Avoid seller’s remorse: Why owning your lab makes sense
For community health care providers, owning a laboratory has been likened to shoveling money down a giant drain. Why invest precious dollars in the lab when it can be sold, and laboratory services outsourced?
Cayuga Medical Center is challenging that narrative. Instead of selling, Cayuga is investing in its lab — which it considers a value center as well as a key part of patient service.
“I can’t overstate it—having a community-based laboratory is an essential element of the value proposition of Cayuga Medical Center,” says Chief Executive Officer Marty Stallone, M.D. “In an era of accountable care, having the ability to rapidly and accurately generate lab-related data for physicians in our community, with decision support along the way, is instrumental.”
Based in Ithaca, New York, Cayuga Medical Center is a not-for-profit provider of comprehensive primary and secondary care for a service area of about 200,000 patients. Describing itself as a “hospital on the move,” Cayuga has doubled its lab business over the past decade, turning the lab into a profit center.
“We designed ourselves to be the laboratory of choice. We didn’t want the national laboratories taking specimens and jobs out of town,” says Toni Burger, administrative director of Cayuga’s laboratory services. “Because we’ve been able to compete against the national labs, we’ve had remarkable growth and created more than 55 new jobs in the lab. The community benefits in terms of clinical care and also a boost to the local economy. We’re very proud of that.”
The lab’s success rests on collaborative relationships forged with both larger and smaller institutions. Cayuga Medical Center partners with Mayo Clinic Laboratories for certain highly specialized lab tests and decision support on lab operations. At the same time, Cayuga provides lab services for a clinically integrated network of nearby community health care providers.
“Our core mission is to provide first-rate, patient-centered care to our community,” Dr. Stallone says. “We repeatedly analyze what health care services are needed here, and strive at all times to meet them. We knew there would be value in having lab work efficiently done at one centralized location, with the data rapidly delivered to the participating practices. We’re happy to be that central lab resource for our community.”
It’s easy to underappreciate a hospital lab. “Historically, laboratories have been kind of behind the scenes. Administrators might not know much about the lab,” Ms. Burger says.
Yet lab work is crucial to patient care. Dr. Stallone notes that 85% of patient data is lab-related data. “It’s costly to attain, but you can't be a modern physician without having accessible lab data,” he says. “The question is, how effective are the lab services?”
Done right, community lab services can be very effective. “It’s a false narrative that the lab is a cost center. We have made the investments to turn it into a revenue center,” Ms. Burger says.
Committed to meeting the community’s needs, Cayuga Medical Center invested in sophisticated technologies—including MALDI-TOF mass spectrometry—to diagnose microorgansims and infectious diseases. That capability is important in Upstate New York, a rural area that also has major universities with globetrotting students and staff.
Using rapid technology, Cayuga Medical Center can provide a diagnosis within an hour. A new open-space laboratory that incorporates lean Six Sigma techniques also improved workflow. Test results are uploaded to electronic medical records that are easily accessed by physicians in Cayuga’s clinically integrated network.
Earlier diagnosis means patients receive appropriate treatment faster, for optimal outcomes.
“When you outsource pieces of your lab, you introduce a delay in getting results,” says Laurie Mras, manager of Cayuga Medical Center’s microbiology laboratory. “Speed is absolutely a huge benefit of getting your lab testing done locally.”
She cites the case of a severely ill infant whose spinal tap at Cayuga Medical Center indicated bacterial meningitis. “Getting those results through normal analysis could take a few days. But MALDI-TOF allowed us to identify the disease within 10 minutes of growing the sample on our lab plates, and to get that result to the doctor right away,” Ms. Mras says. “Almost every day, we have cases like that—they give us a sense of purpose in our lab.”
Additional laboratory investment created the outreach network that made Cayuga Medical Center the lab of choice for other local health care providers. Mayo Clinic Laboratories helped Cayuga assess its outreach capabilities and the local market. The resulting business plan included the creation of lab-service centers in communities surrounding Ithaca. “That’s a huge component of our outreach because if patients can’t get convenient access, they’re not going to use the system,” Ms. Burger says.
Other key elements include software that allows physicians to order tests electronically from their offices and technology to track patient samples through the network. “We lament the use of commercial labs in our community because it fragments the data that otherwise is centralized through our information technology platform,” Dr. Stallone says.
Owning a lab also facilitates cost control. “As an accountable care organization, Cayuga Medical Center isn’t interested in inflating the cost of health care unnecessarily. That’s where the Mayo experts come in,” Dr. Stallone says. “Our local pathologists, who are excellent, are given decision support on how to manage the thousands of potential lab tests that are at every clinician's fingertips these days. It’s important to think about how to use those tools prudently.”
Dr. Stallone notes that owning a laboratory makes sense regardless of the health care cost model. “In a fee-for-service environment, the lab is a wonderful source of outpatient revenue. It actually is a profit center to the hospital,” he says.
At the same time, investing in lab technology and staff provide efficient, value-based care. “We’ve done what was needed to make us the most desirable laboratory on a clinical basis, which adds to the value-based formula,” Ms. Burger says.
“The transition to value-based care is occurring, and we are ideally placed for that,” she says. “We can compete against the national laboratories. I always laugh when the national labs make a pitch that you should sell this component. Why are they so interested in buying something if it's not valuable?”
“We’re very proud of our lab,” Dr. Stallone says. “It's an example of being forward leaning and investing in technology and having the foresight to build something that would then serve the community in years to come.”
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