Just about everyone has heard the adage, "Work smarter, not harder." But with all of the economic pressures laboratories are currently experiencing, I would like to re-coin that phase into "Work leaner and keener."

Laboratory administrators are increasingly faced with the task of cost reduction due to ever decreasing Medicare, Medicaid and third party reimbursements. In a recent article, biomedical expert Mauro Panteghini commented, "Reaction on the part of administrators and decision makers to decreased availability of funds has begun on several fronts, and the funding position of clinical laboratories throughout the world is becoming critical."¹

In Bill Malone's article regarding laboratory tests reimbursement, he stated, "Over the past 25 years, Congress has actually reduced Medicare payments to labs by about 40 percent in inflation-adjusted dollars, completely eliminating the Consumer Price Index (CPI) update most years and offering only modest increases in the update was actually approved."

He went on to say, "Despite this dismal trend, and in an effort to be heard in the healthcare reform debates, labs began lobbying Congress at record levels in 2009, spending at least $4 million last year, according to Laboratory Economics."²

Although the costs of lab work are increasing for patients, the reimbursements for tests are decreasing for laboratories. The Center for Medicare and Medicaid (CMS) publishes annual lab reimbursement fee schedules of new and revised test codes that ultimately affect the bottom line.

On July 18, 2011, CMS has announced a public hearing to receive comments and recommendations from the public on the "new codes that will be included in Medicare's Clinical Laboratory Fee Schedule for CY 2012, which will become effective next year, on Jan. 1, 2012."³

The meeting will review the appropriate basis for establishing the 2012 Medicare payment amounts for a specified list of new CPT codes for clinical laboratory tests. Detailed meeting information is posted on the CMS website.

Laboratory managers are increasing their involvement in both lobbying Congress and attending hearings to petition changes in lab reimbursements. But there are some additional internal fiscal activities that can be equally effective, as well. Fiscal gains can be achieved by managers shifting their mindset even more so than normally into the "Lean" mode of trimming and reducing work processes.

Additionally, a manager's "keen" razor sharp coordination when utilizing staff, equipment and supplies will help in meeting current and future budgetary challenges. A lean keen paradigm shift will be needed in order to stay economically sound. Future laboratory administrators will need to will use creative tools outside of the traditional accounting toolbox.

Fiscal Snapshot
Layoffs, downsizing, outsourcing, and cutbacks are words that have become the new daily jargon for our global society. Clinical laboratories are being hit particularly hard these days on the financial front. Budgetary constraints are affecting all areas of the lab--from staffing to supply orders to the upgrading of necessary equipment.⁴

However, the current healthcare model is caught in a paradoxical Catch 22. According to Annamarie Barros' article on laboratory budgeting, " More than 10 billion medical tests of all types are run annually in the U.S., costing $100 billion to $150 billion or as much as one-third of the nation's $450 billion health care bill." She goes on to say, "Laboratory diagnostic and therapeutic procedures make up a major portion of this activity."⁵

A 2009 finance study revealed that, "Laboratories supply 70  percent of the data that is used for clinical decision support. The shortage of funding and technologists translates into delays in diagnoses and treatment, which increases the bottom line for hospitals and the cost to patients because of longer lengths of stay," said Cheryl Caskey, president of the National Accrediting Agency for Clinical Laboratory Sciences.⁶

Additionally, the Bureau of Labor Statistics projects the need for 138,000 additional medical technologists (MTs) and medical laboratory technicians (MLTs) will be required due to job growth and replacement of workers by 2012.⁷ However, where will these new recruits come? The Bureau's 2000 concern of declining MT and MLT education programs, as well as low student enrollment continues.⁸

To resolve funding, hiring and recruitment issues, multiple tactics have been explored. One maneuver for cost savings is for clinical laboratories to consolidate diagnostic sections into a larger section.⁹ Another approach of cost cutting is the method of reducing expenditures by automating as many services as possible.

According to an article on the role of robotics in the laboratory, "savings are achieved by the addition of automated pre-analytical specimen handling using robotic systems."¹⁰ "Unfortunately, this technological approach to lowering costs has frequently been used to undermine the influence of laboratory professionals are usually trained to concentrate on the technical performance and on the achievement and maintenance of the highest quality test results generated in laboratories."¹¹

Expanded Accounting Role
Historically, the finance function has been seen as the accounting or bookkeeping department's role. But in these days of economical constraints, the appropriate handling of an institution's finances is everyone's job, particularly lab department heads. With limited and shrinking funds, ongoing input and solutions to improve the lack of performance, reduce waste and eliminate process flaws are vital.

Recently, I read an article which posed this question: "The chief pathologist has been questioned by several staff physicians about the availability of a new test for disease XYZ. The pathologist then asks you, the chemistry supervisor, to look into the feasibility of offering this test. In researching the possibilities, you must consider several questions. What level of volume can you expect? What are the associated costs of adding this test to the menu? Will this addition require new equipment? Will this equipment be a capital expenditure? What staffing adjustments will be necessary? How many tests will the lab need to perform before realizing a profit?"

The author goes on to say, "The ability to answer these questions requires a basic understanding of financial management and is essential for the laboratory manager at any level."^12,13

Unlike controllable supply/demand variables in many manufacturing and service industries, controlling supply and demand is under limited power by the clinical laboratory. "Test ordering is driven by patient volume and individual physician determination of the type and frequency of laboratory tests that need to be performed."^14-16

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