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Where have we been? Where are we going? What does the future hold for laboratories? A view from 2013.

Looking back, Thinking ahead, Making Choices

Sten Westgard
December 2013

As I write this, the close of 2013 is drawing near. In the US, this has been a year of impasses, sequesters, and shutdowns. More and more politicians are spending their energy trying to get absolutely nothing done. Even the most recent positive development – a budget compromise – has no good news for US healthcare. The cuts to Medicare that were forced by sequester will actually be extended 2 additional years. In other words, expect the cost pressures on laboratory medicine to increase, not decrease in the coming years. The current paradigm, to be asked to do ever more with ever less, continues.

What’s worse about this cost lens is that it is often applied myopically. That is, we are forced to make cuts that may save pennies on our ledger, even if that short-changes the delivery of healthcare downstream from us. If we make a change in laboratory operations that saves us money in our budget, but the impacts to patient care make it more expensive beyond the lab doors, that actually is very difficult to track. As they say, when you’re making budget cuts, you need to use a scalpel, not a cleaver. Given how lean we’ve been making our laboratories in the past two decades, there’s not much left that isn’t essential bone and sinew. Indeed, we may need to think differently – and begin to value an investment in better laboratory medicine and higher quality that provides us the next way to reduce overall costs.

It’s a story we’ve seen too often: leadership and administration agree that better quality is the path to better care and better profitability, and they espouse this in generalities, press releases and marketing. But when it comes to budget time for the laboratory, inevitably the focus shifts from quality to cutting. We talk quality but slash costs, and many of us miss the point at which this pattern of cutting costs turns into compromising quality.

I came across a recent study that provides the proof to this theory:

Higher Accuracy of Self-Monitoring of Blood Glucose in Insulin-Treated Patients in Germany: Clinical and Economical Aspects, Oliver Schnell, Micahel Erbach, Eva Wintergrest, Journal of Diabetes Science and Technology, (2013)7;4:904-912. (subscription required)

In this study, the authors looked at the impact of an improvement in quality performance in blood glucose monitors on patient care. Currently, the de facto standard for glucose meters is that they meet a 20% allowable total error (which is double that of what is required in core laboratory methods). Years ago, the American Diabetes Association made a recommendation that meters should be able to meet a 5% allowable total error, but that has not been achieved by any devices on the market (even within the core laboratory). Nevertheless, the study modeled the benefit of having meters that would achieve a 5% allowable total error, instead of the currently allowed 20% error.

The modeling results indicate the 20% error rate allows 1 in 10 hypoglycemic episodes to go undetected, a problem eliminated by more accurate meters. The modeling also predicted a 0.5% reduction in coronary heart disease (fatal or nonfatal myocardial infarction) if more accurate meters were used.

By reducing myocardial infarctions and preventing hypoglycemic events, the authors projected a total savings of 24.14 Euros could be gained per patient per year.

That doesn’t sound like much, but given that the patient population in question was 390,000 Type 1 diabetes patients in Germany alone, this adds up to 9.41 million Euros. If this cost savings is applied to all insulin-treated diabetic patients, the sum becomes 55.52 million Euros. That’s nothing to sneeze at.

But of course this model doesn’t suggest the additional cost of a high quality glucose meter. We know how much this theoretical meter could save us in medical costs, but we are only modeling the savings, not estimating the costs of the device.

Here’s the really hard question: if that meter cost more, significantly more, than your current meter, would you (or your health system) be willing to purchase it? Would it have to break even (the extra cost of the meter be balanced by the savings), or be at least X% cheaper (savings must outweigh the costs), or would any additional expense on the lab’s ledger be unacceptable, regardless of the downstream savings?

Because the savings occur outside the laboratory’s ledger book, it’s harder for the laboratory director to make the right choice. Our current method of putting each budget into a silo makes us short-sighted, and we miss the bigger picture.

Part of this also comes down to a balance of margin vs. mission. If we knew we could prevent 0.5% myocardial events, should we adopt the technology regardless of the extra expense to our department budget? Or does that number need to be larger before we act? Does our administration support investing more in one budget (the laboratory) if it cuts down expenses on another budget (patient care)?

There’s a little frustration about having to debate these issues solely on the level of cost. Most of us didn’t get into laboratory work for the money, and probably didn’t realize that so much of our time would be consumed by managing expenditures and the account books. As more and more budget pressure is placed on healthcare and laboratories in particular, most of the advice leans toward turning the laboratory into a more and more factory-like environment. In this list, everything – from tests to instruments to people – are becoming interchangeable commodities.

The laboratory has two paths ahead of it: one where lab techs are low-paid hourly line workers and the numbers they generate are “cheap” but possibly inferior, since the quality is assumed and not assured. Another path exists, where lab techs are more engaged with the patients they care for – they produce not just numbers but advice, interpretation and guidance. The latter path doesn’t preclude the cost reductions that are necessary, but it does mean that laboratories must invest in quality. The result will be a place where professionals can have a career, and where decisions are driven not only by cost, but by quality, and better care is ultimately delivered to the patient.

As you look to the new year ahead, remember that your choices shape the laboratory future.