Consolidate or Outsource: Which Approach Is Right For Your Lab?

Consolidate or Outsource: Which Approach Is Right for Your Lab?

As healthcare organizations struggle with escalating costs and declining reimbursement, many are reevaluating their on-site laboratories and considering the merits of either consolidating or outsourcing. Outsourcing the lab work, the thinking goes, could lead to immediate and significant savings, and free up cash for investing elsewhere. Consolidation, on the other hand, would keep laboratory services under organizational control, while also driving improvements in overall efficiency. But there are possible downsides to either tactic: The impact that outsourcing might have on quality of service, for example, or potential challenges associated with standardization in the case of an organization that decides to build a core lab.

So which approach, if either, is the best? Here's a closer look at the pros and cons of each, with key insights from two industry leaders.

Article highlights:

  • Labs can offer value directly to patients by helping them use their lab results to manage their health
  • Labs can play a role in helping patients interpret and use genomic data
  • Both labs and health system top management must make fundamental culture changes to increase the lab's value to patients


Contributing Lab Leaders

Jeff Myers

Jeff Myers, CPA

Vice President, Consulting

Eyas Hattab

Eyas Hattab, M.D., M.B.A.

Chair, Department of Pathology and Laboratory Medicine
A.J. Miller Endowed Chair in Pathology
University of Louisville



Jeffrey Myers,CPA, Vice President, Consulting at Accumen, agrees. Outsourcing may unload the bulk of your testing burden to a high-volume reference lab that can easily handle the work. But it also takes away a measure of control, and that can lead to problems down the road, including reduced clinician and patient satisfaction. “The best approach to cost improvement is within your own laboratory," Myers says.

Consolidation: a significant investment that gets results

If outsourcing comes with its various drawbacks, what's in store for those who choose to consolidate? According to Hattab, you'll face hurdles here, as well, whether it's in the space you'll need for a new facility or the technologies required for efficient testing. “Laboratory consolidation efforts that are focused solely on moving pieces around without making significant investments are misguided and doomed to fail."

Still, Hattab and Myers agree that consolidation comes with a number of advantages that ultimately outweigh the challenges it presents. When an organization maintains a central lab, for example, it puts that facility and its pathologists in a unique position to identify care gaps and care variation. Pathologists can work closely with the organization's physicians to ensure each analysis includes exactly what is needed so that testing doesn't have to be repeated. Communication between lab staff and clinicians is made easier, so misordered tests are kept to a minimum. The gains in efficiency made possible through standardization translate into gains in care-quality. Costs are reduced as testing leads to better patient outcomes, as well as shorter hospital stays and fewer readmissions.

In the end, some organizations will choose to outsource because it allows them to focus their limited resources on other areas. And others will decide that consolidation makes sense—and turn those limited resources into their biggest strength.


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