The shift from fee-for-service (FFS) to prospective payment systems (PPS) has been among the most important developments in the evolving healthcare landscape. Under FFS, laboratories were viewed as profit centers, and because testing generated profits, the appropriateness of test requests was rarely questioned. Laboratories focused on internal processes and measured performance by efficiency (ie, cost per test, turnaround time, etc).
With the shift to PPS, laboratories are now regarded as cost centers rather than profit centers. As such, additional tests do not increase profits and healthcare organizations now seek ways to reduce inappropriate testing. Many organizations have initiated utilization management programs to reduce inappropriate testing and laboratories are central to this effort.
Utilization management requires laboratories to take a new perspective and develop new capabilities. Laboratories now are asked to contribute value to the parent organization and it is no longer sufficient for laboratories to focus on the efficiency of internal processes. Laboratories must look beyond their own boundaries and seek opportunities to add value by leveraging their knowledge to improve the effectiveness of external processes.1-3 Utilization management provides a mechanism to accomplish this goal; however, to be effective, it requires a significant change in focus. This manuscript describes the capabilities that a laboratory must develop to support a utilization management program and the content presents a high-level, managerial perspective outlining seven characteristics of effective programs.
1. A Systems Perspective
Start by taking a broad view and examine all the ways in which clinical laboratory services affect clinical care. Clinical laboratory services influence diagnostic and therapeutic decisions which, in turn, influence downstream outcomes such as length of stay, patient safety, resource utilization, and customer satisfaction. The primary goal of laboratory utilization management is to bring clinicians, laboratory professionals, and administrators together to ensure that laboratory testing provides clinical benefit to patients, is cost effective, and is appropriately used. Thus, it is important to take a systems perspective to ensure all key inputs and outcomes are accounted for, and affected stakeholders are engaged. Ideally, this engagement should be system-wide.
It is useful to view test utilization as a system of process improvement. Indeed, utilization management can be designed using well-known process improvement principles such as Deming’s plan-do-study-act cycle, which projects a continuous cycle wherein experiments are planned (Plan) and conducted (Do), results are studied (Study), and a decision is made (Act) on whether to conduct further experimentation, implement the change, or abandon the project.4 This approach implies that the program is continuous and evidence-based. Management’s role is to develop organizational capabilities to make this process effective.4 Therefore, executive leadership must create a system that can generate and evaluate project ideas, manage projects effectively, and improve the system over time. The key is to set a governance structure that takes a high-level view and oversees the entire system.
2. Build the Right Utilization Management Organization
Because utilization management requires a system perspective, it requires management that spans organizational boundaries and can engage multiple stakeholders. It is recommended to start with a corporate planning committee. This group normally includes top executives that meet early in the process to develop the mission statement, scope, and objectives. The primary responsibility of the planning committee is to provide a charter for the steering committee, select steering committee members, identify goals, and over time, ensure the steering committee meets expectations. Ideally, laboratory utilization would be one component of a broad value-improvement program.5 Thus, the planning committee could potentially oversee several different steering committees (see FIGURE 1).
The steering committee—a relatively small group of high-level stakeholders—is responsible for managing the overall utilization management program. It sets policy, selects projects, and communicates activities and accomplishments to the organization.4 Committee structure is critical and this step is where many programs hit roadblocks. The committee should be led by individuals with authority to allocate resources and implement change. Committee membership will vary by organization, but generally, should include administrative, clinical, and information technology (IT) representatives that engage stakeholders throughout the organization, solicit project ideas, and evaluate projects (see TABLE).
Specialty committees also are vital to the system. Steering committee members have strong organizational and leadership skills, but may have limited knowledge of particular problem domains and limited capacity to undertake projects. Thus, the steering committee will often delegate specific projects to ad-hoc specialty committees that implement the work. These specialty committees comprise experts who implement a specific project within a particular domain. For example, a specialty committee may be organized around a disease, a care pathway, a department, or a patient group. This subcommittee would include staff with clinical or operational expertise in the problem domain and may be supported by resources (eg, analytics, IT) provided by the steering committee. Subcommittees enable the steering committee to expand the program and apply specialized expertise throughout the organization.
This top-down organizational approach provides high-level support that is required to set and accomplish goals. It also allows for broad engagement across the organization. Although laboratory-directed programs can achieve some success, programs are much more successful if they use a top-down approach. Again, laboratory utilization should be part of a broad organization-wide utilization management program.
3. Select Optimal Projects
Identifying and selecting candidate projects are among the most important tasks of the steering committee. The objective is to select projects that increase value by reducing costs or improving outcomes. The steering committee should solicit feedback from a wide range of groups and organize improvement opportunities by test, care pathway, department, or patient group. Focusing on tests (eg, high-frequency tests or tests with high annual cost) can generate a large list of projects targeting cost reduction. Care pathways involve relatively few tests, but the pathway perspective enables one to identify the downstream impacts of testing, as well as underutilization.
Inappropriate testing can be identified by several different methods, the best of which is to compare testing patterns against published guidelines or algorithms. For example, HbA1c should not be ordered more frequently than four times a year, and an organization can compare the testing frequency against this guideline. Similarly, one can scan for obsolete or suboptimal tests (eg, CKMB, Helicobacter antibodies, rT3). Unfortunately, guidelines are only available for a limited number of tests, so additional approaches are required to identify potential projects.
Benchmarking is another approach that can be used when guidelines are not available.6 Benchmarking provides information on practice variation and is based on the assumption that unusual testing patterns provide a potential signal of inappropriate utilization. Benchmarking greatly expands the number of tests that can be studied; however, it can only identify what is normal. Unfortunately, what is normal is not necessarily correct. Still, benchmarking is a relatively simple approach and can be used to highlight practice variation.
Given a set of potential projects, how does one decide which to pursue? Typically, 90 percent of the costs are associated with a relatively small percentage of the test menu.7 These tests are the so called “vital few.” Generally, one can ignore the “trivial many” because the time and energy required to address a low-impact project is often not different from the effort to address a high-impact project.
The following are effective criteria to prioritize projects: Financial impact, ease of measurement, availability of an effective intervention, and cost of the intervention. Many facilities rank tests by annual spend; however, other measures with high financial impact, such as length of stay, can be used. Projects with outcomes that are easy to measure are preferable. For example, given the complexities of fixed versus variable costs, the financial impact of a reduction in send-out testing is much easier to determine than the impact of a reduction in in-house testing. Similarly, quantitative outcomes are preferred to qualitative outcomes.
Overall, it is important to take a systematic view; to create processes that generate high-quality project ideas and a system to prioritize and select those projects. Utilization projects consume valuable resources, so it is important to pick high-impact projects with a substantial probability of success.
4. Pick the Right Measurements
The improvement process should be evidence based and well documented, though in practice, this can be difficult. The before-and-after model is the most common type of study design, but it suffers from inherent deficiencies. In such studies, one compares performance (eg, test volume) before and after an intervention, and generally assumes that any change is due to the intervention, but this is rarely true. Change is always present, and there are many factors that could affect performance over the course of the study. Thus, often it is difficult to determine the extent to which the change can be attributed to the intervention. Randomized designs are better, but it is often difficult to randomize an intervention across tests. Some studies are challenging because it is difficult to obtain a large enough sample size to detect a change.
Outcomes can be measured at various levels of analysis (eg, physician, department, patient group). The unit of analysis should correspond to the scope of the intervention. Direct measures such as test volume, testing intervals, and test yield are the easiest to interpret. Cost is an important metric, but is difficult to interpret because the fixed and variable components of the total cost are often unknown. Once again, a practical approach that uses direct measurements to document progress and to estimate cost savings is recommended.
5. Implement Interventions that Prompt Change
Interventions are an important consideration when selecting improvement projects. Generally, there are several potential interventions, and one must consider the total cost, impact on clinical operations, ease of implementation, and overall likelihood of success.8 Interventions can be a single event (eg, removing a test from the menu, displaying cost information) or continuous (eg, educating residents about appropriate ordering). Interventions also can be broad (eg, providing feedback on most recent orders in the computerized provider order entry [CPOE] system) or targeted (eg, providing feedback to a physician with an unusual test order pattern). Given a choice, broad, single-event interventions are preferred because they consume the least time and generally have greater impact.
Finally, one has to consider organizational factors. People and departments vary with respect to their receptiveness to change, which can have a significant impact on project success and should be a consideration when selecting projects. For example, formularies can be a very effective intervention; however, they impose restrictions on clinicians. Some organizations are more receptive to restrictive interventions than others, so the team needs to be sensitive to organizational culture and politics.
6. Hold the Gains
Good project management is essential to maintain momentum. With all the activity associated with interventions, it is important to designate someone to manage documentation, communicate progress, ensure that data is pulled 90 days post-intervention, and measure results. At this point, utilization management has gained traction with pilot projects; results have been obtained from some interventions and the facility is moving into the cycle where new ideas begin to arise organically.
The improvement process is cyclical, repeating itself as new issues are identified, policies are developed, and change is implemented. Stories begin to emerge when interventions are measured and reported, and these stories can be used to demonstrate how the lab brings value to the organization, improves patient care, and preserves hospital margin.
7. Improve the Improvement System
The employment of a system perspective is critical. Utilization management involves processes for idea generation, project selection, and project management. It is important to periodically review the effectiveness of the process by asking certain questions. Are we generating enough ideas? Are we prioritizing projects adequately? Are we managing interventions effectively? Are we measuring outcomes? It is recommended that teams conduct post-project reviews and collect project level metrics that can be used to assess the effectiveness of the utilization management system. This information also can be used to improve the utilization management system and to maintain momentum by providing evidence that the system is working. In short, one should document and publicize all victories.
Healthcare organizations are implementing laboratory utilization programs to increase value by reducing inappropriate testing. Programs are most effective when managed from a top-down systems perspective and include the right stakeholders. Selecting the right projects and appropriate interventions are central to success, but have little value without measuring and reporting the outcomes.
Suzanne Carasso, MBA, MT(ASCP), is an accomplished medical technologist and business professional with more than 25 years of technical, management, and consulting experience in the healthcare industry. She is director of Business Solutions Consulting with ARUP Laboratories.
Robert Schmidt, MD, PhD, MBA, is a clinical pathologist who specializes in the evaluation of medical tests, test utilization, and laboratory operations. He is currently an assistant professor at the University of Utah where he also is medical director of the clinical laboratory at the Huntsman Cancer Institute, co-director of resident research, and director of the Center for Effective Medical Testing at ARUP Laboratories.
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