Mergers and Acquisitions are the buzz right now. Competition is fierce, with lower reimbursements on standard tests and outreach making geographic proximity less of an issue for physicians in selecting which labs they send their tests to. Many labs are facing increasing pressure to watch, or cut, the bottom line, from considering investments in new equipment and software to finding profit margins in their existing infrastructure.
The answer? There isn’t just one. The old saying “one size fits all” does not hold true for laboratories and test menus alike.
There are many types of labs, with different test menus they offer to the customers they serve. There are boutique, specialty, and reference labs, of every size and test menu combination.
One of the best strategies we are seeing implemented in the industry right now is the cooperative collaboration between laboratories. Labs that are either in the same health network or geographic region are coming together to help leverage their technology and IT investment as well as their test menus to be able to survive, and even to thrive, efficiently and effectively.
Psyche Systems Corporation has developed a solution called LabTEN, the Laboratory Test Exchange Network. Simply stated, utilizing this system, your lab would approach another lab that provides a test menu that is complementary to yours to form a partnership in a cooperative business manner. This allows both labs to receive orders for tests that can be routed between them for performance, automatically through the Network. Once the results are complete, they are passed back through the Network from the performing lab to the lab that received the order for the final report to be generated, and branded, by that lab.
The perspective from each laboratory’s point of view is the need to leverage its current resources, whether they be human, monetary, equipment, or brick and mortar, in order to expand its test offerings within its region. Labs in a situation to take advantage of this initiative would be ones that need to expand their market and geographic reach with little to no additional investment.
The main objective for each lab is to leverage the risk and the benefit between itself and its partnering lab(s). Further, the goal is to be seamless to the ordering physician or physician group and the patient. Physicians will continue to place their orders with the lab or facility they always use and receive the final test results and report back from the same lab. However, the Network solution allows each lab to determine how and where the test is performed based on the participating laboratories’ resources and efficiencies.
Defining the goals of each laboratory is key to the success of this relationship, as is getting buy-in from all laboratory management and IT staff. Defining which lab is responsible for each piece of the execution of the business is also important. A thorough analysis of each lab’s test menus, cost, turnaround performance times, accuracy, etc,. needs to be done to see which lab should be the performing lab for each test that is offered. Which tests will overlap and potentially compete with one another and which tests are being routed needs to be clearly defined and set up in the rules of the LIS and Laboratory Test Exchange Network. One item to consider is whether you will be sharing an LIS.
If there are separate LIS’s, are they both flexible and easy to integrate with? Do the vendors work well with other applications, and are their integration fees reasonable? You also need to determine, and build into the time frame, an integration between disparate systems. Some vendors are very flexible and fast with implementations, while others can literally take years.
Keep in mind that from a business planning perspective, if you are going to be routing tests that you have performed in the past to your partner lab because it can do them faster or more efficiently—which means more profitably—then you will need to plan accordingly. In order to realize the full benefit, you will need to make sure that you adjust your ordering for supplies such as reagents. The same will be true of your partnering lab and any tests it is routing to you for execution.
One benefit of using the Lab Test Exchange Network lies in finding a partner lab that offers tests that you don’t offer but your clients want. Another benefit is that if you are looking to add some boutique tests to your menu, these tests usually require very specific and highly specialized equipment and final reports. Adding one of these esoteric tests to your menu would be a very large investment in hardware and specialized staff—one that another lab in your region may have already made. Another lab would most likely be looking to offset the cost of its investment by bringing in a larger volume of the test and would therefore be happy to consider partnering with you.
Identifying and determining goals is crucial. Different labs can, and often do, have different business objectives, strengths and challenges. Partnering affords laboratories the opportunity to leverage resources between themselves: monetary and human resources, IT, LIS, and equipment.That can enable labs to do more with smaller budgets and, in some cases, to enable survival and justify new investments. The bottom line for all partnering labs needs to be simply this: will the partnership increase everyone’s margins? If so, and the labs are able to work out who will be responsible for what, then this business model is a win-win scenario.
Lisa-Jean Clifford is CEO, Psyche Systems Corp., Milford, MA. She has more than a dozen years of experience in the health care high tech field.