A large regional health system has saved more than $5 million a year on labor and supplies—and even more with capital expense avoidance—by partnering with Labcorp. Within a period of one year, Labcorp brought nine separate hospital laboratories together utilizing a single core lab along with hospital rapid-response labs, delivering savings on labor and supplies while achieving new levels of standardization. In 2020, the relationship between the two organizations became even more valuable as hospitals nationwide scrambled for lab services and supplies during the COVID-19 pandemic.
Situation
Labcorp reviewed and optimized menus at eight hospitals within the large regional health system to focus and meet the needs of the inpatient and ER testing needs, while centralizing the ambulatory work at a single core laboratory. This resulted in reduced cost and redundancy, and improved efficiency and testing performance. Patients also gained access to Labcorp patient service centers, providing more convenient access to ambulatory testing services. This approach aligned with the health system’s desire to gain more value from its laboratory assets, which was spurred in part by the realization that reimbursement was steadily declining for lab services and that reduction was likely to continue.
Additionally, the health system was able to see stronger provider and patient satisfaction data and stronger analytical insights from the resources that the Labcorp partnership provides.
Three key challenge areas:
- Labor – Finding qualified lab technicians was problematic for the health system prior to the consolidation, especially for its hospitals located in more rural areas. The new core lab brought together the “best and brightest” of the lab team and reduced recruiting expenses. The fact that the lab was well-staffed worked to the organization’s benefit when COVID-19 hit.
- Supplies – Labcorp’s national contracts offered significant savings to the health system for equipment and other supplies while also mitigating concerns about supply chain constraints.
- Standardization – The health system has grown via acquisitions and had a wide range of equipment and protocols. By consolidating key elements of the health system’s labs into a single core facility, Labcorp was able to eliminate duplication and upgrade the centralized lab to the most advanced testing equipment. In addition, Labcorp established lab protocols with equal reference ranges that support standardized treatment protocols across the system. The standardization improved data accuracy, timelines and visibility into quality.
Results
Financial benefits from eliminating redundancies
In order to deliver on Labcorp’s proposed solution of one centralized core laboratory and eight rapid response laboratories, Labcorp developed and executed a project plan in under one year. The result has been savings of more than $5 million per year in the first two years by optimizing labor, eliminating redundancies and improving overall quality. The health system has also achieved substantial savings on capital expenses.
Tailoring a hospital managed services agreement
Through a Hospital Managed Services Agreement, the health system maintains ownership of its laboratory while Labcorp provides managerial support for lab services, assists in process standardization and efficiencies, and helps the health system deliver high quality, cost-effective lab services.
A joint governance process including Labcorp and health system stakeholders oversees operations as well as test utilization. Using real-time data from Labcorp’s analytical systems and software, the joint governance committee can track productivity, turnaround time, blood banking and more through dashboard views that are now critical to the health system.
Delivering patient satisfaction and improving access
At the heart of everything a health system—and Labcorp—does is patient satisfaction and quality of care. Patients have been pleased with lower pricing on lab services and easier access to Labcorp’s numerous patient service center locations, and the data is reflected in patient satisfaction scores at both the health system and Labcorp’s service centers in the region.
Collaboration accelerates COVID-19 response
The health system was able to reap the benefits of a Labcorp partnership when the COVID-19 pandemic hit. The health system was up and running with COVID-19 testing well before its competitors due to access to equipment and materials through Labcorp. In fact, Labcorp was able to supply equipment to ramp up COVID-19 testing at the health system almost immediately.
The staff’s relatively large size after the consolidation of certain laboratory elements helped to create more flexibility from a human resource standpoint. The health system also outsourced all nonessential molecular work to Labcorp to help lower the pressure on the core laboratory. This shift helped maintain the efficiency needed to deliver test results quickly, with little disruption to the highly trained team.