Prior to the advent of Medicare and Medicaid in 1965, laboratory testing services were primarily for the hospital inpatient population, performed according to a "fee-for-service" model. Medicare doubled the number of insured individuals, who became consumers of laboratory services, oftentimes as outpatients.
Large independent medical laboratories, already well-situated to accommodate high-volume lab testing, aggressively marketed their services directly to physicians at a discount. Often physicians marked up the prices of these lab tests, generating large profits from reimbursements from patients or their insurance carriers, including Medicare.
In order to minimize the financial impact in this new health insurance environment, Medicare was changed to eliminate physician office markup, and diagnostic related groups (DRGs) were created, leading to a reimbursement-by-case payment schedule.
Over time, hospital admissions and lengths-of-stay dropped, and outpatient lab testing services grew, roughly at the same rate. Until this time, labs were considered as cost centers, not profit centers. It has been determined that, whereas smaller hospitals can benefit from outsourcing their lab services to one of the large commercial labs (thereby saving from 8% to 20% in lab testing costs), larger hospital labs realized they could adapt to retain or reclaim some of these lab test services, while generating a profit.
In short, lab outreach is the receipt of "lab specimens from sources other than in-patients." A more complete definition of a laboratory outreach is:
"Laboratory outreach businesses typically focus on a range of laboratory testing needs of physicians, other health care providers in the community and their patients on an outpatient basis."
Whereas the first definition addresses the breadth of "outreach", the second carries with it the idea that a hospital outreach service must develop an expanded "footprint" in the community. Given this requirement, how does a lab develop an outreach capability?
First and foremost, it must be agreed that the primary goal is improved patient care. While financial and other considerations need to be carefully considered to determine long-range viability, these elements can never be at the expense of highest-possible quality of patient care.
A hospital needs complete support from administration; it must stand prepared to supply resources and remove obstacles to enable the lab to transform its service model.
Also necessary is a strategic plan, with a dedicated team, headed by a capable project manager / team leader. The plan needs to include, among other elements, elements of service, lists of barriers to success, strategies to overcome these barriers, growth goals, and Key Performance Indicators (KPIs).
Crucial to these efforts is a well-trained marketing team, which is able to explain the advantages of the new service, describe the range of services, billing, and reporting aspects, IT capabilities and requirements, and provide decision support tools to physicians.
Charles V. Wilson, VP of Operations at Robert Wood Johnson University Hospital, has recently proposed five quantitative KPIs for a viable outreach lab service:
Operating margin
Percentage of unbilled claims
Percentage of error or denial by client
Average time from requisition to payment
Average / median price per accession vs average / median payment received per accession.
In addition to quantitative success measures, it is equally important to determine qualitative, behavioral success metrics. Jane Hermansen, Outreach Program Coordinator for Mayo Medical Laboratories in Rochester, MN, has proposed a set of five "Pillars of Excellence" which the outreach lab must purpose to exemplify in its practice:
Quality – always with a mind to improving and exceeding established levels of quality of care.
Service – demonstrating ongoing commitment to creating excellent service
People – providing a supportive work environment wherein associates are loyal and satisfied.
Financial – transparently demonstrating fiscal responsibility.
Growth – commitment to continuous development and enhancement.
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