Leveling the Playing Field

Feb. 1, 2009

How one health system competes with a national reference lab for outpatient lab services revenue.

For many hospitals, outpatient laboratory services are a profit center. This is the case for Buffalo, N.Y.-based Catholic Health Systems (CHS), which means that generating incremental growth in volume is a high priority for the organization. Also, like many hospitals, CHS faces strong competition from a national reference lab that has substantial cost advantages, including the efficiencies gained from centralized services at an out-of-state lab; minimal local staffing needs; and, outpatient-only services that eliminate costs associated with round-the-clock staffing, keeping stocks of blood and other critical supplies and maintaining multiple testing facilities

How one health system competes with a national reference lab for outpatient lab services revenue.

For many hospitals, outpatient laboratory services are a profit center. This is the case for Buffalo, N.Y.-based Catholic Health Systems (CHS), which means that generating incremental growth in volume is a high priority for the organization. Also, like many hospitals, CHS faces strong competition from a national reference lab that has substantial cost advantages, including the efficiencies gained from centralized services at an out-of-state lab; minimal local staffing needs; and, outpatient-only services that eliminate costs associated with round-the-clock staffing, keeping stocks of blood and other critical supplies and maintaining multiple testing facilities.

The national lab has another distinct competitive advantage not related to costs: For the last nine years, the national lab has held an exclusionary contract for outpatient lab services for members of a popular HMO. As a result, we estimate that at least 25 percent of all insured patients in the eight-county area that CHS covers cannot be referred to our outpatient lab services. Losing 1/4th of the potential patients right off the bat is, clearly, a major hurdle; and yet, CHS must also contend with the “pull-through” effects of those exclusions — that is, the national lab’s efforts to secure all of a practice’s referrals.

CHS must continuously address the frequent unwillingness of practices to divide their lab business between CHS and the national lab. Referring eligible patients to CHS often is perceived by practice administrators as extra work, which means that we must add enough extra value to our services to make that additional effort worthwhile. CHS’ steady growth over the last eight years suggests that we have effectively differentiated ourselves from the national lab: Our total billables have grown from about 2.5 million procedures in 2000 to 3.7 million procedures in 2008.

The Challenge of Adding Value

Although community physicians appreciate and support the 24/7 access provided by local outpatient labs and the speed with which we can process lab results, we must nonetheless continuously raise the level of our service. To that end, CHS is committed to adding extra value to our outpatient lab services. At the most fundamental level, CHS focuses on continuing to provide the highest level of service possible to offset the cost and patient-access advantages enjoyed by the national reference lab. That means maintaining access points that are geographically well-located and user-friendly, and employing competent phlebotomists (in the lab services business, quality is not assumed and must be actively maintained).

However, as with any business, new challenges are always emerging that have the potential to erode CHS’ competitiveness, even when we meet the essential expectations described above. One such challenge was the national reference lab’s introduction several years ago of the area’s only automated lab interface with referring physicians’ ambulatory electronic medical records (EMR). The national lab interface delivers results from the lab’s systems directly into EMRs, making patient data available to physicians quickly and efficiently.

CHS realized that we needed to offer our own EMR interface, and we needed it to provide a range of functionalities superior to what the national lab’s interface could offer. That’s why in late 2006, CHS deployed an EMR exchange platform that enables the electronic delivery of lab results to practice EMRs. Over the last two years, our EMR exchange platform has become a significant physician satisfier and has correlated directly to increased billing volume. In keeping with CHS’ strategy of offering value-added services to referring physicians, CHS planned all along to offer electronic delivery of non-laboratory data, such as radiology reports and transcriptions, which we began to provide in December 2007.

Evaluating Internal Interface Options

As soon as CHS Lab Services recognized the need for an interface with physician EMRs, the CHS IT department began the task of identifying and reviewing our technical options. We looked first at developing a system internally, using CHS staff resources.

First consideration went to leveraging CHS’ existing interface engine and integration staff in order to develop EMR interfaces on a case-by-case basis. The IT team determined that, although technically feasible, two factors militated against this option: 1) Every interface at every practice would have to have been built from the ground up; and, 2) This approach would have required significant involvement from the integration staff, which was already working at capacity on internal projects.

The IT team moved on from there to reviewing the possibility of developing point-to-point virtual private networks (VPN) for each referring practice. Although VPNs held the promise of secure, effective delivery of data to physician EMRs, developing them would have required substantial coordination with each practice; the in-depth involvement from the IT engineering group; and, considerable effort to maintain each link.

Ultimately, the CHS lab and IT group decided to steer away from building EMR interfaces internally, due primarily to each option’s lack of scalability and the fact that the CHS IT staff was already fully committed to deploying clinical information systems within CHS facilities. We made the decision to seek a 3rd-party interface solution based not on financial considerations, but rather, on how best to deploy hospital IT resources.

Selecting and Implementing a 3rd-party System

Soon after we began the process of identifying potential 3rd-party EMR interfaces, we learned about, what was at the time, a relatively new EMR exchange platform from Novo Innovations (Alpharetta, Ga.). Beginning in the summer of 2006, the IT team performed extensive due diligence, including numerous reference calls, and ultimately CHS chose the system based on its capabilities and the positive results from a trial deployment.

By helping practices improve the quality of patient care and administrative efficiency, CHS is enhancing the continuing viability of our outpatient lab services.

The Novo Innovations system is a community information exchange solution based on the use of software agents (essentially, software “robots”). The solution enabled CHS to deploy a scalable, collaborative system that we set up quickly at a low cost, with very little staffing and with minimal effort. The system was easy and uncomplicated to implement, requiring only Internet access, one small hospital server and no additional hardware, security or network infrastructure from our end.

Here’s how it works: A single Novo software agent resides inside the hospital network, collecting, filtering and distributing result data throughout the community, while other agents are installed at the practices, receiving and translating information that only pertains to that practice’s patients. Since the agents themselves handle transmission and transformation of data to the practice EMRs (or even practices without EMRs, by means of a “drop box” feature that delivers results to any Internet-enabled workstation), there were no EMR-compatibility issues. This architecture naturally eliminates much of the complexity and cost issues associated with traditional interface solutions, as well as providing built-in security and privacy.

As for implementation, which began in a trial phase in early 2007, on the hospital side, the IT team had only to acquire and configure a server. In terms of ambulatory EMRs, we chose to focus first on establishing an interface with the Medent EMR from Community Computers Services Inc.

The Medent EMR is popular in our region, accounting for, by our estimates, as much as 60 percent of the EMRs in use at community medical groups. Novo and Medent worked together to build both a lab results interface and a documents interface.

Once those interfaces were established, the CHS lab and IT staffs worked together to test the accuracy of the results that would be distributed over the Novo system. In our experience, the testing phase was not difficult, but it did require that we had knowledgeable staff involved to be sure that patient data leaving CHS would populate correctly in the ambulatory EMR. We facilitate the process by gaining access to a Medent test system that enabled us to identify potential data-transfer errors, correct them and validate the data transfer.

Increased Volume and Improved Satisfaction

Today, CHS’ EMR exchange platform electronically distributes lab results to some 50 referring practices. We plan to deploy the EMR exchange platform to an additional 20 practices per year going forward. Moreover, 13 of the 50 interfaced practices also receive radiology reports and transcriptions through the exchange platform.

This expanded range of functionalities has been very well received by physicians and enabled CHS to provide them with longitudinal records. For example, if a physician’s patient has had an inpatient stay at CHS, is then discharged, and completes outpatient lab work as a follow-up, CHS can now distribute the entire longitudinal record directly into the physician’s EMR.

This functionality is a key differentiator and selling point for CHS because it enables physicians to follow the patient’s baseline results starting with the inpatient event and continuing through ongoing evaluation and measurement of outpatient tests. It is important for administrators to understand the great value that clinicians place on having this kind of information at their disposal, easily and efficiently.

As for impact on lab volume, the EMR exchange platform was a significant contributor to CHS’ 7 percent increase in lab volume from 2006 to 2007. Since deploying the exchange platform, CHS has recorded a continuously rising volume of requests from practices to deploy the platform to their practices. As EMR adoption grows in our community, CHS sees this interface as critical to maintaining the organization’s competitive position.

Referring eligible patients to CHS often is perceived by practice administrators as extra work, which means that we must add enough extra value to our services to make that additional effort worthwhile.

By helping practices improve the quality of patient care and administrative efficiency, CHS is enhancing the continuing viability of our outpatient lab services. The EMR exchange platform makes patient data available to physicians within minutes of its being posted in hospital systems, which improves physician decision-making.

From the administrative perspective, interfaced practices eliminate time once spent entering data into the EMR, thus reducing administrative costs and enabling providers to spend more time on patient care, which generates revenue.

One physician told us that the exchange platform has enabled him to save enough time during the day that he can now get home in time to have dinner with his family. With this kind of good will being generated, it’s easy to see why CHS sees the EMR exchange platform as central to our plans to improve relations with community physicians.

Connie Bauer is vice president of laboratory services, and Clay Bozard is director of information systems at Catholic Health System in Buffalo, N.Y. Contact them at [email protected]  and [email protected] .

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