• By Consolidating Labs, Scripps Expects to Achieve Major Savings and Improve Care

    Apr 16, 2012

    By Lola Butcher

    Like many growing health systems, Scripps Health is looking to achieve economies of scale and improve coordination of care by consolidating certain functions or services. The California health system is doing just that with its major lab overhaul.

    Scripps Health is expecting clinical laboratory productivity to improve after embarking on a systemwide laboratory consolidation and overhaul, which is slated to wrap up later this year. The San Diego-area system expects to save up to $6 million a year through improved efficiency and a major reduction in the cost per lab test. 

    Multiple Scripps laboratories-including two microbiology labs-have been consolidated into a single entity that is processing all lab tests for Scripps' five hospitals and 19 outpatient facilities. The overhaul is creating economies of scale that are expected to reduce laboratory staff numbers by about 5 percent. "When you are able to centralize a significant volume of work, you can then use innovation and automation to gain efficiency," says senior administrative laboratory director Chris Nicholson.

    And that's just what Scripps did by installing a laboratory IT system and an automated processing system. Thanks to these technologies, Nicholson expects the centralized laboratory to process about 8 million billed units this year. He estimates that the cost per unit will be cut by 50 cents to $1.

    "If you can centralize, standardize, and eliminate the variation and the nonvalue-added work out of the system, there's no doubt about it-you're doing the test at the lowest cost," says Todd Hoff, corporate vice president for ancillary services.

    Patients are also benefiting from the laboratory overhaul, now that physicians and pathology staff can more easily exchange information that is needed to coordinate care. Plus, Scripps is turning lab tests around faster, which helps ensure that patients get needed treatments in a more timely fashion.

    But the investment in equipment and technology needed for a centralized laboratory requires a careful ROI analysis, warns Hoff. "You need a significant amount of volume to be able to reach that break-even point," he says. "But once you know what that volume number is, you can increase the volume of tests you handle. Each incremental test that comes in drops the overall cost of every single test."

    Putting the Pieces Together

    The project started nearly three years ago when physician leaders began discussing ways to improve laboratory operations throughout the health system. The decentralized clinical laboratories were not always meeting the needs of patients-primarily because of disconnected IT systems, says Nicholson.

    "We had patient lab data that was available, but it was in different pieces of different medical records and in different lab systems," he says. "Scripps is an integrated health system. Yet, because our IT systems were not connected, a patient could be in any of our hospitals at any given time, and we were not always able to provide test results that might be used to benefit the patient."

    The case for lab consolidation was built on the opportunity to improve patient care. However, before moving forward, Scripps leaders conducted a thorough, nearly two-year-long assessment that considered alternative approaches to consolidating laboratory operations, including the costs and benefits of a massive overhaul, says Nicholson. The actual consolidation plan was implemented in late 2010 and is taking 18 months to finish.

    Two key pieces of technology were key to supporting the lab consolidation:

    • A laboratory information system links with the health system's electronic health record, enabling physicians and pathology staff to more easily exchange information about test results and requests
    • An automated processing system moves barcoded samples by conveyor belt to one of several computerized analyzers that perform the tests, significantly speeding up the testing process

    Scripps used to outsource some testing because its facilities often did not have the capacity to handle the work. "By bringing those tests back in-house, we can get the information to the physicians in a more timely manner so they can provide better care for their patients," says Hoff.

    Creating a New System of Governance

    Such a massive consolidation required Scripps to create a new system of governance that includes health system executives, managers, and laboratory technical staff. "How we govern and make decisions was key to our success," says Hoff. "Until you figure that out, you'll just be working in silos."

    Scripps' governance model includes the following three levels:

    Executive-level oversight committee. This committee-in which Hoff serves on and reports to-works like a board of directors and oversees the consolidated laboratory.

    Operations group. This group comprises management teams that work on quality assurance, regulatory compliance, quality improvement, financial performance, and benchmarking.

    Technical committees. Members of various committees are responsible for standardizing clinical issues, including methodologies, instrumentation, testing schedules, and laboratory reference ranges.

    "The technical committees sit on the bottom, but they are probably the most important piece," says Nicholson. "Those are the people who know how to do the work, who like to find best practices, and who love to find efficiencies."

    Building Trust

    One of the challenges Scripps faced was that the three competing pathology groups, which  had staffed the decentralized locations, would now be working together in a single facility. Building trust was imperative for the pathology groups uniting as a single team. To do so, Hoff and Nicholson organized social gatherings for the competitors-turned-colleagues to get to know one another personally. During one outing, the pathologists cooked food together.

    "Chris [Nicholson] is a very talented chef, and he got the physicians and administrators to dress up in cooking outfits," says Hoff. "We cooked chicken paella and seafood paella."

    The team-building events helped reinforce that all pathologists share the same goal of providing the best care for Scripps' patients, says Nicholson. "Once you start to get to know each other, you find that you are more similar than dissimilar, you share common interests, and everybody in Scripps Health really has the same values and mission," he says.

    Lola Butcher is a freelance writer and editor based in Missouri.

    Interviewed for this article:

    Todd Hoff is corporate vice president for ancillary services, Scripps Health, San Diego (hoff.todd@scrippshealth.org).

    Chris Nicholson is senior administrative laboratory director, Scripps Health (nicholson.chris@scrippshealth.org).