Wise Investment or Road to the Poor House?
by Dr. Sheila Dunn
article focused on how physicians came to view lab testing in their
offices. Once convinced that it was easy to do, accurate, and a great way
to generate revenue, they bought lab equipment like crazy. Most of you
"old timers" are still reaping the rewards -the "juice"
business or reagent trail- unless you lost it to CLIA objections or a competitor.
(In that case, go back and read last month's article).
Now, threatened by the purported demise of Medicare (lab
reimbursement from Medicare actually increased 2.7% January in 1997) as
well as the uncertainty about managed care compensation (both capitation
and reduced fee for service), many physicians are seeking reassurance before
they invest in capital equipment.
As medical sales consultants, we need to show physicians
and integrated delivery systems that on-site testing is indeed a profitable
venture - even in a predominately managed care environment- because it's
better for the patient!! What a novel idea!
POL testing achieves the objectives of today's business
of healthcare because it: Increases The Quality
For those of you that are as weary as I am of hearing
the word "quality" bantered about, (It's right up there with
paradigm, empowerment and rightsizing), think about what it actually means
in a healthcare setting.
Quality in healthcare boils down to two issues:
1. the patient (customer) gets better faster, and
2. the patient is satisfied with his medical experience.
Both translate into the real objective of today's healthcare
system: it costs less, i.e., it saves money!
Consider the following example: You have 3 children. The
youngest woke up this morning with a sore throat, a stomach ache and fever.
(Resist the temptation to reach for that brown plastic bottle of antibiotics
left over from your kid's last infection). It's a weekday so both you and
your spouse need to get up and go. You, having the most flexible job, offer
to skip a few hours of making calls and take the child to the doctor. You
visit the doctor and are informed that you'll need to wait at least one
day for the test results (CBC, strep test, and maybe a mono test or a few
chemistry tests). Why? Because your insurance company requires tests to
be sent to a commercial lab. So you take the child home and do phone work
for the rest of the day.
The next day, you feel achy all over and your oldest child
is complaining of a sore throat. You call his school to tell them that
he'll be absent. You continue to do phone work while awaiting that call
from your doctor with the verdict. At 2PM, you finally break down and call
the doctor. After listening to elevator music while on hold for 5 minutes,
the receptionist says that she'll have to call the lab and see what happened
to little Biffy's test results. At 4 PM, you still haven't heard back from
the doctor, so you call and get the service - they're closed for the day1
Your once-peaceful house now resonates with the sounds of coughing, sneezing,
whining, and whimpering. Your spouse comes home and asks you what's for
dinner. To make matters worse, in a few days, you'll be busier than a one-armed
paperhanger trying to catch up on all your work.
Whoa.... did your company save a bundle of money on that
health plan! The fact that you've missed two days of work will end up costing
them (and you) lots more than the $5.00 per month they saved on the PPO
Did you experience quality health care? In this case,
did the health care customer get better quicker? Is the customer satisfied
with his encounter with the health care system? As the customer (for a
change), consider how you would react. Switch doctors? Complain to your
manager about the health insurance your company provides? Change insurance
plans? Also consider another outcome: your child's abdominal pain could
have been due to appendicitis which, because it was not quickly diagnosed
(using a CBC test), developed into a very dangerous and very expensive
case of peritonitis.
I'm sure you can think of many other
scenarios where on-the-spot test results provide superior quality. If you
need inspiration, see Table 1 for more reasons why
POL testing does, in the long run, cost less or save money. Many manufacturers
of lab products are providing distributors with a "disease management"
selling strategy to justify performing certain tests such as glucose, CBCs,
hepatic, and lipid profiles at the point of care.
Do you now see why a $20.00 test performed in an office
lab may be less expensive to a payor than one performed in a referral lab
for $2.00? Both the payor and the MD will lose business if patients (customers)
are inconvenienced, unhappy, or get medically worse1
See also Figure
1 which demonstrates why office-based testing saves money from a workflow
perspective. Remember, time is money and a provider's time is the most
valuable commodity in a practice.
Maybe a managed care plan only pays $8.00 to a physician
office for doing a test (e.g., a rapid strep test costs $3.50 and
many POLs are accustomed to a reimbursement along the lines of about $25.00),
but if the nurse saves 10 minutes, the doctor saves 5 minutes, and the
patient was spared hours of hassles and time off work, the savings generated
for the practice by doing the test in-house is worth a bundle!
In the previous example featuring you and Biffy, the managed
care plan stipulated that all tests (or all but a few simple tests) be
referred out to a mega-lab. This limitation on office-based testing is
becoming a reality in some areas of heavy managed care penetration. Even
so, a physician can usually negotiate to get paid for all tests on a fee-for-service
basis. The worst outcome of the negotiation would be that the physician
is asked to accept the same capitated payment as the referral lab. In this
case, the managed care plan will pay the POL a capitated amount for lab
testing that sounds ridiculously low (most mega-labs accept less than $1.00
per member per month), yet it may still be quite profitable for a POL.
Often, physicians don't understand capitation, and in
the above example, think they will be paid less than $1.00/test1 Of course
they can't afford that1 In reality, their payment for lab testing will
(capitated payment) x (98 of patients in the plan on any
given month), or, e.g.,
($0.75) x (3000 patients) = $2250/month or $27,000/year.
To help your accounts succeed, the most valuable skill
you can develop is to "change the shape of money". When you demonstrate
how a product can not only make money in a fee for service environment,
but at the same time save your accounts money in a managed care environment,
you become a valuable sales consultant because you've demonstrated how
to change the shape of money.
This means learning new ways of presenting products besides
the old: "This little gizmo pays for itself in _____ months and after
that, you'll generate $______ in revenue per month". This routine
only works in a fee for service environment. Accounts with a moderate amount
of managed care will politely (or not so politely) suggest you take your
story elsewhere. Instead, supplement this story with a product justification
based on how it makes patients better faster or less expensively or that
it makes patients happier or that it is less expensive than what's currently
used. If a product can't do any of these things, don't waste valuable time
For the nuts and bolts of accomplishing this as it regards
lab sales, stay tuned to next month's article.
Table 1: Why POL Testing Saves Money
| WHY NEAR-PATIENT TESTING |
| DISSATISFIED CUSTOMERS TAKE THEIR BUSINESS ELSEWHERE
- Traveling to an outside lab and then playing phone tag
with the physicianFriday, January 23, 1998s office for test results wastes
patient's time and money.
- Returning for follow-up care is also costly and inconvenient.
- Patients who were formally "haves" may suddenly
become "have-nots" after joining a plan that prohibits in-office
testing. Patients may switch to other health plans in which the physician
may not participate. Both the plan and the physician lose a customer.
| ABSENT EMPLOYEES ARE EXPENSIVE TO A COMPANY
- Patients may need to take time from work to travel to
a drawing station, to come in for a follow-up office visit, or to pick
up a prescription.
- If test results are delayed, a patient's condition may
worsen and result in more time off from work.
| PRACTICE EFFICIENCY + PRODUCTIVITY= SAVINGS
- Test results in the office allow faster diagnosis and
- Delayed test results cause the office staff to spend
valuable time charting results and contacting patients for follow-up. (Figure
- Delayed test results force the physician to spend valuable
time reviewing results and altering treatment plans. More efficient practices
can see more patients.
| BETTER PATIENT OUTCOMES LEAD TO LESS EXPENSIVE HEALTHCARE
- Patients are treated during the first office visit when
test results are available from a POL. Patients may be difficult to contact
once leaving the practice.
- Drug therapy can be adjusted before patients leave the
- Patients are counseled immediately regarding the significance
of the test results and changes to their plan of care, which enhances patient
compliance with therapy.
- Test result delays may cause additional payments to other
health care providers in the form of hospital admissions, emergency room
visits, expensive specialists, and unnecessary or inappropriate prescription
- An adverse incident due to a delay in diagnosis and treatment
could cost the health care system a huge amount of money.
| LONG DISTANCE TEST RESULTS CAN BE COSTLY
- Transporting lab specimens often damages blood/urine
specimens causing inaccurate results. Occasionally, specimens are lost
in transit or switched with other patient's tests.
(Return to the text.)
Figure 1: Time Is Money For POL Testing!
IN-HOUSE TESTING: 10 STEPS
MD: Order tests on patient
Staff: Take patient chart
(or test requisition) to office lab.
Staff: Collect specimen from
Staff: Log test request in
Staff: Test specimen.
Staff: Put test results on
the chart. Verbally communicate results to MD.
MD: Interpret test results
while the patient's condition is fresh in his mind. If more tests are needed,
run now OR redraw the patient while still in the office.
MD: Use test results to help
confirm diagnosis or select proper treatment for patient.
Staff: File patient chart.
Staff: Bill patient for lab
test and office visit.
REFERRAL LAB TESTING: AT LEAST 18 STEPS!
MD: Order tests on patient
Staff: Check which health
plan the patient belongs to and determine which referral lab is mandated.
Locate a referral lab requisition slip.
Staff: Fill out requisition
slip to include patient name, age, sex, date, type of specimen, etc.
Staff: Collect specimen from
Staff: Log test request on
a referred test log. File a carbon copy of the test request.
Staff: Prepare specimen for
transit (centrifuge chemistry test specimens, wrap with request slip, then
bag or box).
Staff: Take specimen to the
refrigerator or "metal box."
Staff: Re-file patient chart,
or put in a "pending reports" stack.
Staff: Receive test results
returned from the referral lab.
Staff: Locate the carbon copy
of the test requisition.
Staff: Note on referred test
log that results have been returned. Inspect log to see if all test results
from the past have been returned. If not, repeat entire process.
Staff: Locate patient chart
and attach test results to proper location on the chart.
Staff: Transport chart to
MD: Interpret test results,
review chart to correlate results with exam from 1-2 days ago. If more
tests are needed, reschedule patient and repeat entire process.
Staff: Communicate test results
to patient (letter or phone call). If treatment is required, phone Rx to
Staff: Re-file patient chart.
Staff: Bill patient for lab
tests and office visit.
Staff: Pay referral lab for
(Return to the text.)
About the Author:
Dr. Sheila Dunn heads Quality America, Inc., an Asheville, NC-based company
that assists medical manufacturers and distributors as well as healthcare
professionals to survive and prosper in this rapidly evolving industry.
Quality America's publications include "Managed Care: Strategies for
Success", "Lab Testing: Get Your Fair Share From Managed Care",
and "Satisfaction Guaranteed1", a patient satisfaction primer.
For information about Quality America's products or services, call 828-645-3661.
(Go to detailed Dunn biography)
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