Beyond the Price Tag: The Untapped Potential of Labacoeconomics™

Ever considered how molecular diagnostic tests in hospitals could lead to savings that outweigh the cost?

The pharmaceutical industry has faced significant criticism for the cost of therapeutic agents. Initially, these costs were justified on the basis of the expense involved in developing new treatments, which can easily run into hundreds of millions of dollars.

This article explores the discipline of labacoeconomics™, shedding light on how clinical labs may redefine patient care and financial efficiency. It delves into the broadened context of cost, considering not only the expense of developing treatments but also the impact on patient care.

Analyzing the historical evolution of pathology, the piece sheds light on why labacoeconomics hasn't flourished and offers insights into how it could facilitate the transition to value-based care. The importance of clinical laboratories in both financial and clinical outcomes is emphasized, offering a nuanced perspective on healthcare delivery.

Pharmacoeconomics: A Broader Perspective on Costs

The discipline of pharmacoeconomics was developed, in part, in response to that criticism. Pharmacoeconomic studies focus on cost in a broader context than just the dollars spent for the development of a therapeutic agent. For example, the downstream costs associated with the need for hospitalization and length of stay can be dramatically influenced by the choice of a therapeutic agent that can be safely administered in an outpatient setting rather than one that needs to be given in the hospital setting.

Labacoeconomics: Assessing Impact on Care

The concept and discipline of pharmacoeconomics also can apply to the evaluation of services delivered by the clinical laboratory — labacoeconomics, if you will. The key to this approach is to view the laboratory in the context of its impact on the patient’s episode of care rather than the price per test.

For example, some molecular diagnostic tests can cost thousands of dollars. Viewed from the limited perspective of a laboratory budget, it might seem illogical to have such a test available in the hospital lab. But if that test can decrease the patient’s length of stay — or possibly even eliminate the need for hospitalization — then the savings overall could be substantial, given the fact that the direct variable cost fora typical patient’s day in the hospital exceeds $2,000. So why hasn’t the discipline of labacoeconomics flourished?

Why Labacoeconomics Hasn’t Flourished: A Look Back

To understand the current state, it’s helpful to look back at the evolution of pathology as a discipline. At one time, the pathologist was referred to as “the doctor’s doctor.” That’s because pathologists had knowledge of clinical laboratory tests and services that providers didn’t have. But as clinical laboratory testing became increasingly important to specialists in the provision of care, those specialists became more knowledgeable at interpreting the results of tests they used most frequently. As this transition was taking place, anatomic pathology reimbursement and hospital clinical pathology contractual changes disproportionally incentivized pathologists to devote more of their time to anatomic pathology, where the CPT codes afforded them better compensation.

Today, many pathologists, despite being boarded in clinical pathology, are almost entirely focused on anatomic pathology.

This combination of specialists becoming more proficient at interpreting clinical test results and pathologists turning away from clinical pathology has resulted in less time being spent on laboratory medicine and, hence, less focus on the value of the clinical laboratory in the context of the overall cost of care.

The transition to value-based reimbursement models can help to drive the development and increased adoption of labacoeconomics. Here’s why: Under such reimbursement schemes, hospitals, and health systems must take a bigger-picture view of the relationship between costs and patient outcomes, as well as their own accountability for those outcomes. Instead of making decisions on a cost-per-test basis in isolation, for instance, it’s to their advantage to think about the impact of clinical lab data on ongoing care, outcomes, and episode-of-care costs.

Consider this: Clinical laboratories provide approximately 70% of the objective clinical data that supports many critical decisions in the provision of care. Moreover, if the clinical lab supports care across the entire community’s  continuum of care, in the inpatient, physician office, skilled nursing facility, and home care spaces healthcare delivery can become more efficient and effective. As an example, by tracking a patients test results over time, the clinical lab can help identify patients at risk for a prolonged hospital stay — or, post-discharge, those at risk for 30-day unplanned readmission — thereby providing the health system myriad opportunities to improve both financial and clinical outcomes.

Transitioning to Value-Based Care Through Labacoeconomics

Viewed in this light, it’s easy to see how hospitals and health systems can use their clinical laboratories and the concept of labacoeconomics to facilitate and hasten their transition to value-based care if that’s a goal. Even if the transition from fee-for-service to value-based reimbursement is not a priority, every hospital wants to enhance its bottom line and provide a better experience for patients.

Labacoeconomics can play a crucial role in achieving both of these results, while giving pathologists, in collaboration with their clinical laboratorian colleagues, the opportunity to leverage their clinical pathology training to again become “the doctor’s doctor.” It is important to support this shift in focus given the provider knowledge gap that is developing with the significant and rapid expansion in molecular and genomic diagnostics that is taking place.

Authors

Dr. Les Wold is a healthcare veteran with 40+ years of experience in both non-profit and for-profit organizations. Notably, he served at Mayo Clinic, holding key roles in the Department of Laboratory Medicine and Pathology, Mayo Medical Ventures, and Mayo Collaborative Services. As a strong advocate for patient-centric care, Dr. Wold emphasizes data-driven decision making and the use of diagnostic pathways and reflex testing protocols to enhance care delivery. His passion lies in leveraging data to support patients and providers, fostering dialogue and developing efficient systems of care that span from hospitals to home and skilled nursing facilities.

Keith Laughman has more than 30 years’ experience in the lab business, including a 15-year term as President of Mayo Medical Labs. Following Mayo, Laughman became President of AmeriPath Reference Services and Specialty Reference Laboratories. He later helped to create and served as President and CEO of the reference lab startup Med Fusion (Dallas/Fort Worth). Both AmeriPath and Med Fusion were later sold to Quest Diagnostics. Most recently, Laughman serves as the Managing Partner at CareTinuum Advisors.