3 steps to building your own ROI

July 24, 2017

Three steps to building

your own roi

With Charles Wilson, M.H.A., MT (ASCP)
 

To demonstrate value, you must first speak the language of value

Today’s changing healthcare landscape requires lab leaders to adopt a new mindset—one that expands focus beyond the four walls of the lab. When laboratorians start thinking more globally and show how they can contribute to the organization’s bottom line, they will capture the attention of the C-suite and gain their support.

When discussing lab affairs with executives, remember not to lead the discussion with technology and science. While executives certainly expect laboratorians to be fluent in these areas, this is not the only language they want to hear.

They want to hear about value and growth. You can connect on these terms by demonstrating value-add initiatives like improving a process, increasing capacity, reallocating manpower, etc. Only then will you be in a position to gain a seat at the table and earn influence with upper-level decision makers.

To be taken seriously, you’ll have to quantify that value and growth. That’s where a financial rationale comes in. “Organizations want to see the ROI,” says Charles Wilson, Vice President of Operations at Robert Wood Johnson University Hospital. “That’s where most laboratories fall short. We can talk to them all day about improving treatment and care of patients, but we can’t tell them how this is going to positively affect the bottom line of the organization.”

This can be scary for those who have never done it, but to reduce your fear, Wilson offers three fundamental steps to building your own ROI.

1. Know your costs and revenues

The fundamental starting point is knowing your finances. “Most laboratories don’t know how much they are making and how much they are losing,” Wilson says. It’s essential that your lab isn’t one of them.

Charles Wilson, M.H.A., MT(ASCP) Robert Wood Johnson University Hospital

For example, you need to know how much money is coming in per billable test. Work with your finance department to find out how much revenue is being generated for a certain volume of test. “Even a crude figure is a great starting point,” he said. 

You’ll also need to have an understanding of your costs for equipment, and staff expenses, such as those of phlebotomists, technologists, and administrators. If you’re looking ahead five or more years, depreciation of equipment value will be a factor too. 

Once you understand your costs and revenues, you can easily model your language with the C-suite to include “value” and “growth.” This will enable you to confidently project increases in revenue, savings and efficiencies.

 

2. Eliminate inefficiencies

 

One of the most direct ways of improving ROI is eliminating inefficiencies, thereby reducing unnecessary costs. “It’s not about test volume; it’s about test value,” Wilson says. “Especially since new regulations are seriously restricting reimbursement.”

Wilson recalls a LEAN initiative he spearheaded a few years ago. It was based on a foundational ROI principle of reducing costs by eliminating needless tests.

The problem:

More than 30% of tests done in-house are ordered needlessly, according to a recent Harvard study.1 Wilson met with the VP and directors to share this striking result. “That got their attention because it created a strategic imperative,” he said.

The solution:

Wilson and his team developed an EMR alert that would notify the physician if a test was already resulted within the previous 12 hours. “The physician would automatically get a pop-up screen telling them when the test was ordered, along with the results,” he said. This system was rolled out for his institution’s five high-volume automated tests (comprehensive metabolic panel, basic metabolic panel, CBC, CBCD, and Mg).

The result:

In the first year, over $80 thousand was saved—on reagents alone. Wilson was able to use this savings to grow testing for key programs. “If we experienced this cost reduction on just a series of tests, imagine what labs could realize across the full spectrum of tests. When it comes to reversing wasteful over-utilization, this is just the beginning.”

"In many patient cases, insurers are paying the same amount no matter the volume of testing. Furthermore, new Medicare rules don’t observe incremental reimbursement. So it’s in our best interest to only run medically necessary tests."

This example serves as a model for labs everywhere. When you proactively identify and act on opportunities for improvement, you’ll earn newfound leverage with the C-suite.

3. seek mentorship

Since topics like finance and ROI and are not taught at the school of clinical laboratory science, having a mentor is one of the best ways to transfer this knowledge.

“As I began working and gained experience, I was criticized for not doing a better job with my numbers,” Wilson said. It was something he had to learn fast, so he reached out. “My boss, a COO of a large healthcare system, was teaching a class in business leadership. I quickly made him my mentor,” he said. “He coached me on balance sheets, helped me understand concepts like restricted funds, and stressed how important it was to know my board of directors.”
 

Charles Wilson,
M.H.A., MT(ASCP)
Robert Wood Johnson
University Hospital

 

“I walked away understanding that what I learned in college lacked that financial component. And knowing that component is critical in fighting for limited dollars.” 

Wilson’s situation isn’t an exclusive one. Mentors are there to help. Don’t hesitate to reach out to a seasoned financial leader like a COO or a CFO to gain invaluable financial insights. After all, when it comes time to enter discussions with the C-suite, having already built a relationship with its members will make earning a seat at the table that much easier.

enlarge your perspective, enlarge your value

Speaking ROI exists in a global context. Labs can no longer advocate only for their local needs and interests. They must internalize the needs of the entire healthcare enterprise. This means thinking beyond technical matters in favor of balance sheets, cost awareness, and growth opportunities. When you speak ROI, you demonstrate your recognition that nothing ultimately moves in your organization without it. This will give you the credible voice that the C-suite—who control an ever-shrinking pool of dollars—can relate to.

Follow these simple steps and you’ll be well on your way to building your own ROI, and be able to walk into the C-suite equipped with what’s necessary to earn your lab the attention and resources it deserves.

1. Know your costs and revenues: be able to quantify how much your lab is earning and spending, so you can confidently project growth

2. Eliminate inefficiencies: exploit opportunities to streamline operations and reduce unnecessary costs to directly improve your lab’s value

3. Seek mentorship: accelerate your business acumen by building relationships with financial leaders

As a final note from Wilson, he encourages us that, “You must be willing to fail. If your financial projection isn’t realized, keep trying. Too many lab leaders are afraid to fail. My boss told me if I wasn’t failing, I wasn’t trying.”

Good luck in your learning, and stay tuned for more content from Take the Lead that will further explore ways to maximize the value of your lab.

References: 1. Prescott, Bonnie. “Unnecessary Testing?” Harvard Medical School. 18 Nov. 2013. Retrieved from http://hms.harvard.edu/news/unnecessary-testing-11-18-13

Previous Article
Accountable Care and the Laboratory: A Value Proposition
Accountable Care and the Laboratory: A Value Proposition

Les Duncan discusses changing reimbursement models and how the lab can prove it is a valuable asset to the ...

Next Article
Offsetting the costs of new care standards
Offsetting the costs of new care standards

While lab leaders strive to implement new standards of care, it can be a challenge to get paid for such ini...

×

LabLeaders.com has a new home. Tell us a bit about yourself.

Thank you!
Error - something went wrong!