Healthcare restructuring and cost-cutting are unavoidable consequences of a strained healthcare environment.
Consolidation of hospitals and laboratories will only increase. A recent report shows that the volume of mergers and acquisitions has almost doubled.1 Key factors influencing the current wave of mergers and acquisitions are cost-cutting and the increasingly competitive environment. The trend suggests that smaller laboratories are either going to be acquired or consolidated, while the big laboratories will get even bigger.
This intense pressure is affecting some of the largest clinical laboratory networks in the world. One recent layoff affected 200 laboratory workers,2 and this is not an isolated incident.3 With industry-wide consolidation efforts underway, many labs are wondering what impact this trend will have on the larger diagnostic landscape.
Staring in the face of these multi-year, highly complex consolidations, how can success be guaranteed when staff is already stretched thin?
Watch Jeff Myers outline how to properly execute your plan.
What if the real challenge is not the obvious one
While most attention is targeting what impact industry consolidation has on the larger diagnostic landscape, looking ahead reveals another troubling trend. Yes, an unknown number of labs are predicted to close, and many more will potentially be consolidated…but what about the ones that survive? They will still be forced to focus on additional cost efficiencies, particularly in terms of reducing equipment costs and the numbers of reagent vendors. The growing pressure of industry-wide consolidation may only be the first obstacle. Will a lack of in-house consolidation present a more significant challenge?
The need for laboratory standardization
From equipment, reagents, supplies and suppliers, to test menus and test utilization, variety is one area where labs have an abundance. However, this comes at a price. Variations in test ordering patterns can add unnecessary costs to the health system, potentially leading to delays in care, extended hospital stays, or unplanned readmissions.4 Eliminating obsolete tests, tests with little or no diagnostic value, as well as those requiring high-dollar send-outs are attractive propositions. Order set evaluations and evidence-based algorithms can help monitor inappropriate test usage and the related consequences. More immediate opportunities also exist via the streamlining of assay menus.
Why less variety means greater value
Quality output is a lab’s number one responsibility. Excessive variation in tests offered may waste time, limit cost efficiency, and affect performance. Labs are increasingly pressured to streamline operations and there exists opportunity to do so by consolidating assay menus. Test menu offerings should be based on clinical need. Factoring cost, utility, and turnaround time into make-vs-buy decisions can help identify some areas of improvement. Optimizing testing can ensure the right test to the right patient at the right time to eliminate potentially avoidable complications.
Down the road, consolidation will likely provide increased throughput. Assuming the right technologies are in place, labs should be able to translate that into a higher level of service. This would ideally position them for additional testing volume, elevate the perceived value of the lab, and better support patient needs.
Reframe what is possible
How will the role of the laboratory change in the next few years? With widespread industry changes already underway, learn how labs can overcome the considerable challenges and embrace the exciting opportunities.
- Advisory Board. M&A—To What End? Five Characteristics of Intentional Corporate Strategy. https://www.advisory.com/Research/Health-Care-Advisory-Board/Studies/2014/MA-To-What-End?WT.ac=Inline_HCAB_ExRB_x_x_x_ATH_2019Jan09_Eloqua-RMKTG+Blog. Accessed November 13, 2019.
- Spokane Journal. LabCorp to lay off nearly 200 employees here. https://www.spokanejournal.com/local-news/labcorp-to-lay-off-nearly-200-employees-here/. Accessed November 13, 2019.
- Washington Times. Columbia laboratory to lay off 177 workers next year. https://www.washingtontimes.com/news/2018/dec/5/columbia-laboratory-to-lay-off-177-workers-next-ye/. Accessed November 13, 2019.
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