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How labs can help health system leaders accelerate value-based care


Duration: 5 min. read


Management & Operations

While the pace of hospital mergers and acquisitions has slowed in recent years,1 the size of the deals has gone up as fewer independent hospitals have been available. The primary drivers for consolidation have been the pursuit of economies of scale, clinical standardization, and the management of a patient’s entire continuum of care.

By standardizing clinical processes, health systems are moving closer to making value-based care a reality. Yet scale and standardization by themselves don’t create value-based care. In considering the milestones along this journey, the laboratory department offers an excellent case study of what’s required.

1. Lab Stewardship: efficiency through expertise

As a first milestone to value-based care, lab stewardship offers significant benefits and cost reduction that health systems can leverage today. Some organizations try to figure it out themselves, but many see the virtues of partnering with an industry leader to leverage their knowledge, data, and resources.

Since lab stewardship, like population health, means different things to different people, it always helps to offer a definition. At Quest, we view lab stewardship as a program that optimizes the ordering, retrieval, and interpretation of lab tests. Through a combination of updated medical guidelines and collaboration with staff to change behaviors around over- or under-ordering tests, lab stewardship can improve the quality of patient care while reducing costs to patients, hospitals, and health systems.

Like many cross-functional efforts, lab stewardship must be organized on the clinical side, bringing together various subject matter experts to provide input on which tests should be consolidated, added, or even eliminated. For example, if a clinician has identified anemia in a patient using a complete blood count test, he or she shouldn’t have to order 10 more tests to determine what type of anemia it is. Lab stewardship solutions can help clinicians identify anemia reflex panels that allow them to order just 1 subsequent test. While the financial expense is reduced in this case through test ordering optimization, patient care is improved as well. This is only one example of how lab stewardship can be a win-win for health systems.

Measuring impact and driving change management requires specific people resources and systems. For example, by measuring ordering patterns, lab managers can circle back to the clinicians who are continuing to order tests they don’t need, not ordering the tests they should, and/or pursuing their own testing protocols despite established guidelines. Once the test utilization data are combined with data on cost and patient impact, you can start to look holistically at your labs from a productivity, quality, and clinical perspective. This is how we move to the second milestone, systemness. 

"By standardizing clinical processes, health systems are moving closer to making value-based care a reality. In considering the milestones along this journey, the laboratory department offers an excellent case study of what’s required."

2. Systemness: standardizing to drive value

Increasing the efficiency of your health system requires that interconnected elements behave as a functioning whole and drive toward seamless operations. This extends to the lab and potentially operating a core lab across your system with efficient workflows, standard equipment, and standardized processes.

The evidence of how difficult systemness can be to achieve is clear when I meet with health system customers, as many have laboratories that are completely independent of one another and operate as silos within their network. They may have a VP of Administration in the system that owns all the laboratories, but in these scenarios I rarely see a systems director who is driving a vision for the lab. This results in what David Willis recently called SINOs, Systems in Name Only.

A few signs of true systemness? Each lab should be:

  • Using its data to drive the laboratory’s future direction
  • Operating under a true management structure
  • Benefiting from standardized workflows and test codes
  • Using standardized equipment footprints
  • Consolidating its vision around centers of excellence, so it’s not trying to do everything everywhere, but creates efficiencies based on what it does best

The resulting benefits will vary. Lab systemness may contribute to shorter length of stay, lower cost of drugs based on making the right antibiotic choice sooner, and savings based on lowering over-utilization of tests. But standardization, as I like to say, moves all the needles. From a financial perspective, you could reduce your total lab costs.

3. Predictive Analytics: the power of protocols

The third milestone is predictive analytics, where a health system can proactively assess what is likely to happen with each patient and respond with the right care.

In the lab, predictive analytics requires coordination from pathologists, specialists, finance, and even IT. Once systemness is in place, the lab becomes integral in enabling population health initiatives. By identifying medical issues in patients that aren’t aware of them, health systems can intervene in a patient’s healthcare earlier. Of course, one of the ways a health system does this is by defining the right treatment protocols–including the appropriate lab tests–that help support clinicians drive consistent, high-quality care.

Based on its artificial intelligence (AI) algorithms, predictive analytics is already working as a prediction engine in diabetes care and will become increasingly critical to creating better outcomes across health systems. When you consider the benefits of earlier disease detection, analyzing treatment risks, or preventing drug interaction errors, the value-based care opportunities of predictive analytics are nearly limitless.

Every milestone counts

Of course, value-based care is a journey, and some systems are farther along. Most are trying to figure out lab stewardship, while some are close to achieving systemness. These efforts don't necessarily have to be sequential, either. They can work in parallel. If you look at your lab as the heart of your health system, there’s a lot to learn about the progress towards value-based care. 

Page Published: November 07, 2022
1 Singh, A. 2021 M&A in review: A new phase in healthcare partnershipKaufmanHall website. Published online January 10, 2022.

About the author

Mike Lukas

Health Systems Vice President and General Manager

Quest Diagnostics

In his current role, Mike oversees a team of professionals that design, contract, and execute lab services agreements across the country within the hospital segment.  He has led this business since Quest launched it in 2013. Mike joined Quest in 2007 as Vice President of Finance. Prior to coming to Quest, Mike was at General Motors for 17 years where he held a wide range of progressively expanding responsibilities including Assistant Treasurer, Treasurer of GM’s European Operations, Director of Business Development, and Manager of Investor Relations. Mike graduated from the University of Notre Dame with an MBA in Finance and from Saint Meinrad College with a BA in history. 

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