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Clinical Laboratories and Pathology Groups

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Did The Joint Commission Omit Misdiagnosis from Its Lists of Top 10 Sentinel Events for 2018 and 2019?

Though data on delays in treatment due to misdiagnosis have been collected by TJC since 2015, misdiagnosis is not listed among the reported top 10 sentinel events

Accurate diagnosis could be the most critical aspect of all healthcare. Without accurate diagnoses, doctors may be delayed in starting treatment for their patients. In other cases, ordering inappropriate clinical laboratory tests might contribute to a misdiagnosis.

Healthcare experts know that misdiagnoses take place far too often. In fact, the Society to Improve Diagnosis in Medicine (SIDM) recently formed a coalition of more than 50 healthcare providers and patient advocacy organizations to end preventable medical diagnostic errors. (See Dark Daily, “Society to Improve Diagnosis in Medicine Forms Coalition to Address Preventable Diagnostic Errors; Proper Use of Clinical Laboratory Test Is One Goal,” September 13, 2019.)

SIDM’s analysis revealed that “one in three malpractice cases involving serious patient harm is due to misdiagnosis.” And that, “Cancer, vascular events, and infection account for three-fourths of high-harm, diagnosis-related claims.” 

Therefore, it seems odd that misdiagnosis would not be front and center on the latest list of Sentinel Events from The Joint Commission (TJC), the non-profit organization that accredits more than 21,000 healthcare organizations on behalf of the federal Centers for Medicare and Medicaid Services (CMS). Was it omitted? Perhaps not.

What Is a Sentinel Event?

The Joint Commission adopted its formal Sentinel Event Policy in 1996 as a way to help healthcare organizations improve safety and mitigate future patient risk. TJC defines a sentinel event as a “patient safety event that reaches a patient and results in any of the following:

  • “death,
  • “permanent harm,
  • “severe temporary harm, and
  • “intervention required to sustain life.” 

TJC determines healthcare events to be “sentinel” when they “signal the need for immediate investigation and response.”

Misdiagnosis leading to preventable medical errors would seem to be a sentinel event, but it is missing from TJC’s list for the past two years. It’s not, however, missing from an earlier TJC list of preventable diagnostic errors.

Delay in Treatment Due to Misdiagnosis

A 2015 TJC advisory report on safety and quality issues in healthcare, titled “Preventing Delays in Treatment,” lists misdiagnosis among several reported events that led to delays in diagnosis that then led to patient harm or death.

In that report, TJC defines “delay in diagnosis” as “a non-optimal interval of time between onset of symptoms, identification, and initiation of treatment. A delayed diagnosis occurs when the correct diagnosis is delayed due to failure in or untimely ordering of tests (e.g., [clinical laboratory] work, colonoscopies, or breast imaging studies). Whether due to delay in diagnosis, misunderstanding of the disease, misdiagnosis, or failure to treat, delay in treatment can reduce the number of treatment options a patient can pursue.”

So, misdiagnosis was, at that time, an event the TJC collected data on and included in its advisor statements. But since then, it has been omitted from the list. What changed?

Recent Sentinel Events

Turns out, nothing really. Though misdiagnosis is not listed on TJC’s lists for 2018 and 2019, it is part of a more comprehensive list published by TJC in February titled, “Most Commonly Reviewed Sentinel Event Types.” That report offers more details on the listed sentinel events, and also includes a section drawn from TJC’s 2015 report on delays in treatment, which covers results due to misdiagnosis.

In March, TJC released its top-10 list of most frequently reported sentinel events reported in 2018. They include:

  • Falls
  • Unintended retention of a foreign body
  • Wrong-site surgery
  • Unassigned
  • Unanticipated events such as asphyxiation, burns, choking, drowning or being found unresponsive
  • Suicide
  • Delay in treatment
  • Product or device event
  • Criminal event
  • Medication error

Then, in August, TJC release a new report based on the 436 reports of sentinel events TJC received in the first six months of 2019. They include:

  • Anesthesia-related events
  • Care management events
  • Criminal events
  • Environmental events
  • Product or device events
  • Protection events
  • Suicide—emergency department
  • Suicide—inpatient
  • Suicide—offsite within 72 hours (these are defined in the Sentinel Event Policy)
  • Surgical or invasive procedure events

Following the release of its March sentinel events list, TJC noted that the components were typical when compared to previous years. 

“The trend for the most frequently reported sentinel events remains generally unchanged,” stated Gerard Castro, PhD, MPH (above), Project Director, Patient Safety Initiatives at The Joint Commission, in a PSQH analysis of the Joint Commission’s 2018 list of sentinel events. “Organizations should continue their work toward minimizing risks associated with these types of events, but also strengthen systems and processes that keep patients safe, such as reporting and learning from close calls, teamwork, and improving safety culture.” (Photo copyright: The Joint Commission.)

TJC’s website notes, however, that “fewer than 2% of all sentinel events are reported to The Joint Commission. Of these, 58.4% (8,714 of 14,925 events) have been self-reported since 2005. Therefore, these data are not an epidemiologic data set, and no conclusions should be drawn about the actual relative frequency of events or trends in events over time.”

Might that be because the healthcare organizations in the US accredited by the Joint Commission are “encouraged” to report sentinel events and not “required” to do so? This also allows accredited healthcare organizations to pick and choose which events to report to TJC.

If there is one easy conclusion to draw from all the information presented above, it is that the true rate of misdiagnoses—as well as other types of sentinel events—remains unknown. But what is equally true is that, step by step, the adoption and use of electronic health systems (EHRs), along with other digital tracking modalities, will make it easier for providers and healthcare policymakers to more accurately identify and classify instances of misdiagnoses.

When that happens and better data on misdiagnoses is available, it will be possible for medical laboratory professionals to use the methods of Lean and quality management to collaborate with physicians and other providers. The first step will be to identify the sources of misdiagnoses. The second step will be to use these quality improvement techniques to support providers in ways that allow them to reduce or eliminate the causes of diagnostic errors and misdiagnoses.

—JP Schlingman

Related Information:

Sentinel Event Statistics Released for 2018

Sentinel Events (SE)

Most Commonly Reviewed Sentinel Event Types

Preventing Delays in Treatment

Sentinel Event Statistics Released for First 6 months of 2019 with New Suicide Categories

TJC Releases Compliance and Sentinel Event Stats for First Half of 2018

Lab Quality Confab and Process Improvement meeting

Leapfrog Group Report Shows Hospitals Failing to Eliminate Hospital-Acquired Infections; Medical Laboratories Can Help Providers’ Antimicrobial Stewardship Programs

Contrary to CMS and Joint Commission programs implemented in 2017 to reduce them, incidents of hospital-acquired infections have risen for the past few years

Clinical laboratories and anatomic pathologists know that hospital-acquired infections (HAIs) can be deadly, not just for patients, but for their caregivers and families as well. Even one HAI is too many. Thus, the federal Centers for Medicare and Medicaid Services (CMS) required healthcare organizations to upgrade their antimicrobial stewardship (AMS) programs to meet CMS requirements and Joint Commission accreditation starting in 2017.

Nevertheless, a recent Leapfrog Group report indicates hospitals are finding it increasingly difficult to remove infections all together. This has many healthcare leaders concerned.

The report, which was analyzed by Castlight Health, states that the number of hospitals reporting zero infections has declined significantly since 2015, according to a news release. According to the Leapfrog Group’s report:

  • Two million people acquire HAIs every year;
  • 90,000 people die annually from HAIs;
  • HAI costs range from $1,000 to $50,000 depending on the infection.

Hospitals spend $28 to $45 billion annually on HAI costs, Healthcare Finance reported.

“I think it’s far too easy to let something slip, so it’s clear that there really needs to be a renewed focus on getting back to zero. We do still see some hospitals that are getting to zero, so it’s clearly possible,” Erica Mobley (above), Leapfrog Group’s Director of Operations, told Fierce Healthcare. (Photo copyright: LinkedIn.)

Regressing Instead of Progressing Toward Total HAI Elimination

Leapfrog Group’s report is based on 2017 hospital survey data submitted by 2,000 providers. The data indicates that in just two years the number of hospitals reporting zero HAIs dropped by up to 50%. The reported HAIs include:

The remaining infection measures studied by Leapfrog Group had less dramatic decreases over the same time period, according to Fierce Healthcare. Nevertheless, they are significant. They include:

  • Surgical site infections (SSI) following colon surgery: 19% zero infections compared to 23% previously;
  • Clostridium difficile (C. difficile) inpatient infections: 3% zero inpatient infections in 2017, compared to 5% in 2015.

Joint Commission Studies Antimicrobial Program Progress

Meanwhile, the Joint Commission acknowledged that implementation of antimicrobial stewardship programs by providers can be difficult. In “The Expanding Role of Antimicrobial Stewardship Programs in Hospitals in the United States: Lessons Learned from a Multisite Qualitative Study,” the accrediting organization released insights from interviews with 12 antimicrobial stewardship program leaders nationwide.

They published their study in “The Joint Commission Journal on Quality and Patient Safety.” Three themes emerged from the interviews:

  • Hospitals have revised their antimicrobial programs, which originally operated on a “top-down” structure, to programs that include clinicians from throughout entire provider organizations;
  • Health information technology (HIT) can enable real-time opportunities to launch antimicrobial therapy and treat patients; and,
  • Some barriers exist in getting resources to integrate technology and analyze data.

“These programs used expansion of personnel to amplify the antimicrobial stewardship programs’ impact and integrated IT resources into daily workflow to improve efficiency,” the researchers wrote. “Hospital antimicrobial stewardship programs can reduce inappropriate antimicrobial use, length of stay, C. difficile infection, rates of resistant infections, and cost.”

What Do CMS and Joint Commission Expect?

According to Contagion, while the Joint Commission program is part of medication management, CMS places its requirements for the antimicrobial stewardship program under “infection prevention.”

CMS requirements for an antimicrobial stewardship program include:

  • Developing antimicrobial stewardship program policies and procedures;
  • Implementing hospital-wide efforts;
  • Involving antimicrobial stakeholders for focus on antimicrobial use and bacterial resistance;
  • Setting evidence-based antimicrobial use goals; and,
  • Reducing effects of antimicrobial use in areas of C. difficile infections and antibiotic resistance.

Leapfrog Group’s data about fewer hospitals reporting zero infections offers opportunities for hospital laboratory microbiology professionals to get involved with hospital-wide antimicrobial program teams and processes and help their hospitals progress back to zero HAIs. Clinical laboratories, both hospital-based and independent, also have opportunities to contribute to improving the antimicrobial stewardship efforts of the physicians who refer them specimens.

—Donna Marie Pocius

Related Information:

Troubling New Report on Hospital Infections Comes While Centers Medicare and Medicaid Services Considers Discontinuing Publicly Reporting Rates

Leapfrog Group: Healthcare-Associated Infections

Antimicrobial Stewardship Standards: A Comparison of Centers for Medicare and Medicaid Services and Joint Commission Requirements

Joint Commission: New Antimicrobial Stewardship Standard

Core Elements of Hospital Antibiotic Stewardship Programs

Number of Hospitals Achieving Zero Infections Drops

Hospitals Losing Ground on Effectively Preventing Infections with Dramatic Drop in Those Reporting Zero Infections

The Expanding Role of Antimicrobial Stewardship Programs in Hospitals in the United States: Lessons Learned from a Multi-Site Qualitative Study

Anatomic Pathologists Who Work in Independent Reference Laboratories Can Now Provide Diagnostic Services for CLIA-Approved Hospitals without Need for Additional Credentialing and Privileging

The Joint Commission’s recent alteration to the Introduction to Leadership (LD) Standard LD.04.03.09 makes it easier for off-site and independent reference laboratories to service CLIA-hospitals and other CLIA-approved healthcare facilities

Anatomic pathologists working for reference laboratories can now provide diagnostic services to hospitals, critical-access hospitals, and ambulatory care facilities in the US based on the organization’s Clinical Laboratory Improvement Amendments (CLIA) status, rather than the usual credentialing and privileging. The Joint Commission (TJC) made the change effective January 2018.

According to a TJC press release, “Clinical Laboratory Improvement Amendments (CLIA) regulations 42 CFR 493.1351 through 493.1495 outline specific and rigorous competency requirements for laboratory personnel, including requirements for pathology services and its subspecialties. But because pathologists practicing in the US are required to comply with these requirements, Joint Commission-accredited organizations that seek the services of pathologists within independent reference laboratories (that comply with CLIA regulations) can safely presume that the pathologists are qualified and competent to perform all diagnostic services within their pathology practice—thus making an additional credentialing and privileging process unnecessary.”

In an interview with Dark Daily, Heather Hurley, Executive Director, The Joint Commission, and Ron Quicho, Associate Project Director and Standards Development Director at TJC, explained the reasons behind this change. “With the current CLIA requirements, the previous standard was adding unnecessary burdens and regulatory overhead to hospitals and ambulatory care organizations—especially as outsourcing continues to increase within the testing market. This update helps to reduce these burdens and streamline testing,” Hurley noted.

Quicho added, “The Joint Commission continually evaluates its standards and survey process to ensure that we are providing an accreditation service that is of the highest quality and value. That said, we made the decision to update the standards based on feedback from stakeholders and customers.”


Ron Quicho, Associate Project Director and Standards Development Director (left), and Heather Hurley, Executive Director (right), The Joint Commission, believe these updated standards will benefit clinical laboratories and hospitals alike. But they note, “Anytime the pathologist provides professional services and consultation in the same laboratory where the specimen was collected or prepared, credentialing and privileging would be required. The exception for credentialing and privileging only applies when pathology services are provided off-site, such as at a reference laboratory.” (Photo copyrights: LinkedIn/The Joint Commission.)

Joint Commission Reduces ‘Unnecessary Burden’ on Hospitals, Ambulatory Care Facilities

Reference testing and CLIA have been a common part of the diagnostics and medical laboratory landscape for decades. According to Quicho, the key components of The Joint Commission’s decision include:

  • Increasing numbers of independent practitioners and consultants;
  • Reference laboratories often seek pathology services from another laboratory for certain testing and screening. As such, it is unclear if the credentialing and privileging requirements extend to these secondary pathology services, since they may also be providing the interpretation;
  • It would be virtually impossible to credential and privilege all pathologists at a reference laboratory whose services result in patient care decisions, since interpretations are made not only in anatomical (surgical) pathology but in many areas of clinical pathology; and,
  • Reference laboratories employ hundreds of pathologists and healthcare facilities and cannot be sure of who provides interpretation on specimens that are sent out.

It is important to understand that the exclusions in this latest TJC update only apply when testing is performed offsite of the ordering facility. In their press release, TJC stated, “A reference laboratory is a laboratory contracted for testing that is owned and operated by an organization other than the organization referring the testing … When the pathologist provides his or her professional service, including consultation in the same laboratory or organization where the specimen was collected or prepared, credentialing and privileging is required.”

TJC Change Helps Clinical Laboratories and Hospitals Alike

Hurley points out that the January 2018 edition of TJC’s “Comprehensive Accreditation Manuals” already includes the updated standard and that participating ambulatory care, critical access hospitals, and hospitals were updated regarding the changes. The 2018 print editions will also include this change.

She also points out that exclusion from the standard’s requirements does not prevent hospitals from still requiring credentialing or privileging for their internal compliance processes or regulations. Quicho also emphasizes the importance of continuing to meet all CLIA requirements surrounding competencies, training, and personnel qualifications.

The TJC update should result in less action required by both clinical laboratories and hospitals alike—a welcome change for a market in a state of near-constant flux due to healthcare reform and increased regulation. The reasoning behind the decision also highlights current trends amongst pathology groups and clinical laboratories concerning scaling through consolidation and outsourcing among hospitals, ambulatory care organizations, and critical care providers.

—Jon Stone

Related Information:

Now in Effect: Change to Requirements for Credentialing, Privileging of Independent Pathologists

Credentialing and Privileging of Independent Pathologists

The Joint Commission No Longer Requires Credentialing and Privileging of Independent Pathologists—Four Things to Know

Medicare Officials Back Off a Proposal to Make Hospital Inspection Reports Publicly Available; CLIA Inspections of Medical Laboratories Are Still Not Public

The Joint Commission opposed the Medicare proposal, and patient advocate groups say rescinding it is a setback for hospital  transparency

Powerful interests arrayed against greater transparency in the performance of hospitals, physicians, and medical laboratories have stopped a proposed Medicare program that would have allowed the public to see the results of hospital inspections.

Stopped in its tracks was an effort by the Centers for Medicare and Medicaid Services (CMS) to make hospital accreditation inspection reports available for public viewing. Opposition to this program led CMS to withdraw its plan for heightened transparency.

CMS originally called the proposal “groundbreaking” in a National Public Radio (NPR) article. That’s because it would have enabled consumers to view reports that private accreditation organizations, such as The Joint Commission, complete after each inspection. Inspection reports contain information on errors and problems found during hospital surveys. CMS’ push for more transparency in hospital inspections is consistent with the healthcare industry’s trend toward open sharing of healthcare quality, price, and other data.

“We are proposing changes relating to transparency of accrediting organizations survey reports and plans of correction of providers and suppliers,” CMS officials wrote in a proposed rule published on April 28.

CMS Pulls Back Proposal to Make Hospital Survey Reports Public

But it was not to be. After receiving comments, CMS officials stated in early August that the agency had pulled back the proposal.

“CMS is committed to ensuring that patients have the ability to review the findings used to determine that a facility meets the health and safety standards required for Medicare participation. However, we believe further review, consideration, and refinement of this proposal is necessary to ensure that CMS establishes requirements, consistent with our statutory authority, that will inform patients and continue to support high quality care,” noted a CMS fact sheet.

Agencies Find Problems in Hospitals That Accreditors Do Not, CMS Declares

It’s against federal law for CMS to release data related to hospital inspections, Becker’s Hospital Review reported. And, as part of the Clinical Laboratory Improvement Amendments (CLIA), clinical laboratories must participate in inspections to ensure they qualify for Medicare and Medicaid payments. However, the inspection reports of the nation’s medical laboratories are not made public.

So, what motivated CMS to make healthcare organizations’ inspection information public? CMS noted that private accreditation organizations miss serious provider problems that state inspectors find in follow-up visits to hospitals, ProPublica explained.

In fact, state agency reviews of 103 hospitals in 2014 found 41 serious deficiencies, including 39 missed by the accreditors, noted the NPR article.

The chart above based on Johns Hopkins research was compiled by the National Center for Health Statistics and reported by The Washington Post. It shows that medical errors are now the third leading cause of death in the US. (Photo copyright: The Washington Post.)

“Right now, the public has very little information about the places where they’re putting their life on the line, and that’s just not acceptable. If [they are] a good place, what are they afraid of?” Rosemary Gibson, Senior Advisor at The Hastings Center, stated in the NPR article.

Reaction from Accreditors and Consumer Groups Differs

The Joint Commission opposed the CMS proposal. And, now, patient safety advocacy groups are disappointed about the decision by Medicare officials to rescind the proposed program.

“We believe the proposal will have significant detrimental consequences on our nation’s ability to continually improve the delivery of healthcare services,” stated Mark Chassin, MD, FACP, MPP, MPH, Joint Commission President and Chief Executive Officer, in a June letter to CMS published partially in an HCPro blog post.

HCPro, a firm that aids organizations in accreditation, credentialing, and other needs, noted the following Joint Commission concerns about publicly shared survey reports in the blog post:

  • Providers may be less likely to be open about opportunities for improvement;
  • Accreditors could struggle to create new standards;
  • The number of non-accredited facilities may increase;
  • Accreditation may be devalued; and,
  • Costs to providers and accreditors would likely rise.

The Center for Improvement in Healthcare Quality (CIHQ), another accreditation option for hospitals, also expressed concerns with the CMS proposal, according to the ProPublica report.

“Knowing that survey [inspection] reports are public knowledge will only incentivize hospitals and other healthcare entities to go back to the days of ‘hiding’ quality of care issues from accreditors, rather than working with us to improve the quality and safety of care rendered to patients,” CIHQ advised in the ProPublica article.

The Leapfrog Group, which bills itself as an advocate of hospital transparency, called the reversed proposal “a disappointing setback for healthcare transparency.”

In a statement, Leah Binder, President and Chief Executive Officer of The Leapfrog Group, noted, “We are disappointed to learn that the agency that runs Medicare (CMS) has reversed course on its proposal to require private accrediting organizations, such as the Joint Commission, to publicly release reports of problems they found in hospitals and other healthcare facilities. The public deserves full transparency on how the healthcare industry performs.”

Clearly the public is calling for increased transparency in healthcare. As are many organizations and industry journals, such as the Association of Health Care Journalists (AHCJ), which presented a national award to Ellen Gabler, an investigative reporter for the Milwaukee Journal Sentinel, for her work covering weaknesses in inspections for clinical laboratories. (See Dark Daily, “Journalists Take Home Top National Awards for Their Work Covering Theranos and the Clinical Laboratory Industry,” May 16, 2016.)

Some Accreditation Information Available Online

So, for the time being, it appears that what is found during hospital inspections will stay within the inspection report and will not become available to the general public. However, with consumers expecting greater transparency and higher levels of service in all aspects of healthcare, the interest in public access to the quality performance of hospitals, physicians, clinical laboratories, and anatomic pathology groups will only increase.

Meanwhile, for patients interested in existing resources about provider quality, The Joint Commission has an online “find a gold star healthcare organization” quality check. Also, the American College of Surgeons publishes an online search for accredited facilities. And, the Centers for Disease Control and Prevention (CDC) offers an online search for CLIA accredited labs.

—Donna Marie Pocius


Related Information:

Secret Data on Hospital Inspections May Become Public At Last

Proposed Centers for Medicare and Medicaid (CMS) Rule

Changes to the Application and Reapplication Procedures for National Accrediting Organizations

CMS Backs Off Proposal to Make Hospital Accredited Investigations Public; Five Things to Know

Accreditors Can Keep Their Hospital Inspection Reports Secret, Feds Decide

Joint Commission Comments on Proposed CMS Transparency Rule

Disappointing Setback for Healthcare Transparency

Journalists Take Home Top National Awards for Their Work Covering Theranos and the Clinical Laboratory Industry


Medicare Clinical Laboratory Price Cuts and Cost-cutting Predicted to be 2018’s Two Biggest Trends for Medical Laboratories in the United States

To offset the loss of revenue from the price cuts to Medicare Part B clinical laboratory tests, labs will need to aggressively—but wisely—slash costs to balance their budgets

Any day now, Medicare officials will announce the Medicare Part B Clinical Laboratory Fee Schedule (CLFS) for 2018. Both the Centers for Medicare and Medicaid Services (CMS) and the Department of Health and Human Services Office of Inspector General (OIG) have issued reports indicating that these fee cuts will total $400 million just during 2018, which Dark Daily reported on in July.

Many experienced industry executives expect this to be the single most financially disruptive event to hit the clinical laboratory profession in more than 20 years. This will not only have a substantial negative financial impact on all labs—large and small—but two sectors of the clinical lab industry are considered to be so financially vulnerable they could cease to exist.

At Greatest Risk of Financial Failure are Community Laboratories

The first sector is comprised of smaller community lab companies that operate in towns and rural areas. These labs are at the greatest risk because they are the primary providers of lab testing services to the nursing homes and skilled nursing facilities in their neighborhoods. And because they have a high proportion of Medicare Part B revenue.

Thus, the expected Medicare price cuts to the high-volume automated lab tests—such as chemistry panels and CBCs (complete blood count) that are the bread-and-butter tests for these labs—will swiftly move them from minimal profit margins to substantial losses. Since these labs have a cost-per-test that is significantly higher than the nation’s largest public lab companies, they will be unable to financially survive the 2018 Medicare fee cuts.

The second sector at risk is comprised of rural hospitals and modest-sized community hospitals. What officials at CMS and their consulting companies overlooked when they created the PAMA (Protecting Access to Medicare Act) private payer market price reporting rule is that these hospitals provide lab testing services to nursing homes and office-based physicians in their service areas.

Because of the low volumes of testing in these hospital labs, they also have a larger average cost-per-test than the big public labs. Thus, the 2018 cuts to Medicare Part B lab test prices will erode or erase any extra margin from this testing that now accrues to these hospitals.

Rural and Small Community Hospitals Rely on Lab Outreach Revenue

The financial disruption these Medicare lab test price cuts will cause to rural and community hospitals is a real thing. These hospitals rely on outreach lab test revenues to subsidize many other clinical services within the hospital. One rural hospital CEO confirmed the importance of lab outreach revenue to her organization. Michelle McEwen, FACHE, CEO of Speare Memorial Hospital in Plymouth, N.H., spoke to The Dark Report in 2012 about the financial disruption that was happening when a major health insurer excluded her hospital’s laboratory from its network.

Speare Memorial is a 25-bed critical access hospital in the central part of the state between the lakes region and the White Mountain National Forest. McEwen was blunt in her assessment of the importance of clinical laboratory outreach revenues to her hospital. “The funds generated by performing these [outreach] lab tests are used to support the cost of providing laboratory services to all patients 24/7, including stat labs for emergency patients and inpatients,” McEwen explained. “These funds also help support other services in the hospital where losses are typically incurred, such as the emergency room and obstetric programs.” (See “Critical Access Hospitals Losing Lab Test Work,” The Dark Report, April 2, 2012.)

For the second consecutive year, Lab Quality Confab (LQC) is offering an extended session on clinical laboratory accreditation and certification in New Orleans on October 24-25. CMS has indicated it will participate in this year’s session. It was an historic first for the clinical laboratory industry when last year’s Lab Quality Confab convened a panel that included experts in CLIA laboratory inspection and compliance from the four deeming organizations. From left to right: Moderator Nora L. Hess, MBA, MT(ASCP), PMP, Senior Consultant, Operations Management, Chi Solutions, Inc., Ann Arbor, Mich.; Kathy Nucifora, MPH, MT(ASCP), Director of Accreditation, COLA, Columbia, Md.; Stacy Olea, MBA, MT(ASCP), FACHE, Executive Director of Laboratory Accreditation Program, The Joint Commission, Oakbrook Terrace, Ill.; Randall Querry, Accreditation Manager, Clinical, American Association for Laboratory Accreditation (A2LA), Frederick, Md.; Robert L. Michel, Editor-in-Chief, The Dark Report, Spicewood, Texas; and Denise Driscoll, MS, MT(ASCP)SBB, Senior Director, Laboratory Accreditation and Regulatory Affairs, College of American Pathologists, Northfield, IL. (Photo by Linda Reineke of Riverview Photography. Copyright: The Dark Report.)

All Medical Laboratories Will Suffer Financial Pain from Medicare Price Cuts

But it is not just community lab companies and rural hospitals that are at risk of financial failure as the Medicare Part B cuts are implemented by CMS on Jan. 1, 2018. Any clinical laboratory serving Medicare patients will experience a meaningful drop in revenue. Many larger hospital and health system laboratories are recasting their financial projections for 2018 to identify how big a drop in revenue they will experience and what cost-cutting strategies will be needed to at least break even on their lab outreach business.

This explains why the first big trend of 2018 will be substantial revenue cuts from the Medicare program. It also explains why the second big trend of 2018 will be smart cost-cutting as labs attempt to balance their books and lower spending proportional to the reduced income they project.

Labs Have a Decade of Successful Cost-Cutting, More Cuts are Difficult

Aggressive cost-cutting, however, puts the nation’s medical laboratories at risk for a different reason. For the past decade, most well-run labs have already harvested the low-hanging fruit from obvious sources of cost reduction. They installed latest-generation automation. They re-engineered workflows using the techniques of Lean, Six Sigma, and process improvement.

During these same years, most medical laboratories also reduced technical staff and trimmed management ranks. That has created two new problems:

  1. First, there are not enough managers in many labs to both handle the daily flow of work while also tackling specific projects to cut costs and boost productivity. Basically, these labs are already at their management limit, with no excess capacity for their lab managers to initiate and implement cost-cutting projects.
  2. Second, technical staffs are already working at near peak capacity. Increased use of automation at these labs has reduced lab costs because labs were able to do the same volume of testing with fewer staff. However, the reduced staffs that oversee the lab automation are now working at their own peak capacity. Not only are they highly stressed from the daily routine, they also do not have spare time to devote to new projects designed to further cut costs.

Each Year Will Bring Additional Cuts to Medicare Part B Lab Prices

This is why all clinical laboratories in the United States will find it difficult to deal with the Medicare Part lab test fee cuts that will total $400 million during 2018. And what must be remembered is that, in 2019 and beyond, CMS officials will use the PAMA private payer market price reporting rule to make additional fee cuts. Over 10 years, CMS expects these cuts will reduce spending by $5.4 billion from the current spending level.

Taken collectively, all these factors indicate that many medical laboratories in the United States will not survive these Medicare fee cuts. The basic economics of operating a clinical laboratory say that less volume equals a higher average cost per test and higher volume equals a lower average cost per test.

Medical Labs with Highest Costs Most at Risk of Failure from Price Cuts

What this means in the marketplace is that labs with the highest average cost per test make the least profit margin on a fee-for-service payment. The opposite is true for labs with the lowest average cost per test. They will make a greater profit margin on that same fee-for-service payment.

Carry this fundamental economic principle of medical laboratory operations forward as Medicare Part B lab test fee cuts happen in 2018. Labs with the highest average cost per test will be first to go from a modest profit or break-even to a loss. As noted earlier, the clinical lab sectors that have the highest average cost per test are smaller community labs, along with rural and community hospitals. That is why they will be first to go out of business—whether by sale, bankruptcy, or by simply closing their doors.

Learning How to Cut Lab Costs While Protecting Quality

Every pathologist and lab administrator seeking the right strategies to further cut costs in their lab, while protecting quality and enhancing patient services, will want to consider sending a team from their laboratory to the 11th Annual Lab Quality Confab that takes place in New Orleans on October 24-25, 2018.

Anticipating the greater need for shrewd cost-cutting that also protects the quality of the lab’s testing services, this year’s Lab Quality Confab has lined up more than 51 speakers and 39 sessions. Of particular interest are these extended workshops that come with certifications:

Sessions will address proven ways to:

  • Use real-time analytics to improve workflow in molecular laboratories;
  • Introduce automation in microbiology; as well as
  • New breakthroughs in core lab automation; and
  • Success stories in reducing lab test utilization.

Lab Quality Confab is recognized for its use of lab case studies—taught by the nation’s early adopter lab organizations. Certification classes are available to gain proficiency in the use of Lean methods and Six Sigma tools, such as:

Given the strong interest in smart ways to cut costs, boost productivity, and balance revenue-versus-cost, registrations for this year’s Lab Quality Confab is running at a record pace. The full agenda can be viewed at this link (or copy this URL and paste into your browser:

Of special interest to lab leaders preparing to stay ahead of the financial impact of the Medicare Part B fee cuts, Lab Quality Confab offers deep discounts for four or more attendees from the same lab organization. This allows your lab’s most effective cost-cutters to see, hear, and learn together, so that when they return they can get a flying start helping you align your lab’s costs to the expected declines in revenue that will happen on Jan. 1, 2018.

Reserve your place today and register now

—Robert L. Michel, Editor-in-Chief

Related Information:

Information, Agenda, and to Register for Lab Quality Confab Taking Place on October 24-25, 2017

In 2017, to Offset Declining Reimbursement and Shrinking Budgets, Savvy Clinical Laboratories Are Using LEAN to Improve Service and Intelligently Cut Costs

Lean-Six Sigma Medical Laboratories Begin to Innovate in Ways That Add Value to Physicians, Payers, and Patients

An Interview with Robert Michel, Editor-in-Chief of The Dark Report

At Lab Quality Confab in New Orleans this Week, Speakers Addressed Major Issues Faced by Medical Laboratories, including the Need for Labs to Deliver More Diagnostic Value to Physicians