by Walter Valliere
Consulting Director, Vizient, Inc.

At the beginning of the COVID-19 pandemic, medical laboratories immediately experienced a decline in testing volume. And, while the test volumes are inching upward as labs find their footing in the new pandemic environment, the rate of recovery is slower than anticipated. This slow recovery can be attributed to many things, some of which include:

  1. Hospitals are resuming elective surgeries, but not all elective surgeries are laboratory intensive.
  2. Medical practices are resuming patient appointments, but the volumes are well below pre-COVID-19 levels.
  3. Many patients are experiencing a loss of income due to job eliminations, business closures or furloughs. They may have lost their health insurance coverage or are unable to cover the out-of-pocket expenses related to the primary care needs for their families.

These trends impact greatly the ability of any hospital laboratory to maintain and control capacity, personnel, costs and quality management systems. It is reasonable to expect the post-COVID-19 trends to continue for the duration of 2020 and extend into 2021.

Clearly, if you can develop a strategy where capabilities and timeliness are maintained or improved, while costs decrease, isn’t now the time for laboratory and hospital leaders to embrace such a course of action?

How to prepare for more COVID-19 testing

Without a doubt, hospital laboratories were unprepared for the COVID-19 pandemic. The CDC developed and released a SARS-Cov-2 coronavirus test, but it failed to perform when evaluated by state public health laboratories. No hospital laboratory had an FDA-approved test for the virus. As a result, the ability for credible diagnostic testing was delayed significantly. The testing void was filled by many commercial in vitro diagnostic test manufacturers not all of which have marketed reliable products.

While the available data on SARS-Cov-2 testing are not as reliable as science prefers, it is realistic to think that the SARS-Cov-2 coronavirus infection is different than seasonal flu, SARS, and MERS; it is highly infectious and appears to have no seasonal cycle.  As a result, laboratory executives need to address how to better position their laboratories’ capabilities and capacities for the COVID-19 years. Four actions that support this transition are:

  • Add COVID-19 tests to the laboratory test menu.  This action serves to increase volume and revenue but must be tempered against the acquisition of new and costly instrumentation. If a laboratory lacks the technology to add COVID-19 testing to an existing high throughput platform, it should not purchase new automated capacity. Rather, it should strategically contract with an independent laboratory to perform the COVID-19 assays.  Remember, none of the available COVID-19 tests have been approved by the FDA.  All currently available COVID-19 tests are operating under FDA Emergency Use Authorizations (EUA), and once the public health emergency (PHE) declaration is lifted, the tests may not be available for medical use.
  • Reorganize laboratory management and production to achieve cost reductions and improve quality. Start by reviewing the current lab management structure to see if the organizational and reporting structures can be streamlined so that direct reports are in a single hierarchal line. Also consider the lab’s quality management system. Best practice is that It should be led by a professional whose role and functions are independent of production and finance. Next, review all in-house and outsourced test production to understand the following: What tests are less costly to outsource?  What tests reduce costs if produced internally?
  • Realign the laboratory processes and control structures to better match capacity with demand fluctuations. To improve the alignment between demand and production capacity, determine the daily testing capacity. Then, review a detailed accounting of total daily production for one month on an automated test platform and manual basis. Compute production by test as a percent of daily capacity. Next, understand what the reasons are for performing low volume tests internally. What are the costs associated with low volume production? Would it be better operationally and financially to outsource low production volume testing? Also, is the lab performing expensive tests that are non-emergent that can be bought from a reference laboratory at a lower cost?
  • Evaluate and strengthen revenue cycle and technology processes so they are better able to manage reduced volumes at lower costs. Comprehensive revenue cycle management processes are designed to accurately capture all appropriate revenue as well as laboratory units of production. Start a journey to strengthening laboratory revenue cycle practices by taking the following steps:
    1. Confirm the laboratory chargemaster includes a unique test ID number as required by certain commercial payors.
    2. Understand the impact of the Protecting Access to Medicare Act on your laboratory’s outreach operations.
    3. Register your laboratory outreach program as an independent laboratory with payors that require this designation to ensure no interruption in reimbursement and evaluate opportunities to strengthen your laboratory’s billing processes.
    4. Determine if the lab is due for an external charge description master review.
    5. Review actions being taken to ensure that lost or late laboratory charges are less than 2% of total charges.

Today the goal of all hospital-based laboratories must be to not only prepare for the full return of testing volume but also to establish a framework that can quickly scale in response to unanticipated variability or volatility in testing volumes in a manner that is both sustainable and cost-effective. 

To learn more about how Vizient can help you evaluate your current laboratory operations or overcome challenges related to the impact of COVID-19 on your hospital laboratory visit or contact Walter Valliere for additional information.

About the author. Walter Valliere brings more than forty-five years of experience leading initiatives to grow market share and reduce operating costs through process improvements, strategic outsourcing, business restructuring, business consolidations, supply chain optimization, and new venture development. Nine years with Vizient, Valliere has also held principal leadership/ownership positions with both a multi-site independent laboratory and a specialty consulting firm that served healthcare, biotech, and biopharma industries.

Published: August 6, 2020