Given the recent inflationary pressures that have permeated all market segments in the United States, the focus of all laboratory directors is squarely on cost savings and maximizing product and instrument life. Drawing this issue into stark relief, even after removing cost-volatile items such as gasoline and food, core inflation rates still exceed 6% year over year.1 Comparatively, at a national level, wage growth has experienced a 4.5% annualized increase.2 These factors are particularly notable given that much of today’s medical laboratory industry workforce were not employed during the last era of inflationary pressures this significant (ie, the early 1980s).
What sets health care system revenue apart from other markets affected by inflation is its contractually bound agreements with insurance providers; health care system prices are rigid and fixed until a set point in the future. While the cost of goods from suppliers rises, health care systems cannot easily pass those costs through to the consumer. The net effect is detrimental to the operational margin of the health care system, as it absorbs the costs increases without the ability to adjust the pricing of its services.
Accordingly, the health care market must respond by better managing incurred costs and seeking to reduce them. In this vein, health care systems may perform budget cuts and deploy other cost saving initiatives, such as deferring wage increases or replacing retiring workers with new staff under a lower pay scale. However, a more palatable plan involves a review and reevaluation of how goods and services are acquired and managed to enable savings.
Opportunities for Cost Savings
When taking into consideration that the laboratory generally accounts for less than 4% of total health care system expenses,3,4 it may not seem like a primary focus for operational cost savings. That said, while the margin of opportunity may be relatively narrow compared to other areas, the following are common elements of laboratory management costs wherein savings are worth pursuing to help combat rising costs and inflationary pressures.
Multiyear Service Agreements
If the laboratory is not already pursuing cost savings involving its multiyear service agreements, this can represent a double-win opportunity, as it prevents present wage inflation from adding cost to future expenses. Review current instrumentation in the lab, particularly those with contracts coming due in the next 90 days.
Arranging for favorable conditions in a multiyear service agreement is an easy way to capture near term savings, while also locking in current pricing for future agreements, thereby maximizing dollars spent. Consider working with the purchasing and procurement department, as they often have benchmarking tools that help ensure solid pricing. Alternatively, they may be willing to deploy their negotiating skills on your behalf, leveraging for additional savings.
Consider Alternative Disposables and Distributors
Laboratories today stock numerous disposables, including pipettes, gloves and other PPE, microbiological loops, transfer tubes, swabs, and many more. In sourcing these items, determine whether you are using a single distributor or several. There can be multiple ways to capture savings when acquiring disposables; from choosing a less expensive alternative product at another distributor to combining purchases at a primary distributor who offers bundled or rebate savings. A detailed review of disposables acquisition poses another chance to work with the purchasing/procurement department to trial an alternative product.
Furthermore, have the various laboratory departments review their disposables needs and determine if, for example, the individually packaged sterile pipettes used in department A can be replaced with the bulk packaged sterile pipettes being used by department B. This process and mindset help consolidate purchases while reducing SKUs on an ordering template.
Source Multiple Vendors
Many items in the laboratory are vendor and/or instrument specific. However, items such as QC material or blood products may be suitably sourced from various vendors. If you purchase manufacturer specific QC kits for chemistry or microbiology, consider whether a third party offers a less expensive solution. In some cases, using previously sampled or spiked specimens could generate considerable savings while meeting regulatory requirements for QC performance.
For the blood bank, investigate the option of a secondary blood product supplier. Though this may require more direct staff management, the laboratory staff can prioritize use of packed red cells by supplier. Elect to use blood products from the more affordable provider at any given time while returning for credit any excess supply from the more costly provider. In light of current blood product shortages, working with a secondary supplier has become a virtual necessity in any case.
Know the Gamut of Lab Waste Streams
After a recent laboratory inspection by our environmental services team, it was discovered that staff members were disposing of general waste into regulated medical waste (RMW) containers. This is problematic, as it is costly, as well as prohibited. It is significantly more expensive for contracted medical waste handlers to remove and process RMW compared with general non-hazardous waste. Charges for processing RMW are typically based on total weight; therefore, disposing of general waste in a regulated container is accretive to the total charges rendered.
Secondary to solid bulk waste, review current practices for disposal of liquid reagent residual waste. Manufacturers are required to have safety data sheets (SDSs) that indicate appropriate handling of residual material. Specific to your laboratory operations, determine if liquid reagent residual waste needs to be collected, as well as what types may be disposed of into bulk hazardous waste or simply be poured down the sink drain.
The overarching concept here is that evaluation and auditing of appropriate waste disposal practices in specific lab departments can reduce costs. Educating staff on proper internal disposal of generated waste, how the waste is disposed of by the collecting facility, and the extra costs associated with inappropriate waste disposal enables good laboratory stewardship and saves money.
Glass Blood Culture Bottles
Depending on the vendor used for blood cultures in the laboratory, there may be an opportunity to switch from glass bottles to plastic. Not only is this a benefit to the collecting staff who have access to a pneumatic tube station, but the lighter weight of plastic compared to glass translates to lower cost-per-pound charges on generated medical waste. Furthermore, glass bottles need to be disposed of into a hard sided container that is penetration resistant (ie, more expensive), whereas plastic bottles can be disposed into bagged or boxed medical waste.
Considering the vast number of specimens collected by phlebotomy, it is important to assess the performance of conventional, straight needle venipuncture versus butterfly needle venipuncture. The cost of a butterfly venipuncture remains roughly two-to-three times the cost of a conventional straight needle venipuncture. That said, a soft touch is necessary to manage this type of potential change. Start by assessing the overall utilization of butterfly vs straight needle venipunctures. This can help determine appropriateness of use as there are many patients who will still require a butterfly venipuncture for best care. Be open to utilizing both methods as you work to convert team members to adopt the conventional straight needle style.
Bear in mind that less experienced team members may need re-training to become more comfortable with straight needle venipuncture, but the long-term savings will outweigh the cost for retraining.
Request Reduced Reference Pricing
Here is a straightforward idea—reach out to your referral laboratory account manager and request reduced pricing on a particular test. By identifying new test volumes or increases in current test volume for a particular assay, you can certainly request that the account manager obtain more advantageous pricing. If you have a secondary referral laboratory, leverage that relationship during negotiations. As the sayings go; the squeaky wheel gets the grease, and it never hurts to ask.
QC Frequency with an IQCP
Performance of quality control (QC) is a laboratory regulatory requirement with frequency dependent on test complexity. Some test systems require QC performed every 8 hours, 24 hours, or daily. Other tests only require QC to be performed weekly, monthly, or per lot/shipment.
With the advent of an individuated quality control plan (IQCP), laboratories now have the option to delve into their internal data and determine if QC frequency can be reduced on some assays. While ultimately, laboratories must perform QC at least to the frequency suggested by the manufacturer test system, some manufacturers do not make frequency recommendations and instead defer to laboratory regulating agencies. However, development of an IQCP is a one-time action with annual review for updates and therefore offers advantages compared to frequent QC alone. The opportunity to reduce the amount of QC being performed consequently reduces costs, such as those related to materials, labor, and associated troubleshooting.
Leverage IT and IS
Savings rendered in these categories are more difficult to readily quantify, but the premise is simplistic—leveraging information technology and information services tools generally translates to reduced labor, reduced unnecessary utilization, or both.
From a labor perspective, staff members occasionally will continue to work through software bugs or non-optimized workflows without seeking a solution. Empowering staff to bring these issues forward or enter service requests themselves can lead to fewer obstacles during normal workflow, resulting in greater staff satisfaction and labor efficiencies.
In regard to test utilization appropriateness, seek help from IT/IS departments to help guide clinical decisions related to test ordering practices. Setting up Best Practice Advisory warnings, duplicate testing warnings, test synonyms, price warning features, and other similar notifications can curb lab test overutilization issues. These prophylactic measures will translate to reduced laboratory costs and greater labor efficiency downstream as less time is wasted on unnecessary testing.
The rebound in demand for laboratory supplies and services has generated inflationary pressures not seen in decades. In turn, this has created financial headwinds for the health care industry as billable revenue is contracted with insurance and cannot be readily increased to rise with inflation. Therefore, it is incumbent upon all laboratory leaders to review areas of opportunity in an effort to reduce operational costs. We may not be able to match our savings to that of inflation, but every bit is accretive to the operational margin.