1. How do you see the evolution of the management in the Clinical Laboratory arena?
There are two marketplace dynamics reshaping the most common form of clinical laboratory organization. The first dynamic is patient safety. The second dynamic is “evidence based medicine.”

In North America, it is now important for all healthcare providers, such as hospitals, physicians, laboratories, and others, to improve patient safety. Employers and government health authorities want to reduce medical errors. Clinical laboratories, especially those based in hospitals, are beginning to respond to these developments.

In both the United States and Canada, reimbursement for healthcare services is increasing linked to “evidence-based medicine.” The buyers of healthcare in the United States, primarily corporations and government health programs, argue that only healthcare procedures with documented evidence that they deliver a benefit to patients should be eligible for reimbursement. This trend impacts the way clinical laboratories adopt new diagnostic technology. This triggered significant debate among physicians, health insurance companies, and laboratories about whether the clinical gains from the use of such tests warranted the additional cost to the healthcare system.

The trends of improving patient safety and using “evidence-based medicine” require clinical laboratories to shift their management emphasis. Even high quality laboratories in North America now must collect more detailed information about outcomes and the cost of care—then manage their laboratory to show documented improvement in patient safety, a contribution to improved healthcare outcomes, and a reduced cost-per-episode-of-care.

2. What are the main challenges facing laboratory managers in U.S.A.?
Let’s divide this into three categories: independent commercial laboratory companies, hospital-based laboratories, and anatomic pathology groups (which serve hospitals and office-based physicians in the immediate neighborhood around the hospital).

The commercial laboratory industry looks much different today than it did ten years ago. Today, this segment of the industry is dominated by Laboratory Corporation of America and Quest Diagnostics Incorporated . The challenge for this segment of the laboratory profession is to maintain adequate levels of reimbursement for their testing services. Both the federal Medicare/Medicaid health programs for elderly and poor, and private health insurance companies have squeezed down the prices they pay for laboratory testing. Commercial laboratories have responded to the declining prices of lab testing during the past decade by concentrating on operational efficiencies.

In the hospital-based laboratory segment, the challenges are several. The hospital laboratory exists to serve the needs of its hospital inpatients and outpatients. Hospitals are contracting with health insurance companies to accept patients for a fixed reimbursement, like the Medicare “diagnosis related group” (DRG). One consequence of this economic shift is that hospital administration looks at laboratory testing as a cost and pressures lab directors and pathologists to improve laboratory productivity and eliminate unnecessary costs. The evolving dynamics of working to improve patient safety and shifting toward evidence-based medicine now require hospital laboratories to do a better job of measuring outcomes, then improving those outcomes over time. First, they must stay current with the latest in lab medicine and deliver high-quality lab testing services to referring physicians. Second, they must measure the outcomes of both their operational lab work processes and their clinical services and improve those outcomes over time. Third, they must constantly take costs out of the laboratory budget and improve productivity of labor and equipment. Each is a significant challenge, which is why the information presented by The Dark Report has great value for many laboratory directors and pathologists.

For anatomic pathologists, as clinicians feel the pressure to improve their outcomes, they want a higher level of support and interaction from their laboratory medicine specialists. To meet this demand, early-adopter pathologists in the United States are moving past the simple delivery of a test report that contains the relevant numbers from the patient’s lab tests. The rapidly developing field of molecular diagnostics means that pathologists must learn how to marry their traditional skills in tissue analysis with the tools of molecular diagnostics. In the USA, local pathology groups have new competition for specimens originating in physicians’ offices. LabCorp, Quest, and several other national companies have begun to offer anatomic pathology services directly to physicians.

3. Can you tell us about the main threats and opportunities facing the lab managers?
The main threat—and the biggest opportunity—springs from a laboratory’s ability to deliver high-quality lab testing services that add value to clinicians and patients, at a competitive cost. Healthcare is an economic good, and people with adequate amounts of wealth are also willing to spend significant amounts of money to achieve the healthcare benefits they want. Throughout the world, every country faces the same challenge: as its population ages, the amount spent on healthcare threatens to overwhelm government budgets and private individuals’ ability to pay. Thus, one competitive advantage a laboratory can have is to provide demonstrable better laboratory testing services than its competitors, but at a more competitive price. Those laboratories capable of achieving this will enjoy sustained success, both clinically and financially.

4. Can you give us a short- and long-term perspective on the main trends in the clinical lab future?
The healthcare system in each country around the world is evolving at different speeds, but in the same direction. Economic pressures on the healthcare system eventually caused policy-makers to identify laboratory-testing services as ripe for cost cutting. The chosen solution was to eliminate excess or unused lab testing capacity through consolidation across multiple lab sites, while at the same time harvesting economies of scale by feeding larger volumes of specimens into newly created core laboratories. It is logical to assume that changing demographics and pressures to control the year-to-year increases in healthcare spending will put laboratories in Brazil and other South American countries under this same pressure to consolidate and become more productive—without letting the quality of lab testing decline.

5. Laboratories in Brazil are also struggling to survive in an environment that is constantly pushing for price reduction and low reimbursement. Can you comment on how laboratories in the United States coped with this pressure during the past decade, and its consequences?
During the 1990s, the business model of “managed care” proved to be a way to control healthcare spending, although in a way that was destructive to both healthcare providers and patients. Managed care used three specific contracting tactics that eroded the finances of clinical laboratories. During that decade, capitation (fixed prospective reimbursement for healthcare services) drove down the prices of certain routine, high-volume lab tests by as much as 90%! Full risk of test utilization was pushed onto laboratories, also causing financial losses. Competing laboratories where unable to serve those patients. Winning or losing such managed care contracts often meant financial success or failure for smaller, local lab companies. At the end of the 1990s, the laboratory profession in the United States had undergone significant transformation as a result of the managed care “experiment.” A lot of small, independent regional laboratories either sold to a national lab or went bankrupt.

6. Looking into The Dark Report’s crystal ball, how good or how bad is our future?
My crystal ball sees two different futures for individual laboratories. Laboratories resistant to change and wanting to maintain the status quo as long as possible will find the future to be troublesome and frustrating. As healthcare evolves, those laboratories will find themselves behind the curve, unable to provide the necessary laboratory testing services at the competitive cost required remaining viable. On the other hand, there is a bright future for those laboratories that keep an eye on how the healthcare marketplace evolves. By making careful investments in selected diagnostic technologies, by focusing on meeting the needs of clinicians and their patients, and by continuously improving productivity from year to year, these laboratories will thrive and prosper. My crystal ball is accurate on both points, because I have closely watched the outcomes of laboratory management strategies in Canada and the United States over the past fifteen years.