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Stepwise Success

To Cut Costs, Change

Published July 1, 2016 6:20 AM by Scott Warner

These days it’s all about change. I have heard a constant drumbeat for the last thirty years that change is the only constant we can count on. The only thing more constant than change is the need to cut costs. Now that laboratories are becoming cost centers in small hospitals and groups are recognizing the economies of scale in centralizing testing and developing formularies to cut costs, those two are intertwined.

In one sense, it’s easy to save money: just search for a cheaper vendor. The problem for smaller hospitals is less bargaining power. A Group Purchasing Organization (GPO) can help but hinder depending on compliance terms. Small labs just don’t have the clout, especially in the Critical Access world, to convince vendors. The market charges what consumers will pay the world around. So cutting costs by going cheap without sacrificing quality only goes so far and as a strategy is quickly exhausted.

An easier scenario is one understood by every bean counter out there: cut staff. As a rule of thumb payroll is half of all expenses. If full time can be cut to part time, hours reduced, positions eliminated, or managers replaced with “working” managers, it all looks good on the bottom line. When the above is exhausted, this is the next logical step. Labs are benchmarked against each other to determine staffing load, positions are lost through attrition, and managers are challenged to come up with new ways to do more work with fewer people. It’s too bad benchmarking can’t capture the hard work that goes into making a good lab a great lab. And in fact benchmarking doesn’t take quality into account at all.

When that is done, what’s next? Many labs are facing the question today. They’re compliant with GPO contracts, they have evaluated pricing and chosen the cheapest without sacrificing quality, they have evaluated “make it or buy it” to cut costs, and they have lost people to never be replaced.

The answer is a hard one: change.

As an industry we have to change what we do, how we do it, and how we work to deliver a service that is cheaper, faster, and that doesn’t sacrifice quality. Doctors (and the insurance companies) do not care about the how and why, but they want completely separate things. The first wants speed, reliability, and quality. The second wants the lowest cost. Maybe that means outsourcing, merging, or centralizing. Maybe, it means changing.

If the world around us has changed, we must change with it. This requires creative thinking. It requires rethinking what we have done for the last ten or twenty years. It means trying completely different approaches to getting work done. For example, you may have a test kit in your lab that requires more QC if nonwaived and less if waived, and the only difference is the sample type. As another example, maybe moving a workstation to another department will streamline workflow and improve turnaround time.

Only we can change. If we wait for outside forces to change us, it’s too late.

NEXT: Embracing Point of Care

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About this Blog


    Scott Warner, MLT(ASCP)
    Occupation: Laboratory Manager
    Setting: Critical Access Hospital
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