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The ongoing flood of newly available
laboratory tests comes with a big downside: They are increasing healthcare
costs but, in many cases, not improving the value of care.
“Although there are new diagnostic
tests coming out, there are few studies that focus on when a test is clinically
useful and when it is appropriate to perform a test,” says Mary Zutter, MD (pictured at right), vice
president-integrative diagnostics at Vanderbilt University Medical Center
(VUMC) in Nashville.
In some instances, in fact, there is
a lack of clarity about the utility of a given test under any circumstances.
“We often see new tests that have almost no evidence—tests that are only
available from one small company and the only paper about it was paid for by
that company,” she says.
VUMC is tackling the challenge with
a laboratory formulary—a list of approved tests and the guidelines for ordering
them. A multidisciplinary
committee vets every new test proposed for the formulary and reviews
the value of longstanding tests to identify those that need to be dropped.
In 2016 alone, the formulary
approach saved more than $1 million, in part by eliminating some low-value
tests—for example, tests that are commonly used but only appropriate for
specific situations. The savings also came from restricting the circumstances
under which some tests can be ordered and controlling who can order certain
Physicians historically have been
trained to prioritize “thoroughness,” but today’s medical practice must be
guided by value, says Tina Hartert, MD, co-chair of VUMC’s Laboratory
Formulary Committee. “Sometimes on the clinical side, we don't ask the question
of why we need this, what we're going to do with the information, and what's
the downside of getting the same tests done every day during an inpatient stay,”
she says. “This is an area where there has been a lot less focus on both
improving quality and containing costs.”
The concept of a laboratory
formulary began to emerge in health care several years ago, although it has not
been widely adopted. That may reflect the lack of consensus about what a good
“What is amazingly lacking are
guidelines for the most efficient and effective use of a laboratory test,”
Zutter says. “We have to create our own knowledge base around the guideline
VUMC’s Laboratory Formulary Committee
supports the organization’s commitment to Choosing Wisely, a national
initiative of the American Board of Internal Medicine Foundation that
encourages providers and patients to avoid common medical tests and procedures
unless they are truly needed.
“From an institutional perspective,
there's this broad campaign about ‘choosing wisely’ to improve the quality of
care and contain costs,” says Hartert, who is VUMC’s assistant vice president
for translational science. “Does a patient need a blood count every day? It’s
the idea of asking, ‘Do I need to order this test?’ and ‘What am I going to do
with the information from this test?’”
The proliferation of new tests is
contributing to America’s healthcare cost crisis. As of mid-2017, there were
about 75,000 genetic tests on the market, with about 10 new tests appearing
daily, according to a Health
Affairs article. Each DNA
sequencing costs about $1,000.
Those advanced diagnostic tests
contribute to the cost trends in laboratory testing overall. “Laboratory spend
is increasing at nearly double the rate of the healthcare spend in general, so
people are beginning to recognize it as a genuine monetary issue,” Zutter says.
More than 5 billion laboratory tests
are ordered each year, according to Costs of Care, and many of them are
either duplicates or the wrong test. In fact, a study found that, when a clinical-decision support tool blocked unnecessary duplicate
test orders during computerized physician order entry (CPOE), nearly 12,000
tests were prevented over two years, saving more than $180,000.
Despite the “low-hanging fruit” in
U.S. medical labs, the cost of testing has traditionally not received much
attention because, compared to other areas of spending, most tests are
relatively inexpensive. In most cases, clinicians who order lab work have no
idea what a test costs, so it’s easy for “more is better” thinking to take hold,
“It’s not just the cost of the
test,” she says. “Every test requires a paid person to draw the blood and a
paid person to run the test, even if the blood test itself is very
The biggest value in eliminating unnecessary tests is in
improving the quality of care. “Inappropriate testing actually leads to more
inappropriate testing,” Zutter says. “If a patient receives a
borderline test result, they have to come back to the hospital or clinic for
retesting, thereby delaying diagnosis, increasing costs, and consuming more
time—not to mention the unnecessary anxiety and inconvenience we’ve created for
The Laboratory Formulary Committee—a
subgroup of the Pharmacy, Therapeutics and Diagnostics Committee—reports to the
medical center’s medical board. The committee consists of voting members from
several clinical departments and specialties, including a pathologist.
“At VUMC we’ve been extremely careful
to ensure that the process is not perceived as driven by a select group,”
Zutter says. “Providers from across the institution are involved in making
decisions that impact patient care.”
The following elements help the
committee function effectively.
A standardized decision-making process. A template guides the presentation
of each new test being considered. The presentation includes a description of
the test, the data that supports its utility, when the test should be ordered,
how test results should be interpreted, and the financial impact of the test.
Committee members discuss what they
heard in the presentation and then vote on whether to add the test to the
formulary. A simple majority decides the vote, but Zutter says every vote has
been unanimous (sometimes after delaying a vote and asking the requesting
provider for additional evidence or for a way to monitor testing over time).
The committee votes not only on new
tests but also on removing tests from the formulary, restrictions on who can
order or when a test can be ordered, and clinical-decision support protocols to
be added to the CPOE system.
“We don't completely eliminate anything that has some
value,” Zutter says. “We'll often provide an alternative test, and our health
IT team will develop a best-practice alert that pops up to tell a physician
that this is the better test to be ordering.”
Support from the finance department. For each test under review, a member
of the finance department uses several data points—including the applicable CPT
codes; estimated volumes for the test; the ratio of tests likely to be done in the
inpatient versus the outpatient setting; and the payer mix for the patient
population most likely to receive the test—to estimate the cost to individual
patients and to the institution.
A finance department leader presents
that information to the Laboratory Formulary Committee right after the
clinical-utility information is presented.
Efficient implementation of decisions. An implementation team, which Zutter
leads, includes laboratory medical directors, administrators, finance
department representatives, laboratory information systems specialists, health IT
developers, data analysts, genetic counselors, and project managers.
That team meets—typically a week
after the formulary committee meeting—to communicate the committee’s decisions
to all laboratory staff and providers. The IT team members make sure formulary
changes, along with decision-support guidance, are reflected in the CPOE system
that providers use to order tests, and they track the outcomes of the formulary changes.
“If we add something, take something
away, change an algorithm, or provide clinical-decision support, we ask Dr. Zutter’s
group to look at the impact of that and come back to our committee with
outcomes data in six or nine months,” Hartert says. The data provide insight
into changes in test ordering and, when applicable, in clinical outcomes.
About 60 percent of the committee’s work is evaluating new
tests that a provider has proposed for the formulary; the rest is reviewing
tests already on the formulary, Zutter says. For example, if there is wide
variability in the usage of a certain test among different physician groups, or
the National Comprehensive Cancer Network Guidelines change for a given test,
the committee conducts a review.
In 2016, savings came from:
Eliminating tests that offer low
example, providers often were ordering a special test—fractionated
25-hydroxyvitamin D, in addition to a total Vitamin D test—as a matter of
course, even though the special test was recommended only for certain clinical
presentations. By removing the test from the order menu, VUMC saved nearly
$103,000 in 2016. (The test remains available for patients who meet the
Restricting when certain tests can
be ordered. Physicians
often order certain tests for inpatients—for example, genetic tests—that might
provide helpful information, but the turnaround time for getting results typically
exceeds the patient’s expected length of stay. Thus, the results are not
available for decision making about treatment during the inpatient stay.
The Laboratory Formulary Committee set a rule that, if an
inpatient test has a median turnaround time of more than seven days, it must be
approved by a laboratory medical director before it will be conducted. In 2016,
the rule led to a 48 percent decrease in the ordering of tests with long
turnaround times, saving VUMC more than $250,000.
Requiring expert review for all
These tests, some of which cost more than $10,000, are among the most expensive
and most likely to be ordered inappropriately. The committee established a team
of genetic counselors and pathologists to review all orders for genetic tests
to consider appropriateness, price variations among vendors, and other factors.
In 2016, canceled and modified genetic test orders resulted in more than
$390,000 in savings.
that have traditionally been in the formulary but are of questionable value are
reviewed by the committee only after providers have been contacted. If a test
is being considered for review, the health IT staff creates a list of the
physicians who order it.
engage the providers and senior leaders prior to a presentation to the
formulary committee,” Zutter says. “It's really the teamwork that has made us
The laboratory formulary concept also
has the clear support of Jeffrey Balser, MD, PhD, president and CEO of the
medical center. Zutter recommends that other health systems adopt a formulary
only if senior leaders are enthusiastic about the concept.
“The senior leadership of the
hospital as well as the involved stakeholders must be supportive and be willing
to provide not only support for the individuals leading the program, but also
guidance that endorses and solidifies the path for the institution,” she says.
Lola Butcher writes about healthcare business
and policy topics for several HFMA publications.
Interviewed for this article: Tina
Hartert, MD, MPH, assistant vice president of translational science, professor
of medicine, and director of the Center for Asthma Research, Vanderbilt
University Medical Center (VUMC), Nashville; Mary Zutter, MD, vice
president-integrative diagnostics and professor of pathology, microbiology, and
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