Offsetting the Costs of New Care Standards

Offsetting the Cost of New Care Standards

As the healthcare industry moves to provide a higher quality of care at lower cost, many labs are looking to implement new standards of care. However, bridging the gap between the discovery of new capabilities, technologies, or care protocols and their actual implementation—getting paid, in other words—can be a significant challenge.

Adding to this, labs have traditionally been viewed as a cost center, which means that administrators may not always be eager to provide funding for new initiatives. As a result, labs are left on their own to either secure new funding, optimize their current operations, or demonstrate the value of their work to the health system in order to justify a larger budget. Here, our Lab Leaders offer strategies that labs can use to help offset the costs of new standards of care.

Article highlights:

  • Search for external funding sources

  • Better demonstrate the value of your lab

  • Optimize operations to free up funding

Contributing Lab Leaders

Alison Woodworth

Alison Woodworth, Ph.D.

Assoicate Professor of Pathology and Laboratory

University of Kentucky

Michael Laposata

Michael Laposata,M.D., Ph.D.

Professor and Chairman of Pathology

University of Texas at Galveston

Charles Mathews

Charles Mathews

Vice President of Boston Healthcare

Board Member, MassMedic


Pursue National Institutes of Health (NIH) Grants

In many cases, lab leaders will want to look outside their health systems for additional revenue, and federal grants are a viable means by which to procure funding for innovation. "There's quite a gap between the discovery phase [of new care standards] and actually implementing them in real science," according to Alison Woodworth, PhD, Associate Professor of Pathology and Laboratory Medicine at the University of Kentucky. "The NIH has recognized this problem, and now has huge grants that are just about dissemination and implementation. This is a good way to get around the problem of, 'How are we going to bill for this?'" For those looking to see whether their initiative may qualify, a guide to current NIH funding opportunities can be found on the NIH website.

Work to Justify the Value of Your Lab

At the same time, lab leaders should strive to better demonstrate the value of their work to health systems. Oftentimes, labs provide a disproportionate amount of value to the health system—far more than what's reflected in the lab budget—which, when articulated, can make it easier to justify budgeting for new strategies.

"People who manage hospitals don't understand that we're mostly not affecting the lab budget, we're affecting the general ledger," said Michael Laposata, M.D., Ph.D., Professor and Chairman of the Pathology Department at the University of Texas at Galveston. "We're saving millions of dollars in the pharmacy. Everybody has to stop counting the lab budget and say, 'We just brought three people in who are providing advice about tests and interpreting the results. The lab budget went up, yes, but you just saved $50 million of institutional resources.' That's a key point."

Of course, demonstrating those gains with evidence isn't always easy, and both payers and administrators will often ask lab leaders to perform outcome studies to validate the value of new initiatives. However, performing a five-year, randomized trial isn't always practical or preferable—especially when the value of a new program would be obvious and immediate.

To combat this, Charles Mathews, Vice President of Boston Healthcare, recommends that labs leverage the power of data. Usually, this entails developing or incorporating technologies—data warehouses, for instance —which can enable labs to improve their evidence collection capabilities. "If you develop an infrastructure that allows you to collect information organically, on an ongoing basis, it's just there—it's takes just keystrokes to query that data. Then, you're in a much better position to say, 'Actually, this protocol worked. This protocol is not working, and here's where we need to make adjustments,'" Mathews said.

With data on their side, labs stand a much better chance of securing reimbursement in the here and now.

Optimize Your Current Operations

However, it will not always be possible to secure new funding to implement new care standards. In that event, and in general, labs will be well served by building additional efficiencies into their operations. The development of standardized protocols can be useful here, as they can help labs to consistently select the right tests, provide more accurate, contextualized results, and generally streamline operations—lowering general operational costs, and thereby freeing more of the budget for new programs.

"The scarcity of resources actually prompts a push towards more standard operating procedures and protocols," Mathews explains. "You can create a structure that says, '80 percent of things go this way. Let's focus our efforts on the 20 percent of things that are more complex.'" Mathews explains that, in many ways, this amounts to securing new funding. "We always think about generating revenue. It can be through reimbursement. It can also be better optimization of care, so that if you get a fixed payment from a DRG (diagnosis-related group), you actually save money, despite having less costs."

It will always remain a challenge for labs to get paid to implement new care standards, and yet, the current transition of the healthcare industry demands that lab leaders accomplish both. However, by making the most of external grant funding, effectively demonstrating their value, and maximizing the efficiency of care, lab leaders can greatly increase their chances of success.

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