Untapped Potential: How Hospitals Can Get More Value from Labs

Safely flying a plane requires not only a skilled pilot but a cockpit equipped with instrumentation that provides the pilot with accurate and actionable information. In a similar manner, physicians tasked with evaluating a patient’s health need accurate and actionable information, most of which they turn to the clinical laboratory to provide. The pathologists, clinical scientists, and laboratory professionals guide the clinician on the best studies to order. They process the tests to generate valuable results, and most importantly, use this information to answer key clinical questions, providing the accurate diagnosis needed to start effective therapies.

In any health system, the lab is providing thousands of answers a day across the span of healthcare — from pediatric medicine to infectious diseases to cancer care. Yet despite the crucial role that labs play in patient care, some hospitals are struggling with the decision to keep their labs in-house.

Why is this happening? In part, it is because most providers involved in direct patient care interact with the clinical laboratory in a focused way and don’t appreciate the breadth of data that the lab provides — over 70% of the quantitative data in the medical record. From a system leadership perspective, not surprisingly, it comes down to finances.

Hospitals are challenged with maintaining quality as trying to navigate downward pressure on reimbursement and today’s higher costs of providing care. For example, from 2019 to 2022, hospital supply expenses per patient grew by more than 18%, while expenses for emergency services supplies increased by nearly 33%.

Amid these financial pressures, hospital leaders have considered outsourcing lab services to commercial laboratories that offer a short-term infusion of capital and the lowest per-test prices. But before making such moves, it is important to consider the central role their lab plays in delivering on their promise to deliver high-quality care to the patients they serve, and how it can be a revenue generator for their organization.

Understanding the lab’s value

Operating behind closed doors, hospital labs can fall victim to being out of sight, out of mind. Hospital leaders may not have visibility into what happens in a lab or appreciate all the ways it supports both patients and the bottom line. This can lead to a lack of support for growing and investing in labs, and fuel misperceptions about — and under-recognition of — their value.

But the fact is, labs have more patient touchpoints than any other outpatient service line, according to data from Definitive Healthcare. And hospital laboratories that serve the surrounding community through testing outreach programs have an amplified role in providing access to quality care.

So what are the benefits of nurturing and growing the clinical laboratory as an essential, integrated element of the local healthcare delivery system? For starters, integrated hospital laboratories can deliver results back to the patient’s medical record much more quickly, enabling physicians and other healthcare professionals to make faster decisions, and in turn allow patients to be treated sooner. Furthermore, when the information is created by the clinical laboratory, the pathologist and other clinical laboratory professionals are readily available to consult with and advise the clinical care team, guiding the ordering of the correct tests and helping to interpret the significance of their results.

By optimizing the use of the clinical lab and expediting the results, the integrated hospital laboratory improves the efficiency of care delivery, shortens hospital admissions, and improves outcomes and patient experiences.

Labs with outreach programs in their local communities can improve care in other ways. They can help reduce unnecessary testing that occurs in the outpatient setting and use the additional test volumes to introduce operational efficiencies that lower the cost per test and educate patients and providers on best practices in clinical diagnostics.

As the industry boldly moves into the era of “big data” and with healthcare becoming more digitalized, hospital leaders are increasingly mindful of data ownership. As was mentioned, the clinical laboratory is one of the richest sources of data in the electronic health record. This data plays a crucial role in supporting research, furthering scientific knowledge, and aiding the development of life-changing technologies in healthcare. By maintaining their laboratory as an integrated part of their healthcare delivery infrastructure that also serves the local community, hospitals can also maintain control of the lab’s data.

When it comes to understanding the financial value of a hospital lab, hospital leaders need only look to the ongoing acquisitions of hospital lab community outreach programs. The commercial labs purchasing the programs know that even in a time of declining reimbursement, the programs can be revenue drivers. In cases, commercial labs have claimed they’ve recovered their acquisition costs in only about one year.

To maximize revenue, labs should create growth initiatives for capturing the robust market for outpatient laboratories that exists in their local communities. Those initiatives can be strengthened by creating partnerships with other health systems to serve more patients and bringing on supply chain vendors that also stand to benefit from higher testing volumes.

Promoting the value of the lab

The hospital “C-suite” will be more inclined to retain and grow their clinical laboratory when they understand both how integral it is to serving patients and strengthening the bottom line. But for hospital leaders to view their labs as an asset and not a cost center, lab leaders must be willing advocates of the laboratories’ critical role in healthcare delivery and health system economic vitality.

Those running labs should be engaging with other hospital departments and hospital leaders, such as by taking part in regular business and operations meetings. This can help lab leaders share the value of the lab outside of their own walls and give them a voice at the table when decisions are made. And it can help lab leaders shape the narrative about their labs by sharing concrete data that illustrates the significant role they play in the patient journey. The laboratory is the indispensable partner that allows a hospital to put the needs of their patients first.

The lab may not be top of mind for all decision-makers in a hospital today. But the more those decision-makers understand their lab’s value — to deliver answers quickly and get patients on the path to treatment sooner — the more eager they’ll be to tap into the lab’s potential to elevate the standard of care in their community and use it as an economic engine for growth.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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