Hospital Lab Outreach Still Effective Revenue Strategy

When payment rates decline, hospital laboratory outreach programs help bring in needed income

By Joseph Burns | From the Volume XXV No. 9 – June 18, 2018 Issue

Holmes, Balwani Indicted by Department of Justice In Lawsuit Against HHS, ACLA Has Strong Positions

CEO SUMMARY: Despite the challenges hospital and health system laboratory outreach programs face today, there are many ways they can remain viable, according to an outreach expert from Mayo Medical Laboratories. By taking specific steps to increase volume and the value they provide, lab outreach programs can keep their costs down while bringing in more revenue and staying relevant to their parent hospitals, health systems, and clients at the same time.

HOSPITAL AND HEALTH SYSTEM LABORATORIES running outreach programs face unprecedented challenges today as payers cut reimbursement levels and exclude many local labs from their networks.

Despite these challenges, however, outreach programs can remain viable by taking specific steps to increase volume and the value they provide to hospitals and health systems, said Jane M. Hermansen, MBA, MT(ASCP), Manager of Outreach and Network Development for Mayo Clinic, in Rochester, Minn. She made her remarks at THE DARK REPORT’S Executive War College in New Orleans earlier this month.

Hermansen made her assessment that outreach programs can provide significant value to hospitals and health systems based on her experience working for Mayo Medical Laboratories, which consults with some of the best hospital lab outreach programs in the nation. She offered examples from many of these best-in-class outreach programs and found they shared three similarities.

“All of these programs want to do one of three things,” she said. “First, they want to save money. Second, they want to make money, and third, they definitely want to stay relevant in the lab testing services they provide to referring physicians.

“Another important benefit is that lab outreach programs can help hospital labs keep costs down by adding volume to the hospital’s laboratory that the hospital might otherwise not have,” she added.

Is The Joint Venture Hospital Lab An Emerging Trend?

August 20, 2018 From The Dark Intelligent Report Volume XXV

CEO SUMMARY: …has uncovered a previously unnoticed trend that turns common wisdom on Wall Street upside down: Hospitals and health systems may be taking back control of their laboratory outreach programs instead of selling them, and committing major resources to their inpatient labs instead of outsourcing their management.

This joint venture hospital lab trend defies the message that the Blood Brothers have been preaching for decades, and might be a sign of things to come. …evidence that forward-looking health systems and hospitals recognize the importance not only of retaining control of their laboratory services, but also of leveraging and expanding lab testing to support integrated clinical care in all locations. … but the goal of serving inpatient, outpatient, and outreach patients with a standard menu of tests and reference ranges can result in a unified patient lab test record. Such a lab test database will give… competitive advantage in the coming era of integrated care and precision medicine.

Transforming The Hospital Laboratory Into A Profit Center.

By Jacqueline aLaPointe, RevCycle Intelligence, March 27, 2018

Hospital and health system executives are missing an opportunity to maximize revenue cycle and operational success by viewing the hospital laboratory as a cost, rather than profit, center, explained Charles Wilson, MHA, Vice President of Operations at Robert Wood Johnson University Hospital.

Yet fewer hospitals are operating laboratory outreach programs despite its financial benefits and the feasibility of implementing a program.
About 92 percent of hospitals operate their own laboratory and almost all of these hospitals have at least some capacity to increase their test volumes, the most recent National Hospital/Health System

Laboratory and Outreach Survey showed.
“Most people view and envision the laboratory as a service.”

The survey showed that the average annual net revenue from a hospital laboratory outreach program was almost $25 million, more than double the annual net revenue from outreach programs in the last
ten years.

Hospital laboratory outreach programs were also more profitable than national labs. The average hospital lab contribution margin was nearly 33 percent, three to four time that of national commercial laboratories.

Increasingly, what we’re seeing is the commercial labs coming to the hospitals,” he said. “They walk right by the laboratory leadership and they go right to the C-suite. They start talking to the executive people about margins, revenues, and costs. And the language that the folks in the laboratory speak is turnaround times and quality.” “…you don’t want to look at it as what you can save me in regards to what my costs are,” he explained.

“You should be looking at it as to the potential for revenue generation by this laboratory. I can tell you right now, no commercial lab is going to come in and manage you and generate revenue for the hospital because the commercial labs that are primarily doing that, they also do outreach testing for physician offices as well. They’ll tell you the same thing, ‘I may manage your lab, but I’m also competing with you if you’re doing outreach.’”

“But, when it’s looked at as a revenue-producing center, it actually gives you a lot more clout,” he added. “You have earned a seat at the table… Hospitals that have been effectively able to institute laboratory outreach programs have awoken the sleeping giant.” And that sleeping giant will help to maximize revenue for hospitals through a service line that was once regarded only as a cost generator.