced duplicate records in its database from 23% to
under one percent. “When you are talking about several million records, that is
quite a significant improvement,” he said.
Processes have improved not only on the billing side, but in
HNL’s patient service centers as well, he added. Staff there easily find
patients’ electronic test orders, and the flow of consumers through their
visits is enhanced.
Learn More at Lab Quality Confab Conference
Cugini, Doern, and Nortmann will speak on these topics and more during the 13th Annual Lab Quality Confab (LQC), October 15-16, 2019, at the Hyatt Regency in Atlanta, Ga. They will offer insights, practical knowledge, and case studies involving Lean, Six Sigma, and other process improvement methods during this important 2-day conference, a Dark Dailynews release notes.
Register for LQC, which is produced by Dark Daily’s sister publication The Dark Report, online at https://www.labqualityconfab.com/register, or by calling 512-264-7103.
Negative financials, low population growth, and excess inpatient capacity cited as reasons communities—especially rural areas—may lose their independent hospitals, including access to nearby clinical laboratory testing and anatomic pathology services
Could America’s independent rural hospitals actually disappear
altogether? Metrics compiled by multiple healthcare monitoring organizations
suggest that, with the increase in mergers and acquisitions of health networks,
it’s a distinct possibility.
If so, what would happen to all the clinical laboratories affiliated with and servicing those hospitals? And how might hospital-based medical laboratories that are absorbed into larger healthcare networks be required to alter their workflows? For almost three decades, the clinical laboratory profession has seen similar hospital acquisitions lead to consolidation, standardization, and regionalization of the medical laboratories inside these hospitals. Often these organizational restructurings mean layoffs of lab managers and medical technologists.
Probably the more serious challenge is what will happen to
all the rural patients who cannot get to larger health networks located in
urban settings.
Hospital Closings Create Risks for Rural Communities
Experts say rural hospitals—especially providers serving
small populations in southern and midwestern states—are in precarious positions
going forward.
Kaiser Health News (KHN) reported in August that more than 100 rural hospitals closed since 2010, and these closures have serious implications for patients, such as a lengthy transport to another hospital’s emergency department.
“Across America, rural patients spend more time in an ambulance than urban patients after a hospital closes,” Alison Davis, PhD, Professor of Agricultural Economics at the University of Kentucky, and Executive Director of the Community and Economic Development Initiative of Kentucky, told KHN. Her team analyzed ambulance call and transport time data and found that a trip can grow from an average of 14 minutes before a hospital closed to 25 minutes after, KHN reported. (Photo copyright: Northern Kentucky Tribune.)
430 Rural Hospitals Likely to Close!
Rural hospitals usually do not have many nearby competitors. So, what brings so many of them to the brink of closure? According to a Navigant (NYSE:NCI)) analysis of more than 2,000 rural hospitals, “21% are at high risk of closing based on their total operating margin, days cash-on-hand, and debt-to-capitalization ratio. This equates to 430 hospitals across 43 states that employ 150,000 people!”
Navigant identifies the following as factors in the decline
of these struggling rural hospitals:
“Low rural population growth;
“Payer mix degradation;
“Excess hospital capacity due to declining
inpatient care; and
“An inability for hospitals to leverage
technology due to lack of capital.”
Navigant goes on to state, “Further review of the community
essentiality (trauma status, service to vulnerable populations, geographic
isolation, economic impact) of rural hospitals at high financial risk suggests
64% or 277 of these hospitals are considered highly essential to their
community’s health and economic well-being. In 31 states, at least half of
these financially distressed rural hospitals are considered essential.”
After reviewing the 2,000 rural hospitals Navigant’s analysts concluded that, unless trends reverse, one-in-five rural hospitals (21%) risk closing, a news release stated. And these hospitals are “essential” to the area’s residents.
“We show that two in three of these hospitals are considered highly essential to their communities: that’s 277 hospitals nationwide,” wrote David Mosley, Navigant’s Managing Director, in a STAT blog post. “Furthermore, if these hospitals close, already fragile rural economies will crumble while residents will be forced to travel long distances for emergency and inpatient care.”
Fierce Healthcare noted that “Of Montana’s 12 at-risk rural hospitals, all of them are considered essential to their communities. Kansas has 29 total at-risk rural hospitals with 25 of them—or 86%—considered essential to their communities. Georgia and Mississippi have seen 77% and 61% of their essential rural hospitals at financial risk, respectively.”
Navigant’s list of states with the highest percentage of
rural hospitals at risk of closing includes:
Alabama: 21 hospitals (50%)
Mississippi: 31 hospitals (48%)
Georgia: 26 hospitals (41%)
Maine: eight hospitals (40%)
Alaska: six hospitals (40%)
Arkansas: 18 hospitals (37%)
Oklahoma: 17 hospitals (29%)
Kansas: 29 hospitals (29%)
Michigan:18 hospitals (25%)
Kentucky: 16 hospitals (25%)
Minnesota: 19 hospitals (21%)
Comparing Independent Hospitals to Health Networks
But it’s not just rural independent hospitals that are
struggling. Modern
Healthcare Metrics reports that 53% of all stand-alone hospitals in the US
have suffered operating losses during each of the last five years (2012 to
2017). Conversely, about half (26%) of health system-affiliated providers have
lost money.
Statistics compiled by the American Hospital Association (AHA) show there are approximately 5,000 non-federal acute care community hospitals in the US. In 2017, about 75% of them were part of multi-hospital systems, an increase from 70.4% in 2012, Modern Healthcare Metrics data indicated.
Average length of stay increased 6.4% at
independent hospitals, while it decreased at health system hospitals by 23.5%;
Occupancy rates fell to 43.6% from 53.9% at
independent providers, compared to rates falling to 53.7% from 61% at
system-owned hospitals;
Independent hospitals seem to rely on patients
having longer lengths of stay;
Hospices and skilled nursing facilities compete
with stand-alone hospitals.
Change is coming to parts of the nation that depend on
independent hospitals, and it’s not good. Medical laboratory leaders are
advised to prepare for serving patients who may lose access to nearby tests and
diagnostic services. On a positive note, medical laboratories in independent
hospitals that consolidate with healthcare systems could bring expertise,
adding value to their new networks.
Cerner and Epic are the industry’s revenue leaders, though smaller vendors remain popular with physician groups
Sales of electronic health record (EHR) systems and related hardware and services reached $31.5 billion in 2018. And those sales will increase, according to a 2019 market analysis from Kalorama Information. This is important information for clinical laboratories and anatomic pathology groups that must interface with the EHRs of their physician clients to enable electronic transmission of lab orders and test results between doctor and lab.
Kalorama’s ranking includes familiar big EHR manufacturer names—Cerner (NASDAQ:CERN) and Epic—and includes a new name, Change Healthcare, which was born out of Change Healthcare Holding’s merger with McKesson. However, smaller EHR vendors remain popular with many independent physicians.
“We estimate that 40% of the market is not in the top 15 [in total revenue rankings],” said Bruce Carlson, Kalorama’s publisher, in an exclusive interview with Dark Daily. “There’s a lot of room. There are small vendors out there—Amazing Charts, e-MDs, Greenway, NextGen, Athena Health—that show up on a lot of physician surveys.”
“The EHR is really important,” noted Bruce Carlson (above), Publisher at Kalorama. “Since there are a variety of systems—sometimes different from the LIS [laboratory information management system]—you want to make sure you know the vendors and the space.” Carlson says opportunities remain for new entrants in the 700-plus competitor space, which is expected to see continued mergers and acquisitions that will affect clinical laboratories and their client physicians. (Photo copyright: Twitter.)
Interoperability a Key Challenge, as Most Medical
Laboratories Know
Interoperability—or the lack thereof—remains one of the
industry’s biggest challenges. For pathologists, that means seamless electronic
communication between medical laboratories and provider hospitals can be
elusive and can create a backlash against EHR vendors.
Kalorama notes a joint investigation by Fortune and Kaiser Health News (KHN), titled, “Death by a Thousand Clicks: Where Electronic Health Records Went Wrong.” The report details the growing number of medical errors tied to EHRs. One instance involved a California lawyer with herpes encephalitis who allegedly suffered irreversible brain damage due to a treatment delay caused by the failure of a critical lab test order to reach the hospital laboratory. The order was typed into the EHR, but the hospital’s software did not fully interface with the clinical laboratory’s software, so the lab did not receive the order.
“Many software vendors and LIS systems were in use prior to
the real launching of EHRs—the [federal government] stimulus programs,” Carlson
told Dark Daily. “There are a lot of legacy systems that aren’t
compatible and don’t feed right into the EHR. It’s a work in progress.”
Though true interoperability isn’t on the immediate horizon, Carlson expects its arrival within the next five years as the U.S. Department of Health and Human Services ramps up pressure on vendors.
“I think it is going to be a simple matter eventually,” he
said. “There’s going to be much more pressure from the federal government on
this. They want patients to have access to their medical records. They want one
record. That’s not going to happen without interoperability.”
Other common criticisms of EHRs include:
Wasted provider time: a recent study published in JAMA Internal Medicine notes providers now spend more time in indirect patient care than interacting with patients.
Physician burnout: EHRs have been shown to increase physician stress and burnout.
Not worth the trouble: The debate continues over whether EHRs are improving the quality of care.
Negative patient outcomes: Fortune’s investigation outlines patient safety risks tied to software glitches, user errors, or other flaws.
There’s No Going Back
Regardless of the challenges—and potential dangers—it appears EHRs are here to stay. “Any vendor resistance of a spirited nature is gone. Everyone is part of the CommonWell Health Alliance now,” noted Carlson.
Clinical laboratories and pathology groups should expect
hospitals and health networks to continue moving forward with expansion of
their EHRs and LIS integrations.
“Despite the intensity of attacks on EHRs, very few health systems are going back to paper,” Carlson said in a news release. “Hospital EHR systems are largely in place, and upgrades, consulting, and vendor switches will fuel the market.”
Thus, it behooves clinical laboratory managers and
stakeholders to anticipate increased demand for interfaces to hospital-based
healthcare providers, and even off-site medical settings, such as urgent care
centers and retail health clinics.
PwC’s list of 12 factors that will shape the healthcare landscape in 2018 calls attention to many new innovations Dark Daily has reported on that will impact how medical laboratories perform their tests
PwC’s Health Research Institute (HRI) issued its annual report, detailing the 12 factors expected to impact the healthcare industry the most in 2018. Dark Daily culled items from the list that will most likely impact clinical laboratories and anatomic pathology groups. They include:
How clinical laboratory leaders respond to these items could, in part, be determined by new technologies.
AI Is Everywhere, Including in the Medical Laboratory
Artificial intelligence is becoming highly popular in the healthcare industry. According to an article in Healthcare IT News, business executives who were polled want to “automate tasks such as routine paperwork (82%), scheduling (79%), timesheet entry (78%), and accounting (69%) with AI tools.” However, only about 20% of the executives surveyed have the technology in place to use AI effectively. The majority—about 75%—plan to invest in AI over the next three years—whether they are ready or not.
One such example of how AI could impact clinical laboratories was demonstrated by a recent advancement in microscope imaging. Researchers at the University of Waterloo (UW) developed a new spectral light fusion microscope that captures images in full color and is far less expensive than microscopes currently on the market.
“In medicine, we know that pathology is the gold standard in helping to analyze and diagnose patients, but that standard is difficult to come by in areas that can’t afford it,” Alexander Wong, PhD, one of the UW researchers, told CLP.
“The newly developed microscope has no lens and uses artificial intelligence and mathematical models of light to develop 3D images at a large scale. To get the same effect using current technologies—using a machine that costs several hundred thousand dollars—a technician is required to ‘stitch together’ multiple images from traditional microscopes,” CLP noted.
Healthcare Intermediaries Could Become Involved with Clinical Laboratory Data
Pricing is one of the biggest concerns for patients and government entities. This is a particular concern for the pharmaceutical sector. PwC’s report notes that “stock values for five of the largest intermediaries in the pharmacy supply chain have slumped in the last two years as demands for lower costs and better outcomes have intensified.”
Thus, according to PwC, pressure may come to bear on intermediaries such as Pharmacy Benefit Managers (PBMs) and wholesalers, to “prove value and success in creating efficiencies or risk losing their place in the supply chain.”
Similar pressures to lower costs and improve efficiency are at work in the clinical laboratory industry as well. Dark Daily reported on one such cost-cutting measure that involves shifting healthcare payments toward digital assets using blockchains. The technology digitally links trusted payers and providers with patient data, including medical laboratory test results. (See, “Blockchain Technology Could Impact How Clinical Laboratories and Pathology Groups Exchange Lab Test Data,” September 29, 2017.)
PwC’s latest report predicts 12 forces that will continue to impact healthcare, including clinical laboratories and anatomic pathology groups, in 2018. Click on the image of the cover above to access an online version of the report. (Photo copyright: PwC/Issuu.)
The Opioid Crisis Remains at the Forefront
Healthcare will continue to feel the impact of the opioid crisis, according to the PwC report. Medical laboratories will continue to be involved in the diagnosis and treatment of opioid addition, which has garnered the full attention of the federal government and has become a multi-million-dollar industry.
Security Remains a Concern
Cybersecurity will continue to impact every facet of healthcare in 2018. Healthcare IT News reported, “While 95% of provider executives believe their organization is protected against cybersecurity attacks, only 36% have access management policies and just 34% have a cybersecurity audit process.”
Patients are aware of the risks and are often skeptical of health information technology (HIT), Dark Daily reported in June of last year. Clinical laboratories must work together with providers and healthcare organizations to audit their security measures. Recognizing the importance of the topic, the National Independent Laboratory Association (NILA) has named cybersecurity for laboratory information systems (LIS) a focus area.
Patient Experience a Priority
Although there have been significant improvements in the area of administrative tasks, there is still an enormous demand for a better patient experience, including in clinical laboratories. Healthcare providers want patients to make changes for the better that ultimately improve outcomes and the patient experience is one path toward that goal.
As they follow healthcare reform guidelines to increase quality while lowering costs, state governments will continue to ramp up pressure on healthcare providers and third parties in the area of pricing. Rather than simply requiring organizations to report on pricing, states are moving towards legislating price controls, as Dark Daily reported in February.
Social Factors Affect Healthcare Access
The transition to value-based care makes the fact that patients’ socioeconomic statuses matter when it comes to their health. “The most important part of getting good results is not the knowledge of the doctors, not the treatment, not the drug. It’s the logistics, the social support, the ability to arrange babysitting,” David Berg, MD, co-founder of Redirect Health told PwC.
One such transition that is helping patients gain access to healthcare involves microhospitals and their adoption of telemedicine technologies, which Dark Daily reported on in March.
“Right now, they seem to be popping up in large urban and suburban metro areas,” Priya Bathija, Vice President, Value Initiative American Hospital Association, told NPR. “We really think they have the potential to help in vulnerable communities that have a lack of access.”
“Physician decision-support software utilizes medical laboratory test data as a significant part of a full dataset used to guide caregivers,” Dark Daily noted. “Thus, if the FDA makes it easier for developers to get regulatory clearance for these types of products, that could positively impact medical labs’ ability to service their client physicians.”
Healthcare Delivery During and Following Natural Disasters
PwC predicts the long-term physical results, financial limitations, and supply chain disruptions following natural disasters will continue to affect healthcare in 2018. The devastation can prevent many people from receiving adequate, timely healthcare.
PwC’s report is an important reminder of from where the clinical laboratory/anatomic pathology industry has come, and to where it is headed. Sharp industry leaders will pay attention to the predictions contained therein.
