Consultants help IDN realign lab services with $1.2M in savings and potential added revenue of $6M to $7M
CHALLENGE
A six-hospital healthcare system in the southeast launched a project to align its laboratory services with its brand promise as an integrated delivery network and to support its migration to an accountable-care organization model. The organization wanted to:
- Create a lab organizational structure to support full integration
- Find capital/operational cost saving opportunities
- Introduce Lean concepts to improve productivity
- Prevent lab test leakage to competitors
- Provide high quality with no service disruptions
- Position the lab to pursue managed care contracts
SOLUTION
The organization asked LS Flynn & Associates to help integrate and/or consolidate labs from its six hospitals, find opportunities to improve productivity and reduce costs, and improve outreach. Seventeen areas were identified to facilitate integration and improve the cost structure. The consultants were asked to help implement these recommendations.
The process began with a managers’ retreat to involve them in planning. Later, there were regular meetings with hospital presidents and other stakeholders and decision making was streamlined. When the engagement began, lab directors reported to hospital administrators. There was little “system think.” Lab directors now report to a system executive director, employed after a national search, who has a dotted-line relationship to the hospital administrators.
RESULT
The organization realized nearly $1.2million in cost reduction by centralizing tests, controlling reference lab use, and restructuring phlebotomy services. Productivity has increased and targets are being met. Direct cost per billed test has improved by more than 15%.
Managed care staff have successfully negotiated to have the system’s lab included as a provider for two of three primary managed care networks where previously it was not included. As a result, the organization has the potential for $6 million to $7 million in new revenue from managed-care contracts.
“As we move from volume to value, we will need to work directly with individuals to help them improve their health. As part of that process, we will need to make sure we are coordinating patient care effectively and efficiently. We engaged with LS Flynn & Associates to make sure our laboratories are consolidated, fully integrated and that we’ve looked for every opportunity to improve productivity and reduce costs. Not only did they successfully benchmark our operations and provide an excellent improvement plan, they also partnered successfully with us to ensure that the improvements were put into place expeditiously and with minimal disruption. We are definitely pleased with the results and I would definitely recommend them.”
—Senior Vice President & Chief Resource Officer