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Cost Reduction Opportunities in Health Care: The Pathologist's Role


At the recent Annual Health Forum and the American Hospital Association Leadership Summit, Dr. Michael Porter, Bishop William Lawrence University Professor at The Institute for Strategy and Competitiveness, based at the Harvard Business School, gave a keynote talk titled “Redefining Health Care: Creating Value-Based Competition on Results”. This framework is important for every member of the health care system to embrace and implement. Pathologists stand at the intersection of every medical specialty and as such, are the perfect ambassadors for implementation of change.

According to Porter, the core purpose of health care is value for patients. The value formula is based on health outcomes that matter to patients and the costs of delivering those outcomes. To deliver high value, heath care delivery must shift from volume to value.

Quality also factors into the value formula. Quality in the lab is a cumulative sum of accuracy, precision and result timeliness. Porter lists major cost reduction opportunities in health care designed to improve outcomes and lower cost, all with the goal of increasing value for patients. These are important concepts for pathologists. Each can be directly linked to a quality initiative that can be spearheaded by pathology. Pathologists must embrace these principles and be proactive in their implementation. Proving value on the health care team means contributing to value based health care.

The following are some examples of how pathologists can leverage these opportunities.

1) Reduce process variation: By implementing Lean and Six Sigma principles, every pathologist should make sure their lab has an effective quality management program. A great resource for understanding these principles can be found here.

2) Eliminate low value services: Identify tests of low value, those that may be harmful or costly and do not provide higher quality of care. Several examples are available from the Choosing Wisely Initiative of the American Board of Internal Medicine.

In my own lab a process was implemented to review all miscellaneous test orders that previously were just sent to a reference lab, regardless of expense. This involves a pathologist researching the test, identifying potential alternatives, review of the medical record and/or discussion with the ordering provider, and setting up the test when approved.

3) Minimize skilled staff for less skilled activities: An excellent example here is the use of automation for a previously manual lab test, such as chemistry testing in the core lab or slide staining in histology. Human error is minimized, accuracy and precision is improved, at a lower cost.

4) Move routine services out: An example particularly of relevance for pathology is the use of centralized labs or consolidation of reference labs. Services though don’t always have to be outsourced, but rather redistributed. Pathologist specialization is one such tool that can improve quality and value by directing cases to the best trained.

Alternative practice models can be particularly effective in offering high value care. The Promising Practice Pathways offers concrete examples of how pathologists can identify value generating services.

5) Improve utilization: Through test utilization initiatives and lab formularies, value can be delivered.

Pathology is positioned at the intersection of all medical specialties, with the lab generating massive amounts of data. As a consequence, pathologists have the unique opportunity to leverage a hospital’s IT system (computerized physician order entry, CPOE) to deliver value. According to Porter, a value based IT system can enable restructuring of care delivery and measure results. Cloud based computing has been demonstrated to improve utilization and outcomes. The clinical laboratory, instead of functioning as an ancillary service, then becomes a partner in the health care team, contributing to the delivery of high value for patients.

6) Rationalize redundant administrative units: Pathologists should create process maps of each system operating in the lab. Through an understanding of the entire care cycle of a patient, test ordering can be made more efficient. One can identify “invisible cost centers” associated with defects in a value stream. Waste can be eliminated.

This often will involve units outside one’s department. As an example, our lab streamlined a complex preauthorization process for costly genetic testing by working with the lab, oncology, neurology, gastroenterology and a genetic counselor. Working with other labs and payers may sometimes be necessary.

7) Reduce cycle times: A simple example for pathologists is to consider discontinuing routine repeat testing of critical values. Valuable time can be saved, eliminating any delay in reporting critical values to clinicians.

8) Add services that lower total cost: In order for this to be accomplished, one must be able to measure actual costs of patient care. Consider bringing in-house tests that were previously sent out to a reference lab, i.e. vitamin D, celiac, tick panels.

Recently our histology department implemented testing for HER2 in breast cancer cases which will reduce the need for reference lab testing by 60%.

9) Increase cost awareness: Pathologists can play an important role in clinician education on test costs. This is an area where there is a clear need for improvement. One of the mistakes of health care today is too broad of a focus. Instead, one should focus on the individual provider. Here pathologists can help in monitoring utilization rates among clinicians and providing a “report card” on practice patterns.

Porter states that many cost reduction opportunities will actually improve outcomes. Pathologists must partner with our clinical colleagues to measure outcomes that matter for patients. However, change can be difficult. One example is the new HPV and Pap smear guidelines. Despite recommendations on utilization and positive data on outcomes, many practitioners are slow to implement change. Pathologists can and must facilitate change and help provide education for our clinical colleagues.

As the transition from volume to value continues, pathologists need to be proactive and effective team members. It is crucial to the success of new care models, i.e. Accountable Care Organizations, Patient Centered Medical Homes. Use Porter's framework in your own lab. What change can you make to impact the value formula?

For more information, please consult the following references.

Case studies and curriculum guide available at: http://www.isc.hbs.edu/resources/courses/health-care-courses/Pages/health-care-curriculum.aspx Porter, M.E. (2010). What Is Value in Health Care? New England Journal of Medicine. http://www.nejm.org/doi/full/10.1056/NEJMp1011024 Porter, M.E. and Lee, T.H (2015). Why Strategy Matters Now. New England Journal of Medicine. http://www.nejm.org/doi/full/10.1056/NEJMp1502419 Porter, M.E. and Lee, T.H. (2013). The Strategy that Will Fix Health Care. Harvard Business Review. October 2013. https://hbr.org/2013/10/the-strategy-that-will-fix-health-care The author thanks Dr. Michael Porter for providing images and content.

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