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Clinical Laboratory Management SECOND EDITION

Clinical Laboratory Management

SECOND EDITION

Lynne S. Garcia, EDITOR IN CHIEF LSG & Associates, Santa Monica, California EDITORS: Paul Bachner

John C. H. Steele, Jr.

Department of Pathology & Laboratory Medicine, University of Kentucky Chandler Medical Center, Lexington, Kentucky

Clinical Pathology Laboratories, Department of Pathology, Medical College of Georgia, Georgia Regents University, Augusta, Georgia

Vickie S. Baselski Clinical Microbiology, University of Tennessee Health Science Center at Memphis, Memphis, Tennessee

Alice S. Weissfeld

Michael R. Lewis

David S. Wilkinson

Department of Pathology, Fletcher Allen Health Care, Burlington, Vermont

Department of Pathology, VCU School of Medicine, Richmond, Virginia

Andrea J. Linscott

Donna M. Wolk

Department of Pathology, Ochsner Medical Center, New Orleans, Louisiana

Clinical Microbiology, Department of Laboratory Medicine, Geisinger Health System, Danville, Pennsylvania, and Wilkes University, Wilkes-Barre, Pennsylvania

Dale A. Schwab Nichols Institute, Quest Diagnostics, Inc., San Juan Capistrano, California

WASHINGTON, DC

Microbiology Specialists Inc., Houston, Texas

Copyright © 2014 American Society for Microbiology. ASM Press is a registered trademark of the American Society for Microbiology. All rights reserved. No part of this publication may be reproduced or transmitted in whole or in part or reutilized in any form or by any means, electronic or mechanical, including photocopying and recording, or by any information storage and retrieval system, without permission in writing from the publisher. Disclaimer: To the best of the publisher’s knowledge, this publication provides information concerning the subject matter covered that is accurate as of the date of publication. The publisher is not providing legal, medical, or other professional services. Any reference herein to any specific commercial products, procedures, or services by trade name, trademark, manufacturer, or otherwise does not constitute or imply endorsement, recommendation, or favored status by the American Society for Microbiology (ASM). The views and opinions of the author(s) expressed in this publication do not necessarily state or reflect those of ASM, and they shall not be used to advertise or endorse any product. Library of Congress Cataloging-in-Publication Data Clinical laboratory management / Lynne S. Garcia, editor in chief, LSG & Associates, Santa Monica, CA ; editors, Paul Bachner, Department of Pathology & Laboratory Medicine, University of Kentucky Chandler Medical Center, Lexington, KY [and eight others]. — 2nd edition. pages cm Includes bibliographical references and index. ISBN 978-1-55581-727-5 — ISBN 978-1-55581-728-2 (e-ISBN) 1. Medical laboratories— Administration. 2. Pathological laboratories—Administration. I. Garcia, Lynne Shore, editor of compilation. II. Bachner, Paul, editor of compilation. [DNLM: 1. Laboratories—organization & administration. 2. Clinical Laboratory Techniques.] R860.C56 2014 610.72’4—dc23 2013036960 doi:10.1128/9781555817282 Printed in the United States of America 10 9 8 7 6 5 4 3 2 1 Address editorial correspondence to: ASM Press, 1752 N St., N.W., Washington, DC 20036-2904, USA. Send orders to: ASM Press, P.O. Box 605, Herndon, VA 20172, USA. Phone: 800-546-2416; 703-661-1593. Fax: 703-661-1501. E-mail: [email protected] Online: http://www.asmscience.org

Contents

Contributors Preface

xxiii

xxvii

Acknowledgments xxviii

SECTION

I

Basic Concepts and the Current Healthcare Environment 1 Organizing

1 Principles of Management 3 Jeffrey Casterline and John R. Snyder Introduction 3 Leadership, Management, and Administration

Directing 4

Leadership • Management • Administration

Management Concepts

28

Organizational Chart • Time Management • Policies • Procedures • Workflow • Staffing

6

31

Communicating • Delegating • Motivating • Managing Change • Coaching

Controlling 35

Cultural Lag • Review of Management Thought

Setting Performance Standards • Evaluating Employee Performance • Problem Solving • Decision Making

Decision Making

Summary

11

What Is Decision Making? • Types of Decisions • Individual versus Group Decision Making • The Problem-Solving/Decision-Making Process • Risk Management Ethics 17 Definitions • Characteristics of High-Ethics Organizations • Benefits of Strong Workplace Ethics • Management Roles and Responsibilities

Summary

19

KEY POINTS 19 GLOSSARY 19 REFERENCES 20 OTHER READING 21 APPENDIX 22

2 Management Functions 23 Laurence P. Vetter Introduction 23 Planning 24 Strategic Planning • Selecting a Planning Group • Environmental Analysis • SWOT Analysis • Vision and Mission Statements • Goals and Strategies • Prioritization • Accountability • Measuring Success (Metrics)

38

KEY POINTS 38 GLOSSARY 38 REFERENCES 39 APPENDIXES 40

3 Relevant Economic and Business Concepts 43 Roxanne Mercer and Ann L. Harris Introduction

43

Overview of Laboratory Industry Trends during the Past Decade • Forecast for the Future

Strategic Business Planning Overview

45

Market Assessment • Key Strategies

Competitive Environment 47 Clinical Laboratory Competitive Market • Business Entities, Strategic Alliances, Joint Ventures, Mergers and Acquisitions, and Integrated Networks

The Economic Environment 49 Four Stages of the Business Cycle • The National Economy: Fiscal and Monetary Policies • Assess Infrastructure and Develop Production Strategies • Cost Accounting Principles • System-Wide

v

vi

CONTENTS

Approach to Establishing a Fee Schedule • Consumer Price Index • Pricing Strategies

Regulation of Workplace Safety and Human Resource Management 85

Promotional (Marketing and Sales) Strategies 53

Occupational Safety and Health Administration • American National Standards Institute • National Institute of Occupational Safety and Health • CLSI • Centers for Disease Control and Prevention • Food and Drug Administration • Equal Employment Opportunity Commission • Department of Transportation and International Air Transport Association • Hazard Communication Standard • Blood-Borne Pathogens • Ergonomics • Tuberculosis • Latex • Sharps • General Laboratory Safety • Chemicals • Transportation of Clinical Specimens • Employment Discrimination

Market Research • Marketing Strategies • Sales Strategies • Advertising Strategies

Customer-Focused Concepts and Service Strategies 59 Who Is the Customer? • Understanding Customer Behavior • Key Concepts and Recognized Customer Service Strategies • Service Delivery Strategies

Summary

64

Accreditation and Licensure 93

KEY POINTS 64 GLOSSARY 65 REFERENCES 67 ADDITIONAL READING 68 APPENDIX 70

Brief History • Laboratory Inspection and Accreditation • Personnel Certification and Licensure

Regulations Affecting Transfusion Medicine 99

4 Current Challenges to Financial Stability within the Diagnostic Laboratory 71 Roxanne Mercer and David S. Wilkinson Introduction 71 Workforce 71 Availability of Personnel • Training Programs • On-the-Job Training • Recruitment and Retention • Generational Diversity

Workplace

74

Centralized versus Decentralized Operations • Local and Regional Integration of Laboratory Services

Overview of Changes in Transfusion Medicine that Have Resulted in Increased Scrutiny • Safety • Regulatory Organizations that Specifically Impact Transfusion Medicine • Biological Product Deviation Reporting • The Cost of Increasing Regulatory Oversight

Regulation of Laboratory Business Practices

109

Negotiated Rule-Making Process • Corporate Compliance • Key Elements of a Model Compliance Plan for Hospitals • The Legal Environment

Laboratory Reimbursement and Medical Necessity 113 Medicare • Other Federally Funded Programs • National Coverage Determination and Local Medical Review Policies • Reimbursement Methods • Code of Medical Necessity (Reasonable and Necessary Services) • Overview of the Reimbursement Process • Registration and Coding • Claims Processing and Submission • Remittance Advice • Audit and Benchmark Monitors

Compliance—the Next Generation: HIPAA 124

Systematic Approaches to Managing Change • Rightsizing

Covered Entities • Privacy Standards: Rules Governing Protected Health Information • Administrative Requirements • Personnel Policies and Procedures • Patient Informed Rights • Business Associates and Business Associate Agreements • Standards for Electronic Transactions • HIPAA Compliance and Enforcement

Shrinking Reimbursement

Summary

Work Flow 76 New Technology • Testing Site Options

Doing More with Less 78 79

Gross versus Net Revenue • Medicare • Managed Care • Billing

Regulations and Unfunded Mandates 79 Regulations • Unfunded Mandates

Summary

80

KEY POINTS 80 GLOSSARY 80 REFERENCES 81 APPENDIX 83

5 The Impact of Regulatory Requirements 84 Susan D. Roseff, Denise E. Russell, Christina E. Anderson, and Roxanne Mercer Introduction

84

Brief History • Overview of the Current State of Laboratory Regulations

128

KEY POINTS 128 GLOSSARY 128 REFERENCES 133 APPENDIXES 137

6 The Changing Practice of Medicine 139 Susan D. Roseff, Denise E. Russell, and Margaret M. Grimes Introduction 139 Overview of Major Changes

139

Shift from Inpatient to Outpatient Care • Shift from Centralized to Decentralized Testing • Shift to Primary Care: Patient-Centered Medical Home • Shortages of Qualified Staff • Quality of Care and Error Reduction • Pay for Performance • Healthcare Reform • Advances in Technology • Wellness and Prevention • The Aging Population • Recognition of Women’s Health Needs

vii

CONTENTS

The Impact of Technology 142

Reimbursement Strategies in a Managed-Care Market • Healthcare Stakeholders in a Managed-Care Market

The Electronic Medical Record • Meaningful Use/ValueBased Purchasing • Patient Access to Information • Patient Confidentiality • Advances in Diagnostic Testing

The Emergence of Clinical Practice Guidelines

Impact of Healthcare Reform 173 144

The Role of Evidence-Based Medicine and Outcomes Data • Concerns about Utilization and Quality • Clinical Practice Guidelines and Clinical Pathways Defined • Use of Clinical Practice Guidelines • Pros and Cons • Developing Clinical Pathways and Guidelines

Medicolegal Issues

148

Malpractice Litigation • Patient Safety • Disclosure of Adverse Events/CMS Never Events • CMS Serious Reportable Events • Enterprise Risk Management • Insurance • HIPAA and Patient Confidentiality • Contracts • Specimens • Documentation • Research Liability

Training Physicians for Practice in the 21st Century 153 The Educational Goal: The Complete Physician • New Paradigms in Medical Training • Incorporating New Knowledge and Training Techniques into the Curriculum • Training Physicians for the Managed-Care Environment

External Forces Impacting Undergraduate and Graduate Medical Education 156 Finding the Right Mix: How Many Physicians Do We Need? • Current Challenges to Academic Centers

Summary

157

Changing Emphasis on Quality and Value 179 Health Maintenance Organization Network Management • Patient Management • Disease Management • Healthcare Reform: Demonstration Projects

The Educated Consumer

184

Baby Boomers and Generation Xers: The Educated and Savvy Consumer • Consumer-Driven Healthcare • The Increasingly Litigious Environment

Changing Technology 186 Technological Advances • Direct Consumer Access • Direct Access Testing • Advances in Genetic Testing and Molecular Pathology • Personalized Medicine • New Regulations to Address Changing Technology: HIPAA • Impact of Reform on Electronic Health Records and Meaningful Use

Consolidation in the Healthcare Industry

198

Overview: Laboratories, Hospitals, Physician Practices, and Managed-Care Organizations • Integrated Delivery Systems • Laboratories: Change from Revenue Centers to Cost Centers • Internal Consolidation in Hospital Laboratories • Regional Integrated Laboratory Networks

Strategies for Success in the 21st Century

KEY POINTS 157 GLOSSARY 157 REFERENCES 159 APPENDIX 163

7 The Changing Healthcare Environment 164 Ann Harris and David S. Wilkinson Introduction 164 Changing Reimbursement Models

Patient Protection and Affordable Care Act • Payment Reform and Provider Reimbursement Strategies • Current Trends and Issues with Healthcare Reform • Hospitals and Laboratories: Concerns in Healthcare Reform

200

Strategic Redesign • Developing System-Wide Thinking and a Common Culture • Differentiating a Competitive Advantage • Training Adequate, High-Quality Laboratory Professionals for the Future Workforce • Moving from Top-Down Management to Bottom-Up Customer Focus • Evidence-Based Medicine • Meaningful and Relevant Information

Summary

205

KEY POINTS 206 GLOSSARY 206 REFERENCES 210 APPENDIXES 214

168

Change from Traditional Indemnity to Managed-Care Insurance • Four Stages of Managed-Care Market Development •

SECTION

II

Managerial Leadership 217 8 The Foundations of Leadership 219 David S. Hefner and Katharine R. Becker Introduction 219 Distinguishing Management from Leadership 219 What Is “Leadership” and How Do You Become a Leader? • Management • Leadership

The First Foundational Factor Is Integrity

221

The Definition of Integrity • Honoring Your Word • The Pitfalls in Honoring Your Word • What Is Your Word? • What Is the Current State of Your Word? • Trust and Its Relationship to Honoring Your Word • Preparation for Making a Commitment or Giving Your Word

The Second Foundational Factor Is Authenticity

224

The Definition of Authentic • Knowing Yourself • How Do You Respond in Various Situations? • The Importance of Context • The Path to Authenticity

viii

CONTENTS

The Third Foundational Factor Is Commitment to Something Bigger than Yourself 226

Formal Channels of Communication • Informal Channels of Communication

Succeeding as a Leader • What Happens Next?

Types (Methods) of Communication 251

Summary

Oral (Face-to-Face) Communication • Telephone Communication • Written Communication • PowerPoint Presentation • Electronic Communication • Visual Communication • Body Language and Other Nonverbal Communication

227

KEY POINTS 227 ACKNOWLEDGMENTS REFERENCES 229 APPENDIXES 231

229

Barriers to Communication

9 Employee Needs 232

The Importance of Listening Types of Listening 257

Introduction 232 The Laboratory Workforce—Is There an Approaching Crisis? 232 Theories of Human Needs 233 Maslow’s Hierarchy of Needs • Alternative Theories

234

Level 1 and 2 Needs • Level 3, 4, and 5 Needs • Higher-Level Needs

The Role of Generational Differences 236 Characteristics of the Generations • Meeting the Needs and Wants of the Four Generations

Summary

256

Effective Listening • Ineffective Listening • Stages of Listening

John C. H. Steele, Jr.

Meeting Employee Needs

255

Physical Barriers • Nonverbal Barriers • Verbal Barriers • Psychological Barriers

240

KEY POINTS 240 GLOSSARY 240 REFERENCES 240 APPENDIX 242

Nonlistener • Marginal Listener • Evaluative Listener • Active Listener

Elements of Effective Communication 257 Skills for Effective Communication • Organizational Climate • Using Body Language • Using Positive Language

Leadership Essentials for Improving Communication 259 The Interaction Process • Adapting Communication Styles

Summary

260

KEY POINTS 260 GLOSSARY 261 REFERENCES 261 APPENDIX 263

12 Effective Meetings 264 Mark G. Hanly

10 Motivating through Intelligent Leadership 243 Christa Pardue

Determine If There Is a Need for a Meeting • Determine What Type of Meeting Is Needed • Develop the Agenda • Use of the Consent Agenda • Determine Whom To Invite to the Meeting • Determine the Venue of the Meeting • Determine the Technology/ Equipment Required for the Success of the Meeting

What Is Motivation? 243 Knowledge of Self 244 Creating the Vision • Humility • Basic Needs

Knowing What Others See in You 245 Factors of Motivation • The Right People Need the Right Leader • Actually Fix the Problems

Knowing the Emotions of Leading

246

Emotional Intelligence • The Need for Purpose • Human Motivation Theory

Summary

248

Things To Do during the Meeting 268 Things To Do after the Meeting 269 Calculating the Cost of Meetings 269 Recurrent Meetings 269 How To Be an Effective Participant in a Meeting 269 Summary 270 KEY POINTS 270 GLOSSARY 271 REFERENCES 271

KEY POINTS 248 GLOSSARY 248 REFERENCES 249

11 Successful Communication 250 Diane C. Turnbull Introduction 250 Channels of Communication

Introduction 264 Things To Do before the Meeting 265

251

13 Conflict Management 272 Jean Egan Introduction 272 Conflict Defined 272

CONTENTS

What Conflict Is and Is Not 273 Constructive Conflict 273 Destructive Conflict 273 Common Causes of Conflict 273 Internal and External Origins of Conflict 274 Internal Sources of Conflict • External Sources of Conflict

Power Is the Underlying Issue 275 Two Basic Beliefs about Handling a Conflict 275 Five Conflict Resolution Styles 275 Working with Each Style To Resolve Conflict 276 Creating an Environment Where Conflict Is Addressed and Resolved 276

14 Managing Change 281 Kellie Gibbs Introduction 281 Key Concepts of Change 282 Types of Change 282 Factors Affecting Change 283 The Change Curve 283 Laboratory Change Roles 284 How To Become an Agent of Change 285 Why People Resist Change 285

The Role of the Manager • The Role of the Staff • Creating the Right Environment To Resolve Conflict

Fear • Lack of Trust • Comfort • Perception of Need • Lack of Knowledge/Competence • Poor Communication • Exhaustion/ Saturation

A Communication Model To Manage and Resolve Conflict 277

Forms of Resistance to Change 286 Steps to Managing Change 286

The GGMG Model

Prepare • Implement • Monitor • Sustain • Reevaluate

A Seven-Step Plan for Resolving Conflict When Conflict Resolution Fails 278

277

Key Steps in Resolving Conflict

What the Organization Can Do Summary 278

278

KEY POINTS 279 GLOSSARY 279 REFERENCES 279 APPENDIX 280

SECTION

Changes that Are Common Today 286 Looking Ahead 286 Paradigm Shifts in Today’s Healthcare Industry 287 Trends and Changes 287 Competing in the Future in the Healthcare Arena 288 Summary 289 KEY POINTS 289 GLOSSARY 289 REFERENCES 289 APPENDIX 291

III

Personnel Management 293 15 Employee Selection 295 Anthony S. Kurec Introduction 295 Diversity in the Workplace 296 Criterion-Based Job Description Requirements 296 Job Description Review • Minimal Personnel Requirements

Search Process 299

Retention 304 Resignation and Termination 305 Progressive Discipline 305 Summary 306 KEY POINTS 306 GLOSSARY 306 REFERENCES 306 APPENDIX 308

Search Committee • Advertising

Interview Process 300 Screening Résumés • Interview Formats • Interview Questions • Interview “Do’s and Don’ts”

Hiring Process 302 Orientation 302 Documentation 304

ix

16 Performance Appraisals and Competency Assessment 309 Kari Jones, Diane C. Halstead, and Donna L. Oblack Introduction 309

x

CONTENTS

Performance Appraisals 309 Definition of Performance Appraisals • Purpose of Performance Appraisals • Benefits of Performance Appraisals • Appraisal Types: Formal and Informal Appraisals • Responsibility for Developing a Performance Appraisal Program • Legal Aspects of a Performance Appraisal Program • Elements of a Meaningful Formal Performance Appraisal • Competency-Based Appraisals • Rating Methods • Other Types of Performance Appraisals • Who Should Perform the Appraisal? • Preappraisal Preparation • Steps to a Successful Performance Appraisal Interview • Benefits of Becoming a Mentor • Salary Adjustments • Strategies To Reinforce Appropriate Behaviors • Guidelines for Appraising Poor Performers • Dealing with Emotional Outbursts during Performance Appraisals • Completed Performance Appraisal Documents • Improvement Plan • Web-Based Software Products and Websites

Competency Assessment

318

Regulatory Foundation for Competency Assessment • Timing of Competency Assessment • Methods for Assessment of Competency • Practices • Personnel Excellence

Summary

323

KEY POINTS 323 GLOSSARY 323 REFERENCES 324 APPENDIXES 327

17 Staffing and Scheduling 362

Introduction 373 Definition of a Team 374 Distinguishing Teams from Work Groups • Types and Classifications of Teams • Why Define a “Team” So Precisely?

Group Process and Teams 376 Guidelines for Choosing Whether To Have Teams 377 Common Purpose • Interdependent Tasks • Summary • A Cautionary Note

Selecting Team Members 378 Task-Related Training • Team-Related Training

Leading Teams 381 General Ideas about Leadership: A Brief Review • Leadership in a Team Environment • Team Leader Selection

Motivating Team Performance 383 Goal Setting and Performance • Goal Setting and Teams • Evaluating Teams and Team Members • Pros and Cons of Rewarding Team Members

Virtual Teams 384 Global Teams 384 Summary 385 KEY POINTS 385 GLOSSARY 385 REFERENCES 386 APPENDIXES 388

Patti Medvescek

19 Labor Relations 392

Introduction 362 Laboratory Personnel: Current Dynamics Affecting Staffing 362

Lynne S. Garcia

Labor Shortage • Business Need • Increasing Opportunities for Medical Technologists

Introduction 392 Labor Law 393

Education • Training and Competence Assessment • Functional Definitions • Generalist versus Specialist

National Labor Relations Act (Wagner Act), 1935 • Fair Labor Standards Act (Black Act), 1938 • Labor-Management Relations Act (Taft-Hartley Act) • Labor-Management Reporting and Disclosure Act (Landrum-Griffin Act) • 1974 Amendments to the NLRA

Laboratory Staffing 365

National Labor Relations Board

Personnel Requirements 363

Staffing Requirements • Basis for Determination: Workload Recording

Staff Scheduling 367 Key Success Factors • Metrics for Success • Alternatives • Special Considerations • Flexible Staffing

Summary

370

KEY POINTS 379 GLOSSARY 379 REFERENCES 371 APPENDIX 372

395

Description • Function • Structure • Processing of Cases • Authority To Secure Injunctive Relief from a Court • Current Issues Related to the NLRB

Union Structure 396 Formal Structure • Union Membership • Function of the Union Steward

Unionization Process 398 Individual, Group, and Union Image: Reasons Why Employees Join a Union • Relevance for Healthcare Employees

Organizing Campaign

399

Authorization Cards • The Bargaining Unit • Information Distribution and Solicitation • Election • Certification

18 Teams, Team Process, and Team Building 373

Collective Bargaining

James W. Bishop, K. Dow Scott, Stephanie Maynard-Patrick, and Lei Wang

Summary

401

Issues for Bargaining • Preparation Phase • Negotiation Phase • Administration of the Agreement • Management Rights Clause

403

KEY POINTS 403 GLOSSARY 403

CONTENTS

REFERENCES 405 APPENDIXES 406

xi

Preemployment Testing • For Cause/Reasonable Suspicion • Random Testing • Return to Duty

Drug Testing Protocol 411

20 Workplace Drug Testing and the Clinical Laboratory 408

Specimen Collection • Specimen Testing • Cutoff Concentrations • Drug Confirmation • Reporting Results

Jimmy R. Lea

Managing Clinical and Forensic Drug Testing 415 Summary 415

Introduction 408 Regulated and Nonregulated Testing 409 Whom To Test 409

KEY POINTS 415 GLOSSARY 415 REFERENCES 416 APPENDIXES 417

SECTION

IV

Requirements for Effective Laboratory Management 419 21 Quality Management 421 Ron B. Schifman, George S. Cembrowski, Donna M. Wolk, and Joanne I. Brisbois Introduction 421 Quality Management of Preanalytical Processes 422 Test Selection and Ordering • Quality of Specimen Collection • Patient and Client Satisfaction • Specimen Transport, Storage, Receipt, and Preanalytical Processing

Quality Management of Analytical Processes 425 Method Selection and Evaluation • Quality Control • Quality Control Rules • Frequency of Quality Control Analysis • Specification of MAE • Use of Patient Data for Quality Control • External Quality Control (Proficiency Testing)

Quality Management of Postanalytical Processes 436 Turnaround Time 436 Corrected and Incomplete Reports 436 Document Control 437 Summary 437 KEY POINTS 438 GLOSSARY 438 REFERENCES 439 APPENDIXES 444

ISO Background 447 Benefits of the ISO Standards 448 ISO 9000 Family 448 ISO 15189 449 ISO Certification Process 449 ISO 15189 and the CAP Summary 450 KEY POINTS 450 REFERENCES 450

23 Effective Communication in Laboratory Management 451 Elissa Passiment and Andrea J. Linscott Introduction 451 Delivering the Message 452 Communicating to Diverse Audiences 453 Means and Mechanics of Effective Communication 453 Spoken Word • Written Word • Intradepartmental Communication • Interdepartmental Communication • External Communication

Summary

22 International Organization for Standardization 447 Anne Marsden and Amy Shahtout Introduction 447

456

KEY POINTS 456 GLOSSARY 456 REFERENCES 456

xii

CONTENTS

24 The Laboratory Information System: Making the Most of It in the Clinical Microbiology Laboratory 458 Joseph M. Campos Introduction 458 The Microbiology Laboratory in the 21st Century 459 A Primer on Information System Terminology and Architecture 460

26 Principles of Preanalytic and Postanalytic Test Management 488 Adarsh K. Khalsa, Michael Santa Cruz, and Michael A. Saubolle Introduction 488 Preanalytic Activities 489 Test Selection and Implementation • Appropriate Test Utilization • Specimen Acquisition, Transport, and Storage • Test Ordering

Postanalytic Activities

498

A Primer on the LIS

The Report • Storage and Retention • Assessment of Test Results on Patient Outcomes

LIS Interfaces

Summary

461

Admission/Discharge/Transfer (ADT) Interface • Order-Entry Interface • Results-Entry Interface • Instrument Interface • Billing Interface • Reference Laboratory Interface • Peripheral Hardware

Laboratory Informatics

463

502

KEY POINTS 502 GLOSSARY 503 REFERENCES 503

Laboratory Data Repository • Data-Mining Tools • Connectivity Preparation of a Periodic Antibiogram • Electronic Surveillance for Clusters of Hospital-Associated Infections • Unique Device Identifiers

27 Selection and Implementation of New Equipment and Procedures 506

Summary

Paula Revell and Lakshmi Chandramohan

Miscellaneous Applications

465

465

KEY POINTS 467 GLOSSARY 467 REFERENCES 470

25 Management of Point-of-Care Testing 471 Glen L. Hortin and Christopher D. Doern Introduction 471 Organizational Challenges 472 Political Challenges • Setting Goals for POCT Management • Developing Management Structures for POCT • Laboratory Licensure and Accreditation

Operational Challenges 474 Determining the Scope of POCT Services • Weighing Alternatives to POCT • Analyzing Costs and Benefits • Assessing the Impact of POCT Services • Quality Assurance Challenges • Information Systems and Billing

POCT in Developing Countries and Rural Settings 480 Challenges • Organizing POCT in Resource-Limited Settings

Technological Challenges 481 Rapid Changes of Menu, Devices, and Technology • Lack of Equivalence between POCT and Central Laboratory Tests • New Monitoring Technologies

Summary

483

KEY POINTS 483 GLOSSARY 483 REFERENCES 484 APPENDIX 487

Introduction 506 Defining the Laboratory’s Requirements 507 Technical/Performance Considerations 508 Physical/Technology Requirements 509 Human Resources 510 Financial 510 Confidentiality and Conflict of Interest

Information Review 511 Implementation and Product Placement 511 Verification and Validation 512 Verification • Validation

Personnel Competency Assessment and Training 512 Proficiency Testing 512 Summary 513 KEY POINTS 513 GLOSSARY 513 REFERENCES 513

28 Laboratory Safety 515 James J. Dunn and David L. Sewell Introduction 515 Safety Management Plan and Responsibilities Laboratory Hazards 517

516

Biological Hazards • Chemical Hazards • Physical Hazards • Radiation Hazards

Standard Precautions 518

xiii

CONTENTS

Hazard Prevention and Containment 518 Risk Assessment • Handwashing • Barrier Protection • Engineering Controls • Work Practices • Respiratory Protection • Immunization • Warning Signs and Labels • Biological Safety Cabinets and Chemical Fume Hoods

Sterilization and Decontamination Spill Management 526

Andrea J. Linscott, Patti Medvescek, and David L. Sewell Introduction 545 Emergency Management Plan 546

524

Purpose or Policy • Hazard Analysis • Incident Management System

Biological • Chemical

Fire Safety 527 Waste Management 527

Elements of an EMP

Regulatory Oversight • Management Program

Packaging and Shipping Infectious Substances

29 Emergency Management 545

528

Infectious Substances Classification • Packaging, Labeling, and Shipping Regulated Material

Personnel Training 530

548

Emergency Operations Center • Communications • Medical Treatment Areas • Decision To Shut Down Laboratory • Damage Assessment • Evacuation • Personnel Pool • Personnel Care • Locator System • Security • Training • Monitoring and Evaluation

Disasters

551

Training Program • Methods • Documentation • Monitoring and Evaluation

Fire • Hazardous Materials • Radioactive Material • Utility Failure • Bomb Threat • Natural Disasters • Terrorism Threats • Civil Disorder

Summary

Summary

533

KEY POINTS 533 GLOSSARY 533 REFERENCES 534 APPENDIXES 537

SECTION

553

KEY POINTS 553 GLOSSARY 553 REFERENCES 554 APPENDIXES 555

V

Financial Management 565 30 Financial Management: Setting the Stage 567 Ronald B. Lepoff Introduction 567 The Hospital Environment 568 Operating in the Inpatient Hospital Setting • Operating in the Outpatient Hospital Setting

The Non-Hospital Environment 571 Summary 572 KEY POINTS 572 GLOSSARY 572 REFERENCES 572

Structure of the Clinical Laboratory Industry 576 Size of the Testing Market • Concentration of Competitors • Barriers to Entry • Separation of Payor, Purchasing Agent, and Beneficiary • Economies of Scale • Restrictions on Markups and Kickbacks • Powerful Sellers and Buyers • Substitute Products • Unique Economics of Inpatient Care • Conclusions

Competitor Analysis

578

Competitors’ Goals • Competitors’ Assumptions • Competitors’ Capabilities • Interactions of Competitors • Conclusions

Strategic Positions in the Laboratory Industry

Implementing the Strategy: Activity Fit 582 What Is Activity Fit? • Activity Fit Involves Trade-Offs

Failure of Strategy 582 Straddling • Growth Trap • Profitability Trap • Hubris

31 Strategic Planning 573

Summary

Paul Valenstein

KEY POINTS 584 GLOSSARY 584 REFERENCES 585 APPENDIXES 586

Introduction: What Is Strategy? 573 Evidence To Recommend Strategic Planning 574 Randomized Controlled Trials • Case Studies • Economic Theory

Developing and Maintaining a Business Strategy: The Strategic Planning Process 575

580

What Are Strategic Positions? • Types of Strategic Positions • Strategic Positions of Clinical Laboratories • Conclusions

584

xiv

CONTENTS

32 Human Resources at the Local Level: An Important Component of Financial Management 589 Washington C. Winn, Jr., Fred Westenfeld, and Michael R. Lewis Introduction 589 Constraints on Managerial Function 590 The Cardinal Rules for Optimizing Performance 591 Get It Right at the Outset • Expect Cooperative Behavior and Best Possible Performance • Lead by Example • Involve All Members of the Team • Perceived Fairness Is More Important than Rigid Equality • Maintain Communication in All Directions • Keep Your Eyes and Ears Open • Act Quickly and Decisively • When Problems Surface, Involve the Laboratory Manager Immediately; Involve Human Resources as Appropriate

Classic Situations that May Interfere with Optimal Performance 593 The Underperforming Employee • The Overperforming Employee • The Intrusion of Personal Issues • The Underground Troublemaker • The Cabal • Weakness at the Top

Practical Issues in Utilization of Personnel Resources 594 Skill Mix of Personnel • Cross-Training and Rotation • Mix of Employment Arrangements • Coverage of Vacations, Holidays, and Routine Shifts • Use of Overtime

Summary

595

KEY POINTS 596 GLOSSARY 596 REFERENCES 596

Cost Accounting

598

Classification of Costs • Behavior of Costs • Measuring Full Cost • Average versus Marginal Costs • Actual Cost versus Standard Cost • Costing Issues • A Formula for Developing Laboratory Costs • Laboratory Costing Examples

Break-Even Analysis 600 Equipment Purchase • Capitation Contract

Capital Acquisition Concepts

605

Time Value of Money • Depreciation

Budgeting

698

Types of Budgets • The Budgeting Process • Budget Examples

Variance Analysis 610 Financial Statements 613 Financial Ratios

Summary

615

KEY POINTS 616 GLOSSARY 616 REFERENCES 617

34 Financial Decision Making: Putting the Pieces Together 619 Ronald J. Bryant and Michael R. Lewis Introduction 619 Contextual Considerations 619 Analytical Underpinnings of a Decision Executing the Plan 620 Summary 620 KEY POINTS

620

621

33 Costs, Budgeting, and Financial Decision Making 597 Geoffrey C. Tolzmann and Richard J. Vincent Introduction

597

SECTION

VI

Generation of Revenue 623 35 Correct Coding of Billable Services in the Clinical Laboratory 625 Vickie S. Baselski, Alice S. Weissfeld, and Fran Sorrell Introduction

625

Procedure Coding: What Test Procedures Have Been Performed? 626 The CPT System 626 Description • Types of CPT Codes • Modifiers • The Process for Change • Procedure Coding Guidance

Procedure Coding Alternatives 629 Capitated Services 629

CONTENTS

Diagnosis Coding: Why Is the Service Being Performed? 630 Inpatient Diagnosis Coding • Outpatient Diagnosis Coding • Other Unique Patient Groups • ICD-CM • SNOWMED CT

Service Location

631

Role of CLIA and State Licensing • Revenue Codes

Documentation of Codes

632

Requisition • Claims • Code Mapping

Summary

Pay for Performance 643 Summary 643 KEY POINTS 643 GLOSSARY 643 REFERENCES 644 APPENDIX 645

37 Charges and Fees for Laboratory Services 646

632

KEY POINTS 632 GLOSSARY 633 REFERENCES 634 APPENDIX 635

Vickie S. Baselski, Alice S. Weissfeld, and Fran Sorrell

36 Approaches to Billing Laboratory Services 637 Vickie S. Baselski, Alice S. Weissfeld, and Fran Sorrell

Introduction 646 Calculating Costs and Charges 646 Setting Costs • Setting Charges

Determining Payment Amounts

647

Fee Schedules • Medicare Clinical Laboratory Fee Schedule • Fee Setting for New Codes on the CLFS • The Medicare Physician Fee Schedule • Other Fee Schedules • Capitated Payments

Introduction 637 Interactions in the Billing Process 638

Keys to Success in Reimbursement

Provider Mix • Payor Mix

Summary

Terms of Coverage 640

KEY POINTS 650 GLOSSARY 651 REFERENCES 651 APPENDIX 653

Types of Services • Payment for Services

Logistics of the Billing Process 641 Claim versus Invoice Submission • Invoice Billing • Claim Billing

Capitated Arrangement Billing

SECTION

xv

649

Retrospective Payment • Prospective Payment

650

642

VII

Profitability, Contribution, and Reimbursement 655 38 Rules and Regulations in Reimbursement 657 Vickie S. Baselski, Alice S. Weissfeld, and Fran Sorrell Introduction 657 General Criteria 658 Basic Rules 658 Procedure Code Edits 659 Basic Edits • National Correct Coding Initiative • Mutually Exclusive Codes • Comprehensive/Component Edits • Medically Unlikely Edits

Conditions of Coverage

660

Medical Necessity • National Coverage Determination • Local Coverage Determination • Screening Tests • Experimental Testing • Administrative Policies

Special Coverage Conditions 663 End-Stage Renal Disease • Skilled-Nursing Facility • Ambulatory Payment Classifications • Inpatients • Three-Day Window • Date of Service Rule • Other Private-Payor Rules

Remittance Advice Review

664

Beneficiary Documents • Provider Documents • Auditing Remittance Advice

Summary

665

KEY POINTS 665 GLOSSARY 665 REFERENCES 666 APPENDIXES 668

xvi

CONTENTS

39 Reimbursement Compliance 670

Summary 681

Vickie S. Baselski, Alice S. Weissfeld, and Fran Sorrell

KEY POINTS 681 GLOSSARY 681 REFERENCES 682 APPENDIXES 684

Introduction 670 Improper Payments 671 Program Integrity 672

40 Determination of Profitability 685

Authority for Program Integrity • Activities in Program Integrity

Payor Integrity

674

Prepayment Review • Postpayment Review

Laboratory Provider Integrity 675 The Seven Essential Elements • Specific Areas of Concern

Coding and Billing Issues

676

Vickie S. Baselski, Alice S. Weissfeld, and Fran Sorrell Introduction 685 Pitfalls in Cost Accounting 686 Laboratory Profitability 686

CPT Coding • Modifiers • ICD-CM Coding • The Requisition • Special Ordering Situations

Balance Sheets • Income Statements • Cash Flow Statements

Medical-Necessity Issues 678 Record Retention 679 Marketing Practices 679

Key Income Indicators • Key Expense Indicators

Pricing and Inducements • Ordering Provider and Patient Communication

Fraud Alerts and Advisory Opinions 680 Auditing and Monitoring 680 Response to Possible Fraud or Abuse 680 Laboratory Examples of Fraud and Abuse 681

SECTION

Key Indicators

687

Institutional Profitability 688 Human Profitability 688 Laboratory Value 689 Summary 689 KEY POINTS 689 GLOSSARY 690 REFERENCES 690

VIII

Outside Marketing and Expansion 693 41 Outreach Considerations and Overall Goals 695 Charlene H. Harris Introduction 695 Considering an Outreach Program 695 Administrative Interest • Exploring the Market • Strategic Plan • Business Plan • Sales Plan

Commitment from All Relevant Parties 705 Feasibility Report • Philosophical Understanding • Service and Financial Support

Implementing the Outreach Program 706 People • Processes • Facilities • Equipment • Supplies

Outreach Indicators 706 Growing the Outreach Program 707 Market Assessment • Client Needs

Summary

707

KEY POINTS 707 GLOSSARY 708 REFERENCES 710 APPENDIXES 711

42 Outreach Implementation Requirements: A Case Study 740 Frederick L. Kiechle, Jack Shaw, and Joseph E. Skrisson Introduction 740 Outreach Plan Approval Process 741 Barriers to the Plan’s Approval • Consultants to the Rescue • Bureaucratic Simplification Equals Success

Requirements for Outreach Implementation 743 Sales and Marketing Program • Courier Services: Basics and Logistics

xvii

CONTENTS

Beaumont Reference Laboratory: 1993 to 2004 747

Information Technology Changes 778

Annual Growth and Its Implications • Projecting Future Volume • Send-Out Tests • Monitoring Financial Outcome

Joint Venture Hospital Laboratories 754

Hospital Systems versus Separate Systems • Nonstaff Physicians • Data Interface • Patient Registration and Accounting Concerns • Populating the Patient Record • Physician Office Connectivity

History of JVHL • Benefits of BRL’s Affiliation with JVHL

Meeting the Needs

Summary

Capital • FTEs

755

780

Hospital versus Outreach Contracting 780

KEY POINTS 756 GLOSSARY 756 REFERENCES 756

Defining Insurance Plans • Contracting • Acceptance of Payors

Failure To Understand Financial Implications and Requirements 781

43 Finance and Decision Making in Outreach 759

Unrelated Business Income Tax • Other Taxes

Understanding the Hospital’s Point of View

781

Lower Cost per Test • Make Money

Michael G. Bissell and Harry E. Pukay-Martin

Translating Hospital and Laboratory Compliance for an Outreach Operation 782

Introduction

Physician Communication • Medicare Secondary Payor Questionnaires • Physician Acknowledgments • Advance Beneficiary Notices • Requisition Design • Pricing • Add-On Tests • National and Local Coverage Policies • Sanctioned Physicians • Contracts • Audits and Reviews • Participation and Cooperation

759

The Clinical Laboratory as a Business • The Phases of the Growth Curve

Decision Making in Laboratory Outreach Management 760 Types of Costs 760 Direct and Indirect Costs • Fixed, Variable, and Mixed Costs • Unit Costs • Additional Cost Concepts for Decision Making • Characteristics of Laboratory Costs • Microcosting

Levels of Decision Making in Outreach Operations 763 Menu: To Test or Not To Test • Operation: To Perform In-House or Send Out • Capital: Whether or Not To Acquire New Equipment • Financing Capital: To Lease or Buy Equipment

Summary

766

KEY POINTS 766 GLOSSARY 767 REFERENCES 769 APPENDIXES 770

Newsletter • Marketing and Sales Team • Laboratory Guidebook • Website • Focus Group

Customer Satisfaction Assessment

785

Surveys • Problem Reporting and Resolution

Couriers: The First Line 787 Client Services 787 Access to Draw Sites and Patient Service Centers Building and Retaining Your Client Base 789

788

Leverage the Continuum of Care • Keep Asking Why • Follow Up When Clients Leave

Professional Marketing and Sales Personnel 789 Commission Plans • Reports • Prepackaged Information

44 Outreach: Obstacles to Hospital Outreach and Enhancing Customer Satisfaction 777 Beth H. Deaton Introduction 777 Making Organizational Changes

Enhancing Customer Satisfaction: Communication 784

Technical Expertise Accessibility 790 Accounts That Require Special Care 790 Nursing Homes • Drug Accounts • Home Health Agencies • Veterinary Lab Services

Define Service Area and Services 791 Range of Services • The Importance of Standardization

Summary 777

Centralize Work • Place Laboratory Management on Off Shifts

Give Outreach Its Due 778 Make Outreach High-Profile • Manage Outreach as a Business, Not a Department

793

KEY POINTS 793 GLOSSARY 793 REFERENCES 794 APPENDIXES 795

xviii

CONTENTS

SECTION

IX

Clinical Trials and Evidence-Based Laboratory Medicine 807 45 The Current State of the U.S. Food and Drug Administration Process and Regulations for Diagnostic Laboratory Assays 809 Donna M. Wolk, Natalie N. Whitfield, Elizabeth M. Marlowe, and Marilyn M. Marshall Introduction 809 Background: The FDA Processes for Classification and Assessment of New IVDs 810 Premarket Approval (PMA) • Premarket Notification [510(k)] and 510(k) Review • Alternative Application Submission Approaches • The Pre-IDE Process • The Expedited Review

Compliance with HIPAA 822 Compliance with Conflict of Interest Policies 823 Intellectual Property Considerations

GLP and GCP Regulations

825

Sponsor Responsibilities • Study Director and Responsibilities • Quality Assurance Office: Organization, SOPs, Inspections, Reporting Data • GLP Background • Equipment and Equipment Validations • Standard Operating Procedures • Reagent and Solutions: Test and Control Article • Final Research Reports

Summary

827

KEY POINTS 827 GLOSSARY 827 REFERENCES 829 APPENDIX 831

Miscellaneous FDA Requirements 813 Establishment Registration • Medical Device Listing • Good Manufacturing Practices and Quality System Regulations • Quality Control

Automated Laboratory Assays 814 Postmarket Review 814 Limitations Inherent to Current FDA Processes 814 Summary 815 KEY POINTS 815 GLOSSARY 815 REFERENCES 816

Donna M. Wolk Introduction 832 Types of Studies 833 Observational Studies • Mechanistic Studies • Therapeutic Studies • Large-Scale Clinical Trials • Meta-Analysis

Translational Research 833

46 The Clinical Trial Laboratory: Research Compliance for Clinical Research Microbiologists 818 Donna M. Wolk and Marilyn M. Marshall Introduction 818 Funded Clinical Research in Laboratory Medicine 819 Sponsored Projects • Office of Research and Contract Analysis (ORCA)

Compliance with Human Subject Regulations

47 Clinical and EvidenceBased Research in the Clinical Laboratory 832

820

Background for Human Subject Regulations • Regulatory Requirements for Human Subject Protection • Human Subject Research: Classifications Based on Risk • Human Subject Training Requirements and Site Authorization • Informed Consent • Special Populations • Continuing Review by the IRB • Records Retention for HSPPs

Sequence of Investigation • Literature Search • Hypothesis Generation • Designing the Study To Test the Hypothesis

Biostatistics

835

Descriptive Statistics • Inferential Statistics: General Issues for Medical Devices • Other Issues for Diagnostic Studies

Other Research Considerations 837 Systematic Reviews and Laboratory Medicine Best Practices 837 Evidence-Based Laboratory Medicine • Laboratory Medicine Best Practices Initiative

Summary

839

KEY POINTS 840 GLOSSARY 840 REFERENCES 845 APPENDIX 848

CONTENTS

xix

X

SECTION

Defining and Measuring Standards for Success 849 Evaluating Potential and Real Problems 877

48 Benchmarking and Performance Monitoring for the Clinical Laboratory 851

Clinical Relevance • Cost-Effectiveness Analysis, Cost-Benefit Analysis, and Cost-Utility Analysis

Lionelle D. Wells, Washington C. Winn, Jr., and Michael R. Lewis

Laboratory-Based Approaches to Control 880

Introduction 851 Why Benchmark? 852 The Payoff from Benchmarking 852 The Basic Steps 852 Prioritization • Data Collection and Analysis • Development and Implementation of Plans

Where Do We Find Information about Benchmarks? 853 Quality Benchmarks • Financial Benchmarks

General Approach to Financial Benchmarking and Performance Monitoring 854 The Problem of Comparability • The Problem of Cost Accounting • Workload Recording • The Search for Simplicity • Selection of Indicators for Benchmarking or Performance Monitoring • Problems Associated with Benchmarking by UOS • UOS Benchmarking in a Competitive Environment

Measuring Laboratory Financial Performance 857 Performance Monitoring • External Benchmarking

Interpretation of Performance Monitoring Data 862 Summary Measure as Unifying Force • Prerequisites for Effective Use of a Summary Measure

Interpretation of External Benchmarking Data 862 Measuring Laboratory Performance in the Broader Clinical Setting 863 Effect of Accountable Care Organizations • Linkage of Payment to Measures of Quality • Laboratory-Related Standards in Broader Accreditation Programs

Summary

865

KEY POINTS 865 GLOSSARY 865 REFERENCES 866 APPENDIXES 868

49 Test Utilization and Clinical Relevance 876 Michael L. Wilson, Gary W. Procop, and L. Barth Reller Introduction

876

Documenting the Extent of the Problem 878 Literature Review • Centralized Studies • Local Data Newsletters • Policy Changes • Personal and Ad Hoc Communication • LIS/HIS-Based Controls on Test Ordering • LISBased Feedback in Reports

Institution-Based Approaches to Control 882 Working with the Medical Staff • Formal Protocols Validated by Medical Staff • Working with the Nursing Staff • The Concept of the Laboratory Test Formulary • Using Major Events To Effect Change (e.g., Institutional Quality Assurance [QA] Office, Root Cause Analysis)

What Works and Doesn’t Work: How To Take the First Steps 884 Putting It All Together 885 Base Policy Approaches and LIS/HIS-Based Controls on EvidenceBased Medicine • Track Results • The Plan, Do, Study, Act Model • The Future: Better Teaching and Training

Summary

886

KEY POINTS 886 GLOSSARY 887 REFERENCES 887 APPENDIX 889

50 Benchmarking and Performance Monitoring: What Is Appropriate for Your Laboratory? 890 Ronald J. Bryant and Michael R. Lewis Introduction 890 Starting at the Beginning: What To Measure? 891 Where Can We Get Help? 892 How Will I Fund This? 892 Evaluation of Data and Monitoring of Performance 892 Summary 892 KEY POINTS 893 GLOSSARY 893

xx

CONTENTS

XI

SECTION

The Future of Clinical Laboratories 895 51 The Future of Pathology and Laboratory Medicine: Political, Social, Economic, and Regulatory Impacts 897 Paul Bachner Introduction 897 The Current Environment of Healthcare 898 Current Regulations 898 CLIA ’88 • HIPAA • OSHA Standards for Occupational Exposure to Blood-Borne Pathogens • The Stark Laws

Liability Considerations 899 The Future Regulatory Climate under CLIA ’88 900 Personnel Standards and Quality Control Standards • Complexity Categories • Waived Testing • Changes to CLIA and Alternative Approaches

The Impact of HIPAA

901

Laboratory Requirements • The Future of HIPAA

Bioterrorism

901

Recent History • Future Impact

Long-Term Effects: Legislation, Regulation, Accreditation 902 Quality, Value, and Patient Safety • The Patient Safety Movement

Issues Affecting Research and Academic Laboratories 903 Stem Cell Research • Biorepositories

Restrictive Patents and Restraints on Use of Human Tissues 903 Summary 904

KEY POINTS 915 GLOSSARY 916 REFERENCES 916

53 Electronic Health Records and Their Implications and Opportunities for Laboratories 918 Walter H. Henricks Introduction 918 Electronic Health Records 919 Definition and Components • Status of EHR Use

Federal Regulations Related to EHRs and Their Implications for Laboratories 920 Meaningful Use: The EHR Incentive Program • Meaningful Use Requirements Directly Relevant to Laboratories • EHR Certification Program: Functional Criteria and Data Standards • Certification Criteria and Standards Most Relevant to Laboratories

Concerns/Implications for Laboratories Related to Increased Use of EHR Systems 922 Results Management • Test Result Management when Multiple Laboratories Serve a Single EHR System • Computerized Provider Order Entry • EHR-LIS Interfaces • Technical Aspects of Interfaces: HL7 and LOINC • Operational Challenges for Laboratories with LIS-EHR Interfaces

Strategies for Laboratories To Succeed in Laboratory Information Management in the EHR Era 927 Steps To Increase Involvement and Influence in EHR Processes Related to the Laboratory • Tactics for Working with EHR Support Staff • Laboratory Involvement in EHR Selection and Implementation

KEY POINTS 904 GLOSSARY 904 REFERENCES 905 APPENDIX 906

Summary

52 The Future of the Clinical Scientist Workforce 907 Diana Mass and John R. Snyder

54 Current Trends in Instrumentation and Technology: Outlook for the Future 933

Introduction

Sheshadri Narayanan and Audrey N. Schuetz

907

Essential Role in Healthcare • Other Continuing Imperatives • A New Workforce • Laboratory Paradigms • The Old Laboratory • The New Laboratory • The Changing Workforce • Creating Conditions of Good Work

The Changing Nature of Work 913 The Consultation Role and Process • Consultant Skills • The Internal Consultant

Summary

915

930

KEY POINTS 930 GLOSSARY 931 REFERENCES 931

Introduction 933 Chemistry 934 Core Laboratory • Rapid-Response Laboratory and Point-of-Care Testing • Noninvasive Testing

Hematology

938

Automation in the Routine Laboratory

CONTENTS

Coagulation Laboratory

940

xxi

Routine Coagulation • Point-of-Care Testing • Molecular Testing

Laboratory Medicine: Origins and Historic Development 966

Microbiology 943

Clinical Pathology

Molecular Testing

Recent Trends in Clinical Practice 967

Blood Bank

Increasing Utilization of Laboratory Services • Growth of Point-ofCare Testing • Increasing Autonomy of Nonphysician Healthcare Providers • The Electronic Revolution and Clinical Practice

948

Automation • Molecular Testing

Outlook for the Future 949 Driving Forces • Miniaturization and Microfluidics • Biochips • DNA Sensors

Summary

954

KEY POINTS 955 GLOSSARY 955 ACKNOWLEDGMENTS REFERENCES 956 APPENDIXES 961

956

Paul Bachner and M. Desmond Burke 966

Master Glossary Index 1028

Clinical Laboratory Consultation • Teaching Test Strategy and Interpretation of Results • Future Role of Pathologists and the Laboratory in Emerging Economic Models • Evidence-Based Medicine and Medical Informatics

Predictions for the 21st Century 971 Summary 972 KEY POINTS 972 GLOSSARY 972 REFERENCES 972

55 The Future Practice of Laboratory Medicine 966 Introduction

Reaction to Recent Trends 969

975

Contributors Christina E. Anderson Department of Pathology, Virginia Commonwealth University Health System, Richmond, VA 23298 Paul Bachner Department of Pathology and Laboratory Medicine, University of Kentucky Chandler Medical Center, 800 Rose St., Room MS 112, Lexington, KY 40536-0298

Lakshmi Chandramohan Department of Pathology, Baylor College of Medicine, Molecular Microbiology Laboratory, Texas Children’s Hospital, 6621 Fannin St., MC2-2271, Houston, TX 77030 Beth H. Deaton Consolidated Lab Services, 600 Gresham Dr., Norfolk, VA 23507

Vickie S. Baselski University of Tennessee Health Science Center at Memphis, Clinical Microbiology, 349 Riverbluff Place, Memphis, TN 38103-4132

Christopher Doern Children’s Medical Center of Dallas, University of Texas Southwestern Medical Center, Dallas, TX

Katharine R. Becker PLB Ventures and Consulting, 9502 Roe Circle, Franktown, CO 80116

James J. Dunn Department of Pathology, Cook Children’s Medical Center, Fort Worth, TX 76104

James W. Bishop Department of Management, New Mexico State University, Las Cruces, NM 88003

Jean Egan Jean Egan Associates, LLC, 33 Woods Hollow Road, West Suffield, CT 06093

Michael G. Bissell Ohio State University Medical Center, Room 4173 Graves Hall, 333 W. 10th Ave., Columbus, OH 43210-1239

Lynne S. Garcia LSG & Associates, 512 – 12th St., Santa Monica, CA 90402

Joanne I. Brisbois Geisinger Health System, 100 N. Academy Avenue, MC 01-31, Danville, PA 17822-0131

Kellie A. Gibbs MCG Health, Inc. dba Georgia Regents Medical Center, BI-2008B, 1120 15th Street, Augusta, GA 30912

Ronald J. Bryant University of Vermont Medical Group, Fletcher Allen Health Care, 111 Colchester Avenue, Mailstop 233MP1, Burlington, VT 05401

Margaret M. Grimes Department of Pathology, Virginia Commonwealth University Health System, Richmond, VA 23298

M. Desmond Burke Emeritus Professor of Pathology & Laboratory Medicine, Cornell University Medical College, New York, NY 10021 Joseph M. Campos Children’s National Medical Center and Georgetown University Medical Center, Washington, DC Jeffrey Casterline Department of Pathology and Laboratory Medicine, Drexel University College of Medicine, 245 N 15th Street / MS 435, Philadelphia, PA 19102 George S. Cembrowski Medical Biochemistry, University of Alberta Hospital, Edmonton, Alberta, Canada

Diane C. Halstead North Florida Pathology, P.A., and Clinical Laboratory Services, Baptist Medical Center, Jacksonville, FL 32207 Mark G. Hanly SEPALabs, Brunswick, GA 31525, and Department of Pathology, Southeast Georgia Health System, Brunswick, GA 31520 Ann L. Harris Department of Pathology, VCU Medical Center, PO Box 980258, Richmond, VA 23298-0258 Charlene H. Harris System Director, Laboratory Services, Sarasota Memorial Health Care System, 1700 South Tamiami Trail, Sarasota, FL 34239 xxiii

xxiv

CONTRIBUTORS

David S. Hefner Georgia Regents Medical Center and Georgia Regents University, 1120 15th Street, Augusta, GA 30912 Walter H. Henricks Center for Pathology Informatics and Pathology and Laboratory Medicine Institute, Cleveland Clinic, 9500 Euclid Avenue, L21, Cleveland, OH 44195 Glen L. Hortin Quest Diagnostics, Tampa, FL 33617 Kari Jones Anatomic Pathology, MCGHealth, Inc., 1120 15th Street, Augusta, GA 30912 Adarsh K. Khalsa Laboratory Sciences of Arizona, Banner Good Samaritan Medical Center, Phoenix, AZ 85006

Diana Mass Clinical Laboratory Sciences Program, School of Life Sciences, Arizona State University, Tempe, AZ 85287-4501, and Associated Laboratory Consultants, 14142 Ridge Canyon Rd., Valley Center, CA 92082 Stephanie Maynard-Patrick Department of Management, New Mexico State University, Las Cruces, NM 88003 Patti Medvescek Labor Analytics and Benchmarking, Financial Operations, Indiana University Health, 950 N. Meridian St., Suite 800, Indianapolis, IN 46204 Roxanne Mercer Department of Pathology, VCU Medical Center, PO Box 980662, Richmond, VA 23298-0662

Frederick L. Kiechle Pathology Consultants of South Broward, Memorial Healthcare System, 3501 Johnson Street, Hollywood, FL 33021

Sheshadri Narayanan Dept. of Pathology & Laboratory Medicine, Weill Medical College of Cornell University, 525 East 68th St., Room F-715, New York, NY 10021

Anthony S. Kurec Clinical Associate Professor, Emeritus, SUNY Upstate Medical University, 750 East Adams St., Syracuse, NY 13202

Donna Oblack Cincinnati Department of Veteran Affairs Medical Center, Cincinnati, OH 45220

Jimmy R. Lea Forensic Drug Laboratory, Georgia Regents University Medical Center, 1120 15th Street, Augusta, GA 30912

Christa Pardue Laboratory Services, University Health Care Systems, 1350 Walton Way, Augusta, GA 30901

Ronald B. Lepoff Department of Pathology, University of Colorado School of Medicine, 12401 East 17th Avenue, Mailstop A022, Aurora, CO 80045

Elissa Passiment ASCLS, 2025 M Street, NW, Suite 800, Washington, DC 20036

Michael R. Lewis University of Vermont Medical Group, Fletcher Allen Health Care, 111 Colchester Avenue, Mailstop 233MP1, Burlington, VT 05401 Andrea J. Linscott Dept. of Pathology, Ochsner Healthcare System, 1514 Jefferson Highway, New Orleans, LA 70121 Elizabeth M. Marlowe Regional Reference Laboratories, Southern California Permanente Medical Group, 11668 Sherman Way, North Hollywood, CA 91605 Anne Marsden Quality Assurance, Quest Diagnostics Nichols Institute, San Juan Capistrano, CA 92690 Marilyn M. Marshall Office of Responsible Conduct for Research, University of Arizona, Tucson, AZ 85719

Gary W. Procop Department of Molecular Pathology, Cleveland Clinic, 9500 Euclid Avenue / LL2-2, Cleveland, OH 44195 Harry E. Pukay-Martin Department of Pathology, The Ohio State University, 121 Hamilton Hall, 1645 Neil Ave., Columbus, OH 43210 L. Barth Reller Departments of Pathology and Medicine, Duke University School of Medicine, DUMC Box 3938, Research Drive, Durham, NC 27710 Paula Revell Pathology and Pediatrics, Baylor College of Medicine, and Clinical and Molecular Microbiology Laboratories, Texas Children’s Hospital, 6621 Fannin St., MC1-2261, Houston, TX 77030 Susan D. Roseff Department of Pathology, Virginia Commonwealth University Health System, PO Box 980662, Richmond, VA 23298-0662

CONTRIBUTORS

xxv

Denise E. Russell Risk Management, Virginia Commonwealth University Health System, Richmond, VA 23298

Geoffrey C. Tolzmann Dahl-Chase Diagnostic Services, 417 State Street, Suite 540, Bangor, ME 04401

Michael Santa Cruz Laboratory Sciences of Arizona, Banner Gateway Medical Center / MD Anderson Cancer Center, Gilbert, AZ 85234

Diane C. Turnbull Georgia Regents University, 1102 15th Street, Augusta, GA 30912

Michael A. Saubolle Laboratory Sciences of Arizona, Banner Good Samaritan Medical Center, and University of Arizona College of Medicine, Phoenix, AZ 85006

Paul Valenstein IHA Pathology and Laboratory Management, 5301 East Huron River Dr., Ann Arbor, MI 48106-3058

Ron B. Schifman Diagnostics Service Line, Southern Arizona VA Healthcare System, 3601 South 6th Ave. (6-113), Tucson, AZ 85723 Audrey N. Schuetz Dept. of Pathology & Laboratory Medicine, Weill Cornell Medical College/NewYork-Presbyterian Hospital, 525 East 68th St., Room Starr 737C, New York, NY 10065 K. Dow Scott Institute of Human Resources and Industrial Relations, Loyola University Chicago, Chicago, IL 60611 David L. Sewell Pathology and Laboratory Medicine Service, Veterans Affairs Medical Center, Department of Pathology, Oregon Health and Sciences University, Portland, OR 97239 Amy Shahtout Quest Diagnostics, 33608 Ortega Highway, San Juan Capistrano, CA 92690 Jack Shaw Mednet Services, 1633 Fairlane Circle, Suite 300, Allen Park, MI 48101

Laurence P. Vetter Department of Pathology, Virginia Commonwealth University, P.O. Box 980662, Richmond, VA 23298-0662 Richard J. Vincent University of Vermont Medical Group, Fletcher Allen Health Care, 111 Colchester Avenue, Mailstop 233MP1, Burlington, VT 05401 Lei Wang Department of Management, The University of Texas Pan-American, Edinburg, TX 78539 Alice S. Weissfeld Microbiology Specialists, Inc., 8911 Interchange Drive, Houston, TX 77054 Lionelle D. Wells Center for Disease Detection, San Antonio, TX 78233 Fred Westenfeld Department of Pathology and Laboratory Medicine, Fletcher Allen Health Care, 111 Colchester Avenue, Mailstop 233MP1, Burlington, VT 05401 Natalie N. Whitfield Department of Pathology, University of Arizona Medical Center, 3601 N. Campbell Avenue, Tucson, AZ 85724-5059

Joseph E. Skrisson Dynacare Laboratories, 9200 W. Wisconsin Avenue, Milwaukee, WI 53226-3596

David S. Wilkinson Department of Pathology, VCU Medical Center, 1101 East Marshall Street, P.O. Box 980662, Richmond, VA 23298-0662

John R. Snyder Ohio State University College of Medicine, 4240 Campus Drive, Lima, OH 45804

Michael L. Wilson Department of Pathology and Laboratory Services, Denver Health Medical Center, Mail Code #0224, 777 Bannock, Denver, CO 80204-4507

Fran Sorrell American Esoteric Laboratories, 1701 Century Center Cove, Memphis, TN 38134 John C. H. Steele, Jr. Department of Pathology, Georgia Regents University, Room BI-2008A, 1120 15th Street, Augusta, GA 30912-3640

Washington C. Winn (Deceased) Donna M. Wolk Department of Laboratory Medicine, Geisinger Health System, 100 N. Academy Avenue, MC 01-31, Danville, PA 17822-0131

Preface The current environment for laboratory medicine and pathology continues to undergo dramatic transformation, which is influenced by significant changes in the legislative, regulatory, reimbursement, technologic, sociologic, economic, communication, and business sectors. The practice of all aspects of medicine and allied healthcare requires new approaches and a much broader range of managerial expertise. Areas in which a laboratory director, manager, or supervisor is expected to understand and perform include fiscal and human resources, patient care testing and quality performance issues, and overall accountability to the facility administration. It is very important that individuals working within the healthcare environment learn to hear, speak, and thoroughly understand the operational language of healthcare administration. During the past few years, the fields of laboratory medicine and pathology management have seen many dramatic changes, including those related to quality assurance, communication, data storage and retrieval, point-of-care testing, test management, automation, safety and emergency preparedness, regulatory requirements, information confidentiality, billing and coding requirements, physical space changes, laboratory consolidation, shortage of training programs and trained personnel, competency testing, specimen handling and shipping requirements, decrease in reimbursement, demand for increased productivity, and increased need for consultation and educational initiatives for clients. Reactions to the changes that have occurred in the healthcare environment in recent years are essentially twofold: increased efforts to contain costs and increased demand for appropriate and error-free medical care. The purpose of this text is to provide comprehensive, practical information and guidelines for healthcare management in the 21st century to laboratory directors; managers; chief technologists; supervisors; trainees in schools of healthcare administration, medical laboratory technology, and other allied health disciplines; those training for leadership positions; and those studying for board or registry certification in management. This book is designed both for those who are already actively working in clinical pathology and clinical laboratory management and for those who are training to enter these fields. It contains a comprehensive overview of management principles and how they apply to the clinical laboratory. In-depth analysis

of the financial challenges facing clinical laboratories is included, as are discussions on good business practices. There is extensive information on the impact of the regulatory environment on every aspect of clinical laboratory practice, as well as personnel management related to all relevant job classifications. Additional discussions include the changing practice of medicine, managerial leadership, the expanding field of point-of-care testing, enhanced information systems and security/confidentiality requirements, reimbursement compliance, outside marketing and expansion, clinical trials and evidence-based medicine, benchmarking, current trends in instrumentation and technology, enhanced consultation though expanded test result reports, and the future of clinical laboratories. The authors are all practicing laboratorians, many of whom have had extensive “hands-on” experience in all facets of clinical laboratory practice, including both technical and managerial responsibilities. Each section is edited by experienced professionals and includes comprehensive coverage, both didactic and practical, of all issues related to clinical laboratory operations. Clinical Laboratory Management, Second Edition, offers extensive laboratory management information in one resource. Practical examples and numerous summary tables are provided to serve as guidelines for relevant documentation. Various management tools are discussed, particularly related to personnel, technical, regulatory, and financial responsibilities. This information is relevant for all job levels within the laboratory, as well as for all healthcare management and technical training courses. Each chapter follows the same format, designed to flow easily from one section to another. When relevant, chapters contain checklists, work sheets, forms, abbreviations/acronyms, diagrams, figures, photographs, and specific practical examples of relevant material. It is important for readers to understand that there are many different laboratory settings; not every laboratory will handle managerial responsibilities the same way, nor will every option be applicable to every situation. The key to quality and clinically relevant laboratory management approaches requires a thorough understanding of the pros and cons of each approach and how various options may or may not be relevant for one’s particular laboratory size and range of expertise, client base, number and type of patients seen, personnel expertise and availability, equipment xxvii

xxviii

PREFACE

availability, educational initiatives, and communication requirements. The use of product or program names is not intended to endorse specific products or programs or to exclude

substitute products or programs. Every effort has been made to ensure accuracy; however, ASM Press and the Editors encourage you to submit to us any suggestions, comments, and information on errors found.

Acknowledgments As editors for the Second Edition of Clinical Laboratory Management, we would like to express our thanks to the many educators, colleagues, and students who have helped shape our perspectives regarding the field of clinical laboratory and pathology management. As with the first edition, the aim was to consolidate this information for the benefit of those working in healthcare and to share our knowledge with individuals currently working in laboratory management positions. However, regardless of your position in the healthcare arena, understanding the management challenges and “rules of the game” is beneficial for everyone. Our special thanks go to the authors for their outstanding contributions. All of these individuals have extensive work experience in the field and bring this expertise to each chapter. We appreciate the time and energy it took to produce the Second Edition, knowing that all were extremely busy with the day-to-day operations for their current positions.

We would like to thank members of the editorial staff of ASM Press, especially Ellie Tupper, Christine Charlip, and our copyeditors; they are outstanding professionals and contributed extensive support throughout the publication process. With their help, we all managed to complete the task and maintain our sense of humor. Above all, our special thanks go to our families and colleagues for their support, guidance, and advice during this extensive project. This Second Edition was very much a collaborative effort, and we hope the material will prove beneficial to the overall healthcare community. Lynne S. Garcia Paul Bachner, Vickie S. Baselski, Michael R. Lewis, Andrea J. Linscott, Dale A. Schwab, John C. H. Steele, Jr., Alice S. Weissfeld, David S. Wilkinson, and Donna M. Wolk

I Basic Concepts and the Current Healthcare Environment section editor: David S. Wilkinson 1

Principles of Management Jeffrey Casterline and John R. Snyder

2

Management Functions Laurence P. Vetter

3

Relevant Economic and Business Concepts Roxanne Mercer and Ann L. Harris

4

Current Challenges to Financial Stability within the Diagnostic Laboratory Roxanne Mercer and David S. Wilkinson

5

The Impact of Regulatory Requirements Susan D. Roseff, Christina E. Anderson, Roxanne Mercer, and Denise E. Russell

6

The Changing Practice of Medicine Susan D. Roseff, Denise E. Russell, and Margaret M. Grimes

7

The Changing Healthcare Environment Ann L. Harris and David S. Wilkinson

1 Introduction Leadership, Management, and Administration Leadership • Management • Administration

Principles of Management Jeffrey Casterline and John R. Snyder

Management Concepts Cultural Lag • Review of Management Thought

Decision Making What Is Decision Making? • Types of Decisions • Individual versus Group Decision Making • The Problem-Solving/Decision-Making Process • Risk

Management Ethics Definitions • Characteristics of High-Ethics Organizations • Benefits of Strong Workplace Ethics • Management Roles and Responsibilities

Summary KEY POINTS GLOSSARY REFERENCES OTHER READING APPENDIX

OBJECTIVES To familiarize the reader with the concepts of leadership, management, and administration To place modern management ideas in their historical context To review in general terms the variety of management concepts and philosophy in such a way that the reader will feel familiar enough to apply the concepts or know where to turn for more information To learn in general terms the process of decision making and how a decisionmaking style is a reflection of one’s leadership style To consider the issue of management ethics and its positive impact on the workplace The new technology will not render managers superfluous or replace them by more technicians. On the contrary, it will demand many more managers. It will greatly extend the management area; many people now considered rank-and-file will have to become capable of doing management work. Peter Drucker (reference 10, p. 22)

T

Clinical Laboratory Management, 2nd Edition Edited by L. S. Garcia ©2014 ASM Press, Washington, DC doi:10.1128/9781555817282.ch1

he history of humanity could be characterized as the story of our attempts and methods to organize ourselves. Man’s ability to create often exceeds his ability to manage the fruits of his collective and individual genius. It is unclear in the historical record just who was the first person to think through the questions of how to get a job done through other people and how to convey that message. Intuitively we can think of cave dwellers in prehistoric times, gathering their effort together to hunt for food or to protect themselves from other marauding bands of primitive people. Villages became towns, which grew into large cities. Amalgamations of people and buildings provide one of the basic challenges of management, and urban management is one of those areas where the problems humankind can create often exceed the abilities of those charged with keeping the order. Modern times require modern solutions. As society has become more complex, the solutions have become equally complex and sophisticated. The beginning of this chapter will be devoted to the consideration of leadership versus management. What do these terms mean? Are they truly different or is it just semantics? Once we are clear on those points, this chapter will briefly cover the history of management thought, to illustrate that as society and organizations have become more complex, the theories to explain group behaviors have become similarly complex. 3

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One of the main tasks of management is to decide what to do and then provide the roadmap of how to get it done. This chapter will devote several pages to the issues surrounding decision making and decision theory. Finally, the chapter will devote itself to ethics and questions that managers now face in deciding what behavior may be appropriate not just on the shop floor but also in the boardroom. Peter Drucker’s quote, at the opening of the chapter, raises several interesting questions and provides a basic theme for the chapter (reference 10, p. 22). Is our progressively more technological society eliminating the need for managers? Is the mechanization of the workplace and our society rendering management unnecessary? On the contrary, many more people will absorb basic management functions into their work lives. Perhaps this can be looked upon as a form of self-empowerment. Individuals will have some measure of control over their own work life and what they do on a day-to-day basis. We are the managers of the machines we operate, and we decide what role they will play. This is not to say that higher authority will lose its prominence. Rather, strategic direction will become the primary focus of upper management, as opposed to hands-on direction of precisely what we are doing and how we do it. Maybe another way to say this is that upper management must exercise leadership in the modern enterprise if it is to meet its goals and objectives.

Leadership, Management, and Administration Leadership As kids we used to play the game “follow the leader.” Politicians often talk about the need for leadership or the lack thereof. On the job we hear of individuals who take a leadership position on an issue or in that organization. We always talk about what is important to us, and considering the amount of space and print we devote to this concept, clearly it is a key concern to many people. Leadership is at once something that people do and is a key driving force for mankind. A leader is also a piece of fishing line. This may seem a silly analogy, but the role of the leader with bait and tackle is very similar to the role of the leader in an organization. What does a fishing leader do? In some instances, it is designed to be a near-invisible connection between the heavier fishing line and the lure. Its lack of weight and heft makes it easier to cast out to where the fish are, and its near-invisibility makes it less likely that the fish will see the lure as anything other than a tasty morsel. In other cases the leader is designed to be an indestructible connection between the hook and the fishing line. Its toughness means the catch will not be able to bite through it, and coral and rocks will not destroy it. Some “human” leaders maintain near-invisibility, letting those tasked with getting the job

done go forward without any distraction. Some leaders present themselves as an unbreakable connection between those doing the work and the ultimate goal. Starting at the beginning, what precisely is leadership? Or perhaps the question to ask is, What is a leader? More often than not, the definition of leadership is phrased in comparative terms: What is leadership versus what is management? For example, managers are people appointed to positions of authority who enable others to do their work effectively. Leadership is one of the roles that a manager needs to exercise. By executing the leadership role, managers get things done through people. Leadership is modeling the behavior, attitudes, and values that inspire others to work together enthusiastically (reference 23, p. 30–31). Managers do things right. Leaders do the right things. Managers direct, whereas leaders model and coach. The list goes on. We live in a rapidly changing business world that probably requires more leadership and less managing than in past decades. But organizations must still strike a balance between change and stability, which means anyone in a position to influence or direct others must exhibit a balance between leading and managing. If you want to manage, you’ve got to lead. And if you want to lead, you’ve got to manage. It is important to make the distinction between leadership and management, and for readers to understand that at any given point they may be involved in several or all of those tasks simultaneously. A leader can be defined as someone who occupies a defined position in a group, influences others in accordance with the role expectations of the position, and coordinates and directs the group in maintaining itself and reaching its goal (38). Leadership, when viewed this way, is a function of the use of power. The leader has power over his group. Followers follow because of the perceived power of the leader. Power, as exercised in a leadership model, comes in a variety of types. One’s leadership style in part is a function of the type of power one chooses to use. Expert and informational power relates to those skills and knowledge the leader may have and can use to gain influence over others. Reward and coercive power relates to the ability to reward or punish, as a means to gain compliance. Legitimate power is that which is confirmed by the group or the organization itself, such as the elected leadership. And finally, referent power refers to those who are influenced by and identify with the leader. An example here might be a rock star or other notable personality (reference 31, p. 465–466). Most leaders use a combination of the various types of power, depending upon their leadership style or what is needed at that moment. For example, an authoritarian leader would use more reward and coercive power than the participative leader, who would use more legitimate or referent power (reference 31, p. 490–492). But no one leader has or uses the same style at all times. Leadership is responsive to the needs of the moment. One’s leadership

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style will match what is needed for the group to succeed (reference 31, p. 489). It is said that great leaders are made, not born (4). There is considerable evidence and commentary in the literature to support either notion. If you believe leaders are born, you accept more or less that there are certain inborn qualities, such as initiative, courage, and intelligence, that might predestine someone to leadership. Alternatively, one could accept the idea that a leader is a person who was in the right place at the right time. Leadership theory can support either concept. The great man/great woman theory suggests that major events in the world both draw out and mold the leader, or that major events are influenced by persons of power (48). The trait theory expands on the personal characteristics of the leader. However, knowing that leaders come in all varieties and often are as dissimilar as similar, one can only think that some traits merely increase the probability of an individual rising to a position of leadership and power (reference 4, p. 267). Thus, a situational view is now accepted as the predominant theory, that historical forces drive great events, and leaders either rise or do not rise to that occasion. The characteristic of the individual and the situation that presents itself determine who will be the leader (2).

Management What of the leader as a manager? Is management truly a different task or merely something a leader must attend to in order to be successful? Is management a separate and distinct behavior? Managers in general provide four separate but equally important functions: planning, organizing, controlling, and leading (reference 13, p. 5–6). Each of these concepts will be covered in depth in subsequent chapters. It should be noted that the manager is not necessarily the group’s leader. One can influence a group toward reaching its goals and not be the manager, and the manager can succeed by letting the informal leader of any group carry on with the task of motivating the group (44). Managers can be very task specific. For example, financial managers focus on generating and reinvesting financial capital. Human resource managers help recruit staff and oversee labor law vis-à-vis the organization where they work. One of the basic definitions of management is getting things done through other people. Managers prefer to work with others. Managers provide the resources and the direction to accomplish the task. Managers decide upon goals based on necessity and are therefore strongly tied to the organization as it currently exists (33). Management has no meaning apart from its goals. Managers therefore keep organizational goals in mind at all times. Management produces predictability and order. Managers emphasize rationality and control. Managers solve problems. In short, management is an activity that provides structure.

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Management in some ways provides the “what” that needs to be done. The highly informative website LeadersDirect addresses this and many other similar questions (http://www .leadersdirect.com/whats-a-manager; last accessed April 10, 2012). What managers do and what management is are often one and the same. Is there such a thing as a management style? Referring back to the discussion on leadership, largely this is a function of the situation at hand. One of the more prevalent perspectives on management style comes from Blake and Mouton, who as a result of their studies were able to create what is known as the managerial grid (7). This grid places “concern for people” on the vertical axis and “concern for task” on the horizontal axis. Most people fall somewhere in the middle. But Blake and Mouton derived four types of leaders who fall near the extremes of the grid, as shown in Fig. 1.1. The Authoritarian Manager is highly task-oriented, with low concern for people. There is little allowance for cooperation or collaboration. Heavily task-oriented people are strong on scheduling and expect people to do what they are told with little discussion or debate. When something goes wrong, they tend to focus on blame rather than on the problem. Conversely, the Country Club Manager is low taskoriented, with high concern for people. These managers use reward power to maintain discipline and to encourage their team to achieve its goals. This manager is incapable of using coercive powers, because doing so would jeopardize that manager’s relationship with the group. The Impoverished Manager, with low task and low concern for people, uses delegation as his or her primary management tool and for the most part is not committed to the accomplishment of the task or maintenance of the group. The team does what it wants. Finally, the Team Manager is highly task-oriented and maintains a high concern for people. This manager leads Figure 1.1 The managerial grid. Adapted from R. R. Blake and J. S. Mouton, The Managerial Grid (Gulf Publishing Company, Houston, TX, 1964), and J. R. Snyder and D. S. Wilkinson, Management in Laboratory Medicine, 3rd ed. (Lippincott-Raven Publishers, Philadelphia, PA, 1998). doi:10.1128/9781555817282.ch1.f1 Country Club

Team

Manager

Manager

For

Impoverished

Authoritarian

People

Manager

Manager

Concern

Concern for Task

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by example and works at creating an environment where all team members may prosper. The manager works with the team to reach its goals as effectively as possible while also working to strengthen the bonds between the team members. By grid design this is the most effective manager and leads to the most effective teams. But as has been discussed before, management, like leadership, is situational (32). The lieutenant tasked with taking a hill may not have the luxury of acting like a Team Manager. There is a time when discussion and debate have no place. Alternatively, while we might look down on the Impoverished Manager as singularly ineffective, using this model may lead to more self-reliance on the part of the team.

Administration We have talked about leadership and management. What of administration? Is it something different from the above or merely a different word for what managers and leaders do? A Webster’s definition of administer lists first, “to act as manager . . . ” and second, “to furnish help or be of service” (47). Based on that second definition, it is possible to think of administration as an action apart from leadership and management, in that it focuses one’s effort on assistance and service as opposed to the specific acts that a manager or leader might undertake. A manager and/or leader may have as his charge the requirement to serve others. But that becomes a task specific to that individual, rather than a general charge to managers at large. One of the primary definitions of administrator refers to government and public sector jobs (47). Administration by that definition becomes a public service job, much like one would see in academia or healthcare. Thus, administrators might in fact do different things than managers. This is to say, administration is a subset of management. Administrators do all those things that make one a manager. Administrators have a public service requirement and commitment that would not necessarily be found in the portfolio of all working managers. We have covered quickly some of the basics of leadership and management and touched briefly on administration. The above topics have been the focus of many books and academic treatises. It is left to the reader to explore these topics further, either elsewhere in this text or in the multitude of available reference materials.

Management Concepts Above we used the phrase “modern times require modern solutions.” While this phrase is often heard, the reality is that for the most part we are using old solutions and methods to deal with current problems. Generals are said always to be fighting the last war. The technology we buy today is already outdated. The feedback loop we work in is retrospective. We cannot fully plan for or project what the

future will be or what it will bring. The concept of cultural lag is derived from these notions.

Cultural Lag What is cultural lag? Here’s a basic definition: “The failure of one element of a culture to keep pace with changes in other aspects of the culture; e.g. a situation in which rapid technological change is not accompanied by change in the non-material culture” (1). Clearly, technological advances move much faster than the majority of humankind can absorb them. The scale is global. Those who have a technological edge, sometimes referred to as a computerized giant leap forward, will move forward, whereas those who do not will be left behind. By inference one can see this applies to individual urban centers, or national economies, or within global regions. The definition of haves and havenots will be focused not as exclusively on material goods as on access to knowledge and the power that goes with it. This is not a new issue, however. Such has been the case in one form or another since medieval times and more pointedly with the beginning of the current industrial era. Much of the basis of management thought has been how to organize ourselves to match the advances in technology and how best to exploit those advances to the betterment of all. Review of Management Thought Classical theory. The earliest perspectives on management and management theory were described by a group loosely called classical theorists. Most notably, this group includes Frederick Taylor and his work on scientific management theory. Additionally, this group includes Henri Fayol and his work on what he referred to as administrative management, and Max Weber and his research into the nature of bureaucracy. This group and others laid the foundation for management theory, in part by identifying the key managerial processes and skills a manager needs to succeed. Perhaps most importantly, their work made management a valid subject for academic inquiry. Taylor was one of the first to create a science of management (43). He is best known for his attempts to systematically analyze human behavior at work. His model was a machine made of cheap interchangeable parts. Taylor attempted to do to complex organizations what engineers had done to machines. This involved breaking down each task into the smallest identifiable unit and then figuring out the best way to do that part of the job. He felt that productivity would improve if each aspect of work was carefully studied and the alternatives facing each worker were restricted. He was correct but has been criticized for dehumanizing the workplace and reducing human beings to little more than machine cogs in the production process. But the principles of scientific management had been well defined. Describe and break down each task into its smallest component and study that task until the best way to do that task is fully

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defined. Remove uncertainty and alternatives facing each employee and reward productivity with incentives. Use experts, for example, industrial engineers, to define optimal work outputs and plan for optimal results. Fayol identified the four basic management functions: planning, organizing, leading, and controlling. His work focused on management more than task and production. He identified 14 principles of management, universal truths he thought could be taught (reference 13, p. 20–41). They are: • • • • • • • • • • • • • •

Division of work Authority Discipline Unity of command Unity of direction Subordination of individual interest Remuneration Centralization Chain of command Order Equity Stability Initiative Esprit de corps

I will not discuss each principle individually, leaving that for the reader to explore. These are still taught as the basics of management, and Fayol’s work remains as pertinent today and it did early in the 20th century. Max Weber embellished the scientific management theories with his views on bureaucracy and organizational theory (46). He focused on dividing organizations into hierarchies and on the establishment of lines of authority and control. He suggested that organizations develop comprehensive and detailed standard operating procedures for all routine tasks. Where Fayol before him had laid out his principle of management, Weber identified the core elements of the new organization, the bureaucracy: • • • • • • • • • • •

Formal rules and behavior defined by those rules Uniformity of operations despite changes in personnel Division of labor based on functional specialization Rational allocation of tasks Impersonal orientation Membership that constitutes a career Promotion based on technical competence Employment based on merit Tested qualifications Legally defined, prescribed lines of authority Limited discretion of senior management and officers

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• Specific spheres of competence • Legally based organizational tenure (46) Weber believed that emphasizing order, rationality, and uniformity would lead to more equitable treatment of the workers. He is faulted in some circles for his authoritarian views and the concept that authority is position based and not focused on the individual. Clearly, however, his work moved beyond that of Taylor and Fayol and laid the ground work for the next generation of management thought. Behavioral theory. Despite the economic progress brought about by the implementation of scientific management, as noted above, many critics were pointing to the dehumanization of the workplace. Labor and management conflict ensued, and worker apathy and boredom were believed to be widespread. These concerns, along with developments in the field of psychology and economics, brought to the forefront challenges to the assumptions of the scientific management school. The Hawthorne studies at a Western Electric plant were a straightforward attempt to determine if there was a relationship between the work environment and productivity (28). In one famous experiment, the illumination in one work area was adjusted and another area acted as a control. The productivity between the two groups was compared. Curiously, the productivity of each group increased, challenging the assumption that mere physical environmental changes were the key. Elton Mayo and his associates, who performed the experiments, believed the increase in productivity was a result of increased attention paid to both sets of workers. Other studies performed by Mayo illustrated that workers will perform at a level informally set by the work group and that external management often will have little impact on those decisions. Thus, Mayo concluded that social processes play a major role in determining worker attitudes and behavior, far from the previously accepted notions that workers and tasks could be parsed out like parts of a machine (28). This led to the development of the human relations movement, which is based on the idea that a manager’s concern for his workers will lead to increased worker satisfaction and improved performance. Shifting the focus from strictly organizational needs, the human relations movement sought to bring the wants and needs of the individual worker into the discussion. American psychologist Abraham Maslow devised his sixlevel hierarchy of needs that, according to his theory, determines human behavior (27). He ranked them as follows: • • • •

Physiological Security and safety Love and feelings of belonging Prestige and esteem

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• Self-fulfillment • Curiosity and the need to understand As one level of needs is met, we are able to work toward meeting the next level. If management wants solid, productive employees, motivated to work at their best, then every individual must be compensated and supported to the point where his or her basic needs are fulfilled and no longer seem to be a concern. Crucial, of course, is the understanding that what would fulfill one person may not address another’s perceived needs. Hence, individual attention to each worker is a requirement for management to succeed. Douglas McGregor developed his own theory of motivation and management, which is referred to as theory X and theory Y (30). In short, behind every management decision and action are assumptions about human nature and human behavior. Theory X ascribes to the more negative and perhaps Taylorist concept, that people need direction and control and are incapable of taking responsibility. Individuals all need financial inducements and threats to make them work. Theory Y, on the other hand, presumes people want their work to be fulfilling, that they seek selfrespect and self-development. Theory Y suggests that work is a natural human enterprise and that the average person does not dislike work. Effort on the job need not come as a result of threats, but rather results if the individual is committed to the organization and its objectives. Satisfaction on the job and self-actualization can be directed toward the objectives of the organization. Additionally, theory Y proponents accept that imagination, ingenuity, and creativity are not restricted to a narrow group within the organization, but are widespread and only need to be tapped. Both behaviorist models emerged because previous management theory was far too simplistic and did not address the needs of the individual. Maslow and McGregor tried to address individual needs and their relation to the needs of the organization (27, 30). From this we were able to gain some insights into group process and interpersonal relationships among the workers, and it focused management on the needs of employees as people, not just as part of the production process. But therein lie some of the limitations of this view. People are complex beings, and it is never easy to predict what anyone will want at any given moment. Managers themselves often find it easier to focus on process than people. Organizational goals and objectives are frequently stated in other than human relations terms. Nonetheless, these theories remain at the core of modern human resource management and are still robust today in their insights and perspectives. Quantitative theory. As the world moved out of World War II and industrial production shifted its focus from military hardware and support of national causes to consumer

goods and services, so did the corporation move from “cost is no object” to a cost-containment, profit-driven mindset. The legions of industrial engineers, previously focused on industrial efficiency to support the war effort, were now charged with improving corporate efficiency. Who said it first is lost in history, but the adage “if it can be measured it can be managed” took hold, and strong quantitative approaches were adopted. Management science focused very specifically on the development of mathematical models (reference 31, p. 49–52). Early computer applications in this direction centered on helping managers find the best way to do things and to save money. Linear programming models and inventory management and control, difficult mathematical concepts, often beyond the ability of a person to compute within rational time limits, become trivial questions when the power of even the simplest of computers is employed. But this also looked very much like the pendulum was swinging back into Taylorism and the dehumanization of the organization. Much of senior management in the post-WWII period was made up of former officers and military veterans, who placed their focus on accomplishment of the task at hand, often at the expense of the welfare of their employees. Employee work groups could not readily convert to a mathematical problem; hence a new concept of management needed to be developed to bring together the needs of the corporation and the needs of the individual. Operations management was that attempt to develop a set of tools, applied mathematics and human resource management, to develop techniques to produce products and services more efficiently (reference 31, p. 49–52). Operations management often includes substantial measurement and analysis of internal processes. Ultimately, the nature of how operations management is carried out in an organization depends very much on the nature of products or services in the organization, for example, retail, manufacturing, or wholesale. As with management science, though, the focus moved away from the individual and related more to the organization at large and how it interacted within the larger business environment (16). Management by objectives (MBO) tried to integrate the concept of managing what can be measured while simultaneously bringing the individual into focus (reference 10, p. 126–127; 37). At its simplest, in MBO every employee has a set of objectives to achieve, which together with all other employees in the organization will pull the enterprise toward its overall objectives. All targets are quantifiable and easily recognizable for their value to the company. Realistically, though, performance management is difficult, and inevitably the biases and personal agenda of the rater may come into play. Key points here are that objectives must be clearly defined, plans for achieving the objective must be detailed and clear, and there must be ongoing monitoring

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to see if the plans are moving forward (reference 10, p. 126–127). Thus, the quantitative perspective did push the development of mathematical techniques for decision making and the setting of objectives. This modeling methodology dramatically increased the awareness of organizational processes and assisted greatly in organizational planning. As with the previous theories, however, human behavior is unpredictable, and following the dictate “garbage in/ garbage out,” mathematical models based on faulty information or assumptions will not lead to better management. Integrated theory. With the failure of mathematical modeling to fully address management problems, a new, more holistic view of the organization developed (reference 31, p. 56–57). Speaking generally, the integrated, systems approach to management tried to incorporate the best of all that came before it while trying to maintain a human focus (22). Systems theory represents the merger of many ideas from scientific management and the human relations movement. It is project-based and strives toward organizational synergy. There are those who would nest systems theory under the heading of quantitative management. Such an approach misses the point that systems theory is all-encompassing, whereas the basics of quantitative management are pure mathematics. A system here is defined as an organized unit composed of two or more interdependent parts, subsystems perhaps, where the whole can be identified as something separate and apart from its surrounding environment (reference 31, p. 58). Consider an organization to be a system. It will experience problems, and issues will need to be addressed. The systems-oriented manager, rather than merely trying to manage the problem away, will look at the opportunities a problem might bring and will try to bring all available resources from his organization to bear on the situation. Much of systems theory resembles the scientific method. You see a problem to be examined. You hypothesize a solution. You design a controlled experiment to test that hypothesis. You collect and analyze the data. The key here is to maintain your focus and attention on the organization as a whole (22). You cannot change one part of the system without affecting all the others. Systems theory might seem quite basic. Yet it is extremely difficult to examine the whole of an entity. We are used to breaking down problems into identifiable and workable parts. It should be noted that information system tools to allow a real-time focus on an entire organization are only recently available. Into this mix, and possibly in part as a result of the difficulty of trying to manage the whole, a contingency theory of management emerged. At its most basic, contingency theory asserts that when managers make decisions, they must take into account all aspects of the current situation and then act on only those aspects that are most crucial

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(24). You keep the entire entity in mind but only focus on that which seems most important. You acknowledge you will be impacting the entire system, but you keep your attention directed at that which seems most pressing at that moment. Thus, there is no one “best way” to manage an organization. The contingency perspective would say that universal theories do not apply to every organization, because every organization is unique. This falls under the subheading of an integrated theory, because it presupposes that the decision maker involved will keep in mind that even though his concern might be on a subsystem of the larger organization, it is still nested in that larger system. As powerful as the above integrated approaches might be, they soon were dwarfed by the emergence of the various total quality management and continuous quality improvement models. W. Edwards Deming is often referred to as the founder of the modern quality movement (reference 31, p. 622). An American whose ideas were developed based on Western management theory, he gained wide prominence through the acceptance of his theories by the Japanese. The Japanese themselves will say that the application of his ideas led in great measure to their postwar economic success. His theories by themselves are very basic and deceptively simple to implement. To start, Deming believed that total quality management (TQM) begins at the corporate level (34). The entire enterprise must have a deep and wideranging commitment to the continuing improvement of products and services (19). You can never stand still and say, figuratively, that what you have is good enough. Don’t bother with postproduction inspection as the place to identify errors. Inspection and review must be ongoing. Build quality into the production process and the product. Do not rely on low-cost bidding by suppliers. Instead, require true quality, measure quality, and be willing to pay the price for that result. And finally, initiate training programs and leadership models to help people do a better job and to empower them to speak out and respond when problems are detected (reference 39, p. 129). Deming says, do this and you’ll produce a better product. More than 40 years after their adoption, these concepts seem obvious and basic to modern industrial management. At the time, however, they were revolutionary, and their adoption by the Japanese changed the meaning of the phrase “made in Japan” from cheap and poorly made to solid and reliably built (reference 39, p. 98–99). Total quality management, one of the first so-named theories of the quality movement, is a structured system for satisfying internal and external customers by integrating the business environment, continuous improvement, and technological and production breakthroughs (reference 6, p. 15–37). “Structured” means it is strategy driven by the identification of customer wants and needs that have been determined through ongoing interaction with

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those customers. TQM is a description of the culture, attitudes, and organization of a company that aims to provide, and continue to provide, its customers with products and services that satisfy their identified needs. It is a corporate culture that requires quality in all aspects of the company’s operation, with things done right the first time and defects and waste removed from operations. The products are designed to be quality output, and the manufacturing and product systems follow through to meet that goal. Consider the differences. Ford Motor Company strove to become the number one producer of automobiles by determining first what price the consumer would accept and then working toward making a car that could be produced for that price. The challenge was not quality. The challenge was production efficiency and unit cost (reference 31, p. 130–131). More or less, you could look at the production of Ford cars as a “Taylorism” experiment. Divide the work into its smallest parts, make each part as efficiently as possible, and ramp up production to get quantity pricing. On the other hand, consider the production of a Toyota in 1975. Via marketing research, the focus was on what level of quality the customer expected for every unit of cost (34). Design the product to meet those quality demands. Focus not on through-put but on quality production at each step. Acknowledge that the customer does not want the cheapest car, but rather the best value for the selling price. The attitude shift is from car production at whatever the market will bear, to getting the best-quality product onto the market as the best value to be found. Many organizations have trouble integrating a TQM model into their operations. Fewer than half of those who have tried a TQM approach report any improvement in quality, productivity, competitiveness, or financial return (reference 6, p. 6). But that percentage may be deceiving. The focus should be on successful operations, where many more than 50% rely upon TQM to maintain their success. A subset of the TQM movement is often referred to as continuous quality improvement (CQI). What separates CQI from TQM is the focus on the employee (21). A CQI approach forces the organization to look at its employees and their work as part of a continuous process. CQI is thought to have a more human face than TQM. This author finds it hard to see the distinction. Whatever acronym you choose to use, the quality management approach to production changed forever the way manufacturers looked at their world. The focus on cost reduction and profit improvement has been replaced forever by a focus on the customer and the production of a quality product that meets the customer’s needs at a reasonable price. New concepts. Management theory and thought continue to move forward, with ongoing work in the behavioral and

individual employee world, as well as focusing on the organization and production processes. Above, it was noted that management by objectives was one of the most widespread approaches to dealing with individual employees. Taking that notion a step farther is the current interest in lifelong learning, also known as continuous lifelong learning (reference 23, p. 332–336). The continuous lifelong learning process starts by identifying where a person is at that moment and where a person needs or wants to be. Assessment of the individual is an essential part of this self-identification, so that person can move to the next phase of the process. Phase two has individuals taking over and leading themselves to their desired performance level and to the amount of change they want to achieve. There are several key factors. First, the employer recognizes that crucial to lifelong learning is the concept that no one individual will necessarily stay in his job or with that employer forever. As people learn and grow, they move on to new jobs and experiences. Second, individuals can take charge of their lives to reach their full potential. Self-empowerment is both a result and an employee need. Third, each individual is accountable for and responsible for his or her individual progress. One might have a mentor. But that mentor is not responsible for the individual’s growth. The connection to the employer and management is that learning-inspired and -driven employees do better work and absorb the total quality management message much more effectively (reference 23, p. 332–336). TQM and CQI require employees to think and to consider the options available to them to work better and more efficiently. Dialogue between management and worker is enhanced when employees think in terms of their jobs as part of a lifelong journey and they are learning and working toward better lives. This is almost a utopian vision but nonetheless is the direction in which much of the industrial world is heading. Similarly, while on an individual basis the organization actively develops its employees to evolve and grow, on a product and process basis modern corporations are starting to work toward a total product life cycle management concept. This theory suggests that more than merely focusing on a product as a unit at a point in time, the organization needs to consider whether that product is in the ascendancy or is fading and adjust the product to the customer needs accordingly (5, 18). The marketplace is always moving forward, and the organization must move forward with it. Product design and production must think through the issues of product introduction and placement in the marketplace, ultimately the disposal and replacement of that product, and planning for the next generation of product to meet the customer’s demands and needs. Similar in many ways to TQM, in which a product design defines its quality and use, the life cycle management theory goes a step farther to plan for product demise and redefinition as

CHAPTER 1. PRINCIPLES OF MANAGEMENT

customers change their focus to something new. At some point the organization will decide to stop making or doing one thing and to move on to another. Life cycle management forces an enterprise early in a product’s life to plan for its replacement (5). Thus, engineering is always thinking ahead, and employee education always works toward preparing the workforce for the future. Also similarly, process reengineering forces the organization to rethink how it does its work and how it can be done better (reference 41, p. 103–129). Again, this is an extrapolation on TQM and CQI. The difference is that with TQM and CQI you are always trying to improve what you already do. Process reengineering suggests you entirely abandon what you are doing now in favor of something entirely new and different (reference 41, p. 174–192). In the extreme, process reengineering assumes the current process to be irrelevant. Thus, start over with a clean slate and see what you can do. Those subscribing to this theory think in terms of vision and the future (8). What must we look like at some future point to meet the needs of our customers? What technological changes have taken place that we should incorporate to make us better and more responsive? What will our customers expect of us in the future that we must plan and build toward now? A reengineering given is that technological change has negated all that we do now. Thus, it is not merely a desire on our part to change what we do to improve ourselves. Changes in technology by themselves have invalidated all that we do. Hence, we must rebuild from the beginning to utilize all that is new. Competition in the marketplace says new organizations, those that have never used outdated methods, are there to surpass you. Thus, finding new ways to do things, redesigning processes around new technology, is central to organizational survival. Finally, many believe that the customer base we work with now is much more quality sensitive and driven. Only the best will survive. Defining what is the best is a current challenge. Six Sigma is one of those approaches. A thorough coverage of Six Sigma can be found at the Six Sigma website, which covers in depth all aspects of Six Sigma. That site defines Six Sigma as a highly disciplined process to focus on developing and delivering nearperfect products and services (http://www.isixsigma.com/ new-to-six-sigma/; last accessed April 6, 2012). The word sigma is a statistical term that measures how far a given process deviates from perfection. Knowing that deviation, one can predict how many errors and defects there will be in a process; thus you can systematically try to find and remove them. The Six Sigma website states the following: “Six-Sigma by definition is not more than 3.4 defects per million events.” A Six Sigma defect is further defined as anything outside of customer specifications (reference 3, p. 184–202). Thus, it is not merely an operational or production defect. A process

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can function perfectly, but if the end result is outside of what the customer wants, it is a product defect. Six Sigma talks of product and process improvement. It incorporates many of the features of TQM and CQI and also of process reengineering. Loosely, the theory proponents refer to two acronyms: DMAIC (define, measure, analyze, improve, control) and DMADV (define, measure, analyze, design, verify) (reference 3, p. 329). Six Sigma process implementation staff are often referred to as Green Belts and Black Belts, suggesting a special, trained status and the aggressive nature by which the measurement and improvement processes are implemented (reference 3, p. 125–145). Six Sigma is another in the many process and product review methodologies, all with the aim of giving the customers what they want. Six Sigma has “raised the bar” on the definition of product and process quality. Like all management techniques, commitment at all levels of the organization is required, and if nothing else, this is the primary message carried in all of the above-described modern and new theories. To this we can add another layer, Lean Six Sigma, adding a measure of time efficiency to the already established efficient production process. As stated on the Six Sigma website, “Lean production is aimed at the elimination of waste in every area of production including customer relations, product design, supplier networks and factory management. Its goal is to incorporate less human effort, less inventory, less time to develop products, and less space to become highly responsive to customer demand while producing top quality products in the most efficient and economical manner possible.” (http://www.isixsigma.com/ new-lean-six-sigma/; last accessed April 10, 2012)

Decision Making Most everyone makes many decisions every day. Granted, many decisions are small and made almost unconsciously. Other decisions are more significant and require more conscious effort, time to study, and consideration of the potential consequences. Regardless of the nature of the decision, every decision encompasses elements of a basic decisionmaking process. Decision making by laboratory managers is an everyday activity. Decision making is a core administrative action (42). It is a common process that pervades all healthcare organizations and is essential to the managerial functions of planning, organizing, directing, and controlling as shown in Fig. 1.2. The best decisions are made based on “cost-effectiveness (tests we perform or outsource), productivity (employees we hire), service quality (how we organize services), technology (equipment and methods we purchase), and outcomes (what we accomplish for patients)” (20).

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BASIC CONCEPTS AND THE CURRENT HEALTHCARE ENVIRONMENT

Inputs

Process

Outputs

Planning Products

Decision Resources

Controlling

Making

Organizing

And Services

Directing Figure 1.2 Decision making: integral to management functions.

doi:10.1128/9781555817282.ch1.f2

Decisions are made by all levels of management with resource responsibility. In addition, decisions are made by staff. The latter can also affect efficiency and effectiveness in an organization. In fact, sometimes decisions should involve staff in either data gathering or actually making the decision instead of the manager. A common rule of thumb is that decisions should be made at the lowest possible level in an organization. The closer one is to the information and effects of a decision, the higher the quality of that decision. This section on decision making begins with a definition and review of the leadership role in decision making. Different types of decisions are described and contrasted, followed by a discussion of group involvement in decision making. Steps in the decision-making/problem-solving process are dissected to avoid pitfalls and improve skills. Finally, the element of risk in decision making is explored.

What Is Decision Making? Concisely, decision making is the act of choosing one alternative from among a set of alternatives. This act is complex, however. Inherent in this definition is an awareness that a decision needs to be made, that alternatives need to be developed and considered, and that one “best” alternative is chosen and implemented. Consequently, the “act” of decision making is more appropriately termed a “process,” as will be described later. The science of decision making, as described in the literature, applies models based on deductive, inductive, analytical, and simulation approaches. These models note that decision making is a deliberate process, differentiating managerial decisions from habit and reflex. Decision making also has an artistic side, drawing on the decision maker’s creativity and judgment. In addition, managers often base their decisions on personal or organizational value systems and philosophies. Recent reports have looked at decision making as a “window” into leadership style and leadership effectiveness. Indeed, the distinction between managers’ and leaders’ decision making, as shown in Table 1.1, points to

important philosophical and practical differences (35). Embodied in these differences is an understanding of the five crucial elements of leadership: 1. Leadership, like decision making, is a process. 2. The locus of leadership is a person, the “leader.” 3. The focus of leadership is other individuals or groups (followers). 4. Leadership entails influencing. 5. The objective of leadership is good accomplishment (40). Pickett’s differences between leaders and managers in Table 1.1 point to an empowerment of individuals in an organization so they are better able to participate in decision making. He notes that empowerment requires “stretching, coaching, training giving authority, and implying permission to make mistakes (obviously, this must be judiciously applied)” (35). When people in an organization are empowered decision makers, they think differently, act differently, and are more energetic. During an interview, a reporter once asked a successful executive what the secret to his success was. “Two words,” the executive replied. “Right decisions.” The reporter probed for more information, asking, “How are right decisions made?” The executive replied, “One word— experience.” “But how did you get this experience?” asked the reporter. “Two words,” replied the executive. “Wrong decisions.” Experience is a powerful teacher.

Types of Decisions Decisions can be studied and classified from a number of perspectives (9). Some decisions are strategic or tactical— the former focusing on the means to reach a goal, the latter focusing on steps or objectives to be accomplished. Some decisions are administrative, requiring substantial resource commitment; other decisions are operational, dealing with day-to-day activities. Some decisions are programmed because they are routine and repetitive in nature. Other decisions are termed nonprogrammed because they are novel and unstructured. Still other decisions are individual or group, differentiated by who makes the decision. Table 1.1 Emergence of management theories Emergence

Theory

1940s 1950s

Operations management Systems theory Management by objectives Total quality management Continuous quality improvement Six Sigma Lean Process reengineering Lean Six Sigma

1980s 1990s 2000s

CHAPTER 1. PRINCIPLES OF MANAGEMENT

Strategic decisions are concerned with an organization’s relationships with the external environment, the choice of a competitive posture, and the formulation of major policies (26). The goal is to arrive at the best plan for the organization, given operational, economic, logistical, and political constraints. Examples include mergers, expansions into new markets, and off-site testing facilities. Tactical decisions are, as the name implies, tactics or steps for implementing the organizational strategy. These can be categorized further as administrative decisions or operational decisions. Administrative decisions deal with authority, responsibility, and accountability relationships. Operational decisions handle the routine, day-to-day problems in accomplishing work. Decisions may also be classified as programmed or nonprogrammed. Programmed decisions are fairly structured and recur with some frequency (9). For example, the decision to reorder supplies and reagents for the laboratory is a programmed decision. Structure exists in terms of quantity to order, purchase requisition process, etc. This decision is made on a recurring basis. Programmed decisions are guided by rules, policies, and procedures. By contrast, nonprogrammed decisions are relatively unstructured, in part because they occur infrequently (9). Situations that have never arisen exactly like the present or are very complex usually do not have procedures to guide the decision-making process. Some years ago when the concept of core laboratories was introduced, the decisions necessary to plan these high-volume, cross-specialty facilities were unstructured, hence nonprogrammed. A decision today to purchase experimental equipment is a nonprogrammed decision. Nonprogrammed decisions require intuition, creativity, and a tolerance for ambiguity. A manager’s natural tendency toward decision making prompts two more decision types: intuitive decisions and judgmental decisions. Intuitive decisions are made using hunches, subjective values, and personal or emotional factors. A manager who becomes impatient with the time it takes to gather information and sort through details, may make an intuitive decision. The manager’s decision cannot be readily explained by looking for details but is more likely rationalized by a perception of the “big picture,” a holistic view of the situation. Individuals who tend to make intuitive decisions believe creativity comes from inspiration rather than perspiration. Most laboratory managers with education and experience in clinical laboratory science tend to make judgmental decisions. These decisions are reached after data are gathered, facts analyzed, and concrete examples explored. Judgmental decisions rely on objective analysis and rational procedures. For those decision makers who tend to make judgmental decisions predominantly, creativity is really perspiration. The potential danger of “analysis paralysis” is a real threat.

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Individual versus Group Decision Making Individual versus group decision making has received much attention in the management literature. By appointment to a position, the manager has the authority and power to make certain decisions. If managers were all-knowing and highly creative, and if the workplace was not a complex environment, perhaps the involvement of subordinates in decision making would be less important. But all managers have limitations; the work environment is complex; and some of the necessary information and creativity to reach a high-quality decision resides with the subordinates. The involvement of groups in decision making adds both benefits and liabilities. Groups tend to make more accurate decisions compared to individual decisions, although reaching a group decision is slower. Social interaction in group decision making tends to foster competition among members for respect, provide social support, and self-correct errors that might occur when an individual is making the decision alone. Group decisionmaking dynamics sometimes are counterproductive, however. When not constrained by a mandate to reach a group decision, individuals tend to produce more ideas, more unique ideas, and better ideas. Generally, people accept better decisions reached by a group versus an individual if they feel their participation in the decision was considered and valued. Obviously, acceptance of a decision is key to commitment and implementation. Vroom and Jago (45) have shared their insight into the question of whether a decision should be made by the individual manager or with involvement of the affected group of employees. Originally researched by Vroom and Yetton, these insights take into account three criteria: (1) quality or rationality of the decision, (2) acceptance or commitment of subordinates to implement the decision, and (3) time required to make a decision. Vroom and Yetton’s decision-making model identified seven rules to protect the quality and acceptance of a decision, as shown in Table 1.2. Adherence to these rules, and guidance about when to involve groups in decision making, are aided by the corresponding questions shown in this table. Before considering each rule, it is important to answer the first question, “Does the problem possess a quality requirement?” Management decisions are rarely right or wrong in a “black or white” sense; many decisions are simply better than others—hence a higher-quality decision. For example, a manager can make the fairly simple decision of who will staff which holidays simply on a basis of who is available and the number of staff needed. But is this the best decision, the highest-quality decision? Likely not, since certain holidays are more important to some employees than to others. Decisions affecting employees directly often have a quality element that carries over to affect both acceptance and commitment.

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BASIC CONCEPTS AND THE CURRENT HEALTHCARE ENVIRONMENT

Table 1.2 Decision-making differences between leaders and managersa Characteristic

Leader

Manager

Vision Communication

Search for long-term opportunities Tell people why we are doing something Why? An opportunity to excite, educate, prepare for future Something to share and use for the goal of the group Something to learn from, opportunity for growth Integrator; maker of decision makers

Maximize current opportunities Tell people what to do; listen to have an effect; listen for understanding How? What? A path to follow

Question(s) asked Planning Power Problem-solving style Perceived role a

Something to have and use Something to solve, to fix Controller or decision maker

Adapted from reference 35.

Each of Vroom and Yetton’s seven rules to protect quality and acceptance identifies specific concerns in decision making (45) (see Table 1.3): 1. The leader information rule raises the question of whether the manager has sufficient information or expertise to solve the problem himself. Some level of group involvement, only if it is seeking information, may be necessary to protect the quality of the decision. 2. The unstructured problem rule asks whether this is a programmed or nonprogrammed decision, i.e., has it been solved before and are there already rules, policies, and procedures to guide decision making. 3. The acceptance rule asks whether subordinates’ commitment to the decision is key to implementation. 4. The acceptance priority rule asks whether subordinates will be committed to the decision if it is made autocratically by the manager. 5. The goal congruence rule queries whether subordinates share (agree with and hence will be committed to) organizational goals to be reached by solving the problem.

6. The conflict rule poses the question of whether there will be disagreement among subordinates about which is the best solution. 7. The fairness rule considers how subordinates will perceive their involvement and opportunity to air and resolve differences in reaching a decision. The decision styles illustrated in Fig. 1.3 show Vroom and Yetton’s continuum from total management prerogative when an autocratic decision is made, through group involvement in a consultative process, to more employee prerogative in the group having responsibility for a decision. A review of the code descriptions (AI and AII for autocratic, CI and CII for consultative, and GI and GII for group) reveals the subtle differences in approaches. For example, the consultative approach may be done by the manager sharing the problem with employees one at a time to seek their input or all employees at the same time. The latter approach will have both the benefits and limitations of group social interaction. Figure 1.3 also attempts to capture the essence of acceptance or commitment and time criteria. When a decision is made predominantly through management prerogative,

Table 1.3 Concerns in decision making a Parameter

Rules

Question(s)

Quality

1. Leader information rule

Acceptance

2. Unstructured problem rule 3. Acceptance rule

Does the problem possess a quality requirement? Do I have sufficient information to make a high-quality decision? Is the problem structured? Is acceptance of the decision by subordinates important for effective implementation? If I were to make the decision by myself, am I reasonably certain that it would be accepted by my subordinates? Do subordinates share the organizational goals to be attained in solving the problem? Is conflict among subordinates likely in a preferred solution?

4. Acceptance priority rule Quality and acceptance

5. Goal congruence rule 6. Conflict rule 7. Fairness rule

a

See reference 45.

CHAPTER 1. PRINCIPLES OF MANAGEMENT

AI

AII

CI

CII

GI

GII

Subordinate Resistance To Change

Time to Make Decision

Figure 1.3 Continuum of decision styles. AI, You solve the problem or make the decision yourself, using information available to you. AII, You solve the problem or make the decision yourself, using information from subordinates. They may or may not be aware of the decision-making process and their role in it. CI, You share the problem with relevant subordinates individually, getting their ideas. Then you make the decision yourself, accepting or rejecting subordinate advice. CII, You share the problem with relevant subordinates at a group meeting, getting their ideas. Then you make the decision yourself, accepting or rejecting subordinate advice. GI, You share the problem with subordinates individually, and together analyze the problem and arrive at a mutual solution. You both contribute. GII, You share the problem with relevant subordinates at a group meeting and together analyze the problem and arrive at a group decision. You do not try to influence the group, and you are willing to accept and implement what the group recommends. DI (not shown in figure), You delegate the problem to a subordinate, providing him with relevant information and giving him sole responsibility for the problem. doi:10.1128/9781555817282.ch1.f4

5

Select best alternative

Develop and evaluate alternate solutions or options

Judgments Thinking

Feeling

1

3

resistance to acceptance and commitment is highest, but the decision is made in the least amount of time. By contrast, greater employee prerogative in making a group decision requires more time to reach the decision but results in less resistance. In healthcare, group involvement in decision making has become popular as a form of participative management or shared governance. Shared governance models, ranging from interdisciplinary committees to self-directed work teams, attempt to develop group structures where members have “power, authority, accountability and final decision-making capacity” (36). Often these groups are created around functions, such as patient care or practice operations or education. Gill points out that it is important for the manager to understand how different groups interact, communicate, and influence individuals within the group, to effectively facilitate group decision making (14). Moreover, it is important for the manager to have a level of understanding about individual preferences and strengths as a contributor to group decision making. Drucker points out that “a great many people perform best as advisors, but cannot take the burden and pressure of the decision. A good many people, by contrast, need an advisor to force themselves to think, but then they can take the decision and act on it with speed, self-confidence, and courage” (12).

The Problem-Solving/Decision-Making Process While it is true that decisions are choices, decision making and problem solving are indeed a process of steps, as shown in Fig. 1.4. Definition of these steps, a dissection of the anatomy of a decision if you will, points to the value and potential pitfalls in reaching a high-quality decision

Implement solution and follow up consequences

4

2

Identify problem or determine objectives

Gather facts and evaluate information

Perceptions Sensing

15

Intuition

Figure 1.4 Problem-solving/decision-making process. doi:10.1128/9781555817282.ch1.f4

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BASIC CONCEPTS AND THE CURRENT HEALTHCARE ENVIRONMENT

whether made by an individual or group (29). True, many decisions can be made quickly with little attention to the steps along the process. The more complex the problem, and the more mission-critical the objectives, the more important each step is to reaching a successful, high-quality decision. McConnell notes that “one of the greatest trouble spots in decision-making exists because of the human tendency to move from observation to conclusion on limited information” (29).

• Step 5: Implement solution and follow up consequences. The chosen alternative is implemented, and over time the manager determines if the problem has been solved or the objectives met. The potential pitfall here is to ensure that once the chosen alternative is implemented, the process is complete. Two key questions need to be answered: (1) Did the chosen alternative work? (2) Are there unintended consequences to the decision that now must be addressed?

• Step 1: Identify the problem or determine the objectives. Identifying the problem requires a manager to first diagnose the situation. Too often a symptom of the problem is misidentified as the root cause. For example, a manager who identifies poor morale in the laboratory has misdiagnosed the situation. Poor morale is a symptom of an underlying problem. The range of root causes could be low pay, unappreciative supervisors, or lack of respect from coworkers, among other causes. Failure to define the problem in step 1 will negate all subsequent steps to solve the problem. Similarly, clear definition of objectives for a decision provides a constant point of reference when subsequently gathering information and developing alternatives. • Step 2: Gather facts and evaluate information. At this step, the manager will learn whether he is dealing with a programmed or nonprogrammed decision. Are there rules, policies, and procedures that need to be followed? Has someone already solved this problem, and if so, how similar are the characteristics to this situation? Is there a need to get group input, and if so, individually or collectively, and from whom? Figure 1.4 shows the influence of the manager’s perceptions of information gathered as data are evaluated. The natural tendencies to either rely on the five senses to identify factual details (sensing) or to use hunches and a more holistic view (intuition) will be part of this step. • Step 3: Develop and evaluate alternative solutions and options. Some possible solutions will be obvious; other solutions will be more creative. The tendency to quickly adopt the first viable solution may be time efficient but lead to a lower-quality decision or solution. In general, the more important the decision, the more alternatives should be developed. At this step, as shown in Fig. 1.4, the evaluation of options will be influenced by the judgments of the decision maker. The use of both subjective values and objective analysis will lead to a better sorting of potential options. • Step 4: Select the best alternative. After considering each option in light of the situation or objectives to be achieved, the manager chooses the one most likely to be the highest quality with the greatest acceptance within the time available for decision making.

The problem-solving/decision-making process described is illustrated as a continuous circle of events (42). First, because the steps often overlap in practice, a manager may be simultaneously gathering information while still identifying the problem, or evaluating information while developing alternatives, for example. Second, the connection of all steps leading back to solving the identified problem or meeting the intended objectives is important to “closing the loop.”

Risk All decisions involve some element of risk. Risk is based on uncertainty. The greater the outcome uncertainty of the alternative chosen, the greater the risk. Managers must carefully weigh both the tangible and intangible elements of risk to arrive at a comfortable level of certainty. Often, competing elements contribute to risk. A manager who recognizes a staff salary inequity chooses between the risk of alienating upper administration by pressing for equity or incurring cost from employee turnover. A manager’s decisions can be influenced significantly by both his own and his organization’s propensity for risk. A manager with a high propensity for taking risks with decisions in an organizational culture with a low propensity for risk will likely experience problems. Both a personal and organizational comfort level must be achieved. Clearly, the manager must be aware of his own personal attributes regarding risk level: one’s propensity for risk may lead to an underestimate of the actual risk or an overconfidence to overcome the risk. Time available or consumed in decision making can be viewed as a risk. For some, there is never enough information to reach a comfortable level of risk, leading to what some call “analysis paralysis.” For others, making a quick decision increases the risk of a less-than-high-quality decision. Some elements of risk lie in the behavioral factors of risk takers. Hammond et al. identify these as psychological traps (17): • Anchoring trap. Placing disproportionate weight on first or more superficial information found during information gathering • Status-quo trap. A bias toward doing what you’ve always done despite better alternatives

CHAPTER 1. PRINCIPLES OF MANAGEMENT

• Sunk-cost trap. Tendency to perpetuate mistakes of the past • Confirming evidence trap. Bias toward information and judgment that supports an existing predilection • Framing trap. Misstating the problem, focusing on a symptom • Overconfidence trap. Overestimation of accuracy of information • Prudence trap. Being overcautious about the degree of risk • Recallability trap. Placing undue weight on recent, dramatic experiences Good decision making relies on knowledge of both the importance and components of the process. It requires an awareness of personal skills to determine the best way to reach the highest-quality decision with the greatest acceptance in the amount of time available. Good decision making requires experience and learning from one’s mistakes (reference 23, p. 66–68). Good decision making requires the ability to reflect on information, then decide (15, 25).

Management Ethics It is far too easy in these complex times to presume that you or your employees will always know how to do the right thing. The dictates that we have often heard—follow the golden rule, or that Druckerism, “do the right things”— are hard to follow when the issues we face are not that easy to understand or do not readily gel with our value systems. Most discussions of ethics and morals are couched in philosophical or sociological terms. Indeed, the study of ethics remains for the most part an academic discipline, and thus the management literature on the subject is sparse. The literature that can be found is often simplistic, since many business leaders until recently thought the topic irrelevant. Ethics is, however, a very relevant issue in modern management. And every organization should espouse and live a clearly understood set of moral values and maintain the highest possible standards. The Complete Guide to Ethics, an Internet guide, provides an excellent resource for all matters relating to business and managerial ethics (http:// www.managementhelp.org/businessethics/ethics-guide .htm; last accessed July 8, 2013).

Definitions Ethics, speaking simply, involves learning what is right and wrong. At an early age each of us learned these lessons from parents and other caregivers (reference 31, p. 86). Much of the argument one hears about ethics revolves around absolutism versus relativism. Is there always the right thing to do based on moral principles, or does the situation drive the ethics question? Above, part of the discussion on

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management theory referred to the contingency theory in management, that there is no one right way to approach a problem (24). One must focus on the situation at hand, and that will lead to a resolution of that particular problem. A relativistic approach to ethics would say the same thing. There are no moral absolutes—only the most ethical approach to a situation at that moment. Is the definition of “business ethics” any different? Perhaps not. Business ethics refers to doing what is right or wrong in the workplace and doing what is right in relation to products, services, and the various stakeholders (reference 11, p. 366). Business ethics most directly connects to one’s customers, rather than abstractions such as the community, an open question, or a political issue. It is this direct connection to the practical aspects of running an enterprise that makes business ethics different and worthy of separate consideration. Speaking generally, business ethics problems center on two main themes: managerial mischief and “moral mazes” (reference 23, p. 255). Managerial mischief refers to illegal or questionable practices of individual managers or organizations, as well as the causes of those behaviors. Note that it is individuals, and not organizations, that are the issue. An individual cannot hide behind the cloak of an organizational policy. Organizations are groups of people, and people decide what is to be done or not done (reference 23, p. 255). Most of the focus on ethics has centered on this issue and how to approach these problems. Whistleblower policies and laws most likely spring from this area of concern. Perhaps it is comparatively easy to legislate and regulate business behavior to meet ethical standards. Indeed, the law and the generation of regulation are in some ways a societal method of imposing standards of action and behavior on the organization and its individuals. Moral mazes, on the other hand, are not so clear and not so easily handled. A moral maze refers to the numerous and unclear ethical issues a manager faces in everyday work life (reference 11, p. 347–348). Examples here might be real conflicts of interest, wrongful use of resources, or mismanagement of contracts. What is right and what is wrong is not always clear in a competitive work environment. Seeking competitive advantage might mean “bending the rules” in accounting for expenses or in researching a competitor’s products and services. Are accounting standards flexible or inflexible? Is it unethical to stretch the boundaries of accounting principles if it fits your economic model? Is industrial espionage unethical? As you can see, moral absolutes in these situations are not easy to find. A random group of managers, employees, or other stakeholders might read these questions from very different perspectives and hence derive very different answers (reference 11, p. 348). None of the answers would be wrong, necessarily, but the differences of opinion, like political questions, would raise many issues beyond the questions at hand.

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BASIC CONCEPTS AND THE CURRENT HEALTHCARE ENVIRONMENT

Conflict of interest can be seen as a version of the moral maze. Most everyone wants to help those close to him or her. When does a form of aid prove to be a bad choice? Generically, conflict of interest is a situation in which a person, such as a public official, an employee, or a professional, has a private or personal interest sufficient to appear to influence the objective exercise of his or her duties. Conflict of interest can involve anyone and is not limited to officials or politicians. Obligation to your organization and its stakeholders must be viewed as superseding any personal gain you might derive from your work or gain you might pass on to another connected and interested party. For example, everyone would want a family member to succeed in business. As a manager, however, it would be unethical to show favoritism to family members by passing business in their direction in a noncompetitive manner. Similarly, accepting personal gain for your decisions, like sending business to a company you own or accepting bribes to do the same, is a form of conflict of interest.

Characteristics of High-Ethics Organizations In the same manner that a successful organization lays out its mission, goals, and objectives, its ethical guidelines are laid out and understood (reference 23, p. 255). First and foremost, an ethical organization has a clear vision of right and wrong. The discussion above raised the question of relativism versus absolutism. By design, an ethical organization clarifies to the greatest extent possible what is acceptable behavior versus what is not. Obviously, not every question can be addressed. But the organization can state clearly that ethical behavior in all areas and in all activities is what is expected, and failure to do so will have its consequences. Organizational vision most often comes from the top (reference 23, p. 255). The organization’s chief executive must support and underwrite an ethics program. Failure on the part of top management to actively and enthusiastically support an ethics program will be noted by the rank and file. The executive officer should champion the program’s development and foster a climate that encourages ethical behavior. From the start, the senior officers must espouse honesty and integrity as primary operational traits. Everyone in an ethical organization understands its ethical stance. Training in organizational ethics is a part of new employee orientation and part of an organizational ongoing training program. All employees receive this training, and all understand the need to stay vigilant and sensitive to ethical issues. Ethical behavior in this context is good behavior, and the ethical organization designs its reward system around good behaviors. For example, employees can be measured on adherence to policy and their participation in ethics committees and management groups.

Benefits of Strong Workplace Ethics Aside from the desire to do what is right, and perhaps that is a good enough reason in itself, why should an organization devote so much time and energy to an ethics program? To start, business ethics has improved society for all of us (reference 23, p. 339). Thinking back to the time period of the business robber barons, where anything and everything was and could be done to promote one’s competitive edge, worker safety was often compromised, sweatshops were everywhere, price fixing among the major corporate powers was rampant, and workers had no rights. Think now of the situation as it exists today. Perhaps the work environment can be better, but child labor has largely vanished, and there are laws to protect the consumer and the worker. All of this comes at a cost, however, but as a society we have determined that the cost of good and ethical business is one we should bear (reference 23, p. 212). Mission and vision statements tell the employee and those outside of an organization who you are and what you are trying to do. For the employee, it helps foster teamwork and a sense of place in the organization (reference 23, p. 213). Teamwork leads to productivity and organizational success. Maintaining a strong ethical stance helps one’s employees work through questions of what is right and wrong and what they are to do in difficult situations. For the employer, a strong ethics program can reduce some of the problems associated with risk management and conflict of interest. And, of course, a strong ethics program can mesh with the entire strategic planning and quality management process, where trust between individuals and strong communication skills are needed to promote organization success and attention to what should be done and how the organization is to accomplish these goals. Additionally, the ethical organization displays a positive public image (reference 23, p. 20–23). Positive images often translate into marketability and improvement in the bottom line for the enterprise. This cannot be one of the primary reasons for adopting strong and open ethical practices. But there is nothing wrong in strongly stating one’s ethical position in a public forum so that all will know where you stand and what you value. It may set you apart from the mainstream, and that is not a bad thing. Within the healthcare environment, compliance is an often-heard word. Compliance refers to a variety of operational issues: billing, the Health Insurance Portability and Accountability Act, the Occupational Safety and Health Administration, The Joint Commission, and the Clinical Laboratory Improvement Amendment regulations, to name a few. Compliance programs should be viewed as a regulatory enforced form of ethical behavior. The rules and regulations around all of these issues are complex, at times are difficult to implement and enforce, and often add layers of complication to already tough working situations. The positive attribute of all, however, is the clarity they provide to

CHAPTER 1. PRINCIPLES OF MANAGEMENT

the employee and the organization on what is acceptable behavior and what is not. Shades of gray are disappearing, and everyone is learning what is perceived as right and wrong.

Management Roles and Responsibilities Restating what was said above, the most important step management must take in regard to an ethics program is to fully promote it and never waiver from the tenets accepted as organizational guidelines (reference 23, p. 255). Beyond that, however, management must recognize that ethics and the maintenance of an ethical organization require an ongoing and ever renewed commitment to its success. Much like strategic or financial planning, an ethics program must be an ongoing process. It will be difficult to measure program success. Nonetheless, it must be a continuous evaluation of where the organization stands and where its values have moved. Management can take a strong lead in the development of ethical policies and codes of conduct. A staff that is fully educated about organizational ethics is less likely to stray into illegal and unethical behavior. The best way to avoid managerial mischief and the moral maze is to state at the outset what is expected in terms of moral and ethical behavior and what activities to avoid that might lead to difficult working situations. While the initiation and promotion of an ethics program must come from the top of the organization, there must be support from and ongoing interaction with all levels of the enterprise (reference 23, p. 255). It is the role of management to make sure everyone is involved and that all understand the reasons for and the need for prescribed ethical behavior. Employee teams can be put into place for the purposes of policy development and review and as forums for employee guidance when ethical issues arise. Ethics issues and decisions should be public and known, and it remains a responsibility of management to make sure that happens. Finally, and perhaps a characteristic of the ethical organization, it is better to try and fail, often openly and publicly, than not to try at all. As ethics programs are fully integrated into an organizational culture, the increased communication that results between employees, and between management and staff, can lead to embarrassing disclosures and discussions of inappropriate behavior. The intent of an ethics program is not to develop an organization of finger-pointers. Rather, knowing that bad behavior will be found and exposed, the entire organization will move in a more ethical direction, and repeat episodes hopefully will be less frequent.

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moral behavior, managers can and must choose their own path to success. Many studies have been completed and articles written describing what managerial behavior works best and what does not. For the most part the question is situational and focuses on managers and what they must do at any moment to help their organization achieve positive results and move forward. We study the past to learn from notable successes and failures. We live in the present, moving forward ever faster it seems, where the decisions we make must come quickly and the issues we face are more complex and pressing. The best managers remain thoughtful about their avocation, always seeking new answers to the questions they face. KEY POINTS Leadership, management, and administration are not one and the same. At any given moment, any one person may fill any of those roles. Learning what style fits you is a process of self-discovery and is shaped by the needs of the moment. ■ The body of research and literature on management theory is large, both from a historical context as well as in terms of the number of those interested in the topic. There is no consensus on what theories present the best and most accurate picture of how to manage groups of people. As mankind moves forward and our technology advances, management theory likewise expands and adapts to the new workplace. ■ The ability to make good decisions often separates the best leaders and managers from the rest. Knowing how to work through to a good decision, bearing in mind the elements of time and risk, provides one of the solid bases for managerial success. ■ A strong ethical framework must be one of the guiding tenets for the modern organization. The benefits of developing such a framework are many, whereas the downside can be severe. From the top to the bottom, all employees must accept and live the positive values their organization espouses, thus removing any uncertainty of where they stand with any moral dilemma. ■

GLOSSARY Administration Managerial work with a service orientation. Bureaucracy Organizational hierarchies and defined lines of control.

Summary

Business ethics Learning and doing the right thing in the workplace, directly relating to products, services, and stakeholders.

When it comes to the management of an organization, there is no right or wrong way to get the job done. So long as they stay within the boundaries of ethics, the law, and

Conflict of interest A situation in which a person has a private or personal interest sufficient to appear to influence the objective exercise of his duties.

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Contingency theory A decision-making strategy, considering all aspects of the current situation and acting on that information. Continuous/lifelong learning A self-empowering theory, that the employee will throughout his life learn and strive to improve and move on to new things. Continuous quality improvement A more human-focused quality management theory, relying heavily on worker involvement in the product improvement process. Cultural lag The gap between technological advances and the ability of society to control and work with them.

Systems theory The merger of the theories from scientific management and the human relations movement. Tactical decision Steps toward the implementation of organizational strategy. Taylorism and scientific management An approach to work and the workplace where every job is divided into the smallest possible segments and each segment is examined and improved. Theory X and theory Y Defined by McGregor, a theory highlighting the difference between those who believe people need to be forced to work versus those who believe people want to work.

Decision theory The study of how decisions are made and what guides a manager to a good decision.

Total quality management Designed-in product quality, with the focus on customer wants and needs as the key drivers in product and process improvement.

Hierarchy of needs Defined by Maslow, from the most basic to the highest level, needs to be addressed to motivate the employee.

REFERENCES

Human relations movement An approach to management, focusing on the worker and his individual needs.

1. Academic Press Dictionary of Science and Technology. 2002. Harcourt Press, Orlando, FL.

Intuitive decisions Utilization of hunches, subjective values, and personal or emotional factors in deciding what actions to take.

2. Adair, J. 1984. The Skills of Leadership, p. 8. Gower Press, London, England.

Judgmental decisions Conclusions reached after data are gathered, facts analyzed, and concrete examples explored.

3. Adams, C., P. Gupta, and C. Wilson. 2002. Six Sigma Deployment. Butterworth Heinemann, New York, NY.

Leadership Influencing others to attain group, organizational, and societal goals. Lean Optimizing customer value while minimizing waste, using fewer resources. Lean Six Sigma Combining Lean and Six Sigma, time and process efficiency. Management Getting things done through other people. Management by objectives Setting goals for the individual to achieve, dovetailing with larger organizational objectives. Management science Management techniques based on mathematical models. Moral maze Unclear ethical issues. Nonprogrammed decisions Unusual or atypical situational solutions. Operations management Applied management technique, utilizing mathematical modeling and industrial engineering to promote efficiency and effectiveness. Process reengineering Rethinking current work in favor of doing something new. Situational management Acting only on what needs to be addressed at a particular moment and recognizing that there is no best way to get a job done.

4. Adler, R. B., and G. Rodman. 1991. Understanding Human Communication, p. 4. Holt, Rhinehart and Winston, Fort Worth, TX. 5. Berkowitz, E. N., R. A. Kerin, S. W. Hartley, and W. Rudelius. 2000. Marketing, 6th ed., p. 315–402. McGraw-Hill, New York, NY. 6. Berry, T. 1991. Managing the Total Quality Transformation. McGraw Hill, New York, NY. 7. Blake, R. R., and J. S. Mouton. 1964. The Managerial Grid, p. 7–148. Gulf Publishing Company, Houston, TX. 8. Burlton, R. T. 2001. Business Process Management, p. 81–97. Sams Publishing, Indianapolis, IN. 9. Charns, M. P., and M. J. Shaefer. 1983. Healthcare Organizations: A Model for Management, p. 223–249. Prentice-Hall, Inc., Englewood Cliffs, NJ. 10. Drucker, P. F. 1954. The Practice of Management, p. 22. Harper and Row, New York, NY. 11. Drucker, P. F. 1973. Management: Tasks, Responsibilities, Practices. p. 366. Harper and Row, New York, NY. 12. Drucker, P. F. 1999. Management Challenges for the 21st Century, p. 174–175. Harper Collins Publishers, Inc., New York, NY. 13. Fayol, H. 1949. General and Industrial Management. Pitman Publishing, New York, NY. 14. Gill, S. L. 1995. Groups and decision making. Clin. Lab. Manag. Rev. 9:464–476. 15. Giuliani, R. W. 2002. Leadership, p. 123–154. Miramax Books, New York, NY.

Six Sigma A highly disciplined process focusing on developing and delivering near-perfect products and services.

16. Gulick, L. 1965. Management is a science. Acad. Manag. J. 8(1):7–13.

Strategic decision Focus on an organization’s relationship with the external environment, competitive posture, and major policies.

17. Hammond, J. S., R. L. Keeney, and H. Raiffa. 1999. The hidden traps in decision making. Clin. Lab. Manag. Rev. 13:39–47.

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18. Harvard Business Review Paperback Series. 1991. Managing Product Life Cycles: From Start to Finish, p. 8–91. McGraw Hill, New York, NY.

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39. Riggs, J. L., and G. H. Felix. 1983. Productivity by Objectives. Prentice-Hall, Englewood Cliffs, NJ.

19. Hatvany, N., and V. Tucik. 1981. Japanese management practices and productivity. Organ. Dyn. 2(4):10–23.

40. Shortell, S. M., and A. D. Kaluzny. 2000. Healthcare Management: Organization Design and Behavior, 4th ed., p. 109. Delmar Thomson Learning, Albany, NY.

20. Jones, H. 1999. Bayesian analysis: an objective, scientific approach to better decisions. Clin. Lab. Manag. Rev. 13:148–153.

41. Smith, H., and P. Fingar. 2002. Business Process Management: The Third Wave. Meghan-Kiffer Press, Tampa, FL.

21. Juran, J. M. 1995. Managerial Breakthrough, p. 402–403. McGraw-Hill, New York, NY. 22. Kast, F. E., and J. E. Rosenzweig. 1972. General systems theory. Acad. Manag. J. 4(15):447–465.

42. Snyder, J. R., and B. R. Hendrix. 1998. Problem-solving: the decision making process, p. 61–78. In J. R. Snyder and D. S. Wilkinson (ed.), Management in Laboratory Medicine, 3rd ed. Lippincott-Raven Publishers, Philadelphia, PA.

23. Kouzes, J. M., and B. Z. Posner. 1995. The Leadership Challenge. Jossey-Bass, Inc., San Francisco, CA.

43. Taylor, F. W. 1912. Principles of Scientific Management, p. 23–75. D. Van Nostrand, New York, NY.

24. Luthans, F. 1973. The contingency theory of management: a path out of the jungle. Bus. Horiz. 6:62–72.

44. Vecchio, R. P., G. Hearn, and G. Southey. 1988. Organisational Behavior: Life at Work in Australia, p. 334. Harcourt Brace Jovanovitch, Sydney, Australia.

25. Mackoff, B., and G. Wenet. 2001. The Inner Work of Leaders, p. 81–103. AMACOM, New York, NY.

45. Vroom, V. H., and A. G. Jago. 1978. On the validity of the Vroom-Yetton model. J. Appl. Psychol. 69:151–162.

26. Martin, A. L. 1988. Information systems for human resources management, p. 151–152. In M. D. Fottler, S. A. Hernandez, and C. L. Joiner (ed.), Strategic Management of Human Resources in Health Services Organizations. John Wiley and Sons, Inc., New York, NY.

46. Weber, M. 1921. Theory of Social and Economic Organization (translated by A. M. Henderson and T. Parsons), p. 328–333. The Free Press, Simon and Schuster, New York, NY.

27. Maslow, A. 1943. A theory of human motivation. Psychol. Rev. 50:376–396.

47. Webster’s New World Dictionary. 1982. Simon and Schuster, New York, NY.

28. Mayo, E. 1933. The Human Problems of an Industrial Civilization, p. 48–97. McMillan Publishing, New York, NY.

48. Wrightsman, L. S. 1977. Social Psychology, 2nd ed., p. 638. Brooks and Cole, Monterey, CA.

29. McConnell, C. R. 2000. The anatomy of a decision. Healthcare Manag. 18(4):63–74. 30. McGregor, D. 1960. The Human Side of Enterprise, p. 33–48. McGraw Hill, New York, NY. 31. Mescon, M. H., M. Albert, and F. Khedouri. 1985. Management: Individual and Organizational Effectiveness, 2nd ed. Harper and Row Publishers, Inc., New York, NY. 32. Metcalf, H. C., and L. Urwick. 1941. Dynamic Administration, p. 277. Harper and Row Publishers, Inc., New York, NY. 33. Mintzberg, H. 1973. The Nature of Managerial Work, p. 31. Harper and Row Publishers, Inc., New York, NY. 34. Nations Business. February, 1981. p. 67–70. 35. Pickett, R. B. 2001. What does all this leadership stuff mean to me? Clin. Lead. Manag. Rev. 15:395–400. 36. Porter-O-Grady, T., and R. Hess. 1996. Perspectives on shared governance. J. Shar. Gov. 2(4):11–15. 37. Raia, A. 1974. Management by Objectives, p. 11. Scott, Foresman, Glenview, IL. 38. Raven, B. H., and J. E. Rubin. 1976. Social Psychology: People in Groups, p. 37. John Wiley and Sons, New York, NY.

OTHER READING Carman, J. M., S. M. Shortell, R. W. Foster, E. F. X. Hughes, H. Boerstler, J. L. O’Brien, and E. J. O’Connor. 2010. Keys for successful implementation of total quality management in hospitals. Healthcare Manag. Rev. 35(4):283–293. doi:10.1097/HMR.0b013e3181f5fc4a. A reference I thought was interesting. Bard, M. A., and M. Nugent. 2011. Accountable Care Organizations: Your Guide to Strategy, Design, and Implementation. ACHE Management Series. Health Administration Press, Chicago, IL. Fottler, M. D., R. C. Ford, and C. P. Heaton. 2010. Achieving Service Excellence: Strategies for Healthcare, 2nd ed. ACHE Management Series. Health Administration Press, Chicago, IL. McGlown, K. J., and P. D. Robinson. 2011. Anticipate, Respond, Recover: Healthcare Leadership and Catastrophic Events. ACHE Management Series. Health Administration Press, Chicago, IL. Goleman, D. 1998. What makes a leader? Harvard Business Review, Boston, MA. http://ebookbrowse.com/harvard-what-makes -a-leader-daniel-goleman-020217-pdf-d202107054.

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APPENDIX 1.1 Websites Complete Guide to Ethics Management: an Ethics Toolkit for Managers http://www.managementhelp.org/ethics/ethxgde.htm (accessed September 9, 2012) LeadersDirect http://www.leadersdirect.com/whats-a-manager (accessed September 9, 2012) “What’s a Manager?” by Mitch McCrimmon.

Six Sigma http://www.isixsigma.com/new-to-six-sigma (accessed September 9, 2012) http://www.isixsigma.com/new-lean-six-sigma (accessed September 9, 2012) An introduction to Six Sigma and its interconnection to product and process improvement and “Lean” methods. Excellent resource for publication lists http://www.pohly.com/admin.html

2 Introduction Planning Strategic Planning • Selecting a Planning Group • Environmental Analysis • SWOT Analysis • Vision and Mission Statements • Goals and Strategies • Prioritization • Accountability • Measuring Success (Metrics)

Management Functions Laurence P. Vetter

Organizing Organizational Chart • Time Management • Policies • Procedures • Workflow • Staffing

Directing Communicating • Delegating • Motivating • Managing Change • Coaching

Controlling Setting Performance Standards • Evaluating Employee Performance • Problem Solving • Decision Making

Summary

OBJECTIVES To give laboratory managers and supervisors an overview of basic management principles and practices in a laboratory or clinical setting To give the reader practical advice on the strategic planning process To point the reader toward significant writings on the topic of management through citations and a bibliography

KEY POINTS GLOSSARY REFERENCES APPENDIXES

Even if you’re on the right track, you’ll get run over if you just sit there. Will Rogers

T

he American commentator Will Rogers was beloved for his homespun aphorisms that used humor to illuminate universal truths. “Even if you’re on the right track, you’ll get run over if you just sit there” is a folksy nugget of wisdom that is as true today as it was when he first said it generations ago. Being well positioned in the present is desirable and necessary, but failure to move forward all but ensures that you will be flattened by that which is coming up the track. This reality applies to individuals and to organizations as well. In clinical laboratory science, many managers succumb to the temptation to rest on past accomplishments, content with the self-deception that because things are going well now, there is no need to consider changing anything. Laboratories can languish and sometimes fail because the leadership does not recognize the necessity to adapt in anticipation of an ever-evolving environment. Because throughput is at an acceptable level, cash flow is sufficient, staffing is adequate, supplies are being ordered, and payroll is routinely met, the laboratory manager might be tempted to switch on the autopilot and not think too much about the future. An engaged and thoughtful laboratory manager understands the necessity of being the catalyst who keeps the organization continuously moving forward up the track to avoid being crushed when the environmental predictions become operational actualities.

Clinical Laboratory Management, 2nd Edition Edited by L. S. Garcia ©2014 ASM Press, Washington, DC doi:10.1128/9781555817282.ch2

One of the most important human activities is managing. Ever since people began forming groups to accomplish aims they could not achieve as individuals, managing has been essential to ensure the coordination of individual efforts. As society has come to rely increasingly on group effort, and as many organized groups have become large, the task of managers has been rising in importance. (reference 8, p. 3) 23

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Laboratory managers have highly specialized skills, and they often serve multiple overlapping roles within the healthcare system. First and foremost, a laboratory manager is the chief laboratorian, providing specialized technical expertise within the medical laboratory. Managers are “extenders” of the physician and clinical laboratory scientist directors. As such, they must remain abreast of and implement federal and industry regulations, adhere to credentialing and compliance requirements, understand and evaluate new technologies, and remain continuously informed about advancements in clinical testing capabilities. In addition to these very important technical responsibilities, managers must also oversee the business aspects of the laboratory. Personnel supervision, staff recruitment and retention, budgeting, purchasing, and compliance are all essential tasks of the laboratory manager. While bench-level expertise is essential, knowledge is required far beyond and above the skills needed by a technologist. The laboratory manager occupies a truly specialized niche within the organization. Understanding of basic management functions will contribute to the success of any complex organization, and the application of some fundamental, time-honored practices will ensure that the laboratory’s operations are carried out with maximum efficiency. A manager will be more effective, and ultimately more successful, with a systematic approach. As Will Rogers suggested, inaction and complacency—“just sitting there”—will most certainly result in getting run over sooner or later. A manager’s primary responsibility is directing the immediate operations of the laboratory. The day-to-day, and often minute-to-minute, activities of the laboratory will occupy the greatest amount of a manager’s time and resources. Understanding the environment in which the laboratory functions, and anticipating potential problems that might arise within it, allows a manager to avoid costly mistakes in staffing, scheduling, purchasing, and budgeting. The best managers learn how to balance their time and their many overlapping responsibilities with a wellorganized approach. They are always looking to the future and thinking about how major trends might affect the operation of the laboratory. They view changes in the operational environment as opportunities to make needed improvements in staffing, technology, and processes. This progressive, forward-looking approach requires insight, commitment, and the ability to teach the staff how to identify and solve problems. A good manager is a “high-performance” manager. The high-performance manager is: A strategist – One who looks to the future, makes educated guesses about the major forces and trends he or

she can see, and interprets them in terms of opportunities for growth and progress. A problem solver – One who clearly perceives the differences between the anticipated future and the unfolding present and who decides what must be done with those factors under his or her control to influence the environment or to adapt to it most effectively. A teacher – One who guides others and helps them to identify and solve problems, so that they can perform their tasks effectively and can develop themselves as individuals as well as workers. (12) The study of management is typically broken out into four primary areas: planning, organizing, directing, and controlling. This chapter provides an overview of those management functions, presented in basic, practical language.

Planning Planning is the process of formulating objectives and determining the steps which will be employed in obtaining them. No modern healthcare organization can be effective without an overall plan of action. (reference 5, p. 30)

Strategic Planning By taking an educated and well-advised look into the future, a manager can position the laboratory to grow in the proper direction. The surest path to success in any enterprise is careful and committed strategic planning. The essence of effective planning is a sense of preparedness. Savvy teams look ahead, envision when they will do which tasks, anticipate what resources and training they might need, and consider what to do if they run into problems. Unfortunately, many fall prey to the “ready, FIRE, aim” approach that encourages people to act even if it isn’t the right thing to do or the right time to do it. Although planning adds time up front, it increases the chances of success and decreases wasted time in the long run. (reference 18, p. 333)

Having a long-range plan seems like obvious advice, and few would argue the importance of planning. However, unless the plan is well considered within a realistic framework, it will be of little use. In fact, poor planning— without data, without knowledgeable input from expert resources, without accountabilities, without deadlines, without follow-through—is just as bad as failure to plan. Deploying the wrong resources in the wrong directions often makes matters worse. Strategic planning is a methodical process whereby an organization defines its mission, identifies directions, develops a unified approach, prioritizes long- and short-term

CHAPTER 2. MANAGEMENT FUNCTIONS

goals, assigns accountabilities, and allocates financial resources. If done properly, strategic planning involves supervisors and staff, and it requires the use of time and resources. Therefore, a manager must plan to plan. Before any planning is initiated, a number of important questions must be answered, including the readiness of the organization to engage in such a process, whether the culture of the organization generally supports a planning process, how committed the organization is to a time- and energy-consuming process, who should be involved in the planning group, how and when the process should be initiated, how others in the organization who are not directly involved in the planning process will be informed about the process, and the time frames for the process. (reference 14, p. 6)

A strategic plan helps the organization develop an action-oriented approach and identify the pieces needed to build a successful laboratory operation. Good strategic planning is a structured process. “Structured” means that the plans of individual laboratory sections must fit into an overall plan that covers the entire laboratory operation. It is a “process” because good plans are not produced in isolation according to some predefined formula. There are many books offering expert advice on how to develop a strategic plan. These can be useful to a manager in understanding the elements of a strategic plan and how a planning process might be established. However, managers should not get caught up in a by-the-book approach. They should be flexible enough to develop a process that fits their particular organization. Several points should be considered when planning. • Involve staff at every level in developing a strategic plan. Solicit feedback from individuals who really know what’s going on and who will be responsible for executing the plan. You will get great ideas and critical buy-in by getting staff at the bench level to offer input during the process. • Be flexible in developing a plan by circulating drafts and allowing people to provide feedback. • Ensure that everyone knows their responsibility for deployment of the plan and that feedback mechanisms are implemented. The most carefully written plan will fail if those responsible for its execution do not know their roles, deadlines, and resource allocations. A defined feedback mechanism will ensure that the plan does not get lost in daily crises. Strategic planning always presents a challenge, regardless of the size and scope of an organization. The more far-reaching the laboratory’s mission is defined, the greater the challenge. One constant, whenever the paramount resource of an organization is the experience of

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its people, is the absolute necessity to include the input of the staff (23). The objective of planning is to set an achievable course of action by establishing long- and short-term goals, monitoring progress, and establishing an environment where day-to-day activities are well controlled, measurable, and thoroughly understood. Before moving on to a discussion of the planning process, first a note of caution about the dangers of “overplanning”: There are limits to what can be known, or anticipated, about the future. There are limitless scenarios, influenced by unknown events yet to occur, that will affect future decisions. The difficulty of finding the correct scale for planning accounts for many failures. The more uncertain we are, the greater our tendency to overplan, for example. In a situation we find threatening to begin with, we try to foresee all possibilities and make allowances for every conceivable mishap. This approach can have ruinous consequences. The more extensive our understanding becomes, the more the planning process will impress on us the myriad possible results. Planning, like the gathering of information (for planning, too, is a form of information collection), can increase our insecurity rather than reduce it. (2)

It is impossible to plan for every remote possibility. Trying to do so will result in a plan that is so cumbersome and unwieldy that it will be beyond useless. A plan that attempts to cover the spectrum of possibilities will result in poor decisions. Planning must be within a manageable scale.

Selecting a Planning Group A small, knowledgeable, and motivated group from within the laboratory should be assembled by the senior leader to participate in strategic planning. One of the most important aspects of this stage of the process is choosing the planning group, those who actually will be involved directly in the planning process. Typically consisting of seven to eleven persons broadly representing the management level of the various organizational functions, this group will be expected to commit themselves to a time-consuming and demanding process, usually while fulfilling their regular responsibilities. (reference 14, p. 6)

The group must contain key people from all areas of the laboratory. In a large and comprehensive pathology laboratory, there should be executive-level representatives from all functional areas (for example, hematology, microbiology, chemistry, and immunology), as well as key administrative and support leaders (for example, sales, marketing, accounting, and billing). Since physician

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directors, laboratory managers, and supervisors are ultimately accountable for meeting the goals and objectives of the plan, they should make up the core of the planning group. Other key people in the laboratory who possess a strong working knowledge of policies, procedures, technology, and processes should also be included. The group must be large enough to be inclusive of all areas affected by the plan, but not so large that it is not conducive to a free exchange of ideas in a conversational setting. As planning progresses, there will be occasions when facilitation must be utilized to tactfully keep the conversation moving forward in an orderly way. The role of the designated facilitator is to encourage constructive dialogue while remaining unbiased as to the outcome. It might prove useful to designate a facilitator from outside the planning group, someone who is knowledgeable but objective and who can comprehend the complexity of the issues without having a stake in the outcome.

Environmental Analysis When decisions are made within a realistic framework, it ensures that expectations are achievable and success is possible. The climate in which a laboratory operates is in a constant state of flux. It is critical for a manager to be aware of the changes that are constantly occurring in the operational environment. Awareness of these changes is necessary during the planning process. This awareness stems from active involvement and participation. Management cannot be accomplished in a vacuum. The manager must have professional affiliations to gain the insight and perspective of peers in other organizations. Some examples include the Clinical Laboratory Management Association, the American Society for Microbiology, the American Association of Blood Banks, the American Association for Clinical Chemistry, the American Society of Hematology, the American Society of Clinical Pathology, and the Clinical Laboratory Standards Institute (CLSI). There are unique professional organizations for almost every subspecialty of clinical laboratory science. A manager is encouraged to be an active participant in the appropriate professional organizations, sharing knowledge and gaining from the experience of others. Laboratory managers must also regularly read laboratory-specific literature and journals. All professional organizations have some type of regular publication, be it a journal, a newsletter, or a website. These organizations offer continuing education opportunities through national meetings, webinars, conference calls, and online tutorials. Professional involvement allows the manager to keep a current skill set, and also to remain abreast of trends, knowing which questions to ask and where to find pertinent information to answer those questions.

The gathering of necessary information at the beginning of the strategic planning process is often called an “environmental analysis”—a systematic review of the internal and external factors that influence the laboratory. A thorough environmental analysis forces an organization to face reality, and it sets a tone for planning. In this analysis, the administrative staff seeks to answer questions such as: what kinds of services should we be offering the community five years from now? How will these services be different from those offered currently? What kinds of resources (machinery, equipment, buildings, patient rooms, employee personnel) will we have to acquire in order to provide these future services? How will we finance the purchase of these resources? (reference 5, p. 54)

An environmental analysis should be performed at the very beginning of the planning process. Reliable data should be gathered from every possible source. These data should include financial information (trends, current fiscal situation, and projections), capital equipment inventories, personnel data, and laboratory-specific performance data. In some cases, a simple survey can be developed to gauge satisfaction and expectations of clients and employees. The most important consideration in performing an environmental analysis is to be completely forthcoming about the internal and external factors that affect the laboratory. The planning process must begin from a point firmly grounded in reality. If assumptions are not accurate and brutally honest, the resulting strategic plan will be a nonstarter.

SWOT Analysis The modern healthcare organization must appraise its strengths and weaknesses so that it can determine its future opportunities and environmental threats. (reference 5, p. 84)

A necessary component of an environmental analysis is the careful consideration of the laboratory’s strengths, weaknesses, opportunities, and threats, often called a SWOT analysis. Comparing the laboratory’s existing strengths to known opportunities makes it possible to put concrete strategies in place to capitalize on those opportunities. Using the same approach, matching the laboratory’s known weaknesses to actual environmental threats is useful in avoiding costly mistakes.

Vision and Mission Statements If one does not already exist, at the beginning of the planning process a vision statement should be written to articulate what the organization seeks to become. A vision statement is an internal document, by design. It is intended to inspire those within the organization to

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maximize their potential, and by so doing, to maximize the potential of the organization as a whole. A vision statement needn’t be wordy; some of the best vision statements are brief and succinct. A vision statement should be lofty in its ideals. It should state a common purpose, and it should express the long-term goal of the organization. An example of a vision statement, from the Virginia Commonwealth University (VCU) Department of Pathology, states, “Our vision is to become a preeminent Department of Pathology in the United States, which is recognized for excellence in biomedical research, the education of healthcare professionals, and the innovative application of science and technology to the diagnosis and management of human disease.” A mission statement for the laboratory should also be developed at the beginning of the planning process. A mission statement answers certain fundamental questions about the organization, such as What is our purpose?, In what activities will we be engaged to accomplish that purpose?, and What are our basic values and shared beliefs? Having a clearly articulated mission statement benefits the planning process by defining the organization’s purpose, but it also benefits the organization by reminding everyone, staff and clients alike, about the organization’s purpose. An example of a mission statement, also from the VCU Department of Pathology, states, “The mission of the Department of Pathology is to provide high-quality, cost-effective pathology services in a manner that supports the patient care, education, and research missions of the VCU Health System Academic Medical Center and the Virginia Commonwealth University School of Medicine.” Note that this statement clearly defines what the organization is and the clientele that it serves. As planning progresses, people should look to the mission statement for guiding principles in the decision-making process. The mission statement should be credible and closely aligned with the organization’s actual purpose. An effective organization will invariably have a wellgrounded sense of itself, and its mission statement should match. Although a mission statement should provide the base upon which to move strongly into the best possible future for the organization, if it is not credible it will not only fail to attract committed followers, but it will also cause some to lose trust in those who drafted it . . . Credibility is lost when the mission goes beyond the stakeholders’ ability to believe in it. (reference 14, p. 67)

Goals and Strategies The adage, “If you do not know where you are going, any road will get you there,” illustrates why leadership must be visionary and must set clear goals with strategic objectives. (13)

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For practical purposes, a planning horizon that is too distant will be impacted by rapid and perhaps unforeseen changes in the economy, technology, industry trends, and government regulations before the planning period is complete. In a technology-dependent industry with ever-increasing regulation, it is absolutely necessary for a manager to remain knowledgeable about the current operating environment while understanding future trends. Therefore, for the medical laboratory, a planning horizon of eighteen months to two years is practical. It allows the planning group to make decisions that are forwardlooking but does not project the planning to a point where the environment has changed beyond anyone’s ability to realistically predict. Planning is done to produce a list of goals and strategies that will guide laboratory management decisions for a predetermined period of time. Through discussion, the planning group produces a written document that lists specific goals and strategies. A goal is an end or an outcome that one hopes to attain. Simply stated, a goal is something positive that the organization hopes to accomplish. Through discussion and negotiation, the planning group should develop a list of goals for the laboratory. An example of a goal is “to enhance laboratory revenue by increasing referral testing from external sources.” This is a clear statement of something that the laboratory will try to achieve. A strategy is a means to a defined end or, more simply stated, an action taken to reach a goal. Every stated goal can have numerous strategies. For this example, a strategy relevant to the above goal might be to “hire a marketing director to develop business and increase referrals from community hospitals.” A manager can be flexible in creating a strategic planning document. The design of a strategic plan is open to creativity. The essential ingredients are not. A strategic plan must include goals and strategies—a clear statement of that which is intended to be accomplished and the steps that will be taken to accomplish it.

Prioritization In planning, as in every other aspect of effective management, it is necessary to assign priority by weighing the importance of the tasks at hand to determine which have the highest level of immediate importance. Therefore, planning is often a struggle between “must do” and “want to do” decisions. Accountability The only way to ensure follow-through on action items is to assign specific people to be responsible for delivering results. An effective plan must have built-in accountability for all objectives and strategies. This means attaching

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specific names to specific action items. If everybody is accountable for a certain task, then nobody will take proprietary ownership to make certain that the task is done correctly and in a timely way. Accountability, by definition, is the obligation of a person to be responsible for his or her own actions. Therefore, individuals must be assigned to the implementation of specific activities to make certain that follow-through is achieved.

Measuring Success (Metrics) Once a strategic plan is drawn, a process of implementation must be followed to track advancement toward completion of specific aims. The actual strategic plan is articulated in a document that lists the goals, strategies, accountabilities, and deadlines. The document can be as simple as a multiple-column Word table, an Excel spreadsheet, or an Access database. The appearance of the planning document is not important. What is important is the organization of information in a structured format that is readable and understandable. An example of a simple laboratory strategic plan can be seen in Appendix 2.1. Progress in planning must be regularly monitored with thorough, quantifiable measurements. Metrics, or standards of measurement that accurately gauge progress, must be attached to each goal. That which cannot be measured cannot be managed. This adage is especially true in clinical laboratory science. Therefore, great care must be taken in assigning metrics that are appropriate to the goals. A regular reporting mechanism must be established to review progress, reevaluate priorities, and make updates based on a constantly changing operating environment. The ideal venue for reviewing metrics is a regularly scheduled meeting attended by everyone who has assigned accountabilities. At this meeting, accountable people are asked to report upon the progress made on their assignments. A regular reporting forum helps to maintain momentum by removing the human inclination to procrastinate. Monthly, or perhaps even weekly, meetings should be scheduled to discuss progress toward stated goals and objectives. A strategic planning process includes the following steps (see Appendix 2.1):. 1. Select a knowledgeable planning group. 2. Perform an environmental analysis. 3. Identify strengths, weaknesses, opportunities, and threats. 4. Make a manageable and realistically achievable list of goals. 5. Prioritize goals. 6. Develop strategies to accomplish goals. 7. Assign accountabilities and timelines.

8. Measure progress with metrics. 9. Review progress and make updates on a regular basis.

Organizing Time is an irreplaceable commodity, and a manager’s time is a laboratory resource that must be used thoughtfully. A good manager must always be conscious of how time is expended, personally and in laboratory processes. That is the concept of organizing. Organizing is the process of structuring activities, materials, and personnel for accomplishing predetermined objectives. (reference 5, p. 136)

One of the most important functions of a manager is to organize the activities of the laboratory in such a way that use of time is carefully considered so that effort is minimized while output is maximized. The difference between profit and loss is often determined by how well the resources and workflow of the laboratory are organized. There can be no doubt that good people and those who want to cooperate will work together most effectively if they know the parts they are to play in any team operation and the way their roles relate to one another. This is as true in business or government as it is in football or in a symphony orchestra. Designing and maintaining these systems is basically the managerial function of organizing . . . For most practicing managers, the term organization implies a formalized intentional structure of roles or positions. What does ‘intentional structure of roles’ mean? In the first place . . . people working together must fill certain roles. In the second place, the roles people are asked to fill should be intentionally designed to ensure that required activities are done and that activities fit together so that people can work smoothly, effectively, and efficiently in groups. (reference 8, p. 133–134)

The key to organization is in knowing the essential tasks that must be performed, understanding what knowledge and expertise the employees must possess to perform those tasks, and the physical and capital requirements that must be assembled to achieve the desired results. Organization should be approached as an ongoing process, since testing, technology, and staffing are all dynamic. Staff knowledge and technologies are constantly evolving. The educational base of laboratory employees changes with the steady turnover of personnel. While every effort should be made to retain valuable and well-trained personnel, reality dictates that bench-level employees will come and go, often without adequate advance notice. Turnover is a constant concern of a manager. Technology developments further impact staffing needs. Therefore, a manager must be prepared to lead in a constantly changing

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environment where different pieces of the equation are forever being transformed by external factors.

Organizational Chart An essential management tool is the organizational chart. An organizational chart shows hierarchical relationships between functional areas. It is a visual depiction of the organization. It helps to clarify workflow, reporting lines, and areas of responsibility by explicitly listing delineated work areas, be it by division, laboratory, or medical specialty (see Appendix 2.2). The chart specifically indicates positional authority. Authority implicitly accompanies a position on the organizational chart, and its location on the chart implies a degree of consent by direct reports. The organizational chart is a contract of sorts, as it unambiguously illustrates the structure of the organization and the relationships among the people within it. A laboratory manager possesses authority within the organization if he has the right to issue instructions that others are expected to follow. The organizational chart serves as a visual aid for evaluating each of these basics. The organizational chart also attempts to show relationships between line and staff. In this organizational concept, a line position is one in which a superior exercises direct supervision over a subordinate. (20)

Time Management The surest way to be well organized is to develop a structured approach to time management. Every hour of a manager’s day is occupied with urgent concerns and pressing issues. Without a disciplined time management system, a manager can quickly become overwhelmed, consumed by the demands of small crises. There are many different approaches to time management. Your office email system very likely has a calendar function built in. Google, Lotus Notes, BlackBerry, Outlook, and Yahoo! all have calendar functions, and there are many other choices. This is not an endorsement of any specific product. There are hand-held personal digital assistant products and programs for desktop computers, smart phones, and laptops. Each has unique features and functionalities, and each is useful in helping a manager efficiently organize time and tasks. A traditional paper calendar book can still be quite useful. There is no universally prescribed time management system. The type of system you ultimately use will be a very personal decision. The type of system used is optional, but the use of a system is not. An experienced manager must find a system that works best for his or her own unique needs and then use it all the time. If a manager is using a time management system but still feels overcommitted and pressured by time constraints, he should experiment with different approaches until there is reasonable control of time issues.

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With so many competing demands, it is conceivable in a modern laboratory for a manager to be fully engaged 12 to 16 hours a day. This is not sustainable, even for the most dedicated executive. While it is not realistic to expect an eight-hour day, hard scheduling within reasonable parameters (for example, between the hours of 8 a.m. and 5 p.m.) should be the goal. Time spent on the job outside of those parameters should only be considered in times of crisis. In all other circumstances, a manager should set and adhere to a reasonable schedule, building enough time into the day for essential meetings, interaction with staff, coaching, continuing education, and completion of necessary paper work. Therefore, it is imperative that a manager not fully book every day with back-to-back meetings. Some flex time must be built into the daily schedule for unplanned activities that are a normal and expected part of each work day. A time management system allows a manager to: • • • •

Minimize time wasted on nonproductive issues Be prepared for meetings Be aware of existing commitments Understand the capacity to take on new assignments and when to say “no” • Plan each day’s work efficiently and effectively • Make certain that no project (large or small) is neglected Simply stated, the conscious use of a time management system allows a manager to be well organized and well prepared. Failure to use a system ensures disorganization and lack of preparedness.

Policies An effective organization has policies that express behavioral expectations within the workplace. Policies are the “laws” of the laboratory. Little different from laws in a society, policies must be fair and equally applied to everyone in the organization. Every laboratory should have an open, accessible, and easily understood set of policies. These policies must be made known to each employee, and there should be some expectation that employees be required to read and understand those policies that are applicable to them. The manager and employees should review policies regularly as part of an annual review process. Policies should be reviewed on a standard schedule to ensure that they are current and realistic within the changing environment. Outdated policies should be updated or replaced as appropriate. In large laboratories, a committee of knowledgeable employees may manage policy writing and review. The committee should be populated by supervisors and key employees who know how the laboratory functions and what should be considered as standard expectations.

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BASIC CONCEPTS AND THE CURRENT HEALTHCARE ENVIRONMENT

All policies have seven basic characteristics: they must be well thought out; flexible enough to be applied to both normal and unusual situations; acceptable to those who apply them; consistent; objective; clear and communicated to those individuals to whom they apply; and continuously reevaluated and changed when necessary. (15)

A representative example of a policy template is provided as Appendix 2.3.

Procedures Procedures are plans that establish a required method of handling future activities. They are guides to action, rather than to thinking, and they detail the exact manner in which certain activities must be accomplished. (reference 8, p. 50)

Procedures are formal steps to guide an employee through a specific job task. A procedure is a written, sequential course of action to be taken to achieve a desired outcome. A laboratory manager must maintain current, concise procedure manuals for all processes that are performed in the laboratory. As with policies, the book of laboratory procedures should be continuously reviewed and revised by a team of experts to ensure that they are up to date and in compliance with the most current regulations and standards of care. Accreditation of the laboratory will be judged in part on the accuracy and thoroughness of the procedures, so maintaining them should be among the highest priorities of all laboratory managers. The standard operating procedures (SOP) manual is a very important tool in the laboratory. An up-to-date SOP manual ensures that procedures performed by the technical staff are consistent with the industry and of the highest quality. Managers use the procedure manual to train the laboratory technologists, and technologists use the procedure manual as a reference when performing laboratory methods, which constantly change as technologies develop.

Workflow A laboratory manager must be a master of all the interconnected processes within the laboratory. These processes are logically sequential, and they are accomplished in such a way that one process or step must be completed before the next can begin. This is known as workflow, or organizing tasks in a particular way to accomplish a specified result. Doing things a certain way because that’s the way they’ve always been done is a fine approach, but only if consideration has been given to the process to determine if a change in the approach would result in an improved result. Analysis of workflow within a laboratory often identifies inefficiencies that can be corrected, resulting in a more productive process. This analysis should include an evaluation of equipment, technology, information services, computer systems, physical layout, and location of resources.

An important tool for analyzing workflow is the flowchart. Process design flowcharting is a fact-gathering technique used to make the effort of a task visible by writing down what is done. A flowchart graphically illustrates the relationships between necessary tasks. By writing down the steps in a task, you can often identify areas of overlap, redundant effort, and opportunities for improvement. Once the elements of work are identified, it is necessary to determine how they fit together to form a coherent whole: to determine for each element of work the other elements essential to its effective performance. At one extreme are elements that can be performed independently of each other. In contrast, successful performance of other types of work requires that different work elements occur in sequence or that one element affects a second element, which, in turn, acts upon the first element. At the most complex level, elements of work affect each other simultaneously. The concept of interconnectedness of work is critical to effective work design. When different people perform interconnected elements of work, components must be coordinated to ensure effective performance. (19)

Staffing A successful laboratory is dependent on good leadership, and good leadership is dependent on the quality and loyalty of employees. The selection process is critical in matching people and their skills with the appropriate jobs. (10)

Clinical laboratories have unique staffing needs. Each laboratory has an ideal number of employees based upon throughput and automation. A manager must ensure that efficient staffing is maintained at all times. The bestequipped laboratory will not function at top efficiency if it is improperly staffed. Too many full-time employees can result in excess capacity and unduly high wage expenses. Too few full-time employees can result in excessive need for overtime, which is another unnecessarily high wage expense. Overworked employees, regardless of how well they are paid, will eventually burn out. Accurate staffing must be pegged to the organizational chart, taking into consideration how each laboratory component serves the ultimate mission of the laboratory as a whole. Staffing should be a topic of discussion in the strategic planning process. A well-thought-out strategic plan considers staffing, and the resulting carefully considered staffing models enable a manager to make long-term predictions about future staffing needs. Plan-based staffing decisions remove much of the guesswork, thus allowing a manager to stay ahead of staffing issues and providing leadtime to hire and train efficiently. Only with efficient staffing and scheduling can management make the best use of personnel, supplies, instrumentation,

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and facilities in a prompt and cost-effective manner. By definition, “to staff ” is to provide a group of workers for the purpose of securing united and cohesive performance. Specifically, staffing of a clinical laboratory is a two-step process. The initial step is to set up a table of organization denoting laboratory structure and chain of command. It is important to clearly define what the function of the laboratory is and how it fits into the overall organization. Once the mission and purpose of the laboratory have been determined, decisions in efficient utilization of personnel and equipment can be made with accuracy. After thought is given to the need for present and future numbers of positions, a comparison can be made between predicted demand and supply. Differences can then be assessed and finally a plan formulated to recruit, train, and meet suitable staffing needs. (11)

Directing A manager is a director of people and activities. Staff members require and expect direction in their activities. The action of management is in directing people in their activities. Directing is the process of influencing people to attain predetermined objectives. (reference 5, p. 30)

Communicating No matter how great the plan or how talented the person, if managers cannot communicate effectively with other members of the team, their ideas and inputs are doomed. Although it is not listed as a separate management process, communication is an integral part of each management function. It is embedded in every action taken. (22)

Communication is among the most important components of management. Clear written and verbal communication—from manager to employee, from employee to manager, between managers, and between peers—influences every action. Without it, there is no effective way of articulating expectations, expressing concerns, providing feedback, and ensuring that policies are implemented. Communication must flow in all directions. It must be concise, clear, consistent, and continuous. Employees rely upon regular feedback from their supervisors. Supervisors rely upon their employees to inform them of their needs. People at all levels of authority within the laboratory rely upon communication with their peers to remain aware of changes in policy. In every healthcare organization, there are four basic communication flows through which messages can be passed: downward, upward, lateral, and diagonal. Downward communications travel from the superior to the immediate subordinate. Downward communications are used to transmit information and instruct employees in the

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performance of their jobs. Upward communication travels from the subordinate to the immediate supervisor, and it is used to provide feedback on how things are going. Lateral communication takes place between people on the same level of authority within an organization, and it is used for promoting coordination and teamwork. Diagonal communication occurs between people who are neither in the same department nor on the same level of authority within the organization. Diagonal communication is used for cutting across organizational boundaries in an effort to save time. (reference 5, p. 211–214)

Without structured communication, a manager cannot expect employees to act as a coordinated unit. Employees require direction, and they need to know what is expected of them. An organization cannot allow important decisions and information to be communicated in a haphazard or informal way. It is the manager’s responsibility to develop and adhere to a regular, formal communication system. Individuals cannot act in a coordinated, organized fashion in the absence of a communications network that both stimulates and controls the flow of information needed to make and disseminate decisions. (16)

Communication is a job skill that can be developed and improved. Managers can ask certain fundamental questions, of themselves and of their team members, that will help to make communication within the organization more focused and productive. • What information do you receive on a regular basis? • What information does your team need to function properly and effectively? • What are the ideal methods of communication (formal meetings, email, memos, conference calls, video conferencing)? • How often should meetings be held, what subject matter will be discussed, and who should attend? • With regard to communication, what do your employees want you to start doing? • What do your employees want you to stop doing? • What do they want you to continue doing? The basic attributes of good-quality communication are attention, acceptance, and empathy. Attention is the thoughtful consideration of others. When speaking to someone, be considerate of his or her concerns, needs, and experiences. Actively listen to what people are saying. Ask questions to clarify concerns. Affirm your understanding by paraphrasing and restating their concerns until there is no ambiguity and no room for misunderstanding. There are some aspects of active listening that should always be incorporated when communicating with staff

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members. Acceptance is the act of favorably receiving someone’s thoughts and opinions. This does necessarily imply agreement, but conveys that you understand the concerns being expressed and that you will keep an open mind. Successful listening is an active, dynamic process. Alertness at every point of the communication encounter is a prerequisite for the supervisor, as well as for the subordinate. (reference 7, p. 86)

Listening is a skill that can be developed and strengthened with determination and practice. In the modern world, we have smart phones and instantaneous access to information on the Internet—useful tools, certainly, if used correctly. They can be distractions, however, as they encroach further into our daily lives. The newest generation of employees has grown up with these devices, and a new etiquette has evolved with the technology. Do not let an electronic device interfere with personal, face-toface communication. Emails and instant text messages are important and necessary components of a modern communication strategy, but a manager must have personal, spoken interaction with employees at all levels on a regular, continuous basis. Staff members expect and appreciate human contact, and it allows for a more natural dialogue. The skill of listening is the component of communication that is often overlooked. Valid communication goes beyond just putting out well-chosen words. It also involves actively hearing and processing that which is being said. Empathy is a very important aspect of communication. It is the ability to share in another’s emotions or feelings. It is the identification of another’s thoughts and attitudes as they might apply to a particular situation. When placed in an identical circumstance, every person has his or her own interpretation based on personal experience and bias. Therefore, to truly connect with an employee, one must make every effort to understand his or her perspective in a given situation. A clinical supervisor can show concern for a subordinate by standing in the subordinate’s position, identifying with the subordinate’s frame of reference, and helping to meet the subordinate’s objectives. From this standpoint, empathy is an exceptionally strong component of effective communication. (reference 7, p. 87)

While it may seem obvious, it bears mentioning that a manager must establish trust and maintain credibility with the staff. Trust is earned through honest communication and consistent follow-through on promises made. Trust is the foundation of good working relationships. Credibility cuts both ways in the manager-employee dynamic. Each

party must take responsibility in establishing trust and maintaining credibility. Know What You Are Talking About – Receivers will be more attentive when they perceive that senders have expertise in the area about which they are communicating, as when instructions are given by someone authorized to dispense that information. You will lose credibility if people think that you don’t know what you’re talking about. If you don’t know an answer, say so and then develop the expertise to provide a correct answer later on. Establish Mutual Trust – Receivers prefer to have a sender’s motives clarified: Are they selfish or altruistic? Owning up to your motives at the beginning of a conversation can eliminate the receivers’ anxiety about your real intentions and do much to establish common trust. The following suggestions about being honest, reliable, and self-disclosing all appropriate information also contribute to establishing a trust bond. Share All Relevant Information – Interpersonal communications are ethical when they facilitate a person’s freedom of choice by presenting all relevant information accurately. They’re unethical when they prevent another person from securing information relevant to a choice, or force other people to make a choice they would not normally make, or decline to make choices they would normally make. Be Honest – In every national poll, the most important thing people want in a leader, friend, partner, or coworker is honesty. Therefore, you want to avoid any form of deception, which is the conscious alteration of information to influence another’s perceptions significantly. Deception includes lying—concealing or distorting truthful information—and other behaviors that do not reflect our true feelings or beliefs. Be Reliable – A sender’s perceived dependability, predictability, and consistency in providing all relevant information (being consistent in applying performance criteria when evaluating subordinates, and treating subordinates fairly and equally, for example) reinforce the sender’s perceived trustworthiness. Be Warm and Friendly – A warm, friendly, supportive attitude is more conducive to personal credibility than a posture of hostility, arrogance, or abruptness. People are more trusting of those who are friendly than those who appear to be trying to impress or control them. Be Dynamic – If you are dynamic, confident, and positive in your delivery of information, you will be more credible than someone who is passive, withdrawn, and unsure. Receivers tend to be more attentive to messages when the senders are enthusiastic and confident. (6)

The elements of successful communication are: • Listening • Empathy • Trust

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• • • • • • •

Continuous communication Consistency Clarity Honesty Multidirectionality Verbal and nonverbal methods of communication Active communication

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Delegation is a process, a series of linked decisions that identifies what needs to be done, understanding the desired result, and then selecting qualified people to perform important tasks by making an informed decision about who is best qualified to meet performance expectations. Through delegation, a manager is making a prediction that the person selected will follow through to the desired conclusion. Wisely delegated assignments can only be made if the manager has a strong and current knowledge of the processes and procedures of the laboratory. Without a clear understanding of the task, the desired outcome, and the skill set of the person to which the work is being assigned, delegation becomes a guess at best and a disaster at worst. Therefore, do not delegate to an individual until it is clearly understood that the person can deliver as required. Setting people up for failure always results in poor personnel performance, morale issues, and undesirable consequences.

The natural temptation for a manager is to spend energy on trouble areas, with the assumption that the motivated, high-performing employees do not require any attention. Neglecting excellent employees, even benignly, because they’re seen as self-maintaining, can be an unintended “punishment” of good behavior. Even the best and most self-motivated employees must be given regular encouragement. Positive reinforcement is always a motivating influence. People who are doing a good job need to hear it, verbally and face-to-face, on a regular basis, and not only during annual reviews. When an employee is observed going above and beyond the defined expectations of the job, it should be acknowledged with genuine recognition. Simple words such as “well done” or “good job” are great motivators, and the employees who hear those words feel valued for their knowledge and contributions. Many organizations offer financial incentives to motivate and reward excellent performance. Money is a powerful stimulator. It is the reason people work. There are many performance-based incentive programs based on volume, accuracy, punctuality, innovation, etc. Regardless of the type of incentive program used, it is absolutely critical to ensure that it is administered fairly and consistently. If the employees feel that their contributions are not being recognized, the program will become a disincentive, which is the exact opposite of the intended purpose. Even in difficult financial times, when there is no extra money in the budget for a financial incentive program, there are other creative ways to build enthusiasm and reward excellence. A certificate of appreciation or a letter of acknowledgment for the personnel file is an easy and inexpensive motivator. Recognition in the form of a public “pat on the back” has incalculable benefits in motivating employees. Discontent, boredom, and restlessness soon develop unless the individual is doing a job that is enjoyed. A manager must therefore understand the individual strengths and interests of the staff and find ways to tap into those strengths, where possible, in the performance of daily activities.

Motivating Success in any activity is inspired by some type of motivation. Motivation is both internally and externally derived. The most desirable and effective employees are the ones who come to work already equipped with a good deal of enthusiasm and inspiration. These types of employees are self-motivated. They want to do a good job. They take pride in their work and seek excellence in the performance of their duties. They take ownership of their positions. Motivated employees have relatively few problems with absenteeism, tardiness, and poor work habits compared to those who lack motivation in their jobs.

Because the art of management is getting things done through others, it is important, not only to know the fine points of delegation, but also to be able to motivate people to want to achieve. A basic understanding of the psychological needs of the individual is a helpful way to match organizational expectations with the individual’s capabilities. A. H. Maslow’s work Motivation and Personality (1954) is a prime study for understanding motivation. His hierarchy of basic needs is well known. Physiological Needs – The essentials, such as food, sleep, and air. Safety Needs – Based on human preference for a safe, orderly, predictable, organized world that can be relied upon to be free of danger or unexpected happenings.

Delegating An effective manager understands the need and value of delegation, or, simply stated, the assignment of responsibilities to others. Delegation is the process of selecting people from a very limited pool (current job incumbents) to perform a task. When a manager delegates work to someone, that manager is predicting that the employee will meet performance expectations. The more clearly we know what we are looking for someone to do and how we want it done, the easier it will be to choose the right person for the right tasks. (1)

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Belongingness and Love Needs – If both physiological and safety needs are fairly well gratified, the love and affection and belongingness needs will emerge. A person will hunger for affectionate relations and will look for a secure place in his or her group. Esteem Needs – The desire or need for a stable, firmly based evaluation of himself or herself for self-respect or self-esteem. Need for Self-Actualization – If all of the above needs are satisfied, a new discontent may develop unless the individual is doing what he or she is fitted to do. In other words, what a person can be, he or she must be—coming from a desire for self-fulfillment. (3)

Managing Change Change is not easy. Many people are instinctually resistant to it. When change is introduced, or even suggested, people’s first reaction is often to reflexively cling to the old way of doing things and to reject the notion of doing things differently. We’re all creatures of habit. Life is complex enough; we don’t need to consider the full range of options for the hundreds of decisions we have to make every day. To cope with this complexity, we all rely on habits or programmed responses. But when confronted with change, this tendency to respond in our accustomed ways becomes a source of resistance. People with a high need for security are likely to resist change because it threatens their feelings of safety. Another source of individual resistance is concern that changes will lower one’s income. Changes in job tasks or established work routines also can arouse economic fears if people are concerned that they won’t be able to perform the new tasks or routines to their previous standards, especially when pay is closely tied to productivity. Changes substitute ambiguity and uncertainty for the known. You trade the known for the unknown and the fear or insecurity that goes with it. (17)

A manager’s challenge in managing change is to reduce the instinctive resistance to it by presenting it in a way that gives staff members reason to understand that the change will bring an improvement. Presumably, a change in procedure is a response to an unsatisfactory situation and the desire to improve an outcome. When implementing a procedural change, a manager must be very careful to communicate with staff members to assure them that their performance is not being criticized and that their jobs are not threatened. Whenever changes are introduced in a laboratory, it is important to remember the “laws of organizational change.” • People don’t resist change, they resist being changed . . . If you want their cooperation, you’ve got to keep them on board for every step of the change. Ask for their opinions. What do they hope will happen? What do they fear? What suggestions can they make to

ensure the success of the effort? Communicate regularly about progress and results. Provide a clear picture of what the future will be like. • Things are the way they are simply because they got that way. Somebody, sometime, had to write the policy or create the process that you are now trying to change. There were probably some very good reasons for doing things that way when the system was established. Before you attempt to change something, first take the time to understand the history behind the problem. • Unless things change, they are likely to remain the same. If you want improvement, people will need to change the way they work. It’s important not to confuse improvement with tampering. • Change would be easy if it weren’t for all the people. The message is that people are the organization and the organization is there for the customers. So you must pay attention to the people, as well as the systems. Listening to employees and customers before problems arise makes any change go more smoothly. (reference 18, p. 17–18)

As in every aspect of management, good communication is the key to success in managing change. Listening to people’s concerns, asking for their ideas, and genuinely paying attention to their input will dramatically increase the likelihood of success when implementing change.

Coaching The best managers are teachers and coaches, always engaging their employees in a productive and ongoing process of continuing education. Many employees require personalized development to realize the best of their abilities. This is accomplished through traditional teaching, such as standing at the bench and actually demonstrating to an employee how to use an instrument. Coaching goes a step beyond teaching. It also involves encouraging an employee to try new things and to strive for a higher level of accomplishment. This is done in a gentle and supportive way that is intended to bolster self-confidence and to foster a sense of being worthy. Of course, each employee has unique sensitivities, and everyone should be treated as an individual. Every employee has special talents and innate limitations. When acting in a coaching role, the manager should always be mindful of each person’s individual needs, abilities, and desires. • Coaching is providing a person or group with the guidance, support, and confidence to enable them to enhance their performance continuously. • Guidance enables someone to develop his or her skills and knowledge appropriately. Through skilful guidance a coach can also help another person develop useful insights into their work and character.

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• Support means being there when you’re needed. • Confidence means believing in someone so that they can believe in themselves and perform effectively. • Continuously means all the time! Coaching is not something which is turned on and off like a tap. Successful coaching depends on planning coaching assignments and developing supportive relationships over time. (4)

Controlling Controlling is the process of determining that everything is going according to plan. (reference 5, p. 30)

There is no substitute for engaged leadership. A manager simply cannot afford to be distracted or disengaged. Small, isolated problems, when left unattended, often grow in size and complexity, stealing more and more resources as they compound and create other problems, until they become the sole focus of a manager’s time and attention. A manager must constantly and consistently review the current situation in the laboratory to ensure that there are no unattended details. The best way to avoid big problems is to address and solve small problems before they have a chance to become resource hogs that drain productivity and threaten accuracy. Being mindful of the daily activities of the laboratory is one of a manager’s most important responsibilities. By controlling the details, a manager ensures that the laboratory functions at the highest possible level of efficiency.

Setting Performance Standards Regularly scheduled, structured evaluations are a necessary expectation of employees. People deserve to know how they’re doing in relation to a written set of expectations about performance. A job description is a written and signed agreement concerning the responsibilities of the position. Every new employee should have one, and it should be reviewed annually to ensure that the obligations are current and accurately described. This formal document serves as a contract of sorts that informs the employee with specificity about the expectations of the job. The job description should be directly linked to an organizational chart, which provides a visual depiction of the lines of authority. The job description should include a job title, a compensation classification or range, the name of the supervisor who will review performance, a specific and detailed listing of responsibilities, and a performance evaluation schedule. A thoughtful and well-written job description is good for the employee, good for the manager, and good for the organization. It states, in specific terms, the employee’s exact role. Furthermore, it forces the manager to look critically at how the employee is meeting expectations of performance. It provides a baseline standard of

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performance. During the appraisal period, a job description guides the manager in making decisions about meritbased salary adjustments, promotion, areas of expected improvement, and training needs. Regardless of the purpose or format of an appraisal, there are a few critical elements without which an appraisal system will not function. These include: • Standards and criteria of performance – Performance standards must be specified for performance to be evaluated meaningfully. One possible source of standards is the job description. When job descriptions are short and not very specific, a more exacting set of standards may be derived from a job analysis. In this process, someone who is currently fulfilling the responsibilities of a job writes down or reports all the different tasks the job includes. Another possible source of standards is mutual consent to specified goals where the subordinate and manager agree upon certain tasks that the subordinate is to perform during the evaluation period. • Communication of these standards and criteria to the subordinate – Once performance standards and criteria have been specified, the subordinate to be evaluated must be aware of them. The manager or personnel department may communicate standards and criteria during the initial job orientation session, during the subordinate’s first meeting with the manager, or by means of a written document, such as a detailed job description along with the performance appraisal form. • Sufficient frequency of appraisal – The most common interval for appraisal is every 12 months; this is usually adequate for salary and promotion decisions. However, formal review of progress toward goals might be required at more frequent intervals, depending on the nature of the job. • Clear communication of appraisal results. A final vital element in effective performance appraisals is communication of the results to the subordinate. These results must be clear and indicate that the purpose of the performance appraisal was fulfilled. (37)

Fairness of application is the standard in performance evaluations. Performance evaluations must be consistently administered among all employees. The same set of criteria must be applied to all employees performing similar responsibilities throughout the laboratory. For example, all phlebotomists working in a laboratory section must be held to the same expectations of performance and behavior. If evaluation standards are not identical for every employee at the same position, the appraisal system will be fundamentally flawed and useless. A performance appraisal is a formal encounter that should be conducted on a determined, regular, predictable schedule. A probationary evaluation is normally given at a preordained point in employment, for example,

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at 90 days after the hire date. The probationary review protects the organization because it provides the manager the opportunity to evaluate the employee’s progress and make an objective decision about whether or not the person should be added to the staff on a continuing basis. The probationary period is defined and long enough in duration to give the employee an opportunity to learn the new assignments, and also long enough for the manager to make an informed assessment. A probationary period, usually 90 days in duration from the time of hire, is the time when the manager should be critically observant of performance. The manager should treat the probationary period as an orientation process and expect to provide a good amount of teaching, coaching, and mentoring during that time. This ensures that the new employee is given every opportunity to succeed. If, after an adequate period of observation, the manager feels that performance deficiencies cannot be rectified, the manager can dismiss an employee without cause. If there are no performance issues during the probationary period, an employee will be asked to join the staff. It is extremely important to treat the probationary period as a very serious opportunity to observe employee work behaviors, because once the organization makes a commitment to keep a new employee beyond the probationary period, it becomes much more difficult to dismiss an employee because of performance problems, poor attendance record, and/or behavioral issues.

Evaluating Employee Performance A performance appraisal provides an employee with valuable written feedback about progress made toward specific employment objectives. It serves the employee’s need for objective evaluation about how he or she is doing. It also serves the manager’s obligation to assess performance and provide constructive feedback. It is the manager’s opportunity to put into writing an employee’s level of competence measured against the stated requirements of the position. An appraisal also provides a forum for discussion about the employee’s training needs, salary expectations, professional development, and career progress. A properly conducted performance appraisal is a two-way conversation, with the manager actively listening to the employee’s feedback. While some companies conduct formal reviews at least once a year, there should really be an informal and continuous process. A sound review system, fairly administered, can be beneficial to a company and its employees. On the other hand, one that is not properly administered can result in lower performance, greater mistrust, and legal problems. Some of the benefits of regular reviews are: • Keeping good people from getting buried in the system and exposing nonproductive people who disrupt the system.

• Corrections of deficiencies and improved performance. • Providing helpful data for promotion decisions, as well as being a basis for salary and wage adjustments, bonuses, and other financial rewards. • Establishing a baseline against which people can measure their own progress and encouraging them to take affirmative action to work toward more challenging goals. • Forcing communication between manager and staff. • Giving managers a sense of how people are coming along. • Letting people sort out their problems. • Providing an opportunity for managers to ask themselves what they have done to improve employees’ performance. (9)

A fairly administered employee evaluation must deploy a stated set of performance criteria upon which to base judgments about performance. To ensure consistency, performance criteria require clearly defined standards of excellence.

Problem Solving First and foremost, a laboratory manager is a problem solver. Every day, there will be situations that require a high level of decision making in reaction to a situation where a problem is confronted, isolated, and avoided or eliminated. Problem solving is a skill that can be developed, and it improves with confidence and repetition. To be an effective problem solver, a manager must approach problems in a structured, creative way, much as a scientist deploys novel techniques to surpass existing problems. Problem solving is a process that contains several key elements. The manager must be able to determine the exact source and nature of the problem, which is often difficult in complex situations where many people or processes are involved. In the laboratory setting, root problems in technique or procedure often compound at each ensuing step, causing amplified impact further downstream. In these situations, the true cause of the problem is not obvious, since it becomes visible at a point that is far removed from the source. Therefore, the manager must be a dedicated detective, gathering evidence and pulling together as much information as possible to identify the root cause of the flawed process. Once the cause of a problem is known, a manager has to come up with a solution. If a machine is not functioning because it is unplugged, there is only one solution— plug it back in. Problems in the laboratory are rarely so simple, however, that there is only one obvious solution. More often than not, there will be a range of alternatives that should be carefully considered. Through consultation with bench-level experts, the manager should create a list

CHAPTER 2. MANAGEMENT FUNCTIONS

of possible actions directed toward a problem. This step often requires the human touch, bringing people together in an unbiased way to discuss the range of options that are available. Implementing the best solution often involves some level of compromise, usually requiring the cooperation of many affected individuals. A skillful manager makes his or her employees feel that they are part of the solution instead of making them feel that they are responsible for the problem. The final phase of problem solving is follow-up. Once the solution is implemented, it is absolutely necessary to measure outcomes. The manager must gauge the effectiveness of the solution in a structured way at prescribed intervals to make sure that the problem was truly corrected. The solution might create a new set of unanticipated problems. Monitoring the situation to ensure that the desired results have been achieved is an essential final step. Monitors are as unique as the problems, but they should be consciously considered and applied. An example of a scientific approach to problem solving is provided here. The following seven-step checklist offers a systematic approach to identifying a problem and making a clear and rational decision in order to solve it. The simple, seven step approach described here allows the manager the flexibility to modify when necessary but still have some basic guidelines to follow. Step One: Definition of the Problem – One pitfall many managers encounter as they begin a problem-solving process is the temptation to hypothesize about what should have been done earlier so the problem would not have developed. Some problems will be inherited, some resulting from decisions made elsewhere in the organizational hierarchy, and still others from one’s own doing. Regardless of the origin of the problem, the solution must still be made within the framework of the situation. Step Two: Fact Gathering – Once the problem has been identified, the manager can begin to gather information needed for developing alternative solutions. Step Three: Development of Alternative Solutions – The generation of possible solutions calls for creative thinking. Often when faced with this step, a manager will draw on his past experience; in most cases this will be adequate. Today’s manager must supplement his creativity by seeking information from others who have solved a similar problem or from individuals directly involved in the situation. It is wise to keep an open mind and not prejudge ideas as they are generated. Step Four: Weighing of Alternative Solutions – This step requires the analysis of alternative solutions by stating the advantages and disadvantages of each possible course of action. The manager must consider the ramifications of each potential solution. Consideration should be given to the question of whether a chosen alternative will eliminate recurrence of the problem or generate another in its place.

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Step Five: Selection of Solutions – Choosing the best possible course of action is an integrated process. Considerable fact gathering and planning have already occurred. Even though alternatives have been scrutinized, any single approach is not always “best”. There is generally more than one way to solve a problem. Step Six: Implementation of the solution – Of all the steps in the problem-solving process, the implementation step is usually the most time consuming. At the same time, even the best decision, if not properly implemented, is useless. As in the decision-making process, implementation must involve those who are directly affected by the solution. Step Seven: Measurement of the Consequences – Not all decisions rendered will have the effect that was planned. An analysis of what occurred, whether predicted or not, provides an ever-increasing basis of experience from which future problems can be solved. (21)

Decision Making Managers are frequently required to make decisions. It is in many ways an extension of the problem-solving process. A manager’s effectiveness often hinges upon the consistency and quality of the decisions he makes. As in problem solving, there is a scientific approach that enables a manager to make the best possible decisions. Certain factors affect the decision-making process, and they should be carefully considered. Before attempting to make any management decisions, there are several general areas of concern to which a laboratory manager must be sensitive: • Quality of the Decision – In order to make a quality decision, a manager must determine if he has all of the appropriate information available. The manager may need to seek out information regarding specific skills necessary to complement a given alternative. • Acceptance of Commitment to the Decision – It is important to consider not only the degree of acceptance by the subordinates affected directly by the decision but also the degree of acceptance at other levels of management within the organization. • Speed of the Decision – The time element must be considered. Even if it is not essential that the decision be a quick one, the laboratory manager must consider the length of time it will take to involve appropriate parties. • The nature of the Value Judgments of the Decision – All decisions involve a value judgment in terms of what is beneficial or nonbeneficial and important or not important in projecting the probable outcomes of the decision. (20a)

A laboratory manager makes many decisions every day. Those decisions obviously have a profound effect on the success of the lab, and the quality of the decisions is the

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A manager must control the activities of the laboratory, constantly reviewing the current situation to ensure that there are no unattended details. There is no substitute for engaged leadership.

ultimate measure of a manager’s success or failure. Decision making is by definition a thoughtful, conscious process that requires a rational consideration of cause and effect. In most cases, decisions are made to create improvement in a given situation. If the manager has a lucid understanding of what is intended to be accomplished through the decision-making process, and furthermore takes into consideration a wide range of possible actions, the resulting decisions will be quality ones. A rushed decision is rarely the optimal decision. When presented with a big decision, it is often helpful to write down the problem and make a list of possible solutions, intended outcomes, and potential unintended consequences. Most importantly, never panic. Step away from the situation long enough to perform a factual analysis before making a decision. Sometimes factual analysis leads to a single obvious decision. More often than not, however, there are numerous possible decisions whose outcomes must be weighed. A manager must rely on input from others in the laboratory who can offer sound advice, not only on the factors that are causing the problem, but also on the possible far-ranging effects of the decision. Many internal factors have an adverse impact on the decision-making process, including stress, self-doubt, lack of self-awareness, pressure to act too quickly, and procrastination in an effort to avoid difficult decisions. As a manager gains experience and confidence, many of these internal barriers will fall away.

■

Summary

Mission statement A written statement that clearly defines what the organization does and why it is important.

A laboratory manager has unique skills and a high level of daily responsibility spanning all areas of the organization. Because the technical aspects of running a laboratory are tightly regulated, when technical problems arise, there is very often a written set of guidelines that dictate a solution. However, when it comes to managing the human side of the laboratory, there are daily challenges for which there are no rulebook and no obvious solutions. But there is a set of time-tested management tools for use by laboratory managers to address these daily challenges. A laboratory manager must become familiar with these tools and use them on a daily basis to gain confidence and experience in managing the human side of the laboratory. KEY POINTS ■ The manager must develop a system to organize the workflow, policies, and staffing of the laboratory. ■ The manager must provide direction to the laboratory by communicating, delegating, motivating, and coaching.

GLOSSARY Accountability An individual’s obligation to be responsible for his or her own actions within the work environment. Coaching Providing an employee with guidance, direction, motivation, and support with the objective of improving all aspects of job performance. Communication The exchange of information, flowing in all directions within the organization. It can be written or spoken, verbal or nonverbal, formal or informal. Delegation Assigning a specific task to an accountable subordinate. Directing Planning a specific action and actively overseeing the execution of a plan. Environmental analysis A thorough and systematic review of the external and internal factors that affect the functioning and performance of the laboratory. Facilitation The process of assisting participants to move through material in a logical and structured way. Goal A desired outcome that the organization hopes to attain. Metrics Specific, quantifiable measurements used as an indicator of progress.

Motivation Inspiration to perform in a desired way or to achieve a desired result. Organizational chart A diagram showing relationships among functional areas within an organization. Organizing The process of structuring resources and activities in a way that promotes the accomplishment of specific activities. Performance evaluation Formal feedback on job performance. Policies Internally generated rules that establish behavioral expectation within the laboratory. Priority Weighing the importance of the tasks at hand to determine which have the highest level of immediate precedence. Standard operating procedures (SOPs) A written set of instructions that codify technical and administrative activity in the laboratory. Strategic planning A methodical and structured process whereby an organization defines its mission, identifies directions, develops a unified approach, prioritizes long- and short-term goals, assigns accountabilities, and allocates financial resources. Strategy An artful means to a defined objective or goal.

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SWOT analysis Analysis of the laboratory’s strengths, weaknesses, opportunities, and threats. Strengths and weaknesses are often internal to the organization, while opportunities and threats are often externally derived. Vision statement A written statement that clearly and concisely articulates what the organization expects to become. Workflow Tasks organized and accomplished in a particular way to achieve a specified result.

REFERENCES

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(ed.), Administration and Supervision in Laboratory Medicine, 2nd ed. Lippincott Williams and Wilkins, Philadelphia, PA. 12. McClatchey, K. D. 1994. Clinical Laboratory Medicine, p. 5. Lippincott Williams and Wilkins, Baltimore, MD. 13. McPherson, R. A., and M. R. Pincus (ed.). 2011. Clinical Diagnosis and Management by Clinical Methods, 22nd ed., p. 3. Elsevier Saunders, Philadelphia, PA. 14. Nolan, T., L. Goodstein, and J. Goodstein. 2008. Applied Strategic Planning: An Introduction. Pfeiffer, San Francisco, CA. 15. Rakich, J. S., B. B. Longest, and T. R. O’Donovan. 1977. Managing Healthcare Organizations, p. 127–129. W.B. Saunders, Philadelphia, PA.

1. Camp, R., M. E. Vielhaber, and J. L. Simonetti. 2001. Strategic Interviewing: How to Hire Good People, p. 65. Jossey-Bass, San Francisco, CA.

16. Reinke, W. 1988. Health Planning for Effective Management, p. 187. Oxford University Press, New York, NY.

2. Dorner, D. 1996. The Logic of Failure, p. 163. Basic Books. New York, NY

17. Robbins, S. 2008. The Truth about Managing People, 2nd ed., p. 187. FT Press, Upper Saddle River, NJ.

3. Hardwick, D. F., and J. I. Morrison. 1990. Directing the Clinical Laboratory, p. 133–134. Field and Wood Medical Publishers, New York, NY.

18. Scholtes, P., B. Joiner, and B. Streibel. 2003. The Team Handbook, 3rd ed. Oriel Incorporated, Madison, WI.

4. Hill, J. 1997. Managing Performance, p. 87. Gower Publishing, Aldershot, UK. 5. Hodgettes, R. M., and D. M. Cascio. 1983. Modern Healthcare Administration. Academic Press, New York, NY.

19. Shortell, S. M., and A. D. Kaluzny. 1994. Healthcare Management: Organization, Design and Behavior, 3rd ed., p. 172. Delmar Publishers, Albany, NY.

6. Hunsaker, P., and T. Allesandra. 2008. The New Art of Managing People. Free Press, New York, NY.

20. Snyder, J. R. 1989. Laboratory planning, organization, and control, p. 34. In J. R. Snyder and D. A. Senhauser (ed.), Administration and Supervision in Laboratory Medicine, 2nd ed. Lippincott Williams and Wilkins, Philadelphia, PA.

7. Johnson, E. A. 1989. Managerial-organizational communications. In J. R. Snyder and D. A. Senhauser (ed.), Administration and Supervision in Laboratory Medicine, 2nd ed. Lippincott Williams and Wilkins, Philadelphia, PA.

20a. Snyder, J. R. 1989. Problem-solving—The decision making process, p. 45–46. In J. R. Snyder and D. A. Senhauser (ed.), Administration and Supervision in Laboratory Medicine, 2nd ed. Lippincott Williams and Wilkins, Philadelphia, PA.

8. Koontz, H., and H. Weihrich. 1990. Essentials of Management, 5th ed. McGraw-Hill, Inc., New York, NY.

21. Snyder, J. R., and D. S. Wilkinson. 1998. Management in Laboratory Medicine, 3rd ed., p. 66–68. Lippincott Williams and Wilkins, Philadelphia, PA.

9. Krieff, A. 1996. Manager’s Survival Guide: How to Avoid the 750 Most Common Mistakes When Dealing with People, p. 110. Prentice Hall, Englewood Cliffs, NJ. 10. Kurek, A. 1998. Staffing and scheduling for laboratory personnel, p. 226. In J. R. Snyder and D. S. Wilkinson (ed.), Management in Laboratory Medicine, 3rd ed. Lippincott Williams and Wilkins, Philadelphia, PA. 11. Martin, B. G., and A. S. Kurec. 1989. Staffing and scheduling of laboratory personnel, p. 199. In J. R. Snyder and D. A. Senhauser

22. Varnadoe, L. 2008. Medical Laboratory Management and Supervision, p. 39. PriorityEd, Fort Pierce, FL. 23. Vetter, L. P., R. Carden, and D. S. Wilkinson. 2001. Strategic planning in the clinical environment. Clin. Leadersh. Manag. Rev. 15:34–38. 24. Wolfgang, J. W., and L. M. Brigando. 1989. Standards and appraisal of laboratory performance, p. 218–219. In J. R. Snyder and D. A. Senhauser (ed.), Administration and Supervision in Laboratory Medicine, 2nd ed. Lippincott Williams and Wilkins, Philadelphia, PA.

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APPENDIX 2.1 Laboratory Strategic Plan

GOAL

Metric

Strategy

Action Item

Accountability

Target Date

Accountability

Target Date

Metric

Strategy

Action Item Metric

Strategy

Action Item Metric

doi:10.1128/9781555817282.ch2.apx1

APPENDIX 2.2 Laboratory Organizational Chart See facing page doi:10.1128/9781555817282.ch2.apx2

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Cytogenetics Director: Evans Manager: Simms

Molecular Diagnostics Director: Brown Manager: Elvie

Hematology Director: Chang Manager: Ford

Immunology Director: Young Manager: Davis

Clinical Chemistry Director: Fox Manager: Roberts

Clinical Pathology Director: Williams Manager: Potter

Microbiology Director: Robinson Manager: Tate

Blood Bank Director: Ortiz Manager: Allen

Outreach Director: Liu

Personnel Director: Tucker

Surgical Pathology Director: White Manager: Lee

Tissue Acquisition Director: Nicholas Manager: Simon

Autopsy Director: Johnson Manager: Mays

Cytopathology Director: Morgan Manager: Todd

Neuropathology Director: Miller Manager: Casey

Anatomic Pathology Director: Davis Manager: James

Finance Director: Madison

Compliance Director: Kelley

CLINICAL LABORATORIES Medical Director: Smith Administrative Director: Jones

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APPENDIX 2.3 Policy Template

Medical Center Policy Template Subject: Name of Policy

Purpose: Reason for Policy

Policy Number:

_______

Approval Date:

_______

Effective Date:

_______

Review Date:

_______

Policy: Government Regulations Industry Guidelines Regulatory Requirements

Procedure: Defined Steps

References: Supporting Documentation

Approved by:

Date:

_____________________

_______________

Name Title

doi:10.1128/9781555817282.ch2.apx3

3 Introduction Overview of Laboratory Industry Trends during the Past Decade • Forecast for the Future

Strategic Business Planning Overview

Relevant Economic and Business Concepts

Market Assessment • Key Strategies

Competitive Environment

Roxanne Mercer and Ann L. Harris

Clinical Laboratory Competitive Market • Business Entities, Strategic Alliances, Joint Ventures, Mergers and Acquisitions, and Integrated Networks

The Economic Environment Four Stages of the Business Cycle • The National Economy: Fiscal and Monetary Policies • Assess Infrastructure and Develop Production Strategies • Cost Accounting Principles • SystemWide Approach to Establishing a Fee Schedule • Consumer Price Index • Pricing Strategies

Promotional (Marketing and Sales) Strategies Market Research • Marketing Strategies • Sales Strategies • Advertising Strategies

Customer-Focused Concepts and Service Strategies Who Is the Customer? • Understanding Customer Behavior • Key Concepts and Recognized Customer Service Strategies • Service Delivery Strategies

Summary KEY POINTS GLOSSARY REFERENCES ADDITIONAL READING APPENDIX

Clinical Laboratory Management, 2nd Edition Edited by L. S. Garcia ©2014 ASM Press, Washington, DC doi:10.1128/9781555817282.ch3

OBJECTIVES To define relevant economic issues that influence the delivery of healthcare services and their significance to the practice of laboratory medicine To outline the key concepts and principles (for example, supply, demand, and competition) that drive the business decisions faced by laboratory directors, managers, pathologists, and hospital administrators To demonstrate the relationship between global economy concerns and changes in healthcare policies To identify marketing, sales, and customer service tools used to formulate a business plan to respond to the service requirements and economic needs of the healthcare delivery system

In our free enterprise system, business traditionally has been held responsible for quantities—for the supply of goods and jobs, for costs, prices, wages, hours of work, and for standards of living. Today, however, business is being asked to take on responsibility for the quality of life in our society. The expectation is that business, in addition to its traditional accountability for economic performance and results—will concern itself with the health of society, that it will come up with the cures for the ills that currently beset us and, indeed, will find ways of anticipating and preventing future problems in these areas. R. F. Barker (2)

Overview of Laboratory Industry Trends during the Past Decade Following several decades of profitability created by low direct costs, favorable inpatient reimbursement, hospital-based outpatient reimbursement, and physician utilization, the clinical laboratory industry suffered a severe setback beginning in the 1990s and continuing into present times. Increased regulatory requirements and the expansion of managed care were the change drivers for many trends in the healthcare and clinical laboratory industries, as listed in Table 3.1 (21). The industry as a whole suffered a loss of several billion dollars in reimbursements from the impact on test utilization patterns. Faced with possible loss of market share, commercial laboratories engaged in fierce competitive bidding for managed-care contracts, further decreasing laboratory reimbursement. Reimbursements began to improve by the end of the decade as commercial laboratories sought more profitable contracts. At the same time, hospital laboratories faced excess testing capacity created by shifting STAT testing to near-patient testing and shortened inpatient lengths of 43

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Table 3.1 Change drivers during the 1990sa Driver

Change

Tighter quality and documentation requirements (CLIA ’88)b

Reduced test volume Increased cost of production Reduced collections Increased denials Reduced reimbursements Shift from fee for service to capitated reimbursement models Prices and reimbursements reached plateau then decreased in 1990s

Increased coding and claims requirements Reduced Medicare fee schedule Managed-care enrollments more than doubled Fierce competitive bidding among commercial laboratories a

See reference 22. Clinical Laboratory Improvement Amendments of 1988.

b

stay. Laboratory managers expanded their focus, evaluating technical proficiency, as well as analyzing and controlling costs. Successful managers strengthened their skills in human resource management, financial management, and process improvement. Operations managers used their business savvy and experience to create business plans. The industry observed record numbers of laboratory consolidations, mergers, acquisitions, and joint ventures during the decade. Laboratory restructuring often followed hospital or healthcare system reorganization. The concept of laboratory regionalization, first developed in the 1980s, focused on standardizing policies and procedures and providing improved continuity of care across multiple facilities and sites of care. Enhancing income by expanding the geographic market and lowering costs through economies of scale became the primary goals. During the past decade, businesses and the healthcare industry have undergone fundamental changes. As the world economy has become more global, it has fueled growth in competition, an increased dependence on information technology, and an exponential growth in the use of the Internet. Using knowledge to create value has become a key economic driver. During the same period, laboratory medicine has undergone similar transformations. Technological developments continue to improve productivity in the clinical laboratory. Laboratory services information is assessable globally, and laboratories are faced with international competition and greater pressures to reduce costs, increasing the commoditization of the clinical laboratory industry. However, a gap between technical possibilities and financial resources remains prevalent (8). Managed care, pricing pressure, and advances in medicine and technology have created a constant state of change. Table 3.2 shows the typical paradigm shifts encountered by the laboratory industry over the past decade. Adding to a growing population of uninsured patients, employees in their fifties are taking early retirement as employers balk at continuing to pay escalating premiums for healthcare coverage. A growing number of patients will not be able to pay their medical bills, and bad-debt write-offs will continue to rise. The downward trends in reimbursement

will continue with even greater controls and limitations on utilization, forcing further reductions in the unit cost of medical services (reference 28, p. 170). On March 23, 2010, President Obama signed the Affordable Care Act (ACA). The law puts in place comprehensive health insurance reforms to ensure that most Americans have access to quality, affordable healthcare. The constitutionality of the ACA was challenged, and the U.S. Supreme Court upheld its constitutionality in a June 28, 2012, ruling.

Forecast for the Future To compensate for the changes of the past decade, hospital laboratories have become competitive players in the local market by developing their outreach business to capture new revenue from market segments such as physician offices and long-term-care facilities. Hospital laboratories have formed networks to enable them to compete for managed-care contracts. With the trend to consolidate hospitals and develop core laboratories to keep more tests inhouse, there is now competition to perform esoteric testing among hospital-based laboratories. National commercial laboratories also compete for referral testing in the esoteric market, where the profit margin is more attractive. New advances in point-of-care testing (POCT) instruments are stimulating an increase in the number of physician office laboratories. Both academic medical centers and independent commercial laboratories are focusing on research and development of specialized testing to augment the routine testing performed in hospital core laboratories. Successful centralization may involve robotics and increased automation. Standardization and centralization of data management, methods, facilities, equipment, quality assurance, education, and information systems are fundamental to the implementation of responsive business strategies (P. W. Wisler. Module 2: money and finance: strategic planning consideration in a dynamic marketplace by Coopers and Lybrand L.L.P. Presented at The Dark Report’s Strategic Business Plans for Laboratory/Pathology Consolidation and Restructuring, New Orleans, LA, 1997). Healthcare administrators and laboratory managers must develop the skills needed to deal with the logistical and cultural

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Table 3.2 Industry trends during the past decade Old paradigm

New paradigm

Centralized laboratory testing

Point-of-care testing (POCT) Near-patient and bedside testing Home testing kits Direct-access testing (DAT) Patient-care technician at nursing stations Outpatient invasive procedures Global payment systems Diagnosis-related groups (DRGs) Ambulatory payment classification (APCs) Skilled-nursing facility (SNF) beds Consolidated billing: services reimbursed under resource utilization groups (RUGs) Patient care plans Medically necessary testing Local medical review policies (LMRP) Advanced beneficiary notices (ABNs) Specialized esoteric testing Bottom-up customer focus Creating value

Physician office testing Lab-supervised phlebotomy Inpatient procedures Fee-for-service reimbursement (FFS)

Skilled hospital beds Prospective payment system (PPS) for skilled-nursing facilities Standing orders Preventive healthcare screening and diagnosis V-codes

Routine testing Top-down hierarchy Exceptional service

changes required to develop strategic business plans. They must realize that customers are every organization’s most valuable resource. Ultimately, customer satisfaction will be the critical strategic weapon for any enterprise (reference 24, p. ix–xii, 23). The mission of clinical laboratory medicine is to improve patient care through improved laboratory testing. To be strategically positioned for the future, the clinical laboratory discipline and the industry must enhance efficiency by consolidation, must consider formation of alliances or partnerships, and must integrate processes (both horizontally and vertically). Future success hinges on efficiency, but efficiency will not guarantee success. The most relevant standard has become the ability to create value. Laboratory professionals must focus on providing additional information and knowledge services related to the in vitro diagnostic services offered (8).

Strategic Business Planning Overview Strategic planning for organizations provides a useful tool to energize and motivate the employees in the organization regarding its vision, mission, and goals. The planning process provides a document that can be used to recruit others to the mission, focusing time, talent, and resources toward running a successful operation. The initial strategic phase should include thinking and exploration exercises. Taking the time to think before planning is logical, yet most organizations fail to devote adequate time to think and explore. As more stakeholders become involved in the thinking and exploration process, they become vested

intellectually and emotionally, increasing the likelihood of the plan’s success. Questions to ask during the first phase should resemble brain-storming activities such as: Where is the industry headed? What do our customers want or need? What are the current trends in products and services? What should be changed or eliminated? What new products and services should be considered? During the exploration phase, the group should avoid discussing feasibility and cost, and focus on criteria for inclusion or ideas that will either distinguish or add perceived value. Discussions of any constraints identified should be tabled until the strategic planning phase, which should target tactical development. During this phase, the realities of funding and resources are considered using decision-making tools to select the best ideas and options for the developing plan. The planning phase discussions should include the following: market assessment; strategies; competitive and economic environment; a review of strengths, weaknesses, opportunities, and threats (SWOT); and resources. Next, focus on differentiating your organization from the competition by identifying your unique fit, by visualizing three interlocking rings: • Who you are (your strengths and weaknesses) • What the customer needs (the opportunities and threats) • What you stand for (the organization and department’s mission, vision, and core values) The intersection of the three rings could be considered your organization’s differentiated fit (37).

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When used in goal setting, the acronym SMART should be expanded beyond the traditional terms (specific, measurable, achievable, relevant, and time-based) to include other descriptive terms, according to Susan Heathfield at About.com (19): S: specific, systematic, synergistic, significant, shifting, stretching M: measurable, meaningful, memorable, motivational, magical A: achievable, action, accountability, acumen, agreeable R: relevant, realistic, reasonable, resonating, results, rewarding, responsible, reliable, remarkable T: time-based, timely, tangible, thoughtful

Market Assessment The development of a strategic business plan begins with a market assessment. The primary purpose of the market assessment is to research consumer needs and determine if there is an opportunity to provide a service. The impact the project may have on laboratory production (efficiency) and revenue should be evaluated. The market assessment should also include an evaluation of sales and service requirements, as well as an analysis of the competition. After the market assessment, the next step is to develop an implementation plan that considers legal (regulatory), economic, and societal variables. These variables, as well as the competition, are considered environmental variables that can potentially influence customer satisfaction (reference 5, p. 29; reference 28, p. 25–43; 29). Key Strategies Strategy can be defined as the approach or techniques developed by the management team to facilitate the

Figure 3.1 Strategic business planning. The four key strategies (pricing, production, marketing, and service) serve as the cornerstones in the framework for the development of a successful business plan. The strategies must be carefully weighed against the influences of the four variable environmental factors and the market research information on consumer needs for the products and services. doi:10.1128/9781555817282.ch3.f1

organization’s ability to perform successfully. The strategic planning process functions best when it operates in an open and inclusive atmosphere. The strategic planning process should result in innovative and visionary products and service delivery goals (4). A business plan has four key strategies that must be carefully considered (reference 6, p. 19). • Production (product planning) strategies. Production strategies include decisions about research and development, production times for new products, and branding. • Service (distribution) strategies. Service strategies define how the products and services will be delivered. • Marketing and sales (promotional) strategies. Promotional strategies include market research, sales management, customer service, communication, marketing, sales support, and the approach to advertising (publications and promotions). • Pricing strategies. Pricing strategies are typically the most difficult and are often dependent on the complexity of regulatory oversight and public scrutiny. Prices must always be profitable and defendable. The key to success is being able to combine these four strategies into a dynamic business plan (reference 5, p. 29) (Fig. 3.1). Often, one or more of the environmental variables are beyond management’s control, ultimately putting pressure on an organization to continuously reevaluate its business strategy. Society (or the consumer) generally supports businesses as long as the product or service being delivered is perceived as adding value. Economists refer to satisfying this need as utility (reference 6, p. 6). In healthcare it is more commonly referred to as clinical utility.

Perform MARKET ASSESSMENT

ENVIRONMENTAL VARIABLES

KEY STRATEGIES • Pricing • Production • Marketing • Service

• Legal • Competitive • Economic • Societal

Develop STRATEGIC BUSINESS PLAN

CHAPTER 3. RELEVANT ECONOMIC AND BUSINESS CONCEPTS

Competitive Environment A competitive analysis is the practice of analyzing the competitive environment for the geographic area where an organization conducts or plans to conduct business. Elements to include in the analysis are a comparative study of the strengths and weaknesses of the competitors and your own operation; the demographics and desires (needs) of the customer and market segments; the marketing, sales, pricing, production, and service opportunities; and the strategies that either improve or impede progress. Also identify internal and external barriers, obstacles, and threats to your organization’s success. Refer to http://www.reference forbusiness.com./small/Bo-Co/Competitive-Analysis.html (last accessed September 28, 2012).

Clinical Laboratory Competitive Market Competition exists when businesses that offer similar products and services want the same customer base. Over the past four decades, competition among commercial laboratories has resulted in many mergers and acquisitions. Regional laboratories and local independent laboratories have consolidated in an effort to increase market share and offset the declining revenue base. However, new technology is now driving the growth of smaller, independent specialty laboratories focusing on specific niche markets such as clinical trials, genetic and molecular diagnostics testing, flow cytometry, and pathology consultation services. The smaller specialty companies have formed strategic alliances to compete with the major reference laboratories and offer a wider scope of services to their customers. Physician office laboratories are taking advantage of robust, near-patient testing platforms. As POCT technology continues to develop, home healthcare agencies will likely become competition in the clinical laboratory testing market. Business Entities, Strategic Alliances, Joint Ventures, Mergers and Acquisitions, and Integrated Networks Healthcare facilities typically respond to the pressures created by the financial constraints of healthcare reform by solidifying their current market share, expanding their geographic service area, and implementing better cost controls. Industry restructuring is unpredictable and often includes relationships between unlikely business partners. The arrangements include physician practice organizations, physician management groups, physician hospital business organizations (health systems), integrated delivery systems, independent provider associations, and provider networks. The type of business entity that institutions typically form is based on tax status. Tax-exempt status is sometimes difficult to obtain when more than 20% of the healthcare organization’s board members are physicians. Individuals, sole proprietors, corporations, and trusts are all taxpayers.

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The following are some types of business entities: • Corporations are required by state law to file articles of incorporation as a for-profit or a not-for-profit organization. A corporation’s owners have limited liabilities based on their individual investments in the company. • Partnerships are not considered taxable entities and do not pay taxes. The general partners are personally liable for financial obligations and are taxed on their earnings. Partners in a limited partnership are only liable for the amount equal to their investment. • A limited liability company (LLC) is a legal entity treated like a corporation, but the owner’s liability is limited to his or her investment, and the company is treated like a partnership for federal income tax purposes. An LLC may or may not have centralized management. To gain classification as a partnership, the LLC must have at least two members (34). Strategic alliances. Faced with increasingly complex technologies and more intense global competition, healthcare organizations can use strategic alliances to combine their resources to share risk, reduce costs, and expand customer and supplier relationships. When properly planned and managed, an alliance can significantly strengthen competitive advantage through technology exchange, opening new markets, securing investment capital, and sharing costs of research and development. Equity investments, cooperative ventures, research and development contracts, licensing agreements, and sales and marketing agreements fall under the umbrella of strategic partnering. Whenever the income from the venture can be referred to as unrelated business income, the entities should consider restructuring the affiliation agreement. The parties should execute due diligence or confidentiality agreements at the onset of the negotiation process (13). Strategic partnerships are typically formed by corporations with strategic objectives that complement one another. The partners agree to mutual and open communication that supports long-term, multiyear preferential relationships that share risk and reduce costs. These partnerships allow laboratories to deal with fewer suppliers, streamline, standardize, automate purchasing practices, reduce inventories, and measure both quality and financial outcome (4). Less formal alliances allow for the creation of cooperative databases that support information sharing so that the partners can make business decisions with current, detailed information about the healthcare environment. There is a growing need for healthcare providers and insurers to share information across databases. The resulting network server is generally referred to as a community health information network. More formal equity partnerships create a business arrangement with shared ownership and interlocking boards. Franchise alliances link the

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partners through exclusive license agreements that provide training, products, systems, and marketing in exchange for the financial investment. A shared clinical service alliance allocates the costs for specialized clinical services, such as magnetic resonance imaging, among multiple sponsors. A joint venture brings two or more entities together to share an investment (11). Joint venture. A joint venture is formed for economic purposes to achieve mutual or common financial goals. The arrangement may include partnerships, corporations, trusts, LLCs, leases, and contracts. Joint venture is the term used to describe management agreements, partnerships, strategic laboratory arrangements, and outsourcing. Such ventures are not legal entities with legal protection. Facilities entering into a joint venture arrangement should first seek the advice of counsel to ensure that the partnership does not violate Internal Revenue Service guidelines, antikickback statutes, fraud and abuse laws, the Stark law, or safe harbor regulations (34). These regulations are discussed in more detail in chapter 5. Mergers and acquisitions. Performing due diligence in the merger process includes an examination of the financial and legal records of the parties involved. The process identifies the scope of liabilities that will be assumed and the legal impediments and provides a comprehensive understanding of the merging parties’ business operations (1). Typical structures used in mergers are as follows: • Statutory merger. The stock in the merging company is combined with the stock in the surviving company. • Stock acquisition. The stock in the merging company is acquired by the surviving entity, and the merging company continues to operate as a subsidiary corporation of the surviving company.

• Asset acquisition. The surviving company acquires some or all of the assets of the merging entity in return for stock in the surviving company. The merging company continues to exist as a legally distinct corporation. Integrated delivery systems. An integrated delivery system is formed when payors and healthcare providers (including acute-care providers, physicians, home healthcare agencies, nursing homes, primary care offices, and others) combine forces to extend their service lines to improve the coordination and quality of care while controlling costs. Financing an integrated delivery system requires a basic understanding of capital markets and the ability to adapt to the changing market demands. Integrated delivery systems measure their success using outcome data such as patient satisfaction surveys, readmission rates, costs for emergency care, and patient compliance to prescription refills. The creation of integrated delivery systems is a business strategy used to facilitate the change from treating chronic disease and acute episodes to the practice of preventive and predictive medicine. An accountable care organization, as defined by the Affordable Care Act, is one form of integrated delivery system. Emerging network models. There are at least seven loosely connected organizational models emerging with changing partners linked by contracts rather than by ownership. Each one takes a slightly different approach to organizing governance and directorship (27). Table 3.3 discusses various emerging network models (11). Regional network outreach programs. Healthcare facilities developing regional laboratory networks have encountered a number of difficulties along the way. It is never easy to overcome long-standing rivalry and antagonism

Table 3.3 Emerging network modela Description of network

Network organization and governance

Medical clinics

Physician-governed and medically dominated clinics form their own managed-care organizations or start joint ventures with managed-care plans. Academic medical center forms networks with large regional hospitals. The academic medical center serves as the network hub, and most decisions favor it. A network that is composed of strong regional hospitals and tertiary care centers without the expense of the academic medical center.

Hub and spoke Multicenter network Public system Enterprise corporation Provider-insurer partnership Community partnerships

a

See reference 11.

Urban hospitals form networks to capture Medicaid contract work to compete with managed-care and medical center networks. Corporations offer stock to physician and hospital partners, but the parent maintains control. Networks formed by physicians and insurers are difficult to operate due to differences in culture and leadership styles. Community-based healthcare systems or community care networks differ according to the locality and its needs. These networks are focused on financial risk, continuum of care, integration, outcomes data, and clinical protocols.

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among local competitors. Obtaining capital funding for outreach often takes a backseat to capital funding for information systems, acquisitions, and replacing aging facilities. Managers face difficult inequities in salary and benefit structures among the systems. Start-up costs, inaccurate estimates of specimen volume, and inferior information and billing systems often leave managers unable to demonstrate increased revenue, income, or profit in the outreach market (22). Managed competition. As hospital outreach programs develop relationships with community healthcare providers, commercial laboratories argue that hospital-based laboratories have an unfair advantage in the physician market segment, where physicians may feel obligated to patronize the hospital. Hospitals have also become aggressive in buying physician office practices in an effort to capture more referrals. In many areas, hospitals are developing their own managed-care programs in conjunction with the physicians. This approach is known as managed competition. The physician hospital organization negotiates contracts with third-party payors to provide a full scope of services under a managed-care arrangement.

The Economic Environment Four Stages of the Business Cycle There are six major macroenvironmental forces that affect an organization’s ability to serve its customers or sell its goods and services (according to the Business Glossary located at http://www.allbusiness.com/glossaries/ macroenvironment/4954903-1.html#axzz29NuRbPhV [last accessed October 15, 2012]). • Cultural environment includes social factors that influence basic values, behaviors, and preferences. • Demographic environment includes statistical studies of the population in terms of size, density, location, age, sex, race, occupation, etc. • Economic environment includes the economy, salary, credit, and pricing trends that affect consumer spending and purchasing power. • Natural environment consists of the raw materials and energy sources needed. • Political environment includes laws, regulations, government agencies, and lobbyists that restrict or influence society. • Technological environment includes forces that affect technology and the creation of new products, services, and markets. Businesses operate in a complex environment. The business cycle fluctuates through four dynamic stages that follow a cyclic pattern, as demonstrated in Fig. 3.2. Many

Figure 3.2 The four stages of the economy. The economy is

cyclic and progresses through four stages. There are cycles when the economic environment supports the move from recession directly to recovery, bypassing an economic depression. doi:10.1128/9781555817282.ch3.f2

economists argue that society can avoid future depression by intelligent utilization of economic and fiscal policies. In this model, the business cycle would move directly from recession to recovery (reference 5, p. 47–48).

The National Economy: Fiscal and Monetary Policies A variable economic factor that influences marketing strategies is inflation. The federal government uses two basic approaches to counter the effects of inflation on the economy. Fiscal policies target the government’s receipts and expenditures, while monetary policies refer to the management of the money supply and the market interest rates. During periods of inflation, the government’s fiscal policy changes could include reduced spending, increased taxes, or a price freeze. A monetary action plan might be to decrease the money supply or to raise the prime interest rate to curtail spending. Consumers generally do not take notice of modest price increases over time. This pricing phenomenon is known as creeping inflation. As customers perceive erosion of their buying power, they modify their behavior regarding major purchases to either buy now, believing that the price will be higher later, or reallocate their funds, postponing their purchase until later. Each of these results in a decline in demand for goods and services and creates a supply surplus and an excess capacity on the production line (reference 5, p. 47–48). Most laboratory expenses, including fixed and variable costs, are impacted by inflation. Inflation factors are not typically applied to expenses associated with depreciation, interest, rent or leases (except by contract), or bad debt. Inflation factors should be applied to an annual budget on a month-to-month accrual basis, rather than at the first of the year, so as not to overstate the cost (18).

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Global economy. In the global economy, businesses are forced to shift from being multinational (a national company with foreign subsidiaries) to being transnational (where the world is one economic unit). Sales, service, public relations, and legal affairs are local. Parts, machines, planning, research, finance, marketing, pricing, and management are obtained from a world market (14). The neoclassical concept of the global economy implies that the free mobility of products and factors of production across national boundaries will maximize efficiency through forced competition. Since the wider the market, the greater the possibilities for specialization, it follows that the most efficient market is the global market.

Assess Infrastructure and Develop Production Strategies Developing a business plan to pursue new business opportunities always includes an assessment of the existing infrastructure, facilities, equipment, and human resources and a realistic assessment of the laboratory’s excess capacity, using robust benchmarking tools. • Physical location. Determine whether the present location of the laboratory is adequate for convenient access for patients and couriers. Evaluate the space requirements for the anticipated increase in test volumes. • Testing personnel. Analyze the personnel required to support accessioning, testing, reporting, courier, and billing functions for the anticipated test volumes by shift. • Instrumentation/equipment. Work with laboratory managers to assess the existing equipment’s age, reliability, throughput, and cost per test. If new instrumentation is indicated, consider both capital funding and reagent rental. Consider whether the proposed volume justifies front-end automation or robotics. • Production strategies. Develop a detailed test schedule. Evaluate setup times and turnaround time (TAT) needs for the customers. Move batched testing to the most efficient shift for optimal TAT.

Cost Accounting Principles Laboratory costs. Traditional cost accounting methods focus on unit cost per test. Today, laboratory managers must also take into consideration other environmental factors, such as test performance site, for example, near-patient testing versus STAT laboratory to shorten TAT or length of stay for inpatients. Developing financial management skills is requisite to a manager’s ability to make sound business decisions. To establish the price for a laboratory procedure, managers must first understand the factors affecting the cost to perform the test. Laboratory costs are typically divided into four groups (20).

• Preanalytical. The cost of placing the order (connectivity), obtaining the specimen, transporting it to the laboratory, and accessioning/processing the sample for testing. • Analytical. The costs of reagents, labor, equipment purchase, depreciation, or lease. • Postanalytical. The costs associated with reporting results and billing for the services. • Quality assurance/quality control. The associated costs for monitoring and maintaining test quality. Table 3.4 lists terms frequently used in cost and price analysis. Some laboratories use activity-based costing, a method that assigns a cost to every activity throughout the organization. It captures associated costs for specimen collection, transportation, handling, usage, and disposal and assigns costs to bottlenecks, scheduling delays, and other process costs traditionally not captured in healthcare accounting systems. By performing a larger volume of tests in one location, laboratories spread the fixed costs over a larger number of tests, reducing the average fixed cost per test. If the output is increased without increasing the cost on the same scale, the laboratory has achieved economy of scale. Laboratories generally experience a decrease in cost per reportable result created by increased purchasing power for reagents, consumables, and kits. Laboratory managers must recognize that there is a point of diminishing return. When additional volume reaches a point where instruments and people are performing at their maximum throughput, the operational efficiency achieved by economy of scale begins to decline. An infinite number of tests cannot be performed in a finite amount of time and space (39). Return on investment. Capital budgeting is the process of planning for the expenditures expected to generate income to flow into the organization. The analysis for capital budgeting should include the following steps (10): 1. Identify the needed initial cash outflow using bids and proposals from vendors. 2. Forecast the anticipated net cash flows over the life of the project. 3. Evaluate the financial risks associated with the project. 4. Measure the required rate of return for projects of similar risk levels. 5. Compute the return on investment and assess project feasibility. First, determine the cost of the capital project. Include all nonlabor costs. Second, calculate the total gross revenue, or market potential, for the anticipated increase in volume of services over the life of the project. To estimate

CHAPTER 3. RELEVANT ECONOMIC AND BUSINESS CONCEPTS

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Table 3.4 Commonly used terms in cost and price analysisa Term

Definition

Direct costs

The costs incurred to perform analysis and produce test results for a specimen in the lab. Technical labor Reagents Depreciation of equipment The costs to acquire specimens and bill for tests. Billing Courier service Office supplies and administrative costs (telephone) Costs that do not fluctuate with volume changes. Fixed costs/test decrease as test volume increases. Lease/rent Administrative overhead (client service, sales, marketing) Depreciation on capital expenditures such as cars, instrumentation, and laboratory information system Costs that fluctuate proportionately with volume changes. Collection supplies Processing labor Vehicle maintenance and expenses Printer, fax, telephone lines for clients The total cost to perform a test. All elements of expense from front-end registration and specimen collection to back-end reporting, billing, and collection. Direct and indirect Fixed and variable Distribution of indirect costs across the department as a percentage of testing volumes. The cost to perform an additional test once the direct cost of the assay is derived; also referred to as marginal cost.

Indirect costs

Fixed costs

Variable costs

Fully loaded costs

Allocation of indirect expenses Incremental cost a

See reference 17.

the cash flows of the new venture, laboratory managers must know their fixed costs and the changes in variable costs for the anticipated growth. Finally, calculate the return on investment (15). This calculation is complex, but there are a multitude of online tools to facilitate the analysis. An explanation of the formulas is beyond the scope of this text.

System-Wide Approach to Establishing a Fee Schedule The development of a laboratory fee schedule is more successful when a system-wide focus on all of the factors related to laboratory economics is used. Communication must be open among accounting, patient reimbursements, finance, budgeting, production, and administration. The pricing formulas used must result in fees that cover production costs and are competitive in the local market. The individual fees should be reviewed to ensure that maximum reimbursement across the spectrum of payors is achieved. Consumer Price Index The Consumer Price Index (CPI) measures inflation at the retail level and reflects the average price change over time for a constant quality and quantity of market basket goods and services. The CPI approximates what households spend out of pocket for the goods and services used

for daily living expenses. Medical care, one of eight major divisions in the CPI, consists of two classifications: • Medical care commodities, which are divided into three expenditure categories: • Professional services • Hospital and related services • Health insurance • Medical care services, which include: • Medicinal drugs • Medical equipment and supplies Medical care indexes are limited to items with out-ofpocket expenditures including health insurance premiums deducted by the employer. The data includes information on healthcare services received, who received the services, the amount of the payment, and the insurance reimbursement amount. Out-of-pocket expenses include fees that are not recouped by health insurance and are paid to retail outlets for medical goods and to doctors and healthcare providers for medical services, as well as health insurance premiums, including Medicare Part B, paid by consumers. The net consumer out-of-pocket medical expense subtracts any insurance reimbursement made to the consumer from the total amount spent by the consumer. The medical care out-of-pocket expense excludes the cost associated with employer-provided healthcare.

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Hospital services include inpatient and outpatient services. The unit of price is the hospital visit, defined by admission date and discharge date as documented on the hospital bill in conjunction with the diagnosis. This sampling also identifies specific eligible payors and the reimbursement arrangements in the contract, including the patient’s portion of the payment. The goal of the hospital services index is to follow transaction prices of selected services over time while maintaining consistent characteristics that determine price. The transaction price is the reimbursement received by the provider from all eligible sources (insurers and patient). The CPI and Medical Care Price (MCP) index (a subset of the CPI) are often tied to purchasing and managed-care-provider contracts. To learn more about the CPI visit http://www.bls.gov/cpi/cpifact4 .htm (last accessed May 26, 2013).

Pricing Strategies Hospital laboratories typically have two fee schedules, one for inpatients and one for outpatients. Laboratories should have input in the development of the hospital’s inpatient and outpatient fee schedules. Fees for outpatient testing should never be higher than the inpatient fees. Most hospitals use rate-modeling programs that compare their charges with those of other healthcare providers in the local market. Hospitals with community-based outreach programs must determine the pricing strategies necessary to be competitive with each laboratory providing services in the designated service area. Table 3.5 lists tools and techniques frequently used in developing pricing strategies. Pricing strategies must give careful consideration and weight to the impact of

competitive market forces and contract negotiations with customers, suppliers, and insurers (reference 28, p. 133). Price is defined as the exchange value for a product or service or the value of an item. Pricing objectives typically fall into one of three groups: • Profitability. The goal is to maximize profits and target new income. Profits are a function of income and expense. Profit = income − expense. • Volume. Volume strives to maximize sales or market share. Gross revenue is determined by the sales price and the volume of the items purchased. Gross revenue = (unit price) (volume). • Status quo versus prestige pricing. Status quo minimizes competitive pricing wars and allows the company to focus its efforts on product improvement or product promotion. Prestige pricing goals set a relatively high price to create an image of quality or prestige in the mind of the buyer. List price is the term used when the current rate is quoted to the potential buyer. List price is usually determined using a cost-plus formula. Market price is the actual amount the customer pays. Laboratory pricing strategies and policies depend on the types of customers served and their needs. Account billing strategies. Strategies for billing accounts on an itemized invoice often include using a combination of across-the-board percentage discounts and special prices to meet the customers’ needs. When designing pricing options to accommodate customer needs, carefully review the fees to ensure that they are never below

Table 3.5 Tools and techniques used in developing pricing strategies Tool

Technique for use

Reimbursement data

Use patient demographic information gathered in the market assessment in conjunction with hospital statistics on patient mix. Work with the patient accounting or decision support to establish the average reimbursement/patient encounter. Establish pricing policies for accounts that are consistent and are based on anticipated monthly dollar volume. Maintain signed service agreements with customers that outline compliance issues. Does the hospital patient accounting office or the laboratory information system produce client invoices? For direct account billing, does the invoice format provide corporate accounting, line item discounting, special pricing, and monthly test utilization summaries? Can the billing system generate both a CMS (formerly HCFA) 1500 and UB92 billing format? (See chapter 5.) How are accounts receivable statements, aged trial balance reports, revenue reports for third-party payors, feedback on remittance advice and denials, past-due balances, and collections handled? Work with decision support and financial systems to generate monthly net revenue statements. Prepare monthly revenue reports that show net revenue after expense. Monitor net revenue per test compared to sales projections. Track progress and revise financial projections–based data. Revise the financial pro forma for the three-year business plan every quarter. Work with finance to prepare a return on investment that rolls the outreach program revenues up into the laboratory operational budget.

Billing procedures Billing systems

Revenue tracking Business planning

CHAPTER 3. RELEVANT ECONOMIC AND BUSINESS CONCEPTS

incremental costs. When selling to a customer, the best practice is to sell value rather than price. • Discounting strategies • Cash discounts are reductions in the list price that are given in return for prompt payment of a bill. Such discounts are legal provided they are offered to all customers on the same terms. • Quantity (volume) discounts are reductions in price based on volume purchases and may be a one-time transaction or a cumulative volume discount. Laboratories may give accounts higher discounts on certain high-volume tests and offer a standard percentage discount referred to as an across-the-board discount for all other test procedures ordered on a monthly basis. • Nondiscountable prices are usually established for tests that are not performed by the laboratory directly but are sent to a reference lab. Esoteric testing may also be nondiscountable, as start-up costs and initial production costs are higher and the profit margin is lower than for the typical high-volume, routine tests. This strategy, referred to as stratified pricing, targets certain procedures as carve-outs or exclusions from the rate negotiations with insurers. Pricing is stratified according to the test description or service line (for example, surgical and cytopathology, molecular diagnostics, and cytogenetic testing), based on cost and technical expertise. • Rate negotiation strategies for third-party insurers. Rate negotiation with insurers in most hospitals for inpatient, outpatient, and managed-care patient reimbursements is generally conducted by the hospital administrative contract or managed-care department. The contract fees may be a combination of prospective payments (paid on a per-day or per-case basis), fee-for-service payments (billed after the service), or capitation (a fixed fee or rate per member per month). Test utilization information on the patient population is critical in negotiating an equitable agreement that includes a stop-loss threshold for overutilization. • Market positioning strategies. Low option pricing maximizes the sales effort and is used when the goal is to gain market share from the competition or when trying to penetrate a new territory. It is sometimes referred to as marginal pricing. • Defensive pricing to maintain market share. Defensive pricing is a low option pricing strategy used to maintain market share and defend against the competitor’s pricing strategy. It is not always necessary to match the competition’s lowest price when the customer is loyal and agrees that using the hospital laboratory service has a value-added benefit.

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• Value-added pricing. Value-added pricing is a high option pricing strategy used whenever value-added product or service differentiation from the competition is demonstrated (17). • Loss leader pricing. Loss leader is an aggressive pricing strategy used by commercial laboratories to attract or lure customers from the competition, based on the premise that the profit will be recovered from the volume of other purchased services at the regular (higher) price. In recent years, some states have passed laws that limit or forbid selling below cost. This strategy has a down side, when customers respond by “cherry picking” the best pricing offer by purchasing only the services priced near or below cost from the commercial laboratory.

Promotional (Marketing and Sales) Strategies Market Research Companies utilize market research to identify product or service needs in new and existing markets. The inside-out approach develops the product first and then identifies the market. The method employed most frequently is the outside-in (or market pull) approach, which identifies the needs in the marketplace first and then develops the product or service to meet the need. Primary sources for market research include customers, manufacturers, competitors, and consultants who are familiar with the market. Secondary sources are from a literature search. Three techniques typically used to obtain primary market information are mail surveys, telephone surveys (telemarketing), and personal interviews. Direct observation is the fastest and most reliable means of doing market research. Gathering accurate, up-to-date information on the competition is best accomplished on a daily basis while making sales calls. Effective sales representatives routinely take note of the office procedures, hours of operation, type of practice, and medical school affiliations. They collect examples of competitors’ literature and request slips. The sales team must always be aware of the competitive activities at the local, regional, and national levels. Customers and prospects provide most of the market intelligence needed. Competitive information and literature should be reported and filed in a central repository in the laboratory’s marketing office. Before entering a new market, it should be standard practice to perform a market survey asking a few specific questions about the customer, the customer’s laboratory needs, and the competition. Knowledge about a prospect or a market segment increases your success rate in developing interest in laboratory services. In the past, the typical market survey was performed using a written questionnaire that was mailed with return postage. Today, electronic surveys are more the norm. Whether paper or

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BASIC CONCEPTS AND THE CURRENT HEALTHCARE ENVIRONMENT

electronic, the response rate for this approach generally is around 5%. It is best to have the sales representative make an appointment to survey the office on-site. Telemarketing can also be incorporated into the duties of the client service group. This response rate is improved to an estimated 20% if your team has the time to dedicate to this activity. The newly acquired market information is used in conjunction with knowledge about finance and the other environmental factors to develop sound marketing strategies (9).

Marketing Strategies Performing a market assessment ensures that the revenue projections and sales forecasts are realistic. Each of the following factors should be considered: • Market demographics. The statistics related to the size of the market within the geographic boundaries served are called demographics. Population statistics can be obtained by contacting the bureau of census in the state or county. Frequently, the healthcare facility’s managedcare department has these population and geographic data readily available. The healthcare system utilizes data from the decision support systems to generate useful information related to patient and third-party payor mix and relevant reimbursement rates for both inpatient and outpatient procedures. Healthcare systems can extract the detailed laboratory revenue reports necessary to make sound business decisions. • Provider base. The market assessment should also include a thorough evaluation of the total number and distribution of healthcare providers by specialty in the market. Traditionally, the physician has been the gatekeeper to most medical services, including laboratory testing. Even though the trend is toward sharing the responsibility with the payor, doctors will always play a significant role in the determination of preventive health appraisals and establishing medical necessity of testing. • Employer base. The market assessment should research the major Fortune 500 companies in the defined service area. Fortune 500 companies are considered to be the largest, most profitable, and most powerful companies in America. Commonly referred to as the “blue chips,” they represent vast holdings and revenues in the billions and include firms such as Exxon, General Electric, and Philip Morris. Employers purchase healthcare for their employees as a form of compensation, to enhance wellness, and to increase productivity on the job. Surveying the employer’s need for executive physicals, preemployment health assessments, drug screening, and insurance benefit packages for their employees is useful in developing strategies for the industrial market segment, as well as for understanding how many employees in the service area are tied to capitated managed-care contracts. Because of the escalating costs of healthcare, employers are

searching for ways to reduce expenditures for healthcare. In late 1996, commercial laboratories introduced new programs that allowed employers to provide maximum benefit coverage for contracted outpatient and nonemergency laboratory services when the company’s employees sought the laboratory testing directly at the contracted commercial laboratory. Direct contracting offers increased net revenue to the commercial laboratory, bypassing the major health plans that realize margins from squeezing down laboratory reimbursements. • Insurer base. Traditional indemnity companies, thirdparty administrators, and managed-care organizations offer a variety of programs to employers and private individuals for healthcare coverage. Obtaining a working knowledge of the terms and conditions related to insurance coverage will aid the laboratory in surveying the needs of the insurer for contracting with a communitybased provider. Increasingly, third-party payors, including federally funded programs, continue to move toward global reimbursements, such as diagnosisrelated groups for hospital inpatients, consolidated billing for skilled-nursing facilities, and composite rates for end-stage renal disease patients. • Access to laboratory services. Develop a marketing strategy that includes convenient access to laboratory services through strategic placement of patient service centers in the service area. • Laboratory infrastructure. Assess the production and service needs in terms of equipment and human resources. Out-of-pocket expenses. As employers and insurers negotiate benefit packages, the beneficiary’s copays, noncovered services, and utilization limitations are increasing. Medical-necessity guidelines shift the responsibility for payment of noncovered services to the beneficiary. The number of underinsured Americans continues to rise. Over time, more patients will not be able to pay their medical bills, and write-offs will increase. The downward trends in insurance reimbursement will force reductions in the production costs of laboratory services in order for the laboratory to remain profitable (reference 28, p. 170). Decision makers and their buying preferences. Providers have multiple options for choosing a laboratory. Physicians are the constant targets of high-powered sales representatives from regional and national commercial laboratories offering features and benefits that enhance their basic laboratory services. Customers base the decision to use a particular laboratory on a combination of the following factors: • Professional relationship with a local representative • Scope of services offered (courier, specimen procurement, connectivity)

CHAPTER 3. RELEVANT ECONOMIC AND BUSINESS CONCEPTS

• Convenient and consistent level of service • Reputation of the laboratory • Personal or professional attachment to an academic institution laboratory • Price Customers are not motivated to switch laboratories because they want the product or service. The decision to change either eliminates a problem or is perceived to have a value-added benefit compared to the competitor. Identifying the prospect’s “hot-button,” or buying motivators, is a necessary step for closing the sale. Table 3.6 lists the more typical motivators encountered. Differentiated marketing strategies. Companies that produce numerous separate and distinct products and services directed at different market segments develop differentiated marketing strategies. The objective is to match a specific product or service to the customer’s needs. Costs to serve multiple market segments are typically greater than those for serving a single market segment due to higher production costs, increased space needs, expanded record keeping, and promotion. Concentrated marketing strategies. Concentrated marketing strategies are used when companies focus their efforts on servicing a single niche market segment. This strategy is self-limiting, and companies may end up in financial difficulty when buying preferences change to a competitive product (reference 7, p. 202–205). Assess laboratory market potential and estimate market revenue. The best market estimates are based on historical and competitive price data. If the customer will share the information, then you can accurately assess the potential profitability of the new business opportunity. If this information is not available, there are several established models for estimating the market: • Population model. The population model provides an estimate of the gross revenue potential in a geographic Table 3.6 Buying motivators (hot buttons) Turnaround time Courier service (7 days per week) Convenient access to technical support (client services, pathology consultation) Educational support Quality assurance support Computer and telecommunication support Full scope of services (patient service centers, clinical and anatomic pathology) Price

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area. Calculate the anticipated outpatient gross revenue for a new geographic service area by multiplying the current gross revenue per capita by the population of the prospective market. • Calculated gross revenue = (current gross revenue per capita) (population in proposed new service area) • The flaw in this formula is the assumption that the economic, political, reimbursement, and competitive conditions are similar in both markets. • Test mix model. Most clients order a standard battery of tests for their patients. Laboratories that monitor the average number of tests ordered per requisition report an average of 2.5 to 3.0 tests per requisition. To calculate the average reimbursement per test, laboratories should divide the total reimbursement for the outpatient book of business by the total number of outpatient billed tests. The outpatient market typically operates 5 days per week, which averages 22 business days per month. • Calculated reimbursement per month = (average number of requisitions per day) (average number of tests per requisition) (average reimbursement per test) (20) • Practice type model. The practice type model requires estimates of revenue from similar practices (both by specialty and by number of physicians). For example, • Calculated reimbursement per month = (average reimbursement per physician) (number of physicians) • This formula can be used to build estimated revenue models for each physician specialty based on actual reimbursement experiences. • Hospital model. Hospital revenue models can be formulated using existing hospital clients with similar characteristics, such as number of beds, urban or rural setting, and general, specialty, or tertiary services. Other factors that have an impact on the accuracy of these models are the inpatient-outpatient mix and the actual referral test menu. The focus for hospital prospects must be on those clients whose test mix meets the laboratory’s targeted tests where excess capacity exists. • Calculated reimbursement per month = (average daily census of prospective hospital) (average laboratory reimbursement per patient day) (25) Targeted market segments and prospecting. Resources that are useful in preparing prospect lists are local telephone directories and the yellow pages, state and local medical society directories, the American Hospital Association listing by state, nursing home directories by state, managedcare provider lists, the Clinical Laboratory Management

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BASIC CONCEPTS AND THE CURRENT HEALTHCARE ENVIRONMENT

Association directory, and classified and other advertisements for new office locations or physicians joining practices in local newspapers, as shown in Table 3.7. Recruiting the laboratory sales team. One of the keys to a successful hospital outreach program is selecting the best candidates for your marketing and sales representatives. Successful salespeople are self-motivated, self-confident individuals who always seem to maintain a positive attitude. Their enthusiasm is contagious. Customers can sense when salespeople are sincere and genuinely believe in their services. Salespeople must be thick-skinned and very persistent. The customer’s first encounter with a sales representative is crucial. The first impression must be a good one. Sales representatives must look and act like professionals whenever in the presence of current and prospective customers. Product knowledge is essential when trying to close a sale. Sales representatives must know the features and benefits of each of the services being offered by the laboratory in order to handle indifference or objections from the customer. Sales forecasting. The process of measuring sales success actually begins with the department’s administrative strategic planning goals and objectives. Combined with the marketing team’s strategies, revenue projections, target

markets, and prospect lists are the metrics used to measure the laboratory’s success. Sales incentives. Many studies have shown that outreach programs operating from regional or hospital-based facilities select seasoned sales representatives who have exceptional skills in developing rapport with customers and in forming a stable long-term relationship while acting as a laboratory consultant. Most often these sales representatives are offered a base salary in line with other laboratory management staff, with little in terms of incentives or commissions. Incentives, commissions, and bonuses reward people for productivity. The decision to offer bonuses and incentives must be weighed carefully. If everyone on staff who is asked to improve productivity is not included in the incentive process, it can be detrimental to employee morale throughout the entire laboratory operation. Territory management. Sales representatives are extremely competitive. Establishing territory boundaries allows the laboratory to manage the sales effort from a team approach. Sales territory assignments can be defined using several techniques: • Geography. A sales territory can be defined by using geographic boundaries specific to county or city lines or by using the postal service ZIP code boundaries.

Table 3.7 Target market segments for clinical laboratories Market segment

Specific type

Hospitals

Academic Affiliated Community Rural Niche business specialty laboratories (drug testing and pharmaceutical) Group practices (family practice and internal medicine) Family physicians Internal medicine specialties Obstetrics and gynecology Pediatrics Surgical specialties Dermatologists Skilled-nursing facilities (SNFs) Intermediate-care facilities (ICFs) Assisted living facilities Home health agencies Veterans Affairs medical centers (VAMCs) State and local mental health facilities Prisons Health departments Phase I-IV trials, pharmaceutical companies, investigator, independent research Preemployment, employee health services, health fairs Veterinarians (DVM), chiropractors, podiatrists (DPM), dentists

Independent laboratories and physician office labs Physician offices

Nursing homes

Public sector (federal, state, local governments)

Clinical trials Industrial Other

CHAPTER 3. RELEVANT ECONOMIC AND BUSINESS CONCEPTS

• Account type. Another method of defining territories is by account type. For example, individual representatives can focus on specific strategies to bring on family practices or internal medicine or obstetric practices. • Market segment. Focusing on the special needs for each market segment offers another option for sales representatives to become experts in areas of hospital reference testing, physician office testing, clinical trials, infectious diseases, long-term care facilities, substance abuse testing, and public-sector contracting. • Combination. Some laboratories ask their representatives to create detailed prospect lists from the laboratory’s service area each quarter. The representatives use the prospect list to make their daily call plans. If a prospect is not closed within 90 days, another representative can then add the targeted account to his or her prospect list for the next quarter.

Sales Strategies Sales strategies are used to position the company and product before the sale begins. The key to a successful sales strategy is to identify prospective customers who are not satisfied with their present product or service. Long-term sales goals are focused on account cultivation and retention by developing a “customer for life” relationship with the accounts. Short-term sales goals include identifying and closing as many deals as possible. Sales planning. Successful salespeople use a combination of preparation, planning, and just plain luck to place themselves in the right place at the right time. The sales plan should include some flexibility to take advantage of any unanticipated opportunities that arise. Sales objectives can be adjusted for a sudden change in competitive activity. Identifying changes in the environment and ranking their relevance assists sales representatives in defining the sales objective for the call. Effective representatives constantly evaluate the laboratory’s position to reposition the product or service based on need and perception. Thorough planning enables sales representatives to concentrate the call activity within a small geographic area, avoiding excess travel time. Making appointments is the most efficient way to plan a day working in the field. Good time and territory management is vital for the success of the salesperson. As the adage goes, plan your work and work your plan. Daily activities should be prioritized, making it possible for the salesperson to always act with a sense of urgency. Maintaining a daily call itinerary that lists each prospective call to be made, including updates and reminders from a tickler file, allows the representative to function more effectively and provide timely follow-up with prospective customers. Hugh Gouldthorpe, Jr., senior vice president of Owens and Minor, a Fortune 500

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medical supply company, and a master of customer service strategies, reminds his world-class organization to “DWYPYWD,” which simply translates to “Do what you promised you would do.” (Visit http://www.owens-minor .com/companyinfo/whoisom/culture/HughsViews/Pages/ default.aspx [last accessed October 15, 2012].) Sales techniques and strategies. Sales techniques and strategies include: 1. Precall strategy. Sales representatives, much like a teacher preparing a lesson plan, should prepare for their calls in advance (Table 3.8). The customer’s first encounter with a sales representative is crucial. First impressions are lasting and must be good. Sales representatives must look and act like professionals whenever in the presence of current and prospective customers. 2. Cold calling. Even after an exhausting planning process, most prospecting takes place by knocking on doors, making the often dreaded first-time, face-toface, cold call (see Table 3.9). 3. Making the sales call. Sales representatives should always present a positive impression. They build rapport by showing interest and enthusiasm in the client. As salespeople gain experience, they learn to pace the rhythm of the call. 4. Sales techniques are the tactics or actions used during the sales call to deal with customer attitudes of indifference and skepticism and to handle objections. Features are characteristics of your product or service. Benefits are the value the features bring to the customer. One must listen actively and courteously to identify key points and perceived drawbacks. Use simple probing Table 3.8 Call preparation and rehearsal 1. Identify the needs of the prospect, short term and long term. 2. How do the customer’s needs relate to the perceived needs? 3. List the distinctive features of the laboratory services that meet these needs. 4. How are these needs currently being met? 5. Identify the testing area with the greatest opportunity for new or increased business. 6. Is the prospective customer knowledgeable about the hospital laboratory service? 7. Evaluate ahead of time the degree of indifference the customer may have to the laboratory services. 8. List the specific benefits that the prospect may be skeptical about. 9. Gather appropriate proof sources to handle the anticipated indifferences and skepticism. 10. Think through the process to handle objections due to misunderstandings or perceived drawbacks to the services. 11. Plan your tactics to identify the decision maker. 12. List the objectives for each call before you begin.

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Table 3.9 The cold call: information gathering Customer type (hospital, physician, nursing home) Customer demographic information (number of beds, number of M.D.s, number of patients) Gather office staff member business cards Develop key contacts Identify office billing system and procedures Third-party payor mix Commercial laboratory pricing arrangements Number of patients per day with laboratory orders Most frequently ordered test menu Identify the decision maker Gather competitive information Understand office logistics and service needs Reporting and telecommunication system Ask what else they need or what they would change Take notes Schedule a follow-up appointment to present a proposal

with prospective customers to clarify their objections. When promoting a product or service, always restate the features and benefits that support the customer need or that counter a misunderstanding and ultimately resolve the concerns identified. Since most customers generally think they are satisfied in their current situation, they aren’t aware of a better product or service. Creativity is usually necessary. Good salespeople identify a need or dissatisfaction. Then, they convert the need into a potential problem in the customer’s mind. Next, they create a desire to have the problem solved, which leads to introducing a feature of the laboratory service that will satisfy the need and bring a benefit to the customer. Make sure the customer agrees that the stated benefit solves a need or problem, and then ask for the business. Over time the experienced sales representative is recognized as a laboratory consultant and a partner in providing quality healthcare and gains added respect from the client for his or her professional and capable contributions (23, 40). 5. Opening. After making the initial introduction, always thank the customer for the opportunity to meet with him or her. Asking about the customer’s operation and needs for a reference laboratory helps break the ice. A sales call should begin with an initial feature or benefit statement about the laboratory service that supports a specific customer need. 6. Postcall evaluation. The key to success is getting in to see the decision maker. • Unless the representative is sitting face-to-face with a prospect, the representative’s selling skills, product knowledge, and enthusiasm have very little relevance.

• Unless the sales call includes spending time with the decision maker or someone who can influence the decision, a sales representative is probably wasting valuable time. 7. Close/trial close. After the customer acknowledges product approval and is in agreement with you, ask for a commitment to use the product or service. To close a sale, the sales representative summarizes the benefits and outlines a plan to initiate using the product or service. The following actions by a prospective customer indicate a commitment: • Agrees to have a presentation or in-service training program for the office • Accepts an invitation to take the staff on a facility tour • Authorizes an appointment with the office manager to gather or discuss billing details 8. Call/close ratio. Many companies with an aggressive sales operation expect sales representatives to make a minimum of eight calls per day, or an average of one productive call per hour. Making 35 to 40 sales calls a week, or at least 200 calls per month, provides adequate interaction to close three or four accounts by month’s end, another three or four accounts within 2 months, and three or four accounts within 3 months. Maintaining the momentum of the selling cycle requires that the sales representative adhere to a regular sales schedule. One of the most important characteristics of a successful sales representative’s style is persistence, as demonstrated in the statistics that follow: • Eighty percent of all closes are made during the fifth call on a prospect. • Fifty percent of sales representatives quit after one call. • Twenty-five percent more quit after two calls. • Ten percent more quit after three calls. • The 20% that keep selling close 80% of their prospects and bring in the most revenue. Decision makers. A key element in the development of sales strategies is the ability to identify the relevant players. Strategic selling concentrates on the things that remain constant from one customer to another. A complex sale is one that requires more than one signature to authorize approval or involves more than one decision maker. In the corporate business world, each sale is complex and has four distinct buying influencers who must be identified early in the sales process. The “user” buying influencer is primarily concerned about the reliability of the product or service. The “technical” buying influencer acts as the gatekeeper and is responsible for measuring the value of the

CHAPTER 3. RELEVANT ECONOMIC AND BUSINESS CONCEPTS

product or service. The “economic” buying influencer is the one person who gives the critical, final approval for the sale, is usually the most difficult to identify, and is typically very difficult to convince. The fourth buying influencer is a champion, or “coach,” an experienced, trustworthy person from either the purchaser or seller’s organization who assists, guides, and directs the salesman through the difficult sale. Maintain written records of the decision makers and buying influencers for each customer, remembering that the names and faces change periodically along with the hats that they may wear (26). In the past decade, a new approach has emerged in the sales process and planning process used by many Fortune 500 companies and is known as “conceptual selling.” This transition is driven by a shift in customer consciousness that is redefining what we know about sales and the rules that influence the sales profession. Miller, Heiman, and associates have written a series of books (The New Conceptual Selling, The New Strategic Selling, and The New Successful Large Account Management) outlining a new discipline with a well-defined process and useful templates for sales training and planning. Using the “conceptual selling” sales process, the sales professional begins by listening to the customer to understand the customer’s situation or concepts (just as Stephen Covey’s principles emphasize first seeking to understand and then to be understood). Hospital laboratories with outreach programs should consider investing in the series to develop knowledge and business skills.

Advertising Strategies Products and services are identified through the use of brand names, symbols, logos, and distinctive packaging. A brand is a name, term, sign, symbol, design, or some combination

thereof that differentiates a firm from the competition. A trademark is a brand that has received legal protection for the exclusive use of the sole owner. Brands vary widely in consumer familiarity and acceptance. Brand acceptance goes through three stages of development: (i) recognition, (ii) preference, and (iii) insistence. Establishing a product or service that reaches brand insistence is the goal of every company—to be the healthcare provider of choice (reference 7, p. 221–225). Building a reputation and image for the laboratory outreach program depends on the laboratory operation and the healthcare facility as an enterprise. Communicating with the marketing director or public relations coordinator in hospital administration is essential. There are usually policies related to the use of a hospital logo in conjunction with other printed materials. It is important to link the program to the organization from a branding perspective. Successful marketing and sales strategies depend on having printed publications that clearly identify the laboratory services. In developing a needs assessment for the marketing and sales program, laboratories must allocate sufficient funds for publications and advertising costs to ensure that the sales effort has the tools necessary to meet revenue projections (Table 3.10).

Customer-Focused Concepts and Service Strategies Who Is the Customer? Customer satisfaction is a critical strategic weapon for every organization. The laboratory’s customer is the patient, the physician, the nurse, or anyone who depends on the products produced or the services provided. The laboratory must treat each customer as a valuable and

Table 3.10 Marketing publications and advertising needs Marketing tool

Needs associated with marketing tool

Publications

Directory of services – test procedure manuals (accessible online) Fee schedules Requisitions (available online via web-based order entry and result system) Supply order forms Procedure updates (available online via a public website) Telephone result pads Confidential result envelopes Letterhead, envelopes, stamps Business cards Tabletop displays and exhibits (allocate costs to exhibit by number of conventions attended) Yellow pages Specimen lock boxes Promotional – give-away items Customer continuing education budget Holiday greetings, lab week recognition

Advertising

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irreplaceable resource. World-class customer service organizations are successful because they are able to consistently exceed the customer’s expectations. Their primary strategic and structural focus on the external customer includes rewards, recognition, and promotion and treats the customer like a king (reference 24, p. 26). Table 3.11 defines who is the customer.

Understanding Customer Behavior Customer behavior results from personal preferences and pressures exerted from forces in the outside environment. A customer is not motivated to act unless there is an unsatisfied need for a product or service. Selling is the process of uncovering and satisfying customer needs. Identifying an area of dissatisfaction with a competitive product or service becomes an opportunity. The manner in which products and services are presented influences customer perception. Once customers form an opinion, they become indifferent or skeptical. If they have an objection or attitude about a product, effecting a change is difficult (Table 3.12). When this happens, the product and service strategies must be modified in one of two ways: • Change the product or service to more closely match customer opinion or to overcome the basic objections. • Attempt to change customer attitudes and opinions about the product or service.

Key Concepts and Recognized Customer Service Strategies There is a quality revolution emerging in the service industry. Keeping customers satisfied takes a real commitment from management. During the 1980s companies learned that quality does not improve unless you can measure it. Later, various techniques emerged to not only measure Table 3.11 Who is the customer?a A customer is the most important person in any business. A customer is not dependent on us. We are dependent on them. A customer is not an interruption of our work. They are the purpose of our work. A customer does us a favor when they call. We are not doing them a favor by serving them. A customer is not a cold statistic. They are human beings with feelings and emotions like our own. A customer is not someone with whom to argue or match wits. A customer is a person with needs. It is up to us to meet their needs. A customer is deserving of the most courteous and attentive treatment we can give them. A customer is the person that makes it possible to pay our salaries. A customer is the life blood of this and every other business. a

See reference 23

Table 3.12 Customer attitudesa Customer acceptance occurs when a feature or benefit of the product or service is received with general approval or agreement. Skeptical customers question or doubt that the product or service will satisfy their need. Providing a reference source or a demonstration offers proof of the benefits. Indifferent customers display a lack of interest in the product when they do not perceive a need or when they are satisfied with a competitive product or an internal service. Seek first to understand the customer’s attitude by using probing techniques. Objectionable customers relay some degree of dissatisfaction or lack of trust or dislike the product or service based on perceptions. Misunderstandings occur when customers lack enough information about the product or service to make a decision. Whenever a misunderstanding cannot be clarified it becomes a drawback to the sale. It is critical that the drawback be reduced to the minimum by restating other features that offer benefits to the customer. a

See reference 39.

quality, but to improve it using a systematic approach. Quality became more than a slogan; it was recognized as the most profitable way to run a business. The following concepts and strategies represent various approaches to customer service used by many blue-chip market leaders. Zero defections. Losing a customer over quality or service issues carries a high cost. Lost business impacts a company’s profitability more than unit costs and market share. Performing defection analysis is the process of gathering feedback from defecting customers and acting on the information to reengineer the products and services. Typically companies lose 15 to 20% of their customer base annually. By striving for zero defections (keeping every customer the company can serve and empowering the organization to achieve it), companies can document double the average growth rate and increased profits from their loyal customers for each year that they stay. After all, loyal customers are the best form of advertisement and new customer referrals. However, the goal of achieving service quality does not mean retaining customers at all costs. Focus on retaining the most profitable customers; then, manage for zero defections. There are some customers you may not want to serve. The quality of the laboratory’s customers is more important than the quantity of customers (32). For more information about monitoring sales activity, refer to http:// sbinformation.about.com/cs/bestpractices/a/aa083002a. htm (last accessed October 1, 2012). New customer development carries a price tag. Profitability is directly impacted by customer retention. Bringing on new business is more costly than maintaining a current customer. Customer loyalty is the main driver of revenue growth. Satisfied clients are easier to up-sell on new products and services and are more likely to generate referrals. Companies find that the Pareto principle has applications

CHAPTER 3. RELEVANT ECONOMIC AND BUSINESS CONCEPTS

to customers and revenue. The top 20% of a company’s customer base typically represents 80% of the revenue generated. Cultivating relationships with these customers, who are often referred to as “cash cows” in the marketplace, is invaluable. It is well recognized in the industry that the customers that generate the least revenue and are in the lowest tier of your customer base require the most resources to manage and service, ultimately representing a net loss to the bottom line (38). Consistently exceed the customer’s expectations. Systematic approaches to providing service are 80% of customer service. The key is to create systems that allow the laboratory to do it right the first time every time. Success hinges on having a plan for when things fail. When it comes to service, it is always best to under-promise and then overdeliver. People inherently like doing business with people who keep their word. Customer satisfaction is about exceeding our customers’ needs and expectations to the point of “delighting” them (reference 24, p. 45–47). Create customers for life. According to C. Sewell and P. Brown in their book Customers for Life, there are 10 basic commandments for successful organizations to empower employees to create a company of service superstars who turn buyers into lifelong customers (reference 33, p. xix–xx). • Ask what customers want, and give it to them. If you don’t keep your customers happy, someone else will. • When the customer asks, the answer is always yes, up to a point. Quality customers are more valuable and profitable than business based on customer quantity. • Do it right the first time every time. Employees are held accountable for their mistakes. Repeating tasks is costly and lowers productivity. Using a systematic approach is 80% of good customer service. • Keep your promise for service. Simply DWYPYWD: Do what you promised you would do. When you underpromise and then over-deliver, the customer is delighted. • Train and empower every employee to be a customer service representative. • No news is not good news. Encourage customers to tell you when something is wrong. Be proactive and probe to uncover flaws in the systems. • Measure everything that is relevant to performance. Set a target. Post the results. People are naturally competitive and will try to exceed whatever goals are set for them. Employees must be able to relate to the indicator being monitored. Typical indicators used are quantity, quality, cost, and timeliness. Just being good is not enough. The goals established must also be congruous with the best interests of the laboratory operation.

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• Recognize employee performance. Pay employees like they are business partners. • Lead by example, offering equal respect to both internal and external customers. If the organization expects employees to be polite to the customers, the employees must be treated courteously. • Just like the Japanese, organizations should be students of the best customer service companies. Copy them, and then improve on their systems (reference 33, p. 6, 23, 17, 34, 11, 60, 32, 55, 118, 126, 147). Customer loyalty and customer relations. Customer loyalty management is an often-overlooked important part of operating a hospital outreach program. Account retention and repeat customers drive increased sales and decrease the cost of sales, as demonstrated by the following statistics found at http://www.greenpeg.com/index .php/customer-loyalty-management (last accessed October 3, 2012). • It costs six times more to attract a new customer than it does to keep an existing one. • Dissatisfied customers typically tell eight to ten people about their negative experience with the services they receive. • Seven in ten customers will generally do business with you again if you can resolve their concern to their satisfaction. • When you resolve their concern on the spot, 95% of these customers will continue to use the services. • When customers discontinue using your services, 68% have an attitude of indifference about the services. Laboratory managers should ensure that every employee has the communication and problem-solving skill sets needed to handle customers in the proper way each and every time they deal with both internal and external customers. Creating value. Quality and value are generally measured by the end user of the product or service. Identifying how value is created in a business environment is critical to competitive success. Determining the cost associated with creating, delivering, and maintaining the customer’s perceived value and quality becomes fundamental. More complex processes require more activities and overhead expenses for staffing, equipment, information, and communication systems and ultimately increase the possibility for error. Every process in a company eventually affects external customers’ perception about the product or service and determines whether they will make a buying decision. Creating an environment based on pay for performance has never been so important. The manner in

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which products and services are presented influences customer perception. Value is perceived to be quality divided by price. There are two types of value: • Customer-perceived value is the major driver of revenue. There are four drivers (function or utility, convenience, price, and exchange value of competitive products and services) that influence value perception. • Process value is defined by the relative cost of valueadded tasks and services and is influenced by accuracy, speed, consistency, conciseness, and relevance. Cost/benefit analysis. Performing a cost/benefit analysis to identify the nonessential steps in a process, or process waste, enables companies to control the cost and price of a product or service. Managers must be cautious not to over-invest in technology. The focus should be on eliminating unnecessary work, not just speeding up the process (31). When an entire organization focuses on delivering what the customers really want, companies reduce costs by eliminating the processes that don’t add any value to the product. Relevant, meaningful, and quantifiable information. Customer service is more than a theory. In Making Customer Service Happen, Roderick McNealy writes, “By defining it, we can measure it. After measuring it, we can analyze it. If we analyze it, we can control it. If we can control it, we can improve it” (reference 24, p. 26). To ensure optimal proactive customer satisfaction, avoid taking the reactionary, quick-fix approach to customer complaints. Search out the root cause and eliminate it and the resulting downstream effects at the same time. Moments of truth occur when customers develop an impression or perception about products, services, and the organization through encounters that happen over time. Even though the impressions may have been incorrect, all that matters is the customer’s perceptions. Perceptions are real (reference 24, p. 61–75). When organizations first uncover the customer’s negative impression or perception about their product or service, it becomes a moment of truth.

Service Delivery Strategies Service delivery strategies encompass the nontechnical operational support services necessary to deliver laboratory services to the customer (for example, courier services, supplies, information services and communications, customer service, specimen accessioning, and billing services). Logistics and distribution service considerations. Developing a dependable courier network to support the customers’ needs is fundamental to the laboratory’s success.

The service strategy must do or consider each of the following before developing the service: • Decide whether to utilize in-house couriers or outsource to a contract courier. • Determine what type of vehicle will meet your needs. • Evaluate options for capital purchase or lease agreements on vehicles. • Identify daily and on-call stops based on customer needs, hours, and volume. • Develop a logistical plan to meet the needs of each customer. • Calculate the average cost per stop. • Calculate the impact of adding new customers to a route. • Review the number of stops, mileage, travel time, and specimen arrival to determine needs for additional vehicles and couriers. • Include the associated costs of the impact from the recent International Air Transportation Association’s regulatory changes for dangerous and infectious goods on specimen transportation decisions, costs of training, and handling. These regulations are discussed in more detail in chapter 5. Customer supply policies. The support service strategies include the costs of setting up a new account with the supplies necessary for specimen collection, handling, and transportation to the laboratory. • Establish a standard list of items supplied to customers. • Develop policies and procedures for placing equipment such as centrifuges, printers, and computer interfaces that meet compliance guidelines and are based on measurable parameters, such as daily specimen volume. • Develop a distribution system and supply audit process to monitor service and avoid possible charges of inducement. • Use the anticipated test volume for clients to calculate the time needed to recoup the start-up expenses. • Include the expense of providing and training for supplies compliant with the Occupational Safety and Health Administration’s regulations for blood-borne pathogen and needle stick safety. Customer service call center. Implementing a customer service communication center requires a detailed analysis of the phone calls related to service for the entire laboratory operation.

CHAPTER 3. RELEVANT ECONOMIC AND BUSINESS CONCEPTS

• Track the number and type of calls each hour to determine the need for a dedicated group to free technical staff for testing. • Investigate systems that automate data collection and measure call wait time and lost calls. • Evaluate the skill sets and personnel level needed to handle the inquiries. • Consider having the group support calls for nonscheduled pickups and quality assurance functions. • Establish quality assurance monitors, and develop a scorecard to report performance. Outreach registration and specimen processing and accessioning. To sell the laboratory services, it is critical that an electronic directory of laboratory services be available to customers. The directory should be a compendium of the test offerings listing specific information about specimen collection, storage, and transportation. The laboratory’s test requisition forms should be easy to read and complete. The ability to customize the client’s electronic or paper request forms to include the most frequently ordered tests is important. The request should have ample room and clear instructions for completion of billing information. Clients should be able to easily refer to a current medical-necessity guide and reference manual for tests ordered on patients covered by federally funded programs. The laboratory must also have a plan and process developed for when the samples arrive. • Develop a plan to handle the anticipated increase in specimen volume for each shift. • Train the processing team annually regarding laboratory compliance and medical-necessity guidelines. • Make sure that the registration, information, and billing systems can accommodate a short registration pathway for third-party billing to facilitate timely sample accessioning, testing, and reporting. • Consider moving data entry for billing to the day shift to allow the staff to interact directly with the customers regarding any missing data elements required for clean claim submission. • Have a procedure to track specimen handling errors and data entry errors by employee and shift as a quality monitor. Billing systems and revenue tracking services. Most hospitals lack accounting systems to adequately measure and track costs or net revenue at a per-test level. Success depends on having a clear understanding of the hospital revenue systems and processes, including patient registration, coding requirements and regulations, reimbursement by test and payor, patient accounting system, preprocessor

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claim scrubbers for the electronic data interface with insurers, and decision support capabilities. Flowcharting the process often uncovers problematic areas that need attention to streamline the processes. The need to flowchart the billing process is dependent on the complexity and number of systems used for registration, billing, claim processing, accounts receivable, and decision support. The ability to generate accurate and timely monthly invoices, thirdparty insurance claim forms, and patient statements is a key component of the laboratory service and is essential to maintaining satisfied customers. Laboratory information system management. Laboratories have become information brokers that provide the majority of the clinical information used by healthcare providers in disease management. To create value, the results must be accurate and timely. During the past decade, proficiency testing, continuing-education programs, oversight by accrediting and regulatory agencies, and more sophisticated instrumentation were the change drivers that forced laboratories to exceed earlier standards for reproducibility and technical accuracy (4). Result reporting. External customers expect timely results reported to offices via remote printer or facsimile. Include these expenses when calculating new-account start-up costs. Evaluate equipment costs to support remote order entry and online test requests and inquiry. Calculate the impact that the Health Insurance Portability and Accountability Act (HIPAA) security regulations will have on the cost of reporting. Knowledgeable consumers. The laboratory has migrated from providing information about diagnostic detection and treatment to prognostic prediction and prevention (C. Diehl, 2001. The role of the laboratory in the integrated health-care system. Presented at the CLMA Leadership in Clinical Systems Management Annual Convention and Exhibition, St. Louis, MO). Personal computers and the Internet have provided a platform for computer-savvy healthcare providers and patients to communicate and seek information via the World Wide Web. Email and Internet server access provide means for online ordering and result reporting with appropriate security encryptions to ensure that HIPAA privacy regulations are maintained. Healthcare facilities and laboratories now have a mechanism to publish promotional materials and to advertise services by developing user-friendly websites (reference 28, p. 130–131). Create a service delivery report card. Laboratory services are integral to the provision of healthcare. While laboratory test results influence nearly 80% of all treatment decisions, they represent only 3% of the total cost of healthcare.

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Many stakeholders make purchasing decisions primarily using four key service parameters in the following order: quality, cost, access, and service. Organizations that align behaviors with goals and values achieve excellence in customer service through being accountable to the customer (16). Laboratories should develop a quality monitor and scoring system to measure and report the effectiveness and utility of these elements for each service line (patient service centers, customer service center, courier services, billing services, and information services). The highly competitive healthcare environment, historically focused on costs, is increasingly being driven by the need for meaningful information to make informed decisions. Service report cards have become a standard tool to assist in the negotiation of equitable contracts and demonstrate value to customers (30).

Summary In the past the use of the term “healthcare system” to describe the delivery of services was something of an oxymoron, since multiple organizations provided fragmented services while competing for the same customers. The laboratory manager’s responsibilities include three categories of resources: physical infrastructure (space and equipment), financial (operating budget), and human resources (technical and support staff). Even though human resources constitute more than half of the operational expenses, focus on the physical and financial responsibilities now demands increasing attention. In the current market, consumers (linked by geography, employer group, or managed-care plan) have increased the demand for cooperation among the stakeholders, setting the stage for the unprecedented wave of consolidations, mergers, acquisitions, and partnerships witnessed in the past decade. Striving to coordinate a patient’s episode of care, healthcare is vertically integrating across inpatient and outpatient service lines and from home testing to self-testing. Simultaneously, healthcare is integrating horizontally across communities and regions to achieve these goals (36). After enjoying several decades of lucrative fee-forservice reimbursements and high-volume testing that supported duplication of services without collaboration among providers, the nation’s healthcare system and the clinical laboratory industry were forced to reinvent the approach to providing healthcare. In 1984, government regulations aimed at cutting the escalating costs for federally funded programs paved the way for reimbursement to shift from traditional fee-for-service reimbursement to global reimbursements, such as diagnosis-related groups and other prospective payment models. Hospital laboratories, formerly considered revenue centers, became cost centers. They responded to decreasing reimbursements and shifts in volume by using strategic techniques such

as reengineering, downsizing, rightsizing, consolidation, and regionalization. Following the emergence of managed care, the healthcare industry was forced to seek alternative treatment settings and to shift its focus to health promotion and prevention of disease. Manufacturers and suppliers responded to these environmental factors by introducing new technological advances in products and services to support genetic testing, near-patient testing, home testing, and promotion of direct access testing (12). Both laboratories and manufacturers have developed new products and services to meet the changing market needs, targeting new markets and focusing on value-added customer service strategies to outperform the competition and to meet and exceed the customer’s expectations. During the same period, the Internet became the platform for knowledgeable consumers to access information and demand more value from the services related to their healthcare. Today, healthcare providers realize that the patient is the client and consumer. They now recognize the importance of including the patient in the development of the care plan and the decision-making process. Ultimately, the greatest opportunity for creating added value in healthcare hinges on the interface between the patient and the caregiver. When technology contributes to the quality of that relationship, it becomes more valuable (3). The laboratory should expect even more significant changes in diagnostic testing in the future as the industry changes its focus to the following: • Utilization management through elimination of unnecessary testing • Implementation of practice guidelines and standards of practice • Continued standardization of instrumentation and methodology • Increased automation and robotics • Increased testing in molecular diagnostics, genetics, and proteomics • Using patient clinical outcome to measure laboratory quality (12) The increasing importance of access to the most advanced technology must be tempered by the ethical and humane concerns for the use of laboratory information. The efficacy, safety, cost-effectiveness, and clinical outcomes of diagnostic and treatment strategies link utilization of resources and economics (36). KEY POINTS ■ Customers are every organization’s most valuable resource. ■ Customer satisfaction is the most critical strategic weapon for any organization.

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■ ■

■

■

■

Customer service is more than a theory. Moments of truth occur when customers develop an impression or perception about products, services, and the organization through encounters that happen over time. The top 20% of the customers represent 80% of the revenues. Laboratory data account for 80% of the diagnostic information utilized by healthcare providers. The clinical utility of laboratory data is migrating from diagnostic detection and treatment to prognostic prediction and prevention. While laboratory test results influence nearly 80% of all treatment decisions, they represent only 3% of healthcare costs.

GLOSSARY Accountable care organization (ACO) A group of healthcare providers who give coordinated care and chronic disease management and thereby improve the quality of care provided to the patient. Payment to the ACO is based on achievement of healthcare quality goals and outcomes that result in cost savings. Activity-based costing A method being used by some laboratories that assigns a cost to every activity throughout the organization. Affordable Care Act (ACA) The comprehensive healthcare reform law passed in March 2010. The law was enacted in two parts: the Patient Protection and Affordable Care Act was signed into law on March 23, 2010, and was amended by the Healthcare and Education Reconciliation Act on March 30, 2010. Benefit The value a feature of the product or service brings to the customer. Brand A name, term, sign, symbol (logo), design, or combination used to identify and differentiate the products of one firm from the competition. Capital budgeting The process of planning for the expenditures expected to generate income to flow into the organization. Clinical utility Economists refer to the ability to satisfy needs as utility. In medicine, it is more commonly referred to as clinical utility. Community health information network A network formed among community healthcare providers and insurers to maintain healthcare information for patient management purposes. Competitive bidding The process used by buyers to request price quotations from suppliers to get the best product and service at the lowest price. Complex sale A complex sale is one that requires more than one signature/authorization for approval or more than one decision maker. Consumer Price Index (CPI) The CPI measures the rate of price change for goods and services purchased by households. It

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measures changes in the average level of prices over a period of time with a given starting point or base period, is the most frequently used indicator of inflation, and reflects changes in the cost of acquiring a fixed basket of goods and services by the average consumer. Creeping inflation A pricing strategy that uses modest price increases over time that are typically not noticeable to the consumer. Demand The relationship between the price and the quantity needed for a particular product or service. Demand is the quantity of goods that customers are willing to buy at a given price. Diminishing return When additional volume reaches a point that instruments and people are performing at their maximum throughput, the operational efficiency achieved by economy of scale begins to decline. An infinite number of tests cannot be performed in a finite amount of time and space without ultimately reaching the point of diminishing returns. Direct observation A marketing research technique that yields the fastest and most reliable information about the prospective market segments, customer base, and competition. Due diligence A confidentiality agreement exercised between two competing businesses during discussions related to partnership and joint ventures. DWYPYWD A customer service phrase: Do what you promised you would do. Economy of scale Whenever output is increased without increasing the cost of production, economy of scale is achieved. Feature A characteristic of a product or service that adds value or benefit to the end user. Fiscal policies Use of taxation and government spending as a means of controlling the economy. General rule of supply The production of a good or service increases when the price goes up and decreases when the price goes down. Global economy In a global economy, businesses are forced to shift from being multinational (a national company with foreign subsidiaries) to being transnational (where there is one economic unit, the world). Gross revenue Gross revenue is derived by multiplying the volume or quantity of services used by the unit price for the service. Gross revenue is the actual billed charges or fees for products and services before applying any adjustment for contractual arrangements for volume discounts, third-party limits of allowance, or direct and indirect expenses. Independent provider association An independent association of multiple healthcare providers organized to negotiate contracts with an insurer for the provision of healthcare services within a specified service area at a negotiated cap rate or fee schedule. Inflation Inflation is the result of increases in the price of goods that reduce the consumer’s purchasing power. Inside-out approach A product development strategy in which the product is developed first and then the market is identified.

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Integrated delivery system A system that is formed when payors and healthcare providers (including acute-care providers, physicians, home healthcare agencies, nursing homes, primary care offices, and others) combine forces to extend their service lines to improve the coordination and quality of care while controlling costs. Joint venture Term used to describe management agreements, partnerships, strategic laboratory arrangements, or conglomerates formed to share risk or expertise. Law of demand As the price for a product or service increases, the demand for the product decreases. Length of stay Statistical measure of time used to describe the length of a hospital inpatient stay from admission to discharge.

Pareto principle (law) A total quality management principle used by W. Edwards Deming that demonstrates that cause and effect are not linearly related; for example, approximately 20% of the causes account for 80% of the effect (35). Patient service centers Phlebotomy sites or draw stations located off-site in service areas convenient to medical office buildings are referred to as patient service centers. The employees are often cross-trained to offer a variety of services, including electrocardiograms and chain-of-custody drug abuse screening collections for private industry. Physician hospital organization An organization formed by hospitals and physicians to negotiate managed-care contracts with third-party payors.

Loss leader An aggressive pricing strategy used by commercial laboratories to attract or lure customers away from the competition, based on the premise that the profit will be recovered from the volume of other services purchased at the regular (usual and customary) price.

Physician office laboratory A clinical laboratory operation located on-site in a healthcare provider’s office. The testing performed by a physician office laboratory is regulated by the Clinical Laboratory Improvements Amendment and is limited to waived, moderate, or complex test services.

Macroeconomics Macroeconomics examines the interaction of income, employment, and inflation on the economy as a whole.

Point-of-care testing (POCT) An industry term used to describe user-friendly instrumentation developed for use in nearpatient testing or bedside testing sites versus traditional laboratory sites.

Managed-care organization An organization formed by a thirdparty insurer as an alternative healthcare delivery system in an attempt to control the escalating costs of healthcare to large employer groups and the government. Market potential The total anticipated revenue potential for volume of services during a defined period. Market price The actual price at which a commodity is commonly purchased. Market research A marketing strategy utilized by companies to identify the need for new products and services in new and existing markets. Market share The estimate of the expected share of the specific market or territory that you expect to capture. Market surveys Techniques typically used to obtain valuable market information, for example, direct-mail surveys, telephone surveys (telemarketing), and personal interviews. Microeconomics Economic information that focuses on individual behavior and the interaction of companies. Moment of truth The moment when a business recognizes that the customer has developed an impression or perception about their products and services and the organization through encounters that happen over time. Monetary policies Policies related to the management of the money supply and the market rates of interest. Net revenue Gross revenue minus contractual allowances and sales discounts is net revenue. Outside-in approach A frequently utilized product development method that first identifies a need in the marketplace and then develops the product or service to meet the need.

Probing A sales technique used to gather information and uncover customer needs. An open probe asks a direct question, while a closed probe limits a customer’s answers to yes or no and helps to confirm a need. Profit Earnings above the expenditures for salaries, benefits, and direct and indirect costs. Promotion The function of informing, persuading, or otherwise influencing the consumer’s buying decision. Return on investment The tangible and intangible returns received from an investment, minus the fixed, variable, and capital expenditures for the venture. Strategic alliance/partnership An arrangement that enables companies to combine their resources to share risks, reduce costs, and solidify customer and supplier relationships. Strategy The technique, approach, or mechanics developed by the management team to facilitate the organization’s ability to perform successfully. Supply The quantity of goods and services that a company is willing to produce and sell at a specific price. SWOT analysis An assessment of the strengths, weaknesses, opportunities, and threats for an organization, taking the market and the competition into account. See chapter 2 for a detailed description. Telemarketing A market research technique employed by representatives using a predefined list of questions to gather vital information on the market potential. The survey, conducted by telephone, is directed to a specific staff member in a prospect’s office.

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Third-party administrator An unrelated third-party entity that administers and pays claims for multiple small insurers in a geographic region.

17. Fantus, J. E. 1996. Cost-Based Pricing Strategies for Clinical Laboratories—An Interactive Financial Guide, p. 103–107. Washington G-2 Reports, Washington, DC.

Trademark A brand that has received legal protection for the exclusive use of the sole owner.

18. Fantus, J. E. 1997. Laboratory Industry Report, p. 1–4. Washington G-2 Reports, Washington, DC.

Utility The satisfaction derived from using a product or service.

19. Heathfield, S. M. 2012. Beyond Traditional SMART Goals: Update Your Goal Setting Strategy. About.com. http://humanresources .about.com/cs/performancemanage/a/goalsetting.htm?p=1, accessed September 28, 2012.

Zero defections A customer service strategy that strives for no lost customers, or zero defections. The goal is to keep every customer the company can serve, and this strategy empowers the organization to achieve the goal.

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20. Hoerger, T. J., J. L. Eggleston, R. C. Lindroth, and E. Basker. 1997. Background Report on the Clinical Laboratory Industry, p. 1–105. Center for Economics Research, Research Triangle Park, NC. 21. Klipp, J. 2000. Overview of clinical laboratory industry trends, p. 1–5. In D. J. Curren (ed.), Laboratory Industry Strategic Outlook 2000 Market Trends & Analysis. Washington G-2 Reports, Washington, DC. 22. Klipp, J. 2000. Hospitals: laboratory outreach programs, networks and partnerships, p. 111–139. In D. J. Curren (ed.), Laboratory Industry Strategic Outlook 2000 Market Trends & Analysis. Washington G-2 Reports, Washington, DC. 23. Learning International, Inc. 1983. Xerox Professional Skills III. Learning International, Inc., Stamford, CT. 24. McNealy, R. M. 1996. Making Customer Service Happen, p. ix– xii, 23. Chapman and Hall, London, United Kingdom. 25. Mieling, T., and J. Keshner. 1996. Accessing capital for integrated delivery systems. Health. Financ. Manag. 1:32–35. 26. Miller, R., S. Heiman, and T. Tuleja. 1985. Strategic Selling, p. 69–99. Warner Books, New York, NY. 27. Monahan, C. 1997. It’s a done deal: the changing role of traditional medicine, what is a network. Clin. Lab. Manag. Rev. 11:276–283. 28. Nigon, D. 1998. Marketing in Your Laboratory, 2nd ed., p. 25–43. Clinical Laboratory Management Association, Inc., Wayne, PA. 29. Nigon, D., L. Shaw, and J. Barnes. 2000. A case study in laboratory outreach program development. Clin. Leadersh. Manag. Rev. 14:97–108. 30. Otto, C. 2002. Utility scores for dimensions of clinical laboratory testing services from two purchaser perspectives. Clin. Leadersh. Manag. Rev. 16:70–76. 31. Quevedo, R. 1991. Quality, waste, and value in white collar environments. Qual. Prog. 1991(1):33–37. 32. Reichheld, F., and W. E. Sasser, Jr. 1990. Zero defections: quality comes to services. Harv. Bus. Rev. 1990(9/10):105–111. 33. Sewell, C., and P. Brown. 1990. Customers for Life, p. xix–xx. Pocketbooks, New York, NY. 34. Shepard, D. 1995. Strategic restructuring for healthcare organizations: choosing a business structure. Prognosis 1995(11):1–11. 35. Smythe, M. H. 1997. Management in action. Low cost, high payoff solutions! Clin. Lab. Manag. Rev. 11:236–242. 36. Snyder, J. R., and M. Best. 1997. Managing human resources in a changing healthcare environment. Clin. Lab. Manag. Rev. 11: 285–289.

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ADDITIONAL READING Besley, S., and E. F. Brigham. 2003. Principles of Finance, 2nd ed. Southwestern Publishing/Thomson Learning, Mason, OH. Block, S. B., and G. A. Hirt. 2002. Foundations of Financial Management, 10th ed. McGraw-Hill, New York, NY. Buck, E. C., and D. E. Rajkovich. 2009. Tools and knowledge: your management survival kit. The impact of scale on laboratory operations. www.chisolutionsinc.com, accessed October 2, 2012. Carroll, W. W. 2012. Operational transparency: a business ethics path to competitive advantage. http://ezinearticles.com/?expert=William _W_Carroll, accessed October 1, 2012. Clinical Leadership and Management Review. 2001. Template topics. Calculating costs. Clin. Leadersh. Manag. Rev. 15:124–127. Degrote, L. 2002. Lowering bad debt in healthcare: the cure is easier than you think. Clin. Leadersh. Manag. Rev. 16:59–62.

Longberry, J. 2009. The clinical laboratory fee schedule yesterday, today, tomorrow. Clin. Lab. Sci. 22(2):99. Malone, B. 2010. Healthcare reform arrives. How will labs fare in the new era? Clin. Lab. News 36:6. http://www.aacc.org/publications/ cln/2010/june/Pages/coverstory1.aspx, accessed September 28, 2012. Malone, B. 2011. Big changes coming to molecular Dx reimbursement. Clin. Lab. News 37(9). http://www.aacc.org/publications/cln/ 2011/September/Pages/MolecularDxReimbursement.aspx#, accessed October 3, 2012. Malone, B. 2011. Reimbursement and reform in 2011. Will the push for integration open a new role for labs? Clin. Lab. News 37(1). http://www.aacc.org/publications/cln/2011/january/Pages/Reim bursement%20and%20Reform%20in%202011.aspx#, accessed October 3, 2012. McDowell, J. 2007. Building a laboratory outreach business: automation, value help boost growth and manage expansion. Clin. Lab. News 33(2) http://www.aacc.org/publications/cln/2007/feb/pages/ cover1_0207.aspx, accessed October 3, 2012. Miles, J., and R. L. Weiss. 2011. The Role of Laboratory Medicine in Accountable Care Organizations. Arup Laboratories, Salt Lake City, UT. Miller, R. B., S. E. Heiman, and T. Tuleja. 2005. The New Conceptual Selling. The Most Effective and Proven Method for Face-to-Face Sales Planning. Miller Heiman, Inc. Business Plus Hatchett Book Group. New York, NY. Miller, R. B., S. E. Heiman, and T. Tuleja. 1995. The New Strategic Selling. The Unique Sales System Proven Successful by the World’s Best Companies. Miller Heiman and Associates, Inc. Business Plus Hatchett Book Group. New York, NY.

DiGiacomo, K. 2012. 7 ways to build rapport with clients. http:// ezinearticles.com/?7-Ways-to-Build-a-Rapport-With-Clients&id =7297217, accessed October 1, 2012.

Miller, R. B., S. E. Heiman, and T. Tuleja. 2005. The New Successful Large Account Management. Maintaining and Growing Your Most Important Assets – Your Customers. Miller Heiman, Inc. Business Plus Hatchett Book Group. New York, NY.

Emery, D. R., J. D. Finnerty, and J. D. Stowe. 2004. Corporate Financial Management, 2nd ed. Prentice-Hall, Englewood Cliffs, NJ.

Nigon, D. 2000. Evaluating your laboratory outreach program. Clin. Leadersh. Manag. Rev. 14:153–159.

Fantus, J. E. 1999. Business strategies for hospital outreach programs. Clin. Lab. Manag. Rev. 13:188–196.

Pandita, R. 2012. Customer loyalty management. Buzzle. http:// www.greenpeg.com/index.php/customer-loyalty-management (last accessed May 26, 2013).

Francis, P. T. 2011. Personalize your lab’s outreach sales. http://www .mlo-online.com/articles/201108/personalize-your-labs-outreachsales.php, accessed October 3, 2012. Hanford, W. C. 1997. Financial skills for the non-financial manager. Breakout session VI. Clinical Laboratory Management Association Annual Conference and Exhibit, Toronto, Ontario, Canada. Iancu, M., and B. C. Handy. 2009. The value of laboratory medicine. Adv. Admin. Lab 18(1):61. http://laboratory-manager.advanceweb .com/Article/The-Value-of-Laboratory-Medicine.aspx, accessed January 24, 2013.

Paxton, A. 2001. In the news—bean counting basics for laboratories, using ABC to show cost savings. http://www.cap.org/captoday/ archive/2001 (last accessed August 2002). Porter, M. 1996. What is strategy? Harv. Bus. Rev. November Richards, D. 2012, How to do a breakeven analysis. http:// entrepreneurs.about.com/od/businessplan/a/breakeven.htm?p=1, accessed September 28, 2012. Seybold, P. B., R. T. Marshak, and J. M. Lewis. 2001. The Customer Revolution: How To Thrive When Customers Are in Control. Crown Business, New York, NY.

Kibak, P. 2008. The worsening shortage of lab staff: What’s being done to turn it around? Clin. Lab. News 34(5). http://www.aacc.org/ publications/cln/2008/may/pages/cover1_0508.aspx, accessed October 3, 2012.

Seybold, P. B., and R. T. Marshak. 1998. Consumers.com: How To Create a Profitable Business Strategy for the Internet and Beyond. Crown Business, New York, NY.

Klein, R, 2012. Finding the yes factor, picking up on nonverbal communication. http://www.netplaces.com/sales-rep/finding-the-yes-factor/ picking-up-on-nonverbal-communication, accessed October 1, 2012.

Statland, B. 1995. The commercialization of lab services . . . or make no mistake about it, lab testing is big business. MLO Med. Lab. Obs. 27(10):33–37.

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Van Horne, J. 2002. Financial Management and Policy, 12th ed. Prentice-Hall, Englewood Cliffs, NJ.

Providers Need to Know to Survive the Changing Diagnostic Healthcare Environment. www.darkdaily.com, accessed September 28, 2012.

Young, D. W. 2005. Strategic Decision Making: It’s Time for Healthcare Organizations to Get Serious. http://www.redorbit.com/news/ health/306646/strategic_decision_making_its_time_for_healthcare _organizations_to_get/, accessed October 4, 2012.

Wilkinson, I. 1995. Economics 101: exploring the land of costs. MLO Med. Lab. Obs. 27(12):39–43.

White, L., D. Lorber, and R. W. Taylor. 2011. White Paper: A CEO’s Guide to Next Generation Revenue Cycle Management. What Service

Zahorsky, D. 2012. Overcoming a sales dip: sales strategies for a sales dip. http://sbinformation.about.com/cs/bestpractices/a/aa083002a .htm, accessed October 1, 2012. Ziegler, B. 1997. Will history repeat itself? Vantage Point 1(20/21):1–5.

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APPENDIX 3.1 Websites AllBusiness Dictionary of Marketing Terms http://www.allbusiness.com/glossaries/ macroenvironment/4954903-1.html#axzz29NuRbPhV (accessed 12-12-12)

Howard Richards http://www.Howardri.org (assessed 12-12-12) Howard Richards is a professor of global economy at Earlham College.

U.S. Bureau of Labor Statistics, Division of Consumer Price and Price Indexes http://www.bls.gov/cpi/cpifact4.htm (accessed 12-12-12)

Advance for Medical Laboratory Professionals http://laboratorian.advanceweb.com/Article/Healthcare-Reform.aspx (accessed 12-12-12)

Greenpeg http://www.greenpeg.com/index.php/customer-loyalty-management (accessed 12-12-12)

Peter F. Drucker http://www.mtholyoke.edu/acad/intrel/drucker.htm (accessed 12-12-12) Peter Drucker is a faculty member at Mount Holyoke College.

Lifepoint Informatics http://g2intelligence.com/article/ART873425T?channel=20111021 (accessed 12-12-12) Healthcare.gov http://www.healthcare.gov (accessed 12-12-12) A federal government website managed by the U.S. Department of Health and Human Services.

Reference for Business, Encyclopedia of Business, 2nd ed. http://www.referenceforbusiness.com/small/Bo-Co/Competitive -Analysis.html (accessed 12-12-12) Competitive analysis entry

4 Introduction Workforce Availability of Personnel • Training Programs • Onthe-Job Training • Recruitment and Retention • Generational Diversity

Workplace Centralized versus Decentralized Operations • Local and Regional Integration of Laboratory Services

Work Flow

Current Challenges to Financial Stability within the Diagnostic Laboratory Roxanne Mercer and David S. Wilkinson

New Technology • Testing Site Options

Doing More with Less Systematic Approaches to Managing Change • Rightsizing

Shrinking Reimbursement Gross versus Net Revenue • Medicare • Managed Care • Billing

Regulations and Unfunded Mandates Regulations • Unfunded Mandates

Summary KEY POINTS

OBJECTIVES To discuss the staffing shortage environment for laboratory medicine To describe methods for recruiting and retaining laboratory staff To describe advantages and disadvantages of different organizational structures for laboratory operations To illustrate the effect of reimbursement on laboratory operations To review the regulatory agencies that interact with different laboratory operations

GLOSSARY REFERENCES

Chance favors only the prepared mind.

APPENDIX

L. Pasteur

T

he economics of healthcare today challenge clinical laboratories nationwide to provide quality service and patient results in spite of decreasing resources. Decreasing reimbursement for patient testing and dwindling staff resources require the laboratorian to “do more with less.” One must be aware of one’s professional environment and be creative to utilize the existing resources effectively and efficiently. In many cases, this will require a laboratory environment of constant and major change. This chapter addresses some of these issues and their financial implications.

Workforce

Clinical Laboratory Management, 2nd Edition Edited by L. S. Garcia ©2014 ASM Press, Washington, DC doi:10.1128/9781555817282.ch4

Availability of Personnel Recruitment and retention issues continue to challenge medical laboratories across the nation. One contributing cause is the closing of training programs for medical laboratory scientists (MLSs) and medical laboratory technicians (MLTs). Between 1983 and 2009, more than 64% of MLS programs closed their doors (see Fig. 4.1) (2, 20). The number of MLS candidates passing the American Society of Clinical Pathology (ASCP) certification exam decreased from 6,000 in 1983 to a nadir of 1,892 in 2005 (Table 4.1) (33). Professional groups and employers of laboratory professionals recognized this shortage. They have organized efforts to interest middle school, high school, and college students in pursuing careers in clinical laboratory science. It is the hope that interactions between students and laboratory professionals will stimulate interest in laboratory science as a career option (32). Some states are even planning to open new MLS and MLT programs. 71

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BASIC CONCEPTS AND THE CURRENT HEALTHCARE ENVIRONMENT

Figure 4.1 Number of National Accrediting Agency for Clinical Laboratory Sciences–accredited

CLS programs by year. doi:10.1128/9781555817282.ch4.f1

Another significant reason for an inadequate supply of clinical laboratory staff is more job opportunities for people with the skills of a laboratorian. Computer technology firms, pharmaceutical companies, and laboratory instrument manufacturers and distributors all offer laboratory scientists challenging positions with competitive salaries and benefits. Entry-level positions in the clinical laboratory, such as specimen processing and phlebotomy, often pay less than entry-level positions in some large home appliance stores and fast-food outlets. Another factor contributing to the recruitment and retention challenges is the increase in the volume and complexity of clinical tests required to keep up with changes in the population size and patient acuity (4). Laboratory management must continually monitor how their staff salaries compare to the competition. Table 4.1 Annual certification of medical technologists by the American Society for Clinical Pathology Year

No. certified

1983 1989 1999 2004 2005 2006 2007 2008 2009 2010 2011

6,000 3,000 2,100 1,927 1,892 2,050 2,463 2,484 2,712 3,016 3,078

The Bureau of Labor Statistics predicts a need for 14,000 new laboratory scientists each year, with educational programs producing less than 5,000 annually (32). Unless this trend can be reversed, the clinical laboratory industry is facing a critical shortage of personnel for the future. It is encouraging that the number of laboratory professionals passing certification exams has increased over the past 12 years. In 2000, 1,990 scientists passed the ASCP MLS certification exam, with a 66% pass rate. In 2011, this number climbed to 3,078, with a 79% pass rate (Table 4.1) (33). The increase in successful certifications may be attributed to an increased number of hospitals requiring certification as a condition of employment, more emphasis on College of American Pathologists (CAP) personnel standards, which require inspectors to look for certification, and the discontinuation of the National Certification Agency for Medical Laboratory Personnel (NCA) certification in 2009, when the NCA merged with the ASCP Board of Certification.

Training Programs There are several types of formal training programs for the clinical laboratory field. • Phlebotomy at the high school degree level • Histotechnician at the high school or associate degree level • MLT at the high school diploma or associate degree level • Histotechnology at the bachelor of science degree level • Cytotechnology at the bachelor of science degree level • MLS at the bachelor of science degree level

CHAPTER 4. FINANCIAL CHALLENGES IN THE DIAGNOSTIC LABORATORY

• MLS at the master of science degree level, categorical or advanced • Ph.D.-level training in the specialty areas such as clinical chemistry, microbiology, immunology, and toxicology • Postdoctoral training programs in the specialty areas Most programs start with didactic courses in the first half of training and rotate students through the major areas of an operational clinical laboratory to give them clinical experience in the second half. Some MLS and MLT schools have difficulty arranging the clinical training sites because of the short staffing in clinical laboratories. If the shortage of laboratory professionals is to be resolved, the profession as a whole must support the training programs.

On-the-Job Training Some laboratories have developed internal training programs (nonaccredited) that allow individuals with a non-MLS degree to become qualified under the Clinical Laboratory Improvement Amendments of 1988 (CLIA ’88) standards to perform high-complexity testing. On-the-job laboratory training programs (also nonaccredited) can also qualify individuals with high school diplomas to perform laboratory procedures at the CLIA ’88 moderate complexity level. On-the-job training programs must be approved by the CLIA laboratory director (CLIA ’88 regulations). Many laboratories have training programs that provide high school graduates an opportunity to learn phlebotomy (26). Once trained, these individuals may take an exam to become certified phlebotomists. An advantage of an on-the-job training program is that it can provide applicants for vacant laboratory positions. However, some clinical laboratories will only hire MLSs, MLTs, and phlebotomists who have graduated from nationally accredited programs. Some states, such as California, Florida, and New York, require a state license for MLS and MLT positions, making use of internal, nonaccredited training more difficult. The salaries for on-the-job-trained positions may be lower in some laboratories than for certified MLS and MLT positions. There are two disadvantages of on-the-job training. First, it takes considerably longer to train a new employee who

has not completed a formal MLS or MLT program. This can result in the removal of some staff from the laboratory bench area to do training, resulting in staffing shortages. Second, the person trained on the job is usually trained to function in only one section of the laboratory, such as chemistry. This limits the use of personnel resources to provide coverage for other areas such as hematology or microbiology. The more on-the-job-trained technical staff you have, the less flexibility you will have. On-the-job training programs can also help an MLS or MLT who has not worked in a clinical laboratory for many years regain experience and confidence. Table 4.2 compares the features of accredited and on-the-job training programs.

Recruitment and Retention As recruitment becomes more difficult, there are strategies to increase the number of applicants (Table 4.3). • National advertising. Using a medium such as professional publications or the Internet to advertise a position nationally. • Interview expenses. Partial or full coverage by the potential employer to an applicant for expenses incurred to travel for an interview. • Sign-on bonus. Usually a lump sum (for example, $3,000) paid when an applicant accepts a specific position. The new employee must stay in the position for a specified period of time to retain the complete bonus. • Relocation expenses. Partial or full coverage by the employer for expenses related to relocation. • Referral bonus. Usually a lump sum (for example, $1,000) to any employee of an organization who refers a qualified applicant who accepts the position. • Parking expenses. Providing free or subsidized parking to an employee. • Flexible hours. Allowing an employee to work nonstandard hours, such as work week of four 10-hour days. • Tuition benefits. Providing full or partial payment of educational costs for the employee or employee’s dependents.

Table 4.2 Comparison between accredited training programs and on-the-job training programs Feature

Accredited program

On-the-job program

Breadth of training Length of training Salary potential Didactic content Flexibility

Generalist, categorical 1–2 years MLS level General, categorical Easily cross-trained in different specialties (exception: categorical) Certified MLS (limited)

Usually limited to one lab specialty 3–6 months May be lower than certified MLS Usually limited to one lab specialty Difficult to cross-train in other specialties

Applicant pool

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High school, AA, and BS/BA (larger)

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BASIC CONCEPTS AND THE CURRENT HEALTHCARE ENVIRONMENT

Table 4.3 Recruitment strategies National advertising for the position Interview expenses Relocation expenses Sign-on bonus Referral bonus Free parking Flexible hours Tuition benefits Competitive salary

The cost of turnover includes overtime to maintain testing schedules as well as separation pay for the person leaving. Recruitment costs can be significant with national advertisements, sign-on bonuses, and payment of relocation expenses. The cost of turnover can quickly approach 50% of an employee’s annual salary (16). Recruitment and retention issues and the resulting short staffing can have a negative impact on laboratory operations. Turnaround times for patient test results may increase. Mistakes may increase due to overwork and stress. Outreach contracts may be at risk if the necessary quality of services cannot be provided. The morale and proficiency of staff may be negatively affected (see Table 4.4). Quality metrics should be monitored to identify negative impact of short staffing on the laboratory. Table 4.5 lists common indicators for this purpose. Each laboratory should have a recruitment and retention plan as part of its ongoing strategic plan. The development of the plan should include input from the laboratory staff to facilitate buy-in of the plan. The staff can give feedback on the root causes of retention problems and provide great ideas for improvement.

Generational Diversity One of the challenges of laboratory medicine today is the mixture of age generations that make up the workforce. Each generation of people has different needs, wants, and interests. Management must be aware of this if a strong work team is to be developed and retained. Recruitment efforts must take this into consideration, since different Table 4.4 Potential negative outcomes from staffing shortages Increased turnaround time Increased errors Decreased staff morale Staff burnout Increased staff turnover Increased overtime expense Increased expense for agency staff Decreased level of service (e.g., limitations on test menu) Loss of outreach customers

Table 4.5 Recruitment and retention indicators Turnover rate (new hires/total FTE) Vacancies (number) Overtime (overtime hours per pay period) Agency staff (hours paid per pay period) Staff feedback (comments)

recruiting tools will attract each generation. Younger generations may be interested in salary and perhaps tuition benefits for further educational opportunities. Older generations may be more interested in benefits such as healthcare and retirement plans. Competition for workforce resources requires laboratory facilities to provide benefit packages that meet the needs of a diverse applicant pool.

Workplace Centralized versus Decentralized Operations The implementation of the diagnosis-related group (DRG) payment methodology by the Medicare program, the growth of managed care, and the cutback of Medicare fee schedules have resulted in a downward trend of reimbursements for healthcare facilities, including clinical laboratories (35). This has led to a constant pressure for laboratories to cut their operating budgets and to adopt a “do-morewith-less” philosophy since the early 1980s. Figure 4.2 shows a laboratory organizational structure that was very common in medium and large hospital laboratories until the 1980s. It was not uncommon to have a satellite laboratory in the emergency room, intensive care units, or large outpatient clinics throughout a medical center. Many of these satellite laboratories functioned 24 h a day, 7 days a week. They usually performed stat hematology, chemistry, urinalysis, and even immunochemistry procedures. Procedures they did not perform were performed in the central laboratory of the facility. Even though test menus were limited in these satellite laboratories, there was a duplication of equipment and personnel since the main laboratory also performed the same procedures. Convenience and fast turnaround times were the driving factors for the establishment of these satellite laboratories. The cost of one full-time equivalent (FTE) to staff satellite laboratories 7 days a week and 24 h a day could easily exceed $130,000 a year. With the addition of equipment, maintenance, reagents, and supplies, each satellite laboratory was very expensive. The pressure to cut operating costs, use of automated transport systems such as pneumatic tube systems, and redesign of the main laboratory have resulted in a more centralized approach to laboratory testing in many institutions. This automated centralized approach has decreased costs (elimination of satellite laboratories) while still providing rapid turnaround times. A “stat” core laboratory

CHAPTER 4. FINANCIAL CHALLENGES IN THE DIAGNOSTIC LABORATORY

Satellite Laboratory Emergency Department

MAIN LABORATORY

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Satellite Laboratory Operating Room

Satellite Laboratory Clinic Figure 4.2 Relationship of satellite laboratories to the main laboratory. Turnaround time–sensitive tests are performed near the patient and providers. High-volume, more complex, and less timesensitive tests are performed in the main (central) laboratory. doi:10.1128/9781555817282.ch4.f2

within the main central laboratory of a medical facility can successfully and efficiently provide quality laboratory services. Many of these core laboratories have a combination of chemistry, hematology, and coagulation instrumentation in one area and trained staff capable of operating each instrument (8). The development of point-of-care testing (POCT) instrumentation has led to another decentralized-laboratory approach (Fig. 4.3). Satellite laboratories in many cases have been replaced with POCT instrumentation, especially for blood glucose testing. POCT instrumentation has an increasing menu of available tests (Table 4.6). POCT may decrease the turnaround time for results, decrease the volume of blood collected from patients, and help improve medical management for the patient. However, the cost to provide POCT may exceed the cost of central laboratory testing on a cost-per-test basis, and management of POCT can be a compliance challenge for the main laboratory (27). The testing needs for the particular patient population must be assessed to determine the best approach to provide quality testing services in the most cost-effective manner.

Local and Regional Integration of Laboratory Services The past two decades have seen the development of multiple hospital systems. Within a geographical area, one hospital may purchase multiple hospitals, or several hospitals may merge into a single hospital system. One major driver of hospital integration is reduction of costs by consolidating services (18). Figure 4.4 shows a typical laboratory network that can result from the merger of multiple hospitals into a single healthcare delivery system. Usually the larger hospital laboratory serves as the core laboratory and performs the bulk of testing. The remaining smaller hospital laboratories become rapid-response laboratories, performing only those procedures that require a fast turnaround time. These rapid-response laboratories send all other testing to the core laboratory (31). A network structured as in Fig. 4.4 can result in significant operational cost savings in labor, reagents, supplies, and major equipment maintenance (estimated 10 to 20% compared to the total cost of operating each laboratory independently). The development of rapid-response laboratories reduces duplication of equipment since the core

Figure 4.3 Deployment of POCT. It may be possible to achieve rapid turnaround of key laboratory test results by using POCT technology under the supervision of the main (or central) laboratory in lieu of satellite laboratories. Consolidation of key testing into a “core” laboratory may facilitate rapid turnaround time for most analytes, with only a few critical areas needing POCT capability. doi:10.1128/9781555817282.ch4.f3

MAIN LABORATORY

POCT Inpatient Unit

CORE LABORATORY (Ultra-Stat Laboratory)

POCT Emergency Department

POCT Outpatient Unit

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BASIC CONCEPTS AND THE CURRENT HEALTHCARE ENVIRONMENT

Table 4.6 POCT procedures

services for specimen transport. Usually the hospital laboratory can provide local stat testing with fast turnaround times and some esoteric testing capabilities that the commercial laboratory cannot provide. All networks are driven by an economic need to either lower operating costs or increase net revenue by increasing testing volume.

Electrolytes Blood urea nitrogen Glucose Blood gases Hematocrit Hemoglobin Creatinine Calcium Lactate Magnesium Pregnancy test Urinalysis (dipstick) Strep screen Occult blood Troponin Activated clotting time Prothrombin time Activated partial thromboplastin time Hemoglobin A1c

Work Flow

laboratory will perform the majority of the high-volume routine testing (24). Hospital laboratories may work together to form a network with larger geographical coverage. This network may allow a group of unrelated hospital laboratories to service statewide contracts for laboratory services. Commercial laboratories, also referred to as reference laboratories, all have wide geographic, often nationwide, networks to provide laboratory testing services (29). A third network example is a joint venture with a commercial laboratory and a separate hospital or hospital system laboratory (13). The commercial laboratory can provide already existing state and nationwide courier

New Technology Four critical tools that help the clinical laboratory industry meet the current economic challenges are automation, information systems, POCT, and robotics. Rapid technological advances in these areas allow laboratories to improve productivity and efficiency. Automation has had the greatest influence on laboratory productivity. Virtually every section of the laboratory benefits from automation, including molecular diagnostics, transfusion medicine, microbiology, and surgical pathology. Chemistry and hematology usually have the greatest level of automation. Automated instruments allow efficiencies in labor resources (12). One person may be sufficient to perform hundreds or even thousands of tests in one day. Implementation of automation can create excess testing capacity, which allows the laboratory to bring in new volume without adding personnel resources. The additional reagent and supply costs are usually minimal compared to adding labor costs (30). Automation enables reengineering the laboratory. A core, automated laboratory where hematology, coagulation, chemistry, and immunochemistry instrumentation are grouped together with a staff cross-trained on each instrument may be very cost-effective. Rapid turnaround times for results obtained on automated instruments allow laboratories to provide results quickly to clinicians. A concern with total automation is the reliability of the system

Figure 4.4 Organization of an integrated laboratory services delivery network. Several health-

care service delivery sites developed an integrated network to deliver laboratory services. The bulk of high-volume testing is consolidated at one site, the core laboratory. Other sites may offer rapid response testing or just phlebotomy services. doi:10.1128/9781555817282.ch4.f4

Rapid Response Laboratory Physician Office

Rapid Response Laboratory Hospital B

CORE LABORATORY Hospital A

Phlebotomy Site Nursing Home

Rapid Response Laboratory Hospital C

CHAPTER 4. FINANCIAL CHALLENGES IN THE DIAGNOSTIC LABORATORY

because, absent a completely redundant system, the backup will be a manual process requiring additional labor. National laboratory conferences, such as the Clinical Laboratory Management Association and the American Association of Clinical Chemists, exhibit the large number of automated instruments available. When choosing automation, laboratories need to understand the specific needs of their operation and do the necessary homework to determine which instrument is best for them. Three elements that should be considered are quality, service, and cost. If the first two are equivalent among the instruments being considered, then cost may be the deciding factor. Many times the right automation leads to major dollar savings in operational costs. Computers play a major role in laboratory medicine today. The combination of a laboratory information system (LIS), hospital information system (HIS), and laboratory automation can facilitate a highly efficient and cost-effective laboratory operation (10). Automated instrumentation interfaced to an LIS eliminates the labor of manual data entry. This allows immediate availability of electronic (paperless) results to any provider with system access. It also eliminates the need for manual delivery of reports. Computer-generated work lists and the ability to electronically manage quality control data reduce laboratory personnel requirements. Two additional capabilities of some computer systems are autoverification and logic-based rules (28). Autoverification allows the computer to automatically check certain parameters, such as reference values, delta checks, and quality control results. If all parameters are within defined ranges, the computer will automatically release patient results. This eliminates the need for a technologist to review each test manually, which reduces turnaround time and reduces some labor requirements. A logic-based rule is functionality that allows automated decision making based on specific, preprogrammed criteria. For example, computer logic may automatically generate a request for a reflex test if certain results are obtained on an assay. In addition, logic-based rules can support pop-up notification to the person requesting a test, for example, questioning the desire to order a test if it was ordered already on the same patient in less than twenty-four hours. Logic-based rules can help the laboratory work with medical staff to improve the utilization of laboratory services. As with automation, one must understand one’s needs before choosing from the many computer systems available. One of the most rapidly growing technologies in laboratory medicine is point of care testing (POCT). The standards of medical practice, especially in the emergency department and intensive care units, require rapid turnaround times. Even with automation, computerization, and pneumatic tubes, it is not always possible in some

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facilities to achieve an acceptable turnaround time from central lab testing (9). Bringing stat laboratory testing to the bedside through the use of POCT instrumentation has become more and more popular as a means to achieve a clinically acceptable turnaround time. Because POCT is typically more expensive than central laboratory testing, a cost/benefit analysis must be performed and should include operational issues such as quality control, billing, and technical oversight of the program (6, 12, 14). Robotics have been one of the core technologies in industrial automation for years. In the clinical laboratory, robotic automation of front-end, back-end, and workstation-linking processes is common, especially in very large laboratories. Total robotic systems exist that allow a bar-coded specimen to be placed on a track system that does the following: 1. Logs specimen into the LIS 2. Decaps, mixes, and centrifuges specimen (if necessary) 3. Aliquots specimen into daughter tubes if not using primary tube sampling 4. Loads specimen onto automated instruments (chemistry, hematology, and coagulation) 5. Stores specimen 6. Retrieves specimen for repeat or add-on tests Front-end or linking robotic systems are usually installed in larger laboratory operations and are very expensive (25). Robotics can be approached in a modular fashion where a system is purchased and installed in segments. The specimen receiving and processing areas of most medium and large operations are very labor-intensive. Front-end robotics, installed to receive, process, store, and retrieve specimens, can improve efficiency and decrease costs (10). The frontend robotic system can be extended to link the automated instruments. A cost/benefit analysis that shows your return on investment can help you decide whether or not robotics are feasible. All of the aforementioned trends must be considered when designing or renovating laboratory space (15).

Testing Site Options Laboratory testing may be performed in a variety of settings. Testing site options include the central laboratory, POCT, a reference laboratory, and patient home testing. When considering where testing should be performed, one needs to consider the following: • Quality—the accuracy, sensitivity, specificity, and clinical importance of the procedures • Turnaround time requirements • Service—who will maintain and support instrumentation, to include calibration, quality control, and proficiency testing • Cost—the total cost to provide specific testing options

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Usually a centralized automated laboratory operation provides the lowest cost per test (21). However, a centralized laboratory may not always deliver the fastest turnaround time. Sometimes it is more cost-effective to send certain procedures to an outside reference laboratory rather than incur the cost to set up and perform lowvolume procedures in-house (23). POCT may be the only test option that can provide the turnaround time clinically needed for certain procedures. Convenience to the physician and the patient drives POCT demand in inpatient and outpatient settings (27, 37). Some POCT may be categorized as waived testing under CLIA. The regulations governing waived tests are substantially less stringent than those for nonwaived testing. The list of waived tests changes rapidly, and the latest information can be obtained from the Centers for Medicare and Medicaid Services (CMS) website at http://cms.gov/Regulations -and-Guidance/Legislation/CLIA/Downloads/waivetbl.pdf (accessed 4 May 2012). Table 4.7 lists a few procedures approved by the Food and Drug Administration (FDA) for over-the-counter purchase and home use by the public without a prescription. These tests automatically are categorized under CLIA ’88 as waived. This test option does not require a physician’s prescription. This list will most likely grow over time (FDA website: http://fda.gov/medicaldevices/productsandmedical procedures/invitrodiagnostics/homeusetests/default.htm [accessed May 4, 2012]). Research efforts to develop noninvasive laboratory procedures, such as bilirubin and glucose testing, are ongoing. This may replace some of the POCT procedures at the patient’s bedside (22).

Doing More with Less Systematic Approaches to Managing Change The healthcare environment today is one of constant change. The challenge in many facilities is to keep a positive financial bottom line. With reimbursement for healthcare services decreasing and operational costs increasing, a positive bottom line is difficult to achieve. Maintaining the status quo is not an option today, since the changing Table 4.7 Tests approved by the FDA for home testing Human immunodeficiency virus Pregnancy test Glucose Occult blood Drugs of abuse Hemoglobin A1c Ketones Cholesterol Prothrombin time

environment requires changes in our laboratory operations to maintain financial stability. Those laboratories that have not made incremental operational changes in the last 15 years may now face the reality of having to make revolutionary changes to survive. These necessary changes may be highly disruptive. Laboratories need to take a systematic approach to managing their operations (19, 36). Managing the clinical laboratory should integrate all specialty sections. Open laboratory designs facilitate the ability to function as an integrated system (16). Instrument manufacturers are designing instruments that integrate the testing of traditionally separate areas of the laboratories (for example, chemistry, immunochemistry, toxicology, and immunology) into one analytical platform. A systematic approach allows changes that result in efficiency and economic savings. Cross-training of personnel and consolidation of separate sections into one operational area help laboratories meet the demands of the present healthcare environment. But there is a cost to change. Many people are not comfortable with change. With a good strategic plan, good communication, and involvement of the staff, positive change can result.

Rightsizing Personnel can represent as much as 50 to 75% of the direct operating costs of a laboratory. When the operating budget needs to be significantly reduced, the labor component is one of the first considerations. How does one determine the correct number of staff? Benchmarking tools such as the Laboratory Management Index Program (College of American Pathologists, Northfield, IL) and Healthcare Benchmarking System International (Soclucient, Evanston, Ill.) can be helpful in evaluating your laboratory’s productivity. When using benchmarking tools it is very important that you compare “apples to apples.” You should benchmark against peer laboratories. The items for count (such as “test” or “FTE”) must be precisely defined. The way procedures are counted must be defined. Are profiles counted as one procedure or broken out into separate components? Labor costs per procedure, worked hours or paid hours per procedure, procedures per FTE, laboratory costs per discharge, and laboratory cost per patient day are a few of the productivity indices that can be used for comparison. For larger laboratories, section-specific benchmarking may be helpful once you have documented the need to rightsize. There are several ways to approach labor reduction if it becomes necessary. Every time a position comes open, carefully review the need for filling the position. Can the position be eliminated (attrition), or can it be moved to another area of the department where there is a greater need? Consolidation of two or more areas of the laboratory can improve cross-coverage ability and decrease the overall need for personnel (for example, consolidation of

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chemistry and toxicology sections or microbiology and immunology sections). Front-end robotics and new automation may result in labor savings (25). Attrition is less traumatic than layoffs to decrease the workforce. A review of current laboratory services may reveal some labor-saving opportunities. Can some procedures be performed less often (for example, twice a week versus daily)? Can some procedures be sent to outside reference laboratories in place of being performed in-house? Working with the medical staff to change the way they utilize laboratory services may also save money. Are more procedures coming into the laboratory on the night shift than necessary? Are some tests being ordered too often? Are standing laboratory orders not being reviewed soon enough to discontinue unnecessary testing?

Shrinking Reimbursement Gross versus Net Revenue The bill a medical facility sends a patient or a patient’s insurance company lists what is termed the “gross billing” charges. Rarely are these gross billing charges paid in full. There are adjustments that are made (discounts) from the original charges based on the contractual payment agreements set up with various insurance payors. The original patient charge represents the gross revenue that is billed. The adjustments lower the gross revenue and determine the amount the medical facility should receive. This is the net revenue or expected dollars received. The difference between the gross revenue and the net revenue can be as much as 50 to 60%. A medical facility could bill a total of $100,000,000 for patient services but actually receive only $40,000,000 to $50,000,000. Medicare The federal government initiated the Medicare program in 1966. This program provides healthcare for the elderly and people with certain chronic diseases, such as end-stage renal failure. Initially hospitals were paid based on their actual expenses for inpatient care for Medicare patients. In 1983 this all changed when the government instituted the prospective payment system that reimburses hospitals based on DRGs for hospital inpatient services (Medicare Part A) (5). This system was based on reimbursing hospitals after Medicare patients were discharged and paying a set amount based on the discharge diagnosis. A major revision of the DRG system in 2007 resulted in more than 700 medical severity DRGs (MS-DRGs). If a hospital can treat a patient with a specific MS-DRG for less than they were reimbursed, then they make money; if it cost more than the MS-DRG reimbursement, they lose money. The government has instituted a similar program for outpatients with ambulatory payment classification (APC) (7). Both the MS-DRG and APC systems have shifted the financial risk from the government to the provider.

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Physician services and most nonphysician outpatient services are paid by the Medicare Part B program based on a fee schedule. Over the years the Medicare Part B fee schedule for laboratory services has not kept pace with the medical price index, so the reimbursement for laboratory services by Medicare Part B has been decreasing in constant dollars (1).

Managed Care Managed-care organizations are constantly negotiating with healthcare providers regarding reimbursement. They may pay a set fee for each day a patient is in the hospital (per diem). They may pay on a per-case basis, similar to Medicare DRGs. They may pay a set fee per month per member for any healthcare needed (capitated payment). The net effect of the prospective payment system is a significant decrease in reimbursement and cash flow for providers. It does not appear that this trend will change soon. The payment for laboratory services reflects this trend, and reimbursements are usually less than half of the gross laboratory charges. There is very little “profit margin” left for providers of laboratory services (34, 35). Billing Another factor causing decreased reimbursement for hospitals and clinical laboratories is the billing system itself. Hospital billing systems struggle to keep up with the complexity of the healthcare environment. The need for correct diagnosis codes (International Classification of Disease, 9th revision [ICD-9]), billing codes (Current Procedural Terminology, 4th edition), demographic information, and current insurance information can easily result in missing or wrong information in the billing system. This results in lost charges or payment denials. Hospitals have identified such lost income, and the emphasis has shifted from cutting operating expenses to fixing billing systems to recover dollars “left on the table” (17). A major challenge to the laboratory, as well as all healthcare providers, will be implementation of ICD-10, now scheduled for October 1, 2014. ICD-10 increases the number of reporting codes from approximately 13,600 to 69,000, providing increased reporting detail and accuracy of payments.

Regulations and Unfunded Mandates Regulations There has been a steady increase in regulatory control of the healthcare industry by both federal and state government (6). This increase in regulation extends to all clinical laboratories supporting both inpatients and outpatients. All clinical laboratories must be certified as fulfilling the requirements of CLIA ’88. Those requirements include personnel qualifications, quality control, quality assurance, laboratory procedures, proficiency testing, and laboratory safety (3).

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The certification of a clinical laboratory performing moderate- or high-complexity testing as defined by CLIA ’88 is accomplished through an on-site biannual inspection process (3). This inspection can be performed by the federal government, state government, or a voluntary organization such as The Joint Commission (TJC) or the CAP. The voluntary inspecting organization must be granted “deemed status” by CMS, which ensures that the standards of voluntary organizations are equivalent to their own. Other agencies granted deemed status include the Commission on Office Laboratory Accreditation (COLA), which inspects and accredits physician office laboratories, and the American Association of Blood Banks (AABB), which inspects and accredits blood banks. Once a laboratory successfully passes its inspection, CMS issues the appropriate certificate of compliance (if inspected by government agency) or certificate of accreditation (if inspected by a “deemed” organization).

Unfunded Mandates Many of the government regulations imposed on clinical laboratories come with a price tag. There is a cost to laboratories to obtain a CLIA certificate as well as to keep it current. There is a cost to have an inspection by TJC, CAP, AABB, or COLA as well as the required proficiency testing programs. Government compliance regulations as well as the Health Insurance Portability and Accountability Act of 1996 (HIPAA) rules have resulted in unplanned expenses for clinical laboratories and hospitals to modify existing computer systems and even add personnel to help meet the regulations (HIPAA Complete, available at http://www.hhs.gov/ocr/privacy/ [accessed July 25, 2012]). The FDA has recommended that blood banks have their own quality assurance coordinator. This may result in adding a new position to the payroll. All of these expenses incurred by clinical laboratories to meet mandated regulations represent additional costs for which there is no additional revenue.

Summary We live in very exciting and challenging times and must constantly utilize new ideas and changes to obtain the resources, both personnel and nonpersonnel, to move ahead. Automation, computerization, POCT, and robotics will allow a more integrated, systemwide approach to providing high-quality laboratory services in support of patient care. Laboratory networks and multihospital systems may achieve economies of scale. The status quo is not a viable option. The economics of healthcare have changed, decreasing the flow of dollars into diagnostic laboratories. It is imperative today that every laboratorian have a basic understanding of laboratory and healthcare finances (11). This financial knowledge will help the laboratory team work

toward those changes that create a more efficient and costeffective operation. KEY POINTS ■ Between 1983 and 2009 more than 64% of MLS programs have closed or become inactive. ■ As many as 60% of laboratories in this country report understaffing. ■ The Bureau of Labor Statistics predicts a need for 14,000 new laboratory scientists each year, with educational programs producing fewer than 5,000 annually. ■ MLS and MLT on-the-job training programs must be approved by the medical director of the laboratory. ■ The cost of turnover can quickly approach 50% of an employee’s annual salary. ■ The cost of one FTE to staff satellite laboratories 7 days a week and 24 h a day can easily exceed $130,000 a year. ■ Four critical tools that help the clinical laboratory industry meet the current economic challenges are automation, computerization, POCT, and robotics. ■ Three criteria that should be considered before the addition of new technology to any laboratory are quality, service, and cost. ■ Usually a centralized automated laboratory operation provides the lowest cost per test. ■ The difference between gross revenue and net revenue can be as much as 50 to 60%. ■ The prospective payment systems have shifted the financial risk from the payor to the provider. GLOSSARY Ambulatory payment classification (APC) An outpatient prospective payment system similar to the inpatient DRG system. American Association of Blood Banks (AABB) A professional organization that provides a voluntary inspection and accreditation program for blood banks and transfusion services. Centers for Medicare and Medicaid Services (CMS) Formerly known as the Healthcare Financing Administration (HCFA), CMS administers the Medicare program and enforces the CLIA ’88 regulations by conducting laboratory inspections, determining test reimbursements, auditing billing for medical necessity, and contracting with carriers and fiscal intermediaries to provide reimbursement. Clinical Laboratory Improvement Amendments of 1988 (CLIA ’88) The primary government rules that govern clinical laboratory operations. The final rules were first published in The Federal Register on February 28, 1992. College of American Pathologists (CAP) A professional organization that provides a voluntary laboratory inspection and

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accreditation program. It places a major focus on peer review and education.

completed associate-level laboratory-specific education and clinical training.

Commission on Office Laboratory Accreditation (COLA) An organization granted deemed status by CMS to inspect physician office laboratories for accreditation.

Medicare severity DRG (MS-DRG) Revised DRG system introduced in 2007.

Core laboratory This term has several meanings. It may refer to a main (central) laboratory within a multiple-laboratory system, or it may refer to a dedicated section within a single laboratory that does the majority of routine and stat testing. Diagnosis-related groups (DRGs) Based on the discharge diagnosis, DRGs are a system developed by the federal government for prospective payment of Medicare inpatient services to providers. Food and Drug Administration (FDA) One of the administrative components of the Department of Health and Human Services of the federal government. The FDA regulates the laboratory instruments, reagents, and systems provided by the medical device industry. The FDA also regulates blood and blood products and can inspect laboratory blood banks and donor centers. Full-time equivalent (FTE) A person working 40 hours in a week (full-time position). Healthcare Benchmarking System International (HBSI) A benchmarking tool used by many healthcare facilities to compare specific departmental operations, including the laboratory, to other similar healthcare facilities. Hospital information system (HIS) This term usually refers to a hospital computer system and its support personnel. Laboratory information services (or system) (LIS) This term usually refers to a laboratory computer system and its support personnel. Laboratory Management Index Program (LMIP) The LMIP is a benchmarking tool managed by the CAP. It allows a clinical laboratory to compare its operational effectiveness to that of other similar laboratories using ratios from operational management data. Laboratory network A system (formal or informal) of clinical laboratories spread over a geographical area to provide laboratory services in a coordinated, integrated manner. A laboratory network can include commercial laboratories. Managed-care organization (MCO) An organization that provides medical insurance to beneficiaries within a framework that manages patients’ access to certain healthcare services with the goal of providing care at a lower cost. The amount of healthcare coverage varies from one MCO to another depending on the program and fee paid by the client (patient).

National Accrediting Agency for Clinical Laboratory Sciences (NAACLS) An international agency responsible for accrediting educational programs in the clinical laboratory sciences and related healthcare fields. Point-of-care testing (POCT) Usually refers to tests performed near the patient. Often performed by a nonlaboratorian. POCT is often managed or overseen by clinical laboratory personnel. Physician office laboratory (POL) A laboratory run by a physician who performs laboratory tests on his or her own patients. Robotics Computerized, mechanical equipment that automates specimen handling and delivery to automated laboratory analyzers. Return on investment (ROI) ROI analysis shows how much profit (or loss) will be made on an investment (usually capital dollars) for laboratory equipment, projects, or programs. Satellite laboratory A laboratory separated from the main laboratory, usually with a limited test menu, that is dedicated to a specific set of patients and locations in a medical facility. The Joint Commission (TJC) A professional organization that provides a high-level peer review, on-site survey, and accreditation program for healthcare facilities, including laboratories. Waived testing Certain simple laboratory tests meet requirements for waived testing as outlined in CLIA ’88. Waived testing may be performed without concern for personnel standards or written procedures. Some of these tests are approved by the FDA for home use, such as blood glucose monitoring, are simple, and supposedly have little chance for error or major effect on the patients if an error occurs. (FDA, available at https://mymail.mcvh-vcu.edu/mail/ dwilkinson.nsf?OpenDatabase [accessed July 16, 2013].)

REFERENCES 1. Barrow, B. 2000. CLMA spearheads fee schedule updates. Vantage Point 4:8–9. 2. Cearlock, D. 2009. NAACLS programs, graduates, pass rates and placements: findings from the 2009 Annual Survey of Programs. NAACLA News 103:3. 3. Clark, G. B. 1998. Laboratory regulation certification and accreditation, p. 369–393. In J. R. Snyder, and D. S. Wilkinson (ed.), Management in Laboratory Medicine, 3rd ed. Lippincott-Raven, Philadelphia, PA.

Medical laboratory scientist (MLS) Term generally used to refer to a person that has completed a four-year college-level program that requires specific training in the clinical laboratory sciences. In recent years, MLS has replaced the older terms medical technologist (MT) and clinical laboratory scientist (CLS). The designation of MT or CLS also indicates a specific level of professional certification by the American Society for Clinical Pathology. An MLS can perform a full range of laboratory tests.

5. Crolla, L. J., and P. W. Stiffler. 2000. Reimbursements and finance, p. 97–103. In A. S. Kurec, S. Schofield, and M. Wattens (ed.), The CLMA Guide to Managing a Clinical Laboratory. Clinical Laboratory Management Association, Inc., Wayne, PA.

Medical laboratory technician (MLT) An MLT can perform general tests under the supervision of an MLS. An MLT has

6. Curren, D. J. 2000. HCFA proposes rule on lab test coverage, payment. Natl. Intell. Rep. 21:3.

4. Coryelyou-Ward, K., B. Ramirez, and T. Rotarius. 2011. The laboratory workforce shortage. A managerial perspective. Healthcare Manag. 30:(2):148–155.

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7. Curren, D. J. 2000. Outpatient reimbursement: final countdown to July 1 prospective payment launch. Natl. Intell. Rep. 21:3–6. 8. Dadoun, R. 2000. Automation strategies to improve personnel utilization. Adv. Adm. Lab. 9:58–62. 9. Dilts, T. J. 1998. Point of care testing: a step to the future. Lab Notes 8:1–7. 10. Eggert, A. A., K. A. Emmerich, E. R. Quam, and K. L. Bowers. 2000. The LIS as process manager. Save money and reduce tech fatigue. MLO Med. Lab. Obs. 32:32–33, 36–38, 40 passim. 11. Falcone, D. M. 2000. Basic financial management for laboratorians. MLO Med. Lab. Obs. 32:30–34, 36–37. 12. Felder, R. A. 1997. Automation: innovative and inevitable. Clin. Lab. Manag. Rev. 11:365–367.

23. Labeau, K. M., M. Simon, and S. J. Steindel. 2001. Clinical laboratory test menu changes in the Pacific Northwest: an evaluation of the dynamics of change. Clin. Leadersh. Manag. Rev. 15:16–22. 24. Lehmann, C., and A. M. Leiken. 2000. Diagnostic technology for laboratories in an integrated delivery system. Clin. Leadersh. Manag. Rev. 14:118–123. 25. McPherson, R. A. 1998. Robotics, automation, and the new role of process control. Clin. Lab. Manag. Rev. 12:339–346. 26. Mooney, B. 2000. Staffing problems top concerns plaguing phlebotomy supervisors. Adv. Med. Lab. Prof. 12:14–17. 27. O’Brien, J. A. 2000. Point-of-care testing. MLO Med Lab. Obs. 12:38–43.

13. Forsman, R. W. 2001. Joint venture versus outreach: a financial analysis of case studies. Clin. Leadersh. Manag. Rev. 15:217–221.

28. Pearlman, E. S., L. Bilello, J. Stauffer, A. Kamarinos, R. Miele, and M. S. Wolfert. 2002. Implications of autoverification for the clinical laboratory. Clin. Leadersh. Manag. Rev. 16:237–239.

14. Foster, K., G. Dispotis, and M. G. Scott. 2001. Point-of-caretesting: cost issues and impact on hospital operations, p. 269–284. In K. Lewandrowski (ed.), Clinics in Laboratory Medicine: Point of Care Testing. W. B. Saunders Company, Philadelphia, PA.

29. Root, J. M. 1996. Competitive strategies for regional laboratory systems, p. 21–27. In J. W. Steiner, J. M. Root, and D. K. Watt (ed.), Road Map for Laboratory Restructuring. Washington G-2 Reports, Washington, DC.

15. Garikes, R. W., and S. Maxwell. 2001. Flexible and functional: a case study in efficient laboratory design. MLO Med. Lab. Obs. 33:28–33.

30. Smythe, M. H. 1997. Automation: triumph or trap? Clin. Lab. Manag. Rev. 11:360–364.

17. Grider, M., and K. Boles. 2002. Managing your revenue pipeline. Clin. Leadersh. Manag. Rev. 16:211–214.

31. Steiner, J. 1995. Regionalization of laboratory services to consolidate? To network? To do both? p. 7–9. In J. W. Steiner, R. L. Michel, and D. K. Watt (ed.), Case Studies for Laboratory Reconstructing. Washington G-2 Reports, Washington, DC.

18. Ho, D. K. H. 2000. Mission (almost) impossible: merge 2 hospital labs in 6 months. MLO Med. Lab. Obs. 32:46–52.

32. Thornton, K. 2010. Spread the word: laboratory professionals are vital. www.MLO-online.com, accessed July 30, 2012.

19. Hunter, L., J. Lien, J. R. Snyder, and R. Teixeira. 2000. Competencies in clinical systems management. Clin. Leadersh. Manag. Rev. 14:166–172.

33. U.S. Certification. ASCP Board of Certification. http://www .ascp.org/certification, accessed May 30, 2012.

16. Glenn, D. 2008. Higher pay reduces costs. Crit. Values 1(4):11.

20. Kibak, P. 2008. The worsening shortage of lab staff. Clin. Lab. News 34(5). 21. Kilgore, M. L., S. J. Steindel, and J. A. Smith. 1999. Cost analysis for decision support: the case of comparing centralized versus distributed methods for blood gas testing. J. Healthcare Manag. 44:207–215. 22. Kost, J. G., and H. Clifford. 1996. In vitro, ex vivo, and in vivo biosensor systems, p.717–722. In J. G. Kost (ed.), Handbook of Clinical Automation, Robotics, and Optimization. John Wiley and Sons, Inc., New York, NY.

34. Watson, K., and J. F. Boothe. 2001. Government study calls for change in Medicare reimbursement. Vantage Point 5:1–5. 35. Weissman, D. W. 2000. Hospital profits continue to fall. Lab. Ind. Rep. IX:1, 5–7. 36. Wilkinson, D. S., and T. J. Dilts. 1999. Role of medical, technical, and administrative leadership in the human resource management life cycle: a team approach to laboratory management. Clin. Lab. Manag. Rev. 13:301–309. 37. Wright, J. H. U. 1998. Rethinking point-of-care-testing. Adv. Adm. Lab. 7:23–20.

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APPENDIX 4.1 Websites Centers for Medicare and Medicaid Services http://www.cms.gov/Regulations-and-Guidance/Legislation/CLIA (accessed July 25, 2012) Since the list of waived tests tends to change frequently, the latest information can be obtained from CMS.

Procedures approved by the FDA for over-the-counter purchase and home use by the public without a prescription can be found at this website. These tests automatically are categorized under CLIA ’88 as “waived.” The list tends to change with time, so you may want to check the list content periodically.

FDA http://www.fda.gov/MedicalDevices/ProductsandMedicalProcedures/ InvitroDiagnostics/HomeUseTests (accessed July 25, 2012)

U.S. Department of Health and Human Services http://www.hhs.gov/ocr/privacy (accessed July 25, 2012) The complete HIPAA can be found at this website.

5 Introduction Brief History • Overview of the Current State of Laboratory Regulations

Regulation of Workplace Safety and Human Resource Management Occupational Safety and Health Administration • American National Standards Institute • National Institute of Occupational Safety and Health • CLSI • Centers for Disease Control and Prevention • Food and Drug Administration • Equal Employment Opportunity Commission • Department of Transportation and International Air Transport Association • Hazard Communication Standard • Blood-Borne Pathogens • Ergonomics • Tuberculosis • Latex • Sharps • General Laboratory Safety • Chemicals • Transportation of Clinical Specimens • Employment Discrimination

Accreditation and Licensure Brief History • Laboratory Inspection and Accreditation • Personnel Certification and Licensure

Regulations Affecting Transfusion Medicine Overview of Changes in Transfusion Medicine That Have Resulted in Increased Scrutiny • Safety • Regulatory Organizations that Specifically Impact Transfusion Medicine • Biological Product Deviation Reporting • The Cost of Increasing Regulatory Oversight

Regulation of Laboratory Business Practices Negotiated Rule-Making Process • Corporate Compliance • Key Elements of a Model Compliance Plan for Hospitals • The Legal Environment

The Impact of Regulatory Requirements Susan D. Roseff, Denise E. Russell, Christina E. Anderson, and Roxanne Mercer OBJECTIVES To gain a basic understanding of the regulatory requirements facing laboratories To understand the basics of laboratory inspection and accreditation To present an overview of Clinical Laboratory Improvement Amendments 1988 To understand the impact of increasing scrutiny on the practice of transfusion medicine To evaluate model compliance plans and review the intent and impact on patients, physician providers, hospital and laboratory providers, employers, and payors To review medical necessity, local medical review policies, advanced beneficiary notification, and Medicare secondary payor requirements Law and regulation are man’s product. The sum of their content is of less importance than the manner in which they are applied. J. Solomon (126)

Laboratory Reimbursement and Medical Necessity Medicare • Other Federally Funded Programs • National Coverage Determination and Local Medical Review Policies • Reimbursement Methods • Code of Medical Necessity (Reasonable and Necessary Services) • Overview of the Reimbursement Process • Registration and Coding • Claims Processing and Submission • Remittance Advice • Audit and Benchmark Monitors

Compliance—the Next Generation: HIPAA Covered Entities • Privacy Standards: Rules Governing Protected Health Information • Administrative Requirements • Personnel Policies and Procedures • Patient Informed Rights • Business Associates and Business Associate Agreements • Standards for Electronic Transactions • HIPAA Compliance and Enforcement

Summary KEY POINTS GLOSSARY REFERENCES APPENDIXES

Clinical Laboratory Management, 2nd Edition Edited by L. S. Garcia ©2014 ASM Press, Washington, DC doi:10.1128/9781555817282.ch5

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Introduction Brief History Prior to the passage in 1970 of the Occupational Safety and Health Act (OSHA), providing a safe workplace was left to the ethics and knowledge of each employer. Pre-OSHA laboratory safety took a back seat to other priorities such as profits, productivity, automation, unions, and other concerns (69). In recent years laboratories have seen an ever-increasing plethora of rules, regulations, and laws governing their operations (reference 110, p. 197–212). The many laws emanating from the federal and state governments and their details, interrelationships, and complexities are too much for most individuals to understand. In a large institution, there should be an office with environmental health and safety professionals to act as a resource. Smaller institutions should assign an individual responsible for seeking advice from professionals at other institutions, the regulatory agencies themselves, or private consultants (reference 110, p. 197–212). Overview of the Current State of Laboratory Regulations Clinical laboratories operate in a constantly changing environment. Much of that change is driven by rules, regulations, and laws, as well as voluntary standards affecting the operation of every clinical laboratory in the United States.

CHAPTER 5. THE IMPACT OF REGULATORY REQUIREMENTS

Today’s laboratory manager and laboratory director must spend considerable time and effort ensuring that their laboratory maintains compliance with what sometimes seems like a constantly moving target. In an effort to protect laboratory workers from workrelated diseases and injury, the federal government enacts laws and regulations through its various agencies. The health and safety of employees, their fair and equitable treatment, management of pathogens and chemicals, shipping of specimens, and the accreditation of clinical laboratories are a few of the aspects of laboratory medicine regulated by laws or standards. The federal agencies and voluntary organizations that set these regulations and standards form a veritable vegetable soup of acronyms. Through the use of increasingly restrictive donor criteria, screening of donor blood for pathogens, and increased oversight, the federal government seeks to protect the safety of the blood supply. Donor units are screened for a large variety of pathogens prior to transfusion. Because there is a short period after exposure when an infected unit might test negative, extensive records are maintained, and a lookback program identifies recipients of those units. The blood supply has never been safer, but the cost of achieving that safety continues to rise. Laboratory business practices do not escape the scrutiny of federal lawmakers. As the single largest payor of healthcare services, the Centers for Medicare and Medicaid Services (CMS) drives much of laboratory business practice. Hospitals should have a system in place to develop and administer programs to ensure regulatory compliance. Laboratory employees should have a basic understanding of laws prohibiting self-referral, fraud and abuse, and ethics and standards of conduct. Failure to comply with federal laws and regulations can lead to institutional, as well as individual, fines and penalties. HIPAA is the Health Insurance Portability and Accountability Act of 1996. This progressive, patient-friendly law has two sections. Title I deals with protecting health insurance and coverage for people who lose or change jobs. Title II includes language that mandates healthcare providers to establish safeguards that guarantee the privacy of patient information, requiring extensive changes in the way business is conducted. Section II has the greatest impact on clinical laboratory operations. HIPAA codifies institutional security measures to protect the confidentiality of any information that specifically identifies patients.

Regulation of Workplace Safety and Human Resource Management Occupational Safety and Health Administration The Occupational Safety and Health Administration (OSHA) was created as a result of the passage of the Williams-Steiger Act of 1970, commonly known as the Occupational Safety

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and Health Act (129). In keeping with its mission to “save lives, prevent injuries and protect the health of America’s workers,” OSHA establishes and enforces legally enforceable protective standards. Most of the standards applicable to the clinical laboratory fall under Code of Federal Regulations 29 CFR 1910. (More information about OSHA’s mission and a link to the Occupational Safety and Health Act of 1970 are available at OSHA’s website, http://www.osha.gov/about .html [accessed January 25, 2012]).

American National Standards Institute The American National Standards Institute (ANSI) was founded in 1918. ANSI is comprised of over 1,000 companies and organizations, both public and private (129). A private, nonprofit organization, ANSI “administers and coordinates the U.S. voluntary standardization and conformity assessment systems” (American National Standards Institute, available at http://www.ansi.org [accessed January 25, 2012]). ANSI publishes safety standards developed by its accredited standards committees and publishes specifications for safety equipment including eyewash, emergency shower facilities, and protective eye equipment (safety glasses and goggles). ANSI, through its membership in the International Organization for Standardization (ISO), coordinates internationally adopted safety standards (129). National Institute of Occupational Safety and Health In addition to creating OSHA, the Occupational Safety and Health Act of 1970 created the National Institute of Occupational Safety and Health (NIOSH). NIOSH is an agency of the Department of Health and Human Services (HHS) and functions as a research agency charged with conducting research, providing technical assistance, and recommending standards adoption. (More information about NIOSH is available at http://www.cdc.gov/niosh/about .html [accessed July 5, 2012]). NIOSH recommends safety hazard controls, is a leader in assessment and documentation of hazard control technology, and conducts classes throughout the country, but it possesses no enforcement authority (129). NIOSH works to reduce the enormous toll of workplace injury and disease in the United States. Based on 2010 data, nearly 4 million workplace injuries and illnesses were reported in private industry and government, with over 30% requiring days away from work. Every day about 8,300 workers incur a disabling injury and 12 die from a work-related injury. (Additional information about the impact and cost of workplace injury and disease is available at http://www.bls.gov/iif/ and www.cdc.gov/ niosh/injury/ [accessed March 3, 2012].) ANSI and NIOSH work closely with OSHA in setting laboratory standards. On January 19, 2001, OSHA issued “Memorandum of Understanding: ANSI and OSHA

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working together to enhance and strengthen the national voluntary consensus standard system of the United States.” This agreement recognizes OSHA’s authority in the development and enforcement of health and safety standards while at the same time recognizing the important role that national-consensus-standard-producing organizations play in the development of occupational health and safety standards. The memorandum states that ANSI will continue working to develop national consensus standards for OSHA’s use and that OSHA will cooperate with ANSI and assist in its mission. The agreement calls for close cooperation in the areas of technical support, consultation in planning of standards development activities, sharing of reports, and other areas. This cooperative effort is intended to assist OSHA in carrying out its responsibilities through the use of ANSI’s technical support and resources.

CLSI The Clinical and Laboratory Standards Institute (CLSI; formerly NCCLS) is a voluntary global organization that develops consensus standards and guidelines for clinical laboratories and other audiences. Over 2,000 member organizations drawn from government, industry, and the professions propose, review, comment on, and approve standards and guidelines (44). (Information about CLSI can be found at www.clsi.org [accessed January 30, 2012].) Centers for Disease Control and Prevention The Centers for Disease Control and Prevention (CDC) is an agency of the federal government. The CDC tracks, monitors, and researches disease. Of interest to laboratories is the CDC publication Morbidity and Mortality Weekly Report. This weekly report provides information on blood-borne pathogens and infectious waste disposal recommendations, among other topics. Guidelines published by the CDC are published in the Federal Register and may be incorporated into OSHA standards. The blood-borne

pathogen exposure control guidelines set forth by CDC became the OSHA Bloodborne Pathogen Standard published as 29 CFR 1910.1030 (129).

Food and Drug Administration The Food and Drug Administration (FDA), an agency of the Department of Health and Human Services, is charged with regulating laboratory instruments, reagents, and blood banks. The focus of the regulations is to ensure that good manufacturing practices are followed and that instruments, blood, and blood products are safe and effective (42). Blood and blood product regulations will be discussed in more detail later in the chapter. The categorization of diagnostic laboratory tests according to their complexity also falls to the FDA. Tests are classified according to the level of potential public health risk into one of three categories: waived, moderate, or high complexity (Tables 5.1 and 5.2). Tests that have been approved by the FDA for home use are automatically classified as waived. However, versions of those tests marketed for professional use are not automatically granted waived status. Such tests qualify for an expedited review, as any differences in the two versions are all that must be reviewed. (Information on categorization criteria, CLIA waiver information and a searchable database are located at www.fda.gov/cdrh/clia/ index.html [accessed January 30, 2012].) Equal Employment Opportunity Commission The Equal Employment Opportunity Commission (EEOC) was formed in 1965 as the federal agency charged with enforcing the Civil Rights Act of 1964 (135). Title VII of the Civil Rights Act of 1964 put into place guarantees of equal treatment for all persons. The emphasis of Title VII was on protecting individuals from employment discrimination through enforcement of individual rights (125). Since the 1960s the emphasis has shifted to addressing and correcting past deficiencies through affirmative action programs (Table 5.3).

Table 5.1 CLIA categorization of test systems, assays, and examinationsa Knowledge (required to perform the test) Training and experience (required of personnel in preanalytic, analytic, or postanalytic steps) Reagent and material preparation (evaluates stability, reliability, handling and storage conditions, preparation steps) Characteristics of operational steps (evaluates steps in the testing process: pipetting, timing, calculations, etc.) Calibration, quality control, and proficiency testing materials (evaluates the availability and stability of calibration materials, quality control, and proficiency testing materials) Test system troubleshooting and equipment maintenance (evaluates degree of test operator troubleshooting and maintenance required as well as the decision making and special skills or knowledge required to perform the test) Interpretation and judgment (evaluates the degree of interpretation and judgment required to resolve problems in preanalytic, analytic, and postanalytic processes) a CLIA categorizes laboratory tests as waived, moderate, or high complexity. Each test system (test plus instrument), assay, or examination is graded. A grading system using seven criteria and scores of 1, 2, and 3 is employed—a score of 1 being the lowest, 3 the highest, and 2 intermediate. Scores are totaled. A test system, assay, or examination with a score equal to or less than 12 is assigned to the moderate-complexity category, and those with a score of greater than 12 to the high-complexity category. (The Food and Drug Administration website provides additional information on grading of test complexity at www.fda.gov [accessed March 15, 2012].)

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Table 5.2 Examples of waived, moderate-complexity, and high-

complexity tests

a

Waived Pregnancy test Rapid strep test Fecal occult blood Blood glucose by glucose monitoring devices cleared by the FDA specifically for home use Spun hematocrit Moderate complexity Gram stain Urine culture and colony count kits Manual procedures with limited steps and with limited sample or reagent preparation Automated procedures that do not require operator intervention during the analytic process High complexity Manual cell counts Serogrouping and typing Hemoglobin electrophoresis Western blot Flow cytometry Cytopathology examinations

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Table 5.3 Federal laws prohibiting job discrimination (EEOC)a Civil Rights Act of 1964 (Title VII). Prohibits employment discrimination based on race, color, religion, sex, or national origin. Equal Pay Act of 1963. Protects men and women doing substantially the same job in the same establishment from wage discrimination based on sex. Age Discrimination in Employment Act of 1967. Protects workers over 40 years old. American with Disabilities Act of 1990 (Titles I and V). Protects qualified individuals from employment discrimination. Rehabilitation Act of 1973 (Sections 501 and 505). Prohibits discrimination against disabled federal government employees who qualify. Civil Rights Act of 1991. Provides monetary damages in cases of intentional employment discrimination. Genetic Information Nondiscrimination Act of 2008. Prohibits discrimination against employees, applicants, and those individuals’ family members because of genetic information. a The website of the Equal Employment Opportunity Commission, www.eeoc.gov (accessed March 15, 2012), provides details regarding the various laws prohibiting employment discrimination.

a The Food and Drug Administration website provides additional information on grading of test complexity at www.fda.gov (accessed March 15, 2012).

Department of Transportation and International Air Transport Association The Department of Transportation (DOT) is responsible for coordinating the safety program for shipment of hazardous goods within the United States. Of particular interest to laboratories, biohazardous materials, infectious materials, and dry ice are classified as hazardous goods (Table 5.4). The Office of Hazardous Materials Safety, which is located in the Research and Special Programs Administration Office of the DOT, develops and administers the Hazardous Materials Regulations (HMRs), which can be found in the Code of Federal Regulations (49 CFR parts 100–185). Both the DOT’s HMRs and the International Air Transport Association (IATA) regulate shipment of hazardous goods sent by air. Air carriers worldwide have a major interest in ensuring the safe shipment of dangerous goods. The IATA functions as their international trade association. The DOT and IATA both base their regulations on the recommendations of the United Nations Committee of Experts (UNCOE). Although both organizations derive their regulations from the recommendations of the UNCOE, IATA’s adds additional restrictions. The IATA regulations are updated frequently and published annually in the IATA Dangerous Goods Regulations (IATA DGR). Laboratories adhering to the IATA regulations for shipping infectious or biohazardous materials can be assured of also complying with DOT’s HMRs (55).

Hazard Communication Standard OSHA standard 29 CFR Part 1910.1200, also known as the Hazard Communication Standard (HAZCOM), was originally published in 1983 (http://www.osha.gov/pls/oshaweb/ owadisp.show_document?p_table=STANDARDS&p _id=10099, accessed February 29, 2012). Intended to protect workers from hazardous chemicals in the workplace (83), this version of the standard specifically included employees and employers in specific industries. Laboratories in academic institutions and in other industries were not Table 5.4 Hazard classes and definitionsa Class 1 2 3 4

5 6 7 8 9 Other regulated materials a

See reference 45.

Definition Explosives Gases (flammable, nonflammable, and poison) Flammable liquids Flammable solids, spontaneously combustible material, dangerous when wet Oxidizers, organic peroxide Poisonous materials, infectious substances (6.2) Radioactive materials Corrosive materials Miscellaneous hazardous materials (includes dry ice)

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included. Following court challenges, OSHA was required to extend the standard to all employees who work with, or are exposed to, chemicals. The final Hazard Communication Standard was published in 1987 and became effective on May 23, 1988 (reference 75, p. 69–197). The laboratory community quickly realized that the OSHA standards, designed for industrial-scale operations, were not appropriate for laboratories. As a result of comments and concerns from the laboratory community, an effort to craft a separate regulation for laboratories began. The result was OSHA Standard 29 CFR Part 1910.1450, “Occupational exposure to hazardous chemicals in laboratories,” also known as the laboratory standard, which became effective in 1990 (reference 110, p. 197–212) (http:// www.osha.gov/pls/oshaweb/owadisp.show_document?p _table=STANDARDS&p_id=10106, accessed February 29, 2012). In most cases laboratories are held to the laboratory standard rather than the HAZCOM standard (reference 75, p. 342–352). Although the laboratory standard and the HAZCOM standard are very similar, they do have some key differences. The laboratory standard adds requirements for development of a chemical hygiene plan, appointment of a chemical hygiene officer, and a requirement that there be available standard operating procedures (reference 75, p. 342–352). The OSHA laboratory standard is not intended to supersede all OSHA standards. OSHA rules and standards on areas not mentioned in the laboratory standard are still in effect. For instance, the Occupational Safety and Health Act contains a “general duty” clause that requires employers to provide a workplace free from recognized hazards that may cause death or serious harm and requires employees to comply with all OSHA rules and health standards. Because the requirements of the HAZCOM and laboratory standards are similar, many institutions have chosen to institute programs that meet the requirements of the Hazard Communication Standard while adding the requirements for a chemical hygiene plan (reference 110, p. 197–212).

Blood-Borne Pathogens Over time, and with increasing knowledge, laboratories have seen changes in the precautions used in handling laboratory specimens. Laboratories have moved from procedures that employed special handling of known or suspected infectious specimens to those requiring the handling of virtually all human specimens as if they were infectious. Over the years, handling of human specimens has progressed from labeling known infectious specimens as “blood and body fluid precautions” to following the recommendations from the CDC and advisories from HHS and the Department of Labor on ways to protect healthcare workers from occupational exposure, warnings from OSHA that healthcare institutions not following the

guidelines are subject to fines and prosecution (86), and federal requirements as promulgated in the OSHA Bloodborne Pathogen Standard. OSHA’s Bloodborne Pathogen Standard (29 CFR 1910 .1030; http://www.osha.gov/pls/oshaweb/owadisp.show _document?p_table=STANDARDS&p_id=10051, accessed February 29, 2012) and its companion compliance directive, OSHA Instruction CPL 02-02-069 (http:// www.osha.gov/pls/oshaweb/owadisp.show_document?p _table=DIRECTIVES&p_id=2570, accessed March 9, 2012), became effective on March 6, 1992 (31). The standard protects employees who work with blood, body fluids, or other potentially infectious materials by requiring that employers provide certain safeguards. Recognizing that carriers of blood-borne pathogens are not always identified and that contaminated materials are not consistently labeled, the standard fundamentally changed previous practices. Standard Precautions, the practice of assuming that all human blood and body fluid specimens are potentially infectious, is the basis of the standard (47). Requirements of the plan are summarized in Table 5.5. On November 5, 1999, OSHA released an updated compliance directive, CPL 02-02-069, “Enforcement Procedures for the Occupational Exposure to Bloodborne Pathogens” (111; http://www.osha.gov/pls/oshaweb/owadisp.show _document?p_table=DIRECTIVES&p_id=2570, accessed March 9, 2012). The directive provides clarification to OSHA inspectors and sets policy for use in conducting inspections to enforce the Occupational Bloodborne Pathogen Standard. Clarifications are provided in Table 5.6.

Ergonomics Work-related musculoskeletal disorders are most often caused by repetitive tasks, poor posture, and muscle strain. The 2010 Bureau of Labor Statistics reports that 29% of all workplace injuries are due to musculoskeletal Table 5.5 Blood-borne pathogen exposure control plan requirements Determination of employee exposure to blood and other potentially infectious materials Implementation of methods of exposure control, including: Universal precautions Engineering and work practice controls—including sharps management, laboratory hygiene, and waste disposal Personal protective equipment Housekeeping Policy for hepatitis B virus (HBV) vaccinations Procedure for postexposure examination and follow-up Communication of hazards to employees and training Record keeping Procedure for evaluating exposure incidents a

See http://www.osha.gov/Publications/osha3186.pdf (accessed August 1, 2012).

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Table 5.6 Clarifications provided in enforcement procedures for the occupational exposure to blood-borne pathogens All employees (part-time, temporary, and per diem) are covered. OSHA jurisdiction does not include students. An exposure control plan, either a “cohesive entity” or a guiding document, must be provided stating what separate policies make up the plan. The plan must be updated at least annually. Updates should include changes in technology, changed or new tasks that present exposure, and changed or new job classifications presenting exposure. The plan must include provisions for reviewing exposures and the circumstances under which they occurred. Because hepatitis B virus (HBV) is easily transmitted by environmental contamination, contaminated work surfaces must be cleaned with an “appropriate disinfectant.” Dilute bleach is an effective disinfectant. A 1:10 dilution of stock household bleach (0.5% sodium hypochlorite) is considered to be effective in the time it takes to dry. For commercial products, users must follow the instructions. Gross contamination must be cleaned first with a soap and water solution to ensure a disinfectant’s effectiveness. Other U.S. Environmental Protection Agency–registered products may be obtained from the EPA Hotline at 1-888-546-8740. Sharps containers must not be overfilled. OSHA notes that the Exposure Prevention Information Network study “Uniform Needlestick and Sharp Object Injury Report,” including data from 77 hospitals in 1993–1995, found 717 injuries that occurred during disposal into a sharps container. Potable eyewash facilities are not acceptable unless they contain at least a 15-minute supply of free-flowing water and both hands are free to hold the lids open. OSHA notes changes in treatment of HBV. Employers are required to use the most current CDC guidelines. (Current guidelines may be located on the Centers for Disease Control and Prevention website at http://www.cdc.gov [accessed February 15, 2012].) Exposure documentation, to be useful in creating recommendations to prevent future accidents, must contain useful information including the circumstances of the exposure, the route of exposure, engineering and work practices in use, what device was in use, and personal protective equipment in use at the time. Training must include description of blood-borne pathogens in addition to human immunodeficiency virus (HIV) and HBV. OSHA notes that hepatitis C virus is now the “most common chronic bloodborne infection in the United States.” Training need not include a discussion of the transmission and symptoms of less common diseases. Training may not be accomplished solely using a film or video. Trainees must have the opportunity to ask questions of the trainer. Accurate training records must be maintained for three years. Such records should include the names and job titles of the attendees.

disorders, with an estimated 11 days away from work for every injury (http://www.bls.gov/news.release/archives/ osh2_11092011.pdf, accessed March 12, 2012). OSHA has been working toward creating an ergonomics standard since it hired its first ergonomist in March 1979. In 1990 OSHA created the Office of Ergonomics Support. The following decade saw proposed rule making and publication of a proposed ergonomics standard, culminating in November 2000 with President Clinton signing the first ergonomics rule. The OSHA ergonomics standard went into effect in January 2001 (57). Court challenges and politics (56) resulted in Congress repealing the standard in March 2001, thus marking the first time a rule has been successfully overturned through use of the Congressional Review Act (57). OSHA’s interest in ergonomics was not diminished by the congressional action. On April 5, 2002, OSHA announced a “Comprehensive Plan to Reduce Ergonomic Injuries.” This comprehensive plan calls for guidelines targeted at specific industries combined with enforcement, assistance with compliance, Hispanic outreach, and ergonomics research (132). Since 2002, OSHA has published

several industry- and task-specific ergonomic guides to help employers prevent and reduce musculoskeletal disorders in the workplace. Although the OSHA ergonomics standard was repealed, employers should continue to be concerned about ergonomic injuries. Not only is OSHA likely to implement ergonomic reviews under their “general duty” clause, but with an estimated 4–7 million lost days from work in 2010, employers cannot afford to ignore ergonomic issues (57; http://www.bls.gov/news.release/archives/osh2_11092011 .pdf, accessed March 12, 2012). Ergonomics has been defined as “the science of fitting jobs to people” (56). Some laboratory tasks posing a particular risk of ergonomic injury include conventional microtomy, microscope use, manual pipetting, phlebotomy, sitting for long periods, and long periods of computer entry (89). By studying the amount of time spent at a particular task, how long people are in the same position, repetitive motion, and awkward positions, among other factors, managers can work to reduce ergonomic injuries. (Some ergonomic guidelines are listed in Table 5.7.)

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Table 5.7 Computer workstation and general ergonomic guidelines (not a comprehensive list)a Hold head, neck, and body upright and facing forward. Forearms, wrists, hands, and thighs should be parallel to the floor. Feet should rest on the floor or on a footrest. Top of the monitor screen should be at or below eye level and directly in front of the employee. The mouse or trackball should be next to the keyboard and be easy to activate. Wrists and hands should not rest on sharp or hard edges. Wrist rests, if used, should be padded, with no sharp or square edges. Chairs should provide lumbar support and have armrests and a seat size appropriate to the employee. Chair seats should be cushioned; the front edge of the seat should not be sharp or push against the back of the employee’s lower legs or knees. Avoid repetitive motions. Limit microscope use to a total of five hours a day, preferably spread over the day. Position the microscope so the operator sits as straight as possible. Use armrests to support the forearms while using adjustment knobs. Use an antifatigue mat if long periods of standing are required. Take frequent short breaks to stretch. a OSHA provides an “e-tool” on hospital ergonomics, with specifics for laboratories, on its website at http://www.osha.gov/SLTC/etools/hospital/index.html (accessed March 15, 2012). The CDC provides additional information on ergonomics at http://www.cdc.gov/niosh/topics/ergonomics/ (accessed March 15, 2012).

Tuberculosis Increases in nosocomial tuberculosis (TB) over the past few decades have prompted the CDC to issue guidelines and OSHA to propose a new health standard. Alarmed over the increases in nosocomial infections seen in the 1980s and early 1990s, the CDC issued guidelines in 1990 that were expanded and revised in 1994 (100). In 1993 OSHA was petitioned by several labor unions requesting a permanent standard for occupational exposure to TB. In their petition the labor unions noted the recent increase in the number of active TB cases and their contention that the 1990 CDC guidelines were not being implemented (130). On October 16, 1997, OSHA released its proposed TB standard. According to OSHA, more than 130 lives can be saved annually under the new proposed standard, and implementation of the standard will prevent 70–90% percent of occupationally acquired TB. Noting increased concern due to the emergence of multidrug resistance and new and often deadly forms of the disease, OSHA noted an expected prevention of 21,000 to 25,000 new infections per year with implementation of the standard. The basics of the proposed standard are very similar to the 1994 revised CDC recommendations for healthcare facilities and include (130): • Exposure control. Employers will be required to identify employees who have occupational exposure to TB and develop a written exposure control plan to be reviewed at least annually and available to all employees. • Work practice and engineering controls. Employers will be required to identify individuals with TB (suspected or confirmed) and to segregate them, use negative

•

•

•

•

pressure rooms, and inform contractors of any potential occupational exposure. Respiratory protection. Employees who enter TB isolation rooms, work in or enter an area where an individual known or suspected to have TB has been segregated, or may be otherwise exposed to aerosolized Mycobacterium tuberculosis (such as work on airhandling systems) must be provided with respirators that meet NIOSH guidelines. Medical surveillance. All employees will be required to have medical surveillance before assignment to a job with occupational exposure and then annually, after known exposure, when displaying signs and symptoms of TB, following a skin test conversion, and within 30 days of termination of employment. Hazard communication and training. Employers are required to post signs at the entrance to laboratories where M. tuberculosis is present, label exhaust systems noting that aerosolized M. tuberculosis may be present and that respiratory protection is required, and require employees to attend a training program. Record keeping. Medical and training records, OSHA logs, and other records have specific retention requirements (130).

Latex Latex allergy has become a major healthcare concern. While the reasons are uncertain, the number of healthcare workers exhibiting sensitivity to latex has increased markedly over the last 10 to 15 years. Some of the reasons for the increase are most likely attributable to the increased use of latex gloves to prevent the spread of blood-borne pathogens following implementation of OSHA’s Bloodborne Pathogen

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Standard and its requirement that employees use gloves when working with blood and body fluids. Struggling to keep up with the increased demand, manufacturers made changes in their manufacturing processes and materials that may have contributed to the increased level of extractable latex proteins in the gloves. Latex proteins are the cause of sensitization and allergic reaction. When these proteins become attached to the powder used in the gloves, the proteins are more easily spread throughout the environment (109). In 2008 the FDA published an industry guidance on medical gloves that includes glove powder limitations and recommendations for product labeling (37). Workers exposed to latex may exhibit three types of reactions: • Irritant contact dermatitis, though not a true allergy, is the most common reaction. It is caused by skin irritation resulting in irritated, dry, itchy areas on the skin. • Allergic contact dermatitis or chemical sensitivity dermatitis results from a reaction to the chemicals used in the manufacturing and harvesting processes. It can cause a delayed skin reaction (usually 24 to 48 hours after exposure). • True latex allergy can be a much more serious reaction to latex. Reaction is usually much more immediate, often occurring within minutes of exposure, and may vary in severity from mild reactions such as hives or itching to respiratory symptoms and, rarely, shock (109). NIOSH recommends that employers adopt policies to protect workers from undue latex exposure in the workplace. Some strategies to consider include providing nonlatex gloves where appropriate (minimal contact with infectious materials), using reduced protein, powder-free gloves when latex gloves are used, ensuring good housekeeping practices to minimize latex-containing dust, educating workers about latex allergy, periodically screening high-risk workers for latex allergy, and evaluating the program whenever a worker is diagnosed with latex allergy (109).

Sharps As a result of the efforts of healthcare worker advocates, the Federal Needlestick Safety and Prevention Act (HR5178) (http://www.axelbio.com/Needle_Safety_Prevention_Act .pdf?p_table=STANDARDS&p_id=10051, accessed February 29, 2012) was signed into law on November 6, 2000. The bill mandated that OSHA revise and enforce the existing Bloodborne Pathogen Standard (29 CFR 1930.1030). Specifically, the law required that OSHA revise the Bloodborne Pathogen Standard by strengthening employer requirements for “identification, evaluation, documentation and use of safety engineered sharp devices” (99). In a news release on May 9, 2001, Secretary of Labor Elaine Chao is quoted as saying, “Prevention is the best medicine. The

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more emphasis we place up front on education and prevention, the better able we are to protect workers. By revising this standard, OSHA is giving employers a stronger tool to help reduce serious injuries and illnesses caused by needles and sharps” (131). Highlights of the revised standard are that employers must maintain a sharps injury log that contains, at a minimum, the type and brand of device involved, where the incident occurred, and a description of the incident; exposure control plans must be reviewed annually and include documentation that consideration has been made of available safety devices reflective of technological advances; and input must be solicited from front-line employees for the “identification, evaluation and selection of effective engineering controls, including safer medical devices.” Other revisions include amendment of the term “engineering controls” and the addition of definitions for “needleless” systems and “sharps with engineered sharps injury protection” (131).

General Laboratory Safety Laboratory safety is one of the most important responsibilities of a manager. A complete laboratory safety program includes all aspects of laboratory safety from identification of hazards and procedures for training, maintaining records, and reporting accidents to comprehensive biohazard, microbiological, chemical, and waste disposal policies and procedures. Table 5.8 lists components that should be included in a laboratory safety program. Chemicals Plan ahead, minimize exposure, don’t underestimate risks, and be prepared for accidents are the four basic principles that should underlie all work with chemicals (109). Table 5.9 lists the elements of a chemical hygiene plan. Planning ahead allows the worker to prepare for possible mishaps. Material safety data sheets should be reviewed, especially for unfamiliar chemicals, to understand the hazards associated with the chemical. General safety procedures should be observed when working with or around chemicals. Exposure via the skin, eyes, mucous membranes, or lungs and ingestion should be avoided. Eye protection should be required. Gloves should be chosen for their resistance to the chemical in use. Long hair, jewelry, and loose clothing should be confined. Sandals and open-toed shoes should be prohibited. Work areas should be uncluttered and clean, with exits and emergency equipment unobstructed. Minimum quantities of chemicals should be purchased. Chemicals should be labeled properly, with special hazards noted on the label, and stored with attention to incompatibilities. A plan for waste disposal should be in place before an activity begins. Equipment should be maintained in good condition through a program of regular inspection and maintenance.

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Table 5.8 Elements of a laboratory safety program Maintenance and inspection of the laboratory Appoint a laboratory safety officer and chemical hygiene officer. Establish training protocols. Identify and assess hazard risks. General safety program Develop guidelines for personnel responsibility including prohibiting smoking, eating, drinking, and applying cosmetics in areas where there are biohazards and chemicals; appropriate dress codes; and use of personal electronic devices in laboratory areas. Provide proper personal protective equipment and describe appropriate use. Implement effective work practice and engineering controls. Comply with local and federal regulations for specimen transport within and outside the facility. Develop hazardous waste disposal procedures. Warning signs and labels Alert employees and visitors to particular hazards such as flammables, combustibles, biohazards, and hazardous chemicals. Use OSHA-specified signage when applicable. Fire prevention and emergency management Develop procedures for fire prevention and control and use of fire prevention equipment. Establish fire evacuation protocols. Establish procedures for handling flammable chemicals. Electrical safety Include provisions for electrical safety checks of instruments and outlets and proper repair and maintenance. Compressed gases Include provisions for proper storage, labeling, transport, maintenance, and pressure regulators and valves of both flammable and nonflammable gases. Chemical safety Develop procedures for proper classification of chemicals, material safety data sheets, labels, storage, transportation, personal protective equipment, spills, clean-up procedures, and proper use of hoods. PPE Establish a chemical hygiene plan that includes OSHA-specified information (Table 5.5). Carcinogens Develop protocols that include special precautions, proper labeling and disposal, medical exams, storage, and transport. Microbiological hazards Establish procedures for blood-borne pathogens (HBV, HIV, and HCV), pathogens commonly encountered in the clinical laboratory, and specimens and procedures involving highly virulent agents. Anatomic pathology Establish procedures for use of special equipment with knives or blades, handling of radioactive specimens for surgical pathology, and autopsy areas. Occupational health and safety Establish procedures for reporting and assessing illnesses, injuries, and incidents. Develop an ergonomics program.

Table 5.9 Elements of a chemical hygiene plana Basic rules and procedures Chemical procurement, distribution, and storage Environmental monitoring Housekeeping, maintenance, and inspections Medical program Protective apparel and equipment Records Signs and labels Spills and accidents Information and training program Waste disposal program a

See reference 49.

All employees should be familiar with emergency procedures and the location and use of emergency equipment (Table 5.10) (reference 110, p. 81–104).

Transportation of Clinical Specimens Shippers of hazardous materials are required not only to follow the regulations, but also to have documented training every two years. The individual signing the shipping documents as the “certified shipper” assumes responsibility for the complete shipping process. According to law he or she is the one person deemed fully responsible for the condition of the packaging of the specimen. He or she is responsible for determining whether or not the specimen is a regulated substance, knowing the regulations governing that substance and the appropriate packaging to use, accurately completing all required documentation

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Table 5.10 Safe handling of chemicalsa Review the material safety data sheet. Plan ahead. Observe general safety procedures. Wear eye protection or face protection. Use the proper gloves. Purchase minimum quantities of chemicals. Properly label and store chemicals. Leave exits and emergency equipment unobstructed. Know emergency procedures and use of emergency equipment. a

See reference 109.

and shipping papers, correctly marking and labeling the package, and notifying the recipient of the shipment. Fines for improper shipping or lack of training are substantial. The Federal Aviation Administration (FAA) employs lawyers and cargo security specialists to conduct preventive measures ensuring safety. One of the FAA’s recent initiatives is to send “strike teams” to airports, where they spend one week checking every package coming through (87). The DOT document “How to Use the Hazardous Material Regulations CFR 49 Parts 100 to 185” provides useful information about reading and interpreting the regulations governing shipping and transportation of hazardous materials. (The document can be located on the website of the U.S. DOT Pipeline and Hazardous Materials Safety Administration at www.phmsa.dot.gov [accessed February 2, 2012] or http://www.dgtraining.com/Enforcement/Regulations/ HowToUse03.pdf [accessed February 3, 2012].)

Employment Discrimination The Americans with Disabilities Act (ADA) of 1990 (Titles I and V) prohibits employment discrimination based on disability in qualified individuals. Disabilities are defined as mental or physical impairments limiting at least one major life activity. Major life activities are defined as walking, breathing, seeing, hearing, speaking, learning, and working. It is important to understand that the act protects “qualified individuals.” Qualified individuals are those who possess the necessary skills, job requirements, education, and experience for a particular position and who can perform the functions of the position. While not required to lower production standards, an employer is required to make reasonable accommodation(s) for such a qualified individual. Reasonable accommodations may include such things as altering job schedules, restructuring a job, acquiring or modifying equipment, or providing readers or interpreters. Applying for a job, performing a job, or enjoying the benefits of employment may also require reasonable accommodation. (A more detailed explanation of required accommodations can be found on the website of the Equal Employment

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Opportunity Commission at http://www.eeoc.gov (accessed February 2, 2012). Perhaps the disabled employee most likely to require accommodation is the mobility-impaired employee who requires use of a wheelchair. Wheelchair use is relatively easy to accommodate by providing wider aisles, space to turn the wheelchair, and variable-height work benches with access to the equipment on the bench (reference 75, p. 69–197). Reasonable accommodations are required unless they create an undue hardship. An undue hardship is defined as one that imposes significant difficulty or expense in relation to the size, resources, and nature of the business. Employers may inquire about an applicant’s ability to perform the job, but not about specifics of any disability. A job offer may be conditional based on a medical examination only if the same examination is required of all applicants in the same job category. The ADA does not protect employees or applicants currently using illegal drugs when an employer acts on the basis of the drug use. (Additional information about reasonable accommodations may be found on the website for the Equal Employment Opportunity Commission at http://www.eeoc.gov [accessed February 3, 2012].) Since its passage in 1990, many employers have been concerned about the implications of the law. It is the inclusion of psychiatric and mental, along with physical, disabilities that most concerns employers. Unfortunately, EEOC guidelines do nothing to relieve their anxiety, as the guidelines state that “credible testimony from family members and coworkers may be sufficient notice to the employer that a psychiatric disability exists” (95). The Job Accommodation Network notes that most ADA accommodations cost relatively little. Data from a survey of employers using the Job Accommodation Network’s services showed that 70% of accommodations cost $500 or less (with 21% costing nothing) (118). Accommodations for people with psychiatric or mental disabilities tend to be no more difficult or expensive than other types of accommodation. Such accommodations may range from to-do lists, tape-recorded instructions, or division of large tasks into smaller components (95). While the ADA regulations strive for voluntary compliance, it is important to note that the act does include legal remedies for noncompliance. Employers should ensure that employees involved in any part of the process of interviewing, hiring, promoting, or firing are well versed in the law. Lack of such knowledge could result in a legal challenge when no intention of discrimination was intended.

Accreditation and Licensure Brief History Laboratory standards and testing have been evolving for centuries. The evolution has progressed from urine testing done before 400 B.C. to diagnosing boils by observing

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whether insects were attracted to urine poured on the ground (18) to today’s modern laboratories. As testing sophistication grew and hospitals began to appreciate the skills of laboratory professionals, self-regulating groups emerged to ensure laboratory quality. The first inspection of laboratories occurred in 1918 when the American College of Surgeons inspected hospitals utilizing standards that required an adequately staffed and equipped laboratory. The year 1918 also saw the first call for a national method to certify technologists and a Pennsylvania state law requiring that hospitals install and equip a laboratory staffed with a full-time technician (19). Regulation of clinical laboratories began in earnest soon after the Medicare and Medicaid laws went into effect in 1966. The Clinical Laboratory Improvement Amendments of 1967 (CLIA ’67) established minimum quality standards for Medicare participating laboratories engaged in interstate commerce, a relatively small portion of clinical laboratories. Lawmakers soon saw the need to regulate all laboratories engaged in testing human specimens. Thus began the effort to amend CLIA ’67 to establish minimum standards for personnel, accuracy, and quality control and to mandate inspections. When the CLIA ’67 final rule was enacted in 1978, it included rules for quality control, proficiency testing, and personnel competency. Personnel working in laboratories receiving Medicare reimbursement were required to be medical technologists with a bachelor’s degree or equivalent or to demonstrate satisfactory performance on a proficiency exam administered by HEW (Health, Education and Welfare, the precursor to Health and Human Services). In the years following the implementation of CLIA ’67 there were repeated attempts to update the act to include all laboratories. The breakthrough came in 1988 when President Reagan signed the Clinical Laboratory Improvement Amendments of 1988 (CLIA ’88) into law. Practical problems delayed implementation until 1992. This more comprehensive law requires all laboratories doing human clinical testing to have a certificate issued by HHS (20), now known as the Centers for Medicare and Medicaid Services (CMS). The enactment of CLIA ’88 brought virtually all laboratories doing clinical testing for diagnosis or disease management on human specimens under the umbrella of federal regulation. The final CLIA regulations published on February 28, 1992, are based on the complexity of the test method; thus, the more complicated the test, the more stringent the requirements. Three categories of tests have been established: waived complexity, moderate complexity, including the subcategory of providerperformed microscopy procedures (PPMPs), and high complexity (Table 5.11). CLIA specifies quality standards for proficiency testing, patient test management,

quality control, personnel qualifications, and quality assurance for laboratories performing moderate- and/or high-complexity tests. Waived laboratories must enroll in CLIA, pay the applicable fee, and follow manufacturers’ instructions. Because problems in cytology laboratories were the impetus for CLIA, there are also specific cytology requirements (http://www.cms.gov/clia, accessed July 29, 2012). Before the CMS grants a certificate laboratories must register, pay fees, and be surveyed. Moderate- and high-complexity laboratories have the option of choosing to be surveyed by the CMS or by a private accrediting organization that has been granted “deemed status” (Table 5.12). (An excellent overview of the CLIA program is located on the Centers for Medicare and Medicaid Services website at http://www.cms.gov/clia [accessed January 25, 2012]).

Laboratory Inspection and Accreditation The type of CLIA certificate held by the laboratory determines whether or not routine inspections are required. Routine inspections are not required for laboratories registered with a certificate of waiver or a certificate for PPMPs. Over time the number of waived laboratories has increased to 67% of the total laboratories enrolled. Combined with the 17% of enrolled laboratories that hold a PPMP certificate, 84% of all laboratories do not have routine inspections or oversight (http://www.cms.gov/ clia, accessed February 1, 2012) (see Tables 5.2 and 5.11). Table 5.11 Types of laboratory CLIA certificatesa Certificate of waiver. Issued to a laboratory to perform only waived tests. Certificate for provider-performed microscopy procedures. Issued to a laboratory in which a physician, midlevel practitioner, or dentist performs no tests other than the microscopy procedures. This certificate permits the laboratory to also perform waived tests. Examples of PPMP include fern testing, microscopic urinalysis, nasal smears for eosinophils, and wet mounts, including preparations of vaginal, cervical, or skin specimens. Certificate of registration. Issued to a laboratory and enables the entity to conduct moderate- or high-complexity laboratory testing or both until the entity is determined by survey to be in compliance with the CLIA regulations. Certificate of compliance. Issued to a laboratory after an inspection that finds the laboratory to be in compliance with all applicable CLIA requirements. Certificate of accreditation. Issued to a laboratory on the basis of the laboratory’s accreditation by an accreditation organization approved by the CMS. a Information about the various types of CLIA certificates is available at the Centers for Medicare and Medicaid Services website, www.cms.gov/clia (accessed February 2, 2012).

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Random inspections are conducted at a small percentage of waived and PPMP laboratories each year. These inspections focus on ensuring that the laboratories are not performing testing at a higher level than their certificate warrants and that they are following other CLIA regulations. Laboratories holding certificates of waiver may only perform waived tests. They must enroll in the CLIA program, pay applicable fees, and follow manufacturers’ test instructions. Laboratories holding a certificate for PPMP must enroll in the CLIA program, pay applicable fees, and meet specified quality and administrative requirements. Pilot studies conducted during 1999–2001 in 10 states found significant problems with quality and certification (laboratories testing beyond their certificate). As a result, in April 2002, the CMS began on-site educational and information-gathering visits to approximately 2% of waived laboratories. The CMS currently has no plans to increase the percentage of site visits to waived laboratories (http://www.cms.gov/clia, accessed July 29, 2012). Laboratories performing moderate- or high-complexity testing are required to have an inspection every two years. The laboratory may opt to be inspected by the CMS or by an organization that has been approved by the CMS (granted deemed status) as having program requirements at least as stringent as CLIA. The CMS awards a certificate of compliance to laboratories that are successfully inspected by the CMS and a certificate of accreditation to laboratories based on a successful inspection by an organization having deemed status with the CMS (Table 5.12). A provision of CLIA ’88 exempts from CLIA requirements “all State licensed or approved laboratories in a State that has a State licensure program established by law” if the state licensure requirements are at least as stringent as the CLIA requirements. Two states, Washington and New York, are currently exempt. (The CMS maintains a list of exempt states on its website at https://www.cms.gov/ CLIA/20_CLIA_Laboratory_Demographic_Information .asp#TopOf Page [accessed March 2, 2012].) As noted above, before the CMS grants an organization’s laboratory inspection program deemed status, the organization must show that the inspection criteria used are at least as stringent as those of the CLIA program. Thus, the basic focus of all accredited inspection programs is to ensure compliance with the CLIA standards. However, organizations that have deemed status use different approaches to achieve that goal. Centers for Medicare and Medicaid Services. Laboratories inspected under the CMS program experience an outcome-oriented survey process. CMS inspections utilize a quality assurance focus combined with an educational approach to assess and ensure compliance. (General

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Table 5.12 Accrediting organizations with deemed status under

the CMSa AABB (Formerly American Association of Blood Banks) 8101 Glenbrook Road Bethesda, MD 20814-2749 Regulatory Affairs (301) 215-6539 www.aabb.org or [email protected] (accessed March 12, 2012) American Osteopathic Association 142 East Ontario Street Chicago, Illinois 60611-2864 (312) 202-8000 (800) 621-1773 www.osteopathic.org (accessed March 12, 2012) American Society of Histocompatibility and Immunogenetics 15000 Commerce Parkway, Suite C Mt. Laurel, New Jersey 08054 (856) 638-0428 www.ashi-hla.org (accessed March 12, 2012) COLA (Formerly the Commission on Office Laboratory Accreditation) 9881 Broken Land Parkway, Suite 200 Columbia, Maryland 21046-1195 (800) 981-9983 www.cola.org (accessed March 12, 2012) College of American Pathologists 325 Waukegan Road Northfield, Illinois 60093-2750 Laboratory Accreditation Program 847-832-7000 800-323-4040 www.cap.org (accessed March 12, 2012) The Joint Commission One Renaissance Boulevard Oakbrook Terrace, Illinois 60181 (630) 792-5000 www.jointcommission.org (accessed March 12, 2012) a The Centers for Medicare and Medicaid Services maintains a current list of accrediting organizations with deemed status at its website (www.cms.gov/clia, accessed February 1, 2012).

information about the CLIA program can be found on the CMS website at http://www.cms.gov/clia [accessed February 1, 2012].) The Joint Commission. Experienced in surveying laboratories since 1979, The Joint Commission (TJC) gained deemed status under CLIA ’88 in 1995. TJC surveys are conducted by experienced medical technologists who provide consultation on performance improvement throughout the survey process. (TJC’s survey process is further explained on the organization’s website at http://www.jointcommission.org [accessed February 3, 2012].) The specific standards that apply to transfusion medicine are discussed later in this chapter.

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College of American Pathologists. The College of American Pathologists (CAP) laboratory inspection and accreditation program encompasses all of the laboratory disciplines. It provides the most comprehensive offerings of any of the accrediting bodies. Conducted as a peerreview process, inspections are performed by experienced working professionals. The peer review process provides the opportunity for laboratories to learn from both their own inspection and from the experience of inspecting other laboratories. CAP has deemed status with both CLIA ’88 and TJC. (Detailed information about the CAP inspection program is available on the CAP website at http:// www.cap.org [accessed February 1, 2012].) AABB. Formerly the American Association of Blood Banks, AABB has been developing voluntary compliance standards for blood banking since 1957. AABB inspections have deemed status under CLIA ’88. The inspections are based on compliance with federal regulations and documents as well as AABB standards (http://www.aabb.org, accessed February 16, 2012). This will be discussed in more detail later in this chapter. COLA. Formerly known as the Commission of Office Laboratory Accreditation, but now known by its acronym, COLA is a nonprofit, physician-directed organization. COLA was founded in 1988 to provide a private alternative for complying with CLIA ’88. Originally established to inspect physician office laboratories (POLs), COLA’s accreditation program now covers many types of laboratories from POLs to community hospitals and industrial laboratories. COLA inspections are conducted in an educational and friendly peer-review process. COLA has had deemed status with CLIA ’88 since 1993 and with TJC since 1997. (Laboratories interested in COLA accreditation can find more information at the organization’s website at http:// www.cola.org [accessed February 1, 2012].) American Society of Histocompatibility and Immunogenetics (ASHI). ASHI conducts a voluntary inspection program encompassing over 200 histocompatibility laboratories. ASHI’s laboratory accreditation program has been evolving since 1976. Deemed status with CLIA ’88 was granted in 1995, and with TJC and the states of Florida, Oregon, and Washington in 1997. ASHI’s accreditation program evaluates facilities to ensure compliance with ASHI standards. Laboratory procedures, staff, and facilities are surveyed with an emphasis on education and assistance with correcting deficiencies. (The ASHI website, http:// www.ashi-hla.org [accessed February 1, 2012], provides more information about the ASHI accreditation process.) American Osteopathic Association (AOA). The AOA has deemed status under CLIA ’88 to accredit laboratories that

are in AOA-accredited hospitals. (Laboratories in hospitals accredited by the AOA can find information about the laboratory accreditation program at the association’s website at http://www.osteopathic.org [accessed February 1, 2012].) Foundation for the Accreditation of Cellular Therapy (FACT). FACT, while not granted deemed status under CLIA ’88, does set voluntary standards and accredit laboratories in the field of cellular therapy. Previously known as the Foundation for the Accreditation of Hematopoietic Cell Therapy, FACT is a nonprofit corporation that establishes standards covering all phases of cellular therapy. FACT accredits programs and laboratories voluntarily meeting these standards. (Information about FACT and its parent organization, the International Society for Cellular Therapy can be found at http:// www.celltherapy.org [accessed February 1, 2012].) Laboratories exempt from CLIA ’88. The CLIA ’88 law states that laboratories will be cited as out of compliance unless they have a “current, unrevoked or unsuspended certificate of waiver, registration certificate, certificate of compliance, certificate for PPM procedures, or a certificate of accreditation” or are CLIA exempt. Laboratories falling under the exempt category include: • Laboratories performing forensic testing only. • Research laboratories testing human specimens but not using patient-specific results in the diagnosis, prevention, treatment, or assessment of disease or health of individuals. • Laboratories certified by the Substance Abuse and Mental Health Services Administration (SAMHSA). This exemption applies only to drug testing meeting SAMHSA guidelines and regulation (all other testing is subject to CLIA regulations). • Federal laboratories under the jurisdiction of an agency of the federal government are subject to CLIA regulations unless the application is modified by the secretary. • Laboratories licensed in states that have their own inspection programs that are exempt under CLIA. These states have inspection programs that CLIA has deemed at least as rigorous as a CLIA inspection. Washington and New York are the only two states currently in this category. (Information regarding laboratories exempt from CLIA regulations may be found in 42 CFR 493.3, which is available at http://www.cdc.gov/clia/regs/ subpart_a.aspx#493.3 [accessed February 1, 2012].)

Personnel Certification and Licensure Certification is a voluntary program, usually administered by a professional association or governmental agency, recognizing an individual for having met predetermined criteria as set by that organization (123). Certification

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programs began as a voluntary method of demonstrating competence and enhancing competitiveness in the job market. Current CLIA ’88 regulations emphasize specific education and experience, rather than certification, for the various levels of testing complexity. In general, the requirements of certifying organizations are more stringent than those of the CLIA ’88 law (42). Licensure is the process of a governmental authority granting an individual legal permission to engage in a specific practice. Typically, licenses are granted after examination or proof of specific education. The public is protected from incompetent practitioners by defining regulated practices and making unlicensed practice illegal (123). Personnel requirements under CLIA ’88. The personnel regulations under CLIA ’88 do not rely on either certification or licensure, although some states may require either or both. The CLIA ’88 personnel requirements are

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determined by the level of testing complexity. There are no personnel requirements for waived testing. For PPMPs and moderate- or high-complexity testing, CLIA ’88 personnel regulations define specific job titles and associated qualifications and responsibilities (Table 5.13). The regulations spell out several ways an individual may qualify for each of the job titles, with the qualifications growing slightly more stringent as complexity increases. Only laboratory directors are limited in the number of lab affiliations. Each director may direct no more than five laboratories. Qualifications and responsibilities are delineated for the laboratory director and testing personnel at each testing level. For moderate-complexity certificates the titles of technical consultant and clinical consultant are added. In addition to the laboratory director and testing personnel, high-complexity laboratories must also have a technical supervisor, clinical consultant, and general supervisor.

Table 5.13 Summary of personnel responsibilities and qualifications under CLIA ’88a Laboratories Performing Provider-Performed Microscopy Procedures (PPMP) Lab director Qualifications. Must be qualified to direct and manage the laboratory personnel and the performance of PPMPs; must either possess a current license in the state in which the laboratory is located, as required, be a physician or a midlevel practitioner authorized to practice independently as authorized by the state where the laboratory is located or a dentist. Responsibilities. Overall operation and administration of the laboratory, including the prompt, accurate, and proficient reporting of test results. Testing personnel Qualifications. Must possess a current license in the state in which the laboratory is located, as required; must be a physician or a midlevel practitioner authorized to practice independently as authorized by the state where the laboratory is located or a dentist. Responsibilities. Specimen processing, test performance, and reporting test results. Laboratories Performing Moderate-Complexity/High-Complexity Procedures Lab director Qualifications. Must either be qualified to direct and manage the laboratory personnel and the performance of PPMPs. Must possess a current license as a laboratory director in the state in which the laboratory is located, as required; be a doctor of medicine or osteopathy licensed to practice medicine or osteopathy in the state in which the laboratory is located, or have certification in anatomic or clinical pathology or both. Responsibilities. Overall operation and administration of the laboratory, including the employment of personnel who are competent to perform test procedures, and record and report test results promptly, accurately and proficiently and for assuring compliance with the applicable regulations. Technical consultant Qualifications. Must be qualified by education or experience to provide technical consultation for each specialty and subspecialty of service in which the laboratory performs moderate complexity tests. Must possess a current license in the state in which the laboratory is located, as required; be a doctor of medicine or osteopathy licensed to practice medicine or osteopathy in the state in which the laboratory is located; and have certification in anatomic or clinical pathology or both. Responsibilities. Technical and scientific oversight of the laboratory. The technical consultant is not required to be onsite whenever testing is performed but must be available to the laboratory on an as-needed basis. Clinical consultant Qualifications. Must be qualified to consult with and render opinions to the laboratory’s clients concerning the diagnosis, treatment, and management of patient care; be a doctor of medicine, doctor of osteopathy, or doctor of podiatry and possess a license to practice medicine, osteopathy, or podiatry in the state in which the laboratory is located. Responsibilities. Provides consultation regarding the appropriateness of testing ordered and interpretation of test results. Testing personnel Qualifications. Must possess a current license in the state in which the laboratory is located, as required; be a doctor of medicine or doctor of osteopathy, and possess a license to practice medicine or osteopathy in the state in which the laboratory is located or have earned a doctoral, master’s, or bachelor’s degree in a chemical, physical, biological, or clinical laboratory science from an accredited institution. Responsibilities. Specimen processing, test performance, and reporting test results. a

All qualifications are a partial list. More details can be found at http://www.cdc.gov/clia/regs/subpart_m.aspx.

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Specialty boards. The CMS is tightening the qualification for directors of high-complexity laboratories that hold a doctoral degree. Until December 31, 2002, they were required to have two years of laboratory experience or training and two years’ experience directing or supervising high-complexity testing. On December 31, 2002, the requirement for certification by a specialty board was added. Now, in addition to a doctoral degree in a chemical, physical, biological, or clinical laboratory science and two years’ experience, such individuals must also be board certified (Table 5.14). This additional requirement does not apply to laboratory directors who are already serving and who prior to February 28, 1992, qualified under the state law in which the laboratory is located, were previously qualified, or could have qualified as a laboratory director under the CLIA regulations published in March 14, 1990, or for the subspecialty of oral pathology are certified by one of several pathology boards. (More detailed information can be found in 42 CFR 493.1443, which is available at http:// www.cdc.gov/clia [accessed February 1, 2012].) National certifying organizations. Certification by a professional agency is valued (and in many cases required) by employers because it is a demonstration of basic competence in the area of examination. There are several options for certification as a laboratory professional. The majority of graduates of programs accredited by the National Accrediting Agency for Clinical Laboratory Sciences choose to take a certification examination. Successful completion of a certifying examination demonstrates basic competency in laboratory science. Two national organizations offer the most widely recognized certifying examinations. The exams to certify medical technologists and medical laboratory technicians that are offered Table 5.14 CMS-approved certification boards, doctoral degree clinical consultants, and directors of high-complexity testinga American Board of Bioanalysis (ABB) ABB public health microbiology certification American Board of Clinical Chemistry (ABCC) ABCC 24-month Commission on Accreditation in Clinical Chemistry (COMACC) accredited program American Board of Forensic Toxicology (limited to individuals with a doctoral degree)b American Board of Histocompatibility and Immunogenetics American Board of Medical Genetics American Board of Medical Laboratory Immunology American Board of Medical Microbiology National Registry of Certified Chemists (limited to individuals with a doctoral degree)b a The most current list of approved certification boards may be found at the Centers for Medicare and Medicare Services website: https://www.cms.gov/ CLIA/16_Certification_Boards_Laboratory_Directors.asp#TopOfPage (accessed February 1, 2012). b NRCC and ABFT will certify individuals who do not hold a doctoral degree; all others require one.

by the American Society for Clinical Pathology (ASCP) are most popular. Also offering certification, the National Credentialing Agency for Laboratory Personnel (NCA) administers exams for laboratory personnel but uses the terms clinical laboratory scientist and clinical laboratory technician (10). The ASCP, an organization of pathologists and other clinical laboratory personnel, was the first organization to offer a certifying examination. Responding to a need for programs that would allow documentation of the basic competence of laboratory workers, the ASCP established the Board of Registry in 1928 to certify nonphysician laboratory personnel. Certification by the ASCP does not require recertification or mandate continuing education. The ASCP does, however, recognize the importance of continuing documented competence. The ASCP Board of Registry offers a voluntary program to recognize competence based on documentation of 60 hours of continuing education, obtaining a higher level of certification (specialist or diplomate), or an onsite assessment completed by a supervisor. The ASCP Board of Registry certification program has expanded from its initial offering of the medical technologist exam to its current offering of 21 different certifications (10). In 1978 the NCA offered its first credentialing examinations (10). A voluntary, not-for-profit organization, NCA offers the “only peer-developed and peer-administered examination for medical laboratory personnel.” NCA’s website (www.nca-info.org, accessed February 1, 2012), is an excellent resource for information about NCA’s certification programs. A major difference between certification by ASCP’s Board of Registry and NCA is NCA’s emphasis on continuing education. NCA requires 36 hours of continuing education every three years to maintain certification. Ten different certifications are currently available from NCA (10). Other organizations offering certification include the American Medical Technologists (AMT) and the American Association of Bioanalysts (AAB). AMT offers certification in eight areas of practice. Individuals with an appropriate bachelor’s degree and one year of laboratory experience are eligible to sit for the medical technologist certification exam. The AMT medical technologist certification may be awarded in some circumstances without taking the examination. The AAB Board of Registry requires the applicant to pass an examination that the AAB deems acceptable and meet one of several education and/ or experience requirements. (Information about the AAB certification process can be found at www.aab.org [accessed February 1, 2012].) States requiring licensure/certification. While certification demonstrates a basic level of competence that may make it easier to get a job, ten states and one territory also require that laboratory personnel obtain state licensure.

CHAPTER 5. THE IMPACT OF REGULATORY REQUIREMENTS

Requirements for obtaining a state license vary by state but usually include a licensing fee, documentation of certification, some evidence of continuing education, and demonstration of education and competency as defined by the state. Most states accept certification from a recognized certifying organization. The exception is California, which administers its own examinations and does not recognize any certification or grant reciprocity for any other state’s license. Requirements for state licensure may change. The most current information is available at the American Society for Clinical Laboratory Science (ASCLS) website (www.ascls.org, accessed February 1, 2012) (see Table 5.15). Some states and U.S. territories require that laboratories operating in their borders, and in many cases performing testing on samples from that state, obtain a license from that state or territory. The Centers for Medicare and Medicaid Services maintains a list of state and territory laboratory licensure programs at www.cms.gov/clia (accessed February 25, 2012). However, because the number of states requiring laboratory licensure is fluid, an individual laboratory is advised to contact the appropriate state survey agency for the most current information.

Regulations Affecting Transfusion Medicine Overview of Changes in Transfusion Medicine That Have Resulted in Increased Scrutiny One of the defining moments in the modern history of transfusion medicine was the realization that HIV, the virus that causes acquired immunodeficiency syndrome (AIDS), can be transmitted by transfusion. With all eyes on transfusion safety, blood banking and transfusion medicine went through dramatic changes. Blood banking evolved from a laboratory discipline into transfusion medicine, focusing on patient care through clinical consultation, and then into a blood manufacturing industry (127). Blood donors, previously seen as the altruistic givers of life, were increasingly seen as sources of infection and risk (24). In 1991, hearings in the U.S. House of Representatives, chaired by John Dingell (D-MI), clearly expressed the lack of faith that our elected officials had in the safety of the blood supply, echoing the sentiments of their constituencies. By referring to blood banking as an industry, an important paradigm had shifted (105). The generalized concern was apparent when looking at the changes in blood usage that began in the 1980s: decreases in the use of volunteer allogeneic blood, in the backdrop of an aging and sicker population, and more use of autologous blood and directed donor blood (11, 79, 101). This climate served as a catalyst for a variety of changes, from purely medical to regulatory and legal. The lay public, concerned about exposure to known and yet unknown

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Table 5.15 States and territories requiring licensure of laboratory

personnela State or territory

Licensing entity

California

Department of Public Health Laboratory Field Services (510) 620-3800 www.cdph.ca.gov/programs/LnC/pages/LnC.aspx

Florida

Department of Health Division of Medical Quality Assurance (850) 488-0595 www.doh.state.fl.us/mqa/ClinLab/index.html

Hawaii

Hawaii Department of Health State Laboratory Division (808) 453-6652 www.hawaii.gov/health/laboratories/laboratories

Louisiana

Clinical Laboratory Personnel Committee Louisiana State Board of Medical Examiners (504) 5568-6820 www.legis.louisiana.gov/boards/board_members .asp?board=468

Montana

Montana Department of Commerce Board of Clinical Lab Science Practitioners (406) 841-2395 or 2369 www.cls.mt.gov

Nevada

Nevada Bureau of Licensure and Certification (775) 786-0231 www.nvaccountancy.com/requirements.fx

New York

Office of the Professions Division of Professional Licensing Services (518) 473-4501 www.op.nysed.gov/opsearches.htm

North Dakota

North Dakota Department of Health Division of Microbiology (701) 328-6272 www.ndhealth.gov/microlab/Default.aspx

Puerto Rico

Puerto Rico Medical Technology Board of Medical Examiners (809) 792-6400 www.ctmpr.com

Rhode Island

Rhode Island Department of Health Division of Health Services Regulation (401) 222-2827 www.health.state.ri.us

Tennessee

Tennessee State Licensure Board Department of Health Tennessee Medical Laboratory Board (615) 532-5128 www.tennessee.gov

West Virginia

WV Office of Laboratory Science Department of HHS (304) 558-3530 www.wvdhhr.org

a The American Society for Clinical Laboratory Science maintains a list of states requiring licensure of laboratory personnel at www.ascls.org (accessed March 13, 2012). Click “New Graduate Information.”

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pathogens, sought ways to decrease their risk. The medical community responded by using pharmacologic alternatives and blood salvage techniques (collecting and reinfusing blood from the operative field) and by adopting more conservative transfusion guidelines. On the production side of the equation, more sensitive tests were added to screen donor blood, more restrictive donor criteria were applied, and more regulations were added to blood banking to increase oversight and scrutiny (79). The complex process of supplying blood to patients was also taking place in a more litigious and cost-conscious environment (101). With infectious complications on the decline, concerns about adequacy are on the rise (6, 106). The public seeks zero risk, and the industry strives to move closer to that ideal.

Safety HIV and hepatitis C virus. As a result of changes in blood donor screening implemented in response to concerns about transmissible disease, the United States’ blood supply has never been safer. In 1993, to prepare for future threats to the blood supply, The Institute of Medicine established a committee to retrospectively study the spread of HIV in the American blood supply. Their report, published in 1995, and two reports published by the United States General Accounting Office in 1997 acknowledged the current high level of blood safety, while recommending continued enhancements in specific manufacturing practices and in FDA oversight (96, 133, 134). (These reports are available at, respectively, http://books .nap.edu/openbook.php?isbn=0309053293, http://www .gao.gov/assets/230/223767.pdf, and http://www.gao.gov/ assets/160/155792.pdf [accessed February 16, 2012].) To gain perspective into the great strides made in reducing the risk of HIV in the blood supply, it is helpful to compare the risk of acquiring HIV in the early 1980s to the current risk. Using a mathematical model, Busch estimated that the overall risk of posttransfusion HIV infection was 1.1% per transfused unit in San Francisco between 1978 and 1984, prior to implementation of HIV testing (34). This is in contrast to the current risk of receiving a unit infected with HIV that is negative for all markers (including nucleic acid testing), which is approximately 1 in 1.47 million (143). Despite all the attention paid to HIV, other pathogens pose greater risks. While the risk of acquiring HIV through transfusion had greatly diminished, the risk of hepatitis C virus (HCV) transmission was actually two to four times higher than HIV in 1996 (122). With the implementation of nucleic acid testing, the risk of receiving a unit of blood from a donor during the infectious window period has gone from 1 in 103,000 (122) to approximately 1 in 1.15 million (143). With the reduction of risk of transfusion-transmitted HIV and HCV, the risk of other pathogens, such as bacte-

rial contaminants, attracted attention. Platelets are stored at room temperature and provide a fertile growth medium for bacteria. Beginning with discussions in 2001 at the Blood Products Advisory Committee meeting, the FDA approved blood collection sets with pouches to divert the first portion of the collection, which contains the skin plug, the major source of contaminating skin flora. In 2002 the FDA cleared the BacT/ALERT culture system as a quality control method, which was used to culture leukoreduced apheresis platelets. In 2003, in the 22nd edition of the Standards for Blood Banks and Transfusion Services, the AABB implemented Standard 5.1.5.1, which required testing to limit and detect bacterial contamination in all platelet units. Standard 5.6.2 proscribed the use of green soap for cleansing of the venipuncture. In 2009, with the 26th edition of the standards, pathogen inactivation was included as a method to meet the standard. Since glucose, pH, swirling, and Gram stain did not have the same sensitivity as culture, the AABB wrote association bulletins, and with Standard 5.1.5.1.1 in the 27th edition, the requirement was revised to use detection methods that either are FDA-approved or provide equivalent levels of sensitivity to FDA-approved methods. The risk of bacterial contamination leading to transfusion-associated sepsis has been significantly reduced by these actions, but a residual risk remains. Tests that can be done at the time of release of platelets from the blood bank are currently available, and their use continues to be evaluated (76; personal discussions with Jarostav Vostal, FDA, on July 25, 2012, and Eduardo Nunes, AABB, on July 30, 2012). Infection with babesia, a parasite carried in ticks that infects red blood cells, has also been increasing, as has transmission via transfusion. Efforts are under way to develop a test to screen blood donors, as the incidence of babesia is increasing; it is considered to be the most important blood-borne parasite to have an impact on transfusion safety (76, 79). Lookback. It is important to remember that both HIV and HCV were present in the blood supply prior to the availability of screening methods. In addition, early HCV testing was neither sensitive nor specific (1). To address the risk of window period transmission to blood recipients transfused prior to testing, a variety of processes known as lookback were initiated; this involves essentially looking back at patients with risk of acquiring a pathogen through transfusion. Targeted lookback, triggered when a blood donor is found positive for HIV and/or HCV, is the process of identifying and informing transfusion recipients that they might have been exposed to an infectious agent from individuals who previously donated blood during a clinically serosilent window period; in other words, donations of an infected individual with disease are looked back upon. The recipients can then be notified of their risk,

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tested, counseled, and referred for proper medical care. This can also prevent secondary transmission of disease, which was especially important prior to testing (32). Lookback programs have been fraught with limitations. For lookback to be successful, it means that the recipient has been found, has the disease, and was previously unaware of the infection. Targeted lookback requires that high-risk individuals come back and donate again, so recipients of the products donated prior to their seroconversion can be alerted. By asking high-risk individuals to refrain from donating, this trigger is removed. In fact, through an education program aimed at high-risk individuals, it was calculated that about 90% of infected donors were either self-deferred or deferred during the donation process in San Francisco, prior to implementation of HIV screening. In contrast, only about 6% of transfusion recipients were identified through early donor-targeted HIV lookback programs in the same area (32). The logistics of being able to effectively track a unit of donated blood to the recipient is challenging in more mobile societies, making the process of lookback inefficient (32, 78). Despite these limitations, proponents of lookback argue that it is the legal and ethical responsibility of the blood banking community to provide transfusion recipients any and all knowledge related to their health. In the backdrop of previous concerns about blood safety, the public believes it is their right to have all relevant information. Furthermore, this might renew the public’s trust in the blood banking industry, by fully disclosing such information (12). Table 5.16 summarizes the pros and cons of lookback. In contrast to HCV lookback, HIV lookback was initiated voluntarily as a means to trace infected donors back to their blood recipients. In the heated climate of blood safety concerns, it served as one of the few ways to do something to stop the spread of disease in the early years of the epidemic. By 1984 the general blood banking community endorsed the process, which began in earnest as targeted lookback in 1986, the year following implementation of HIV screening. In high-risk metropolitan areas, the process was expanded by using additional means, such as reports from health departments, to trigger lookback. In an attempt to find individuals at risk more rapidly, the

Table 5.16 Pros and cons of lookback Pros

Cons

Public health initiative Inform people of their health Change people’s lifestyle Bring to medical attention Ethical and moral obligation to inform Renew public’s trust

Unnecessary anxiety for recipients Low yield High-risk people must donate again Record keeping dependent Recipient died of underlying illness Disease not acquired by transfusion

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CDC recommended a broader alert to the public and medical community known as universal or general lookback. Through wide-ranged communication and a public health campaign, transfusion recipients were advised to get tested for HIV. Some hospitals in high-risk areas also sent out letters directly to all transfusion recipients to alert them of the risk (32). Due to the low yield and high cost of HIV lookback, there was a great deal of debate regarding HCV lookback in the early 1990s, with the availability of the first serologic assay. It was estimated that the yield might be even lower, recognizing that HCV had been present in the general population for decades and in a larger proportion than HIV. In addition, most people with HCV infection have less clinically significant and serious disease at presentation than those with HIV. The prevention of secondary infection was not as of great concern, either, since sexual transmission of HCV is not very effective (32). Implementation of HCV lookback was ultimately deferred due to concerns that informing blood recipients, without complete information or treatment options, might do more harm than good (13, 32). In January 1998, Donna E. Shalala, the Secretary of the Department of Health and Human Services, endorsed the August 1997 recommendations of the department’s Advisory Committee on Blood Safety and Availability regarding HCV lookback, performed on the basis of screening tests performed since 1992 (EIA [enzyme immunoassay] 2.0 and 3.0). With more sensitive and specific testing for HCV available at that time, a greater understanding of the virus, and new treatment options, it was felt that the time for HCV lookback was upon us (2, 71). The committee felt that this intervention could improve the patient’s prognosis by preventing further liver damage and disease progression (12). HCV lookback was initiated in 1998 under guidance from the FDA (71). After 85.5% of the initial phase of lookback was complete, the CDC reported that only 1.5% of recipients targeted for notification found out about their HCV infections in this manner; HCV lookback yielded poor results. It was concluded that targeted lookback was of limited value and that other means were necessary to identify the majority of people with disease, primarily acquired due to life style, not transfusion (58). Of interest, the yield in Quebec, Canada, was reported to be only slightly better, at about 3% (98). In 1998 and 1999 the Public Health Service’s (PHS) Advisory Committee on Blood Safety and Availability reconsidered whether to expand testing to include the first generation of HCV testing (EIA 1.0) that was performed between 1990 and 1992. Despite the low yield, following a series of public meetings, the PHS Advisory Committee endorsed the expansion of testing, and a proposed rule was published in 2000. The final rule was published in August 2007 in the Federal Register (67). Simultaneously, guidance was published to assist the industry in

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determining how to comply with the new rule. In December 2007 the FDA issued updated guidance on hepatitis C, “Lookback for hepatitis C virus (HCV): product quarantine, consignee notification, further testing, product disposition, and notification of transfusion recipients based on donor test results indication infection with HCV.” This was updated in December 2010 (http://www.fda.gov/ downloads/BiologicsBloodVaccines/GuidanceCompliance RegulatoryInformation/Guidances/UCM238488.pdf, accessed February 29, 2012) (73). Precautionary principle. It is ideal to make decisions on the basis of solid, scientific evidence. This evidence-based approach has been used to make decisions on the health of individuals. When there is a lack of evidence, proactive decisions must be made to limit risks, since the true risks are unknown. This is the basis of the precautionary principle. The precautionary principle has been a part of policy making in many arenas, such as the environment, but it has also formed the foundation for many practices related to blood and transfusion safety. The dictum to first, do no harm is a hallmark of medical practice (94, 139). The response to the knowledge that HIV was a transfusion-transmitted disease was primarily evidencebased. But without a real understanding of the threat and the perceived risk, an evidence-based model did not protect the public health or lead to an effective public health policy. Waiting for the definitive scientific evidence to make a decision about risk, by using randomized controlled trials, was not an option. In addition, this type of study might put the population at risk, since the study design is not appropriate for public policy decisions; such studies are designed to look at statistical differences between different treatment arms, not the assessment of risk (139). In addition, randomized controlled trials may not be ethical; the subjects of one arm of the trial might be subjected to a harmful intervention. As a result, public policy decisions made in arenas where there are knowledge gaps cannot rely upon the strict tenets of evidence-based data. Unfortunately, using the precautionary principle is not without its problems. Putting systems in place to prevent risk of unknown proportions creates rigidity due to the enforcement of stringent requirements. Further, putting these requirements into place is frequently expensive and may not meet the criteria of cost-effective care; since the true risk is unknown in these situations, interventions might require unlimited resources and will not be feasible. An unforeseen consequence of the addition of more policies to prevent risk is a reduction in the supply of blood products. This has been seen with the introduction of deferrals for variant Creutzfeld-Jakob Disease (vCJD), as discussed in the next section (59). Finally, the reduction of risk for one intervention might prohibit the ability to add additional resources for a risk that is subsequently determined to be

more important than the original risk. With so many unknowns, it is hard to prioritize which policies need to be put in place and which is the most cost-effective (139). Increases in testing and screening leading to decreases in supply. As mentioned earlier, there is increasing emphasis on regulatory compliance and safety. Due to heightened concerns, theoretical risks are being monitored and proactively addressed, primarily using the precautionary principle. The response to new vCJD is an example of how the blood industry responded to an emerging pathogen with possible transfusion transmissibility. In November 2002 FDA guidance required the deferral of all donors who had been in the United Kingdom for three months from 1980 to 1996 and Europe for five years from 1980 to the present (72). These policies were estimated to lead to the deferral of approximately 5% of the current blood donors (89). Beginning on September 17, 2001, the American Red Cross began deferring all donors who had been in the United Kingdom for three months and Europe for six months from 1980 to present, estimated to have resulted in the deferral of 8% of donors at that time (8). New York, a state that imported 25% of its red blood cells from Europe, braced itself to face severe shortages (9, 128). Of interest, an article from the Wall Street Journal in August of 1999, entitled “Mad Regulatory Disease,” focused on concerns about imposing new regulations on the everdiminishing blood supply without concrete evidence of transmissibility (137). The balance between safeguarding the blood supply from pathogens versus adequacy of supply is one of the ever-present themes as blood shortages in the United States have become more common. Donors are still deferred based on travel, family history, and the possibility of exposure to central nervous tissue. There have been four cases of transfusion-transmitted vCJD in the UK (76). Shift to a pharmaceutical manufacturing model. There has been an evolution of stricter regulatory oversight of blood manufacturing and blood banking. As background, in the 1960s and early 1970s, blood establishments were monitored by the National Institutes of Health, as an arm of the Public Health Service. Their focus was on public health and research through a collegial relationship, not one of legal enforcement. It wasn’t until 1973 that the FDA announced that all blood banks, including hospital transfusion services, were required to register as drug manufacturers. The FDA began writing new regulations specifically applicable to blood establishments. Regulations used by the FDA are published in the Code of Federal Regulations (CFR) (101, 127). In the mid to late 1980s, in response to the nightmare of HIV, the public and elected officials raised concerns about the processes and scrutiny being used to ensure a safe blood supply (127). The FDA is charged with the responsibility to

CHAPTER 5. THE IMPACT OF REGULATORY REQUIREMENTS

monitor blood establishments and enforces regulations related to the production of blood and blood products. During this time it also garnered increased scrutiny. Whereas the relationship between the FDA and the blood banking community had been that of professional colleagues, it too changed, since the FDA was also being criticized for its role in the spread of HIV through the blood supply. As a result, in the late 1980s and early 1990s, the FDA focused on enforcement. Inspections were conducted annually, and they were more thorough. The FDA began frequently citing blood manufacturers for their lack of process control and for quality assurance deficiencies (102, 105, 127). By 1992 the FDA’s direction was clear. Previously blood products were governed by 21 CFR 600, which classifies blood products as biologics, and 21 CFR 606, specifically outlining good manufacturing practices for blood and blood components. In addition, 21 CFR 210 and 211 were also enforced. Regulations that had previously been reserved for pharmaceutical manufacturers with details of quality assurance requirements were then applied to blood products. Blood was therefore classified as both a biologic and a drug. Since the FDA was finding problems in the areas of process control and quality assurance, they felt that applying current good manufacturing practices (CGMP) from 21 CFR 210 and 211 would be the best way for blood manufacturers to improve their operations. This was especially important since blood manufacturing had become increasingly complex with the addition of new tests, computerization, and automated operations (46, 50–52, 105). Pharmaceutical manufacturing facilities have been adhering to CGMP in compliance with 21 CFR 210 and 211. The most important aspect of CGMP is process control, which results from strict and consistent adherence to standard operating procedures (SOPs). The elements of CGMP ensure that products are made the same way, every time, resulting in a safe, pure, potent, efficacious product (46, 52). A quality assurance (QA) function is defined as being outside of technical operations, reporting independently and directly to management. This gives QA staff the ability and authority to report serious infractions outside of the operational chain of command and to shut down production and/or product release when deemed necessary (70). The QA group must make sure that personnel follow CGMP. The QA group monitors all aspects of SOP development, training and education, competency and proficiency training, validation, audits, error and accident reporting (as discussed in greater detail later), and product release. The QA group audits manufacturing operations and defines critical control points (3, 70, 105, 121). Manufacturers also have product specifications with manufacturing pathways that identify and clearly define the critical steps, or critical control points, of the process. Documentation is an essential part of CGMP, so each step of the process can be re-created, as necessary.

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An individual designated the responsible head is identified. This individual is responsible for ensuring compliance with the CFR and enforcing discipline and proper performance of all individuals engaged in manufacturing. The responsible head must understand the principles and techniques of the manufacturing process and serve as the establishment’s representative to the FDA (105). By adopting CGMP, many pharmaceutical manufacturers have been able to perform complex operations while providing safe, pure, potent, and efficacious products. It was theorized that using these same principles for blood manufacturing should produce the same results. It is essential to have control of the manufacturing process to provide the highest-quality, safest blood products (24, 102, 105, 121). Defining blood manufacturing as equivalent to pharmaceutical manufacturing was not straightforward and consequently met with resistance (24, 102, 105, 127). The most apparent incongruity was trying to apply the regulations that outline requirements for product release of manufactured goods. Usually in a pharmaceutical operation, these relate to groupings of goods coming off a production line. In blood manufacturing, since the source material is an individual blood donor, the same processes are hard to apply. Since each unit of blood comes from a different donor, they aren’t uniform and cannot be “manufactured” in a consistent process each time (127). There was also concern that by placing so much emphasis on conformity and process control, other important aspects of transfusion medicine would be overlooked. Instead of spending time working on new and innovative therapies, practitioners would be sidelined into regulatory concerns, leading to stagnation (105). Despite these concerns, the paradigm shift described above has become the culture of blood banking and transfusion medicine. Blood banks and transfusion services must comply with the rules of a variety of regulatory organizations and can also undergo inspections to earn voluntary accreditation. This not only ensures compliance with legal requirements, but also demonstrates the laboratory and transfusion services’ dedication to the highest standards of quality and safety.

Regulatory Organizations that Specifically Impact Transfusion Medicine AABB. The AABB was established in 1947. It is an international, not-for-profit association that represents individuals and institutions involved in the field of transfusion medicine and cellular therapies. The AABB states that its mission is to “advance the practice and standards of transfusion medicine and cellular therapies to optimize patient and donor care and safety.” The AABB’s membership consists of about 2,000 institutions (community and hospital blood banks, hospital transfusion services, and

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laboratories) and about 8,000 individuals comprising physicians, scientists, administrators, medical technologists, blood donor recruiters, and public relations personnel. AABB members are located in more than 80 countries. The organization supports voluntary donation of blood and tissue and supports high standards of medical, technical, and administrative performance, scientific investigation, clinical application, and education. The committees and board of directors are comprised of volunteer members, as described on the Association’s website (www.aabb .org, accessed January 30, 2012). The AABB publishes the “Standards for Blood Banks and Transfusion Services,” which is updated every 18 months. The standards are written by experts in blood banking and transfusion medicine and are consistent with FDA regulations. The AABB maintains a voluntary accreditation program, based on its standards, with voluntary compliance activities that began in 1957. The first edition of “Standards for Human Progenitor Cells” was published in 1996. The “Standards for Cellular Therapy Product Services” is now in its fifth edition. The AABB accreditation program uses trained peerassessors to perform the inspection to verify a facility’s compliance with their standards, the Code of Federal Regulations (CFR), and other federal regulations. The AABB’s program has deemed status for Clinical Laboratory Improvement Amendments of 1988 (CLIA ’88) and has also been accredited by the International Society for Quality in Healthcare. In addition, the AABB conducts proficiency testing programs in coordination with the College of American Pathologists (CAP), provides a variety of educational venues, and publishes textbooks as well as the journal Transfusion. Additional information about these programs is available at www.aabb.org (accessed January 30, 2012). The AABB standards require that blood banks and transfusion services establish and maintain a quality system (35). The responsibility for the supervision of the quality management system must be given to a specific individual who reports to upper-level management. The program must contain necessary essential elements as listed in Table 5.17. Full implementation of a quality program was required of all AABB-accredited facilities by January 1, 1998. The focus of full implementation was to change the approach from one of detection of errors to one of prevention of errors, in accordance with requirements put forth by the FDA in 1995. The essentials required were consistent with both the AABB Quality Program and the FDA’s quality assurance requirements (3, 70). Unlike the FDA’s 1995 requirements, the AABB required transfusion service members, not just manufacturers of blood and blood components, to develop their own quality programs. It’s also interesting to note that the AABB voluntary standards were written in 1957, 18 years before the

FDA published the federal CGMP for blood and blood components. Also, some parts of the CFR refer to AABB standards (121). The Food and Drug Administration. In stark contrast to the role of the AABB, the FDA has enforcement power over blood establishments. It is an agency of the Department of Health and Human Services and has been a part of it since 1979. The FDA is authorized by Congress to enforce the Federal Food, Drug, and Cosmetic Act. According to its website, the FDA is “responsible for protecting the public health by assuring the safety, efficacy and security of human and veterinary drugs, biological products, medical devices, our nation’s food supply, cosmetics, and products that emit radiation. FDA is also responsible for advancing the public health by helping to speed innovations that make medicines more effective, safer, and more affordable and by helping the public get the accurate, science-based information they need to use medicines and foods to maintain and improve their health” (www.fda.gov, accessed January 10, 2012). The Center for Biologics Evaluation and Research (CBER) is a center of the FDA that regulates biological products including blood, vaccines, therapeutics, and related drugs and devices. As such, the CBER can be viewed as the “blood arm” of the FDA, with the role to ensure compliance with laws and regulations through review, education, surveillance, and enforcement. The CBER regulates biological products under the authority of the Public Health Service Act and specific sections of the Food, Drug, and Cosmetic Act. The safety of the nation’s entire blood supply and the products derived from it fall into the realm of the CBER’s responsibility (http://www.fda.gov/BiologicsBlood Vaccines/default.htm, accessed January 10, 2012). As an example of the FDA’s regulatory posture, in the late 1980s, the FDA expressed concern over the American Red Cross’ (ARC) lack of regulatory compliance. In 1988 the ARC entered into a consent agreement with the FDA, promising that they would take steps toward tightening their operations (101, 105). Other blood collection facilities were also under increased scrutiny, but the ARC, representing 45% of the nation’s blood supply, was by far the largest (101). The FDA issued additional warnings to the ARC, and the ARC began a major reorganization, separating blood services from the rest of their operations. This reorganization began a transformation, focusing on enhancing their computer system, revamping their training programs, and revising standard operating procedures (SOPs) to create both national and local-level compliance with current good manufacturing practices (CGMP). The ARC named a responsible head and worked on a quality assurance program. The Council of Community Blood Centers members (now called America’s Blood Centers), representing a large number of

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Table 5.17 Essential components of a quality management systema Organization and leadership Provide the leadership to establish a quality plan and create the structure. Define specific responsibilities, including who has authority. Provide the resources to design and implement processes and procedures. Enforce adherence. Customer focus Serve the needs of the customer. Work with customers to ensure that their needs are met. Obtain feedback from the customers and assure them that you are meeting their expectations. Facilities, work environment, and safety Follow procedures and controls to provide a safe facility and environment. Comply with regulations including the provision of adequate ventilation, hand-washing facilities, sanitation, etc. Human resources Use processes to hire qualified personnel. Follow policies and procedures for orientation, training, and competency assessment, in accordance with FDA regulations. Equipment management Have plans to install and verify the operation of new equipment that will be installed. Institute a system to uniquely identify and track all critical equipment. Suppliers and materials management Qualify suppliers of critical materials. Maintain a list of approved suppliers. Contracts and agreements should be periodically reviewed, with changes agreed upon by both parties. Process management Follow policies for all critical functions. Design a mechanism to ensure that equipment and processes are working as defined after implementation, including quality control. Follow systematic approaches for all aspects for implementing new processes and for changing existing processes. Use validations for test methods, equipment, and computer systems. Documents and records Documents provide the structure of the organization. Records serve as evidence of processes and procedures. Documents and records are important since they serve as evidence of processes and procedures; these are used by inspectors. Procedures, forms, and labels are examples of types of documents and records. Information management Privacy and confidentiality must be ensured. Policies should delineate who should be granted access to different types of information and how to prevent unauthorized access. Ensure that data are available, maintained, retrievable, and usable. Provide backup and redundancy of key data. Management of nonconforming events Detect events. Investigate events, including root cause analysis when indicated. Address events and implementation of corrective action. Evaluate the effectiveness of corrective actions. Require reporting to regulatory agencies. Monitoring and assessment Monitor and assess processes. Make internal and external assessments. Establish quality indicators for evaluation. Assess the facility’s blood transfusion practices. Process improvement Maintain continuous improvement as a means to ensure patient safety and quality. Identify problems and their causes using root cause analysis and other tools. Find solutions and assess their effectiveness. a

See reference 35.

independent blood centers, also worked on meeting full regulatory compliance (105). Despite progress, the FDA still felt the ARC was not meeting the full extent of the law. On May 12, 1993, the FDA applied increasing pressure, invoking a consent

degree on the ARC. A consent decree is a formal, binding, enforceable court order requiring full compliance. If violated, a party can be found guilty of contempt of court. The consent decree cited deficiencies in quality assurance, training, computer and database review, record review,

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record management, error and accident investigation, adverse transfusion reaction investigation, transfusiontransmitted disease investigations, and lookback procedures. It also required that the ARC implement an internal audit system. While the FDA has stated that the ARC is making progress, there have been setbacks, and it remains under the consent decree. To date, the FDA has imposed more than approximately $21 million in fines (7; http:// www.redcross.org/www-files/Documents/Governance/ QualityRegulatoryComplianceCharter.pdf, accessed July 2, 2012). The Joint Commission (TJC). TJC (formerly the Joint Commission on Accreditation of Healthcare Organizations [JCAHO]) is an independent, not-for-profit organization, formed in 1951, that sets standards for healthcare facilities. TJC evaluates and accredits nearly 19,000 healthcare organizations and programs in the United States. Its mission is “to continuously improve healthcare for the public, in collaboration with other stakeholders, by evaluating healthcare organizations and inspiring them to excel in providing safe and effective care of the highest quality and value.” An organization must be inspected every three years to maintain accreditation; laboratories are inspected at two-year intervals, to maintain compliance with CLIA ’88. TJC states that their accreditation and certification “is recognized nationwide as a symbol of quality that reflects an organization’s commitment to meeting certain performance standards” (http://www.jointcommission.org, accessed February 29, 2012). During its inspections, TJC uses “laboratory tracers”: The inspector follows a laboratory test and evaluates the performance of all of the associated processes. They are specifically looking at the integration and coordination of distinct, yet interrelated processes. This allows assessment of how the different departments and programs work together, thereby identifying strengths and weaknesses in each process. As an example, TJC describes tracing a unit of blood to a patient who then experiences a transfusion reaction. By using the tracer methodology, the inspector can observe diverse aspects of the organization such as the laboratory’s standard operating procedures and assessment of training records of personnel and can evaluate other laboratories or services that would be involved in further evaluation and treatment of the transfusion reaction (http://www.jointcommission.org/tracer_methodology _101/, accessed February 29, 2012). Most of the blood and blood products requirements are covered in standards that have a broader context. Each standard lists elements of performance. For example, National Patient Safety Goal Standard NPSG.01.01.01 requires at least two patient identifiers when providing care, treatment, or services (90). The first element of performance describes the need for patient identifiers when

administering blood or blood components and when collecting blood samples and specimens that will be used for clinical testing. The second element requires that containers used for blood be labeled in the presence of the patient. Provision of Care Standard PC.02.01.07 specifically relates to blood and blood component administration. It requires that the organization safely administer blood and blood components (91). Medical Staff Standard MS.05.01.01 relates to the medical staff ’s leadership in performance improvement activities. Element of Performance 5 addresses the need to measure, assess, and improve the use of blood and blood components (90, 92). To comply with this standard, peer review of blood and blood product usage is usually accomplished through a hospital transfusion committee that monitors the use of blood and blood products against institutional guidelines. Requirements for informed consent are also addressed by Joint Commission Standards, available at http://www.joint commission.org and https://e-dition.jcrinc.com/Frame .aspx (accessed January 9, 2012). International oversight through the World Health Organization (WHO). The international community has recognized the need for a standardized approach for the regulation of blood and products. The WHO’s World Health Assembly passed a resolution establishing the need for coordinated blood systems that would be supported and managed at a national level. In 2006 the WHO established the Blood Regulators Network to create a group of international peers who could exchange information on aspects of blood-related issues, such as new technologies and emerging threats, as well as to establish regulatory collaboration and cooperation. The group is examining standardized criteria for national regulatory agencies. Since some blood products are shipped internationally, coordination and minimal standards are necessary. Regulatory agencies must exist to ensure compliance with national legislation and to ensure the availability of safe blood products in an organized manner. This body believes that international standards will ensure basic and minimum levels of uniformity, standardization, and quality in each country. They are interested in improving and standardizing the method of decision making for blood safety and evaluation, using scientific data as well as feasibility, social effects, and economics as some of the factors required in the development of sound policy. The organization has also looked at the challenges of decision making when there is scientific uncertainty, especially the importance of the precautionary principle, which is discussed above. It is noted that the establishment of regulations must ensure safety and availability but must also ensure that rules do not impose unnecessary harm: When new regulations are enforced, the risks of reduced blood availability must be weighed (62, 63).

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Biological Product Deviation Reporting In the manufacturing facility and transfusion service. Through current CGMP the FDA requires all licensed manufacturers of biological products to report errors and accidents affecting the safety, purity, or potency (SPP) of a product to the FDA. On May 7, 2001, the FDA added 21 CFR 606.171 to extend this requirement to unlicensed registered establishments and transfusion services. Two other regulations, 21 CFR 606.171 and 21 CFR 600.14, changed the terminology of errors and accidents to biological product deviations (http://www.accessdata.fda.gov/scripts/cdrh/cfdocs/ cfcfr/CFRSearch.cfm?fr=600.14; http://www.accessdata.fda .gov/scripts/cdrh/cfdocs/cfcfr/CFRSearch.cfm?fr=606.171, accessed March 3, 2012). In 2004, through 21 CFR 1271/350(b), these requirements were extended to include reporting certain deviations in manufacturing of human cells, tissue, and cellular and tissue-based products (http://www.accessdata.fda.gov/ scripts/cdrh/cfdocs/cfcfr/CFRSearch.cfm?fr=1271.350, accessed March 1, 2012). When a deviation occurs, any blood establishment that has control of a blood product must report the deviation to the FDA within 45 days if the deviation affects the SPP of a distributed product. Distributed products are those that have left the control of the blood establishment. For example, when a courier comes to pick up a product, and a deviation affecting SPP is discovered before the courier leaves the area but after the product has been released to the courier, this becomes an FDA reportable occurrence. Control is defined as having responsibility of maintaining a product’s continued SPP and compliance with applicable product and establishment standards and CGMP requirements. The events must also represent either a deviation from CGMP, applicable regulations, applicable standards, or established specifications or be unforeseen or unexpected occurrences (50, 51, 53, 54). In 2006 the FDA issued final guidance, Guidance for Industry: Biological Product Deviation Reporting for Blood and Plasma Establishments (http://www.fda.gov/downloads/BiologicsBloodVaccines/ GuidanceComplianceRegulatoryInformation/Guidances/ Blood/UCM062918.pdf, accessed February 29, 2012). The document also clarifies the earlier draft guidance. (The FDA’s most recent guidance is available at http:// www.fda.gov/BiologicsBloodVaccines/SafetyAvailability/ ReportaProblem/BiologicalProductDeviations/default .htm [accessed January 1, 2012].) These documents highlight the inclusion of the transfusion service as a part of the manufacturing process of blood, having responsibility for compatibility testing, processing, packing, labeling, and final distribution of the product (60). When deviations meeting the requirements for reporting are discovered, a biological product deviation report (BPDR), form FDA-3486, must be completed and emailed or faxed (http://www.fda.gov/BiologicsBlood

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Vaccines/SafetyAvailability/ReportaProblem/Biological ProductDeviations/default.htm, accessed January 10, 2012). The form can be found at http://www.fda.gov/downloads/ AboutFDA/ReportsManualsForms/Forms/UCM061463 .pdf (accessed January 10, 2012). As part of the reporting process, the initiator assigns a code to characterize the deviation so it can be tracked and trended. Processing a biological product deviation. For deviations that occur before the product has left control of the blood establishment, the FDA does not need to be informed, but the transfusion service must investigate the deviation. These reports are subject to review during an inspection. The FDA expects a thorough investigation of the cause. To have a standardized process, institutional SOPs need to be written for this activity. The process should include the mode of documentation of the occurrence, how the cause of the occurrence is investigated, who has responsibility for each step of the process, and how the information is used to prevent future occurrences of the same problem. The steps of the process are summarized in Table 5.18. An algorithm for evaluating each deviation, developed by the FDA, is presented in Figure 5.1 (http://www.fda .gov/downloads/BiologicsBloodVaccines/Guidance ComplianceRegulatoryInformation/Guidances/Blood/ UCM062918.pdf, accessed February 29, 2012). The process of root cause analysis can be used to determine the true underlying, or root, cause of the deviation, not necessarily the most obvious cause. During root cause analysis a group of people delve into the occurrence in a predetermined fashion by asking sequential questions or using standard diagram techniques. The intent of tracking deviations is to improve quality, improve patient outcomes, and prevent future deviations (108). The best way to detect deviations is to encourage employees to report such occurrences in a non-punitive environment. These principles have been successfully applied outside of medicine; the most well-known arena is the aviation industry. By not just identifying errors, but by gaining an understanding of their myriad causes, a true opportunity for process improvement is captured (22).

Table 5.18 Steps in processing biological product deviations Identify deviation; if reportable, must report within 45 days. Document deviation. Take immediate corrective action. Investigate deviation (may involve root cause analysis). Track deviations. Look for trends in deviations. Implement corrective action. Monitor for effectiveness of corrective action. Oversee quality assurance.

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Was the event associated with

No Action

NO

“manufacturing ”? YES

Was there a deviation that might affect the safety, purity, or potency of a product?

Was there an unexpected event that might affect the safety, purity, or potency of a product?

NO

NO

Record per FDA guidance

Investigate per FDA guidance

YES

Did it occur in your facility?

Did it occur at a facility under contract with you?

NO

NO

Notify responsible party

YES

Did you have control over the product when the deviation occurred?

NO

Notify the manufacturer who had control over the product

YES Was the product distributed?

NO

YES

Evaluate the need for product retrieval or consignee notification per FDA guidance

Record per FDA guidance

Investigate per FDA guidance

Record and investigate per FDA guidance

Submit report to CBER per FDA guidance

Figure 5.1 Flow diagram for management of deviations in accordance with Food and Drug Ad-

ministration requirements. doi:10.1128/9781555817282.ch5.f1

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The FDA publishes summary reports and the most frequent BPDRs submitted for different types of establishments and services. These reports can help organizations see common pitfalls and can also serve as a tool for benchmarking (http://www.fda.gov/BiologicsBlood Vaccines/SafetyAvailability/ReportaProblem/Biological ProductDeviations/ucm240904.htm, accessed February 29, 2012).

The Cost of Increasing Regulatory Oversight Implementation of safety initiatives in conjunction with regulatory requirements is a costly endeavor. Data on the costs incurred by meeting regulatory compliance are scarce. In this era of cost containment, many employees are asked to add new tasks to their current workload. The true allocation of their time for compliance functions is hard to capture, since it is “fit” into the rest of their responsibilities. Adding new personnel for compliance functions is more straightforward. One of the few studies looking at the staff costs associated with implementing a compliance program was performed at a community blood center between 1989 and 1994 (124). To maintain compliance and keep the organization on track, the blood center initially hired someone with the sole responsibility of compliance officer. With time, it was necessary to create a separate compliance department. In addition, department heads and other employees within the operational structure devoted increasing time and energy to the effort. A list of activities that comprise “compliance” appears in Table 5.19. During this period, the number of full-time equivalents dedicated to compliance rose from 7 to 24, with compensation costs rising from $367,000 to $1,298,900. These data focus on personnel costs, but there were additional costs associated with the raw materials necessary for the program. Menitove estimated that on a yearly basis, training in itself might actually occupy about 10% of an employee’s time (102). Of course, there is no alternative to maintaining regulatory compliance. In fact, with the goal of compliance being the maintenance of CGMP, the consequences of poor quality can be quite onerous and costly, from the patient care perspective as well as the blood center/transfusion service perspective. The cost of recalling and withdrawing blood products can incur additional expense (21). It is unknown whether or not increasing regulatory compliance leads to an increasingly safe transfusion (120). Specific programs aimed at blood safety, as well as their regulatory components, are also cited as increasing the cost of transfusion. As blood gets safer, attempts to further decrease the risks of pathogen transmission come at a higher cost per infection saved (33, 106, 120). In 1999 nucleic acid amplification technology was introduced to donor blood screening under an experimental protocol. Testing is done

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Table 5.19 Typical compliance functions within blood centers and transfusion medicine services Competency assessment Documentation of all operational activities Error and accident reporting Implementation of new regulatory requirements Inspections Preparation Hosting Internal audits Lookback Validation Standard operating procedures Standardizing Writing Regular review Quality control and its documentation Training: performance and documentation Regulatory training CGMP training Task training Competency assessment

on samples that are pools of individual donor samples. However, looking at quality-adjusted life year (QALY) in the mid to late 1990s, expenditures for testing individual donations (in contrast to the current pooled testing) by nucleic acid amplification technology were estimated to cost about $2 million per QALY gained, far exceeding the usually acceptable levels of $50,000 per QALY for most other healthcare initiatives (23, 80, 106). Aggregating the costs of administrative changes across the industry from 1980 to 1997, one author estimated that an additional $226 million was spent per year to maintain regulatory compliance. It was also felt that the requirement to be inspected by multiple organizations contributed to increased expenditures (25). In addition, the precautionary principle has an impact on cost as new safeguards are added to the blood industry.

Regulation of Laboratory Business Practices The federal government’s Medicare and Medicaid program is administered by the Centers for Medicare and Medicaid Services, a division of the Department of Health and Human Services. Medicare is the single largest payor for healthcare services. The CMS maintains the Uniform Bill (UB-92), institutional and professional electronic medical chart format specifications, and other specifications for various certifications and authorizations used by the Medicare and Medicaid programs. The CMS also maintains the Healthcare Common Procedural Coding System (HCPCS) medical code set and the Medicare Remittance Advice Remark Codes administrative code set.

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Negotiated Rule-Making Process Negotiated rule making describes the process of federal agency representatives and other special interest groups convening to negotiate the text of a proposed rule. A committee, with members from each participating group, develops the language for any proposed regulation before it appears in the Federal Register for comment. Congress has passed three generations of regulatory legislation to offer guidance to healthcare providers: • The Model Compliance Plan in 1984 • The Model Compliance Plan for Clinical Laboratories in July 1997 (available at http://oig.hhs.gov/authorities/ docs/cpglab.pdf, accessed September 5, 2012) • The Model Compliance Plan for Hospitals in February 1998 • Model Compliance Plan to Extend Deadline for Compliance with Electronic Transactions Rule March 2002 (http://aspe.hhs.gov/admnsimp/PRelease.htm, accessed April 4, 2012) Copies of the programs are available through professional associations and are published in the United States Code and the Federal Register.

Corporate Compliance Corporate compliance has evolved over the last four decades. Starting as a movement to curtail price fixing and other antitrust violations, it has developed into a quest to solve the national healthcare debt created by fraud and abuse. The Office of the Inspector General (OIG) developed the first Model Compliance Plan (MCP) after the Reform Act of 1984 was enacted. In February 1998 the Compliance Program for Hospitals (MCPH) was released and included essentially the same elements as the MCP for Clinical Laboratories in 1997. The Model Compliance Plans for Clinical Laboratories and Hospitals are a set of guidelines used to evaluate past behavior and implement policies and procedure for future compliance. The government recognizes that it cannot discover and eliminate every instance of fraud and abuse in healthcare. The intent is for healthcare organizations, laboratories, and providers to police themselves through self-regulation, self-auditing, and self-reporting and to proactively practice prevention. Compliance is an enterprise-wide attitude, culture, and commitment that supports honesty, integrity, and diligence in the workplace. Key Elements of a Model Compliance Plan for Hospitals The Compliance Program Guidance for Hospitals developed by the OIG suggests that the following key elements be addressed in the compliance plan (64). • The chief compliance officer is typically a high-level individual in the organization who is authorized to

develop, oversee, administer, and monitor any necessary regulatory compliance policies and committees. This individual generally reports directly to the chief executive officer. • Other appropriate bodies like the compliance committee consist of representatives from operations, finance, audit, human resources, utilization review, social work, discharge planning, medicine, coding, and legal. Key managers from areas like laboratory and radiology should serve on the compliance committee. • The compliance office must have authority to review documents and information that relate to compliance issues. • Employee ethics guidelines and standards of conduct. Human resource policies should include expected behaviors and standards of conduct related to regulations and guidelines for federally funded programs, fraud, and abuse. A mission statement that defines the organization’s core values and commitment is essential. Hospitals are charged with developing and distributing written policies that identify areas of risk to the hospital and include: • Written standards of conduct for employees • Development of policies addressing areas of risk to regulatory exposure • Claim development and submission • Medical necessity demonstrated by the provider and certified on the claim form • Avoidance of anti-kickback and self-referral violations created when referrals are made to designated health services in which the physician or an immediate family member may have a financial interest • Bad debts • Credit balances that occur when hospitals fail to refund overpayments by Medicare • Record retention for matters related to compliance (governed by CLIA ’88) • Education and training programs. All personnel should be required to attend ethics education and standards of conduct training initially. New employees and existing staff must sign a certifying statement following compliance training that indicates thorough understanding of the standards. The compliance office generally maintains these records. Thereafter, managers, supervisors, and employees who interact regularly should receive annual retraining. Annual performance evaluations should include a monitor for measuring adherence with distinct guidelines for disciplinary actions, including termination when indicated. • Compliance communication. The compliance officer should design a program that ensures each employee’s

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anonymity and guarantees that the lines of communication are open 24 hours per day, 7 days per week, without fear of reprisal for any effort to identify or report compliance policy violations or problems. Hospitals should also post in a prominent area the HHSOIG Hotline telephone number: 1-800-HHS-TIPS (447-8477). Institutions should maintain an anonymous hotline and document all incoming calls in a log. Compliance programs should strictly prohibit the use of termination, demotion, and disciplinary action against employees who report suspected violations. • Quality monitors and audits. An ongoing evaluation process is an essential element of a successful compliance program. Regular, periodic, and random inspections by internal and external auditors should review a random sampling to detect significant variation or deviation from a baseline in each of the areas of risk to exposure as cited above under “Employee Ethics Guidelines and Standards of Conduct.” The monitor should include any reserves the hospital may have established for payments that it may owe to Medicare, Medicaid, TRICARE, and other federally funded programs. • Disclosure. Development of a system to respond to allegations of improper activities. Whenever the compliance office becomes aware of any potential employee misconduct or an incorrect claim submission resulting in an erroneous overpayment, it is imperative that a prompt investigation be conducted, in order to make a decision to disclose the misconduct within the 60 days reasonable reporting period allowed by the government. Prompt voluntary unsolicited repayment within 30 days of the finding will eliminate potential exposure to possible fraud and abuse allegations. Repayment is the remedy when the government overpayment is the result of a one-time billing error. If an investigation uncovers a systematic billing problem, the office should consult an attorney and consider self-disclosure. • Develop policies to investigate and eliminate systematic problems, including the retention of sanctioned individuals. Model compliance plan for laboratories. Both the hospital and laboratory must develop and distribute policies that demonstrate a commitment to employee training in areas of marketing, medical necessity, billing, and coding and processing of claims. Key elements include the following: • Laboratories should design the order screens and requisitions to include approved panels and indicate the need to demonstrate medical necessity when ordering additional individual automated chemistry tests.

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• Laboratories should send referring physicians annual notices that provide the following information: • Medicare only pays for medically necessary testing. • Lists of Medicare-approved panels and their components. • HCPCS and CPT codes used to bill for the panels. • The national limitation amount (NLA) for the tests (also referred to as Medicare expect). • How Medicare will be billed for the service. • Physicians who request that laboratories develop custom panels for their patients must acknowledge in writing on an annual basis that they understand the components and billing mechanisms for the profiles. • Laboratories should monitor the utilization pattern for high-volume testing and investigate shifts in frequency of more than 10% to determine the reason. • Claims for testing services submitted to Medicare must be correctly coded to avoid charges of false claims. • Physicians are charged to establish medical necessity and provide the correct diagnosis code (ICD-9 code) for the test order to the laboratory. • Laboratories must ensure that any claim submitted has a corresponding test order and report. • Do not bill for both calculations and the underlying tests. The OIG considers this double billing. Laboratory marketing: compliance issues. Marketing efforts by the laboratory should be honest, clear, correct, straightforward, informative, and nondeceptive. Laboratories are prohibited from offering inducements to physicians to gain business. Specifically, laboratories must ensure that physicians are never charged below fair market value for referred testing to avoid the risk of allegations of kickback. Physicians should never be offered lower prices for non-Medicare patients in exchange for obtaining Medicare business that is reimbursed at a higher rate. The laboratory supplies provided to a physician’s office should also be scrutinized carefully. Equipment such as centrifuges, printers, and faxes must be used for specimen preparation and results reporting. The laboratory and physician should sign a document that supports the terms and conditions of supplies and equipment provided by the laboratory. The laboratory should have a system to monitor abuse or excessive use of any supply provided.

The Legal Environment The OIG’s position is one of zero tolerance. The office expects a healthcare institution to promote and adhere to compliance at all levels and expects that noncompliance will not be tolerated. The government can potentially file charges under the Civil False Claims Act for a period of up to 10 years. The

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compliance program should synchronize the institution’s record retention policies to conform to government regulations. In a 1995 status report (113) issued by the OIG and the Department of Justice joint project, three tiers of penalties were established for hospitals that submit false claims. The tiers are dependent on the extent of the problem in relationship to its size (Table 5.20). Qui tam provisions of the False Claims Act, which originated during the Civil War, give knowledgeable private citizens the ability to file lawsuits on behalf of the federal government and to share in any recovered damages. From 1987 to 1996, whistleblower cases filed by current employees, employees with grievances, or competitors alleging individual or corporate healthcare fraud against the federal government increased nearly 1,000%. Federal prosecutors use the provisions to their advantage since it requires the lower standard of preponderance of evidence but authorizes damages and penalties of $5,000–$10,000 for each false claim submitted. Over the years, whistleblowers have received an average 18% of the total amount recovered by the government in these suits. The physician self-referral law, commonly referred to as the Stark Law, originated in 1989. It prohibits doctors from making referrals to an entity for the provision of laboratory services if they or their immediate family have a financial relationship with that entity. Submission of Medicare claims when the ordering physician has a business arrangement with the laboratory is forbidden unless it fits the exceptions list as defined in the law. The Stark II legislation expanded the law to cover 10 other categories including physical and occupational therapy, radiology, radiation therapy, durable medical equipment services and supplies, prosthetic devices and supplies, home health services, parenteral and enteral nutrients, outpatient prescription drugs, and inpatient and outpatient hospital services (84). The Phase I Rules of Stark II included modification to key terms such as “referral,” “indirect financial relationships,” “indirect referrals,” and “volume or value of referrals” and the definition of “group practice.” The most significant additions to the Stark I legislation include new exceptions to prohibitions for fair Table 5.20 Hospital financial exposurea Tier 1 A hospital’s payment or penalty was equal to the potential overpayments plus interest. Tier 2 Payment and penalty were equal to 100% of potential overpayment plus interest. Tier 3 Payment and penalties were equal to 300% (treble damage) of potential overpayment plus interest. a See http://oig.hhs.gov/oas/reports/region3/39400021.pdf (accessed October 22, 2012).

market value, academic medical centers, and nonmonetary compensation. In 2007 the CMS completed the third and final installment of the Stark Law. The final rule, referred to as Phase III, responds to public comments regarding the Phase II interim final rule and addresses the entire Stark Law regulatory scheme. In Phase III the CMS continues to reduce the regulatory burden on the healthcare industry through its interpretation and modification of exceptions to the Stark Law’s prohibition on referrals (http://www .cms.gov/PhysicianSelfReferral/Downloads/66FR856.pdf, accessed March 1, 2012). The anti-kickback statutes specifically forbid individuals from seeking, receiving, offering, or paying any compensation (bribe or rebate) in exchange for a referral or for the purpose of purchasing or leasing of goods and services covered by payments from a federally funded program. Inducement is inferred when a laboratory provides anything of value, not paid for at fair market value, to a provider who has a referring relationship with the laboratory. The OIG could consider the following as inducements: • The provision of phlebotomists who provide other clerical services • Picking up of biohazard materials unrelated to the specimen collection • Providing medical supplies and equipment not related to testing referred to the lab • Provision of computers, printers, or faxes unless exclusively used for the outside laboratory’s work • Providing free POL consultation • Waiving managed-care patient charges to retain the client’s referral work • Professional courtesy (free healthcare testing) to the provider and office staff Violators are subject to criminal penalties and/or exclusion from participating in the federally funded healthcare programs. Safe-harbor regulations. The Medicare and Medicaid Patient and Program Protection Act directed the Office of Inspector General (OIG) to assure healthcare providers that they would not be prosecuted for engaging in certain practices where they assumed compliance while acting in good faith. Arrangements that may qualify under the regulation include certain investment interests, equipment or space rental agreements, management service contracts, manufacturers’ warranties, and gain-sharing. Gain-sharing results when a hospital agrees to share with a provider a fair market share or percentage of any measurable reduction in costs for patient care where quality and performance criteria were met and said reductions could be directly attributed to the efforts of the provider.

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The OIG from time to time issues special fraud alerts to assist contractors and providers who participate in federal programs. (These alerts are available on the OIG website at http://oig.hhs.gov/compliance/alerts/index.asp [accessed February 28, 2012].) Legal sanctions. When a lab is cited for violations of any of the regulations, sanctions could include denial of payment, refund of monies collected when billed in violation, civil monetary penalties of $15,000/claim and exclusion, civil penalties of $100,000 and exclusion for cross-referral billing schemes, and civil penalties of $10,000/day for failure to report. The OIG has the authority to exclude healthcare providers from federally funded programs and maintains a list of excluded individuals and entities called the List of Excluded Individuals and Entities. Anyone who contracts with an excluded individual or entity may be subject to civil monetary penalties (http://oig.hhs.gov/exclusions/ background.asp, accessed February 28, 2012). The General Services Administration also maintains a monthly list of debarred contractors. (The list is posted on the General Services Administration website at https://www.epls .gov/ [accessed February 28, 2012].) Hospitals may request information from this database as a part of the employee recruitment, screening, and credentialing process. Settlement agreements. Corporate integrity agreements (CIAs) are executed as a result of a civil settlement between the government and a healthcare provider based on alleged fraud and abuse under the False Claims Act, including qui tam. The most compelling reason for a provider to enter into a CIA is to avoid exclusion from federal programs. Although the government has a standard CIA boilerplate agreement, it is in the facility’s best interest to work toward developing an agreement that avoids a broad-brush approach using language that closely follows the hospital’s existing compliance program, concentrating on the issues prompting the investigation. Over time, CIAs have become more rigorous and now impose longer terms of duration, investigate a wider span of issues, include elaborate and expensive provisions, and expand internal and external monitoring of CIA compliance (77). Impact of compliance on healthcare providers. Facilities should design compliance programs that strive to create a culture that promotes prevention, detection, and resolution of any occurrence that does not comply with federal, state, or private payor healthcare program guidelines (J. F. Boothe and J. A. Gayken, workshop on laboratory compliance, special session, Clinical Laboratory Management Association Annual Conference and Exhibition, Toronto, Ontario, 1997). The benefits of having an effective program outweigh the managerial costs incurred to establish and administer a compliance program. Healthcare

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organizations with established compliance plans can prevent or detect violations and identify employee misconduct prior to an investigation, substantially reducing their exposure to criminal penalties. Federal sentencing guidelines. Believing that the federal court’s sentences for organizations were unfair and unpredictable, under legislation known as the Reform Act of 1984, Congress authorized the creation of a Federal Sentencing Commission to establish guidelines for judges to use in sentencing individuals (first issued in 1987) and organizations (issued in November 1991). A compliance program becomes most valuable when there is a clear understanding of how fines are determined under the sentencing guidelines. Civil monetary penalties. The complex system of civil monetary penalties enables the government to clearly define the guidelines for an effective compliance plan in the clinical laboratory and the hospital setting (65). After analyzing the seriousness of the offense, a base fine is determined. Then the organization is scrutinized for the degree of responsibility and degree of involvement of management in the commission of the acts to determine the overall culpability score. These two factors are used to calculate the guideline fine range used by the courts to set the amount of the overall fine. A well-established compliance program shields the healthcare provider from suffering longer sentences or harsher penalties. Under the Federal Sentencing Guidelines, the culpability score for a company being prosecuted for a violation would be reduced by as much as 95% when a corporate compliance program is in effect (61). The challenge is to provide and document evidence of the plan’s effectiveness, targeting training as the key.

Laboratory Reimbursement and Medical Necessity Medicare In 1999 the Department of Health and Human Services (HHS) established the Centers for Medicare and Medicaid Services (CMS), formerly known as the Healthcare Financing Administration (HCFA), to provide operational oversight and administer guidance to third-party healthcare contractors. Medicare contractors: third-party payors. The CMS contracts with third-party contractors to administer federally funded programs such as Medicare and TRICARE. The Medicaid program is administered cooperatively between the HHS and state agencies. The contractors are generally companies whose business is the administration of insurance plans. They must demonstrate financial solvency,

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adequate infrastructure, and a satisfactory record of service to be awarded a government contract. In the past, a fiscal intermediary served as a primary third-party contractor administering Part A payments, and a different primary third-party contractor administered Part B payments. Since 2008, there has been a transition away from separate Part A and Part B contractors. Instead, there is a Medical Administrative Contractor that handles both Part A and Part B payments; this has been shown to improve efficiency of claims processing. Provider designation, responsibilities, and agreements. To be designated as a Medicare provider, a healthcare facility must first define the types of services being offered as a hospital, clinical laboratory, rural health clinic, skilled-nursing facility, or home health agency. Survey agencies in each state certify that each provider meets the statutory regulations governing the conditions of participation defined by the program (Table 5.21). The Medicare enrollment application may be completed using form CMS-855 or the Internet-based Provider Enrollment, Chain and Ownership System (PECOS). Both are available at http://www.cms.gov (accessed February 18, 2012). As participating suppliers, laboratories are required to accept the assigned Medicare fee schedule reimbursement as payment in full. The limiting charge covered by Section 1848(g) of the Social Security Act applies to claims submitted by nonparticipating physicians or suppliers who do not accept payment on an assignment-related basis for physician services. Hospital inpatient services: Medicare Part A. In general Medicare Part A covers the following services provided to qualified Medicare beneficiaries (QMB): • • • •

Services related to a hospital inpatient stay Services provided in a skilled-nursing facility Home health or hospice services End-stage renal disease services

Medicare excludes or does not cover long-term care and custodial care in a nursing or private home. Medicare payments for hospital inpatient stays are reimbursed using the diagnosis-related group (DRG), a prospective payment system. The Medicare Hospital Manual contains billing and coding guidelines for Medicare Part A. The Balanced Budget Act of 1997 included a provision to move skilled-nursing facilities’ Medicare payments for Part A and B services to a prospective payment system referred to as consolidated billing (28). In 2000 the Benefits Improvement and Protection Act (BIPA) limited the scope of consolidated billing to the services covered under Part A for skilled bed care, and the payment is referred to as resource utilization group. Three-day (72-hour window) rule. The CMS issued the final diagnosis-related group (DRG) 72-hour window rule in February 1998, which states that the hospital’s inpatient costs are reimbursed by Medicare Part A under the prospective payment system (PPS) that pays an established rate for all services during the stay including diagnostic testing. An institution’s billing service must ensure that claims are never submitted for any outpatient testing performed by the facility’s laboratory within three calendar days of a hospital admission if the services are furnished directly in connection with the admitting diagnosis and are covered by PPS payment (112). Separate payment is not allowed for: • Any nonphysician outpatient service rendered on the day of the admission or during the inpatient stay • Diagnostic services rendered up to 72 hours before the day of admission • Admission-related nondiagnostic services rendered up to 72 hours before the day of admission On June 25, 2010, President Obama signed the Preservation of Access to Care for Medicare Beneficiaries and Pension Relief Act of 2010, which contains a section to clarify the three-day rule. The three-day rule previously

Table 5.21 Medicare provider designation Provider designation

Certifying agency

Conditions of participation

Hospital

The Joint Commission American Osteopathic Association Det Norske Veritas Healthcare, Inc. 42 CFR. Part 482 Clinical Laboratory Improvement Act of 1988

Utilization review Staffing for psychiatric Adhere to HHS standards or higher

Clinical laboratory

Rural health clinic

Federally qualified healthcare center 42 CFR δ491

Skilled-nursing facility

42 U.S.C. δ1395I-3

CLIA certificate current and unrevoked No participation agreement needed Must accept assignment for negotiated Part B reimbursements Not physician directed Located in rural area Providers: participating or nonparticipating Participation agreement

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stated that hospitals must bill as part of an inpatient stay all diagnostic services provided within three days of admission, as well as all nondiagnostic services related to the inpatient admission. “Related” was defined by CMS as an exact diagnosis code match between the inpatient admission and the outpatient services. Because hospitals had struggled to correctly apply the rule in their billing operations, the statutory change requires that hospitals bill as part of the inpatient stay all nondiagnostic services provided on the day of admission as well as those in the three days prior to admission, unless they can demonstrate that the services are unrelated to the admission (http:// www.gpo.gov/fdsys/pkg/PLAW-111publ192/pdf/PLAW -111publ192.pdf, accessed March 1, 2012). Outpatient services: Medicare Part B. Medicare Part B covers physician and other outpatient healthcare services including: • Physician services and services incident to physician services • Ancillary services (clinical lab testing, home health services, rehab services, and ambulatory surgical services) Hospital-based laboratories that perform outpatient and nonpatient testing submit Medicare UB 92 claims as Part A reimbursement to the fiscal intermediary but actually receive payment based on the Medicare Part B fee schedule for the services. The Medicare Carrier’s Manual contains useful billing and coding guidelines for independent labs, group practices, and physician office laboratories for filling claims for Part B services. Medicare Part C is known as a Medicare Advantage Plan (HMO or PPO) and provides Part A (hospital insurance) and Part B (medical insurance) coverage. Medicare Advantage Plans may offer extra coverage, such as vision, hearing, dental, and/or health and wellness programs. Most include Medicare prescription drug coverage (Part D) (https:// www.medicare.gov/default.aspx, accessed July 11, 2012). Medicare Part D was created when the president signed the Medicare Prescription Drug, Improvement and Modernization Act (MMA) of 2003 into law on December 8, 2003. Title I of the MMA added sections that created the Medicare Prescription Drug Benefit (66). Outreach (nonpatient) testing. Hospital laboratories provide services to three different patient types: inpatients, outpatients, and nonpatients. Classification of a patient as a hospital inpatient is a straightforward process. The ability to differentiate between an outpatient and a nonpatient is more difficult but very important, since the applicable rules are not the same. The Medicare Intermediary Manual describes nonpatient testing as tissue or blood samples or specimens that are collected by personnel who are not

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employed by the hospital and sent to the hospital for testing. Sometimes laboratories are governed by hospital regulations, but there are also instances when the independent laboratory regulations apply. Tax-exempt hospitals are subject to taxation on their unrelated business income (UBI) for outreach testing activities, because outreach testing activities are not substantially related to the hospital’s tax-exempt purposes. UBI is subject to taxation at ordinary corporate rates, and the hospital should file 990-T forms with the IRS. UBI should include outreach testing income minus deductions for expenses directly associated with the program. When hospital employees are used for both patient and nonpatient testing, allocations between the two should be calculated on a reasonable basis. Hospital outreach programs must maintain and retain appropriate records to permit calculation of the outreach testing net contribution to income (74). Coordination of benefits and coordination of Medicare benefits. The Coordination of Benefits (COB and COMB) program is designed to ensure that a patient’s alternative healthcare benefits (workman’s compensation and automobile insurance) are identified before a claim is submitted to Medicare. The goal is to eliminate improper payments for services when Medicare should be the secondary rather than the primary payor. The CMS maintains a COB page (available at http://www.cms.hhs .gov/COBGeneralInformation, accessed March 1, 2012) to assist providers with their benefits coordination process. Medicare secondary payor status. Patient registration staff should be familiar with Coordination of Benefits and the organization’s process to establish Medicare secondary payor (MSP) status. In certain circumstances another third-party payor, not Medicare, may be the primary insurer for a claim. The claim should always be submitted to the primary payor first and then to Medicare. The MSP regulation requires an MSP questionnaire (http://www .cms.gov/Regulations-and-Guidance/Guidance/Manuals/ downloads/msp105c03.pdf, accessed July 3, 2012) to be completed to direct providers to other third-party payors first whenever they are primary to Medicare (140). Medicare is considered secondary in the following instances: • The beneficiary or the beneficiary’s spouse is gainfully employed. • The beneficiary is disabled and under age 65. • Automobile, no-fault medical, personal injury protection, or third-party liability is involved. • Pulmonary/respiratory illnesses are associated with mining, and benefits are covered by the Black Lung Program. • The beneficiary is entitled to veteran’s benefits.

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• The beneficiary’s injuries occurred on the job and are covered by workman’s compensation. • An individual entitled to Medicare on the basis of end-stage renal disease (ESRD) is covered under an employer group plan. MSP policies apply in cases where Medicare does not assume the primary obligation to pay for services, as the beneficiary may have other coverage. (MSP policies are available on the Centers for Medicare and Medicaid Services website at www.cms.gov/manuals/downloads/msp105c03.pdf [accessed April 4, 2012].) A major reason for Medicare claim denials nationwide is the inability to correctly verify a subscriber’s eligibility for coverage. CMS Program Memorandum Transmittal AB-00-36 assigns the responsibility for updating the common working files (CWF) and MSP database to a COB subcontractor (41). CWF editors should include prepayment edits, medical necessity edits, frequency limitations, and postpayment edits. The contractor will not process any claims or handle any mistaken payment recoveries or claim-specific inquiries (141). The CMS intends for the COB contractor to serve as an information-gathering entity to detect and prevent improper payments for MSP by ensuring that the CWFs are accurate and current.

Other Federally Funded Programs Medicare Advantage plans (Medicare Part C). Medicare Advantage plans are offered by private companies that contract with Medicare to provide both Part A and Part B benefits. The plans may take one of several different forms, including health maintenance organizations, preferred provider organizations, private fee-for-service plans, or special needs plans. Many Medicare Advantage plans include prescription drug coverage. The beneficiary and the plan share the expenses. The plan company must deliver the care at a cost below what it receives from Medicare and the beneficiary in order to make money. It seeks to do this by managing the care more closely than possible through traditional Medicare. Medicaid (Title XIX). Medicaid is a jointly administered program that is funded by both federal and state government and provides health insurance for certain low-income and needy people. There are approximately 62 million enrollees including children, the aged, blind, and/or disabled, and people who are eligible to receive federally assisted income maintenance payments (http://www.census.gov/compendia/ statab/2012/tables/12s0152.pdf [accessed June 18, 2013]). TRICARE. Formerly known as the Civilian Health and Medical Program of the Uniformed Services, or CHAMPUS, TRICARE provides medical and dental care for members and former members of the uniformed services

and their dependents. It is administered by the TRICARE Management System within the Department of Defense Military Health System. Only authorized providers may participate, and they must agree to accept the TRICARE allowable fee as payment in full. Participating institutions must file claims with the third-party administrator on behalf of the beneficiary. Railroad Retirement Act. The Railroad Retirement Act is a federal insurance program similar to Social Security designed for workers in the railroad industry. The provisions of the Railroad Retirement Act provide for a system of coordination and financial interchange between the Railroad Retirement program and the Social Security program.

National Coverage Determination and Local Medical Review Policies Balanced Budget Act of 1997. The Balanced Budget Act of 1997 mandated the use of a negotiated rule-making committee to develop national coverage and administrative policies for clinical diagnostic laboratory services payable under Medicare Part B by January 1, 1999. The bill included provisions for numerous healthcare issues, such as civil penalties for fraud and abuse, anti-kickback violations, guidelines for exclusion from the Medicare program, diagnostic information on medical necessity, coverage for additional screening tests, and prospective payment of Part B services to patients in a skilled bed in a nursing facility. The provision required that national coverage policies promote program integrity and national uniformity and simplify administrative requirements for clinical diagnostic laboratory services. NCDs. The National Coverage Determinations (NCDs) are the national policies that establish whether Medicare will cover or not cover certain healthcare services, procedures, or technologies. The CMS tracks emerging technologies and patterns of care to determine the application of an NCD and the need for policy change. When an NCD does not specifically exclude an indication or circumstance and does not specify an item or service in an NCD or a Medicare Manual, Medicare contractors are then responsible for making the coverage decision and publishing and updating the local medical review policies (LMRPs) on a monthly basis. The final rule, published in the Federal Register on November 23, 2001 (48), included 23 coverage determinations as listed below. (More details may be obtained from the publication “Medicare National Coverage Determinations: Clinical Diagnostic Laboratory Services,” available on the CMS website located at http://www.cms.gov [accessed February 18, 2012].) • Culture, bacterial (urine) • Human immunodeficiency virus testing (prognosis including monitoring)

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• • • • • • • • • • • • • • • • • • • • • • • • • •

Human immunodeficiency virus testing (diagnosis) Blood counts Partial thromboplastin time Prothrombin time Serum iron studies Collagen crosslinks (any method) Blood glucose testing Glycated hemoglobin or glycated protein Thyroid testing Lipids Digoxin therapeutic drug assay Alpha-fetoprotein Carcinoembryonic antigen Human chorionic gonadotropin Tumor antigen by immunoassay (CA125) Tumor antigen by immunoassay (CA 15-3 and CA 27.29) Tumor antigen by immunoassay (CA 19-9) Prostate specific antigen Gamma glutamyl transferase Hepatitis panel (acute hepatitis panel) Fecal occult blood Cytogenetic studies Diagnostic pap smears Histocompatibility testing Blood platelet transfusions Blood transfusions

Each NCD follows a uniform format that includes policy name, policy number, reason, policy type, bill type, revenue code, a narrative description of the tests, clinical indications for their use, coverage limitations, HCPCS code, a list of related ICD-9 codes covered by Medicare, a list of ICD codes that will be denied by Medicare, a list of codes that are not generally covered unless certain exceptions are met, national policy, reasons for denial, sources of information, documentation requirements, revision history, and effective dates. The policies include frequency limitations for tests for which Medicare restricts coverage to a specific number of times per year. In some geographic regions, the NCD policies replace the LMRPs. In states where no policies exist, the NCDs become new restrictions (81). Local carriers and fiscal intermediaries can supplement the NCDs with additional requirements before communicating the LMRPs to providers in the form of bulletins, determine eligibility for coverage and reimbursement allowances for services, pay claims, audit, and determine appeals from providers.

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Medicare requires that providers retain the bulletins a minimum of five years. Medicaid differs from Medicare in that the program is administered jointly by both federal and state agencies. The reader may want to refer to the CMS Medicare Coverage Database site at http://cms.gov/ medicare-coverage-database/overview-and-quick-search .aspx (accessed February 28, 2012) for review of all LMRP policies by contractor for a specific area.

Reimbursement Methods Reimbursement is generally driven by the types of service rendered to a beneficiary and the location in which the service is rendered. Additional information is available in the Outpatient Prospective Payment System (OPPS) patient booklet (located at http://www.medicare.gov [accessed February 28, 2012]). Prospective payment system for outpatient services. Congress directed HCFA to develop a prospective payment system (PPS) for hospital outpatient services in the Omnibus Reconciliation Act (OBRA) of 1986. The Balanced Budget Act established an implementation date of January 2000. Under PPS, hospital services other than those covered under a fee schedule would be included. Excluded services include laboratory, ambulance, occupational therapy, physical therapy, and speech pathology. Ambulatory payment classifications. In July 2000 Medicare introduced a new prospective payment system for outpatient services. The CMS originally proposed an ambulatory payment group (APG) after a study done in 1995. The APGs were mandated by the 1997 Balanced Budget Act. In 2002 the terminology changed to ambulatory payment classifications (APCs) (38, 39). Under the APCs, there are 451 groups defined by clinical relevance and resource usage (40). In contrast to the Part A diagnosisrelated group approach, which covers a patient’s entire inpatient hospital stay, multiple APCs may be assigned to a single encounter. The payment rate for the APC is predetermined and is equal to a national conversion rate multiplied by an APC-specific weight and adjusted for local area wage differences. The APC system ensures payment predictability and provides an incentive for efficiency. Clinical laboratory services are excluded from the outpatient PPS and are paid from the Part B clinical laboratory fee schedule (15). End-stage renal disease (ESRD). ESRD facilities provide services to Medicare beneficiaries who have permanent kidney dysfunction and require dialysis treatment. The facilities have strict medical necessity guidelines and utilization criteria. • Medicare composite payment or rate. Reimbursement for physician, supervisory, and direct care services that

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BASIC CONCEPTS AND THE CURRENT HEALTHCARE ENVIRONMENT

are routinely rendered in relation to outpatient dialysis (including hemodialysis, continuous ambulatory peritoneal dialysis, continuous cycling peritoneal dialysis, intermittent peritoneal dialysis, or hemofiltration). The costs of certain ESRD laboratory services are included in the composite rate. The three major risks associated with billing for tests included in the composite rate are duplicate billing, failure to document medical necessity for tests not included in the composite rate, and failure to comply with the 50/50 Medicare Composite Payment rule (103). • The Medicare Composite Payment 50/50 rule limits when a multichannel chemistry panel can be included in the composite rate. If 50% or more of the covered tests are included under the composite rate, then the entire panel is to be part of the composite rate paid to the facility, and the lab cannot bill for the additional testing separately. On the other hand, if more than 50% of the automated tests are not in the composite rate, then the testing laboratory may bill the entire panel directly to Medicare. Laboratories can expect increased scrutiny by the OIG for ESRD claims (93). • Medicare fee schedule. Laboratory testing not included in the composite rate is subject to medical necessity guidelines and is reimbursed under the Medicare fee schedule when appropriate (17). Hospice benefits are optional to Medicare beneficiaries whose terminal illness prognosis is less than six months. Payment for treatment and management services is made under the benefit, and all other Part B claims except the professional fees of the attending physician are waived. Medicare direct billing rules. Medicare pays only the healthcare entity that actually performed or supervised a clinical laboratory test. The exceptions are: • Laboratory-to-laboratory referrals if the laboratory billing for the service performs at least 70% of the total tests billed within the laboratory • Laboratory-to-laboratory referrals if the laboratory performing the test is commonly owned by the laboratory billing for the test • Tests provided under an arrangement with a hospital, critical-care facility, or skilled-nursing facility Competitive Bidding Demonstration Project. In 1985 Health and Human Services issued a request for proposals to establish demonstration projects for the provision of clinical laboratory services for Medicare beneficiaries on a competitive bidding basis. The Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) prohibited HHS from conducting the project until after 1987. Competitive bidding is a method for setting the price of healthcare services through a bidding process to establish

payment rates on the lowest price submitted by providers. Although the Balanced Budget Act of 1997 removed the prohibition, the demonstration project remains stalled due to the enormous complexity of the endeavor. The Medicare fee schedule and the system’s payment problems are subject to application of different standards in each of the carrier jurisdictions. Competitive bidding would further complicate the system for laboratories that refer tests between jurisdictions while increasing the costs of processing claims. Restricting the ability of physicians to choose the laboratory believed to best serve the needs of their Medicare patients might create access problems. Allowing only a few select providers might create government-sanctioned monopolies that force necessary providers out of business (43). The Medicare Improvement for Patients and Providers Act of 2008 repealed the Competitive Bidding Project.

Code of Medical Necessity (Reasonable and Necessary Services) Medical necessity regulation first originated in the Social Security Act. A test must meet the following criteria to be considered medically necessary. • The ordered test must be consistent with the signs, symptoms, or diagnosis of the injury or illness being treated and be appropriately documented, both on the test requisition and in the patient’s medical record. Medicare does not pay for tests where documentation in the medical record does not support medical necessity requirements. • The test must be necessary and consistent with the generally accepted professional medical standards of practice (not investigational or experimental). • The test must not be ordered for the convenience of the patient or the physician. Medicare generally does not cover routine screening tests even when the healthcare provider ordering the tests considers it to be appropriate for the beneficiary. • The test must be provided safely and effectively at the appropriate level. Medicare only reimburses for tests that meet the Medicare coverage criteria and are deemed reasonable and necessary to treat or diagnose an individual patient. The intent of the guidelines was to encourage partnerships between third-party contractors, physicians, and providers in providing appropriate care to patients. The Carrier Advisory Committee was formed to educate and train physicians after analyzing patterns of practice rather than denying claims. Advance beneficiary notice (ABN). The Medicare program’s purpose for the ABN is to ensure that all Medicare beneficiaries are informed in writing prior to receiving a service or procedure that may not be a covered benefit. The

CHAPTER 5. THE IMPACT OF REGULATORY REQUIREMENTS

ABN serves as a waiver of liability and is intended to assist the patient in making a decision to receive a service and to agree to accept financial responsibility if the claim is not covered. The use of an ABN should be limited to individual instances where the provider feels there is reason to believe reimbursement will be denied. In designing a facility ABN notice, the correct language to satisfy the CMS requirements is “Medicare will pay only for items and services it determines to be reasonable and necessary.” Non-covered services include routine physical exams, screening tests, cosmetic surgery, and experimental or investigational services. The Balanced Budget Act of 1997 made it a requirement that physicians provide specific diagnostic information when ordering tests for which reimbursement from the Medicare program will be sought. Failure to comply with the medical necessity regulations could result in the government filing false claims charges for performing unnecessary tests or services. Tests ordered and performed at a greater frequency than those allowed must have medical necessity documentation. In March 2008 the CMS implemented the use of a revised Advance Beneficiary Notice of Non-coverage (CMS-R-131-L). The form replaced the General Use ABN (CMS-R-131-G) and the Lab ABN (CMS-R-131-L) for physician-ordered laboratory tests. The form is posted on the Beneficiary Notice Initiative web page (www.cms .hhs.gov/bni, accessed February 28, 2012). Authorized representative. The ABN instructions define an authorized representative as a person who does not have a conflict of interest with the beneficiary when the beneficiary is temporarily or permanently unable to act for him or herself. The representative acts on the beneficiary’s behalf, in his or her best interest. This definition differs from the rules on who may sign when the beneficiary is incapable. The following individuals may qualify to serve as an authorized representative: • A person authorized under state law to make healthcare decisions or exercise power of attorney • A legal spouse, adult child, parent, adult sibling, or close friend • A disinterested third party or public appointed guardian Although the instruction does not define the method of determination of conflict of interest, it does state that an employee of a healthcare provider or supplier of service may have a conflict and therefore be precluded from serving in this capacity (138). Medical necessity guide. Laboratories that develop a medical necessity guide for use by providers and clients who order tests governed by a national coverage determination or a local medical review policy must avoid code steering, the appearance that the laboratory is directing or steering

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the healthcare provider to select a code that will make the claim payable, rather than assigning or selecting the code based on the patient’s medical condition. The code choice should always be made before payment issues are considered and should be appropriately documented in the patient’s chart (medical record) and the test requisition (142). Standing orders. A standing order is valid for a limited time as long as it meets medical necessity guidelines. Regulations require the following criteria for the use of standing orders for any patient type in any type of facility: • A healthcare provider placed the order. • The order was specific to the patient and met medical necessity guidelines. • An ABN should be executed for screening or a noncovered service. • The order must have a start date and indicate the period of time for the standing order (20% (New York, Hawaii, and Alaska) (New York, Hawaii, Alaska, and Michigan in 2002). The largest numbers of union members live in California (2.5 million) (2.7 million in 2002), New York (1.8 million) (2 million in 2002), and Illinois (800,000) (1.1 million in 2002).

•

• •

•

• •

a

From reference 3.

397

• • • •

a

From reference 2.

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step; employees may ask for assistance from the steward at this beginning step in the process. The Supreme Court has ruled that a member of the bargaining unit has a right to union representation during a management interview if the employee feels that disciplinary action might result from the interview (9).

Unionization Process Individual, Group, and Union Image: Reasons Why Employees Join a Union Although there may be a number of reasons why employees decide to join unions, generally these reasons can be categorized as (i) personal, (ii) related to the social environment, and (iii) the image of the union. Table 19.8 shows a combination of these factors. One of the main considerations against unionization has been the perception that professionals don’t equate being concerned about socioeconomic issues with unionization. However, some groups of professionals have moved beyond this perceived barrier to unionization and are willing to consider collective bargaining as just another component of their “professional activities.” In some cases, unions have or have considered establishing a separate professional division within their union in an attempt to make unionization a more attractive alternative. Another approach is to limit the bargaining unit to professional employees, thus fostering the idea that the union and professionals are not incompatible. Relevance for Healthcare Workers For many years, healthcare professionals as a group have been somewhat skeptical and apprehensive about unionization; many always assumed that they would never need to join a union. As professionals, they felt that their concerns could be taken directly to management and that they would always have a fair hearing and reasonable outcomes. Employees may question the need for a union if the institution uses a fair system for work assignments, raises, promotions, and corrective action policies and has an appropriate policy for handling employee grievances.

However, over the years some of these perceptions have changed, and many healthcare employees are now represented by unions. Often, just the potential of a union entering a healthcare institution may stimulate management to improve salaries and benefits. Generally, if both management and unions are well informed, approach the organizing campaign within specific guidelines, maintain professional attitudes, and express appropriate behavior, the outcome of an election may be acceptable to both parties, even if the union receives the required number of “yes” votes. Unfortunately, when either management or the union fails to “play by the rules,” the outcome can lead to chaos, inappropriate behavior, anger, and feelings of betrayal and mistrust. How the organizing campaign is handled will impact relations with employees for years to come, regardless of the outcome. Professional workers are confronting increasing challenges to their careers, brought about by rapidly changing technology, the turbulent world economy, and new work methods. Like so many other workers, professionals are forming unions to enhance their professional autonomy, to be involved in making the decisions that affect their careers, and for greater professional and personal security. Current information on unions and professionals includes the following (www.bls.gov/ooh/about/projections-overview.htm, accessed April 25, 2013; www.bls.gov/news.release/union2 .t03.htm, accessed April 25, 2013): • In 2011, 13.0% of healthcare practitioners belonged to unions, while in 2012, the number declined to 12.5%. Of those represented by unions, the percentages were 14.7% in 2011 and 14% in 2012. • Employment in the professional and technical occupations is growing faster and adding more workers than any other major occupational group. While total U.S. employment is projected to increase by 20.5 million jobs from 2010 to 2020, industries and occupations related to healthcare, personal care and social assistance, and construction are projected to have the fastest job growth.

Table 19.8 Reasons why employees decide to seek union representation Personal reasons

Social environment

Image of the union

Individual Economic benefits (salary, fringe benefits) Job security Fairness in job conflict resolution Group Unity and togetherness Advancement of profession

Family tradition and history Work-category tradition and history Unionization within the organization and/or community Unionization within the profession, pros/cons Based on work group union membership, pressure to conform to the group

Success in bargaining Ability to represent workers Goals consistent with individual goals Ability to support and advance the profession Professional in their approach to labor relations Reasonable dues No evidence of violence

CHAPTER 19. LABOR RELATIONS

• The healthcare and social assistance industry is projected to create about 28% of all new jobs created in the U.S. economy from 2010 to 2020. This industry— which includes public and private hospitals, nursing and residential care facilities, and individual and family services—is expected to grow by 33%, or 5.7 million new jobs. Employment growth will be driven by an aging population and longer life expectancies, as well as new treatments and technologies. • Employment in computer systems design and related services is expected to increase by 47%, driven by growing demand for sophisticated computer network and mobile technologies. • Computer and information technology occupations are projected to grow by 22%, adding 758,800 new jobs from 2010 to 2020. Demand for workers in these occupations will be driven by the continuing need for businesses, government agencies, and other organizations to adopt and utilize the latest technologies. Workers in these occupations will be needed to develop software, increase cybersecurity, and update existing network infrastructure.

Organizing Campaign The first step in the process of gaining union representation is the organizing campaign. Situations may exist where the employees contact a union representative to initiate a discussion regarding union representation. However, union representatives may initiate the contact to determine whether employees want to pursue discussions about possible unionization. Employees’ right to seek or aid unionization or to refrain from such activities is guaranteed by the National Labor Relations Act. There may be more than one union involved in an organizing campaign, competing for the employees’ interest and eventual votes for union representation.

Authorization Cards It is highly unlikely that management will voluntarily recognize employees’ wishes to be represented by a union for the purposes of collective bargaining. The union must follow set procedures to demonstrate employee interest, leading to an election for union representation. The union will ask employees to sign authorization cards; such cards state that the employee wishes to be represented for purposes of collective bargaining by the union named on the cards. The union must have 30% of the employees sign authorization cards before the NLRB will honor a petition for a union-representation election. The union must specify in its petition exactly which occupational groups it seeks to represent; this specification begins the process of defining the bargaining unit.

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The Bargaining Unit Final responsibility for determining the job categories within a bargaining unit resides with the NLRB; often the employer may challenge the union’s proposed bargaining unit. Generally, the employer will want to include occupational groups perceived to be unfavorable toward unionization or may want the bargaining unit decreased to eliminate groups perceived to be in favor of unionization. Key factors considered by the NLRB include (i) the history of bargaining within the industry and occupational groups under consideration, (ii) the community of interest among employees and common supervision, and (iii) the wishes of the employees. Certainly, they will also consider the pros and cons of inclusion and exclusion of various groups as requested by the union and the employer. In general, the NLRB will allow up to six different bargaining units in a healthcare institution: physicians, registered nurses, other professional employees, technical employees, service and maintenance employees, and business office clerical employees. However, recognition of these bargaining units does not mean the NLRB is forced to maintain these categories; several groups can also be combined into a single bargaining unit. Information Distribution and Solicitation Information distribution generally refers to distribution of printed materials to employees, in which the content is informational only. Solicitation is directed to a specific individual, with the intent to elicit a specific response from that individual; an excellent example is the request for an employee to sign and return an authorization card. There are very specific rules that govern these activities, both for the union and for the employer. Table 19.9 shows several Table 19.9 Rulings regarding information distribution and solici-

tation in the hospital setting Union

Union Employer

Employer

Employer

Distribution and solicitation by an employee (prounion) are allowed during nonworking time in nonworking areas of other nonworking employees on the premises other than patient care areas (patient rooms, operating rooms, treatment rooms). Solicitation is banned in sitting rooms and corridors adjoining or accessible to patient rooms; crowding issues. Cannot ban solicitation in the cafeteria, gift shop, and lobbies on the first floor of the institution; however, employer need only show that solicitation is likely to disrupt patient care or disturb patients in order to enforce a ban on solicitation in non–patient care areas. May allow solicitation in “normal gathering places” for employees, but ban it in certain areas such as lobbies and gift shops. If management insists on a very broad “no solicitation rule,” it is important that supervisors and managers realize this approach may be found to be invalid if challenged by the union.

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specific examples. It is important that a proper balance be achieved between the rights of the employees and the rights of management to guarantee safe and efficient patient care.

Election Once at least 30% of the employees in a proposed bargaining unit have signed and turned in authorization cards, the union may petition the NLRB for a representation election. Certainly the union would prefer a showing of much more than 30%, particularly since there is a time lag between the submission of the petition for election and the election itself. During this interim, management will campaign vigorously to counteract the union’s position and will try to change employees’ minds regarding the necessity for unionization. Therefore, some employees may change their minds during this time lag between petition submission and the actual election. The NLRB, or in the case of federal workers the Federal Labor Relations Authority, reviews the petition and makes a number of determinations directly related to approval or rejection of the election proposal (Table 19.10). If there are no reasons to preclude the election, and the bargaining unit is appropriate, agreement is sought regarding a “consent” election; there are two types of agreements to consent elections. The first consent-election agreement provides for an election over which final authority regarding disputes with the NLRB itself resides with the regional director. The second type of agreement, termed stipulation for certification, provides for an election over which the final authority regarding disputes resides with the NLRB itself. If either the employer or the union(s), or both, fail to agree to a consent election, a formal hearing occurs before a hearing officer appointed by the regional director. Employees, the employer, the union, or any of their representatives may appear at the hearing and may testify and introduce additional evidence. These issues must be relevant to representation and may include jurisdiction of the NLRA over the employer and the occupational makeup of

Table 19.10 NLRB determinations regarding acceptance or rejec-

tion of union election petition 1. Confirm whether there are any statutory or policy reasons that would preclude an election. a. Participation in interstate commerce b. Large enough in size to quality; use of dollar volume amount 2. Determine whether the bargaining unit is an appropriate unit. 3. If there are no reasons to preclude the election and the bargaining unit is appropriate, agreement is sought regarding “consent” election. a. Consent-election agreement provides for an election; final authority over disputes with the NLRB itself resides with the regional director. b. Stipulation for certification provides for an election: final authority over disputes resides with the NLRB itself.

the bargaining unit. Although the regional director makes the decision, either ordering the election to occur or dismissing the petition, a party may appeal the decision to the NLRB. If all parties agree to the consent election based on the filing of the petition, the date is set, and the election normally occurs 60 days after the union files the petition. However, if the parties do not agree and the hearing process is instituted, the election normally occurs between 25 and 30 days following the final decision. Employees who have been confirmed as being in the bargaining unit at the end of the payroll period immediately preceding the date of the election are eligible to vote. The employer must provide the NLRB and the union a list of names and home addresses of eligible employees within seven days after the final decision on the consent election. The election is held at a place and time that is designed to provide maximum participation for all bargaining unit employees to vote for or against union representation; mail ballots may also be used in the election process. The election is by secret ballot, and the union must have a simple majority of the votes cast to win and to be certified by the NLRB as the bargaining representative. All relevant parties may have observers at the polls; an NLRB agent supervises the observers to ensure appropriate behavior during the election process. Ballots may be challenged, and these ballots are impounded. If the number of impounded ballots would make a difference in the election outcome, the regional office investigates these ballots and makes a decision regarding whether or not they will be counted. If the number of impounded ballots will not impact the election outcome, they are not counted. Depending on the ballot count, there may need to be a runoff election; this occurs if more than one union is involved in the election process and there is no majority vote for one union or for no representation.

Certification If union representation is rejected, another election within that bargaining unit cannot be held for 12 months. If a union wins the election, the NLRB issues a certification of representative confirming the union’s status as the exclusive bargaining representative for a period of one year after the date of certification. During this one-year period, the employer is required to bargain with the certified union. It is important to remember that although the bargaining unit may be composed of union members and those who choose not to join the union, a negotiated collective bargaining agreement applies to all those within the bargaining unit. All members of the bargaining unit are subject to the contract terms and provisions. Because compulsory union membership is prohibited but all members of the bargaining unit benefit from union representation, some states allow the union to collect some portion

CHAPTER 19. LABOR RELATIONS

Informal Organization

Based on perceived inequities by employees.

Authorization Cards

Signed by a “representative group” (minimum of 30% of persons from a bargaining unit).

National Labor Relations Board

401

• Determines whether a minimum of 30% of persons have signed authorization cards. • Determines whether the institution fits within NLRB jurisdiction. • Holds hearing to determine those eligible to vote in the election. • Sets date of election.

Solicitation and Distribution of Information from both Union(s) and Management

Election: Decided by majority of the votes cast

Union A, 50 votes No union, 49 votes

Union must receive a majority (50% + 1) of the votes cast.

Union A, 43 votes Union B, 52 votes No union, 72 votes

( Union wins and represents all persons within the bargaining unit, whether those persons voted or not )

Union A, 82 votes Union B, 63 votes No union, 52 votes

( A runoff election would be conducted between Union B and No Union since none of the three ballot choices received a majority of the votes cast )

( A runoff election would be conducted between Union A and Union B since none of the three ballot choices received a majority of the votes cast )

Union A, 50 votes No union, 50 votes

( Tie: No Union )

Figure 19.2 Union organizing campaign from first inquiries to election results. doi:10.1128/9781555817282.ch19.f 2

of the monthly union dues from nonunion members of the bargaining unit. A review of the organizing, election, and certification phases of the process can be seen in Fig. 19.2.

Collective Bargaining After a bargaining unit selects a particular union as its representative, both the employer and the union must bargain in good faith. This negotiating process addresses many issues, such as (i) establishing work rules, (ii) selecting the form and mix of employee compensation, (iii) providing uniformity among competitors, and (iv) setting priorities for both labor and management.

Issues for Bargaining There are three basic categories of bargaining subjects: mandatory, permissive, and illegal and prohibited (3). Mandatory subjects include wages, hours, and other terms

and conditions of employment. Permissive subjects are bargained only if both parties voluntarily agree to do so. However, neither party may refuse to bargain on mandatory subjects to force bargaining on permissive subjects. Illegal or prohibited subjects include those that would cause one or both parties to violate federal or state law, such as (i) bargaining for a closed shop, (ii) bargaining for a contract clause under which union members could refuse to work with nonunion goods and materials, and (iii) bargaining for contract language that would permit discrimination as defined by the Civil Rights Act. Attempts to negotiate these illegal subjects would constitute an unfair labor practice (ULP). Other ULPs associated with the bargaining process include (i) refusing to bargain collectively, (ii) failing to offer meaningful counterproposals, (iii) refusing to discuss economic terms until noneconomic issues are resolved, and (iv) attempting to delay meetings or move meeting sites. Although the NLRB cannot force an agreement

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between the parties, as a remedy for an unfair labor practice, the Board can order them to bargain or may order a cease and desist order to refrain from bad faith bargaining. With the current changes in healthcare reform (Patient Protection and Affordable Care Act, passed in 2010) becoming more of an issue, the union can demand to bargain over the implementation of reforms, which definitely include health benefits. They can bargain for improvement of the minimum requirements of the new law; however, the employer does not have to agree. Although the parties may not reach agreement on proposed changes, the employer must implement the terms of the new law. The union can also bargain over the pros and cons of implementation, rather than allowing the employer to unilaterally implement the new law (www.cwa-union.org/issues/ entry/c/health-care, accessed April 25, 2013).

Preparation Phase The union and the employer begin the process by selecting negotiating teams. The union team is often led by a fulltime paid official, while the management team is led by industrial relations managers and key department managers. Both parties may also include attorneys experienced in labor law and contract negotiations. Depending on the size and complexity of the bargaining units and relevant issues, preparations by both negotiating teams may begin several months prior to actual negotiations or may begin as long as a year prior to initiation of the bargaining process. Negotiation Phase Table 19.11 shows a representative list of bargaining subjects. It is important to remember that almost any topic falling within the context of wages, hours of work, and other terms and conditions of employment is a mandatory bargaining subject. Some issues may be bargained to the point of impasse but not lead to a work stoppage if the union feels they are not issues about which members feel strongly. In these situations, the final contract between the union and the employer would just eliminate wording about these particular issues. Some contracts allow either party to reopen negotiations on any section of the contract by giving the other party a notice of such interest. A change may also be accomplished by amending the contract through a letter of agreement covering a specific issue. Administration of the Agreement Unfortunately, there is no such thing as a “perfect” contract. The negotiating teams cannot envision all the potential problems that could arise during the time span of the contract. Different people will interpret the contract differently, especially depending on healthcare environmental changes, economic conditions, and a number of other potential changes. If the union, the employer, or an employee believes that the collective bargaining agreement has been

Table 19.11 Representative topics for contract negotiations Recognition and representation Membership requirements Wage rates (including cost-of-living clause) Hours and overtime Flextime options, including four days on, four days off, etc. Shift differentials Seniority Vacations Personal leave and provisions for time off Holiday, overtime, on-call, “incentive,” and merit pay Lunch and rest periods Employee benefits (e.g., insurance, pensions) Safety and health Grievance procedure Corrective action and discharge procedure Strikes and lockouts Effect of agreement and amendments Use of bulletin boards Management rights Union security clause Dues “checkoff ” clause Terms of the contract

violated, the process for handling such disagreements is contract administration, which uses the agreement’s grievance procedure, which likely contains arbitration as the final step. The purpose of such a process is to provide a mechanism for handling day-to-day differences among the union, management, and employees. The grievance procedure includes a series of steps through which the complaint may move toward resolution. The initial step usually includes a verbal discussion with the opposite party. Each step contains time limits for the appeal and response after the preliminary discussions. Each step in the process also includes the addition of higher levels of decision makers. If resolution is not obtained, most collective bargaining agreements provide that either the union or the employer, but not an aggrieved employee, may appeal to arbitration; usually 60 to 120 days elapse before a grievance reaches arbitration. During arbitration, a neutral third party, or arbitrator, hears the facts and each party’s position. The arbitrator then renders a final and binding decision. These arbitrators are selected and agreed upon by both parties prior to the beginning of the arbitration process. The arbitration hearing is similar to a court hearing; witnesses are called and subjected to cross-examination, exhibits are introduced, and the opposing parties present opening and closing arguments. However, there is no jury. Although a single individual conducts most arbitration hearings, an arbitration panel may be used.

CHAPTER 19. LABOR RELATIONS

Management Rights Clause Although the length of this clause in the contract may vary from several paragraphs to several pages, the management rights clause generally states that management has the sole right and prerogative to unilaterally make decisions concerning the operation of the institution except as it may be limited by the contract (10). These rights include the right to hire, fire, suspend, and discharge for just cause; to temporarily assign, promote, or discharge employees according to the needs of the business; to determine the methods of work; and other items. The inclusion of the management rights clause can often eliminate prolonged disagreement over many issues, one of which is the right to suspend and discharge employees for just cause. These policies must be clearly defined and consistently used. Often the union may challenge a suspension or discharge for lack of just cause. The arbitrator may reinstate an employee who has been improperly terminated. The arbitrator may also decide on remedial action, such as full pay for all time lost and restoration of all benefits that resulted from improper discharge. Due to the potential for lengthy remediation of such issues, many contracts include provisions for an expedited grievance procedure, thus limiting the potential for substantial remedial legal liability.

Summary Contemporary labor law attempts to balance two goals: the encouragement of stability through collective bargaining and reasonable dispute settlement and the balance of bargaining power between employees and management. In the past few years, the field of labor relations has become more relevant to the healthcare industry. Therefore, it is critical that all levels of management personnel recognize the importance of understanding labor relations, both as a general concept and as a complex process with many parts. Also, all of the systems inherent in labor relations must be seen as dynamic, changing entities, primarily based on changes in the laws themselves, changes in the regulations, decisions of agencies participating in the administration of the laws, and the decisions of the federal and state courts. Through the years a number of changes have been proposed regarding the NLRB’s regulations. However, each proposed change has been carefully reviewed for its impact on the balance of power between employees and employers. KEY POINTS Labor laws are relevant for different groups of employees and employers. ■ Specific legal entities support, guide, and confirm appropriate behavior by unions, employers, and employees. ■

■

■

■

■

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The unionization process is very clearly defined, with specific actions that can and cannot be taken by all parties involved. The organizing campaign, election, and certification form a step-by-step process through which a union may or may not be voted in as the exclusive representative of a particular bargaining unit. Collective bargaining is comprised of mandatory, permissive, and illegal topics for negotiation. Although some contracts are very detailed and inclusive, there is no such thing as the “perfect” contract. Therefore, the ability to administer the contract specifications can require a day-to-day working knowledge of the contract and its use.

GLOSSARY Administrative law judge The National Labor Relations Board (NLRB) has a corps of judges who conduct hearings at which the parties present evidence. These judges work for the NLRB. Decisions of administrative law judges can be appealed to the fivemember Board in Washington, DC. AFL-CIO American Federation of Labor–Congress of Industrial Organizations; voluntary federation of unions that provides education, lobbying, public relations, and consultation services for unions; currently has 65 member unions covering more than 13 million employees. Agency shop Requires nonunion members of the bargaining unit to pay a “collective bargaining service fee” to the union; however, the person is not required to join the union; other terms are collective bargaining service fees and fair-share arrangements. Ally doctrine Acceptance of work normally performed by striking employees of a struck employer by a neutral employer; thus the neutral employer becomes an “ally” of the struck employer; the neutral or ally employer may be legally picketed by the striking employees of another employer; the ally doctrine does not apply in healthcare settings (example: hospital). Arbitration A process during which a neutral third party decides the outcome of a dispute between labor and management, typically regarding a collective bargaining agreement. The arbiter then issues a decision, which is binding on the parties. Authorization card A card that authorizes the union to represent the employee during the collective bargaining process once the card is signed by the employee. Authorization card, required percentage The union must obtain authorization cards from at least 30% of the employees in a bargaining unit as proof of “employee interest” before the NLRB will allow an election for union representation. Bargaining topics Include wages, hours, and conditions of employment; neither labor nor management can refuse to bargain on these issues.

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Bargaining unit A group of employees (approved by the NLRB) that share a community of interest and can vote in a union representation election; they will be the group represented by the union and are covered by the terms of the collective bargaining agreement if the union wins the election and negotiates a contract with the employer. Bargaining unit, employees Usually composed of a family of closely associated jobs.

Good faith bargaining To bargain collectively is the performance of the mutual obligation of the employer and the representative of the employees to meet at reasonable times and confer in good faith with respect to wages, hours, and other terms and conditions of employment, or the negotiation of an agreement or any question arising thereunder, and the execution of a written contract incorporating any agreement reached if requested by either party, but such obligation does not compel either party to agree to a proposal or require the making of a concession.

Certification election Conducted by the NLRB to determine whether employees do or do not want to be represented by the union that wants to represent them.

Grievance Allegation, typically by a union or bargaining unit employee, that the employer has acted improperly, usually by violating provision(s) of the collective bargaining agreement.

Certified union Has the exclusive right to bargain on behalf of the employees it represents; individual employees within the represented group are not allowed to enter into separate agreements with the employer.

Impasse A deadlock in negotiating between management and union over terms and conditions of employment. According to the NLRB, whether an impasse in bargaining exists “is a matter of judgment” and depends on such factors as “bargaining history, the good faith of the parties in negotiations, the length of the negotiations, the importance of the issue or issues as to which there is disagreement, the contemporaneous understanding of the parties as to the state of negotiations.”

Charge An allegation made by an individual, employer, or labor organization of an unfair labor practice (ULP) under the National Labor Relations Act (NLRA); charges are filed at the NLRB’s regional offices. Closed shop Illegal; an employment site where all employees must join the union prior to employment. Collective bargaining Contract negotiations between union and employer; mandatory topics include wages, hours, and conditions of employment. Collective bargaining is governed by federal and state statutory laws, administrative agency regulations, and judicial decisions; in areas where federal and state law overlap, state laws are preempted. Complaint After investigating a ULP charge, if the regional office finds merit and no settlement is reached, the regional director of the NLRB issues a complaint in the name of the Board stating the unfair labor practices and containing a notice of hearing before an administrative law judge. The complaint does not constitute a finding of wrongdoing but raises issues to be decided by the judge. Decertification An election in which bargaining-unit employees vote to rescind the union’s certification as their representative. Decertification requirement Petition for decertification election requires a minimum of 30% of the employees within the bargaining unit. Dues Paid by the union members, usually on a monthly basis; with employee-signed authorization, can be paid through automatic payroll deduction. Election (NLRB) Election process for union representation with a secret-ballot election at the work site, including voting booths and ballot boxes; overseen by an NLRB agent in a space where the employee and union are not present during the balloting process. Feather-bedding Union having employees paid for work not actually performed. Full-time workers Workers who usually work 35 hours or more per week at their sole or main job.

Labor laws, agency: • 1936: National Labor Relations Act (Wagner Act) Federal law passed in 1935; gives employees the right to organize, select their representative(s), and bargain with the employer regarding wages, hours, and working conditions; established the authority of the NLRB. • 1938 Fair Labor Standards Act (Black Act) Federal law passed in 1938 that establishes minimum wage, overtime pay, record keeping, and youth employment standards affecting employees in the private sector and in federal, state, and local governments. • 1947: Labor-Management Relations Act (Taft-Hartley Act) Federal law passed in 1947; amended the National Labor Relations Act and established the authority of the Federal Mediation and Conciliation Service. • 1954: Labor-Management Reporting and Disclosure Act (Landrum-Griffin Act) Designed to close loopholes in the Taft-Hartley Act pertaining to internal union affairs; provides amendments to the National Labor Relations Act. • 1974: Amendments to the NLRA Provides NLRA notice requirements in the healthcare industry. • 1978: Civil Service Reform Act Established the Federal Labor Relations Authority (FLRA) for administration of federal sector labor relations. • Federal Mediation and Conciliation Service (FMCS) Federal agency that provides mediation services to labor and management to resolve bargaining impasse situations or to assist in securing arbitrators. Lockout When the employer closes the business or dismisses employees in order to deny current employees access to the workplace. Management rights clause Contract clause in a bargaining agreement that states that anything not covered in the contract remains within the purview of management.

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Managerial “employee” Persons who provide managerial functions are not employees and are excluded from protection under the National Labor Relations Act (NLRA). Medicaid A federal health program for low-income adults, their children, and people with certain disabilities. It is jointly funded by the state and federal governments but is managed by the states. Medicare A federal health program for people aged 65 or older and younger people with certain disabilities. Those enrolled in the program must pay deductibles and copayments. Medicare is divided into four parts: Part A covers hospital bills, Part B covers doctor bills, Part C provides the option to choose from a group of healthcare plans, and Part D provides prescription drug coverage.

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Unfair labor practice (labor organizations) Restraining or coercing employees as they exercise their legal rights; “even conduct that does not actually restrain or coerce employees but is reasonably calculated to do so is prohibited” (www.lae.cornell .edu/wex/unfair_labor_practices_ulps, accessed April 23, 2013). Union shop A site where all employees must join the union after a short introductory period.

REFERENCES 1. Bakke, E. W. 1960. To join or not to join. In E.W. Bakke, C. Kerr, and C.W. Anrod (eds.), Unions, Management and the Public. Harcourt Brace Jovanovich, New York, NY.

No-solicitation rule Rule instituted by management to prevent solicitation of employees for union membership at the workplace. Rules that are too broad are often found to be invalid by the NLRB and the courts.

2. Bureau of Labor Statistics. 2012. National occupational employment and wage estimates. www.bis.gov/oes/current/oes_nat.htm, accessed April 25, 2013.

No-strike, no-lockout clause During the life of the contract, a clause in which the union agrees not to strike and management agrees not to lock employees out or keep them from reporting to work.

4. Emerson, R. W., and J. W. Haardwicke. 1987. Business Law, 3rd ed. Barron’s Educational Series, Inc., Hauppauge, NY.

Part-time workers Workers who usually work less than 35 hours per week at their sole or main job. Professional employees Employees meeting the NLRA (amended) criteria; generally professionals and nonprofessionals are not included in the same bargaining unit. Represented by unions Employees who may or may not be union members but whose jobs are part of a bargaining unit represented by a union. Steward Individual within a union who serves as the union’s counterpart of the employer’s manager or supervisor. Unfair labor practice (employers) Interference with employee rights to organize, join, or assist a labor organization.

3. Bureau of Labor Statistics. 2013. Union members summary. www.bls.gov/news.release/union2.nr0.htm, accessed April 25, 2013.

5. Fitzgibbon, R. J. (ed.). 1981. Legal Guidelines for the Clinical Laboratory, p. 280–283. Medical Economics Co., Oradell, NJ. 6. Karni, K. R., K. R. Viskochil, and P. A. Amos (ed.). 1982. Clinical Laboratory Management, p. 519–553. Little, Brown and Co., Boston, MA. 7. NLRB. 1979. NLRB no-solicitation rule guidelines. Labor Relations Reporter: News and Background Analysis. Bureau of National Affairs, Washington, DC. 102:164. 8. NLRB. 2013. Fact sheet on the National Labor Relations Board. www.nlrb.gov/news-outreach/fact-sheets, accessed April 25, 2013. 9. NLRB v J. Weingarten Inc. 1975. 420 US. 251, 35 LRRM 2689. 10. Snyder, J. R., and A. L. Larsen. 1983. Administration and Supervision in Laboratory Medicine, p. 262–280. Harper & Row, Philadelphia, PA.

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APPENDIX 19.1 Helpful Websites Related to Unions and Collective Bargaininga Workforce www.workforce.com Stories on arbitration, employer-employee relations, the National Labor Relations Act, unions, and non-union shops. Federal Mediation and Conciliation Service www.fmcs.gov/ Independent agency to promote sound and stable labor-management relations in such areas as dispute mediation, preventive mediation, and alternative dispute resolution. FMCS mediators work from more than 60 field offices around the United States, administer through 10 geographic regions. Legal Information Institute, Cornell University Law School www.law.cornell.edu/topics/collective_bargaining.html Primer on the laws of collective bargaining.

National Labor Relations Board www.nlrb.gov/rr/rr5.pdf Authority and assigned responsibilities. United States Department of Labor www.dol.gov/compliance/guide/ Elaws—employment law guide. American Constitution Society for Law and Policy www.acslaw.org/acsblog/the-future-of-the-national-labor-relations-act Communications Workers of America www.cwa-union.org/issues/entry/c/health-care Department of Health and Human Services www.healthcare.gov a

All websites accessed April 25, 2013.

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APPENDIX 19.2 Do’s and Don’ts for Management Regarding Union Activity Things Management Can Do Regarding Union Activity (5)

Things Management Cannot Do Regarding Union Activity

• Tell employees that if a majority of the employees in the bargaining unit select the union, the employer will have to deal with the union on all their daily problems involving wages, hours, and other conditions of employment. Advise the employees that the employer would prefer to continue working with them directly on such issues. • Emphasize that members of management are always willing to discuss any subject. Remind the employees how earlier problems have been resolved through such discussions. • Remind employees of the benefits they currently enjoy, all of which have been obtained without union representation; avoid threats or promises, either direct or indirect. • Point out how wages, benefits, and working conditions compare favorably with other institutions in the area, whether unionized or not; all information must be factual. • Advise employees of the disadvantages of belonging to a union, such as initiation fees, dues, fines, strike assessments, and membership rules. Quote from the union’s constitution and bylaws granting it authority to impose punishment and discipline against its members and giving the international organization power over the local. • Tell employees there is a possibility that a union will call a strike or work stoppage even though many workers may not want one and the employer is willing to negotiate or has already been bargaining. • Point out that any strike can cost employees in lost wages. • Explain that in negotiating with the union, the employer does not have to agree to all of its terms, and certainly not to those terms that are not in the economic interest of the institution. • Relate any experience with unions, especially the ones involving the organizing campaign; be factual. • Provide employees with information about the union or its officers; identify the source of the information. • Point out any untrue or misleading statements made by an organizer, in a pamphlet, or through any other medium; management may always give employees the facts. • Advise employees that signing an authorization card does not mean they have to vote for the union. • Inform employees of the NLRB election procedures and the importance of voting, and emphasize that the vote is by secret ballot. • Make and enforce rules limiting solicitation of membership or discussion of union affairs to outside working time. However, remember that employees can solicit members and discuss the union on their own time, even on the premises, when it does not interrupt work. • Prohibit the distribution of union literature in patient care areas. • Restrict the wearing of union buttons to areas where there is no patient contact. • Enforce all other institution rules impartially in accordance with established procedures.

• Promise employees a pay increase, promotion, benefit, or special favor if they vote against the union. • Threaten loss of job, reduction of income, or elimination of privileges or benefits. • Discharge, discipline, or lay off an employee because of union activities (or threaten to do so). • Spy on union meetings. • Discriminate against workers actively supporting the union. • Transfer employees because of union affiliation. • Show partiality to employees not involved in union activities over those active in union activities. • Discipline or penalize employees supporting a union for an action permitted to employees not supporting a union. • Separate pro-union employees from other employees through assignments or transfers. • Ask employees how they intend to vote in a union election. • Question workers about whether they belong to a union or have signed an authorization card. • Inquire about internal affairs of the union. • Ask employees about the union sentiments of their coworkers. • Say that the employer will not deal with the union. • Urge employees to persuade others to oppose the union. • Give financial support or assistance to a union, its representatives, or employees; this restriction prevents an employer from favoring one union over another. • Make speeches to assemblies of employees on institution time within the 24-hour period prior to a representative election. • Call employees to your office or visit their homes to discuss the union. • Remember these TIPS; do not do the following: • Threaten • Intimidate • Promise • Spy

20 Introduction Regulated and Nonregulated Testing Whom To Test Preemployment Testing • For Cause/Reasonable Suspicion • Random Testing • Return to Duty

Drug Testing Protocol

Workplace Drug Testing and the Clinical Laboratory Jimmy R. Lea

Specimen Collection • Specimen Testing • Cutoff Concentrations • Drug Confirmation • Reporting Results

Managing Clinical and Forensic Drug Testing Summary KEY POINTS GLOSSARY REFERENCES APPENDIXES

OBJECTIVES To learn the rationale for and differences between regulated and nonregulated testing To provide guidelines for collection, testing, and reporting of results in workplace drug testing To give the reader insight to the commonalities and differences between clinical and forensic drug testing

Doveryai, no proveryai (Trust but verify). Russian proverb

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n December 8, 1987, President Ronald Reagan quoted this Russian proverb as the opening statement to the signing of the Medium Range Missile Treaty with the Soviet Union. The English translation, “Trust but verify,” could just as well have been stated the previous year, when on September 15, 1986, President Reagan signed executive order 12564, Drug-Free Federal Workplace, launching the first widespread initiative to deter drug use in the workplace. One can reasonably argue that this maxim of trust and verify is a core principle for this new federal workplace drug testing program. Twenty-five years later, regulated (federal) and nonregulated (private sector) drug testing is commonplace in our culture. Clinical laboratory scientists (CLSs), whether they manage a federal laboratory or a private sector laboratory, may utilize their expertise and understanding of quality management to enhance the hiring process for their own employees as well as the institution they represent. While the human resources (HR) department sets the guidelines for the hiring process, the CLS manager can represent a vital quality and technical resource for the employer’s drug policy. After all, drug testing results are laboratory results, and who recognizes the need for quality laboratory results better than the CLS manager? Technical competence and quality assurance are the foundation of any laboratory. This is also true for any workplace drug testing program. Reviewing processes for workplace drug testing provides CLS managers an opportunity to understand how basic laboratory management skills can benefit their employers’ drug testing policies. The hiring of qualified laboratory staff and maintenance of a safe working environment for the laboratory are direct benefits of a well-designed workplace drug testing policy.

CHAPTER 20. WORKPLACE DRUG TESTING AND THE CLINICAL LABORATORY

Regulated and Nonregulated Testing The Mandatory Guidelines for Workplace Drug Testing Programs (53 C.F.R. 11979) clearly define federal workplace drug testing as to the drugs/drug class and specimen validity parameters to be tested (3), as shown in Table 20.1. The majority of laboratories are in the state or private employment sector and must be considered for nonregulated testing. While some states may have specific requirements for workplace drug testing of laboratory employees, private sector laboratories are free to design their own programs. Certainly, the 53 C.F.R. 11979 documents have been used as a reference point for nonregulated testing. Many private sector employers choose to broaden the scope and depth of the requirements. This may include changing the cutoff concentration for each analyte screened (higher or lower) as well as increasing the number of drugs and drug classes tested from five to ten or more (see Table 20.2). A key difference is the creatinine requirement, with many nonregulated protocols raising the cutoff of acceptability to 20 mg/dl (4). This is an effective change to detect and deter the donor from “flushing” a drug with mass quantities of water prior to submitting a sample. CLS personnel can provide employer clarity in the technical explanation of the benefits of this and other requirements for specimen validity.

(How many HR people do not realize pH directly affects the immunoassay of some drugs?) Furthermore, the CLS manager understands the need for confirmation of any presumptive (preliminary) positive screening result. Trust but verify.

Whom To Test Workplace drug testing is designed to provide a safe work environment, discourage drug use, and provide assistance in the treatment, recovery, and return to work of individuals with substance abuse problems. As stated by The Council on Alcohol and Drugs (http://www.livedrugfree.org/ Drug-Free-Workplace-FAQ.72.0.html, accessed March 1, 2012), “The one place where there can be mandated adult education is the workplace.” Testing acts not only as a deterrent, but as an opportunity to educate about the problems of substance abuse. The most common utilization of workplace drug testing includes: • Preemployment testing as a condition of hiring. Testing of applicants may be restricted to a particular job description or category such as safety-sensitive positions or may be applied as a nondiscriminatory practice (4, 6) to all applicants for all positions.

Table 20.1 Analytes and cutoff concentrations for federally regulated testinga Initial test analyte Marijuana metabolites Cocaine metabolites Opiate metabolites or Codeine/morphinec 6-Acetylmorphine Phencyclidine Amphetaminesd,e

MDMAg

a

Initial test cutoff concentration (ng/ml)

Confirmatory test analyte

Confirmatory test cutoff concentration (ng/ml)

50 150 2,000

THCAb Benzoylecgonine Codeine or Morphine 6-Acetylmorphine Phencyclidine Amphetamine and Methamphetaminef MDMA and MDAh and MDEAi

15 100 2,000

2,000 10 25 500

500

2,000 10 25 250 250 250 250 250

Effective date: October 1, 2010. See reference 3. Delta-9-tetrahydrocannabinol-9-carboxylic acid (THCA). c Morphine is the target analyte for codeine/morphine testing. d Either a single initial test kit or multiple initial test kits may be used, provided the single test kit detects each target analyte independently at the specified cutoff. e Methamphetamine is the target analyte for amphetamine/methamphetamine testing. f To be reported as positive for methamphetamine, a specimen must also contain amphetamine at a concentration greater than or equal to 250 ng/ml. g Methylenedioxymethamphetamine (MDMA). h Methylenedioxyamphetamine (MDA). i Methylenedioxyethylamphetamine (MDEA). b

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Table 20.2 Drug categories and cutoff concentrations for nonregulated testinga Screening cutoff (ng/ml)

Confirmation cutoff (ng/ml)

1,000

500

Barbituratesb Benzodiazepinesb Cannabinoids Cocaine Methadone

200 or 300 200 or 300 50 300 300

200 or 300 200 or 300 15 300 300

Methaqualone MDMA (ecstasy)

300 500

300 500

Opiates

2,000

2,000

Opiates

300

300

Oxycodone Phencyclidine (PCP) Propoxyphene

300 25 300

300 25 300

Drug Amphetamine

Comments If amphetamine is ≥500 ng/ml, assay is confirmed. If methamphetamine is ≥250 ng/ml, then amphetamine must be >250 ng/ml for confirmation. Confirmed analyte is the parent drug. Confirmed analyte is the parent drug. Confirmed analyte is the metabolite THCA. Confirmed analyte is the metabolite benzoylecgonine. Confirmed analyte is the metabolite 2-ethylidine-1,5dimethyl-3,3-diphenylpyrrolidine (EDDP). Confirmed analyte is the parent drug. If MDMA is ≥500 ng/ml then MDA must be >250 ng/ml. If morphine is >5,000 ng/ml then 6-mono-acetyl-morphine must also be present at >10 ng/ml. Confirmed analyte(s) are codeine, morphine, hydrocodone, and/or hydromorphone. Confirmed analyte(s) are oxycodone and/or oxymorphone. Confirmed analyte is the parent drug. Confirmation is of metabolite norpropoxyphene.

a

Modified from: Cut-off and Toxicity Levels For Drugs-of-Abuse Testing, http://www.clr-online.com (4 April 2012). See Table 20.1 for abbreviations. Some laboratories use 200 ng/ml as the screening cutoff concentration for these drugs while others use 300. The confirmation cutoff must be the same concentration as used for screening. b

• “For cause” or reasonable suspicion. Performed when coworkers or supervisors observe inappropriate behavior, work performance, or behavior indicative of drug impairment/intoxication (4, 6). Specific and detailed policies for identifying worker impairment and subsequent testing should be followed with this testing to avoid claims of discrimination, personal vendetta, or the like. • Postaccident testing. As outlined by the employer’s HR policy, testing may be a routine requirement to protect the employer and the employee in worker’s compensation claims stemming from on-the-job injury (4, 6). • Random testing. Sometimes referred to as “neutral selection” testing (3), personnel in safety- and securityassociated jobs may be the only workers required to be tested (4, 6). • Return to duty. Also designated as “fitness testing” (3), return-to-duty testing may be a requirement for an employee assistance program (EAP) (6).

Preemployment Testing The basic component of any workplace drug policy is the preemployment drug test (3). At some point in the hiring process, the job candidate will be required to submit a specimen for testing. This should come as no surprise to the candidate, as it is routine on many applications to make the candidate aware that this employer requires completion and passing of a urine drug test in order to be

hired. CLS managers should embrace and encourage this practice to ensure that the candidate chosen during the hiring process will not be a safety issue to coworkers or to the patients served through the quality of results generated by the laboratory.

For Cause/Reasonable Suspicion For-cause drug testing should follow a written policy and procedure (1) that documents the preliminary steps taken prior to collection and analysis. This policy should be approved by the employer’s risk management or legal department. The request should document a specific administrative approval chain of command. Rationale for conducting a for-cause test must be based on specific, objective, and articulated facts. Any drug history related to the source of impairment is beneficial to establishing the breadth of the testing to be performed. Much has been reported about identifying and treating addicted healthcare workers (5). Specific statistics on clinical laboratory employees have not been reported. Random Testing Preemployment testing notification before and during the hiring process forewarns an applicant with recreational or chronic substance abuse issues to take steps to avoid detection. Random testing is the most effective and continuous monitoring tool available for maintaining a drug-free workplace (6). The element of surprise in random testing

CHAPTER 20. WORKPLACE DRUG TESTING AND THE CLINICAL LABORATORY

allows no time to attempt to take adulterants or delay testing. Notification of intent to test and a defined time to complete collection are critical to the success of random testing. There should be strict guidelines in a written policy prior to implementing testing (6). Checking state and federal guidelines for allowance of random testing is advisable. All employees must have an equal chance of being tested to eliminate any hint of bias or discrimination (4).

Return to Duty A worker seeking help with a substance abuse problem is required to submit to monitoring (testing) during and upon completion of the recovery program (4, 6). The benefits to the employer and manager are as significant as those to the employee. The time, effort, and expense to recruit, hire, and train new personnel are greater than the cost of the EAP and the cost of drug testing during the monitoring for return to duty.

Drug Testing Protocol Specimen Collection The most vulnerable point of the drug testing process is at specimen collection (3, 4, 6). In nonregulated testing, direct observation is generally not an option. A review of the collection procedure by the critical eye of an experienced CLS is beneficial to ensure that the process is sound. The fundamentals should include a clear and concise chain of custody, a control form, a controlled physical environment at the collection site, and a well-trained collector. (See http://www .reginfo.gov/public/do/PRAViewIC?ref_nbr=201007 -0930-002&icID=193835 [accessed July 13, 2012] for a regulated chain-of-custody form.) Figure 20.1 shows the first page of a sample six-part drug testing request and custody form for nonregulated testing. • Copy 1 is retained by the testing laboratory. • Copy 2 is identical to copy 1 and is sent to the medical review officer (MRO) once testing is completed and the results are entered into section 9. • Copy 3 unblocks section 7 (Fig. 20.2) and blocks sections 9 and 10; this copy is also given to the MRO. • Copy 4 is identical to copy 3 but is given to the donor. • Copy 5 is retained by the collector. It is identical to copy 3 except that the phone numbers and information below the signature line are blocked out. • Copy 6 is identical to copy 5 and is given to the employer. • The back of copy 6 contains the specimen collection instructions (Fig. 20.3). A criterion for specimen collection is outlined in Subpart H of the Department of Health and Human Services SAMHSA Collection Site Manual (see Appendix 20.2). The

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53 C.F.R. 11979 collection protocol is an excellent standard to follow when training collectors and implementing an effective urine collection process. Accurately documenting the process is critical to protecting the integrity of the donor, the collector, and the results. Experience in understanding the necessity to link the requisition, specimen, and result is second nature in CLS management and is a valuable insight to the forensic collection process and requirements. It is the chain of custody that distinguishes the clinical from the medicolegal. Although clinical laboratories may experience mislabeled, misplaced, or lost specimens (albeit a relatively small percentage for the volume of specimens received and processed), forensic documentation is specifically designed to negate any such occurrence. The chain-of-custody/control form, initiated at collection, represents a diary of that specimen through the preanalytical, analytical, and postanalytical processes. Furthermore, each aliquot’s disposition associated with the process can be traced from the original sample bottle (2, 3, 6).

Specimen Testing Having completed the collection, the initial step in testing is receipt of the sample, while verifying and maintaining the chain of custody. The difference in managing the clinical receiving process from a forensic receiving requirement is not the verification of sample demographics but the documentation of that verification (2). Specimen integrity is also part of this process. Any evidence of tampering, errors, or irregularities are strictly noted and are potential fatal errors to continuing the process toward analysis. All scenarios should be detailed in the policy and procedures. Once verified, accepted, and logged into the laboratory, aliquots can be prepared from the original sample(s) to perform analytical testing. Immunoassay is the most common analytical method (2) to perform the initial screening for drugs of abuse. A CLS manager may be acquainted with one or more immunoassay techniques. Based upon his or her experience or existing technology within the clinical laboratory, a CLS manager may select between a radioimmunoassay, enzyme immunoassay, fluorescence polarization immunoassay, and particle assay analyzer. The advantages and disadvantages of each method may have already been determined by the manager’s evaluation for clinical testing. Batch analysis provides economy of scale and cost efficiency. An important distinction for the CLS manager to note is that quality control samples are included with each batch of samples, at a greater frequency than necessary in clinical testing. A typical forensic sample batch consists of positive, negative, and blank (2, 3) samples. The positive control will contain the specific analytes to be tested, typically at a concentration 20–25% above the cutoff calibration concentration. The negative control will contain the specific analytes to be tested at a concentration 20–25% below (2, 3) the cutoff calibration concentration. The blank control is

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Figure 20.1 Nonregulated custody and control form containing multiple forms to serve as documentation for donor, collector, laboratory, and medical review officer. The choice of drugs to be tested is dependent upon the client’s requirement. doi:10.1128/9781555817282.ch20.f1

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Drug Confirmation Once a specimen within the screening batch has been identified as “presumptive positive” for a particular drug or metabolite, confirmation must be performed on a new aliquot from the original sample (2–4). To the CLS manager, this may be akin to the verification of a panic value for a clinical specimen by repeating the analysis on the sample to ensure that the result is true. It is essential that all presumptive positive results be confirmed by an alternative method, using a calibration cutoff at least as sensitive as the screening cutoff (2). The accepted standard for confirmation is mass spectroscopy (MS), with either gas chromatography (GC) or liquid chromatography (LC) as the separation technique (2, 3). Recent technology advances have allowed for more sophisticated choices to include a tandem mass spectrometer (MS-MS) coupled to either a GC or LC instrument. With MS technology, the cutoff concentration for confirmation can be tied to specific drugs and metabolites at greater sensitivity and lower concentration than with immunoassay. Both MS technologies may be a novelty to a CLS manager; however, the blossoming use of tandem mass spectrometry in clinical testing, particularly immunosuppressant drugs and vitamin D analysis, is worth noting. Acquiring this technology is of mutual benefit to clinical and workplace drug testing, thereby enabling a CLS manager to multitask the instrumentation. Use of GC-MS and/or LC-MS-MS technology for drug confirmation or clinical testing has the added

the formats differ slightly, documentation for donor, collector, laboratory, and medical review officer is included. doi:10.1128/9781555817282.ch20.f2

Cutoff Concentrations In nonregulated testing, an employer may have specific concerns or rationale for requesting cutoff concentrations that differ from the standards specified in the 53 C.F.R. 11979 document for regulated testing. Knowledge of the specificity and sensitivity for a particular immunoassay is beneficial to the CLS manager when discussing an employer’s request to utilize a higher or lower cutoff for testing. Direction and guidance may be required to assist the employer (or your own HR department) in selecting the correct calibration or specific immunoassay to best meet the expressed desire. Most importantly, the CLS manager will be able to explain that the chosen method and cutoff for screening provides only a “presumption” of the presence of drug or drug metabolite and therefore must be confirmed by an alternate methodology.

Figure 20.2 Federal custody and control with mandated drugs/drug classes to be tested. Although

a true drug-free (2, 3) sample. Use of the terms “negative” and “blank” may be misleading to the CLS manager, as negative in the clinical setting is commensurate to a blank specimen. The utility of the negative control in the forensic batch, followed by the blank control, is an effective safeguard for the presence of carryover by the instrument. Additional positive and negative controls are placed within the batch, with a recommended frequency of one set per 10 samples. The blank is only analyzed once.

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Forensic Drug Lab Requisition and Specimen Collection Instructions Sample Collection Materials Complete urine collection kit includes the following: • Drug Testing Request and Custody (DTRC) Form • 60 mL Tamperproof Urine Specimen Bottle with Temperature Indicator, Chain-of-Custody Label and optional ID Label • Female Collection Adaptor • Dox™ Easy Press Closer • Chain-of-Custody Bag with Absorbent Pad

Completing the Requisition Complete the DTRC Form by providing the following information. Press firmly, as you are making six copies. Collector: The use of gloves and universal precautions are recommended during sample preparation. • Verify identification of the donor with a picture ID. • Open the sample collection kit in the donor’s presence. • Complete the Drug Testing Request and Custody Form as described below. Before Specimen Collection • Collector completes lines 1 through 4 of Copy 1 of the DTRC Form. • Collector deactivates the water supply and places dye in the toilet and removes any soap or other foreign material. Specimen Collection • Collector gives clean specimen bottle to the Donor. • Collector instructs the Donor to void at least 30 mL of urine into the specimen bottle. The Donor must not flush the toilet or attempt to use the lavatory until returning the specimen bottle to collector! After Specimen Collection • Collector activates the water system and allows the Donor to return to the collection unit. • Collector enters the Specimen ID number (from the top right of the DTRC Form) on the Chain of Custody Label, places the specimen bottle in the ring of the Easy Press Closer and places a closure top on the specimen bottle with the spout through the hole in the handle. The Collector holds the base firmly with one hand and presses the handle down with the other until the closure “snaps” and locks into place. • Collector has the Donor complete the “From” line on the Chain-of-Custody Label, then the Collector completes the “To” line, dates and times the collection on the Label, and places the Label on the specimen bottle. • Collector reads and records temperature on line 5 of Copy 1 of the DTRC Form. • Donor completes section 7 (all parts) of Copy 3 of the DTRC Form. • Collector completes lines 6 and 8 of Copy 1 of the DTRC Form and gives Copy 4 to the Donor. • Collector places sealed bottle and completed DTRC Form in the Chain-of-Custody Bag, seals the bag, and has the donor initial and date Chain-of-Custody Bag, then the Collector initials the Bag.

THE SPECIMEN IS NOW READY FOR TRANSPORT. Figure 20.3 Specific and detailed instructions for the chain-of-custody collection are essential. Specimen collection remains the most vulnerable component of forensic drug testing. Inaccurate or incomplete information may invalidate the collection as a “fatal error.” doi:10.1128/9781555817282.ch20.f3

management challenges of hiring, training, and retaining personnel with the skills and proficiency necessary to provide accurate, reliable, and defendable results.

Reporting Results Just as a CLS manager implements protocols for result review or autoverification prior to release of results to a clinician or client, workplace drug testing results require

specific review also. Designated, experienced, and qualified personnel certify (verify) both negative and presumptive positive screened results (3, 6). Presumptive positive screens subjected to confirmation testing are certified as confirmed positive or negative. Certified positive results in regulated testing are required to undergo final review by a certified medical review officer (MRO) (3, 6). Indeed, the use of an MRO review for nonregulated testing is a

CHAPTER 20. WORKPLACE DRUG TESTING AND THE CLINICAL LABORATORY

valuable and beneficial quality assurance procedure. The MRO is responsible for making the final determination about the validity of the confirmed positive result. The donor may have legitimate reasons for testing positive for a particular drug or metabolite in the urine sample provided for testing. Through personal contact and interview, the MRO may determine if the positive result is caused by a valid medication or from medical treatment or ingestion of particular food (poppy seeds) (6). Therefore, a confirmed positive by the laboratory may have a final negative result reported by the MRO, with the employer or client unaware of the presumptive positive or confirmed positive result. The MRO’s training and certification provide the combined medical and analytical expertise (6) to make the correct final analysis of the result. A working knowledge of MRO certification by the CLS manager offers benefits and opportunities if the decision is made to include workplace drug testing in the clinical laboratory. Utilizing existing pathologist staff as a certified MRO is a viable and cost-effective option.

Managing Clinical and Forensic Drug Testing CLS managers are experienced in the accreditation process and requirements for clinical laboratory testing, having met CLIA, CAP, and/or state standards for their laboratory. Clearly, this is an advantage to negotiating the challenges associated with regulated and nonregulated workplace drug testing. While standards and requirements for clinical and workplace drug testing share commonalities (2, 6), the intertwining of clinical and forensic specimens is to be avoided. Instrumentation utilized for analysis of both specimen types may be the same, but it is important to have separate policies and procedures for each. Batching of specimens is cost-effective for any analysis, but clinical specimens must be sequestered from forensic specimens. Following sound chain-of-custody practices will prevent mixing clinical and forensic specimens when the same analyzer must be used for both. The training, skill, and documentation of competency in workplace drug testing may involve greater detail for the personnel engaged in this activity within the clinical laboratory. As stated previously, the instrumentation and methods of analysis for clinical and workplace drug testing may be identical for a particular laboratory, but detailed documentation for forensic specimens may seem onerous to the clinical laboratorian. Identifying laboratory personnel to perform specific functions and maintain specific responsibilities (2) for workplace drug testing is key to management. This element must be well thought out by a CLS manager before considering adding workplace drug testing to the clinical laboratory’s responsibilities.

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Summary Workplace drug testing is a reality of employment in the majority of small and large businesses. Clinical laboratories may choose to expand revenue and service opportunities within this growing market. As such, the CLS manager should be aware of the benefits of testing to their own workplace safety and to the requirements to establish and maintain a quality workplace drug testing laboratory. Expertise in the preanalytical, analytical, and postanalytical procedures for workplace drug testing is an achievable goal for any CLS manager. KEY POINTS ■ The instrumentation and methodology for clinical and workplace drug testing are similar. ■ CLS manager experience with accreditation standards, requirements, and implementation are skills that enable clinical and workplace drug testing to enhance the laboratory management of either. ■ Management policies for drug testing benefit from technical knowledge provided by the laboratory. Whether contributing as the site of testing or not, the CLS management should be actively engaged in providing technical and practical expertise to ensure a safe workplace for their laboratory. ■ Drug and drug classes to be tested differ for regulated (federal) and nonregulated workplace drug testing. Accreditation is required for regulated testing (SAMHSA). Nonregulated testing may be subject to state law and require either SAMHSA or CAP-FDT accreditation. ■ A medical review officer (MRO) is required for regulated testing and may be a state requirement for nonregulated testing. Review by a certified MRO is strongly recommended for nonregulated workplace drug testing programs. GLOSSARY American Association of Medical Review Officers (AAMRO) Voluntary medical organization dedicated to establishing national standards for the certification of medical practitioners who perform drug and alcohol testing. College of American Pathologists Forensic Drug Testing (CAPFDT) Accreditation for forensic drug testing by College of American Pathologists provides standards and proficiency in forensic drug testing. Drugs and drug classes included in the proficiency go beyond the limited scope designated in mandatory federal drug testing programs. Cutoff concentration The concentration of drug designated to determine a positive screening or confirmatory test from a negative result.

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Enzyme immunoassay A competitive binding assay that employs an enzyme-bound antibody to detect a specific antigen (drug). The enzyme catalyzes a reaction when exposed to a substrate, and the reaction rate is measured spectrophotometrically to quantitate the concentration of antigen. Fluorescence polarization immunoassay Fluoroimmunoassay where detection of the hapten-antibody reaction is based on measurement of the increased polarization of a fluorescencelabeled hapten when it is combined with antibody. The assay is very useful for the measurement of small haptenic antigens such as drugs at low concentrations. Gas chromatography mass spectrometry (GC-MS) Analytical instrument that consists of methodologies. The gas chromatography portion separates the sample into a pure compound, and the mass spectrometer identifies and quantifies the compound based on structure.

medical history and relevant biomedical information to render a final decision on positive drug results. Radioimmunoassay Competitive binding assay that uses a radio-labeled antibody to detect the concentration of unlabeled antigen (drug). Substance Abuse and Mental Health Services Administration (SAMHSA) Branch of U.S. Health and Human Services charged with improving the quality and availability of prevention, treatment, and rehabilitative services to reduce illness, death, disability, and cost to society resulting from substance abuse and mental health. The administrator of SAMHSA reports directly to the secretary of the U.S. Department of Health and Human Services. The agency is responsible for accreditation of all laboratories engaging in federal workplace drug testing.

Kinetic microparticle immunoassay Immunoassay in which a conjugate reagent consists of drug bound to microparticles. The microparticle conjugates in solution minimally block light transmission. When antibody to the drug is added to the conjugate solution, lattice formation takes place as the antibodies crosslink the microparticles by binding to the drug moieties. The resulting lattice structure effectively blocks light transmission and increases absorbance. Unconjugated drug in the sample competes with the drug conjugates for antibody-binding sites, and the degree of lattice formation is inhibited proportional to the concentration of the drug in the urine.

REFERENCES

Liquid chromatography–mass spectrometry (LC-MS-MS) Analytical technique that combines the physical separation capabilities of liquid chromatography with the mass analysis capabilities of dual mass spectrometers.

4. Kapur, B. M. 2012. Drug testing methods and clinical interpretation of test results. eNotes. http://www.enotes.com/drug -testing-methods-clinical-interpretations-test-reference/drug-testing -methods-clinical-interpretations-test (accessed May 21, 2012).

Medical review officer (MRO) The role of the medical review officer is to review and interpret lab results obtained through a forensic drug testing program. The MRO must be a licensed physician trained and certified in the knowledge of substance abuse, interpretation of analytical results for drugs of abuse, and evaluation of

5. Kenna, G. A., and D. C. Lewis. 2008. Risk factors for alcohol and other drug use by healthcare professionals. Substance Abuse Treatment Policy 3:3.

1. Chamberlain, R. T. 1988. Legal issues related to drug testing in the clinical laboratory. Clin. Chem. 34(3):633–636. 2. Clinical and Laboratory Standards Institute. 2007. Toxicology and Drug Testing in the Clinical Laboratory; Approved Guideline, 2nd ed. CLSI document C52-A2. Clinical and Laboratory Standards Institute, Wayne, PA. 3. Federal Register. 2008. Substance Abuse and Mental Health Services Administration: mandatory guidelines for federal workplace drug testing programs. Fed. Regist. 73(228):71858.

6. Shults, T. F. 2009. Medical Review Officer Handbook, 9th ed. Quadrangle Research, LLC, Research Triangle Park, NC.

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APPENDIX 20.1 Case Vignettes CASE 1: SPECIMEN COLLECTION A 24-year-old male reported to the forensic collection site for a preemployment drug screen (nonregulated test). Upon completion of the chain-of-custody and control (C-o-C) form, he received the specimen cup and entered the collection stall. Within a few minutes, he placed the filled collection cup in the designated area for processing by the collector. The collector noted that the specimen container had no reading on the temperature strip (90–100°F). Per protocol for the forensic laboratory, the collector labeled and sealed the specimen and completed the C-o-C form. The donor was requested to complete another C-o-C form and submit for a second collection. The donor complied and submitted a second specimen, which met the temperature requirement. The collector completed the second C-o-C form and submitted both the donor specimens to the laboratory for analysis. Analysis of the specimens yielded GC-MS–confirmed results for both specimens; however, specimen 1 was confirmed for cocaine metabolite and specimen 2 was confirmed for THC metabolite. During the MRO review, the donor admitted to recent use of

marijuana and that the first specimen was from a surrogate who he was unaware had used cocaine. Doveryai, no proveryai.

CASE 2: SPECIMEN VALIDITY A preemployment specimen received by the forensic drug laboratory was analyzed for drugs of abuse (nonregulated), adhering to a urine creatinine cutoff of 20 mg/dl as requested by the employer client. The specimen was negative by immunoassay for all drugs of abuse tested but flagged for a urine creatinine value of 15 mg/dl. The laboratory reported the result to the MRO, who requested a recollection to obtain a valid specimen (creatinine ≥20 mg/dl). The donor was recollected within 24 hours and the specimen submitted to the forensic lab for drugs of abuse analysis. The immunoassay was presumptive positive for THC, with a urine creatinine of 120 mg/dl. The THC was confirmed positive by GC-MS and reported to the MRO. The MRO noted that had this specimen been submitted as a regulated testing sample, the original result would have been accepted since the creatinine was >5 mg/dl.

APPENDIX 20.2 Websites American Civil Liberties Union http://www.aclu.org/files/FilesPDFs/testing-chart.pdf (accessed May 5, 2012) This section lists state-by-state statutes and orders applying to workplace drug testing.

Substance Abuse and Mental Health Services Administration http://www.samhsa.gov/data/NSDUH/2k10/Results/web/HTML/ 2K10Results.htm (accessed April 1, 2012) This is the site for Drug Use and Health: Summary of National Findings (accessed April 1, 2012).

American Presidency Project http://www. presidency.ucsb.edu/ws/index.php?pid=36416#px22/ mw4/cufk (accessed February 20, 2012) This section contains Ronald Reagan Executive Order 12564— Drug-Free Federal Workplace.

U.S. Archives http://www.archives.gov/federal-register/codification/executive -order/12564.html (accessed March 1, 2012) This is the citation for Executive Order 12564—Drug-Free Federal Workplace.

Council on Alcohol and Drugs http://www.livedrugfree.org/Drug-Free-Workplace-FAQ.72.0.html (accessed March 1, 2012) This section contains Drug-Free Workplace FAQ.

U.S. Department of Justice http://www.deadiversion.usdoj.gov/pubs/brochures/drug_hc.htm (accessed April 4, 2012) This section describes drug addiction in healthcare professionals.

Federal Register https://www.federal.register.gov/ (accessed March 20, 2012) This government agency archives all government directives and documents. Information on current and past revisions to federal regulations may be accessed by the public.

IV Requirements for Effective Laboratory Management (section editor: Andrea J. Linscott) 21

Quality Management Ron B. Schifman, George S. Cembrowski, Donna M. Wolk, and Joanne I. Brisbois

22

International Organization for Standardization Anne Marsden and Amy Shahtout

23

Effective Communication in Laboratory Management Elissa Passiment and Andrea J. Linscott

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The Laboratory Information System: Making the Most of It in the Clinical Microbiology Laboratory Joseph M. Campos

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Management of Point-of-Care Testing Glen L. Hortin and Christopher D. Doern

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Principles of Preanalytic and Postanalytic Test Management Adarsh K. Khalsa, Michael Santacruz, and Michael A. Saubolle

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Selection and Implementation of New Equipment and Procedures Paula Revell and Lakshmi Chandramohan

28

Laboratory Safety James J. Dunn and David L. Sewell

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Emergency Management Andrea J. Linscott, Patti Medvescek, and David L. Sewell

21 Introduction Quality Management of Preanalytical Processes Test Selection and Ordering • Quality of Specimen Collection • Patient and Client Satisfaction • Specimen Transport, Storage, Receipt, and Preanalytical Processing

Quality Management Ron B. Schifman, George S. Cembrowski, Donna M. Wolk, and Joanne I. Brisbois

Quality Management of Analytical Processes Method Selection and Evaluation • Quality Control • Quality Control Rules • Frequency of Quality Control Analysis • Specification of MAE • Use of Patient Data for Quality Control • External Quality Control (Proficiency Testing)

Quality Management of Postanalytical Processes Turnaround Time Corrected and Incomplete Reports Document Control Summary KEY POINTS GLOSSARY

OBJECTIVES To understand the three phases of the total testing process To understand factors affecting quality of test ordering, specimen collection, and patient satisfaction To understand basic statistical processes involved in monitoring analytical performance To understand factors affecting test turnaround time To understand the role of corrected and incomplete reports in quality management To understand systems for document control

REFERENCES APPENDIXES

Quality has to be caused, not controlled. Philip Crosby, Reflections on Quality

Q

Clinical Laboratory Management, 2nd Edition Edited by L. S. Garcia ©2014 ASM Press, Washington, DC doi:10.1128/9781555817282.ch21

uality management is a system for continuously analyzing, improving, and reexamining resources, processes, and services within an organization (7, 25, 34, 36, 43, 92, 94, 98, 127). This is accomplished by defining quality indicators that are measured and analyzed either over time or compared to similar or identical indicators from other departments or organizations (benchmarking) (100). The primary objective of quality management is to achieve the best possible outcome. Quality indicators provide information on which to base strategies for improvement, and quality is achieved by reducing variability by standardizing these processes across the organization. Managing the development and implementation of a quality program requires a global understanding of the various resources, processes, and outcomes associated with laboratory medicine as well as healthcare systems and their regulatory environment in general (32). The design of a quality management system depends in large part on expected outcomes. For example, processes involving identification of patient specimens for blood transfusion purposes are much more rigorous than processes for identifying patient specimens for general chemistry testing because the possible risk of a poor outcome from a misidentified specimen is substantially higher for the former (72). Fortunately, poor outcomes from laboratory errors are uncommon. The frequency of laboratory mistakes is estimated to be about 1 per 1,000 patient visits in which laboratory testing is performed. Of these errors, only about a quarter of mistakes are judged to have any impact on patient management, and very few are associated with any significant adverse patient outcome (24, 87). In 2005 a 5-week prospective study of patient and 421

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specimen identification errors at 120 (primarily hospital) laboratories documented 345 adverse events arising from 6,100 identification errors (126). More than 70% of the adverse events resulted in significant patient inconveniences with no known change in treatment or outcome. Developing an effective quality management program is challenging because the goal of the program (good outcomes) is often difficult to quantify and may involve processes that are not directly under the laboratory manager’s control (73). In this context, quality assessment of laboratory medicine should be viewed as part of the organization’s total quality plan. The “total testing process” is a concept that provides a comprehensive working model for evaluating the components of the laboratory’s quality management plan as an interdependent component of the organization’s total quality improvement program (54, 84, 103, 104, 135). The total testing process consists of three phases. The first phase, the preanalytical phase, involves all the various processes and resources that precede the measuring step. This phase includes proper ordering and test selection by the clinician, patient preparation, specimen collection, identification, transport and/or storage, and premeasurement laboratory processing. The second phase, the analytical phase, involves managing the reliability of instruments and reagents used for measuring patient specimens and obtaining test results. This phase relies heavily on statistical quality control processes to reduce errors and variation in test measurements. Quality management of the analytical phase is the most standardized and regulated and has therefore received the most attention. The fewest errors occur during this part of the testing cycle. For example, various studies have shown that only 13 to 32% of laboratory errors are due to analytical problems (9). Howanitz et al. (51) have suggested that the heavy focus on laboratory quality control processes has diverted attention and resources away from other equally important quality objectives associated with the pre- and postanalytical phases of testing. The last phase, postanalytical, involves reporting, interpretation, and clinical use of test results. Application of different quality management processes may involve one or a combination of all three phases. For example, turnaround time and examination of reasons for corrected reports are important quality indicators that may cross over any or all phases of the testing process. The College of American Pathologists (CAP) (http:// www.cap.org) provides numerous management tools to assist laboratories with quality improvement. Two in particular, the Q-Probes and Q-Tracks programs, focus on pre- and postanalytical phases of the testing process (100, 138). Several standardized monitors are provided each year to participants. The Q-Probes program provides a series of cross-sectional quality assurance studies with peer

evaluations, while the Q-Tracks program provides continuous quality monitors for tracking changes over time. These programs have substantial value for benchmarking performance and tracking improvement. Table 21.1 shows the 2011 Q-Probes and Q-Tracks monitors. A broad range of Q-Probes studies from the last 15 years is available from the CAP for use by laboratories. These predesigned quality assurance studies are linked with historical data for benchmarking performance and can be a useful supplement to a laboratory’s quality program. Organizational structure, personnel information, and utilization management as well as laboratory safety are important components of the total quality management plan and are discussed in other chapters. In addition, many of the laboratory’s quality management procedures conducted in clinical laboratories today have been mandated by regulatory and accreditation requirements. Participating in on-site laboratory inspections and appropriate external proficiency programs is required to comply with government regulations (see chapter 5, this volume).

Quality Management of Preanalytical Processes Even the most accurate measurement using the most upto-date technology by a highly trained technologist may cause an untoward clinical outcome if the wrong test is ordered or the specimen is compromised prior to analysis (28, 67, 68, 95, 116). The preanalytical phase of the testing cycle is complex and is prone to the most variation and the highest proportion of errors (24, 64, 110). For example, one study uncovered only 0.47% erroneous results arising from 40,490 stat tests performed for critical-care patients. Of these erroneous results, 68% occurred during the preanalytical phase of testing, compared to 13% of errors during the analytical phase and 18% in the postanalytical phase. About one-quarter of all erroneous results led to unnecessary additional testing or therapy (91).

Test Selection and Ordering The first step in the testing process occurs at the moment of test selection. While the majority of laboratory testing is ordered by physicians and nurse clinicians, other groups, including pharmacists in some jurisdictions, can order tests. Information on laboratory testing is expansive and involves knowledge of the indications for testing, including test sensitivity and specificity for the patient’s condition or diagnosis. Many tests are performed for monitoring or screening, so frequency of test ordering may need to be considered. Multiple clinical guidelines provide expert opinions about clinical indications for testing based on specific signs, symptoms, or suspected disorders (27, 78). However, implementation of these guidelines has proven difficult (11). Some approaches for managing the

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Table 21.1 CAP Q-Tracks and Q-Probes quality assurance pro-

gram, 2011a Q-Tracks Patient Identification Accuracy (QT1) Assess the incidence of wristband errors within individual institutions, compare performance between participating institutions, and identify improvement opportunities. Blood Culture Contamination (QT2) Determine the rate of blood culture contamination using standardized criteria for classifying contaminants. Laboratory Specimen Acceptability (QT3) Identify and characterize unacceptable blood specimens that are submitted to the chemistry and hematology sections of the clinical laboratory for testing. In-Date Blood Product Wastage (QT4) Compare the rates of blood product wastage (i.e., units discarded in-date) in participating hospitals and track rates of improvement over time. Satisfaction with Outpatient Specimen Collection (QT7) Assess patient satisfaction with outpatient phlebotomy services by measuring patients’ assessment of waiting time, level of discomfort, courteous treatment, and overall satisfaction. Stat Test Turnaround Time Outliers (QT8) Monitor the frequency with which stat test turnaround time intervals exceed institutional stat test turnaround time expectations. Critical Values Reporting (QT10) Evaluate the documentation of successful critical values reporting in the general laboratory for both inpatients and outpatients according to the laboratory’s policy. Turnaround Time (TAT) for Troponin (QT15) Determine the median order-to-report turnaround time of troponin (I or T) ordered on patients presenting to emergency departments (EDs) with signs and symptoms of acute myocardial injury. Corrected Results (QT16) Monitor the number of corrected test results within individual institutions and compare performance with that of all institutions and those institutions similar to yours. Outpatient Order Entry Errors (QT17) Measure the incidence of incorrectly interpreted and entered outpatient physician test orders, compare performance across institutions, and track performance over time. Specimen Acceptability in Blood Bank (QT18) Identify and characterize incorrectly collected and labeled blood specimens submitted to the blood bank for testing. Q-Probes Laboratory Services for Emergency Department (QP111) Measure order-to-report turnaround times for laboratory tests requested from the ED and measure ED physician satisfaction with the provided TAT. Appropriateness of Plasma Transfusions (QP112) Assess the conformance of plasma transfusion practice to institutional guidelines and assess the posttransfusion coagulation testing documentation and extent of coagulation correction achieved. Clinical Consequences of Specimen Rejection (QP114) Quantify the effect of laboratory specimen rejection on the delay in test result availability. Determine the effect on test result availability by (i) the reason for specimen rejection, (ii) the detection method for mislabeled specimens, and (iii) the laboratory’s policy regarding resolution of improperly labeled specimens. a

CAP (http://www.cap.org).

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quality of test selection include monitoring the frequency of testing use by algorithms and instituting test restriction policies (59). Limits can be established for test ordering frequency. Thus, for a slowly changing analyte like hemoglobin A1c (used to monitor glucose control in diabetics), some healthcare systems cancel any new test order if the hemoglobin A1c is ordered within 28 days of the last test (75). Some laboratory information systems can notify the clinician about potential excess ordering patterns when the number of tests (e.g., two serum cholesterol orders within a week) exceeds a predetermined number (4, 117). Use of algorithms in which indications for ordering a test depend on the results of another test or other patient parameters can be effective. Examples include deferring serological testing for acute hepatitis A when alanine aminotransaminase is normal or deferring ova and parasite examinations in patients who have been hospitalized for more than three days (82). To promote optimal test usage, a multifaceted approach is recommended, including clinician education about laboratory testing, controls on ordering, and feedback about the individual clinician’s test utilization (108). New Zealand offers such a program for its general practitioners that combines physician education and utilization feedback; initial results have been dramatic (120). Preanalytical errors associated with ordering tests include inaccuracies or omissions when transcribing from paper requisitions into a laboratory computer system, tests performed but not actually ordered, associating the order with the wrong physician, and mistakes with assigning priority status to the order (e.g., stat, routine). Of all tests ordered, about 2% are not completed because of these problems (124). In one study involving 660 laboratories, 4.8% of about 115,000 outpatient orders resulted in mistakes (125). The most common was assignment of the wrong physician with an order, and the least common was test priority assignment. High test volume, verbal orders, and lack of laboratory policies and procedures to ensure a high-quality order entry process were associated with higher error rates. While ordering errors and inappropriate test requests should be tracked and trends should be investigated, major advances in improving the quality of test selection will depend on advances in healthcare information systems strengthening their ability to assist clinicians based on other information in the patient’s electronic record (4, 44, 93). Schiff reported that 2% of patients with a laboratory diagnosis of hypothyroidism were not informed of this finding by their clinician. Another 5% with hypothyroidism were lost to follow-up, and patients with thyroid replacement therapy were not considered (97). Computer linkage of laboratory data to a pharmacy database would decrease such issues and improve patient safety. Use of computerized test ordering directly by the physician reduces clerical and transcription errors associated with paper requisitions, reduces

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costs, and improves utilization (106, 118). Electronic access to patients’ imaging and laboratory results is not a panacea; physicians who were able to access their patients’ radiology and laboratory results online tended to order more tests, especially radiologic tests (77).

Quality of Specimen Collection Laboratory test results may be affected by the patient’s condition at the time of specimen collection, as well as by the materials and procedures used for specimen collection (80). These types of errors may be easily overlooked and lead to inaccurate test interpretations or incomplete testing due to specimen rejection (e.g., hemolysis), insufficient volume, or incorrect collection containers. In one study that examined more than 800,000 outpatient visits at 210 facilities, about 0.4% of phlebotomy procedures were unsuccessful (31). The most common causes in order of frequency were nonfasting patient, missing orders, unsuccessful phlebotomy procedure, patient left collection area, and patient not prepared for test (other than nonfasting status). Of the successful blood collections, 0.26% of specimens were unsuitable for testing. In order of decreasing frequency, this was caused by hemolyzed specimen, insufficient specimen volume, clotting of anticoagulated specimen, lost specimen, mislabeling, and rejection based on delta check failure. Other studies have shown that about 0.35% of specimens submitted for chemistry examinations are rejected, with hemolysis being the most common reason, and about 0.45% of specimens received for hematology testing are rejected, with specimen clotting being the most common reason (56, 57). The quality of coagulation testing depends greatly on good collection technique and full sampling (1, 64). A review of videotaped phlebotomies showed that 4 of 10 phlebotomists did not mix their filled blood tubes and 2 of 10 delayed mixing (45). Delayed mixing of filled plasma separator tubes can cause artifactual increases in troponin and hCG (115). Well-documented and validated specimen collection procedures used by trained phlebotomy and nursing staff are key factors to prevent preanalytical errors from affecting the overall quality of the testing process (6, 8). It is important to provide patients with detailed instructions about preparation prior to collecting the specimen and then to make sure the instructions were followed. For example, two consecutive studies have found that between 25 and 34% of toxic serum digoxin levels were likely falsely elevated due to specimen collection too soon after patients ingested their medication (49). These falsely high results can be avoided by instructing phlebotomists to ask patients when they last took a digoxin pill to determine if a specimen collection should be deferred to a later time. To mitigate the problem of falsely elevated digoxin results in northern Alberta, an interdisciplinary team of a clinical biochemist, pharmacists, and clinicians mandated evening digoxin dosing.

This nocturnal dosing coupled with the usual morning therapeutic monitoring has resulted in very few incorrectly timed digoxins (D. LeGatt, personal communication). Phlebotomists should always ask if a patient is fasting prior to collecting a specimen for triglyceride, as false elevation of serum triglyceride occurs in specimens collected from nonfasting patients, making this determination meaningless. Measuring total creatinine on 24-h urine specimens helps determine whether a complete 24-h collection was obtained, and this can be monitored as a quality indicator. Special attention must be given to the collection of specimens for microbiological examinations. Poor-quality specimens that are collected improperly or inappropriately will produce useless or even misleading results that may be misinterpreted as having significance to patient care (134). In some cases, specimen quality can be evaluated by smear examinations before cultures are performed, and specimens may be deferred from testing if judged to be of poor quality (83). For example, excessive epithelial cells seen on a Gram stain from a sputum specimen suggest that the specimen contents are from the mouth rather than the lower respiratory tract; this may warrant rejection of the specimen for culture. Another example, the failure to collect a sufficient number of sputum specimens, is the most common cause of delayed diagnosis of tuberculosis in HIV-infected patients (37, 76). While contaminated cultures from sterile sources cannot be completely eliminated, they can be reduced with good aseptic collection techniques. Proper sterile preparation of the venipuncture site with the correct materials and careful collection procedures by a properly trained phlebotomist significantly reduce the cost of blood culture contamination, which varies up to fivefold between laboratories (42, 69, 102, 107, 130). Blood collection processes have important implications for costs and outcomes. A preliminary false-positive blood culture results in additional costs of $4,000 per episode because of prolongation of hospitalization and concomitant laboratory testing and therapies (3). Finally, the specimen may be collected properly, but there may be insufficient blood volume or inadequate specimen numbers to provide the highest-quality result. For example, collection of solitary rather than multiple blood cultures makes it difficult to differentiate contamination from true bacteremia when coagulase-negative Staphylococcus sp. is isolated (99). It is critically important that specimens be labeled correctly and properly. The frequency and reasons for incorrect patient identification should be part of the laboratory’s quality assessment program. Delta checking (see Use of Patient Data for Quality Control) is a method in which the laboratory manager establishes parameters in the laboratory information system that flag current patient results that differ substantially from previous results (53, 62, 63). Generally, delta checks are not very helpful in highly

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automated laboratories because of the relative absence of sample mix-up and analytic error. Delta checks also lack utility for most analytes because of large expected changes in these analytes (e.g., glucose). Other analytes are more sensitive (e.g., red blood cell mean corpuscular volume). Depending on how the parameters are set, only a small proportion of delta check investigations will uncover specimen mix-up errors in today’s healthcare organizations, where the median identification error rate is 4 per 10,000 (88, 105, 114, 126).

Patient and Client Satisfaction Typically, the only direct experience patients have with the laboratory is during phlebotomy. Patient satisfaction with this experience is an important preanalytical quality measurement. This is determined by patient surveys as well as objective parameters such as patient waiting times or number of self-reported hematomas (47), number of needlesticks, and even the cleanliness of the phlebotomy area (22). Laboratories should also conduct nurse and physician satisfaction surveys. Excessively long turnaround time is usually the most significant concern expressed by both physicians and nurses (54, 57, 111). Esoteric test turnaround time has been associated with low levels of physician satisfaction (55). Nurse customers were the least satisfied with test turnaround time in the intensive care units and emergency departments (58). Setting up a hotline through which clients can report potential problems or errors and make inquiries may help large laboratories improve customer support services. It is useful to track this information to look for trends or ideas for quality improvement. Specimen Transport, Storage, Receipt, and Preanalytical Processing Specimens can deteriorate through prolonged delays or failure to maintain proper conditions during transport. Some tests (e.g., urine culture, coagulation tests) are more susceptible than others to processing delays. The World Health Organization has published a very useful comprehensive monograph that documents the stability of anticoagulated blood and serum and plasma specimens (137). It is difficult to monitor transport times or even collection time when the collection is not under the control of the laboratory. Specimens that are lost or mishandled in other ways (e.g., broken tube) during transport or preanalytical laboratory processing should be tracked as a quality indicator (see Corrected and Incomplete Reports). Specifications for specimen transport and storage based on stability of analytes should be validated and documented. Accurate identification of the specimen throughout the testing process is facilitated by the use of bar codes that can be scanned by laboratory instruments prior to testing (119). Bar codes are significantly more reliable than the

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manual entry of specimen information. Bar-coded specimens prevent errors due to misplacement of specimens into instruments or when aliquoting specimens into secondary containers. Bar code systems work best when integrated into the blood collection process with wristband (inpatient) or identification card (outpatient) positive patient identification schemes. Finally, significant error reduction can be accomplished with the implementation of robotic technology for the automated handling of all aspects of preanalytical within-laboratory specimen processing (10, 46).

Quality Management of Analytical Processes Quality management of the analytical phase involves reducing inaccuracy and imprecision (variability) of test methods as much as possible (109). Attention to standardizing test procedures and monitoring method performance with a well-designed quality control system are the key elements for meeting this management goal. Appropriate method selection and proper training are additional factors that are important for success.

Method Selection and Evaluation Method selection is laboratory dependent and based on characteristics that best fit internal goals for cost, timeliness, and reliability (see chapter 27, this volume). These characteristics include type of specimen required, sample volume, run size, population to be tested, instrument capacity, analysis time, personnel requirements, existing equipment, safety, utilities (e.g., electrical, water), and space requirements. The complexity of analysis, including calibration, stability of reagents and controls, sensitivity and specificity of the method, linear range of analysis, and interferences, as well as types of internal and external proficiency systems, are factors that may affect method selection decisions. In the United States, most laboratory methods require review of rigorous premarket evaluations and approval by the U.S. Food and Drug Administration (FDA). As a result, implementation of FDA-approved tests is usually relatively straightforward. Validation and implementation of non-FDA-approved methods can be much more complex and labor-intensive and require substantially more development and evaluation, as well as resources. Sometimes, the best decision is to outsource a test when rapid turnaround time is not necessary, test volume is low, or it is difficult to maintain an acceptable quality of proficiency. Method evaluation and implementation involves assessing the analytical process statistically by the use of control materials, establishing or validating the reference (normal) range of the population being tested, documenting the procedure in writing (both for laboratory use and

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another document for client use), and training personnel (Table 21.2). When a new method is introduced, it must be compared to the old method before bringing it into use. All procedure changes, training, and analytical performance data from the previous method should be documented, and clients should be notified of changes affecting interpretation of results.

Quality Control The term “quality control” describes the approach used to monitor the analytical process to ensure that the test results meet their quality requirements. Quality control includes establishing specifications for the analytical process, monitoring the analytical process to determine conformance to these specifications, and taking any necessary corrective actions to bring the analytical process into conformance (16). The primary quality characteristic that is monitored during the analytical process is the deviation of an analytical measurement from expected. If the size of this deviation (also known as error) is large, the analytical process may be defective and thus must be investigated. Errors can be classified as systematic (resulting in a shift) or random (resulting in increased imprecision). They may also be classified as persistent or intermittent. Other typically monitored quality characteristics of the analytical process include specific instrument checks that are usually unique to a particular instrument. The deviation of the analytical measurement from the expected value is usually monitored by repetitively assaying one or more levels of quality control specimen. The results of testing these commercially prepared, stabilized control specimens are compared to a range of expected values calculated as the mean and variance (standard deviation) of

Table 21.2 Method evaluation and implementation Stage I Prepare and document procedure Validate linearity and calibration Determine within-run imprecision Evaluate for interferences Stage II Determine between-day imprecision Compare to old method Evaluate acceptability of imprecision and bias Perform or validate reference range(s) Stage III Establish final quality control ranges, critical values, and delta checks Train personnel Complete and sign procedure documents Notify clients of any significant changes in method

these measurements. If the quality control result deviates significantly as defined by quality control rules (see below), routine analysis is suspended, the analytical run is investigated, and corrective action is taken. Usually two or three different control levels are used. In hematology and hormone (ligand) measurements, it is standard to use three levels; in general chemistry, two levels are standard. As a rule, it is better to have more measurements on fewer control products. Laboratories may also compare their own quality control results to those generated in other laboratories using the same lot of control materials and instrument/reagent systems. This information is provided by most commercial manufacturers of quality control materials and provides a way to assess bias and imprecision of the laboratory’s methods relative to others’ tests performed under similar quality control conditions (Fig. 21.1). Quality control systems for microbiological and serological testing are primarily qualitative in nature. Control testing is performed to check the performance of media, biochemical reactions (positive or negative), immunological reactions, or expected growth in the presence of antibiotics (susceptibility testing). In molecular microbiology, more than three standards are typically used to generate standard curves for quantitative measurements and are combined with two or three density levels (e.g., low, mid, and high density), external positive controls, or standards.

Quality Control Rules Quality control rules developed for the clinical laboratory originated in the early 1950s with Levey-Jennings charts. These charts were implemented with three standard deviation (SD) limits for the mean and range of two controls analyzed just twice per week. By the 1960s, the limits had been reduced to two SD for single controls (Fig. 21.2). In the next decade, statistical quality control rules were implemented to help reduce the number of false rejections. Table 21.3 shows some of the common quality control rules used to evaluate control measurements today. Westgard et al. have developed a nomenclature for these control rules and devised graphical summaries (power function curves) of their sensitivity and specificity (131, 132). For most applications of clinical laboratory quality control, a combination of the 1-3SD and the 2-2SD control rules is adequate. The 1-3SD rule can detect increases in random error and large systematic errors, while the 2-2SD control rule detects moderate-sized systematic errors. This quality control combination is relatively simple to implement and has a relatively low false rejection probability. Figure 21.3 shows how the 1-3SD and the 2-2SD control rules are applied at one laboratory. On highly precise analyzers, the analytical variation of some analytes may be so small that violations of the 1-3SD or 2-2SD rules can be

CHAPTER 21. QUALITY MANAGEMENT

Laboratory Performance Overview

Cardiac Markers

Lab 123456

L e v e l 1

Peer -0.39 0.5 37 1500

TM

2.0

Troponin-I Chemiluminescence Bayer ADVIA Centaur Dedicated Reagent mg/dL SDI: CVR: # Labs: # Points:

Lot 30710 Data For: 07-2003 Lot Exp: 06-2004 Printed: 08-15-2003 Page 1

QC Coordinator Associated Regional Laboratory 123 Main St. Anytown, NY 12345-6789

1.0

Method 0.32 0.1 224 7964

S D I

0

CVR

-1.0 -2.0

2. 0

L e v e l 2

1. 0

SDI: CVR: # Labs: # Points:

Peer -0.44 0.5 30 1269

Method 0.01 0.0 150 5181

S D I

0

CVR

-1. 0 -2. 0

2.0

L e v e l 3

1.0

SDI: CVR: # Labs: # Points:

Peer -0.07 0.7 40 1706

Method -0.08 0.1 210 7608

S D I

0

CVR

-1.0 -2.0

© 2003 BIO-RAD LABORATORIES • ALL RIGHTS RESERVED

Figure 21.1 Examples of interlaboratory quality control reports. (A) The SDI (a peer-based mea-

sure of bias) and CVR (a peer-based estimator of precision) are combined as an x, y coordinate within three performance zones: acceptable, acceptable to marginal, and marginal. (continued)

427

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REQUIREMENTS FOR EFFECTIVE LABORATORY MANAGEMENT

Lab 123456

Laboratory Comparison Report Cardiac Markers

QC Coordinator Associated Regional Laboratory 123 Main St. Anytown, NY 12345-6789

Lot 30710

TM

Data For: 01-2003 Lot Exp: 06-2004 Printed: 08-15-2003 Page 1

The following statistics are derived from user-supplied data and are provided by Bio-Rad Laboratories as a service to customers. Such action does not imply support of reported analytes and test methods. Refer to the package insert for specific analyte claims and stability information. Peer group statistics contained in this report may not be used without the express written consent of Bio-Rad Laboratories. Analyte Method Units Instrument/Kit Reagent

Level 1

Temp

Mon

Level 2

Level 3

Cum

Mon

Cum

Mon

Cum

Troponin-I Chemiluminescence ng/mL Bayer ADVIA Centaur Dedicated Reagent Your Lab

Peer Group

Group Values by Method

Mean SD CV (Peer) CVR (Method) CVR (Peer) SDI (Method) SDI # Points

1.49 0.053 3.6 0.5 0.1 -0.39 0.32 4

1.60 0.074 4.6 0.6 0.1 0.27 0.37 151

10.78 0.332 3.1 0.5 0.0 -0.44 0.01 4

11.08 0.405 3.7 0.6 0.1 0.03 -0.03 151

38.94 1.60 4.1 0.7 0.1 -0.07 -0.08 4

38.17 1.49 3.9 0.7 0.1 -0.28 -0.17 151

Mean SD CV # Points # Labs

1.53 0.102 6.7 1500 37

1.57 0.111 7.1 5889 39

11.08 0.677 6.1 1269 30

11.06 0.635 5.7 4917 32

39.10 2.14 5.5 1706 40

38.78 2.20 5.7 6900 41

Mean SD CV # Points # Labs

1.21 .0866 7.15 7964 224

1.23 .100 8.13 37806 254

10.70 .786 7.35 5181 150

11.34 1.023 9.02 25366 179

40.46 1.901 4.70 7608 210

41.98 2.294 5.46 35479 238

© 2003 BIO-RAD LABORATORIES • ALL RIGHTS RESERVED

Figure 21.1 (continued) (B) Reports provide monthly and cumulative statistics for the laboratory and between-laboratory comparisons with a peer group. Report includes mean, standard deviation, coefficient of variation, CVR, SDI, number of data points, and number of laboratories. CVR, coefficient of variation ratio, a ratio of laboratory imprecision to peer group imprecision. A value less than 1 indicates better than average imprecision; a value greater than 1 indicates more than average imprecision compared to the peer group. doi:10.1128/9781555817282.ch21.f1

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429

Figure 21.2 Quality control charts. doi:10.1128/9781555817282.ch21.f2

caused by very small errors that would not affect the clinical interpretation of the test result. For these tests, it might be reasonable to expand the control limits and diminish the frequency of attempts at correction and prevention of these small errors. Variations of these rules have been adapted for testing platforms in quantitative molecular microbiology (66).

Frequency of Quality Control Analysis The more frequently control products are analyzed, the more quickly analytical errors can be detected, investigated, and corrected. For some tests, government regulations specify the longest period over which controls need not be analyzed. While many laboratories analyze controls more frequently,

the government-mandated period tends to become a de facto standard for control analysis. The average time to detect a persistent error has been shown to be one-half of the period between control analyses (90). Thus, if the period between control analyses is 24 h, an error may impair laboratory testing for an average of 12 h before being detected. It is possible to shorten the interval between control analyses without increasing the number of controls analyzed. Rather than analyzing several controls one after another, each control can be tested at different times of the day. As a result, the period between control testing is shortened. For example, rather than analyze three blood gas controls every 24 h, one can be tested every 8 h. Using this control analysis schedule, the average time to detect a persistent error will be 4 h.

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REQUIREMENTS FOR EFFECTIVE LABORATORY MANAGEMENT

Table 21.3 Common quality control rules 1-2SD

Use as a rejection or warning when one control observation exceeds the x − (±2SD) control limits; usually used as a warning.

1-3SD

Reject a run when one control observation exceeds the x − (±3SD) control limits. Reject a run when one control observation exceeds the x − ±(3.5SD) control limits. Reject a run when one control observation exceeds the x − ±(4SD) control limits. Reject a run when two consecutive control observations are on the same side of the mean and exceed the x − (+2SD) or x − (−2SD) control limits. Reject a run when four consecutive control observations are on the same side of the mean and exceed either the x − (+1SD) or x − (−1SD) control limits. Reject a run when 10 consecutive control observations are on the same side of the mean. Reject a run if the range or difference between the maximum and minimum control observation out of the last 4 to 6 control observations exceeds 4SD. Reject a run if the mean of the last N control observations exceeds the control limits that give a 1% frequency of false rejection (pfr = 0.01). Reject a run if the range of the last N control observations exceeds the control limits that give a 1% frequency of false rejection (pfr = 0.01).

1-3.5SD 1-4SD 2-2SD

4-1SD

10x R-4SD

x-0.01 R-0.01

Some laboratories do not analyze quality control specimens on a periodic basis; rather, the number of controls analyzed depends on the number of patient specimens run. Because reference laboratories can analyze large numbers of specimens over the course of a day, regular but infrequent control analysis may result in large numbers of samples being analyzed with minimal information provided about the run quality. As such, many reference laboratories test their patient samples in batches, with a specific number of controls analyzed in each batch. Only when the quality control specimens are within quality control limits is the batch of patient results reported. Some authors have suggested that for high-volume multichannel chemistry analyzers, control specimens be tested between every 30 and 100 patient specimens (85). Some referral laboratories do not use specimen number to establish quality control frequency; they test quality control specimens more frequently, e.g., each hour.

Specification of MAE The primary function of quality control is to maintain a stable analytic process. Once the process is stable, then any required improvements can be implemented. Specifications for maximum allowable error (MAE) provide information about the adequacy of an analytic system for patient care. MAE represents the magnitude of total error that can be tolerated without invalidating the medical usefulness of the result. The analytical quality of a test can be

Overused. Should only be used with manual assays with low number of analytes/control materials. Detects random error and large systematic error. Detects large random and systematic error. Use only with highly precise assays. Detects large random and systematic error. Use only with highly precise assays. Detects systematic error.

Detects small systematic error; very few applications. Detects very small errors; do not use. Detects random errors; use within run.

Underutilized Underutilized

evaluated by comparing its total analytic error to the MAE; this is a method for setting goals for the analytical performance of a laboratory test. Several different approaches have been used for determining the MAE of laboratory tests. One of the first was offered in 1963 (121) by Tonks, who insightfully suggested that the MAE be based on interindividual variation. For most analytes, he suggested that the MAE should be no greater than one-quarter of the analyte’s reference interval (normal range) (121). Cotlove et al. proposed that the MAE should be less than one-half of the intraindividual range (29). Ricos et al. tabulated MAEs for over 300 different analytes based on biological variation and associated method biases and imprecisions (96). Table 21.4 compares the MAE for select analytes to typical amounts of imprecision of current laboratory analyzers. There is tremendous variation in the MAEs, ranging from around 1% for serum sodium to 30% for various urine assays. The MAE/imprecision ratio is a measure of the analytical quality of the test method. The ratio can be thought of as the magnitude of shift, expressed in standard deviations, which will render a test measurement unfit for medical usage. Thus, for sodium, whose ratio is approximately 1, just a 1% shift in measured sodium might make the measurement too inaccurate for serial monitoring. Sodium is an extreme example because its plasma concentration is tightly controlled by multiple feedback mechanisms. Where a test’s MAE/imprecision ratio is less than 2.5, it is highly desirable

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431

Figure 21.3 Flow chart showing implementation of the 2-2SD/1-3SD control procedure. Courtesy

of Tammy Hofer. doi:10.1128/9781555817282.ch21.f3

that the manufacturer reduce the method’s imprecision. This is a better approach than adding extra quality control samples to attempt to detect small analytical errors on a system that has insufficient reproducibility. Such effort is highly frustrating and, in the authors’ opinion, generally nonproductive. For analytes with MAE/imprecision ratios of 2.5 or less, we recommend the combination of the 1-3SD

and 2-2SD rules, possibly combined with the R-4SD rule. Table 21.5 shows recommended quality control rules for various MAE/imprecision ratios. Whenever possible, the laboratory manager should deploy instruments that provide tests with MAE/imprecision ratios that exceed 3.5. For analytical systems with high MAE/imprecision ratios, it is possible to employ control rules with very low false

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REQUIREMENTS FOR EFFECTIVE LABORATORY MANAGEMENT

Table 21.4 Comparison of MAEs derived from physiological variation to typical instrument imprecisions Analyte Serum albumin Urinary albumin Urinary creatinine, 24 h Activated partial thromboplastin time Hemoglobin Serum sodium Urinary sodium, 24 h

MAE (%), 95% limits

Typical imprecision (%)

MAE (%)/imprecision

3.9 46.1 6.9 4.5

1.5 8 2.5 3

2.6 5.8 2.8 1.5

4.1 0.9 28.8

0.8 0.8 4

5.1 1.1 7.2

rejection probabilities, such as 1-3SD or 1-3.5SD or even 1-4SD (21). Unfortunately, selection of analyte-specific control rules can require variations in the timing of quality control testing. Alterations in control frequency are difficult because many quality control analytes are measured together on a single instrument. It is almost impossible in a busy hospital laboratory to schedule more frequent analytespecific quality control testing and interpretation. At this time, very few instruments can automatically sample and analyze on-board quality control material on a per analyte basis. As a result, most laboratories use the same schedule of control analysis for all of the analytes measured. Some laboratories apply analyte-specific quality control rules through the use of a sophisticated laboratory information system or instrument-based quality control systems.

Use of Patient Data for Quality Control Virtually all laboratories that perform patient specimen testing for ongoing care must alert the caregiver of any results that are critical (sufficiently outside of their usual physiological limits such that they are incompatible with life). Each laboratory must have a critical value list that specifies the limits for alerting the caregiver (60, 61, 89, 128). In the past, many areas of the clinical laboratory have repeated testing in the most timely manner if the initial results were “critical.” This kind of a check (sometimes called a limit check) delays the reporting of the critical value to the caregiver. As successive generations

Table 21.5 Control rules that can be used for various MAE/imprecision ratiosa MAE/imprecision

Control rule

2 to 4

Multirule consisting of combination of 1-3SD, 2-2SD, and R-4SD (2 or 3 control levels at start-up) 1-2.5SD (2 or 3 control levels at start-up) 1-3SD or 1-3.5SD (2 or 3 control levels at start-up)

3.5 to 5 4.5 to 7 a

Adapted with permission from reference 14.

of analyzers become more precise, and as laboratories determine that the repeat values are substantially the same, more laboratories are ending the practice of confirming the critical value. Such decisions should be data driven; if an evaluation of the last 50 to 100 critical-value repeats does not yield clinically significant differences, the laboratory director can confidently suspend this increasingly non-value-added practice. For analytes exhibiting large random errors (usually in the low-volume, manual laboratory), specimens should be analyzed in duplicate with the average reported as long as the difference between duplicates does not exceed certain limits—originally around ±15%, but presently around ±5%. Some laboratories use duplicate analyses of another type: patient-sample comparisons. These comparisons require the regular analysis of split samples on identical or dissimilar instruments that measure the same analyte. Differences between instruments that exceed predetermined limits are investigated and corrected (19, 79). Too often, these comparisons are performed retrospectively and contribute little to quality improvement. We recommend that the analyst enter the patient comparison data into an active database; outlying data should be signaled immediately to the analyst and laboratory supervisor. Such prospective analysis can easily be followed by reanalysis of another sample, adjustment of calibration, perhaps widening of the acceptable differences, and rarely, instrument replacement. The average of patient (AOP) data is another control procedure that uses patient data. In AOP, an error condition is signaled when the average of consecutive centrally distributed patient data is beyond the control limits established for the average of the patient data. The assumption underlying AOP is that the patient population is stable. Any shift would thus be secondary to an analytical shift. The error-detection capabilities of AOP depend on several factors (17). The most important are the number of patient results averaged and the variances of the patient population and analytical method. Using averages of patient endocrine data has demonstrated high error-detection capabilities for thyroid testing (33). However, AOP is not commonly used for clinical chemistry. In contrast, AOP

CHAPTER 21. QUALITY MANAGEMENT

has been used extensively in hematology to monitor patient red blood cell indices and, indirectly, their constituent measurements, hemoglobin and red blood cell count, as well as hematocrit (23, 65, 74). The primary limitation of AOP in the hospital laboratory is the lack of randomization in the order of receipt and analysis of patient samples. In hematology, for example, the averaging of a large number of specimens from a neonatal unit or a hematology unit can cause the red blood cell indices to inappropriately indicate an out-of-control situation. In clinical chemistry, analysis of specimens primarily from renal units will cause large shifts in the AOP of creatinine, glucose, and urea nitrogen. In referral laboratory testing, there is “natural randomization” of patient specimens, and AOP is a powerful tool in guaranteeing acceptable analytical performance (20). Hospital laboratory AOP is significantly influenced by longer-term, within-day and within-week trends. Overnight and over weekends, less testing is ordered; this weekend and nightly testing is performed on more acutely ill patients. As a result, these evening and weekend AOPs will demonstrate elevated glucose, lower sodium, lower protein, and lower calcium averages (13). One other quality control approach uses patient data: the delta check, in which the most recent result for a patient is compared to the previous value. The difference between consecutive laboratory values (deltas) is calculated and compared to previously established limits (62). A difference that exceeds these limits is investigated; this difference is either the result of specimen mix-up or real changes in the patient’s test results. The difference is usually calculated in two ways: as a numerical difference (current value minus last value) and as a percentage difference

433

(numerical difference times 100 divided by the current value). There is a tremendous range in the true positive rate of delta check methods depending on the analyte and its delta limit (133). While delta checks are almost universally applied, there is a high cost in investigating the many false positives, especially in tertiary-care hospital populations in which there are large excursions in laboratory values secondary to disease or therapy.

External Quality Control (Proficiency Testing) Proficiency-testing programs provide samples of unknown concentrations of analytes to participating laboratories. Their purpose is to evaluate the ability of laboratory personnel to achieve the correct analysis. Participation in these programs is usually government-mandated, with the premise that acceptable performance indicates proficiency in patient specimen analysis. This assumes that proficiency specimens are comparable to and treated the same as patient specimens. Acceptable performance is determined by some form of consensus by peer comparisons using “fixed limits,” which are expressed either in measurement units of the analyte (e.g., ±0.5 mmol/liter from the mean for potassium) or as percentages (e.g., ±10% for total cholesterol) (122). Statistically defined limits of acceptability are used for a far smaller number of methods (e.g., thyroid-stimulating hormone) (Table 21.6). The standard deviation index (SDI) is used for this purpose and is calculated as the numerical difference between an individual laboratory’s results and the mean of all laboratory results, divided by the standard deviation of all laboratory means. For these analytes, the participant result is acceptable if it falls within ±3 SDI of the group mean.

Table 21.6 CLIA testing criteria for acceptable external proficiency testing performance Test or analyte

Acceptable performance (+ target value)

Chemistry, toxicology Alanine aminotransferase Albumin Alcohol, blood Alkaline phosphatase Alpha-1 antitrypsin Alpha-fetoprotein Amylase Anti-HIV Antinuclear antibody Antistreptolysin O Aspartate aminotransferase Bilirubin, total Blood lead Blood gas pO2 Blood gas pCO2

20% 10% 25% 30% 3 SD 3 SD 30% Reactive or nonreactive 2 dilution or positive/negative 2 dilution or positive/negative 20% 0.4 mg/dl or 20% 10% or 4 mg/dl 3 SD 5 mmHg or 8% (continued)

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REQUIREMENTS FOR EFFECTIVE LABORATORY MANAGEMENT

Table 21.6 CLIA testing criteria for acceptable external proficiency testing performance (continued) Test or analyte

Acceptable performance (+ target value)

Blood gas pH Calcium, total Carbamazepine Chloride Cholesterol, total CK isoenzymes Complement C4 Complement C3 Cortisol Creatine kinase Creatinine Digoxin Ethosuximide Free thyroxine Gentamicin Glucose HDL cholesterol Hepatitis (HBsAg, anti-HBc, HBeAg) Human chorionic gonadotropin (HCG) Immunoglobulin A (IgA) IgE IgG IgM Infectious mononucleosis Iron Lactate dehydrogenase Lithium Magnesium Phenobarbital Phenytoin Potassium Primidone Procainamide (and metabolite) Quinidine Rheumatoid factor Rubella Sodium T3 uptake Theophylline Thyroid stimulating hormone Thyroxine Tobramycin Total protein Triglycerides Triiodothyronine (T3) Urea nitrogen Uric acid Valproic acid

0.04 1.0 mg/dl 25% 5% 10% MB present or absent, or 3 SD 3 SD 3 SD 25% 30% 0.3 mg/dl or 15% 20% or 0.2 ng/ml 20% 3 SD 25% 6 mg/dl or 10% 30% Reactive, positive or nonreactive, negative 3 SD or positive/negative 3 SD 3 SD 25% 3 SD 2 dilution or positive/negative 20% 20% 0.3 mEq/liter or 20% (greater) 25% 20% 25% 0.5 mEq/liter 25% 25% 25% 2 dilution or positive/negative 2 dilution or positive/negative 4 mEq/liter 3 SD 25% 3 SD 20% or 1.0 mg/dl 25% 10% 25% 3 SD 2 mg/dl or 9% 17% 25% (continued)

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435

Table 21.6 (continued) CLIA testing criteria for acceptable external proficiency testing performance Test or analyte

Acceptable performance (+ target value)

Hematology Cell identification White cell differential Erythrocyte count Hematocrit Hemoglobin Leukocyte count Platelet count Fibrinogen Partial thromboplastin time Prothrombin time

80% or greater consensus on identification 3 SD based on leukocyte percentage 6% 6% 7% 15% 25% 20% 15% 15%

An alternative multirule system has been developed to evaluate proficiency test results (12, 15, 18). The alternative method is simple and can be used by pathologists, doctorate-level scientists, and medical technologists. The most current approach is illustrated in Fig. 21.4. When significant deviations are detected in a set of five survey results (the mean of the five results exceeding +1.5 SDI, or the range of the observations exceeding 4 SDI, or at least one

observation exceeding 75% of the total allowable error), the laboratory records, including the internal quality control results, should be reviewed. Mix-ups of proficiency specimens or of proficiency and clinical specimens should be ruled out. Whenever possible, aliquots of the survey specimens should be frozen and saved. If the survey results differ significantly from those obtained on peer instruments, these aliquots should be reassayed. Results that still deviate Figure 21.4 Flow chart illustrating proficiency

Examine Proficiency Testing Data

test review, from reference 14 with permission. doi:10.1128/9781555817282.ch21.f4 Yes

X1.5 SDI Failure?

Probable Systematic Error

No

Yes

R4 SDI Failure?

Probable Random Error

No Yes

1 75% EA Failure?

“Near Miss” Detected

No

Acceptable

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REQUIREMENTS FOR EFFECTIVE LABORATORY MANAGEMENT

significantly after retesting can indicate a long-term bias. If the deviations are variable in magnitude and direction, there may be a problem with imprecision (random error). In the event that repeat analysis yields satisfactory results, the error probably represented a random error or transient bias encountered during the testing period.

Quality Management of Postanalytical Processes The two most important factors affecting the postanalytical phase of the testing process are test reporting and result interpretation (113, 129). One source of inaccurate reporting is clerical errors due to data entry mistakes. Laboratory instrument interfaces with computer reporting capabilities prevent most of these types of errors. Phone reports have a relatively high rate of errors and should be avoided if possible. To mitigate such errors, both The Joint Commission and CAP require the healthcare provider to read back the information conveyed during the telephone reporting of patient critical values. If computer reporting is unavailable, printed results should be promptly delivered to the patient’s chart or physician’s office. Whenever possible, calculations should be done by preprogrammed computer systems. Procedures for defining and reporting critical laboratory test results must be developed and periodically reviewed by the laboratory director in conjunction with the medical staff to ensure that clinicians are immediately notified about abnormal results when necessary (35, 70, 71). Common examples of critical values that require immediate notification include severe hypo- or hyperglycemia, thrombocytopenia, and positive blood cultures. Failure to notify a clinician of a critical test result is a serious quality failure and requires investigation. Quality management of results utilization and proper test interpretation is underdeveloped at this time. For example, the appropriateness and timeliness of treatment of patients with serious infections improve when the laboratory actively broadcasts the findings of clinically significant bacterial culture results (30, 101). Recent publications, such as those using PCR or peptide nucleic acid fluorescence in situ hybridization (PNA-FISH), document the laboratory’s ability to provide postanalytical impact (5, 38–40, 136).

Turnaround Time Excessively prolonged laboratory test turnaround time is one of the most common complaints voiced to the laboratory manager (55, 58). The slow delivery of laboratory results is associated with increased diagnostic uncertainty and delays in patient management. From an outcome perspective, slow test turnaround times lead to longer waiting times for the patient or incomplete information at the time

of a clinical encounter. Pressure to provide test results more rapidly has led, in part, to the growth of point-of-care testing by nonlaboratory personnel outside of the main clinical laboratory. As a general rule, faster service is associated with higher costs and sometimes lower quality of test results. Therefore, it is the laboratory manager’s responsibility to determine the most effective testing process and testing schedules that will provide the most cost-effective and reliable results within a clinically appropriate time frame. Evaluation of test turnaround time is an important component of the laboratory’s quality assurance program (50, 123). Turnaround time involves all stages of the testing process and is a good way to globally assess performance. Table 21.7 shows the major intervals in the testing process that are potential bottlenecks for delayed testing. Measurement of turnaround time can involve any of these intervals, although the typical measurement is usually specimen collection to result reporting or specimen delivery to result reporting. Typically, the distribution of turnaround times is shifted to the right with a few cases of prolonged times due to various factors such as verification protocols, dilutions, or instrument malfunction. Therefore, simply taking an average of all turnaround time measurements is misleading. A more appropriate measure is to examine the percentage of outlier turnaround times (86, 112). These are also the events that will most likely be noticed and be of concern to clinicians. The key to this approach is to establish an appropriate target for turnaround time based on the goals of the clinical staff and the capabilities of the laboratory and facilities infrastructure (48). For example, in one study involving 496 hospitals, about 90% of stat tests from the emergency department were completed in less than 70 min. Test ordering and specimen collection accounted for nearly 60% of all reasons for delays (112).

Corrected and Incomplete Reports Corrected reports are an important indicator of a failure in one or more laboratory processes. They are analogous to shipping a defective part in the manufacturing Table 21.7 Stages in the testing cycle where turnaround time may be measured Order received and recorded Patient registration Specimen collection Specimen delivery Specimen processing Test Result verification Result reporting Interpretation by clinician

CHAPTER 21. QUALITY MANAGEMENT

industry. Fortunately, only about 4% of these errors have a significant impact on patient care (52). The largest proportion tend to be associated with hematology testing, while the fewest are documented in transfusion medicine. Prior to a result being reported, any number of quality processes may come into play to prevent incorrect results from being reported. However, after the result is verified and reported, the defective result has the potential to affect patient outcome. Incorrect results may be detected in a variety of ways, including input from the physician about a clinical inconsistency, a delta check that uncovers a mislabeled sample that was previously tested, delayed recognition of a significant quality control failure, or a clerical error found during routine supervisory review. All corrected reports should be treated as opportunities to reexamine and improve processes to prevent recurrences of the same problem. Incomplete reporting of results arises from about 2% of orders received by laboratories (124). This may occur for a variety of reasons that involve the total testing process, including improper specimen collection, an unavailable patient, broken tube, lost specimen, misinterpretation of the order, an interfering substance in the specimen, or failure to provide the result in the patient record. Whenever possible, incomplete testing should be reported to the clinician as soon as possible so that testing can be repeated, if necessary. As with corrected reports, incomplete tests should be monitored and examined with the goal of modifying processes to prevent future occurrences.

Document Control Clinical laboratories process and handle an enormous amount of information each day. These processes require an organized approach for controlling, organizing, and retaining this information and making it readily accessible to busy laboratory staff and laboratory inspectors. Document control can be a challenge to manage; electronic software packages are available to help the laboratory manage its documents. Nationally, the top three laboratory deficiencies identified during CAP on-site inspections in the years 1998 to 2001 were related to document control items (41). The Joint Commission inspection of laboratories yields similar results, especially when off-site or multisite laboratories are involved. A document control policy should state the intent and direction the laboratory takes to document and record the structure it uses for creating, revising, approving, distributing, storing, retrieving, and destroying documents. Using the Clinical and Laboratory Standards Institute Quality Systems approach, documents are broken down into 12 quality system essentials (Table 21.8) to provide laboratories with a mechanism to manage

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Table 21.8 CLSI quality system essentialsa Organization Leadership’s commitment to laboratory quality and quality plan Organizational charts, definitions, responsibilities, and relationships Customer focus Identifies laboratory customers and expectations and a means to monitor Facilities and safety Overall safety plan with regard to facility and staff safety and emergency response planning Personnel Hiring, training, competency, qualifications, job/position descriptions Purchasing and inventory Supplier agreements to provide needed inventory and verification of incoming supplies. Equipment Selection and installation, equipment list, validation records, operation/maintenance checks Process management The path of workflow to make the most efficient use of laboratory resources. Documents and records Policies, processes, and standard operating procedures that control the creation, revision, approving, distribution, storing, retrieving, and destruction of laboratory documents Information management Confidentiality and security of patient information Nonconforming event management Reporting and analyzing of events that do not adhere to laboratory policies, processes, or standards Assessments Internal and external monitoring to ensure laboratory meets requirements External proficiency testing, accreditation, and quality indicators Continual improvement Identifying opportunities to continually look for ways to improve a

See reference 26.

the information required to provide quality laboratory services (26).

Summary Clinical laboratories are required to have in place a comprehensive quality program. This requires managing the quality of a wide spectrum of resources, procedures, and services by continuously evaluating quality indicators and making adjustments to improve laboratory performance and patient outcomes. The program involves ongoing inspection of the total testing process, from the time a test is ordered until the results are utilized. The quality program is supported by a robust document control system and is conducted by measurement and analysis of indicators to provide information to guide improvement.

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KEY POINTS ■ Quality management is a system for continuously analyzing, improving, and reexamining resources, processes, and services within an organization. ■ The total testing process provides a comprehensive working model for evaluating the components of the laboratory’s quality management plan as an interdependent component of the organization’s total quality improvement program. ■ Well-documented procedures and trained phlebotomy and nursing staff are key factors for ensuring quality of specimen collection. ■ Patient satisfaction is an important quality indicator. ■ Quality control is a method for establishing specifications for an analytical process, assessing the procedures, monitoring conformance by statistical analysis, and taking corrective actions to bring the procedures into conformance. ■ The two most important factors affecting the postanalytical phase of the testing process are test reporting and result interpretation. ■ Turnaround time, corrected reports, and incomplete testing are important indicators for monitoring the total testing process. ■ A document control policy should state the intent and direction the laboratory takes to document and record the structure it uses for creating, revising, distributing, storing, retrieving, and destroying documents.

Confidence interval Expected range of values within a group with a specified probability. Constant systematic error An error that is always in the same direction and of the same magnitude, even as the concentration of analyte changes. Control limit A range of expected values that, if exceeded, warns of random and/or systematic error in an analytical process. Control material Specimen that is repeatedly analyzed, with test results statistically analyzed to monitor method performance. Delta check Rule-based method to compare a patient’s current test result to a previous measurement to check for unexpected differences that might be due to analytical or nonanalytical errors in the testing process. Error Deviation of measured concentration from expected or true value. Gaussian distribution A random distribution of values described by their average and variance (standard deviation); used to describe analytical imprecision. Imprecision Analytical variance, usually expressed as the standard deviation or coefficient of variation ([standard deviation/ mean] ×100). Interference One or more specimen constituents that cause bias by affecting the analytical method. Matrix Total constituents of the specimen that may affect the analytical process. Maximum allowable error (MAE) Amount of error associated with an analytical method that can be tolerated without invalidating the medical usefulness of the result. Mean Arithmetic average of a set of values.

GLOSSARY Accuracy Agreement between the best estimate of a quantity and its true value.

Medical usefulness limits Quality control limits derived from clinical application of results rather than statistical imprecision of the method.

Analyte Sample to be measured.

Normal range See reference range.

Analytical error The difference between the result of an analytical method and the true value.

Proportional systematic error An error that is always in one direction and whose magnitude is a percentage of the concentration of analyte being measured.

Analytical method Set of written instructions that describe the procedure, materials, and equipment necessary for the analyst to obtain a result. Analytical range The range of concentration or other quantity in the specimen over which the method is applicable without modification. Bias Systematic error that describes the difference between measured and true or assigned value. Calibration Process of using standards of known concentration to establish a relationship between the measured signal from the instrument and analyte concentration. Coefficient of variation A measure of variance expressed as a percentage of the mean ([standard deviation/mean] ×100).

Quality assurance A systematic approach to continuously analyzing, improving, and reexamining the total testing process. Quality control A process for monitoring assay performance to detect deviations from expected outcomes. Random error A variance from expected that is not reproducible or predictable. Recovery Amount (usually expressed as percentage) of known quantity of an analyte that is measured when added to a specimen. Reference range Test results that are within expected parameters for about 95% of all individuals in a defined healthy population. Values outside of the range are classified as abnormal and may be associated with a pathological condition.

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Sample Part of specimen that is measured. Sensitivity, analytical The lowest detection limit of an assay; sometimes measured as the concentration of an analyte that can be differentiated from a blank within a 95% confidence interval. Specificity, analytical The ability of an analytical method to determine solely the component(s) it purports to measure. Standard Material of known or assigned concentration used for assay calibration. Standard deviation A statistic that describes the amount of variance of a set of measurements about the mean value. It is used to describe the random error of an analytical method. Turnaround time The interval between the beginning of one event to the end of another event in the total testing process. Typically measured as the collection to reporting time or as the receipt of specimen in laboratory to reporting time. Variance Standard deviation squared. Assuming all sources of error are independent of each other, total error is the sum of variances of individual sources of error.

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118. Tierney, W. M., M. E. Miller, J. M. Overhage, and C. J. McDonald. 1993. Physician inpatient order writing on microcomputer workstations. Effects on resource utilization. JAMA 269:379–383.

103. Schumacher, G. E, and J. T. Barr. 1998. Total testing process applied to therapeutic drug monitoring: impact on patients’ outcomes and economics. Clin. Chem. 44:370–374. 104. Shahangian, S., R. Cohn, E. E. Gaunt, and J. M. Krolak. 1999. System to monitor a portion of the total testing process in medical clinics and laboratories: evaluation of a split-specimen design. Clin. Chem. 45:269–280. 105. Simpson, J. B. 2001. A unique approach for reducing specimen labeling errors: combining marketing techniques with performance improvement. Clin. Leadersh. Manage. Rev. 15:401–405. 106. Smith, B. J., and M. D. McNeely. 1999. The influence of an expert system for test ordering and interpretation on laboratory investigations. Clin. Chem. 45:1168–1175. 107. Snyder, S. R., A. M. Favoretto, R. A. Baetz, J. H. Derzon, B. M. Madison, D. Mass, C. S. Shaw, C. D. Layfield, R. H. Christenson, and E. B. Liebow. 2012. Effectiveness of practices to reduce blood culture contamination: A Laboratory Medicine Best Practices systematic review and meta-analysis. Clin. Biochem. Epub ahead of print, PubMed PMID: 22709932. 108. Solomon, D. H., H. Hashimoto, L. Daltroy, and M. H. Liang. 1998. Techniques to improve physicians’ use of diagnostic tests: a new conceptual framework. JAMA 280(23):2020–2027.

119. Tilzer, L. L., and R. W. Jones. 1988. Use of barcode labels on collection tubes for specimen management in the clinical laboratory. Arch. Pathol. Lab. Med. 112:1200–1202. 120. Tomlin, A., S. Dovey, R. Gauld, and M. Tilyard. 2011. Better use of primary care laboratory services following interventions to “market” clinical guidelines in New Zealand: a controlled beforeand-after study. BMJ Qual. Saf. 20(3):282–290. 121. Tonks, D. B. 1963. A study of the accuracy and precision of clinical chemistry determinations in 170 Canadian laboratories. Clin. Chem. 9:217–223. 122. U.S. Department of Health and Human Services. 1992. Medicare, Medicaid, and CLIA programs. Regulations implementing the Clinical Laboratory Improvement Amendments of 1988 (CLIA) final rule. Fed. Regist. 57:7002. 123. Valenstein, P. 1996. Laboratory turnaround time. Am. J. Clin. Pathol. 105:676–688. 124. Valenstein, P., and P. J. Howanitz. 1995. Ordering accuracy: a College of American Pathologists Q-Probes study of 577 institutions. Arch. Pathol. Lab. Med. 119:117–122. 125. Valenstein, P., and F. Meier. 1999. Outpatient order accuracy: a College of American Pathologists Q-Probes study of requisition order entry accuracy in 660 institutions. Arch. Pathol. Lab. Med. 123:1145–1150.

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126. Valenstein, P. N., S. S. Raab, and M. K. Walsh. 2006. Identification errors involving clinical laboratories: a College of American Pathologists Q-Probes study of patient and specimen identification errors at 120 institutions. Arch. Pathol. Lab. Med. 130(8): 1106–1113. 127. Vesper, H. W., and L. M. Thienpont. 2009. Traceability in laboratory medicine. Clin. Chem. 55:1067–1075. 128. Wagar, E. A., R. C. Friedberg, R. Souers, and A. K. Stankovic. 2007. Critical values comparison: a College of American Pathologists Q-Probes survey of 163 clinical laboratories. Arch. Pathol. Lab. Med. 131(12):1769–1775.

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quality control: probabilities for false rejection and error detection. Clin. Chem. 23:1857–1867. 133. Wheeler, L. A., and L. B. Sheiner. 1981. A clinical evaluation of various delta check methods. Clin. Chem. 127:5–9. 134. Wilson, M. L. 1996. General principles of specimen collection and transport. Clin. Infect. Dis. 22:766–777. 135. Witte, D. L., S. A. VanNess, D. S. Angstadt, and B. J. Pennell. 1997. Errors, mistakes, blunders, outliers, or unacceptable results: how many? Clin. Chem. 43:1352–1356.

129. Walz, S. E., and T. P. Darcy. 2013. Patient safety and postanalytical error. Clin. Lab. Med. 33:183–194.

136. Wolk, D. M., E. J. Kaleta, and V. H. Wysocki. 2012. PCRelectrospray ionization mass spectrometry: the potential to change infectious disease diagnostics in clinical and public health laboratories. J. Mol. Diagn. 14(4):295–304.

130. Weinbaum, F. I., S. Lavie, M. Danek, D. Sixsmith, G. F. Heinrich, and S. S. Mills. 1997. Doing it right the first time: quality improvement and the contaminant blood culture. J. Clin. Microbiol. 35:563–565.

137. World Health Organization. 2002. Use of anticoagulants in diagnostic laboratory investigations and stability of blood, plasma and serum samples, WHO/DIL/LAB/99.1 Rev.2. http://whqlibdoc.who .int/hq/2002/WHO_DIL_LAB_99.1_Rev.2.pdf.

131. Westgard, J. O., and T. Groth. 1979. Power functions for statistical control rules. Clin. Chem. 25:863–869. 132. Westgard, J. O., T. Groth, T. Aronsson, H. Falk, and C. H. de Verdier. 1977. Performance characteristics of rules for internal

138. Zarbo, R. J., B. A. Jones, R. C. Friedberg, P. N. Valenstein, S. W. Renner, R. B. Schifman, M. K. Walsh, and P. J. Howanitz. 2002. Q-Tracks: a College of American Pathologists program of continuous laboratory monitoring and longitudinal tracking. Arch. Pathol. Lab. Med. 126:1036–1044.

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APPENDIX 21.1 Regulations, Guidelines, and Information with Application to a Clinical Laboratory A listing of relevant regulations grouped according to the regulatory agency from which they are issued. FDA http://www.fda.gov/scienceresearch/specialtopics/runningclinical trials/ucm155713.htm (accessed May 7, 2013) 21 CFR 11, Electronic Records; Electronic Signatures, Subpart B— Electronic Records 21 CFR 58, Good Laboratory Practice for Nonclinical Laboratory Studies 58.185 Reporting of nonclinical laboratory study results 58.190 Storage and retrieval of records and data 58.195 Retention of records

Department of Health and Human Services: Center for Medicare and Medicaid Services (CMS) 42 CFR 493, Laboratory Requirements (CLIA 88) 493.1107 Test—Records 493.1201(b) Written quality control procedures 493.1202(c)(2) Procedure manual, moderate-complexity testing 493.1211 Procedure manual, high-complexity testing 493.1221 Quality Control—Records 493.1721 Quality Assurance—Records Department of Health and Human Services, Public Health 42 CFR 72, Interstate Shipment of Etiologic Agents

21 CFR 211, Current Good Manufacturing Practice for Finished Pharmaceuticals Subpart J—Records and Reports (211.180–211.198)

Department of Transportation

21 CFR 600, Biological Products, General 600.12 Records

Department of Labor

21 CFR 606, Current Good Manufacturing Practice for Blood and Blood Components 606.100 Standard operating procedures Subpart I—Records and Reports (606.160–606.171) 21 CFR 640, Additional Standards for Human Blood and Blood Products 640.72 Records 21 CFR 803, Medical Device Reporting of Adverse Events and Certain Malfunctions 803.17–803.18 Written MDR procedures, Files 21 CFR 820, Good Manufacturing Practice, Quality System Regulation Subpart M—Records (820.180–820.198) Department of Labor: Occupational Safety and Health Administration (OSHA) 29 CFR 1904, Recording and Reporting Occupational Injuries and Illnesses 1904.6 Retention of records 1904.9 Falsification or failure to keep records or reports 29 CFR 1910 Occupational Safety and Health Standards Appendix C to 1910.120 4. Training (records) 8. Medical surveillance programs (records)

49 CFR 171–7 Shipment of Hazardous Materials

29 CFR 71—Protection of individual privacy and access to records under the Privacy Act of 1974 Miscellaneous sources (specifics not listed) American Association of Blood Banks: http://www.aabb.org (accessed 5/7/13) CDC Guidelines: http://www.cdc.gov (accessed 5/7/13) Clinical Laboratory Standards Institute (CLSI): http://www.clsi.org (accessed 5/7/13) College of American Pathologists (CAP): http://www.cap.org (accessed 5/7/13) FDA Guidelines, Guidances, and Memoranda: http://www.fda.gov/ (accessed 5/7/13) Federal Register, multiple sources: https://www.federalregister.gov/ (accessed 5/7/13) International Organization for Standardization (ISO): http://www .iso.org/iso/home/standards/management-standards/iso_9000.htm (accessed 5/7/13) The Joint Commission: http://www.jointcommission.org (accessed 5/7/13)

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APPENDIX 21.2 CAP Laboratory Inspection Checklist Associated with Quality Management The checklist is comprised of declarative statements for which the laboratory must show evidence of compliance. The checklist provides “notes” that provide further detail on the declarative statements. Quality Improvement GEN.13806 The laboratory has a documented quality management (QM) program. GEN.16902 For laboratories that have been CAP accredited for more than 12 months, the QM plan is implemented as designed and is reviewed annually for effectiveness. GEN.20100 The QM program covers all areas of the laboratory and all beneficiaries of service. GEN.20208 The QM system includes a program to identify and evaluate errors, incidents and other problems that may interfere with patient care services. GEN.20316 The QM program includes monitoring key indicators of quality in the pre-analytic, analytic, and post-analytic phases. GEN.20325 The laboratory has a procedure for employees and patients to communicate concerns about quality and safety to management. GEN.23584 The laboratory conducts an interim self-inspection and documents efforts to correct deficiencies identified during the process. Quality Management of Preanalytic Processes: Test Selection and Ordering GEN.40000 There is a procedure manual or other source for the complete collection and handling instructions of all laboratory specimens. GEN.40016 There is documentation of at least biennial review of the specimen collection/handling procedure manual by the current laboratory director or designee. GEN.40050 The specimen collection manual is distributed to all specimen-collecting areas within the hospital (nursing stations, operating room, emergency room, out-patient areas) AND to areas outside the main laboratory (such as physicians’ offices or other laboratories). GEN.40100 The specimen collection manual includes instructions for all of the following elements, as applicable 1. Preparation of the patient 2. Type of collection container and amount of specimen to be collected 3. Need for special timing for collection (e.g., creatinine clearance) 4. Types and amounts of preservatives or anticoagulants 5. Need for special handling between time of collection and time received by the laboratory (e.g., refrigeration, immediate delivery)

6. Proper specimen labeling 7. Need for appropriate clinical data, when indicated GEN.40125 For specimens sent to reference laboratories, the referring laboratory properly follows all requisition, collection and handling specifications of the reference laboratory. GEN.40470 There is documentation that all personnel performing patient blood collection have been trained in collection techniques and in the proper selection and use of equipment/ supplies. GEN.40490 The individual collecting the specimen positively identifies the patient before collecting a specimen. GEN.40935 The laboratory has a policy that personnel receiving verbal or phone orders read back the entire order to verify accuracy of transcription. GEN.40938 The laboratory has a policy on confirmation of test orders that may be unclear (e.g., orders using non-standard or non-specific terms). Quality of Specimen Collection GEN.40505 There is a mechanism to provide feedback to the collector of the specimen on issues related to specimen quality. GEN.40825 There is a system to positively identify all patient specimens, specimen types, and aliquots at all times. GEN.43750 The system provides for comments on specimen quality that might compromise the accuracy of analytic results (e.g., hemolyzed, lipemic). GEN.40535 There is an adequate process for monitoring the quality of submitted specimens, correcting problems identified in specimen transportation, and improving performance of clients or offices that frequently submit specimens improperly. Patient and Client Satisfaction GEN.20335 Referring physicians’/clients’ or patients’ satisfaction with laboratory service was measured within the past two years. Quality Management of Analytic Processes GEN.30000 There is a written quality control program that clearly defines policies and procedures for monitoring analytic performance. GEN.30070 If the laboratory performs test procedures for which neither calibration nor control materials are available, procedures are established to verify the reliability of patient test results. Proficiency Testing (PT) COM.010000 The laboratory has written procedures for proficiency testing sufficient for the extent and complexity of testing done in the laboratory. (continued)

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APPENDIX 21.2 CAP Laboratory Inspection Checklist Associated with Quality Management (continued) COM.01100 The laboratory has a procedure for assessing its performance on PT challenges that were intended to be graded but were not.

for the patient’s care) when results of designated tests exceed established “alert” or “critical” values that are important for prompt patient management decisions.

COM.01500 For tests for which CAP does not require PT, the laboratory at least semi-annually 1) participates in external PT, or 2) exercises an alternative performance assessment system for determining the reliability for analytic testing.

COM.30100 When critical results are communicated verbally or by phone, there is a policy that laboratory personnel ask for a verification “read-back” of the results.

COM.01600 The laboratory integrates all proficiency testing samples within the routine laboratory workload, and those samples are analyzed by personnel who routinely test patient/client samples, using the same primary method systems as for patient/ client/donor samples.

Turnaround Time

COM.01700 There is ongoing evaluation of PT and alternative assessment results, with prompt corrective action taken for unacceptable results. COM.01800 There is a policy that prohibits interlaboratory communication about proficiency testing samples until after the deadline for submission of data to the proficiency testing provider. COM.01900 There is a policy that prohibits referral of proficiency testing specimens to another laboratory.

GEN.41345 Has the laboratory defined turnaround times (i.e., the interval between specimen receipt by laboratory personnel and results reporting) for each of its tests, and does it have a policy for notifying the requester when testing is delayed? Corrected and Incomplete Reports GEN.41307 When errors are detected in patient test reports, the laboratory promptly notifies responsible clinical personnel or reference laboratory as applicable and issues a corrected report. GEN.41310 All revised reports of previously reported, incorrect patient results are identified as revised, and both the revised and original data are clearly identified as such.

Quality Management of Postanalytic Processes: Reporting GEN.43825 Manual and automated result entries are verified before final acceptance and reporting by the computer. COM.30000 The laboratory has procedures for immediate notification of a physician (or other clinical personnel responsible

Document Control GEN.20375 The laboratory has a document control system. GEN.20377 Laboratory records and materials are retained for an appropriate time.

22 Introduction ISO Background Benefits of the ISO Standards ISO 9000 Family ISO 15189 ISO Certification Process

International Organization for Standardization Anne Marsden and Amy Shahtout

ISO 15189 and the CAP

Summary KEY POINTS REFERENCES

OBJECTIVES To provide an overview of the International Organization for Standardization To describe the ISO standards most relevant in a clinical laboratory service setting To describe the process for obtaining and maintaining ISO certification

Without continual growth and progress, such words as improvement, achievement, and success have no meaning. Benjamin Franklin

A

quality-management system (QMS) is the combination of organizational structure, resources, people, documents, and activities designed to ensure quality in an organization’s products and services. It describes the coordinated activities needed to direct and control an organization with regard to its quality. Worldwide, the most widely adopted QMS regime is the ISO 9000 family. A related QMS stems from ISO 15189, which is tailored to clinical laboratories.

ISO Background

Clinical Laboratory Management, 2nd Edition Edited by L. S. Garcia ©2014 ASM Press, Washington, DC doi:10.1128/9781555817282.ch22

Operating since 1947, the International Organization for Standardization (ISO) is a nongovernmental association consisting of representatives from over 150 countries, one member per country. There are approximately 3,000 ISO technical committees and working groups, with participation from about 50,000 experts, contributing to the development of ISO standards that provide the framework for compatible technology internationally. Efforts to achieve technical consensus for each standard are coordinated by a central secretariat in Geneva, Switzerland. As the world’s largest developer of standards, the organization’s goal is to define quality standards for organizations to facilitate and promote the trade of products and services internationally. (Isos, Greek for “equal,” is the basis for the organization’s short name, ISO.) The standards are also used by governments to establish health, safety, and environmental laws. While ISO certification is voluntary in the United States, it serves as an attractive credential—especially for companies that intend to reach an international market—and demonstrates the intent to manage quality through 447

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practices deemed acceptable by the ISO. Conformance to standards inherently contributes to higher quality, safety, reliability, and interchangeability of products and services. This potentially increases a company’s marketability, customer retention, and acquisition of new customers.

Benefits of the ISO Standards An ISO certificate does not ensure a company’s product or service quality; it attests that a company adheres to documented processes and quality controls. Product quality is achieved through adherence to defined processes that are designed to deliver products and services that meet the company’s predefined requirements. The increased credibility associated with ISO certification leads to the following advantages: • Decreased operating expenses stemming from scrap and rework • Enhanced management control through management review participation • Reduced product liability risk due to a robust qualitymanagement system • Increased customer satisfaction as a result of customerfocused quality systems (2) • Increased marketability from the commitment to meeting internationally accepted quality standards

ISO 9000 Family The quality standards in the ISO 9000 family focus on quality management and include QMS requirements that are general for the manufacturing and service industries. In 2000, the ISO 9000 series was revised with an increased focus on customer satisfaction. Based on basic quality-management principles, ISO 9001 (4) provides the criteria for a quality-management system. The eight quality-management principles are (5): • • • • • • • •

Leadership Customer focus Process approach System approach to management Involvement of people Factual approach to decision making Continual improvement Mutually beneficial supplier relationship

The standard requires that the organization appoints a member of management as a management representative, who shall have the responsibility of ensuring that the QMS is established, implemented, and maintained and who shall report on the performance of the QMS to top management

and ensure the promotion of the awareness of customer requirements to the organization as a whole. ISO 9001 is a short document that outlines a series of “must haves” for a quality system but does not go into detail about how the requirements are to be approached, carried out, or met. As a result, ISO 9001 is a one-size-fits-all standard that can be implemented in many different industries and services. ISO 9001 first requires that an organization determine its quality policy and related quality objectives. Quality objectives must be measurable and include those needed to meet the requirements of the product, for example, on-time results or employment of assays with sufficient specificity to meet medical needs. The organization must also develop a quality manual (QM), which will include a description of how the processes in the QMS interact, either as a flow map, cross-references to the standard, or a written description. The QM is to be updated whenever there is a change to the QMS or to the ISO standard. It defines the QMS and describes the scope of the services provided and any exclusions from the ISO. The QM also contains information on the six written procedures that ISO 9001 requires: • • • • • •

Control of documents Control of records Internal audits Control of nonconforming product Corrective action Preventive action

The standard requires regular management review of the objectives and documented output from the reviews in terms of resource provision, improvement to the effectiveness of the QMS, and improvement to the product. It also mandates activities in competence, training, and awareness—the first two being familiar to all laboratorians and the third being a requirement that the staff members are aware of the role they play in the achievement of quality objectives. There are further requirements for planning product realization, research and development, purchasing, identification and traceability, control of measuring equipment (e.g., calibration activities), internal audits, measurement of customer satisfaction, control of nonconforming product, continual improvement, and corrective and preventive action. The advantage of adopting ISO 9001 in the laboratory is the standard’s skeletal outline that can be easily developed into a strong framework that fits the exact circumstances under which it is to be deployed. However, the language used in ISO 9001 may be daunting to laboratorians. It is so generalized that it may have to be translated into more familiar terms in the QM; for example, one kind of nonconforming product is the failure of an assay to meet QC acceptability. The “control of nonconforming product” can

CHAPTER 22. INTERNATIONAL ORGANIZATION FOR STANDARDIZATION

therefore be translated into the commonly understood process of ensuring that no results are released from an assay that fails QC. As medical laboratory leaders and professionals realized the advantage of applying systemic quality models to the clinical laboratory environment, it became clear that the ISO 9001 standard required a great deal of reinterpretation to be relevant. The ISO then set out to leverage the ISO 9000 principles to develop ISO 15189, which outlines quality standards specific to medical laboratory operations.

ISO 15189 First published in 2003, ISO 15189 (3) is based on ISO 9001 and a standard known as ISO/IEC 17025. It is an international standard specifically developed for medical laboratories, although it may be of relevance to such disciplines as clinical physiology and medical imaging. It is a much longer document than ISO 9001, and the requirements are very detailed; to the QMS requirements of ISO 9001 it adds the technical and competency factors that are relevant to laboratories. It is the standard for reimbursement in some countries and in some ways is regarded as a regulation, but in the United States it is a guidance document and certification is voluntary. Unlike the 9001 family, the standard begins with the requirement that the laboratory shall be a part of an entity legally responsible for its activities. There is a similar requirement to ISO 9001’s management representative; the laboratory shall appoint a quality manager, with similar duties to a representative. However, the ultimate authority, as under the Clinical Laboratory Improvement Amendments of 1988 (CLIA ’88), is the laboratory director. The requirements for the QMS are similar to those of ISO 9001—quality manual, quality policy, document control, management review, internal audit, and so forth. The technical requirements are detailed and closely aligned with U.S. regulatory language. For example, there are requirements for the selection and evaluation of referral laboratories, periodic reviews of the laboratory’s examinations to ensure that they are clinically appropriate, competence assessment with wording following that of CLIA ’88, request forms, proficiency testing, result report format, and revised reports. One area where ISO 15189 is considerably less detailed than ISO 9001 is in the verification and validation of examination procedures. ISO 9001 specifies exactly how product development should occur and be documented. ISO 15189 requires only that it takes place and is documented. The language is less detailed than CLIA ’88, and if a laboratory is intending to bring up laboratorydeveloped tests, ISO 15189 alone would not supply an adequate framework.

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ISO Certification Process Although the ISO develops standards, it is not a certifying body (or registrar); rather, assessment and certification to an ISO standard are performed by external certification bodies. An independent, U.S.-based certifying body for clinical laboratories can be identified through the International Laboratory Accreditation Cooperation (ILAC) website (www.ilac.org, accessed April 13, 2013). The ISO’s Committee on Conformity Assessment (CASCO) has developed and published standards related to the certification process; the standards contain assessment techniques, deemed good practices based on an international consensus. Maintaining an ISO certificate is an iterative process, as demonstrated by requirements for annual surveillance and certification renewal every three years (Fig. 22.1).

Figure 22.1 Skeletal representation of the ISO certification pro-

cess. doi:10.1128/9781555817282.ch22.f1

ISO Certification Process

Application submission

Assessments (certifying body reviews submission and performs initial assessment of Laboratory QMS)

Certification Assessment (certifying body assesses Laboratory QMS)

Laboratory demonstrates compliance?

Certifying body issues Certificate of Compliance

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ISO 15189 and the CAP As with ISO 9001, many companies can certify an organization as compliant with the ISO standard. Additionally, in 2008, the College of American Pathologists (CAP) announced its own accreditation process based on ISO 15189 (15189:2007) and has since updated the program to ISO 15189:2012. The CAP had input into the development of the ISO 15189 standard and continues to participate in the ISO TC 212 Committee. Under the Centers for Medicare and Medicaid Services, the CAP is a body with deemed status for medical testing and regards the standard as an adjunct to its mission of supporting excellence in pathology and laboratory medicine. The CAP Laboratory Accreditation Program (LAP) inspection process focuses on technical procedures, and the ISO 15189 certification focuses on the quality management system. The ISO accreditation is voluntary and does not replace the LAP, as ISO does not fulfill U.S. federal regulatory requirements. Once a laboratory has applied, the CAP assigns a lead assessor to guide the laboratory through accreditation. A gap analysis is performed, and once the laboratory is ready, the CAP performs an accreditation assessment. As with ISO 9001, a successful accreditation is followed up with on-site surveillance audits (1).

Summary ISO certification can be an attractive credential for a clinical laboratory. Although the ISO standards discussed here each provide QMS framework, the ISO 9001 standard

requires extensive interpretation, while ISO 15189 is written specifically for a medical laboratory setting. The CAP continues to play a role in the development of the ISO 15189 standard and, since 2008, has been a certifying body for this standard. The certification process is followed by ongoing maintenance of the QMS by the laboratory, as well as surveillance audits performed by the certifying body.

KEY POINTS ■ The ISO 9000 series is based on eight quality-management principles. ■ ISO 15189 provides a quality-management system framework specific for medical laboratories.

REFERENCES 1. College of American Pathologists. CAP 15189SM Quality Management Program. www.cap.org, accessed April 12, 2013. 2. Hoyle, D. 2006. ISO 9000 Quality Systems Handbook, p. 39–54, 6th ed. Routledge, New York, NY. 3. ISO 15189. 2012. Medical laboratories: requirements for quality and competence. http://www.iso15189.com/ http://www.iso.org/iso/ catalogue_detail.htm?csnumber=56115. 4. ISO 9001. 2008. Quality management systems: requirements. http://www.iso.org/iso/qmp_2012.pdf. 5. Levett, J., and R. G. Burney. 2011. Using ISO 9001 in Healthcare, p. 75–84. ASQ Quality Press, Milwaukee, WI.

23 Introduction Delivering the Message Communicating to Diverse Audiences Means and Mechanics of Effective Communication Spoken Word • Written Word • Intradepartmental Communication • Interdepartmental Communication • External Communication

Effective Communication in Laboratory Management Elissa Passiment and Andrea J. Linscott

Summary KEY POINTS GLOSSARY REFERENCES

OBJECTIVES To describe the importance of effective communication to laboratory management To identify the recipients of laboratory communication To discuss the means and methods of communication

The newest computer can merely compound, at speed, the oldest problem in the relations between human beings, and in the end the communicator will be confronted with the old problem, of what to say and how to say it. Edward R. Murrow

I

n this era of information overload, effective communication is one of the most important skills needed in pathology and clinical laboratories. Laboratory services cannot be delivered effectively without a coordinated, intricate system of communication. In many institutions, the laboratory is viewed as a mystery or a black hole, as stated by one hospital administrator, into which money, body fluids, and body parts go, but little comes out. A major contribution to that perception of the laboratory is the necessary practice of sending the laboratory’s output—patient test results—directly to the patient’s chart or caregiver. However, the mystery of the laboratory is perpetuated by the lack of an organized, systematic, flexible, and bidirectional exchange of information, ideas, standards, and beliefs between the laboratory and its customers, i.e., effective communication. Communication can be defined a number of ways:

Clinical Laboratory Management, 2nd Edition Edited by L. S. Garcia ©2014 ASM Press, Washington, DC doi:10.1128/9781555817282.ch23

• The exchange of thoughts, messages, or information using speech, signals, writing, or behavior (1) • The art and technique of using words effectively to impart information or ideas (1) • A system, such as mail, telephone, television, or computer, for sending and receiving messages (1) • The exchange or transmission of ideas, attitudes, or beliefs between individuals or groups (9)

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The importance of communication has been discussed and documented since formal management theories were first promulgated. Chester I. Barnard wrote in 1938 in Functions of the Executive that the first executive function is to develop and maintain a system of communication (2). Management textbooks throughout the decades have devoted chapters to the need for effective communication. In The Management of Organizations, Hicks (6) stated, “Organizational interaction depends on communication.  .  .  . Communication is of prime concern to managers because it makes cooperative action possible.” It was his belief that as one moved up any management structure, more time had to be devoted to communication to succeed. Because he taught that “communication is a primary requirement of decision making,” it was the only way to achieve any change in direction or activity of the company or institution. As management theory evolved, the importance of communication grew. Peters and Waterman, in In Search of Excellence (10), state, “The nature and uses of communication in excellent companies are remarkably different from those of their nonexcellent peers. The excellent companies are a vast network of informal, open communications.” The results of constant communication include getting the right people together and maintaining the continuous transmission of ideas and information. Peters and Waterman (10) say, “The intensity of communications is unmistakable in the excellent companies.” If laboratories are to provide excellent service, i.e., function as excellent companies for their clients, communication should still be the first priority of everyone in laboratory management. Communication within healthcare, or the lack thereof, was a major focus of the Institute of Medicine’s (IOM) two reports, To Err Is Human: Building a Safer Healthcare System (7) and Crossing the Quality Chasm: A New Health System for the 21st Century (8). The reports discuss the lack of efficient flow of information within healthcare and the misconception in our health system that the need for privacy has been translated into secrecy and has severely compromised the necessary sharing of information. In this era of patient safety concerns, laboratory management must strive to create an “excellent company” to provide the level of care and information every individual hopes to receive. Many of the concerns that surround laboratory services are directly attributable to a lack of communication. Communication does not come easily for laboratorians. The traditional scientific personality types attracted to the profession may be focused and introverted. Communication skills are not routinely taught in the curricula for physician and nonphysician laboratorians. In fact, communication among members of the healthcare “team” is generally not taught at all. The IOM study (7) states, “Because medical training is typically isolated from the training of other health professionals, people have not learned to work together to share authority and collaborate in

problem solving.” The same can be said for the training of all health professionals. It is rare to find an interdisciplinary course on communication and problem solving in any allied health school. The health professions that commonly interact with the patient and other members of the healthcare team often develop their communication skills on the job. But that opportunity does not always present itself to laboratorians. Communication and information flow or transfer throughout the healthcare setting are very complicated. Information must be exchanged between internal departments, external departments, external vendors and regulators, and the laboratory’s clients (customers). Any time the flow of information is improved, the efficiency of the laboratory will be improved. For instance, if all of the ordering providers in your client base (hospital, system, network, etc.) know what tests your laboratory offers, when they are performed, and the expected turnaround time (TAT), the service center will field fewer phone calls about these aspects of the operation. The service center will be able to spend more time on the patients, specimens, and reports that are part of their function. If these providers also know when and what tests to order, the laboratory’s resources, staff, and materials will be more efficiently utilized. In the past few years, laboratories have begun to emphasize and provide specific and detailed guidelines on the use of laboratory services for their healthcare clients, many of which can be found on the Internet. It is the responsibility of laboratory management to ensure that the information flow is bidirectional. The laboratory should not simply send out information, memos, policies, and procedures but should have a mechanism for receiving information from its clients. Clients (healthcare providers) should be able to retrieve information from the laboratory easily. If the retrieval system is inadequate, these clients will not be happy and their patient care needs will not be met. For inpatients, the needs include feedback on the effects and efficacy of any medication and/or procedures. For the consumer, that translates to an affable, helpful voice on the phone or a short TAT to an Internet inquiry.

Delivering the Message Management should have a communication strategy—a plan that is used whenever the laboratory has information that it wants to disseminate (Table 23.1). This plan should first identify the specific purposes for communication. The purposes should include the education of all clients on: • The appropriate utilization of laboratory services (test orders, frequency of test orders, specimen collection and transport, testing turnaround times, report formats, additional report comments, reference ranges, consultation options, and test limitations)

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Table 23.1 Elements of a communication plan Define objectives and purpose of the plan. Use a concise message. Gear communication to education level of recipient. Identify the structure and format of written communiqués. Design a format and use it as a template for all written communications. List recipients of laboratory communication. Identify all stakeholders who should receive communication (medical staff, laboratory staff, administration, clients, computer services, patients, etc.). Identify the method(s) of communication. Written (memo, newsletter, email, specimen collection manual, etc.), verbal (phone call, intercom, etc.) or visual (banner, poster, video, etc.)

• The extent of services offered (test menu, test available for STAT testing, and comprehensive test parameters) • Regulations concerning the operation of the laboratory as well as any mandated communication (hours of operation, performance of tests per shift, STAT reporting, critical value reporting, and laboratory organization chart) The plan should also contain the formal structure or format of all written communiqués such as memos, newsletters, and flyers. Once a uniform look and feel of the written word has been adopted, all communications from the laboratory will convey an image and eventually establish an identity for the department. The plan should also include the elements of the strategy, i.e., recipients of the information, the communication options that the laboratory will use, and the purpose of the communication. Communication should be considered a way of marketing the laboratory and its services, and a well-constructed plan will aid in that marketing by focusing the message. Whether the information concerns a protocol; a new test; a change in procedure; discontinuation of a test that is now obsolete, no longer has reagents being made, or for which there is a better test; or a new service, the information should be presented so that the laboratory’s expertise and its concern for its customers are obvious. Performed properly, effective communication can be a competitive advantage.

Communicating to Diverse Audiences Laboratories should communicate with all of their customers: physicians, nursing and allied health professionals, patients, third-party payors, and paying customers. Each of these customers has very different needs and processes information differently. As Hicks (6) states, “A person may not communicate with his supervisor in the same manner that he does with a person of equal standing.” Adapting that statement to laboratories means that the laboratory

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manager may not tell the hospital administrator about federal rules and regulations in the same fashion used to inform the staff of each department. Indeed, the actual information that the hospital administrator needs to know will be different from that required by the staff. It is incumbent on the laboratory manager to tailor the message to each audience so that the message is understood. Boyett and Boyett (3) implore managers to communicate, communicate, communicate, and communicate some more. There is really no such thing as too much communication. Clients will only perceive that there is too much communication if the information is superficial or not pertinent to their needs. Visitor encounters in many laboratories are treated as trespassing or interruptions. They should be treated as opportunities to exchange information with other healthcare providers. The successful laboratories are often those in which clinicians can be found looking through microscopes in hematology, microbiology, and pathology and consulting with the staff. These laboratories are highly valued and perceived as very credible sources of important, accurate information. Heller (5) wrote, “For successful operations, information must be totally visible.” Laboratories that open their doors to their customers and become visible will be successful and valued. However, these options will also depend on the physical location of the laboratory and its proximity to the medical staff. Laboratories communicate to convey information about policies and procedures (including rules and regulations that determine policies), results of tests ordered, status of testing, and new technology and services that are being added or tests that are being discontinued. The job of all managers is to coordinate the human and physical elements of an organization into an efficient and effective working unit. Communication is of prime concern to managers because it makes cooperative action possible (6). The higher one is in the organizational hierarchy, the more likely it is that communication becomes a key priority (6).

Means and Mechanics of Effective Communication Heller (5) wrote, “For effective communication, you must be aware of the means and the channels .  .  . with which to transmit and exchange information” (Table 23.2). The means of communication are fairly simple: the spoken word, the written word, and visual images. The mechanics include written memoranda, emails, reports, notices, newsletters, flyers, telephone service, manuals, and formal presentations, among others. These messages can be delivered by direct mail, the Internet, fax, or video using the hardware of communication such as telephone systems, computer information systems (and their interface with the institution’s information system), terminals, fax

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Table 23.2 Methods of communication Action

Examples

Verbal Written Visual

Telephone, intercom, face-to-face Memoranda, email, newsletter, flyer, manual Videos, posters, presentation, personal digital assistants

machines, intercoms, headsets, and beepers. The trick is to match the mechanics to the message so that the message is well received. For instance, many laboratories produce a handbook that describes all of the tests they offer (test menus), with information about the specimen requirements, expected TATs, indications for ordering, and reference ranges. While this is an excellent communication device for anyone needing laboratory services, it isn’t always used effectively. In many instances, the reason that this effort does not achieve the intended results is that the book is huge and imposing. The individuals needing the information in this book are the very people who do not have the time to read it. Many laboratories have miniaturized the book; the most successful have made it truly pocket-sized. The real key to communicating all of this information is determining what the ordering providers and nurses use as help aids (e.g., wall charts, the institution’s computers, personal digital assistants, the Internet, etc.) and employing that mechanism to transfer this information. Any type of communication can be misinterpreted or contain errors. That is a risk that must be understood, but it should not impede the flow of information. The IOM’s reports remind us that the majority of medical errors occur because of a lack of an open flow of information (7, 8).

Spoken Word While we may not realize it, communication via the spoken word occurs daily in our laboratories—every time someone answers the phone. This is the most direct means of communication, but it can be the most damaging if words are not chosen carefully and if tone is not modulated. In our society of instant information, it is necessary to educate laboratorians in the use of the spoken word. Much can be accomplished with a telephone exchange or the clinician-laboratorian encounter in the laboratory if the words are carefully chosen, if body language and facial expressions are positive, and if we state our knowledge clearly without a great deal of laboratory shorthand that may be misunderstood by other members of the healthcare team. Scripting can be used to deliver a concise message when information or questions are routinely asked, for example, questions asked to verify a patient’s name and medical record number or when relaying information about testing delays. Staff and management should be encouraged to

engage caregivers in a discussion of the tests, the appropriateness of the tests, and the meaning of the results based on their level of knowledge. Each level of staff should be trained in consultation techniques and when to refer the provider to the next level of expertise. The traditional policy that no one other than the physician communicates information to other physicians is no longer workable given the increasing amount of information that needs to be communicated. However, it is necessary that laboratory personnel continually receive updated information that is relevant and appropriate for their job level, thus expanding the laboratory’s consultative services. It is the responsibility of the laboratory management to provide continuing education opportunities, both inhouse and through external meetings, to improve the verbal skills and knowledge level of its personnel. It is not appropriate to rely on self-study modules to improve verbal skills. While self-study continuing education can be very efficient for the transfer of new scientific knowledge, it does nothing to enhance verbal skills because there is no verbalization going on. In this day of personnel shortages, it is difficult to free employees to attend meetings, in-house or externally. However, if one considers the payback when employees become adept at the spoken word and the laboratory’s image and usefulness are improved, the sacrifices needed to send them to meetings will be worth it.

Written Word As Heller (4) states, “The written word is the basis of organizational communication and . . . is relatively permanent and accessible.” Laboratory management should learn how to design written communications to optimize readability. The physical design of the piece should be easy to read, with standard fonts and font sizes. The page should not be crowded—the reader will be overwhelmed with the amount of information and either will not read it or will only skim it, potentially missing important information. While clip art has expanded our ability to become artistic, resist the urge to use it when communicating with most clients unless the visual image will really convey the message. Intradepartmental Communication Laboratory managers must encourage a routine exchange of thoughts and messages between the laboratory departments, management and staff, and different shifts. The laboratory’s organizational structure is based on the disciplines of pathology and laboratory science, which may not always be conducive to an open flow of information. Many laboratories use established intranets—communication superhighways for internal information exchange. Without good internal communication, the potential for error increases. It is common for one department or

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shift to be unaware of new announcements concerning testing or schedules that were disseminated to the laboratory’s customers. Laboratory managers may mistakenly assume that because the testing will not occur on that shift or in that department, for instance, that all personnel don’t need to know about the changes. Because your customers (e.g., nurses, physicians, outpatients) read memos at any time of the day and night, you cannot predict when or to whom a query will be addressed. Written intradepartmental communication is very effective because there is documentation that it occurred and it can reach every shift and all staff, whether they were present on the day it was issued or not. However, communication should not be exclusively in the written form. Meetings, informal chats, and impromptu announcements allow the staff to ask questions and exchange ideas immediately. This active communication can improve staff morale, as personnel know that they are being heard.

Interdepartmental Communication The flow of communication beyond the laboratory includes that between the laboratory and the institution’s administration (whether it is the vice president of clinical services or the office manager in a physician’s office) and its clients (e.g., patients, physicians, and nonphysician caregivers). Written interdepartmental communication tends to be more formal than intradepartmental and needs to be carefully structured. Memos, letters, and notices are adequate forms of communication for most announcements and responses to inquiries from other departments of the institution. However, when laboratory management wants to start a new service, change protocols, discontinue a test, acquire instrumentation, or reorganize any part of the business, they should communicate through formal proposals (Table 23.3). Structuring a request this way ensures that you will address all of the questions that the reader may have. Before you write the proposal, you need to fully understand the missions and strategies of your institution. Your proposal should always point out how it will fulfill or complement the missions and strategies of the organization, particularly related to patient care. The components of a proposal, or a business plan, should (i) explain why the change or plan is needed and how it will contribute to the strategies of the overall institution/business (e.g., economic benefits, objectives); (ii) estimate the resources required, the cost of the program, revenues from the plan, and the timeline for completion, and identify the individual responsible for completion of the proposal; (iii) produce an outline of a plan of action; and (iv) describe what success will look like. If you cannot verbalize or quantify outcomes, the project will not be noticed and probably will not be approved.

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Table 23.3 Elements of a formal proposal to change laboratory

services Identify the benefits to the organization. Better patient care (e.g., quicker TAT, better test sensitivity, lower limits of detection) Better patient safety (e.g., less toxic ingredients in specimen collection devices, needles with shield guards to prevent needle sticks) Lean (e.g., less technologist time, better throughput) Identify project-required resources, costs, and revenues. Cost saving may also include less technologist hands-on time. Specify the responsible individual. Identify owner of the project who is responsible for making sure that all stakeholders (medical staff, laboratory staff, administration, clients, information service, and/or patients) are notified. Communicate project completion timelines for implementation of the service. Communicate any delays in the timeline to the appropriate stakeholder. Describe the final outcome. Put procedures in place for periodic review and revision, if necessary.

External Communication Entities external to the organization include insurance companies, the federal government, accrediting agencies, competitors, and others. There are myriad regulations that affect a laboratory’s operation, such as a license to operate and personnel policies. The federal government requires that every laboratory performing tests for diagnostic purposes be certified by the Centers for Medicare and Medicaid Services under the Clinical Laboratory Improvement Amendments of 1988. Laboratory managers must continuously remain current with these federal rules and regulations and must communicate any changes to their superiors. The changing rules for Medicare reimbursement also require monitoring and reporting up the chain of management. In addition, clinical laboratories are required by the Centers for Medicare and Medicaid Services to have a compliance plan (Health Insurance Portability and Accountability Act) that helps employees avoid actions that might be construed as fraud and abuse. The Office of the Inspector General has outlined what that compliance plan should look like. The human resources department in most institutions dictates personnel policies that must be followed in the laboratory. The manner in which individuals communicate depends upon the formal organizational structure. In an organization that is rigidly structured, individuals will act and interact differently than in an organization that is very informal. The organizational chart will define how and with whom a manager will communicate; however, actual communication channels do not always strictly adhere to the organizational chart.

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The most important activity that laboratory managers should undertake is to get out of the office and out of the laboratory. Managers should volunteer to serve on hospital committees and should encourage their staff to do so as appropriate. “Management by walking about” (MBWA) contributes to informal communication. As a manager from Hewlett Packard (identified as an excellent company) stated, “We just plain talk to each other a lot without a lot of paper or formal rigmarole” (10). The lesson from all successful companies is that management must be visible. Sitting in the laboratory, monitoring TATs, quality assurance, compliance, and billing, while essential to keeping the laboratory functioning, will not achieve the goals of a good communication system. Laboratory managers should practice MBWA, not just in the laboratory but also in the institution of which the laboratory is a part. The informal communication that occurs will be of immeasurable benefit to the laboratory as a whole. As nurses, physicians, patients, patients’ families, and the institution’s management begin to recognize the laboratory management, additional impromptu communication will occur. Managers should visit the nursing units (or any departments in which patients/customers are using the laboratory’s services) on a routine, predictable basis. The agenda of these visits should include but not be limited to checking on the phlebotomy service, satisfaction with TATs, and the interpretation of laboratory reports. As care providers come to know that the laboratory is interested in its performance, the department will be increasingly perceived as a member of the team. Some hospital laboratories have assigned personnel to a nursing unit or department so that there is a recognizable liaison with whom caregivers can readily communicate. The laboratory should survey its clients periodically to determine how they get the majority of their information and what information they routinely need. The survey results will also tell management whether the services the laboratory is providing are pertinent and can be used to identify future services. All avenues for communication with people who interact with the laboratory should be explored and used to improve laboratory services.

Summary Communication is the exchange of ideas, attitudes, and information through the spoken word, written word, and visual images. Communication should be targeted to a specific audience and understood by that audience and can be delivered by myriad methods (e.g., telephone, fax, newsletters, manuals, Internet, videos, etc.). Effective communication is a critical skill that laboratorians need to ensure effective delivery of laboratory services. It must be bidirectional between the laboratory and its customers, clients, and members of the organization’s hierarchy.

KEY POINTS ■ Effective communication, whether internal or external to the organization, is critical to the management of the laboratory. ■ Communication must be tailored to the understanding and needs of its audience. ■ Communication occurs by the written word, the spoken word, and visual images. GLOSSARY Communication Exchange of thoughts, messages, or information (through speech, signals, writing, or behavior); art and technique of using words effectively to impart information or ideas; system, such as mail, telephone, or television, for sending and receiving messages; exchange or transmission of ideas, attitudes, or beliefs between individuals or groups. External communication Occurs with entities outside of the organization (e.g., insurance companies, regulatory agencies, accreditation organizations). Hierarchy A group of individuals organized or classified according to rank or authority. Interdepartmental communication Occurs between the laboratory and other organizational departments, clients, and healthcare providers. Tends to be structured and formal. Intradepartmental communication Occurs within the laboratory between management, sections or divisions, and work shifts. Tends to be informal. Management by walking about (MBWA) A process that promotes informal communication between managers and employees. Quality assurance A systematic approach to continuously analyzing, improving, and reexamining the total testing process. Turnaround time (TAT) The interval between the beginning of one event and the end of another event in the total testing process.

REFERENCES 1. American Heritage Dictionary of the English Language, 4th ed. 2000. Houghton Mifflin Company, Boston, MA. 2. Barnard, C. I. 1938. Functions of the Executive. Harvard University Press, Cambridge, MA. 3. Boyett, J., and J. Boyett. 1998. The Guru Guide: The Best Ideas of the Top Management Thinkers. John Wiley & Sons, Inc., New York, NY. 4. Heller, R.  1998. Communicate Clearly, 1st ed. DK Publishing, Inc., New York, NY. 5. Heller, R. 2002. Manager’s Handbook: Everything You Need to Know about How Business and Management Work. DK Publishing, Inc., New York, NY. 6. Hicks, H. 1967. The Management of Organizations. McGraw-Hill Book Company, New York, NY.

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7. Institute of Medicine. 2000. To Err Is Human: Building a Safer Healthcare System. National Academy Press, Washington, DC. http://www.iom.edu/, accessed September 28, 2012. 8. Institute of Medicine. 2001. Crossing the Quality Chasm: A New Health System for the 21st Century. National Academy Press, Washington, DC. http://www.nap.edu/books/0309072808/html/, accessed September 28, 2012.

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9. On-line Medical Dictionary. 1997. Academic Medical Publishing & CancerWEB, Lexico Publishing Group, Los Angeles, CA. 10. Peters, T. J., and R. H. Waterman, Jr. 1982. In Search of Excellence: Lessons from America’s Best-Run Companies. Harper & Row Publishers, New York, NY.

24 Introduction The Microbiology Laboratory in the 21st Century A Primer on Information System Terminology and Architecture A Primer on the LIS

LIS Interfaces Admission/Discharge/Transfer (ADT) Interface • Order-Entry Interface • Results-Entry Interface • Instrument Interface • Billing Interface • Reference Laboratory Interface • Peripheral Hardware

Laboratory Informatics Laboratory Data Repository • Data-Mining Tools • Connectivity

Miscellaneous Applications Preparation of a Periodic Antibiogram • Electronic Surveillance for Clusters of Hospital-Associated Infections • Unique Device Identifiers

Summary KEY POINTS

The Laboratory Information System: Making the Most of It in the Clinical Microbiology Laboratory Joseph M. Campos OBJECTIVES To review the principles of laboratory informatics To review the architecture of information systems To identify methods to enhance the cost-effectiveness and accuracy of microbiological data through informatics

GLOSSARY REFERENCES

What I am going to tell you about is what we teach our physics students in the third or fourth year of graduate school. . . . It is my task to convince you not to turn away because you don’t understand it. You see my physics students don’t understand it. . . . That is because I don’t understand it. Nobody does. Richard P. Feynman, The Strange Theory of Light and Matter

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ears from now, the 1980s, the 1990s, and the first decades of the 21st century will be recalled as the dawn of a new era for diagnosis and management of infectious diseases. That is because the clinical microbiology laboratory is in the midst of a period of historic change as its utilization of diagnostic tools changes in a remarkable fashion. This laboratory discipline is evolving before our very eyes in a manner that is affecting the management of testing and the flow of information into and away from the laboratory. The first decades of the 21st century will also be remembered for major changes to the healthcare landscape that impacted hospitals in an enormous way. A highly significant event was the passage of the Patient Protection and Affordable Care Act, which was signed into law by President Obama on March 23, 2010. Among its many provisions is language defining the steps that physician groups, hospitals, and other providers must take to form accountable care organizations (ACOs). ACOs are the centerpiece of a healthcare delivery model in which the levels of reimbursement to providers are dependent upon them meeting quality standards while reducing the cost of healthcare (22). Among other requirements, physicians within an ACO must have an electronic health record (EHR) system available that can maintain disease registries and population-based care records and can provide advanced reporting capabilities to confirm that the expectations of an ACO are being met. Populating the ACO EHR with the laboratory data that are required is a connectivity challenge that must be met by the laboratory and collaborating information technology personnel.

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Another piece of recent legislation affecting healthcare information technology is the Health Information Technology for Economic and Clinical Health (HITECH) Act, which was enacted under Title XIII of the American Recovery and Reinvestment Act of 2009. The HITECH Act grants authority to the Department of Health and Human Services to implement programs that improve healthcare quality, safety, and efficiency via improvements in health information technology, including the use of EHRs. Under the HITECH Act, healthcare organizations can qualify for Medicare and Medicaid incentive payments when they adopt certified EHR technology and use it to achieve a group of “meaningful use” goals (12). The EHR stimulus money becomes available to organizations that can document that their EHRs are being used in a meaningful fashion, e.g., e-prescribing medications, ordering laboratory tests electronically, exchanging health information with other information systems to improve the overall quality of health care, and demonstrating the benefits that the EHR is contributing to patients under their care.

The Microbiology Laboratory in the 21st Century Returning to the microbiology laboratory itself, there are other momentous changes underway. A growing number of laboratories are being affected by a trend that started near the end of the 20th century—forwarding microbiology work from individual hospitals to full-service central laboratories. From a financial perspective it makes perfect sense to capitalize on the economies of scale such an arrangement offers (5). However, taking this step introduces complications that must be resolved from the standpoint of information access. When this model is employed, maintaining steadfast communication between the peripheral hospitals and the central laboratory presents difficulties that require informatics expertise and close attention to detail. Whether microbiology testing is being referred to a central laboratory or is being performed in the hospital itself, the complete automation of workflow from receipt of specimens to the issuance of final test results is no longer just a fanciful notion (8). Platforms that enable hands-free inoculation of cultures and preparations of smears already exist. “Smart incubators” that depend on digital photography and computerized image analysis to monitor the growth of cultures have left the drawing board and actually exist today in prototype format. It is now conceivable that a microbiology technologist will be able to examine cultures and designate colonies for further work-up from a remote location—even while telecommuting from home! The availability of automated specimen-handling tracks, comparable to what is already available in core chemistry and hematology laboratories, is also just around the corner. All of this automation will be greatly dependent upon

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connectivity with a robust laboratory information system (LIS) that is able to assist microbiology technologists serving at the helm of the laboratory operation. Another transformation affecting the workflow and information management in microbiology laboratories is the shift from diagnostic testing based on culture, antigen detection, antibody detection, and microscopy to a greater dependence upon molecular technologies. Reporting the results of single-target molecular assays, whether qualitative or quantitative, does not pose much of a challenge to a modern LIS. However, multiplex assays in which 10, 20, 30, or more targets are sought simultaneously introduce complexities that today’s systems are not prepared to handle. Even more daunting are microarray assays where thousands, tens of thousands, or even hundreds of thousands of targets may be in play. Assays involving the sequencing of genes, multiple genes, or entire genomes are equally difficult for current systems to manage. LIS vendors are finding themselves playing catch-up to keep pace with the influx of molecular technology into the clinical laboratory as a whole and the microbiology laboratory in particular. The responsibilities of the microbiology laboratory leadership team are becoming more informatics-centric as well. Along with ensuring that the laboratory is employing the most appropriate test methodologies, is producing clinically relevant test results, is passing biannual accreditation surveys, and is scoring well on proficiency tests, they must be assured that the LIS is receiving test orders and disseminating test results reliably. As in the rest of the laboratory, it is clear that the preanalytical and postanalytical phases of microbiology testing are much more prone to clinically significant errors than is the analytical phase (23). Yet the preanalytical and postanalytical phases of testing receive much less attention than the analytical phase during test development and validation. In the preanalytical phase, correct ordering of appropriate tests is greatly dependent upon information supplied by the laboratory (20). Clearly differentiating tests that detect antigens versus antibodies, recognize IgG versus IgM antibodies, and provide qualitative versus quantitative molecular results is the duty of the laboratory. That kind of information is provided most effectively in an online format that can be viewed anytime of the day or night (14). In addition, there should always be a knowledgeable individual on call who can answer questions not addressed by the online information. Postanalytically, physician understanding of the clinical significance of test results can be aided by the laboratory supplying interpretive comments. They can be in the form of composed text comments that the LIS automatically appends to test results, or they can be ad hoc free text statements created on-the-spot for a particular patient. In addition to explaining the implication of test results, they

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can suggest follow-up tests that may be ordered to better understand a patient’s medical situation. Most microbiology laboratories today depend on the LIS for much more than ordering and resulting laboratory tests (2, 4). The LIS can be used to manage the quality control and quality assurance activities of the laboratory and monitor the inventory of laboratory supplies, among other things (11). The remainder of this chapter will review information system architecture and the principles of laboratory informatics. The manner in which the LIS can serve to enhance the cost-effectiveness and accuracy of microbiology testing will also be discussed.

A Primer on Information System Terminology and Architecture Lack of understanding of terminology is a major source of intimidation for any field of technology. Computer terminology may be incomprehensible to microbiologists, just as microbiology terminology may be unintelligible to information system personnel. Simple definitions of computer components and terminology can be found in the glossary at the end of the chapter. It is advisable that all personnel working in the microbiology laboratory have a fundamental understanding of information system terminology and architecture. A healthcare enterprise information system provides a computerized platform that facilitates the management of a hospital’s clinical, financial, and quality improvement activities. The information system may consist of a patchwork of “best of breed” products that are interfaced to each other to meet the needs of the facility. Then again, the hospital may employ a software suite from a single vendor in which component applications work together in an integrated fashion. The cornerstone of either design is the patient-centered hospital information system (HIS) (13). The HIS is the home of the master patient index (MPI), which is a listing of current and past patients receiving medical care from the hospital. It is also the storage site for all of the patientrelated information gathered before, during, or after each episode of care, including the patient demographic data. It is the location of the official record that feeds patient information to all of the other information systems in the enterprise. Because of its critical role, the MPI should be strongly protected. Additions, deletions, modifications, and merges of patient records in the MPI should be tightly controlled and under continuous surveillance. The integrity of the MPI should be verified on a regular basis. User access to MPI editing functions should be restricted to authorized individuals who are thoroughly trained and assessed as competent. Other information systems are also present in the hospital setting. Examples include systems for warehousing

patient care records (the EHR), scheduling patient visits, billing for services rendered (financial information system), enabling decision support analyses, coordinating physician practice management, administering materials management, operating pharmacy services (pharmacy information system), and overseeing diagnostic imaging services (radiology information system). Most hospitals and healthcare information technology vendors have adopted the Health Level 7 (HL-7) data exchange standard to support communication of information between information systems. The HL-7 standard is composed of a set of rules that dictates how healthcare clinical and administrative data can be shared in a uniform, consistent manner. Its specifications identify the appropriate location and sequence of data elements (“segments”) in messages between healthcare information systems. It is common for hospitals to install an interface engine at the hub of the information system architecture to manage the flow of data between disparate information systems. The interface engine is analogous to a traffic cop who oversees the orderly passage of vehicles through a busy intersection. A properly functioning interface engine grants hospitals the freedom and flexibility to select HL-7-compatible information systems of their choice from a variety of vendors and link them together to provide system-wide communication. Each information system in the hospital environment is installed on at least one server that houses the operating system and application software. An ideally designed architecture includes redundant servers housed in physically separate locations to provide effective disaster recovery and efficient use of server resources. Locating redundant servers several miles apart minimizes the likelihood that all will be affected during the same disastrous event. The detrimental impact of heavy concurrent user activity on system resources can be lessened by distributing users across redundant servers (load balancing). Redundant servers are also an important safeguard during system downtime. When a primary server is not available during scheduled or unscheduled downtime, user sessions logged onto that server can be moved quickly to a different server and remain productive. One other point regarding information system architecture deserves emphasis. There must be a mechanism available for scheduling regular system backup. Information contained on each server should be copied to quickly accessible storage media on at least a daily basis. One copy of the backed-up system and database files should be stored in a location that is remote from the server location. Should a disaster occur at the location where an information system server is located, the stored information and application software within that server can be activated or loaded onto a replacement server using the system backup media as the source.

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A Primer on the LIS Because the data management needs of microbiology laboratories are advancing right along with the newer technologies being used, the features of the ideal LIS vary widely from laboratory to laboratory. Thus, it is not possible to come up with a standard list of LIS specifications that will meet the demands of all microbiology laboratories. The rationale for building the first LIS was to manage the billing for testing performed by laboratories (27). Once that was accomplished, they have become ever more sophisticated and feature-rich in response to competitive forces in the marketplace. An LIS consists of one or more servers that provide the array of services described in the sections that follow. Not surprisingly, the information entered into, stored within, and reported from the LIS is directly or indirectly related to laboratory testing. The LIS counterpart to the HIS MPI is a dynamic database usually referred to as the patient laboratory file (PLF). Within the PLF resides all of the patient demographic information sent to the LIS via the admissions/discharges/transfers (ADT) interface from the MPI, as well as complete information about laboratory tests that have been ordered and the results of those tests. Users generally have access to the LIS via “thick client” or “thin client” workstations. Thick client workstations are usually personal computers capable of running a wide variety of software applications in addition to the LIS (e.g., email, word-processing, spreadsheet, and presentation software). Application software resides on both the user workstations and the LIS servers. While such workstations have extreme functionality, they have consequential disadvantages. They are more expensive. The presence of unrelated software that is incompatible with LIS functionality can prevent the workstation from behaving properly. Information technology support of a group of dissimilar workstations is a major headache when problems need to be solved or LIS upgrades are ready for installation. Accordingly, many laboratories have migrated away from the thick client environment. Thin client workstations are personal computers that are minimally equipped and often limited to running applications that are loaded on network servers. They are usually web-enabled and thus can access applications via secure connections over the Internet. They are inexpensive, as workstations go. LIS upgrades do not require support personnel to have hands-on contact with all workstations, as changes to the LIS need be made only on the network servers. The relatively recent popularity of “cloud computing” can be adapted to a thin client environment. Cloud computing is analogous to having a laboratory staff of 100 fulltime equivalents (FTEs) who have been cross-trained to perform all laboratory testing. The number of those FTEs allocated to a particular activity can be flexed up or down

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depending upon the workload and the urgency with which test results are needed. The “laboratory cloud,” in this example, is able to adjust available resources rapidly to meet fluctuating and unpredictable demand. Similarly, cloud computing permits a group of linked servers to assign the requisite processing power to a task for the time period required to complete the task.

LIS Interfaces Transactions that are communicated between information systems are conveyed by one of several interfaces. Each of the interfaces includes generation of an error log that must be monitored continuously by information technology personnel. Many of the messages recorded in the error log are informational and of little consequence. However, the most critical of errors are found also in the same log, and it is those errors that must be recognized and that warrant immediate resolution. Typically encountered interfaces between the LIS and other information systems include the ones described below.

Admission/Discharge/Transfer (ADT) Interface The LIS depends on the MPI for the most current information regarding individual patient admissions, discharges, and transfers. Usually, the creation of new MPI records or changes to existing records are sent to the LIS instantaneously via an ADT interface. Such an interface obviates the need for manual entry of patient demographics in the LIS and guarantees that the information within the LIS is up-to-the-minute. Order-Entry Interface Direct entry of laboratory orders into EHRs by caregivers and other patient care personnel is the norm in hospitals today. Although it can be argued that the placement of orders by patient care personnel requires time that might be better spent seeing additional patients, this practice is a central component of the universal strategy to eliminate medical errors. The ordering of laboratory tests that takes place in the EHR should be simplified by logically organized, online test menus that offer easy access to information concerning testing (e.g., specimen requirements, turnaround time for test results, and the costs of testing). Verifying that the content and organization of the microbiology ordering screens in the EHR are easily navigated and understandable is a task best handled by a laboratorian. Once laboratory test orders are entered in the EHR, they are sent electronically to the LIS via an order-entry interface. Specimen container labels, usually bar-coded, are generated either by the EHR or by the LIS and applied to the containers in the presence of the patient. Specimens are transported to the laboratory, where they are received

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into the LIS, and then testing is initiated. If a specimen is not received into the LIS within a user-defined timeframe (e.g., 72 hours) and an acknowledgment of receipt is not sent back to the EHR, at most hospitals the EHR will cancel the test automatically. Medicare, Medicaid, and third-party payors now require that the current procedural terminology (CPT) 4 code(s) for laboratory tests being ordered on outpatients be accompanied by an International Classification of Disease (ICD) 9 (soon to be ICD10) ordering diagnosis code that justifies the medical necessity of the test. This requirement is intended to discourage indiscriminate ordering of laboratory tests as part of a “shotgun” approach to working up a particular patient. Many outpatient order-entry information systems today offer an optional medical necessity checking module that automatically alerts the ordering clinician when there is not an appropriate match between the CPT4 and ICD9 codes. Inclusion of this module in the outpatient order-entry information system is strongly recommended. EHR ordering systems often include rules engines or “expert systems” that can assist clinicians in selecting the correct test, can identify tests that require consultation with “gate keepers” before ordering is permitted, and can check automatically for redundant test orders. The recognition of medically unnecessary or redundant tests can be displayed in real time on the ordering clinician’s workstation. If that capability does not exist in the ordering system, such tests can also be identified by the LIS after orders have come across the order-entry interface. These essential features are most effective when the information is presented to an ordering clinician rather than after the fact to a laboratory employee.

Results-Entry Interface The same EHR application used for placing laboratory test orders is often tapped by patient care personnel for viewing test results. Thus, installation of an order-entry interface generally is accompanied by installation of a results-entry interface. The microbiology laboratory should play a central role in testing and validating the functionality of the results-entry interface to ensure that its test results display in an accurate, unambiguous, and clinically advantageous way. This is especially true for the presentation of antimicrobial susceptibility results, which should be laid out in an arrangement that clearly distinguishes susceptible from resistant results. Consideration should be given to displaying cascaded results, meaning that the agents showing susceptible results are limited to those that are safer and less costly for the patient. Along with test results, the LIS can supply information to the EHR that improves the utilization of laboratory services and assists in the “back-office” management of testing. Preliminary and final test results should be viewable

in the EHR immediately after they are filed in the LIS. Test result reports may be printed on paper or delivered electronically to patient care personnel by fax, email, alphanumeric pager, or video monitor display on remote personal computers, tablets, or smart phones. Interpretive comments can be attached to reports by the laboratory to assist clinicians in understanding their significance and learning which additional tests should be considered for ordering. Efforts are under way to develop a standard “plug and play” interface that would enable connectivity between LIS/HIS and EHR software (25). That is because the financial incentive for practicing physicians to implement EHR software has increased profoundly under the tenets of the HITECH Act. Such software includes laboratory test order-entry capability complete with medical necessity checking and test results viewing capability in the context of a patient’s electronic health record. More than 300 different EHR systems are on the market now in the United States alone, all competing for this lucrative business. Developers of these systems are not always familiar with the requirements mandated by the Clinical Laboratory Improvement Act of 1988 (CLIA ’88) for the display of laboratory test results. Therefore, it is obligatory that the responsibility for ensuring the display of laboratory data by EHR software meets CLIA ’88 standards is assigned to individuals who are competent to make that judgment. For infectious disease testing, generally an individual with microbiology expertise should be given this responsibility.

Instrument Interface Connectivity between high-volume test instruments and the LIS is critically important for eliminating tedious, resource-intensive, manual entry of information into the instrument data management system and into the LIS. Manual transcription of this information is also a major source of preanalytical and postanalytical errors, leading to avoidable harm in patients. The current standards for communication between laboratory instruments and the LIS were promulgated by the American Society for Testing and Materials (ASTM) in the 1980s. The primary goal at that time was to define standards usable for the current day yet permit them to be adaptable to new technology as it was developed in the future. Such flexibility actually contributed to the ASTM standards becoming so broadly defined that customized software code known as “drivers” has had to be created for each laboratory instrument to make it possible for the instruments and the LIS to understand each other. If standardized connectivity protocols were accepted by instrument manufacturers and LIS vendors, plug and play instrument interfaces could become a reality. The current lack of standardization, however, leads to expenditure of much time and money by laboratory users and vendors alike, trying to establish reliable channels of data communication.

CHAPTER 24. THE LABORATORY INFORMATION SYSTEM

To put this problem into a present-day context, the purchaser of a music player, a portable tablet, or a notebook expects to be able to plug the device into a personal computer or connect to a wireless network to access content immediately that can be downloaded to the device. Imagine how sales would plummet if it became necessary to develop, validate, and implement costly interfaces between these devices, computers, and wireless networks before being able to enjoy use of the devices. There is promising news on the horizon. A group known as the IVD Industry Connectivity Consortium is hard at work defining a new uniform connectivity standard that should enable laboratories to benefit from the same plug and play ease of use with which home consumers are accustomed with their electronic devices. The timing of this effort is favorable for microbiology laboratories as they add newer molecular diagnostics platforms to their testing armamentarium.

Billing Interface From a dollars-and-cents perspective, the billing interface between the LIS and the hospital financial system is crucial (29). Laboratory test charges are sent either individually as they are incurred or, more typically, in a daily batch across this interface. The hospital’s financial leadership must decide whether charges should be levied upon test ordering or upon specimen receipt by the laboratory. Selecting the former choice inevitably means crediting a large number of charges for tests that are ordered without specimens being received by the laboratory. The latter option risks delays in billing that encourage some payors to deny reimbursement if too much time has elapsed since the date/time of service. Automatic billing for laboratory services often is triggered by the transmission of billing transactions across the interface between the LIS and the financial information system. Complex financial algorithms dictated by contracts with third-party payors, accountable-care organizations, and managed-care providers can be processed by LIS tools included in some systems but probably are better left for handling by financial information system software. An important requirement that must be met with respect to laboratory billing is that the test charges are precise, complete, and convertible into a format dictated by the payors—or denial of reimbursement becomes a likely outcome. Reference Laboratory Interface Virtually all hospital laboratories send specimens to reference laboratories for esoteric testing that is not performed on-site. The results of send-out tests often are complicated and accompanied by large blocks of interpretive text. Manual transcription of results into the LIS by clerical employees who are frequently unfamiliar with testing terminology can be fraught with mistakes. Interfaces between the LIS

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and the information systems at each reference laboratory are attractive to both the originating and reference laboratories because they automate what is ordinarily a resourceintensive process and they minimize the occurrence of errors during test ordering and results entry into the LIS.

Peripheral Hardware Peripheral hardware connected to the LIS server(s) either directly or through a personal computer (PC) workstation may include: • Data entry devices (e.g., keyboards, light pens, touch screens, barcode wands, scanners, terminal-emulation devices, and digital cameras). • Printers for preparation of specimen identification labels, worksheets, and reports. • Laboratory instruments to permit batch or real-time transfer of patient demographic data and test results. Instrument connections are mediated by interface software. These interfaces permit the LIS server and the attached instruments to communicate in much the same way that an interpreter enables people who speak different languages to understand one another. Instrument interfaces may be unidirectional (instrument to server or server to instrument) or bidirectional (server to instrument to server). • Middleware, in the laboratory context, is software that is usually loaded on a high-storage-capacity server that enables multiple instruments and other peripheral devices to feed information to a data repository so that it can be aggregated and displayed in a manner defined by and made valuable to the user (9). An especially helpful use of middleware makes possible the display of real-time data-derived dashboards that furnish practical workload and quality indicator information at a glance.

Laboratory Informatics The specialty of laboratory informatics was originated to better manage the expanding quantity of laboratory data and the growing complexity of the LIS (3, 26). Laboratory informatics is defined simply as the application of information technology to optimize laboratory operations. Just about every hospital microbiologist interacts with one external information system, and many deal with several such systems on a daily basis. Despite this circumstance, most microbiologists understand the complexities of antimicrobial susceptibility testing or molecular diagnostics better than they do information technology. That is because most microbiologists lack training in laboratory informatics and consider the LIS to be a “black box” that keeps them happy when it does what is expected and makes them miserable when it doesn’t. They are driven to

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understand the intricacies of microbiology and decide to leave the mysteries of information technology to others. It needn’t be that way. Much of the data residing in the LIS is of little interest to clinical microbiologists. Buried within the patient laboratory file (PLF), however, are all of the records of microbiology test orders and results. Data elements of interest that are stored within these records can be extracted and exported to personal computer spreadsheets and relational tables during queries of the LIS. Results of these queries can be displayed on computer workstations or in printed reports. Long-term storage and retrieval of laboratory data can be easily accommodated by a suitably configured LIS. The current emphasis by payors and healthcare accrediting agencies on utilization review of laboratory services and quality assurance analysis of laboratory testing requires that laboratory activity be evaluated on a regular basis. Generation of hard-coded “canned” or ad hoc user-defined reports from the LIS, middleware, or institutional decision-support systems can be instrumental to this effort. Data from canned reports that would ordinarily be printed to paper can be stored electronically as formatted text files, PDF files, or XML files. Such files can be opened using off-the-shelf data extraction software (e.g., Monarch from Datawatch) that enables the assembly and conversion of data elements of interest into spreadsheet format. Once the data are in spreadsheet format, business analytics tools (e.g., Excel and Access from Microsoft) can be employed to query and organize the data in tabular or graphical format to simplify the assessment of laboratory activities. To make the most of the wealth of information stored within the LIS, individuals must be on-board who understand the qualitative aspects of the laboratory data available and who have the skills needed to query the data in a manner that yields answers to the questions at hand (7, 24). This includes clinical microbiologists who ought to be able to take advantage of the many capabilities that are placed at their disposal by healthcare information systems. They can position themselves ideally to make this happen by becoming facile in the use of information system tools. This expansion of personal proficiencies places individuals in a position to help achieve institutional priorities such as conducting patient outcome studies, eliminating unnecessary laboratory testing, maximizing reimbursement for necessary laboratory testing, developing clinical practice guidelines, and actively participating in hospital-wide performance improvement activities. By doing so, clinical microbiologists increase their visibility within their organizations and simultaneously diversify their skill sets to make themselves more attractive to future employers. The subspecialty known today as laboratory or pathology informatics emerged several years ago to help meet the laboratory’s data-mining needs (18, 19). The ideal

laboratory informatics specialist is first and foremost a laboratory professional who understands the principles, requirements, and flow of laboratory testing. He or she also possesses the knowledge, know-how, and inner drive to leverage his or her skills effectively to unearth data that lead to beneficial changes both internally and externally to the laboratory. Informatics specialists should have at their disposal a standard set of hardware and software tools, including the following.

Laboratory Data Repository A storehouse of laboratory data (preferably online) should be readily accessible and span a period of at least three years. Queries encompassing three or more years of data make longitudinal trending of laboratory activities possible. Given the relatively low cost of information system memory these days, the price tag should not be a significant impediment. Not to be overlooked is the need to maintain enough processing power in the LIS server upon which data queries will be run so that searches can be conducted within a reasonable time frame and without degrading system performance for other users. If server upgrades are required to meet this requirement, they can entail a significant financial outlay. Data-Mining Tools The software tools essential for performing ad hoc queries of the LIS data repository must be on hand. Such tools are normally an extra-cost option purchased from LIS vendors. They may be referred to as ad hoc or user-defined report writers or as report engines. They may include commercial, off-the-shelf software (e.g., Crystal Reports from SAP) that is installed on a user’s workstation to make possible relational database queries. The server hosting the report engine needs access to a complete copy of the PLF. The PLF copy may be located on a separate server that is kept up-to-date through a dynamic link with the primary LIS server. Connectivity An electronic channel through which data can be transferred quickly from the LIS to a personal computer is needed. This may be accomplished in a variety of ways: • Reports can be “printed” in flat field text format to a file on a PC linked to the LIS via a wired serial connection. • Report files can be sent directly to a PC from the LIS using file transfer protocol (FTP) over a network connection or a wireless network connection. • The LIS PLF can be queried directly with PC-based software (e.g., Crystal Reports from SAP or Access from Microsoft), assuming that the PLF data are stored

CHAPTER 24. THE LABORATORY INFORMATION SYSTEM

in an open database connectivity (ODBC)–compliant table format. The driver needed to link the querying software to the LIS also must be available. • The screen capture functionality that is a component of the terminal emulation software (e.g., SmarTerm from Esker) used to display character-based LIS screens on a PC workstation can be used to capture LIS reports as formatted text files. Once the data are delivered to a PC, spreadsheet, database, and/or data extraction software can be used to perform sophisticated analyses. The types of analyses that can be conducted are virtually limitless, and the results can be displayed in a multitude of formats (e.g., Word or PowerPoint from Microsoft or PDF from Adobe).

Miscellaneous Applications Preparation of a Periodic Antibiogram Organism-specific antibiotic susceptibility data collected over a discrete period of time should be analyzed and distributed to clinicians on a regular basis. The purpose is to present local cumulative data to assist them in selecting empiric antimicrobial therapy prior to the availability of actual antibiotic susceptibility results. The data are retrieved from the LIS, from a middleware repository between the LIS and the testing instrument, or from the data management system linked to the testing instrument. The data should be analyzed according to the guidelines published by the Clinical and Laboratory Standards Institute (CLSI) (6). The guidelines recommend that the antibiogram be issued at least annually, that only organisms for which there were at least 30 isolates during the analysis period be included, that surveillance culture isolates be excluded, that only the first isolate per species per patient, regardless of the specimen type or antibiogram, be included, and that the data for each organism be reported as the percent susceptible for each routinely tested antibiotic, not including intermediately susceptible results. Electronic Surveillance for Clusters of HospitalAssociated Infections Data mining has been described as the process of examining large bodies of data to recognize tessellations and associations that unearth trends, forecast future events, and judge the virtues of assorted courses of action. It is possible to employ an automated data-mining software solution (e.g., MedMined from CareFusion) for detecting clinically relevant patterns of microbiology culture isolates (10, 28). These patterns would include clusters of hospital-associated infections, increased frequency of multiply resistant microorganisms, or other user-defined observations that contribute measurably to improving patient safety.

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These applications usually run on a separate server and receive an HL7-standardized feed of patient registration and microbiology test result data. After “scrubbing” the data to remove duplicate tests, outlandish test results, and anomalous information, the data that remain are analyzed in an algorithmic fashion to recognize trends and associations that would otherwise escape detection. Realtime alerts can be issued as notification that a set of recent events warrants closer scrutiny.

Unique Device Identifiers Recently, the U.S. Food and Drug Administration (FDA) issued a proposed rule that each medical device in the United States, including those in the microbiology laboratory, be assigned a unique device identifier (UDI) (http://www .fda.gov/MedicalDevices/DeviceRegulationandGuidance/ UniqueDeviceIdentification/default.htm, last accessed August 27, 2013). The idea is to bolster the quality of information included in adverse event reports, which will assist in the identification of device-related problems that could negatively impact patient safety. The UDI is an alphanumeric identifier that encodes the device model and lot number, the device serial number, and the device expiration date if appropriate. A database that is available for public scrutiny will be created that specifies a basic set of identifying elements for each UDI. Once it is in place, the UDI system should offer several advantages: • It will provide manufacturers, distributors, and healthcare facilities the information they need to efficiently manage device recalls. • It will decrease the frequency of medical errors by identifying problem devices early on that should be replaced. • It will provide a way to document in the LIS the use of specific devices, contributing to the establishment of an effective postmarket surveillance program within the laboratory.

Summary When new technology transforms into a “must-have” staple of the laboratory, the question becomes not should we adopt the technology, but which iteration of the technology should we implement? The LIS certainly falls into this category. There are a wide variety of options available in today’s marketplace. Whether it is a first-time decision for the laboratory or it is a decision for a laboratory seeking an upgrade over existing technology, the selection of an LIS is an action that should be made only after thorough consideration of the pros and cons of the contenders for the laboratory’s business. No single LIS is ideal for every laboratory setting. That is a good thing because it encourages vendors to strive

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continuously to make their LISs more appealing to all sectors of the laboratory community. Competition between vendors breeds technological progress fueled by innovation. The big winners are the customers and their patients, who benefit from the game of technological “leapfrog” that the LIS vendors are playing with each other. The other winners are the vendors who are creative enough to develop what the industry calls “killer apps”—LIS features that a laboratory cannot live without. It is the responsibility of laboratory leadership to convince hospital administrators of the wisdom of investing in state-of-the-art or at least near state-of-the-art LIS hardware and software. Older servers that lack the processing power required to efficiently run current versions of LIS software will create user frustration and encourage reliance upon “Band-Aid” work-around solutions that are not always in the best interests of patients. Similarly, software that lacks newer feature sets that have quickly become the community standard because of their criticality to optimum laboratory service will place the organization in risk-management jeopardy. The analytics tools that can be so valuable to laboratory and hospital leadership in engaging in performance improvement activities cannot be employed to their fullest extent if the LIS infrastructure is subpar. There has been much interest in recent years in transforming healthcare practices with an eye toward greater efficiency, lower costs, and elimination of medical errors—in other words, the pursuit of excellence (15). The packaging of lean approaches to optimize workflow with Six Sigma principles to reduce error rates has been discussed in virtually every healthcare organization board room during the past decade. What has been learned is that it is a concept that is very easy to talk about but oh so difficult to implement. The clinical laboratory, including the microbiology laboratory, is an ideal candidate for lean/Six Sigma reorganization. Leveraging the capabilities of the LIS to track bar-coded specimens, to connect with testing instruments to improve error-free data flow, and to display laboratory productivity snapshots on workstation dashboards are all important components of a program to pursue excellence in laboratory testing. A near-universal problem in healthcare is overutilization of laboratory services. It may be due to fear of litigation on the part of clinicians, or it may result from ignorance that tests being ordered have already been ordered by someone else. Tools are available in the modern LIS to help recognize and eliminate such unnecessary testing (29). For example, a query of the LIS PLF can quickly generate a list of tests that appear to be requested more often than they should. An individual with informatics skills can easily “drill down” in that list to identify ordering physicians, patient locations, patient diagnoses, and work shifts associated with the apparent abuse of laboratory testing.

Laboratories can also eliminate laboratory errors and improve their quality of testing by employing investigative informatics to pinpoint technologists whose testing results exhibit questionable elements (16). This approach can be particularly useful in the microbiology laboratory for evaluating qualitative test results that are interpreted by subjective criteria. The use of lateral flow technology for rapid detection of microbial antigens or antibodies is an excellent example. Test data from the microbiology laboratory over the course of time can be extracted from the LIS and imported into a PC-based spreadsheet or database application. Then, using tools from either software application, test data can be stratified by technologist to determine whether any test performers differ significantly from the laboratory mean in the percentage of positive results reported. After taking potential confounding factors into account, such as work shift or ordering location of tested patients, individuals that remain as notable outliers can have their testing competency reassessed and be provided with retraining if that is deemed necessary. More than ever before, the clinical microbiology laboratory is a purveyor of information—much of it valuable but some of it valueless (21). Clinical microbiologists have become information brokers, in effect, and it is their job to determine whether the data they have generated are clinically important enough to be passed on or whether the data are unimportant or potentially misleading. The LIS is a valuable ally in this regard. Comparing a patient’s current result with past results (i.e., “delta checking”), identifying incongruities between smear and culture results, and recognizing antimicrobial susceptibility results that vary significantly from those expected for a particular organism are all tasks that can be greatly simplified by the LIS. The responsibility of selecting, maintaining, and operating an LIS is much more complex than it used to be. Discharging these responsibilities is more than a full-time job in all but the smallest laboratories. The subspecialty of laboratory informatics has emerged for this reason, but there unfortunately is a shortage of knowledgeable personnel. The work is challenging and constantly changing and carries tremendous potential for job security and career advancement. The blending of clinical microbiology, molecular diagnostics, and laboratory informatics expertise is an excellent combination for today and for the future. It is a career path that can be highly recommended. The informatics skills described in this chapter are easily acquired and can be extremely practical for the reasons outlined earlier. Because of the strong dependence of healthcare organizations on information technology, individuals who possess informatics skills and knowledge are considered valuable members of the hospital workforce by laboratory and hospital administrators (1, 17). Today’s healthcare environment is change-oriented, with a definite emphasis on becoming more cost-efficient.

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Clinical microbiologists who have earned the respect of their leadership because of the diverse skills they bring to the workplace can expect to be rewarded with continuing employment and opportunities for promotion—both within their organization and in the world beyond. KEY POINTS Failure to keep data stored in the information systems up to date can lead to medical errors. ■ The HIS contains the master patient index and is the source of demographic data provided to other interfaced information systems. ■ Transactions between the LIS and other information systems occur by five typical interfaces: ■

■

• ADT • Order entry • Results entry • Billing • Reference laboratory The LIS can be used to identify and eliminate unnecessary testing.

GLOSSARY This glossary contains informatics terms and mnemonics with which laboratorians should be familiar. Definitions of some of these terms and mnemonics were adapted from The PC Glossary—Definitions of Computer and Internet Terms (http://pc.net/glossary/, accessed September 23, 2012). AIX (advanced interactive executive) An operating system (OS) that is installed on many large enterprise-level servers because of its robust security capabilities. It was developed by IBM and is UNIX-based. It also is able to run most LINUX applications. API (application program interface) The set of tools that programmers use when building software to run on a particular OS. It permits them to use standardized approaches for interacting with an OS instead of having to redefine them from scratch each time. Application A software program that is able to run on a workstation or server. In the Windows (Microsoft) environment, application software uses the “.exe” extension, whereas in the Macintosh (Apple) environment, application software uses the “.app” extension. BIOS (basic input/output system) The program stored on a ROM (read-only memory) chip that a Windows-based computer uses to begin its operations when it is turned on (booted up). The program checks all of the computer’s hardware connections and locates all of the attached devices. If all is fine, the BIOS then loads the OS (e.g., Windows) into the computer’s RAM (random access memory) and finishes the boot-up process.

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Browser A browser (e.g., Internet Explorer) is the application people use to access content on the Internet. It is able to interpret HTML and XML code to display web pages in readable format. Central processing unit (CPU) The main information processor (the brain) in a computer that interprets and implements instructions. The CPU performs calculations, makes logical decisions, and stores information transiently. Client In network parlance, the client is a computer/workstation that communicates commands to a server in a client/server relationship. Cloud computing The use of hardware and software services that are delivered to a client workstation over a network (e.g., the Internet). Users access cloud-based hardware and software via a browser or a network connection to enable sharing of resources with other users during periods of fluctuating demand. Driver A computer file that enables a computer to recognize and control a hardware device. Ethernet An Ethernet connection is the most common type of wired link between a computer workstation and a LAN (local area network) server. An Ethernet port resembles a telephone jack but is a little bit wider. The two main types of Ethernet are 10BaseT and 100BaseT, the latter enabling data transfer rates at tenfold higher rates. Firewall A computer firewall limits the information that can flow from outside a network to servers and workstations within the network. Its purpose is to prevent access to the network by unauthorized individuals and to protect the network from damage from external malware. Firewalls are either hardware- or software-based. FTP (file transfer protocol) A commonly used routine for moving data files from one workstation to another on a network or through the Internet. Graphical user interface (GUI) A format for displaying content on a computer OS (e.g., Windows from Microsoft) in which users interact with objects on a monitor via a pointing device (e.g., a mouse) rather than issuing text commands via manually placed key strokes. With a mouse users are able to click on and drag objects on the monitor instead of entering instructions on a command line. Hard disk Data and installed programs on a computer are typically written to one or more hard disks. A hard disk is a group of magnetic disks, called platters, upon which information is recorded. Because information is stored on magnetic medium, it remains in place when the computer is turned off. This is an important distinction between a hard disk and RAM, which is erased when the server’s power is turned off. The hard disk is located within the hard drive, which reads and writes data to the disk. The hard drive also moves data between the CPU and the hard disk. Health level 7 (HL7) A nonprofit organization concerned with the promulgation of international interoperability standards for healthcare informatics. It also has become a generic term for specific standards created by the organization. The “HL7 standard” defines a set of guidelines and methodologies through which

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healthcare information systems converse with one another. The guidelines and methodologies establish the rulebook for sharing information in a consistent manner. They define how a data stream is packaged into segments that are then passed on to and interpreted by another information system. Hospital information system (HIS) An integrated set of information systems that oversee the medical, administrative, financial, and legal activities of a hospital. Linked to the HIS may be a variety of other medically oriented information systems such as the laboratory information system (LIS). HTML (hypertext markup language) HTML is the language used for creating Internet web pages. HTML syntax is composed of a group of instructions (tags) that define a web page’s format for a browser and how the page’s content should be displayed. Hub A central connection point for a group of workstations and other devices on a network. Information from one workstation or device connected to the hub can be directed to any other workstation or device connected to the hub. Instrument interface A hardware and software connection between a server and a laboratory instrument that enables electronic communication of patient demographic and laboratory test data. In today’s architecture there is frequently instrument interface manager middleware between the instruments and the LIS to streamline communication. Interface A port on a hardware device that allows it to be connected to another device. Examples of interfaces include RS232, serial, parallel, modem, USB, Firewire, and Ethernet ports. IP (Internet Protocol) address An IP address is a numerical code consisting of a number or a group of numbers separated by three dots (e.g., 123.45.67.89) that specify a particular workstation or server on a network or on the Internet. The address can be static (never changing) or dynamic (assigned on-the-fly when the computer logs in). Laboratory information system (LIS) Software running on server hardware that provides the tools needed to support a laboratory’s operations. The tools have advanced over the years from sample tracking and billing to a suite of tools that manages virtually all of the activities within the clinical laboratory. LINUX An open-source OS that is derived from UNIX and is available at no cost to users. It is widely used by web-hosting companies. Local area network (LAN) A network of neighboring, linked computers and other devices within a work group (e.g., a hospital, an office building, a university, or even a home). The primary advantage of a LAN is that it makes it easy for computers and other devices on the network to share information. Devices on a LAN may be linked through a router by network cable. Wireless connections of devices to a network router have become extremely popular lately. Master patient index (MPI) A database that contains a unique identifier for every patient registered within a healthcare organization along with the patient’s demographic information and a history of previous encounters with the healthcare organization.

The MPI is referred to during patient registration to guarantee that each patient has a single identifier and that multiple patients do not share the same identifier. Modem (modulator/demodulator) A device that allows one computer to connect to another computer over a telephone line to transfer data. Dial-up modems are almost obsolete because of the slow data transmission speed. They have been replaced by cable modems and DSL (digital subscriber line) modems, which transfer data at a much faster rate. ODBC (open database connectivity) The ODBC standard was formulated in 1992 to enable any application that supports the standard to access data from any ODBC-compliant database (e.g., Access from Microsoft) regardless of what database management system the database uses. To be ODBC-compliant, a database must include an ODBC driver to allow other applications to access its data with a standard set of commands. Operating system (OS) The OS (e.g., Windows from Microsoft) is the computer software that allocates memory, processes tasks, accesses disks and peripherals, and serves as the user interface. The OS prompts users (or peripheral devices) for input and/or commands, takes actions, and then reports back the results of these actions. Without an OS, software programs cannot run. Patient laboratory file (PLF) The LIS version of the MPI. It contains the information about patients that is relevant to LIS users, including demographics and information about laboratory tests previously ordered and resulted. Plug and play (PnP) PnP devices are able to communicate with computer workstations as soon as they are connected. New drivers do not need to be loaded, nor does the workstation need to be notified that a new device has been attached. Processor The processor (or microprocessor) is a chip (e.g., Pentium from Intel) located in the heart of a workstation or server that handles all of the arithmetic computations that are necessary to run the computer. The speed of a processor is measured in cycles per second (also known as megahertz). Random access memory (RAM) RAM is made up of individual memory chips that collectively form a memory module. The RAM is where copies of the OS, the application software, and the data in current use are stored temporarily so that they can be quickly accessed by the CPU. Accessing or storing data in RAM is much faster than accessing or storing it on a hard drive or a CD-ROM drive, but the data are present in RAM for only as long as the computer is turned on. RFID (radio frequency identification) RFID-tagged objects can be detected, recognized, and tracked by the emission of an identifying signal when the object is within an electromagnetic field produced by an interrogator device. The interrogator receives the signal and transmits information to a workstation running RFID software or middleware. Miniaturization of RFID chips is an active area of research, with current chips being as small as 50 microns by 50 microns. The cost of these chips is as little as $0.05 each. They can be embedded in specimen labels and patient wristbands to enable effective tracking of both.

CHAPTER 24. THE LABORATORY INFORMATION SYSTEM

Router Hardware that distributes data from a LAN to devices on the network or to another authorized network (e.g., via a cable modem portal to the Internet). The router also screens and allows only authorized devices to connect to the LAN. SAN (storage area network) A networked repository of storage devices that can be accessed by networked workstations. Because the individual hard drives in a SAN can be reached by a group of workstations, the SAN facilitates the sharing of large amounts of information by these workstations. Server A server is at the service of the workstations that connect to it. A server is a storage location for application software and data files that can be accessed by client workstations. Examples of servers include Internet servers, email servers, and LAN servers. SQL (structured query language) A querying language that allows workstations with SQL-compatible software to access or modify information in databases. SQL is frequently used for development and management of Internet-based databases. TCP/IP (transmission control protocol/Internet protocol) TCP/IP protocols were developed in the early days of the Internet by the U.S. military. It has since become the heart of the Internet and specifies how data should be formatted, addressed, transmitted, routed, and received during its travel through the Internet. Thick client A thick client workstation is a full-fledged computer that is functional whether it is connected to a network or not. When it is connected to a network, it functions as a client of the network server using programs and files that are not present on the client’s hard drive. Thin client A personal computer that lacks a hard drive and most of the ports that are part of a standard computer. Its activity is limited to running programs and accessing data stored on a network server. Thin clients are cost-effective in that they are less expensive than full-fledged computers and require minimal maintenance since software troubleshooting and upgrades need only be performed on the network server. UNIX (Letters do not stand for anything.) An OS that was first created by Bell Laboratories in the 1960s. It is the most common OS for Internet servers. Derivative OSs of UNIX, such as ULTRIX, XENIX, LINUX, and GNU are also in use today. URL (uniform resource locator) The Internet address for a particular web page (e.g., http://www.google.com/search). The address cannot have spaces in it and thus uses periods and forward slashes to designate different components of the address. USB (universal serial bus) USB ports have become the most widely used ports in today’s computers. Up to 127 devices can be connected to a single USB port through a series of hubs. They transfer data at significantly faster rates than the serial and parallel ports they are replacing. Video card Most of the processing done by a computer workstation is performed by the CPU. To relieve the CPU of some of the workload, video cards can be installed to handle the graphics portion of the processing load. The video adapter enables the

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digital-to-analog conversion of a video signal so that data can be displayed on a monitor. Virtualization Virtualization permits a single workstation or server to run multiple OSs simultaneously. The OSs running on top of the standard OS are referred to as “virtual machines.” VPN (virtual private network) A VPN is the result of “tunneling” through a wide area network (WAN) like the Internet. Using high-level encryption protocols and other security measures, the VPN is able to scramble the data sent from the WAN so that connection from the Internet through a network firewall is virtually private. Thus, hospital employees with VPN access can connect to the hospital LAN via the Internet and move about the LAN as if they were physically present in the hospital. Wide area network (WAN) Similar to a LAN but spans a much larger territory. A WAN may comprise several LANs that are interconnected. A WAN is a large group of personal computers or workstations that are linked via a geographically dispersed telecommunications network, for example, the Internet. WEP (wired equivalent privacy) A security protocol used for encrypting data sent over Wi-Fi networks. Wireless networks transmit data via radio waves; thus, it is not difficult to eavesdrop on wireless transmissions. The purpose of the WEP protocol is to make wireless networks as secure as wired Ethernet networks. Access to a WEP-protected network is authorized by entry of a password. Wi-Fi A wireless networking standard developed by the Wi-Fi Alliance. Wi-Fi allows computers and other devices to connect to wireless routers that then provide a gateway to the Internet. They may also connect to other devices on the network for datasharing purposes. Wiki (From the Hawaiian wiki wiki, meaning “super-fast.”) An Internet site that allows individuals to add and update content via their own Web browser. An example of a wiki is Wikipedia (www .wikipedia.com), a free encyclopedia that anyone can edit. Another example is MicrobeWiki (www.microbewiki.kenyon.edu), a student-initiated resource on microbes and microbiology. WPA (Wi-Fi protected access) A security protocol designed to protect transactions taking place over a wireless (Wi-Fi) network. It is similar to WEP but offers advancements in the way security keys are handled and the way individuals are authorized for access. Workstation A computer that is assigned to a particular task, e.g., accessing the LIS. Since processing speed is usually more important than in an all-purpose personal computer, workstations tend to have a fast microprocessor, a large amount of RAM, and a high-speed video adapter. XML (extensible markup language) Despite the origin of its name, XML is not a markup language. Instead, it can be described as a markup “metalanguage” that defines a set of rules for encoding documents in a format that is both human- and machine-readable. Hundreds of XML-based languages have been developed. They are often used in Internet applications, but many other applications can read XML documents as well.

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REFERENCES 1. Balis, U. J. 1999. Alternative careers in the laboratory reengineering paradigm. Clin. Lab. Med. 19:453–461. 2. Bazzoli, F. 1999. Laboratory systems evolve to meet data demands. Health Data Manag. 7:66–71. 3. Block, C. 1997. Benefits and limitations of computerized laboratory data. J. Clin. Pathol. 50:448–449. 4. Campos, J. M. 2007. Laboratory consultation, communication, and information systems, p. 30–42. In P. R. Murray, E. J. Baron, J. H. Jorgensen, M. A. Pfaller, and R. H. Yolken (ed.), Manual of Clinical Microbiology, 9th ed. ASM Press, Washington, DC. 5. Carter, E., J. R. Stubbs, and B. Bennett. 2004. A model for consolidation of clinical microbiology laboratory services within a multihospital health-care system. Clin. Leadersh. Manag. Rev. 18:211–215.

16. Kern, D. A., and S. T. Bennett. 1999. Quality improvement in the information age. MLO Med. Lab. Obs. 31:24–28. 17. Lincoln, T. L. 1999. Re-engineering the clinical laboratory. An overview. Clin. Lab. Med. 19:265–276. 18. McClintock, D. S., B. P. Levy, W. J. Lane, R. E. Lee, J. M. Baron, V. E. Klepeis, M. L. Onozato, J. Y. Kim, A. S. Dighe, B. A. Beckwith, F. Kuo, S. Black-Schaffer, and J. R. Gilbertson. 2012. A core curriculum for clinical fellowship training in pathology informatics. J. Pathol. Inform. 3:31. 19. McPherson, R. A. 1999. Perspective on the clinical laboratory: new uses for informatics. J. Clin. Lab. Anal. 13:53–58. 20. Meyer, R., and C. Lovis. 2011. Interoperability in hospital information systems: a return-on-investment study comparing CPOE with and without laboratory integration. Stud. Health Technol. Inform. 169:320–324.

6. Clinical and Laboratory Standards Institute. 2009. Analysis and presentation of cumulative antimicrobial susceptibility test data; approved guideline,3rd ed. CLSI document M39-A3. Clinical and Laboratory Standards Institute, Wayne, PA.

21. Miller, W. G. 2000. The changing role of the medical technologist from technologist to information specialist. Clin. Leadersh. Manag. Rev. 14:285–288.

7. Elevitch, F. R. 1999. Prospecting for gold in the data mine. Clin. Lab. Med. 19:373–384.

22. Nichols, L. M. 2012. Accountable care organization pathways: diverse but ultimately parallel. Mayo Clin. Proc. 87:710–713.

8. Greub, G., and G. Prod’hom. 2011. Automation in clinical bacteriology: what system to choose? Clin. Microbiol. Infect. 17:655–660.

23. Nutting, P. A., D. S. Main, P. M. Fischer, T. M. Stull, M. Pontious, M. Seifert, Jr., D. J. Boone, and S. Holcomb. 1996. Toward optimal laboratory use. Problems in laboratory testing in primary care. JAMA 275:635–639.

9. Grisson, R., J. Y. Kim, V. Brodsky, I. K. Kamis, B. Singh, S. M. Belkziz, S. Batra, H. J. Myers, A. Demyanov, and A. S. Dighe. 2010. A novel class of middleware: promoting information flow and improving computerized provider order entry. Am. J. Clin. Pathol. 133:860–869.

24. Oakley, S. 1999. Data mining, distributed networks, and the laboratory. Health Manag. Technol. 20:26–31.

10. Hacek, D. M., R. L. Cordell, G. A. Noskin, and L. R. Peterson. 2004. Computer-assisted surveillance for detecting clonal outbreaks of nosocomial infection. J. Clin. Microbiol. 42:1170–1175.

25. Pantanowitz, L., W. LaBranche, and W. Lareau. 2010. Stepwise approach to establishing multiple outreach laboratory information system–electronic medical record interfaces. J. Pathol. Inform. May 26:1.

11. Harrison, J. P., and G. M. McDowell. 2008. The role of laboratory information systems in healthcare quality improvement. Int. J. Health Care Qual. Assur. 21:679–691.

26. Pantanowitz, L., W. H. Henricks, and B. A. Beckwith. 2007. Medical laboratory informatics. Clin. Lab. Med. 27:823–843.

12. Henricks, W. H. 2011. “Meaningful use” of electronic health records and its relevance to laboratories and pathologists. J. Pathol. Inform. 2:7.

27. Park W. S., S. Y. Yi, S. A. Kim, J. S. Song, and Y. H Kwak. 2005. Association between the implementation of a laboratory information system and the revenue of a general hospital. Arch. Pathol. Lab. Med. 129:766–771.

13. Huet, B. 1998. Hospital information system: reusability, designing, modeling, recommendations for implementing. Medinfo 9:952–956. 14. Kay, J. D. 2001. Communicating with clinicians. Ann. Clin. Biochem. 38(Pt 2):103–110.

28. Peterson, K. E., D. Hacek, A. Robicsek, R. B. Thomson Jr., and L. R. Peterson. 2012. Electronic surveillance for infectious disease trend analysis following a quality improvement intervention. Infect. Control Hosp. Epidemiol. 33:790–795.

15. Kenney, C. 2011. Transforming Health Care: Virginia Mason Medical Center’s Pursuit of the Perfect Patient Experience. Productivity Press, New York, NY.

29. Workman, R. D., M. J. Lewis, and B. T. Hill. 2000. Enhancing the financial performance of a health system laboratory network using an information system. Am. J. Clin. Pathol. 114:9–15.

25 Introduction Organizational Challenges Political Challenges • Setting Goals for POCT Management • Developing Management Structures for POCT • Laboratory Licensure and Accreditation

Operational Challenges Determining the Scope of POCT Services • Weighing Alternatives to POCT • Analyzing Costs and Benefits • Assessing the Impact of POCT Services • Quality Assurance Challenges • Information Systems and Billing

POCT in Developing Countries and Rural Settings Challenges • Organizing POCT in Resource-Limited Settings

Technological Challenges Rapid Changes of Menu, Devices, and Technology • Lack of Equivalence between POCT and Central Laboratory Tests • New Monitoring Technologies

Summary KEY POINTS GLOSSARY REFERENCES

Management of Point-of-Care Testing Glen L. Hortin and Christopher D. Doern OBJECTIVES To identify how management of point-of-care testing (POCT) differs from other types of laboratory testing To describe cost factors in POCT and approaches for analysis of the costs of testing To provide information about how to operate a POCT program and to ensure the quality of testing To identify the challenges of implementing POCT in developing countries To understand the clinical benefit of POCT To provide an understanding of how technological advances are driving change in the scope of POCT

APPENDIX

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Clinical Laboratory Management, 2nd Edition Edited by L. S. Garcia ©2014 ASM Press, Washington, DC doi:10.1128/9781555817282.ch25

oint-of-care testing (POCT) presents some of the most controversial and difficult laboratory management challenges (Table 25.1). There is a commonly held view among laboratory workers that POCT represents a compromise in test quality in the interest of speed to obtain results. Many of the challenges presented by POCT are substantially different from those of any aspect of centralized laboratory testing. Common challenges include crossing traditional physical and organizational boundaries, performing tests at a large number of locations, training a large number of personnel with limited laboratory experience, using technologies or devices that differ from those in central laboratories, capturing test results and control values into information systems, and difficulty in tracking costs and program activity. In many respects POCT requires management “outside of the box,” not only the physical box of laboratory space but also the usual boxes of organizational structures, groups of coworkers, testing devices and technologies, laboratory practice, and management information systems. In this chapter, the management challenges of POCT are categorized into organizational, operational, and technological issues as listed in Table 25.1, although in reality some of the issues listed overlap into more than one category. There is not complete agreement about the definition of POCT, and a variety of other terms such as “near patient,” “bedside,” or “alternative site” testing have been used as approximate synonyms. For this chapter, POCT will be 471

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Table 25.1 Management challenges of POCT Organizational challenges

Historical resistance of laboratories to POCT Competition between POCT and central laboratories Setting goals Cooperation across multiple departments Deciding who controls/directs testing Developing a management structure Assignment of costs and revenue Management across usual lines of authority Deciding about licensure and accreditation of POCT

Operational challenges

Determining the scope of POCT services Weighing alternatives to POCT Analysis of costs Performance of POCT at a large number of sites Training a large number of staff to perform POCT Lack of experience and training of staff in performing laboratory tests Lack of centralized records of test results Quality assurance Inventory management Management of information Billing

Technological challenges

Growing menu of tests that can be performed as POCT Rapid change in POCT devices Rapid changes in testing technology Linking POCT data systems Lack of equivalence of POCT versus central laboratories New monitoring technologies

defined as testing that is performed outside defined laboratory facilities, including not only central laboratories but also small satellite or special-function laboratories in physician offices, intensive care units, and emergency rooms. The College of American Pathologists (CAP) uses this definition to define POCT for laboratory inspections (3). POCT represents one of the most rapidly growing and changing segments of laboratory testing. A recent survey shows that nearly every hospital has some form of POCT. Glucose testing is the most widespread component of POCT, but there were substantial increases in the menu of testing in many hospitals between 1999 and 2001 (26). POCT devices are evolving very rapidly, and recent technological advances have made it possible to perform virtually any laboratory test as POCT. The growing scope of POCT has led to the publication of entire books related to this topic that serve as general resources of information about POCT (21, 42, 54, 59). This chapter concentrates on

aspects of the management of POCT that differ from other areas of the laboratory and that are controversial.

Organizational Challenges Political Challenges Up until the mid-1990s, laboratory workers often were highly antagonistic to the perceived competition and lower analytical quality provided by POCT. Laboratory directors and managers secured the four walls of the laboratory by building a fortress of organizational boundaries, regulations, and arguments to serve as moats and barriers to prevent outsiders from intruding into the domain of laboratory testing. This management strategy sought the disappearance of POCT. However, the historical resistance of laboratory workers to POCT did not make it disappear. Instead, POCT often developed under separate management from the central laboratory, and testing volume grew rapidly as testing technologies advanced. It was only with recent attention to the licensing of all laboratory testing and efforts to control costs that POCT began to be merged with laboratory management. Nevertheless, the previous independent operation of POCT and the resistance of laboratory workers to POCT serve in many organizations as political and historical contexts that must be overcome in the management of POCT. Recently, acceptance of POCT among laboratory workers has grown, and laboratories have participated more actively in managing POCT. Input from laboratory professionals in POCT appears to be an important element in promoting the quality of testing based on long-standing problems recognized for POCT (33) and on studies of testing in physician office laboratories (27, 67). Some of the reported problems with testing included inaccuracy of test results, failure to perform quality control (QC) testing and correct test procedures, and inadequate staff training. Despite increased recognition of the importance of teamwork, healthcare organizations are complex political environments. Each department or nursing unit where POCT is performed will have its own experience, expectations, and sense of ownership of POCT performed within its domain. Acceptance of centralized management of POCT requires commitment from central administration and leaders of departments and the perception from individuals that their needs will be addressed and that there is overall benefit from such a structure. On a federal level, POCT has proven to be equally polarizing. Rapid HIV tests of waived Clinical Laboratory Improvement Amendments complexity have been available since 2002, but it was not until July of 2012 that they were approved as over-the-counter home-use tests (see Appendix 25.1 for a link to the FDA press release). This issue had been hotly contested among laboratorians for some time. Principal arguments against allowing HIV POCT to be

CHAPTER 25. MANAGEMENT OF POINT-OF-CARE TESTING

sold over-the-counter were that patients would not have immediate access to proper medical counseling upon receiving the results. There were also concerns that allowing untrained users to perform these tests would result in a high percentage of false results. In the end it was decided that the benefit of increasing access to HIV testing outweighed the risks.

Setting Goals for POCT Management One of the key initial steps in the management of POCT is the development of institutional goals. Common motivations for hospital administration and nursing units to seek additional management support for POCT are deficiencies in accreditation surveys, difficulty in meeting accreditation standards, problems with the quality of test results of POCT, resulting in complaints or lawsuits, and requests from nurses who feel the need for assistance to address laboratory regulations. In response to these acute problems, plans to revamp POCT management structure often are made in a crisis mode. Success is viewed narrowly as passing the next inspection or solving the acute problem. However, deciding that the primary goal in managing POCT is to address regulatory requirements is a very limited vision that may lead to overlooking opportunities for improving the quality and efficiency of patient care or potential clinical benefits of POCT. It would be tantamount to saying that the primary goal in the management of a clinical laboratory is to maintain accreditation. Developing a broader vision of the goals of POCT and a commitment from institutional leadership is important for moving beyond a minimal standard of performance and generating a positive sense of mission and purpose. More far-reaching goals in management of POCT are to provide testing that will improve patient care and to improve organizational efficiency (Table 25.2). Meeting regulatory standards is also a necessary goal, but regulations may be of greater value as a means than as an end. Regulations and inspectors provide guidance, incentives, and useful tools for maintaining the quality of testing and meeting more ambitious goals. Developing Management Structures for POCT In developing the management structure for POCT, there are political issues that central administration and departmental leaders need to sort out. These include issues such Table 25.2 Goals of management of POCT Improve the quality of patient care Enhance the efficiency of patient care Increase physician and nursing satisfaction Improve patient education and satisfaction Address accreditation standards Fulfill federal and state laboratory regulations Decrease liability risk

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as what department and who will direct testing, institutional priorities for POCT, and how costs and revenues will be assigned. An oversight committee can serve as a useful mechanism to assess evolving needs for POCT. It also provides bidirectional communication with participants in POCT. Considering the diverse range of stakeholders in POCT, it may be useful to have representation of nurses, physicians, laboratory and hospital administrators, information technology specialists, and laboratory directors and technologists. Such a committee can advise about needs for general changes in policy and review requests for changes in the menu of tests or sites of POCT. Day-to-day operations usually are overseen by testing coordinators and a laboratory director. However, there is much greater variation in organizational structure than there is in other areas of the laboratory. Some POCT programs are organized as extensions of the clinical laboratory, with all testing performed by laboratory staff such as phlebotomists or medical technologists. In these circumstances, management of POCT differs little from other sections of the laboratory: All of the staffing, training, employee evaluations, instrument and reagent inventory, analytical and quality assurance processes, reporting of results, data systems, and budgeting are handled within the laboratory. From a management standpoint, this results in the simplest structure. The main practical problems with this model are the need to hire extra staff to perform POCT and to have staff available at the appropriate sites when testing is needed. A more common organizational structure is that testing is performed by nurses or other nonlaboratory staff, but these are organized under a single POCT management. Problems inherent in the centralized management of a far-flung POCT program are difficulty in training a large number of nonlaboratory staff, maintaining effective communication to and from all units and staff, maintaining accountability, avoiding interdepartmental competition and turf battles, and managing a large number of staff across usual lines of management authority. It is important to identify POCT skills as core competencies and elements of job performance for the staff who perform testing and to have active participation of nursing managers in corrective action. Problems with POCT compete with many other urgent patient care issues on individual units. POCT program managers, then, sometimes need to resort to drastic actions such as withdrawal of testing devices or authorization for testing to create the necessary urgency for correcting problems. A third organizational model, more common in the past, is for POCT in each clinical department or nursing unit to operate as a separate laboratory. This does simplify the management of each unit. However, it has become less common due to the inefficiencies of applying for separate licenses for multiple sites, the lack of standardization of

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procedures and equipment, and the coordination of testing activities within an institution. This organizational model may apply where POCT or a specific type of POCT is limited to a single unit or at a remote location.

Laboratory Licensure and Accreditation Decisions about how POCT will be licensed and accredited influence how POCT will be managed and the types of tests that can be performed. Federal licensure is required for all clinical laboratory testing in the United States (12, 13). Specific standards are described for three levels of complexity of testing—high, moderate, and waived. If all testing is in the waived category, laboratory testing can be performed under a certificate of waiver, which has less stringent requirements than other levels of testing. Several agencies including CAP, The Joint Commission (TJC, formerly the Joint Commission on Accreditation of Healthcare Organizations [JCAHO]), the American Osteopathic Association, and the Commission on Office Laboratory Accreditation (COLA) have the authority to accredit laboratories. Some states have specific regulations that must be met. The initial question to address is how many and what types of licenses to apply for. It is possible to perform POCT under the same license as the central laboratory. However, many laboratory directors have been reluctant to cover POCT under their licenses due to concerns about compliance of POCT with laboratory standards and lack of direct control over how testing is performed. Also, including POCT under the main laboratory license means that the same accreditation standards must be applied for POCT and central laboratory testing. CAP, which does not recognize any relaxation of standards for waived testing, accredits many hospital laboratories (7, 13). Some POCT programs, particularly those including only waived testing, decide to apply for a separate license or certificate of waiver for POCT to simplify requirements. Although CAP may inspect the central laboratory, if POCT is under a different license, it may be inspected by a different accrediting agency, such as TJC. POCT can be performed at multiple locations within a facility under the same license. For the sake of efficiency in the application process and avoidance of additional fees, all POCT within a facility often is operated under a single license or certificate of waiver.

Operational Challenges Determining the Scope of POCT Services One of the most critical operational challenges is deciding what sites will perform POCT and what menu of tests should be offered. A starting point for this analysis is to inventory the types and testing volumes of ongoing POCT. Obtaining an accurate inventory of POCT can be difficult due to the dispersed nature of testing, the lack of information systems, and in some cases, the lack of recognition of what represents

a laboratory test. Commonly overlooked POCT activities might include occult blood testing, urine dipstick testing, physician-performed microscopy, and whole blood coagulation testing. Many POCT devices are small, portable, and distributed among many sites, so it can be difficult to find or count the devices. Surveys of patient care units often provide incomplete responses. It may be necessary to resort to information from vendors, purchasing departments, or material management departments to determine the number of analyzers and the volume of testing. The major source of demand for POCT has been from clinicians who desire rapid laboratory results for clinical decision making. A large gap exists between the expectations of clinicians and laboratory targets for turnaround times (32, 68). Surveys of clinicians indicate that they believe that stat test results for analytes such as electrolytes and glucose should be available within about 15 minutes, while laboratory professionals often have set a goal of stat turnaround times of less than 60 minutes (32). This gap between clinical expectations and laboratory service delivery has led to the high demand for POCT. Turnaround time usually is perceived as the key advantage of POCT, but there are a number of other factors that may come into play for specific tests or clinical situations (Table 25.3). Use of a smaller specimen volume for POCT may be an important consideration for care of infants and young children. Lower capital costs of POCT for equipment or facilities may be important advantages for infrequently performed tests. For some tests, such as whole blood coagulation tests, the specimen must be tested immediately, so POCT becomes necessary. For the care of diabetics, POCT of blood glucose can be viewed to have educational value and to address patient expectations. Some common disadvantages of POCT that must be weighed are lower accuracy and precision of tests, less laboratory experience of staff performing tests, lack of comparability with central laboratory results, and the greater difficulty of managing POCT, ensuring quality, and capturing test results into central information systems. One point that may be overlooked in considering where to perform a test is whether to offer the test at all. Consider, for example, the bleeding time test. A large body of evidence suggests that this test is of questionable clinical value and it should not be performed (47). There must be a clear clinical justification for any test that is performed as well as an assessment of whether increasing the speed of testing will result in significant improvement in the quality or efficiency of patient care. A full discussion of POCT clinical utility is addressed in a subsequent section.

Weighing Alternatives to POCT Usually, POCT is not the only option for performing a test. Common choices for delivering a test include performing it in a central laboratory, in a satellite laboratory, or

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Table 25.3 Common advantages and disadvantages of POCT versus central

laboratory testing Advantages

Disadvantages

Faster turnaround time Smaller specimen volume Lower capital cost Testing of labile samples Immediate access to results Patient education/satisfaction Physician satisfaction

Lower accuracy and precision Less skilled testing personnel Higher supply costs Lack of comparability with laboratory results Lack of data systems Difficulty in assuring quality Difficulty in managing testing

as POCT. A fourth option that has become available recently is a robotic or remotely controlled analyzer. The first option, and in many cases the most efficient, may be to improve central laboratory processes to meet turnaround time goals. This might involve changes in infrastructure such as installation of a pneumatic tube system for rapid specimen delivery, changes in laboratory instrumentation to perform analyses on whole blood rather than serum or plasma, and improving mechanisms for delivery of test results (21). For tests designed for POCT use, such as fecal occult blood tests, qualitative drugs of abuse tests, urine pregnancy tests, or whole blood cardiac marker tests, sometimes an assumption is made that the tests should be performed as POCT based on history within an organization or the design of a device for POCT use. However, the advantages and disadvantages of performing the test as POCT should be weighed considering the factors listed in Table 25.3. As long as the specimens are stable, it may be desirable to perform these tests in the central laboratory even though the test device is acceptable for POCT use. For some tests such as those for drugs of abuse, there may be special considerations such as complicated legal issues and a need to confirm positive results, and this issue must be considered in evaluating whether it is desirable to perform the tests as POCT (18). Conversely, a barrier to performing Group A Streptococcus (Streptococcus pyogenes) POCT outside the laboratory is the need to reflexively confirm negative results with bacterial culture. An instructive example of the decision to perform a test as POCT or in a laboratory is provided by intraoperative parathyroid hormone (PTH) testing. This test is performed during parathyroid surgery, and test results are needed rapidly (29). The first commercially available analyzer to perform this test was designed to be on a mobile cart that could be moved to the operating room. However, many hospitals that offer this test now perform it in a laboratory setting and set up processes for rapid transport of the specimen to use staff and equipment most efficiently (23, 31). Setting up or maintaining a satellite laboratory represents a major commitment and expense for facilities,

equipment, and laboratory staff. Usually, this commitment of resources is justified only when there is an acute clinical need for rapid turnaround time, a high volume of testing, and use of relatively complex testing procedures. Remotely controlled analyzers may represent a new alternative to satellite laboratories. Considerable engineering expertise was required for early application of the approach (15). However, this has become a practical option now that functions such as calibration and QC testing have been automated on some analyzers and operation of the analyzers can be monitored remotely by laboratory workers (see surveys of blood gas analyzers in CAP Today, accessible at http:// www. cap.org, for current information).

Analyzing Costs and Benefits Although it would seem that the cost of a test would be an objective quantity that could be calculated precisely, the absolute and relative costs of POCT and central laboratory testing are some of the most controversial issues relating to POCT. The majority of older published references conclude that POCT is more expensive than the same test performed in a central laboratory (8, 37, 46). One report went so far as to conclude, “The costs of central laboratory testing are always very much less than that of distributed testing” (79). However, in examining these reports, it is notable that the major cost identified for POCT is for labor. It turns out to be difficult to account for labor for POCT, which involves small bits of time by a large number of staff. There is a paradox in that if you add up all of the time spent collectively performing POCT, it represents a substantial number of hours that may equal the time of several full-time staff members (full-time equivalents [FTE]). However, POCT usually has no impact on FTEs within the units that perform the testing; usually, the only recognized impact on FTEs is one or more positions as central coordinators of POCT. POCT and impact on FTEs. There are several possible reasons why performing POCT on a clinical unit has no direct impact on FTEs. A time-and-motion study of nurses comparing time spent to perform a POCT glucose test

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versus time spent to draw a specimen for central laboratory testing noted that less time was required by nurses to perform a glucose test than to collect a specimen and send it to the laboratory (21, 52). The entire POCT process from specimen collection and testing to result retrieval was completed in one brief episode about the length of time required to draw blood. Sending a sample to the laboratory required multiple steps at different locations spread over about 1 hour—generating a test requisition and label, performing phlebotomy, transporting the specimen to the nursing station, and retrieval of results from the computer. The timing study points out that there may be an underaccounting of the labor required to send specimens to the laboratory and retrieve results and that there is the potential for POCT to save labor even without accounting for the labor to perform the test within the laboratory. In addition to the greater amount of time directly spent by nurses to send the sample to the laboratory, the delay between testing and receipt of results may lead to indirect inefficiencies and less effective patient care because adjustments of diet and medication wait on receipt of test results. Based on its higher efficiency and low volume within an individual clinical unit, POCT will rarely result in the need for additional staff or worked hours within the clinical unit. However, the aggregate volume of testing for a large POCT program sometimes reaches hundreds of thousands of tests. This volume of testing can significantly affect laboratory staffing, particularly if there is a demand for stat results at the time of peak demand in the early morning. One published estimate is that each reduction of 100,000 specimens sent to the laboratory would result in the reduction of work by four FTEs (21). This value obviously will vary depending on the levels of automation and efficiency of the laboratory. Coordination of POCT for this volume of testing requires about one FTE, depending on the complexity of testing and the number of testing sites. Analysis of the impact of POCT on FTEs suggests that at a low testing volume, POCT usually would require an additional FTE in the form of a test coordinator but would have no impact on staffing within the central laboratory. However, at higher test volumes, there is the potential for greater FTE reduction in the laboratory than the additional FTE required for coordinating POCT. One other situation in which POCT may result in an overall reduction of FTEs is in the replacement of a satellite laboratory with POCT. If work is not evenly distributed for a satellite laboratory, often there is a high labor cost for idle time between testing activities. An analysis of the costs of various testing options indicates that POCT may result in direct cost reductions versus satellite laboratories (39). Cost analysis complications. There are a number of other complicating factors that affect cost analysis. First, two fundamentally different approaches are applied—a bottom-up,

or microcost, analysis that adds up individual cost elements and a top-down, or macrocost, analysis that divides budgeted costs. Second is the problem of allocation of overhead or small bits of labor that do not result in changes of FTEs, such as nursing time spent on POCT. Third, most analyses of labor costs do not account for any changes in productivity; e.g., if nursing staff perform an additional task without any increase in worked hours, that represents a change in productivity, not a labor cost. Finally, the most important complicating factor is weighing the indirect effects of POCT on the overall cost of patient care (4). Laboratory tests account for a small proportion, perhaps 5%, of healthcare costs (5). If changes in laboratory testing have any impact on factors such as length of stay or changes in clinical outcome, the cost impact potentially could be far greater than the total amount spent on laboratory testing. Two recent studies provide evidence that POCT affects treatment decisions in a substantial proportion of testing episodes, although the net effect on costs was not clear (5, 20). Other interesting examples have been described in which POCT may result in substantial savings by having impacts on processes such as frequency of transfusion (9) or in which rapid intraoperative PTH testing contributes to an overall cost reduction. Although providing intraoperative PTH testing results in an increase in laboratory costs, total costs for patient care appear to be decreased substantially (31, 66, 76). Improvements in the quality and the efficiency of patient care delivery or reduction in transfusion frequency have been considered to result from POCT in a number of other cases, with the potential for overall cost reduction (3, 19, 53, 58, 59a). Difficulty in arriving at an exact dollar benefit for a change in clinical process makes these analyses challenging. In deciding how to analyze the costs of POCT, it is necessary to decide what question is being asked. A common question is, How much is POCT going to cost the organization? That is, what is the overall budgetary impact? Usually, addition of POCT will have little effect on facilities or overhead costs within the organization, so there is negligible effect on these cost factors. In analyzing the budgetary impact of POCT, the labor cost would be represented primarily by any change in FTEs or paid working hours. Management of a POCT program is timeconsuming, so it is appropriate to allocate some labor expense for management and medical direction. Depending on the nature of POCT within a facility and the alternatives of POCT versus no POCT, labor costs may be either positive or negative. To these labor costs will be added costs for equipment, supplies, and information systems. Adding all of these expenses together yields an estimate of the annual organizational cost or impact on expense budgets. Dividing these costs by the total number of tests performed will provide an estimate of the average cost to perform a test by POCT.

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A second common question is, What charge would be necessary to recover the costs of POCT? In this analysis, there usually would be an allocation of nursing time for performing the analysis and an allocation of a portion of facilities and administrative overhead costs that must be recovered in some manner. These costs would be added to costs for equipment, supplies, etc. In addressing this question, usually there is no accounting for potential savings of expenses for central laboratory testing, changes in worker productivity, or efficiency of clinical care. This type of analysis usually provides a much higher estimate of per test cost than an analysis of the budgetary impact of POCT. It is notable that if calculations are performed to address these two questions, very different values usually result for the average cost of a test. This comparison underlines the importance of understanding exactly how a cost analysis is being performed and what question is being addressed. One of the major problems in many of the published analyses of the costs of POCT (8, 37, 46, 79) is that they use cost allocation approaches that do not directly assess the budgetary impact of a test. Differences in approaches of cost analysis and lack of recognition that there is more than one way to calculate the costs of a test lead to much of the controversy about the economics of POCT. For most purposes, costs of POCT are better represented by an analysis of budgetary impact performed by a macrocost analysis of labor (measured as FTEs) rather than by a microcost analysis of labor (measured as minutes performing tests) because measurement of labor as change in FTEs accounts for changes in productivity and efficiency. Other differences in the economics of POCT. Besides the labor component, there are a number of other ways in which the economics of POCT generally differ from central laboratory testing. Usually, the supply costs are higher for POCT and a higher proportion of tests are used for quality assurance purposes because a much larger number of analyzers need to be checked. The high proportion of tests used for QC and the relatively fixed time required for staff training and management of testing lead to substantial economies of scale for performing a higher volume of testing (46). The significance of this economy of scale for the management of POCT is that efficiency is best served by restricting POCT to sites that perform a high volume of testing. Performing POCT at sites with low volumes of testing leads to higher supply, equipment, and labor costs per test. Due to wide variation in the cost elements of different POCT procedures, there is no fixed threshold value for the volume of testing that reaches a significant economy of scale; each situation must be analyzed with respect to both the direct cost factors and clinical necessity for rapid turnaround time. Three final potential problem areas in the economics of POCT are in management of reagent wastage, utilization

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of testing, and duplication of POCT and central laboratory testing. These problems may lead to higher than expected costs for POCT. Checking a small proportion of POCT results with the same test performed in a central laboratory may serve as a useful quality assurance process (38). However, if most POCT is repeated with a duplicate test in the laboratory, this will have a major impact on the analysis of costs, and it may represent a substantial problem either in test-ordering patterns or in clinical confidence in the reliability of the POCT. Keys to managing these sources of increased costs are good systems for inventory management, data systems that allow review of test utilization patterns, agreement with and among clinicians regarding appropriate test ordering practices, and effective training of staff.

Assessing the Impact of POCT Services Clinical impact. An important part of deciding whether a point-of-care test should be adopted is assessing its potential clinical impact. The general assumption is that faster results make for better patient care and better outcomes. However, as has been discussed elsewhere in this chapter, POCT does not always offer optimal results if proper protocols are not followed and QC is not performed. Even if the testing is conducted properly, performance may be inferior to that of more robust laboratory-based methods. A performance trade-off in favor of a more rapid turnaround time may be acceptable, but it is important that the risk of lower performance be weighed carefully against the benefit of a faster result. Quantifying the benefit of POCT can be difficult because many important outcomes such as patient satisfaction and employee efficiency do not lend themselves to objective measure. The following are just a few examples of how POCT has been shown to improve a variety of outcomes. Resource utilization. Resource utilization is a key consideration when implementing point-of-care testing. In some cases POCT can be used to more efficiently allocate valuable supplies such as blood products. In one prospective, randomized trial POCT was used in coagulopathic cardiac surgery patients to manage hemostatic therapy. In this study patients were randomly assigned to either conventional testing or a POCT group. The study found that on average the POCT group required fewer blood products (five units conventional versus three units) (72). These findings have been replicated in other settings and suggest that POCT can have a meaningful impact on the use of blood products (63, 73). Length of stay. Length of stay is a common measure used to assess the impact of laboratory testing and can be considered a marker of both resource utilization and quality of care. It seems logical that faster test results would lead to shorter lengths of stay, but if testing provides erroneous

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results and inappropriate care, lengths of stay may actually be longer. A number of studies have shown that a variety of POCT can reduce lengths of stay for patients seen in the emergency department. Comprehensive metabolic panels; multimarker cardiac panels including myoglobin, creatinine kinase-MB fraction, and cardiac troponin; whole blood D-dimer; and urine tests for drugs of abuse all reduced lengths of stay in the emergency department by between 20 minutes and 1 hour 15 minutes (24, 49, 51, 65). It is important to note that these results may not be generalizable to all settings, as some studies have demonstrated no impact on ED length of stay (55). In addition, POC pregnancy testing was shown to have no effect on length of stay in the emergency department (57). There is a paucity of literature addressing the impact of POCT on inpatient length of stay. Although evidence suggesting that POCT has any impact on inpatient length of stay is scarce, it has been shown to reduce the need to admit patients in the first place, which is an equally valuable outcome (17). Improved access to healthcare. Another potential benefit of offering POCT is the ability to provide better access to healthcare for patients. This can manifest in several important ways. POCT can be used in developing countries and rural settings where complex laboratory services are not readily available. The management of POCT in these settings is discussed elsewhere in this chapter. POCT can also be used to provide rapid and discreet results to patients who might not otherwise submit to testing. HIV POCT can be used to reach patient populations who are unlikely to seek healthcare. The goal of offering HIV testing in these settings is not only to make the diagnosis but to link newly diagnosed patients to care. This may seem obvious, but understanding this goal can help guide the management of how HIV POCT is offered and who conducts the testing. Several studies have looked at how effective different caregiver groups are at consenting patients for testing and subsequently linking those HIV-positive patients to care. Hsieh et al. showed that when compared to medical staff indigenous to the ED, exogenous staff who were placed in the ED for the sole purpose of conducting POC HIV testing identified more positive patients, conducted more tests, and were more effective at linking those positive patients to care (25). Similarly Walensky et al. found that counselors dedicated exclusively to HIV POCT consented more patients for testing than the ED provider arm of the study (71). Modeling studies have extrapolated these findings to conclude that increased HIV test volume is a critical component to reducing HIV transmission. In their model, which considered the performance limitations of POCT HIV testing inside the window period, testing did not reduce transmission unless frequency of testing increased (77).

Clinical outcomes. The most important measure of a test’s value is, of course, clinical outcome. The wide variety of point-of-care tests available makes a comprehensive review of their clinical impact outside the scope of this chapter. The following are a few representative examples to illustrate the clinical impact one can hope to achieve with POCT. (i) POCT along with an extensive resident education program and team-based approach resulted in a statistically significant improvement in the number of diabetic patients who achieved their goals of A1C, LDL, and BP levels (62). (ii) In a South African study researchers found that offering CD4 POCT significantly improved the chances of initiating patients on antiretroviral therapy for the treatment of HIV infection (14). Others have found the same thing in other settings (30). (iii) Mortality was significantly lower when i-STAT POCT was used to manage pediatric patients following congenital heart disease surgery (61). When compared to conventional testing, the POCT group had statistically lower mortality in neonates (2.4% vs. 6.2%, P < 0.007) and those patients undergoing the highest-risk surgeries (9% vs. 30%, P < 0.03). It is clear that POCT can have a positive impact on many different aspects of patient care. It may not be surprising, however, that the vast majority of studies assessing the impact of POCT focus on cost, resource utilization, and ED length of stay. More studies are needed to assess the true impact of these tests on clinical outcome.

Quality Assurance Challenges POCT has many of the same overall quality assurance requirements as testing in the central laboratory, such as training of staff, confirming competency, equipment maintenance, recording of patient results, inventory control, QC of testing, proficiency testing, documentation of processes to meet regulatory requirements, review of utilization and budgets, and billing for testing activities. Recent reports about patient harm from errors in medical care underscore the importance of developing improved strategies for avoiding error in POCT (41). Although the goals of quality assurance activities are similar to those in the central laboratory, there may be substantial differences in implementation due to the highly distributed nature of testing and the large number of staff involved. Staff training and competency. One of the greatest challenges and a key to making POCT work is training and assurance of the competency of staff. Even if test devices are operating perfectly, accurate test results will not be produced if staff personnel are not educated about appropriate specimen collection and operation of test devices. Fecal occult blood testing could be considered one of the least complicated tests to perform. However, without appropriate training a number of breakdowns in test procedure have been noted in the past, such as use of the wrong

CHAPTER 25. MANAGEMENT OF POINT-OF-CARE TESTING

developer solution, refilling bottles of developer solution with water, incorrect timing of test procedures, and lack of understanding of color changes (22). Completion of training by staff must be an essential component of jobspecific competencies. Considering that training is one of the most important functions of the coordinators of POCT, teaching skill should be one of the prime factors in the selection of testing coordinators. It can be difficult to schedule enough training sessions to accommodate a large number of staff, so it may be helpful to have selfinstruction videos or web-based instruction as additional options. Vendors of a number of POCT products have recognized the critical role of training and provide assistance with initial training of staff. Quality assurance. Quality assurance of POCT can be a very demanding activity due to the large number of analyzers that need to be tracked. Most POCT devices require limited maintenance such as cleaning and battery replacement, but if this is neglected, devices may fail. Portable devices may be dropped or exposed to vibration, water, extremes of heat or cold, or other environmental challenges that may lead to equipment failure. In part, this is a training issue, but even with appropriate maintenance and use, periodic device failures are likely. The greater potential for equipment damage in an uncontrolled environment emphasizes the need for control processes to detect malfunctions of devices. Usually, failure of POCT devices is handled by replacement of the failed unit rather than attempts at recalibration, service, or repair. This is handled by having one or more devices available as backups or by having a contingency plan for how service will be delivered. Lack of experience of the testing staff with troubleshooting equipment or reagent problems requires on-call support by POCT coordinators or other experts. The central laboratory may assist with troubleshooting, particularly with interferences or with systematic changes of analyzers or reagents that may be identified by comparison of test results from POCT and the central laboratory. Changes in U.S. federal regulations in 2003 have affected quality assurance of testing (11). Control processes of POCT ideally should assess equipment, specimens, reagents, and testing personnel. Some POCT equipment executes internal checks of electronic components, batteries, photometers, and other components with each use of the device. Mechanisms may exist for detecting specimen problems, such as inadequate specimen volume, clots, or bubbles. Many devices that are interpreted by direct visual inspection, such as tests for fecal occult blood, pregnancy, and other rapid antigen and antibody tests, have internal procedural controls that indicate whether the individual device is operational and whether there are inadequate specimens or interferences with the test. These control processes are highly desirable for POCT and should be

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sought when selecting equipment because they check the instrument, specimen, and in some cases, the reagents with each use. The primary quality assurance focus of laboratory workers and regulations usually is on external QC testing and proficiency testing. These external controls do serve as additional checks for equipment and reagent failure. However, standard QC processes are designed primarily to detect systematic shifts in performance over time, and these are less of a problem with POCT, where reagents and equipment often are stable for months. A standard from NCCLS (now the Clinical Laboratory Standards Institute [CLSI]) on unit-use devices has suggested that the frequency of QC testing should be one-tenth of the shelf life of reagents rather than more customary testing per shift or per day (75). Discussion of this standard provides an excellent overview of potential sources of error in POCT (75). Standard QC processes are not well designed to detect sporadic failures of unit-use devices and do not detect specimen problems. Two areas in which QC testing may make a positive contribution in the POCT environment are to evaluate and provide ongoing competency assessment of testing staff and to provide ongoing training of staff who infrequently perform a test. To achieve these benefits, it is important for QC testing to be rotated among all staff. Electronic simulators vs. control materials. One controversial issue with respect to QC testing is the suitability of using electronic simulators rather than control materials (12). Advantages of using electronic controls are substantial reduction in the costs for test supplies and control materials. Often, control testing represents as much as one-quarter to one-half of the total volume of testing at a low-volume testing site. Therefore, use of electronic controls could reduce supply costs by as much as 50%. This reduction in costs may be critical to the economic viability of some testing activities in which unit costs of supplies are high. The major argument against the use of electronic simulators is that although they check performance of the electronic components of an analyzer, they do not check the performance of the reagents. If electronic simulators are used, there should be some mechanism to periodically check the appropriate function of the reagents. Other drawbacks of the simulators are that they may provide less assistance with ongoing training and competency evaluation of testing staff.

Information Systems and Billing Extensive record keeping is essential for meeting the regulatory and quality assurance requirements for POCT (33, 39, 41, 54). The only way to prove that appropriate procedures have been followed is to provide documentation of all activities. Historically, this was one of the most onerous aspects of the management of POCT. Most information

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was recorded manually, and it was a constant struggle to encourage complete recording of necessary data and to collect all of the data sheets. In organizations in which the scope and volume of POCT grew, it became increasingly critical to develop data systems to collect this information. Many POCT analyzers now have data systems that collect information about control testing, patient results, and which operators performed testing. Also, analyzers may have security functions to limit access to authorized users and lockout functions that require control testing at defined intervals before patient testing can be performed. Information from individual analyzers is gathered by periodic uploading of information into a central data station via modem or electronic network or by taking a laptop computer to testing sites. There is increasing recognition of the value of consolidating all patient test results into central information systems. Entry of POCT results into central laboratory information systems provides many advantages: increased access to the results of POCT for patient care, improved ability to track and manage testing activities, ongoing quality assurance by providing comparison of POCT versus central laboratory results (38), and improved records for liability purposes. A major consideration in the selection of equipment for POCT should be the data-handling capabilities and how it will be interfaced with central information systems. The decision to bill for POCT and the selection of billing methods are complex issues that have been handled in completely different ways by different organizations (56). Some organizations have decided not to bill for POCT, others have rolled these costs into nursing or room charges, and others have billed for individual tests. To perform billing, it is necessary to have effective information systems that can document ordering of the test, performance of the test, and patient diagnoses suitable for reimbursement. If there is some duplication of POCT and central laboratory testing, this could be identified as double billing. It may be necessary to review the frequency of testing on bills to see that this is within allowable limits. Creating the necessary documentation and reconciling bills with rules for reimbursement are formidable challenges.

POCT in Developing Countries and Rural Settings Challenges The challenges of conducting quality POCT in developed countries with established hospital infrastructures are magnified when performed in the context of a developing country or rural setting. Yet these are precisely the environments in which POCT can have the greatest impact. One of the primary problems encountered in these settings is that populations are often dispersed over large areas and

are small in number. These patients travel long distances to seek healthcare and are unlikely to make the trip back to follow up on laboratory results that are not immediately available. An example from sub-Saharan Africa suggests that an average of 40% of HIV-positive patients either do not provide a blood sample for testing or do not return for their CD4 count results (48, 60). This is one of the primary reasons that POCT has proven so beneficial in these environments. The simplicity of POCT also offers some obvious advantages. These environments may have inconsistent power, lighting, and refrigeration, which make offering conventional laboratory testing difficult if not impossible. High staff turnover is a constant problem in any lab but can be particularly problematic in these settings. The simpler the test, the easier it is to maintain competency and train new technologists. In India, Kabra and Kanugo speculated that this was the single greatest challenge to maintaining a quality POCT program (35). One problem with POCT training is the common misconception that because it is so simple, it does not require training. In a setting where personnel are unfamiliar with laboratory procedures and practices, quality control and proficiency testing (PT) programs can be difficult to implement. Not only can it be difficult to institute quality control and PT programs because they are time-consuming, but they are expensive. In these resource-limited settings it can be difficult to convey the importance of performing testing that is not going to contribute directly to patient care and may add significantly to total cost. A review article by Shott and colleagues illustrates how critical it can be to eliminate laboratory error in these settings. Using HIV testing in sub-Saharan Africa as an example, they postulate that with the high volume of HIV testing in this setting, just a 0.5% error rate could lead to the misdiagnosis or mismanagement of approximately 50,000 patients (64). Although ideally testing would be conducted by trained laboratory technicians, this is not a realistic possibility in these settings. Examples from Botswana and Zimbabwe demonstrate that when proper training programs are in place, nonlaboratory personnel can provide reliable testing results. Another issue in managing POCT in resource-limited settings is developing physician confidence in test results. For the reasons just discussed, complex laboratory testing is very difficult to perform reliably, and as a result physicians grow to distrust laboratory results and often rely on clinical diagnosis and empiric treatments. POCT may offer a simpler form of testing with a better chance of success. Despite their simplicity, though, point-of-care tests are not without their problems, as numerous examples from Uganda, Ethiopia, the Democratic Republic of Congo, and Cameroon demonstrate poor sensitivity and specificity of POCT (1, 10, 36, 40).

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Organizing POCT in Resource-Limited Settings In response to the need for high-quality healthcare in these settings, there have been significant movements from donors such as Global Fund for AIDS, Tuberculosis and Malaria, the World Bank, The U.S. President’s Emergency Plan for AIDS Relief (PEPFAR), the Global Health Initiative, and private foundations (2). These programs provide valuable materials and access to healthcare, but it is important that proper laboratory infrastructure be in place to take advantage of these resources. Due the nature of the rural setting, it is important that some form of decentralized laboratory system be in place to provide testing. The centralized lab model does not work in situations where the population is spread out over a large area and people are unlikely to make long trips to seek care at a central location, much less follow up on test results. These rural “laboratories” can be present in traditional hospital or clinic settings if they exist, or they can be mobile, in which case the testing can be brought directly to those in more rural settings. To manage quality of testing and maintain proper training as well as distribution of supplies Alemnji and colleagues (2) recommend what they call a “tiered standardized integrated structure.” An important key to this kind of system is having a robust referral center and centralized national public health laboratory that can help to manage the testing program on a national level. These centers should be able to perform more complex confirmatory testing if needed as well as provide counseling and treatment for patients with new diagnoses. Importantly, these centers should also help to maintain the quality control and quality assurance programs and be responsible for maintaining training and proficiency testing. Quality assurance (QA) programs are critical to the success of POCT in these settings. QA programs should include external proficiency testing (PT) specimens, follow-up on discrepant results, and routine site visits. An obvious barrier to a successful QA program is the cost and challenge of distributing PT specimens. The Centers for Disease Control and Prevention (CDC) has developed a dried tube specimen that simplifies the shipping of HIV serology and viral-load proficiency specimens. The same distribution concerns that exist for PT specimens also exist for the tests themselves. There are many potential pitfalls for implementation of effective in-country distribution systems; lack of reliable human resources, inventory tracking, and delayed processes for requesting laboratory tests are a few of the most significant. In the end, implementing a successful POCT program in a rural setting or developing country is dependent on having a strong system approach. There must be coordination among the many interested parties, from local, regional, and national governments to other interest groups outside the country. It is recommended that stakeholder

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meetings are held to ensure that the many moving parts in such a system are all involved in the development, implementation, and maintenance of the program.

Technological Challenges Rapid Changes of Menu, Devices, and Technology Historically, POCT was severely limited by the small menu of tests that could be performed and by the relatively poor analytical quality of tests. However, advances in technology and successful miniaturization of devices have made it technically feasible to perform virtually any test as POCT (41, 54). Ongoing advances in the microfabrication of devices and in nanotechnology provide the promise of substantial future technological change and further reduction in the size of POCT devices. Miniaturization of testing devices alone is not sufficient to make a test suitable for POCT. It is also important to reduce analysis times, to simplify the operation of test devices, and to minimize requirements for specimen preparation. To be suitable for POCT, a test usually must accept an unprocessed sample such as whole blood, and the analysis times must be less than about 15 minutes. If these conditions are not met, it is difficult to perform the procedure as POCT or the advantage in turnaround time of POCT versus central laboratory testing is not sufficient to provide a strong advantage for POCT. The previously cited example of intraoperative PTH testing provides an interesting example of the interplay between testing technology and the decision to perform a test as POCT. When technological advances reduced the time it takes to perform PTH tests from hours to less than 15 minutes, it became practical to perform testing during surgical procedures (29). Some organizations decided to perform intraoperative PTH testing as POCT, while other organizations decided to transport specimens rapidly and to perform intraoperative PTH testing in a central laboratory (23). The decision of how to provide this testing appears to be influenced strongly by the characteristics of the testing devices—size, complexity of operation, cost, and testing menu. This test serves as just one example of how technological advances are greatly complicating the management of POCT by expanding the menu of tests that can be performed. In the past, it was easy to make the choice of POCT versus central laboratory when a test such as PTH could not be performed rapidly or no analyzer was available that was suitable for POCT. Now it is necessary to evaluate critically a much wider range of potential tests and devices for POCT. The rate of innovation and change of POCT devices has been faster than for high-throughput analyzers in the central laboratory. This is possibly due to the lower complexity and much smaller capital investment for manufacturers to design a POCT device than a large laboratory analyzer. For

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example, there have been about five generational changes in the fundamental technology applied to POCT glucose measurement over the past 25 years from (i) visually interpreted test strips to (ii) test strips read by optical meters after wiping away blood to (iii) no-wipe test strips read by optical meters to (iv) test strips read electrochemically to (v) microsample testing with electrochemical detection (6, 16, 74). Other changes in approach, allowing testing with minimally invasive or noninvasive technologies, are described in the next section; they may be viewed as further generational changes in technology. At the same time as all these changes in POCT devices and testing technology have occurred, there has been little change in the technology applied to glucose testing in central laboratories other than increased automation of analyzers and availability of whole blood glucose testing through expansion of the menu of blood gas analyzers. The high rate of change and innovation in POCT devices presents a management challenge to stay abreast of information about these products. When advertisements and salespeople tout the latest and greatest new POCT devices and tests, how can your organization evaluate these claims? There are continuous upgrades for existing POCT devices, so a vendor of devices currently in use in your organization is likely to propose or require an upgrade as a change in the product is made and the old product is discontinued. It is difficult for laboratory workers to be knowledgeable about the characteristics of a wide range of new POCT devices, many of which are not used in central laboratory settings. Technologies and performance characteristics may differ from central laboratory analyzers, and extensive track records of clinical use and published evaluations may be lacking. It is difficult to even keep up with the range of test devices that are available, and most published reports become outdated quickly. As a result, the most useful resources for surveying what devices are available are periodically updated surveys such as those in CAP Today (accessible at http://www.cap.org). A website of the U.S. Food and Drug Administration includes a list of approved devices and devices that are classified as waived (http://www.fda.gov/cdrh/oivd). For the most current information about individual products, it is necessary to consult with vendors. At the same time as there has been rapid evolution of the analytical capabilities of POCT devices, there have been major changes in the quality assurance processes, internal data systems, and the ability to transmit data to central information systems. A major problem with POCT devices has been the lack of common standards for internal data systems and for communication between other devices or central information systems. Recent development of standards by the Industry Connectivity Consortium should lead to improved ability to link devices to information

systems (10a). How to link devices to information systems has become an increasingly important consideration in the evaluation of devices.

Lack of Equivalence between POCT and Central Laboratory Tests In many cases, the specimen type or fundamental measuring principles of POCT devices differ from those used in the central laboratory, and these can be confusing to clinicians who are trying to interpret test results. Thus, it is important to perform careful comparisons of POCT and central laboratory results. Differences in whole blood specimens used for POCT versus serum or plasma samples used for central laboratory testing can lead to systematic differences in results for tests such as glucose (6, 28, 44). Efforts have been made to reach agreement on a common reference standard such as plasma for glucose measurement to reduce the problem with comparison of POCT and laboratory results (28). However, the volume displacement and viscosity effects of hematocrit still can affect the reliability of results for specimens with extremely high or low hematocrits (6). Fundamental problems of comparability of methods often have been experienced for POCT hematocrit measurements by conductivity versus laboratory measurements (69) and for POCT whole blood coagulation tests versus laboratory measurements on plasma specimens (45). Sometimes variation in the site of specimen collection can affect results. The glucose concentration of capillary blood from fingers can differ substantially from the concentration in venous blood (44). Collection of capillary blood from a forearm can yield different results than sampling from a finger (16, 34, 50). Differences in testing technology can lead to differences in the interferences with POCT devices (6, 43), so it is important to become informed about the potential limitations of each test device. Practical consequences when there is nonequivalence between POCT and laboratory methods include a need (i) for careful comparison studies by the laboratory to guide device selection and to provide data about expected differences for clinicians, (ii) for education of clinicians about differences, and (iii) to report values by nonequivalent methods in separate columns in laboratory reports with appropriate reference values. It is desirable to have POCT and laboratory values side by side in reports to provide ongoing comparison. New Monitoring Technologies One growing source of uncertainty in defining the limits of POCT is the blurring of the boundaries between physiological monitoring—traditionally, measurements such as blood pressure, pulse rate, and temperature—and laboratory testing. It is now possible to perform measurements

CHAPTER 25. MANAGEMENT OF POINT-OF-CARE TESTING

of analytes such as electrolytes, blood gases, and glucose with new types of devices attached to a patient (70, 78). Electrodes can be inserted into blood vessels or subcutaneously to provide continuous measurements. Specimens can be collected through the skin barrier by micropuncture or iontophoresis and analyzed by devices placed on the skin surface. Measurements can be made photometrically through tissue or by reflectance to measure bilirubin, glucose, hematocrit, or other compounds. The greatest commercial and clinical interest is in noninvasive measurement of glucose for diabetes care. This is a very large and dynamic field for which current information is best obtained through websites such as http:// www.diabetesmonitor.com/meters.htm and http://www .childrenwithdiabetes.com. Federal regulations in the United States (Clinical Laboratory Improvement Amendments of 1988) define laboratory tests as procedures in which specimens are removed from the body for analysis (13). Procedures that are performed by devices attached to patients, such as those described above, or that involve the analysis of breath specimens are considered to represent physiological monitoring rather than laboratory testing. This raises a question: Is a glucose measurement performed by a device attached to a patient not a laboratory test, while a glucose measurement performed on a specimen physically removed from a patient is a laboratory test? At this point, it is not clear how tests performed by monitoring devices will be classified in the future or whether the same standards will apply to measurements made by monitoring devices. In addition to posing fundamental questions about the limits and regulation of laboratory testing, monitoring technologies pose new challenges in the interpretation of test results. Some of these devices measure concentrations in tissue or interstitial fluids rather than in plasma or blood, and there may be physiological differences in the specimens sampled (34, 50, 70). Accuracy and performance characteristics of these devices may differ substantially from those delivered by usual laboratory tests, and the number of test results may be much greater. These issues will complicate the interpretation of results and the management of a large number of test results. For clinicians to interpret results from these devices, it will be important for any organization using monitoring devices to perform comparisons versus traditional laboratory measurements to generate information about how results from the monitoring device and the laboratory compare. Also, whether these devices are officially classified as laboratory tests or not, there will be a need for mechanisms to ensure the quality of the test results. Processes and management structures developed for POCT may be effective mechanisms for supporting monitoring devices even if these are not covered by the same regulations as laboratory testing.

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Summary POCT presents some of the greatest and most controversial political, organizational, operational, and technological challenges for laboratory workers. POCT often crosses traditional organizational boundaries, encompasses testing activities performed at a large number of different sites, and requires training and coordination of a large number of staff with limited experience performing laboratory tests. One of the most controversial issues is whether POCT costs more or leads to lower costs relative to central laboratory testing. Part of this controversy relates to a lack of standard approaches for analyzing costs. There is evidence that POCT can reduce total organizational costs in certain circumstances. POCT is also one of the most dynamic and rapidly changing fields of diagnostic testing, driven by rapid technological change as well as evolving clinical demands. There are no simple solutions to the complex issues of POCT that are universally applicable to varying organizational structures, political and historical contexts, laboratory operations, and clinical demands for testing. With all of the organizational and operational hurdles to overcome, perhaps the greatest challenge in POCT is to try to maintain a focus on the goals of using POCT to achieve the greatest organizational efficiency and the best possible patient care. KEY POINTS POCT presents different management challenges than other types of laboratory testing. ■ Cost analysis of POCT requires a clear understanding of the question that is being addressed. Analysis of labor costs usually is best addressed by evaluation of the impact on FTEs. ■ There is evidence that POCT can lower organizational costs in selected circumstances. ■ Advances in testing and information technology are driving rapid change in the form and scope of POCT. ■

GLOSSARY American Osteopathic Association A professional association of doctors of osteopathy that also provides laboratory accreditation services, primarily for physician office laboratories. Clinical and Laboratory Standards Institute (CLSI) A global, nonprofit, standards-developing organization. COLA (formerly the Commission on Office Laboratory Accreditation) An organization that provides laboratory accreditation services primarily for physician office laboratories. College of American Pathologists (CAP) A professional association of pathologists that provides laboratory proficiency testing and accreditation services.

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Full-time equivalent (FTE) A labor component equivalent to the time worked by one full-time employee on a standard schedule.

8. De Cresce, R. P., D. L. Phillips, and P. J. Howanitz. 1995. Financial justification of alternate site testing. Arch. Pathol. Lab. Med. 119:898–901.

Industry Connectivity Consortium A group that has developed engineering standards for electronic communication between POCT devices.

9. Despotis, G. J., J. E. Grishaber, and L. T. Goodnough. 1994. The effect of an intraoperative treatment algorithm on physicians’ transfusion practice in cardiac surgery. Transfusion 34:290–296.

The Joint Commission An organization that accredits healthcare facilities and components of their services such as laboratory testing.

10. Dessie, A., B. Abera, F. Walle, D. Wolday, and W. Tamene. 2008. Evaluation of Determine HIV-1/2 rapid diagnostic test by 4th generation ELISA using blood donors’ serum at Felege Hiwot Referral Hospital, northwest Ethiopia. Ethiop. Med. J. 46:1–5.

Macrocost analysis Analysis of costs by breaking down overall budgetary costs. Microcost analysis Analysis of costs by adding up costs for performing an individual test.

10a. Dunka, L. J. 2006. Point-of-Care Connectivity. Approved Standard, CLSI publication POCT1A2. Clinical Laboratory Standards Institute, Wayne, PA.

Monitoring devices Devices that are attached directly to a patient and provide periodic or continuous measurements.

11. Ehrmeyer, S. 2003. Using a creatinine ratio in urinalysis to improve the reliability of protein and albumin results. MLO Med. Lab. Obs. 35:26–30.

NCCLS (formerly National Committee for Clinical Laboratory Standards)  An organization that develops standards for laboratory practice.

12. Ehrmeyer, S. S., and R. H. Laessig. 2001. Electronic “quality control” (EQC): is it just for unit use devices? Clin. Chim. Acta 307:95–99.

Physician-performed microscopy Microscopic examinations such as potassium hydroxide preps and wet preps performed by primary-care physicians outside the laboratory setting.

13. Ehrmeyer, S. S., and R. H. Laessig. 1995. Regulatory requirements (CLIA ’88, JCAHO, CAP) for decentralized testing. Am. J. Clin. Pathol. 104:S40–S49.

Point-of-care testing (POCT) Testing performed outside of a laboratory facility.

14. Faal, M., N. Naidoo, D. K. Glencross, W. D. Venter, and R. Osih. 2011. Providing immediate CD4 count results at HIV testing improves ART initiation. J. Acquir. Immune Defic. Syndr. 58:e54–e59.

Waived testing Laboratory testing with the lowest level of complexity that can be performed under a certificate of waiver rather than a full laboratory license.

15. Felder, R. A., J. Savory, K. S. Margrey, J. W. Holman, and J. C. Boyd. 1995. Development of a robotic near patient testing laboratory. Arch Pathol. Lab. Med. 119:948–9451.

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APPENDIX 25.1 Websites with Information Relating to POCT Children with Diabetes http://www.childrenwithdiabetes.com, accessed September 26, 2012 Information about new developments in the field of diabetes including POCT devices.

DiabetesMonitor.com http://www.diabetesmonitor.com/meters.htm, accessed September 26, 2012 Information about POCT devices and technologies useful for testing diabetics.

Clinical and Laboratory Standards Institute http://www.clsi.org, accessed September 26, 2012 Website with many links to laboratory standards information.

Point of Care http://journals.lww.com/poctjournal/pages/default.aspx, accessed September 26, 2012 Website for the journal Point of Care; access to articles requires subscription.

College of American Pathologists (CAP) http://www.cap.org, accessed September 26, 2012 Checklists and information about laboratory inspections, articles and instrument surveys in CAP Today, and information from the POCT Committee. Critical and Point-of-Care Testing Division of the AACC http://www.aacc.org/members/divisions/cpoct/pages/default.aspx, accessed September 26, 2012 Information about educational programs and other resources.

U.S. Food and Drug Administration http://www.fda.gov/cdrh/oivd, accessed September 26, 2012 Provides a list of approved diagnostic devices and devices classified as waived. U.S. FDA Press Release: FDA approves first over-the-counter home-use rapid HIV test http://www.fda.gov/NewsEvents/Newsroom/PressAnnouncements/ ucm310542.htm, accessed September 26, 2012

26 Introduction Preanalytic Activities Test Selection and Implementation • Appropriate Test Utilization • Specimen Acquisition, Transport, and Storage • Test Ordering

Postanalytic Activities The Report • Storage and Retention • Assessment of Test Results on Patient Outcomes

Principles of Preanalytic and Postanalytic Test Management Adarsh K. Khalsa, Michael Santa Cruz, and Michael A. Saubolle

Summary KEY POINTS GLOSSARY REFERENCES

OBJECTIVES To familiarize readers with the principles of selection, assessment, and incorporation of diagnostic tests To review principles of test evaluation and utilization and their effect on patient outcomes To describe major elements of requisition and test menu formats To review principles of formatting of reports of test results To review the necessity for report interpretation and consultation comments To review the needs for record storage

When you are called to a sick man, be sure you know what the matter is—if you do not know, nature can do a great deal better than you can guess. Nicholas de Belleville

T

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he primary function of a clinical laboratory is to provide accurate, clinically relevant data for the diagnosis of medical conditions in patients. Once available, the data can be used to provide the individual patient a management plan to increase the probability of achieving a desirable outcome (32). The production of laboratory data is a culmination of sequential processes constituted of preanalytic, analytic, and postanalytic laboratory activities that begin with a clinician’s request for specific studies on an individual patient (11). Such sequential processes are also known as “path of workflow” and have been described and defined by the Clinical and Laboratory Standards Institute (CLSI; previously called National Committee on Clinical Laboratory Standards or NCCLS) and Clinical Laboratory Improvements Amendment (CLIA) regulations (Table 26.1). The level of quality of service provided by a laboratory can affect patient care outcomes considerably, either positively or negatively (32). To achieve optimal patient outcomes, it is imperative to evaluate the effect of preanalytic and postanalytic activities on the clinical significance and medical impact of laboratory tests (36). Processes and procedures implemented within the laboratory should be understood as to their impact on workflow. Their design should have the level of quality needed to minimize errors and resource waste while maximizing efficacy. Quality standard guidelines and regulatory accreditation requirements have been published and need to be met (Table 26.2) (10, 21, 26, 27, 55, 56).

CHAPTER 26. PREANALYTIC AND POSTANALYTIC TEST MANAGEMENT

Table 26.1 Processes in the clinical laboratory: path of workflowa,b Process type

Description or definition

Preanalytic

Steps taken before test is performed (preexamination phase). Processes beginning with test request and its format, patient preparation, specimen collection, specimen transportation, specimen receipt in the laboratory and preparation for testing (specimen processing).

Analytic

Activities related to the performance of laboratory testing or examination of specimens (examination phase).

Postanalytic

Steps that occur after a laboratory test has been performed (postexamination phase). Processes include data review, report formatting, result interpretation and presentation, permission for release, result transmission, and sample storage.

a

Path of workflow: sequential sum of all preanalytical, analytical, and postanalytical processes, beginning with test order and culminating with laboratory data output. b Compiled from references 11 and 21.

It is not adequate to evaluate tests solely from the laboratory-centered perspectives of accuracy, rapid turnaround time, low cost, and high sensitivity/specificity. Rather, to achieve the highest quality in all processes, laboratory management must be dedicated to the continuous assessment of both pre-and posttesting of all laboratory studies. The laboratory medical director should be responsible for the assessment of test results on patient outcomes and therapeutic protocols (34). After careful test selection and implementation, the laboratory should evaluate both test utilization and appropriateness of test ordering Table 26.2 Partial list of guidelines and regulatory accreditation requirementsa Test method validation Accuracy Precision Analytic sensitivity (lower level of detection) Analytic specificity Reportable range Reference range Verification of FDA-approved tests Retention of validation/verification data Proficiency testing Personnel requirements Competency of personnel Reporting of critical results (critical list) Computer system accuracy checks Format of reporting corrected reports a For additional description and listing see CAP Checklist Updates, 2009 LAP Audioconference Series, sponsored by the Commission of Laboratory Accreditation of the College of American Pathologists (CAP) at www.cap.org (accessed November 12, 2012).

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to achieve the most positive effect on patient outcomes and cost effectiveness. Because, subsequent to laboratory testing, various actions or interventions may occur that are not under laboratory control, to ensure quality care and follow-up for the patient, it is important for laboratory management to interact with teams of nonlaboratory specialists, including infectious disease clinicians, hospitalists, infection control epidemiologists, radiologists, pharmacists, clinical case managers, and the nursing staff. The reporting format of test results and the accompanying interpretation also play crucial roles in assisting clinicians to best serve their patients.

Preanalytic Activities The preanalytic phase refers to all steps taken before actual testing is performed on a patient’s specimen. It includes test selection, test ordering, patient/specimen identification, specimen collection and transportation, specimen processing and preparation, as well as appropriate specimen storage prior to testing. Referral of specimens to reference laboratories for additional or otherwise esoteric testing is included in this phase. Processes must be maintained for the assessment of all preanalytic activities. Business management strategies such as application of Six Sigma practices and the College of American Pathologists (CAP) Q-Probes Program (www.cap.org/appa/ cap.portal, accessed October 17, 2012) may further assist in the analysis of laboratory processes for appropriateness and efficacy (40).

Test Selection and Implementation Test complexity. The Clinical Laboratory Improvements Amendments were passed by Congress in 1988 (CLIA ’88) to establish quality standards for laboratory testing and to ensure the accuracy, reliability, and timeliness of patient test results. Initially, laboratory tests were categorized by CLIA ’88 as either waived, moderate complexity, or high complexity. However, a “final rule” published in the Federal Register in 2003 recognized only two classifications of laboratory tests: waived and nonwaived (14). Thus, the original classifications of moderate complexity and high complexity were combined together under the classification of “nonwaived testing.” Waived tests are defined as simple laboratory examinations and procedures that are cleared for home use by the U.S. Food and Drug Administration (FDA), have simple methodologies, or pose no reasonable risk of harm to the patient if performed incorrectly (21). Nonwaived tests (both moderate and high complexity) have more difficult methodologies and, with one exception, more rigorous regulatory requirements. The exception is the differing levels of training required for personnel performing either moderate- or high-complexity testing. When determining whether to add a specific test

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to the menu, laboratories must decide into which of these categories the test fits and whether or not the laboratory meets the requirements to perform this level of testing. Further information regarding categorization of tests can be found at the FDA website at http://www.fda.gov (last accessed October 12, 2012). Laboratories performing nonwaived testing must be certified or licensed under CLIA regulations. They must operate with guidelines in place for proper patient test management and must set specifications for all areas that can impact specimen integrity and positive identification throughout preanalytic, analytic, and postanalytic processes. The laboratory must maintain an adequate number of qualified employees to perform these tests (21). Types of tests. At the most basic level, laboratory tests are tools to gain information about a patient (16). Tests are commonly ordered for a variety of reasons, including diagnosis, screening for disease, and patient management (Table 26.3) (23). Clinicians’ self-described reasons for ordering tests are usually somewhat diverse, in that tests are often ordered for establishing a baseline, assessing prognosis, reassuring patients, and helping with treatment decisions. Appropriateness of ordering and effects of testing often go beyond diagnosis or immediate treatment decisions in this setting (16). Thus, understanding testing needs from the clinician’s point of view can help in developing strategies to optimize patient care while at the same time enhancing cost-effectiveness. Testing that may appear unnecessary to the laboratory may be based on physical findings known only to the clinician (3). The diagnostic process in patient care is critical in that it leads to prognosis and treatment (23). A clinician may inappropriately order diagnostic tests because the tests appear to pose minimal risk while providing possible further useful information. Unfortunately, in general, there are no perfect diagnostic laboratory tests. This type of Table 26.3 Applications of laboratory testsa Basic screening Establishing (initial) diagnosis Differential diagnosis Estimating prognosis Evaluation of current medical case management and outcomes Evaluating disease severity Detecting disease recurrence Monitoring course of illness and response to treatment Selecting drugs and adjusting therapy Group and panel testing (often with authorized “reflex” testing) Regularly scheduled follow-up tests as part of ongoing care Testing responding to specific events or certain signs and symptoms (such as sexual assault, drug screening, postmortem) a

Adapted from references 16 and 39.

overuse may burden the laboratory unnecessarily, may cause the patient avoidable harm, and does not contribute to improved quality of medical care, shorter hospital stays, or reduced mortality (37). An unexpected result may lead to unnecessary additional testing or inappropriate care for a particular patient (23). It has been shown that, even for a healthy person, the greater the number of tests ordered, the greater the probability that some of the test results will fall outside of the “normal” range. Table 26.4 lists the properties of useful diagnostic tests (31, 39). Clinically relevant screening tests (such as lipid panels for evaluation of risk for coronary artery disease, PSA for prostate cancer, and carriage of group B Streptococcus during the 35–37th week of pregnancy as a risk factor for neonatal infection during delivery after premature rupture of membranes) are those that may show previously undetected disease in asymptomatic people or identify risk factors for a disease (23, 39). Table 26.5 lists various parameters for the ideal setting for diagnostic screening tests. When these criteria are applied to measure the efficacy of screening tests, it becomes evident that only a few such tests are appropriate and only for a handful of diseases. People shown to have an increased risk of disease by a screening test are usually advised to consult a physician for follow-up when appropriate (7). Input from clinicians and other healthcare providers is vital for the best possible selection of tests. Diagnostic and monitoring criteria can be established through collaboration with specialists in each area of clinical practice. From these criteria, essential tests for a particular clinical setting can be chosen. It is also crucial to work with managedcare leaders, case managers, contract providers, insurance payors, and government representatives, as certain types of testing may not be covered by insurance or other financial reimbursement. Needs assessment should also consider the testing environments, of which there are many more options than in the past. Testing may be done “in the field,” commonly known as point-of-care, or may be done in a clinician’s office, a clinic, hospital, or freestanding diagnostic facility (16). Collection of specimens or administration of some tests may require hospital admission, albeit normally as outpatient status. There is increasing interest in patient-directed orders for testing, both by consumers and laboratories. Direct Table 26.4 Properties of useful diagnostic testsa Methodology is well described and easily reproducible. Accuracy and precision have been ascertained. Established reference range. Sensitivity and specificity established based on an appropriately wide spectrum of clinical presentations and patient types (including age where necessary). a

Adapted from references 16 and 39.

CHAPTER 26. PREANALYTIC AND POSTANALYTIC TEST MANAGEMENT

Table 26.5 Parameters for ideal settings for screening tests Characteristics of population Sufficiently high prevalence of disease Likely to be compliant with subsequent tests and treatments Characteristics of disease Significant morbidity and mortality Effective and acceptable treatment available Presymptomatic period detectable Improved outcome from early treatment Characteristics of test Good sensitivity and specificity Low cost and risk Confirmatory test available if necessary and practical a

Adapted from reference 39.

access testing (DAT) is initiated by an individual patient, without evaluation or order by a clinician (1, 50). Results are returned directly to the patient ordering the test rather than to a clinician. Reimbursements for DAT come directly from the patient and not from third-party payors (e.g., Medicare, managed-care plans). This type of testing is becoming increasingly popular due to a move toward a more health-conscious society that wishes to be more proactive in its health management. Avoiding the cost of the copay or the cost of the entire physician visit is another reason that DAT is becoming popular in the outpatient setting. Self-initiated testing is a natural progression to testing offered at health fairs and home test kits (19, 24). Laboratories must develop an awareness of some of the issues related to offering DAT (Table 26.6). Many states allow test ordering and result release only to appropriately licensed practitioners. State regulations must be reviewed

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to ascertain local regulatory constraints, if any, on releasing results to unauthorized people, including the patients themselves. Many of the tests performed at DAT centers are classified as waived. However, there are tests offered at these facilities that are categorized as nonwaived, requiring stringent regulatory compliance. Laboratories considering offering DAT may damage their relationships with their physician clients. Although it appears that corporations are welcoming this type of testing as a business opportunity, physicians may be more concerned about its ramifications and effects. Laboratories will have to find ways to bridge the gap between these differing opinions. Test sensitivity, specificity, and predictive values. The parameters of the sensitivity, specificity, and predictive value of a test, in essence, describe the clinical value of a test. Numerous detailed descriptions and analyses are available (16, 17, 23, 28). The sensitivity of a test is the percentage of individuals who have the particular disease for which the test is used and for whom positive test results are found. Expressed as a formula, percent sensitivity is the percentage of people with the disease/analyte who test positive using the test in question divided by the total number of people tested with the disease multiplied by 100. Specificity shows the percentage of individuals who do not have the particular disease being tested and for whom negative test results are found (16, 17). Expressed as a formula, percent specificity is the percentage of people without disease who test negative with the test in question divided by the total number of people without the disease multiplied by 100. While sensitivity and specificity do not change with various populations of unwell or healthy people, predictive values can vary considerably depending on the age, gender, or geographic location of those tested. The positive

Table 26.6 Pros and cons of direct access testing (DAT)a Pros

Cons

Allows patients to keep sensitive test results out of medical records or away from insurers if desired Empowers consumers to take charge of their own health Opportunity to reduce costs by eliminating the middleman Gives educated patients opportunity to be involved in managing and monitoring their own health Makes it easier for patients with chronic conditions to be involved in monitoring; could reduce unnecessary physician visits Testing not limited by geography of provider

Potential to have negative impact on health status for certain patients Potential to leave patient’s physician unaware of conditions or problems that need care or attention False positives or false negatives may have adverse impact on patient health Physicians may have less control over patient management Potential to play into patient hypochondria Potential for charlatans to take advantage of uninformed consumers Testing costs may be higher because they are not negotiated by an insurance company

Other considerations Testing laboratories need to establish clear lines of communication when providing results to patients. Individual state regulations may differ and need to be closely examined. DAT testing is often not covered by insurance providers; patients must be made aware. Concerns may be addressed through education, regulation, oversight, and enforcement. a

See references. 1, 23, and 50.

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REQUIREMENTS FOR EFFECTIVE LABORATORY MANAGEMENT

predictive value provides the probability that a positive result indicates the presence of disease. Conversely, the negative predictive value provides the probability that a negative result indicates the absence of disease. Test reimbursement. To remain viable, laboratories need to be reimbursed appropriately for the testing they perform. In most instances, for a test to be reimbursable by Medicare and other third-party payors it must have been reviewed and approved by the FDA. The test must also have received recognition by the American Medical Association (AMA) by being assigned to the code book of current procedural terminology (CPT) by the AMA’s CPT committee; it often takes a year or longer for an approved test to receive a designated CPT code for billing purposes. When a laboratory performs a test that is deemed experimental by the AMA or is not approved by the FDA, the Centers for Medicare and Medicaid Services (CMS), previously known as Health Care Financing Administration (HCFA), will not allow reimbursement for that test, and Medicare will not reimburse the laboratory for that test. Managed-care providers generally follow this pattern as well. Thus, laboratory managers must review the AMA’s official CPT code book, which is published and updated yearly, to keep current with the available chargeable tests. Failure to do so may compromise the financial viability of the laboratory due to the performance of tests whose expense is incurred solely by the laboratory. Beyond the initial evaluation, it is imperative to consistently monitor the reimbursement of frequently ordered tests. Laboratories need to reevaluate the reimbursement of individual tests and to use this during negotiation for managed-care contracts in order to be appropriately compensated and to be able to continue offering the tests. Available technology. Advancements in science and technology have allowed and will continue to allow laboratories the opportunity to increase and enhance test menus to aid clinicians in their endeavors to monitor and provide

medical services to patients. Improvement in diagnostic capability and decreasing turnaround times (TATs) have brought clinical medicine to the verge of “real-time” diagnosis, in which early intervention has a real chance to improve outcomes significantly. Molecular-based technology and computerized automation will continue to improve diagnostic capability. Often, clinicians request diagnostic tests whose overall effect and efficacy on patient care have not been well evaluated and whose reimbursement by third-party payors is in doubt. It is imperative that the laboratory evaluate such innovations and categorize them as to clinical and diagnostic efficacy and financial feasibility. Fiscal as well as clinical responsibility is paramount when making decisions on implementing tests (Table 26.7). Cost studies. Cost-benefit analysis is a very important step in the assessment for test implementation. Several methods are available to assist with the cost accounting process. The instrument cost accounting technique was published by Travers in 1989 and is presented elsewhere in detail (56). This method takes into account instrument-related costs, direct materials costs, and labor costs. The process is sufficiently generic to apply to any department in the laboratory. As the cost for each test is determined, total costs for patterns of disease-related groupings can be calculated. Procedural analysis can also be implemented using published CLSI guidelines (38). These guidelines include methods for analysis that can justify the addition of new procedures, assist in determining the frequency of test runs, and supply information regarding the performance of laboratory personnel or instrumentation. The guidelines provide in-depth definitions of terms, numerous sample forms, examples of different scenarios, relevant variables, and frequently asked questions. The importance of first having a functional model of the laboratory in place is emphasized. The model should include component working instruments and laboratory cost centers, as well as availability of ancillary data from finance, payroll, and purchasing departments.

Table 26.7 Factors affecting the decision to implement or discontinue a test Category

Reasons to implement

Reasons to discontinue

CLIA

Have staff with adequate education and experience Have system to ensure accurate results Assay reimbursed by Medicare and managed care Ease of use with test kits More readily obtained Technology advanced High-volume ordering Increase in reimbursements from managed care

Staff fails to meet CLIA guidelines

Managed care/Medicare reimbursement Testing technology

Cost effective

Inability to obtain adequate reimbursement from managed care or Medicare Testing becomes obsolete Manufacturers discontinue test kits/reagents Test volumes too low

CHAPTER 26. PREANALYTIC AND POSTANALYTIC TEST MANAGEMENT

A formula has been described for determining the cost-effectiveness of screening tests (51). Each of the factors (prevalence of the disease, cost of the test, and the benefit of detecting the disease) is assigned a numerical value, yielding a benefit-to-cost ratio. For a test to be costeffective, the ratio should be greater than 1.00. The consideration of whether to perform a test inhouse or to send it to a referral laboratory is influenced by several factors (33). One factor is the comparison of the estimated total cost of performing the test in-house versus the estimated total revenue for that test. The costs must include capital expenditure for equipment, instrument maintenance, reagents, consumables, controls, repeat testing, and personnel expenses. Expected test volume must be considered in the equation. Other issues concern the technical expertise of existing personnel, space availability in the laboratory, frequency of test performance, the time and complexity of processing the specimen for referral, and the test’s clinical acceptance (i.e., likely to become commonplace or remain esoteric). Additional factors playing important roles in the decision-making process on in-house performance of testing include consideration of required turnaround time, accreditation and quality of the available reference laboratories, specimen transport issues, reporting format, and method of report delivery (computer, fax, mail, or courier). Because of variances in individual laboratories and the population or community that they serve, there will also be variances in needs for and utilization of tests among laboratories. As noted above, reimbursement from Medicare, managedcare plans, and any third-party payors must also be considered when determining if a test is considered cost-effective or not. As utilization increases for a particular test, a conclusion can be drawn as to the cost-effectiveness of that assay. Even though reimbursement is an important component, there are other ways to measure a test’s costeffectiveness. A test’s contribution to patient care and appropriate patient outcomes also plays a crucial role in the decision of whether to perform a test. Although a test may be a financial loss, it may contribute significant savings to institutions from either a patient safety standpoint or in financial savings by other means. For example, a nonreimbursable, rapid molecular-based test of sputum that is smear positive for acid-fast bacilli can show the absence of Mycobacterium tuberculosis, thus forestalling the need to isolate the patient and providing a significant cost-savings to the institution. Another example is the rapid, same-day diagnosis of enterovirus meningitis precluding the need to hospitalize the patient or beginning other antiviral or antibacterial therapies, thereby saving the organization the associated costs. To recognize such financial savings to all areas within the institution, the laboratory must work closely with other clinical departments.

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Test implementation: verification and validation. CLIA ’88 specifies that for a newly introduced or modified test methodology a laboratory process must be in place to initially verify the test and periodically validate its performance (10, 21). The topic, including discussion of methods for verification and validation, is well reviewed elsewhere (10). Verification includes evaluation of the performance of a new or modified test being introduced into the laboratory. It focuses on the determination of new performance characteristics or confirmation of commercially determined and published performance characteristics for a test. Specifically, in verification, test sensitivity, specificity, and perhaps predictive values must be determined or confirmed. Verification results must be available for physician review during the tenure of the test method in the laboratory (10, 45). Validation, on the other hand, as a component of an ongoing laboratory quality assurance program, periodically evaluates and documents the performance of a test over time to ensure its continued provision of expected results established during verification. Guidelines from manufacturers and accreditation agencies may be used to determine the validation frequency for a test; CLIA ’88 suggests six-month intervals.

Appropriate Test Utilization In the patient-oriented, cost-effective laboratory, periodic evaluation of test utilization and appropriateness of test ordering is mandatory. Inappropriate or excessive testing takes scarce laboratory resources that could be used elsewhere (55). The Joint Commission (TJC), formerly called the Joint Commission on Accreditation of Healthcare Organizations (JCAHO), describes the foundation for laboratory responsibility for clinician education in test appropriateness. In its standards (Accreditation Manual for Hospitals, standard PA 1.2.7) TJC stresses that the medical director of clinical and pathologic laboratory services should ensure that an active policy for the monitoring and evaluation of the quality and appropriateness of the services provided be in place (26, 27). Because laboratory tests are a form of clinical intervention, the laboratory medical and administrative management teams have a professional and moral responsibility to clinicians to advocate for the patient (34, 35). Legal and ethical implications also dictate providing the patient with information to aid in understanding the risks and benefits of testing (16, 29). Test evaluation. It may appear difficult to determine which tests should be evaluated. There are many examples of tests for which monitoring of testing practices is mandatory to determine appropriateness. These examples may include, but are not limited to, repetitive testing on the same specimen sites within short time periods (e.g., 24 hours), excessive numbers of cultures (e.g., more than two to four blood cultures per episode, daily sputum cultures),

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cultures of superficial sites (e.g., pressure ulcers), and cultures of inappropriate specimens (nasal swabs for etiologies of pneumonia). If available, technical specialists or other senior personnel in each area may encounter situations through studies, day-to-day tracking duties, quality assurance, recently published articles, interdepartmental interactions, meetings, or other problem-solving circumstances that indicate which tests are good candidates for further appraisal. Input from bench technologists concerning clinician-laboratory interactions, usually from telephone calls, may also be a source of potential problems suggesting additional test evaluation. Some suggest that the Pareto principle, also known as the 80/20 rule, can be applied (38). This rule is commonly employed in many types of industry and states that 80% of an entity’s total revenues are produced by 20% of its products. For the laboratory, this means first listing all tests performed by the lab and ranking them according to total annual revenues produced by each test. Basic Cost Accounting for Clinical Services: Approved Guideline gives further details of using the principle, along with definitions and examples (38). Laboratory tests may be overutilized, underutilized, or utilized incorrectly (29, 42). Overutilization occurs when tests are ordered in the wrong clinical setting or too frequently; underutilization implies that relevant tests are not ordered in the right clinical circumstances. Incorrect utilization occurs when results are ignored or interpreted improperly. Various studies have shown that increased laboratory testing does not enhance quality of patient care and that there are no serious negative consequences with the reduction in testing (52). A potential problem with superfluous testing is that with a larger volume of information to read and comprehend, a clinician may overlook the more important and relevant test values. Utilization and appropriateness. Utilization and appropriateness issues are related. While utilization may have more to do with frequency of testing, appropriateness is concerned with the use of tests for the right patient in the correct setting for the proper monitoring and for diagnostic or therapeutic reasons. Improving utilization has the ability to reduce laboratory costs while precluding several unpleasant alternatives such as rationing laboratory tests or eliminating some altogether (59). Several published studies illustrate types of possible changes by reviewing utilization and appropriateness. In 2000, Jacobs et al. questioned whether all trauma victims being admitted to the hospital required, per hospital protocol, a complete battery of 11 laboratory tests (25). To examine alternatives, trauma patients were divided into two categories with established criteria: those with defined severe injuries and those in whom severe injuries were unlikely. A team leader or attending physician placed each patient in one of the two groups. Patients in the

severe injury unlikely group received only two laboratory tests, while those in the severe injury group received five. Evaluation after the three-month study period showed no patient care problems, no change in quality of patient care, and a cost savings for the organization. Toubert et al. assessed possible overutilization or inappropriate use of various thyroid tests within their hospital network (54). Thyroid test needs vary, whether for disease screening, diagnosis, or monitoring. In a trial period subsequent to an information campaign, physicians were asked to provide justification and clinical information if tests other than thyroid-stimulating hormone were ordered. The endocrinology staff collected and analyzed order forms for appropriateness. With education and a requirement for justification, appropriateness of ordering was increased by approximately 30% for most tests. At times, studies involving multiple institutions may be suitable. In the mid-1990s, Valenstein et al., working with the College of American Pathologists and 601 institutions, assessed the use of routine stool microbiology tests in the hospital setting (57). Nearly 60,000 specimens were evaluated, leading to the establishment of guidelines to limit routine bacterial stool cultures to the first three days of hospitalization. In a final example, panels of preoperative laboratory tests appeared to have high usage with low yield and little change in patient management (48). Studies at a variety of facilities led to new guidelines based on patient age and history, thus reducing automatic use of large preoperative panels while not adversely affecting patient outcome. It has been described in the past to be very difficult, if not impossible, to change physicians’ test-ordering practices (28, 41, 45, 55). Physicians often have prior experience with hospital “quality” programs under various guises and may feel that, in the end, beyond “harassment” and poorly disguised cost-cutting, little has occurred to improve patient outcome (9). For these reasons, it becomes imperative to include clinical specialists and service leaders when attempting to alter laboratory utilization patterns. In spite of the reported past failures to modify physician test ordering, a plethora of articles has been published containing salient points and methods to consider when working with clinicians concerning utilization and appropriateness of testing. One hurdle to overcome is the use of diagnostic testing to ostensibly reduce the risk of malpractice liability (13). Analysis has shown that “defensive testing,” as it is known, appears rational but is actually costly and harmful to patients. The incremental knowledge gained does not affect the course of treatment but more often leads to misdiagnosis and inappropriate treatment. Physician education and/or guidance offer the simplest solution to this situation. Importance of communication. Consensus between medical staff and laboratorians can help effect positive change.

CHAPTER 26. PREANALYTIC AND POSTANALYTIC TEST MANAGEMENT

Of primary importance are communicating and establishing professional relationships. First, it is necessary to examine patterns of clinical thinking, clinical pathways, local and national peer guidelines, preferred practice patterns, and if available, clinician algorithms for decision making (9, 37, 45, 55). This examination can lead to the establishment of customized groupings of laboratory tests for various specialties, which can provide quality results for the lowest cost (e.g., hepatitis serology panel for acute hepatitis and Epstein-Barr virus serology panel for acute mononucleosis). Outdated tests may be eliminated, and sequential protocol testing may be developed in line with diagnostic algorithms (41). To facilitate actual change, validated best-practice information has to be accepted by physicians (20). Other helpful steps include having recurring meetings with medical staff committees to explain policies, new tests, or changes in protocol; publishing schedules or time tables of particular assays; publication of practice guidelines; integration of the laboratory information system (LIS) into clinician workflow; issuing handbooks (hardcopy or Web-based); and education by clinical leaders or respected peers (2, 6, 9, 42, 47). The laboratory physician may also use consultation, interpretive reporting, cumulative laboratory reports, and narrative or interpretive statements about particular tests (55). Free-texting comments may be necessary for some specific situations in which the laboratorian needs to interpret or explain a unique report in the LIS; however, for consistency, error-free reports, and later data retrieval, standardized (canned) comments should be created for more common reporting situations. One laboratory created a Clinical Laboratory Information Consulting Center, staffed by a medical technologist and a clinical pathologist, which offers telephone consultation during weekdays and e-mail or fax on weekends (46). By providing information, interpreting testing, and if needed, offering clinical advice, the center assists in combating unnecessary testing while establishing relationships with the medical staff. Another option would be to provide individual feedback to family doctors as a routine healthcare activity (58). The purpose is to improve the quality of test-ordering behavior. What is unique in this setting is the use of thorough and comprehensive personal feedback over the course of many years, not just in a temporary study setting. Feedback is provided in a report by respected clinical specialists and concerns both overuse and rationality (in accordance with guidelines or standards). This system requires enlisting experts to give feedback and a requisition form that allows for basic input of patient clinical data. Some institutions make use of the availability of more sophisticated software programs to assist with ordering compliance and appropriate test utilization (20). Essentially these systems use information technology to enhance clinical decision making, allowing compliance to increase reimbursement rates and timeliness in processing

495

of orders. As with the previously described solutions, the software must be designed with cooperation leading to mutual confidence. It must employ legitimate expert information, be monitored by specialists, and provide information in real time while test ordering is occurring. In one organization, the computerized order entry system utilizes initial screen views designed to look like the paper order forms they replaced (20). Indicator lists then guide the clinician to lists of the most appropriate choices for test ordering for the specific situation at hand. The system is continually evolving as new procedures become available, as professional guidelines are updated, and as the users provide feedback. The presence of house staff provides a unique environment for influencing and training in optimal test ordering. Clinical service leaders, in cooperation with the laboratory, can track frequency and volume of testing by residents and use this as an instructive tool (55). One investigation found that education, peer review, and feedback were most helpful in combination to alter staff test utilization (43). Part of the education concerned information about the cost of tests, while the feedback showed residents their own results of tracking the numbers of tests per patient. Studnicki et al. also showed a reduction in the number of tests exceeding frequency guidelines by using a feedback system comparing resident test ordering patterns to predetermined guidelines (52). Such feedback may also be used for nonresident physicians. Feedback seems to be most constructive when it contains cost-audit information and shows clinicians how their test usage compares to that of their peers (15). Pharmacists and infection preventionists play a role in selecting or recommending laboratory tests as well and, when appropriate, should be consulted by the laboratory for input (8). Not only may they order or recommend laboratory tests pursuant to consult with a clinician, but they also need to interpret and apply test results when making recommendations concerning therapy or isolation precautions. Their role as intermediaries between the laboratory and clinicians should be used for any applicable evaluations or studies. The informational technology department can also be a great asset in influencing ordering practices. Algorithms can be applied to influence ordering of tests or in tracking utilization. Schubart et al. studied the use of algorithmbased decision rules to employ appropriate intervals for repeat testing for some commonly ordered laboratory tests. For example, for serum potassium testing in their hospital, application of the established algorithm allowed for a 34% reduction in testing for the first five days of hospitalization without a reduction in quality of care (44). Even a model laboratory compliance plan can assist in controlling redundant testing (29). With the passage of the Health Insurance Portability and Accountability Act

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of 1996 (HIPAA), and later the Medicare Integrity Program, laboratory managers may now have legal liability for inappropriate test utilization. The development of an institution’s individual compliance plan is an occasion to incorporate processes for tracking utilization and making appropriate changes. The most successful plans should define the roles of various departments in compliance monitoring and tie the hospital laboratory to the compliance office, usually with the use of the LIS. Commonly, LIS records have the ability to show test usage rates and patterns. Follow-up to potential compliance problems is best affected by meetings with the nursing, physician, or other staff involved. Through this venue, any noted opportunities for improvement in utilization can be discussed. Recently, the federal government mandated that electronic medical records (EMRs) be implemented by 2014 and offered incentives, in the form of both rewards and penalties, to help drive their adoption by physicians and health organizations. The American Recovery and Reinvestment Act was legislated to provide a network of incentives that could be directly resourced toward healthcare professionals or physicians for adoption of EMRs by 2014. Support for EMRs is based on the advantages that they provide: benefits of securing patient information and lowering healthcare costs. Such records can be used rapidly to monitor utilization and to correlate it to increased or decreased good patient outcomes, thereby affecting patient management strategies.

Specimen Acquisition, Transport, and Storage Requisition information. There has been a tendency in today’s medical climate to place more emphasis on primary care clinicians seeing more patients and fewer referrals to the specialists or subspecialists. Often, this emphasis encourages the use of more diagnostic tests to ensure high-quality patient care but decreases the time allocated to evaluate the patient or to research diagnostic test ramifications. One of the laboratory’s primary responsibilities is to ensure that adequate information is provided to the clinician-client to make appropriate choices in specimen collection and test ordering. CLIA regulations state that the laboratory must establish and follow written policies and procedures characterizing and describing each of the following, when applicable: • Patient preparation • Specimen collection (routine vs. STAT) • Specimen labeling, including patient name or unique patient identifier and, when appropriate, specimen source (some cases require more information; can be modified as required) • Specimen storage and preservation • Conditions for specimen transportation

• • • •

Specimen processing Specimen acceptability and rejection Specimen referral Specimen reporting timelines

For each test offered, the laboratory must be able to provide the appropriate collection materials and instructions together with adequate transport systems and suitable equipment to process and/or store the specimen (Fig. 26.1) (23). Additionally, the laboratory must document the date and time of receipt of the patient’s specimen. Specimen transfer to reference laboratory. When a specimen requires transfer to a reference laboratory, it is the submitting laboratory’s responsibility to ensure that the reference laboratory receiving the specimen is either CLIA-certified or meets equivalent requirements as determined by CMS (33). When tests are to be referred to another laboratory, all pertinent information should still be provided to the clinician, including the destination of the referred specimen. Written instructions should be available for the client to be able to get additional assistance for unusual circumstances or special specimen handling Figure 26.1 An example of information and instructions in a laboratory users’ manual for collection and submission of specimens for evaluation of whooping cough. doi:10.1128/9781555817282.ch26.f1

BORDETELLA CULTURE (WHOOPING COUGH) [Includes B. pertussis and B. parapertussis] Specimen: Submit 2 nasopharyngeal swabs in ReganLowe transport medium. Specimens should be stored refrigerated until and during transport to the laboratory. Other transport media are not suitable for maintaining the viability of pertussis organisms. Method: Conventional Culture Setup: Monday through Sunday Available: Negatives 7 Days CPT: 87081 Reference Ranges: None Isolated Note: Cultures are not useful in adults. Serologies or PCR studies should be considered. All positives are called upon isolation. Collection: Use a mini-tipped culturette to collect 2 nasopharyngeal swabs. The swab is gently inserted through the nose to the posterior nasopharynx where it is gently rotated. It should remain in this position for several seconds. The withdrawal should be slow to minimize irritation. Place in Regan-Lowe transport medium. Specimens should be stored refrigerated (2–8°C) until and during transport to the laboratory.

CHAPTER 26. PREANALYTIC AND POSTANALYTIC TEST MANAGEMENT

situations. Instructions and testing schedules can be obtained from manuals published by the individual reference laboratories. Mechanisms for problem identification and resolution. For quality assessment and performance improvement, the laboratory must establish and follow written policies for an ongoing mechanism to monitor, assess, and when indicated, correct problems identified in the preanalytical testing phase. The preanalytical systems assessment must include a review of the effectiveness of corrective actions taken to resolve problems, revision of policies and procedures necessary to prevent recurrence of problems, and discussion of preanalytic systems assessment reviews with appropriate staff. Furthermore, the laboratory must also document all preanalytic systems assessment activities as well as its attempts to modify clinicians’ ordering patterns or behavior when consistent problems in specimen submission occur.

Test Ordering Test requests may be received in a variety of ways but must be in either written or electronic form and must originate from an authorized person. Such authorization is prescribed by state law and may vary from state to state. The laboratory should encourage the clinicians to specifically write in the orders for any add-ons they decide on at the last minute. Oral requests for laboratory tests are acceptable if followed within 30 days by written orders (21). The laboratory must document its attempts to obtain written authorization in cases where oral requests are not followed by written ones in a timely fashion. A detailed test requisition enables the laboratorian to provide a higher caliber of service to the physician and patient. Timely, accurate, and relevant results are attained with a comprehensive requisition form. Additionally, proper reimbursement is more likely to occur with this type of form. The form must be easy for the client to complete and must contain all pertinent information necessary for proper result interpretation. Phone calls to verify any missing or vague data severely consume resources from both the laboratory and physician’s viewpoint. Therefore, a considerable amount of time should be spent on developing a requisition format and educating clients in its usage. Electronic test requests. Electronic requests are frequently utilized in hospital settings where the laboratory information system (LIS) is connected with either handheld devices or stationary terminals that the medical staff may use to order tests. Electronic test ordering systems are becoming more common, even in off-site locations and clinics, and in many instances can be designed to help guide physician test order choices. Such formats can include “caresets” for specific diagnoses, which list the appropriate tests

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first and leave out the less desirable ones. The conventional manually printed multicopy paper request form may still be common in some facilities, such as clinics or clinician offices, or when sending tests from one facility to another; however, with today’s connectivity, electronic requests are gaining popularity. Often, a physician will handwrite the desired tests on a prescription pad (script) rather than use a requisition. Such a practice should be discouraged, as multipart requisitions or electronic orders are preferred to scripts for a multitude of reasons. In any laboratory setting, it is imperative to possess a down-time procedure for occasions when the standard operating procedure cannot be followed, such as with electrical or computer outages. Test requisition. Typically, a written or electronic requisition consists of a demographics section and a test selection section. The general information needed for the demographic section of a test requisition is depicted in Table 26.8. If the laboratory transcribes or enters test requisition or authorization information into a record system or a laboratory information system, the laboratory must ensure that the information is transcribed or entered accurately. Requisitions must include two unique identifiers such as the patient’s name and medical record number, as well as the name and address of the person authorized to request the test (21). It is also recommended that a contact person and phone number be listed in case additional information is required or when critical values require immediate notification. All applicable diagnosis codes for the date of service should be specified on the requisition. Diagnosis codes are typically referred to as International Classification of Disease (ICD) codes, which are published by the World Health Organization. These codes not only help interpret results, but may also be required for reimbursement by third-party payors. The evaluation of specimen stability depends on the date and time of specimen collection. Some demographics,

Table 26.8 Demographic information needed on test requisitiona Authorized person ordering test Individual using test results (when appropriate) Laboratory submitting specimen (with contact person for STAT tests) Patient name or unique identifier Patient sex and age (or date of birth) Source of specimen (if appropriate) Time and date of collection of the specimen (as needed) Patient’s last menstrual period and indication of whether patient had a previous abnormal report, treatment, or biopsy (for PAP smears only) Additional information that may be needed for specific tests to ensure timely, accurate testing and reporting (with appropriate interpretation) a

See reference 21.

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such as the patient’s sex, date of birth, and fasting state, may affect patient reference ranges in certain procedures. This information also ensures accurate patient identification for appropriate billing and charting of laboratory tests. The billing information required depends on how the client has the account set up with the laboratory. The laboratory can bill the patient, a third-party payor, or the client (the client can then bill the patient or his or her insurance provider), or a combination of payors. Thus, the Social Security number, patient home address, and patient phone number may not be required if billing the client. Similarly, insurance information may not be necessary. Laboratories often print the most common tests and their test codes in the test-request section of the requisition for user convenience. Not only specific tests, but test panels can be preprinted on the requisition. However, due to compliance issues, it is the responsibility of the laboratory to educate the client that, although there is a panel or test preprinted on the form, the option to order any panel or component separately is still available. The test selection section should include an area to indicate the specimen site or source. This is especially true when handling anatomic pathology or microbiology specimens. In such situations it is also imperative to know the type of procedure that was performed and the nature of the disease. For PAP smear testing, CLIA ’88 requires inclusion of the date of patient’s last menstrual period, age or date of birth, and indication of whether the patient had a previous abnormal report, treatment, or biopsy. Other information that should be included on a test requisition includes notation of any medications the patient may be on, symptoms or suspected diagnosis or organism, antibiotic allergies (where pertinent), priority of testing (e.g., STAT), and copy-to instructions for additional reports where needed. Advanced beneficiary notice. The CMS developed a new advanced beneficiary notice (ABN) form in 2002. The new ABN is intended to provide a standardized form that results in more effective communication to beneficiaries. For limited-coverage laboratory tests that Medicare is expected to deny, an ABN form must accompany the test request. Patients have the option to ask for an estimated cost and may decline testing if they choose (which is documented on the ABN). An ABN does not take the place of a test requisition. Local Medicare carriers disseminate specific instructions on when and how to order screening tests. If these specific tests are ordered more often than is medically necessary as indicated by CMS guidelines, the beneficiary may be held responsible for payment. However, the same test that is used for screening purposes may also be used as a diagnostic tool if specific symptoms or diseases are present. Medicare will cover this testing

when the diagnosis codes provided support the necessity requirements.

Postanalytic Activities The postanalytic phase refers to all steps taken after actual testing is performed on a patient’s specimen. It includes the reporting of test results, report review, result archiving, and specimen storage, as well as assessment of all postanalytic activities (Table 26.9).

The Report Although the laboratory should release results only to authorized people or the individual responsible for utilizing the test results, some state regulations allow reporting directly to patients (e.g., Arizona). The reports can be sent through a variety of means, including verbal, written, or electronic. Clear processes must be in place to allow timely reporting of preliminary, interim, or final reports. Written procedures for reporting of results exceeding normal values (STAT or critical) must be published and clearly understood and followed by laboratory personnel. Any such reporting must have documentation of when, where, to whom, and what was reported. Report turnaround time. The caregiver should have available the expected turnaround time (TAT) for a report to be generated from the time the specimen is collected. It is the laboratory’s responsibility not only to make available the TAT information for all tests, but to periodically monitor TAT to determine that reports are being sent without excessive delay and that there are no problems in the process. When excessive TAT is confirmed, corrective action (CA) must be initiated, and all steps in the CA process must be documented. If any delay occurs beyond the expected TAT for any test, the laboratory must have a process in place to notify the clinician of the status of the specimen.

Table 26.9 Areas that should be reviewed or evaluated in quality

assessment of postanalytic systemsa Effectiveness of corrective actions Procedures and policies to prevent recurrences Accuracy and completeness of test results and reports Disposition of unacceptable specimens Turnaround times Referral specimens and their reports Corrected reports Procedures for notification of test results, including for STAT situations For analyte-specific reagents, test reports should include information necessary for proper interpretation of results, including disclaimers as needed Ensure confidentiality of patient information a

See references 14 and 21.

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Types of reports. The main means used for reporting laboratory results are EMR, Web-based reports, and standard paper reports. Although somewhat infrequently used now, paper reports will likely survive for a period of time as backup systems in the event of electric or computer downtime. With the EMR, laboratory data are transmitted to a hospital information system (HIS) and are integrated with patient demographic information, providing integrated reports for in-house patients. When available, Web-based reports have the advantage of multiple access points, and clinicians can access them from any Internet connection. Web-based and EMR reports must be validated initially and periodically to verify that the information transmitted is being translated accurately and in the approved format. Ultimately, regardless of how many or what types of computer systems or networks results travel through, the laboratory must ensure that results get to the authorized person who will act on the results in an accurate and timely manner. Results format. The standard test report must include the name and address of the laboratory at which the test was performed, the test that was performed, the test results (including the unit of measurement, if applicable), any information regarding the condition and disposition of specimens that do not meet the laboratory’s criteria for acceptability, as well as the laboratory’s reference or normal ranges for specific tests, if applicable. If the latter is not included on the report, it must be available to the authorized person who ordered the test or to the person responsible for utilizing the test results. It is also the responsibility of the laboratory to make available to clients a list of test methodologies, including any information regarding interpretation of test results. Any changes to this testing information that would affect results or interpretation of results must be communicated to physicians. For tests using analyte-specific reagents or test systems not FDA approved for use on patients, disclaimers reflecting such status must be added to reports. The disclaimer statement may read, “This test was performed using a kit that has not been cleared or approved by the FDA. Performance characteristics of this test have been determined by (laboratory name). This test should not be used for diagnosis without confirmation by other medically established means.” The FDA has further clarified that testing systems labeled by manufacturers as being for “research use only” should not be used for decisions in actual patient care, and reports based on such testing should have the appropriate disclaimer attached; testing performed for “research” purposes is not reimbursable by Medicare. Additional “value-added” textual comments can be added to reports to help the clinician interpret results or to better understand how to use the results appropriately (Fig. 26.2) (36). Although free-texting allows greater

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flexibility in comment writing, it also provides a greater potential for errors and a lack of standardization of responses to specific, commonly encountered situations. Thus, predetermined (canned) and standardized comments are preferred in such cases. The reports should be easy to read, unambiguous, readily interpretable, and use standard terminologies. Studies on a variety of surgical pathology reports found that subtle nuances in wording of the diagnosis and comment lines could be significant if misinterpreted (22). They stressed using redundancy (restating what might seem obvious) and avoiding certain ambiguous words. Quality assessment and corrected reports. The laboratory must have a process in place to monitor and evaluate its test results and reports for inconsistencies and inaccuracies. Such evaluation must include a review of patient test reports for completeness of patient information, accuracy of test results, normal ranges, correlation between test results, validation of LIS reports to verify accurate transmission and/or transcription, and review of corrected reports (21). There must be a mechanism for correcting an erroneous report and identifying the new report as one that is corrected while maintaining both reports in the patient’s record.

Storage and Retention Regulatory constraints require that the laboratory have processes and procedures for the retention and storage of specimens and records. Storage regulations may differ between various agencies (Table 26.10). Individual state laws are typically more stringent than those of the federal government or other agencies. In any case, the laboratory should follow the more stringent regulations, which should be reviewed periodically to ensure they are current. Specimens. A sample list of specimens that have to be stored is given in Table 26.10 (11). A procedure should be in place for their retention based on the most stringent regulatory requirements for the individual laboratory. Records. Typically test requisitions and reports must be stored in a retrievable fashion for a minimum of two years. Some records, especially in areas of immunohematology (5 years), histocompatibility (5 years), histology (10 years), cytology (10 years), bone marrow (10 years), and cytogenetics (25 years), may require longer retention periods (11). In this litigious era, many laboratories are opting to hold records and documents for longer periods of time. Record retention is made easier if electronic copies are used.

Assessment of Test Results on Patient Outcomes Outcome analysis. The science of outcome analysis has been in common use by physician, nursing, and pharmacy staffs for many years. However, only recently has it

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MICROBIOLOGY/INFECTIOUS DISEASES • Coagulase positive staphylococci are rare causes of primary UTI. In the absence of catheterization, such infections may originate via hematogenous dissemination from another source. • Methicillin (penicillinase-R-penicillin) resistance in Staphylococcus species infers resistance to all other penicillins, beta-lactamase inhibitor combinations, cephalosporins and carbapenems. • A characteristic of the Streptococcus anginosus group is its frequent association with abscesses. When these organisms are isolated from the blood, the possible presence of an abscess should be considered. • Presence of this organism at this site is not indicative of its role as a cause or contribution in an infectious process, and may not require specific therapy. • Plasmodium spp. seen: Unable to rule out Plasmodium falciparum or P. knowlesi. • Entamoeba histolytica/E. dispar: Differentiation between the pathogen E. histolytica and the nonpathogen E. dispar not possible based on organism morphology. SEROLOGY/IMMUNOLOGY • Antibodies to cardiolipin have been found in a subgroup of patients with autoimmune disorders as well as in some patients with myocardial infarction and acute and other infections, including syphilis and AIDS. • IgG and IgA cardiolipin antibodies have been associated with thrombocytopenia, arterial and venous thrombosis and recurrent fetal loss with the predictive value and specificity increasing with the level of cardiolipin antibodies. • IgM cardiolipin antibody is predominately found in association with infections unless a lupus anticoagulant is also present. CHEMISTRY • In addition to congenital Protein C deficiency, decreased Protein C activity can be seen in association with Vitamin K deficiency, severe liver disease, nephrotic syndrome, disseminated intravascular coagulation and other disease states where consumption is increased. Decreased Protein C activity is also seen in patients on Warfarin therapy or oral contraceptives. • A low ratio is indicative of activated protein C resistance due to a factor V gene mutation. This could be confirmed by ordering a Factor V Leiden (PCR) assay. Note that the presence of inhibitor activity (e.g. phospholipid antibodies or a specific factor inhibitor) may cause an abnormal APCR result. • Specimen is grossly hemolyzed. The following results may be affected: increase in glucose, potassium, ALT, AST and total bilirubin; decrease in alkaline phospatase. Suggest recollection if clinically warranted. URINALYSIS • Color interference noted- may affect the result of the dip stick tests. • Unable to read due to color of urine. HEMATOLOGY • Analyzer counts may be inaccurate due to platelet clumping; suggest redrawing in citrate tube. • Platelets clumped on smear, invalidating results. COAGULATION • Proteins C and S results may be falsely decreased due to coumadin therapy. • Specimen is hemolyzed and may cause shortened PT and APTT results. Evaluate results with extreme caution. • Findings suggest the presence of a platelet autoantibody. Recommend obtaining a direct platelet antibody test for confirmation. Figure 26.2 Sample list of textual “value-added” comments attached to specific laboratory reports.

doi:10.1128/9781555817282.ch26.f2

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Table 26.10 Example of specimen retention requirements by regulatory agency Retention period required by: Specimen

CAP

CLIA

Body fluids, CSF, serum Bone marrow smears Fine-needle aspirates Histology slides Negative or unsatisfactory cytology slides Normal blood films, body fluid slides Paraffin blocks Positive/questionable cytology slides Wet and formalin-fixed tissue

24 hours 10 years 10 years

20 years

gained importance in the laboratory as regulatory agencies focus on laboratory-associated patient safety and outcome issues (53). In its 1996 Comprehensive Accreditation Manual for Pathology and Laboratory Services, TJC defines quality to include outcomes: “the degree to which patient care services increase the probability of desired patient outcomes and reduce the probability of undesired outcomes, given the current state of knowledge” (27). More recently, the Affordable Care Act has elevated the importance of outcomes by focusing on their application to payment by CMS, with organizations being either rewarded or penalized depending on the outcomes in their patient populations. The concept of accountable care organizations (ACO), with single payments for the overall medical care of individual patients over time, has further increased the importance of measuring outcomes so as to implement strategies to improve care. Measurable outcomes. Generally, measurable outcomes are defined in two areas: clinical and financial. Clinical patient outcomes, as a result of medical care, relate to the patient’s functional status, health status, and quality of life (7). Measures that are often used for outcomes are familiar to those in the hospital setting: length of stay, mortality, morbidity, infection rate, complication rate, readmission rate, and others. Case management and quality management departments are good sources of quality indicators and measures of performance typically used across institutions and within their statistical analyses. Financial outcomes may concern costs to the patient, a particular department within the healthcare institution, the institution itself, the insurer, or even society at large. One author suggested that all tests offered by the laboratory need clinical trials with outcome result studies to show whether they are valid or not (35). Such studies become even more relevant with the focus on population health management, on chronic disease, and on preventive care and wellness with the potential growth of ACOs.

5 years 7 days 10 years 5 years 2 weeks

5 years 2 years 10 years

TJC

10 years 5 years 2 years 5 years 7 days

Outcome studies. Outcome studies may take a narrower perspective in the laboratory. In simpler terms, the question may be posed, “When the laboratory reports a specific result for a specific patient for a particular test reported in a specific way, what is the clinician response and subsequent change (if any) in patient management?” Actions taken from the more limited focus will, of course, have an effect on the larger measures described above. It may be said that the only true assessment of the quality of laboratory testing is reflected by the quality of patient outcomes (41). The laboratory must come to be seen as playing an integral role in patient management rather than be viewed as an “ancillary” department. The clinical laboratory’s contributory role is already crucial in antimicrobial stewardship programs and in prevention of hospital- or healthcare facility–acquired infections. Ultimately, various studies may lead to new roles for the clinical laboratory (5, 7). Such roles should include expansion of direct participation in patient care and in contribution to clinical care consensus groups. As with test evaluation, ideas for outcome studies may arise from technical coordinators, technical specialists, clinical laboratory scientists (bench technologists), technical directors, or laboratory/department directors. They may be pursuant to articles read in the literature or discoveries made during an annual budget review or subsequent to discussion with a clinician or other staff member. Many good studies focus on a targeted clinical service, such as pharmacy (4, 5, 53). A multidiscipline team is usually needed to gather all necessary information and complete the analysis. The team may include, as needed, but is not limited to, nursing, pharmacy, case management, laboratory, epidemiology or infection control, clinical specialists, statisticians, information technology, medical records, and finance and legal departments. Data may be derived from medical records, LIS, pharmacy IS, billing/charge databases, patient account databases, quality improvement studies, and satisfaction survey systems. Generally,

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information systems are used as well in radiology, respiratory care, dietary, operating room, and other departments and can provide valuable information for studies. For example, in a published study, Barenfanger et al. sought to examine the impact of a program used to improve interventions involving antibiotic therapy (4, 5). The manual, paper-based method of pharmacy review was compared with a system using a computer software program that linked immediately to the pharmacy in cases of alerts for possible intervention. Alerts could show patients with a bacterial isolate and no order for antimicrobial therapy, patients with a bacterial isolate resistant to their current therapy, patients receiving a therapy not tested, or patients with no cultures collected but who were receiving antimicrobial therapy. For the group of patients with alerts generated by the computer software program, the physician received more rapid notification of the information in the intervention. Analysis showed that this group had significant differences in lengths of stay, total costs, variable costs, and radiology costs. Other institutions have had success with comparable programs (18, 49). Some laboratories may have sophisticated algorithms available to search for, among other situations, suboptimal therapy or use of intravenous antimicrobials when an oral agent might be substituted. This system and others can provide savings by keeping antimicrobial costs down but, more importantly, have been shown to reduce length of stay, days of intubation, number of subsequent laboratory and radiology tests, and days in intensive care for many patients (3). In almost all instances, multidisciplinary teams oversee interference or outcome evaluation programs. In a second example, Kollef et al. worked with the microbiology department in a study involving ICU patients who were mechanically ventilated (30). Ventilator-associated pneumonia (VAP) can be a significant factor in the mortality of critically ill patients. By collecting mini-BAL cultures, the researchers hoped to determine the best strategies for administration of antibiotics to improve outcomes of the patients with VAP. From their data, they were able to confirm the findings of earlier investigators and develop recommendations for the empiric treatment of VAP. The College of American Pathologists has developed a series of patient outcome templates—education-based information tool sets to assist member pathologists in setting up outcome measurement studies at their institutions (12). Each template set contains several modules: a set of text pages reviewing a particular disease, references, a table of applicable indicators for outcome measures, and a PowerPoint presentation with tables, charts, and cost-saving models. For example, one template works with the underutilization of lipid analysis in identifying patients at risk

for coronary artery disease. Additional tools such as these templates will be emerging as laboratories become more routinely involved in patient outcomes.

Summary The clinical laboratory has an expanding role in today’s healthcare setting. It must, first and foremost, provide accurate and timely, quality-minded, appropriate analytical testing to help clinicians diagnose and manage medical conditions in patients. It must also recognize its responsibility to provide the overall guidance for appropriate test utilization and result interpretation and to assess the impact of its results on patient outcomes. As such, the laboratory is becoming more of a team player and participant in overall patient management. To fulfill its role adequately, the laboratory must outline, measure, and document the processes needed for all phases of work performed; it must be especially cognizant of the crucial role of preanalytic and postanalytic activities in the provision and application of its accurate, quality-assured, and cost-effective end products. Laboratory professionals must provide services that help physicians focus their test selection. They must also convey and connect the importance of patient preparation and identification with patient safety and improved outcomes to all levels of care givers. Clinical laboratory professionals will need to explain, interpret, and relate results to patient care and outcomes. As laboratory professionals extend their expertise and attention to the pre-and postanalytical phases of their services, one may see improved quality of laboratory testing. KEY POINTS Preanalytic activities include, but are not limited to, test selection, implementation, appropriate utilization, and ordering, as well as specimen collection, transport, and storage. ■ Postanalytic activities include, but are not limited to, reporting of results, storage and retention of specimens and information, and assessment of the effect of test results on patient outcomes. ■ Preanalytic and postanalytic activities are crucial to accurate laboratory results and to their appropriate interpretation for patient care. ■ Effective laboratory test menu formats and comprehensive listing enhance appropriate test ordering. ■ Adequate explanation and interpretation of result reports is important and can greatly influence patient care and outcomes. ■ The role of the clinical laboratory includes assessment of the effect of its results on patient care and outcomes. ■

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GLOSSARY Accountable care organization (ACO) A healthcare organization characterized by a payment and care delivery model that seeks to tie provider reimbursements to quality metrics and reductions in the total cost of care for an assigned population of patients. Affordable Care Act (ACA, 2010) A series of reforms to health insurance designed to increase the availability of health insurance policies to individuals. Analytic activity Pertaining to actual performance of a test procedure on a specimen. Analyte-specific reagents Defined by the FDA as “antibodies, both polyclonal and monoclonal, specific receptor proteins, ligands, nucleic acid sequences, and similar reagents which, through specific binding or chemical reaction with substances in a specimen, are intended to use in a diagnostic application for identification and quantification of an individual chemical substance or ligand in biological specimens.” (21 CFR 864.4020) Centers for Medicare and Medicaid Services (CMS) Primary federal body responsible for the oversight of clinical laboratory activity and licensure. In the United States, the CMS regulates all nonresearch laboratory testing performed on humans through the Clinical Laboratory Improvement Amendments (CLIA). Clinical Laboratory Improvements Amendments of 1988 (CLIA ’88) Passed by Congress in 1988 to establish quality standards for laboratory testing and to ensure the accuracy, reliability, and timeliness of patient test results. Laboratory tests are categorized as being waived, moderate complexity, or high complexity. Laboratories performing tests in the latter two categories have to register and comply with a set of regulatory rules to become certified (licensed). In 2003, a final rule was issued in the Federal Register that defined some new regulations and changed the categorization of tests into two categories (waived and nonwaived tests).

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International Classification of Diseases (ICD) A healthcare classification system that provides codes to classify diseases and a wide variety of signs, symptoms, abnormal findings, complaints, social circumstances, and external causes of injury or disease. Negative predictive value Probability that a negative result indicates absence of disease or analyte. Pareto principle (80/20 rule) Used in many industries, it states that 80% of an entity’s total revenues are produced by 20% of its products. Path of workflow Combined sequential activities in the laboratory, beginning with a clinician’s ability to order a test and culminating in data being generated and reported for use in patient care. Positive predictive value Probability that a positive result indicates presence of disease or analyte. Postanalytic activity Pertains to the period after the actual testing of a specimen and includes phases such as reporting of results, storage and retention of specimens and data, and assessment of effect of results on patient outcomes. Preanalytic activity Pertains to the period prior to actual testing of a specimen and includes phases such as test selection and implementation, appropriate test utilization, specimen collection, transport and storage, as well as test ordering. Procedure/protocol A prescribed way to carry out a diagnostic test or other activity. Process Systematic course of definitive actions or activities culminating in a desired end product. Research use only A product that is not FDA approved for general diagnostic purposes and is labeled by the manufacturer for testing in the initial research phase of product development.

Clinical laboratory scientist The title designation for individuals that perform laboratory testing on patient specimens.

Sensitivity The ability of a test to detect a condition (# with condition testing positive ∕ # having the condition × 100 = percent sensitivity).

Current procedural terminology code (CPT®) Test codes recognized by the American Medical Association and required for filing claims and billing to Medicare.

Specificity Ability of a test to define a true condition (number without condition testing negative ∕ total number without condition × 100 = percent specificity).

Direct access testing (DAT) Generally defined as consumer- (as opposed to physician-) initiated testing of human specimens. DAT is also known as direct-to-consumer or patient-authorized testing.

REFERENCES

Electronic medical record (EMR) A medical record in digital format. Food and Drug Administration (FDA) Federal agency responsible for the oversight of commercial tests and for their approval and licensure for use in clinical health laboratories. Health Insurance Portability and Accountability Act (HIPAA) The U.S. Department of Health and Human Services issued the Privacy Rule to implement the requirement of the Health Insurance Portability and Accountability Act of 1996.

1. American Society for Clinical Pathology. 2002. Direct access testing (policy number 01-02). http://www.ascp.org/pdf/Direct AccessTesting.aspx, accessed September 17, 2012. 2. Bailey, M. K., L. Blacklidge, C. M. Day, L. S. Garcia, D. Parks, and T. Street. 1994. Keep tests in or send them out? Med. Lab. Obs. 26:46–47. 3. Bailey, M. K., L. Blacklidge, C. M. Day, L. S. Garcia, D. Parks, and T. Street. 1995. How to curb physicians’ excessive testing. Med. Lab. Obs. 27:69. 4. Barenfanger, J. 2001. Clinical microbiology laboratories can directly benefit patients. ASM News 67:71–77.

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5. Barenfanger, J., M. A. Short, and A. A. Groesch. 2001. Improved antimicrobial interventions have benefits. J. Clin. Microbiol. 39:2823–2828. 6. Baron, E. J. 1996. Development in laboratory informatics. Clin. Microbiol. Newsl. 18:65–70. 7. Bissell, M. G. 2000. Introduction: what’s in a laboratory outcome?, p. 3–10. In M. G. Bissell (ed.), Laboratory-Related Measures of Patient Outcomes: An Introduction. American Association for Clinical Chemistry Press, Washington, DC. 8. Cannon, B., and M. Lee. 1996. Clinical laboratory tests: application to daily practice. J. Am. Pharm. Assoc. NS36:668–679. 9. Chassin, M. R. 1996. Quality of healthcare. Part 3. Improving the quality of care. N. Engl. J. Med. 335:1060–1062. 10. Clark, R. B., et al. 2009. Cumitech 31A, Verification and validation of procedures in the clinical microbiology laboratory. Coordinating ed., S. E. Sharp. ASM Press, Washington, DC. 11. Clinical and Laboratory Standards Institute. 2011. Quality Management System: A Model for Laboratory Services; Approved Guideline, 4th ed., CLSI Document GP26-A4. CLSI, Wayne, PA. 12. College of American Pathologists. Education: CAP patient outcome templates. http://www.cap.org/apps/cap.portal?_nfpb =true&cntvwrPtlt_actionOverride=%2Fportlets%2FcontentViewer %2Fshow&_windowLabel=cntvwrPtlt&cntvwrPtlt%7BactionForm .contentReference%7D=outcomes%2Fpatient_outcome_templates %2Fpot.html&_state=maximized&_pageLabel=cntvwr (accessed July 1, 2013). 13. DeKay, M. L., and D. A. Asch. 1998. Is the defensive use of diagnostic tests good for patients, or bad? Med. Decis. Making 18:19–27. 14. Department of Health and Human Services. 2003. Medicare, Medicaid and CLIA programs: laboratory requirements relating to quality systems and certain personnel qualifications. Fed. Regist. 68:3639–3713. 15. Epstein, A. M., and B. J. McNeil. 1986. Relationship of beliefs and behavior in test ordering. Am. J. Med. 80:865–870. 16. Fischbach, F. 2000. A Manual of Laboratory and Diagnostic Tests, 6th ed., p. 1–33. Lippincott Williams & Wilkins, Philadelphia, PA. 17. Garcia, L. S., G. W. Procop, G. D. Roberts, and R. B. Thomson. 1998. Selection of diagnostic tests, p. 60–63. In B. A. Forbes, D. F. Sahm, and A. S. Weissfeld (ed.), Bailey & Scott’s Diagnostic Microbiology. Mosby, Inc., St. Louis, MO. 18. Gums, J. G., R. W. Yancey, Jr., C. A. Hamilton, and P. S. Kubilis. 1999. A randomized, prospective study measuring outcomes after antibiotic therapy intervention by a multidisciplinary consult team. Pharmacotherapy 19:1369–1377. 19. Halsey, J. F. 2000. Direct access testing in the clinical laboratory: should laboratories offer testing services directly to the consumer? Clin. Leadersh. Manag. Rev. 14:261–266. 20. Hawkins, H. H., R. W. Hankins, and E. Johnson. 1999. A computerized physician order entry system for the promotion of ordering compliance and appropriate test utilization. J. Healthcare Inf. Manag. 13:63–72. 21. Health Care Financing Administration. 1992. Medicare, Medicaid, and CLIA programs. Regulations implementing the Clinical Laboratory Improvement Amendments of 1988 (CLIA). Fed. Regist. 57:7002–7186.

22. Heffner, D. K., and C. F. Adair. 1999. Clarity on the diagnosis line (the devil is in the details). Ann. Diagn. Pathol. 3:187–191. 23. Howanitz, J. H., and P. J. Howanitz. 1991. Principles of laboratory medicine, p. 1–10. In J. H. Howanitz and P. J. Howanitz (ed.), Laboratory Medicine: Test Selection and Interpretation. Churchill Livingston Inc., New York, NY. 24. Inlander, C. B. Direct access testing: a consumer group’s perspective. http://wwwn.cdc.gov/cliac/pdf/addenda/cliac0303/inlander 0303n.pdf, accessed September 21, 2012. 25. Jacobs, I. A., K. Kelly, C. Valenziano, A. H. Chevinsky, J. Pawar, and C. Jones. 2000. Cost savings associated with changes in routine laboratory test ordered for victims of trauma. Am. Surg. 66:579–584. 26. Joint Commission on Accreditation of Healthcare Organizations. 1990. Accreditation Manual of Hospitals. p. 137–138. Joint Commission on Accreditation of Healthcare Organizations, Chicago, IL. 27. Joint Commission on Accreditation of Healthcare Organizations. 1996. Comprehensive Accreditation Manual for Pathology and Laboratory Services. Joint Commission on Accreditation of Healthcare Organizations, Oakbrook Terrace, IL. 28. Kazmierczak, S. C. 1999. Statistical techniques for evaluating the diagnostic utility of laboratory tests. Clin. Chem. Lab. Med. 37:1001–1009. 29. Kilgore, M., L. Hensley, C. Howard, J. Craft, and J. A. Smith. 1999. Curbing overutilization: the silver lining to HCFA compliance. Med. Lab. Obs. 31:26–28. 30. Kollef, M. H., and S. Ward. 1998. The influence of mini-BAL cultures on patient outcomes. Chest 113:412–420. 31. Labeau, K. M., M. Simon, and S. J. Steindel. 2011. Clinical laboratory test menu changes in the Pacific Northwest: an evaluation of the dynamics of change. Clin. Leadersh. Manag. Rev. 15:16–22. 32. LaRocco, M. 1995. Quality and productivity in the microbiology laboratory: continuous quality improvement. Clin. Microbiol. Newsl. 17:129–131. 33. Lewandrowski, K., and D. MacMillan. 2003. Selection of a clinical reference laboratory: general principles and some observations from Massachusetts General Hospital. Clin. Microbiol. Newsl. 25:33–37. 34. Linehan, B. J., M. M. El-Nageh, S. Cordner, and A. Richter. 2002. Ethics in laboratory medicine, p. 134–142. In K. D. McClatchey (ed.), Clinical Laboratory Medicine, 2nd ed. Lippincott Williams & Wilkins, Philadelphia, PA. 35. Lundberg, G. D. 1999. How clinicians should use the diagnostic laboratory in a changing medical world. Clin. Chim. Acta 280: 3–11. 36. Marcon, M. J. 2003. “Value-added” reporting in clinical microbiology: using computer-based textual reports and comments as an aid to communicating appropriate utilization and application of test results. Clin. Microbiol. Newsl. 25:25–31. 37. Mayer, M. 1991. Unnecessary laboratory tests in diagnosis and treatment. Harefuah 120:66–69. 38. NCCLS. 1998. Basic Cost Accounting for Clinical Services: Approved Guideline. NCCLS document GP11-A. NCCLS, Wayne, PA. 39. Nicoll, C. D., and M. Pignone. 2002. Diagnostic testing and medical decision making, p. 1669–1680. In L. M. Tierney, Jr., S. J. McPhee,

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50. Stapleton S. 2003. Do-it-themselves diagnosis: patients pick their tests. Am. Med. News, amednews.com, accessed September 21, 2012.

40. Pande, P. S., R. P. Neuman, and R. R. Cavanagh. 2000. The Six Sigma Way: How GE, Motorola, and Other Top Companies are Honing Their Performance. McGraw-Hill, New York, NY.

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41. Plebani, M. 1999. The changing face of clinical laboratories. Clin. Chem. Lab. Med. 37:711–717.

52. Studnicki, J., D. D. Bradham, J. Marshburn, P. R. Foulis, and J. V. Straumfjord. 1993. A feedback system for reducing excessive laboratory tests. Arch. Pathol. Lab. Med. 117:35–39.

42. Rodriguez, F. 1996. Improve microbiology procedures and utilization while saving money. Med. Lab. Obs. 28:60–64.

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54. Toubert, M. E., S. Chevret, B. Cassinat, M. H. Schlageter, J. P. Beressi, and J. D. Rain. 2000. From guidelines to hospital practice: reducing inappropriate ordering of thyroid hormone and antibody tests. Eur. J. Endocrinol. 142:605–610.

44. Schubart, J. R., C. E. Fowler, G. R. Donowitz, and A. F. Connors, Jr. 2001. Algorithm-based decision rules to safely reduce laboratory test ordering. Medinfo 10:523–527. 45. Sewell, D., and J. D. MacLowry. 1999. Laboratory management, p. 4–22. In P. R. Murray, E. J. Baron, M. A. Pfaller, F. C. Tenover, and R. H. Yolken (ed.), Manual of Clinical Microbiology, 7th ed. ASM Press, Washington, DC. 46. Shimetani, N. 1998. Consultation on laboratory information: from the perspectives of clinical pathologists and medical technologists. Rinsho Byori 46:987–993. 47. Silverstein, J. C., and A. S. Rothschild. 1999. Clinical perspectives on the modern laboratory. Clin. Lab. Med. 19:421–432. 48. Silverstein, M. D. 2000. Laboratory tests for case-finding and screening for disease in the ambulatory setting, p. 129–146. In M. G. Bissell (ed.), Laboratory-Related Measures of Patient Outcomes: An Introduction. American Association for Clinical Chemistry Press, Washington, DC. 49. Southwick, K. 2002. Antibiotic alert: labs, pharmacies take on cost and misuse. CAP Today 16:62–71.

55. Travers, E. M., and K. D. McClatchey. 2002. Basic laboratory management, p. 3–48. In K. D. McClatchey (ed.), Clinical Laboratory Medicine, 2nd ed. Lippincott Williams & Wilkins, Philadelphia, PA. 56. Travers, E. M. 2002. Business management of the clinical laboratory, p. 49–77. In K. D. McClatchey (ed.), Clinical Laboratory Medicine, 2nd ed. Lippincott Williams & Wilkins, Philadelphia, PA. 57. Valenstein, P., M. Pfaller, and M. Yungbluth. 1996. The use and abuse of routine stool microbiology: a College of American Pathologists Q-probes study of 601 institutions. Arch. Pathol. Lab. Med. 120:206–211. 58. Winkens, R. A. G., P. Pop, A. M. A. Bugter-Maessen, R. P. T. M. Grol, A. D. M. Kester, G. H. M. I. Beusmans, and J. A. Knottnerus. 1995. Randomized controlled trial of routine individual feedback to improve rationality and reduce numbers of test requests. Lancet 345:498–502. 59. Wong, E. T. 1985. Cost-effective use of laboratory tests: a joint responsibility of clinicians and laboratorians. Clin. Lab. Med. 5:665–672.

27 Introduction Defining the Laboratory’s Requirements Technical/Performance Considerations Physical/Technology Requirements Human Resources Financial

Selection and Implementation of New Equipment and Procedures Paula Revell and Lakshmi Chandramohan

Confidentiality and Conflict of Interest

Information Review Implementation and Product Placement Verification and Validation Verification • Validation

Personnel Competency Assessment and Training Proficiency Testing Summary KEY POINTS GLOSSARY

OBJECTIVES To establish the requirements that mandate acquisition and implementation of new equipment or procedures To list the practical considerations involved in the selection and implementation of new equipment or procedure(s) To describe the preevaluation and information gathering stages of planning, selection, and decision making To review the process of implementation of new equipment or procedures

REFERENCES

He that will not apply new remedies must expect new evils; for time is the greatest innovator. Francis Bacon, Essays, II, On Innovation

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o offer the best possible care for the patients they serve, clinical laboratories are in constant need of newer and more efficient diagnostic testing methods. The acquisition of new equipment and/or diagnostic procedures is an important factor in this constant quest for quality improvement. The primary driver for the acquisition of new equipment and/ or implementation of new procedures is this ever-present need to offer the best possible quality of patient care. The constant demand to improve quality patient care is, however, often combined with limited available resources and pressure to reduce testing costs. A critical mistake during the selection process not only impacts the organization’s financial resources but also affects the workflow, staffing, and turnaround times and can result in less than optimal patient care. The selection of new laboratory equipment or procedures is complex and time-consuming. Faced with changing clinical needs and limited financial resources, laboratorians must make difficult choices about which new equipment, technology, procedures and assays, or combinations of these to acquire and implement and how to incorporate them into their diagnostic laboratories. The choice of which to buy may be further confused by conflicting advice and persuasive salesmanship, as well as the rapidly changing policy environment. The selection process calls for a clear understanding of the principal need for the acquisition of the new equipment, and the selection process must be carried out in an objective manner, taking into account the practicality, reliability, and fitness for purpose with input from potential end users, clinicians, and management teams.

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Some common scenarios that lead laboratorians to initiate the selection process include replacement of old equipment because it is no longer able to meet the laboratory’s clinical needs, has become excessively expensive to maintain, and/or is no longer supported by the manufacturer and the need to acquire new technology that provides the laboratory with opportunities to improve the quality of patient care by expanding or updating the test menu (10). Every laboratory has its unique requirements. Since there is no “one size fits all” approach, there are no official guidelines or regulations to guide laboratorians in this decisionmaking process. This chapter will serve as an overview of the important considerations involved in the selection and acquisition of new equipment and the implementation of new procedures in a diagnostic laboratory. For any purchase or implementation, it is imperative to look at the big picture. Caveats to be considered include (i) Does the introduced change provide information of significant clinical utility to the clinicians and patients? (ii) Does it facilitate the recapture of resources and generate longterm and short-term cost benefits? (iii) Will this acquisition interact with other technology or personnel within the laboratory? And (iv) how will future upgrades, expansions, or consolidations be impacted by it? Other factors that will play a vital part in the selection process are current and projected test volumes, instrument flexibility and throughput, laboratory information system (LIS) and infrastructure requirements, impact on staffing, and maintenance (8). The introduction of new equipment or procedures into the routine clinical laboratory is a three-stage process that involves (i) planning and selection, (ii) method verification and validation, and (iii) implementation and continuous monitoring of the performance (9). The majority of this chapter will focus on the selection and decision-making process involved in introducing new equipment and/or procedures and will briefly review the other two processes.

Defining the Laboratory’s Requirements Prior to the acquisition or implementation of any new diagnostic equipment or assay it is critical that the laboratory define exactly what is driving the potential process change. New processes or procedures can offer tremendous benefits ranging from improved workflow to increased volume and throughput to increased efficiencies that lead to cost savings; however, the lab may fail to achieve these benefits if the specific problems are not well defined. With the increasing arsenal of diagnostic options today, it becomes imperative to ask the right questions during the planning and selection process. The definition of the laboratory’s requirements depends on what the clinical needs are now as well as what is planned for the future. Some examples of factors that may drive process change include but are not limited to the following:

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• Changing clinical needs of the community served by the laboratory, for instance, change in the prevalence of local diseases or new patient populations with unique testing needs. For example, the opening of a maternity center that adds a new patient population focused on labor and delivery will require that the laboratories serving this center implement a process change to accommodate the center’s clinical needs. • New guidelines or recommendations for diagnostic testing by agencies such as the Centers for Disease Control and Prevention (CDC) (http://www.cdc.gov/ labstandards/, accessed September 25, 2012) and the World Health Organization (http://www.who.int/en/, accessed September 25, 2012), e.g., the CDC’s recommendations for an alternative HIV diagnostic testing algorithm in 2010. • Emergence of new and promising technologies (instrumentation or procedures) with better testing accuracy, improved clinical performance, reduced cost per test, and multianalyte testing, e.g., converting end point PCR-based testing to multiplex real-time PCRbased assays. • A need for improved turnaround times for critical tests that in turn produces quicker diagnosis and timely initiation of therapy, e.g., testing for neonatal central nervous system infections caused by herpes simplex virus. • Clinician’s interest in providing tests that have improved diagnostic confidence as a result of improved feasibility and interpretability, e.g., introducing tests that the clinician can easily interpret with reduced frequency of indeterminate results. Once you establish the drivers or needs that mandate acquisition and implementation of a new instrument or procedure, you must gather both objective and subjective information to facilitate the decision-making process. The following section will attempt to provide a comprehensive list of practical considerations that may be important factors in choosing the best instrument or assay for a specific laboratory or a group of associated laboratories. Every laboratory is unique, with various different aspects driving the acquisition of new platforms or the implementation of new assays or procedures. Discussed below and listed in Table 27.1 are potential factors to consider; however, due to the varying needs of each individual lab, this list is not intended to be a universal fit for all data collection prior to choosing or implementing a platform, but rather is a starting point from which managers and directors can begin gathering relevant information to aid in making the most informed and educated decision possible. The following sections describe in detail several of the objective and subjective considerations for which information should be collected to aid in the decision-making process.

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Table 27.1 Factors to consider prior to the acquisition of new equipment or implementation of new procedures Technical/Performance Consideration Specimen types Specimen volumes Test menu Current menu Expansion capability and history of vendor offering new assays as planned Turnaround time/batch size Time from sample loading to result reporting STAT result capability for some/all tests offered Batch processing capability for specimen testing and/or reporting Random access Operational throughput Maximum capability of testing offered per shift or per day On-board time Open vs. closed platform LIS interfacing capability (bidirectional, ease of maintenance) Assay performance Sensitivity and specificity Assay precision, accuracy, and linearity Regulatory clearance/approval FDA cleared/approved assays Complexity of offered testing Control availability Available from the manufacturer Control usage and type if supplied QC tracking programs Proficiency testing

Technical/Performance Considerations • Specimen type. For example, whole blood, CSF, serum, plasma, etc. This factor is critical in terms of the flexibility of various platforms or assays; a platform with limited specimen flexibility will have limited flexibility in routine laboratory operations. Additionally, it is critical to consider what specimen types are currently being used for a given assay if the laboratory is transitioning to a new platform or assay rather than bringing in something new. Education regarding new specimen type requirements will be an essential aspect of implementation if there are new specimen requirements. • Specimen volume. What are the minimum and maximum volumes required to run the assay? This volume should include the dead volume and can be an issue particularly for pediatric specimens and short collections. The sample volume requirement can also be an issue for shared specimens or limited-volume specimens such as CSF and pleural fluid.

Physical/Technology Requirements Labor space requirement Power Can current power supply support the platform? Requirements for additional or backup power Data On-board data management Linking with lab automation systems Plumbing/water system External plumbing Waste disposal system Temperature/humidity requirements Requirements for additional ventilation and air conditioning Human Resources Requirements Staffing Workflow Running the assay all shifts Hands-on time Ease of use Complexity of operation Ease of troubleshooting Error alerts (audio/visual) Training requirements Off-site/on-site training Number of staff that can be initially trained Future training of staff available with/without charge by vendor Financial Considerations Instrument cost Cost of operation Cost per result Warranty Maintenance contract Other costs (consumable and disposable costs, software requirements, reimbursement)

• Test menu. What assays/tests are offered on a platform? Does the platform offer multiple test options and thus increase the flexibility and growth potential? This is an important consideration given the decreasing budgets of many modern laboratories; by offering multiple assays on one platform the laboratory can often increase efficiency and decrease reagent cost due to volumebased purchasing of reagents. • Turnaround time/batch size. What is the total elapsed time from sample loading to reporting results? Are STAT results needed for some or all of the tests offered on the platform? Are specimens tested in a batch capacity, and if so, what are the batch sizes? Does the platform offer truly random-access testing or partially random access testing? Some platforms claim a “random access” feature, but there may be limitations such as the inability to interrupt a batch run to perform a different test type or run a different sample type. Are the results continuously reported, or are results reported in a “batch” format?

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• Operational throughput. What is the maximum capacity of testing offered per shift or per day? The throughput incorporates multiple variables including the number of samples that can be loaded onto the platform at one time and the total “onboard time” for any given sample. For example, a completely random access platform with a single reaction chamber and an onboard time of 2 hours would have a throughput of 12 tests/24 hours. Other variables that can influence throughput include the “hands-on time” for sample preparation and the time required to load the samples onto the platform. The throughput may change for various combinations of specimen types or assays, and all potential profiles should be considered. It is important to consider not only whether the throughput will meet existing needs, particularly at peak demand, but also whether it will allow for potential future growth. • Open vs. closed platform. Does your laboratory have any plans for internal assay development? Some platforms allow for laboratory test development, while others only allow vendor-specific assays and reagents. • Available interface. Does the system interface effectively with any laboratory information system (LIS), and if so, is the system compatible with your laboratory’s LIS? The ability to directly transfer results from the testing platform to the LIS and to avoid manual data entry is a critical factor in terms of improving patient safety through accurate result reporting. • Assay performance. These factors represent objective measures of an instrument or assay, such as precision, accuracy, linearity, sensitivity, and specificity. It is important to know how the numbers reported by the vendor were determined. During the evaluation period the laboratory must verify the performance of these objective measures through the validation process. Laboratories need to be aware of both the analytical performance (usually reported by the manufacturer) as well as the clinical performance, which is much more difficult to determine. The specific needs of your patient population should be considered. • Regulatory clearance/approval. The Food and Drug Administration (FDA) regulates all medical devices, and platforms and assays fall under this umbrella. It is critical to understand the specific classification of the instrument or assay you are considering for your laboratory. Most platforms must be FDA cleared to be marketed in the United States; however, there is much more variability regarding commercially available assays. Assays can be considered for research use only, analyte-specific reagents, FDA cleared, or FDA approved. FDA clearance indicates the establishment of analytical performance for the assay by the

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manufacturer when the assay is performed exactly as described in the package insert. FDA approval indicates that not only analytical performance characteristics have been established, but also clinical performance characteristics. FDA-approved assays are much less commonly available; examples include RNA viral load assays for HIV and hepatitis C virus, as well as others. FDA-cleared assays are also given an additional designation regarding the complexity of testing. “Waived” tests are considered the simplest and can be run as point-of-care assays; additional designations include moderate-complexity and highcomplexity tests. The designated level of complexity significantly impacts who in the laboratory can perform the various assays. • Control availability. Many vendors sell controls, and thus availability is not an issue; however, this is an important factor to consider because for certain assays controls are not available commercially, and thus issues such as consistency and reliability can become limitations to assay performance.

Physical/Technology Requirements • Space requirement. What are the physical specifications of the equipment, including size and weight, and how will the instrument fit in the laboratory and within any existing workstations if applicable? Additionally, it is important to consider not just the physical footprint of the instrument but also the space needed for proper ventilation and access required for routine maintenance and servicing of the instrument. In certain parts of the country, natural disaster issues must also be considered (earthquake protection and equipment lock-down; potential flooding/floor models). • Power. Will the existing power supply in the laboratory be sufficient to support the operation of the equipment? Will additional dedicated or backup power be required? Alterations to existing electrical supply can significantly increase the overall cost of implementation. • Data. If the instrument will require a connection to the Internet for cloud-based services or be interfaced with other equipment or the laboratory information system, the data line requirements must be carefully evaluated. • Plumbing/water. Some instruments require highquality water supplies or direct access to plumbing to remove waste. • Temperature/humidity. Most equipment requires specific environmental controls to operate optimally. Consider not just the existing environmental conditions but also the impact the addition of the new equipment will have through heat production, etc. Ventilation and air conditioning are critical factors for optimal instrument performance.

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Human Resources • Staffing. What is the number of staff required to operate the equipment, and what level of skill and expertise is required of the staff? How will the implementation of the platform impact current staffing levels? Depending on the assay or instrument in question, staffing requirements could go up or down. With automation or platforms that require less hands-on time, the new instrumentation could free up existing staff to perform different laboratory tasks. • Workflow. Can the equipment or assay be run during all shifts? What is the required hands-on time? How will the addition of the new assay or platform impact existing work practices? All aspects of testing need to be included in the evaluation, not only direct testing but sample preparation time, quality control practices, and maintenance. • Ease of use. Do the technologists who will use the instrument find it “user friendly”? • Training requirements. What types of training are required prior to implementation, and are training programs offered by the vendor? Is there an additional cost associated with the required training? Financial • Instrument cost. In addition to the actual cost of the equipment, what are the available options for purchasing or financing? Are there options for lease or reagent rental agreements? • Cost of operation. What are the direct and indirect costs over the lifetime of the instrument? • Cost per result. This number involves a variety of factors including the cost of reagents, disposables, calibrators, controls, labor, maintenance, repeats, etc. Additionally, it is important to have a good idea of the volume of samples you will be running, as the cost of reagents is typically impacted by the volume of reagent purchased from the vendor. • Warranty. Many instruments have a limited warranty. • Maintenance contract. The details of the annual maintenance contract should be discussed up front, as they can vary widely and significantly impact the cost to operate the equipment. Details should include what is covered by the annual contract as well as the cost of additional requirements such as after-hours or holiday repair calls and parts that need to be replaced on maintenance schedules (e.g., bulbs, probes, etc.). • Consumable costs. What are the estimated reagent, calibrator, and control costs given the laboratory’s estimated test volume? Important factors to consider in this analysis include the size of the reagent kits and their shelf life once opened. If a vendor sells only large

• •

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kits and the shelf life of reagents is short, a laboratory may end up paying for wasted reagents, increasing the cost unnecessarily. Disposable cost. What are the costs for tips, reagent bins, etc.? Software requirements. Are there up-front costs associated with software purchases, and will there be costs associated with software upgrades? Is there a cost associated with the implementation of an LIS interface? Who will actually be handling the upgrades, interface, etc. (company or laboratory personnel)? Evaluation and validation. What are the costs associated with equipment evaluation prior to the purchase, and if purchased, what will be the cost to properly validate and verify performance characteristics. Keep in mind that if the laboratory is transitioning to a new or different technology, platform, or assay, physician end users may need to see extensive parallel testing to know how to appropriately apply new diagnostic values. Personnel Costs. What are the costs associated with travel, hotel, meals, etc., for laboratory personnel undergoing training off-site?

Prioritization of Requirements Once the decision has been made as to what the laboratory needs and wants from a given assay or platform, and the data regarding the subjective and objective specifications of available platforms or assays have been collected, the list of possible choices will be narrowed due to elimination of those products that do not meet the minimal criteria. Prioritizing the desired features that are not minimum requirements can further refine the list of possible choices that meet the laboratory’s basic needs. In today’s environment of limited budgets and higher demands on productivity, whether the final decision about which assay or instrument to implement is left to the individual supervisor or director, or more commonly to a team of decision makers including administrators, clinicians, and even hospital board members, communication regarding the final choice is critical. A clear and concise presentation of the logic and motivation behind the decision to purchase any given platform can be the difference between a successful purchase and a failed attempt. In situations where a team of decision makers is involved, be cognizant of the fact that many of the team members may not be experts in the area for which the equipment will be purchased.

Confidentiality and Conflict of Interest Throughout the entire process of selection and decision making, it is critical that all those involved in the process remain independent, free of obligation or suspicion, and

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completely fair and impartial. Maintaining the integrity, credibility, and confidentiality of selection and acquisition of equipment requires a clear set of guidelines, rules, and responsibilities to govern the behavior of the decision makers. For example, an employee or team member may not solicit or accept anything of value from an actual or potential manufacturer or vendor, be employed by or agree to work for a vendor or potential vendor, or knowingly disclose confidential information for personal gain. Those involved in the selection process are not permitted to communicate about or discuss the procurement or evaluation process with any other employee who is not involved in this process. Furthermore, the employees and team members shall not disclose the scoring outcomes or content of the proposals. Depending on the institution, all those who have been delegated the authority to purchase may also be required to sign a conflict of interest statement each year. In case of an actual or potential violation, the employee or team member involved may be reprimanded, suspended, or dismissed. The manufacturer or vendor may be barred from receiving future contracts and/or have an existing contract canceled.

Information Review Once the laboratory’s requirements for introducing new equipment and/or a new procedure have been clearly defined, the next critical step in the selection process is preevaluation and information review. It is important to review the latest information on as many commercially available platforms and procedures as you can via thorough Internet searches (PubMed, manufacturer’s websites, and commercial advertisements), review of trade journals and existing literature, review of manufacturers’ package inserts, and conversations with vendors’ representatives and other users. Accurate data collection is vital in choosing the appropriate system. Recommendations of relevant professional bodies such as the CDC, the Infectious Disease Society of America (http:// www.idsociety.org/, accessed September 25, 2012), and the American Association for Clinical Chemistry (http://www .aacc.org/Pages/default.aspx, accessed September 25, 2012) and regulatory agencies such as the College of American Pathologists (CAP; http://www.cap.org/apps/cap.portal, accessed September 25, 2012) and the Clinical and Laboratory Standards Institute (CLSI; http://www.clsi.org/, accessed September 25, 2012), as well as clinical outcome trials and presentation at professional conferences and review of external quality assurance schemes (7) can be vital sources of information. Professional publications and specialty journals also have articles on clinical evaluations of equipment and procedures. Contact other laboratories or scientists who already have implemented a new system that might be of interest and ask them about cost, performance, reliability, and service. Assessment of available information is

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best performed by tabulating the data to compare and contrast variables that are high on the list of laboratory needs or wants. Select or short-list those that will best serve the laboratory’s needs. Once the necessary information is tabulated, decision makers should meet to discuss the shortlisted choices and the reasoning behind each selection criterion. The process can then be refined or modified as needed, with the modified criteria retabulated to address all issues of concern. Figure 27.1 provides an overview of the planning and selection of equipment or procedures leading to clinical implementation in the laboratory for routine patient care.

Implementation and Product Placement The implementation of a new procedure or instrument requires coordination between the placement site and the vendor. Typically the vendor requires the placement site to fill out questionnaires regarding the physical characteristics of the space, and then the vendor will inspect the site to clarify what, if any, physical changes might be required prior to placement. The timing of the purchase can be significantly impacted by any required changes to the space such as electric, plumbing, data, etc. If the purchase of an instrument is delayed, this can impact the original quoted price, so laboratories need to be diligent about planning and coordinating the entire process.

Figure 27.1 Overview of the selection of equipment and imple-

mentation of procedures. doi:10.1128/9781555817282.ch27.f1

Defining the laboratory’s requirements: new patient populations, disease prevalence, new technology, test volumes, cost, staffing limitations

Gathering objective and subjective information: quality of assays, test menu, turnaround time, operational requirements, instrument features, equipment maintenance, LIS, manufacturer’s support, cost and contract issues, backup options . . .

Implementation and product placement: Contract review, placement of equipment, on-site or off-site training, verification and validation studies

Communication with clinicians/providers and clinical testing

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Once the instrument is placed, many vendors offer onsite training of key laboratory personnel. After key personnel have been trained on the operation of the instrument or performance of the assay, the laboratory is responsible for verification and validation of the new purchase.

Verification and Validation On acquisition of equipment and/or implementation of new procedures, laboratories are required to establish policies and procedures to maintain or improve the reliability, efficiency, and clinical utility of the testing systems. Two critical analyses performed in the laboratory are method verification and validation. These processes provide critical objective evidence that the chosen system is fit for purpose, meaning that the particular requirements for a specific intended use are fulfilled.

Verification According to the Cumulative Techniques and Procedures in Clinical Microbiology (Cumitech) (2), verification is the one-time process performed to determine or to confirm a test’s expected performance prior to implementation in the clinical laboratory. Verification requires determination of performance characteristics that include sensitivity, specificity, predictive values, precision, and accuracy of the test. In contrast, validation is an ongoing process of monitoring a test, procedure, or method to ensure that it continuously performs as expected. Validation According to the Clinical Laboratory Improvement Amendments (CLIA) (http://wwwn.cdc.gov/clia/regs/toc.aspx, accessed September 25, 2012), validation is an integral part of a laboratory’s quality assurance programs, and it requires personnel competency assessment, quality control, internal and external proficiency testing, and correlation with clinical findings. It is important to note that the definitions for validation and verification as written above are accepted by the CLSI, the CLIA, and the International Organization for Standardization. However, the definitions accepted by the CAP are the inverse. The CLIA requires that for FDAcleared and approved tests, a laboratory must document its verification of the following four performance characteristics: accuracy, precision, reference range, and reportable range. These performance characteristics are published in the manufacturer’s package insert. Furthermore, laboratories performing laboratory-developed tests (LDTs) and modified FDA-cleared and approved tests are required to “establish” the same four performance characteristics that are required for FDA-cleared and approved tests, as well as to determine the analytic sensitivity, analytic specificity, and any additional performance characteristics. It is also

important to keep in mind that the processes of validation and verification add to the cost of implementation of a new laboratory testing system.

Personnel Competency Assessment and Training Establishing the competency of each laboratory employee is an extremely important component of laboratory quality control. It ensures that personnel are trained appropriately to perform prompt and accurate clinical testing. All newly implemented tests or testing procedures must have proper, documented personnel training before patient results can be reported. The competency of all personnel must be assessed semiannually during the first year of their employment and then annually thereafter (3, 6). According to the CLIA, the necessary components of a competency assessment program are (i) direct observation of performance during routine testing; (ii) monitoring of recording and reporting of patient results; (iii) review of worksheets, quality control records, proficiency testing results, and preventive maintenance records; (iv) direct observation of performance of instrument maintenance and function; (v) assessment of test performance through testing of previously analyzed specimens, internal blind testing, or external proficiency testing samples; and (vi) problem-solving skills assessment. Training is required before a new or current employee can perform a new test or when a new assay is introduced. Training updates are required whenever changes are implemented to a procedure or when new learning objectives are added to the training document.

Proficiency Testing Proficiency testing (PT) is a critical tool used by clinical laboratories to verify the accuracy and reliability of their testing (4). Laboratories that are CLIA-certified are required to enroll in a Centers for Medicare and Medicaid Services–approved (1) proficiency program for each specialty and subspecialty for which certification is sought. Routine reviews of proficiency testing reports by the laboratory director and staff will help determine areas of testing that are not performing as expected and also indicate subtle shifts and trends that, over time, would affect patient results. Proficiency samples are tested in the same manner as any other patient sample. A score of at least 80% is required for satisfactory performance. The laboratory must establish an internal proficiency program for those tests that have no external proficiency testing programs available (5). Monitoring and disseminating information about trends in PT performance during the ongoing implementation of the CLIA regulations can assist individual

CHAPTER 27. NEW EQUIPMENT AND PROCEDURES

laboratories in assessing their performance relative to other laboratories.

Summary The overall value of diagnostic testing is measured not only by its analytical performance or financial value but also by how well it meets the clinical needs of the clinicians and patients. Thus, establishing benefit to patient health is the primary driving force when introducing changes in routine diagnostic testing. The critical nature of communication with the clinicians or community health workers who will be using the laboratory tests cannot be overemphasized. It is important to remember that a new diagnostic system must be examined as a part of a broader management strategy. Although this chapter has emphasized the objective consequences of a process change due to either acquisition of equipment or implementation of procedures, other variables such as clinicians’ views and diagnostic confidence can positively or negatively impact the outcome of any process change. Clinicians’ perspectives of testing, their experience of the testing process, and their understanding of the test can all affect downstream patient care. The clinicians who utilize the new procedure must agree that its performance characteristics are satisfactory and meet the clinical need. To purchase equipment simply because it is economically feasible may not be in the best interest of the laboratory. Therefore, whenever possible, the selection process should be performed keeping in mind the range of conditions in which the intended equipment or procedure is likely to be used in routine clinical practice. KEY POINTS ■ Defining the requirements that mandate the laboratory’s purchase and implementation of new equipment and/or procedures is the first and most critical component of the planning and selection process. ■ Practical considerations when choosing the best instrument or assay for a specific lab include testing volumes, specimen types, test menu, turnaround time, operational throughput, physical requirements, assay performance, cost, manufacturer’s contract and warranty, computer interfacing, and staffing considerations. ■ Method verification, validations, competency, proficiency testing, and training are required before new equipment or procedures can be implemented in a clinical laboratory. ■ Throughout the process, timely and accurate communication with end users is critical to the successful purchase and implementation of any new laboratory equipment or procedure.

513

GLOSSARY American Association of Clinical Chemistry A professional organization of clinical laboratory professionals, physicians, research scientists, and other individuals involved with clinical chemistry and related healthcare disciplines. Centers for Medicare and Medicaid Services (CMS) Previously known as the Health Care Financing Administration (HCFA). A federal agency that administers the Medicare program and enforces the CLIA ’88 regulations by conducting laboratory inspections, determining quality standards through its survey and certification process, and auditing billing for medical necessities and reimbursements. Clinical and Laboratory Standards Institute (CLSI) An international organization responsible for developing and promoting best practices in clinical and laboratory testing throughout the world through accreditation and educational programs. Clinical Laboratory Improvement Amendments (CLIA) The primary government rules that set standards designed to improve quality in all laboratory testing. They include specifications for quality control, quality assurance, patient test management, personnel, and proficiency testing. College of American Pathologists (CAP) A professional organization of board-certified pathologists, involved in fostering and advocating excellence in the practice of pathology and laboratory medicine. It also provides voluntary laboratory inspection and accreditation programs. Infectious Disease Society of America (IDSA) A professional organization that develops guidelines to improve the health of individuals and communities and promotes excellence in patient care, education, research, public health, and prevention relating to infectious diseases. U.S. Centers for Disease Control and Prevention (CDC) A federal agency that focuses on developing and implementing disease control and prevention and environmental and occupational health and protects public health through educational programs and partnerships with state health departments and other organizations.

REFERENCES 1. Centers for Medicare and Medicaid Services. 2003. Medicare, Medicaid and CLIA programs; laboratory requirements relating to quality systems and certain personnel qualifications, final rules. Fed. Regist. 68:3640–3714. 2. Clark, R. B. 2009. Cumitech 31A: Verification and validation of procedures in the clinical microbiology laboratory. Coordinating ed., S.E. Sharp. ASM Press, Washington, DC. 3. Clinical and Laboratory Standards Institute (CLSI). 2009. Training and competence assessment; approved guideline, 3rd ed. CLSI document GP21-A3. CLSI, Wayne, PA.

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4. Clinical and Laboratory Standards Institute (CLSI). 2007. Using proficiency testing to improve the clinical laboratory; approved guideline, 2nd ed. CLSI document GP27-A2. CLSI, Wayne, PA.

7. Olson, J. D. 2007. External quality assurance in thrombosis and hemostasis: an international perspective. Semin. Thromb. Hemost. 33(3):220–225.

5. Clinical and Laboratory Standards Institute (CLSI). 2009. Assessment of laboratory tests when proficiency testing is not available; approved guideline, 2nd ed. CLSI document GP29-A2. CLSI, Wayne, PA.

8. Mina, A. 2008. A practical approach to instrument selection, evaluation, basic financial management and implementation in pathology and research. Clin. Chem. Lab. Med. 46(9):1223–1229.

6. Elder, B. L. 2003. Cumitech 39: Competency assessment in the clinical microbiology laboratory. Coordinating ed., S.E. Sharp. ASM Press, Washington, DC.

9. Murphy, P. G. 2008. Selection of a suitable assay. Clin. Biochem. Rev. 29(Suppl. I):S17–S22. 10. Myers, J. 2007. Primer for selecting lab equipment. MLO Med. Lab. Obs. 39(1):26–27.

28 Introduction Safety Management Plan and Responsibilities Laboratory Hazards

Laboratory Safety James J. Dunn and David L. Sewell

Biological Hazards • Chemical Hazards • Physical Hazards • Radiation Hazards

Standard Precautions Hazard Prevention and Containment Risk Assessment • Handwashing • Barrier Protection • Engineering Controls • Work Practices • Respiratory Protection • Immunization • Warning Signs and Labels • Biological Safety Cabinets and Chemical Fume Hoods

Sterilization and Decontamination Spill Management Biological • Chemical

OBJECTIVES To define the essential components of a laboratory safety program To administer the program to meet safety requirements To evaluate the program for regulatory compliance To identify hazardous materials and procedures in the laboratory

Fire Safety Waste Management Regulatory Oversight • Management Program

Packaging and Shipping Infectious Substances Infectious Substances Classification • Packaging, Labeling, and Shipping Regulated Material

Before anything else, preparation is the key to success. Alexander Graham Bell

Personnel Training Training Program • Methods • Documentation • Monitoring and Evaluation

Summary KEY POINTS GLOSSARY REFERENCES APPENDIXES

Clinical Laboratory Management, 2nd Edition Edited by L. S. Garcia ©2014 ASM Press, Washington, DC doi:10.1128/9781555817282.ch28

T

he laboratory environment can be a hazardous place to work. Laboratory workers are exposed to numerous potential hazards including chemical, biological, physical, and radioactive hazards, as well as musculoskeletal stresses. Laboratories, by the nature of the work performed, contain inherent risk to workers that is often difficult to measure and manage because safety is not an intrinsic, absolute, and measurable property (23). Therefore, we must continually assess and manage risk in the laboratory based upon current knowledge and propose and enforce commonsense safety practices to minimize harm or injury to the worker and to prevent laboratory contamination (53). Accidents in the laboratory are often attributable to a person’s inability to recognize a hazardous situation, an individual’s diminished concern for risk over long periods of time, or excessive risk taking. Thus, an individual’s behavior influences the degree of occupational risk present in the workplace (48). Risk takers and individuals who ignore safety precautions not only suffer the consequences from their acts but also pose a risk to their colleagues, families, and friends. Biological hazards (e.g., exposure to blood, body fluids, and other potentially infectious materials [OPIM]) are a major concern for laboratory workers today and have heightened the need for implementation of sound safety practices. Exposure to these pathogens through specimens, aerosols, or droplets may cause an occupationally acquired infection that can be transmitted to other employees, employees’ families, or the public. Today, the potential use of biological, chemical, and radioactive materials as terrorism agents imposes additional safety and security concerns in the laboratory (6, 27, 31, 32). Exposure to hazardous chemicals may result in acute and/or chronic disease that may be exacerbated in employees with preexisting medical conditions. 515

516

REQUIREMENTS FOR EFFECTIVE LABORATORY MANAGEMENT

Although there is a continuing effort to reduce the number and quantity of laboratory chemicals that are toxic, carcinogenic, caustic, flammable, or radioactive, these compounds cannot be eliminated completely from laboratories. In addition to biological, radiological, and chemical hazards, fires and electrical accidents may occur, and laboratory instruments and equipment may cause injury to the user. However, the laboratory can be a safe workplace when the risks are recognized and reduced through appropriate training of personnel and implementation of safe work practices, appropriate containment equipment, well-designed facilities, and administrative controls (13, 15, 16, 33, 40, 42). Many laboratories use a combination of control methods to protect workers. This hierarchy of controls prioritizes intervention strategies based on the premise that the best way to control a hazard is to systematically remove it from the workplace, rather than relying on workers to reduce their exposure. These types of measures, prioritized from the most effective to least effective, include engineering controls, administrative controls, work practices, and personal protective equipment (PPE).

Safety Management Plan and Responsibilities The key to a safe laboratory environment is the development, implementation, and enforcement of a highquality safety management program that considers worker safety as a responsibility of the facility (Table 28.1). The Occupational Safety and Health Administration (OSHA) requires a risk assessment (exposure determination) of each task performed in the laboratory. The safety program begins with a well-written safety manual that defines the program and identifies the individuals responsible for specific tasks (15, 18, 28). Management must commit to the program and provide the necessary resources (e.g., equipment and time) to produce and implement the plan, assign oversight and responsibility for the plan, and communicate the plan and expectations to the employees. The risk associated with each task performed in the laboratory is assessed, and practices are implemented to minimize these risks. These practices include the use of standard precautions, PPE, engineering and work practice controls, workplace design, vaccination, safe handling and disposal of hazardous waste, and use of safety devices (16). In addition, the safety plan should include sections on blood-borne pathogens, a medical surveillance program, a chemical hygiene plan, infection control procedures, hazard communications, record keeping, waste disposal, fire safety, and spill cleanup. The federal regulations that directly address general laboratory safety include Hazard Communication Standard 29 CFR 1910.1200 (43), Bloodborne Pathogens Standard 29 CFR 1910.1030 (45), and

Table 28.1 Elements of a safety management plan Administrative support Develop and maintain written safety information identifying workplace hazards. Appoint a safety officer and members of the safety committee. Appoint a chemical hygiene officer. Appoint a radiation safety officer (if radioactive materials are used in testing). Provide for occupational health services. Provide funds and time for surveys, meetings, education, and development of a safety management plan. The plan should address safety and security, exposure control, emergency preparedness, waste, utilities, and equipment management. Risk assessment Perform safety audits and risk assessments. Obtain MSDS and other necessary safety information. Develop chemical inventory lists. Identify safety needs and controls. Training Provide safety training for new employees, annual training for all employees, and training as needed for workers assigned to a new workstation. Plan review and record keeping Review all audits, surveys, and accident reports to measure the effectiveness of the plan and make changes to reduce the probability of additional occupational exposures. Evaluate and update the plan when new information is available or new hazards are introduced. Maintain records of all surveys, accidents, and inspections and the resulting corrective actions.

Occupational Exposure to Hazardous Chemicals in the Laboratory 29 CFR 1910.1450 (44). To ensure that the laboratory safety policies and procedures are active and enforced, a safety officer and safety committee should be established. All sections of the laboratory should be represented on this committee. These individuals ensure that the safety program’s policies, procedures, and training programs are uniform throughout the laboratory and that the laboratory is in compliance with all state and federal safety regulatory requirements. In larger organizations the laboratory safety officer also participates on the other institutional safety-related committees. A laboratory chemical hygiene officer should also be designated to coordinate and be responsible for the laboratory’s chemical waste disposal. The coordinator should evaluate hazardous chemicals based on their properties, according to national and/or regional regulations. It is essential that all employees review the safety manual, receive annual training based on the hazards and risks present in the laboratory, and understand the specific safety precautions required for each procedure or workstation.

CHAPTER 28. LABORATORY SAFETY

Laboratory Hazards The laboratory contains numerous hazards that fall into four general classes: biological, chemical, physical, and radiological. A hazard is any material, condition, or action that may result in physical harm or impairment to employees. The management of these hazards poses a significant challenge due to the complexity of the work and the diversity of the hazards that are present in the laboratory environment. The risk from these hazards is related to exposure levels, duration of exposure, toxicity or pathogenicity of the hazardous material, safety controls present, and other factors such as the general health or age of the laboratory worker. In general, the risk of suffering an adverse event from a laboratory hazard is decreased by minimizing the exposure to the hazard, storing only small quantities of the hazard in the laboratory, and storing hazardous materials in appropriate containers. Whenever possible, a less hazardous material should be substituted for highly toxic or dangerous chemicals.

Biological Hazards Biological hazards include infectious agents such as bacteria, parasites, fungi, and viruses that may be transmitted through contaminated body secretions, tissue, or other materials. All clinical specimens are potentially infectious, and the isolation and culture of pathogenic microorganisms from these specimens increases the risk to the clinical microbiologist. Bacteria cause the majority of laboratoryacquired infections (LAI), followed by viruses, rickettsia, fungi, and parasites. Today, 96% of all LAIs are caused by bacteria, viruses, and rickettsia (30). The major routes for acquiring an infection in the laboratory are from exposure to a specimen containing a potential pathogen and the procedures used to culture and identify the agent. Agents that are transmitted by aerosols cause most of the serious LAIs and include Mycobacterium tuberculosis, Bordetella pertussis, Corynebacterium diphtheriae, Neisseria meningitidis, Bacillus anthracis, Brucella spp., Francisella tularensis, Burkholderia pseudomallei, and Yersinia pestis (7, 9, 15). The factors that influence the risk of acquiring an infection from blood, body fluids, or other potentially infectious material (OPIM) are related to the quantity of specimen involved in the exposure; the concentration, prevalence, and type of pathogen in the specimen; the number and types of contact experienced by the worker; the susceptibility and behavior of the host; and the routes of exposure (e.g., percutaneous exposure, splashes to mucous membranes, splashes to intact or nonintact skin, oral ingestion, or aerosol inhalation) (2, 30, 51). Aerosols are especially problematic because they are generated by numerous procedures performed in the laboratory such as sonication, homogenization, centrifugation, mixing, pipetting, heating inoculation loops, streaking agar plates,

517

opening lyophilized ampoules, and expelling bubbles from a syringe (15, 49, 50). Because symptoms of infection are often delayed following an exposure, the person generally cannot recall the specific event that caused the infection but only that he or she was working with the agent or was in the laboratory (30). Traditional safety guidelines have emphasized the use of safe work practices, well-designed laboratories, containment equipment, and management controls (3, 13). Today, laboratories also need to prevent unauthorized entry to the laboratory areas and removal of potential bioterrorism agents (6).

Chemical Hazards Chemical hazards include all chemicals that may be toxic or irritating and include solids, liquids, and gases such as mercury, acetone, xylene, stains, and formaldehyde. The diversity of chemical hazards found in the clinical laboratory is as great as the biological hazards. The risk and severity of an exposure to a chemical is influenced by the amount of chemical to which one is exposed (dose), the route of exposure (i.e., inhalation, ingestion, absorption through or contact with mucous membranes and intact/ nonintact skin), the chemical properties of the compound, the susceptibility of the individual, and the duration of exposure (54). Because containment procedures are based on the chemical hazard class, laboratory chemicals are labeled and described by their hazard classification, such as irritant, corrosive, flammable (gas, liquid, solid), poison (toxic), or carcinogen. Reactive chemicals must be segregated for storage. Acids are not stored with bases, oxidizers are not stored with reducing agents or organics, and flammables are stored in flammable-safe cabinets. Poisons or toxic compounds can cause acute or chronic symptoms when ingested, inhaled, or absorbed through the skin and can affect the nervous, respiratory, or reproductive systems. Carcinogens may cause malignant neoplasms in humans or animals long after exposure to the compound. Use of highly toxic chemicals or carcinogens should be restricted, and they should be handled only in a designated area by well-trained personnel. When possible, disposable PPE should be used when handling toxic chemicals. A chemical hygiene plan (required for all laboratories) details the specific safety measures (i.e., engineering and work practice controls, PPE, exposure monitoring, waste management) required for each class of chemicals used in the laboratory. When exposure monitoring is required, a trained industrial hygienist can measure the chemical level as the work is performed and determine whether the level exceeds the permissible exposure limit (PEL) (4, 33, 41). PELs represent the maximum concentration of a chemical to which an employee may be exposed over an 8-h workday or 40-h workweek (time-weighted average). PELs may also

518

REQUIREMENTS FOR EFFECTIVE LABORATORY MANAGEMENT

be expressed as a short-term exposure (15-min period) or a ceiling limit not to be exceeded. These limits are set so that employees are not exposed to chemical levels that may cause acute or chronic symptoms.

Physical Hazards Physical hazards abound in the laboratory and include such things as ergonomic issues, fire, electrical hazards, noise levels, equipment, accidents (e.g., slipping, falling, and lifting), UV light exposure, and compressed gases (25). Accidents often occur from overcrowding in the work area, poor lighting, poor maintenance, and lack of attention to detail by the employee. All accidents should be investigated with the intent of identifying the cause of the accident and correcting the problem. For example, back injuries are reduced by training employees on the correct method for lifting heavy objects. Falling is often caused by slippery floors, obstructed vision, or obstacles. Electrical safety relies on the proper grounding of equipment, the availability of adequate electrical outlets, and the prohibition of the use of extension cords. UV lights should be installed according to the manufacturer’s instruction to avoid skin or eye injuries. Also, the laboratory should be evaluated for ergonomic problems, excessive noise, and excessive stress on employees. Workers under excessive stress tend to make more mistakes and have more frequent accidents. Radiation Hazards Any laboratory that performs tests using radioactive materials needs to meet the requirements of the U.S. Nuclear Regulatory Commission (NRC), including a radiation control plan. The implementation of a radiation safety program and control plan monitored by a radiation safety officer can minimize the occupational exposure to ionizing radiation from radioactive material or ionizing radiation-producing equipment (39). The degree of risk from ionizing radiation is related to the type of radiation (i.e., alpha, beta, or gamma) emitted, the quantity of radioactive material present, and the source of exposure (i.e., internal or external). Engineering and work practice controls are essential to minimizing the risk of working with radioactive material. Three factors must be considered: time, distance, and shielding. The goal is to minimize the length of exposure, maintain the greatest distance between the radioactive material and the worker, and use an effective shield (i.e., lead, Plexiglas). Work practice controls for radiation, including a dedicated area for working with radioisotopes, are similar to other laboratory hazards and include appropriate PPE (e.g., lead aprons) and monitoring badges (39). Today, most tests that were once performed by radioimmunoassay are now performed by enzyme immunoassay, so many clinical laboratories no longer handle any radiolabeled compounds.

Standard Precautions All laboratories should adhere to the concept of standard precautions, which states that all patients and all laboratory specimens are potentially infectious and should be handled accordingly (15, 34). This concept arose from the observation that infections are often unrecognized in patients. “Standard precautions” replaces earlier terms, such as “blood and body fluid precautions,” “universal precautions,” and “body substance precautions,” found in OSHA documents (45, 46). The OSHA documents place the emphasis on blood-borne pathogens such as HIV, hepatitis B virus (HBV), and hepatitis C virus, whereas the concept of standard precautions recognizes that all infectious agents and all OPIM, except perspiration, pose risk to the healthcare worker (51). OSHA identifies a number of practices that should be implemented to protect the worker from exposure to blood-borne pathogens, including an exposure control and risk assessment plan (15). Methods that can be implemented to minimize exposure to infectious agents shield the laboratory worker from infectious material through a set of engineering and work practice controls and the use of PPE. In addition, the OSHA regulations require that employers provide HBV vaccination, postexposure evaluation, and follow-up; communicate the hazards to employees; and maintain appropriate records (2, 5, 15). Employees who decline immunization against HBV are required to sign an HBV vaccine declination form (Appendix 28.1).

Hazard Prevention and Containment Risk Assessment The risk associated with handling hazardous material should be assessed, and an exposure control plan should be implemented. Rather than retrospectively analyzing problems, laboratory managers need to proactively assess risk and institute the necessary procedures to reduce the potential risk. For chemical, physical, and radiological hazards, the classification of the hazard is straightforward, and usually the risk can be determined. For biohazardous material, the assessment of risk is more difficult, is often qualitative, and is based on the pathogenicity and concentration of the agent, the infectious dose, the route of transmission, the viability of the agent in the environment, and the availability of treatment or prophylaxis (13, 23, 38). Two lists of risk groups have been published to facilitate the assessment of risk from different microorganisms and to recommend the appropriate safety practices for handling infectious agents (13, 60). The World Health Organization (WHO) lists four groups of biohazardous agents based on the level of risk to the individual and community and the availability of effective treatment and prevention (Table 28.2). The Centers for Disease Control and Prevention/

CHAPTER 28. LABORATORY SAFETY

Table 28.2 WHO classification of microorganisms by risk groupa Risk group

Characterization

1

Low or no individual and community risk. Unlikely to cause human disease. Moderate individual and low community risk. Unlikely to cause serious disease or be transmitted. Effective treatment and prevention available. High individual and low community risk. Causes serious infections but not readily transmitted. Effective treatment and prevention usually available. High individual and high community risk. Causes serious human disease and readily transmitted. No effective treatment or prevention available.

2

3

4

a

519

Table 28.3 CDC/NIH-recommended biosafety levels for infec-

tious agentsa BSL 1

2 3

4

Characterization Well-characterized agents not known to consistently cause disease in healthy adult humans. Minimal potential hazard to laboratory personnel and the environment. Agents associated with human disease of moderate potential hazard to personnel and the environment. Indigenous or exotic agents that cause serious or potentially lethal disease as a result of exposure by the inhalation route. Dangerous and exotic agents that pose a high individual risk of aerosol-transmitted laboratory infections and life-threatening disease.

a

From reference 13.

From reference 60.

National Institutes of Health (CDC/NIH) guidelines propose four biosafety levels (BSLs) and recommendations for appropriate containment practices for a list of agents known to cause LAIs. Each BSL is based on the increased risk associated with the factors listed earlier (Table 28.3). Each BSL consists of combinations of PPE, engineering and work practice controls, and laboratory design that are appropriate for work with a particular infectious agent (Table 28.4). The BSL numbers (1 to 4) imply increased occupational risk from exposure to an agent and the need for additional containment for work with that agent. A conservative approach should be used when safety information is not available for a microorganism or new laboratory procedure. Generally, routine clinical laboratories operate with BSL-2 practices or BSL-3 practices for some

mycobacterial or fungal agents (13). Additional information can be found on websites listed in Appendix 28.2. A risk assessment and exposure plan for the clinical laboratory should identify the appropriate safety practices for handling infectious material that may contain any of a variety of pathogenic microorganisms (Table 28.5). Risk assessment must take into account the agent, the host, and the work activity in the development of a comprehensive safety plan (23). Management must monitor the plan, document accidents in writing, and make adjustments based on accidental exposures to infectious agents and new information. Laboratory accidents should be discussed at the quality assurance or safety committee meeting (preferably quarterly but no less than yearly) and immediately with the staff in the section where the accident occurred. The

Table 28.4 Laboratory biosafety level criteriaa BSL 1

2

3

4

a

Practices

Safety equipment and facilities

Standard microbiological practices Controlled access Sharps precautions Display biohazard signs BSL-1 practices Restricted access Staff trained with pathogens Safety manual available BSL-2 practices Consider baseline serum for all at-risk personnel

PPE (coats, gloves) as needed

BSL-3 practices Clothing change before entering Shower on exit Decontaminate all waste on exit

From reference 13.

Class I or II BSC used for specimen processing and work producing aerosols or splashes: PPE (coats, gloves, eyewear/face shields) as needed; self-closing laboratory doors; eyewash station available BSL-2 equipment/facilities and BSC (class II or III) used for work with all specimens and cultures; PPE (gowns, masks) as needed; negative pressure airflow; exhausted air not recirculated; decontamination (e.g., autoclave) in laboratory Class III BSC or class II BSC in combination with full-body, airsupplied, positive pressure personnel suit; anteroom for clothing change/shower; specialized ventilation and decontamination system

520

REQUIREMENTS FOR EFFECTIVE LABORATORY MANAGEMENT

Table 28.5 Risk assessment and exposure control plan for clinical microbiology laboratorya PPEb

Exposure risk from:

Laboratory section and task General Supplies inventory Clerical: computer entry, telephones, records, etc. Instrument maintenance: Parts contaminated Parts not contaminated Surface decontamination Waste disposal Bacteriologye Specimen processing Subculture blood culture bottles Subculture colonies or broth cultures Prepare, fix, stain, and read slides Identification tests and antimicrobial susceptibility testing Mycology and Mycobacteriology e Specimen processing Prepare smears, wet mounts; fix slides Read wet mounts from specimens Read wet mounts from cultures Examine sealed cultures Stain fixed smears, read Handle yeast cultures, smears, and fixed slides Handle molds and mycobacteriology cultures Virology i Specimen processing Feed and manipulate uninoculated cells Read cells for cytopathic effect Feed and manipulate inoculated cells Perform identification tests Stain fixed slides, read Parasitology Concentrate fecal specimens, smears, wet mounts Read fecal wet mounts Prepare blood smears; fix slides Stain and read slides Molecular testing Specimen processing Cultured microorganism

Blood and body fluids

Cultured biologic agents

Low Low

Gloves

Lab coats/ gowns

P

Coat Coat

Engineering controlsc Face/splash shields

BSC

Sharps containers availabled

High Low Low High

Variable Variable Variable Variable

R D R R

Gown Coat Coat Gown

High High Low

BSL-2 BSL-2 BSL-2e

R R

Coat Coat Coat

Low

BSL-2

Coat

Slides

Low

BSL-2

Coat

Sharps

High High

BSL-2/3 BSL-2/3

R R

Gown Gown

High

BSL-2/3

R

Coat

Slides

Low Low Low Low

BSL-2/3 BSL-2/3g

R

Coat Coat Coat Coat

Slides

D

Slides Slides

Low

BSL-2/3h

R

Gown

Re

Sharps

High Low

BSL-2

R

Coat Coat

Low High

BSL-2 BSL-2

R

High Low

BSL-2

R

Coat Coat

Low

BSL-2

R

Coat

Low High Low

BSL-2 BSL-2

R R

Coat Coat Coat

High Low

BSL-2/3 BSL-2 BSL-3

R D R

Coat Coat Gown

BSL-2

A(D)

Af

Sharps R Af

Re R

Sharps Slides

R

Coat Coat

Sharps Needles Sharps

Sharps Pipettes

R

Pipettes

D

Sharps Slides Pipettes, sticks Slides Slides Slides

A

Aj

Aj R Rk

Pipettes Sharps Sharps

CHAPTER 28. LABORATORY SAFETY

521

assessment and exposure control plan for clinical microbiology laboratorya Table 28.5 Risk (continued) PPEb

Exposure risk from:

Laboratory section and task Serology Manipulate serum Arrange tubes; prepare and dispense reagents Mix serum and reagents; read and discard tests

Cultured biologic agents

Gloves

High Low

BSL-2

High

BSL-2

Blood and body fluids

Engineering controlsc

Lab coats/ gowns

Face/splash shields

R

Gown Coat

A

R

Gown

Aj

BSC

Sharps containers availabled Pipettes

Aj

Pipettes

a

Adapted from reference 26. Abbreviations: R, required; D, discretionary; P, prohibited; A, one of the required alternatives. Remove PPE when leaving the laboratory. Gowns must have a solid front and be impervious to liquid. c Recapping of needles is prohibited. Carry tubes in racks or use plastic tubes. Plan each task to minimize known hazards. Wash hands before leaving the laboratory. d Sharps include needles, scalpels, pipettes, sticks, syringes, slides, plastic loops, and coverslips. e Requires surveillance and action plan for occasional isolation of BSL-3 organism (e.g., Brucella spp., Francisella spp., Mycobacterium spp., and systemic fungi), especially when plates are held more than three days. M. tuberculosis requires the use of a safety centrifuge, a BSC, and a HEPA-filtered mask or respirator. f Use a BSC or acrylic splash shield. g Requires a contingency plan for breakage of culture containers. h Mycobacteria other than tuberculosis can be handled at BSL-2; however, use BSL-3 practices because most manipulations precede organism identification. i Special precautions for BSL-4 agents (e.g., hemorrhagic fever virus, smallpox) should be arranged through CDC’s emergency number (770-488-7100). j Vortexing or other splatter-generating steps require use of a BSC or safety shield. k Requires BSL-3 practices if there is potential for aerosols. b

accident report and corrective action are documented in the minutes of the committee meeting. Common safety mistakes or compliance issues are listed in Appendix 28.3. Laboratories that use or store Select Agents (Table 28.6) under BSL-2, -3, or -4 practices must address the following security and safety concerns: • • • • • • • • • •

Risk and threat assessment Facility security plans Physical security Security of data and electronic technology systems Security policies for personnel Access controls to the laboratory Procedures for agent inventory and accountability Shipping, transfer, and receiving of Select Agents Emergency response plans Reporting of incidents, unintentional injuries, and security breaches

The select agents plan must be part of the daily operation of the laboratory, and all employees must be knowledgeable about the plan (6). For security of Select Agent areas and public safety, access to the laboratory should be limited and restricted to individuals who have a legitimate purpose for entering the work area. Laboratory entrances should be locked by keypads, keys, or identification card keys. Laboratory employees should continuously monitor entrances that remain open. The laboratory should have a policy that defines who may visit and a procedure

for removing unauthorized persons. Visitors and service workers should sign an entry log, be issued an identification badge with an expiration date, wear a laboratory coat, and be accompanied by a laboratory employee. Laboratory supervisors should ensure that all visitors and service workers understand the laboratory’s security and safety requirements, safety signage, and areas that are posted offlimits to visitors. Most clinical laboratories serve as sentinel laboratories in the national Laboratory Response Network (LRN). The primary responsibility of a sentinel laboratory is to rule out and refer suspected Select Agents to the nearest LRN reference laboratory (usually a state health laboratory) or a federal level laboratory, depending on the suspected agent. Laboratory personnel should be familiar with the morphological, cultural, and identification characteristics of certain Select Agents that might be encountered in clinical specimens. The laboratory should notify the institutional infection control or epidemiology personnel who are responsible for assessing the situation and notifying local or state public health officials. Maintenance workers and cleaning staff must also understand the laboratory’s security and safety procedures, sign the entry log, and ideally, perform their tasks when laboratory employees are present. The laboratory supervisor should instruct the maintenance and cleaning staff on the restricted areas of the laboratory (e.g., mycobacteriology laboratory) and precisely define their duties (e.g., do not handle biohazardous material). When work is required in the restricted areas, a laboratory worker should escort or monitor the person.

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REQUIREMENTS FOR EFFECTIVE LABORATORY MANAGEMENT

Table 28.6 Select agents and toxinsa Bacteria Bacillus anthracis Brucella species Burkholderia mallei and B. pseudomallei Clostridium botulinum Francisella tularensis Yersinia pestis Rickettsiae Coxiella burnetii Rickettsia prowazekii and R. rickettsii Fungi Coccidioides immitis and C. posadasii Viruses Crimean-Congo hemorrhagic fever virus Eastern equine encephalitis virus Ebola virus Equine morbillivirus (Hendra, Nipah) Herpesvirus 1 (herpes B virus) Lassa fever virus Marburg virus Monkeypox virus Rift Valley fever virus South American hemorrhagic fever viruses Tick-borne encephalitis complex viruses Variola major and minor virus (smallpox virus) Venezuelan equine encephalitis virus Viruses causing hantavirus pulmonary syndrome Yellow fever virus Toxins Abrin Botulinum toxins Clostridium perfringens epsilon toxin Conotoxins Diacetoxyscirpenol Ricin Saxitoxin Shigatoxin Staphylococcal enterotoxins Tetrodotoxin T-2 toxin a

From reference 58.

Handwashing Handwashing is the most important procedure to reduce the duration of exposure to an infectious agent or chemical, prevent dissemination of an infectious agent, and reduce overall infection rates in a healthcare facility. Hand contamination occurs during manipulation of specimens

and contact with work surfaces, telephones, and equipment. Laboratory personnel should wash their hands: • • • • •

Immediately after removing gloves After obvious contamination After completion of work Before leaving the laboratory Before hand contact with nonintact skin, eyes, or mucous membranes

Handwashing sinks should be located at each entry and exit door, and ideally the faucet should be operated by a knee or foot control. If these controls are not available, the faucet should be turned on and off using a paper towel. Handwashing should be performed using a soap or antiseptic compound, starting at the wrist area and extending down between the fingers and around and under the fingernails. Hands should be rinsed from the wrists downward (21). Recently, the CDC recommended that in addition to traditional soap and water handwashing, healthcare personnel can also use alcohol-based gels (Table 28.7) (8).

Barrier Protection PPE shields the individual from contact with a particular hazard. OSHA standards require that PPE shall be provided, used, and maintained for all hazards found in the workplace, including biological, environmental, chemical, and radioactive compounds and mechanical irritants capable of causing injury or illness through absorption, inhalation, or physical contact. Employees must be trained in the appropriate use of PPE for a specific task, the limitations of PPE, and procedures for maintaining, storing, and disposing of PPE. Gloves. Gloves protect the wearer from exposure to potentially infectious material and other hazardous material and are available in materials designed for specific tasks. Gloves must be provided by the employer and should be of the proper size and appropriate material for the task. Gloves are available in wrist, elbow, and shoulder length. Thin latex, vinyl, or nitrile gloves offer protection from exposure to potentially infectious material and should be changed frequently. Because of latex hypersensitivity in some workers, only powder-free latex gloves should be used, or better yet, gloves should be made of nitrile, polyethylene, or another material. The prevalence of latex allergy in healthcare workers ranges from 6 to 16% and usually presents as a type of allergic reaction (e.g., skin rashes; hives; flushing; itching; nasal, eye, or sinus symptoms; asthma; and rarely, anaphylaxis). While removal of latex products from the workplace is the final solution, other exposure control measures include education of new

CHAPTER 28. LABORATORY SAFETY

523

Table 28.7 Characteristics of hand-hygiene antiseptic agentsa Bacteria Group

GP

GN

Mycobacteria

Fungi

Viruses

Speed of action

Alcohols

+++

+++

+++

+++

+++

F

Chlorhexidine (2% and 4% aqueous) Iodine compounds

+++

++

+

+

+++

I

+++

+++

+++

++

+++

I

Iodophores

+++

+++

+

++

++

I

Phenol derivatives

+++

+

+

+

+

I

Triclosanb

+++

++

+

−

+++

I

+

S

Quaternary ammonium compounds

+

++

−

−

Comments Optimum concentration 60–95%; no persistent activity Persistent activity; rare allergic reactions Causes skin burn; usually too irritating for hands Less irritating than iodine Neutralized by nonionic detergents Acceptability on hands varies Used only in combination with alcohols; ecologic concerns

a From reference 8. +++, Excellent; ++, good, but does not include entire bacterial spectrum; +, fair; −, no activity or not sufficient; F, fast; I, intermediate; S, slow; GP, Gram positive; GN, Gram negative. b A polychlorophenoxyphenol.

employees on latex allergies, screening high-risk employees for latex allergy symptoms, and frequent cleaning and changing of ventilation filters in latex use areas. When an employee suffers from the more serious type I hypersensitivity to latex, latex cannot be used in the employee’s work area, which should be posted as “latex free.” When working with chemicals, the gloves should be of a material known to resist the particular chemicals. Generally the material will be neoprene, nitrile, or a butyl rubber. General-purpose utility gloves should be used for housekeeping chores. Insulated gloves are available for handling hot or cold items. Puncture-resistant gloves should be used in the autopsy suite or when handling scalpels or other sharp objects. Protective clothing. Laboratory workers should wear fully closed long-sleeved coats or gowns that extend below the level of the workbench. When there is a potential for splashing or spraying, the material must be fluid resistant. Fluid-proof clothing (plastic or plastic lined) must be worn when there is the potential for soaking by infectious material. When handling chemicals, clothing must be composed of a material that is resistant to the particular chemical. Laboratory workers should not wear laboratory clothing out of the laboratory. All protective clothing should be changed immediately when contaminated to prevent the potentially infectious material or chemical from contacting the skin. Coats and gowns should not be taken home for cleaning but should be laundered by the institution. When handling highly toxic compounds, complete body suits should be worn.

Face and eye protection. Face and eye protection should be used when splashes or sprays of infectious material or chemicals may occur. Face and eye protection equipment includes goggles, face shields, and splash guards. Face shields provide the best protection for the entire face and neck. Splash guards provide an alternative method for face and eye protection. If only goggles are worn, the user should also wear an appropriate mask to prevent contamination of mucous membranes. Hazardous materials such as corrosives should always be manipulated behind splash guards or while wearing appropriate PPE.

Engineering Controls Engineering controls are those that involve making changes to the work environment to reduce work-related hazards. These types of controls are preferred over all others because they make permanent changes that reduce exposure to hazards and do not rely on worker behavior. By reducing a hazard in the workplace, engineering controls can be the most effective solutions for laboratories to implement. These controls include mechanical pipettes, bench tops impervious to liquids and chemicals, biohazard bags, centrifuge safety cups, eye wash stations, ventilation systems, biological safety cabinets (BSCs) and fume hoods, plasticware, and plastic collection devices (e.g., vacutainers, hematocrit tubes) (19). An OSHA standard requires that safety needle devices or needleless systems be used whenever possible (14, 47). All hazardous chemicals should be stored below eye level and transported in safety carriers. Incompatible chemicals should be stored apart, and flammables should be stored in a safety canister and

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REQUIREMENTS FOR EFFECTIVE LABORATORY MANAGEMENT

a flame-resistant cabinet. The maximum quantity of flammable material that can be stored in a cabinet is defined by the manufacturer (33). Flammables requiring refrigeration can only be stored in an explosion-proof refrigerator. Compressed gas cylinders must be moved with the valve safety cover in place and secured to a handcart. When stationary, the cylinder must be secured upright with bottom and top restraints.

Work Practices Work practices are procedures for safe and proper work that are used to reduce the duration, frequency, or intensity of exposure to a hazard. These controls need to be understood and followed by all who work in the laboratory. These practices include not allowing mouth pipetting and selecting less hazardous chemicals for a specific procedure. Wearing open-toed shoes or sandals should not be allowed in the laboratory to prevent accidental spillage on bare skin. Movements that bring the hand to the mouth, eyes, or mucous membranes should be discouraged. Therefore, employees should not eat, drink, apply cosmetics or contact lenses, etc., in the laboratory. Visitors should be discouraged or accompanied by an employee. Respiratory Protection Respiratory devices are available to prevent inhalation of chemical dust or fumes and infectious aerosols. The type of mask used depends on the specific hazard. For example, a properly fitted N95 mask is employed for protection against aerosolized M. tuberculosis (15). A chemical fume mask employs cartridges that are designed to reduce exposure to a particular chemical, but the cartridge must be replaced periodically. A self-contained breathing apparatus offers the greatest degree of protection and is used when toxic levels are high or the danger is unknown (33). Immunization The current CDC/APIC (Association for Professionals in Infection Control and Epidemiology) guidelines on immunization of healthcare workers, including laboratory personnel, provide recommendations for agents on the basis of documented nosocomial transmission, for which there is substantial risk of acquisition or transmission. These include hepatitis B, influenza, measles, mumps, rubella, pertussis, and varicella (10, 11) (Table 28.8). The recommendations for vaccination of healthcare personnel are represented by two categories: (i) diseases for which routine vaccination or documentation of immunity is recommended because of risks to personnel in their work settings and, should a healthcare worker become infected, to the patients they serve and (ii) diseases for which vaccination of personnel might be indicated in certain circumstances. Vaccines recommended in the

first category are hepatitis B; seasonal influenza; measles, mumps, and rubella; pertussis; and varicella vaccines. Vaccines in the second category are meningococcal, typhoid, and polio vaccines.

Warning Signs and Labels Warning signs and labels are designed to provide a universal policy to alert visitors and employees to potential laboratory hazards and hazardous areas in the laboratory. A comprehensive warning labeling system should be implemented to identify contaminated objects or hazardous materials. OSHA-specified signage should be used whenever applicable (18, 43, 44). The color of the sign identifies the level of risk: (i) danger (red, white, and black), (ii) caution (yellow and black), or (iii) safety instruction (green and white) (18). Containers of hazardous reagents, radionuclides, chemicals, and waste must be labeled with the chemical name and appropriate hazard label (e.g., flammable, corrosive, carcinogen, irritant). Biological Safety Cabinets and Chemical Fume Hoods Chemical fume hoods should be used when there is risk of exposure to hazardous fumes or splashes while preparing or dispensing chemical solutions. Airflow is generally controlled by a movable sash and should be in the range of 80 to 120 feet per minute (33, 44). Objects in the hood should not obstruct the airflow or the workspace. Chemical fume hoods are certified annually. Biological hazards are best contained within a class IIA or class IIB BSC. BSCs are the most important containment equipment in the microbiology laboratory. Class III cabinets are used with infectious agents requiring BSL-3 or -4 containment. BSCs operate at a negative air pressure, with air passing through a HEPA filter. The vertical airflow serves as a barrier between the cabinet and user. BSCs are certified annually. More detailed information on the selection and use of BSCs can be found in Appendix 28.2 and references 12, 13, and 15.

Sterilization and Decontamination When discussing germicides, sterilants, disinfectants, and decontamination, it is important to understand the differences between the terms (15, 19, 21). A germicide is a substance that kills pathogenic organisms on inanimate surfaces. Disinfectants destroy all microorganisms, but not necessarily their spores, on inanimate surfaces. Sterilants are agents that kill all microbial life, including spores, on inanimate surfaces. Prions (abnormal host proteins) are not covered by these definitions. Decontamination is a procedure that eliminates or reduces microbial or toxic agents to a safe level with respect

CHAPTER 28. LABORATORY SAFETY

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Table 28.8 Immunizing agents and schedules for healthcare personnela Name

Primary schedule/booster(s)

Immunizing agents recommended for all healthcare personnel Hepatitis B recombinant vaccine Two doses 4 weeks apart; third dose 5 months after second; booster doses not necessary Influenza vaccine (TIV and LAIV) Annual vaccination with current seasonal vaccine Measles live-virus vaccine Two doses at least 28 days apart

Mumps live-virus vaccine

Two doses at least 28 days apart

Rubella live-virus vaccine

Two doses at least 28 days apart

Tetanus and diphtheria (toxoids) and acellular pertussis (Tdap) Varicella-zoster virus live-virus vaccine

One dose regardless of last Td; after Tdap, receive Td for routine booster every 10 years Two doses 4 to 8 weeks apart if aged greater than 12 years

Other immunologics that might be indicated in certain circumstances for healthcare personnel One dose; booster dose in 5 years if person Quadrivalent meningococcal conjugate remains at increased risk vaccine (ages 19–54 years); quadrivalent meningococcal polysaccharide vaccine (age ≥ 55 years) Typhoid vaccine IM: one dose, booster every 2 years; Oral: four doses on alternate days, revaccination with entire four-dose series every 5 years Inactivated poliovirus vaccine (IPV) If unvaccinated, two doses 4 to 8 weeks apart; third dose 6 to 12 months after second dose

Indications Personnel at risk for exposure to blood or body fluids All healthcare personnel Recommended for all personnel who lack presumptive evidence of immunity b; should be considered for those born before 1957 Recommended for all personnel who lack presumptive evidence of immunity c; should be considered for those born before 1957 Recommended for all personnel who lack presumptive evidence of immunity d All healthcare personnel All healthcare personnel who do not have evidence of immunity e

Microbiologists who might be routinely exposed to isolates of Neisseria meningitidis

Microbiologists who frequently work with Salmonella typhi Healthcare personnel with exposure to patients who might be excreting polioviruses

a

From reference 11. Written documentation of vaccination with two doses of live measles or MMR vaccine administered greater than 28 days apart or laboratory evidence of measles immunity or laboratory confirmation of measles disease or birth before 1957. c Written documentation of vaccination with two doses of live mumps or MMR vaccine administered greater than 28 days apart or laboratory evidence of measles immunity or laboratory confirmation of measles disease or birth before 1957. d Written documentation of vaccination with one dose of live rubella or MMR vaccine administered greater than 28 days apart or laboratory evidence of measles immunity or laboratory confirmation of measles disease or birth before 1957. e Evidence of immunity is defined as written documentation of vaccination with two doses of varicella vaccine or laboratory evidence of immunity or laboratory confirmation of disease or diagnosis/verification of varicella disease by a healthcare provider. b

to the transmission of infection or other adverse effects. Routine decontamination of the work environment is usually performed with disinfectants (Table 28.9). It is important that the manufacturer’s instructions for preparation and use be followed carefully. The selection of a disinfectant depends on the degree of microbial killing required, the effectiveness against an extended spectrum of pathogens, compatibility with the surface or device being decontaminated, toxicity, residue activity, and odor. Disinfectants can be hazardous compounds when not used properly (Table 28.9). No single product is adequate for all decontamination purposes. Appropriate PPE (i.e., gloves, impervious gowns, eye protection, masks) should be worn when cleaning and decontaminating equipment. Alcohol should not be used in a poorly ventilated area or near flames, and corrosive sodium hypochlorite solutions should not be used on metals.

Prions, the causative agents of Creutzfeldt-Jacob disease and transmissible spongiform encephalopathies, are resistant to standard disinfection and sterilization procedures (1, 15, 19, 22). The disinfection procedures for high-risk specimens (central nervous system tissue), medium-risk specimens (cerebrospinal fluid, lymph node, spleen, pituitary gland, and tonsil) and low-risk specimens (bone marrow, liver, lung, thymus, and kidney) or equipment contaminated with these specimens differ according to the level of risk (15, 22). Devices or material contaminated with high-risk tissue should be discarded or decontaminated by steam sterilization at 121°C for 1 h or soaked in 1N NaOH for 1 h or in 0.5% sodium hypochlorite (2% free chlorine) for 2 h before cleaning and sterilization by conventional means (15). Conventional heat, chemical, or gas sterilization or high-level disinfection can sterilize

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REQUIREMENTS FOR EFFECTIVE LABORATORY MANAGEMENT

Table 28.9 Activity levels and hazards of selected germicidesa Procedure/product

Aqueous concentration

Activity level

Hazards

Sterilization Glutaraldehyde Hydrogen peroxide Formaldehyde Chlorine dioxide Peracetic acid

Variable 6–30% 6–8% Variable Variable

NA NA NA NA NA

Dermatitis, toxic Irritant Irritant, toxic, sensitization Irritant, gas toxic Irritant

Variable 3–6% 1–8% Variable Variable 500–5,000 mg/liter free available chlorine Ethyl, isopropyl: 70% 0.5–3% 40–50 mg/liter free iodine; up to 10,000 mg/liter available iodine 0.1–0.2%

High to intermediate High to intermediate High to low High High Intermediate

Dermatitis, toxic Irritant Irritant, toxic, sensitization Irritant, gas toxic Irritant Gas toxic, irritant

Intermediate Intermediate to low Intermediate to low

Toxic (isopropyl) Leukoderma, depigmentation Skin irritation

Low

Dermatitis, sensitization

Disinfection Glutaraldehyde Hydrogen peroxide Formaldehyde Chlorine dioxide Peracetic acid Chlorine compounds Alcohols Phenolic compounds Iodophor compounds Quaternary ammonium compounds a

From references 8, 15, and 21. NA, not available.

devices contaminated by medium- or low-risk specimens. Formaldehyde (3.7 to 4.0%)–fixed brain tissue (0.5 mm thick) is soaked in 95 to 100% formic acid for 1 h followed by immersion in fresh 4% formaldehyde for 48 h before preparing histological slides for examination.

Spill Management Biological The management of biohazardous spills in the clinical laboratory must account for the specific infectious agent, the volume of infectious material spilled, and the presence of aerosols. Spills involving BSL-3 agents are serious because aerosols can transmit these agents. Occupants should hold their breath, evacuate the area immediately, close the doors, and not reenter the area for 30 to 60 min (15, 24). When breakage occurs in a centrifuge, the equipment must remain closed for at least 30 min before decontamination is undertaken. A tuberculocidal disinfectant should be used for decontamination (19). A low-level disinfectant such as a quaternary ammonium compound should not be used. Additional factors that influence decontamination of the spill site include the type of infectious material (blood, culture medium), the concentration and virulence of the infectious agent, the protein content of the material, and the spill surface (porous or fluid resistant). Initially, spills should be absorbed with paper towels, gauze pads, or commercial absorbents such as granular or silica gel absorbents.

Generally, the spill cleanup should be performed by the individual who accidentally spilled the infectious material or by people specifically trained in the cleanup of biohazardous materials. Appropriate protective equipment must be used in decontaminating spills involving BSL-2 or BSL-3 agents. The PPE includes disposable gloves (heavyweight and puncture resistant), fluid-impermeable shoe covers, coats or gowns with long sleeves, and facial protection. When the spill involves a BSL-3 agent, a respirator or HEPA-filtered mask should be used. In this situation it is usually best to call the spill emergency response team, which is trained to handle this type of spill. Any broken glass in the spill area should be removed and discarded without contact with the hands. This is accomplished with rigid cardboard, tongs, forceps, hemostats, or a plastic scoop (dustpan). Glass is discarded into a puncture-resistant container, and other contaminated material is discarded into a biohazardous waste container. After the absorbent material is discarded, the spill site can be cleaned with an aqueous detergent solution to dilute any remaining infectious material and to remove excess protein. You should use a tuberculocidal disinfectant that remains on the site for 20 min. Then absorb any remaining disinfectant with absorbent material, rinse the area with water, and dry. When spills occur in a BSC, do not turn off the cabinet fan. Minor spills can be absorbed with absorbent paper, and the area can be decontaminated with a disinfectant.

CHAPTER 28. LABORATORY SAFETY

When the infectious material has flowed into the grille, all items in the cabinet should be wiped with a disinfectant and removed. The drain valve should be closed, and disinfectant should be poured onto the surface and through the grille into the drain pan. You should allow 20 min of contact time with the disinfectant and then absorb the disinfectant with paper towels. Attach a hose to the drain valve and drain into a container with disinfectant. Remove the grille and rinse the drain pan with water. For major spills involving BSL-3 agents, a service consultant should be contacted for decontamination. All materials necessary for the cleanup of a biohazardous spill should be assembled and stored as a biohazard spill kit (Appendix 28.4). The kit should contain an appropriate disinfectant (e.g., 10% household bleach), absorbent material (e.g., paper towels, gauze pads, and granular material such as BioZorb for large spills), PPE (e.g., punctureresistant utility gloves, water-impermeable shoe coverings, gown, mask, face shield, or eyewear), and autoclavable dustpan, tongs or forceps, plastic scoop and pusher, and bags. For BSL-3 agents a full-face respirator or HEPAfiltered mask should be available. The biohazard spill kit can be stored in a puncture-resistant biohazardous waste container. Examples of spill cleanup procedures may be found in various guidelines (13, 15, 19, 24) and Appendix 28.5. Following the spill cleanup, a report should be completed and submitted to the safety committee.

Chemical The laboratory should have adequate spill response equipment readily available as a chemical spill kit (18). In the event of a chemical spill or leak, an initial determination on the need for an evacuation is made based on the immediate danger to life or health or when employees experience severe discomfort. Any or all of the following conditions usually warrant an evacuation: • • • • • •

Injured or ailing personnel Symptoms of irritation reported by employees Large-volume spill Flammable or explosive material spilled Carcinogen spilled Presence of strong odors

When an evacuation is required, close off the area, notify employees in the immediate vicinity of the spill, and report the situation to the emergency response team. Provide the location, nature of the spill, personnel injured or trapped, and hazard involved. Do not attempt to rescue patients or employees if your life or health may be endangered. For minor spills (not involving flammables, explosives, or carcinogens), contain the spill, close off the spill area,

527

and contact the emergency response team. An example of a chemical spill cleanup procedure for minor spills is shown in Appendix 28.6. A trained person should clean up the spill using appropriate PPE (gloves, gowns, and shoe covers resistant to the chemical, plus a face shield). Contain the spill with spill pads, pillows, or socks. Clean the spill using approved absorbents and neutralizing agents. Package the waste appropriately for pickup, labeling the container with the substance, date, and amount of material. As with biological spills, the response is dependent on the chemical hazard and volume of the spill. Prepare a spill report and submit it to the safety committee. The material safety data sheets (MSDSs) contain information on the hazard classification, appropriate PPE, symptoms arising from exposure, and instructions for the safe handling, disposal, and cleanup of laboratory chemicals. OSHA requires that MSDSs for all laboratory chemicals be readily available to all employees. Emergency aids such as eyewash stations and an emergency shower should be available in locations in which caustic and corrosive chemicals are used and in which the possibility of a large spill exists.

Fire Safety While proper procedures and training can minimize the chances of an accidental fire, laboratory workers should still be prepared to deal with a fire emergency should one occur. Laboratories should have a written emergency plan and ensure that workers are trained. A training program should be provided for new employees and updates provided to current employees as needed. The program should include recognition and evaluation of fire hazards, planning to reduce the risk of fire, and all actions to take when a fire occurs (18).

Waste Management The laboratory is a major generator of chemical and biohazardous waste in the healthcare facility. Procedures for the handling of chemical waste are well defined because the hazardous substance is usually identifiable. However, medical or infectious wastes are not well defined and include categories such as contaminated sharps, cultures and stocks of infectious agents, blood and body fluids, and pathological waste (17, 37). For effective and efficient management of infectious wastes, a comprehensive management plan is essential to ensure the safety of the employees handling the waste, compliance with the various regulatory requirements, meeting the standards of The Joint Commission and the guidelines of other professional groups such as CLSI, and implementation of cost-effective strategies for waste disposal.

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REQUIREMENTS FOR EFFECTIVE LABORATORY MANAGEMENT

Regulatory Oversight There are numerous federal, state, and local regulations governing the management of biohazardous waste: • Federal regulations • OSHA’s Bloodborne Pathogen Standard (45): Applies to the handling and packaging of regulated waste and the implementation of procedures to protect employees against potential exposure to infectious medical waste. • Department of Transportation (DOT) (55, 56): Sets requirements for transport of hazardous materials and regulated medical waste. • Guidelines and standards • CDC/NIH (13): Management of infectious waste. • CLSI (17): Management of waste generated by a clinical laboratory. • The Joint Commission (36): Requires a waste management plan for the institution that is in compliance with all federal, state, and local regulations. • State and local regulations: Many state and local jurisdictions have passed regulations governing the handling, treatment, and disposal of biohazardous waste.

Management Program The laboratory’s waste management plan should be part of the overall facility plan and must comply with the numerous federal, state, and local regulations. Most plans address the following elements. Identification of hazardous waste. Although no generally acceptable definition of medical waste is available, there are categories of waste that are considered potentially infectious, namely human blood, body substances, and blood products; contaminated sharps; cultures and stocks of microbial agents; contaminated laboratory waste; PPE grossly contaminated with blood, body fluids, or microbiological cultures; and pathological waste (13, 15, 17, 20, 45). Segregation. Knowledgeable personnel segregate waste into designated categories (i.e., chemical, routine trash, radiological, and infectious) at the point of generation to reduce the cost of disposal and to protect employees and others from exposure to hazardous material. Packaging and labeling. Appropriate containment of hazardous material is the key to minimizing personnel and public exposure. Chemical and radioactive waste is separated and handled differently from other regulated medical waste. Containers for liquids are leak-proof. All containers must have secure closures and maintain their integrity throughout the handling and transportation process. Containers

must comply with the OSHA requirements for the category and volume of waste and treatment, transportation, labeling, and disposal method. For example, sharps must be placed in impervious, rigid, leak-proof, color-coded, punctureresistant containers with secure lids. Other medical waste may be placed in containers that are leak-proof and labeled or color-coded as to hazard and have secure closures. Storage. All waste should be treated as soon as possible. The waste storage area should be posted as to the hazard, be sited near the treatment area or loading dock for offsite treatment, and maintain a temperature and duration of storage that prevents spoilage. Access should be limited to authorized personnel. Transport. Waste is transported in labeled and leak-proof containers or carts appropriate for the hazard. When shipped to an off-site treatment facility, the containers must meet the specifications established by the DOT. Transportation containers or carts should be routinely disinfected. Treatment and disposal. The treatment and disposal of waste must comply with all federal, state, and local regulations. Most institutions contract with companies licensed to treat and dispose of hazardous waste. A number of waste treatment techniques and disposal methods are available for organizations that produce a small amount of waste (17, 20), but they must meet all regulatory requirements. Contingency planning. The waste management plan should include a written plan for alternative treatment and disposal in the event of the failure of the normal waste management process. This plan must provide for increased storage or include an agreement with another generator to handle the waste in an emergency. Training. Employee training must comply with OSHA’s requirements and should include exposure risk information, safety policies, procedures for handling waste, required PPE, and the duties and responsibilities of the position. Training occurs annually for all employees, immediately for new employees, and before workers assume new duties or tasks.

Packaging and Shipping Infectious Substances A complex and confusing set of national and international guidelines and regulations governs the packing and shipment of clinical specimens and cultures of microorganisms (35, 55, 57, 60). The most widely recognized, copied, and accepted requirements come from the International Air Transport Association (IATA). Most national and international

CHAPTER 28. LABORATORY SAFETY

regulations are based on or are at least in substantial agreement (harmonization) with IATA requirements. In the United States, the Department of Transportation (DOT) regulates the commercial transport of dangerous goods by both air and ground carriers. The DOT revised its regulations for the transportation of infectious substances to be in substantial harmonization with IATA requirements. These regulations dictate the packaging and labeling of infectious material that is shipped via commercial carriers with the stated goal of protecting employees in the transportation industry and the general public. This protection is based on packages that are unlikely to leak or be damaged during shipment, labels affixed to the package that identify the particular hazard, and trained personnel who are responsible for the shipment of infectious material. These regulations and guidelines are constantly evolving as the various groups and organizations attempt to agree on one set of standards.

Infectious Substances Classification Classes of dangerous goods that are regulated include explosives, gases, flammables (liquids and solids), oxidizing substances, toxic and infectious substances, radioactive material, corrosives, and miscellaneous (includes dry ice). The two classes encountered in the clinical laboratory are class 6 (toxic [6.1] and infectious substances [6.2]) and class 9 miscellaneous dangerous goods (including dry ice). Infectious substances are materials known or suspected to contain a pathogen with the potential to cause disease upon exposure. A pathogen is a virus or microorganism (including its plasmids or other genetic elements) or proteinaceous particle (prion) that has the potential to cause disease in humans or animals. In most clinical laboratories, division 6.2 infectious substances must be classified into one of the following four types: • • • •

Category A infectious substance Category B infectious substance A patient specimen Exempt human specimen

A category A substance (pathogen or agent) is “an infectious substance which is transported in a form that, when exposure occurs, is capable of causing permanent disability

or life-threatening or fatal disease to otherwise healthy humans or animals.” Category A pathogens were previously classified as WHO risk group 4 substances and ostensibly encompass cultured select agent organisms. If there is doubt as to whether or not a substance meets the criteria of category A, it must be included in category A. Category A pathogens must be assigned the UN number UN2814 (infectious substance, affecting humans) or UN2900 (infectious substance, affecting animals). A category B substance is defined by IATA as “an infectious substance which does not meet the criteria for inclusion in Category A.” Category substances are not in a form generally capable of causing disability, life-threatening illness, or fatal disease. Examples include typical clinical, diagnostic, or patient specimens and typical clinical laboratory cultures of routinely encountered non–category A microorganisms. Category B substances must be assigned UN number UN3373 (biological substance, category B). Exempt specimens are those for which there is “minimal likelihood there are pathogens present.” A patient specimen is material collected directly from humans for diagnostic, treatment, prevention, investigational, or research purposes. Patient specimens that have category A or B criteria should be classified, packed and shipped as category A or B. Patient specimens that have neither category A nor B criteria should be packed and shipped as exempt human specimens (Table 28.10). For category A shipments, an itemized list of contents must be placed between the secondary and outer packaging. The shipper is legally responsible for correctly classifying the material being shipped and for packing substances correctly to ensure the safety of all personnel who handle the package before, during, and even after shipment to the point of acceptance of the package by the consignee. When there is uncertainty about the infectious nature of the material, it is prudent to declare and ship the material as an infectious substance. The following questions may be helpful for classifying diagnostic specimens and biological products (52) and in determining substances that are regulated. • Is the substance known or suspected to contain a pathogen? • Is the sample being shipped for diagnostic or investigational purposes?

Table 28.10 Shipping classification examples Substance

Classification

UN number/label

Blood sample suspected to contain Ebola virus Culture of foot and mouth disease virus

Category A; infectious substance, affecting humans Category A; infectious substance, affecting animals Category B, biological substance

UN2814

UN3373

Exempt

Exempt human specimen

Blood sample suspected to contain hepatitis B virus Blood sample for cholesterol testing

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UN2900

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REQUIREMENTS FOR EFFECTIVE LABORATORY MANAGEMENT

• Is there a low probability for the occurrence of risk group 4 pathogens in the sample? • Is the sample known not to contain a pathogen? • Is the substance a licensed biological product? • Is the substance being shipped for any other reason?

Packaging, Labeling, and Shipping Regulated Material All packages containing infectious substances must meet the shipping regulations of various organizations or agencies (35, 59, 60). However, the International Air Transport Association (IATA) requirements are usually acceptable under all regulations. They require triple packaging consisting of a primary receptacle that is leak-proof, secondary packaging that is also leak-proof, and an outer package that is durable (Appendix 28.7). These containers are commercially available. For liquid infectious substances, an absorbent material should be placed between the primary receptacle and secondary packaging and be sufficient to absorb the entire contents. There are specific instructions for labeling packages containing infectious substances, diagnostic specimens, and biological products (29). Under IATA requirements, labeling and marking of the outer package must include the following as appropriate for the substance (Appendix 28.8): • An address label with the shipper’s and receiver’s names and addresses • A hazard label for category A shipments; “Infectious Substance” label UN2814 or UN2900 • A hazard label for dry ice; class 9 “Miscellaneous Dangerous Goods” label • Marking required for category B shipments; UN3373 • Label for “Exempt Human Specimens” if neither category A nor B A shipper’s declaration is required for dry ice (a dangerous good) if dry ice is used as a refrigerant for a category A substance, but not for a category B substance or exempt human specimens. A shipper’s declaration form may be available electronically from the carrier. The shipper should prepare at least three copies: one for their records and two for the carrier. The carrier must deliver a copy to the consignee. The shipping documents must be affixed to the outer package and include the shipper’s declaration (Appendix 28.9) and an airway bill if shipping by air. Orientation labels (arrows) must be placed on all packages containing greater than 50 ml of material. The Federal Aviation Agency and/or Department of Transportation may inspect any shipper or receiver of dangerous goods unannounced at any time. The inspector may review training records, oversee the actual packaging and labeling of a shipment, and/or call the 24-h emergency

number listed on the paperwork. The shipper or receiver may be quizzed on the hazards and characteristics of the dangerous goods, the proper decontamination and disposal of the hazardous material (information found on the MSDS), and accident mitigation. It is critical that the training program for the shipment of dangerous goods emphasizes this safety information. Anyone involved in the shipping or transportation of dangerous goods must be trained and certified. Recertification is required every two years.

Personnel Training Safety training and the education of workers about potential hazards and safe work practices are essential to creating a safe work environment (15, 33). All personnel employed in the clinical laboratory must receive adequate safety training applicable to their positions in order to perform their assigned tasks in a safe manner. Safety policies should be applied to work practices. This training is mandated by various governmental regulations and accreditation organizations and is required for new employees and students, individuals assigned new tasks, before the introduction of new hazards or procedures to the work environment, and on an annual basis for all personnel.

Training Program The size and complexity of a safety training program will vary with the needs of the institution but must cover all applicable safety topics and policies. Some topics include: • Chemical information regarding job-specific hazards (e.g., exposure to formaldehyde or carcinogens) • Management of hazardous material and waste • Blood-borne pathogen information (epidemiology, symptoms, transmission) • Standard precautions • Selection, use, and limitations of PPE, safety equipment, and other control procedures • Postexposure management, accident reporting, and investigation of incidents • Emergency preparedness, including bioterrorism issues • Availability of all safety regulations • Medical surveillance program • The employee’s responsibility to follow all safety policies and inform supervisors of potential safety hazards The laboratory safety training program should be developed with input from the infection control practitioner, industrial hygienist, and other knowledgeable individuals; highlight the potential risk from infectious agents and hazardous chemicals; and emphasize the reduced risk when work is performed according to the safety guidelines. The

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contents of the training program should be updated frequently as new safety information becomes available or regulations change.

Methods The training format can be lectures, hands-on demonstrations, safety workshops, videos, computer programs, or distance learning. However, no matter which method is used, the trainer must be available to immediately respond to the trainee’s questions during the session. The trainer must be competent in the area of laboratory safety and knowledgeable about current safety regulations, work practices, safety equipment, and hazards found in the clinical laboratory. Documentation The date of training, a summary of the presentation (or contents of the session), and attendance should be documented and placed in the employee’s record. Training records should be maintained for 3 years.

Monitoring and Evaluation The effectiveness of the training program can be evaluated with a test but realistically must be assessed by observing the daily practices of the employees for compliance with safety policies. When safety practices are not followed, the individual should be counseled and reeducated on the appropriate practice. Repeated disregard for safety guidelines should trigger strict disciplinary action. It is the employer’s responsibility to enforce adherence to safe work practices. The overall effectiveness of the laboratory safety program is assessed through safety audits (Table 28.11), inspections by outside agencies and organizations, review of incident and accident reports (Appendix 28.10), and observations and suggestions from employees. Audits and inspections should highlight concerns and provide recommendations to improve the safety program. Management provides the resources to address and correct any deficiencies, beginning with the most frequent and severe problem. However, in the end, a safe workplace develops from the efforts of all individuals in the organization.

Table 28.11 Sample laboratory safety audit Date: Location: Instructions: • Answer yes, no, or N/A (not applicable) • Explain N/A responses on separate sheet • If insufficient space, include information on separate page General

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Describe deficiency

_______ Has a Safety Officer been appointed? _______ Employee safety training at hire and then annually? _______ Current posted listing of emergency contacts? _______ Are BSCs certified annually? _______ Blood-borne pathogen and chemical spill kits available? _______ Are chemical fume hoods certified annually? Housekeeping/signage _______ Are aisles/hallways unobstructed? _______ Are work surfaces routinely disinfected? _______ Are doors and storage areas labeled appropriately? _______ Are proper warning labels on containers? _______ Are handwashing sinks available? _______ Are heavy objects stored on lower shelving? _______ Are biohazard receptacles separate from regular trash? _______ Is trash removed at least once daily or when full? _______ Is storage in hoods limited to not obstruct ventilation? _______ Are tops of centrifuges locked down when in use? _______ Are refrigerators clean and defrosted? (continued)

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Table 28.11 Sample laboratory safety audit (continued) Personal Protective Equipment _______ Has PPE assessment been completed and documented? _______ Are proper lab coats worn while in work area? _______ Are lab coats and gloves removed before leaving the lab? _______ Are appropriate gloves worn while testing? _______ Are gloves available in appropriate sizes? _______ Are glove liners available for those with latex allergy? Documentation _______ Are current CLSI documents M29 and GP17 available? _______ Are safety training records kept for three years? Blood-borne pathogens _______ Is blood-borne pathogen written program available? _______ Do employees understand standard precautions? _______ Are hands washed before leaving the work area? _______ Are sharps containers disposed of when ¾ full? _______ Is mouth pipetting prohibited? _______ Do employees refrain from eating, drinking in lab? _______ Are those shipping infectious substances certified? Chemical Hygiene _______ Is chemical hygiene plan available and current? _______ Do employees know where MSDSs are located? _______ Has the chemical inventory been performed and updated? _______ Is there a list of carcinogens, mutagens, teratogens? _______ Has chemical risk assessment been updated? _______ Are chemicals stored appropriately? _______ Have employees been trained in spill clean-up? Fire _______ Is there a fire alarm pull station nearby? _______ Can fire alarm be heard in the lab? _______ Are emergency exits accessible? _______ Are fire extinguishers accessible? _______ Have fire extinguishers been serviced? _______ Have quarterly fire drills been completed/documented? Waste Management _______ Is there a waste management plan? _______ Is there a recycling program? _______ Is waste disposed of according to regulations? _______ Has the use of mercury been eliminated in the lab?

Describe deficiency

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Summary The laboratory contains many biological, chemical, radiological, and physical hazards, including new infectious agents and the possibility of the use of biological and chemical agents for acts of terrorism. However, many tools and practices are available to reduce the occupational risk from exposure to these hazards, including safety devices, standard precautions, PPE, BSCs and chemical fume hoods, warning signs and labels, safe work practices, and proper disposal of biological and chemical waste. A wellwritten safety management plan is a blueprint for implementation of safe practices and includes the necessary training to produce a safe work environment. KEY POINTS ■ Laboratory workers are exposed to biological, chemical, physical, and radiological hazards. ■ A well-written and enforced safety management plan can minimize occupational risk. ■ All laboratory personnel should adhere to the concept of standard precautions and use available barrier precautions. GLOSSARY Aerosol A system of respirable particles dispersed in a gas, smoke, or fog that can be retained in the lungs. Airborne transmission The spread of infection by inhalation of droplet nuclei containing an infectious agent. Blood-borne pathogens Pathogenic microorganisms that are present in human blood and can cause disease in humans. Carcinogen Substance capable of causing a malignant tumor in humans or animals. Category A substance An infectious substance or microorganism that is transported in a form that, when exposure to it occurs, is capable of causing permanent disability or life-threatening or fatal disease in an otherwise healthy human or animal. Category B substance An infectious substance that does not meet category A criteria. Category B substances generally are considered to be one of the following: (i) patient or clinical specimen reasonably expected to contain, or being cultured or otherwise tested for, a pathogen and (ii) microorganisms not specifically listed in category A. Ceiling limit The airborne concentration of a substance that cannot be exceeded at any time during the workday. Contaminated Describes the presence or reasonably anticipated presence of blood or other potentially infectious materials on an item or surface. Corrosive Any substance that causes visible destruction of human tissue at the site of contact. The U.S. Environmental

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Protection Agency defines corrosivity as a substance that is highly acidic (pH < 2.1) or highly alkaline (pH > 12.4). Decontamination A procedure that eliminates or reduces microbial or toxic agents to a safe level with respect to the transmission of infection or other adverse effects. Disinfectant An agent intended to destroy or irreversibly inactivate all microorganisms, but not necessarily their spores, on inanimate surfaces, e.g., work surfaces or medical devices. Disinfection A procedure that kills pathogenic microorganisms but not necessarily their spores. Engineering controls Controls (e.g., sharps disposal containers, self-sheathing needles, safer medical devices) that isolate or remove the hazard from the workplace. Germicide A general term for an agent that kills pathogenic microorganisms on inanimate surfaces. Infectious waste Waste containing or assumed to contain pathogens of sufficient virulence and quantity that exposure to the waste by a susceptible host may result in a communicable disease. International Air Transport Association (IATA) A trade organization of the commercial airline industry that governs international aviation and publishes Dangerous Goods Regulations for use by anyone who packs, ships, or handles dangerous goods. Latex allergy Allergic reaction associated with latex glove use. The two types of allergic reactions are contact dermatitis (type IV delayed hypersensitivity), due to chemicals used in processing latex, and the more serious immunoglobulin E/histaminemediated allergy (immediate or type I hypersensitivity), due to latex proteins. Material safety data sheet (MSDS) Provides detailed information about hazards and protective measures relative to hazardous chemical substances. Occupational exposure Reasonably anticipated skin, eye, mucous membrane, or parenteral contact with a hazard that may result from the performance of an employee’s duties. Other potentially infectious material (OPIM) Human body fluids including semen, vaginal secretions, urine, cerebrospinal fluid, synovial fluid, pleural fluid, pericardial fluid, peritoneal fluid, amniotic fluid, saliva, body fluids that may be contaminated with blood, unfixed tissue, HIV- or hepatitis virus–containing cell or organ cultures, blood or tissue from an infected animal, reagents, infectious waste, and cultures. Parenteral Piercing mucous membranes or the skin through events such as needlesticks, human bites, and abrasions. Permissible exposure limit (PEL) Maximum allowed exposure during a time-weighted average period (e.g., 8-h workday or 40-h workweek). Personal protective equipment (PPE) Specialized clothing or equipment worn by an employee for protection against a hazard. Primary container A vessel, including its closure, that contains a specimen.

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Prions Infectious, abnormal host proteins that cause transmissible spongiform encephalopathies and are resistant to a number of standard disinfection and sterilization procedures.

7. Centers for Disease Control and Prevention. 2002. Laboratoryacquired meningococcal disease: United States, 2000. Morb. Mortal. Wkly. Rep. 51:141–142.

Regulated waste Liquid or semiliquid blood or OPIMs, contaminated items that would release blood or OPIMs in a liquid or semiliquid state if compressed, items that are caked with dried blood or OPIMs and are capable of releasing these materials during handling, contaminated sharps, and pathological and microbiological wastes containing blood or OPIMs.

8. Centers for Disease Control and Prevention. 2002. Guideline for hand hygiene in health-care settings. Morb. Mortal. Wkly. Rep. 51(RR-16):1–47. 9. Centers for Disease Control and Prevention. 2005. Guidelines for preventing the transmission of Mycobacterium tuberculosis in health-care settings. Morb. Mortal. Wkly. Rep. 54(RR-17):1–141.

Secondary container A vessel into which the primary container is placed for transport within an institution. It contains a specimen if the primary container breaks or leaks in transit.

10. Centers for Disease Control and Prevention. 2006. Influenza vaccination of health-care personnel. Morb. Mortal. Wkly. Rep. 55(RR-2):1–16.

Sharps container A container approved for the containment and transport of contaminated sharps. Short-term exposure limit Maximum exposure to a hazardous substance allowed at one time (normally measured in a single 15-min period). Standard precautions Set of precautions applied to all patients; designed to reduce risk of transmission of microorganisms in the healthcare setting. Sterilant An agent intended to destroy all microorganisms (viruses, vegetative bacteria, fungi, and a large number of highly resistant bacterial endospores) on inanimate surfaces. Sterilization A procedure that effectively kills all microbial life, including bacterial spores, on inanimate surfaces. Universal precautions Set of precautions designed to reduce the risk of transmission of HIV, HBV, and other blood-borne pathogens in the healthcare setting.

REFERENCES 1. Aguzzi, A., and M. Glatzel. 2011. Transmissible spongiform encephalopathies, p. 1677–1683. In J. Versalovic, K. C. Carroll, G. Funke, J. H. Jorgensen, M. L. Landry, and D. W. Warnock (ed.), Manual of Clinical Microbiology, 10th ed. ASM Press, Washington, DC. 2. Beltrami, E. M., I. T. Williams, C. N. Shapiro, and M. E. Chamberland. 2000. Risk and management of blood-borne infections in health care workers. Clin. Microbiol. Rev. 13:385–407. 3. Burnett, L. C., G. Lunn, and R. Coico. 2009. Biosafety: guidelines for working with pathogenic and infectious microorganisms. Curr. Protoc. Microbiol. Ch. 1, unit 1A.1. 4. Centers for Disease Control. 1987. Registry of Toxic Effects of Chemical Substances. U.S. Government Printing Office, Washington, DC. 5. Centers for Disease Control and Prevention. 2001. Updated U.S. Public Health Service guidelines for the management of occupational exposures to HBV, HCV, and HIV and recommendations for postexposure prophylaxis. Morb. Mortal. Wkly. Rep. 50(RR-11):1–42. 6. Centers for Disease Control and Prevention. 2002. Laboratory security and emergency response guidance for laboratories working with Select Agents. Morb. Mortal. Wkly. Rep. 51:1–6.

11. Centers for Disease Control and Prevention. 2011. Immunization of health-care personnel: recommendations of the Advisory Committee on Immunization Practices (ACIP). Morb. Mortal. Wkly. Rep. 60(RR-7):1–45. 12. Centers for Disease Control and Prevention and National Institutes of Health (CDC/NIH). 2007. Primary Containment of Biohazards: Selection, Installation and Use of Biological Safety Cabinets, 3rd ed., U.S. Printing Office, Washington, DC. 13. Centers for Disease Control and Prevention and National Institutes of Health (CDC/NIH). 2009. Biosafety in Microbiological and Biomedical Laboratories, 5th ed. HHS Publication No. (CDC) 21-1112, U.S. Printing Office, Washington, DC. 14. Clinical and Laboratory Standards Institute. 2002. Implementing a needlestick and sharps injury prevention program in the clinical laboratory; a report. CLSI document X3-R. Clinical and Laboratory Standards Institute, Wayne, PA. 15. Clinical and Laboratory Standards Institute. 2005. Protection of laboratory workers from occupationally acquired infections; approved guideline, 3rd ed. CLSI document M29-A3. Clinical and Laboratory Standards Institute, Wayne, PA. 16. Clinical and Laboratory Standards Institute. 2007. Laboratory design. CLSI document GP18-A2. Clinical and Laboratory Standards Institute, Wayne, PA. 17. Clinical and Laboratory Standards Institute. 2011. Clinical laboratory waste management; approved guideline, 3rd ed. CLSI document GP05-A3. Clinical and Laboratory Standards Institute, Wayne, PA. 18. Clinical and Laboratory Standards Institute. 2012. Clinical laboratory safety; approved guideline, 3rd ed. CLSI document GP17-A3. Clinical and Laboratory Standards Institute, Wayne, PA. 19. Denys, G. A. 2010. Biological safety and biohazard prevention. In L. S. Garcia (ed.), Clinical Microbiology Procedures Handbook, 3rd ed. ASM Press, Washington, DC. 20. Denys, G. A., and J. G. Gordon. 2010. Management of infectious waste. In L. S. Garcia (ed.), Clinical Microbiology Procedures Handbook, 3rd ed. ASM Press, Washington, DC. 21. Favero, M. S., and M. J. Arduino. 2000. Decontamination and disinfection, p. 383–402. In D. O. Fleming and D. L. Hunt (ed.), Biological Safety: Principles and Practices, 3rd ed. ASM Press, Washington, DC. 22. Favero, M. S., and W. W. Bond. 2001. Chemical disinfection of medical and surgical materials, p. 881–917. In S. S. Block (ed.),

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Disinfection, Sterilization, and Preservation, 5th ed. Lippincott Williams and Wilkins, Philadelphia, PA. 23. Fleming, D. O. 2006. Risk assessment of biological hazards, p. 57–64. In D. O. Fleming and D. L. Hunt (ed.), Biological Safety: Principles and Practices, 4th ed. ASM Press, Washington, DC. 24. Fleming, D. O. 2006. Prudent biosafety practices, p. 369–381. In D. O. Fleming and D. L. Hunt (ed.), Biological Safety: Principles and Practices, 4th ed. ASM Press, Washington, DC. 25. Gershon, R., and T. Stimpfel. 1992. Physical and ergonomic safety, p. 14.4.1–14.4.3. In H. D. Isenberg (ed.), Clinical Microbiology Procedures Handbook, vol. 2. American Society for Microbiology, Washington, DC. 26. Gilchrist, M. J. R., J. Hindler, and D. O. Fleming. 1992. Laboratory safety management, p. xxix–xxxvii. In H. D. Isenberg (ed.), Clinical Microbiology Procedures Handbook, vol. 2. American Society for Microbiology, Washington, DC. 27. Gilchrist, M. J. R., W. P. McKinney, J. M. Miller, and A. L. Weissfeld. 2001. Cumitech 33: Laboratory Safety, Management, and Diagnosis of Biological Agents Associated with Bioterrorism. Coordinating ed., J. W. Snyder. ASM Press, Washington, DC. 28. Gilpin, R. W. 2000. Elements of a biosafety program, p. 443–462. In D. O. Fleming and D. L. Hunt (ed.), Biological Safety: Principles and Practices, 3rd ed. ASM Press, Washington, DC. 29. Gray, L. D., and J. W. Snyder. 2006. Packaging and shipping biological materials, p. 411–425. In D. O. Fleming and D. L. Hunt (ed.), Biological Safety: Principles and Practices, 4th ed. ASM Press, Washington, DC.

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37. Keene, J. H. 2000. Regulated medical waste handling and disposal, p. 403–409. In D. O. Fleming and D. L. Hunt (ed.), Biological Safety: Principles and Practices, 3rd ed. ASM Press, Washington, DC. 38. Knudsen, R. C. 1998. Risk assessment for biological agents in the laboratory. In J. Y. Richmond (ed.), Rational Basis for Biocontainment: Proceedings of the Fifth National Symposium on Biosafety. American Biological Safety Association, Mundelein, IL. 39. Mahoney, W., and I. F. Salkin. 1992. Radiological safety, p. 14.3.1–14.3.3. In H. D. Isenberg (ed.), Clinical Microbiology Procedures Handbook, vol. 2. American Society for Microbiology, Washington, DC. 40. McGowan, J. E., Jr. 1999. Nosocomial infections in diagnostic laboratories, p. 1127–1135. In C. G. Mayhall (ed.), Hospital Epidemiology and Infection Control, 2nd ed. Lippincott Williams and Wilkins, Philadelphia, PA. 41. National Institutes of Health. 1985. Pocket Guide to Chemical Hazards. U.S. Government Printing Office, Washington, DC. 42. Noble, M. A. 2011. Prevention and control of laboratoryacquired infections, p. 132–142. In J. Versalovic, K. C. Carroll, G. Funke, J. H. Jorgensen, M. L. Landry, and D. W. Warnock (ed.), Manual of Clinical Microbiology, 10th ed. ASM Press, Washington, DC. 43. Occupational Safety and Health Administration. 1990. Hazard Communication Standard. 29 CFR 1910.1200.U.S. Government Printing Office, Washington, DC. 44. Occupational Safety and Health Administration. 1990. Occupational Exposure to Hazardous Chemicals in the Laboratory. 29 CFR 1910.1450.U.S. Government Printing Office, Washington, DC.

30. Harding, A. L., and K. B. Byers. 2006. Epidemiology of laboratory-associated infections, p. 35–54. In D. O. Fleming and D. L. Hunt (ed.), Biological Safety: Principles and Practices, 4th ed. ASM Press, Washington, DC.

45. Occupational Safety and Health Administration. 1991. Occupational exposure to bloodborne pathogens: final rule. Fed. Regist. 56:64003–64182.

31. Henderson, D. K. 2003. Managing occupational risks for hepatitis C transmission in the health care setting. Clin. Microbiol. Rev. 16(3):546–568.

46. Occupational Safety and Health Administration. 2001. Pathogens (29CFR 1910.1030) directives numbers: CPL 2-2.69; effective: November 27, 2001.

32. Henderson, D. K., L. Dembry, N. O. Fishman, C. Grady, T. Lundstrom, T. N. Palmore, K. A. Sepkowitz, and D. J. Weber. 2010. SHEA guideline for management of healthcare workers who are infected with hepatitis B virus, hepatitis C virus, and/or human immunodeficiency virus. Infect. Control Hosp. Epidemiol. 31(3):203–232.

47. Occupational Safety and Health Administration. 2001. Occupational exposure to bloodborne pathogens; needlestick and sharps injuries; final rule. Fed. Regist. 66:5317–5325.

33. Hoeltge, G. A. 2002. Laboratory safety, p. 78–96. In K. D. McClatchey (ed.), Clinical Laboratory Medicine, 2nd ed. Lippincott Williams and Wilkins, Philadelphia, PA. 34. Hunt, D. L. 2006. Standard (universal) precautions for human specimens, p. 355–367. In D. O. Fleming and D. L. Hunt (ed.), Biological Safety: Principles and Practices, 4th ed. ASM Press, Washington, DC. 35. International Air Transport Association (IATA). 2012. Dangerous Goods Regulations, 53rd ed. International Air Transport Association, Montreal, Quebec, Canada. 36. The Joint Commission. 2012. Comprehensive accreditation manual for laboratory and point-of-care testing, Joint Commission Resources, Oakbrook Terrace, IL.

48. Phillips, G. B. 1986. Human factors in microbiological laboratory accidents, p. 43–48. In B. M. Miller, D. H. M. Groeschel, J. H. Richardson, D. Vesley, J. R. Songer, R. D. Housewright, and W. E. Barkley (ed.), Laboratory Safety: Principles and Practice. American Society for Microbiology, Washington, DC. 49. Sewell, D. L. 1995. Laboratory-associated infections and biosafety. Clin. Microbiol. Rev. 8:389–405. 50. Sewell, D. L. 2006. Laboratory-acquired infections: are microbiologists at risk? Clin. Microbiol. Newsl. 28:1–6. 51. Siegel, J. D., E. Rhinehart, M. Jackson, L. Chiarello, and the Healthcare Infection Control Practices Advisory Committee. 2007. Guideline for isolation precautions: preventing transmission of infectious agents in healthcare settings, 2007. Am. J. Infect. Control 35(10 Suppl. 2):S65–S164. 52. Snyder, J. W. 2002. Packaging and shipping of infectious substances. Clin. Microbiol. Newsl. 24:89–93.

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53. Songer, J. R. 1995. Laboratory safety management and the assessment of risk, p. 257–277. In D. O. Fleming, J. H. Richardson, J. J. Tulis, and D. Vesley (ed.), Laboratory Safety: Principles and Practices, 2nd ed. ASM Press, Washington, DC. 54. Tweedy, J. T. 1997. Healthcare Hazard Control and Safety Management. Lewis Publishers, Boca Raton, FL. 55. U.S. Department of Transportation. 1991. Performance-orientated packaging standards: revisions and response petitions for reconsideration. Fed. Regist. 56:66124–66287. 56. U.S. Department of Transportation. 1996. 49 CFR Parts 171– 180. Hazardous Materials Regulations: Public Health Service 42 CFR Part 72. Interstate Transportation of Etiologic Agents. U.S. Government Printing Office, Washington, DC.

57. U.S. Department of Transportation. 1996. 49 CFR 173.134(a) (4). Regulated medical waste. U.S. Government Printing Office, Washington, DC. 58. U.S. Department of Health and Human Services. 2002. Notification of possession of Select Agents or high consequence livestock pathogens and toxins. Fed. Regist. 67:51058–51064. 59. U.S. Department of Transportation, Pipeline and Hazardous Materials Safety Administration. 2006. Hazardous materials: infectious substances; harmonization with the United Nations recommendations; final rule. Fed. Regist. 71:32244–32263. 60. World Health Organization. 2004. Laboratory Biosafety Manual, 3rd ed. World Health Organization, Geneva, Switzerland.

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APPENDIX 28.1 Sample Form for Declination of Hepatitis B Vaccinationa HEPATITIS B VACCINE DECLINATION I understand that due to my occupational exposure to blood, or other potentially infectious materials, I may be at risk of acquiring hepatitis B virus (HBV) infection. I have been given the opportunity to be vaccinated with HBV vaccine, at no charge to myself. However, I decline HBV vaccination at this time. I understand that by declining this vaccine, I continue to be at risk of acquiring hepatitis B, a serious disease. If, in the future, I continue to have occupational exposure to blood or other potentially infectious materials and I want to be vaccinated with HBV vaccine, I can receive the vaccination series at no charge to me.

Print full name

Date of birth

Signature of employee

Date

a

See reference 45.

APPENDIX 28.2 Information Resources on the Interneta U.S. GOVERNMENT AGENCIES Centers for Disease Control and Prevention (CDC) http://www.cdc.gov Resources related to public health issues in the United States. U.S. Department of Health and Human Services (HHS) http://www.hhs.gov Information on policies and regulations, disasters and emergencies, safety, diseases and conditions, aging, resource locators, drugs and food, and other topics. U.S. Department of Transportation (DOT) http://www.dot.gov Resources related to the transportation of infectious and diagnostic specimens. U.S. Environmental Protection Agency (EPA) http://www.epa.gov Information on general-purpose disinfectants. U.S. Food and Drug Administration (FDA) http://www.fda.gov Information on chemical germicides formulated as antiseptics, preservatives, sterilants, high-level disinfectants, and agents used on the body.

Office of Health and Safety http://www.cdc.gov/biosafety Training materials and information on safety, biosafety, and safety survival skills. U.S Government Printing Office http://www.gpo.gov/fdsys A source for federal regulations.

BIOSAFETY RESOURCES CDC/NIH: Biosafety in Microbiological and Biomedical Laboratories, 5th ed. http://www.cdc.gov/biosafety/publications/bmbl5 CDC/NIH: Primary Containment for Biohazards: Selection, Installation and Use of Biological Safety Cabinets http://www.cdc.gov/biosafety/publications/bmbl5/BMBL5_ appendixA.pdf Medical Surveillance and Biosafety Program References http://www.cdc.gov/biosafety References on occupational health and laboratory safety with materials on medical screening and surveillance.

National Institute for Occupational Safety and Health (NIOSH) http://www.cdc.gov/niosh Training materials and information on chemical agents and emergency preparedness.

International Healthcare Worker Safety Center at University of Virginia http://www.healthsystem.virginia.edu/pub/epinet Information on the prevention of occupational transmission of blood-borne pathogens and resources for complying with the federal Needlestick Safety and Prevention Act.

Occupational Safety and Health Administration (OSHA) http://www.osha.gov Training materials, standards, and regulations related to safety in the workplace.

(continued)

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APPENDIX 28.2 Information Resources on the Interneta (continued) BIOTERRORISM American Society for Microbiology (ASM) http://www.asm.org Information related to bioterrorism and protocols for the isolation and identification of select agents. Bioterrorism Preparedness and Response http://www.bt.cdc.gov Information on bioterrorism preparedness, training materials, and protocols for handling, identifying, and shipping select agents. Health Alert Network http://www.bt.cdc.gov/HAN Communications to local and state health departments, distance learning offerings from the CDC, and health alerts. Infectious Diseases Society of America (IDSA) http://www.idsociety.org Clinical information related to bioterrorism and select agents. a

SHIPPING AND PACKAGING OF INFECTIOUS SUBSTANCES International Air Transport Association (IATA) http://www.iata.org Information on shipping dangerous goods.

GUIDELINES, STANDARDS, AND ACCREDITATION Clinical Laboratory Standards Institute (CLSI) http://www.clsi.org Information on laboratory standards and guidelines. College of American Pathologists (CAP) http://www.cap.org Standards for laboratory accreditation. The Joint Commission http://www.jointcommission.org Information on standards for accreditation.

Last accessed September 23, 2012.

APPENDIX 28.3 Common Safety Compliance Failures STANDARD PRECAUTIONS, PPE, AND CONTAINMENT EQUIPMENT Laboratory coats worn open Staff not wearing gloves at the workbenches Handling contaminated objects with gloves (e.g., telephones) Wearing laboratory coats outside the work area Not using splash guards or appropriate eyewear when required Improper storage of chemicals in fume hoods and BSCs Improper storage of flammables, corrosives, and acids Overfilled sharps containers Sharps containers not properly secured Gas tanks not properly secured Eye wash stations not checked on a periodic basis Disposal of biohazardous waste in routine trash receptacles Food stored in refrigerators containing laboratory supplies

LABELING AND SIGNAGE Improper labeling of chemical waste containers Primary and secondary containers not labeled as to hazard Lack of signage for biohazardous areas

FIRE Storage of combustibles within 18 inches of sprinkler heads Hallways used for storage Fire doors blocked open

CHEMICAL HYGIENE PLAN Chemical inventories not current Employees’ exposure to OSHA-regulated substances (e.g., formaldehyde) not monitored

TRAINING/MONITORING Staff lacks knowledge of MSDS location Staff lacks knowledge of fire alarm and extinguisher location Accident/incident reports are not submitted or reviewed

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APPENDIX 28.4 Biohazard Spill Kit Sample Disinfectant (e.g., 10% household bleach or a tuberculocidal agent) Absorbent material Small spills: paper towels, gauze pads, etc. Large spills: granular material (e.g., BioZorb) PPE Puncture-resistant utility gloves Water-impermeable shoe coverings Gown

Eyewear (face shield or goggles) Mask Full-face respirator or HEPA-filtered mask for BSL-3 agents Collection material (autoclavable) Dustpan Tongs or forceps Plastic scoop and “pusher” Biohazard bag Puncture-resistant biohazardous waste container

APPENDIX 28.5 Biological Spill Cleanup Procedure (possible aerosol) Alert personnel in area and evacuate. Close doors and do not reenter area for 30 to 60 min. Don PPE appropriate for type of spill. Wear gown, gloves, and facial protection (full-face respirator or HEPA-filtered mask for BSL-3 agents). Remove and discard broken glass or other objects. Absorb the spill with absorbent material. Discard contaminated material in the biohazardous waste container. Clean the spill site with aqueous detergent.

Decontaminate the area with an appropriate disinfectant: • Pour disinfectant on the spill site or wipe down the site with disinfectant-soaked paper towels or gauze pads. • Absorb the disinfectant or permit it to air dry. Rinse the spill site with water and allow the site to dry. Place all disposable, contaminated material in the biohazard bag or container. Treat as infectious waste. Wash hands. Prepare a spill/incident report, identify the cause of the spill, and determine remedial action.

APPENDIX 28.6 Minor Chemical Spill Cleanup Procedurea Evacuate personnel in the immediate spill area. Attend to any contaminated individuals. Extinguish all sources of ignition. Contain the spill. Ventilate the area of the spill. Close off the spill area (call emergency response team when no trained individuals are available). Notify safety officials. Review MSDS for appropriate PPE and specific instructions for cleanup and disposal. Don appropriate PPE (chemical-resistant gloves, gown, and shoe covers; face shield or goggles; mask). a

Spill does not involve flammables, explosives, carcinogens, or life-threatening chemicals.

Dike area of spill to prevent further spread of chemical. Clean the spill area with appropriate neutralizing agent and absorbent. Place contaminated material in disposal container. Scrub area with soap and water. Package all waste appropriately for pickup. Label containers with substance, amount, and date. Prepare a spill/incident report, identify cause of spill, and determine remedial action.

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REQUIREMENTS FOR EFFECTIVE LABORATORY MANAGEMENT

APPENDIX 28.7 Shipping Containers a

Figure A7.1 Example of packing and marking for category A infectious substances. The smallest external dimension of the outer packaging must not be less than 100 mm; the primary receptacle or secondary receptacle must be capable of withstanding, without leakage, an internal pressure of not less than 95 kPa. doi:10.1128/9781555817282.ch28.fA7.1

Figure A7.2 Example of packing and marking for category B infectious substances. At least one surface of the outer packaging must

have a minimum dimension of 100 mm × 100 mm; the primary receptacle or secondary receptacle must be capable of withstanding, without leakage, an internal pressure of not less than 95 kPa. doi:10.1128/9781555817282.ch28.fA7.2 (continued)

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APPENDIX 28.7 Shipping Containers a (continued)

Figure A7.3 Example of packing and marking for exempt specimens. At least one surface of the outer packaging must have a minimum dimension of 100 mm × 100 mm; the outer packaging must be of adequate strength for its capacity, mass, and intended use. doi:10.1128/9781555817282.ch28.fA7.3 a

Images courtesy of Saf-T-Pak, Inc.

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REQUIREMENTS FOR EFFECTIVE LABORATORY MANAGEMENT

APPENDIX 28.8 Shipping Label Examples a

Figure A8.2 Label: biological substance, category B. doi:10.1128/9781555817282.ch28.fA8.2

Figure A8.1 Label: infectious substance, category A (class 6). doi:10.1128/9781555817282.ch28.fA8.1

Figure A8.4 Label: package orientation.

doi:10.1128/9781555817282.ch28.fA8.4

Figure A8.3 Labels: miscellaneous dangerous goods (class 9). doi:10.1128/9781555817282.ch28.fA8.3

a

Images courtesy of Saf-T-Pak, Inc.

Figure A8.5 Label: exempt human specimen. doi:10.1128/9781555817282.ch28.fA8.5

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APPENDIX 28.9 Shipper’s Declaration for Category A, Infectious Substances Note: The original shipper’s declaration given to the carrier must have vertical red stripes along the left and right edges of the document, and shippers must retain copies for two years.

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REQUIREMENTS FOR EFFECTIVE LABORATORY MANAGEMENT

APPENDIX 28.10 Employee Accident and Exposure Report Employee information (to be completed by the employee) Name: Date of birth:

Employee I.D. number: Sex: M F

Home phone:

Work phone:

Address (include city, state, and ZIP code) Job title:

Department:

Signature:

Date signed:

Accident/incident information (to be completed by the employee) Date incident occurred:

Time:

Location:

Date incident reported:

Reported to:

List names of witnesses: Witness statement: Description and cause of incident (identify injury and part of body): Blood/body fluid exposure (identify source patient): Supervisor’s report Name: Was employee injured during performance of duty?

Work phone: Yes

No

(explain)

Date medical care received: Do medical reports indicate employee is disabled for work? Yes

No

Identify corrective actions or safety violations: Additional comments: Signature:

Date:

29 Introduction Emergency Management Plan Purpose or Policy • Hazard Analysis • Incident Management System

Emergency Management Andrea J. Linscott, Patti Medvescek, and David L. Sewell

Elements of an EMP Emergency Operations Center • Communications • Medical Treatment Areas • Decision To Shut Down Laboratory • Damage Assessment • Evacuation • Personnel Pool • Personnel Care • Locator System • Security • Training • Monitoring and Evaluation

OBJECTIVES To list emergencies and disasters that could affect the clinical laboratory To identify the elements of an emergency management plan To implement the emergency management plan To evaluate the plan for regulatory compliance

Disasters Fire • Hazardous Materials • Radioactive Material • Utility Failure • Bomb Threat • Natural Disasters • Terrorism Threats • Civil Disorder

Summary KEY POINTS GLOSSARY REFERENCES APPENDIXES

It’s no use saying, “We’re doing our best.” You have got to succeed in doing what is necessary. Sir Winston Churchill

 D “

Clinical Laboratory Management, 2nd Edition Edited by L. S. Garcia ©2014 ASM Press, Washington, DC doi:10.1128/9781555817282.ch29

isaster” is defined in the dictionary as a calamitous event, especially one occurring suddenly and causing great loss of life, damage, or hardship, such as a flood, airplane crash, or business failure, whereas “emergency” is defined as an unexpected situation or sudden occurrence of a serious and urgent nature that demands immediate action (16). In the healthcare arena, external emergencies and disasters generally include meteorological disasters (e.g., tornadoes, hurricanes, hailstorms, snowstorms), landslides, floods, earthquakes, tsunamis, warfare, civil disorder, terrorism, and transportation accidents. Internal emergencies usually include utility failures, hazard spills, fires, bomb threats, and personnel or reagent shortages. A disaster caused by any of these events could ultimately prevent the laboratory from providing test results or services. Programs or plans that respond to these situations are known as emergency preparedness, emergency management, or disaster plans. In this chapter we will use the term “emergency management plan” (EMP). Often the EMP developed by the laboratory is part of a larger plan for the entire healthcare organization and may be part of a regional or national EMP. Emergency planning and preparedness are the keys to preventing interruption or cessation of laboratory services when an emergency or disaster occurs. Understanding the type of external and internal disasters or emergencies fosters appropriate preparation and planning that diminishes or eliminates the disruption of services provided by the laboratory and healthcare facility. The EMP collects in one document the information required by employees to respond appropriately to any emergency. Because disasters or emergencies 545

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REQUIREMENTS FOR EFFECTIVE LABORATORY MANAGEMENT

are unpredictable, an EMP can serve only as a guide. The plan assumes that individuals will use good judgment and adapt the response plan to the unique needs of the situation. A well-written EMP can reduce confusion and panic during an emergency, allow responsible individuals to assess the situation and make information-based decisions, and provide a predictable response for the employees (12).

Emergency Management Plan An organized emergency management program begins with a written comprehensive document that defines the scope and goals of the program and lists the responsible individuals. The College of American Pathologists and The Joint Commission require that laboratories and healthcare facilities have an emergency plan in place and be prepared to accommodate and respond to a disaster so that patient care can be provided in an emergency (2, 4). Accreditation guidelines require that the EMP (i) address both internal and external disasters in a general manner such that the facility can respond to multiple scenarios and (ii) document incidents and training of staff. The basic EMP should include the following sections.

Purpose or Policy The purpose or policy states the need for a response plan that deals with the natural or human-caused events that may disrupt normal operations, as well as the responsibility to provide services to patients through effective utilization of limited resources and to assist any injured individuals. Hazard Analysis Hazard analysis requires that laboratory personnel prepare a risk assessment for the occurrence of both internal and external disasters, utility failures, hazard spills, epidemics, reagent shortages, civil disorder, and terrorism. This assessment should attempt to define the direct and indirect impact on the facility and reduce the risk or diminish the damage from an emergency or disaster. Incident Management System The incident management system is used to manage emergency and disaster events through a flexible response regardless of when or where the event occurs. The first employee to discover the problem is in charge of the emergency response until someone higher in the supervision chain arrives. Each employee is expected to provide the leadership necessary to protect life and property and to carry out the responsibilities of the laboratory. He or she will ensure patient, visitor, and employee safety, will report the incident to the proper authorities, and will use proper procedures as outlined in the plan. Emergency management generally falls into four phases: (i) identification of the emergency (e.g., tornado,

transportation accident, electrical failure, etc.), (ii) containment (limit the impact of the disaster), (iii) response (assist victims and confine the physical damage of the event), and (iv) recovery (restore the organization’s normal operation). The plan must reflect and include the facility, local, regional, state, and federal requirements for disaster planning. The laboratory EMP should be complete but concise. To be effective, a plan must be well written and easy to execute. Laboratory staff should be familiar with the plan, the location of the plan, and each individual’s role in the execution of the plan. Possible disaster scenarios should be covered in the plan based on the probability or frequency of occurrence of an event for a specific laboratory or geographical location or based on the hazardous material and equipment present in the facility. All plans must consider first the safety of employees, patients, visitors, and individuals with special needs and then address alternative sources of utilities and communications, areas for radioactive or chemical isolation and decontamination, and alternative roles and responsibilities of personnel during the emergency. For example, the plan must address the following questions in emergency planning and recovery. • Is there sufficient instrumentation to perform testing? • All instruments (or critical instruments) should be on emergency power. • Is an alternative test method or instrumentation available in-house? • Identify manual test methods not requiring instrumentation or use point-of-care test analyzers when laboratory instruments are not available. A standard operation procedure variance may be needed. • Are there sufficient supplies and reagents to perform testing? • As supply chains are often affected, inventory levels may need to be adjusted if there is ample warning. If there is no warning, inventory levels will need to be assessed to determine how long reagents will last if supplies cannot be delivered. A list of alternative resources (vendors or a neighboring laboratory) of supplies and reagents should be available. Phone numbers, both cell and office numbers, fax numbers, and email addresses should be available for any vendor or laboratory that may be called upon. • Are there sufficient personnel to perform testing? • To ensure that sufficient personnel are available, an emergency call-back list should be available at all times. A plan should address possible delays or absence of personnel during a disaster. A plan should address personnel transportation or lodging for a weather-related event.

CHAPTER 29. EMERGENCY MANAGEMENT

• Is the test menu sufficient to provide requested services? • A test menu may need to be scaled back or specimens sent to a reference laboratory during an emergency. A plan should include the use of a reference laboratory or discontinuation of certain tests during an emergency. • How will specimens be transported to the laboratory if an electrical or mechanical failure prevents the use of the pneumatic tube system? • A backup plan detailing who will be responsible for getting specimens to the laboratory in the event of pneumatic tube failure should be available. • Who will be responsible for the packaging and shipping of specimens or organisms to a reference laboratory? • All federal and state regulations must be followed when specimens are packaged and shipped to another laboratory. A plan outlining who can package and ship specimens or organisms should be available. The impact of the emergency or disaster on the staff itself must be considered. Ignoring the emotional response to disasters can create a disaster itself, resulting in staff members who are unable to perform the actions required. At a minimum, employee assistance personnel should be contacted to assist when national or local emergencies or disasters directly affect laboratory staff. Immediate and complete verification of personnel location is important when the staff are involved in the emergency. Open, complete communication with status updates is critical to maintaining laboratory operations throughout the disaster. To handle a disaster successfully, the laboratory must anticipate and plan for the problems that will arise (Table 29.1). The keys to success include (i) development of flow charts detailing potential events and actions to be taken; (ii) identification of the level of laboratory service required based on the anticipated duration and severity of the emergency or disaster; (iii) projection of the impact of limited service on other hospital services, e.g., emergency room, intensive care units; (iv) establishment of effective lines of communication with laboratory staff and other healthcare providers; (v) identification of alternative sites to provide the necessary laboratory services; (vi) plans for recovery activities, e.g., scheduling and staff changes, alternative test procedures; and (vii) drills to test the effectiveness of the plan. Successful planning must involve all of the affected personnel so that they are aware of their individual responsibilities during an emergency as well as activities necessary to maintain essential services to support patient care activities. The level of service provided by the laboratory dictates the depth and breadth of involvement by the laboratory staff in disaster recovery. A full-service, hospital-affiliated

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Table 29.1 Elements of emergency planning Element

Action

Identify potential disasters and laboratory’s response

Prepare list of authorities to notify Identify critical positions and assign individuals Identify critical space and supplies Prepare security measures Develop criteria for evacuation

Define level of service and impact on patient care

Full service (normal operations) Limited service (prioritize testing) Emergency service (prepare minimal test menu)

Develop communication plan

Identify critical healthcare staff Identify critical laboratory staff (call-back) Identify critical suppliers

Alternative operations

Identify alternative site of operations Identify alternative laboratory for service work Prepare alternative scheduling or staffing

Drills

Assess performance of emergency plan Modify plan to correct deficiencies

laboratory may be required to play a more comprehensive role in disaster recovery than a satellite facility or rural laboratory. It is important to recognize, however, that national disasters can significantly affect laboratory operations, regardless of the geographic proximity or services offered. Governmental and private agencies that are available to assist in a large community or regional disaster should be listed in the EMP with contact information (Appendix 29.1). A business failure, such as manufacturer’s recall of products, could also prevent the laboratory from providing services. Just-in-time inventory levels absolutely require a dependable delivery system. The receipt of back-up reagents from other sources depends on the availability of transportation and possible reciprocal relationships with local or regional clinical or reference laboratories. Other possible scenarios that may affect the laboratory, and the questions they raise, include: • A mail or airline strike prevents delivery of reagents or supplies. What is the back-up plan for routine and emergency testing? How quickly can medical staff be notified of a reduction in services based on supply delivery? • An influx of victims of bioterrorism requires more sophisticated testing than the laboratory has available. Where should the tests be sent? Who should be notified?

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REQUIREMENTS FOR EFFECTIVE LABORATORY MANAGEMENT

• Staffing levels are routinely at or below minimum levels and an earthquake occurs. How and when does the laboratory manager contact additional staff? What testing should be performed until additional staff arrive? Emergency planning and preparedness allow for more efficient and effective deployment of activities to mitigate the impact of the disaster on laboratory services and staff. The laboratory manager may assign members of the laboratory staff to assist the facility in maintaining patient services. Emergency management requires that all possible events are considered to ensure that appropriate actions are taken to provide laboratory services where needed and to prevent a negative impact on laboratory operations. To do so, emergencies and disasters are categorized as external or internal to the laboratory and by the severity of the event (Table 29.2). External events occur outside of the physical laboratory and can affect the laboratory’s delivery of services or require additional services from the laboratory. Internal emergencies occur within the facility or laboratory and significantly influence delivery of services. Each laboratory, regardless of size or affiliation with hospitals or clinics, may be required to participate in emergency or disaster recovery in response to national or regional events that include terrorist acts, acts of war, or accidents threatening public safety.

Elements of an EMP Emergency Operations Center The emergency operations center (EOC) represents the situational leadership that is necessary to manage the emergency, protect life and property, carry out the function of the laboratory, and assist in other areas of the facility. Generally, individual employees are empowered to manage the event until relieved by someone higher in authority as defined by the order of succession of management. This concept means that individuals must step up and accept responsibility to perform tasks and supervise areas outside of their normal duties. The EMP (Table 29.3) defines who will automatically return to the facility (e.g., department chairperson, laboratory manager), describes the emergency call list, and defines the level of service that will be provided and how personnel will be deployed. Appendixes 29.2 and 29.3 show examples of an EOC checklist and a status report. Communications Communication is the most critical and difficult aspect of managing an emergency. The EMP must define the communication lines and how employees will be notified of the emergency. Communication by telephone, cell phones, runners, two-way radios, and other means provides links to internal and external events, responses to the event, and

Table 29.2 External and internal disasters and impact on the laboratory Disaster External Severe weather and natural disasters Hazardous material spill or contamination Community illness Transportation accident National disaster National recall of product Terrorism

Internal Utility failure Hazardous material spill, fire, bomb threat Shortage of personnel Shortage of reagents or supplies Civil disorder Computer issues (security breach, downtime, data loss)

Impact Staff availability; relocation of patients and services; utilities and supplies/reagents disrupted Staff availability; laboratory services required to treat patients; implement decontamination protocols Staff availability; increase in patient and test volume Staff availability; increase in patient volume and specialty requirements (i.e., transfusion services) Supply/reagent availability Supply/reagent availability Staff availability; necessary laboratory services for patient care; implement decontamination protocols; increased safety precautions; notification of authorities

Services interrupted; relocation or assistance from another laboratory Personnel affected; testing delayed; special testing may be required; relocation or assistance from another facility Testing delayed or cancelled; assistance from another laboratory Testing delayed or cancelled; assistance from another laboratory Staff availability; supplies/reagents and utilities may be disrupted Delay or manual test reporting; incomplete database

CHAPTER 29. EMERGENCY MANAGEMENT

Table 29.3 Elements of a laboratory EMP Element

Function

Emergency operation center

Describes leadership hierarchy Constructs emergency call-back list Defines level of service required Deploys laboratory personnel Maintains supply level Establishes communication services Defines communication lines Identifies individuals for notification Maintains list of emergency numbers Disseminates information to employees and authorities Locates medical treatment areas Provides service to the medical treatment areas Conducts a damage assessment of laboratory Reports assessment to facility’s command center Determines need to evacuate Posts evacuation routes Identifies evacuation leaders Notifies facility’s command center Assesses availability of personnel Assigns personnel to laboratory or where needed Develops system for tracking location of employees, patients, and visitors Communicates locations to facility’s command center Assigns individual to provide laboratory security until relieved by security personnel Restricts access to laboratory Addresses personnel responsibility, role in an emergency, communication system, and supply system Conducts drills Documents deficiencies during drills Corrects deficiencies

Communication

Medical treatment areas Damage assessment

Evacuation

Personnel pool

Locator system

Security

Training

Monitoring and evaluation

the recovery operation. Generally, a bell code system or the public address system is used to identify the location of a fire. The EMP should identify who is notified of internal and external disasters (e.g., on-duty staff, off-duty staff, organizational staff, etc.) and should include a list of emergency phone numbers for external agencies and organizations (e.g., local law enforcement agencies, local and regional emergency management organizations, the Federal Bureau of Investigation [FBI], the state health laboratory, the Centers for Disease Control and Prevention [CDC]) that can assist the facility or that may need to be contacted

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during the emergency (Appendix 29.1). The plan should identify key personnel, their alternates, and their responsibilities. A part of communications involves assessing the nature of the emergency and the potential impact on patients, employees, and the public and developing a plan to include employee meetings, internal dissemination of information, and public information releases. Cell phone texting, cell phone calls, pagers, or internal and external emails can be used to disseminate information depending on the disaster and resources available. Inquiries from outside sources (e.g., press, employee family members) should be forwarded to the individual responsible for addressing these concerns. A hot-line phone system with updated recorded messages can be used to disseminate information to those not on site. Accurate information must be provided to prevent rumors and to inform individuals involved in the event.

Medical Treatment Areas The laboratory staff must be aware of the areas in the facility that are designated as medical treatment areas in the event that they require treatment or specimens need to be transported to the laboratory. Decision To Shut Down Laboratory A decision may be made to shut a laboratory down when there is ample warning, as in the case of a hurricane, or a laboratory may be shut down as a result of an emergency. A procedure should be available for how to power down or off all instruments, equipment, and computers according to manufacturer’s specifications, when possible. In addition, a procedure for steps that need to be taken to bring a laboratory back up should also be included in the EMP. For example, before an instrument or piece of equipment can be placed back into use, a safety assessment must be performed. Validation of instruments may be warranted, depending on the extent of the damage and time frame in which the instrument was down. Storage temperatures should be monitored to ensure that any reagents, collection devices, or equipment are stored within their specified temperature ranges. If temperature ranges are not met and additional product is not readily available, quality control or verification studies may be needed to show that the product is working as expected. Damage Assessment A damage assessment should be performed as soon as possible following a disaster. The assessment can be rapid (5 to 10 min) or more detailed (1 to 2 h) and should determine whether an area can be used safely or must be evacuated. The plan must identify who will assess structural damage, equipment failures, hazard contamination, etc. The assessment should provide uniformity in assessing damage due to structural problems and fire and should address safety

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and the status of the environment (e.g., gas, water, electrical power, lighting, etc.). Damage assessment should also include reviewing temperature charts to determine if reagents were affected by electrical outages. Results are reported to the organization’s command center. Appendixes 29.4 through 29.7 contain examples of assessment checklists for a healthcare organization, but the forms can be modified for the laboratory.

Evacuation Evacuation may be necessary if a fire, hazardous spill, or structural damage occurs. The immediate area should be evacuated, the affected area should be isolated, and the command center should be notified. Evacuation routes must be posted and can be in a vertical or horizontal fashion. Individuals should be identified who are responsible for the safe evacuation of other employees, visitors, patients, and anyone who requires assistance. Employees should not return until authorized by a designated individual. Personnel Pool The incident manager (e.g., laboratory manager) will decide which personnel can be released from their normal responsibilities to assist elsewhere in the laboratory or facility. Personnel Care Plans for the care of personnel should address the beginning, during, and aftermath of an emergency (1). Plans should include the availability of staffing and the use of supplemental staff, if needed. It is important to remember that state and federal laws be followed when using supplemental staffing. In areas where known disasters occur, stockpiles of essential items should be available and checked regularly for expiration dates (Table 29.4). For natural disasters that provide some warning (hurricanes, ice storms, etc.), personnel should bring enough personal supplies to last three to five days (Table 29.5). Depending on the emergency, makeshift housing may need to be arranged; often the offices of pathologists or other clinic staff are available for use. Arrangements for family members and pets may also need to be addressed. More frequent breaks may be needed during these times. Downtime activities (card games, watching DVDs, etc.) may be needed to release stress. Plans should be put into place to protect the personnel from any hazards and to protect personnel when leaving the premises. Locator System The EMP must address the problem of communicating the location and status of employees, patients, and visitors to a central location so that the public can locate family and friends quickly (Appendix 29.8). Often victims of a disaster may be spread over an entire metropolitan area or region.

Table 29.4 Stockpile items Item

Comment(s)

Ready to eat food items

Can opener, scissors, plastic silverware, etc. Drinking water, potable water, etc. Extra batteries Pliers, hammer, wrenches Hardhat Toilet paper, paper towels, paper plates

Water Flashlight Tools Protective wear Paper products

Security An individual should be assigned responsibility for providing direction to the staff regarding security and crowd control until the security personnel arrive in the affected area. Access to the laboratory is restricted to allow employees and emergency staff to respond to the emergency. The individual with temporary security duty provides information to security personnel and may determine whether to evacuate the laboratory. Training The EMP outlines an orientation and education program for facility personnel, including interaction with other emergency organizations in the region. The training addresses (i) specific roles and responsibilities during an emergency, (ii) the information and skills required to perform duties, (iii) the back-up communication system used during disasters, and (iv) the system to ensure that supplies and equipment are delivered where needed. The most important element of training is drills that are conducted to test whether the EMP works as anticipated. A challenging aspect of emergency planning and training is the assignment of responsibilities to the various participating

Table 29.5 Personal supplies Item

Comment(s)

Food

Ready to eat foods, canned juice, high energy bars, condiments, comfort food 1 gallon of water per person/day (3 day supply) Air mattress, sleeping bag, sheets, blanket, pillow, etc. 7-day supply of prescription and over-thecounter medication Toilet paper, towelettes, deodorant, toothbrush, toothpaste, soap, shampoo, gel hand sanitizer, plastic bucket with tight lid, etc. Charger and batteries Bills and change

Water Sleeping gear Medications Toiletries

Cell phone Money Extra clothes Special items

Clock, portable radio, games, DVDs, books, contact lens supplies, glasses, infant or pet supplies

CHAPTER 29. EMERGENCY MANAGEMENT

community agencies and organizations, especially when there are competing agendas among the groups.

Monitoring and Evaluation The EMP must address ongoing monitoring of performance regarding staff knowledge and skills, level of staff participation, inspection activities, incident reporting, and interagency cooperation. The Joint Commission requires that an EMP be activated yearly. Activation of the EMP may be as a result of an actual disaster or as a planned exercise. The goal of the activation is to identify weaknesses in the program. An evaluation of the drill or emergency should be documented, and corrective actions must be implemented to correct any deficiencies.

Disasters Fire All staff must be familiar with the potential fire hazards within the laboratory and be aware of the procedures necessary to ensure the safety of personnel in the area. These procedures include minimizing working supplies of flammable material, storing flammables in a flammable-safe cabinet, and identifying and controlling ignition sources. Training should emphasize response according to the RACE (rescue, alarm, confine, evacuate/extinguish) approach, sounding the alarm, knowing the preferred and alternative exit route from the work area, which may be dark and smokefilled, using a fire extinguisher, knowing the fire codes, and closing all fire/smoke barrier doors. Fire extinguishers are classified by the type of fire that they will extinguish. Classifications are denoted by an initial. Most laboratories use a class C fire extinguisher, which is designed to combat fires involving live electrical equipment. When a fire is discovered, the RACE approach is as follows. Rescue. Immediately notify others on the floor or in the area. Rescue any patients or victims in the fire area and close the door to the room or area involved. Do not reopen door. Alarm. Activate the alarm by pulling the nearest fire alarm. Next, report the fire to the emergency center and give the location (room number, building, etc.) and the type of fire (type of material burning, how extensive, etc.). Generally, this information is relayed to the responding fire department so they can be prepared when they arrive. Confine. Close all windows and doors on the floor as appropriate. Advise patients and visitors to keep the doors closed until notified otherwise. Keep calm and try to reassure patients. Check to make sure all fire/smoke barrier doors have been closed and are not blocked. Clear corridors.

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Evacuate/extinguish. Attempt to extinguish only small fires. Do not attempt to fight large fires. Your best defense is to close the door and evacuate the immediate areas. When using a portable fire extinguisher, PASS guidelines should be followed (12): • • • •

Pull the pin on the extinguisher. Aim the nozzle at the base of the fire. Squeeze the handle firmly. Spray in a sweeping motion.

Hazardous Materials Hazardous materials are any substances cited as a health and physical hazard by OSHA. Laboratory hazards are usually identifiable and quantifiable, and personnel should be knowledgeable about hazardous materials, be familiar with procedures to follow in an emergency, and be aware of measures to ensure the safety of personnel. Laboratories are required to maintain a chemical inventory list that identifies the type of hazard, the location, and the quantity present. This list should be posted in the laboratory and submitted to the facility’s industrial hygienist and the local fire department. The plan should identify and assign responsibility to responders (i.e., safety officer, industrial hygienist) who can shut off utilities to prevent the spread of the hazard through the ventilation system and to minimize the potential for fire or explosions. Individuals must be trained to clean up spills and to decontaminate individuals exposed to chemical, radiation, or infectious agents. The telephone number for the regional hazmat team should be posted. Generally, the industrial hygienist or safety officer can make a prompt evaluation of the hazard severity and based on available information determine what action is necessary. The severity of the hazard is based on room size, type of chemical, and volume of material released. The decision to evacuate and notify the region’s hazmat team is based on assessment of imminent danger to life or health as marked by injured or ailing personnel, symptoms of severe irritation, evidence of a large-volume spill, gas leaks, fire hazard, presence of carcinogens, or presence of very strong odors beyond the immediate area. When it can be done safely, individuals should be posted at entrances to prevent other people from entering the hazard area. When possible, response personnel will disconnect any heat- or flame-generating equipment. The RACE approach to hazardous materials incidents should be followed. • Rescue. Rescue only when applicable and safe to do so. Provide first aid (eye wash or showers) to victims and control access to the spill area. • Alarm. Activate the emergency response system. Report the spill to the responsible person and provide relevant information such as who, what, when, where, and how much.

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REQUIREMENTS FOR EFFECTIVE LABORATORY MANAGEMENT

• Confine. Contain the spill, if possible, but only if trained to do so. • Evacuate. Evacuate when there is immediate danger to life or health.

Radioactive Material Sources of toxic, ionizing radiation in the laboratory include devices and reagents containing radioactive material. Policies should restrict access of untrained individuals to areas containing radioactive substances. The EMP should describe appropriate responses in the event of a spill, such as preventing spread by covering the spill with absorbent paper, limiting movement of contaminated individuals, shielding the radioactive source if possible, closing and locking the room, or otherwise securing the area. The individual is decontaminated by removing contaminated clothing and flushing contaminated skin with lukewarm water and then washing with mild soap. The affected area should be evacuated when the spill is large. Only trained persons should decontaminate an area, and they must wear protective clothing, gloves, and eye protection. After decontamination, the area must be checked for residual radiation. Each spill incident and decontamination must be documented (Appendix 29.9). Utility Failure Utility failures may be long or short in duration, may require an alternative means of providing service, or may require evacuation of the laboratory or facility. Water. The EMP must address the need for emergency water for both equipment and potable water. The Department of Homeland Security (www.ready.gov) recommends 1 gal of water per person per day and at least a 3-day supply. The potable water should be replaced every 6 months (www.redcross.org). Areas requiring water must be prioritized, and nonessential water consumption must be curtailed. Electrical. Because loss of electrical power can paralyze a modern clinical laboratory, essential equipment must be attached to lines powered by emergency generators. Battery-powered lighting must be available in case the emergency generators fail so that employees can safely exit the premises. Plans must anticipate the loss of ventilation and airflow to chemical and biological safety cabinets (BSCs). Loss of ventilation in the laboratory may cause instruments to overheat and accumulate noxious or toxic fumes. Inoperative chemical hoods and BSCs prevent the performance of procedures requiring their use. BSCs should have a safety mechanism that automatically prevents backflow of air through the filter when the fan shuts off.

Sewer. The EMP should address a failure in the sewer system due to lack of water or inability to discharge effluent. Priority is given to infection control measures (e.g., handwashing), direct patient testing, and meal preparation.

Bomb Threat All threatening telephone calls should be taken seriously. The employee must remain calm, attempt to keep the caller on the line without increasing his or her antagonism, record details of the call, and notify police immediately (Appendix 29.10). Often, a colleague can notify the security personnel while the first employee talks to the caller. Security personnel will decide whether the facility should be evacuated. Natural Disasters Earthquakes, tornadoes, floods, hurricanes, and similar weather-related disasters usually arrive with little warning and can have a major impact on the hospital or clinic and the surrounding community. The EMP should contain definitions of storm warnings used in the local area, provide instructions for employees (e.g., take cover under sturdy furniture or in a doorway during initial earthquake shaking), and establish an early release from work for nonessential employees. When structural damage is suspected, clinical operations should not resume until a qualified inspection of the premises has occurred. The effects of a natural disaster include damage to the facility, interruption of communications, inability of employees to leave or return to the facility, and injured individuals requiring treatment. Initially, a survey of the area should be performed to identify trapped people, structural damage, inoperative equipment or systems, unsafe or unhealthful conditions, and hazardous locations. Damaged containers of chemicals must be removed and infectious material must be bagged and safely discarded. Visitors, patients, and employees within a dangerous area should be evacuated. Terrorism Threats Terrorism threats pose a very complex problem for laboratories, facilities, communities, and the nation. Sources of expert information on chemical and biological agents should be readily available (Appendix 29.11). The laboratory EMP must outline procedures for handling terrorism material (e.g., chemical, radiological, or biological) in the laboratory and for managing a large number of walk-in patients and subsequent clinical specimens (Appendix 29.11) (5, 6, 13, 14, 15). Key elements of an effective terrorism EMP include issues such as prompt recognition of an event; identification of individuals who are first responders (e.g., staff who have received smallpox vaccination), staff, and facility security; obtaining assistance from community and federal agencies (e.g., hazmat teams, FBI, local police, CDC, state laboratory); coordination of

CHAPTER 29. EMERGENCY MANAGEMENT

activities with other external emergency response agencies or organizations; release of public information; and decontamination plans for patients and staff. The administration should address physical security, airflow and ventilation, and maintenance of the facility’s structure (8). Security officers must plan for crowd control, directing the flow of casualties and vehicles, and preventing unauthorized entry to decontamination and treatment areas. Plans need to be in place to rotate staff into work areas and to provide food, psychological support, and rest for employees. The CDC’s Bioterrorism Preparedness and Response Program addresses a unified public health response to bioterrorism events that includes measures for disease surveillance, laboratory diagnosis of biological agents, communication between various public health authorities, epidemiological investigations, and readiness assessments (www.bt.cdc.gov). The Laboratory Response Network links local, state, federal, military, veterinary, and environmental laboratories and classifies laboratories based on their anticipated role in the event of a biocrime or bioterrorism event and on their capacity to safely handle and identify agents of bioterrorism (3, 7, 10). The original Laboratory Response Network model involved four levels of laboratories (levels A, B, C, and D) but currently contains three classification levels (sentinel, reference, and national laboratories). Sentinel laboratories (formerly level A) include most clinical and commercial laboratories, whose function is to recognize, rule out, and refer potential agents to the reference laboratories (formerly levels B and C). Reference laboratories are generally local or state public health laboratories, whose function is confirmatory testing and processing of environmental samples. There are presently only two national laboratories (the CDC and the U.S. Army Medical Research Institute of Infectious Diseases) that can operate at a biosafety level 4 capability. Clinical microbiology laboratories must develop protocols for the recognition and identification of the potential agents of bioterrorism and procedures for management of these events. These protocols should be part of the routine bench procedures so that potential agents are not misidentified or improperly handled and can be rapidly referred to a reference laboratory for confirmation (9). Protocols developed by authorities are available on various websites (www.bt.cdc.gov, www.asmusa.org) and in publications (11). Sentinel laboratories should not process specimens for smallpox or viral hemorrhagic fever from high-risk patients. These samples should be sent to the CDC after consultation with the state public health division. Instructions for the collection and shipment of specimens for smallpox can be found at http://emergency.cdc.gov/agent/smallpox/ vaccination/vaccinia-specimen-collection.asp. In addition, sentinel laboratories should not process environmental samples (e.g., suspicious powder for Bacillus anthracis spores) or animal specimens but rather should contact the

553

FBI and reference laboratory for instructions. Often the latter samples involve a chain-of-custody procedure.

Civil Disorder In most situations, the local law enforcement agency is aware of planned demonstrations and arranges for control measures. Unplanned acts of civil disturbance are handled by the facility security personnel in cooperation with the local law enforcement agency. An effective communication system must be in place to keep the employees and public informed.

Summary Emergency preparedness planning and management must involve the entire healthcare organization, the community, and with the present threat of terrorism, the nation. Effective disaster planning requires anticipation of any type of disaster that prevents the laboratory from providing services. The laboratory manager may be involved in overall disaster recovery, providing laboratory resources as needed for patient care and facility support. Disasters can be external (e.g., weather, failures in transportation services) or internal (e.g., facilities breakdowns, equipment malfunctions, lack of personnel). Consideration should be given to the impact on laboratory personnel, depending on the nature of the disaster. Planning, preparation, and communication will improve the laboratory’s response to a disaster if and when it occurs. KEY POINTS ■ Disasters may stem from a variety of root causes but result in consistent impact on operations—failure to provide services. ■ EMPs should be comprehensive and included in laboratory policy and procedures. ■ Guidelines are available from many resources, based on local, regional, and national regulations. GLOSSARY Biohazard An agent of biological origin that has the capacity to produce deleterious effects on humans, e.g., microorganisms, toxins. Disaster Any incident that interferes with a facility’s ability to operate in a normal manner. Emergency A natural or human-caused event that suddenly or significantly disrupts the environment of care, disrupts care and treatment, or changes or increases demands for the organization’s services. External disaster An event external to the physical laboratory location that may affect operations by limiting available staff or supplies or changing laboratory workload (e.g., influx of patients,

554

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uncommon tests required). Examples include major storms, earthquakes, transportation accidents, or acts of terrorism.

5. Londorf, D. 1995. Hospital application of the incident management system. Prehosp. Disaster Med. 10:184–188.

Facility A healthcare organization (hospital, clinic, physician’s office) that includes an on-site laboratory.

6. Macintyre, A. G., G. W. Christopher, E. Eitzen, Jr., R. Gum, S. Weir, C. DeAtley, K. Tonat, and J. A. Barbera. 2000. Weapons of mass destruction events with contaminated casualties: effective planning for healthcare facilities. JAMA 283:242–249.

Hazardous material A substance or material that has been determined by the U.S. Department of Transportation to pose an unreasonable risk to health, safety, and property when transported in commerce. Hazmat team Group of individuals who are trained to respond to and clean up hazardous material spills. Internal disaster An internal event within the laboratory or facility that affects patient care and facility operation, including power failure, hazardous chemical spill, fire, or lack of personnel. Laboratory A facility that provides services including specimen collection, testing, and results reporting. RACE Acronym describing the appropriate approach by first responders to a fire or disastrous situation: rescue, alarm, confine, evacuate/extinguish. Reference laboratory An on- or off-site laboratory performing tests on behalf of a clinical laboratory or facility, typically including rare or esoteric test menus. Service levels Test menu, results reporting, and ancillary assistance provided by the laboratory to hospitals, clinics, physicians, and patients.

REFERENCES 1. CLSI. 2003. Planning for Challenges to Clinical Laboratory Operations During a Disaster; A Report. CLSI document X4-R. CLSI, Wayne, PA.

7. Miller, J. M. 2001. Agents of bioterrorism: preparing for bioterrorism at the community health care level. Infect. Dis. Clin. North Am. 15:1127–1156. 8. National Institute for Occupational Safety and Health. 2002. Guidance for Protecting Building Environments from Airborne Chemical, Biologic, or Radiological Attacks. DHHS publication no. NIOSH2002-139. U.S. Government Printing Office, Washington, DC. 9. Shapiro, D. S., and D. R. Schwartz. 2002. Exposure of laboratory workers to Francisella tularensis despite a bioterrorism procedure. J. Clin. Microbiol. 40:2278–2281. 10. Snyder, J. W. 2003. Role of the hospital-based microbiology laboratory in preparation for and response to a bioterrorism event. J. Clin. Microbiol. 41:1–4. 11. Sharp, S. E., and M. Loeffelholz. 2011. Biothreat agents, p. 174– 187. In J. Versalovic (ed.), Manual of Clinical Microbiology, 10th ed. ASM Press, Washington, DC. 12. Tweedy, J. T. 2005. Healthcare Hazard Control and Safety Management, 2nd ed., p. 121–155. CRC Press, Boca Raton, FL. 13. U.S. Department of Health and Human Services. 1996. Health and Medical Services Support Plan for the Federal Response to Acts of Chemical/Biological (C/B) Terrorism. U.S. Government Printing Office, Washington, DC.

2. College of American Pathologists. 2012. Laboratory Accreditation Program, Laboratory General Checklist. College of American Pathologists, Northfield, IL.

14. U.S. Army Medical Research Institute of Chemical Defense. 2000. Medical Management of Chemical Casualties Handbook, 2nd ed. U.S. Army Medical Research Institute of Infectious Diseases, Fort Detrick, MD.

3. Gilchrist, M. J. R., W. P. Mckinney, J. M. Miller, and A. S. Weissfeld. 2000. Cumitech 33: Laboratory Safety, Management, and Diagnosis of Biological Agents Associated with Bioterrorism. Coordinating ed., J. W. Snyder. ASM Press, Washington, DC.

15. U.S. Army Medical Research Institute of Infectious Diseases. 2011. Medical Management of Biological Casualties Handbook, 7th ed. U.S. Army Medical Research Institute of Infectious Diseases, Fort Detrick, MD.

4. Joint Commission. 2012. Laboratory Accreditation Standards. The Joint Commission, Oakbrook Terrace, IL.

16. Webster’s American College Dictionary. 1998. Random House, New York, NY.

CHAPTER 29. EMERGENCY MANAGEMENT

APPENDIX 29.1 List of Selected Emergency Preparedness Agencies and Organizations Governmental Agencies Centers for Disease Control and Prevention Domestic Preparedness Information Line Federal Bureau of Investigation Federal Emergency Management Agency Homeland Security Operations Center National Centers for Environmental Predictions National Hurricane Center National Oceanic and Atmospheric Administration National Response Center National Weather Service

U.S. Army Corps of Engineers U.S. Geological Survey National Earthquake Information Center U.S. Public Health Service Nongovernmental Organizations American Red Cross Church charities Corporation for National Service (disaster services) National Emergency Management Association Salvation Army

APPENDIX 29.2 Emergency Operations Center (EOC) Checklist

Determine status of the emergency and implement emergency management plan as appropriate. Set up EOC in the designated area. Determine the presence of all key personnel in the EOC and triage areas. Establish command activity and direct all emergency relief activities. Identify the departments needed to support the relief activity and ensure that each department knows what is expected of it. Ensure that the triage area is functioning. Ensure that appropriate call-back is progressing and all necessary supplies are delivered to the triage area. Utilize personnel pool to ensure that appropriate assistance is maintained. Request necessary assistance from state or local agencies (i.e., fire, police, ambulance, bomb squad, hazmat team, etc.). Notify other divisions of the emergency and request aid or place staff on standby. Brief all individuals reporting to the EOC. Dismiss individuals that are not required for the relief effort. Ensure that all departments (e.g., security, safety) that automatically respond to external and internal emergencies are notified and responding. Ensure that internal communication is established. Ensure that recorders are assigned to key response functions to document activities for the incident manager.

555

556

REQUIREMENTS FOR EFFECTIVE LABORATORY MANAGEMENT

APPENDIX 29.3 Operating Status Report Form Name of hospital:

Date/time report given:

Contact person:

Title/location:

Contact method:

Contact number:

Questions

Comments

1.

Y

N

Can you continue to treat incoming patients?

If no, why not?

2.

Y

N

Any patients evacuated to outside the hospital?

If yes, why? Total # evacuated # unstable or critical patients

3.

Y

N

Any patients or staff injured?

# of injured people. Deaths?

4.

Y

N

Any structural damage?

Partial or total collapse? List

5.

Y

N

Any major non-structural problems?

6.

Y

N

Power from any source?

7.

Y

N

Can generator power essential areas?

8.

Y

N

Can you communicate with the outside world?

9.

Y

N

Access to all essential areas?

10.

Y

N

Sufficient number of elevators working?

11.

Y

N

Water lines intact to essential areas?

12.

Y

N

Natural gas lines intact to essential areas?

13.

Y

N

Sewage system intact in essential areas?

Anyone trapped?

14.

Y

N

Adequate staff at the hospital?

What do you need?

15.

Y

N

Adequate supplies and equipment?

What do you need?

16.

Y

N

Any outside assistance needed?

What?

17.

Y

N

Need structural engineer?

APPENDIX 29.4 Damage Assessment Chart a Damage assessment

Report

Post:

Rapid evaluation by department

Safe Questionable Unsafe

Inspected Limited entry Unsafe

Detailed evaluation by engineering

Safe Questionable Unsafe

Inspected Limited entry Unsafe

Engineering evaluation by consultants

Safe Unsafe

Inspected Unsafe

a

Adapted from reference 12.

CHAPTER 29. EMERGENCY MANAGEMENT

557

APPENDIX 29.5 Rapid Evaluation Safety Assessment Forma Building/area description:

Overall rating:

Area name:

Inspected Limited entry

Room numbers:

Unsafe

Primary occupancy:

Inspector:

Patient care

Office

Name:

Laboratory

Mechanical

Date:

Research

Engineering

Time:

Other:

Instructions: Review area for the conditions listed below. A “yes” answer is grounds for posting an area UNSAFE. If more review is needed, post LIMITED ENTRY. Condition 1. Collapse, partial collapse, or building off foundation

Yes

No

Review Needed

2. Building or floor leaning

Yes

No

Review Needed

3. Severe cracking of walls, severe damage and distress

Yes

No

Review Needed

4. Ceilings, light fixtures or other non-structural hazards

Yes

No

Review Needed

5. Hazmat spill

Yes

No

Review Needed

6. Other hazard present

Yes

No

Review Needed

Recommendations No further action required Detailed evaluation required (circle one): Barricades needed in the following areas: Other: Comments:

a

Adapted from reference 12.

Structural

Hazmat Other

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REQUIREMENTS FOR EFFECTIVE LABORATORY MANAGEMENT

APPENDIX 29.6 Safety Considerations for Fixed Equipmenta Item

Principal concern

Boilers Refrigerator/freezer Emergency generators Fuel tanks Fire pumps On-site water storage Communication equipment Transformers Electrical panels Elevators Radiation equipment Toxic chemicals Liquid oxygen tanks Infectious hazards Equipment

Sliding, broken gas/fuel lines; broken exhaust, steam, and/or relief lines Sliding; loss of function; leaking refrigerant Failed isolation mounts; sliding; broken fuel, signal, and/or power lines; broken exhaust lines Sliding or overturning; leaks; broken fuel lines Anchorage failure; misalignment between pump and motor; broken piping Tank or vessel rupture; pipe break Sliding, overturning, or toppling leading to loss of function Sliding; leaking; loss of function Sliding or overturning; broken or damaged conduit or electrical bus Counterweights out of guide rails; cables out of sheaves; dislodged equipment Breach of containment Spills; fumes in ventilation system Sliding or overturning; leaks; broken lines Overturned incubators; broken culture bottles Sliding or overturning leading to loss of function or damage to adjacent equipment

a

Adapted from reference 12.

CHAPTER 29. EMERGENCY MANAGEMENT

APPENDIX 29.7 Equipment Checklist a General items

Equipment Damaged No

Yes

Boilers

_________

_________

Refrigerator/freezer

_________

_________

Emergency generators

_________

_________

Fuel tanks

_________

_________

Fire pumps

_________

_________

On-site water storage

_________

_________

Communications equipment

_________

_________

Transformers

_________

_________

Electrical panels

_________

_________

Elevators

_________

_________

Radiation equipment

_________

_________

_________

_________

_________

_________

_________

_________

_________

_________

_________

_________

_________

_________

Chemical storage:

Gas tanks:

Other equipment:

Comments:

a

Adapted from reference 12.

Comments

559

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REQUIREMENTS FOR EFFECTIVE LABORATORY MANAGEMENT

APPENDIX 29.8 Patient Locator Information Form Provide the following information by telephone to the Patient Locator System on each new or readmitted disaster victim during the emergency status. 1. Patient name: 2. SSN: 3. Date of birth: 4. Age: 5. Patient’s sex:

Male

6. Patient’s condition:

Female Critical

Serious

Fair

Good

Excellent

Deceased

Not sure

7. Treated by: 8. Released from care:

Yes

No

Date of release:

9. Patient’s Address: City:

State: ________

Zip: ______________

10. Person to notify: Relationship:

Husband ________ Brother ________

Wife ________ Sister ________

Father ________

Mother ________

Other ______________________________

Address: City: Phone:

State: ________ Home/Cell:

Work:

Name of person filling out form: Information called in: Date:

Time:

Patient condition update called in: Date:

Time:

Condition:

Date:

Time:

Condition:

Zip: ______________

CHAPTER 29. EMERGENCY MANAGEMENT

561

APPENDIX 29.9 Radioactive Spill Report

The spill occurred at __________ : (am/pm)

on ______/ ______/ ______

Bldg __________________________

Room ______________

Instrument used to check for personnel contamination: Meter manufacturer Meter S/N

Meter model Probe model

Personnel present

Probe S/N Personnel contamination results*

* On the back of this sheet, indicate any personnel decontamination or care instituted. Please be detailed. Survey the spill area to identify hot spots and then begin decontamination. When finished, conduct a post-cleaning contamination wipe test. Radioisotopes present or suspected in the spill: _________ mCi of

as

_________ mCi of

as

_________ mCi of

as

Provide a brief description of the accident:

Provide a brief description of action taken to prevent a recurrence:

Name: Date:

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REQUIREMENTS FOR EFFECTIVE LABORATORY MANAGEMENT

APPENDIX 29.10 Bomb Threat Checklist

Date and time of call: Words of caller:

Questions to ask: 1. When is the bomb going to explode? 2. Where is the bomb? 3. What does it look like? 4. What kind of bomb is it? 5. What will cause it to explode? 6. Did you place the bomb? 7. Why? 8. Where are you calling from? 9. What is your address? 10. What is your name? Caller’s voice (circle) Calm

Disguised

Deep

Crying

Nasal Squeaky

Angry Excited

Stutter Stressed

If the voice was familiar, whom did it sound like? Were there any background noises? Remarks

Person receiving call

Sincere Accent

Lisp

Rapid

Scared

Normal

CHAPTER 29. EMERGENCY MANAGEMENT

563

APPENDIX 29.11 Selected Information Resources on the Internet EMERGENCY PREPAREDNESS WEBSITES

BIOTERRORISM WEBSITES

Federal Emergency Management Agency http://www.ready.gov/are-you-ready-guide Source of materials for emergency preparedness

American Society for Microbiology http://www.asmusa.org Training materials, laboratory protocols, and regulations related to bioterrorism preparedness

The Joint Commission http://www.jointcommission.org Guidelines on emergency management standards National Institute for Occupational Safety and Health http://www.cdc.gov/niosh Resources on chemical agents and emergency preparedness Occupational Safety and Health Administration http://www.osha.gov Training materials, standards, and regulations related to safety in the laboratory Office of Health and Safety http://www.cdc.gov/od/ohs Resources on safety, biosafety, and safety survival U.S. Government Printing Office http://www.access.gov/nara/cfr Source for federal regulations

College of American Pathologists http://www.cap.org Links to other websites on bioterrorism preparedness Centers for Disease Control and Prevention http://www.bt.cdc.gov Training materials, laboratory protocols, regulations, guidelines for laboratory and healthcare facilities preparedness Department of Homeland Security http://www.ready.gov Information on preparedness for all terrorism events Infectious Diseases Society of America http://www.idsociety.org Resources related to bioterrorism preparedness U.S. Army Medical Research Institute of Infectious Diseases http://www.usamriid.army.mil Reference material on biological and chemical warfare agents

V Financial Management (section editor: Michael R. Lewis) 30

Financial Management: Setting the Stage Ronald B. Lepoff

31

Strategic Planning Paul Valenstein

32

Human Resources at the Local Level: an Important Component of Financial Management Washington C. Winn, Fred Westenfeld, and Michael R. Lewis

33

Costs, Budgeting, and Financial Decision Making Geoffrey C. Tolzmann and Richard J. Vincent

34

Financial Decision Making: Putting the Pieces Together Ronald J. Bryant and Michael R. Lewis

30 Operating in the Inpatient Hospital Setting • Operating in the Outpatient Hospital Setting

Financial Management: Setting the Stage

The Non-Hospital Environment Summary

Ronald B. Lepoff

Introduction The Hospital Environment

KEY POINTS GLOSSARY REFERENCES

OBJECTIVES To establish the importance of the environment in which the laboratory operates To review the constraints placed upon management in the hospital and independent laboratory settings To introduce the fiscal considerations that may be important for laboratory management in these settings

All the world’s a stage, And all the men and women, merely Players; They have their Exits and their Entrances, And one man in his time plays many parts . . . William Shakespeare As You Like It, Act II, Scene VII

T

Clinical Laboratory Management, 2nd Edition Edited by L. S. Garcia ©2014 ASM Press, Washington, DC doi:10.1128/9781555817282.ch30

here are approximately 233,000 clinical laboratories in the United States (4). Roughly 117,000 of these laboratories are located in physician offices; of these, 60,000 perform only Clinical Laboratory Improvement Amendments (CLIA)–waived testing (see Glossary), and 37,300 do only provider-performed microscopy. In contrast, there are approximately 8,800 hospital laboratories. Of the remainder, about 5,600 are independent. The total U.S. clinical laboratory market is about $57 billion in revenue. Table 30.1 summarizes the demographics of the laboratory industry. In this chapter, we will concentrate on hospital and independent laboratories, which usually perform moderate- and high-complexity testing. As laboratory instrument and supply manufacturers innovate and improve their products, the number of high-complexity tests done in clinical laboratories has declined somewhat; it is obvious that the market incentives for manufacturers lie in simplicity and reliability of operations. The supply of individuals qualified to perform high-complexity testing has declined along with this lack of demand (although not solely for this reason; the number of schools training medical technologists/clinical laboratory scientists has also dramatically declined). In contrast, testing in most physician office laboratories is limited, of waived or moderate complexity, and performed by individuals whose primary training and responsibilities are not in laboratory medicine.

567

568

FINANCIAL MANAGEMENT

Table 30.1 The demographics of the laboratory industry a Laboratory type Total clinical laboratories Physician office laboratories Performing CLIA-waived testing only Performing provider-performed microscopy only Other physician office laboratories Hospital-associated laboratories Independent laboratories Others (includes public health, insurance, etc.) a

No. 233,000 117,000 60,000 37,300 19,700 8,800 5,600 101,600

See reference 4. All numbers approximate.

The most important contributors to financial performance in the laboratory industry are: • Leadership • Operations management • Information management • Marketing • Laboratory specialty niches • Service area • Competition • Customer service • Couriers • Phlebotomy • Client services • Billing and pricing • Availability of consultation/expertise • Payor mix and policies • Network contracts (local and national) • Out-of-network policies This section of the book deals with the operational management of the laboratory, including strategic planning, human resource management in the operational units, cost analysis, and financial decision making. Before discussing the details, it is worthwhile to consider the broad outlines of the challenges that face laboratory managers and workers in the industry as a whole and in the major segments.

because the work of the clinical laboratory is relatively invisible compared to direct patient care, it can be at a relative disadvantage in these negotiations. Consequently, it becomes even more important for laboratory management to be perceived as a team player in the hospital—to be seen as clinically responsive and fiscally responsible. These attributes become increasingly important when large capital expenditures or program expansions are sought. In these situations the role of the laboratory medical director becomes critically important. To be most effective the director must speak for the medical needs of patients, particularly as they relate to laboratory services, but must also present a credible front to the hospital administration when addressing the business aspects of the laboratory, such as budgeting, billing, and planning. In certain sections of the laboratory, such as anatomic pathology and the blood bank, the director must be a physician. The directors of all sections—and especially the overall laboratory director—will be able to function most effectively, whatever their academic degree, if they have a medical or clinical background that gives them credibility with the medical staff. Similarly, the relationship with the hospital administration may be enhanced if the laboratory director has a business background or at least demonstrable competence in business matters. The ideal director, who fully satisfies both sets of competencies, may be difficult to find. In fact, it is not essential that all that talent be manifest in one individual if the director can utilize other resources within the laboratory. It is essential, however, that the person at the top have a balanced view of the laboratory world.

Operating in the Inpatient Hospital Setting The major differences in the cost and operational structures of independent and hospital laboratories lie in the patient populations and the nature of the services provided. The Figure 30.1 The organizational chart of a hospital that is orga-

nized in a traditional manner. Note that the chief operating officer, who is parallel in reporting responsibility to the VP of nursing, is responsible for all ancillary services through a director who is responsible for operations. doi:10.1128/9781555817282.ch30.f1 Chief Executive Officer

The Hospital Environment In the hospital institutional environment, the laboratory usually operates as a division under a vice president or director of operations. Along with other operational divisions such as pharmacy and dietary, the laboratory must compete for resources with direct patient care divisions such as nursing (Fig. 30.1). Because the laboratory may not be directly represented at the table where administrative and fiscal decisions are made for the institution, and

Chief Operating Officer

VP Nursing

Chief Financial Officer

Chief Information Officer

Director

Laboratory Pharmacy

Dietary

Other operational departments

CHAPTER 30. FINANCIAL MANAGEMENT: SETTING THE STAGE

two are dramatically different in their institutional missions, patient populations, hours of operation, percentage of tests requiring rapid turnaround (STAT testing), communication and reporting requirements, and the need for highly specialized testing. In this section we will explore the environment of the hospital laboratory and how these factors may affect financial performance (Table 30.2). Hospital laboratories have primary responsibility for an inpatient population of seriously ill people. Care has shifted to the outpatient environment, and length of hospital stays has dramatically decreased in the United States since the introduction of diagnosis-related reimbursement. As a consequence, the acuity of illness of hospitalized patients has increased. More than ever, hospital laboratories must dedicate significant resources to 24-hour-per-day, 7-dayper-week support for critically needed testing, often with a rapid turnaround time, to care for these patients. The simultaneous requirement to support the care of an increasing population of patients who are seeking emergent care further adds to the burden. In this environment, the primary mission of the institution requires staffing, procedures, and instrumentation that support rapid production of testing results around the clock. The financial consequence of this mission is relatively low productivity for both instruments and personnel; as a consequence, costs are relatively high. Fortunately, the per-unit cost of equipment and reagents for most of the required tests is low. Additionally, economies can be achieved if additional nonemergent testing can be used to fill excess capacity. The high-acuity setting also leads to its own set of requirements for communication and information technology. The frequent need to transmit highly abnormal results to clinicians who care for critically ill patients often requires staff to leave the workspace, both to call in results on the telephone and to answer requests for results. As the laboratory obtains more critically abnormal results, more tests must be repeated or additional procedures must be performed. For example, the percentage of routine blood counts that require a manual differential count in the usual outpatient setting is less than 10%, while in a hospital, especially one seeing a substantial number of patients with cancer, that proportion may reach 30 to 35% or more. Balancing the demanding Table 30.2 Components of diagnostic laboratory testing Category of testing

Examples

STAT; immediate response required Intermediate response; same day or shift ASAP response; depending on technology

Blood gases; frozen sections Routine chemistry and hematology Microbiology, surgical pathology, molecular testing

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requirements for testing among sites with critical needs, such as intensive care units and emergency departments, often becomes very difficult to manage. Table 30.3 summarizes the factors that detract from the efficiency of hospital-based laboratories. Depending on their size, hospital laboratories find it financially feasible to add batch processing for tests that do not require rapid turnaround times. Cutting-edge technology, such as molecular diagnosis and molecular genetics, does not at present require immediate response—although as technology improves, this is likely to change. Thus, these laboratories tend to have a portion of their staff devoted to relatively low-complexity, rapid-turnaround testing operating around the clock and a second component of staff devoted to batch production of relatively high-complexity testing that requires special expertise, high-cost reagents or instrumentation, and longer turnaround times (reference 6, p. 435–480). It should be noted that even in the rapidly expanding arena of molecular testing, pressure is growing to produce speedy results using real-time amplification technologies. The two components of staff needed for these two categories of testing are not interchangeable. Cross-coverage for vacations, illness, or other mandated benefits, such as training and continuing education, is impractical because the skill sets (and mind-sets) for the two forms of testing are so different. In some hospitals, laboratories support decentralized testing in or near operating rooms, intensive care units, and emergency departments, again increasing cost and lowering staff productivity. Table 30.4, which is derived from the College of American Pathologists Laboratory Management Index Program (LMIP), shows a clear inverse relationship between the per-test cost of labor and laboratory size; larger laboratories are more productive. Reagent and supply costs are the second-largest component of laboratory costs, after personnel. There is a clear relationship between laboratory size, as measured by test volume, and supply costs. Larger laboratories have lower per-test supply costs than do smaller laboratories. Table 30.4 presents the cost-effectiveness ratios for the four quartiles of participating laboratories in the LMIP. The relative decrease in the cost of consumables with increases in laboratory size presumably occurs because larger purchasers get better pricing from suppliers; the development of group purchasing alliances such as Novation and Premier may well have blunted some of this effect. Table 30.3 Factors that produce inefficiency in hospital-based

laboratories that serve inpatients Requirement for rapid laboratory response Necessity for frequent repetition of tests Need to telephone emergent or critical results to providers

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Table 30.4 Laboratory productivity and volumea Quartile b ($)

Expense per billed test

1

2

3

4

All laboratories

Consumables Labor Direct test

2.96 6.03 10.22

2.65 5.51 8.78

2.31 4.99 8.05

2.14 4.65 7.34

2.74 5.02 8.43

a

Data from Laboratory Management Index Program of the College of American Pathologists (1994). Quartile values are the means of independent distributions. The sum of mean consumable and labor expense is not necessarily the same as direct expense. b

Reimbursement of hospitals for inpatient stays is based on one of the following schemes, depending on the payor (Table 30.5): • Percent of charges • Per diem • Reimbursement for diagnosis-related groups (DRGs) The second and third of these schemes are the most common in the United States, where reimbursement based on charges has almost disappeared for inpatients. As discussed earlier, payment schemes affect the financial performance of hospital laboratories in complex ways. For example, the intent of diagnosis-based reimbursement for hospital care is to create incentives for hospitals to minimize unneeded expenditures for all aspects of hospital care (commonly measured as length of stay), including laboratory testing (2). The efficacy of this incentive is illustrated by two changes in health care. Length of hospital stay has dropped substantially, from around 7.5 days in 1980 (before DRGs) to approximately 4.8 days in 2008–2009, a decrease of 36% (5). Additionally, de novo systems of less expensive home care, including the ongoing administration of intravenous medications, for example, have proven very popular (1). Generally, reimbursement for care of hospitalized patients that is not driven by DRGs is done on a per diem basis. For the laboratory, the consequence of both payment schemes is that inpatient revenue is unrelated to the quantity of testing. The institution gains if the length (cost) of stay declines and if the number of laboratory tests done on each inpatient is reduced. Under this scenario, however, physicians are faced with the need to care for increasingly

Table 30.5 Reimbursement mechanisms in the inpatient, outpatient, and independent laboratory settings Inpatient laboratories DRGs Per diem Percent of charges

Outpatient and independent laboratories Percent of charges Fee schedule Capitation Ambulatory payment classification groups (APCs)

ill patients quickly. It is estimated that upwards of 70% of the patient data in hospitals comes from the clinical laboratory. The bulk of laboratory testing during a hospital admission occurs in the first few days, when the patient is most acutely ill and when diagnoses are being tested and rejected or established by clinicians. The financial gain for the laboratory produced by earlier discharge after these initial intensive days may, therefore, be minimal. Pressures to reduce length of stay will tend to compress the same amount of testing into a shorter period, leading to little if any reduction in laboratory costs (7). Laboratory administrators are often surprised by the amount of indirect costs borne by the laboratory in the hospital setting. The laboratory is one of the few hospital departments that bills for services directly; other charges include those for pharmaceuticals, medical supplies, and “hotel” functions (bed charges). The simplest way to approach these costs is to examine the hospital’s annual Medicare cost report, which allocates all indirect costs in a uniform way to departments. Often, direct laboratory costs for labor and supplies may be only half of total costs, with the remainder resulting from these charges for institutional indirect costs (reference 6, p. 154–155).

Operating in the Outpatient Hospital Setting Many hospital laboratories, especially those in academic medical centers, serve significant numbers of outpatients. These encounters with the outpatient facility may be associated with prior or future inpatient stays, for example, before or after surgical procedures. Here one might suppose the demand for rapid turnaround times must be less than in the inpatient setting. In fact, the need for high-volume outpatient clinical operations is as varied and complex as the inpatient operations. In some cases the need for rapid turnaround of test results may be surprising—and it results from the increasing shift of sophisticated patient care from the hospital ward or operating room to the outpatient medical clinic, dialysis unit, or surgery. Oncology clinics, for example, often need the results of laboratory testing to decide if and at what dose a patient may receive chemotherapy that day. The complexity and sophistication of testing in this environment actually tends to be higher than in the inpatient setting; complex endocrinologic diagnoses,

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for example, are usually sought in the outpatient setting. In this instance the tests do not usually require rapid turnaround and are best batched. Hospital reimbursement in the outpatient setting is based on (Table 30.5): • Percent of charges. Contractually negotiated by the hospital with payors • Fee schedule. Contractually negotiated with payors or as prescribed by the government for Medicare • Capitation. A contractual scheme in which the healthcare system (in many cases including both hospitals and physicians) undertakes to provide needed care to a defined population at a certain fixed rate per month, regardless of the volume of care • Ambulatory payment classification groups (APCs) (3) The first two methods are straightforward and traditional. Capitation first appeared to any significant degree after the failed Clinton-era attempt at reconstruction of healthcare. Health maintenance organizations and other payors found that their market power enabled them to demand favorable, often capitated contracts from providers in many areas of the country. At one point, capitation of laboratory testing was paid at $0.60 per member per month in some areas. Over the past 15 years, as excess capacity has been wrung out of the healthcare system, providers have regained some of their market power, and the pendulum has swung back toward the first two approaches. Medicare now reimburses hospital outpatient services on a modified diagnosis-related scheme (APCs). In this outpatient arena, hospital laboratories compete with the commercial laboratory sector for business. In recent years, the market share of hospital laboratories has increased at the expense of the commercial sector. While serving hospital outpatients has its own set of service demands, as indicated earlier, hospital laboratory outreach programs require, in addition, marketing, courier and phlebotomy services, business services such as billing and accounting, and customer support. Hospital laboratories often have excess technical capacity for testing, resulting from their need for rapid turnaround and their diurnal variation in demand (highest during the day and lowest at night). The unused capacity in the evening may allow the addition of outreach testing at minimal marginal cost. While most hospitals in the United States are still not for profit, laboratory operations in the for-profit sector are basically similar to those in the not-for-profit sector.

The Non-Hospital Environment The breadth of testing provided by independent laboratories generally mirrors that of hospital-associated laboratories. The major differences lie in the population served,

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hours and scope of operation, turnaround time requirements, and need for ancillary functions, such as business operations. Some of these facilities do a substantial amount of reference (esoteric) testing for hospitals and other laboratories. Most of the testing done by the independent laboratories is for outpatients of physicians and clinics. Some may provide phlebotomy services at or near the offices and clinics they serve. Essentially all provide couriers for the transportation of specimens back to the home laboratory. Except for work that requires rapid turnaround, which is unusual in this setting, most specimens are transported during daylight hours and arrive at the laboratory in the late evening or night. Thus, the major testing effort takes place during the night in one large batch, and most results of routine tests are transmitted before the physicians’ offices open the next morning. This type of workload and scheduling influences the laboratory’s staffing pattern and even its instrumentation choices. For example, the setting requires batch instrumentation that can process large numbers of samples relatively expeditiously but with no need for rapid turnaround of any individual sample. An instrument that operates in a batch mode, then, may be better suited to this setting than one that may be somewhat slower but allows the interposition of STAT samples at any time. To the extent that these laboratories do esoteric work, for which a longer turnaround time of up to four or five days is often acceptable, that work is usually done separately during a smaller day shift. If the marketplace justifies provision of the service, some independent laboratories perform forensic, veterinary, or environmental testing. A number of highly specialized niche laboratories operate in still other areas such as cytogenetics, molecular genetics, forensic toxicology, and other areas that the large national laboratories have been reluctant to enter because of cost or need for specialized expertise. For the most part, independent laboratories serve an outpatient population. To be sure, in some (mostly rural) areas, an independent laboratory may contract with a local hospital to supply laboratory services. The reimbursement schemes for this sector of the industry are the same as those listed above for hospital outpatient work (Table 30.5). Major requirements for these laboratories include, in addition to the aforementioned courier and phlebotomy services, medical consultation, billing, accounting, client relations, marketing, sales, and information services functions. In the hospital setting, these functions are usually performed mostly outside the laboratory. The small independent laboratory has the advantage of flexibility and the ability to move quickly to adapt to the market; it is not burdened with hospital administrative overhead and cumbersome decision-making processes. Of course, management decisions are reflected rapidly in the

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bottom line, for better or worse. Because diagnosis-related reimbursement is usually not an issue in this market segment, and because the prevalence of capitation has been declining, it is in the interest of the independent laboratory to maximize laboratory utilization and thus revenue. As the independent laboratory industry has rapidly consolidated, the number of independent laboratories has plummeted; two large public corporations now dominate the industry, and consolidation continues apace (8). Operating in the corporate setting involves less local autonomy and more centralized decision making. Local choices of tests offered, instrumentation, reagents, and so forth are likely to be very limited. On the other hand, the corporation will supply a centralized purchasing capability and likely similar data processing functions, releasing the local branch from these duties. On the revenue side, while the small independent laboratory must negotiate with providers or with payors who still permit local contracting, the large national corporations negotiate national contracts with payors when possible.

Summary The objectives of laboratory management must reflect the demands of the laboratory’s clients and the clinical and financial environment in which it operates. There are fundamental and striking differences in clinical need and demand, financial constraints and considerations, and laboratory mission and cost structures, which depend on the laboratory’s situation. Whether inpatient or outpatient hospital or independent laboratory, each has its own set of functional drivers of which laboratory management must be acutely conscious. KEY POINTS ■ The demands for capable, effective management differ in the hospital inpatient, hospital outpatient, and independent laboratory settings. ■ Laboratory management must be able to demonstrate intimate knowledge not only of the clinical needs for laboratory testing in various situations, but also the fiscal constraints of the institution in which it operates and be able to communicate this understanding to higher administration. ■ Reimbursement mechanisms vary according to setting, and laboratory management must have a clear understanding of all of the relevant mechanisms, payor requirements, and limitations.

GLOSSARY CLIA ’88 The Clinical Laboratory Improvement Amendments of 1988 and their implementing regulations, as published since 1992. CLIA-waived testing A category of laboratory test complexity under CLIA (q.v.) which applies to tests that (i) are cleared by the U.S. Food and Drug Administration for home use, (ii) employ methods that are so simple and accurate as to render the likelihood of erroneous results negligible, or (iii) pose no reasonable risk of harm to the patient if the test is performed incorrectly. Provider-performed microscopy A category of moderatecomplexity tests under CLIA (q.v.) involving a patient care provider using a microscope for testing, such as urine microscopic examinations.

REFERENCES 1. Centers for Disease Control and Prevention. 2001. National Hospital Discharge Survey. Centers for Disease Control and Prevention, Atlanta, GA. 2. Centers for Medicare and Medicaid Services. 2012. Acute Inpatient Prospective Payment System. http://www.cms.gov/Medicare/ Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html (last accessed August 30, 2012). 3. Centers for Medicare and Medicaid Services. 2012. Hospital Outpatient Prospective Payment System. http://www.cms.gov/Medicare/ Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index .html (last accessed August 30, 2012). 4. Centers for Medicare and Medicaid Services. 2012. CLIA Statistical Tables/Graphs. http://www.cms.gov/Regulations-and-Guidance/ Legislation/CLIA/CLIA_Statistical_Tables_Graphs.html (last accessed September 4, 2012). 5. National Center for Health Statistics. 2012. Health, United States, 2011: With Special Feature on Socioeconomic Status and Health. Table 103. http://www.cdc.gov/nchs/hus/contents2011.htm#103 (last accessed September 14, 2012). 6. Travers, E. M. 1997. Clinical Laboratory Management. Williams & Wilkins, Baltimore, MD. 7. Valenstein, P., A. Praestgaard, and R. Lepoff. 2001. Six year trends in productivity and utilization of 73 clinical laboratories: a College of American Pathologists Laboratory Management Index Program Study. Arch. Pathol. Lab. Med. 125:1153–1161. 8. Washington G-2 Reports. 2003. Laboratory Industry Report, vol. 12, no. 42003.

31 Introduction: What Is Strategy? Evidence To Recommend Strategic Planning Randomized Controlled Trials • Case Studies • Economic Theory

Strategic Planning Paul Valenstein

Developing and Maintaining a Business Strategy: the Strategic Planning Process Structure of the Clinical Laboratory Industry Size of the Testing Market • Concentration of Competitors • Barriers to Entry • Separation of Payor, Purchasing Agent, and Beneficiary • Economies of Scale • Restrictions on Markups and Kickbacks • Powerful Sellers and Buyers • Substitute Products • Unique Economics of Inpatient Care • Conclusions

Competitor Analysis Competitors’ Goals • Competitors’ Assumptions • Competitors’ Capabilities • Interactions of Competitors • Conclusions

OBJECTIVES To define strategy and contrast strategic planning with the management of operations To describe the competitive structure of the laboratory industry To articulate the elements of competitor analysis To characterize strategic positions commonly used by clinical laboratories To explain how strategies are sustained and why they commonly fail

Strategic Positions in the Laboratory Industry What Are Strategic Positions? • Types of Strategic Positions • Strategic Positions of Clinical Laboratories • Conclusions

The essence of strategy is choosing what not to do. Michael E. Porter

Implementing the Strategy: Activity Fit What Is Activity Fit? • Activity Fit Involves Trade-Offs

Failure of Strategy Straddling • Growth Trap • Profitability Trap • Hubris

Summary KEY POINTS GLOSSARY REFERENCES APPENDIXES

Clinical Laboratory Management, 2nd Edition Edited by L. S. Garcia ©2014 ASM Press, Washington, DC doi:10.1128/9781555817282.ch31

Introduction: What Is Strategy? Strategy is an elusive concept for the typical manager of a clinical laboratory, who is often more comfortable working with operational issues. The word “strategy” evokes images of generals planning vast military campaigns—a process that would appear to have little relevance in the quiet and measured atmosphere of the diagnostic laboratory. Business strategy complements the management of operations, which comprises the main focus of this book. Operational management consists of optimizing individual business processes. It may involve the efficient use of human resources, supply chain management, financial planning, or quality control. Managing laboratory operations includes the oversight of marketing, client services, specimen processing, billing, safety, and information technology, as well as the testing operations that constitute the heart of the diagnostic clinical laboratory. In contrast to operational management, business strategy is about equipping an organization to withstand competitive market forces. Whereas the operational manager seeks to maximize the effectiveness of each part of a business, the business strategist seeks to arrange the parts into a whole that will succeed in a competitive environment and to toss out any parts that do not fit with a firm’s strategy, no matter how well the part seems to function. Business strategists concern themselves with understanding the structure of the industry and their firms’ competitors, defining unique market positions for the laboratory, and creating interlocking processes that provide the laboratory with a sustainable competitive advantage in its target market. Business 573

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strategists value focus over growth; they are creative but also disciplined and not easily distracted. Operational effectiveness and sound business strategy both produce competitive advantage. However, neither stands on its own. If all laboratory competitors enjoy excellent operational effectiveness and produce test results that are equally accurate, inexpensive, and timely, none of the competitors will enjoy a healthy financial return. Competition within the market will drive out profitability and lead to commoditization of laboratory services. Conversely, a laboratory may have a well-developed strategy to serve a defined group of customers that is not being well served by others, but at the same time may lack the operational wherewithal to execute the strategy and keep its target customers satisfied. It, too, will flounder. A sound business strategy requires several elements (Table 31.1). These are (i) understanding the underlying structure of the industry in which an organization competes; (ii) assessing a firm’s strengths, weaknesses, assumptions, and goals, as well as those of its nearest competitors; (iii) identifying a distinctive market position that the firm can occupy more successfully than its rivals; (iv) developing interlocking and reinforcing business activities that drive the organization toward its desired position in the market; and (v) avoiding common traps that upend the best-laid strategy. These five elements form the basis of this chapter. Readers may believe that special characteristics of the clinical laboratory industry make it unsuitable for strategic planning. Many individuals hold this view because most laboratory activity is concentrated within not-for-profit hospitals; laboratories are subject to a regulatory environment that imposes a high degree of uniformity on testing practices, and the strong market power of payors such as Medicare seems to limit managers’ options to find unique market positions. Nevertheless, this chapter will show that clinical laboratories have developed a variety of distinctive strategic positions to differentiate themselves from rivals.

Evidence To Recommend Strategic Planning Randomized Controlled Trials The process of strategic planning has not been tested in randomized controlled trials. Business leaders are not willing to subject the fates of their companies to experiments

Table 31.1 Elements of strategy Understanding industry structure Assessing a firm’s and competitors’ strengths and weaknesses Identifying a distinctive market position Adopting business activities that reinforce a market position Avoiding common strategy traps

in which their firms are randomized to either using or not using a particular business strategy. Moreover, strategic planning is not a standardized, welldefined intervention that can be dispensed to corporate leaders in the same manner as a pharmaceutical product. A strategic plan must take account of the unique strengths and vulnerabilities of competitive adversaries and will therefore be different for every business. Because of these limitations, the strongest type of research evidence—the randomized controlled trial—has not been applied to strategic planning. If strategic planning were a medical device, it would not be approved for sale. If it were a drug, it would not be licensed or prescribed.

Case Studies A number of studies carried out by the faculty of business schools have evaluated the role of strategy in business. For example, Porter evaluated the 35-year diversification histories of 33 large U.S. companies, using annual reports, 10K forms, Moody’s ratings, and several other sources (9). Porter concluded that a large number of acquisitions were later divested as a result of their poor strategic fit with the acquiring firm. Studies such as Porter’s rely on qualitative examination of an individual company or, as in this example, a series of companies. Many of the case studies have been conducted in considerable depth; it is not unusual for an industry case study to be drawn from hundreds of pages of interview transcripts and financial data. Still, case studies are subject to several types of bias. There is likely to be selection bias in the firms authors choose (or are permitted) to study. Authors may also demonstrate interpretive bias when deciding which attributes of a company led to its market success or failure. In addition to the case studies published by academicians, consultancies involved in strategic planning have published articles attesting to the importance of strategic planning for organizational success. These publications are subject to the same selection and interpretive biases that beset academic case reports and may additionally be troubled by conflicts of interest when the consultancies derive revenue from helping firms develop strategic plans. In published case studies and reviews, academicians have identified strategy as a critical component in the success of particular firms (10). For example, Southwest Airlines’ strategy of flying only short-haul, point-to-point routes between midsized cities and secondary airports of larger cities has been linked to its ability to attract pricesensitive travelers while maintaining profitability. Jiffy Lube International’s strategy of limiting its product line to lubrication services has allowed it to offer faster service and thereby attract time-sensitive customers. When a particular firm is identified in a case study as having a successful business strategy and the firm later stumbles in the marketplace, readers may conclude that

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the study author misinterpreted the facts of the case. However, authors argue that the identification of a company with a successful business strategy does not represent an endorsement of the company in all respects or indicate that the company’s strategy will be successful for all time. Case studies of strategy represent an analysis at a particular point in time and under specific business circumstances. In this sense, a business author’s work is analogous to that of a historian who asserts that a specific historical figure was able to effect political reform at a particular time in history, without also arguing that the subject was a model citizen in all respects or would have been successful in promoting reform under different historical circumstances.

Economic Theory Classical economic theory provides indirect support for the value of strategy in business. Economic theory suggests that when one firm earns profits that are larger than average, other organizations will emulate the firm’s practices until the increased competitive pressure brings the firm’s profits down to an average level. The more benchmarking rivals in an industry perform and the more rivals outsource similar activities to third parties, the more alike their operations become (10). Even if operational efficiency improves for the first firm, theory holds that the first firm will not be able to maintain a relative productivity advantage over its rivals. Therefore, classical economics predicts that the profitability of firms in an industry should tend to equalize over time, as firms’ products become commoditized. The fact that some firms are able to outperform their adversaries over extended intervals suggests that factors other than increased operational effectiveness are at work in the marketplace. Business authors suggest that strategy— the ability of firms to stake out and defend unique market positions—explains the capacity of some firms to earn returns that consistently exceed those of their competitors. A successful business strategy tends to weaken competitive pressure and allows organizations to achieve aboveaverage returns for extended periods of time.

Developing and Maintaining a Business Strategy: the Strategic Planning Process There is little consensus in the business literature about how strategies are best developed. Bruce Henderson, founder of the Boston Consulting Group, describes the development of strategy as “an iterative process that begins with a recognition of where you are and what you have now. Your most dangerous competitors are those that are most like you. The differences between you and your competitors are the basis of your advantage” (3). Henderson does not require that all of the stakeholders in an organization participate in developing a business strategy or that

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it be contained in a written document. He requires only that a business strategy take into account existing differences between a firm and its competitors and purposefully build upon these differences. To Henderson, development of strategy is a creative act. Other business authors also downplay the importance of developing a written strategic plan, and some maintain that a formal strategic planning process can lead organizations astray. Campbell and Alexander argue that the planning frameworks managers use to develop strategy often yield disappointing results because business strategy is about insights and not about plans, which tend to be operational in nature (1). Kim and Maugorgne believe that when an inclusive planning process is used to formulate strategy, the competing agendas of an organization’s various stakeholders limit development of a clear sense of purpose (4). Other authors recommend a more formal procedure in which input is solicited from a firm’s owners, board of directors, managers, employees, and customers and is incorporated into a written document called a strategic plan. Not-for-profit companies tend to be particularly attracted to a formal, inclusive planning procedure. This may be the result of discomfort that many not-for-profit organizations experience in framing their business in competitive terms. Mission-based organizations also lack some of the direct feedback that for-profit companies obtain from the market, and a formal strategic planning process sometimes substitutes for the validation that for-profit companies receive in the marketplace. It should come as little surprise that consultancies engaged in selling strategic planning services recommend a more structured approach to strategic planning. The formal strategic planning process consists of several steps (Table 31.2). The process generally begins with a commitment by leadership to identify a strategic direction for the organization. Typically, a planning committee of a half dozen individuals is created to specify important stakeholders and the information that will be collected in the planning process. The second step of the planning process involves development or refinement of a mission statement—what the organization values and seeks to accomplish. The third step involves a situation analysis, in which the strengths and weaknesses of the organization are articulated, along with external threats and opportunities. This generally takes the form of a competitor analysis, a process described later in this chapter. The fourth step of the strategic planning process involves the development of specific objectives and tactics that will further the organization’s mission, given the realities that surface during the situation analysis. Finally, a subset of the planning committee summarizes the conclusions in a document called a strategic plan, which is given to the board of directors and senior staff to put into practice.

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Table 31.2 The formal strategic planning process Formation of the strategic planning committee Development of a mission statement Situation analysis Development of tactics to further the organization’s mission Writing of formal strategic plan

Whether or not a formal process is used to develop a business strategy, all strategies are shaped by the underlying structure of the industry in which a firm competes. We therefore turn our attention to the organization of the laboratory industry.

Structure of the Clinical Laboratory Industry Competition in any industry is rooted in economics unique to the industry. Competitive pressure is applied not only from existing rivals, but also from potential entrants, substitute products, customers, and suppliers (8). The clinical laboratory industry has its own underlying structure, which is described in the paragraphs that follow and summarized in Table 31.3.

Table 31.3 Structural elements of the clinical laboratory industry Market size Inpatient vs. outpatient Routine versus esoteric Concentration of competitors Mergers and acquisitions of hospitals Consolidation of commercial laboratories Barriers to entry Regulations, e.g., CLIA Customer (physician) loyalty Staff-model hospital systems Cost to customers of switching Barriers to exit Local resistance to hospital closing Separation of payor, purchaser, and beneficiary Economies of scale Supplies, reagents, and testing instruments Other laboratory functions Regulatory restrictions Markups Kickbacks Powerful buyers and sellers Buyers, e.g., Medicare, Blue Cross Sellers, e.g., American Red Cross Substitute products Potentially, home diagnostics Economics of inpatient care

Size of the Testing Market Excluding over-the-counter testing products, the clinical laboratory market comprises approximately 3% of the healthcare industry, which in turn represents 18% of the U.S. gross domestic product. The U.S. diagnostic testing industry had annual revenues in 2010 of approximately $55 billion. More than two-thirds of all testing is performed on outpatients, a fraction that has been growing by 1 to 2% per year over the past decade. Overall, clinical test activity has been growing by slightly less than 4% per year due to changes in clinical practice, the introduction of new tests, and the growth and aging of the U.S. population. Demand for testing increases with age; testing activity per Medicare beneficiary is four to five times higher than testing per commercial insurance beneficiary. Cumulative revenue for the laboratory industry has been growing at a rate of slightly more than 4% per year (14). Growth in revenue is the result of a shift in test mix toward more esoteric tests, including gene-based testing, and increases in test volume, offset by reductions in payor fee screens. Trends in laboratory costs are more difficult to measure than revenue trends. In one report that focused on hospital-based laboratories, the variable cost of testing remained constant over a 6-year period in nominal dollars and declined in real (inflation-adjusted) dollars; increases in the cost of wages and reagents were offset by commensurate increases in productivity (15). Concentration of Competitors The U.S. outpatient clinical laboratory industry is highly fragmented geographically; there are many providers but few that operate over large geographic areas. Within any local market there are relatively few competitors. As of this writing most outpatient markets are served by only one or two national commercial laboratories, which in 2009 shared only 13% of the outpatient testing market. The reference testing is more concentrated. The five largest reference laboratories accounted for 88% of 2009 reference laboratory activity (14). Mergers have reduced competition in the outpatient and reference laboratory testing market; the number of laboratory consolidations in 2010 and 2011 were at decade-long highs, and acquisition prices in 2010 approached three times revenues. Mergers or strategic alliances have also reduced competition among hospital laboratories. Although hospital markets are somewhat difficult to define, most communities are served by no more than three local hospitals. The physician office laboratory market is less concentrated than the commercial and hospitalbased laboratory markets. Physician office laboratories, however, typically perform testing only on behalf of their owner’s patients and as a result do not compete directly with one another.

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Barriers to Entry State and federal regulations constitute a significant barrier to the entry of new competitors to the clinical laboratory field. Certificate of need laws in many states prevent the construction of new hospitals without regulatory approval. In addition, laws in several states limit the acquisition of not-for-profit hospitals by for-profit companies. Clinical laboratories must also meet regulatory and performance hurdles specified in the Clinical Laboratory Improvement Amendments (CLIA) of 1988 and elsewhere. Most laboratories meet this requirement by participating in the College of American Pathologists (CAP) Laboratory Accreditation Program or The Joint Commission Laboratory Accreditation Program, both of which enjoy deemed status from the Centers for Medicare and Medicaid Services of the U.S. federal government. CLIA regulations specify that laboratory directors and workers must meet certain education and experience standards and impose other requirements that limit entry to the laboratory industry. Little capital is required to enter the laboratory industry, so capital is not a significant barrier to entry. Depreciation accounts for less than 7% of the operating costs of most clinical laboratories, even after analytical instruments obtained on a reagent rental basis are capitalized and the costs of information systems are amortized. Because physicians order the vast majority of laboratory tests, doctors represent an important distribution channel that must be accessed by any new entrant in the laboratory business. Most physicians in private practice who participate in managed-care arrangements are accustomed to using several different laboratories for patients enrolled in different health plans. These physicians are fairly easily introduced to new laboratory services. However, physicians employed in staff-model practices or who are affiliated with tightly integrated independent practice associations may not be available to new laboratory entrants and therefore represent a barrier to entry into the testing market. The consolidation of physician practices that is taking place as of this writing can be expected to increase barriers to entry for clinical laboratories. Switching costs—the cost incurred by a customer switching from one producer to another—may constitute a barrier to entry. In the specialty laboratory market, the effort required to configure and test new laboratory-tolaboratory computer interfaces tends to lock in customers and reduce competitive pressure. Many community-based physicians do not currently experience difficulty switching laboratories, but difficulties are increasing as laboratories develop sophisticated interfaces with practice management systems and the electronic medical records increasingly common in office practices. Barriers to exit also influence industry economics. Unprofitable hospitals supported by local communities

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may not be permitted to close, perpetuating an oversupply of hospital-based laboratories. Specialized staff in unprofitable clinical laboratories who are reluctant to leave their employers or retrain may also produce a surplus of competitors.

Separation of Payor, Purchasing Agent, and Beneficiary The healthcare industry is characterized by an unusual separation of roles that are typically combined in other businesses. The beneficiaries of services (patients) do not generally pay for services directly; less than 20% of care delivered in the United States is paid for directly by patients. Most payments for health services are made by government insurance programs (principally Medicare and Medicaid) or private insurance companies that are supported by employer contributions. To add to the complexity, neither the payors nor the beneficiaries act as purchasing agents of clinical laboratory services. Physicians order almost all laboratory tests. In fact, in many states it is illegal for patients or insurers to order laboratory tests. The separation of beneficiaries, payors, and purchasing agents creates a number of market distortions that have been widely studied. Teisberg et al. review the implications of this separation of roles on competition and incentives in healthcare (13). Economies of Scale There is strong evidence that analytical operations in chemistry, hematology, gynecological cytology, and blood banking are subject to substantial economies of scale. In the CAP Laboratory Management Index Program, test volume (standardized billable tests/year) was the factor most closely correlated with labor productivity (tests/full-time equivalent) and with overall efficiency (cost/test). Most laboratories that participate in the CAP program operate with test volumes that are well below the level at which efficiency tends to flatten out. There are insufficient data to determine whether significant economies of scale operate in other aspects of clinical laboratory operations, such as marketing, courier and transportation services, professional oversight, surgical pathology, and informatics. Studies on economies of scale for microbiology operations have produced conflicting results. Restrictions on Markups and Kickbacks Federal law prohibits physicians and their employers from marking up Medicare and Medicaid charges billed to their practices. Further, antikickback laws prohibit laboratories from providing referring physicians with goods or services of value in exchange for referral of laboratory tests. These restrictions have been enacted to reinforce the fiduciary duties of physicians to their patients by eliminating

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financial incentives to order unnecessary tests or to select laboratories based on the physician’s potential to profit from the transaction. However, these laws dampen market forces that would otherwise pressure laboratories to lower their prices. Some states, such as New York, New Jersey, Michigan, and Rhode Island, prohibit physicians from marking up laboratory charges when billing nonfederal insurance programs. In states that do not have these restrictions, laboratory charges to physicians for patients enrolled in non-Medicare programs tend to be lower and are then typically marked up by the physician before billing an insurer.

Powerful Sellers and Buyers Powerful sellers of analytical equipment do not generally trouble the laboratory industry. Large purchasing cooperatives have enabled clinical laboratories to impose competitive pressures on the manufacturers of testing equipment and reagents. There are a number of providers of laboratory information systems that compete on the basis of price, support, stability, and functionality. In a few instances, however, specialized vendors of specific tests have strategically positioned their products with consumers (Cytyc’s positioning of liquid-based cytopathology tests) or with clinicians (Athena Diagnostics’ positioning of neurological tests) to blunt competitive pressure and increase costs to purchasers. Myriad Genetics holds a patent that gives it a dominant position in testing for genetic predisposition to breast cancer. Another powerful seller to the laboratory industry is the American Red Cross, which dominates the blood supply in most American communities. As a result of American Red Cross market power, coupled with increased requirements for testing, blood and blood products have been the fastest growing expense for hospital-based laboratories (15). Prices for blood products in markets where American Red Cross facilities compete with community blood centers are significantly lower than in markets in which the American Red Cross is the sole supplier. The laboratory industry experiences significant pressure from powerful buyers, which the industry refers to as “payors.” Medicare, the federal government’s largest health insurance program, makes up approximately 20% of the clinical laboratory market by volume. In most communities, Blue Cross/Blue Shield and two or three other insurers dominate the remainder of the market. These buyers profoundly shape the clinical laboratory industry through imposition of (i) fee screens that place upper bounds on effective industry pricing, (ii) claims edits that place limits on the frequency or clinical setting in which services can be ordered and the manner in which tests can be billed, (iii) requirements that laboratories offer broad geographic service before they become eligible for exclusive testing arrangements, and (iv) turnaround time or result reporting requirements.

Substitute Products The clinical laboratory industry is not currently subject to significant pressure from substitute products. However, over-the-counter testing products, point-of-care instrumentation used by nonlaboratory providers, and disease management programs run by pharmaceutical companies that incorporate laboratory testing have the potential to alter the configuration of the laboratory industry. Currently, most clinical laboratory testing is categorized as high or moderate complexity and thereby subject to extensive regulation under CLIA, which makes it unsuitable for displacement by over-the-counter or small-office testing. This situation may change rapidly as manufacturers exploit new technologies to create reliable, low-cost analytic test platforms that the FDA classifies as waived. Unique Economics of Inpatient Care For most inpatient care, laboratory testing is not a separate reimbursable service. More than 80% of inpatient care is reimbursed on a per diem basis or on the basis of diagnosis-related groups. As a result, inpatient laboratories are inextricably tethered to the providers of inpatient care, most of which have elected to own and manage their inpatient testing operations. If a hospital-based laboratory does not have an outreach testing program, it will invariably follow the strategic direction set by its parent institution. Conclusions The structural elements of the laboratory industry are girders that impose a rough shape on any laboratory business strategy. To develop a unique strategy for a particular laboratory, the strategist must work within these constraints. This is most often accomplished by studying the strengths and weaknesses of the firm’s closest competitors.

Competitor Analysis The objective of a competitor analysis is to predict competitors’ behavior, both when the competitors are left to their own devices and in response to the moves of rivals. The strategy, position, and capabilities of competitors may limit a firm’s opportunities for growth in some areas while simultaneously suggesting other areas in which a firm might expand with little challenge. Popular back-of-the-envelope competitor analysis relies on a procedure referred to as a “SWOT” analysis, an acronym that describes an assessment of an organization’s own strengths and weaknesses and external opportunities and threats. This procedure begins with an inward examination of an organization’s capabilities and ends with an outward examination of rivals (Fig. 31.1). Through a SWOT analysis a manager may discover opportunities for market expansion or repositioning or identify areas in which a firm is vulnerable. Appendix 31.2 provides a hypothetical

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Unfavorable

Strengths

Weaknesses

Opportunities

Threats

External

Internal

Favorable

Figure 31.1 SWOT analysis. doi:10.1128/9781555817282.ch31.f1

example of the sort of competitive information that the manager of a laboratory might receive about rivals during the normal course of business. Interested readers are encouraged to reorganize this information in the form of a SWOT analysis. In the academic business literature, competitor analysis is a sophisticated process in which the future goals, assumptions, and capabilities of competitors are analyzed with the aim of predicting a competitor’s response profile (11). A fully developed competitor analysis is beyond the means of most clinical laboratories, which are generally too small to conduct extensive systematic research about rivals. The following assessments are included in a formal competitor analysis.

Competitors’ Goals What are the business objectives of major competitors and potential competitors? Is the company most interested in generating returns on investment or sales growth? Is shortrun or long-run performance most important? What incentive systems are used for management and sales? Does the competitor have noneconomic values that form part of its culture and that help determine how it will behave? If the competitor is a business unit of a larger company, how important is the unit to the overall company strategy? Most hospital-based laboratories are part of not-for-profit hospital companies that have a distinctive culture. Emphasis is often placed on fulfilling a noneconomic social mission for which laboratory success is tangential. Volume of medical center activity is often expressed in “adjusted discharges”—a unit of activity that reflects the historical importance of inpatient care and the secondary consideration of outpatient and outreach efforts. From these two observations, it can be predicted that most hospital companies will not vigorously defend outpatient laboratory operations that are under attack by competitors.

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Competitors’ Assumptions Organizations operate with assumptions about their industry and their place within the industry. One laboratory’s managers might believe (correctly or incorrectly) that the laboratory enjoys greater physician loyalty than its rivals. Another laboratory manager might believe (correctly or incorrectly) that the testing industry will rapidly integrate genomic testing to the exclusion of more traditional microbiological assays. These assumptions will govern competitors’ behavior. When rivals’ assumptions are incorrect, they create business opportunities. A laboratory that overestimates its customer loyalty will be vulnerable to discounts or incentives. A laboratory that overestimates the importance of offering broad geographic access to managed-care plans may lose business in a regional market in which a smaller rival has partnered with a physician group or a group of hospitals. Competitors’ Capabilities The strengths and weaknesses of a firm determine its ability to meet its goals. A weak rival is unlikely to represent a competitive threat even if its goals overlap with goals of one’s own enterprise. An assessment of a rival laboratory’s strengths and weaknesses includes a study of its testing menu and other services it provides clients, the number and loyalty of physician and institutional customers, marketing capabilities, operational skills (diagnostic speed and accuracy, specimen logistics, and informatics), patents and proprietary research to which the rival has access, cost structure, financial strength (cash flow and access to capital), and organizational strength (reputation, clarity of purpose, management talent, and special structural characteristics that might make it subject to different regulatory pressures). Interactions of Competitors In a market operating with what economists term perfect competition, the actions of one producer do not influence the actions of other producers. If one farmer stops growing corn, the price of corn does not rise. However, in the clinical laboratory industry, which has significant barriers to entry and relatively few direct competitors in a given community, the actions of one party are likely to precipitate reactions from rivals. Competitive situations in which actions precipitate reactions are described by game theory, a branch of mathematics pioneered by John von Neumann, Oskar Morgenstern, and John Nash. The theoretical and economic underpinnings of game theory are complex and beyond the scope of this chapter. However, the wise business strategist will consider likely reactions of rivals before making a change in the marketplace. Every move in business has the potential to shift the competitive equilibrium. Armed with an understanding of a rival’s goals, attitudes toward risk, and historic behavior, a strategist may be able

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to predict his or her rivals’ responses to moves the firm might make. For example, if a competitor has recently removed a phlebotomist from one of its client’s offices, what will be the competitor’s reaction to your placing a phlebotomist in the office to woo the client? Will the competitor retaliate by scrapping a joint venture with your laboratory, or will the competitor’s loss of volume from the client be the straw that breaks its back in a local market and cause it to exit?

Conclusions An understanding of a laboratory’s and its competitors’ aspirations and capabilities prepares the strategist to identify the distinctive needs or customer groups that the organization can satisfy better than its competitors. Defining these groups and needs is the subject of the next section.

Strategic Positions in the Laboratory Industry What Are Strategic Positions? The term “strategic position” refers to an organization’s commitment to serve many needs of a specific group of customers or the specific needs of many customers. This section will describe generic types of strategic positions common in many industries and will then enumerate particular positions held within the clinical laboratory industry. The list of strategic positions that appears in this section is not exhaustive and should not discourage the development of creative new positions. In a competitive environment, the best strategic positions are often those that are off rivals’ radar screens. Types of Strategic Positions There is no single taxonomy of strategic positions. Porter has identified several types of strategic positions that successful organizations may develop (10, 11). Implicit in his discussion is the tenet that a single company cannot be all things to all people. Strategy involves choices and trade-offs. Variety-based positioning. Companies that offer only a single or narrow scope of service and perform the service exceptionally well or inexpensively demonstrate varietybased positioning. For example, Jiffy Lube International has chosen to offer only automotive lubrication services and does not perform automobile repair or general maintenance. The company has been organized to offer faster service at lower costs than rivals that offer a broader spectrum of services. Group-based positioning. When groups of customers have different needs, a firm can elect to serve many needs of a defined demographic group. Ikea has been organized to meet the furniture needs of young families who seek

style but lack resources. Ikea offers services that appeal to its target demographic, such as in-store childcare and extended hours. Costs are kept low by requiring customers to deliver and assemble their own furniture, a trade-off that the target customer is willing to make. Access-based positioning. Access-based positions arise when different groups of customers must be accessed in different ways. These differences may be due to geography or differences in the size of the customer pool. Carmike Cinemas targets customers in rural communities and small towns and has organized its operations around the constraints and demands of this market. Cost-based positioning. Competitors with lower production costs may be able to profit at market prices that leave other providers without earnings. As of this writing, Acer, a manufacturer of computers and other electronic devices, has lower production costs than its competitors and has lowered industry pricing to a level that allows it to profit while other firms are forced to exit the industry. Product differentiation–based positioning. Some producers, through marketing or other distinctive attributes, are able to convince purchasers that their product is superior to their competitors’ and thereby command a price premium. It can be argued that the Mayo Clinic enjoys this position in the market for certain elective clinical procedures. As with most firms that differentiate their product to obtain a price premium, the Mayo Clinic does not command a large share of the market for its hospital services.

Strategic Positions of Clinical Laboratories Diagnostic laboratories have sought a number of distinguishable market positions to differentiate themselves from rivals and defend their operations from competition (Table 31.4). Outpatient-centered testing. Several laboratories with national scope have organized themselves primarily to serve the testing needs of physicians operating in offices. These companies compete vigorously for exclusive managed-care contracts that allow them to become a “onestop shop” for the office practitioner who treats patients enrolled in a variety of insurance products. The large size of these companies allows testing costs to remain low and permits profitability despite the low payment levels offered by managed-care organizations. An extensive courier system and a sophisticated billing system that can handle the insurance requirements of different payors reinforce these companies’ strategic positions. These companies are also well positioned to offer electronic medical records (EMRs) and EMR interfaces to practitioners.

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Table 31.4 Sample strategic positions in the laboratory industry Outpatient-centered testing Exclusive contracts with multiple insurers Large volume to contain costs Blood collection and specimen pickup Reference-centered testing Specialized and esoteric tests Specimen logistics Professional support for referring laboratories Hospital-centered testing Support for inpatients and intensive care Participation in hospital planning committees Discipline-centered testing Niche markets serving a particular subspecialty Customized reports for specialists Community-centered testing Outreach by hospital laboratories to physicians on medical staff Multihospital core laboratory Centralization of routine testing by laboratories of a multihospital system Co-tenancy Shared ownership of esoteric laboratory by a group of hospitals Purchasing and contracting consortia

Reference-centered testing. A handful of laboratories provide reference testing that smaller hospital-based or regional laboratories cannot economically perform on their own. Successful competitors in this market manage complex shipping logistics, typically by air, and provide electronic interfaces to referring laboratories’ information systems. Professional support is provided to the staff of referring laboratories who are unsure which test to order or how to interpret results. Specialized software allows referring institutions to track the status of orders. Hospital-centered testing. Many laboratories have staked out strategic positions serving a hospital’s core patient population—inpatients, ambulatory surgery patients, and emergency department patients. These operations are designed to provide rapid turnaround time appropriate to high-intensity patients. Laboratory representatives serve on hospital patient care committees and are attuned to the special coordination and communication needs of this demanding patient population. The emergence of in-office laboratories, particularly in anatomic pathology, represents a variation on the hospital-centered model, with such laboratories confining their reach to patients seen in the office of a group practice. Discipline-centered testing. Specialized clinical laboratories have evolved to meet the particular needs of physicians within one medical specialty or the needs of one type of commercial concern. Dermatopathology laboratories, forensic testing laboratories, pharmaceutical trial testing facilities, and urological pathology laboratories provide

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specialized diagnostic skills required by a subset of laboratory purchasers. These organizations typify variety-based positioning; they may offer unique reporting formats appropriate to their customers, such as provision of reports to urologists that include serial prostate-specific antigen graphs alongside prostate biopsy reports. Community-centered testing. A number of in-hospital testing operations have expanded into the community outpatient market, serving a defined medical staff that sees patients in both the hospital and outpatient settings. These laboratories maintain tight connections with local physicians and often allow seamless access to old test results as patients move through the healthcare continuum. In one variant of this model, a for-profit company providing management expertise and capital enters into a joint venture with a not-for-profit hospital or local pathologists to provide community testing services. Multihospital core laboratory. Innovative hospital systems have created core laboratories where routine testing from several hospitals is performed. Outpatient testing from each of the participating hospitals or from a separate combined outreach operation is also processed within the core laboratory. This strategic position drives large volumes of testing into the core laboratory, lowering costs beyond levels that can be achieved in many other configurations. The large test volume permits the economical introduction of robotic equipment to handle repetitive testing and transport tasks. Rapid response laboratories remain in hospitals to serve the urgent testing needs of hospital patients. Cotenancy. The author is involved in an operation in which a group of not-for-profit hospitals collectively own esoteric testing services as tenants-in-common. This operation amounts to a shared cost center and provides hospital laboratories with governance control, pricing flexibility, and a cost structure that cannot be acquired from many reference-centered laboratories (12). Purchasing and contracting consortia. Purchasing and contracting cooperatives have evolved to provide clinical laboratories with more favorable relations with suppliers and payors. Although not performing testing themselves, purchasing consortia allow testing laboratories to obtain favorable pricing on analytical instruments and supplies. Contracting consortia allow testing laboratories to compete collectively for managed care contracts that require a geographic scope of service that individual members cannot offer on their own. In the author’s state of Michigan, Joint Venture Hospital Laboratories has allowed hospitalowned laboratories to acquire exclusive laboratory contracts for major health maintenance organization (HMO) insurers in the state (12).

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Conclusions The design of a business strategy is fundamentally the process of identifying a strategic position for an organization, informed by the underlying structure of the industry and knowledge of an organization’s and its competitor’s capabilities and proclivities. From the brief preceding discussion, the reader will appreciate that clinical laboratories have developed a wide variety of strategic positions to differentiate themselves in the market. We now turn our attention to implementing a business strategy. Sadly, managers too often content themselves with design and never move on to implementation. It is during implementation that strategy collides with operations and difficult trade-offs must be made.

Implementing the Strategy: Activity Fit What Is Activity Fit? Academicians who study businesses with robust strategies emphasize the importance of interlocking and reinforcing business processes that sustain the strategy. The activities of a company with a successful strategy must fit with one another and reinforce the strategy. For example, Southwest Airlines limits itself to short-haul, point-to-point flights between midsized cities and secondary airports. This activity frees the company from having to coordinate connections between flights or to transfer baggage between planes, which in turn reinforces another Southwest activity—15-minute gate turnaround of aircraft. The short gate turnaround time achieved by Southwest reinforces yet another activity—more frequent and more reliable departures. All of these activities—point-to-point flights, rapid gate turnaround, and more frequent departures—allow the airline to maintain a lower cost structure and reinforce its market position as the low-cost airline. Low ticket prices lead to higher demand, which increases the airline’s load factor (percentage of occupied seats) and supports its ability to offer more frequent departures. The operational activities of Southwest Airlines reinforce one another and make its business model more resistant to competitive pressure. A competitor that copies only one of Southwest’s business activities will not be able to emulate the whole. In Porter’s view, “fit locks out competitors by creating a chain that is as strong as its strongest link” (10). Milgrom and Roberts have studied successful manufacturers and found that they too use complementary manufacturing and inventory processes to defend their market positions (6, 7). Activity Fit Involves Trade-Offs A commitment to reinforcing business activities that sustain competitive advantage requires trade-offs. While the successes of Southwest Airlines have been widely commented

upon, we might also consider the many markets that Southwest has skipped over to maintain its strategic position. A traveler who wishes to fly first class will not choose Southwest. There are many cities that Southwest does not serve, and travelers who fly to these cities will select other airlines. Travelers who prefer to use travel agents will use other carriers. Southwest’s success in one arena excludes the airline from many other markets. Yet Southwest earns a return its larger rivals envy. Most hospital-based laboratories focus their activities around a small group of local physicians with whom they maintain close relationships. These laboratories strive to meet the broad testing needs of a narrow group of clients. Activities that fit with this strategy may be found in other departments of a hospital, which may be marketing radiology, cardiology, and other services to the same group of community physicians. The hospital-based laboratory that wishes to maintain its competitive advantage will look to other hospital departments for activities that reinforce its strategic position. For example, community physicians might be offered convenient electronic access to the hospital’s entire clinical data repository, which will contain radiology and consultation reports as well as laboratory results. Alternatively, a local laboratory and physician group can bid together for a managed-care contract that includes both physician and laboratory services. These activities would fit well with other activities that strengthen a hospital-based laboratory’s ties with community physicians. However, the fit of activities that optimizes a laboratory’s value to community physicians may not be suited to other strategic positions. Electronic access to a local hospital’s clinical data repository would not serve a laboratory seeking to service a statewide commercial contract, the reference testing market, a geographically dispersed group of dermatologists, or businesses in need of forensic drug testing. From a strategic perspective, the hospital-based laboratory that markets a broad bundle of services to local physicians should pass up the opportunity to market a more narrow set of services over a broad geographic expanse because a different set of interlocking activities will be required.

Failure of Strategy The best-laid strategy may fall short through bad luck or external developments that no strategist could reasonably foresee. Business authors, however, have identified four types of preventable errors (described in the following sections) that account for the majority of strategic failures.

Straddling The term “straddling” describes an attempt to hold several strategic positions at once. This failure to focus has also been called “mission creep” and “stuck in the middle.”

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The business consequences of straddling may be severe. Continental Airlines attempted to emulate some of Southwest’s business practices by offering point-to-point service with frequent departures, low pricing, and short gate turnaround. It maintained its position as a full-service airline, however, using travel agents to book flights and assign seats, operating with a mixed fleet of aircraft, and allowing interflight baggage checking. The results were severe: late flights and lost baggage generated several thousand complaints per day. Payment of commissions to travel agents prevented the airline from competing on price. Ultimately, the new service was withdrawn. Other examples of straddling may be found closer to the laboratory industry. Premier, a large purchasing cooperative for hospitals, developed a number of strategic partnerships with suppliers of goods and services. The perception of conflict of interest has resulted in negative publicity for Premier and pushback from its hospital owners, significantly reducing Premier’s size and market power (16). Quest Diagnostics has attempted on a number of occasions to manage hospital-based laboratories, but in this author’s opinion the difficulty of straddling between operations suited for the commercial market and those required for hospital-based operations has resulted in the abandonment of several joint ventures between Quest and hospitals. The adoption of Internet laboratory portals by many community-based laboratories may represent another case of straddling. Laboratory portals that do not include radiology and other ancillary results represent a better strategic fit for a company that offers only laboratory services. Although many examples of straddling are readily identified in retrospect after a venture has failed, it should be noted that straddling may not be easy to recognize in its early stages. The concept of leveraging existing competencies and current market position to enlarge a business is an accepted competitive practice. Where leveraging ends and straddling begins can be difficult to determine. This dilemma is familiar to anyone who has attempted to rapidly cross a river by stepping on rocks spaced some distance apart. How far is too far may be clear only in hindsight.

Growth Trap An overemphasis on growth can cause an organization to lose its competitive advantage. The unfocused pursuit of growth causes managers to add features and services without first considering whether they fit with a firm’s existing strategy and set of competencies. Often, new types of customers are pursued when an organization has little distinctive ability to serve the new customers. In the testing industry, the occasional community-centered laboratory has attempted to acquire managed-care contracts on its own without partnering with other laboratories or other providers. These facilities have little chance of succeeding

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in the managed-care market on their own. A few hospitalcentered laboratories have added expensive forensic or molecular testing operations without acquiring the distribution channels and client services, billing, and logistics infrastructure that are necessary to support these services. These operations will also fail. Authors who study strategy advocate that firms seek deep penetration of markets in which they already have a distinctive presence, rather than “slugging it out in potentially higher growth areas where a company lacks uniqueness” (10). Henderson points out that “chasing market share is almost as productive as chasing the pot of gold at the end of the rainbow. You can never get there. . . . If you are in business, you already have 100% of your own market” (3).

Profitability Trap Clayton Christensen has documented the difficulties experienced by some competitors that focused on their most profitable (and typically most demanding) customer segments (2). Successful firms have a tendency to embrace the value system of profitable customers and seek to add features to products and services that will appeal to this segment. Christensen has documented that these firms sometimes ignore what appear to be inferior technologies that are only attractive to less profitable customer segments. As the inferior technology improves, however, it moves “upstream” in the value chain and becomes attractive to more customers, eventually disrupting entire industries such as the makers of 8-inch high-capacity disk drivers or owners of large steel mills. It is not difficult to imagine the disruptive potential of miniaturized, portable microbiology testing instruments that exploit nanotechnology, microfluidics, and molecular diagnostic techniques. High testing costs and a limited spectrum of target organisms might initially confine such instruments to low-profitability, low-volume settings where turnaround time and portability are particularly valuable (such as in detecting group B streptococci immediately before delivery). As the technology improves, the convenience and speed become combined with a lower price point and larger repertoire of detectable organisms, eventually displacing much of the work currently performed by traditional microbiology laboratories. It is extremely difficult for a company to embrace a disruptive technology before the technology appeals to the company’s most profitable customer segments. The strategic implications of this vulnerability are obvious. Hubris Because strategic initiatives are a deliberate perturbation of the competitive equilibrium and because strategic discipline requires explicit trade-offs that must permeate an organization, strategy is best championed by confident high-visibility leaders with the ability to persevere amid

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distractions. Excessive confidence, however, may also undermine disciplined analysis and result in a loss of focus. There is evidence that corporate acquisitions that are preceded by favorable business press about the acquiring company’s chief executive officer are less likely to be successful than acquisitions made in a publicity vacuum (5). Accordingly, hubris must be added to our short list of reasons that strategies frequently fail.

Summary Business strategy is about equipping an organization to thrive in a competitive market. In competitive markets, producers tend to emulate one another until their products and services become indistinguishable. This process of commoditization benefits consumers through lower costs and higher quality but minimizes profits for producers. Strategy represents a deliberate effort to resist commoditization and maintain an organization’s competitive advantage by defending a distinctive position in the market. A successful strategy is a creative approach that is shaped by the particular industry in which an organization operates and the particular competitors it faces in the marketplace. Business strategy complements but is different from operational efficiency. Both produce competitive advantage. Many authors believe, however, that strategy is more likely to produce sustained competitive advantage than operational effectiveness, because rivals can more easily emulate operational improvements than good business strategy. Business strategy is informed by an understanding of the structure of the industry in which an organization competes. It is further advanced by a competitor analysis in which the capabilities and proclivities of individual competitors are analyzed. An essential element of business strategy is the selection of a strategic position that defines the particular customers or needs that an organization seeks to serve. Finally, a strategy is maintained by the implementation of interlocking activities that drive the company toward its strategic position and that are collectively difficult to emulate. There is no consensus about how good strategies originate. Some argue for a defined strategic planning process in which a formal, written strategic plan is developed following input from a variety of stakeholders. Others believe that the creative insight of a small group of individuals is more likely to produce a successful strategy. Thus, ideas about how to best undertake strategic planning are varied and debated, even though the importance of a wellarticulated strategy is widely recognized. Strategies commonly fail because organizations lose their focus and attempt to emulate competitors. This may be due to straddling—an attempt to assume several strategic positions concurrently—or due to the unbridled

pursuit of growth. Failure may be due to excessive focus on the needs of the most demanding customer segments or to leadership hubris. In the clinical laboratory industry, a number of distinctive strategic positions are identifiable. These positions allow focused laboratories to maintain a competitive advantage over rivals in a segment of the testing industry the laboratory claims as its own, while ceding the rest of the market to other competitors. KEY POINTS ■ Business strategy is about equipping an organization to thrive in a competitive market. Strategy is distinct from the pursuit of organizational efficiency. Both produce competitive advantage, but neither stands on its own. ■ Strategy requires that an organization pursue a defined strategic position, focusing on meeting many needs of a particular set of customers or particular needs of many customers. In the clinical laboratory industry, laboratory competitors have staked out several distinguishable strategic positions. ■ The differences between an organization and its rivals are the source of an organization’s competitive advantage and the basis of its strategy. Emulating rivals usually weakens an organization’s competitiveness. ■ Strategy requires trade-offs. Organizations are not well served by pursuing several strategic positions concurrently or by adopting capabilities that are not central to maintaining the organization’s strategic position. ■ An effective strategy is maintained by interlocking business capabilities that reinforce an organization’s market position and that are collectively difficult to emulate. If rivals copy only one or two of these capabilities, they will still remain at a competitive disadvantage. GLOSSARY Activity fit Interlocking and reinforcing business practices that define and defend a strategic position. Commoditization The process by which a product provided by one firm becomes indistinguishable from products provided by other firms. Competitive advantage Qualities that allow a firm to outperform its rivals consistently. Competitor analysis Assessment of the capabilities, goals, assumptions, and strategies of competitors, with the aim of predicting competitor behavior. Economy of scale The reduction in the cost to produce a unit of product when the level of production increases. Straddling The attempt to execute several distinct business strategies or to hold several strategic positions at once.

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Strategic planning An organized process for developing a business strategy. Strategic position Serving a particular set of customers or meeting a defined set of needs, usually in a manner that is unique. Strategy Quest for sustainable competitive advantage by means of analysis of industry structure and competitors, identification of a strategic position, and adoption of business practices that defend that position. SWOT An abbreviated strategic analysis that is based on assessment of an organization’s own strengths and weaknesses and external opportunities and threats.

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6. Milgrom, P., and J. Roberts. 1991. The economics of modern manufacturing: technology, strategy, and organization. Am. Econ. Rev. 80:511–528. 7. Milgrom, P., and J. Roberts. 1995. Complementarities and fit: strategies, structure, and organizational changes in manufacturing. J. Accounting Econ. 19:178–208. 8. Porter, M. E. 1979. How competitive forces shape strategy. Harv. Bus. Rev. March–April:2–10. 9. Porter, M. E. 1987. From competitive advantage to corporate strategy. Harv. Bus. Rev. March–April:117–150. 10. Porter, M. E. 1996. What is strategy? Harv. Bus. Rev. Nov.–Dec.: 61–78.

REFERENCES

11. Porter, M. E. 1998. Competitive Strategy: Techniques for Analyzing Industry and Competitors. The Free Press, New York, NY.

1. Campbell, A., and M. Alexander. 1987. What’s wrong with strategy? Harv. Bus. Rev. Nov.–Dec.:42–51.

12. Smart, J. 2002. Hospitals in Michigan build unique shared laboratory. Dark Rep. Oct. 28:1–6.

2. Christensen, C. 1997. The Innovator’s Dilemma: The Revolutionary Book that Will Change the Way You Do Business. Harvard Business Press, Cambridge, MA.

13. Teisberg, E. O., M. E. Porter, and G. B. Brown. 1994. Making competition in health care work. Harv. Bus. Rev. 72(42):131–141.

3. Henderson, B. 1989. The origin of strategy. Harv. Bus. Rev. Nov.–Dec.:139–143. 4. Kim, W. C., and R. A. Maugorgne. 2002. Charting your company’s future. Harv. Bus. Rev. June:76–83. 5. Malmendier, U., and G. A. Tate. 2008. Superstar CEOS. NBER working paper no. w14140. http://ssrn.com/abstract;eq1152681 (last accessed September 14, 2012).

14. Terry M. (ed). 2010. Lab Industry Analysis 2010: Test Volumes, Revenues, and Category Leaders. Washington G-2 Reports, Peterborough, NH. 15. Valenstein, P., A. Praestgaard, and R. Lepoff. 2001. Six year trends in expense, productivity, and utilization of seventy-three clinical laboratories. Arch. Pathol. Lab. Med. 125:1153–1161. 16. Walsh, M. W. 2002. More hospitals change the way they buy drugs and supplies. The New York Times. December 28.

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APPENDIX 31.1 Websitesa Alliance for Nonprofit Management http://www.allianceonline.org/ The alliance is the professional association of organizations devoted to improving the management of nonprofit organizations. Their website provides links to strategic planning resources. Centers for Medicaid and Medicare Services http://www.cms.gov This division of the U.S. Department of Health and Human Services maintains an extensive website that provides information about regulations pertinent to the laboratory industry. These regulations shape the competitive landscape and limit the strategic options of competitors. a

Last accessed September 14, 2012.

College of American Pathologists http://www.cap.org/ The College of American Pathologists Laboratory Accreditation Program represents the largest laboratory accreditation program approved under the Clinical Laboratory Improvement Amendments. The CAP program and its standards for accreditation are contained in the CAP website. A complete list of accrediting organizations approved under CLIA can be found at http://www.cms .gov/Regulations-and-Guidance/Legislation/CLIA/index.html. Securities and Exchange Commission http://www.sec.gov/ This website provides access to the EDGAR database of company filings. Quarterly and annual statements of publicly traded laboratory companies discuss company strategy and financial performance.

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APPENDIX 31.2 SWOT Analysis (Strengths, Weaknesses, Opportunities, Threats) To illustrate SWOT analysis in practice, the current position of a hypothetical but fairly characteristic clinical laboratory will be discussed (Lab A), along with its major competitors. This illustration contains the typical snippets and fragments of information that all managers receive about their competitors and their own operations during the normal course of conducting business. As an exercise, the reader is encouraged to extract essential competitive information from the narrative that follows and to list strengths, weaknesses, opportunities, and threats in a 2 × 2 SWOT table of the form illustrated in Fig. 31.1.

INTERNAL ASSESSMENT Lab A processes 700,000 billable tests per year and is located in a not-for-profit hospital in a metropolitan area of 300,000 people. The organization has an active outreach program that accounts for 50% of its total test volume.

Strengths Lab A employs managers who enjoy personal relations with managers in other hospital departments. The pathologists affiliated with Lab A are members of the local hospital medical staff and market to their colleagues, many (but not all) of whom are the laboratory’s outreach customers. A recent hospital-sponsored satisfaction survey demonstrated a moderately high level of satisfaction with laboratory services—86% of physicians and nurses considered Lab A performance to be “highly satisfactory” or “excellent.” Lab A staff are well represented on hospital committees and are aware of other departments’ needs for special testing services (rapid myocardial infarction testing in the emergency department and intensive care units, for example). Lab A transmits test results to a hospital clinical information system that is used to treat inpatients. Many of the laboratory’s customers are located in a physician office building constructed by the hospital, in which the laboratory has placed a convenient blood drawing station. The hospital is contemplating the construction of a second office building that may bring in more business. The laboratory contracts with reliable outside couriers to serve members of the medical staff with nearby offices. The analytical equipment in chemistry and hematology is used for both inpatient testing (which is run mostly during the day shift) and outpatient testing (which is run mostly during the afternoon shift), which lowers fixed costs. Patients who lack insurance and financial resources are eligible for the hospital’s charitable care program, which absorbs the expenses of laboratory testing.

Weaknesses Because Lab A does not operate its own courier service, it has difficulty adding courier routes on short notice. Compared to commercial laboratories, the relatively small size of Lab A leads to higher testing costs. During the evenings, when outreach laboratory work arrives, stat testing from the intensive care units sometimes interferes with workflow. Although the laboratory has its own information system, all billing is done through a

hospital-operated billing system. This system does not handle front-end advanced beneficiary notice and medical necessity checking and does not offer flexible pricing schedules that would allow the laboratory to match competitors’ pricing. The hospital does not participate in TrueCare, the second largest preferred provider organization in the state; when physicians send their TrueCare patients to the laboratory, the patients are billed directly, which disturbs many referring physicians. Although the hospital participates in the state’s largest HMO, BlueChoice, the HMO has carved out laboratory services to a commercial laboratory that offers statewide coverage. The local chapter of the American Red Cross increased the cost of blood products by 18% two months ago, after the laboratory’s expense budget was approved. As a result the laboratory will exceed its budget, which means that laboratory management will not be able to fill the open phlebotomy position in the physician office building or purchase a blood irradiator. Because of declining professional reimbursement, the pathology group affiliated with Lab A has decided to operate its own anatomic pathology laboratory for nonhospital patients. Lab A’s marketing director was told by four busy pulmonologists in the neighboring community that they will not use Lab A because the hospital that owns Lab A cancelled their contract to provide intensivist services to the intensive care unit. The hospital’s chief operating officer has indicated that the hospital’s big push for the new fiscal year will be strengthening the hospital’s cardiovascular surgery program; he wants the laboratory to open a phlebotomy site in the new ambulatory heart center, even though projected demand for laboratory tests at this site will be low.

EXTERNAL ASSESSMENT An external assessment begins with the identification of specific rivals that compete with the organization for business. In this example, we will limit our external assessment to two hypothetical rivals—a large commercial laboratory that operates in the same community as our hospital laboratory (OmniLab) and a second hospital laboratory that is part of a seven-hospital system in the process of building a core laboratory (Lab B).

Opportunities Word-of-mouth indicates that Lab B is likely to be spending significant effort during the next two years planning its core laboratory and installing a robotic system to reduce costs. Lab B has left its outpatient marketing director position open while it recruits a new manager for its laboratory information and robotics system. Lab B has also pulled a phlebotomist from a physician client’s office. The physician is now offering to change to any laboratory that provides him with a phlebotomist. Lab B is part of a consortium that is bidding for the BlueChoice laboratory contract in the next calendar year. There may be an opportunity for Lab A to join this consortium. OmniLab recently closed a phlebotomy station in the community, presumably due to slack demand. Wages paid by OmniLab are below those paid by Lab A, and two (continued)

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APPENDIX 31.2 SWOT Analysis (Strengths, Weaknesses, Opportunities, Threats) (continued) technologists were recently lured away from the competition’s testing center 30 miles away. There are rumors that OmniLab’s testing center may be closed, which will mean that OmniLab will have to transport specimens to its next nearest testing site, across the state border.

Threats Lab B has hired two dermatopathologists and appears to have a stranglehold on dermatology biopsies in the community. Hospital administrators overseeing Lab B wish to partner with a laboratory management company that has significant interest and experience in the outreach business, a prospect that would increase competitive pressure in the local market. Lab B participates

in TrueCare and therefore has access to patients who cannot be served by Lab A. OmniLab recently interfaced its computer system with the practice management system used by a group of five family practitioners; office staff no longer have to copy insurance information onto test requisitions and can have advanced beneficiary notices printed automatically at the time of ordering. The practice’s office manager is telling other family practitioners in the community about the labor she hopes to save. In addition, OmniLab has started making test results available to physicians and patients over the Internet. A group of gastroenterologists who are important clients of Lab A want to know why Lab A cannot offer the proprietary ultrasensitive quantitative hepatitis C test that OmniLab offers.

32 Introduction Constraints on Managerial Function The Cardinal Rules for Optimizing Performance Get It Right at the Outset • Expect Cooperative Behavior and Best Possible Performance • Lead by Example • Involve All Members of the Team • Perceived Fairness Is More Important than Rigid Equality • Maintain Communication in All Directions • Keep Your Eyes and Ears Open • Act Quickly and Decisively • When Problems Surface, Involve the Laboratory Manager Immediately;  Involve Human Resources as Appropriate

Classic Situations that May Interfere with Optimal Performance

Human Resources at the Local Level: An Important Component of Financial Management† Washington C. Winn, Jr., Fred Westenfeld, and Michael R. Lewis

The Underperforming Employee • The Overperforming Employee • The Intrusion of Personal Issues • The Underground Troublemaker • The Cabal • Weakness at the Top

OBJECTIVES To establish the importance of managing personnel resources effectively at the individual unit level as well as at the institutional level To review the constraints on the ability of a manager to lead his or her crew optimally To review some important tools for getting the most out of employees To consider some of the classic problems that may face a unit manager To provide some specific examples of ways that a manager may get the biggest return from the investment in personnel resources that the institution has made

Practical Issues in Utilization of Personnel Resources Skill Mix of Personnel • Cross-Training and Rotation • Mix of Employment Arrangements • Coverage of Vacations, Holidays, and Routine Shifts • Use of Overtime

Summary KEY POINTS GLOSSARY REFERENCES

If my boss calls, be sure to get his name. Anonymous ABC executive, quoted by William S. Rukeyser, 1986

T

he two most important manageable components of any business enterprise are the costs of personnel and materials. The relative importance of these two factors depends on the business of the organization. A highly automated producer of expensive physical products will have very high materials costs and lower personnel costs. In contrast, for a service industry that produces no physical products, the cost of materials will be minimal, but the highly trained, competent workers who are required to run a successful enterprise will probably come at a high cost. In the laboratory industry, managers are faced with a difficult situation—an information product for which a highly trained workforce must operate expensive equipment and reagents. On the other hand, the fact that both sides of the equation are important means that there are opportunities for savings in two very different managerial areas. In this chapter, we will concentrate on †

Clinical Laboratory Management, 2nd Edition Edited by L. S. Garcia ©2014 ASM Press, Washington, DC doi:10.1128/9781555817282.ch32

A significant portion of this chapter was originally written by Dr. Washington Winn, our beloved colleague, who passed away on July 3, 2011. His contributions to this book and the medical microbiology world have touched so many. Dr. Winn’s incredible knowledge, dedication to the field, sense of humor, and friendship are sorely missed by us and by his many friends and colleagues (16). We dedicate this chapter to Dr. Washington Winn. We miss you, Wash, and we will do our best to uphold the high standards that were so clearly a part of everything you did.

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personnel costs because they are the ones over which a manager can exert the greatest influence. Although careful negotiation of contracts and searches for alternative suppliers can reduce the expense of materials, these costs are even more heavily driven by volume than are the salaries of workers. Table 32.1 summarizes selected examples of manageable and unmanageable costs. It must be recognized that there are cost components that are beyond a manager’s control. Examples of such unmanageable components are sickness, pregnancy, and military conscription of employees. Although these factors cannot be avoided and often cannot be predicted, their consequences can usually be managed within the budget that has been approved. For an organization to be successful in today’s rapidly evolving healthcare environment, provisions for such exigencies in the budget process must be made if at all possible. Strong leadership at all levels of the organization is essential if costs are to be kept in line with institutional plans and goals (8). The many theories and practical approaches that are useful for good management have been covered in other sections of this book and in a variety of excellent books on management (1, 10, 12, 13). In this chapter, we will attempt to address some practical issues that face the manager on the front lines. There is no “correct” way to deal with the problems that come up in daily life, so this discussion will reflect our prejudices and experiences. A frontline manager must function within the rules established by the organization, as well as in accordance with pertinent state and federal laws. The first and most important task, therefore, is to become familiar with the personnel policies and procedures of your organization. Familiarity with basic tenets of employment law (e.g., the Fair Labor Standards Act) is advisable, as is knowing whom to contact in human resources when specific questions arise. In addition, it is critical to understand the written and unwritten culture both of the organization as a whole and of the smaller unit to which you belong, presumably the laboratory or one of its subunits. Most organizational rules and regulations are open to interpretation. A manager must understand that flexibility in interpretation Table 32.1 Manageable and unmanageable cost components Manageable

Unmanageable

Number of employees Skill mix of employees

Employee fringe benefits Legal or institutional limitations on permitted duties of employees Injury, illness, pregnancy, and military duty Volume requirements for materials Indirect costs assessed by institutional management

Scheduling and cross-training of employees Competitive bidding and selection of cost-effective materials Direct costs of operation

of the rules is part of the job. Understanding the culture of the organization, however, will help you avoid going out on a poorly supported limb only to find out there is nobody behind to extend a helping hand. At the start of a new job, it is useful to look around and identify those managers who appear to have mastered the system. They can serve as invaluable aids until you gain enough experience to become a resource for subsequent neophytes. Even an experienced manager must maintain regular contact with superiors. There should be a sixth sense about the possibility of trouble, depending on the nature of the problem and the nature of the employees involved. Areas that are controversial, such as repetitive stress injuries, and employees who are considered difficult or potentially litigious should elicit early rather than late discussions with superiors. When an issue begins to manifest itself, it is absolutely essential that both superiors and institutional contacts in human resources be involved. The most valuable manager is the one who takes the initiative in dealing with problems without burdening superiors unnecessarily yet keeps upper-level managers in touch with what is going on.

Constraints on Managerial Function The first potential constraint on a manager is implied in the introduction to this chapter. If upper-level leaders lack vision, steadfastness, and consistency, it may become extremely difficult or even impossible for subordinates to do their jobs (4, 7). The higher up in the organization the problem extends, the greater the odds against correcting the problem quickly. The manager in this situation has only two options: to do his or her best with the tools available and/or to look for a position in another organization. This may also be the case when confronted with inadequate administrative support in the finance or human resources domains, an inability to employ an appropriately qualified staff, and/or unworkable limits on allocated hours (“head count”). The presence or absence of a unionized workforce will dramatically affect the way a manager interacts with workers. Depending on the quality of labor-management relationships, a unionized workforce is not necessarily a constraint on managerial function, though unionization adds a layer of complexity that may prove unnecessary in an organization that has policies and provisions that support staff members and foster a positive working relationship. The challenges are often substantial with or without a union representative, but the rules may be very different in the two situations, and the manager must constantly keep the specifics of the union contract in mind. We have never worked with a unionized workforce, so we have no personal experience from which to draw. We do suspect, however, that the talented manager will be successful in either situation and that the marginal manager will struggle in each.

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Finally, there may be significant constraints placed on a manager by the history and culture of the unit, and perhaps by the capabilities of the employees. In this case, however, the appropriate way to view the situation is as a challenge rather than a constraint. Given support from above, a capable manager should be able to work through any difficulties that may detract from optimal function of the unit (Table 32.2).

The Cardinal Rules for Optimizing Performance In very simple and straightforward terms, following the biblical Golden Rule by all concerned is the surest way to motivate employees. A manager must ask whether subordinates are being treated the same way he or she wants to be treated by superiors. Among the employees, it is obviously in everyone’s best interest if cooperative activity is the order of the day. Staff members who feel that they are making strong contributions to the goals of the department will generally be more motivated. It is important that the manager reminds himself or herself daily to act in a manner promoting a positive work place, to the extent that specific circumstances allow. If the manager can promote development of staff self-confidence and self-respect, this will go a long way toward creating an environment of constant learning and improvement (2).

Get It Right at the Outset A manager will be presented with a group of employees who were selected by previous incumbents. Unless the workforce is totally ossified, however, there will be turnover. When that happens, the new manager has an opportunity to influence the tone of the laboratory unit. Technical competence is obviously an important consideration in a production worker, and a certain base level of ability is essential. From years of experience, however, we are convinced that an indefinable characteristic called “attitude” is even more important. Quoting a well-known leadership expert, Michael Henry Cohen, “Hire for attitude, train for skill” (3). The team player who hits singles consistently and furthers the position of the organization will, in the long run, be far more valuable than the flashy home run hitter Table 32.2 Constraints on unit managers Quality of upper-level management Adequacy of financial and accounting support Adequacy of human resources support Quality of work force available Quantity of allocated hours Unionized workforce Past practices (culture) of the unit

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who denigrates fellow workers. Often that slugger is, in reality, not so competent as the hyped self-image would make one think. One of the most difficult managerial decisions is to defer hiring the ready applicant if the right candidate is not immediately available. In the long run, however, it pays to wait. The challenge is to convince coworkers of the need to continue the search. If a mistake is made in the initial hiring decision, it is critical to recognize the problem during the evaluation or trial phase that is used by many organizations. A divorce is always easiest when the partners have not been married very long.

Expect Cooperative Behavior and Best Possible Performance If the expectations are clear, it will be impossible for anyone to plead ignorance (9). Most people respond to high expectations. If nothing else, expecting less is likely to produce less. Expecting the best may not be easy for the manager. It is entirely too easy to make value judgments about individuals and to expect only those things that are implicit in the assumption. Moving beyond initial prejudices, however, is an early step toward success. Some of the best leaders, colleagues, teachers, and mentors we’ve known were the most demanding of excellence. Lead by Example Employees will adopt the outlook and habits of their manager, just as children emulate their parents. If workers are expected to pitch in and work collaboratively to get the work done, they must see their supervisor doing the same thing. Supervisors must “roll up their sleeves” and work in the trenches as needed. It is important to remember, however, that good habits do not come equally easily to everyone. Some will take more encouragement and coaching than others (5). Involve All Members of the Team Most work groups consist of individuals with differing backgrounds and talents. It will not be possible for everyone to pitch in on every project or in every way. There should be an opportunity, however, for all to contribute their abilities to make the unit function optimally. Even those individuals who find it most difficult to excel should be challenged. If any employee is not given the opportunity to do his or her best, there is a risk that the individual will feel undervalued or inferior and that colleagues will feel that they have a shirker in their midst. The reluctant or recalcitrant employee will require special attention and a firm, but gentle, insistence on participation. On the other side, any employee who feels taken advantage of will require gentle counseling to see that, in fact, everyone is pulling an appropriate load (5). Good managers learn over time to sort out the strengths of their staff and use them accordingly.

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Perceived Fairness Is More Important than Rigid Equality It is impossible to interact with each individual in the same way all the time, although every effort should be made to be as fair and consistent as possible. Circumstances change, and individuals vary in their needs. Judgment is essential when applying rules and regulations to a specific situation. The essence of leadership is making everyone feel valued and a part of the process (15). Maintain Communication in All Directions It is extremely important that subordinates feel comfortable talking to each other and to their supervisor without fear of retribution. The best way to prevent rumor and innuendo is to avoid secrets by facilitating open discussion. Most importantly, free interchange of ideas and concerns is the best way to quash the development of cliques, the most destructive phenomenon in any group. If a topic cannot be discussed because of institutional strategy or employee confidentiality, it may be possible to indicate that there are constraints but that full information will be made available at the first opportunity. Managers and supervisors should be seen regularly out in the open, mingling with staff, not tucked away in their offices. Communication should naturally proceed in multiple directions. It is just as essential that the lines of communication upward be free and clear as that lateral and descending channels be protected. Keep Your Eyes and Ears Open The recommendation to keep your eyes and ears open is a companion to the one above. The best way to detect disconnects in the communication network is to observe and listen closely in the course of going about the normal routine of

daily business. Body language is as important as speech in giving the alert manager clues to incipient problems. Physical proximity to the activity hub is key for the manager, as is regularly leaving the office area to mingle with staff.

Act Quickly and Decisively The best way to turn a brewing crisis into one that has boiled over the top of the pot is to ignore it. Action need not be manifested by confrontation. On occasion, judicious temporizing may reduce the heat sufficiently to abort the overflow, but unless the basic problem is addressed, a recurrence is guaranteed. When Problems Surface, Involve the Laboratory Manager Immediately; Involve Human Resources as Appropriate As discussed above, the art of management includes knowing when to involve superiors in a problem. Alerting upper-level management to a potential difficulty does not necessitate their involvement. In fact, the better the interaction, the more likely a manager will be left alone to solve the problem. Human resources personnel can be excellent advisors regarding the handling of problematic situations. Once a potentially serious problem has been identified, it is important to seek the advice and input of your human resource colleagues. Other experienced managers and supervisors can also serve as excellent mentors. Where personnel actions are possible, countermeasures, including legal challenges, are also possible. Involving experienced colleagues may help mitigate any repercussions. Table 32.3 provides a summary of cardinal rules of personnel management and potential consequences of breaking them.

Table 32.3 The cardinal rules for optimizing performance and possible consequences of breaking them Cardinal rule

Potential consequences

Get it right at the hiring stage

An underperforming employee or troublemaker who will consume managerial resources Employees who are not so inclined will not feel constrained to modify behavior “If gold ruste, what shal iren do?”—Geoffrey Chaucer describing the Parson in The Canterbury Tales A solution that is perceived as imposed may be less readily accepted A decision with unpleasant consequences will be better received if perceived as fair Without communication, problems will arise and proliferate Brewing problems may boil over if not recognized early Matters are likely to deteriorate if not addressed forthrightly Support in a difficult situation will be more difficult if your superior is not prepared A problem that escalates will be more difficult to manage if your support system is not activated early

Expect cooperative behavior Lead by example Team involvement Perception of fairness Open communication Eyes and ears open Act quickly and decisively Involve superiors Involve institutional human resources

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Classic Situations that May Interfere with Optimal Performance Some classic personnel situations are described in Table 32.4 and discussed in the following sections.

The Underperforming Employee The first challenge in dealing with an underperformer is to understand why the employee is not reaching his or her potential. If there is a lack of confidence, counseling should be directed at boosting self-esteem. Technical confidence can be advanced by successfully achieving specialty certification and should be considered for those who are interested. Encouraging involvement in a special project may be a useful tack. If the problem is boredom, once again an additional challenge may be useful. Teaching and/or presenting interesting cases, new information, reviews of proficiency testing specimens, technical advances, and meeting summaries are a good way for staff to gain knowledge and confidence in their abilities. If, on the other hand, the employee has tired of the job or was never truly committed, the direction of counseling may be toward an honest and critical evaluation of career opportunities and challenges. In any event, thorough documentation must be kept throughout the period of evaluation. The Overperforming Employee It may seem strange to consider an overperforming employee a problem. In most situations, of course, the response should be to encourage the star to attempt ever greater feats. However, when the employee is capable of work beyond that defined in the job description, or is limited by official rules based on paper qualifications (degrees and/or licensure), a difficult conundrum arises. Should the employee be limited strictly to the tasks defined in the job description? That course may well result in a bored and frustrated employee who will seek a job that is more challenging. The other option is to allow the employee to advance to the limits of intellectual ability rather than bureaucratic guidelines. The result may be an employee who

is enriched cerebrally by the expanded experience but not monetarily due to the salary restrictions of the job description. It is an exceptional individual who does not eventually resent colleagues who do the same tasks, perhaps less well, for significantly higher pay. The decision as to which road to take must be guided by the rigidity of institutional or union rules, regulatory limitations, and by frank and open discussion with the employee. Those discussions should not be one time only but should continue to ensure that resentment does not arise.

The Intrusion of Personal Issues One of the potential causes of friction in the workplace is carryover from previous experience, either on the job or outside. If a manager senses that personal antipathy may be at the root of a problem, or if that information is volunteered, the response should be the same. The only acceptable behavior in the workplace is collegial or at least tolerant. Past personal experiences must be parked at the door each day. Rarely, the problem is more remote, the result of a perceived similarity of a coworker to someone with whom the employee has had a previous negative interaction. If it is possible to separate the parties physically, lack of interaction may solve the problem. Should separation not be possible, coaching and documentation should occur, after which transfer or resignation may be the only alternative for an employee who cannot exert self-control. The Underground Troublemaker A very difficult problem is the employee who stirs up trouble surreptitiously—outside of work, on breaks, or in the hallway. Usually the promotion of cliques is the tactic chosen. It is a recalcitrant problem because it is underground, and the fomenter will usually deny such activities. The only recourse of the manager is to counsel the disruptive employee and deal with the problems that arise. Clear expectations must be delineated, and the importance of teamwork emphasized. If the employee cannot be induced to join the team, an isolation strategy

Table 32.4 Classic personnel situations Situation

Necessary action

The underperforming employee

Identify the reason for the failure to reach potential and tailor counseling accordingly. Channel energy in productive ways. Watch for the potential consequences of performance at a level above pay grade. Attempt to convert the employee to productive behavior. If unsuccessful, attempt to isolate the troublemaker. The single troublemaker magnified. Break up the clique if possible by reassignment or introduction of others into the group. Same approaches as for lower-level personnel but with more urgency.

The overperforming employee The underground troublemaker The cabal Weakness at the top

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may be adapted. With patience and care, eventually other employees will see what is going on. It is particularly important not to make the troublemaker a martyr, so to the extent possible, the counseling must be done so as not to appear punitive (14).

The Cabal A particularly virulent version of the underground troublemaker is the cloned version. A small group of workers, acting in concert, can make life miserable for fellow workers, for superiors, and for those in lower personnel classifications. In addition to the actions recommended for the individual troublemaker, there are a couple of other possibilities for the cabal. If it is possible to separate the group, either spatially or temporally, the problem may be alleviated. An attempt should be made to isolate any obvious leaders. Alternatively, it may be possible to introduce a new actor into the play, someone who is equal in stature to the members of the cabal but has an appropriate outlook. Weakness at the Top Personnel problems can occur at any level in the organization. The higher up the problem is, the more difficult it is to pinpoint the issue. It may take considerable effort and persistence to determine that the problem is with a supervisor or assistant supervisor, rather than with the lowerlevel employees. The symptoms may well be manifest at a level below that of the person who is truly responsible. It is often difficult to deal with problems in managers. For a start, it is important to keep an open mind as to where the difficulty lies, as the cure is dependent on correct diagnosis of the dysfunction. It is common to promote people who possess great technical ability but may be lacking in management skills and experience; possession of these, or at least potential to acquire them, ought to be considered in the hiring process. Regardless, providing training and tools to recently appointed leaders is critical to building leadership skills and enriching the organization.

Practical Issues in Utilization of Personnel Resources There are relatively few means available to a manager for optimizing the workforce of a unit. The success of these means will depend to a significant extent on the efficacy of the management approaches described above (Table 32.5) (6).

Skill Mix of Personnel It is important to examine on a regular basis the skills required for accomplishment of the goals set for the unit. At the very least, the question should be raised each time there is a new vacancy. Soliciting input from your best staff members often yields insight into how to do things better and more efficiently. Hiring incompletely trained or educated workers for complex tests is false economy (although the intrinsic intelligence of the individual may be as important, or more important, than the credentials). Conversely, it is not good stewardship to use overqualified individuals. Some simple testing may be assigned to technicians, who, along with laboratory assistants, can perform other support functions, such as maintenance and accessioning of specimens (11). When using less qualified staff in roles that are appropriate and accepted by regulatory agencies, our experience has demonstrated time and again, that good supervision is key to being successful. Cross-Training and Rotation Some degree of cross-training (or competence in multiple areas) and rotation through multiple areas is necessary in most laboratories to ensure constant coverage with competent workers. The breadth of coverage of an individual worker depends on the depth of experience and knowledge required for the tests. Workers in a small laboratory in a rural hospital may need to perform many simple tests in a variety of scientific disciplines, whereas a technologist working in a large university hospital will probably be responsible for a restricted number of very sophisticated procedures. Even in a large unit, cross-training within the unit is important. The important goal is to strike a balance between what is

Table 32.5 Practical approaches to optimization Parameter

Approach

Skill mix

To the greatest extent possible consistent with good practice, utilize less trained individuals for more routine or menial duties. Give employees the stimulation of multiple tasks or areas, being careful not to stretch them too thin. Consider part-time and/or per diem arrangements if costs of maintaining competency and consistency do not exceed benefits of increased scheduling flexibility. Make clear what is needed to do the job. To the extent possible, allow employees to work out the details among themselves. Within the constraints of the budget, allow overtime if required to get the job done, but always look for other options.

Cross-training and rotation Mix of employment arrangements

Scheduling Use of overtime

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needed to get the work done, the needs of employees, and the ability for each worker to perform a sufficient number of procedures to maintain proficiency.

Mix of Employment Arrangements While having a solid core of full-time employees is essential to the continuity of a unit’s day-to-day work and for progress toward long-term goals, having a complementary cohort of part-time workers and individuals who can work on a per diem or ad hoc basis can significantly enhance the supervisor’s ability to provide appropriate coverage. Including part-time technologists as part of the team can enhance the skill mix and broaden the spectrum of knowledge and experience available to a unit when the number of allocated full-time equivalents is fixed. In a large hospital, some part-time technologists may be crosstrained individuals who split their time between two divisions of the laboratory; care must be taken, though, to ensure that competency in each area is maintained. Provisions must be made to ensure that even those technologists who log relatively few hours not only keep up with changes in routine laboratory operations (as when new procedures are introduced) but also fulfill their regulatory requirements (continuing education, participation in proficiency testing). Managers may reach differing conclusions regarding the desirability of diversifying employment arrangements after considering the potential benefits and associated costs. Coverage of Vacations, Holidays, and Routine Shifts In some instances institutional policies or contractual obligations will determine the rules of coverage for vacations, holidays, and routine shifts. Often, however, the procedure is undefined and will vary with each unit. Consistent with the cardinal rules, a manager might adopt the following policy: 1. Define the minimum personnel requirements for each type of work situation, e.g., weekday, weekend, holiday. 2. Define positions so as to provide the most flexible coverage. When a new position opens, give the existing workers a chance to review their schedules. If a worker wants to increase or decrease hours or to change the distribution of work among the daily time periods that must be covered, attempt to balance the request with the needs of the department, but make it clear that all requests may not be possible. Getting the work accomplished well and expeditiously is always the first priority. 3. Entrust development of the schedule to the involved workers, preferably with a single individual as coordinator. That individual may be an assistant manager or senior technologist but should not be the unit manager. It is important that the coordinator have the sup-

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port of the group as a whole. The manager should have good working knowledge of the schedule and be available as needed to resolve discrepancies. 4. Solicit requests for vacation time well in advance (as much as six months). Make it clear that it may not be possible to grant everyone his or her first choice. Try to even out assignment of priority vacation times over a period of years. It may be necessary for the group to make a decision as to whether they will pitch in and work harder during the vacation months to allow everyone to have desired time off. Getting the work done, without sacrificing quality, must be the first priority for all concerned. 5. Publish the work schedule far enough ahead for people to make plans (minimum of one month, preferably more). 6. When holes appear in the schedule, ask for volunteers to fill in. Encourage switching of shifts or use of parttime workers, with overtime as a last resort. It should be clear that the possibility of assigning the slot to a nonvolunteer lurks in the background, but avoid resorting to that tactic if at all possible.

Use of Overtime The objective of every manager should be to get the work done in the most efficient manner with the least expenditure of financial resources necessary. On occasion it may be necessary to use overtime to complete necessary work. When possible, however, an attempt should be made, within the rules of the institution and in compliance with applicable laws, to use other methods, such as providing compensatory time or increasing the hours of part-time employees. Staff whose work may be completed before the end of the shift should be trained to pitch in and help their colleagues without hesitation. In a well-run operation, this occurs automatically, promoting teamwork and reducing overtime. Conversely, there may be occasions when work has been completed expeditiously, leaving free time at the end of the shift. It is useful to have a plan for such occasions. There are usually odds and ends of maintenance, writing of procedures, etc. that could be completed at these times. Another option is to offer the possibility of early departure, leaving the residual time for use on another occasion as regular time.

Summary Unit managers can make important contributions to the success of an organization by exerting careful control over manageable components. Although economies can be realized in both materials and personnel, the optimization of personnel resources will present the greatest challenge and the greatest opportunity for a manager. To

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accomplish this goal there is a series of mainly commonsense rules. The savvy manager must recognize some classic personnel challenges, including overperforming and underperforming employees and individuals who work at cross purposes to the goals of the team. Specific areas where financial economies may be accomplished include careful scheduling, cross-training and/or rotation, and judicious utilization of employees with varying backgrounds and skills. KEY POINTS ■

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■

■

Provide compassionate, interactive leadership so that employees will understand the goals of the unit as well as the challenges and barriers to achieving those goals. Involve all employees in the process so that they feel that they are a part of the solutions that you discover jointly. Acknowledge the constraints under which the unit operates and accommodate plans accordingly. Recognize at an early stage problems in performance that will interfere with achievement of goals, and take appropriate action. Identify the practical issues that will allow employees to use their time most efficiently and get the job done with a minimum of disruption.

GLOSSARY

Skill mix The variable backgrounds of personnel, all of whom will contribute to the operation. The nature of the work will define the required proportion of workers of each background.

REFERENCES 1. Baron, R. A. 1986. Behavior in Organizations. Understanding and Managing the Human Side of Work, 2nd ed. Allyn and Bacon, Inc., Boston, MA. 2. Branden, N. 2001. The Psychology of Self Esteem: A Revolutionary Approach to Self-Understanding that Launched A New Era in Modern Psychology. Jossey-Bass, San Francisco, CA. 3. Cohen, M. H. 2011. Time to Lead. Creative Health Care Management, Minneapolis MN. 4. Kanter, R. M. 1992. Power failure in management circuits, p. 449–461. In J. M. Shafritz and J. S. Ott (ed.), Classics of Organization Theory. Brooks/Cole Publishing Company, Pacific Grove, CA. 5. Kotter, J. P. 1990. What leaders really do. Harv. Bus. Rev. May-June:103–111. 6. Martin, B. G. 1985. Cost containment: strategies and responsibilities of the laboratory manager. Clin. Lab. Med. 5:697–707. 7. Mechanic, D. 1992. Sources of power of lower participants in complex organizations, p. 424–431. In J. M. Shafritz, J. S. Ott, (ed.), Classics of Organization Theory. Brooks/Cole Publishing Company, Pacific Grove, CA. 8. Rodgers, T. J. 1990. No excuses management. Harv. Bus. Rev. July-August:84–98. 9. Schaffer, R. H. 1991. Demand better results—and get them. Harv. Bus. Rev. March-April:142–149.

Cabal A group of people working secretly and underhandedly to overthrow a regime. An acronym for a group of ministers chosen by Charles II of England in 1667: Clifford, Arlington, Buckingham (of Three Musketeers fame), Ashley Cooper (later Earl of Shaftesbury), and Lauderdale.

10. Schuler, R. S., and S. E. Jackson. 1996. Human Resource Management. Positioning for the 21st Century, 6th ed. West Publishing Company, Minneapolis/St. Paul, MN.

Constraints Factors that limit the flexibility of action.

12. Snyder, J. R., and D. A. Senhauser. 1989. Administration and Supervision in Laboratory Medicine, 2nd ed. J.B. Lippincott Company, Philadelphia, PA.

Cross-training Training individuals to perform more than one task. Golden Rule “Do unto others as you would have them do unto you.” Manageable components A parameter over which a manager has control. Scheduling and use of overtime are manageable. Vacation time and work breaks are defined by government or the institution and are thus not manageable (although the number of employees eligible for these benefits may be). Rotation Movement of personnel through the tasks for which they have been trained, often on a regular, sequential basis.

11. Snyder, J. R. 1992. Technician or technologist? Sorting out overlapping roles in the lab. Med. Lab. Observ. June:36–41.

13. Szilagyi, A. D., Jr., and M. J. Wallace, Jr. 1990. Organizational Behavior and Performance, 5th ed. Scott, Foresman/Little Brown Higher Education, Glenview, IL. 14. Umiker, W. O. 1991. Turning around the behavior of uncooperative employees. Med. Lab. Observ. October:59–66. 15. Umiker, W. O. 1992. How to qualify as a praise master. Med. Lab. Observ. July:41–46. 16. Walker, D. H., R. LaSala, B. Pritt, E. Koneman, and J. M. Miller. 2011. In memoriam: Washington C. Winn, Jr. (1941–2011). Emerg. Infect. Dis. 17:2400–2401.

33 Introduction Cost Accounting Classification of Costs • Behavior of Costs • Measuring Full Cost • Average versus Marginal Costs • Actual Cost versus Standard Cost • Costing Issues • A Formula for Developing Laboratory Costs • Laboratory Costing Examples

Costs, Budgeting, and Financial Decision Making Geoffrey C. Tolzmann and Richard J. Vincent

Break-Even Analysis Equipment Purchase • Capitation Contract

Capital Acquisition Concepts Time Value of Money • Depreciation

Budgeting Types of Budgets • The Budgeting Process • Budget Examples

Variance Analysis Financial Statements Financial Ratios

Summary KEY POINTS GLOSSARY REFERENCES

OBJECTIVES To learn the types and behaviors of costs, how to measure them, what data are needed to generate a cost analysis, and how to cost a basic laboratory test To understand the relationships among cost, volume, and profits and calculate contribution margin and break-even point To apply time value of money concepts to capital acquisition plans using net present value To understand the three common types of budgets, the budgeting process, and how budgets are used to measure financial performance and to control costs To be able to analyze the causes of differences in actual financial performance from budgeted amounts and understand how this information is used for management control To learn about the three primary financial statements: the balance sheet, the income statement, and the cash flow statement To learn how to calculate key financial ratios that reveal information about an organization’s financial health

Accounting is the most useful “information system” for managers, because it organizes and accumulates related information over time and aligns it with initial objectives and requirements, called “budgets.” Principles of accounting must be applied to other types of information managers use in order to make “information technology” useful. Peter F. Drucker, at the Forbes CEO Forum “Management in the 21st Century,” June 1997

T

oo often the financial aspects of the laboratory business can intimidate managers who have a scientific background. However, managers must understand and participate in cost accounting and budgeting. In addition, they must understand the principles of financial accounting and financial analysis in order to gauge performance, because “what gets measured gets managed.” This chapter will provide an overview of these extensive and complex activities (1–4). A note on accounting conventions:

Clinical Laboratory Management, 2nd Edition Edited by L. S. Garcia ©2014 ASM Press, Washington, DC doi:10.1128/9781555817282.ch33

• Variances that are “favorable” are depicted unmodified. A favorable variance is an expense that is less than budgeted or revenue that is greater than budgeted. 597

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• Variances that are “unfavorable” are depicted in parentheses. An unfavorable variance is an expense that is greater than budgeted or revenue that is less than budgeted. • Profit is depicted unmodified and in black ink; loss is depicted in parentheses and in red if a color document is employed. • “Productive” labor is labor that actually produces a product directly (be it a physical product or an intellectual one). • “Nonproductive” labor may be necessary for proper functioning of the organization but is not directly involved in production of the product. Vacation, conferences, sick time, all management functions, and support activities such as financial analysis and marketing are examples of nonproductive labor. Note that “nonproductive” is not a pejorative term in accounting lingo.

Cost Accounting Cost accounting is a system of measuring and reporting information about costs. Its purpose is to generate information sufficient for managers to make intelligent decisions. A common challenge of cost accounting systems is balancing the degree of specificity needed with the amount of work required to reach that specificity in light of the decisions to be made. A good system does not require unnecessarily detailed information. Cost accounting is useful for several purposes: • Profitability analysis. Cost accounting enables managers to determine whether a laboratory division or a market segment is generating revenues in excess of expenses. • Cost control. Cost accounting helps define the relationship between cost and activity and can help align responsibilities with incurred costs. • Planning. Cost accounting helps us understand what happens to costs as activity changes. • Decision making. Cost accounting aids in setting prices, negotiating reimbursement or capitation rates, and making staffing decisions and make-versus-buy decisions (for example, whether to perform a laboratory test in-house or send it to a reference laboratory).

Classification of Costs Costs can be categorized in many different ways, but the most critical distinction is direct cost versus indirect cost. Direct costs are those costs clearly associated with the item being costed (be it a patient, a service, a department, or an individual assay). In the laboratory, direct costs include testing supplies and reagents, instrument depreciation, maintenance and repairs, and the labor involved in performing testing. Indirect costs are those costs that are not directly associated

with the item being costed. The most common types of indirect costs are general laboratory supplies; labor costs associated with supervision, administration, and training; and hospital overhead. The full, or total, cost of an item includes its direct costs and an allocated portion of indirect expenses.

Behavior of Costs Costs behave in four basic ways depending on their relationship to the relevant range of activity. Variable costs vary in direct proportion to the volume or level of activity, such as reagent cost. Therefore, variable costs are constant per unit of service (UOS), which is whatever the logical measure of work for a given area is. Fixed costs, such as rent, are constant regardless of changes in levels of activity. Therefore, fixed costs per UOS change with volume. Semivariable costs have a fixed and a variable cost component. An example is telephone service, for which customers are usually charged a fixed amount per month that may include a specified amount of service above which a per-unit charge is incurred. Step-fixed costs are fixed over a relatively small range of activity and then change to a new fixed level over another relatively small range of activity. Labor costs often exhibit step-fixed behavior, as a certain staffing level supports a range of activity beyond which additional staffing must be added. The behaviors of most costs are fairly intuitive. Figure 33.1 illustrates these behaviors. Measuring Full Cost There are four steps to the process of measuring full costs: 1. Identify the responsibility centers into which costs may be appropriately grouped. For a hospital, these areas might be laboratory, radiology, laundry, etc. Within the laboratory, these centers might be chemistry, hematology, microbiology, central receiving, etc. Within chemistry, the centers might be individual analyzers or testing modalities. 2. Trace all revenues and expenses to the responsibility center incurring them.

Figure 33.1 Cost behavior. doi:10.1128/9781555817282.ch33.f1

Costt

598

Volume Fixed Cost

Variable Cost

Step Fixed

CHAPTER 33. COSTS, BUDGETING, AND FINANCIAL DECISION MAKING

3. Allocate the costs of supporting responsibility centers to the revenue-producing centers. There are several techniques by which this allocation may be accomplished: • Direct allocation • Step-down allocation (which usually entails starting with allocating the costs of centers that provide the most services to all other centers, then allocating the costs of those that provide the next level of service, including those costs that were just allocated in the first round, to all others, etc.) • Algebraic allocation (used by sophisticated cost accounting systems) Allocation also requires some sort of basis, such as cause and effect, or facilities provided or ability to bear the allocated costs. Examples of bases include square footage, utilization, visits, number of personnel, revenues, and payroll expense. 4. Determine the average cost of each procedure or service by dividing the responsibility center’s costs by the measure of activity (in the laboratory, the measure is usually the number of procedures or billed tests). The average cost per procedure for the laboratory center might be $10, while the average cost per procedure for the chemistry center might be $5, and the average cost per procedure for a specific analyzer center within chemistry might be $2.

Average versus Marginal Costs As noted above, the average cost equals the full costs divided by the UOS. Marginal cost equals the change in total cost relative to the change in volume. It is the variable cost plus any additional fixed costs incurred because the volume change exceeds the relevant range. In most instances, there are no additional fixed costs. Marginal costs are also called incremental costs. Over the long run, average revenues must be greater than or equal to average costs for an organization to survive, but in the short run, decisions should be made based on marginal costs. For example, the incremental cost of adding another sample to a chemistry analyzer that is running below capacity is very low. If adding another sample requires the purchase of another analyzer, however, its incremental cost is very high. Actual Cost versus Standard Cost Standard costs represent what a given item should cost under normal circumstances. Standard costs are useful for comparison to actual cost experience when analyzing cost variances and for budgeting. Costing Issues When performing cost accounting, it is always worthwhile to examine the results and ask, Is it fair? Is it equitable? Is it understandable? Do the benefits justify the effort required to ascertain cost?

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A Formula for Developing Laboratory Costs Direct costs of test (instrument depreciation, maintenance and repair, reagents, calibration, quality controls, direct labor) + Indirect costs (general laboratory supplies), indirect labor (such as supervision, training), other indirects (such as research and development expenses) = Laboratory section cost + General laboratory overhead (specimen collection, report distribution, information systems, management, education, quality assurance, sales, marketing) = Laboratory test total cost

Laboratory Costing Examples Tables 33.1 through 33.6 are examples of the types of information that need to be collected and some of the calculations involved in generating unit costs. Table 33.1 shows the key variables that are needed to generate unit cost, including staff costs that are both variable (tester) and fixed (nontester), plus indirect fixed divisional, overall laboratory, and overall hospital costs. Table 33.2 is an example of the calculation involved in generating a per-unit cost for a test that is run in a batch with other tests. It is an example of a step-fixed cost. Should the threshold of 250 tests per run be exceeded, another run would need to be instituted, along with its concomitant expenses. The “step” is the period jump in costs with each new test run, whereas the cost per test progressively decreases within each test run as more samples are added. The most efficient position would be the inclusion of 250 tests in every run, the situation in which no further savings could be achieved without increasing the capacity of the run. In Table 33.2, the average number of tests per run is 228, a point that approaches the most economic efficiency possible. Table 33.3 combines all the costing information thus far to calculate a unit cost for a given volume. After generating this cost information it is important to validate the model by running a check on the total cost captured by the model. This total is measured by multiplying the unit costs by the volume over a given period of time and comparing that to actual costs for the same time period, which were generated in Table 33.1. Tables 33.4 through 33.6 are the same as the previous examples, except they show the effects of adding an additional 7,500 partial thromboplastin time tests to the mix.

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Table 33.1 Key variables for a hematology laboratory with static volume

Clearly, the additional tests make all the indirect fixed costs less expensive because the same fixed costs are now being divided over a larger number of tests. This relationship is important when generating pricing proposals for new business. Comparing Table 33.5 with Table 33.2 shows the effects of adding additional tests to the cost of a test run. In Table 33.2 we were able to run the batch of tests five times a week and still be under the test run maximum of 250. With the addition of 7,500 tests, one can see in Table 33.5 that the batch now needs to be run six times a week, which adds more cost and increases the per-unit cost of the tests. Thus, the cost for these tests was fixed within a certain volume level (250 tests per batch), but when the volume

went over that level, the costs shifted upward, an example of a step-fixed cost.

Break-Even Analysis Contribution margin is the revenue per UOS less the marginal cost per UOS and is often written as contribution margin = price − variable costs. As long as the contribution margin is positive, the organization benefits. The margin can go to supporting fixed costs (or to supporting items or activities whose contribution margin is negative), and if fixed costs have been covered, it represents profit. The break-even point is the volume of activity required for all fixed costs to be covered. Therefore, the break-even

Table 33.3 Cost calculation for a hematology laboratory with static volume

Table 33.2 Test run calculation for a hematology laboratory with static volume

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Table 33.4 Key variables for a hematology laboratory with additional volume

point equals the total fixed cost divided by the contribution margin. Volume break-even point = =

total fixed costs contribution margin per unit total fixed costs price − variable costs

This equation underscores the relationships among costs, volume, and profits. In the previous section, we discussed cost behavior and displayed the relationships of fixed and variable costs to volume. A given responsibility center incurs both fixed and variable costs, and its total costs are the sum of the two, as illustrated in Fig. 33.2.

Adding the revenue line, which increases at a rate equal to the revenue per unit, yields Fig. 33.3. If the revenue per unit is greater than the variable cost per unit, the revenue line and the total cost line must cross at some point, where revenues equal costs—the breakeven point. Note that the graph illustrates not only the break-even volume, but also the unit revenue required to reach break-even. Figure 33.4 shows this calculation for a hypothetical hematology division.

Equipment Purchase When considering expensive equipment purchases, it is critical to know the point at which the volume of procedures

Table 33.6 Cost calculation for a hematology laboratory with additional volume

Table 33.5 Test run calculation for a hematology laboratory with additional volume

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$80,000

$60,000

$70,000

Cost / Revenue

Cost / R Revenue

$50,000 $40,000 $30,000 $20,000 $10,000

$60,000 $50,000 $40,000 $30,000 $20,000 $10,000 $-

$0

100

200

300

400

0

500

100

Fixed Cost

200

300

400

500

Volume

Volume Variable Cost

Fixed Cost

Total Cost

Total Cost

Revenue

Figure 33.3 Fixed, variable, and total expense and revenue.

Figure 33.2 Fixed, variable, and total cost.

doi:10.1128/9781555817282.ch33.f3

doi:10.1128/9781555817282.ch33.f 2

performed on the equipment covers its annual depreciation and maintenance costs, compared to the projected demand for the procedures, as illustrated in Fig. 33.5.

therefore, with member enrollment, not with the volume of procedures performed. To understand what the break-even point is in terms of the number of members, a provider must first understand the expected utilization by those members (see Fig. 33.6). The provider, not the health plan, is usually at risk for variations in utilization. This risk can be ameliorated by negotiating utilization

Capitation Contract Under “capitation,” healthcare providers are paid a fixed amount per member per month (PMPM). Revenue varies,

Figure 33.4 Graphical representation of the break-even point for a hematology division. doi:10.1128/9781555817282.ch33.f4

Variable Cost

$1,600,000

Fixed Cost Variable Cost Price

$1,400,000

BE Point =

$ $ $

397,700 1.42 10.00

397,700 (10.00 - 1.42)

=

46,381

$1,200,000

Cost & Revenue

$1,000,000

$800,000

$600,000

Break-Even Point 46,381 $400,000

$200,000

$-

15,000 30,000 45,000 60,000 75,000 90,000 105,000 120,000 135,000

Volume

CHAPTER 33. COSTS, BUDGETING, AND FINANCIAL DECISION MAKING

$250,000

$200,000

Cost of Equipment Annual Depreciaon Maintenance Contract Variable Cost Price

$ $ $ $ $

BE Point =

605

300,000 42,857 4,286 4.00 8.00 47,143 (8.00 - 4.00)

= 11,786

Cost & Revenue

$150,000

Break-Even Point 11,786

$100,000

$50,000

$-

3,000

6,000

9,000

12,000

15,000

18,000

21,000

24,000

27,000

Figure 33.5 Break-even point for equipment

Volume

corridors into the contract, whereby the PMPM revenue is adjusted up or down if utilization is over or under budget by a certain amount. If not, the provider can incur significant losses if utilization is over budget.

Capital Acquisition Concepts Time Value of Money Before evaluating potential capital acquisitions, it is important to understand the concept of the time value of money. Most people prefer current consumption to future consumption. Similarly, investors expect to be rewarded for their patience by receiving a rate of return on an investment, which could be interest, dividends, or capital gains. Intrinsic in this is the notion that money received in the future is not as valuable as money received today. We can quantify this. The future value (FV) of an investment = its present value (PV) multiplied by (1 + interest rate, k) raised to the number of investment periods, n (usually expressed as years), or FV = PV × (1 + k)

n

The future value in 3 years of $100 invested at 5% interest equals $100 × (1 + 0.05)3 = $115.76. This formula becomes useful in considering capital acquisitions when we rearrange the terms: PV =

FV (1 + k)n

Here, the rate k is called the discount rate (not the interest rate), and the practice is called discounting (we are

purchase. doi:10.1128/9781555817282.ch33.f5

discounting the value of money, not to be confused with discounting, or reducing the price of, a test charge). This approach allows us to value different investments in today’s dollars in relation to their future values. Which would you rather receive: $115.76 in 3 years or $120.34 in 4 years? At a 5% discount rate, we already know that the present value of $115.76 after 3 years is $100.00. For $120.34 after 4 years, PV =

$120.34 = $99.00 (1 + 0.05)4

Therefore, the first choice (3 years) has a higher value. Investments are evaluated based on their cash flows (CF), where CF = cash revenues − cash expenses. The net present value (NPV) of a project equals the sum of the PV of the CF of the project. n

NPV =

CF

t ∑ ––––– (1+k)t t =0

Here, the rate k is referred to as the required rate of return, the cost of capital, or the hurdle rate. If the NPV is > 0, the investment is warranted. If NPV < 0, it should not be pursued. If you are comparing two alternatives, pick the one with the higher NPV. A special case is when the NPV = 0. The rate k that induces this is called the internal rate of return (IRR). Instead of calculating the NPV for two competing investments, you can calculate their internal rates of return. Pick the investment with the higher IRR, as long as the IRR is greater than your cost of capital (if it is not, then your capital would be better invested elsewhere). For example, a new analyzer costs $100,000 and will allow the

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Number of Members PMPM Rate Yearly Revenue Variable Cost per Procedure BE Point$1,600,000 =

$ $ $

10,000 8.00 960,000 5.00 960,000 5.00

=

192,000 Total Tests

1.6 Tests PMPM

$1,400,000

2.0 Tests PMPM

Cost & Revenue

$1,200,000

Break-Even Point 1.6 Tests PMPM $1,000,000

$800,000

$600,000

1.0 Tests PMPM $400,000

$200,000

$-

30,000 60,000 90,000 120,000 150,000 180,000 210,000 240,000 270,000

Figure 33.6 Break-even point for a capitated

contract. doi:10.1128/9781555817282.ch33.f6

laboratory to perform testing it does not perform today, so it will generate $35,000 in net cash flow per year for the next 4 years. If our required rate of return is 10%, is this a worthwhile investment? Time Cash flow 0 −$100,000 1 $35,000 2 $35,000 3 $35,000 4 $35,000 NPV =

−$100,000 $35,000 $35,000 + + + (1 + 0.10)0 (1 + 0.10)1 (1 + 0.10)2 $35,000 $35,000 + (1 + 0.10)4 (1 + 0.10)3

NPV = $10,945 Solving for the internal rate of return (spreadsheet software and most financial calculators automate this): 0=

−$100,000 $35,000 $35,000 + + + (1 + IRR)0 (1 + IRR)1 (1 + IRR)2 $35,000 $35,000 + (1 + IRR)3 (1 + IRR)4

Volume

IRR = 14.96%. This IRR would then be compared with the other possible returns the company might get with the money if it were invested in other projects. Many laboratory investments do not create new revenues, but these same techniques can be applied to calculating net present cost and then choosing the option with the lowest cost. Table 33.7 evaluates a direct purchase versus an installment purchase, where payments are made over time, as an example of a net present cost application. Assume the following: direct purchase price equals $200,000; installment purchase equals $40,000 per year with a useful life of 7 years; discount rate equals 10%. In this example it would be less expensive to purchase the equipment directly than make an installment purchase, $200,000 versus $213,397. Nonetheless, other factors may favor installments, such as available cash. Table 33.8, the evaluation of two different pieces of laboratory equipment that serve the same function, is an example of calculating the NPVs. Equipment 1 costs $200,000 and generates $60,000 of net cash flow per year for the 7-year useful life of the equipment. Equipment 2 costs $300,000 and generates $90,000 per year for the 7-year useful life of the equipment. The cost of the equipment and depreciation is spread evenly over the 7 years

Table 33.8 NPV of two different pieces of equipment

Table 33.7 NPV of direct purchase versus installment purchase

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of useful life. Based on these figures, equipment 2 would be chosen over equipment 1 because of its higher NPV— $125,598 versus $83,732.

Depreciation Depreciation is associated with capital investments, so it is worth commenting on. Depreciation is the allocation of the cost to acquire an asset that has a useful life of greater than 1 year into each year of the asset’s life. It is common to use a “straight line” method in healthcare, whereby the depreciation is evenly allocated across the item’s useful life. For example, if a piece of equipment costs $100,000 and has a useful life of 10 years, after which it is worth nothing, an annual depreciation expense of $10,000 per year would be recorded for each of the 10 years. There are other methods of depreciation that are driven by tax laws and usually allow for a more accelerated treatment of this expense. Investment decisions are based on cash flows, and depreciation is not a cash flow. The relevant cash flow is the purchase event. From an accounting standpoint, the organization is simply exchanging one asset, cash, for another, the asset. Depreciation serves to reduce the value of the asset over time on the organization’s financial statements, but it should be ignored when evaluating capital acquisitions.

Budgeting It is through budgeting that an organization turns its strategic plans into daily operations. A budget expresses planned revenues and expenses, as well as the volumes of services and amounts of resources required to realize them. Through the budget process the organization establishes priorities for its plans, allocates its resources, and controls its costs. It authorizes new programs and services and sets performance standards for existing ones. A budget thus serves as a tool and a benchmark for monitoring the performance of the organization throughout its fiscal year. In addition, it is a mechanism for imposing discipline on the organization. Two key concepts are integral to healthcare budgeting: full-time equivalents (FTEs) and UOSs. An FTE is one or more employees paid for a total of 2,080 h per year (based on 8 h per day × 5 days per week × 52 weeks per year); this is the standard labor measure. An employee who is paid for two 8-h days per week represents 0.4 FTE, while an employee who is paid for two 12-h days per week represents 0.6 FTE. Together, they represent 1.0 FTE to the organization. Labor is divided into productive time, the time spent working on job-related activities, and nonproductive time, which includes vacation, holidays, and sick time. Depending on an organization’s fringe benefit policies, it will need 1.1 or more FTEs to realize 1.0 FTE of productive time. Each area of the organization needs a way of quantifying its productivity. As stated earlier, a UOS is the logical measure of work for a given area. In the laboratory, it is

usually either the number of billed tests or the number of procedures performed. For the operating room, it may be the number of surgeries; for a physician office, it may be the number of patient visits. UOSs are useful for measuring and comparing resource consumption, such as total expenses per billed test or billed tests per FTE, as we saw in the cost accounting section.

Types of Budgets Three separate budgets are developed during the budgeting process. The first, and the one with which you are probably most familiar, is the operating budget. This is prepared at the level of the cost center, usually by those managers who have direct responsibility for managing the cost center and who can affect its operations. The operating budget can be broken down into three components: • Statistical budget, or volume budget, which is the forecast of activity for the unit • Revenue budget, which determines the gross charges that will be generated by the forecasted volume • Expense budget, which projects the amounts of resources that will be required to produce the forecasted volumes The capital budget is the second type of budget. Its development can occur simultaneously with the operating budget. It is usually prepared at the organization level and includes new or replacement property, physical plant, and equipment needs of the organization for the coming year. Most organizations have a system in place to collect information on these needs from departments across the organization and then arrange the priorities centrally with respect to acuity of need, organizational goals, and available funding. Capital budgeting is separated from the operating budget because the impact of capital purchases is predominantly on cash, with only the depreciation expense affecting the operating budget (see the previous section’s discussion of depreciation). With the operating and capital budgets prepared, an organization can develop the third type, the cash budget. This is usually prepared by the organization’s finance department and predicts the cash flows in and out of the organization and the resultant cash availability. While obscure to most, it is the most critical of the three budgets. To remain solvent and thus stay in business, the organization must carefully plan its cash reserves, timing of cash disbursements, and any borrowing and investing activities.

The Budgeting Process Creating a budget entails a fairly linear set of sequential steps, some of which occur at the organizational level and some that are done at the departmental or cost center levels.

CHAPTER 33. COSTS, BUDGETING, AND FINANCIAL DECISION MAKING

Step 1. Establish organizational goals and objectives. Although the senior management usually sets these, it is not uncommon for departments to develop their own objectives in support of the broader organizational goals. For instance, a hospital may set a goal to expand market share in ABC County by 3%. This, in turn, might lead to a goal of establishing a satellite facility in that county. The laboratory might then establish objectives for equipping and running a laboratory or phlebotomy station at that satellite. Step 2. Review key environmental factors, such as demographics, political and regulatory issues, competition, technology, and the economy. This function is usually performed at the organizational level, although the laboratory may have unique information about its particular niche, such as the marketing activities of a regional reference laboratory with which it is competing for outpatient testing. Step 3. Determine starting assumptions about inflation, payment levels, admissions, and other key volumes. This function is usually performed at the organizational level. Step 4. Develop the statistical budget for each UOS in the organization. This budget is completed at the department level using the information garnered in steps 1 to 3. The laboratory manager will need to consider projections of the number of admissions and the length of stay to forecast volumes of inpatient laboratory tests and will have to estimate the activity for various outpatient departments to forecast volumes of outpatient laboratory tests. If the laboratory is freestanding or has nonaffiliated clients, managers must develop forecasting methods for these markets as well. Step 5. Develop the revenue budget, based on the statistical volumes forecasted in step 3 multiplied by the applicable charges per UOS, resulting in the gross revenue budget. In most organizations, consideration of contractual allowances, write-offs, and bad debt occurs at the organizational level, for purposes of estimating the net revenue budget. Step 6. Prepare the expense budget on the basis of the data gathered in steps 1 to 4. Because labor often constitutes roughly 70% of a healthcare organization’s budget, the expense budget is frequently broken down separately into a staffing budget and a nonpersonnel expense budget. The staffing budget takes into account the numbers and types of employees, pay rates, and FTEs required in each cost center. Nonpersonnel expenses include the various supplies consumed and services utilized to produce the UOS forecasted. Step 7. Assuming the capital budget was produced in parallel with the previous steps, there is usually a process of negotiation and revision between department heads and senior managers once all of the departments’ budgets are rolled into one organizational budget and the operating income is calculated. Step 8. Develop the cash budget. Step 9. Continue negotiations and revisions across the organization.

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Step 10. Submit the budget to the organization’s board of directors for approval. Usually, current year and prior year results form the basis on which the new budget is developed. This process is called incremental budgeting. An alternative used in some organizations is zero-based budgeting. Under this approach, every expenditure must be justified as if the service were starting from scratch, and it must be established that other ways to provide a service are not more cost-effective. While this can be timeconsuming, it forces a regular reexamination of why things are done the way they are and whether they still fit with the organization’s mission. Another refinement to the budget process is the use of flexible budgets. The process that has been described so far results in a fixed budget, one in which an annual budget is developed and approved, after which this agreed-upon budget acts as the yardstick against which monthly performance is monitored. Recall, however, the earlier discussion about cost behavior (fixed, variable, etc.). It is relatively straightforward to divide an organization’s expenses into those that vary with changes in UOS and those that do not. Subsequently, the variable portion of the budget may change with volume for purposes of monitoring performance. This approach is known as flexible budgeting.

Budget Examples Table 33.9 is an example of a staffing worksheet that is prepared to calculate how many FTEs a laboratory division would need for the upcoming fiscal year and the costs associated with those FTEs. In practice, more detailed information is required than just FTEs and hourly rates to generate an accurate staffing budget. A manager also has to break down each employee’s hours into the different shifts that he or she works, so that any differential rates can be applied. Examples of typical differential rates would be for weekends, evenings, nights, holidays, overtime, etc. In this example, the manager is requesting 19.36 FTEs, which equates to $998,247 in salary expense and $299,474 in fringe benefit expense (such as payroll taxes, health insurance premiums, etc.). Notice that the salary expense is broken down into productive and nonproductive components. This allocation is commonly done to track nonworked but paid hours versus the actual worked hours. Table 33.10 is an example of a worksheet that is used to analyze a budget being requested by a manager. In this example, the starting point is a pro forma budget that was calculated by (i) projecting any changes in volume and (ii) using the revenue and expense per UOS from the previous year to adjust both revenues and costs. This calculation allows for a comparison between what one would expect for revenue and expense, given a certain volume level, and what the manager is actually requesting. The manager will need to present a valid case for deviating

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Table 33.9 Staffing worksheet

from the pro forma budget. Once the differences between the pro forma budget and the requested budget, i.e., the variance, have been resolved with senior management, the last step in the process is to apply inflation factors to the approved budget (if all the variances have been accepted) and generate the final budget for the upcoming fiscal year.

Variance Analysis Management reporting is a process of communicating actual versus budget performance throughout the organization to identify necessary corrective actions and help make decisions. Distribution of reports usually follows the organizational structure. Detailed line item reports are analyzed at the cost center level. These reports roll up into more and more summaries as one moves up the chain of command. For example, a chemistry supervisor reviews more detail than does the laboratory manager, who looks at summary reports across the laboratory, while the vice

president for ancillary services looks at summary reports for the laboratory, radiology, pharmacy, etc. Variance analysis is critical to the control function of management. Having established a budget, the extent to which actual experience differs from the budget represents a variance. Controllable variances can be resolved by management action. Vendors may be substituted, contracts may be renegotiated, or alternative methodologies may be pursued. Other variances are not controllable, such as a flu epidemic that drives up demand for services above what was budgeted, but as a result may require management to make changes to more discretionary expenditures to offset the uncontrollable epidemic factor. Variance analysis commonly focuses on the company’s actual results versus budgeted expectations on a line-by-line basis for each cost center. It is important that the line manager who has the understanding of the cost center and the ability to make any necessary changes actually perform this analysis. It is the job of the manager to explain the variances to superiors.

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Table 33.10 Worksheet for constructing a budget

Table 33.11 is an example of a typical variance report for a laboratory division. Cost variances can have several causes. Volume variances result from a change in the volume of services performed, either up or down. A flexible budget, described in the previous section, takes account of these variances. At the top of Table 33.11, you can see that volume is under budget by $1,797, or a little less than 1%. Price variances are due to a change in the price of a supply or service versus what was anticipated in the budget. In Table 33.11, laboratory supplies are budgeted at $1.13/UOS, but the actual cost is $0.89, a $0.24 favorable price variance. Quantity, or efficiency, variances represent differences in the amount of inputs (labor and/or supplies) used to produce each UOS. The budget in Table 33.11 considers 16,818 tests per FTE (290,784 tests divided by 17.29 FTEs), and the actual is only 15,792/FTE, so more employee hours are required

than was budgeted, an unfavorable quantity variance that helps explain the unfavorable salary dollar variance. Any variance can be broken down into one of three main causes: volume, price, or quantity. If the cause of the variance is understood, a manager can tailor the response rationally and appropriately. Analysis and reporting of variances are ongoing processes and should be conducted monthly in order to respond quickly. As with cost accounting, however, the effort should be justified by the information gained in the process. Normal random fluctuations will cause small variances, so it is useful to establish triggers to indicate when further investigation is warranted. Control charts, as illustrated in Fig. 33.7, are useful tools for this purpose. In this chart the budget monthly test volume serves as the median line. The upper and lower limits represent arbitrary figures that are 5% above and below the budgeted volume.

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Table 33.11 Variance report

Variations in labor, which can be further analyzed, are important because labor costs constitute such a large portion of expenses. Both labor costs and hours can be divided into worked and paid categories. The duties of workers who are vacationing, attending conferences, sick, or injured must be assumed by others; the proportion of costs due to a reduction in worked versus paid time may be important for the organization. Worked time can be further subdivided into productive and nonproductive. The variance due to assuming the duties of staff who are attending a conference is considered nonproductive worked time. Only if such expenses are adequately identified and characterized can a rational

decision be made as to whether they are justified by sufficient benefit to the organization. At the bottom of Table 33.11, one can see that in this example FTEs are over budget by 1.01, or 5.86%. Laboratory productivity, defined as the UOSs produced divided by the laboratory inputs required to produce them (in either hours or cost), should be benchmarked against regional and national peers to gauge the laboratory efficiency of the organization. At the bottom of Table 33.11, you can see that for this example hours per UOS are over budget by 0.01, or 6.51%. This variance is caused by a combination of volume being slightly under budget and FTEs being over budget.

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Financial Statements

12,500

12,000

Upper Limit

Volume e

613

11,500

Budget 11,000

10,500

Lower Limit 10,000 OCT

NOV

DEC

JAN

FEB

MAR

APR

MAY

JUN

JUL

AUG

SEP

Month Figure 33.7 Volume control chart. doi:10.1128/9781555817282.ch33.f 7

Table 33.12 Balance sheet for an organization as of September 2012

In the previous section, we discussed internal reporting and variance analysis, which management uses to control expenses and help make decisions. In this section, we turn to external reporting of an organization’s finances. The various groups of people interested in the financial health of an organization include stockholders who have invested in the company (or potential stockholders), creditors who might loan the company money, and government agencies that regulate the company. Management itself also uses financial statements to help monitor the activities of the firm. The three primary financial statements are the balance sheet, the income statement, and the cash flow statement. The balance sheet (Table 33.12) is a snapshot of a firm’s financial position at a particular point. It has two sections: assets and equities. Assets are economic resources that are expected to benefit the company’s activities. Equities are claims against or interests in the assets. Equities are divided into liabilities and owners’ equity. Liabilities are economic obligations of the organization. Owners’ equity (usually called stockholders’ equity) is the ownership

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claim against the total assets. Balance sheet account balances carry over from year to year, whereas income statement account balances start from zero at the beginning of each new fiscal year. The income statement in Table 33.13 reports the results of a firm’s operations over a period of time by matching its revenues to its expenses, while the cash flow (CF) statement in Table 33.14, also called the statement of changes in financial position, reports the impact of operating, investing, and financing activities over a period of time. Its purpose is to

present the results of financial management, as opposed to the operating management reflected in the income statement.

Financial Ratios Several key indicators, expressed as ratios, can help us understand the financial health of an organization as represented in its statements. There are four categories of financial ratios: • Liquidity ratios measure the ability of a firm to meet its immediate obligations, i.e., the relationship

Table 33.13 Income and expense statement for an organization, year-to-date September 2012

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Table 33.14 Cash flow statement for an organization, September 2012

between a firm’s cash and other current assets to its current liabilities. • Asset management, or activity, ratios measure how effective a firm is at managing its assets. • Debt management, or leverage, ratios measure both the extent to which the firm is financed with borrowing and its likelihood of defaulting on its debt obligations. • Profitability ratios measure the combined effects of liquidity, asset management, and debt management policies on operating results. Although the financial ratio values themselves, or their trends over time, provide useful information, their greater value comes from comparing them to industry averages. As an example, the automotive industry, with its well-established firms, will have a very different financial structure than firms in the Internet industry. A negative profitability ratio in the automotive industry would be viewed as a sign of poor financial health, but in the Internet industry it may not be viewed this way (or, at least, so it was once thought). Table 33.15 shows the financial ratios for the financial statements shown in Tables 33.12 through 33.14.

Summary In this chapter, we began with cost accounting and discussed the types and behaviors of costs. Direct costs are clearly associated with the item being costed, while all other costs are indirect. The behavior of costs relative to changes in volume can be variable (in direct proportion to volume) or fixed (constant regardless of volume) or some

combination thereof. We reviewed how to measure full cost and how it differs from marginal cost, which is the change in total cost relative to a change in volume. An extensive costing example showed what data are needed to generate a cost analysis and how to cost a basic laboratory test. Understanding the relationships among cost, volume, and profits allowed us to calculate contribution margin— the revenue per UOS less its marginal cost—and break-even point, which is total fixed cost divided by the contribution margin per UOS. These concepts were applied to an equipment purchase and to evaluating a capitation contract. The equipment purchase decision was then augmented by applying time value of money concepts to capital acquisition plans using the NPV and IRR calculations. These techniques allow for acquisitions with different future cash flow patterns to be compared in today’s dollars. We looked at purchasing versus leasing and compared two pieces of equipment using these techniques. We then turned to the budget process and reviewed the three common types of budgets: the operating budget (which consists of a statistical, or volume, budget; a revenue budget; and an expense budget), the capital budget, and the cash budget. We learned the concepts of FTE and UOS, two key building blocks in budget development. We walked through the 10 steps of the budgeting process and illustrations of staffing and budget worksheets. With the budget as the baseline, we looked at management reporting and how to analyze the causes of differences in actual financial performance from budgeted amounts. We broke variances down into one of three causes: volume, price, or quantity variances. Finally, we discussed the importance of understanding which factor is responsible in order to direct the manager’s response.

Table 33.15 Ratio analysis for an organization, September 2012

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We learned about the three primary financial statements: The balance sheet is a snapshot of the company’s financial condition at a given point in time and is a cumulative statement; the income statement reports the results of the company’s operations over a period of time; the cash flow statement presents the results of financial, as opposed to operating, management of the company. We used four types of financial ratios to reveal information about an organization’s financial health from its financial statements: liquidity ratios, asset management ratios, debt management ratios, and profitability ratios. Ratios are best used in comparison to other companies in the same industry.

Capital lease A lease in which the firm retains ownership of the asset at the end of the lease period.

KEY POINTS ■ Cost accounting is an important tool for controlling expenses and making good resource allocation decisions. ■ Marginal costs and the break-even point are relevant when considering taking on additional work. ■ Capital investments, such as equipment purchases, require an NPV approach to decision making. ■ Budget creation and monitoring should be vested in the managers responsible for implementing the changes that affect the budget. ■ Regular variance analysis, especially in regard to labor, is critical to managing within a budget. ■ Financial statements and their corollary financial ratios are useful for benchmarking against other organizations in the same industry.

Contractual allowances Discounts on gross charges given to third-party payors who have a negotiated contract with the billing provider.

GLOSSARY Accounts receivable Money that is owed to the firm by outsiders. Accrual accounting System that records revenue and expenses as they occur. Asset (and asset accounts) The resources owned or used by the firm. Asset management ratios Measure of how effective the firm is at managing its assets. Average cost Full cost divided by the unit of service. Bad debt Recorded as an expense for gross charges that are deemed uncollectable from self-payors. Balance sheet Shows assets on the left side and liabilities or claims against assets on the right side. The balance sheet shows a firm’s financial position at a particular point in time. Break-even point The level of activity at which revenue and total costs are exactly equal. Capital The cash required to purchase the firm’s property, plant, and equipment. Capital budget The financial plan for the acquisition of capital assets.

Capitation A reimbursement mechanism in which the service provider receives a fixed payment based on the number of covered lives. The payment does not fluctuate with the level of activity. Cash accounting Records revenue and expenses when the cash has either been paid out or collected. Cash budget The cash management plan for how the operational and capital budgets will be supported. Cash flow (CF) Cash revenues less cash expenses; excludes noncash expenses such as depreciation. Cash flow statement Reports the impact on cash flow of a firm’s operating, investing, and financing activities over a period of time.

Contribution margin The excess of revenue over variable costs. Cost accounting A system of measuring and reporting information about cost. Debt management ratios Measure of both the extent to which the firm is financed with borrowing and its likelihood of defaulting on its debt obligations. Depreciation An annual charge of an asset’s cost into each year of the asset’s useful life, for assets that have a useful life of greater than 1 year. Direct allocation Allocates costs of each service department directly and only to revenue-producing responsibility centers. Direct cost A cost that can be traced to, or caused by, a particular service, product, segment, or activity of the department. Discount rate The rate used to calculate the present value of future cash flows. Equity Claims against, or interests in, the assets of a company; divided into liabilities and owners’ equity. Expense budget The amount of resources that will be required to produce the forecasted activity. Fiscal year The year on which the general ledger is based. It can be different from the calendar year. The fiscal year used by a firm is usually based on the norm of the industry to which it belongs. Fixed budget A budget in which the budgeted amounts do not fluctuate with the volume. Fixed costs Costs whose total remains constant regardless of changes in level of activity. Flexible budget A budget in which the variable portion of the budget fluctuates with the level of volume. Full-time equivalent (FTE) The proportion of an employee’s paid hours per year to the standard labor measure, which is typically 2,080 h (5 days × 8 h × 52 weeks per year). Fund accounting A form of accounting in which revenues and expenses must always be equal and expenses are stopped when revenue is exhausted.

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Future value (FV) The amount to which a given amount of cash will grow at the end of a given period of time when compounded at a given rate of interest.

Required rate of return Known as the hurdle rate or cost of capital, it represents the minimum return on investment a firm requires on capital expenditures.

General ledger The system that records all accounting activity.

Revenue budget The revenue that will be generated by the forecasted activity for a responsibility center.

Income statement Reports the financial results of a firm’s operations over a period of time. Incremental budgeting Uses prior year results as a basis for building the current year budget. Indirect cost A cost that cannot be traced to a particular service, product, segment, or activity. Interest rate The amount charged by lending institutions for the use of the money borrowed by a firm. Internal rate of return (IRR) The rate that equates the present value of a project’s expected cash inflows to the present value of the project’s costs. Liabilities (and liability accounts) The debts or obligations owed to outsiders. Liquidity ratios Measure of the firm’s ability to meet its immediate obligations; thus, the relationship between a firm’s current assets and its current liabilities. Long-term debt The firm’s obligations that are due after more than a year. Management reporting A process of communicating actual versus budgeted performance throughout the organization to identify necessary corrective actions and help make decisions. Marginal cost The change in total cost relative to the change in volume, i.e., the cost of producing one more unit of service; incremental cost. Net present value (NPV) The present value of future net cash flows, discounted at the cost of capital. Nonproductive time Paid time for non-job-related activities such as vacation, holidays, and sick time. Operating budget The financial plan for managers with direct responsibility for managing the operations of a responsibility center(s). The operating budget is made up of a statistical budget, a revenue budget, and an expense budget. Overhead costs Costs that are from non-revenue-generating departments. Owners’ equity The ownership claim against the total assets of a company (also called stockholders’ equity).

Semi-variable costs Costs that include both variable and fixedcost elements. Standard cost A measure of how much an item should cost, rather than a record of how much it actually did. Statistical budget The forecast of activity for a responsibility center. Step-down allocation Distributes the costs of the service departments providing the most services to all departments. All remaining service departments’ costs are then allocated in descending order determined by the amount of service they render. Step-fixed costs Costs that are fixed over a range of activity and are then increased when activity levels go up. Stockholder equity accounts The difference between a firm’s assets and liabilities (claims against assets). The accounts are reported on the balance sheet and have natural credit balances. Time value of money A concept that recognizes that a dollar of cash today is worth more than a dollar of cash to be received at some time in the future. Unit of service (UOS) The logical measure of work for a given area. In the laboratory, it is usually the number of billed tests or procedures performed. Variable costs Items of cost that vary, in total, directly, and proportionately with volume or level of activity changes. Variance analysis The process of analyzing differences in actual versus budgeted performance to identify necessary corrective actions and help make decisions. Volume variance The difference between the volume of services performed versus the volume that was budgeted. Write-offs Recorded reductions in revenue for gross charges that are deemed uncollectable from third-party payors. Zero-based budgeting A budgeting methodology in which every expenditure must be justified regardless of the prior year’s results.

Present value (PV) The value today of a future cash flow. Price variance The difference between the price of a supply or service versus the price that was budgeted. Productive time Paid time for job-related activities. Profitability ratios Measure of the combined effects of liquidity, asset management, and debt management policies on operating results. Quantity variance The difference between the amount of inputs (labor and/or supplies) used to produce each unit of service versus the quantity that was budgeted.

REFERENCES 1. Finkler, S. A. 1994. Cost Accounting for Health Care Organizations. Aspen Publishers, Inc., Gaithersburg, MD. 2. Horngren, C. T. 1984. Introduction to Management Accounting, 6th ed. Prentice-Hall, Inc., Englewood Cliffs, NJ. 3. Joy, O. M. 1983. Introduction to Financial Management, 3rd ed. Richard D. Irwin, Inc., Homewood, IL. 4. Pavlock, E. J. 1994. Financial Management for Medical Groups. Medical Group Management Association, Englewood, CO.

34 Introduction Contextual Considerations Analytical Underpinnings of a Decision Executing the Plan Summary KEY POINTS

Financial Decision Making: Putting the Pieces Together Ronald J. Bryant and Michael R. Lewis OBJECTIVES To place the financial decision-making process in the context of the laboratory, the institution, and the broader healthcare environment To review important considerations in the financial decision-making process

If you know how to spend less than you get, you have the philosopher’s stone. Benjamin Franklin

O

ptimal allocation of a laboratory’s finite financial resources, while ultimately a numbers-driven task, depends not only on the quality of available financial analyses but also on factors that are not readily quantified: the manager’s understanding of the organization’s strategy, his or her recognition of the institutional and extra-institutional environments in which the laboratory is operating, and his or her aptitude for employing nonfinancial (e.g., human) resources effectively. Each of these facets of financial management has been addressed in a preceding chapter in this section; we seek here to integrate these perspectives into an approach to making financial decisions.

Contextual Considerations

Clinical Laboratory Management, 2nd Edition Edited by L. S. Garcia ©2014 ASM Press, Washington, DC doi:10.1128/9781555817282.ch34

The sweeping influence of reimbursement reform will have an impact not only on hospitals and individual physicians but on laboratories of all sizes and structures, regardless of the laboratory’s position as an independent entity or a subunit of a large organization. Fundamentally, the laboratory will be transformed from a profit center to a cost center, and the effects of this shift will be predictably dramatic. The shift from a model in which higher volumes are rewarded financially to one in which containment of volumes and elimination of unnecessary testing directly affect the bottom line will necessarily influence decisions about which activities make sense to start, continue, or stop. Compounding the difficulty of analyses in this new environment is the expected integration of many laboratories into accountable care organizations (ACOs) that will more directly link the financial fortunes of the laboratory 619

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with those of a variety of physician practices and hospitals. Much of a laboratory’s revenue will likely be fixed based on the size of the population receiving care from an ACO, making cost containment an even greater imperative. In such circumstances, a valid cost analysis will look not merely at costs borne directly by the laboratory but also at those incurred by the larger organization. While taking a broad view such as this has been intellectually appealing even in the fee-for-service era, such forward-thinking approaches have not always been well rewarded under the existing management structures of large institutions. Consider, for example, a decision regarding the introduction of molecular techniques (e.g., real-time PCR) in the virology section of a microbiology laboratory. Capital expenditures would be substantial, and there would be associated needs for space, training time for technical staff (“nonproductive” time in the accounting sense), and infrastructural support (including building tests in the laboratory information system and billing system, client education, etc.), all of which would increase laboratory costs in the short term. Assuming that reimbursement for these new tests is unlikely to offset the associated start-up costs, a management culture reliant on “silo”based budgets and variance reports could cause a laboratory manager to hesitate when contemplating such a move. Even if the manager believes that the overall impact on the organization’s finances would be favorable, deciding whether to proceed may not be straightforward. Can the overall financial impact be known? Would this move be aligned with the laboratory’s strategy and with that of the broader organization?

Analytical Underpinnings of a Decision An accurate assessment of the costs associated with different options is clearly essential, as is a reasonable forecast of the associated revenues. Techniques such as those described in chapter 33, by Tolzmann and Vincent, are employed by many laboratories to develop cost data—costs under the status quo as well as costs of contemplated initiatives. Communication with laboratory marketing and billing staff is necessary to develop plausible revenue scenarios for options under consideration. Generating data that managers trust and that are timely is no small feat; nonetheless, while laboratory-specific figures are necessary for the decision-making process, they are, as suggested above, less and less likely to prove sufficient to the task as the laboratory’s financial fate becomes even more tightly intertwined with those of other institutions and providers. Understanding the impact of laboratory decisions on the operations of the hospital or system, and being able to quantify that impact, will become increasingly important. Consequently, close collaboration with colleagues

outside of the laboratory to ensure that managers are up to speed on institutional initiatives and conversant in the operational and financial language of the institution is imperative if laboratory decisions are to make sense in the broader context. Returning to our example, how can the laboratory manager make an evidence-based decision regarding molecular virology without an understanding of the extra-laboratory effects of such testing? Would inpatient length of stay (LOS) be shortened if such tests were available? Would empirical use of antimicrobials be reduced? Would admissions be reduced? How much would these changes save the system? While assigning precise dollar figures to incremental changes in LOS is problematic and beyond the purview of the laboratory manager, communication between the manager and colleagues addressing such issues is necessary to ensure that financial decisions in the laboratory are based on consideration of the wide range of pertinent data.

Executing the Plan As the influences on and ramifications of financial decisions made in the laboratory broaden with the evolution of the environment in which laboratories operate, it is clear that effective collaboration among colleagues with varied backgrounds is essential for effectively making and implementing decisions. The need for teamwork in developing a suitable evidence base for decision making has been addressed above; no less important is effective human resource management to ensuring optimal performance in the implementation phase. Returning to the example of molecular testing in virology, among the many tasks associated with implementation would be communication with staff concerning the change, planning for resources (physical, human, financial) to implement the new technology, and collaboration with billing, compliance, and information systems personnel and with clinical colleagues, nursing staff, and institutional authorities. All of these components are necessary to ensure that the expected benefits are realized. Not to be overlooked is the role of ongoing review of the laboratory’s decision-making process. Given the rapid pace at which challenges arise, it is easy to postpone systematic consideration of decision-making effectiveness. Reflection on what has worked well and on ways to improve the process, while unlikely to be considered urgent, is often undervalued and underutilized.

Summary Effective financial decision making draws on varied aspects of management. Beyond having the appropriate analytical tools, the manager must bring to bear an understanding of the organization’s strategy, of the environment in which

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the laboratory is operating, and of how to collaborate to make and implement decisions optimally. KEY POINTS ■ Financial decision making takes place not only in a laboratory context but also under the influence of broader healthcare forces.

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■

Strategic planning and clear delineation of goals are necessary prerequisites for effective financial decision making.

■

Successful decision making draws heavily on effective collaboration among motivated colleagues within and outside the laboratory.

VI Generation of Revenue (section editors: Vickie S. Baselski and Alice Weissfeld) 35

Correct Coding of Billable Services in the Clinical Laboratory Vickie S. Baselski, Alice S. Weissfeld, and Fran Sorrell

36

Approaches to Billing Laboratory Services Vickie S. Baselski, Alice S. Weissfeld, and Fran Sorrell

37

Charges and Fees for Laboratory Services Vickie S. Baselski, Alice S. Weissfeld, and Fran Sorrell

35 Introduction Procedure Coding: What Test Procedures Have Been Performed? The CPT System Description • Types of CPT Codes • Modifiers • The Process for Change • Procedure Coding Guidance

Procedure Coding Alternatives Capitated Services Diagnosis Coding: Why Is the Service Being Performed? Inpatient Diagnosis Coding • Outpatient Diagnosis Coding • Other Unique Patient Groups • ICD-CM • SNOWMED CT

Service Location Role of CLIA and State Licensing • Revenue Codes

Documentation of Codes Requisition • Claims • Code Mapping

Summary KEY POINTS GLOSSARY

Correct Coding of Billable Services in the Clinical Laboratory Vickie S. Baselski, Alice S. Weissfeld, and Fran Sorrell OBJECTIVES To explain the importance of using the standardized coding systems recognized by payors To discuss laboratory responsibilities to ensure that correct and complete coding has been done To describe the importance of the ICD-CM coding system and its relationship to proper billing To discuss the fundamental principles of correct and complete coding

REFERENCES APPENDIX

Let the good service of well-deservers be never rewarded with loss. Let their thanks be such as may encourage more strivers for the like. Elizabeth I (1533–1603), Queen of England (1558–1603)

T

Clinical Laboratory Management, 2nd Edition Edited by L. S. Garcia ©2014 ASM Press, Washington, DC doi:10.1128/9781555817282.ch35

he primary goal of laboratory medicine is to provide a variety of laboratory services that facilitate the role of physicians and other direct healthcare providers in the prevention, diagnosis, and treatment of diseases by generating data upon which clinical decisions are made. It has been estimated that although laboratory medicine accounts for only 5 to 7% or less of total healthcare costs, the information generated drives 60 to 70% of subsequent resource utilization and is estimated to direct at least 80% of all clinical decision making (8). In turn, laboratory payments constitute a very low percentage of actual payments to healthcare providers. For example, laboratory services represent just under 2% of program spending for Medicare Part B outpatient healthcare services and just over 2% of national healthcare expenditures (13). By any standard, these figures demonstrate that laboratory medicine services are a bargain as well as a critical component in the provision of healthcare services. As a critical component of healthcare, it is essential that a uniform approach to documenting laboratory services be used to track utilization (16). The critical parameters that one must specify in accounting for laboratory services include (i) the actual laboratory service (i.e., what test procedures the laboratory performed), (ii) the clinical reason for performing the laboratory service (i.e., why the test procedures were performed), and (iii) the specific laboratory type (i.e., the setting in which the work was performed). For each of these parameters, the laboratory must use standard language to communicate with payors and for use in benchmarking comparisons of practices to assess efficiency and effectiveness of services provided. 625

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Procedure Coding: What Test Procedures Have Been Performed? A number of procedure coding systems have been developed to standardize the documentation of services rendered for financial purposes, although one particular system is primarily used in the United States and is also in use in many other countries. The predominant procedure coding system is the Current Procedural Terminology (CPT) system (2). This system is recognized by the U.S. federal healthcare payment programs (i.e., Medicare and Medicaid) as the official coding system and has been adopted in its entirety as the federal procedure coding system known as the Healthcare Common Procedure Coding System (HCPCS). For procedures or practices not yet defined by a CPT code, HCPCS codes may be established that are used until an appropriate CPT code is available. The CPT system is recognized by all other major third-party payors; thus, it is an oft-stated adage that “as goes Medicare, so go others.” The CPT system has also been designated as the Standard Electronic Healthcare Transaction Code Set for procedures under the Health Insurance Portability and Accountability Act of 1996. However, it should be recognized that alternatives do exist, and it was a recommendation of the 2000 Institute of Medicine report Medicare Laboratory Payment Policy, Now and in the Future that “HCFA (Health Care Financing Administration, now known as the Centers for Medicare and Medicaid Services [CMS]) should review alternatives to the current system for coding outpatient clinical laboratory services for claims processing. More accurate, open, and timely coding processes for new technologies, as well as tests and services should be sought” (10). Thus, general familiarity with alternatives (e.g., International Classification of Diseases, Version 10, Procedure Coding System [ICD-10-PCS], based on an approach similar to the Logical Observation Identifier Names and Codes [LOINC]) is recommended (3, 17).

The CPT System Description The CPT system, a proprietary product of the American Medical Association (AMA), is a listing of five-digit descriptors and numeric and alphanumeric identifiers that are used for documentation of services rendered (Table 35.1). The system was first developed in 1966 and is currently in its fourth edition. The purpose of CPT is to provide a uniform language that accurately describes medical, surgical, and diagnostic services for financial and administrative purposes and to serve as a standard means of identifying and documenting services performed (2). These codes are multifunctional and serve as the basis for service order documentation and procedure results, claim and invoice generation and billing, fee-for-service

Table 35.1 The CPT system Definition

The CPT system is a proprietary product of the AMA and is a listing of five-digit numeric and alphanumeric identifiers with narrative descriptors, which are used for documentation of services rendered. A “billable service” may be defined as one that is CPT codeable.

Purpose

To provide a uniform language that accurately describes medical, surgical, and diagnostic services for financial and administrative purposes. CPT serves as a standard means of identifying and documenting services performed.

Code uses

The basis for service order documentation and procedure results Claim and invoice generation and billing Fee-for-service payment schedules Development of edits that assess the appropriateness of payment for the service Assessment of the productivity of laboratories in providing services Utilization review and outcomes in specific clinical situations

payment schedules, development of edits that assess the appropriateness of payment for the service, assessment of the productivity of laboratories in providing services, and utilization review and outcomes assessment in specific clinical situations (4, 11). All aspects of effective financial management of the clinical laboratory begin with correct and complete coding for all services rendered (14). In essence, a “billable service” may be defined as one that is CPT codeable.

Types of CPT Codes All generally accepted laboratory service codes, termed category I codes, are found in a specific pathology and laboratory section that includes both clinical laboratory and anatomic services (Table 35.2). Clinical laboratory services are further divided into discipline-specific subsections (e.g., chemistry, hematology, immunology, transfusion medicine, microbiology, molecular pathology). In addition, both technical testing services and professional, physician-provided services may be coded. In general, category I codes represent services that are performed by many healthcare professionals in multiple locations throughout the United States, that have received Food and Drug Administration clearance or approval, if required, and that have been shown to have clinical efficacy. Technical category I codes are of several types. Primary codes are those that denote a specific procedure. Add-on codes are those that are performed in addition to a primary code and are indicated by a “+” symbol or by the descriptor language “use in

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Table 35.2 Types of CPT-4 codes Category I

All generally accepted laboratory service codes; found in the specific pathology and laboratory section (includes both clinical laboratory and anatomic services) Divided into specific subsections (e.g., molecular pathology, chemistry, hematology, immunology, transfusion medicine, microbiology) Represents services that are performed by many healthcare professionals in multiple locations throughout the United States, that have received Food and Drug Administration clearance or approval, if required, and that have been shown to have clinical efficacy

Category II

Developed for performance measurement tools Initially released in 2003, with annual updates Currently, there are no Category II codes that specifically address laboratory practices. Use is optional and nonessential for correct coding.

Category III

Implemented in 2001 Designed to be a temporary code set for procedures that represent emerging technologies not yet meeting the requirements for assignment of a category I code Retired after five years if not moved to Category I There have been several category III codes that describe laboratory procedures.

addition to.” Organ- or disease-oriented panels represent AMA-approved and CMS-accepted test groupings that are coded as a single billable test procedure and are generally performed conveniently as such on automated instruments. Technical services are often subject to payment under a defined fee schedule that is updated on a regular, generally annual basis. Professional services are identified by specific CPT codes found in the anatomic pathology and cytology subsections and by two defined codes in a clinical pathology consultation section. In addition, for a few designated clinical laboratory codes requiring clinical interpretation, one may attach a two-digit modifier indicating that the code has both a technical and a professional component that may each be billed by different entities. Coding and billing for professional services are also generally subject to payment under a defined fee schedule that is developed through a resource-based relative value system (6, 12, 15). Category II codes and category III codes represent newer components of the CPT system that were developed as a component of the CPT-5 (5th edition) project (Table 35.2). Category II codes were developed as performance measurement tools and were initially released in 2003, with updates generated annually. They are designed to

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track best practices associated with specific clinical conditions and are thus similar conceptually to Healthplan Employer Data and Information Set (HEDIS) monitors, which are widely used by managed-care plans. However, at this point there are no category II codes that specifically address laboratory practices, although laboratory test use may be a component of the best practice algorithm associated with a specific category II code. At this time, the use of category II codes is optional and nonessential for correct coding. Category III codes were implemented in 2001 and are designed to be a temporary code set for procedures that represent emerging technologies not yet meeting the requirements for assignment of a category I code. They are intended to be used to track utilization of these types of procedures and are updated biannually. It is possible that a category III code may eventually satisfy criteria for assignment of a category I code. However, from a correct-coding perspective, if a category III code is available, it must be used. In addition, if not assigned to a category I code in a five-year period, these codes may be retired. There have been several category III codes that describe laboratory procedures.

Modifiers Modifiers are another important component of the CPT system. Modifiers are composed of two-digit numbers that are attached to a specific code prior to the billing process (Table 35.3) (1, 2). They are “used to indicate that a service or procedure has been altered by some specific circumstance but not changed in its definition or code” (1). In laboratory medicine, there are several critical modifiers. The modifier -26 is used when a certain procedure is a combination of a physician component and a technical component. This modifier for “professional component” is only applicable in selected circumstances, usually involving inpatients, when the professional “interpretative” component is reported separately. Duplicate services of the same type on the same type of specimen from the same date of service are generally not reimbursed but may be appropriate if modified with -91 (repeat clinical diagnostic test performed on the same day to obtain subsequent reportable and clinically useful test values). However, this modifier may not be used when tests are rerun to confirm initial results (due to testing problems with specimens or equipment) or for any other reason when a normal, one-time, reportable result is all that is required. Modifier -59 (distinct procedural service) identifies distinct and separate multiple services of the same type on the same date of service that “are not normally reported together but are appropriate under the circumstances.” This modifier generally refers to different encounters with the same patient or different anatomic sites. Modifier -59 is

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Table 35.3 CPT modifiers used in laboratory medicine Modifier

Description

-26

Certain procedures are a combination of a physician component and a technical component; this modifier for “professional component” is applicable only in selected circumstances, usually involving inpatients, when the professional “interpretative” component is reported separately.

-91

Repeat clinical diagnostic test performed on the same patient, on the same type of specimen from the same date of service, to obtain subsequent reportable and clinically useful test values; this modifier may not be used when tests are rerun to confirm initial results (due to testing problems with specimens or equipment) or for any other reason when a normal, one-time reportable result is all that is required.

-59

This modifier (distinct procedural service) identifies distinct and separate multiple services of the same type on the same date of service that “are not normally reported together but are appropriate under the circumstances.” This modifier generally refers to different encounters with the same patient or different anatomic sites.

-90

Used to indicate that a laboratory has referred a procedure it is billing to a reference laboratory. To use this code, laboratories must follow a 70-30 rule, which states that no more than 30% of total testing is referred out.

also used to report services that may be considered a component of another service but have been carried out in a distinctly unrelated fashion. The modifier is not appropriate if a procedure is repeated due to analytical error or to confirm or verify a result. Modifier -90 is used to indicate that a laboratory has referred a procedure it is billing to a reference laboratory. To use this code, laboratories must follow a “70-30” rule, which states that no more than 30% of total testing is referred out. Laboratorians must also be familiar with a two-digit alpha character HCPCS modifier set to denote situations for which a CPT modifier does not exist. Modifier -QW is used to indicate that a procedure being performed in a Clinical Laboratory Improvement Amendments (CLIA) waivedstatus laboratory has received a waiver to be performed as such from the CLIA program. A series of very important HCPCS modifiers indicate the status of the acquisition of a “waiver of financial liability” (termed an advance beneficiary notice [ABN]) from the patient. The Medicare ABN must adhere to a specific format that should not be a component of a requisition. An ABN should be obtained whenever it is likely that a service does not meet Medicare payment rules and is therefore likely to be denied. Other

third-party payors use notices modeled after the ABN to inform patients of their financial obligations for payment for coded services. Use of modifier -GA is mandatory and indicates that Medicare is not likely to pay for a service and the patient has signed an ABN. Modifier -GZ is optional and indicates that Medicare is not likely to pay for a service but the patient has not signed an ABN. Modifier -GY indicates that a service is statutorily excluded from payment and the patient has acknowledged financial responsibility by signing an ABN. Finally, -GX may be used when an ABN has been voluntarily issued for a noncovered service.

The Process for Change Since laboratory procedures are constantly evolving, particularly with the emergence of new technology, it is necessary for the CPT system to undergo regular updates (Table 35.4). Updates, which add, delete, and modify existing codes, are issued annually after an extensive and systematic review process that begins with the submission of an AMA coding change request form by any individual, professional group, or corporation. Each request undergoes a complete review by AMA-appointed specialty committees, general CPT committees (the CPT Advisory Committee and the Health Care Professionals Advisory Committee), and ultimately the CPT Editorial Panel. The time frame to effect a change is usually 15 months or more, with new codes being released in midsummer since 2001 and the completely updated CPT manual released in hard copy by October prior to the January implementation date. Federal payors require use of new codes beginning in January (2). Table 35.4 Process and schedules for CPT code revisions Timing

Action

18 mo prior 18 to 9 mo prior

Code changes are proposed. Proposals are reviewed by multiple AMA committees including: Healthcare Professionals Advisory Committee AMA CPT Advisory Committee and subcommittees AMA CPT Editorial Panel Final changes for the next calendar year are approved by CPT Editorial Panel. Early release of new codes for determination of reimbursement Publication of the new edition for the upcoming year Mandatory Medicare implementation of new codes Time for action. Systematic efforts to verify codes, perform new cost analyses, update charge masters, change information systems, etc.

February prior Summer prior October prior January 1 October–January 1

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Other third-party payors generally follow the same timeline, but there may on occasion be disconnects. HCPCS codes are also published annually but may be developed and issued any time it is deemed necessary to supplement the CPT system.

Procedure Coding Guidance The selection and verification of CPT codes should be performed annually, coincident with the release of annual changes by the AMA. Correct coding is clearly the responsibility of the laboratory, in which the technical knowledge of the current procedures resides. Laboratorians must pay close attention to the narrative descriptors for the test procedures when selecting codes for use in documentation. Descriptors relate only to the procedure and do not reflect the reason for performing the test. Documenting why a test is performed generally requires an ICD-CM code. Note that there are some exceptions to this duality of purpose. For example, the newly established Medicare HIV screening benefit requires the use of newly established HCPCS codes that indicate both method and purpose (i.e., screening). There is an established hierarchy for choice of CPT codes that places analyte first, followed by method, and then finally the use of a generic “not otherwise specified” code. If no match for the analyte and method can be found, then an “unlisted code” (usually ending with “-99”) is available. However, as specificity of coding decreases, the probability that a code will not be reimbursed without submission of additional documentation increases. One should also review current HCPCS codes to determine if the procedure in question is described there. It is very important to ensure that one does not “unbundle codes,” that is, select multiple individual codes rather than a comprehensive single code (e.g., when coding for panels). Further, the National Correct Coding Initiative directs that for federal payor programs, “multiple tests to identify the same analyte, marker, or infectious agent should not be reported separately.” Keep in mind that the same guiding principles generally apply to other third-party payors.

Procedure Coding Alternatives The CPT system is obviously firmly entrenched in laboratory management as the primary tool for procedure coding and subsequent billing of laboratory services. However, there are alternatives that may gain wider use at a future date. Foremost among these is a system known as LOINC (17). With input from a consortium of laboratories, information system vendors, hospitals, and academic institutions, the grant-supported Regenstrief Institute developed and maintains LOINC. LOINC is considered a universal laboratory language that is based on the systematic breakdown of the components of a service into more specific

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units, ultimately creating a highly standardized, typically seven-digit, number, with each possible result from a procedure being mapped to a specific code. The breakdowns take into consideration where the procedure was performed, the specific analyte type, the method, and the type of result. Unlike CPT, LOINC is publicly available and can be used with no license fee. It is widely used by commercial laboratories to track specific procedures from order to result. The LOINC system formed the basis for the development of the CMS ICD-10-PCS laboratory coding system intended for use as an alternative to CPT (3). This system was developed by 3M under contract to the Health Care Financing Administration (now CMS), with substantial input from specialty professional groups. It was finalized and released in 1999 but has remained inactive, as CPT has continued to be used as the “official” procedure code set.

Capitated Services Beginning in the 1980s, a trend toward paying capitated, or predetermined, amounts for management of a specific disease or in a specific clinical circumstance rapidly emerged (19). This trend began with the development of diagnosisrelated groups (DRGs) under Medicare to classify reasons for hospitalization, where payment amounts were defined based not on the actual procedures performed but on the final diagnosis, while in other capitated payor plans, hospitalizations were paid for on a per-diem basis. Subsequently, this concept was extended to cover all outpatient healthcare costs, and managed-care plans emerged that paid for all required services under terms like “per member per month” or “per covered life.” Finally, Medicare recognized special categories of patients for whom payments were similarly categorized by the condition or situation of the patient and not by a compilation of individual procedures. Examples may be found in payment for services to patients in skilled-nursing facilities (SNFs) or patients being treated in dialysis centers for end-stage renal disease (ESRD). More recently, Medicare has similarly initiated an outpatient prospective payment system based on defined ambulatory payment classifications (APCs). Needless to say, other third-party payors find inpatient payment by this method to be financially gratifying, and Medicare is seeking to move outpatients into managed-care situations. In other words, the trend is definitely to try to find ways to minimize payment for services. Under such capitated or prospective payment systems, laboratories may find themselves in the situation of representing financial liabilities rather than revenue generators. To balance this perception, it is extremely important for laboratories to develop mechanisms to document all work performed in a given clinical setting. Therefore, correct coding is also a key to success in capitated payment situations. Knowledge of the exact amount of work performed

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per DRG or APC allows one to justify the allocation of a specific proportion of the total payment to the laboratory. This also allows one to “carve out,” or specifically exclude, unique high-cost niche test procedures from the contract. Thus, even in capitated payment situations, laboratorians should seek to code correctly for every laboratory procedure performed. Very recently, in keeping with healthcare reform changes promoted through the Patient Protection and Affordable Care Act of 2010, the key concepts of coordinated, centralized, and cost-effective care coupled with prospective payment have been extended through accountable care organizations (ACOs). While it is not clear how pathology and laboratory medicine services will be most efficiently structured under ACOs, it is clear that the intent will be to provide services in the most cost-effective manner. While some models suggest that laboratory algorithms may be used to reduce unnecessary testing, other models suggest that laboratory testing may increase in some settings due to expansion of the use of laboratory tests used to screen for disease or disease precursors (7). In either model, correct coding and accurate documentation of services will be essential for effective laboratory management.

Diagnosis Coding: Why Is the Service Being Performed? As previously stated, the purpose of laboratory testing is to facilitate the management of a patient by a physician or other authorized healthcare provider. Thus, to accurately and completely document laboratory testing for both financial and clinical purposes, it is important to also document the reason(s) for performing the test. This too requires the use of a standardized and systematic approach if maximum information is to be readily obtained for administrative and financial purposes. The systems currently in use take into account the patient environment (e.g., inpatient versus outpatient) as well as the actual diagnosis, signs and symptoms, or other reason for the encounter. It is now both a statutory requirement for Medicare as well as an almost uniformly accepted requirement for other third-party payors to provide diagnostic information for claim review prior to payment for services. The information is used to verify that a procedure is clinically necessary for payment purposes and to determine if it is clinically appropriate and useful for patient management in utilization review. It should also be acknowledged that provision of specific diagnostic information with each orderable and billable test is useful in the laboratory to ensure appropriate laboratory handling.

Inpatient Diagnosis Coding For inpatient purposes, the DRG prospective payment system has already been mentioned. Effective in 1983, this system assigns a final diagnosis to each patient admitted to

the hospital. The system was expanded in 2007 as a Medicare Severity DRG system (MS-DRG). Currently more than 750 MS-DRGs have been defined that take into account clinical condition or reason for admission, medical responses, and presence or absence of complications. Each MS-DRG is weighted according to relative costs, inclusive of laboratory costs (although as already noted, the actual laboratory component is generally quite low), and payment schedules are published annually for a January implementation date. DRGs are now used by many third-party payors to determine payment rates and are the primary basis for developing algorithms for cost-effective management of the condition specified by the DRG. These algorithms are known as “critical pathways,” “clinical pathways,” or “care paths” and often include delineation of laboratory tests that should be performed as well as when testing is appropriate (18). Correct coding of these tests provides the laboratory a valuable means to track utilization as well as costs (16). Such tracking has become very important recently, as the CMS has begun investigating why certain specific DRGs are consistently increasing both in relative proportion of total admissions and in percentage of total costs in a project dubbed “Project DRG Creep.” In addition, beginning in 2008 the CMS began to identify specific hospitalacquired conditions (HACs) that were not present on admission (POA) and are deemed preventable. In the case of the occurrence of a specified HAC, no additional reimbursement for the complication is made. Documentation of both the HAC as well as the tests performed as a component of documenting the HAC will assume increasing importance as the list of HACs increases. One other critical parameter in coding for inpatient procedures pertains to the DRG payment window. At present, any procedure performed by an affiliated laboratory three days or less prior to an admission is deemed to be a component of the payment for the admission DRG that should not be billed separately. After discharge as well, any tests ordered on specimens collected during the hospital stay are considered as a component of the DRG assigned. However, it is still in the laboratory’s best interest to continue to code for these procedures to document the actual work performed. Physician professional services are not included in the DRG but are billed separately.

Outpatient Diagnosis Coding Medicare has initiated a prospective payment program for outpatient visits similar to the DRG system. As previously discussed, this prospective payment system is based on APCs. However, at this point, laboratory payments are excluded from the APC payments, and tests continue to be billed on a fee-for-service basis. It is likely that at some point in the future, to control costs, the prospective payment will be modified to include laboratory services.

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Other Unique Patient Groups Medicare also recognizes some unique patient groups for management and administrative purposes. For these groups, laboratory tests are frequently combined with other services for reimbursement. Examples include patients in end-stage renal disease (ESRD) clinics and patients in skilled-nursing facilities (SNFs). If providing services to these groups, laboratories must be aware of the specific billing rules. ICD-CM For all of the above diagnosis groups, the actual payment is based on a complex formula that takes into account both the specific clinical conditions as well as the diagnostic procedures used. The primary coding system for documentation of the clinical conditions leading to a patient encounter is the International Classification of Diseases, Clinical Modification (ICD-CM). The ICD-CM used in the United States is currently the 9th edition (ICD-9-CM) but will be replaced in 2014 with a significantly modified and expanded 10th edition (ICD-10-CM) (9). Basically, the ICD-CM system provides a mechanism to classify morbidity data for medical records, for medical care review, and for basic health and utilization statistics. It is the official CMS system for assigning codes for clinical conditions associated with consequent medical procedures, including laboratory testing. The system is maintained by a consortium of professional clinical medicine groups, professional medical record groups, the National Center for Health Statistics, the CMS, and the World Health Organization. Updates are made on a quarterly basis and published for public use. The ICD-CM is composed of a tabular numerical list of diagnoses, signs and symptoms, and clinical conditions or reasons for a physician encounter. The system includes both disease conditions or signs and symptoms, and preventative medical reasons for encounters. When a test is performed on a patient with signs, symptoms, or a specific diagnosis, the purpose is typically diagnostic or for monitoring progression. Such tests are often deemed “medically necessary” and are typically reimbursed. When a test is performed in the absence of signs, symptoms, or a specific diagnosis to identify patients with clinically silent disease, a disease precursor, or risk factors for a disease, it is referred to as a “screening test.” Such tests may or may not be eligible for reimbursement (an issue further discussed in chapters 36 and 38). The system also allows coding for exposures and sources of external injury, as well as a classification system for surgical, diagnostic, and therapeutic procedures for inpatients. While ICD-9-CM lists approximately 13,000 codes, ICD-10-CM lists approximately 68,000 codes. SNOMED CT An alternative clinical coding system developed by the College of American Pathologists is called SNOMED CT, which is an acronym for a comprehensive and precise

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“systematized nomenclature of medicine clinical terminology.” This system was developed in conjunction with the United Kingdom’s National Health Service and is now maintained by the International Health Terminology Standards Development Organisation (IHTSDO). The system is designed to easily map to other diagnostic terminology systems, but it is unique in its ability to show expected and logical relationships between clinical conditions (5). For example, with the ICD-9-CM a foot ulcer may have diabetes as a contributing diagnosis, but with SNOMED, it is a diabetic foot ulcer. It should be noted that the ICD-10-CM revisions similarly improve upon condition linkages. Like other major proprietary coding products, SNOMED is subject to regular updates and requires an appropriate license for use.

Service Location The last major issue in correct coding is the assignment of credit for the work performed as well as credit for the revenue generated to the entity performing or billing the services. In most large laboratories, there are multiple departments performing testing, and it is necessary to assign each entity designated as an independent financial center a unique identifier for financial analysis purposes.

Role of CLIA and State Licensing Under CLIA, each laboratory has a unique certificate number that validates its status as a billing entity for federal healthcare programs. Most other paying entities also use CLIA certification as an indicator of the operational validity of the laboratory. Laboratories may only bill for work performed that is compatible with the CLIA service level that they are assigned unless the laboratory is billing reference work properly modified as previously discussed with modifier -90 and not exceeding 30% of the test volume. Many states also have stringent facility licensing requirements, and in those states, a billing entity must also have a valid state licensure status. CLIA and some states require the facility certificate or license numbers to appear on claims. Revenue Codes Revenue codes comprise a system for categorizing and billing services that is recognized by CMS and most thirdparty payors. This system is maintained by the National Uniform Billing Committee of the American Hospital Association and is designed to standardize major revenueproducing centers in an institutional setting, particularly hospitals. For each test performed and charge code billed, the institution should determine which revenue code is most appropriate to assign credit. Both charge codes, which map to CPTs, and revenue codes, which map to actual testing location, must appear on claims.

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Documentation of Codes Two types of documents important in the billing and reimbursement process require the documentation of the codes assigned for procedures, diagnoses, and revenue centers appropriate to the testing. First is the requisition, which documents both the order and the diagnosis, and then the claim form or invoice, which allows transmission of the bill for services to a payor. Healthcare providers frequently use coding data from both requisitions and claims in overall financial assessments of the laboratory operational efficiency. Therefore, it is important that the laboratory have a clear understanding of how each test name or procedure relates to a specific code.

Requisition Requisitions may be manual (hard copy) or, preferably, electronic but should be designed to facilitate the capture of all of the required data for accurate processing of an order as well as effective processing of a claim or invoice. Standard elements include demographics of the patient, billing information, ordering provider contact and authenticity information (the unique provider identification number), date of service, and a menu of tests that may be ordered. The test menu should map to CPT coding information and to diagnostic information justifying payment by a third-party agency, and it should identify those tests requiring an ABN. Any test groupings not strictly defined as a panel by the AMA and any standard reflex protocols should also be clearly delineated. Of course, each orderable test should also have an easily accessible reference defining specimen requirements and clinical utility as well. Claims Claims submitted to third-party payors are now generally required to be electronic, but they may occasionally be prepared as a manual process. It is also common to engage an independent contractor to perform procedure billings due to the complexity of the process, with many rules for ordering, billing, and reimbursement often being payor specific. However, claim forms have remarkable similarity in that they all depend on the use of standard coding nomenclature for patient identification, provider identification, laboratory identification, procedures including modifiers, diagnoses, and revenue centers. The forms used by the Medicare program serve as a model for the format of claims. Form UB-04 is the form currently required by Medicare for laboratory services submitted from healthcare institutions (e.g., hospitals), having replaced form UB-92, which was used until 2007. However, it should be noted that some nongovernment payors may still use form UB-92. Form CMS-1500 is required by Medicare Part B for claims submitted by physicians and independent laboratories to the contractor. Failure to complete all required information

on either the requisition or the claim form may result in failure to be reimbursed for otherwise payable services.

Code Mapping For optimal use of coding data obtained from requisitions and claims as a component of operational efficiency analysis, it is essential that there be a direct link between common elements in use. The common test names that appear on the requisition or in the electronic order entry system used by ordering providers should link to a specific CPT code or code set. Similarly, the common name and the related CPT code(s) should link to line items on the charge master for billing purposes. In addition, the laboratory service manual should have information on codes used, particularly for external clients who may independently bill for services. Since CPT codes are updated annually, a careful and well-documented annual review of all related documents is strongly encouraged.

Summary It is of paramount importance for the documentation of services rendered that laboratories employ the standardized coding systems recognized by payors. While use of each code set is subject to general guidelines provided by the maintaining entity, it is ultimately the responsibility of the laboratory to ensure that correct and complete coding has been done. This pertains particularly to assignment of correct CPT codes for delineation of services and verification that the codes map to the assigned charge code on a charge master, as well as the determination of circumstances in which appropriate modifiers may be used. Documentation of the ICD-9-CM code provided by the ordering provider is absolutely required for claim processing, although it is generally the responsibility of the laboratory to ensure that claims are appropriately and correctly completed. However, diagnosis classification groups such as DRGs and APCs are assigned by medical record professionals within institutions, and revenue codes are assigned by appropriate finance personnel within an institution. Regardless of where the operational responsibility lies, there still remains a clear responsibility for the laboratory to understand the importance of these coding systems to their operations and to verify assignments of codes when appropriate. Without a doubt, all other aspects of billing and reimbursement processes begin with a solid understanding of and application of fundamental principles of correct and complete coding (11). KEY POINTS It is mandatory that laboratories use standardized coding systems, which are recognized by payors for documentation of services rendered.

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Although each code set is subject to general guidelines, it is the responsibility of the laboratory to verify that correct and complete coding has been done. Documentation of the ICD-CM code provided by the ordering provider is required for claim processing and may be the responsibility of the laboratory. It is recommended that the laboratory perform annual updates of procedure coding, including impact of changes on service manuals, requisitions and order entry systems, and charge masters. It is the laboratory’s responsibility to understand all aspects of correct and complete coding principles.

GLOSSARY Advance beneficiary notice A waiver of liability used by the provider to notify Medicare beneficiaries prior to receiving a service that it may not be a covered service and that they may have to assume financial responsibility. Bundling Placing codes together in a panel. Capitation A predetermined, fixed amount paid to providers in return for rendering a specified set of health services. The rate is established per person (per capita) enrolled in the health plan. Carve out To exclude from a capitated contract and bill as fee for service. Claim The manual or electronic document or invoice, which allows transmission of the bill for services to a payor. CMS-1500 The claim form authorized by the Centers for Medicare and Medicaid Services for filing Medicare Part B claims with contractors. Previously designated the HCFA-1500 (Health Care Financing Administration). Contractors Centers for Medicare and Medicaid Services (CMS) primary third-party claims management entities who administer Part A and/or Part B payments to facilities, physicians, and commercial laboratory providers according to national and local coverage determination policies. Covered lives Population insured by a managed-care contract for prospective payment. Current Procedural Terminology (CPT) Proprietary service codes developed and maintained by the American Medical Association and required for filing claims and billing Medicare and other payors. Diagnosis code Medical diagnoses are assigned a numerical code from a document entitled International Classification of Diseases, Revision (Clinical Modifications). The 9th edition (ICD-9-CM) will be replaced by a substantially updated 10th edition (ICD-10-CM) in 2014. The ICD-CM code refers to the clinical reason for a patient’s encounter. Diagnosis-related groups (DRGs) Classification system developed at Yale that defines more than 700 major diagnostic categories and places patients into case types based on the ICD-CM

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classifications. Substantially updated in 2007 as MS-DRG (Medicare severity adjusted). Downcode The use of a lower-reimbursed test, generally coupled with rebundling, to induce unnecessary utilization. Eligibility/Medicare Part A Federally managed health insurance plan covering Americans over age 65, and Americans under age 65 who have certain disabilities, and most patients with endstage renal disease (ESRD); established by a 1965 amendment to the Social Security Act. Part A covers part of hospitalization and skilled-nursing facility costs. Eligibility/Medicare Part B Federally managed health insurance plan covering Americans over age 65, Americans under age 65 who have certain disabilities, and most patients with ESRD; established by a 1965 amendment to the Social Security Act. Part B provides supplementary coverage for medical services and supplies, including physician services, outpatient services, and certain home healthcare services, as well as diagnostic laboratory tests and services, X rays, and the purchase and rental of durable medical equipment. End-stage renal disease (ESRD) The term used for Medicare beneficiaries who have permanent kidney dysfunction requiring dialysis treatment. Health Insurance Portability and Accountability Act of 1996 Title I resulted in regulations to protect health insurance coverage for workers and their families when they change or lose their jobs. Title II requires the Department of Health and Human Services to establish national standards for electronic healthcare transactions and national identifiers for providers, health plans, and employers. It also addresses the security and privacy of health data. Adopting these standards will improve the efficiency and effectiveness of the nation’s healthcare system by encouraging the widespread use of electronic data interchange in healthcare. International Classification of Diseases, Version 10, Procedure Coding System (ICD-10-PCS) Laboratory coding system intended for use as an alternative to CPT; not currently in use. Logical Observation Identifier Names and Codes (LOINC) Considered a universal laboratory language that is based on the systematic breakdown of the components of a service into more specific units, ultimately creating a highly standardized, typically seven-digit, number, with each possible result from a procedure being mapped to a specific code. Unlike CPT, LOINC is publicly available and can be used with no license fee. It is widely used by commercial laboratories to track specific procedures from order to result. Medicaid Program established under Title XIX of the Social Security Act, which provides health insurance to the impoverished; the state and federal governments fund the program jointly. Medical necessity The determination of ICD-CM codes for which a CPT code will be reimbursed as reasonable and necessary. Medicare A/B contractor Designation for primary third-party contractors who administer Part A and Part B payments for covered services. Previously known as fiscal intermediaries for Part A and carriers for Part B claims management.

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Modifier Two-digit numbers (CPT) or letters (HCPCS) that are appended to a specific CPT code prior to the billing process (see Table 35.3). Modifiers are “used to indicate that a service or procedure has been altered by some specific circumstance but not changed in its definition or code” (1). National Correct Coding Initiative (NCCI) Listings of CPT codes that should not be used simultaneously due to a determination that their use is not in accordance with the intended use; updated quarterly by a Medicare contractor.

4. Baselski, V., L. Garcia, and A. Weissfeld. 2001. The ABCs of CPT coding in microbiology. Clin. Microbiol. Newsl. 23:37–42. 5. Brouch, K. 2003. AHIMA project offers insights into SNOWMED, ICD-9-CM mapping process. J. AHIMA 74:52–55. 6. Burke, M. D. 2003. Clinical laboratory consultation: appropriateness to laboratory medicine. Clin. Chim. Acta 333:125–129. 7. Evans, M. 2011. Test-driving an ACO. Mod. Healthc. 41:38–41. 8. Forsman, R. W. 1996. Why is the laboratory an afterthought for managed care organizations? Clin. Chem. 42:813–816.

Neg reg Negotiated Rulemaking Committee for diagnostic clinical laboratory tests. The committee was charged with the development of national coverage determinations of medical necessity for select laboratory tests as a component of the Balanced Budget Act of 1997.

9. Grider, D. 2012. Principles of ICD-10-CM Coding. AMA Press, Chicago, IL.

Not medically necessary The determination that an ICD-9-CM code does not justify payment for a service denoted by a specific CPT.

11. Kovar, M., and E. Shannon. 2011. Laboratory pricing: charge master risks and rewards. New Perspect. 30:15–17.

Prospective payment system (capitated payment) Payment amounts are predetermined prior to the delivery of services. Profit results from care delivered at a total cost below the contract payment; loss results from care delivered at a total cost above the contract payment. Retrospective payment system Payment is rendered for specifically coded services after the service is rendered; also known as fee-for-service. Skilled-nursing facility (SNF) A Medicare Part A benefit in defined circumstances for rehabilitative and extended care after a hospital discharge. Unbundling Coding individual tests rather than using an appropriate AMA panel approved for payment by the CMS. Upcoding Using a higher-paying code than justified to maximize reimbursement.

REFERENCES 1. American Medical Association. 2012. Principles of CPT Coding. AMA Press, Chicago, IL. 2. American Medical Association. 2013. Current Procedural Terminology, Professional Edition. AMA Press, Chicago, IL. 3. Averill, R. F., R. L. Mullin, B. A. Steinbeck, N. I. Goldfield, and T. M. Grant. 2001. Development of the ICD-10 procedure coding system (ICD-10-PCS). Top. Health Inf. Manag. 21:54–88.

10. IOM. 2000. Medicare Laboratory Payment Policy Now and in the Future. National Academy Press, Washington, DC.

12. Kratz, A., and M. Laposata. 2002. Enhanced clinical consulting— moving toward the core competencies of laboratory professionals. Clin. Chim. Acta 319:117–125. 13. The Lewin Group. 2008. Laboratory medicine. A national status report. https://www.futurelabmedicine.org/pdfs/2007%20status%20 report%20laboratory_medicine_-_a_national_status_report_from_ the_lewin_group.pdf, accessed October 15, 2012. 14. Lorence, D. P., and I. A. Ibrahim. 2003. Benchmarking variation in coding accuracy across the United States. J. Health Care Finance 29:29–42. 15. MacMillan, D. H., B. L. Soderberg, and M. Laposata. 2001. Regulations regarding reflexive testing and narrative interpretations in laboratory medicine. Am. J. Clin. Pathol. 116(Suppl.):S129–S132. 16. Malone, B. 2012. The future of lab utilization management. Are lab formularies the answer? Clin. Lab. News 38:1, 6–7. 17. McDonald, C. J., S. M. Huff, J. G. Suico, G. Hill, D. Leavelle, R. Aller, A. Forrey, K. Mercer, G. DeMoor, J. Hook, W. Williams, J. Case, and P. Maloney. 2003. LOINC, a universal standard for identifying laboratory observations: a year update. Clin. Chem. 49: 624–633. 18. Schubart, J. R., C. E. Fowler, G. R. Donowitz, and A. F. Connors, Jr. 2001. Algorithm-based decision rules to safely reduce laboratory test ordering. IFIP World Conf. Ser. Med. Inf. 10:523–527. 19. Travers, E. M. 1997. Clinical Laboratory Management, p. 759– 760. Williams and Wilkins, Baltimore, MD.

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APPENDIX 35.1 Publications, Phone Numbers, Websites, and Guidance Documents PUBLICATIONS ICD-9-CM manual (issued every October) ICD-10-CM manual (effective October 2014) CPT manual (issued every October) HCPCS Level II manual (issued every January) Medicare Clinical Laboratory Fee Schedule (issued every November) Medicare Physician Fee Schedule (issued every November) National Correct Coding Policy Manual, Chapter X—Pathology and Laboratory Services, 2012, version 18 (issued quarterly, National Technical Information Services) CPT 2013, Professional Edition (updated each year; available October prior to January implementation) CPT Changes 2013. An Insider’s View (2013, AMA Press, Chicago, IL) CPT Assistant (monthly newsletter, CAP) CPT Network (online subscription service from AMA for CPT inquiries) Codemap (subscription service available at http://www.codemap .com) Clinical Laboratory News (newsletter of the American Association of Clinical Chemists) National Intelligence Report (newsletter published by Washington G-2 Reports, Washington, DC) Laboratory Industry Report (newsletter published by Washington G-2 Reports, Washington, DC) Laboratory Compliance Insider (Brownstone Publishers) The Clinical Laboratory Compliance Alert (Eli Research) Compliance Hotline (American Health Consultants)

PHONE NUMBERS AMA: 1-800-621-8335 CMS (formerly Health Care Financing Administration): 1-800447-8477 or 1-800-633-4227 Note: Coding resources are available from many vendors including the AMA

WEBSITES American Medical Association (AMA) http://www.ama-assn.org (last accessed November 9, 2012) AMA searchable website. http://www.ama-assn.org/ama/pub/physician-resources/solutions -managing-your-practice/coding-billing-insurance/cpt.page (last accessed November 9, 2012) AMA CPT information. Centers for Disease Control and Prevention http://www.cdc.gov/nchs/icd/icd10cm.htm (last accessed November 9, 2012) ICD-10 resources, CDC.

Centers for Medicare and Medicaid Services http://www.cms.gov (last accessed November 9, 2012) CMS searchable website. http://www.cms.gov/Medicare/Medicare.html (last accessed November 9, 2012) Medicare searchable website. http://www.cms.gov/Regulations-and-Guidance/Guidance/ Manuals/Internet-Only-Manuals-IOMs-Items/CMS018912.html (last accessed November 9, 2012) Medicare Claims processing manual, Internet version. http://www.cms.gov/Outreach-and-Education/Medicare-Learning -Network-MLN/MLNProducts/Downloads/MLNCatalog.pdf (last accessed November 9, 2012) Instructional resources for Medicare billing: • Remittance guide: http://www.cms.gov/Outreach-and -Education/Medicare-Learning-Network-MLN/MLN Products/downloads/RA_Guide_Full_03-22-06.pdf (last accessed November 9, 2012) • Remittance and remark codes: http://www.cms.gov/Outreach -and-Education/Medicare-Learning-Network-MLN/ MLNMattersArticles/downloads/MM6229.pdf (last accessed November 9, 2012) • UB-04 guide: http://www.cms.gov/Outreach-and-Education/ Medicare-Learning-Network-MLN/MLNProducts/downloads/ ub04_fact_sheet.pdf (last accessed November 9, 2012) • POA guide: http://www.cms.gov/Outreach-and-Education/ Medicare-Learning-Network-MLN/MLNProducts/downloads/wPOAFactSheet.pdf (last accessed November 9, 2012) • HAC fact sheet: http://www.cms.gov/Medicare/Medicare -Fee-for-Service-Payment/HospitalAcqCond/downloads/ hacfactsheet.pdf (last accessed November 9, 2012) • CLFS fact sheet: http://www.cms.gov/Outreach-and-Education/ Medicare-Learning-Network-MLN/MLNProducts/downloads/ clinical_lab_fee_schedule_fact_sheet.pdf (last accessed November 9, 2012) • PFS fact sheet: http://www.cms.gov/Outreach-and-Education/ Medicare-Learning-Network-MLN/MLNProducts/downloads/ MedcrephysFeeSchedfctsht.pdf (last accessed November 9, 2012) • ABN booklet: http://www.cms.gov/Outreach-and-Education/ Medicare-Learning-Network-MLN/MLNProducts/downloads/ ABN_Booklet_ICN006266.pdf (last accessed November 9, 2012) • CLIA brochure: http://www.cms.gov/Outreach-and-Education/ Medicare-Learning-Network-MLN/MLNProducts/downloads/ CLIABrochure.pdf (last accessed November 9, 2012) • Form 1500: http://www.cms.gov/Outreach-and-Education/ Medicare-Learning-Network-MLN/MLNProducts/downloads/ form_cms-1500_fact_sheet.pdf (last accessed November 9, 2012) • HIV screening coding guidance: http://www.cms.gov/Outreach -and-Education/Medicare-Learning-Network-MLN/MLN MattersArticles/downloads/MM6786.pdf (last accessed November 9, 2012) (continued)

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APPENDIX 35.1 Publications, Phone Numbers, Websites, and Guidance Documents (continued) http://www.cms.gov/Medicare/Coding/NationalCorrectCodInitEd/ index.html (last accessed November 9, 2012) National Correct Coding Initiative (NCCI) edits.

International Health Terminology Standards Development Organisation (IHTSDO) http://www.ihtsdo.org/snomed-ct/ (last accessed August 23, 2013)

http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/ ClinicalLabFeeSched/index.html (last accessed November 9, 2012) Clinical laboratory fee schedule.

National Technical Information Service http://www.ntis.gov (last accessed November 9, 2012) Source for hard copy NCCI updates.

http://www.cms.gov/apps/physician-fee-schedule/ (last accessed November 9, 2012) Physician fee schedule.

Office of Inspector General (OIG) https://oig.hhs.gov/ (last accessed November 9, 2012) OIG searchable website. https://oig.hhs.gov/authorities/docs/cpglab.pdf (last accessed November 9, 2012) Laboratory compliance program guidance.

http://www.cms.gov/Medicare/Coding/ICD10/downloads/pcs _final_report2012.pdf (last accessed November 9, 2012) ICD-10 final report. http://www.cms.gov/medicare-coverage-database/ (last accessed November 9, 2012) Searchable database for NCDs and LCDs. http://www.cms.gov/Outreach-and-Education/Medicare-Learning -Network-MLN/MLNProducts/downloads/AcutePaymtSysfctsht .pdf (last accessed August 23, 2013) Inpatient Prospective Payment System http://www.cms.gov/Outreach-and-Education/Medicare-Learning -Network-MLN/MLNProducts/downloads/hospitaloutpaysysfct sht.pdf (last accessed August 23, 2013) Outpatient Prospective Payment System College of American Pathologists (CAP) http://www.cap.org (last accessed November 9, 2012) Searchable CAP website. Healthcare Compliance Association http://www.hcca-info.org (last accessed November 9, 2012) Institute of Medicine http://www.iom.edu/ (last accessed November 9, 2012) Institute of Medicine reports.

U.S. National Library of Medicine http://www.nlm.nih.gov/services/medcodes.html (last accessed November 9, 2012) Links to standard code set websites.

FEDERAL REGISTER AND RELEVANT GUIDANCE DOCUMENTS Federal Register. 2001. Medicare program; negotiated rulemaking: coverage and administrative policies for clinical diagnostic laboratory services. Fed. Regist. 66(226):58788–58890. Federal Register. 2008. HACs Medicare program; changes to the hospital inpatient prospective payment systems and fiscal year 2009 rates; payments for graduate medical education in certain emergency situations; changes to disclosure of physician ownership in hospitals and physician self-referral rules; updates to the long-term care prospective payment system; updates to certain IPPS-excluded hospitals; and collection of information regarding financial relationships between hospitals. Fed. Regist. 73(161):48434–49083.

36 Introduction Interactions in the Billing Process Provider Mix • Payor Mix

Terms of Coverage Types of Services • Payment for Services

Logistics of the Billing Process

Approaches to Billing Laboratory Services Vickie S. Baselski, Alice S. Weissfeld, and Fran Sorrell

Claim versus Invoice Submission • Invoice Billing • Claim Billing

Capitated Arrangement Billing Pay for Performance Summary KEY POINTS GLOSSARY REFERENCES APPENDIX

OBJECTIVES To illustrate the importance of hiring individuals well versed in all aspects of correct coding, including the rules and regulations To discuss the importance of having a comprehensive information technology platform and software resources that ensure accuracy and completeness To explain the need for laboratory personnel to be involved in the billing process and to maintain a close working relationship with members of the billing department To explain the relationship between complete and accurate billing and the generation of sufficient income to continue to perform expected functions Alas! How deeply painful is all payment! George Gordon Noel, Lord Byron (1788–1824)

I

Clinical Laboratory Management, 2nd Edition Edited by L. S. Garcia ©2014 ASM Press, Washington, DC doi:10.1128/9781555817282.ch36

t is an extreme understatement that the billing of clinical laboratory services is a tedious and complex process. The billing process can be said to be frequently overwhelming, rarely straightforward, always changing, and never easy. There are a number of variations among providing entities and among paying entities as well as in the actual process of how reimbursement for services is made. The complexity is further increased by the sequential financial relationships between the patient requiring testing, the ordering provider making decisions about which tests to order, the laboratory interpreting the provider’s order and verifying the appropriate mechanism to bill for services, and the payor, who reimburses an amount generally predetermined per contractual agreement and who may also deny payment based on criteria that are not always readily available or logical. The laboratory occupies a painful middle position in the entire process, where there is little or no input into the patient-physician process to effect appropriate test ordering and the acquisition of a properly executed requisition and advanced beneficiary notice (ABN) if necessary. However, as the billing entity, the laboratory has total fiscal responsibility and complete financial liability for the procedures the physician may have ordered rightly or wrongly (10). An understanding of the specific requirements for billing laboratory services and a systematic approach for ensuring that the processes are carried out as specified are key to the financial success of a laboratory (5, 11, 12, 14, 15). Underpayments due to denials by payors to providers under their payor agreements are a cause of significant lost revenue. Providers should devise a plan to make sure that payments made to them are accurate and timely and adhere 637

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to other contractual obligations. Specific areas where underpayments are common include underfunding due to late payments, fee schedule changes that are contractually disallowed, miscalculation of performance-based bonuses and errors in risk payment reconciliations, inappropriate denials or inappropriate downcoding of claims, and nonpayments (15). Claim denial management can enhance revenue, particularly in times of declining payment and increasing cost containment pressures (2). Proactive prevention strategies can minimize denials through accurately defining the scope of service, tracking causes for denials and nonpayments, and improving related processes.

Interactions in the Billing Process While the entire laboratory test process from test order to test result reporting to payment for services involves several categories of individuals, the actual billing process can be considered in terms of two main categories (Fig. 36.1). The “provider mix” describes those entities that actually perform and/or bill the services, and the “payor mix” describes those entities that have fiscal responsibility for payment for services.

Provider Mix Since 1992, all laboratory providers must be registered under the Clinical Laboratory Improvement Amendments (CLIA) to provide the type of services they are billing for. CLIA classifies laboratories into four main categories: highcomplexity laboratories (capable of providing all services), moderate-complexity laboratories (capable of performing procedures with slightly lower skill requirements and slightly lower patient risk), certificate-of-waiver laboratories (may perform only tests meeting “waived” criteria under CLIA and requiring minimal skill and carrying minimal risk to a patient), and provider-performed microscopy services (applying to only a selected few microscopic

Figure 36.1 Payor-provider interactions in reimbursement. POL, physician office laboratory. doi:10.1128/9781555817282.ch36.f1

procedures when performed by a physician or other authorized individual). When billing for laboratory services, the laboratory must have the appropriate CLIA status for the service being billed or the service will be subject to denial. Laboratory services are provided in several types of facilities. Hospital-based laboratory units generally perform and bill more tests than the other categories, with the exception of independent laboratories. They provide services for inpatients and often for outpatients in institutionally affiliated clinics and occasionally for nonaffiliated clinics termed “outreach business.” Independent laboratories perform testing for a variety of clients, including hospitals, physicians, other healthcare providers, patients in areas where direct-access testing is allowed by law, and by contract for non-healthcare purposes (e.g., employee drug screens). With such a diverse clientele, independent laboratories are frequently quite high volume. Some develop and perform highly complex procedures not performed in a routine setting and are termed reference or esoteric laboratories. Physician office laboratories are generally established to provide convenient, rapidresponse-type procedures that may impact immediate clinical decision making. The test mix is generally less complex in a physician office laboratory setting than in the other two settings. The final type of laboratory is the “niche” laboratory, which exists to provide services to specific groups of patients. For example, laboratories may focus on service to end-stage renal disease (ESRD) or skilled-nursing facility (SNF) patients. Each type of laboratory must be prepared to follow the billing processes specified by all of the payors for which it is an approved provider. If the laboratory is not an approved provider, the laboratory services provided will be subject to denial.

Payor Mix The entities disbursing payment also fall into several categories. Federal payors include those in the Medicare program for senior and disabled citizens, a program that

Traditional Medicare & Medicaid

Third party fee for service

Hospital Lab

Independent Lab

Capitated contracts

Ordering Provider

POL

Clients

Niche Labs

Patients

CHAPTER 36. APPROACHES TO BILLING LABORATORY SERVICES

was initiated in 1965 as a result of the Social Security Act. Medicare pays for services that are “reasonable and necessary for the diagnosis or treatment of illness or injury, or to improve the malfunctioning of a malformed body member.” Payments are made for either inpatient services, including services provided in an SNF (termed Part A), or outpatient services (termed Part B), with both parts administered through a CMS (Centers for Medicare and Medicaid Services)–selected Medicare A/B contractor. In 1972 the Social Security Amendments added coverage to two additional high-risk groups—those disabled and receiving cash benefits from Social Security and individuals suffering ESRD. The Medicaid programs provide federal assistance to states for payment for healthcare for indigent citizens, and the Balanced Budget Act of 1997 created the State Children’s Health Insurance Program to assist with the healthcare of children. Both Medicare and Medicaid are third-party payors; payment for services provided by a healthcare provider to a patient is made by a contracted entity. Many other thirdparty payors render payment to laboratories as a component of a healthcare benefit plan, also referred to as simply a “health plan.” These insurance plans require payment of regular premiums so that in the event of a high-cost or catastrophic illness, the third party will cover an agreedupon percentage or fee for the services provided. There are

multiple types of plans, including traditional indemnity, preferred provider organizations, point-of-service plans, and health maintenance organizations. Within the Medicare and Medicaid programs there also exist variations comparable to those seen in the private sector. Adding to the complexity is the frequent presence of a “secondary payor,” that is, another healthcare plan that provides coverage on the balance after payment by the primary payor. A generic third-party process is diagrammed in Fig. 36.2. Laboratories may also receive payments through contracts with specific physicians and other healthcare providers, who in turn bill third-party payors. These are probably the easiest billing arrangements to execute. A generic client-bill process is diagrammed in Fig. 36.3. It is important to note that this practice may be subject to “anti-mark-up” provisions for specific categories of tests pursuant to federal and state regulations. Laboratories are also required to bill patients who have no insurance coverage or have received a noncovered service, as well as in any circumstance in which the patient is expected to copay a percentage of the total bill. In some cases, laboratories do not directly bill or receive payment for individually defined services. Rather, a parent organization negotiates payment prospectively. These arrangements are termed capitated, and the payment is made at a set amount on a basis other than individual

Figure 36.2 Generic billing flowchart: third-party. LIS, laboratory information system.

doi:10.1128/9781555817282.ch36.f2 Determine need for ABN Patient accepts or declines ABN

Initiate Order

Demographics Payer info Test requests Diagnoses ABN status

Log-in to LIS

Convert narratives

Request missing or incomplete information Claims processing software

Rework incomplete claims Denied

File clean claim Paid

Post Paid

Co-pay (secondary)

639

Re-work and re-file

Bill client or patient

Denied

Appeal Denied

Bad debt

See Fig. 36.3

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Initiate Order

Log-in to LIS

Demographics Payer info Test requests

Request missing or incomplete information Submit invoice

Not Paid

Paid Paid

Post

Re-bill Paid

Collection agency

Bad debt

Figure 36.3 Generic billing flowchart: client or patient. LIS, laboratory information system.

doi:10.1128/9781555817282.ch36.f3

test. For example, payments may be per diem or per individual according to contractual terms. Medicare DRG (diagnosis-related group) payments are an example of capitated payment for hospitalizations, APC (ambulatory payment classification) payments are for hospital outpatient services, and more recently, ACO (accountable care organization) arrangements may be globally constructed to encompass all aspects of laboratory medicine. In these kinds of arrangements it is critical that the laboratory have a system in place to completely document services performed so that accurate capitated payment terms can be negotiated that include consideration of expected laboratory services.

Terms of Coverage Each individual payor sets criteria for payment for services (both which types and under what conditions). Further, each payor is intimately involved in the determination of the actual payment amount. Each payor may interact with each provider through one of two main types of payment: retrospective (or fee for service) and prospective (or capitated).

Types of Services Three general categories of laboratory services are performed based on clinical utility, and payors vary in whether these services will be covered (Table 36.1). The terms “covered services” and “noncovered services” are

used to categorize whether a specific type of service will be covered. Diagnostic tests assist in the determination of an etiology for a specific disease or clinical condition. They are almost always covered by third-party payors, although there may be restrictions on which specific tests may be used. In addition, there may be restrictions on when a test may be used based on diagnosis or clinical condition. This type of restriction is generally known as “medical necessity.” Monitoring tests are used to follow disease progression or response to therapy or to detect side effects of a therapy. Monitoring tests are generally covered when the Table 36.1 Types of laboratory services Diagnostic tests

Used to identify physiological abnormalities associated with disease.

Monitoring tests

Used to follow disease progression or response to therapy or to detect side effects of therapy.

Screening tests

Performed in the absence of signs, symptoms, complaints, injury, or personal history of a disease to discover potentially treatable or preventable diseases.

Tests requiring prior authorization

In some cases, there may be a requirement for prior authorization from the third-party payor for the test provided.

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therapy is also covered and may also be subject to restrictions. Screening tests are performed in the absence of signs, symptoms, complaints, injury, or personal history of a disease to discover potentially treatable or preventable diseases. They may or may not be covered by a third-party payor, depending on the particular health plan coverage conditions. A classic example of noncoverage of screening is in the Medicare program, which by historical interpretation of statute allows payment only for “treatment of illness or injury” and not for “screening.” For all test types, there may be frequency restrictions that limit the number of times a test may be performed in a given period. In addition, in some cases, there may be a requirement for “prior authorization” for the test service provided. This is, in essence, the obtaining of approval of payment for the service by the third-party payor. If a particular test is deemed noncovered, then the patient generally assumes financial liability for the service if there has been prior notification and acceptance of such.

other patient-related parameter (6). The payment is based on average anticipated utilization of healthcare services by patients in the denominator group and should include specific consideration of laboratory medicine services. For select high-cost, esoteric laboratory tests, the parent organization may choose to “carve out,” or exclude, the test from the capitated payment and bill separately. A recent Medicare demonstration project for certain genetic tests has been recently undertaken. Payment for outpatient services on a capitated basis is not currently common in laboratory medicine. However, in the inpatient population, in SNFs, and in other specialty niches (e.g., ESRD facilities), both Medicare and other payors have moved toward a prospective payment system (16). In addition, a recent move toward the establishment of ACOs that will negotiate payment for complete healthcare services for a covered population suggests a move toward greater use of capitated systems (7). Thus, the laboratory needs to be familiar with both approaches.

Payment for Services There are two general approaches to payment for healthcare services, including laboratory services (Table 36.2). The traditional approach and the one most commonly employed is based on a fee-for-service strategy. This approach is retrospective in that the total amount to be billed is not known until services have been rendered and a cumulative bill is generated. However, the fee schedule used for billing has been prospectively determined and accepted by both the provider and the payor. Traditional federal payment programs are based on a fee schedule set annually by a specific formula. Other payors generally develop fee schedules after negotiation with providers. Fee schedules may vary considerably based on considerations related to the “cost of doing business” with a particular payor. The alternative approach is one based on capitation. This approach is prospective in that a payment amount has been established based on a designated denominator such as per member per month, per diagnosis-related group or ambulatory payment classification, or per some

Logistics of the Billing Process

Table 36.2 Payment for services Fee for service

This approach is retrospective; total amount to be billed is not known until services have been rendered; results in cumulative bill; fee schedule prospectively determined and accepted by provider and payor

Capitation

This approach is prospective; payment amount established on some denominator (per member per month, per DRGa, or per APCb); payment based on average anticipated utilization in the denominator group

a b

DRG, diagnosis-related group. APC, ambulatory payment classification.

The actual billing process is obviously quite complex considering all of the variations in possible interactions between providers and payors. There are numerous fee schedules, various billing arrangements, multiple payors, diverse manual and electronic forms, variable coverage conditions, and payor-specific rules. Nonetheless, one can outline and compare the general processes involved in billing for laboratory services.

Claim versus Invoice Submission Claims for payment are generated for submission to thirdparty payors, while invoices are generated for contractual payment by clients or by patients (Table 36.3). Claims are typically submitted electronically, although the same information may be submitted on a manual claim form. Claims are very complex and require that a great deal of information be accurately and completely provided. This includes date of service, correct codes for services and diagnosis codes, complete patient demographic information, complete payor information, and an ABN specific to each service likely to be denied. It is also possible to outsource billing activities to an independent entity that is familiar with the various rules and regulations pertaining to major payors. Invoices may also be generated manually or electronically; however, invoices are much less complex, generally including only the date of service, patient demographics, and types of services. Thus, billing costs are generally much lower for non-third-party billings. Invoice Billing Invoice billing is a relatively simple process (Fig. 36.3). After an order is placed and logged in to a laboratory information system, the tests ordered are performed and

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Table 36.3 Billing process: invoice versus claims Invoice billing

Relatively simple process; can be based on fee-for-service or capitated payment schedule; amounts generally posted upon completion of testing; generated at some regular interval (e.g., weekly, monthly)

Claim billing

Very complex; requires extensive and complete information; careful review prior to payment; payment often denied; need for rechecking all claim information and resubmission for payment

result reports are generated in the appropriate laboratory department, and a cumulative invoice is generated at some regular interval (e.g., weekly, monthly). The invoice may be based on either a fee-for-service or capitated payment schedule. It may on occasion be necessary to verify information pertaining to an order from the requisition, but the overall process is relatively straightforward. The billed entity either pays or does not pay in the expected time frame. Nonpayment generally results in one or more repeat billings and, eventually, action by a collection agency. The amounts due are generally posted upon completion of testing but on occasion may be generated at the time of order. This, however, carries the risk of billing for tests that may not have been completed and requires that a system be in place to issue credits whenever necessary.

Claim Billing The entire claim process is quite complex, requiring multiple steps conducted over a lengthy period. It also begins with the generation of an order. However, at the time of test order, it is necessary to compare the tests ordered to the diagnoses given to determine if a waiver of financial responsibility (ABN) is required. If it is required, an attempt may be made to contact the ordering provider for additional relevant diagnostic information, but documentation of the attempt must be signed by the patient and maintained on file. Test orders are then logged in the laboratory information system, and samples are routed to the appropriate laboratory for testing and result reporting. During log-in, if any information critical to processing the order for testing or billing is missing, it is again necessary for the laboratory to contact the ordering provider to seek additional documentation. As in invoice situations, a bill for service may be posted at the time of log-in or at the time of result reporting, but if the former is done, there must be a system in place to accurately issue credits when necessary. Claims are generally processed according to date of service, so multiple services may be submitted on a single claim. However, the ABN, if required, must be both date

and test specific. It is also necessary to attach appropriate modifiers to any test code requiring one for payment. After preparation, each claim is generally subjected to a review using “claims processing software” (13). This kind of review evaluates each claim to determine if all of the information required is complete and accurate. Importantly, this review also assesses whether a claim is likely to be covered by the particular payor (1, 3, 9). If not, then once again, calls are made to the ordering provider to attempt to obtain appropriate documentation. Once “clean,” the claim is actually filed with the payor. After filing, there are several possible outcomes. In the best case, the claim is paid and the funds are posted to an appropriate account. If the claim is denied, the denial documentation may be reevaluated to ensure that everything was in order, and if not, the claim must be corrected and refiled (8). Denial documentation is generally sent to both the laboratory and the patient as an explanation of benefit (EOB) or explanation of medical benefit form. Denials are coded with a generic description outlining the reason(s) for the denial. Careful review of the EOBs can greatly assist in correction of documentation to subsequently obtain payment. If upon review it is determined that payment was appropriate, it is also possible to initiate an appeal for review and reconsideration by the payor. Alternatively, a new claim or a claim for remaining amounts may be filed with a secondary payor by following the same general pattern. If no payment is forthcoming from any payor, and an ABN or other acceptance of liability is on file, the patient may be billed. It is also necessary to bill the patient in any case in which a copay is part of the process. In cases in which a provider has consistently failed to provide essential information, a laboratory may choose to bill the errant provider. Once a patient or client is billed, the process follows the pathway described for the invoice process. Certainly the billing format and accuracy can play a large role in both client and patient satisfaction and understanding (4).

Capitated Arrangement Billing In a capitated arrangement with a laboratory, billing and payment are operationally similar to invoice billing. Terms and conditions, frequency, and amounts are, of course, defined contractually. If a parent healthcare organization is the billing provider, the laboratory is not directly involved in billing or receipt of payment. Under these conditions, the laboratory is frequently seen as a cost center rather than a revenue center. Thus, it is very important for laboratory managers to maintain accurate and complete documentation of the laboratory service activity, both for utilization review and for future contract negotiations.

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Pay for Performance

GLOSSARY

While not strictly an operational issue, laboratorians should take note of an increasing trend toward use of payfor-performance monitors in adjustment of reimbursement amounts. Laboratories already generate utilization and diagnostic data of value for assessing patient outcomes in specified disease conditions, and these data influence capitated payments. For example, nonpayment of DRG amounts for complications resulting from hospital-acquired conditions defined in part through laboratory results are already a reality. It is highly likely that specific laboratory payments may similarly be linked to performance data.

Accountable care organization (ACO) A coordinated care system in which providers are incentivized on the basis of outcomes rather than the number of services.

Summary With the complexity of the billing process, it is no wonder that in many laboratories, the billing department has undergone rapid expansion in the number of employees. The billing department must employ individuals who are well versed in all aspects of correct coding and who are knowledgeable about the myriad rules and regulations pertaining to each payor. The billing processes are so complex that it is virtually impossible to develop and submit claims and receive payment without a sound information technology platform and software resources that ensure accuracy and completeness of the process. However, it is also critical that laboratorians remain involved in the billing process and maintain a close working relationship with members of the billing department. Extensive technical expertise is required to ensure that test procedures are coded correctly, as well as to determine that best practices for laboratory medicine are being followed. For clinical laboratories, the key to survival is in complete and accurate billing for all services performed so that timely and comprehensive payment can be made for those services. Regardless of the corporate structure of the laboratory one practices in, the generation of sufficient income to continue to perform expected functions is absolutely essential. KEY POINTS ■ It is mandatory that laboratories hire personnel who are well versed in all aspects of correct coding, including the rules and regulations. ■ It is almost impossible to develop and submit claims and receive payment without adequate information technology systems (platforms and software). ■ Selected laboratory personnel must be involved in the billing process and work closely with members of the billing department. ■ Complete and accurate billing is required to generate sufficient income for laboratory operations to continue.

Advance beneficiary notice (ABN) A waiver of financial liability form used by the provider to notify Medicare beneficiaries prior to receiving a service that it may not be a covered service and that they may have to assume financial responsibility. Ambulatory payment classification (APC) A prospective payment amount assigned to an outpatient visit for a specified clinical condition. Capitation A predetermined, fixed amount paid to providers in return for rendering a specified set of health services. The rate is generally established per person (per capita) enrolled in the health plan. Claims denial management A set of processes to enhance revenue by assessing reasons for denials; denials often arise from process problems leading to inadequate documentation. Copay A fixed dollar amount or a percentage of a charge paid by the subscriber to the provider at the time of services. Diagnosis-related groups (DRGs) Classification system developed at Yale that defines more than 700 major diagnostic categories and places patients into case types based on the ICD-CM classifications. Substantially updated in 2007 as MS-DRG (Medicare severity adjusted). End-stage renal disease (ESRD) The terminology used for Medicare beneficiaries who have permanent kidney dysfunction requiring dialysis treatment. Explanation of (medical) benefit form (EOB/EOMB) Provides reasons for denial of payment. Fee-for-service A payment system in which individual service codes are reimbursed after service is rendered. Health maintenance organization A prepaid system of healthcare with emphasis on the prevention and early detection of disease and on continuity of care. HMOs generally offer a package of services; however, the choice of physician is frequently limited to those working within the HMO. Health plan or health benefits plan Any plan or organized format for delivering healthcare services. Payor mix Describes those entities that have fiscal responsibility for payment of services. POL Physician office laboratory. POS Point-of-service insurance plan; a type of plan combining elements of both an HMO and a PPO. Referrals out of network are allowed but at some additional cost to the subscriber. Preferred provider organization (PPO) A healthcare organization that negotiates set rates of reimbursement with participating healthcare providers for services to insured clients; a type of prospective payment system.

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Provider mix Describes those entities that actually perform and/or bill the services.

6. Fee, D. N. 2002. Success with APCs. Healthc. Financ. Manag. 56:68–72.

Regulation Legally binding rules developed to implement a statute.

7. Gross, D. J. 2012. Contributions of pathologists in accountable care organizations. CAP white paper. http://www.cap.org/apps/ docs/advocacy/aco_white_paper.pdf, accessed November 20, 2012.

Secondary payor An additional healthcare plan that provides coverage on the balance after payment by the primary payor.

8. Hodges, J. 2002. Effective claims denial management enhances revenue. Healthc. Financ. Manag. 56:40–50.

SNF Skilled-nursing facility providing rehabilitative services after a hospitalization.

9. LaForge, R. W., and J. S. Tureaud. 2003. Revenue-cycle redesign: honing the details. Healthc. Financ. Manag. 57:64–71.

Statute A law passed by the U.S. Congress or a state legislature.

10. The Lewin Group. 2008. Laboratory Medicine. A National Status Report. https://www.futurelabmedicine.org/pdfs/2007%20 status%20report%20laboratory_medicine_-_a_national_status_report _from_the_lewin_group.pdf, accessed October 15, 2012.

REFERENCES 1. Adams, D. L., H. Norman, and V. J. Burroughs. 2002. Addressing medical coding and billing. Part II. A strategy for achieving compliance. A risk management approach for reducing coding and billing errors. J. Natl. Med. Assoc. 94:430–447. 2. Alwell, M. 2003. Stem revenue losses with effective CDM management. Healthc. Financ. Manag. 57:84–88. 3. Barber, R. L. 2002. Prompt payment depends on revenue-cycle diligence. Healthc. Financ. Manag. 56:52–59. 4. Cohen, D., and P. Hoffman. 2003. When putting patients first fits the bill. Healthc. Financ. Manag. 57:90–96. 5. Eckhart, J., and N. Mathahs. 2001. Physicians and compliance: developing a system that works. Clin. Leadersh. Manag. Rev. 15:222–229.

11. McNeely, M. D. 2002. The use of expert systems for improving test use and enhancing the accuracy of diagnosis. Clin. Lab. Med. 22:515–528. 12. Moss, M. M., and S. M. Schexnayder. 2001. Coding and billing in the pediatric intensive care unit. Pediatr. Clin. N. Am. 48:783–793. 13. Segal, M. J., S. Morris, and J. M. Rubin. 2002. Automated claim and payment verification. J. Med. Pract. Manag. 17:297–301. 14. Smith-Shoemake, M. A. 2002. Solving the claims conundrum. Manag. Care Q. 10:13–14. 15. Welter, T., and P. Stevenson. 2001. Calculating five types of typical underpayments. Healthc. Financ. Manag. 55:46–50. 16. Wolf, P. 2001. Charge-process strategies for outpatient prospective payment. Healthc. Financ. Manag. 55:58–61.

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APPENDIX 36.1 Websites Centers for Medicare and Medicaid Services http://www.cms.gov (last accessed November 19, 2012) CMS home page with search feature. http://www.cms.gov/Outreach-and-Education/Medicare-Learning -Network-MLN/MLNGenInfo/index.html (last accessed November 19, 2012) Medicare Learning Network resources.

Office of Inspector General https://oig.hhs.gov/compliance/compliance-guidance/index.asp (last accessed November 19, 2012) OIG compliance guidance documents.

37 Introduction Calculating Costs and Charges Setting Costs • Setting Charges

Determining Payment Amounts Fee Schedules • Medicare Clinical Laboratory Fee Schedule • Fee Setting for New Codes on the CLFS • The Medicare Physician Fee Schedule • Other Fee Schedules • Capitated Payments

Charges and Fees for Laboratory Services Vickie S. Baselski, Alice S. Weissfeld, and Fran Sorrell

Keys to Success in Reimbursement Retrospective Payment • Prospective Payment

Summary KEY POINTS GLOSSARY REFERENCES APPENDIX

OBJECTIVES To discuss the four key concepts related to payment for laboratory services To explain the relationship between charges and fee schedules and a reasonable profit margin To describe the uses for profits and how they relate to generating returns on investments To describe the following terms: market competitive and value-added services To discuss appropriate ways to avoid the appearance of kickbacks and how this relates to compliance Put money in thy purse. William Shakespeare (1564–1616)

T

he ultimate goal in the provision of laboratory services is to make certain that information is delivered to ordering healthcare providers in a timely manner that ensures that quality is maintained, costs are minimized, and clinical relevance is established. At the same time, it is paramount to make sure that the laboratory does not lose money in doing so. This concept applies regardless of the corporate structure. It has been said, “For-profit entities exist to make money, and not-for-profit entities make money to exist, but both need to make money to survive.” To make money in the laboratory business, it is critical that one establish charges that at least cover total costs and control expenditures such that low-paying fee schedules do not put the laboratory at risk for significant loss.

Calculating Costs and Charges

Clinical Laboratory Management, 2nd Edition Edited by L. S. Garcia ©2014 ASM Press, Washington, DC doi:10.1128/9781555817282.ch37

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Setting Costs The responsibility for cost analysis of individual laboratory procedures rests primarily with the laboratorian. Chapters in section V present an in-depth look at the process of cost accounting in the clinical laboratory. However, for purposes of determining a charge structure, it is critical to have a clear understanding of the total costs of a procedure (7, 8, 11). A commonly used measure for this purpose is the “cost per reportable test.” In general an “orderable and reportable test” will map to a specific Current Procedural Terminology (CPT) code or codes, as well as to the institutional charge code for accounting purposes. The cost per reportable test is a composite of all related costs. These include the obvious costs such as average direct costs (e.g., reagents, equipment),

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including labor, and indirect costs, including overhead and support services (e.g., housekeeping, couriers, billing, customer service, marketing), but they also include hidden costs such as quality control, calibration, repeats, dilutions, and wastage. The cost per reportable test is considered to be a parameter that allows “apples to apples” comparisons between methods (interassay) and between laboratories (intra-assay). In addition, the cost per reportable test is a useful tool for setting charges such that the laboratory maintains an appropriate profit margin. The break-even point is the point at which net income equals total costs. Net income takes into account actual payment for services and deducts actual costs as well as “bad debt,” that is, the amount that is not reimbursed by any potential payor. Obviously, the goal is to do better than break even since profits are essential to support business development. To be profitable, one must have a clear understanding of both total costs per reportable test as well as expected net income.

Setting Charges A number of general principles guide the process of setting a charge (6). One must consider the actual total costs and the expected reimbursement, so that one can exceed the break-even point. In general, it is never good business to price any service below cost, and in fact, this practice could be viewed as an inducement for ordering providers to submit federally reimbursed testing to a particular laboratory. On the other hand, one cannot charge federal payors “substantially in excess of usual charges,” potentially leading to a conclusion that these payors are being overcharged. At the same time, one must review the market situation and ensure that charges are comparable to those of competitors unless the service offered has a quantifiable valueadded component. In some market settings, laboratories may identify tests that are high volume and offer them at a charge below cost (termed a “loss leader”). At the same time, more esoteric, high-cost procedures with lower utilization may be offered with a substantial profit margin to make up the difference (termed “pull-through”). In addition, the billing simplicity of a contractual arrangement in which clients or patients are billed directly is considered a justification for offering deep discounts since billing costs are substantially lower and the percentage of services paid for is significantly higher. However, the entire area of discounts and multiple fee schedules has come under intense scrutiny in recent years, and this practice needs to be carefully evaluated for providers, particularly those doing business with federal payors. Although it is a longstanding interpretation of Medicare law that one cannot charge federal payors “substantially in excess of usual charges,” exactly what “substantially in excess” means is not well established, although the Office of Inspector General (OIG) has proposed a level of 120%

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greater than a usual charge for the same item or service for any payor. “Usual charge” is generally defined as either the average or median of charges to all parties for the most recent one-year period. In addition, a previous OIG advisory opinion noted that discount arrangements may be reviewed to determine “whether the discount on the PPS-covered services makes business sense standing alone without reference to any other business the provider may receive.” Legislation known as the Stark and Anti-Kickback Laws is designed to ensure that laboratories provide services to ordering providers without any evidence of inducement or kickback. Thus, determination of charges currently has both financial and compliance implications.

Determining Payment Amounts The amount of payment made for laboratory services may be based on one of two general categories. A fee schedule represents one category, although payment amounts typically vary based on payor. Actual provider charges may apply to some payors, while payor-defined fee schedules may be the basis for others. In capitated payment agreements, the payment takes the form of a negotiated agreement for a specified level or category of service, often based on diagnosis or clinical condition.

Fee Schedules Counter to attempts to develop rational charges based on real costs and net income is the concept of payor-established fee schedules. Many payors will arbitrarily establish a fee schedule for defined services, and it is the laboratory’s responsibility to determine whether to do business with that particular payor. Fee schedules are generally loosely based on charges although usually set at a percentage substantially lower than actual charges. In addition, fee schedules may vary considerably by payor. The quintessential example of payment according to fee schedule is the Medicare Part B clinical laboratory payment system. Medicare Clinical Laboratory Fee Schedule Medicare currently pays for technical clinical laboratory tests according to a set clinical laboratory fee schedule (CLFS) initially established in 1984 and based on 1983 charge data. Fees are assigned based on the CPT or Healthcare Common Procedure Coding System (HCPCS) code established for each procedure (1, 9, 12). The actual Medicare payment is the lowest of (i) the actual charge, (ii) the fee schedule amount set by the Medicare contractor, or (iii) the national fee cap, termed the national limitation amount (NLA). For tests established before January 1, 2001, the NLA is currently 74% of the median of local fees, a percentage that has been rapidly reduced from 115% in 1986 to the current level. Local fees are set at 60%

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of prevailing charges (except for sole community hospitals, which are set at 62%). Thus, Medicare payments can be seen to be substantially lower than actual charges. In addition, there may be significant geographic variation in the actual payment amount based on the Medicare contractor (10). Medicare clinical laboratory payments are also not subject to copayments, a situation endorsed by the laboratory community, as billing costs often exceed the copay amount. Adjustments are made to the NLA on a regular basis. After 2001, as a result of the Balanced Budget Act of 1997, the NLA was set at 100% of the median to allow for improved reimbursement for new CPT codes, ostensibly representing emerging technology. For other test codes, the Centers for Medicare and Medicaid Services (CMS) should adjust the fee schedule annually to reflect changes in the consumer price index (CPI). However, in response to a number of federal budgetary “fixes” mandated by various statutes enacted since 1990, the actual adjustments have been zero or a negative percentage for 14 of the 23 ensuing years, primarily due to fee schedule CPI “freezes.” In addition, the Medicare program has the authority to mandate modifications in fees (increases or decreases) that are viewed as inappropriate or unreasonable. One strategy is termed “inherent reasonableness.” Under this strategy, the CMS may employ “reasonable-charge methodology” to arbitrarily reduce or increase an NLA deemed “grossly excessive or grossly deficient” against market values. In point of fact, reasonable-charge methodology has resulted primarily in reduced payments. On occasion payments are adjusted upward, as in 1999 when it was determined that cervical cytology (Pap smear) payment amounts were unreasonably low. In addition, reasonable charge methodology is used for laboratory services at critical access hospitals to help ensure beneficiary access. Another strategy is termed the “least costly alternative” approach, which makes a determination that a new more costly procedure has the same clinical utility as a less costly alternative, and payment is adjusted to that of the older methodology, thus impeding the implementation of new technologies. In addition, laboratories have successfully withstood several attempts to lower payment amounts due to a competitive bidding model. Despite representing less than 2% of total Medicare expenditures, the laboratory has been a repeated target of a disproportionate share of attempted Medicare savings. Payment amounts are published annually on the CMS website in the fall and are effective the following January 1.

Fee Setting for New Codes on the CLFS For new CPT test codes, Medicare fees are assigned based on one of two methods: cross-walking or gap filling. Crosswalking is used when new tests employ a method that is deemed comparable to an existing method or combination of methods, and the fee is simply set according to that

of the existing code(s) to which the new code is mapped. Gap filling is used when a new code describes a test using a novel technology for which no comparable code exists. The fee is then set after collection of data by local contractors, who then apply the formulas previously described. Since 2001, the process of assigning fees to new codes has involved open meetings in which laboratorians and professional laboratory groups may present public recommendations on the best method to use. Subsequently, proposed fees and the rationale for setting each are published by the CMS for comment prior to the final publication of the CLFS for the next year. It is something of a paradox in the Medicare fee schedule process that a laboratory may have to accept a fee lower than its costs but has no recourse for recouping costs other than to develop strategies aimed at other payors. This paradox led the Institute of Medicine (4) to issue 6 of 12 recommendations in its report on Medicare laboratory payment policy pertaining to the fee schedule (Table 37.1). These recommendations are (i) that “Medicare payments for outpatient clinical laboratory services should be based on a single, rational, national fee schedule”; (ii) that “on an interim basis, relative payments for Medicare outpatient clinical laboratory services should be based on the current NLA”; (iii) that “a data driven consensus process” be used to refine the Medicare fee schedule; (iv) that fees be “adjusted for geographic location” and evaluated for other circumstances “likely to affect beneficiary access”; (v) that there be processes to “periodically update” the fee schedule; and (vi) that there be an “open, timely, Table 37.1 Recommendations related to fee schedulesa Recommendation 1

Medicare payments for outpatient clinical laboratory services should be based on a single, rational, national fee schedule.

Recommendation 2

On an interim basis, relative payments for Medicare outpatient clinical laboratory services should be based on the current NLA.

Recommendation 3

A data-driven consensus process should be used to refine the Medicare fee schedule.

Recommendation 4

Fees should be adjusted for geographic location and evaluated for other circumstances likely to affect beneficiary access.

Recommendation 5

There should be processes to periodically update the fee schedule.

Recommendation 6

There should be an open, timely, and accessible process to incorporate new tests into the fee schedule.

a

See reference 4.

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and accessible process” to incorporate new tests into the fee schedule that does not “impede clinical decision making that is essential to providing appropriate care.” These goals have not yet been reached in the Medicare clinical laboratory payment system.

The Medicare Physician Fee Schedule Laboratory tests that have both a technical component and a physician interpretation component are priced on the Medicare Physician Fee Schedule (PFS). These include primarily anatomic pathology and cytology services and are subject to a copay by beneficiaries. Payments on the PFS are updated according to a complex formula for both technical and professional components and include consideration of relative value units for physician, practice, and malpractice expense adjusted by a conversion factor based on the geographic practice cost indices. A statutory change was introduced in 1998 using the sustainable growth rate to ensure that Medicare expenditures did not exceed targets. This approach has proved to be very problematic, with double-digit reductions projected over the last few years. To prevent loss of patient access to services, Congress has stepped in each year to date to prevent such dramatic decreases. However, the future of payment adjustments for the PFS is uncertain, and a permanent solution is needed. PFS payments are updated annually each fall and are effective January 1. Other Fee Schedules The importance of the Medicare fee schedules, both the CLFS and the PFS, is quite simply, the impact on the fee schedules developed by other third-party payors. Medicare fees are generally a starting point for negotiations between laboratories and other payors, which may lead to the deep discounts and special pricing situations already discussed. Alternatively, forced acceptance of lower fees may result in setting higher charges for noncontracted entities (e.g., patients) to attempt to achieve a break-even status. The adage “as goes Medicare, so go other payors” is of particular relevance in the realm of payment for services. Capitated Payments Capitated contracts for laboratory services are somewhat uncommon in outpatient arenas, but they may play a major role in the provision of laboratory services in extremely cost-constrained markets. In federal programs, there are a number of examples of capitation for lab services in managed-care Medicaid programs, and capitation will likely emerge in the managed-care Medicare Part C programs. The Medicare ambulatory payment classification and payment system for clinical services may also in the future encompass laboratory testing services (2, 3). Accountable care organizations being developed under healthcare reform are almost certainly going to use capitation as a

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means to control costs (1). In other managed-care environments, such as health maintenance organizations (HMOs), laboratories may also be asked to develop a capitated payment scheme. In laboratories, a common payment mechanism is a per-member-per-month basis for provision of the most common laboratory services, with a separate fee schedule often appended for high-cost, esoteric services carved out of the capitated contract. Inpatient service reimbursement may also be considered a type of capitated payment. Medicare and most other payors generally reimburse for inpatient stays as a specified amount based on either a diagnosis-related group or a per diem amount. To document both labor and financial input and to justify resources needed to provide services, laboratories should keep complete documentation of all activities. This information can also be used in future negotiations with specific payors. Certain healthcare environments represent a hybrid between retrospective and prospective payment systems. End-stage renal disease dialysis facilities are reimbursed a composite amount, which includes some laboratory services, while other additional services may be billed separately. Testing done for patients in skilled-nursing facilities is usually done by contract with an independent laboratory, while the actual stay is reimbursed as a Medicare Part A capitated amount, and other third-party payors generally follow the Medicare model.

Keys to Success in Reimbursement Regardless of the type of payment situation, there are a few key actions that can help guarantee that a laboratory will be able to attain a reasonable profit or, at the least, avoid any significant losses in fulfilling its mission to provide high-quality, clinically relevant information at a reasonable cost. Integral to this process is a firm understanding of costs for procedures as well as correct coding for procedures performed and complete knowledge of all billing rules promulgated by a given payor (Table 37.2).

Table 37.2 Key concepts related to successful reimbursement Costs

Know your real/total costs for any given orderable and billable procedure.

Charges and fee schedules

Set charges and accept fee schedules or other payments to guarantee a reasonable profit margin.

Market competition

Set charges to be market competitive and provide services that are equivalent to or better than those of your competitors (value-added services).

Compliance

Avoid any appearance of kickbacks.

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Retrospective Payment The primary key to success in a retrospective (fee-forservice) payment situation is to obtain payment for all services that a physician orders and that you perform and for which you report the result. Therefore, you should code correctly and completely for all that you do and bill for all that you code for. In any situation in which more than one code applies, or if a procedure is added on by request or as a reflex, the associated codes should be added to the bill. You should obtain the diagnosis, preferably as an International Classification of Diseases, Clinical Modification code (ICD-9-CM or in the future, ICD-10-CM), but translation of a narrative diagnosis into an ICD-CM code is generally acceptable. The diagnosis will help to satisfy any documentation requirements that a payor may have to determine whether a service is covered. One should obtain a waiver of financial liability (e.g., an advance beneficiary notice for Medicare Part B) from the patient in any situation in which there is a question as to whether the payor will cover the services. Finally, make every effort to price at a level at least equal to the cost per reportable test and preferably at a level that maintains a reasonable profit while remaining competitive in the marketplace. Prospective Payment The primary key to success with prospective (capitated) payment is also correct and complete coding. To determine if a proposed payment amount is acceptable, you must know (or project) the utilization rates for services, including rates of use of add-on and reflex tests. You should understand the patient mix according to diagnoses and/or medical subspecialty to help project utilization of specific, especially esoteric or niche, tests. You must certainly know your costs by CPT code and must project total expenditures based on the terms of the contract. If certain esoteric tests are extremely high cost, you may wish to carve out those services and amend the agreement with a separate fee schedule for specific services. As for retrospective payment situations, if the proposed terms of the agreement are not financially favorable, you can decline to provide service.

Summary In considering payment for laboratory services, there are four key concepts to remember. First, know your real costs for any given orderable and billable procedure, and make sure the terms of the payment agreement allow the recovery of costs. Second, set charges and accept fee schedules or other payments to guarantee that a reasonable profit margin has been attained. To continue to develop any laboratory business unit, it is essential to generate revenue that can be used to enhance the services offered. Beyond simply paying the bills, profits are essential for additional

research and development, for facility improvements, for professional development of employees, and in the case of a for-profit entity, for generating returns on investments. Third, set charges to be market competitive and provide services that are equivalent to or better than those of your competitors. “Better than” is synonymous with “valueadded” and includes developing a strong and knowledgeable customer support team. Finally, avoid any appearance of kickbacks. Under the Office of Inspector General compliance program guidance for clinical laboratories, it is essential to avoid any appearance of inducement of ordering providers to submit testing from patients under federal payment programs. All of these concepts make for good clinical laboratory practice and also ensure that one is equipped to make good business decisions. The establishment of reimbursement for laboratory services is a complex process with a variety of possible payor-provider relationships. Many relationships fail to make financial sense, and laboratories must carefully assess each potential client for impact. Increasing the use of prospective payment systems will only make it more difficult for a laboratory to determine if an arrangement makes financial sense. A recent IOM report on providing “Best Care at Lower Cost” (5) provides a very accurate analogy for laboratory pricing: “If shopping were like healthcare, product prices would not be posted, and the price charged would vary widely within the same store, depending on the source of payment.” Clearly, improvements to the process are desirable. KEY POINTS ■ The responsibility for cost analysis of individual laboratory procedures rests primarily with the laboratorian. ■ To have a clear understanding of the total costs of a procedure, the best parameter to use is the cost per reportable test. ■ The determination of charges has both financial and compliance implications; one generally does not charge below cost (which may be construed as an inducement for ordering providers) or substantially in excess of usual charges. ■ The Medicare fee schedule is quite complex and is adjusted regularly, and payments can be substantially lower than actual charges. A laboratory may have to accept a fee lower than its costs and assess other mechanisms to remain financially sound. ■ The importance of the Medicare fee schedule is its impact on the fee schedules developed by other thirdparty payors. ■ The laboratory must maintain a thorough understanding of coding for procedures performed, as well as complete knowledge of all billing rules for each payor.

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■

Payment for laboratory services is based on four key concepts: (i) know your real test costs, (ii) set charges and accept fee schedules that guarantee a reasonable profit margin, (iii) set charges to be market competitive and provide services that are better than those of your competitors, and (iv) avoid any appearance of kickbacks.

GLOSSARY Actual charge The amount of money a provider charges for a certain medical service or supply. This amount is often more than the amount Medicare or another third-party payor reimburses. Assignment The fee Medicare sets as approved for a covered medical service (also known as an approved charge). This is the amount Medicare pays a provider for a service or supply. It may be less than the actual amount charged by a provider. Other third-party payors also set approved payment amounts. Balanced Budget Act of 1997 (BBA ’97) An omnibus legislative package with many far-reaching effects on Medicare. The package included reductions in payments to providers and mandated a negotiated rule-making process to develop coverage determinations for laboratory services. Balanced Budget Refinement Act of 1999 (BBRA ’99) Legislation that addressed flawed policy and excessive payment reductions for federal healthcare programs resulting from BBA ’97. Break-even point Point at which net income equals total costs. Capitation A predetermined, fixed amount paid to providers in return for rendering a specified set of health services. The rate is generally established per person (per capita) enrolled in the health plan. Carve out To exclude from a capitated contract and bill as fee for service. Claim The claim form or invoice, which allows transmission of the bill to a payor. Contractors Centers for Medicare and Medicaid Services (CMS) primary third-party claims management entities who administer Part A and/or Part B payments to facilities, physicians, and commercial laboratory providers according to national and local coverage determination policies. Covered lives Population insured by a managed-care contract. Cross-walking The fee is set at the same rate as that for another CPT code (or codes) deemed “equivalent” and to which it is “mapped.” Current Procedural Terminology (CPT) Proprietary service codes developed and maintained by the American Medical Association and required for filing claims and billing of Medicare and other payors. Diagnosis code Medical diagnoses are assigned a numerical code from a document entitled International Classification of Diseases, Revision (Clinical Modifications). The 9th edition (ICD-9-CM)

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will be replaced by a substantially updated 10th edition (ICD10-CM) in 2014. The ICD-CM code refers to the clinical reason for a patient’s encounter. End-stage renal disease (ESRD) The term used for Medicare beneficiaries who have permanent kidney dysfunction requiring dialysis treatment. Gap filling A new code is deemed novel and not adequately described by an existing code. Payments are set by individual contractors based on existing charges, and these payments are then used to subsequently set a national limitation amount (NLA). HCPCS (Healthcare Common Procedure Coding System) The code set recognized by federal and other third-party payors to describe medical, surgical, and diagnostic services. The CPT system is accepted as the HCPCS level 1 code set for laboratory and physician services. Health maintenance organization (HMO) A prepaid system of healthcare with an emphasis on the prevention and early detection of disease and on continuity of care. HMOs generally offer a package of services; however, the choice of physician is frequently limited to those working within the HMO. Inherent reasonableness The CMS may employ “reasonablecharge methodology” to arbitrarily reduce or increase a national limitation amount (NLA) deemed grossly excessive or grossly deficient. International Classification of Diseases, Version 10, Procedure Coding System (ICD-N-PCS) Laboratory coding system intended for use as an alternative to CPT. IOM (Institute of Medicine) The IOM is an independent, nonprofit organization that works outside of government to provide unbiased and authoritative advice to decision makers and the public concerning health and science policy. Loss leader High-volume test that is charged below cost to obtain additional, more profitable business. National limitation amount (NLA) The national fee cap for a particular test. Pull-through A marketing approach in which some mechanism, usually a financial benefit, is used to entice utilization of a product or service. Reflex test Second related test performed automatically when the initial test results are positive (e.g., identification and susceptibility tests on pathogens). Stark and Anti-Kickback Laws Legislation passed governing physician referrals and payments that ensures that laboratories provide services to ordering providers without any evidence of inducement or kickback. Substantially in excess of usual charges Under certain provisions of Section 1128 of the Social Security Act, the submission of claims for services substantially in excess of an entity’s usual charges may result in the exclusion of that entity from participation in Medicare and Medicaid programs.

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REFERENCES 1. Evans, M. 2011. Test-driving an ACO. Mod. Healthc. 41:38–41.

report%20laboratory_medicine_-_a_national_status_report_from _the_lewin_group.pdf, last accessed November 20, 2012.

2. Fee, D. N. 2002. Success with APCs. Healthc. Financ. Manag. 56:68–72.

8. Nigon, D. L. 2000. Clinical Laboratory Management, p. 177–188. McGraw-Hill, New York, NY.

3. Gold, M., and S. Snodgrass. 2001. Calculating pass-through and outlier payments under APCs. Healthc. Financ. Manag. 55:54–57.

9. Reiser, W. S., and B. O. Brunicardi. 2002. Assessing the impact of Medicare payment changes. Healthc. Financ. Manag. 56: 68–71.

4. IOM. 2000. Medicare Laboratory Payment Policy Now and in the Future. National Academy Press, Washington, DC.

10. Roselle, G., M. L. Render, L. B. Nugent, and G. N. Nugent. 2003. Estimating private sector professional fees for VA providers. Med. Care 41(6 Suppl.):II23–II32.

5. IOM. 2012. Best Care at Lowest Cost. The Path to Continuously Learning Health Care in America. National Academy Press, Washington, DC. 6. Kovar, M., and E. Shannon. 2011. Laboratory pricing: charge master risks and rewards. New Perspect. 30:15–17. 7. The Lewin Group. 2008. Laboratory Medicine. A National Status Report. https://www.futurelabmedicine.org/pdfs/2007%20status%20

11. Travers, E. M. 1997. Clinical Laboratory Management. Williams and Wilkins, Baltimore, MD. 12. Weiss, R. L., D. Sundwall, and J. M. Matsen. 2002. Estimating the budgetary impact of setting the Medicare clinical laboratory fee schedule at the national limitation amount. Am. J. Clin. Pathol. 117:691–695.

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APPENDIX 37.1 Publications, Phone Numbers, Websites, and Guidance Documents PUBLICATIONS Clinical Laboratory Strategies (newsletter of the American Association of Clinical Chemists Delta Project (https://www.aacc .org/publications/strategies/Pages/default.aspx#, [last accessed November 20, 2012]) National Intelligence Report, Laboratory Industry Report, G2 Compliance Report, and Diagnostic Testing & Technology Report (newsletters published by Washington G-2 Reports, Washington, DC [http://www.g2reports.com [last accessed November 20, 2012]) Laboratory Compliance Insider, Medicare Weekly Update, Coding Compliance Strategies (newsletters available from HCPro at http://www.hcpro.com/ [last accessed November 20, 2012]) The Dark Report (newsletter available at http://www.darkreport .com/ [last accessed November 20, 2012]) CodeMap (e-newsletter available at http://www.codemap.com [last accessed November 20, 2012])

PHONE NUMBERS AMA: 1-800-621-8335 CMS (formerly Health Care Financing Administration): 1-800447-8477 or 1-800-633-4227 Note: Coding resources are available from many vendors including the AMA

WEBSITES CMS http://www.cms.gov (last accessed November 20, 2012) Searchable CMS website. http://www.cms.gov/Outreach-and-Education/Medicare-Learning -Network-MLN/MLNGenInfo/index.html (last accessed November 20, 2012) Medicare Learning Network resources. http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/ ClinicalLabFeeSched/index.html) (last accessed November 20, 2012) Medicare Clinical Laboratory Fee Schedule (issued every November).

http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/ PhysicianFeeSched/index.html (last accessed November 20, 2012) Medicare Physician Fee Schedule (issued every November). Government Accountability Office http://www.gao.gov/highrisk/agency/hhs/reforming-medicare -payments.php (last accessed November 20, 2012) GAO studies on reforming and refining Medicare payments. Institute of Medicine http://www.iom.edu (last accessed November 20, 2012) Office of Inspector General https://oig.hhs.gov/compliance/ (last accessed November 20, 2012) Compliance program guidance, fraud alerts, advisory opinions, and work plan. http://oig.hhs.gov/fraud/docs/safeharborregulations/lab.htm (last accessed August 23, 2013) Discount arrangements between clinical laboratories and SNFs

FEDERAL REGISTER AND RELEVANT GUIDANCE DOCUMENTS Negotiated Rulemaking Federal Register. 2001. Medicare program; negotiated rulemaking: coverage and administrative policies for clinical diagnostic laboratory services. Fed. Regist. 66(226):58788–58890

Inherent Reasonableness Federal Register. 1998. Medicare program; application of inherent reasonableness to all Medicare part B services (other than physician services)—HCFA. Interim final rule with comment period. Fed. Regist. 63:687–690.

Substantially in Excess Federal Register. 2007. Medicare and state health care programs: fraud and abuse; clarification of terms and application of program exclusion authority for submitting claims containing excessive charges. Fed. Regist. 72:33430–33432.

VII Profitability, Contribution, and Reimbursement (section editors: Vickie S. Baselski and Alice Weissfeld) 38

Rules and Regulations in Reimbursement Vickie S. Baselski, Alice S. Weissfeld, and Fran Sorrell

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Reimbursement Compliance Vickie S. Baselski, Alice S. Weissfeld, and Fran Sorrell

40

Determination of Profitability Vickie S. Baselski, Alice S. Weissfeld, and Fran Sorrell

38 Introduction General Criteria Basic Rules Procedure Code Edits Basic Edits • National Correct Coding Initiative • Mutually Exclusive Codes • Comprehensive/ Component Edits • Medically Unlikely Edits

Rules and Regulations in Reimbursement Vickie S. Baselski, Alice S. Weissfeld, and Fran Sorrell

Conditions of Coverage Medical Necessity • National Coverage Determination • Local Coverage Determination • Screening Tests • Experimental Testing • Administrative Policies

Special Coverage Conditions End-Stage Renal Disease • Skilled-Nursing Facility • Ambulatory Payment Classifications • Inpatients • Three-Day Window • Date of Service Rule • Other Private-Payor Rules

Remittance Advice Review Beneficiary Documents • Provider Documents • Auditing Remittance Advice

Summary KEY POINTS GLOSSARY

OBJECTIVES To discuss the rules set forth by third-party payors that determine claim payment To describe the term “medical necessity” and its relationship to reimbursement To discuss the importance of claim compliance to reimbursement To describe certain special coverage conditions for which unique billing rules may apply To discuss national coverage determinations and the relationship between these determinations and local coverage determinations To describe the most common reasons for reimbursement denial and what can be done to correct the problems

REFERENCES APPENDIXES

Call them rules or call them limits, good ones, I believe, have this in common: They serve reasonable purposes; they are practical and within a child’s capability; they are consistent; and they are an expression of loving concern. “Mister” Fred Rogers (1928–2003)

B

Clinical Laboratory Management, 2nd Edition Edited by L. S. Garcia ©2014 ASM Press, Washington, DC doi:10.1128/9781555817282.ch38

eyond the basic logistical issues surrounding the battle for laboratory reimbursement are a number of issues that pertain to the rules of engagement. The logistical aspects include the documentation of what is done through Current Procedural Terminology (CPT) and Health Care Common Procedure Coding System (HCPCS) coding, why it is done through International Classification of Diseases, Clinical Modification (ICD-9-CM and ICD-10-CM) or alternative diagnosis coding, where it is done through use of revenue and place-of-service codes, and what the actual billing processes and amount of payment are (see section VI). The rules of engagement pertain to the establishment of criteria for the actual execution of payment, also known as conditions of coverage. Providers must meet all conditions imposed by regulations as well as terms of business set upon them by payors. In addition, to evaluate services for appropriateness for coverage and subsequent payment, payors generally employ standard sets of prepay edits, which specify clinical conditions for payment or nonpayment. Further, payors often conduct postpay audits to evaluate the accuracy of claim payments based on the defined coverage conditions, including prepay edits. While it might be a stretch to compare these rules to the limits imposed upon a child by a parent, they do share some common features. They are basically simple and clearly defined; they are relatively easily applied through an electronic claim review process; and they represent a form of “tough-love” 657

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in that they attempt to place some controls on the excessive spending associated with healthcare out of concern for the effective management of healthcare resources. Unfortunately, one can easily find examples of errors in the reimbursement system, thus strengthening the need for well-defined limits. While the focus of this chapter is the conditions payors place upon providers, one should recognize that payors are also subject to rules governing good business practice.

General Criteria Criteria for conditions of coverage for laboratory services historically have as their bases a number of elements. First is the evidence-based-medicine element, which specifies that laboratory services should be covered if shown in the medical literature to be necessary, safe, and effective in the management of a particular condition. Second is the medical-ethics element, which suggests that patients should not be denied a procedure proven to be necessary, safe, and effective. Third is the medical-judgment element, which places the burden of decision making on the ordering provider, whose training and experience in patient management should justify performance of a procedure. These criteria have been traditionally adequate to determine coverage. However, as healthcare costs have risen, and rationing of available resources has become a necessity, more uniform and systematically applied criteria to verify that a service should be covered have emerged in the form of payor rules, which in federal payment programs are based on interpretation of regulations arising from statutes. These rules are applied through stringent claim review processes in which both procedures and diagnoses are considered in making a payment determination (1, 3, 5, 7). The primary statute upon which federal programs are based is the Social Security Act of 1967. This provided for healthcare benefits for “the diagnosis or treatment of illness or injury or to improve the functioning of a malformed body part” in the elderly and, subsequently, in disabled individuals. Many regulations have evolved from this phraseology, which limits services to those that have been interpreted by the Centers for Medicare and Medicaid Services (CMS) and its contractors as meeting the intent of the law. Furthermore, many other third-party payors have adopted similar types of payment rules. These rules can be divided into three general categories: those that are basic and review a claim for standard identifying information, those that evaluate the appropriateness of the procedures that are ordered in a given time frame, and those that assess the “medical necessity” of performing a test in view of the established coverage criteria.

Basic Rules The claims for laboratory services must meet certain basic requirements for processing. The coding requirements for claim transactions have been standardized under the Health Insurance Portability and Accountability Act (HIPAA), and the CMS requires submission of all standard code and transaction sets. CMS claims are filed using one of two basic formats for laboratory services that are used in their entirety or as models for claims submitted to other payors. Form CMS-1450 (formally UB-92) is used for institutional (e.g., hospitals, nursing homes) claims for Medicare Part A services. It is designed and maintained by the National Uniform Billing Committee and used by many institutional providers. Form CMS-1500 is used by noninstitutional providers (e.g., independent laboratories) to bill Medicare Part B services and some Medicaid services, and it has become a universal claim form for many other third-party payors. While these are manual forms, the required data elements are the same as those in electronic forms. As a result of the Administrative Simplification and Compliance Act of 2001, providers are required to submit electronic claims after October 2003, with only a few exceptions. Under HIPAA, the Department of Health and Human Services has adopted ASC X12 (Accredited Standards Committee) Version 5010 as the HIPAA standard for electronic transactions after January 2009, with mandatory implementation as of January 2012. Importantly, form 5010 will be able to accommodate ICD-10-CM codes when required in 2014. The major required elements for claim submission and subsequent reimbursement for covered services are as follows (Table 38.1). The patient must be identified using a unique identifier, and all demographic information necessary for subsequent communications, particularly bills for services if indicated, must also be provided. The date of service, which is defined as the date of collection of clinical specimens, must be provided. The ordering provider must be identified using a national provider identifier, or NPI (previously called the unique provider identifier number, or UPIN), and adequate demographic information must be provided for subsequent communications, including acquisition of additional documentation, test results, and bills for services if indicated (8). The authentication of the laboratory service provider requires a Clinical Laboratory Improvement Amendments (CLIA) number and designation (high complexity, moderate complexity, certificate of waiver, provider-performed microscopy) appropriate to the service being billed. The place of service must be designated, either as a revenue code in the case of an inpatient or using a place-of-service code for outpatient testing. The actual services provided on the specified date must be indicated using the appropriate CPT or HCPCS codes, including units of service and modifiers where appropriate as

CHAPTER 38. RULES AND REGULATIONS IN REIMBURSEMENT

Table 38.1 Major required elements for claims submission and subsequent reimbursement Unique patient identifier Date of service Bills for services Ordering provider number (national provider identifier) Provider CLIAa number and designation (high complexity, moderate complexity, certificate of waiver, provider-performed microscopy) Place of service (either revenue code for inpatient testing or place-ofservice code for outpatient testing) Actual services provided (CPT or HCPCS codes, including units of service and modifiers where appropriate, and actual charges for each service) Reason for performing the test (ICD-9-CM or ICD-10-CM diagnosis code for outpatients and DRG or narrative diagnosis for inpatients) a

Table 38.2 Procedure code edits Basic edits

Determination of whether a service may represent a duplicate service (review of actual procedures identified by HCPCS or CPT codes) Frequency limits (how often a particular laboratory procedure may be reimbursed); it may be necessary to obtain an ABN for frequency-limited test procedures.

NCCI

Review to determine if two or more different codes are appropriately ordered on the same date of service. NCCI provides an extensive system for this type of claim review process, administered through Correct Coding Solutions, LLC (Medicare contractor). Documents published on quarterly basis; available on the CMS website or as a printed version from the NTIS

Comprehensive/ component edits

These edits identify cases in which a specific code has been identified as representing a component of a more comprehensive code documented on the same date of service (AMAa-approved panel—one would not also code and bill for individual analytes included in the panel).

Mutually exclusive codes

Codes for services that are not reasonably performed during the same patient encounter; these codes are considered to provide duplicate information. Multiple tests to identify the same analyte, marker, or infectious agent should not be reported together.

CLIA, Clinical Laboratory Improvement Amendments.

well as the actual charges for each service. Reimbursement is rarely made at the charge level, but Medicare and other third-party payors use this information for determination of fee schedule payment amounts. Finally, the reason for performing the test must be indicated using an appropriate ICD-CM diagnosis code (ICD-9-CM or ICD-10-CM) for outpatients and a diagnosis-related group (DRG) or ambulatory payment classification (APC) for hospital inpatients and outpatients, respectively. Failure to complete all required data fields is likely to result in a denial of payment from any third-party payor (2, 8, 10).

Procedure Code Edits Basic Edits The next category of prepay edits used for claim review evaluates the actual procedures performed as identified by HCPCS or CPT codes (Table 38.2). The most basic edit is a determination of whether a service may be a duplicate service (i.e., same procedure on the same date of service). If a laboratory procedure is performed more than once on a given date of service for a valid medical purpose, an appropriate modifier (-59 or -91) must be appended to the procedure code. Similarly, frequency limits are used to determine how often a particular laboratory procedure may be reimbursed. These types of edits may be problematic for clinical laboratories if a patient has presented to more than one ordering provider or laboratory provider during the time frame for reimbursement. For this reason, it is reasonable to obtain an advance beneficiary notice (ABN) for frequency-limited test procedures. National Correct Coding Initiative Procedure codes are also reviewed to determine if two or more different codes are appropriately ordered on the same date of service. The Medicare National Correct

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a

AMA, American Medical Association.

Coding Initiative (NCCI) provides the most extensive system for this type of claim review process. This program was initiated by the CMS in 1996 through a contract with a Medicare contractor and is currently maintained by Correct Coding Solutions, LLC. The program is designed to promote correct coding of healthcare services, including laboratory services, and to control improper payment for incorrect coding. Edits have been developed based on national and local coverage policies, coding guidelines and practice guidelines published by professional societies, and review of provider current coding and billing practice. The NCCI documents are published quarterly. Hard copies are available from the National Technical Information Service (NTIS), and electronic versions are publicly available on the CMS website. The complete document includes a table of contents and 13 narrative chapters, with chapter X specific to pathology and laboratory services. However, on occasion, there is crossover between chapters in edit pairs, and laboratorians should be aware

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of all edits pertaining to the laboratory. NCCI is provided to contractors as a set of automated edits that examine all CPT and HCPCS codes submitted on the same date of service. As expected, NCCI also serves as a model for claim review by other third-party payors. The edits fall into several types but are now combined into a single listing of edit pairs in two columns. For codes that appear in these columns, payment is made only for the code in column 1 and payment is denied for any associated codes in column 2. The edits also indicate the code pairs in the columns for which a modifier (generally -59) may be appropriate to indicate that the tests were in fact unique and appropriate under the circumstances. Because denials are due to incorrect coding, an ABN is not appropriate for use to render patients financially liable for payment. The NCCI contractor bases the edits on a number of features of CPT codes. Particular attention is given to the narrative descriptors for the codes to determine if the code is appropriate for use more than once per date of service. In addition, narratives are evaluated to determine if two or more codes provide the same information, in which case codes are deemed mutually exclusive. Narratives are also evaluated to determine if elements of one code are embedded in another code, in which case the edit is considered a comprehensive/component edit.

Mutually Exclusive Codes Mutually exclusive codes are those that are not reasonably performed during the same encounter. In essence, these are considered to provide duplicate information. There is a long-standing CMS interpretation of the Medicare statute that has influenced the development of mutually exclusive edits—that multiple tests to identify the same analyte, marker, or infectious agent should not be reported together. For example, it would not be appropriate to perform an enzyme immunoassay and a nucleic acid detection procedure to detect the same infectious agent from the same specimen on the same date of service, nor would it be appropriate to perform and bill a nonamplified and an amplified nucleic acid test for the same analyte from the same specimen on the same date of service. Again, if additional clinically useful information may be obtained by performing both procedures in a mutually exclusive code set, modifier -59 may be attached. When mutually exclusive codes are billed together inappropriately, in general, the lower-paying code is the code that is reimbursed. Comprehensive/Component Edits Comprehensive/component edits identify cases in which a specific code has been identified as representing a component of a more comprehensive code documented on the same date of service. The most obvious example is the performance of an American Medical Association– approved panel. In this situation, one would not also code

and bill for the individual analytes included in the panel unless a subsequent measurement of a specific analyte was necessary for patient care. In other cases, the descriptor for a procedure may include several related codes. All of the molecular infectious disease codes are considered inclusive of all individual procedural step codes previously found in the chemistry section of the CPT codebook as molecular diagnostic procedural steps. It should be noted that these procedural step codes (termed “stacking codes”) were eliminated in 2013 and all noninfectious analytes were reassigned to a new, analyte-specific molecular pathology section. Finally, if after a test is ordered and performed, an additional related procedure is necessary to confirm the result, this would be considered a part of the original ordered test unless a specific confirmatory code is available (e.g., in the case of several serologic tests for infectious agents, including human immunodeficiency virus and Treponema pallidum, and for hepatitis B surface antigen). When incompatible comprehensive edit code pairs are billed, the most comprehensive code, but not the component codes, is generally reimbursed. As for mutually exclusive codes, these edit pairs may also allow use of modifier -59 in some cases if the component test is determined to be appropriate for the circumstances. It can be extremely challenging for laboratorians to assess how the NCCI process applies to their standard operating procedures and subsequent billing for procedures performed.

Medically Unlikely Edits In 2007, the NCCI established an additional set of edits known as medically unlikely edits (MUEs). An MUE is a frequency edit and represents the maximum number of units of service allowable under most circumstances for a single CPT or HCPCS code billed by a provider on a single date of service for a single beneficiary. MUEs are developed based on a number of considerations including CPT/ HCPCS code descriptors, CPT coding instructions, anatomic considerations, established CMS policies, nature of service/procedure, nature of analyte, nature of equipment, and clinical judgment. Not all HCPCS/CPT codes have an MUE, and not all MUEs are published. For example, if the MUE is set at greater than 3, it is not published due to concerns about risk for overutilization. In addition, the MUE should not be considered as a guide for utilization, and any repeat testing should be clinically indicated. Since some MUEs are not published, careful claim denial review is often indicated to recognize that a frequency edit is operational.

Conditions of Coverage The term “conditions of coverage” has two distinct meanings for reimbursement. First, the term may apply to the conditions that a healthcare provider must meet to be able to bill a payor and be reimbursed by that payor for a

CHAPTER 38. RULES AND REGULATIONS IN REIMBURSEMENT

service. Also known as “conditions of participation,” this may entail having the correct CLIA certificate and state facility and professional licenses, meeting patient notification requirements under HIPAA as well as providing patients notice of their rights, accepting assignment of specified payment amounts for services, and meeting all other applicable regulatory requirements. The second meaning applies to the conditions that a patient must meet for a service to be paid for. In this situation, conditions of coverage refers to a determination by a payor of the clinical circumstances under which a particular procedure will be paid for. Note that for both meanings, the payor sets the conditions of coverage and subsequent payment.

Medical Necessity “Medical necessity” refers to a specific mechanism for defining conditions of coverage for a patient. Under Medicare, this terminology derives from Section 1862(a)(1) (A) of the Social Security Act of 1965, which stipulates that Medicare payment will be made only for expenses incurred for items or services that are reasonable and necessary for the diagnosis or treatment of illness or injury or to improve the functioning of a malformed body member. Medicare has consistently interpreted this provision to exclude services that have not been determined to be safe and effective, are experimental, and are not performed in accordance with accepted standards of medical practice as demonstrated through peer-reviewed literature and published professional society guidelines or practice standards (2). In addition, Section 1862(a)(8) excludes coverage for expenses for routine physical checkups and for testing performed to screen for an illness or an illness precursor in the absence of signs, symptoms, complaints, or personal history of disease or injury except where explicitly allowed by statute (e.g., cervical cytology in women and prostatespecific antigen testing in men). Medical-necessity edits have been developed that specify both the procedures performed and the reason for performing the procedures on a given date of service. These edits may be developed and applied nationally and are known as national coverage determinations (NCDs). Alternatively, where there is not an NCD or where an NCD is silent, local policies may be developed by individual contractors. These are known as local coverage determinations (LCDs). However, a local contractor may not develop an LCD in conflict with an NCD. Both types of policies explicitly delineate the ICD-CM diagnosis codes, which are recognized as providing evidence of medical necessity for coverage of a particular laboratory procedure identified by CPT code. As would be expected, private third-party payors have embraced this concept, and while not as extensive as the system used for Medicare reimbursement, medical necessity nevertheless forms the basis for denials of payment in the private sector as well.

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National Coverage Determination Section 4554(b)(1) of the Balanced Budget Act of 1997 mandated the use of a negotiated rule-making process to develop national coverage and administrative policies for Part B clinical diagnostic laboratory services (Table 38.3). Beginning in 1998 and continuing through 1999, 18 professional groups representing laboratory, physician, and beneficiary interests and the Department of Health and Human Services Medicare Program participated in this process, culminating in the publication of 23 national coverage policies developed through consensus. A notice of proposed rulemaking was published in March 2000, and a final rule was published in November 2001, with an implementation date one year hence. These 23 policies are believed to represent 60% of the Part B laboratory outlays and provide consistency in coverage for beneficiaries. Further, a system has been developed to allow for the continuation of the development of new NCDs through a formal, defined process. The format for an NCD is also defined. A narrative description of the covered services is given and the associated

Table 38.3 National Coverage Determinations Definition

Balanced Budget Act of 1997 mandated the use of a negotiated rule-making process to develop national coverage and administrative policies for Part B clinical diagnostic laboratory services.

Participation

From 1998 to 2000, 18 professional groups representing laboratory, physician, and beneficiary interests and the Department of Human Services Medicare Program participated in this committee.

Publications

National coverage policies developed through consensus; 23 policies are believed to represent 60% of the Part B laboratory outlays and provide consistency in coverage for beneficiaries.

NCD format

Narrative description of the covered services and associated CPT codes Specific ICD-9-CM codes that may be covered, those that are generally not covered, and those that are never covered due to statutory interpretation (e.g., screening tests for diseases or disease precursors)

Content of narrative section

Defines indications, coding guidelines, and limitations

Updates

NCDs have been updated with technical corrections on a regular basis and communicated to payors and providers through program memoranda and transmittals issued by the CMS.

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CPT codes are identified, as well as the ICD-CM codes that may be covered, those that are not generally covered, and those that are never covered due to statutory interpretation (e.g., screening tests for diseases or disease precursors). In addition, each NCD has a narrative section that defines indications, coding guidelines, and limitations upon which the coding portions are based. These NCDs are updated with technical corrections based on annual coding changes or new CMS interpretations and communicated to providers on a regular basis through transmittals issued by the CMS. During the claim review process, the procedure codes (CPT or HCPCS) that have been submitted are compared to diagnosis codes (ICD-CM) to determine if payment is appropriate.

Local Coverage Determination Where a national policy does not exist, or for any aspect of a national policy for which coverage conditions are not specified (e.g., frequency limits), a regional contractor may issue an LCD. The contents of LCDs are very similar to those of NCDs, and each contractor must develop software for claim review, again comparing procedure codes (CPT or HCPCS) to diagnosis codes (ICD-CM) to make a payment decision. A contractor advisory committee (CAC) generally develops LCDs through a systematic process. LCDs are published in local contractor bulletins for a review-and-comment period (generally 90 days), after which a final policy is developed and implemented. The inequities in coverage promulgated by LCDs led to a Government Accountability Office recommendation that future LCD development be eliminated and existing policies be evaluated to determine if they should be incorporated into national policies or rescinded. However, at this time LCDs are still being routinely developed and used by local contractors. Some, particularly those for emerging

technology like molecular pathology tests, may be very restrictive and controversial. The Medicare Coverage Database contains all NCDs and LCDs, local articles, and proposed NCDs. The database also includes several other types of national coverage policy–related documents including national coverage analyses (NCAs), coding analyses for labs (CALs), Medicare Evidence Development and Coverage Advisory Committee (MEDCAC) proceedings, and Medicare coverage guidance documents. It should be noted that other third-party payors similarly use medical review or technology assessment groups to develop coverage policies. These payors generally maintain coverage policies on websites. Laboratories should remain aware of all relevant coverage documents from both federal and other payors, particularly if medical-necessity denial trends are noted.

Screening Tests Historically, preventive tests that screened for disease, disease precursors, or increased risk for disease in asymptomatic patients were not considered to meet medical-necessity indications under Medicare. Only a very few screening tests were reimbursed as a result of congressional action. However, under the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA), CMS now has the authority and the flexibility to add to the Medicare-covered preventive services, including laboratory tests, if there is sufficient evidence published such that the United States Preventive Service Task Force (USPSTF) issues a recommendation. The current laboratory screening benefits are listed in Table 38.4. The CMS uses the NCD proposal process to make such new screening coverage decisions. As expected, other third-party payors similarly set coverage conditions for specific screening tests.

Table 38.4 Medicare laboratory screening benefits Condition

Test(s)

Frequency

Cardiovascular disease risk Colorectal cancer Diabetes if at risk, e.g., high blood pressure, dyslipidemia, obesity, elevated glucose, age >65, family history, gestational diabetes Human immunodeficiency virus if pregnant, at risk, or on request Cervical cancer

Cholesterol, lipid, and triglycerides Fecal occult blood Fasting blood glucose

Every 5 years Every 12 months Up to twice per year

HIV antibody ± antigen screening testa

Every 12 months or up to 3 times in pregnancy Every 24 months or 12 months if high risk Every 12 months

Prostate cancer Sexually transmitted infections if pregnant or at risk

Papanicolaou test (Pap smear) Prostate-specific antigen (PSA) Chlamydia, gonorrhea, syphilis, and hepatitis Bb

a See coding guidance at http://www.cms.gov/Outreach-and-Education/Medicare-Learning-Network-MLN/MLNMattersArticles/downloads/MM6786.pdf (last accessed November 20, 2012). b See coding guidance at http://www.cms.gov/Outreach-and-Education/Medicare-Learning-Network-MLN/MLNMattersArticles/downloads/MM7610.pdf (last accessed November 20, 2012).

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Experimental Testing Medicare has historically interpreted the “reasonable and necessary” clause to mean that services that are experimental (i.e., for research or investigational use) are not reasonable or necessary and therefore are not reimbursed. Further, clearance or approval by the Food and Drug Administration is taken as evidence that a procedure is not experimental. Currently, however, there is much controversy in this area, particularly in the realm of newly emerging molecular technologies. Procedures with a category B investigational device exemption may be reimbursed at a contractor’s discretion, as may routine tests used in support of a new investigational device or procedure in a clinical-trial setting. However, it is still generally accepted that failure to have Food and Drug Administration clearance or approval if required is justification for denial. In the case of laboratorydeveloped tests using analyte-specific reagents (ASRs), the tests may be approved for reimbursement by a contractor if the assay has been properly verified in accordance with CLIA regulations in a high-complexity laboratory, the ASR is being used in accordance with the ASR rule, and all other conditions for medical necessity are met. In the case of other third-party payors, there tends to be more leniency in coverage, as payor-specific independent technology assessment groups make individual coverage decisions. Administrative Policies A number of Medicare administrative policies were also developed during the negotiated rule-making process. These policies were related to the actual processing of claims and required contractors to accept and evaluate all diagnostic codes submitted before making a medicalnecessity determination, allowed a narrative diagnosis to be translated into an ICD-9-CM code if a match could be found, and forbade the use of unpublished frequency edits as a basis for denial of payment. In addition, although the laboratory remains the entity that receives payment and therefore is the entity at risk for nonpayment when a claim is denied, the policy did clarify that the ordering providers have a responsibility to submit required medical-necessity documentation. Further, if documentation is not provided, CMS contractors should notify the ordering provider that additional documentation is required to complete the claim for payment. The policies also clarified that absent evidence or clear proof of medical necessity, laboratories are encouraged to seek beneficiary signing of an ABN assuming financial liability in the case of denial. Such documents are also common in third-party-payor situations.

apply (Table 38.5). In the Medicare program, special rules apply, particularly in the setting of end-stage renal disease (ESRD) and its management in dialysis centers and in payment for laboratory services in Part A skilled-nursing facilities (SNF). Patients admitted to hospitals with preadmission testing are also subject to a rule called the “DRG payment window” prior to admission and to a “date of service rule” after discharge. Finally, each individual payor may impose other arbitrary rules that may be discerned only through careful evaluation of denials.

End-Stage Renal Disease ESRD payment rules are rather complex and represent a combination of a capitated system and a fee-for-service system (6). Most clinical laboratory tests are included in a composite rate payment through the Medicare contractor. To bill separately according to the clinical laboratory fee schedule for additional tests, 50% or more of the covered tests must be noncomposite rate tests for a given date of service. In addition, several unique HCPCS modifiers are used to identify a separately billable test. Skilled-Nursing Facility The Balanced Budget Act of 1997 altered the manner in which the majority of services are provided to Medicare beneficiaries in a Part A–covered SNF stay. All reimbursement was bundled into a single composite prospective payment. While there are a few exceptions that represent separately payable services, laboratory services are generally included in the composite per diem. In a Part B stay in Table 38.5 Special coverage conditions ESRD

Complex payment rules that represent a combination of a capitated system and a fee-for-service system

SNF

All reimbursement is bundled into a single composite prospective payment; there are a few exceptions, but laboratory services are included in the composite per diem.

Three-day window

Used to prevent transfer of charges from the capitated DRG system to a fee-for-service Part B system. Specifies that laboratory services performed by a hospital are included in the DRG payment for a related admission within the preceeding three-day period.

Date of service rule

Tests ordered after discharge on existing samples within a 14-day window are covered under the DRG payment and not billed separately. May place costs for esoteric procedures on the hospital.

Other private-payor rules

Third-party payors model coverage rules on Medicare; however, each has its own guidelines for reimbursement.

Special Coverage Conditions The rules discussed thus far apply primarily to laboratory services for outpatient populations. In a number of other specific clinical circumstances, unique billing rules may

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which Part A benefits have been exhausted, certain medical services, including laboratory tests, may be payable according to the previously described rules.

Ambulatory Payment Classifications Ambulatory payment classifications (APCs) are used for prospective payment for outpatient services. At this time, laboratory services are not included in the prospective payment but are billed and paid separately as previously described for outpatients. In order to better control laboratory spending as healthcare reform progresses and accountable care organizations (ACOs) become predominant brokers for services, it is likely that APC payments will be modified to include laboratory services. Inpatients Laboratory services for hospitalized inpatients are often established to comply with additional sets of rules. Although edits such as the NCCI edits may form a basis for correct code utilization, it is equally important to apply other diagnosis- and institution-specific checklists to ensure that testing is performed according to established protocols. Since payment is made prospectively (e.g., by DRG), it is very important to establish laboratory protocols that contribute to safe and clinically effective patient management while expending resources in a rational and cost-effective manner. Three-Day Window Patients admitted to the hospital and eligible for Part A services frequently require preadmission testing. To prevent the transfer of charges from the capitated DRG system to a fee-for-service Part B system, Medicare implemented the three-day payment window, which specifies that laboratory services performed three days prior to admission by a hospital or by an entity wholly owned or operated by a hospital are included in the DRG payment for the subsequent hospitalization. In short-term hospital settings, the window is reduced to one calendar day. Date of Service Rule After discharge, there are also Medicare rules restricting payment for tests ordered on samples collected during the hospital stay. Tests ordered on existing samples within a 14-day window are covered under the DRG payment and not billed separately. This policy may cause delays in test ordering and may also place a hospital in an unfavorable reimbursement situation for more esoteric tests referred out for testing. Under a provision of the Patient Protection and Affordable Care Act, a demonstration project is planned to review payment mechanisms for certain complex laboratory tests, particular molecular pathology tests, in this setting.

Other Private-Payor Rules While many third-party payors model their coverage rules on Medicare, each has its own guidelines for reimbursement. A large laboratory may interact with several hundred unique payor plans, and the ability to triage claims for compliance with all payment rules absolutely depends on regularly updated claims-processing software. Fortunately, these payors tend to be more liberal in reimbursement for services, yet as healthcare costs rise, rules restricting payment for services will almost certainly become an attractive means to control costs.

Remittance Advice Review Beneficiary Documents The importance of review by the laboratory of the bases for denial or adjustment of claims by all payors cannot be overemphasized (9). For beneficiaries, a specific explanatory statement termed an explanation of benefits or explanation of medical benefits accompanies each denial by any payor. In the Medicare program, a beneficiary receives a Medicare summary notice (previously termed an explanation of Medicare benefits). These documents provide specific and standardized explanatory information that identifies the reason for the denial. This information can be used to attempt to obtain additional documentation from the ordering provider to resubmit the claim, initiate an appeal process, or bill an alternative responsible party (i.e., client or patient) if appropriate. Provider Documents Laboratories also receive remittance advice reports from Medicare contractors and other payors that provide an explanation of the disposition of a claim for specific patients in a given period. These reports list the deficient items that are responsible for preventing expected payment. Under the Health Insurance Portability and Accountability Act of 1996, two sets of standardized codes are now required to convey this information to providers. The claim adjustment “reason codes” communicate why a claim for service was “adjusted” (i.e., paid differently from expected) and are maintained by the American National Standards Institute (ANSI). The “remark codes” add greater specificity and additional explanatory narrative to the reason codes. The CMS is the national maintainer for the standard remark codes. Current reason and remark codes are maintained and accessible at a centralized website (http://www.wpc-edi.com/ Reference/, last accessed November 20, 2012). Auditing Remittance Advice Careful review of these remittance documents provides a mechanism to identify billing problems that are costly in terms of both uncompensated labor and lost revenue (4). Recent data indicate that the most common reasons for

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denial include lack of medical-necessity documentation, the fact that the service performed is noncovered (generally if used for screening purposes), inadequacy or lack of basic identifying documentation (particularly date of service, ordering provider identifier number, and patient identification number), and incorrect coding (both procedure and diagnosis). Studying these reports to identify trends can identify systematic problems often resulting from a simple failure to follow the payor rules and can lead to successful interventions to correct the problems and enhance appropriate reimbursement. A number of case studies have demonstrated significant improvement in reimbursement after implementation of processes to ensure adequate documentation and compliance with rules prior to claim submission.

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■

■

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■

Summary Knowledge of and understanding of the rules set forth by third-party payors that determine whether a claim submitted for laboratory services will be paid are key to success in the laboratory. Many of the rules emanate from Medicare statutes, with resulting regulations that are designed to ensure that only services that are deemed medically necessary for management of a disease condition are paid for. However, in a few defined circumstances, payment has been deemed appropriate for certain specific preventative medicine test procedures. Design of a system that attempts to ensure compliance with all of the known rules and regulations from federal and other payors can significantly reduce costly and time-consuming claim resubmissions. Likewise, the system will ensure timely reimbursement for services that are considered to be covered and allow for alternative billing of the appropriate responsible party in the event of a denial. Indeed, such rules lay a consistent and logical, if not always mutually agreed upon, ground for reimbursement. In addition, since the majority of these rules are published and readily accessible from payors, a systematic approach not only ensures payment for services, but lays a firm foundation for regulatory compliance. KEY POINTS ■ Medicare payor rules are based on regulations arising from statutes and often form the basis for claims review by other payors. ■ Rules for reimbursment are applied through stringent claim review processes. ■ Failure to complete all required data fields in a claim for laboratory services will result in a denial from a thirdparty payor. ■ It is important to understand the types of prepay edits that can result in claim denials.

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Both procedures and diagnoses are considered in making a medical necessity payment determination. The concept of medical necessity forms the basis for claim denials in both the public (Medicare) and private sectors. It is important to understand how NCDs, LCDs, and other conditions of coverage are set and how to contact the payors for claim denial clarifications. It is important to recognize that postpay audits may be conducted by payors to ensure compliance with billing rules. Postpay audits may result in the laboratory being required to return payments if billing compliance problems are noted. The importance of reviewing all claim denials to identify trends for process improvement cannot be overemphasized.

GLOSSARY Advance beneficiary notice (ABN) A waiver of liability used by the provider to notify Medicare beneficiaries prior to receiving a service that it may not be a covered service and that they may have to assume financial responsibility. Similar notices are used by other payors. Ambulatory payment classification (APC) A prospective payment amount assigned to an outpatient visit for a specified clinical condition. American National Standards Institute A private organization that oversees development of and accredits nationally used standards. In the Medicare program, the claim adjustment reason codes are maintained by ANSI. Analyte-specific reagent (ASR) An essential component of a laboratory-developed test that is integral to the detection of an analyte. If the ASR is used in accordance with the ASR regulations and all other reasons for medical necessity are met, laboratory-developed tests may be reimbursed at the discretion of a contractor. Claim The claim form or invoice, which allows transmission of the bill to a payor. CMS-1450 (formerly UB-92) Manual claim form used for institutional (e.g., hospitals, nursing homes) claims for Medicare Part A services. CMS-1500 Manual claim form authorized by the CMS for filing Medicare Part B claims. CMS-5010 Standard form used for electronic claims submission. The CMS requires electronic submission with few exceptions. Conditions of coverage A determination by a payor of the circumstances under which a particular procedure will be paid for. Conditions of participation The requirements that a healthcare provider must meet to be able to bill a payor and be reimbursed by that payor for services rendered.

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Contractor Third-party payor who administers Medicare Part A and Part B payments according to providers (e.g., hospitals, physicians, ancillary and commercial laboratories) in accordance with payment policies (e.g., NCDs and LCDs). Contractor advisory committee (CAC) A committee established by a Medicare contractor to assist in development of local coverage determinations (LCDs). Current Procedural Terminology (CPT) Proprietary service codes developed and maintained by the American Medical Association and required for filing claims and billing of Medicare and other payors. Diagnosis code Medical diagnoses are assigned a numerical code from a document entitled International Classification of Diseases, Revision (Clinical Modifications). The 9th edition (ICD-9-CM) will be replaced by a substantially updated 10th edition (ICD-10-CM) in 2014. The ICD-CM code refers to the clinical reason for a patient’s encounter. Diagnosis-related groups (DRGs) Classification system developed at Yale that defines more than 700 major diagnostic categories and places patients into case types based on the ICD-CM classifications. Substantially updated in 2007 as MS-DRG (Medicare severity adjusted). End-stage renal disease (ESRD) The term used for Medicare beneficiaries who have permanent kidney dysfunction requiring dialysis treatment. Food and Drug Administration clearance Failure to have required Food and Drug Administration clearance or approval for a particular test is generally justification for claim denial. Health Insurance Portability and Accountability Act of 1996 Title I resulted in regulations to protect health insurance coverage for workers and their families when they change or lose their jobs. Title II requires the Department of Health and Human Services to establish national standards for electronic healthcare transactions and national identifiers for providers, health plans, and employers. It also addresses the security and privacy of health data. Adopting these standards will improve the efficiency and effectiveness of the nation’s healthcare system by encouraging the widespread use of electronic data interchange in healthcare. International Classification of Diseases, Version 10, Procedure Coding System (ICD-10-PCS) Laboratory coding system intended for use as an alternative to CPT; not yet in use. Medicaid program Established under Title XIX of the Social Security Act, which provides health insurance to indigent patients; the state and federal governments fund the program jointly. Medical necessity The determination of ICD-9-CM codes for which a CPT code will be reimbursed as reasonable and necessary. Medicare Federally managed health insurance plan covering Americans over age 65 and Americans under age 65 who have certain disabilities and for most patients with ESRD; established by a 1965 amendment to the Social Security Act.

Modifier Modifiers are composed of two-digit numbers (CPT) or letters (HCPCS) that are appended to a specific CPT code prior to the billing process. Modifiers are “used to indicate that a service or procedure has been altered by some specific circumstance but not changed in its definition or code” (1a). National Correct Coding Initiative (NCCI) A Medicare program initiated in 1996 and managed by a specific contractor that evaluates and publishes procedure code sets to determine if two or more unique codes are appropriately ordered on the same date of service. Edits fall into two major categories: comprehensive/ component and mutually exclusive. Edits also indicate the code pairs in these edit categories for which a modifier (generally -59) may be appropriate. National Technical Information Service (NTIS) Publishes the NCCI procedure code edit documents on a quarterly basis. Neg Reg Negotiated Rulemaking Committee for diagnostic clinical laboratory tests. The committee was charged with the development of national coverage determinations of medical necessity for select laboratory tests as a component of the Balanced Budget Act of 1997. Not medically necessary The determination that an ICD-9-CM code does not justify payment. Postpay audits A targeted evaluation of claims for accuracy and compliance with billing rules after payment has been made. Detected errors render payments already made subject to reimbursement. Prepay edits Edits used for the systematic evaluation of claims for accuracy and compliance with billing rules prior to payment. Detected errors render the claim subject to denial. Reason codes The Claim Adjustment Reason Codes (CARC) are part of a national code set that identifies the reasons for any difference between the provider charge for a service and the payor’s payment for a service. This code set is maintained by a national code maintenance committee. Reasonable-charge methodology Based on inherent reasonableness, authority to arbitrarily increase or decrease payment. Regulations Legally binding rules developed to implement a statute. Remark codes The Remittance Advice Remark Codes (RARC) are used to convey information about remittance processing or to provide a supplemental explanation for an adjustment already described by a Claim Adjustment Reason Code (CARC). RARC codes are maintained by the CMS. Social Security Act of 1967 Provided for healthcare benefits for “the diagnosis or treatment of illness or injury or to improve the functioning of a malformed body part” in the elderly and, subsequently, in disabled individuals. Statute A law passed by the U.S. Congress or a state legislature. Transmittal The mechanism by which the CMS conveys information regarding the Medicare program to providers and payors (e.g., national coverage determinations that have been updated with technical corrections).

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REFERENCES 1. Alwell, M. 2003. Stem revenue losses with effective CDM management. Healthc. Financ. Manag. 57:84–88. 1a. American Medical Association. 2012. Principles of CPT Coding. AMA Press, Chicago, IL. 2. Carter, D. 2002. Optimizing revenue by reducing medical necessity claims denials. Healthc. Financ. Manag. 56:88–94.

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6. Parker, S., N. Davidson, and R. Gagliano. 2002. Preventing and dealing with ESRD claim denials. Nephrol. News Issues 16:18–21, 25–26. 7. Reed, R. L., II, K. A. David, G. M. Silver, T. J. Esposito, V. Tsitlik, T. O’Hern, and R. L. Gamelli. 2003. Reducing trauma payment denials with computerized collaborative billing. J. Trauma 55:762–770.

3. Cathey, R. 2003. 5 ways to reduce claims denials. Healthc. Financ. Manag. 57:44–48.

8. Reiser, W. S., and B. O. Brunicardi. 2002. Assessing the impact of Medicare payment changes. Healthc. Financ. Manag. 56:68–71.

4. Mesaros, F. 2000. The remittance advice, auditing for compliance. Clin. Leadersh. Manag. Rev. 14(2):69–71.

9. Scott, M., and D. Nguyen. 2009. Clinical laboratory compliance: something old, something new. Lab Med. 40:428–435.

5. Murray, M. E., and J. B. Henriques. 2003. Denials of reimbursement for hospital care. Manag. Care Interface 16:22–27.

10. Wallack, S. S., and C. P. Tompkins. 2003. Realigning incentives in fee-for-service Medicare. Health Aff. (Millwood) 22:59–70.

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APPENDIX 38.1 Federal Register Guidance Documents NEGOTIATED RULEMAKING

ANALYTE-SPECIFIC REAGENTS

Federal Register. 2001. Rules and regulations, Medicare program; negotiated rulemaking: coverage and administrative policies for clinical diagnostic laboratory services. Fed. Regist. 66:58788–58890.

Federal Register. 1997. Medical devices; classification/reclassification; restricted devices; analyte specific reagents—FDA. Final rule. Fed. Regist. 62:62243–62260.

CATEGORY B IDEs Federal Register. 1995. Medicare program; criteria and procedures for extending coverage to certain devices and related services—HCFA. Final rule with comment period. Fed. Regist. 60:48417–48425.

APPENDIX 38.2 Websites Related to Reimbursement Processes CMS http://www.cms.gov (last accessed November 20, 2012) Searchable CMS homepage. http://www.cms.gov/Medicare/Coding/ICD10/downloads/ Versions5010TestingReadinessFactSheet.pdf (last accessed November 20, 2012) Electronic form 5010. http://www.cms.gov/medicare-coverage-database (last accessed November 20, 2012) Medicare NCD and LCD database. http://www.cms.gov/Medicare/Coding/NationalCorrectCodInitEd/ index.html (last accessed November 20, 2012) NCCI index. http://medicare.gov (last accessed November 20, 2012) Searchable Medicare beneficiary information website. http://www.medicare.gov/Pubs/pdf/11100.pdf and http://www .medicare.gov/Pubs/pdf/10110.pdf (last accessed November 20, 2012) Preventive services. http://www.cms.gov/MLNGenInfo (last accessed November 20, 2012) Medicare Learning Network index. http://www.cms.gov/Outreach-and-Education/Medicare-Learning -Network-MLN/MLNProducts/downloads/ABN_Booklet _ICN006266.pdf (last accessed November 20, 2012) Advance beneficiary notices. http://www.cms.gov/Outreach-and-Education/Medicare-Learning -Network-MLN/MLNProducts/downloads/form_cms-1500_fact _sheet.pdf (last accessed November 20, 2012) Form 1500. http://www.cms.gov/Outreach-and-Education/Medicare-Learning -Network-MLN/MLNProducts/downloads/ub04_fact_sheet.pdf (last accessed November 20, 2012) Form UB-04. http://www.cms.gov/Outreach-and-Education/Medicare-Learning -Network-MLN/MLNProducts/downloads/RA_Guide_Full_03-22 -06.pdf (last accessed November 20, 2012) Remittance advice guide. http://www.cms.gov/Outreach-and-Education/Medicare-Learning -Network-MLN/MLNMattersArticles/downloads/MM7683.pdf (last accessed November 20, 2012) Remittance advice remark codes.

http://www.cms.gov/Outreach-and-Education/Medicare-Learning -Network-MLN/MLNProducts/downloads/MedicareClaim SubmissionGuidelines-ICN906764.pdf (last accessed November 20, 2012) Claims submission guide. http://www.cms.gov/Outreach-and-Education/Medicare-Learning -Network-MLN/MLNProducts/downloads/MCRP_Booklet.pdf (last accessed November 20, 2012) Claims review process. http://www.cms.gov/Outreach-and-Education/Medicare-Learning -Network-MLN/MLNProducts/downloads/How-To-Use-NCCI -Tools.pdf (last accessed November 20, 2012) National Correct Coding Initiative. http://www.cms.gov/Outreach-and-Education/Medicare-Learning -Network-MLN/MLNProducts/downloads/AcutePaymtSysfctsht .pdf Acute care hospital inpatient prospective payment system. http://www.cms.gov/Outreach-and-Education/Medicare-Learning -Network-MLN/MLNProducts/downloads/hospitaloutpaysysfctsht .pdf Outpatient prospective payment system. Office of Inspector General https://oig.hhs.gov/ (last accessed November 20, 2012) Compliance program guidance, fraud alerts, advisory opinions, red book, and work plan. Washington Publishing Company http://www.wpc-edi.com/reference/ (last accessed November 20, 2012) ASCX12 code maintenance site. http://www.wpc-edi.com/reference/codelists/healthcare/claim -adjustment-reason-codes/ (last accessed November 20, 2012) Claim adjustment reason codes. http://www.wpc-edi.com/reference/codelists/healthcare/ remittance-advice-remark-codes/ (last accessed November 20, 2012) Remittance advice remark codes. U.S. Preventive Services Task Force http://www.uspreventiveservicestaskforce.org/ (last accessed November 20, 2012)

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APPENDIX 38.3 Medicare’s NCCI Editsa,b PART 1: HELPFUL QUESTIONS AND ANSWERS How do I obtain a copy of the CCI Policy and Edits Manual? Two ways: (i) through the CMS website at http://www.cms.gov/ Medicare/Coding/NationalCorrectCodInitEd/index.html (last accessed November 20, 2012) and (ii) by purchasing the manual, or sections of the manual, from the National Technical Information Service (NTIS) website at http://www.ntis.gov/products/cci.aspx (last accessed November 20, 2012) (NTIS: 1-800-363-2068). Are the edits in the CCI Edits Manual valid for a whole year? No, the edits are updated quarterly. However, the NCCI Policy Manual is updated annually in October. What does the effective date mean for CCI edits? This date applies to the dates of service on or after a given date. Do I need to obtain each version update of the CCI to manage our coding practices effectively and efficiently? Yes, there are various numbers of changes in every update. Do the edits change that much between quarterly updates? The number of changes depends on the volume of comments received, modifications processed, and edits reviewed. There are some software coding programs that already contain the CCI edits. Do I still need to purchase the manual from NTIS? At this time, the official method for providers to receive the CCI edits is through the CMS website or through NTIS. It is up to the hospital and the physician to be aware of the quarterly updates to the CCI Edits Manual. Is there a list of deletions to each version update available, or do I have to do a comparison between the previous and the current version updates to determine what was actually deleted? The electronic file that is available on the CMS website has several columns that include the effective dates and deletion dates of the CCI edits. However, the CCI Manual (specifically the printed version) available from NTIS does not list the effective and deletion dates of the CCI edits. How are the CCI edits arranged in the manual? The edits are arranged in a single table as column 1/column 2 correct coding edits. This table now includes codes previously designated mutually exclusive codes and comprehensive/component edits, and other edits based on correct coding conventions. In the table, the column 2 codes are not payable with the column 1 codes unless the edit permits the use of a modifier associated with CCI. If I want to determine what codes/procedures are paired with a certain code, how can I find this out? NTIS provides the printed versions of column 1/column 2 correct coding. The NTIS electronic version allows you to search for a code in the database in either position.

What are some of the possible denial messages that may be displayed on the beneficiary’s explanation of medical benefits? “Medicare does not pay for this service because it is part of another service that was performed at the same time.” “Payment is included in another service received on the same day.” Does anyone have input about these edits before they are implemented? Edit modifications resulting from comments are often referred to medical societies prior to final disposition of the edit. In addition, the American Medical Association receives a listing of all changes at least one month prior to the quarterly implementation of a new version of the CCI.

PART 2: TERMS AND DEFINITIONS THAT APPLY TO CCI What are CCI edits? CCI edits are pairs of CPT or HCPCS level II codes that are not separately payable except under certain circumstances; the edits are applied to services billed by the same provider for the same beneficiary on the same date of service. What does it mean when codes are considered mutually exclusive of each other? Mutually exclusive codes represent procedures or services that could not reasonably be performed at the same session by the same provider for the same beneficiary. What exactly does “column 1” mean in the coding edits table and in the mutually exclusive edits table? The column 1 code generally represents the major procedure or service when reported with the column code. When reported with the column 2 code, “column 1” generally represents the code with the greater work relative-value units of the two codes. However, within the mutually exclusive edit category, “column 1” generally represents the procedure or service with the lower work relative-value units and is the payable procedure or service when reported with the column 2 code. What are mutually exclusive edits? This edit table contains edits consisting of two codes for services that cannot reasonably be performed together based on the code definitions of anatomic considerations. If the two codes of an edit are billed by the same provider for the same beneficiary for the same date of service without an appropriate modifier, the column 1 code is paid.

a The information in this appendix is from http://www.cms.gov/Medicare/Coding/ NationalCorrectCodInitEd/index.html (last accessed November 20, 2012). b The website for the current NCCI contractor is http://correctcodingsolutions.com (last accessed November 20, 2012).

39 Introduction Improper Payments Program Integrity Authority for Program Integrity • Activities in Program Integrity

Reimbursement Compliance Vickie S. Baselski, Alice S. Weissfeld, and Fran Sorrell

Payor Integrity Prepayment Review • Postpayment Review

Laboratory Provider Integrity The Seven Essential Elements • Specific Areas of Concern

Coding and Billing Issues CPT Coding • Modifiers • ICD-CM Coding • The Requisition • Special Ordering Situations

Medical-Necessity Issues Record Retention Marketing Practices Pricing and Inducements • Ordering Provider and Patient Communication

Fraud Alerts and Advisory Opinions Auditing and Monitoring Response to Possible Fraud or Abuse Laboratory Examples of Fraud and Abuse Summary

OBJECTIVES To describe what constitutes fraud and/or abuse To discuss specific examples of the most common forms of fraud and abuse found in the public and private sectors To discuss a prepayment review and its relationship to reimbursement To describe some of the legal ramifications that might be associated with a postpayment audit To define the seven key elements within a sound compliance program To list some of the acceptable marketing practices, as well as some that may not be in compliance To provide several specific examples of potential laboratory fraud and abuse

KEY POINTS GLOSSARY REFERENCES APPENDIXES

Money made through dishonest practices will not last long. Chinese proverb

W

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ith the extensive array of statutory, regulatory, and other payordefined rules that exist with regard to billing for healthcare services, including laboratory medicine, it is no surprise that improper payments are not uncommon. Improper payments may be either over or under the appropriate amount, and they may result from actions on the part of the provider or a provider’s contracted billing entity or the payor. To minimize and control improper payments, including those that are intentional and therefore potentially fraudulent, all entities involved in reimbursement should have formal review processes in place. Collectively these processes are referred to as a “compliance program.” The most extensive review program encountered in the laboratory is that developed by the federal government under the heading of “program integrity.” A strong compliance program uses a systematic approach for prevention, detection, and correction of improper payments for healthcare services to preserve the integrity of the provision of healthcare services. In laboratory medicine, program integrity includes elements that ensure both accurate billing by the laboratory and accurate payment by the payor. Compliance expectations modeled after the federal program exist for essentially all third-party payors to ensure that appropriate payment is made for covered services but not made in noncovered situations.

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Improper Payments Improper laboratory payments are payments made to a laboratory provider for testing that was not indicated based on the documentation provided, including the codes submitted or the clinical condition of the patient. Improper payments can be categorized as errors, waste, abuse, or fraud (Fig. 39.1). Errors generally result from simple mistakes in completing documentation on the requisition or claim form or from unintentionally assigning an incorrect code for the procedure or the diagnosis. Waste generally results from inefficient practices leading to overutilization or in some cases from performing medically unnecessary testing. Abuse can be considered as “bending the rules” and generally results from improper billing practices. This can include a wide range of behaviors including but not limited to billing for a noncovered service, misusing codes on a claim out of compliance with coding conventions (e.g., upcoding or unbundling), and inappropriately allocating costs on a cost report (e.g., for diagnosis-related group submission). While these types of activities are not acceptable, and any payment deemed inappropriate should be returned, they are not considered fraudulent. Fraud is distinguished on the basis of intent. Thus, laboratory fraud may be defined as the intentional deception or misrepresentation of documentation on a claim to purposely receive reimbursement for services not performed, not necessary, or performed at a higher level or frequency or including more units of service than appropriate. Fraud may also result from certain business arrangements that may lead to inappropriate utilization of and overpayment for services. Fraudulent activities are frequently systematic and may result in significant amounts of improper payment. Claim review processes will identify many unintentional errors, particularly those pertaining to inadequate documentation. However, for two decades now, the laboratory

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medicine industry has been the subject of intense scrutiny for evidence of systematic attempts to receive improper payment (15). A systematic process of receiving inappropriate payment is often referred to collectively as “fraud and abuse.” Identification of fraud and abuse may result in criminal and civil liabilities as well as payback of amounts determined to be paid in error by both federal payors and private third-party insurers. However, it is important to recognize that innocent errors and mistakes do occur. Only in the case of actual knowledge of the falsity of a claim, reckless disregard of the truth of the claim, or deliberate ignorance of the correct process will civil or criminal legal action be taken. Truly innocent false or incorrect claims generating overpayment are generally simply subjected to repayment. Both private insurers and federal payors have identified situations that are associated with fraud and abuse. These activities include the following: • Providing an incorrect diagnosis or misrepresenting the diagnosis to justify payment. This is known as code jamming (i.e., inserting a code that was not provided by the ordering provider but that will justify payment). Another practice is code steering (i.e., providing lists of diagnosis codes that are known to justify payment). • Billing for services not performed as ordered. Performing and billing for tests not ordered is a straightforward incorrect practice, but performing a related test for which the Current Procedural Terminology (CPT) code pays at a higher level is also incorrect (termed “upcoding”). • Unbundling or “exploding” charges by billing for individual codes rather than using a Center for Medicare and Medicaid Services (CMS)–approved comprehensive or panel code or routinely billing mutually exclusive

Figure 39.1 Program integrity activities focus on

Spectrum of improper payments in the laboratory Errors

Waste

Abuse

Fraud

Mistakes

Inefficiencies

Bending the Rules

Intentional Deception

Incorrect Coding

Medically Unnecessary Test

Improper Billing Practice

Billing for Test Not Performed

$ $ Lost $ $

prevention and detection of improper payments resulting from a spectrum of related coding and billing activities (adapted from http://www.cms.gov/ Medicare-Medicaid-Coordination/Fraud-Prevention/ MedicaidIntegrityProgram/downloads/cpiinitiatives .pdf). doi:10.1128/9781555817282.ch39.f1

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codes. The National Correct Coding Initiative (NCCI) has been previously discussed (chapter 38) as a system by which all federal claims are subjected to a prepay review process to identify incorrect use of codes as described above. The correct use of “comprehensive” codes rather than “unbundled” individual codes, the routine “bundling” of codes and attaching them to a specific orderable code absent evidence of the medical appropriateness of doing so and with the knowledge and approval of the ordering providers that it is being done, and the routine use of mutually exclusive codes with modifiers to bypass edits absent the same criteria for medical appropriateness and with provider knowledge and approval are all considered suspect. • Referral of testing to a laboratory facility in which the ordering provider has a financial interest. Legislation known as the Stark Laws generally disallows billing for services performed in a laboratory in which a provider or an immediate family member has a financial interest. There are some clearly defined exceptions that allow billing, but self-referral arrangements are highly suspect and intensely scrutinized. • Routine waiver of deductibles and copayments on nonMedicare patients or offering charges lower than accepted market value. Any attempt to offer incentives to nonfederal payors to encourage them to also submit federal program testing is termed “inducement” and is a violation of elements of both the Stark legislation and the federal Anti-Kickback Statute. The routine offering of waivers for amounts due or the routine billing for a service that pays at a lower level to encourage utilization (termed “downcoding”) is similarly inappropriate. Recent Office of Inspector General (OIG) proposals indicate the intent to look closely at the common practice of laboratory discounts to determine if the Medicare program payment amounts are excessive relative to the charges to a laboratory’s other clients. • Soliciting, offering, or receiving a kickback in exchange for receiving business. The provision of any item of value in exchange for referral of federal business to a laboratory is also prohibited as a violation of elements of both the Stark legislation and the federal AntiKickback Statute. The provision of free testing services to clients (termed “professional courtesy”), free supplies other than those used strictly in the provision of laboratory services, and free data summary reports used for purposes other than evaluation of laboratory utilization (e.g., antibiograms, drug-of-abuse profiles) are unacceptable practices. Also suspect are clinical trial work done for no charge and routine leasing of laboratory space, primarily for specimen collection by a laboratory-affiliated phlebotomist, at rates higher than usual. One can say that any value-added service

has value and should therefore be billed to the client at its fair market value. There are some well-defined exceptions to the Stark laws, termed “safe harbors.” These exceptions are particularly important in the provision of electronic health record (EHR) systems for test ordering and result transmission. Many specific examples of situations involving these or other practices have been identified through review processes under program integrity. Descriptions are available in documents from both CMS and OIG.

Program Integrity Simply stated, the goal of program integrity is to “pay it right.” That is, the goal is topay the right amount to the right provider for the right service to the right beneficiary. Provisions to address the issue of program integrity in federal programs can be found in a number of statutes and resulting regulations.

Authority for Program Integrity A primary basis for Medicare program integrity lies in provisions of the Social Security Act and CMS interpretation of resulting regulations. Services that are authorized by law are those described in Section 1828(a)(1)(A), which states that Medicare will pay for services “that are reasonable and necessary for the diagnosis or treatment of illness or injury or to improve the functioning of a malformed body member.” This provision has been interpreted to indicate that preventative services are in general not covered except as defined by statute or CMS rulings. This phrase is also the basis for the development of medical-necessity rules for reimbursement. Medicaid and Children’s Health Insurance Program (CHIP) coverage is generally based on criteria established by states administering the program, and other third-party payors establish their own coverage criteria, but in all cases the Medicare system frequently serves as a model. Failure to comply with and abide by the rules established by any payor may put a laboratory at risk for legal action. To enforce compliance with government rules and regulations for federal reimbursement for healthcare services, in 1981 Congress enacted the Civil False Claims Act and the Civil Monetary Penalties Law. These laws authorized the Secretary of Health and Human Services (HHS) to impose civil monetary penalties (CMPs) for knowingly violating Medicare rules and regulations to receive improper payment from the federal government for services. In addition, the Secretary could specifically exclude an individual or entity determined to be in violation from participation in providing services to and receiving payment for federal program beneficiaries for designated periods. In 1994, the responsibility for enforcing Medicare statutes

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was realigned between both the CMS (the Health Care Financing Administration, HCFA, at that time) and the OIG. The HCFA was given responsibility for program compliance, and the OIG was given responsibility for CMPs involving fraud and abuse. Finally, in 1996, the Health Insurance Portability and Accountability Act (HIPAA) increased maximum CMPs to $10,000 per item or service in noncompliance (increased from $2,000) and increased assessments to three times the amount claimed (increased from two times the amount). HIPAA also established a formal Health Care Fraud and Abuse Control Program to combat such activities in claims filed by both public and private payors. It is noteworthy that HIPAA also paved the way for better enforcement of billing compliance for nonMedicare payors. Two additional pieces of legislation that are important for program integrity are the Anti-Kickback Statute from 1987 and the physician self-referral laws known as the Stark Laws initially passed in 1989. The Anti-Kickback Statute makes it a criminal offense to knowingly offer, pay, solicit, or receive any type of payment as an inducement or reward for referrals of items or services payable by a federal health care program. The Stark Laws prohibit physician referral for designated healthcare services performed by an entity in which the physician or an immediate family member has a financial interest. The intent of both is to ensure that business practices do not allow for improper payments. It should also be noted that the CMS has the authority and responsibility under the Clinical Laboratory Improvement Amendments (CLIA) to ensure compliance by registered laboratories with all applicable federal rules and regulations. On a yearly basis, the CMS makes publicly available a listing of laboratory providers who have failed to comply with regulations pertaining to billing and reimbursement. The listing includes those laboratory providers to which the following apply: • They have been convicted of fraud and abuse under federal or state laws. • They have appeals and hearings pending for the same. • They have been excluded from participation in federal programs. • CMPs have been imposed on them. Also under HIPAA’s Privacy Rule is the authority to perform automated tracking. Complaints, incidents, allegations, investigations, and dispositions logged by any beneficiary or participant in a federal program can be tracked by CLIA number to generate provider-specific data. Automated tracking is recognized as an extremely important strategy for the future, and such efforts have been greatly enhanced under the Affordable Care Act. Systematic, electronic analysis and tracking has the potential

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to move efforts to reduce improper payments away from dependence on recovery to an early detection and proactive prevention approach. In sum, there are numerous lines of authority that govern and enforce compliance with billing and reimbursement statutes and regulations. The lines are well established, and specific entities, primarily the CMS and the OIG together with the Department of Justice (DOJ), carry the authority to require payback and to impose both civil and criminal penalties as appropriate to the situation. The Government Accountability Office (GAO) considers healthcare programs to be high risk for improper payment, including fraud, since payments are generally made to “any willing provider” and are made in a relatively timely manner. Both of these features lead to a “pay and chase” approach to dealing with improper payments. However, new program integrity enforcement and monitoring enhancements are being added on a regular basis, and such programs apply not only to federal payor programs but also to private payors. In any case, if judged by indictments and payments, program integrity efforts may be deemed highly successful. A recent Health Affairs Policy briefing (7) notes that for 2011 there were 1,430 healthcare fraud charges, with 743 criminal convictions, 977 new civil investigations, and recovery of $4.1 billion. In addition, almost 5,000 providers had billing privileges revoked. However, since almost 25% of the $428 billion in federal healthcare payments are thought to be improper, much work remains to be done.

Activities in Program Integrity Given the importance of program integrity, it is not surprising that the federal and state governments as well as other third-party payors have a number of programs in place to prevent, detect, and correct improper payments. Several entities are involved in ensuring program integrity for the CMS healthcare programs and are outlined in Table 39.1. In 2010, the CMS created the Center for Program Integrity to serve as a focal point for all activities pertaining to Medicare, Medicaid, and CHIP programs. However, well before that date a number of ongoing activities were in place. Contractors who administer benefits have extensive medical review programs in place that evaluate both prepay and postpay situations. In addition, several other contractor-directed programs are in place to address program integrity issues. For example, prepay issues have been regularly addressed by the NCCI contractor through quarterly update of edits since 1996. Postpay concerns have been addressed through several programs. The Comprehensive Error Rate Testing (CERT) program was established in 2000. In this program, a designated contractor has responsibility for the random review of selected claims processed by federal payors to verify that contractor decisions are accurate and based on sound policy

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Table 39.1 Government payor program integrity activities Prepay or Postpay

Abbreviation

Entity or program

CERT

Comprehensive Error Rate Testing

Postpay

CPI

Center for Program Integrity Government Accountability Office

Both

Health Care Fraud Prevention and Enforcement Action Team Medicaid Integrity Contractors Medical review

Both

National Correct Coding Initiative Office of Inspector General

Prepay

PERM

Payment Error Rate Measurement

Postpay

PSC

Program Safeguard Contractors Recovery Audit Contractors

Postpay

GAO

HEAT

MIC MR

NCCI OIG

RAC ZPIC

Zone Program Integrity Contractors

Both

Both Both

Both

Both (initially postpay) Postpay

compliant with statutes and regulations. The goal is to generate national paid claim error rates, claim processing error rates, provider compliance rates, and benefit-specific error rates. The purpose is to provide benchmark data that can be utilized to identify emerging trends and implement effective corrective action. A similar program, the Payment Error Rate Measurement (PERM), was implemented for Medicaid and CHIP data analysis in 2006. For focused review of provider payments, Program Safeguard Contractors were engaged in 2003 to assume formal responsibility for the Medicare Integrity Program. These contractors were charged with identifying and reviewing any suspected case of improper payments. A related entity, Zone Program Integrity Contractors (ZPIC), focuses specifically on suspected fraud cases, and Medicaid Integrity Contractors (MIC) focus on issues regarding payment in that program. A final group, Recovery Audit Contractors (or Recovery Auditors), was initially established in 2003 as a pilot program and

Activities CMS program to collect and review data on statistically valid random samples of fee-for-service claims to produce annual improper payment rates CMS coordinating center for all activities pertaining to prevention, detection, and recovery of improper payments The investigative arm of Congress charged with examining matters pertaining to receipt and payment of public funds; has published a number of reports on government healthcare spending HHS and DOJ collaborative program to prevent waste, abuse, and fraud in Medicare and Medicaid programs; uses a multiagency Medicare Fraud Strike Force team in selected cities Contractors assigned to identify cases of suspected improper payments and take appropriate action in the Medicaid program Targeted review by a contractor to assess claim and payment accuracy that may result in corrective action or lead to a formal payment policy CMS program designed to identify procedure code pairs that are not generally used together and to establish frequency limits on codes Responsible for protecting the integrity of HHS programs by developing policy guidance documents and through a system of audits, investigations, inspections, and reports of findings; also maintains a list of individuals and entities excluded from CMS payment programs due to misconduct CMS program to collect and review data on statistically valid random samples of state Medicaid and CHIP claims to produce annual improper payment rates Contractors assigned to identify cases of suspected improper payments and take appropriate action; similar to the ZPIC program Contractors assigned to systematically identify and correct improper payments Contractors assigned to identify cases of suspected fraud and take appropriate action; similar to the PSC program

subsequently extended nationally in 2010. These contractors identify both overpayment and underpayment and refer providers to the appropriate administrative contractor for action. Finally, it should be noted that there are other significant contributors to program integrity. In 2009, the Health Care Fraud Prevention and Enforcement Action Team (HEAT) was developed as a joint effort by the Departments of Justice and HHS to evaluate potential improper payments in selected cities. The GAO plays a role in developing reports on healthcare spending to identify potential problem areas, and of course, the OIG facilitates all program integrity efforts. Medicare even solicits assistance from beneficiaries to identify questionable reimbursement situations through a number of mechanisms. Recently, the National Fraud Prevention Partnership was announced to engage a variety of public and private entities in sharing information to stop losses to payors, including patients, before they occur (7).

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Payor Integrity While much of the focus has been on laboratory provider error in the claim submission process, contractors or thirdparty insurers paying claims also have an absolute obligation to develop effective medical review processes. In fact, contractors have on occasion been found to be responsible and liable for payment errors. There are two main categories of review processes that must be developed and implemented by the administrative contractors: those performed prepayment and those performed postpayment.

Prepayment Review Prepayment review is the preferred approach for a very obvious reason. It eliminates the need to “pay and chase,” i.e., attempt to recoup payments made in error. Prepayment review is ordinarily accomplished through a computer-based system of defined edits similar to those used by laboratory providers to submit “clean claims.” Prior to payment, claims are assessed for complete documentation, correct coding, and evidence of medical necessity (i.e., meets criteria as a covered service). As already discussed (chapter 38), a variety of edits are currently in place and include those published as frequency limits, NCCI edits, national coverage determinations (NCDs), and local coverage determinations (LCDs). In a small percentage of cases, claims may be manually reviewed to ensure that the edit process is correct, and medical record documentation may be requested from both the ordering provider and the laboratory provider. In addition, any laboratory provider that has been identified as having problems with correct claim submission may be placed on routine prepayment review status. Postpayment Review Postpayment review is also an important component of the claim review process. This process focuses on statistical evaluation of subsets of claims (i) to check claims on a random basis to function as a deterrent for fraud and abuse, (ii) to identify aberrant patterns of utilization and billing that may indicate a general emerging or provider-specific problem, and (iii) to determine the extent of a particular kind of problem that has been previously identified. When a review is performed to detect aberrancies or specific problems for a particular laboratory or other healthcare provider, it is termed a focused medical review. In turn, a focused medical review may identify a problem that results in development of a prepayment LCD. Postpayment review may be performed on individual claims or on samples of claims. From review of a statistically valid sample, the payor can estimate the extent of incorrect payment made without necessarily undertaking a complete medical record review. However, the possibility exists that complete evaluation of all individual documentation associated with testing may be performed whenever

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a postpayment review identifies a significant problem associated with large expenditures.

Laboratory Provider Integrity While payors have an obligation to “pay it right,” laboratory providers obviously have an obligation to “do it right” in the first place. The continuing recognition of costly systematic billing errors, including some categorized as fraudulent, led the OIG to issue the Compliance Program Guidance for Clinical Laboratories in August 1998 (2–4, 6, 9, 11, 13, 14). This document, which updated the previous Model Clinical Laboratory Compliance Plan published by the OIG in 1997, is designed primarily to ensure that appropriate reimbursement is made through federal programs, that is, to ensure that payors “pay it right.” However, it also provides commonsense principles for conducting laboratory business in general by promoting the concept of “doing it right.” The document provides guidance for “doing the right thing” (through compliance with all regulatory and statutory rules and regulations), for “getting paid for doing the right thing” (through correct coding and billing practices), and for “making sure the right thing is done” (through a systematic approach to ensuring that rules and regulations are followed). While the 1998 guidance is voluntary, the strategies recommended represent sound business practices and serve to make certain that laboratories function as business entities providing laboratory services in an ethical and legal manner. The importance of a compliance program has recently been affirmed in the 2010 Patient Protection and Affordable Care Act (PPACA or simply, ACA) provisions that require the Secretary of HHS to promulgate “core elements” and set an effective date for mandatory compliance programs. The core elements were not specified but will likely be similar to those in the 1998 guidance. They will presumably be defined through a rulemaking process, but the legislation did not set a deadline for these actions. ACA provisions also increased monies for activities related to program integrity, for example ramped-up computer capabilities to support proactive data analysis and systematic audits. Under the ACArequired revalidation process, laboratories are classified as moderate risk, so unannounced on-site visits to ensure compliance programs are operational may occur. A strong foundation for an effective compliance program requires that a laboratory provider have understandable and updated compliance program policies. These policies should follow the recommendations and address the situations discussed in the 1998 OIG guidance and any ACA-driven core elements and should apply equally to all payor types. The compliance program should be comprehensive and address all relevant aspects of preanalytical, analytical, and postanalytical processes. The laboratory must also be in compliance with all other applicable

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federal, state, and local statutes and regulations (e.g., CLIA, the Occupational Safety and Health Act, HIPAA). Laboratories are in a truly unique position to provide essential information on appropriate testing to ordering providers, and rather than being a burden, a sound compliance program can be thought of as an opportunity to provide such information.

The Seven Essential Elements The OIG compliance guidance specifies that, at a minimum, a sound compliance program should include seven key elements. These are as follows: • There should be written standards of conduct. These standards should promote the laboratory’s commitment to the accurate, ethical, and legal practice of laboratory medicine. • There should be a chief compliance officer (CCO) charged with procedure and protocol development, education and training, and auditing and monitoring. The CCO should interact with a formal corporate (or institutional) compliance committee (CC) composed of key individuals who are charged with approval of compliance policies and with oversight of all other elements of the compliance program. Both the CCO and the CC should report directly to the chief executive officer. • There should be an effort to provide standardized education about compliance. Compliance training should be a mandatory component of an employee’s initial orientation as well as the annual competency assessment process. • There must be a defined process for receipt and documentation of complaints, including an opportunity for anonymity, if desired, via a hotline. • There must be a system to respond to allegations of possible fraud or abuse, as well as disciplinary policies that clearly delineate consequences for violations of compliance policies. It is expected that a zero-tolerance approach to violations will be taken. • The compliance program must include the use of ongoing monitoring and auditing tools to detect possible compliance problems as soon as possible and to measure the effectiveness of interventions designed to minimize the occurrence of such problems. • The program must specify the processes for remediation of identified systemic problems and address individuals or other business associates who are sanctioned from participation in federal programs due to a known previous violation. The laboratory must have representatives drawn from the technical side of operations to address scientific and medical concerns in policy development and assessment. On the business side, individuals who are involved in

management, marketing, client services, coding, billing, accounts receivable, and medical records are equally important contributors to an effective compliance program.

Specific Areas of Concern To guarantee that the overall goals of the above elements are met, there are a number of specific areas that the OIG guidance identifies as critical to address. Each area should ideally be discussed in a specific compliance policy, with protocols or procedures for implementing the policies developed for each. In addition, each policy area should be specifically monitored using defined audit criteria. Table 39.2 provides a listing of areas commonly requiring compliance policy development. However, these may be divided into five main general areas of concern: • • • • •

Coding and billing issues Medical-necessity issues Record retention Marketing practices Compliance with OIG and CMS compliance issuances

Coding and Billing Issues Key to any successful compliance program is a clear understanding of the principles of procedure coding as well as the accurate and complete application of those principles (chapter 35). The laboratory should be familiar with the HIPAA standard data sets, particularly those used for billing. These include CPT codes, International Classification of Diseases, Clinical Modification, Revisions 9 and 10 (ICD-9-CM and ICD-10-CM) codes, diagnosis-related groups, ambulatory payment classifications, revenue center and provider type codes, and remittance advice codes.

CPT Coding The laboratory must have access to a current copy of the American Medical Association (AMA) CPT codebook as well as to current supplementary Healthcare Common Procedure Coding System (HCPCS) codes. A comprehensive annual review of procedure coding must be conducted to ensure that additions, deletions, and modifications made by the CPT editorial panel and published by the AMA each fall are incorporated by the laboratory into the current recommended coding by January 1. This also provides an opportunity to ensure that previous code selections are compatible with coding convention and reimbursement rules. All associated documents such as requisitions (manual forms and online order entry), service manuals, charge masters, and fee schedules must also be updated to reflect any changes. It is also recommended that at the time of the annual CPT review, laboratories review and update their cost analyses for use in setting laboratory charges for procedures. In November, the CMS generally publishes a

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Table 39.2 Summary of areas requiring compliance policiesa ABN Ambiguous test orders Anonymity and nonretribution Billing for calculations Claim submission, postsubmission review of EOMBs Claim submission, presubmission review CLIA regulations Client contracts Client supplies, provision of and monitoring Confidentiality of medical information Contracts with third-party billing companies Cost reporting, laboratory component Courier service CPT coding Custom panels and physician acknowledgment Data summaries as a free service Diagnosis information, translation to ICD-9 codes Discounts and special prices Education and training for customers as inducement Employees, phlebotomists in client offices ESRD arrangement Excused charges and adjustments Fraud alerts, review and compliance Gifts, contributions, and entertainment Health fairs as inducement a

Home health service client arrangements ICD-9 codes, obtaining and using Indigent care Medical-necessity guidelines Monitoring utilization of laboratory services by clients Nonemployment of sanctioned individuals Notices to physicians Nursing home client arrangements OSHA regulations Placement of equipment or products in client offices Professional courtesy Record retention Reflex testing Release of test results by phone, fax, and/or other nonroutine methods Removal of hazardous waste for clients as inducement Rental or lease of space from healthcare providers Reporting compliance issues and open-door policy Requisition design Sales and marketing Sales proposals Standing orders Test not ordered and/or not performed Test ordering by authorized individual Test orders, requisitions, and electronic order review Verbal and add-on test orders

EOMBs, explanations of medical benefits; OSHA, Occupational Safety and Health Administration.

transmittal that sets the national limitation amounts (NLA) for Medicare reimbursement of each CPT code, thus allowing revenue projections to be made for budget purposes. In addition, it is necessary to submit actual current charges on Medicare claims so the lowest amount of the actual charge, the NLA, or the contractor fee schedule amount may be paid. Of course, it is absolutely essential that all payors be informed of any coding or charging changes.

Modifiers The laboratory has the responsibility for the appropriate use of modifiers, both AMA-approved and HCPCS-based. In general, these are added at the time of billing. However, it is up to the laboratory to review coverage rules and edits to determine when use of a modifier is indicated. The most common modifiers used are those that designate advance beneficiary notice (ABN) status (GA, GY, and GZ), those that designate replicate use of a code (-59 and -91), one that indicates CLIA waived status (QW), and the referred test modifier (-90). ICD-CM Coding ICD-CM codes are updated twice per year and published annually. While the ordering provider rather than the laboratory provider selects diagnostic codes used for a

test order, it is still necessary that the laboratory maintain updated data files for claim review. In addition, laboratories do have the authority to translate a narrative code provided on a requisition into an ICD-CM code if an exact match is available. Under government and most other payor programs, a narrative or ICD-CM diagnosis is absolutely required on all claims submitted, and laboratories must make a serious attempt to obtain this information if it is not provided. The transition from Version 9 (ICD9-CM) to Version 10 (ICD-10-CM) in 2014 will require an extraordinary effort by laboratories to ensure that electronic edit systems are updated.

The Requisition The requisition, whether online or manual, represents the major tool used by ordering providers to select tests for use in patient management. Thus, it should be designed to be user friendly and include all data elements required for billing. All orderable tests must be clearly defined and represent only AMA-developed and CMS-approved codes representing procedures, individual tests, or panels. If a special situation exists (as described below), this too should be indicated on the requisition. It is not required that the actual CPT code be on the requisition, although many billing experts recommend that it should be. If not on the requisition, CPT

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codes must be readily accessible elsewhere (e.g., in the service manual). In the event of receipt of an ambiguous order, the laboratory is required to take action to clarify the order. An ambiguous order is one that does not match the test description or conditions in the laboratory. In these cases, a laboratory should not attempt to guess the ordering provider’s intent. Rather, it is necessary to contact the physician to determine the exact procedure desired.

Special Ordering Situations There are several situations in which an orderable procedure may be represented by more than one code, and these must be clearly indicated on a requisition (Table 39.3). First is a reflex procedure. A reflex test is defined as a second related, codeable test that is performed automatically when initial tests are positive or abnormal. Replicate testing performed per protocol and repeat testing performed to confirm or verify a result are not considered a reflex (10). Second is a composite procedure. This term is most commonly used to describe the battery of tests that are included under end-stage renal disease (ESRD) payment, but the term can also be used to describe the routine simultaneous use of two or more unique codes to meet accreditory guidelines or in accordance with an accepted standard of practice (e.g., microbiology: test 1, microbial stain; test 2, microbial culture). Another term, “code-stacking,” has been used in particular reference to procedural step code groups previously used in molecular pathology (note that this approach was replaced with an analyte-specific coding approach in 2013). Under compliance guidance, the codes used for both reflex and composite coding situations should meet medicalnecessity requirements. In addition, what is actually done and its associated codes must be clearly communicated to the ordering provider, generally through the requisition and service manual. There should also be documentation of such communication, and notifications should be performed annually. For outpatient providers a written annual notice should be sent, but for inpatient care annual

approval by the medical staff may be preferred. Finally, each ordering provider must have the clear choice to not have the testing performed in that manner, but rather to order only specific codes if desired. The third multiple-code situation is the custom panel. This is a grouping of several independent codes made available as a single orderable procedure, usually as an ordering convenience, and generally specifically requested by a physician to meet his or her own style of practice. These kinds of test order groupings must meet the same medical-necessity determination requirements as the individual components and require that a physician formally acknowledge in writing his or her understanding of such on an annual basis. Lastly, one should address the issue of “standing orders.” This practice is most common for chronically ill individuals with extended courses of treatment, as in a skillednursing facility or ESRD setting. Although not prohibited, the practice is discouraged. The reason is that the tests included in the order must meet medical-necessity requirements for the date of service, and that information may not be known in advance. At a minimum, laboratories should ensure that standing orders have a fixed term and be defined in writing and that such arrangements are renewed at expiration. The term of expiration should be no more than one year and preferably a shorter interval.

Medical-Necessity Issues “Medical necessity” has a specific meaning for the CMS but is a concept used by other payors as well. It is a determination by the payor of whether the ordering provider’s reason for ordering a test represents a condition that meets criteria for coverage and reimbursement at a designated level. The term does not address whether a particular test is believed to be necessary for management of an individual patient by a physician. From the CPT and ICD-CM codes, the laboratory should be able to make a determination of

Table 39.3 Examples of reflex test proceduresa Laboratory category

Primary test

Reflex test

Immunology Microbiology Molecular diagnostics Toxicology Urinalysis

RPR or VDRL, positive Primary culture, positive Pap smear with ASCUS Qualitative drug screen, positive Nonculture bacteriuria screen or biochemical urinalysis Quantitative RT-PCR for HCV

Specific treponemal serology and RPR titer Identification and susceptibility HPV DNA Drug confirmation, each procedure Urine culture positive

Chemistry (7) Hematology (14)

a

Reticulocyte count, erythrocyte morphology, bilirubin, haptoglobin (help diagnose hemolytic anemias)

If quantitative test result is below limit of detection, qualitative RT-PCR for HCV is performed. If acute intravascular hemolysis is suspected, plasma and urinary hemoglobins and a DAT may be ordered.

HPV, human papillomavirus; RT-PCR, reverse transcriptase PCR; HCV, hepatitis C virus; DAT, direct antihuman globulin test.

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whether a claim will be paid for by a third-party payor based on its knowledge of the particular billing rules of the payor. The complexity of the rules, and the numbers of payors that any given laboratory may do business with, is such that electronic rule-based claim review is essential to accomplish this task. If it is determined that payment is unlikely, then the laboratory should obtain a waiver of financial liability from the patient (e.g., the Medicare ABN) (5). In the common setting of specimen collection by the ordering provider, the ordering provider should make this determination and obtain the waiver. It is acceptable for laboratories to make copies of LCDs and NCDs, as well as National Correct Coding Initiative edits, including in the form of a software application, available to ordering providers to facilitate this process. It is also recommended that laboratories clearly indicate on requisitions tests that are likely to be noncovered or have limited coverage (i.e., LCDs and NCDs). For Medicare, an annual notice should be sent to physicians describing laboratory practices with respect to coding and billing and reaffirming the concept of medical necessity in making a payment determination. Indeed, it is the responsibility of the laboratory to ensure that physicians are aware of all Medicare and other payor rules for coverage.

Record Retention Adequate record retention is an extremely important component of a compliance program. All records should be maintained as required by applicable federal statutes and regulations for use if needed in the investigation of potential fraud or abuse. There might also be additional requirements based on voluntary accreditation standards and state laws and regulations. Federal statutory retention times include the following: • 42 CFR 482.24(b)(1). Condition of participation for hospitals in federal programs specifies five years. • 42 CFR 488.5(a). Discussion of accreditation standards deemed to meet Medicare conditions of participation indicates variable times of at least five years. • 42 CFR 493.1105. CLIA of 1988 (CLIA ’88) specifies two years for test requisitions. • 42 CFR493.1107. CLIA ’88 specifies two years for testing records. • 42 CFR 493.1107 and 1109. CLIA ’88 specifies that transfusion medicine records should be held for a minimum of five years. • 42 CFR 493.1257(g). CLIA ’88 specifies that cytology slides should be held for five years. • 42 CFR 1003.132. The False Claims Act specifies that claims related to civil actions may be initiated up to six years after the date of claim presentation.

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While most laboratorians are aware of the CLIA requirements, the need to maintain records that document test orders and test performance for a longer period in case civil or criminal legal action is taken is not as well appreciated.

Marketing Practices All marketing efforts in a laboratory setting should adhere to strict principles of offering clear, correct, nondeceptive, and fully informative guidance and pricing regarding testing services. It is simply good laboratory medicine practice to ensure that all parties understand both the testing and billing processes.

Pricing and Inducements No free supplies, equipment, or services of any kind should be offered that are not an essential component of performing and reporting laboratory tests. No other services or items should be provided that may be construed as an inducement for the submission of federally reimbursed work. Rather, any special services should be billed to a client at a fair market value rate. Similarly, prices charged to physicians and other payors should represent fair market value and be based on careful and consistent cost accounting practices for each test procedure. For Medicare in particular, you cannot establish a charge to be substantially in excess of any charge offered to another payor. “Substantially in excess” has been redefined in a recent proposal as 120% of the average charge to all payors for each test. Although you will likely not be reimbursed at your charge rate, the data are used in the determination of the NLA. Medicare laboratory reimbursement is made at the lower amount of the charge, the NLA, or the local fee schedule. Discounts that place charges below costs, particularly if offered to match competitor pricing, may be viewed as an inducement. In addition, failure to attempt to bill patients for services that were denied on the basis of medical necessity may also be viewed as an inducement. Any form of inducement is a violation of both Stark Laws and Anti-Kickback Statutes and may therefore be a federal offense. Ordering Provider and Patient Communication To ensure that all parties understand the testing and billing processes, it is critical that a laboratory establish clear and consistent lines of communication. For ordering providers, coding information should be readily accessible through a service manual or other test-listing document. The laboratory must send an annual notice to each client detailing the ordering and billing processes and must clearly document any special ordering or billing situations. In particular, the notice should address current NCDs and LCDs, use of AMA-developed and custom panels, special situations involving reflex and composite testing or standing orders,

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appropriate use of an ABN, and current fee schedule information. Finally, the name of the individual who serves as the CLIA clinical consultant for a specific laboratory should be readily available. In a health care institution or system setting, it may be most convenient to provide annual notice at a medical staff meeting. Open lines of communication between providers and payors regarding billing must be maintained during regular business hours. For patients, open lines of communication regarding billing must similarly be available. It may be helpful to have written patient information readily available that describes unfamiliar terms such as medical necessity and ABN. As in all endeavors, a thorough, consistent, and honest approach is the best one to take.

Fraud Alerts and Advisory Opinions A number of guidance documents are issued on a regular basis by both the CMS and the OIG. Each laboratory CCO and CC should be aware of the issuance of any such documents. Obviously, laboratories should remain abreast of any new coverage decisions and edits that are issued by any payor. Other documents that should be reviewed include relevant program transmittals from the CMS, specific fraud alerts from the OIG, and advisory opinions issued by the OIG that are specific to a given provider situation but may set important precedents. Also important is the annual OIG work plan that describes proposals designed to reduce reimbursement for services that have been assessed to be at risk for overpayment. Every work plan since the issuance of the Compliance Program Guidance in 1998 has included clinical laboratory targets. Careful review of these documents will prepare a laboratory to effectively manage situations with emerging compliance ramifications.

Auditing and Monitoring To demonstrate that a compliance program is effective, it is essential to have in place a series of monitors and audits (7, 11). Monitors simply measure a parameter that can be used to assess some aspect of compliance. The most common monitor is test utilization. The OIG recommends an annual review of the top 30 test codes ordered to determine if any significant pattern changes (i.e., greater than 10%) are noted. Further investigation should be performed to ascertain the reasons for the change. In most cases, the change can easily be explained by test volume growth, new-procedure implementation, or correct-coding adjustments. However, if not explainable, additional review of the reasons for testing may be indicated. Another essential monitor is the tracking of denied claims (12). Patterns that are identified are important indicators of possible billing problems that may be rectified by some specific process adjustment.

Audits are a more comprehensive and systematic review of a specific compliance policy to determine that the policy is in fact being followed. For each compliance policy in place (Table 39.1), there should be some measurable parameter that assesses its effectiveness. The most common audit is one that simply reviews a statistically significant sampling of claims to determine the tests that were ordered, confirm that they were actually performed and the results were reported, and confirm that the tests were billed correctly. This audit technique encompasses the entire process. Other audits may be applicable to a specific policy. For example, one might review the accuracy of translation of narrative diagnoses to ICD-CM codes, the frequency and appropriateness of obtaining ABNs, and whether a high percentage of supplies for sample collection are being returned with samples and requested services. The overall effectiveness of the training program might be assessed by examination of employees after training, and the effectiveness of the overall program might be determined by an employee survey. Careful and complete audits are a time-consuming task and are often outsourced to external parties. This is an acceptable practice, although review of findings and plans for improvement remain the responsibility of the CCO and the CC.

Response to Possible Fraud or Abuse Every laboratory must have plans in place to evaluate complaints that indicate the possibility of fraud or abuse. If a complaint is determined to actually indicate receipt of improper payment, the OIG Compliance Program clearly specifies the actions that must be taken. If the overpayment represents a true mistake, caused by misunderstanding or misapplication of rules, the laboratory should take prompt action to correct the problem and to make voluntary repayment as outlined in the OIG Compliance Program. Evidence of systematic “rule-bending” (abuse) can be handled in a similar manner. If a specific employee is found to be responsible, standard disciplinary actions should be taken. If, however, there is evidence of intent to defraud a payor, the potential violation should be reported to the Department of Justice. All subsequent actions will then be directed as part of a legal investigation process, with outcomes including both settlements and indictments. For individuals, laboratories should maintain a zero-tolerance policy toward deliberate disregard for compliance policies. In the event of an indictment, both facilities and individuals will be listed on the OIG sanction list and prohibited from doing further business with or for the federal government. Other nonfederal payors may similarly file suits, and they may also exclude an entity from participation when evidence of a systematic error representing fraud or abuse is found. Laboratories must also be prepared to deal with a legal process emanating from an external complaint reported

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by a whistle-blower directly to the Department of Justice. There should be a well-defined plan of action in which employees are advised as to the correct course, particularly with regard to notification of superiors. Certainly, cooperation is expected, and any type of obstruction is to be avoided. However, laboratories should take steps to legally protect their interests. For example, categories of documents protected by client-attorney privileges should be clearly marked as such and maintained separately, and legal counsel should be sought as soon as possible after recognition or allegation of fraud or abuse.

Laboratory Examples of Fraud and Abuse Sadly, there are many examples of deliberate attempts by a small number of healthcare providers to obtain improper and illegal reimbursement for services. While some have resulted in indictments, many more are settled out of court when it is recognized that there may be actions that could be construed as evidence of impropriety. Some of the more dramatic and visible laboratory compliance cases have involved the following practices: • Billing for tests not performed, e.g., billing for identifications and susceptibilities on “no growth” urine samples • Failure to clearly define the test being performed, e.g., performing a CBC with differential but describing the test as CBC only • Routinely performing additional tests that were not part of the original order, e.g., adding a chemistry test to an approved panel • Improper billing for panels, e.g., when not all components of a chemistry panel were performed • Routinely performing reflex testing that was not subject to a defined review process, e.g., performing microscopic analysis on a urine sample with abnormal urinalysis • Routinely reporting results for and billing tests when quality control was out of range and therefore in violation of CLIA • Routinely performing procedures, including laboratory testing, in specific DRGs to artificially inflate the payment, e.g., in the case of pneumonia Unfortunately, these isolated episodes of improper billing influence the overall view that many who hold political office share: (i) that laboratories cannot be trusted and must be subjected to close scrutiny and (ii) that overpayment is rampant, and therefore payment reductions are justified. To combat these negative opinions, it is paramount that laboratorians adopt the attitude that a successful compliance program that guarantees that laboratories “get paid right” is essential to survival.

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Summary Compliance has assumed a new meaning in the last two decades as laboratories have been accused of and found guilty of fraud and abuse. The actual concept of adherence to rules and regulations is not new, however. Laboratories must comply with the rules and regulations promulgated by many government entities. What is new is the concept that laboratorians must also comply with rules and regulations pertaining to reimbursement. A sound knowledge of coding and billing practices is an absolute key to success. The OIG Compliance Program Guidance for Clinical Laboratories published in 1998 provides the basis for development of policies and procedures that ensure that laboratories are paid appropriately for what they do. In essence, the document provides the basis for application of commonsense principles for receiving requests for laboratory services, performing those services, and getting paid for those services. While the OIG Compliance Guidance is considered voluntary, provisions in the PPACA specify that compliance programs will soon become a mandatory process. Indeed, the importance of an effective compliance program should be considered as vital to the success of a clinical laboratory as compliance with CLIA is. KEY POINTS ■ Compliance has taken on a new meaning during the last few years as laboratories have been accused of and found guilty of fraud and abuse. ■ Laboratories and laboratorians must be knowledgeable about and comply with rules and regulations related to reimbursement. ■ It is mandatory that laboratory personnel maintain a thorough understanding of coding and billing practices. ■ All laboratories should have in place a comprehensive compliance program, with its key provisions and requirements in effect at all times with a zero-tolerance approach. ■ It is critical and appropriate that laboratories be paid for the services they provide within the framework of the compliance regulations. GLOSSARY Advance beneficiary notice (ABN) A waiver of liability used by the provider to notify Medicare beneficiaries prior to receiving a service that it may not be a covered service and that they may have to assume financial responsibility. Similar notices are used by other payors. Any willing provider An approach by federal payors that allows any healthcare provider willing to meet all specified conditions to provide services for beneficiaries. Bundling Placing codes together in a panel.

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Civil False Claims Act and the Civil Monetary Penalties Law Authorizes the Secretary of Health and Human Services to impose civil monetary penalties (CMPs) for violations of Medicare rules and regulations, as well as additional assessments for statutory violations of Medicare law. Code jamming Inserting a code that was not provided by the ordering provider but that will justify payment. Code steering Providing lists of diagnostic codes that are known to justify payment. Compliance program Processes, policies, and procedures designed to ensure that all applicable regulatory and other conditions for operations are met; specifically applicable to the area of reimbursement. Compliance Program Guidance for Clinical Laboratories (1998) Updated Model Clinical Laboratory Compliance Plan (1997); designed to ensure that appropriate reimbursement is made through federal programs, to ensure that payors “pay it right”; provides guidance for doing the right thing (through compliance with all regulatory and statutory rules). Current Procedural Terminology (CPT) Proprietary service codes developed and maintained by the American Medical Association and required for filing claims and billing of Medicare and other payors. Custom panel Grouping of several independent codes made available as a single, orderable procedure, usually as an ordering convenience. Diagnosis-related groups (DRGs) Classification system developed at Yale that defines more than 700 major diagnostic categories and places patients into case types based on the ICD-CM classifications. Substantially updated in 2007 as MS-DRG (Medicare severity adjusted).

Inducement Offering incentives to nonfederal payors to encourage them to also submit federal program testing; violation of the Stark legislation. Kickback The provision of any item of value in exchange for referral of federal business to a laboratory; the Anti-Kickback Statute explicitly prohibits this practice. Medical necessity The determination of ICD-9-CM codes for which a CPT code will be reimbursed as reasonable and necessary. Modifier Modifiers are composed of two-digit numbers (CPT) or letters (HCPCS) that are appended to a specific CPT code prior to the billing process. Modifiers are “used to indicate that a service or procedure has been altered by some specific circumstance but not changed in its definition or code” (1). National Correct Coding Initiative (NCCI) A Medicare program initiated in 1996 and managed by a specific contractor that evaluates and publishes procedure code sets to determine if two or more unique codes are appropriately ordered on the same date of service. Edits fall into two major categories: (i) comprehensive/ component and (ii) mutually exclusive. Edits also indicate the code pairs in these edit categories for which a modifier (generally -59) may be appropriate. Pay and chase A strategy whereby reimbursement for services is made as quickly as possible and reviewed after the fact for appropriateness. If inappropriate, payback is required and legal action is possible. Pay it right Pay the right amount to the right provider for the right service to the right beneficiary. Program integrity A systematic approach to prevention, detection, and correction of improper payments for healthcare services. Reflex test Second related, codable test, which is performed automatically when initial tests are positive or abnormal.

Downcode The use of a lower-reimbursed test, generally coupled with rebundling, to induce unnecessary utilization.

Standards of conduct Standards should promote commitment to the accurate, ethical, and legal practice of laboratory medicine.

End-stage renal disease (ESRD) The term used for Medicare beneficiaries who have permanent kidney dysfunction requiring dialysis treatment.

Stark legislation Legislation prohibiting referral of designated health services including laboratory services to an entity with which an ordering provider has a financial relationship. Specific regulatory exceptions do exist.

Fraud and abuse The receipt of payment for services that are not appropriate to the patient situation; generally results from the systematic application of incorrect coding approaches. Fraud is distinguished as being intentionally deceptive. Health Insurance Portability and Accountability Act of 1996 (HIPAA) Title I protects health insurance coverage for workers and their families when they change or lose their jobs. Title II requires the Department of Health and Human Services to establish national standards for electronic healthcare transactions and national identifiers for providers, health plans, and employers. It also addresses the security and privacy of health data. Adopting these standards will improve the efficiency and effectiveness of the nation’s healthcare system by encouraging the widespread use of electronic data interchange in healthcare. Improper payment Payment made for a healthcare service that is not indicated based on documentation or clinical condition.

Substantially in excess Defined as 120% of the average charge to all payors for each test. Unbundling Coding individual tests rather than using a CMSrecognized and AMA-approved CPT panel. Upcoding Performing a related test for which the CPT code pays at a higher level; using a higher-paying code to maximize reimbursement.

REFERENCES 1. American Medical Association. 2012. Principles of CPT Coding. AMA Press, Chicago, IL. 2. Beatty, M. F. 1999. A survey measuring the degree of model compliance plan for clinical laboratories implementation in small/rural hospital laboratories. Clin. Lab. Manag. Rev. 13:81–86.

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3. Belton, P. R., and S. E. Roughton. 1999. The ideal compliance world: integrating physicians into the compliance program. QRC Advis. 16:4–10.

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9. Lovitky, J. A., and J. Ahern. 2002. Using the OIG model compliance programs to fight fraud. Healthc. Financ. Manag. 56:64–68.

4. Campen, R. B., and D. DiLoreto. 2000. Here to stay: health care compliance. An overview. Med. Group. Manag. J. 47:30–33.

10. MacMillan, D. H., B. L. Soderberg, and M. Laposata. 2001. Regulations regarding reflexive testing and narrative interpretations in laboratory medicine. Am. J. Clin. Pathol. 116(Suppl.):S129–S132.

5. Carter, D. 2003. Obtaining advance beneficiary notices for Medicare physician providers. J. Med. Pract. Manag. 19:10–18.

11. Matusicky, C. F. 1998. Fraud and abuse. Building an effective corporate compliance program. Healthc. Financ. Manag. 52:77–80.

6. Eckhart, J., and N. Mathahs. 2001. Physicians and compliance: developing a system that works. Clin. Leadersh. Manag. Rev. 15:222–229.

12. Mesaros, F., Jr. 2000. The remittance advice, auditing for compliance. Clin. Leadersh. Manag. Rev. 14:69–71. 13. Saner, R. J. 1999. Third-party biller compliance guidance emphasizes risk awareness. Healthc. Financ. Manag. 53:43–45.

7. Goldman, T. R. 2012. Health policy brief: eliminating fraud and abuse. http://healthaffairs.org/healthpolicybriefs/brief_pdfs/health policybrief_72.pdf (last accessed November 20, 2012).

14. Saum, T. B., and J. Byassee. 2000. Effective health care corporate compliance. Physician Exec. 26:56–59.

8. Keoppel, P. 2001. Performing laboratory compliance audits. Clin. Leadersh. Manag. Rev. 15:368–375.

15. Scott, M., and D. Nguyen. 2009. Clinical laboratory compliance: something old, something new. Lab Med. 40:428–435.

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APPENDIX 39.1 Federal Register Documents Federal Register. 1998. Publication of OIG Compliance Program Guidance for Clinical Laboratories. Fed. Regist. 63:45076–45087. Federal Register. 2001. Rules and regulations, Medicare program; negotiated rulemaking: coverage and administrative policies for clinical diagnostic laboratory services. Fed. Regist. 66: 58788–58890.

Federal Register. 2011. Medicare, Medicaid and Children’s Health Insurance Programs; additional screening requirements, application fees, temporary enrollment moratoria, payment suspensions, and compliance plans for providers and suppliers; final rule (CMS-6028-FC). Fed. Regist. 76:5862–5970.

APPENDIX 39.2 Websites for Laboratory Compliance Information CMS http://www.cms.gov (last accessed November 20, 2012) CMS searchable website. http://www.cms.gov/Medicare/Medicare-Contracting/ MedicareContractingReform/Downloads/compliance.pdf (last accessed November 20, 2012) Medicare compliance program guidance. http://www.cms.gov/MLNGenInfo (last accessed November 20, 2012) Medicare Learning Network index of information documents. http://www.cms.gov/Outreach-and-Education/Medicare-Learning -Network-MLN/MLNProducts/downloads/MCRP_Booklet.pdf (last accessed November 20, 2012) Medicare claims review process. http://www.cms.gov/Outreach-and-Education/Medicare-Learning -Network-MLN/MLNProducts/downloads/Fraud_and_Abuse.pdf (last accessed November 20, 2012) Fraud and abuse fact sheet. http://www.cms.gov/Outreach-and-Education/Medicare-Learning -Network-MLN/MLNProducts/downloads/MedQtrlyCompNL _Archive.pdf (last accessed November 20, 2012) Medicare Quarterly Provider Compliance Newsletter archives.

Office of Inspector General https://oig.hhs.gov/ (last accessed November 20, 2012) OIG searchable website: compliance, fraud alerts, advisory opinions, work plan. https://oig.hhs.gov/compliance/compliance-guidance/index.asp (last accessed November 20, 2012) OIG compliance information. https://oig.hhs.gov/authorities/docs/cpglab.pdf (last accessed November 20, 2012) OIG Program Guidance for Clinical Laboratories. U.S. Department of Health and Human Services http://www.stopmedicarefraud.gov (last accessed November 20, 2012) Beneficiary fraud prevention website.

40 Introduction Pitfalls in Cost Accounting Laboratory Profitability Balance Sheets • Income Statements • Cash Flow Statements

Determination of Profitability Vickie S. Baselski, Alice S. Weissfeld, and Fran Sorrell

Key Indicators Key Income Indicators • Key Expense Indicators

Institutional Profitability Human Profitability Laboratory Value Summary KEY POINTS GLOSSARY REFERENCES

OBJECTIVES To describe those items that are included in the true costs of a laboratory procedure To discuss possible reasons why cost analyses rarely account for all expenditures To list the three primary tools used in the laboratory to assess profitability To describe several of the key indicators used to evaluate an institution’s performance (benchmarking) To discuss the term “outcome assessment” and its relationship to institutional profitability To discuss the concept of human profitability and its relationship to quality patient care To describe the trend toward value-based laboratory medicine If you don’t do it excellently, don’t do it at all. Because if it’s not excellent, it won’t be profitable or fun, and if you’re not in business for fun or profit, what the hell are you doing there? Robert Townsend (from Further Up the Organization), 1988

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Clinical Laboratory Management, 2nd Edition Edited by L. S. Garcia ©2014 ASM Press, Washington, DC doi:10.1128/9781555817282.ch40

n any business, including laboratory medicine, the ultimate goal is to be profitable. From financial profits come funds for enhancements in facilities, equipment, and personnel. From profits also come the means to continue to exist as either a for-profit or nonprofit entity. A laboratory must certainly be profitable as a business unit, and there are well-defined financial monitoring tools to demonstrate this. However, profits in laboratory medicine are measured by more than simply dollars made or lost and dollars spent or saved. A profitable laboratory is also one that contributes positively to patient care. In the current healthcare climate, the term “outcome assessment” has been used to describe the success or failure of a disease management strategy with regard to both financial and medical measures (13). The profitability of an institution arises at least in part from effective and efficient patient care, including the effective and efficient use of laboratory medicine. In fact, provision of healthcare services is undergoing a major shift under healthcare reform. The emphasis is moving from one focused on procedures to one focused on patients. In today’s world the laboratory is being viewed as neither a “cash cow” nor a “cost center,” but as a unit vital to an institution’s ability to provide healthcare services. Therefore, in laboratory management today, one must be able to discuss both the individual profitability of a laboratory unit and 685

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the contribution of the laboratory to the profitability of patient care. It must also be appreciated that at least in part, one can also measure the satisfaction of making a positive contribution to patient care as a measure of human profitability. In addition, one must understand that laboratory medicine is a service that provides value, not a simple commodity to be delivered at the lowest cost possible.

Pitfalls in Cost Accounting Integral to any determination of profitability is a clear understanding of the true costs of a procedure. Chapter 37 deals with cost accounting in detail, but a few key concepts justify consideration here as well. First is that a complete cost analysis should consider all identifiable costs for a service. One must consider many factors, including all of the following: • Direct material costs, including all consumables, quality control, repeats, and wastage • Direct labor costs, including benefit costs • Equipment and other capital costs, either leasing or depreciation based on purchase as well as maintenance and repair costs • Laboratory-specific indirect costs, generally based on an allocation method and including licensure and accreditation maintenance (e.g., inspections, documents, proficiency testing) and training or continuingeducation costs • Indirect facility costs, also generally based on allocation of a percentage of costs due to utilities, rent or purchase notes, housekeeping and medical waste disposal, and information technology and communication systems • Indirect administrative costs, again allocated and including courier services, marketing, customer service, and financial processes (e.g., billing, collections, payments) Careful systematic consideration of all of these factors will allow a laboratory to make reasonable decisions regarding price structure for fee-for-service testing services. The information is particularly useful when assessing whether a discounted fee schedule approximates the laboratory expenses. However, cost analyses in any business, including in a laboratory, are rarely able to account for anywhere near 100% of expenditures. There are frequently many unpredictable variables, particularly in areas in which the laboratory has little or no control. For example, supplies provided for collection and submission of samples are rarely accounted for 100% on return, and rates of recollections due to preanalytical issues, repeats due to analytical issues, and wastage due to insufficient product in a kit lot to complete an additional run all contribute to

inaccuracies in projecting total technical expenses. In addition, allocated costs are similarly subject to changes associated with unanticipated events. In a like manner, attempts to account for anticipated revenue are also subject to inherent inaccuracies. The inability to obtain critical documentation, misunderstanding or misapplication of payor rules or issuances of new rules, failure to obtain patient waivers of financial liability, and failure to collect billed amounts due all contribute to a reduction in anticipated revenues. To determine true costs and revenues, and to subsequently assess profitability as well as efficiency, it is necessary to measure resources actually expended, including through amortization, and compare that measurement to amounts actually collected. In a strict accounting sense, revenues less expenses equals profit, and revenues divided by expenses equals profitability.

Laboratory Profitability Analyses to assess laboratory profitability are usually performed on a regular basis, not less than quarterly and typically monthly. To accomplish this there are three primary tools used in the laboratory setting: the balance sheet, the income statement, and the cash flow statement (11, 12, 15).

Balance Sheets The balance sheet provides an indicator of an organization’s overall financial well-being. It compares an organization’s total assets to its total liabilities. In the laboratory, assets include not only cash holdings and accounts receivable but also facilities and all possessions used to create services (e.g., equipment and supplies). Liabilities include all money owed and, in the case of a for-profit institution, shareholder equity amounts. Simply stated, a balance sheet should at least balance. However, to be considered profitable, total assets should exceed total liabilities. From a laboratory management perspective, while a positive balance sheet is critical to success and may certainly be reassuring to employees and shareholders, it provides little information that may be used to improve operational efficiency in an individual laboratory setting. Income Statements An income statement is used to demonstrate profitability over a given period. These statements are also known as “profit and loss” statements because they compare the net profit for a specified period to the total expenses of doing business during the same period. Calculating total gross income and subtracting total expenses determines net profits or losses. The net profit may also be expressed as a percentage of gross income and may be referred to as the profit margin. The net profit should not be considered an absolute value, however. This figure is generally determined prior to

CHAPTER 40. DETERMINATION OF PROFITABILITY

consideration of taxes and interest amounts due and is referred to as earnings before taxes and interest. Clearly, an accurate determination of profit requires considerations of these expenses as well. Income statements also frequently include figures reflecting budgeted and expected revenue and expense amounts. Thus, they allow a laboratory to assess whether there are significant variances from the amounts expected in both categories. In general, variances of more than 3 to 5% require evaluation to determine if other downstream adjustments may be necessary. For example, loss or gain of a major client or medical specialty service may necessitate renegotiation of standing reagent orders for delivery of a more appropriate quantity of supplies. As with the balance sheet, the income statement often reflects the overall financial situation of a laboratory and therefore is most useful to upper management for determining profitability for the entire laboratory. However, this statement may be configured to reflect the income and expenses of a specific department as well. In this configuration, individual department heads may find the document useful to assess whether expenses and income are as expected and to assess whether an individual department is profitable.

Cash Flow Statements Cash flow statements demonstrate exactly what the name implies. They provide a summary of the amounts paid out and to whom (accounts payable) and the amounts received in payment for services or other items and activities (accounts receivable). Again, simply stated, accounts receivable should exceed accounts payable. Similar to balance sheets, these documents are not very useful in assessing operational efficiency for a given laboratory.

Key Indicators In addition to these institutional summary reports, most laboratories employ the use of key indicators to assess not only profitability but also overall operational efficiency. Such indicators are often financial or other ratios (i.e., a numerator/a denominator) that may be used to evaluate an institution’s performance over time or in comparison to that of like institutions. This practice is known as benchmarking and can provide very useful information for operational improvement leading to financial benefit (14). Key indicators can assess both sides of doing business: income and expenses. In addition, they are useful in both prospective and retrospective payment systems.

Key Income Indicators Key income indicators are used to determine whether a laboratory is financially successful. They measure both success in an institutional sense and success from an investment

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perspective. In a business sense, monitors generally compare assets to liabilities or revenue to expenses. Clearly the expectation is that in each case the ratio should exceed 1. In addition, it is customary to track volume indicators that translate into income. Most laboratories track daily numbers of billable tests and look for significant deviations that may have a financial impact. For independent laboratories, new sales or lost business can also be used to monitor potential for future financial success or failure. From an investment perspective, for-profit laboratories must also demonstrate earning potential for investors. This is usually done by comparing price per share to earnings per share. Here as well, data on volumes may be used to demonstrate earning potential. It should be appreciated that tracking volumes has potential utility beyond simply predicting income in feefor-service-payment systems. In a prospective payment system, tracking utilization is an important activity (7, 8). One may detect overutilization of testing outside of what is expected for a given patient population. However, one can also detect underutilization of services deemed to be necessary for patient management. Either situation can contribute to less than optimal patient care. Recall as well that utilization tracking is also an important component of compliance activities (chapter 39).

Key Expense Indicators While income monitors should show favorable performance for a laboratory to be considered profitable, monitors that assess efficiency or effectiveness over time are more useful to individual laboratory managers seeking to ensure that their departments contribute to overall profitability. While it is useful to monitor indirect and fixed expenses for deviation and for comparability to those of similar institutions, of most importance to laboratorians are those monitors that assess an aspect that can be adjusted or controlled. Both labor and material expenses are considered useful for the development of such monitors. Monitors for labor efficiency generally focus on productivity. It has become customary to use billable tests (i.e., Current Procedural Terminology [CPT] or codable tests) produced per full-time equivalent for this purpose, although the monitor may also be inverted and expressed as time paid or time worked per billable test. There is wide variation in expectations for productivity based on the department being evaluated. Obviously, an automatedtesting department will show higher output than a laboratory employing more manual processes. For this reason, productivity assessments are most useful when used for benchmarking either temporally to assess performance of a single institution over time or when comparing laboratories that have been determined to be comparable in both scope and processes for services provided.

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Another commonly used labor effectiveness monitor is percentage of overtime used. In a properly staffed laboratory, overtime usage should be minimal (0.99 N/A N/A N/A 0.93 1.16 1.10 5.20 0.07 0.08 0.08

(continued)

CHAPTER 48. BENCHMARKING AND PERFORMANCE MONITORING

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APPENDIX 48.2 Performance Characteristics of Four Laboratories (continued) PARAMETER 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64

Laboratory A Laboratory B Laboratory C Laboratory D

LABORATORY CHARACTERISTICS University Affiliated Laboratory Primary University Laboratory Pathology Residency Program Number of Pathology Residents Surgical Pathology Cytopathology Cytogenetics Autopsy Electron Microscopy Molecular Diagnostics Laboratory Courier Service Marketing Personnel Customer Service Personnel Dedicated Compliance Personnel

Yes Yes Yes 14 Yes Yes Yes Yes Yes No Yes Yes Yes Yes

Yes Yes Yes 25 Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes

Yes No Yes 4 Yes Yes No Yes No No No No Yes Yes

No No No 0 No No No No No No Yes Yes Yes Yes

NOTES Start by examining the characteristics of the four laboratories (rows 51–64). Note that the “numbers” in rows 4–48 serve only as clues to which issues require deeper analysis. Laboratories A and B are those for which comparisons are most legitimate. It is more difficult to compare either of these laboratories to laboratory C, and laboratory D is in quite a different category from the other three. 1. The test volume of all four laboratories is similar (B > D > C > A). 2. Laboratories A and B are the most complex of the group. Both are primary university-affiliated laboratories with large pathology residency programs, a full range of services, and a relatively small number of referred tests. Blood expense is correspondingly high. Laboratory B appears to be the most complex of the group. 3. Laboratory C is also a hospital laboratory but with a more restricted range of services. It is located in a teaching hospital but is an affiliate with a small number of pathology residents. 4. Laboratory D is an independent laboratory with a clientele that consists entirely of outpatients and nonpatients. The menu of offered services appears to consist of simple tests, as a very small percentage of tests are referred, and the laboratory does not contain scientifically complex divisions. The nonpatient tests could represent work done for physicians who bill as a group or could represent work from other institutions, such as nursing homes and other chronic care facilities. 5. Compare laboratories A and B, the two primary university laboratories. a. They are similar in most parameters (rows 51–64), but laboratory B performs a larger volume of tests (row 4).

b. Both laboratories do most of their testing on-site (row 27) and send only a small fraction of tests to a referral laboratory (row 28). c. The two laboratories differ in the origin of their testing (rows 29–31); the majority of business for laboratory A is from its outpatient business, whereas inpatient work comprises a majority of laboratory B’s business. Nonpatient tests account for a minority of business for both laboratories A and B, though they comprise a slightly higher percentage for laboratory A. d. Productivity for the two laboratories is similar, whether measured by productive paid hours, total paid hours, or FTEs (rows 32–36, 46–48). e. Consumable expenses are similar in the two laboratories (row 44). f. Referred test expense per billed test is greater for laboratory B than for laboratory A (row 45), suggesting that the tests sent out by laboratory B are more time-consuming, use more expensive reagents, or are less susceptible to competition in the marketplace. Alternatively, laboratory A may use a less expensive reference laboratory or have negotiated a better contract than laboratory B. g. Although productivity, as measured by hours, is similar between the two laboratories, labor expenses are very different (rows 42–43). There are several possible explanations for the difference; the explanation may be due to a single factor or a combination of the following: i. The ratio of worked hours to paid hours is higher for laboratory B (row 37), suggesting that the benefits are more generous in laboratory A than in laboratory B. Alternatively, personnel in laboratory A may have achieved better benefits because of a longer average length of service. (continued)

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APPENDIX 48.2 Performance Characteristics of Four Laboratories (continued) ii. The salaries in laboratory A may be higher than in laboratory B because of regional differences, competitive factors in the local marketplace, or better negotiated contracts if the workforce is unionized. Once again, if the workers in laboratory A have greater length of service, their salaries may be higher on average than those in laboratory B. iii. The skill mix utilized in the two laboratories may be different. If laboratory B uses more technical assistants and medical technicians, whereas laboratory A uses more medical technologists, labor costs would be higher in laboratory A. Ultimately, all of the possible differences in labor costs might be acceptable to the management of each laboratory because of other perceived advantages. h. The utilization of tests for inpatients is more efficient in laboratory A than in laboratory B (rows 39–40). Once again, there are several possible explanations: i. Laboratory A may have better control over the utilization of laboratory services than does laboratory B. ii. There may be more chronic care patients, who require less intensive laboratory support, in the institution served by laboratory A (less likely as an explanation, however, as the phenomenon is observed whether the denominator is inpatient days or discharges). iii. The acuity of illness of patients served by laboratory B may be greater than that of patients served by laboratory A (more trauma, more transplants, etc.). To some extent, this variable could be analyzed by including objective characterizations of the patient population, such as the Medicare case mix index. i. The reverse situation occurs with outpatient tests, where laboratory B appears to function better (row 41). This parameter is more difficult to assess, however, because of the difficulties involved in determining outpatient visits objectively and comparatively. 6. Compare laboratory C with laboratories A and B. a. Laboratory C is a university-affiliated laboratory with a pathology residency program but only a small number of residents (rows 53–54). b. Laboratory C serves inpatients primarily (rows 7–9, 29–31); notably, there are no nonpatient tests. c. Laboratory C sends a relatively large percentage of its tests to a reference laboratory (rows 5–6, 27–28), compatible with a general hospital laboratory. d. Productivity for laboratory C is, not surprisingly for a less complicated laboratory, better than for laboratories A and B (rows 32–33, 35–36). Interestingly, productivity looks less different when only productive labor is compared (row 32), because laboratory C has relatively few nonproductive personnel (more of the employees in that

laboratory are actually involved in turning out results; fewer are in managerial or support services) (row 34). e. All costs are lower for laboratory C than for laboratories A and B (rows 42–44). The fact that testing (productive) costs are also lower suggests that salaries and/or benefits may be lower in this laboratory (row 42). This interpretation is compatible with the observation that the ratio of productive to total personnel is higher in laboratory C than in either laboratory A or B (row 34). f. Although the number of tests sent to a reference laboratory from laboratory C is higher than for either laboratory A or B (rows 6 and 28), the cost of referral testing is less on a unit basis (row 45). The explanation for this phenomenon may be that laboratory C is performing less complicated or sophisticated testing in general and is also sending less complicated tests to the reference laboratory than are laboratories A and B. In fact, laboratory A or B could be the reference laboratory for laboratory C. g. Utilization of laboratory resources for inpatients is actually higher in laboratory C’s institution than in the two primary university-affiliated laboratories (rows 39–40). The difference is greater when tests per discharge are compared than when the comparison is by tests per inpatient day. This situation suggests a greater proportion of chronic care patients at the institution served by laboratory C and provides a potential target for improvement of laboratory utilization and costs. Outpatient utilization appears similar in the three institutions (row 41). 7. Comparison of laboratory D with laboratories A, B, and C: a. Laboratory D is very different from any of the other three laboratories (rows 51–64). It serves outpatients and nonpatients exclusively (rows 7–9, 29–31). The nonpatients may represent patients of physicians with whom the laboratory has a contract or patients in chronic care facilities such as nursing homes. Data for outpatient visits are not given (row 12), suggesting that the laboratory does not have access to the records of those patients who are classified as outpatients. Not surprisingly, there is no blood expense (row 24). If the data were broken out in more detail, you might expect to find a high percentage of simple automated chemistry and hematology tests in the workload of Laboratory D. b. Despite the large volume of tests, very few of laboratory D’s tests are sent to a reference laboratory (rows 6 and 28). The cost of these referred tests is low (row 45), suggesting that they are relatively uncomplicated. c. All major costs are less for laboratory D than the other three (rows 18–22, 42–44), again reflecting the outpatient nature of the laboratory. d. Some clues as to the reasons for lower labor costs can be found in the high ratios of worked to paid hours and of productive to total FTEs (rows 34 and 37).

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APPENDIX 48.3 Organizations and Websitesa AABB www.aabb.org Formerly the American Association of Blood Banks, AABB is an international association of blood banks and related services dedicated to promoting the highest standard of care for patients and donors in all aspects of blood banking, transfusion medicine, cellular and gene therapies, and tissue transplantation. AABB accredits transfusion services, blood banks, parentage testing laboratories, hematopoietic progenitor cell services, and cord blood services. American Association for Clinical Chemistry (AACC) www.aacc.org AACC is an international scientific/medical society of clinical laboratory professionals, physicians, scientists, and others advancing the practice and profession of clinical laboratory science and its application to healthcare. American College of Medical Genetics and Genomics (ACMG) www.acmg.net ACMG provides resources and a voice to the medical genetics profession and promotes the development and implementation of methods to diagnose, treat, and prevent genetic disease. The ACMG provides a publication, Standards and Guidelines for Clinical Genetics Laboratories, used to improve genetic testing. American Society for Microbiology (ASM) www.asm.org ASM is a worldwide professional organization that is open to all practicing microbiologists, including those who are active in the clinical laboratory. ASM Press publishes books and materials in all fields of microbiology; this book is just one indication of the interest of this organization in laboratory improvement. American Society for Reproductive Medicine (ASRM) www.asrm.org ASRM is devoted to advancing knowledge and expertise in infertility and maintains a joint program for accreditation of fertility laboratories with the College of American Pathologists.

Centers for Disease Control and Prevention (CDC) www.cdc.gov CDC is a U.S. government agency protecting the health and safety of people through applying disease prevention and control, environmental health, and health promotion and education. Centers for Medicare and Medicaid Services (CMS) www.cms.gov CMS is a U.S. government agency with responsibility for administering the Medicare and Medicaid programs and is therefore responsible for monitoring laboratories that bill Medicare and Medicaid for services rendered. COLA www.cola.org Formerly the Commission on Office Laboratory Accreditation, COLA is a nonprofit organization providing programs of voluntary education, consultation, and accreditation, including laboratory accreditation. College of American Pathologists (CAP) www.cap.org CAP is a medical society in the United States serving over 15,000 pathologist members and is considered a leader in providing laboratory QI programs and accreditation programs. The Joint Commission (TJC) www.jointcommission.org Formerly the Joint Commission on Accreditation of Healthcare Organizations, TJC sets standards by which healthcare is measured and accredits institutions and laboratories worldwide. U.S. Food and Drug Administration (FDA) www.fda.gov FDA defines QA as planned and systematic activities to ensure that a laboratory will meet certain requirements for quality. a

Websites last accessed on September 28, 2012.

49 Introduction Evaluating Potential and Real Problems Clinical Relevance • Cost-Effectiveness Analysis, Cost-Benefit Analysis, and Cost-Utility Analysis

Documenting the Extent of the Problem Literature Review • Centralized Studies • Local Data

Test Utilization and Clinical Relevance Michael L. Wilson, Gary W. Procop, and L. Barth Reller

Laboratory-Based Approaches to Control Newsletters • Policy Changes • Personal and Ad Hoc Communication • LIS/HIS-Based Controls on Test Ordering • LIS-Based Feedback in Reports

Institution-Based Approaches to Control Working with the Medical Staff • Formal Protocols Validated by Medical Staff • Working with the Nursing Staff • The Concept of the Laboratory Test Formulary • Using Major Events To Effect Change (e.g., Institutional Quality Assurance [QA] Office, Root Cause Analysis)

What Works and Doesn’t Work: How To Take the First Steps Putting It All Together Base Policy Approaches and LIS/HIS-Based Controls on Evidence-Based Medicine • Track Results • The Plan, Do, Study, Act Model • The Future: Better Teaching and Training

Summary

OBJECTIVES To become familiar with the concepts of clinical relevance and cost effectiveness and how they are related To learn how to document the extent of the problem of laboratory test utilization, including relevant sources of information To learn laboratory-based approaches to the control of laboratory test utilization To learn institution-based approaches to the control of laboratory test utilization To learn one approach for the implementation of change in a patient care setting (McLaughlin’s approach) To learn one approach for integrating evidence-based medicine with computerbased systems for controlling laboratory test utilization

KEY POINTS GLOSSARY REFERENCES

The truth is always the strongest argument. Sophocles

APPENDIX

C

Clinical Laboratory Management, 2nd Edition Edited by L. S. Garcia ©2014 ASM Press, Washington, DC doi:10.1128/9781555817282.ch49

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linical laboratories provide much of the information that is necessary for contemporary medical practice; by some estimates up to 70% of clinical data are derived from laboratories. Obviously the era in which high-quality healthcare can occur in the absence of high-quality and timely laboratory testing is long past. The fundamental reason for this is that our understanding of pathophysiology and treatment of diseases and chronic medical conditions is more advanced, and the diagnosis of many conditions is entirely laboratory-based. As our understanding of the causes of diseases becomes more sophisticated, it is clear that a number of “diseases” are, in fact, simply the final common pathway of a number of predisposing genetic mutations, exposures to drugs or toxins, or other pathophysiologic mechanisms. Moreover, there is increasing evidence that many diseases have genetic bases that not only predispose the patient to developing the condition, but also influence the efficacy of therapy and clinical outcomes. Yet our understanding of the role of laboratory testing in guiding diagnosis and treatment is far from complete. Just as our understanding of pathophysiologic mechanisms is evolving, the availability of the right tests lags somewhat in the discovery process. In addition, there are many tests that were developed to diagnose specific disease states or conditions but that we now know measure or detect only a part of the disease or condition or detect it only at a specific time in the disease process. Clearly we have much to learn in order to provide cost-effective, timely, and clinically relevant laboratory testing.

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Clinical microbiology laboratories have unique challenges. They perform tests to aid in the diagnosis of infectious diseases, guide therapy for those diseases, help control and prevent infection in healthcare settings, and educate and train professionals. Most importantly, “clinical microbiology” is not a discipline per se, but rather a melding of many different disciplines that have little in common other than the fact that they study infection. For example, it is obvious that parasitology has little in common with virology or antimicrobial susceptibility testing of bacteria, yet clinical microbiology laboratories must perform all of these tests and do so in a high-quality manner. This is a broad and challenging mission with some unique challenges, but it also provides a paradigm for laboratory testing in general. Even though the issues facing clinical microbiology laboratories may be more challenging than those facing some other routine laboratory testing, the overall mission is the same for all sections within clinical laboratories. This mission—providing high-quality, cost-effective laboratory testing—has become even more challenging in recent years because of the emphasis on cost control in healthcare, the introduction of new (and often more expensive) diagnostic technologies, and increasing regulations. Thus, laboratories must maintain quality while expanding services with ever-diminishing resources. One of many approaches to solving this dilemma is for laboratories to limit testing to tests that are both clinically relevant and cost-effective. In the past, laboratories could control costs by using traditional management techniques, yet most laboratories exploited this technique to its fullest many years ago (48). For most of the recent past, there were more—and stronger—reasons to perform tests than there were reasons to limit test utilization. Only in the past few years have economic incentives for limiting utilization coincided with medical incentives for improving clinical relevance. The alignment of these incentives affords the clinical laboratories an opportunity to eliminate useless tests, offer only tests known to be clinically relevant, and begin using information technology to facilitate implementation of these changes. The purpose of this chapter is to provide the reader with a strategy for making changes in laboratory utilization that are based on the clinical relevance of the tests. The information contained herein is not meant to be a theoretical approach to making change. Rather, it specifically addresses strategies for dealing with political realities and other impediments to making change. Although this book covers clinical laboratory management in general, the information that has been selected for this chapter deals primarily with clinical microbiology. This information was selected because some of the information and tactics were developed first and specifically for clinical microbiology laboratories. Another reason for using clinical microbiology as a paradigm for change was that attempts at changing the

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utilization of microbiology services can be more controversial than in other areas of the laboratory. This is because clinical microbiology tests (i) are more interpretive in nature compared with most other clinical laboratory tests, (ii) are less standardized than many other clinical laboratory tests, (iii) deal with living microorganisms that have variable phenotypic characteristics, and (iv) are often made more complicated by the presence of contaminating flora.

Evaluating Potential and Real Problems Attempts to improve laboratory utilization must begin with an assessment of current and potential issues with laboratory utilization. The question “Where to start?” is easier to answer than is the question “When to start?” One can approach laboratory utilization from a number of perspectives, including financial models, staffing ratios, productivity or other benchmarks, treatment and evaluation guidelines, and so on. To some extent, the approach that is selected should be the one that prompted the assessment. For example, if a laboratory is being reorganized to meet financial constraints, then financial models and productivity benchmarks should be guides for the assessment. If the assessment is being done because of the introduction of new diagnostic technology or the expansion of services to meet new clinical needs, then the assessment should be based on treatment and evaluation guidelines, clinical protocols, or other clinically driven considerations. Regardless of the approach that is taken, the one principle that must play a role in any assessment of laboratory utilization is that of clinical relevance; no test can be cost-effective, no laboratory can be efficient and productive, and no organization can provide good patient care unless laboratory testing is clinically relevant.

Clinical Relevance Most laboratorians and providers have an idea of what is meant by the term “clinical relevance” (or the roughly synonymous terms “clinical significance” and “clinical importance”). The term is not used consistently, however, because there is no standard definition, nor is there yet a quantifiable way to measure clinical relevance. This lack of objectivity should not impede assessments of clinical relevance or lead to inaction. There are many instances wherein standing orders no longer are clinically relevant when they are filled. These orders may have been medically appropriate when the standing order was written, but as the condition of the patient changed, these orders became unnecessary. A timely and thoughtful review of standing orders is a simple way to reduce unnecessary testing for inpatients. One simple approach is to time limit standing orders (e.g., daily × 3 days), rather than leaving orders open ad infinitum (e.g., daily). As shown in Table 49.1, clinically relevant tests share certain characteristics that can be used in an audit.

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Table 49.1 Characteristics of clinically relevant laboratory tests Test results can be used to initiate, modify, or terminate therapy. Test results are available in an acceptable time frame. Test sensitivity and specificity are acceptable to users. Test positive and negative predictive values are acceptable to users. Test results are easily reported to and interpreted by users.

Cost-Effectiveness Analysis, Cost-Benefit Analysis, and Cost-Utility Analysis Cost-effectiveness analysis (CEA) has been defined as “the primary tool for comparing the cost of a health intervention with the expected health gains” (13) and as “a method for evaluating the health outcomes and resource costs of health interventions” (10). The method has been in use for many years and has been the subject of much discussion as a potential means of helping guide healthcare policy and allocation of resources (34). Not surprisingly, there is understandable confusion between the terms CEA, costbenefit analysis (CBA), and cost-utility analysis (CUA). These terms do have specific meanings and usages: • CEA expresses outcomes in natural units (e.g., cases prevented or number of lives saved). • CBA assigns dollar values to the outcomes attributable to the program. • CUA is a specialized form of CEA that includes a quality-of-life component associated with morbidity using common health indices such as quality-adjusted life years and disability-adjusted life years. Compared with CBA and CUA, CEA is: • Less time- and resource-intensive • Easier to understand • More readily suited to decision making (Centers for Disease Control and Prevention, Cost Effectiveness Analysis; http://www.cdc.gov/owcd/eet/CostEffect2/ fixed/1.html, accessed August 25, 2012) Despite being a better type of analytical tool compared with the other two methods, CEA may not be useful as a tool to evaluate laboratory tests. Trying to determine the contribution of a laboratory test result to a natural outcome such as “cases prevented” is not easy; there are so many other variables that determining the relative role and contribution of the laboratory test result may not be possible. For example, the impact of using a rapid malaria diagnostic test as part of a malaria control program depends not only on the accuracy of the test, but also on whether the providers based their treatment on the test result, whether the treatment was appropriate, patient compliance, the presence or absence of comorbid conditions, the severity of the infection, and the general health of the patient (49).

As another example, a new test to confirm infection in critically ill patients may provide accurate and timely test results, but the variables of getting the provider to order (appropriate) therapy, the time needed to dispense and administer that therapy, pharmacokinetic variation between patients, the presence or absence of comorbid conditions, the severity of the infection, and the general health of the patient may all influence the outcome of the intervention; sorting out the contribution of the new test to the eventual outcome simply may not be possible. Not surprisingly, despite wide use of the term in the context of laboratory testing, relatively few laboratory tests have been subjected to true CEA. Because laboratory tests are so widely used, and in some situations are the basis for initiation, change, or withholding of therapy, better analytical tools to assess the “effectiveness” of laboratory tests are badly needed.

Documenting the Extent of the Problem Effective laboratory management requires continuous evaluation of the tests performed in the laboratory in terms of their clinical relevance, cost effectiveness, and whether new diagnostic methods should be used, either to replace methods currently in use or as new tests. This type of evaluation requires an unbiased assessment of the test in light of published information, including a review of the literature, use of centralized studies that yield benchmark information, and if necessary, use of local data.

Literature Review The published data regarding appropriate laboratory test utilization have, until recently, focused on the issues of the relative accuracy of diagnostic methods, the clinical relevance of tests, or the cost-effectiveness of different diagnostic methods. These issues first received emphasis in the early 1970s, when controlled clinical comparisons of diagnostic laboratory methods became more common, investigators began looking at the clinical relevance of diagnostic tests, and the issue of cost control became increasingly important. As noted by van Walraven and Naylor (45) and commented on by Lundberg (21), much of the published literature about the clinical relevance and cost-effectiveness of laboratory tests lacks the scientific rigor that characterizes evaluations of other diagnostic modalities and therapies. These criticisms almost certainly are valid, but holding laboratory tests to the same standards as other diagnostic procedures or methods may be unrealistic. There are two reasons for this. First, laboratory methods usually are used to confirm clinical impressions or to supplement clinical, radiographic, or other laboratory data. This is different from, for example, a biopsy that by itself may provide definitive diagnostic information. In other words, many laboratory tests do not stand alone for the purposes of making diagnoses.

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Second, the clinical impressions of providers play an important role in the interpretation of test results. This is because the pretest probability of a disease affects interpretation of test results. (For an example and further statistical explanation, the reader is referred to Aronson and Bor’s [3] classic discussion of blood cultures, specifically the section on the influence of pretest probability on posttest probability). Thus, while it often is possible to design controlled clinical trials of novel diagnostic methods or therapies, evaluating laboratory methods is not as straightforward. Despite these limitations, some issues regarding laboratory tests can be studied adequately via controlled clinical trials, including product comparisons, comparison of new diagnostic tests with older methods, evaluations of the cost effectiveness of different tests, and some evaluations of clinical relevance. Some aspects of the clinical effects of laboratory testing also can be studied adequately, such as the impact of the timeliness of result reporting (7, 14).

Centralized Studies A second type of study exists that can be useful in comparing laboratory practices among peer groups, also known as benchmarking studies. These studies differ from scientific studies in that the purpose is not to test a hypothesis, but rather to compare laboratory practices in such a way as to develop statistically valid standards against which individual laboratories can compare their relative performance. By their design they do not test clinical outcomes, so they cannot be used to determine clinical efficacy. Nonetheless, because these studies tend to involve many hospitals and laboratories, they can be used to collect large data sets about laboratory practices. Examples of centralized studies include the College of American Pathologists (CAP) Q-Probes and Q-Tracks programs (43). In these studies, laboratories provide data about specific laboratory practices, which are then collated and analyzed. The Q-Probe is based on a single observation, such as turnaround times for certain tests sent from emergency departments, used to establish benchmarks for specific tests. In contrast, the Q-Track is based on a series of observations taken during specific times to determine trends for specific tests. These studies typically involve collecting data from hundreds of hospitals for hundreds of thousands of tests. As a result, they are of a scale that is unique in the United States, matched only by reporting to the Centers for Disease Control and Prevention (e.g., the National Nosocomial Infections Study) and other data collected by the federal government. When the data are sorted and analyzed by hospital type, size, geographic region, and other parameters, they provide laboratory directors with a powerful benchmark tool. Large data sets also are collected as part of the CAP Proficiency Testing program. These data are not collected for the purpose of evaluating specific laboratory tests, but some of the results can be pooled to yield information

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regarding laboratory practices. As an example, the CAP Microbiology Resource Committee has evaluated data regarding the utility of user-based quality control (QC) for commercial microbiological media (19). The data show that, for a number of types of commercial media, user QC adds little to manufacturer QC and therefore can be eliminated without adversely affecting quality (19). Eliminating superfluous QC not only saves money, but also allows technologists to focus their time and efforts on tasks that are more beneficial to patient care.

Local Data Making a change often requires convincing users that the change is necessary and that the decision to make the change was based on data. For the most part, data should be from published clinical trials, particularly those that meet the requirements of evidence-based medicine. In specific circumstances, as noted by McLaughlin, it helps to supplement published data with data collected locally (24). The reason for this is that many providers believe that their patients are in some way different from those elsewhere. While this may be true if one is dealing with patient populations that are specific in terms of age, gender, or ethnicity, it is not true when applied to the general population. Nonetheless, many providers do believe that their patients are different, and collecting local data can help to convince them that observations made elsewhere do apply to their patients. The implementation of changes is often subject to local politics, even in the presence of evidence. It is important, therefore, to gain a thorough understanding of the medical and administrative hierarchy within the local system. It is also useful to explore how others have successfully implemented changes. Although one would hope that in an era of “evidence-based” medicine one would not have to consider such variables, this is in fact the real world. One author (GWP) has found that a multidisciplinary test utilization committee is a useful venue in which to brainstorm ideas as well as to formulate recommendations. The recommendations can then be presented to the medical executive committee or its equivalent for further consideration and (hopefully) implementation. While collecting local data may be necessary for specific purposes, studies performed locally are unlikely to meet the requirements of evidence-based medicine. They are expensive, and performing them delays implementation of necessary changes. Moreover, even though there has not been a systematic study of this issue, it is unlikely that the results of local studies (if performed correctly) will differ from those performed on broader populations. Most clinical studies published in peer-reviewed publications are of a magnitude and cost that cannot be duplicated locally. Additionally, if a local study yields findings that are different from those of larger studies, the investigator will be in the position of needing to explain why the results differed

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and were not just wrong. If the results are valid, the investigator should publish the findings in a peer-reviewed journal so that others can benefit from the observations. As an example, in 1990, Siegel, Edelstein, and Nachamkin published a study showing that there was no yield in performing stool cultures or tests for ova and parasites after patients had been hospitalized for three or more days (35). This study was repeated in a number of hospitals during the next few years, culminating with a CAP Q-Probe study that was published in 1996 (15, 28, 43). Each of these studies yielded almost identical results as the Siegel study. In one author’s experience (MLW), the local data were found to be more persuasive than were the original data in convincing physicians to accept the recommended changes, which initially were met with some skepticism by providers. Subsequent studies have indicated some exceptions to the initial findings, but for the most part the “three-day rule” is now standard practice in clinical microbiology laboratories. Other examples of local data that were published and that have resulted in widespread changes in laboratory practice include screening cerebrospinal fluid specimens before performing cerebrospinal fluid Venereal Disease Research Laboratory tests or mycobacterial smears and cultures (1, 2), performing nucleic acid amplification tests for the etiologic agents of viral meningoencephalitis (36, 39), eliminating bacterial antigen tests for the diagnosis of bacterial meningitis (16, 25, 30), and eliminating broth “backup” cultures for most tissue and fluid specimens (27). Morris et al. reviewed the cost and time savings that resulted when several of these changes were made in one laboratory; the time savings in particular were substantial (26). Test utilization changes that both improve patient outcomes or the patient experience while decreasing costs are often the changes most readily accepted by both medical and administrative professionals.

Table 49.2 Laboratory-based approaches to control Newsletters Policy changes Personal and ad hoc communication LIS/HIS-based controls on test ordering LIS/HIS-based feedback in reports

Newsletters Newsletters, like all written materials, often are ineffective as a means of communication for the obvious reason that busy providers are unlikely to read them. This is particularly true if they are not written well, are not timely, or contain a lot of trivial information. On the other hand, they have the advantage of being a dispassionate means of disseminating information. This can be a strategic advantage when introducing contentious changes. They also have the advantage of being impersonal, which again can be advantageous when introducing contentious or unpopular changes. Although one should never dodge the responsibility of explaining and defending proposed changes to those who will be affected the most, there is only a finite amount of time for doing so, and it is unrealistic to meet with every provider or stakeholder, particularly in large organizations. Moreover, some individuals will not agree to proposed changes, no matter how rational the change is, so there is little point in trying to persuade them. When this occurs, it is better simply to announce the change as a fait accompli, usually as a policy change, and move on to other issues.

Laboratory-Based Approaches to Control

Policy Changes As with newsletters, policy changes have the advantage of being impersonal and dispassionate. They have the additional advantage of having an air of authority about them, an attribute that can be advantageous when it can be anticipated that the policy will face some opposition.

As medical care facilities implement computerized physician order entry (CPOE) systems, there are opportunities to intervene and stop unnecessary test orders before specimens are even collected. This approach saves time and money associated with unnecessary collection and specimen transportation. In addition, decreased phlebotomy decreases iatrogenic anemia in hospitalized patients and improves the patient experience. If these types of interventions are not possible, the laboratory remains an excellent place to control (limit) test utilization. Not only is the laboratory the site where specimens are processed and testing is performed, but in many hospitals the laboratory is responsible for the phlebotomy service. In addition, laboratories are ultimately responsible for specimen collection. A number of laboratory-based approaches to control laboratory test utilization have been described (Table 49.2).

Personal and Ad Hoc Communication The preceding paragraphs emphasize the use of dispassionate and impersonal written communication as a mechanism of reducing any potential opposition to making changes in laboratory practices. This is not intended to be a substitute for direct personal communication with providers as a means of explaining why changes are necessary, for receiving input from those who will be affected by the changes, and for monitoring the effect(s) of the changes. One of the first steps is to ensure support from the institutional leadership. Next, one should discuss the proposed changes at length with those who will be affected. These discussions may not reverse the decision to make the change, but merely having the discussions often ameliorates the emotional impact of the changes. In some

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instances, unanticipated consequences may be discovered during these conversations, and improvements to the proposed changes can be made. Approaching changes from the perspective of the provider can affect the way that the change is implemented.

LIS/HIS-Based Controls on Test Ordering Modifying the test ordering process has been shown to be an effective approach to changing test utilization behavior. Tierney et al. showed that the computerized display of test charges for outpatients resulted in a significant decrease in test utilization (40). Although Bates et al. showed that a similar effect did not occur with inpatients, there were trends in that direction (5). The same authors, in a similar study, showed that computerized display of redundant tests was an effective intervention but that the effect was limited (6). In another similar study, Solomon et al. showed that a computer-based intervention was effective in reducing unnecessary serologic testing in an inpatient setting (38). Despite the limited effect associated with some of these interventions, there appears to be increasing evidence that computer-based interventions can be effective for changing test utilization behavior. Most commercial laboratory information systems (LISs) have the capability to identify duplicate orders, to flag orders that meet specific criteria (e.g., the number of blood cultures ordered within a defined period), to document test changes or cancellations, and to notify providers of changes to an order. These rudimentary capabilities allow laboratories to improve test utilization substantially, as duplicate or redundant tests are by any definition clinically irrelevant and wasteful. This is particularly important in settings where more than one provider may be ordering tests for patients, a circumstance that results in increased duplicate testing (9, 42). The ability to determine test utilization by provider also is within the capability of most commercial LISs; this information can be used to track test ordering patterns and to provide feedback to the provider. As useful as these capabilities may be, by no means are they a feature of all commercial LISs. Moreover, many LISs cannot be used to modify test ordering at the time orders are placed. This capability is a feature of LISs that can be used for computerized physician order entry (CPOE). These LISs are integrated with the hospital or organization information system; the more sophisticated CPOE systems are integrated with software that allows for the analysis of information regarding other laboratory tests, drug allergies and other adverse drug reactions, nutrition, radiographic findings, and clinical findings. The LISs that have some CPOE capability vary considerably in their ability to integrate this information so that orders can be modified either by alerting the provider at the time of entry or by the CPOE system directly. A fully functional and robust

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CPOE system would have all of these features and would have the potential to reduce errors and to change orders so that practice standards, clinical pathways, and other efforts to improve care would be realized (31, 32, 37). The advantage of a hospital information system (HIS) intervention that works in conjunction with CPOE is that the intervention occurs prior to specimen collection. One author has helped to implement an intervention in his institution that blocks unnecessary (i.e., redundant) same-day repeat test orders. The tests on this list were vetted with the medical leadership prior to intervention, and means are available to complete these orders if the provider believes they are medically necessary. In 2011, 7,243 unnecessary same-day duplicate orders were blocked by this electronic intervention. The cost avoidance from this intervention, calculated based on materials and technologist time, was $115,590. Although the cost avoidance associated with specimen collection and transportation was not calculated, it too was likely significant. As IT systems become more sophisticated, with better connectivity between individual modules such as the HIS and the LIS, developing “rules” to eliminate redundant testing should become easier. More highly developed IT systems will have the ability to block tests that do not meet other criteria. As an example, the LIS will have the ability to check with the pharmacy system to see if a patient has received a dose of drug at the correct time before allowing for measurement of a peak or trough drug level. Other potential rules are obvious, but at this time many IT systems do not have the functionality for such programming.

LIS-Based Feedback in Reports Even without a rules-based CPOE system, many LISs can be programmed to provide information about the cost of laboratory tests, information regarding the clinical utility of tests, and warnings about the use of certain drugs in patients with specific laboratory findings (such as renal failure). Many LISs have the ability to show specific comments either automatically (based on rules within the system) or by manual ad hoc request. These systems can be an inexpensive and effective way to disseminate information to providers. There are a number of types of feedback that can be given to providers. In clinical microbiology, one of the most commonly used types of feedback is the selective reporting of antimicrobial susceptibility test results, with or without comments, to help guide interpretation of the results. Even without comments, the provider receives test results only for those antimicrobial agents that are likely to be clinically relevant, information that should improve patient care. Another common type of feedback is the average daily cost of drugs that are reported for antimicrobial susceptibility test results. Other common types of feedback for microbiology tests include comments regarding the presence of

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contaminating flora, the lack of clinical relevance for some types of testing (e.g., microorganisms recovered only from broth cultures), specimen adequacy (e.g., the evaluation of sputum specimens for neutrophils and epithelial cells), the types and numbers of microorganisms recovered from midstream urine specimens and their likely clinical relevance, and the number and adequacy of specimens received for blood culture. Given adequate laboratory and computer resources, comments can be developed to help guide the interpretation of most laboratory tests.

Institution-Based Approaches to Control As with laboratory-based approaches to control, a number of institution-based approaches to control laboratory test utilization have been described (Table 49.3). The two types of approaches are not exclusive: Each complements the other, and used together, they might be more effective than either type of approach used alone.

Working with the Medical Staff In most organizations, the medical staff is in a leadership position regarding patient care. There are several reasons for this. First, most hospital-based medical care continues to be provided by physicians, and hospital care is much more expensive than is outpatient primary care. Second, physicians provide most outpatient specialty care, and specialty care often is the most expensive and cutting edge and therefore requires the most immediate oversight of cost control. Third, The Joint Commission requires that the medical staff fulfill specific roles within organizations, including overseeing the quality of medical care in the organization, participating in committees that affect patient care (e.g., the pharmacy and therapeutics committee), and overseeing graduate medical education (resident and fellow training). Fourth, although nonphysician providers such as nurse practitioners and physician assistants provide a great deal of primary (and some specialty) care, in many states these providers work under the supervision of a physician. Last, physicians generally are the most outspoken group when changes in patient care are proposed, and some changes are unlikely to occur without their concurrence. One can approach the medical staff in a number of ways when a change is needed. One effective strategy is to first meet with the medical staff leadership and senior physicians Table 49.3 Institution-based approaches to control Working with the medical staff Formal protocols validated by medical staff Working with the nursing staff Institutional protocols Using major problems to effect change

before meeting with the general membership. This is because (i) medical staff leaders typically have a better understanding of issues that necessitate changes, (ii) leaders are selected because of their experience and the respect that physicians have for them, (iii) most leaders have been through a number of changes and thus are less resistant to change, and (iv) obtaining leader support facilitates changing the way medicine is practiced. Medical staff leaders can also serve as a liaison with the general membership. It is difficult to overstate the importance of having their support when contentious or unpopular changes must be made. In teaching hospitals and clinics, one of the leading roles of the medical staff is to provide adequate supervisions of students and residents. Laboratory test overutilization is well known to be higher in teaching settings, is partially attributable to trainees (12), and does require adequate oversight. One of the more important roles of attending physicians is to teach and train when to order tests; which tests to order; how to interpret test results in the context of the patient’s other clinical, laboratory, and radiographic findings; and what interventions (if any) should be based on the test results.

Formal Protocols Validated by Medical Staff A particularly effective means of implementing changes is the use of clinical protocols or guidelines that have been reviewed and validated by the medical staff. These have a number of synonyms, including care protocols, clinical pathways, key clinical pathways, clinical care standards, and patient care guidelines. When developed correctly, these protocols incorporate findings and guidelines from evidence-based medicine, as well as specific guidelines from organizations such as the Centers for Disease Control and Prevention, into the practices and workflow of an organization. The end result should be the application of state-of-the-art medical knowledge to a specific patient population in a specific setting. Such protocols not only provide the best patient care but also improve medical training and education and should help providers use the most cost-effective approach to healthcare. For obvious reasons, these protocols should specify the use of the most appropriate laboratory testing and radiologic tests and procedures. Working with the Nursing Staff In the hospital and the outpatient clinic settings, there is no group other than the nursing staff that can be of more support in making changes. Nurses provide almost all of the immediate patient care in hospitals. They provide a large amount of primary care, they are responsible for most specimen collection in both inpatient and outpatient settings, and they play an important role in medical training and education. Moreover, nurses bring different training and insights to patient care that are just as important as those of physicians. Thus, it is of particular importance to

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discuss proposed changes with nurses, as they know best the practical side of implementing changes and how each setting functions throughout the day and the week. One current challenge in working with the nursing staff is the shortage of trained nurses in the United States. To maintain appropriate nurse-to-patient ratios, hospitals have opted to use nurses from companies that provide nurses for varying periods, from one shift to several months. Another change, particularly in hospitals, is to assign nurses to different units depending upon the number of patients on those units at a given time. Although these staffing approaches are necessary for purposes of patient care, one consequence is that it is more difficult to train nurses adequately and to work with them to implement changes smoothly. It is unlikely that this will change in the immediate future. Consequently, the best approach at this time is to work with the nursing leadership in the organization and to take the extra steps necessary to work with the nurses who are temporarily assigned to a given setting.

The Concept of the Laboratory Test Formulary Pharmacies improve the use of drugs, reduce costs, and work to minimize or slow the emergence of antimicrobial drug resistance by several mechanisms, one of which is the development and use of drug formularies. At its most basic level, a formulary is little more than a list of drugs that have been approved for use in a given healthcare setting or program. It obviously is more complicated than that, but the principle behind a formulary is simple: For condition X, only drugs Y and Z are available. Other drugs in that class, and even drugs in different classes that could be used to treat condition X, are unavailable. The concept of developing a similar mechanism to direct and limit laboratory test utilization is not new; all laboratories select specific assays and specific platforms on which to run those assays rather than offering multiple tests for the same condition. This is part of good laboratory practice. What is a newer concept involves a more directed and systemic approach involving a committee of both laboratorians and providers who develop a tiered formulary and then act to enforce it. A number of models exist, but all have in common a list of tests available to any provider at any time, a second tier of tests restricted to a specific group or groups of providers (usually specialists who can order certain tests relevant to their specialty), a third tier of tests available only under specific circumstances and with prior authorization, and a fourth tier of tests that are not available (23). Despite the variations that have been described, most of these systems are similar in their structure and function. Whether they are an effective and sustainable means of controlling and improving laboratory utilization requires further research. Laboratory tests are not used the same way as drugs, do not have the same direct impact on patients, and often are used for many different conditions; furthermore, there are

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far more laboratory tests than there are drugs. That said, there are enough similarities between the two that it is worth testing the hypothesis that a laboratory test formulary is an effective method for controlling utilization. One author, in conjunction with medical leadership at his institution, has instituted a restricted use initiative, wherein only providers with subspecialty training in medical genetics or other advanced training can order expensive molecular genetic testing. The cost avoidance associated with this intervention, which was only active for part of 2011, was $248,923. There are already opportunities to make similar interventions in the use of some of the expensive molecular diagnostic assays that are used for the detection and characterization of infectious agents. A second author helped develop a similar system whereby a list of tests sent to reference laboratories was hidden in the CPOE system used for inpatients at his institution. The reasons for developing this system were straightforward. First, the results of many (if not most) tests sent to reference laboratories are not available prior to discharge and therefore cannot affect the care of the patient during the hospitalization. Second, because of the way reimbursement occurs with the diagnosis-related group system, hospitals do not receive reimbursement for many of these tests when they are ordered on an inpatient basis. In contrast, if one waits for 72 hours following discharge before ordering these tests, the healthcare system can charge for these tests and receive reimbursement at the rate covered by the patient’s insurance or healthcare plan. Lastly, in teaching hospitals in particular, it is often better to defer esoteric testing to an outpatient specialty clinic where more experienced providers are responsible for selecting tests. Even though these tests are hidden in the CPOE system, a process was developed to allow providers to order a test when necessary for inpatients. The most recent estimate for the cost savings during hospitalizations is $330,000 annually.

Using Major Events To Effect Change (e.g., Institutional Quality Assurance [QA] Office, Root Cause Analysis) Major events in healthcare provide opportunities to make changes that otherwise may not be possible. This is neither a cynical observation nor opportunistic management. Rather, it is recognition of the fact that some issues cannot be dealt with under normal circumstances because of political, financial, or other constraints. During major events, however, these constraints may diminish or disappear, providing an opportunity to bypass them. Change occurs more easily during major events because there typically is an acknowledgment that the status quo no longer can be preserved, individuals may need to take a different view of circumstances, and many departments may be involved. A particularly opportune time to eliminate procedures or tests that are of marginal utility, or that providers

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are unwilling to give up at other times, may be during a reduction in operating budgets. Other events that provide unique opportunities for change include changes in organizational management, changes in ownership, relocation of laboratory facilities within the building or complex, construction of new facilities, implementation of CPOE systems (particularly when rules-based orders will be implemented), and changes in academic or other types of affiliations. Although these changes may not afford equal opportunity for change, or for the same types of change, laboratory directors should look for opportunities that accompany what otherwise are challenging circumstances. Important allies for implementing changes include the quality assurance (QA) office and the compliance office. The QA office plays a number of important roles within organizations, including ensuring compliance with accreditation standards, investigating adverse events, performing root cause analyses, and developing organizational policies and procedures. The compliance office deals primarily with ethics, business practices, and compliance issues related to financial matters. The QA office, given its broader role within the organization, can assist with change by helping develop clinical protocols, particularly those that involve changing organizational policies and procedures. It can also assist with change when an adverse event or the findings from a root cause analysis indicate that a change is necessary. Obviously, either office can assist with change when the change is necessary for compliance reasons. In some cases, this type of assistance can be invaluable for making changes that are contentious but necessary.

What Works and Doesn’t Work: How To Take the First Steps There is a substantial body of literature regarding the effectiveness of different methods for changing laboratory test utilization. Most of this literature reflects the notion that “changing” test utilization usually means limiting test utilization. This undoubtedly is an oversimplification of the issue, as there are good examples of how laboratory tests can be underutilized as well as overutilized. Nonetheless, the problem of overutilization receives more emphasis because it probably is more pervasive in modern medicine than is underutilization, and decreasing overutilization can yield substantial cost savings. It is true that increasing the use of tests that are underutilized can decrease costs in the healthcare system as a whole, but until recently, few systems have taken the broader approach to cost control, instead focusing cost control efforts on specific issues. Changing/controlling laboratory test utilization means changing/controlling provider (usually physician) behavior. This has proven to be a complex and difficult issue for healthcare systems to address, as most interventions intended to change physician behavior have been ineffective

or have had only a temporary effect (4, 41). As reviewed by Valenstein, physician education has been shown to be an ineffective approach to changing test utilization (despite being the most commonly used intervention), and both clinical and financial feedback has been shown to have variable effectiveness (41). In the same review, Valenstein noted that administrative interventions have been shown to be effective in changing test utilization (41). These include requiring justification for certain tests, changing the test request process, and changing “informal testing rituals” (29, 41). The first of these, requiring justification for certain tests, may be an effective intervention, but it is impractical to implement in many settings and almost certainly will be unpopular with physicians. The second, changing the test request process, may ultimately be the most practical and effective intervention, particularly when it involves the use of CPOE systems. Hindmarsh and Lyon report a similar observation (17). The third intervention, changing testing “rituals,” usually falls under the penumbra of clinical pathways, and in settings where physicians adhere to the pathways it can be an effective intervention (8). In their review, Axt-Adam et al. noted that one explanation for the lack of effectiveness of many interventions is that physician behavior depends upon the physician’s personality, education, training, specialty, location of practice, years of clinical experience, estimated test charges, and expectations (4). Malcolm et al. also reported that “personal factors” affect the way physicians use laboratory tests (22). The effect of clinical experience on test utilization has been reported in a number of studies, one recent example being the increased use of ancillary tests by inexperienced physicians in the evaluation of acute febrile illness (33). In his review, Valenstein reported that risk-taking attitudes might affect test-ordering behavior, although some investigators have not found a relationship between personality and test utilization (41). Given the number of factors that may affect test-ordering behavior, it comes as no surprise that many specific interventions have been found to be ineffective in changing behavior. It may be that at any time and in any place only a subset of physicians is amenable to a particular intervention and that over time no static intervention will result in sustained changes in test utilization behavior. As Valenstein noted in his review, “to the extent that differences in the test-ordering behavior of physicians reflect ingrained and immutable psychological traits, one would expect little success in modulating test utilization by trying to influence individual providers” (41). This may be the most realistic assessment of the effect of personality on test utilization behavior and the lack of effectiveness of educational interventions in changing that behavior. Despite the reported variable success in changing test utilization behavior and the difficulty in sustaining changes, there is cause for optimism. First, there has been

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for many years little or no doubt among laboratorians— and many clinicians—that more laboratory tests are performed than are needed for patient care and that many laboratory tests are used incorrectly (18, 20). Second, there is a growing awareness among providers that healthcare resources are limited and should be allocated so as to maximize their benefit to patients. Third, improvements in information systems have resulted in CPOE systems that have the capability to affect test utilization via immediate feedback to providers as well as by use of artificial intelligence. Last, the growing body of literature on evidence-based medicine makes it much easier for healthcare systems to develop rational clinical pathways and for laboratorians to use those pathways as part of their strategy to change test utilization. From a purely pragmatic standpoint of making changes in diagnostic microbiology testing, McLaughlin has published a step-by-step approach that is rational, practical, and (by anecdotal experience) effective (24). Table 49.4 shows a modified version of this approach. As emphasized in McLaughlin’s approach, building support for change is crucial (24). Many changes that are needed to make a laboratory more cost-effective or clinically relevant are contentious, even when they are not costly. There are several reasons for this. The first is that making changes can mean taking something away from providers, and it is axiomatic that it is more difficult to take something away than it is to not give it in the first place. The second reason is that making changes shifts control from the provider to the laboratory, and providers may perceive that this affects their clinical autonomy and/or their ability to act on behalf of their patients. The backlash against managed care by providers illustrates this principle. Last, making changes is difficult under most circumstances, even when it is perceived to be in one’s best interests. To facilitate changes, having the support of departmental and organizational leadership is crucial. By support, one hopes for an understanding and analysis of the recommended changes, including an understanding of the impact on services as well as of benefits, costs, and alternatives. In all circumstances, one should Table 49.4 Implementation of diagnostic microbiology policiesa Base proposed changes on published data. Supplement these data with in-house data. Gain the support of the infectious diseases service. Discuss proposed changes in advance with influential providers. Educate providers who will be affected by the changes. Announce changes by effective means of communication. Educate laboratory staff who will implement the changes. Revise laboratory manuals accordingly. Initially give providers an “override” mechanism. Provide necessary explanations and follow-up to users. a

Modified from reference 24.

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avoid presenting support as an edict, as this approach may yield not the desired response but instead its opposite. Perhaps the single most effective argument that can be presented to providers is to emphasize that the change will result in the best care for the patient. That may mean that the change is supported by evidence-based medicine, a topic that has received much emphasis recently. This concept is a process by which evaluation and treatment guidelines are based on published evidence regarding their effectiveness.

Putting It All Together Base Policy Approaches and LIS/HIS-Based Controls on Evidence-Based Medicine The published data about changing physician behavior indicate that most approaches achieve only a temporary effect or are ineffective altogether. Of the described methods that have been shown to be effective, use of LIS-based controls may be one of the more effective methods. Data regarding the effectiveness of evidence-based medicine as a tool for limiting test utilization are available for only a limited number of tests, but the data that are available (as well as anecdotal experience) suggest that physicians may be more accepting of changes that are derived from evidencebased medicine (46). There are at least two reasons why this observation may be true. First, by the nature of their education and training, physicians are more receptive to information based on sound scientific or medical research. Second, information that is scientifically persuasive is likely to be adopted as the standard of care, and physicians by and large adhere to what is perceived to be the standard of care within their community. Thus, one approach to increase the likelihood that physicians will accept change is to use LIS-based controls on physician ordering and to base the changes on evidence-based medicine. As stated previously, one of the advantages to the use of LIS-based controls is that test-ordering patterns can be tracked automatically, thereby generating physician-specific utilization data. Track Results As with any type of decision to make changes within an organization, the effectiveness of changes in laboratory test utilization is determined by (i) the quality of the decision to make the change, (ii) the success of the implementation, (iii) the likelihood that the intervention can be sustained, (iv) the willingness to modify the change as needed, and (v) whether the change improves patient care and/or outcomes. Documenting the effectiveness of the change requires the collection of data prior to implementation of the change followed by tracking the results of the change. For some changes, this is simple. Changes made to decrease or increase utilization of a specific test can be tracked simply by auditing test utilization over

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specific intervals. On the other hand, changes intended to improve patient care or outcomes require the collection of large amounts of data, often over long periods of time, and interpretation of the data in light of other clinical, radiographic, and laboratory findings. In some instances, they require formal study of the issue via randomized clinical trials. Finally, feedback to the governing bodies (e.g., medical executive committee, board of governors) of the positive outcomes (e.g., improved response, decreased length of stay, or cost savings) is important, as it builds relationships and trust, which will be important for your next proposal.

The Plan, Do, Study, Act Model Once the effects of a change have been tracked for some time, a decision can be made to either continue the change without modification, to modify it, or to discontinue the change. This approach parallels what The Joint Commission for many years promoted as the plan, do, study, act approach for making change. The approach is selfexplanatory, is simple, and can be used to address many types of issues. For this approach to be used effectively, the study and act stages of the process require the use of quantifiable data that can be tracked through time. Nardella et al. described a model system that incorporates many of the issues discussed in this chapter (29). The model is a good example, without use of the specific terms of the plan, do, study, act model for creating an effective intervention. The Future: Better Teaching and Training Because physicians, and those working under their supervision, drive the demand for most laboratory testing, it would seem intuitive that medical education and training should place a priority on test ordering as part of learning to care for patients. Unfortunately, this is not the current state in the United States, either in undergraduate or graduate medical education (GME). In fact, past GME tradition has caused some of our current problems; omissions were chastised more often than commissions: “Did you order/get X?” and not “Why did you order/get X?” was the paradigm for generations of trainees. Cooke (11) clearly delineates the responsibility of GME to inculcate cost-consciousness, and Weinberger (47) presents a realistic mechanism for changing this paradigm, as he advocates for the addition of a seventh competency, costconscious care and stewardship of resources, to the six general competencies promulgated by the Accreditation Council for Graduate Medical Education (ACGME). The ACGME has the influence to mandate change in training programs, as teaching institutions certainly seek to comply with regulations rather than risk being placed on probation or even shut down. Education has grave limits for changing behavior: Regulation works better. As the “competencies” permeate undergraduate education and GME,

there is the possibility of change. The best patient care and societal outcomes will derive from stewardship, which is what Weinberger’s proposed seventh competency really is about, particularly if implementation of this competency changed care based on evidence. It is unlikely that many GME programs will implement (or even explicitly acknowledge) this competency in the evaluation of trainees unless required to do so by the ACGME.

Summary The principle that guides changes in laboratory test utilization must be that of clinical relevance. Clinically relevant tests may or may not be cost-effective, but tests that are not clinically relevant cannot be cost-effective, regardless of how inexpensive they may be. Although the tools for assessing clinical relevance are imperfect, efforts are being made to improve the way that clinical evaluations of laboratory tests are performed so that assessments of clinical relevance, the impact on patient outcomes, and cost effectiveness can be standardized and quantified. Until those assessment tools are available, however, laboratorians should make use of the characteristics of clinically relevant tests presented in Table 49.1. There is now good evidence that any effective and sustainable approach must include a combination of interventions (44). Based on the available evidence, and on the experience of the authors and others, changing laboratory test utilization requires (i) careful planning and preparation; (ii) establishment of guidelines (clinical pathways or other types) derived from evidence-based medicine; (iii) a detailed plan for introducing and implementing the changes; (iv) use of informatics to disseminate guidelines, automatically perform some tasks (e.g., elimination of duplicate tests), and track data regarding utilization; (v) continuous monitoring of the effectiveness (and the effects of) the change; and (vi) continuous modifications as necessary. KEY POINTS ■ A number of laboratory-based approaches to controlling laboratory test utilization are described, including newsletters, policy changes, personal and ad hoc communication, LIS-based controls, and LIS-based feedback in reports. ■ A number of institution-based approaches to controlling laboratory test utilization are described, including approaches to working with the medical and nursing staff and using formal protocols that have been validated by the medical staff, institutional protocols such as clinical pathways, and major events to effect change. ■ Effective control of laboratory test utilization requires the use of more than one approach or intervention. Of the different types of interventions that have been

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■

evaluated, education appears to be the least effective. Feedback to providers appears to be the most effective intervention, particularly when it is computer-based and when it is linked to evidence-based medicine. Effective interventions require the tracking of results, modification as indicated by data, and sustained effort.

GLOSSARY Cerebrospinal fluid Venereal Disease Research Laboratory (CSF-VDRL) test A serologic test for neurosyphilis that is performed on a cerebrospinal fluid specimen rather than on a peripheral blood specimen. College of American Pathologists (CAP) One of the professional societies for pathologists. One of the organizations that accredit laboratories and provide a service for proficiency testing. CAP also provides services such as Q-Probes and Q-Tracks (see below). Computerized physician order entry (CPOE) A computerbased system for placing clinical orders. Some systems have the ability to integrate orders with pharmacy and laboratory data, to make recommendations for drug dosage and timing, and to alert the ordering physician of issues such as drug allergy. Evidence-based medicine The application of medical data (evidence) that have been analyzed using rigorous criteria to clinical decision making. The Joint Commission (TJC) An organization that accredits most hospitals and healthcare organizations in the United States. TJC can also accredit clinical laboratories as deemed organizations. Laboratory information system (LIS) A computer system used to report laboratory test results. A large number of commercial systems are available. Most can be interfaced directly with instruments to facilitate test result reporting and to minimize the need for manual data entry. Some systems have added functionality such as order entry. Q-Probes A program provided by the CAP that allows laboratories to collect data regarding laboratory processes and to compare their data with data collected from peer organizations. The data are collected for one time only. Q-Tracks A program provided by the CAP that allows laboratories to collect data through time regarding laboratory processes and to compare their data with data collected from peer organizations on a quarterly basis. Quality assurance (QA) Systematic approaches to assessing and improving the quality of care within a specific healthcare setting (e.g., a hospital or clinic) or healthcare program.

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19. Jones, R. N., K. Krisher, and D. S. Bird, for the College of American Pathologists Microbiology Resource Committee. 2003. Results of the Survey of the Quality Assurance for Commercially Prepared Microbiology Media. Update from the College of American Pathologists Microbiology Surveys Program (2001). Arch. Pathol. Lab. Med. 127:661–665. 20. Kassirer, J. P. 1989. Our stubborn quest for diagnostic certainty. A cause of excessive testing. N. Engl. J. Med. 320:1489–1491. 21. Lundberg, G. D. 1998. The need for an outcomes research agenda for clinical laboratory testing. JAMA 280:565–566. 22. Malcolm, L., L. Wright, M. Seers, L. Davies, and J. Guthrie. 2000. Laboratory expenditure in Pegasus Medical Group: a comparison of high and low users of laboratory tests with academics. N. Z. Med. J. 113:79–81. 23. Malone, B. 2012. The future of lab utilization management: are lab formularies the answer? Clin. Lab. News. 38(1):1, 6–7. 24. McLaughlin, J. 1995. The implementation of cost-effective, clinically relevant diagnostic microbiology policies: the approach. Clin. Microbiol. Newsl. 17:70–71. 25. Mein, J., and G. Lum. 1999. CSF bacterial antigen detection tests offer no advantage over Gram’s stain in the diagnosis of bacterial meningitis. Pathology 31:67–69. 26. Morris, A. J., L. K. Smith, S. Mirrett, and L. B. Reller. 1996. Cost and time savings following introduction of rejection criteria for clinical specimens. J. Clin. Microbiol. 34:355–357. 27. Morris, A. J., S. J. Wilson, C. E. Marx, M. L. Wilson, S. Mirrett, and L. B. Reller. 1995. Clinical impact of bacteria and fungi recovered only from broth cultures. J. Clin. Microbiol. 33:161–165. 28. Morris, A. J., M. L. Wilson, and L. B. Reller. 1992. Application of rejection criteria for stool ovum and parasite examinations. J. Clin. Microbiol. 30:3213–3216. 29. Nardella, A., M. Farrell, L. Pechet, and L. M. Snyder. 1994. Continuous improvement, quality control, and cost containment in clinical laboratory testing. Enhancement of physicians’ laboratoryordering practices. Arch. Pathol. Lab. Med. 118:965–968. 30. Perkins, M. D., S. Mirrett, and L. B. Reller. 1995. Rapid bacterial antigen detection is not clinically useful. J. Clin. Microbiol. 33:1486–1491. 31. Peters, M. 1995. Managing test demand by clinicians: computer assisted guidelines. J. Clin. Pathol. 48:98–100. 32. Peters, M., and P. M. G. Broughton. 1993. The role of expert systems in improving the test requesting patterns of clinicians. Ann. Clin. Biochem. 30:52–59. 33. Procop, G. W., J. S. Hartman, and F. Sedor. 1997. Laboratory tests in evaluation of acute febrile illness in pediatric emergency room patients. Am. J. Clin. Pathol. 107:114–121. 34. Russell, L. B., M. R. Gold, J. E. Siegel, N. Daniels, and M. C. Weinstein. 1996. The role of cost-effectiveness analysis in health and medicine. JAMA 276:1172–1177.

35. Siegel, D. L., P. H. Edelstein, and I. Nachamkin. 1990. Inappropriate testing for diarrheal diseases in the hospital. JAMA 263:979–982. 36. Simko, J. P., A. M. Caliendo, K. Hogle, and J. Versalovic. 2002. Differences in laboratory findings for cerebrospinal fluid specimens obtained from patients with meningitis or encephalitis due to herpes simplex virus (HSV) documented by detection of HSV DNA. Clin. Infect. Dis. 35:414–419. 37. Smith, B. J., and M. D. D. McNeely. 1999. The influence of an expert system for test ordering and interpretation on laboratory investigations. Clin. Chem. 45:1168–1175. 38. Solomon, D. H., R. H. Shmerling, P. H. Schur, R. Lew, J. Fiskio, and D. W. Bates. 1999. A computer based intervention to reduce unnecessary serologic testing. J. Rheumatol. 26:2578–2584. 39. Tang, Y. W., J. R. Hibbs, K. R. Tau, Q. Qian, H. A. Skarhus, T. F. Smith, and D. H. Persing. 1999. Effective use of polymerase chain reaction for diagnosis of central nervous system infections. Clin. Infect. Dis. 29:803–806. 40. Tierney, W. M., M. E. Miller, and C. J. McDonald. 1990. The effect on test ordering of informing physicians of the charges for outpatient diagnostic tests. N. Engl. J. Med. 322:1499–1504. 41. Valenstein, P. 1996. Managing physician use of laboratory tests. Clin. Lab. Med. 16:749–771. 42. Valenstein, P., A. Leiken, and C. Lehmann. 1988. Test-ordering by multiple physicians increases unnecessary laboratory examinations. Arch. Pathol. Lab. Med. 112:238–241. 43. Valenstein, P., M. Pfaller, and M. Yungbluth. 1996. The use and abuse of routine stool microbiology. A College of American Pathologists Q-Probes study of 601 institutions. Arch. Pathol. Lab. Med. 120:206–211. 44. van Walraven, C., V. Goel, and B. Chan. 1998. Effect of population-based interventions on laboratory utilization. A timeseries analysis. JAMA 280:2028–2033. 45. van Walraven, C., and C. D. Naylor. 1998. Do we know what inappropriate laboratory utilization is? A systematic review of laboratory clinical audits. JAMA 280:550–558. 46. van Wijk, M. A. M., J. van der Lei, M. Mosseveld, A. M. Bohnen, and J. H. van Bemmel. 2001. Assessment of decision support for blood test ordering in primary care. A randomized trial. Ann. Intern. Med. 134:274–281. 47. Weinberger, S. E. 2011. Providing high-value, cost-conscious care: a critical seventh general competency for physicians. Ann. Intern. Med. 155:386–388. 48. Wilson, M. L. 1997. Clinically relevant, cost-effective clinical microbiology. Strategies to decrease unnecessary testing. Am. J. Clin. Pathol. 107:154–167. 49. Wilson, M. L. 2012. Malaria rapid diagnostic tests. Clin. Infect. Dis. 54:1637–1641. Epub May 1, 2012.

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APPENDIX 49.1 Websites for Performing Searches for Published Information Regarding Cost Control, Clinical Relevance, and Cost Containmenta The Cochrane Collaboration http://www.cochrane.org/ A nonprofit organization that studies the effects of healthcare interventions. One of the leading organizations for evidence-based medicine. EBM Online http://ebm.bmj.com/ The website for the electronic version of the journal Evidence-Based Medicine. PubMed http://www.ncbi.nlm.nih.gov/PubMed/ One of the easiest ways to search the medical literature. This website is supported by the National Library of Medicine. It provides access to the published results of recent controlled clinical trials.

U.S. Food and Drug Administration Center for Devices and Radiological Health http://www.fda.gov/MedicalDevices/default.htm Provides access to a wide variety of information regarding laboratory devices that are regulated by the FDA. a

All sites last accessed on August 28, 2012.

50 Introduction Starting at the Beginning: What To Measure? Where Can We Get Help? How Will I Fund This? Evaluation of Data and Monitoring of Performance Summary

Benchmarking and Performance Monitoring: What Is Appropriate for Your Laboratory? Ronald J. Bryant and Michael R. Lewis

KEY POINTS GLOSSARY

OBJECTIVES To discuss the importance of selecting measures appropriate to the laboratory’s strategy and environment To discuss considerations relevant to the evaluation of benchmarking data

It’s a funny thing about life: if you refuse to accept anything but the best, you very often get it. W. Somerset Maugham

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laboratory director encounters a colleague at a conference; it’s been a while since they’ve talked, and the colleague asks, “How are things going in your lab?” How does the laboratory director answer this question? Quickly, now—how would you answer this question about your laboratory? Would you hesitate? On what basis would you form your answers? Do you have data to support your response? Why do these questions matter? Most laboratory managers and directors would agree that doing a good job is important for several reasons. We’re professionals; we strive to do our work well for the sake of our patients, and we derive personal satisfaction from knowing that we have served them well. We have colleagues in a variety of specialties who depend on our diagnostic work to inform their decisions regarding therapeutic interventions. We have inspections to survive, administrators to please, and a variety of other possible reasons to want to know that things are going well in our laboratories. As noted in the chapter that introduces this section, there are many data relating to laboratory performance that are collected regularly—some selected by laboratory management, some required by external agencies, some delivered by the Web or the mail (proficiency testing results). These data frequently relate to precision and accuracy in the analytical phase of testing; many financial figures are analyzed, and some of the data extend into the preanalytic and postanalytic realms. Because possible measures of performance are numerous and varied, one of the laboratory director’s most important tasks is to determine which of these are most applicable to his or her particular laboratory

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and how best to use the data. Effective selection of performance measures not only facilitates assessment of progress toward organizational goals and minimizes waste associated with unnecessary measurement and analysis, but it also enables leaders to make a data-driven case for the quality of the laboratory’s work. The last of these points is increasingly salient, given the evolution of healthcare delivery and reimbursement models. While system changes are being driven at the federal and state levels, their effects have implications for those responsible for making the following determinations at the local level: • Which measures should we use to gauge our performance? • Against what standards should we measure (benchmark) our performance? • How do we effectively incorporate performance monitoring into ongoing management of our laboratory operations?

Starting at the Beginning: What To Measure? It is essential that the laboratory director understands what he or she is attempting to measure and why; the analogy to clinical laboratory practice is straightforward, as there is no sense in performing a test if the result will not influence subsequent actions. It is easy to become bogged down with the broad array of possible techniques and measures for benchmarking, but a clear sense of which tasks and issues are most important is essential to avoid drowning in a sea of data of dubious value. The earlier chapter on strategic planning highlights the importance of knowing where the operation is headed. Selection of variables for consideration and measurement requires a clear vision of the laboratory’s strategy and precision with respect to defining measures that can guide subsequent decisions. Definitions must be clear, stable, and sensitive for detection of noteworthy changes. That is, the measures must be sensitive to the tasks that one seeks to measure and be specific to those tasks as well. Identifying such measures is not straightforward. Information from colleagues at other institutions, as well as experience that has been published in the literature, can be of assistance in defining the types of measures that are sensitive and specific, though it is important always to remember that institutions differ in ways both obvious and subtle. Consequently, the degree to which experience at other institutions is analogous to that at your institution is always limited, just as performance of an assay even using the same reagents may yield different results in different settings. Putting appropriate effort into defining measures well at the outset is essential, because anything worth measuring

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is unlikely to change immediately, and a precise definition is essential for stability and suitability for monitoring over the long term. Stepping back from the data and avoiding overreaction to short-term variations that may represent noise, not signal, is important. Additionally, avoiding discouragement that may result from the inertia of some measures is important; the initial “stickiness” of a measure at an unacceptable level may indicate a need to apply greater force to the intervention or to employ an alternative (and more effective) intervention. Interfaces between people and between divisions or departments pose special challenges to laboratories, both operationally and with respect to measurement. It is easier to look at ourselves and our unit’s performance in isolation than to assess how well our patients are being served by the complex systems in which we operate. Nonetheless, a superb laboratory within a dysfunctional institution has limited value. While it may be difficult to measure performance across interfaces, given the disparate data sources and frames of reference involved, effort invested here may be well rewarded by increases not only in performance level but also in the satisfaction of all involved. Employing several measures that address specific components of a process that involves interfaces may identify particular processes requiring attention. Once each component of the larger system is functioning at a reasonable level, however, a summary measure may not only prove more efficient for measurement and review but may also align the interests of those contributing to the process. As an example, a laboratory director may seek to have laboratory results available for clinicians early in the morning for rounds, so that decisions can be made with respect to possible discharges during the day. Instinctively, the director might believe that turnaround time is a sensible measure to examine. A few questions quickly arise: What interval of time should be measured, and what interval can be measured using the currently available systems? Should the clock start when an order is placed, when an order is received in the laboratory, or when the sample is received? Does the clock stop when the result is reported or when the ordering provider receives the information? Measuring turnaround time well may be difficult, particularly if you have only laboratory data that reflect the time of sample receipt and the time at which the test was resulted. One could readily generate data, track them over time, and act to modify processes on the basis of this measure, but important factors relating to the timely availability of phlebotomy services or to effective reporting of results would not be reflected in such a measure. Alternatively, the order times may be irrelevant if the main topic is early morning laboratory work. If, in fact, the only measure that matters is result time, then using this as the monitor may not only save

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the considerable effort required to refine turnaround time but also appropriately focus attention on addressing broader system issues (e.g., specimen collection and transport) rather than on fine-tuning what is likely a well-functioning laboratory process. Suppose that the laboratory director takes the next step of comparing local data to those of other institutions. How do they define turnaround time? From when to when? What tests should be included in a study of turnaround time? Are there separate turnaround times for chemistry and hematology? Which tests are performed on the major chemistry analyzer? Are they the same as those performed on the high-volume instruments at other institutions? Which tests do the physicians need to complete their rounds? How do the rounding patterns of local doctors compare to those of their colleagues at other institutions? Even if one obtains data for comparisons at other institutions, these will have to be interpreted in light of the local clinical needs and of variation in the specifications underlying the measures. There is no doubt that every laboratory is capable of generating spreadsheets filled with vast quantities of measurement data; the question becomes what to do with these and how to use them to improve your practice. It is easy to float adrift in kilobytes and megabytes of data and lose sight of the desired destination; let us hope that our goal does not become the mere manipulation of the data that are available to us.

Where Can We Get Help? External resources for benchmarking data are available from a number of sources, as noted in the benchmarking chapter that introduces this section. Of particular note are the Q-Probes from the College of American Pathologists, which feature precise, well-validated measures. The importance of interacting with clinical services served by the local laboratory cannot be overemphasized, as the laboratory will not be able to address their needs if there is a deficit of interaction and if the needs to be met are not recognized. Another internal data source is data mining. This term refers to searching blocks of data for meaningful information reflective of underlying relationships; this search is driven by computer algorithms and is analogous to the genome-wide association studies (GWAS) that are proliferating in the scientific literature. As in GWAS, much of what is found is of little significance. Additionally, data mining reveals associations, not causes; establishing a causal relationship requires application of the laboratory director’s insight, and there is no guarantee that the associations uncovered by data mining will yield the best measures of processes in terms of sensitivity, specificity, and stability.

How Will I Fund This? Much attention has been paid over the years to financial benchmarking, yielding reams of data. Precision may appear great—down to the nearest cent. Unfortunately, the accuracy of allocation of cost to various clinical functions is problematic at best and sometimes misleading; benchmarks addressing personnel costs in the lab must be carefully understood. How comparable are the laboratories being compared in terms of services, size, and structure? What are the units of the benchmark? Lab payroll? Lab tests? Do the benchmarks make sense given the local laboratory’s structure and services? Of particular note are costs allocated to the hospital laboratory that facilitate better quality and lower costs for the broader institution; expensive but timely virology services are but one example in which excessive focus on the direct testing expense without concomitant attention to decreased length of stay or decreased risk of nosocomial infection may lead to decisions contrary to the hospital’s broader goals. More and more hospital administrations are spending resources to generate broad benchmarks applicable to the laboratory and all of their functions throughout their institutions, but it is essential to set aside resources internally to develop and monitor appropriate performance measures in the laboratory.

Evaluation of Data and Monitoring of Performance As with test results, benchmarking data must be evaluated in light of the broader context: Do these results make sense? Do they square with the reality of our laboratory’s operation? If there is an apparent mismatch, then while it is true that the data may be inaccurate, it is also possible that a heretofore unrecognized problem is presenting an opportunity for laboratory improvement. Such a situation may be especially likely to be encountered in the context of external benchmarks that take a broader view of laboratory performance in the context of the institution, and it is critical that the laboratory director’s ingenuity and creativity be aimed at identifying and solving underlying problems, not at discrediting data and circumventing administrative necessities. As is frequently encountered with test results, often there are multiple data to be reconciled; similarly, internal and external benchmarking data must be evaluated together, performing an internal check on each other.

Summary We do not propose a universal standard for what types of benchmarks or performance monitoring are applicable to all laboratories. Fundamentally, the laboratory director cannot determine whether he or she is doing a good job without first defining what that job is, so effective measurement of performance starts with effective defining of the

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laboratory’s goals. There are many variables that influence the applicability and accuracy of performance measures, and it is essential that the laboratory directors, managers, and others interpret the data accurately and confront the available choices with an open mind. Consideration of the context in which the data were obtained is fundamental to effective use of these measures. KEY POINTS Arrive at consensus on critical processes that must be improved or maintained above certain thresholds for benchmarking and for performance monitoring. ■ Clearly define measures that are appropriate to the task and that are realistic in terms of data availability and resource availability. ■

■

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Follow up on performance measures consistently, so that appropriate actions can be taken in response to changes. Change measures with care, keeping the underlying goal in mind.

GLOSSARY Benchmarking Comparison of one’s performance with that of peers. Data mining Searching of data (usually large quantities) for underlying patterns or other information. Summary measure A variable that integrates multiple underlying parameters; for our purposes, the underlying parameters could be performance measures pertaining to each of several interrelated tasks.

XI The Future of Clinical Laboratories section editor: Paul Bachner 51

The Future of Pathology and Laboratory Medicine: Political, Social, Economic, and Regulatory Impacts Paul Bachner

52

The Future of the Clinical Scientist Workforce Diana Mass and John R. Snyder

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Electronic Health Records and Their Implications and Opportunities for Laboratories Walter H. Henricks

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Current Trends in Instrumentation and Technology: Outlook for the Future Sheshadri Narayanan and Audrey N. Schuetz

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The Future Practice of Laboratory Medicine Paul Bachner and M. Desmond Burke

51 Introduction The Current Environment of Healthcare Current Regulations CLIA ’88 • HIPAA • OSHA Standards for Occupational Exposure to Blood-Borne Pathogens • The Stark Laws

Liability Considerations The Future Regulatory Climate under CLIA ’88 Personnel Standards and Quality Control Standards • Complexity Categories • Waived Testing • Changes to CLIA and Alternative Approaches

The Future of Pathology and Laboratory Medicine: Political, Social, Economic, and Regulatory Impacts Paul Bachner

The Impact of HIPAA Laboratory Requirements • The Future of HIPAA

Bioterrorism Recent History • Future Impact

Long-Term Effects: Legislation, Regulation, Accreditation Quality, Value, and Patient Safety • The Patient Safety Movement

OBJECTIVES To discuss major features of the current healthcare environment To describe current regulations affecting laboratory practice To identify likely future regulations and political and economic events impacting pathology and laboratory practice

Issues Affecting Research and Academic Laboratories Stem Cell Research • Biorepositories

Restrictive Patents and Restraints on Use of Human Tissues Summary

All predictions are wrong, that’s one of the few certainties granted to mankind. But, though predictions may be wrong, they are right about the people who voice them, not about their future but about their experience of the present moment. M. Kundera (14)

KEY POINTS GLOSSARY REFERENCES APPENDIX

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t is alleged that Henry Ford observed, “History is bunk.” If he was correct, predictions about future events are even more suspect. Given the volatility of current political, economic, and social events and the enormous changes that we have witnessed in the science, technology, and practices of healthcare during the last half of the 20th century and the first decade of the 21st, any attempt at predicting the future is undertaken with considerable temerity and only because it is extremely unlikely that readers of the future will remember the accuracy of prior predictions. It is my intention to examine the current environment of healthcare with particular attention to political, social, economic, and regulatory factors and to attempt to identify trends within and external to that environment that are likely to influence future developments. I will restrict myself to trends that I believe will emerge during the next decade; any attempt to try to “see” farther into the future would be foolhardy since I firmly believe the axiom that prediction is very difficult, especially about the future. Rather than making explicit predictions, I will emphasize emerging and at times conflicting trends and suggest what I believe to be likely options and directions that may arise in response to those trends. My summary of regulatory requirements is meant to be illustrative only. Readers are referred to the references and to websites within the text that provide greater detail and additional information. Readers are also strongly urged to seek legal and other professional advice for specific issues related to their own laboratory practice and environment.

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The Current Environment of Healthcare A high level of volatility and uncertainty, reflecting the political, economic, and social instability of our current environment, characterizes healthcare in the United States in the second decade of the 21st century. Our country—as well as the global economy—which had enjoyed a prolonged period of political stability, economic growth, and prosperity, is now enmeshed in global economic uncertainty and concerns about national security. Funding and support for healthcare are diminishing, and the economic future of healthcare is hostage to the following identifiable trends and concerns: • A growing federal deficit and concerns about the future sustainability of Medicare and Medicaid. • An increasing inability of state budgets to fund rising Medicaid expenditures. • The expanding potential of molecular technologies to identify a potential for disease at the genotypic level prior to the onset of detectable phenotypic changes. • A healthcare insurance and delivery system plagued by problems of access, quality, and safety. • An insurance, payment, and delivery system for healthcare, sometimes loosely described as “managed care,” that is increasingly viewed as dysfunctional by consumers (formerly known as “patients”), providers, and employers, the latter constituting the primary but decreasing source of funding for health insurance for the employed sector of the population. • Continuing major increases in healthcare costs driven by the aging of the population and the growth of technology. • A highly politicized climate of blame and intense controversy in which the various players in the healthcare arena—insurers, drug companies, patients, providers, lawyers, politicians, and economists—reproach each other and advance conflicting solutions. Although significant modification of the managed-care system has occurred, there is a notable absence of any consensus about the contours of politically or economically viable alternatives. The Affordable Care Act, which was passed during the first term of the Obama administration, contains provisions that radically alter all aspects of healthcare delivery and financing. Although the constitutionality of major provisions and the core of the entire law were affirmed by the Supreme Court in June of 2012, the ultimate fate of the Affordable Care Act—the specifics of its implementation as well as the trajectory of decreasing financial resources available for healthcare—remains unclear. It may be that specific events such as the February 17, 2012, congressional cut in Medicare lab fees ($2.7 billion over 10 years) to pay for the Medicare physician fee “fix” is but an early example of how reduced funding will differentially

impact healthcare providers and lead to increasing conflict over the allocation of resources.

Current Regulations Historically, regulations concerning public health and healthcare in general, as well as those affecting laboratory medicine specifically, have tended to reflect social and political concerns. They have also reflected the periodicity of alternating cycles of regulatory enthusiasm for consumer protection versus the traditional American reluctance to restrict and regulate commerce. The locus of regulations concerning public health and the laboratory community has traditionally been at the state level, reflecting a constitutional and judicial preference to default health and welfare issues to the states. The initiatives to establish and regulate public health and safety testing that took place in the middle years of the 20th century were largely at the level of municipal and state health departments and were concerned primarily with environmental issues such as safe water, food, sanitation, and infectious disease prevention. In the closing years of the 20th century, Congress turned its attention to legislation and regulation in healthcare, perhaps the two most striking examples of which are the Clinical Laboratory Improvement Amendments of 1988 (CLIA ’88) and the Health Insurance Portability and Accountability Act (HIPAA). The “four horsemen” of federal laws and regulations that are particularly pertinent to pathology and laboratory medicine services are CLIA ’88, HIPAA, the Occupational Safety and Health Administration (OSHA) standards for occupational exposure to blood-borne pathogens, and the so-called Stark regulations that prohibit self-referral by healthcare providers.

CLIA ’88 CLIA ’88 represents the foundation of regulation and accreditation of laboratory testing in the United States (1, 2). Subsequent to a series of Pulitzer Prize–winning newspaper articles that appeared in the Wall Street Journal in 1988 that described major flaws in cytopathology testing in so-called “pap mills” and laboratory testing practices in physicians’ offices, a series of congressional hearings resulted in the very rapid passage by Congress and the signing into law of the CLIA ’88 amendments by the president. Although the law was enacted in 1988, the regulations were not implemented until 1992, in part because of a prolonged and contentious rule-making process involving two federal agencies, the Health Care Financing Administration, now called the Centers for Medicare and Medicaid Services (CMS), and the Centers for Disease Control and Prevention (CDC). An extended public commentary period ensued, characterized by lobbying efforts by organized medicine and by the laboratory equipment manufacturing industry as well as by groups representing hospitals

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to make the regulations less stringent. At the same time, organizations representing laboratory professionals argued to maintain existing personnel and quality control standards. Although changes to the regulations continue to be made, the amendments in their current form have been well established for many years and are applicable to all testing performed on humans, with few exceptions and without regard to venue of testing (site neutrality). The regulations encompass personnel standards, patient test management, quality assurance, proficiency testing, provisions for inspection and certification, and both civil and criminal penalties for noncompliance. Inspection and accreditation options are multiple and include government and private-sector organizations such as the College of American Pathologists and The Joint Commission.

HIPAA Congress enacted HIPAA partially in response to public concerns about portability of employer-provided health insurance for workers changing jobs as well as related concerns about denial of insurance coverage for preexisting medical conditions. The administrative simplification components of the law—which were enacted very much below the radar of major insurance industry, hospital, and healthcare professional organizations—contain far-reaching standards concerning simplification of electronic transactions and the privacy and security of protected health information (PHI). The privacy standards do the following: • Limit the use and disclosure of PHI • Provide patients the right to access their medical records, to know who has accessed their records, and to request amendments to their records and restrict access to their records • Restrict disclosure to “minimum necessary” purposes • Establish criminal and civil penalties for improper use and disclosure and restrict access to records for research purposes The regulations permit the use and disclosure of PHI for treatment, payment, or healthcare operations (e.g., quality assurance, accreditation, certification, credentialing, and medical review) without consent or authorization and also allow for disclosure of PHI for treatment by another healthcare provider. More complete information can be found at http://www.hhs.gov/ocr/privacy/hipaa/understanding/ summary/index.html (accessed June 30, 2012).

OSHA Standards for Occupational Exposure to Blood-Borne Pathogens The standards for exposure to blood-borne pathogens were promulgated in 1991 by OSHA, part of the Department of Labor, in response to widespread concerns by organized labor—particularly unions representing healthcare

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and hospital workers—about the inadequacy of protective practices, equipment, and other safeguards for employees with regular and predictable exposure to body fluids and substances with the potential to transmit human immunodeficiency virus and hepatitis B virus. More complete information can be found at http://www.osha.gov/SLTC/ bloodbornepathogens/index.html (accessed June 30, 2012).

The Stark Laws The Stark regulations constitute a series of congressional actions enacted sequentially over a period of several years that severely limit referral of a wide variety of services— including laboratory testing—to entities in which the referring provider has a financial stake. The regulations are named for Rep. Fortney “Pete” Stark (D–CA), who was the legislative sponsor of the initial regulations enacted in 1992 (Stark I) that prohibited a physician from making Medicare referrals for clinical laboratory services if the physician or an immediate family member had any financial relationship with the laboratory. The Stark II legislation, enacted in 1993, extended the regulations to Medicaid and broadened coverage to 10 additional health services, including, among others, occupational and physical therapy, durable medical equipment, radiology, and radiation therapy. The regulations are very complex and difficult to interpret and have spawned a new industry of lawyers and consultants specializing in the intricacies of the regulations. The Stark regulations have been regarded by some as inhibiting innovative and potentially beneficial restructuring of the relationships between healthcare providers and other entities. Enforcement by the government, particularly the Justice Department, is closely linked to other “fraud and abuse” enforcements under a variety of federal antikickback and “false claims” statutes (4). An area of concern to pathologists as well as hospital and independent laboratories has been the in-office ancillary services exemption under the Stark laws, which allows specialty physician groups (urologists, dermatologists, gastroenterologists) to “in-source” pathology professional and technical services into their office practices. The services are provided by affiliated or contracted pathologists and laboratory entities; revenue is diverted to the clinical practice. The exemption is supported by physician groups who argue, somewhat questionably, that provision of service in the office facilitates continuity and immediacy of patient care. A recent study from Georgetown University (17) demonstrated that self-referring urologists billed Medicare for approximately 72% more biopsies than urologists who derived no financial benefit from the pathology studies.

Liability Considerations Although the scope of this chapter precludes a discussion in detail, a presentation of legislative and regulatory influences on the practice of medicine and laboratory medicine

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is incomplete without mention of the enormous impact of the judicial system and medical liability concerns on pathology and laboratory practice. Decisions by juries and judges at primary and appellate levels as well as increasingly high monetary awards for noneconomic damages (“pain and suffering”) are increasingly having an impact on decisions that hospitals and physicians make concerning services to be offered and the circumstances under which services should be made available. This impact may also play a role in decisions concerning how laboratory medicine and pathology are practiced. Specific examples include concerns about the reporting of results from methods not approved by the Food and Drug Administration or decisions by blood transfusion services not to implement available screening tests for infectious markers absent clear mandates or regulatory requirements. Although neither of these practices constitutes violations of existing laws or regulations, concerns about possible future civil law claims of failure to follow “standards” may determine operational decisions by laboratory services. It is widely acknowledged that a major motivation for overutilization of laboratory and imaging studies is attributable to desires to avoid liability exposure.

The Future Regulatory Climate Under CLIA ’88 Congress conceived CLIA ’88 to protect consumers against shoddy and poor-quality laboratory testing, particularly in physician office laboratories and “pap mills” in which cytotechnologists were paid “by the slide.” Although widely viewed by the organized physician community as an intrusion into the practice of medicine as well as a regulatory overreach by the federal government and conversely by some segments of the professional laboratory community as a dangerous lessening of federal standards for testing personnel, CLIA has by now been generally accepted— albeit with some reluctance—by most interested parties as the law of the land, and it is unlikely that in the foreseeable future there will be serious legislative initiatives to repeal or significantly modify CLIA. The broad outlines of laboratory practice under CLIA will continue in the foreseeable future to include the following three features.

Personnel Standards and Quality Control Standards Personnel standards, quality control standards, and inspection requirements will vary with the complexity of testing categories. Some modification in quality control requirements will reflect changes in technology, particularly the advent of unitized, self-contained testing platforms. Recent changes have included the promulgation of a single set of quality control standards for all nonwaived testing (moderate and high complexity) as well as a reduction in frequency requirements for most specialties and subspecialties of testing (7).

Complexity Categories Complexity categories are based upon analyst training and experience in the testing performed as well as the operational characteristics of testing that is performed. The complexity categories may remain as (i) high complexity, e.g., histopathology, cytopathology, cytogenetics, blood banking, histocompatibility, and complex chemistry, hematology, and microbiology procedures; (ii) moderate complexity, for the bulk of routine hematology and chemistry procedures; (iii) provider-performed microscopy, encompassing a limited number of procedures (e.g., microscopic urinalysis) commonly performed in physician offices in conjunction with patient visits; and (iv) waived testing, performed in any location with essentially no quality control or personnel requirements and without any inspection requirement. Recent revisions have simplified complexity categories into waived and nonwaived categories only, although personnel requirements remain different for moderate- and high-complexity tests. Waived Testing In the decade since the regulations were implemented, the category of waived testing has undergone the most change, with a striking expansion of the original list of eight waived tests to the current number in excess of 1,000 procedures. Although many of these tests represent alternative analytic versions of common tests such as hemoglobin, occult blood, and cholesterol, more esoteric procedures have been approved in recent years (e.g., influenza virus testing, coagulation tests). There will be continuing efforts at the regulatory level to increase the scope and breadth of waived testing and continuing debate about the relative allocation of the responsibility for guaranteeing quality testing standards between the laboratories and the manufacturers of diagnostic systems. Changes to CLIA and Alternative Approaches Other changes to CLIA have been recently announced and include changed requirements for frequency of quality control, an increased regulatory focus on personnel qualifications and competency, and increasing emphasis on the role of the laboratory director for laboratory operations and ensuring the quality of testing (21). The CMS has revised the guidelines to include risk management principles similar to those used in manufacturing industries. A general consensus exists that the major components of CLIA pertaining to the complexity model, personnel standards, patient test management, quality control, and proficiency testing will not change substantially. Change could occur through legislative action, but incremental change through regulatory action is more likely and would be far less likely to result in disruptive impacts on laboratory practice. Because of the rapid momentum of advances in genomic medicine and the promised transition

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to next-generation sequencing and other technologies, the clinical, societal, and privacy implications of these modalities will invite regulatory attention (8, 11). It is probable that increased oversight of lab-developed tests (LDTs) will occur. The Food and Drug Administration (FDA) has draft guidelines under review addressing FDA concerns about the ability of test manufacturers to bypass FDA approval through the CLIA process, which does not address clinical validity. The FDA is expected to seek the ability to review LDTs based on a risk model. An alternative approach is contained in a bill that has been introduced into Congress (H.R. 3207) that would move regulatory oversight from the FDA to CLIA and thus allow the CMS, through CLIA, to review tests for clinical validity. As of this writing, the FDA has not yet released its proposals for comment, and the future of the House bill is uncertain.

The Impact of HIPAA In the opinion of many knowledgeable observers, HIPAA may have been the most important legislative and regulatory event impacting healthcare in the first decade of the 21st century. The final privacy rule regulations specified that by April 14, 2003, laboratories that transmit data electronically must implement policies and procedures safeguarding against unauthorized use of or disclosure of identifiable patient information.

Laboratory Requirements To comply with the regulations, a laboratory is required to do the following. • Designate a “privacy official” to assume responsibility for developing and implementing privacy rules and procedures. This individual may have other responsibilities. • Develop specific policies and procedures stating how PHI may be used and disclosed by its employees and agents and state how the laboratory intends to comply with the HIPAA rules. • Train all personnel on understanding and enforcing privacy policies and procedures. Documentation of training must be available. • Prepare a notice of privacy practices explaining how the laboratory will protect, use, and disclose PHI. While direct treatment providers must make a goodfaith effort to obtain written acknowledgment from the patient of provision of the notice of privacy, pathologists and laboratories, as indirect providers, are exempt from this requirement. • Establish administrative, technical, and physical safeguards for PHI. These may include periodic audits, password protection schemes, and physical safeguards such as secured backup copies of patient data.

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The Future of HIPAA In view of these mandates, it is now obvious that HIPAA has had enormous operational and economic impacts upon the entire healthcare industry. The scope and extent of these impacts and efforts to respond to the regulations have required the expenditure of significant economic and human resources and will continue to do so in the future. Although the societal benefits of HIPAA in safeguarding patient privacy are obvious, the law and the implementing regulations clearly constitute another unfunded mandate for an already heavily burdened healthcare system.

Bioterrorism Recent History In the wake of the events of September 11, 2001, credible threats of terrorism that include the potential for use of nuclear, chemical, and biological agents have had significant impacts on the funding and costs of providing laboratory services. The identification of clinical cases and environmental contamination attributable to deliberate dissemination of Bacillus anthracis through the mail system during the early part of 2002 brought this lesson home to a number of microbiology laboratories. These events and the fear of additional terroristic uses of other infectious agents—not to mention the concurrent emergence of other “natural” biological threats to public health such as acute respiratory syndrome, West Nile, Middle East Respiratory Syndrome, bird flu, and other variant influenza viruses—have not only alarmed the public, the government, and the medical and microbiological community, but also focused attention on technical capabilities, biologic safety infrastructure, and staff preparation. Future Impact The potential for utilization of these agents for terroristic purposes remains a concern. Public anxiety and governmental action in response to these threats may have significant budgetary impacts on a wide variety of healthcare facilities, including laboratories. These budget impacts will reflect training costs, acquisition and deployment of equipment, facility modification, and other unfunded mandates, such as the CDC-issued rules (August 2002) requiring all laboratories to report to the government whether they are in possession of “select agents” that could be used in a bioterrorist attack. The rule is available on the CDC website at http://www.cdc.gov/od/ohs/1rsat/possess.htm (accessed June 30, 2012). Increased federal concerns about laboratory preparedness may generate some increased funding for specific areas of the laboratory; it is more likely that in the event of actual or suspected biological attacks, the impact on all areas of the laboratory will be to significantly increase

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utilization of laboratory services not only for unusual diagnostic challenges but also because of potentially massive increases in demand for routine laboratory services required for the care of large numbers of acutely ill patients.

Long-Term Effects: Legislation, Regulation, Accreditation It is important to remember that legislative and regulatory mandates—both of which are closely intertwined with the requirements of accreditation and certification organizations—play a significant role in the delivery of healthcare services and the conditions of access to those services. In general, in addition to other economic imperatives, increases in the often fixed “overhead” costs of regulations tend to be more easily absorbed by larger entities, particularly in an industry in which prices and payments are often fixed by regulatory authority or subject to market force constraints. Thus, any increase in regulatory burdens can be expected to accelerate the trend toward aggregation of laboratory services into larger and larger entities. The trend toward aggregation in the laboratory industry will be secondary to the larger trend of consolidation of hospitals and hospital systems in response to economic considerations and changes in the healthcare system driven by the Affordable Care Act or successor regulations and legislation.

Quality, Value, and Patient Safety The landmark report of the Institute of Medicine (IOM) published in 1999, To Err Is Human: Building a Safer Health Care System (13), has had a transformative impact on the agenda of medicine and healthcare and, therefore, on the practice of pathology and laboratory medicine. The assertion that as many as 98,000 patients die annually because of medical error has driven initiatives to improve the quality of care and to minimize risk to patients. A 1999 study (3) claiming that medical errors were responsible for an estimated annual cost of $17 to $29 billion further highlighted the criticality of this problem. Many educational, administrative, and regulatory changes at both the national level and at the level of individual hospitals and caregivers have been deployed. Some have argued that the numbers cited in the IOM report may be excessive (5), and others have argued that they underestimate the gravity of the problem. Most agree, however, that efforts have met with variable degrees of success, although the consensus is that the ambitious goals of the IOM report have not been met (3, 5, 15). The impetus to imbed value, quality, and patient safety into everyday healthcare will continue and will become linked to the efforts to make healthcare more efficient and less costly. Hospital and physician “report cards” are available from both private and governmental sources (9) and were initially introduced as voluntary efforts to spur improvement and to provide consumers and

payors with data concerning performance. However, the use of such data to provide both rewards and punishments through payment and public disclosure has started (19).

The Patient Safety Movement The societal, market-driven, and political pressures for increased standardization in healthcare have led to a variety of initiatives to monitor and improve patient safety by many powerful private-sector and government entities. Many of these entities serve as a source of comparative data, performance-based ratings, and benchmarks. It is likely that as the impact of these initiatives becomes apparent, demands for external standards will become more prevalent in all areas of medical and laboratory practice— scientific, operational, fiscal, and legal. The interactions between the above-described initiatives for standardization, patient safety, and error prevention with the movement for evidence-based medicine will be considerable and important. It is already evident that the prevention of adverse events (i.e., error) has been confounded with other aspects of provision of optimal care (16). It may be reasonable to predict that standardization of laboratory practice arising from multiple sources, such as consolidation of laboratories and laboratory testing platforms, automation, bar-coding, and other “fail-safe” patient and specimen identification systems, including standardized nomenclatures and languages (18), will have a positive impact on patient safety outcomes. The availability of standardized nomenclatures and languages that will allow for coded capture, aggregation, and retrieval of granular (detailed) data expressed in a variety of terminologies and across a variety of information systems will become increasingly important in patient safety and quality improvement efforts as well as for more mundane operational applications. The efforts of public and private sector organizations to promote increased standardization and improvement in educational practices will also play a positive role (20). Several recent trends including growth in point-of-care testing, increasing autonomy of nurse and mid-level practitioners, and a well-informed consumer-oriented public will generate initiatives to increase patient involvement with and control of their medical care. This will facilitate patients’ direct access to clinical laboratory tests, already provided by some laboratories subject to state regulations. The Department of Health and Human Services, the Centers for Medicare and Medicaid Services, the Centers for Disease Control and Prevention, and the Office for Civil Rights proposed a rule in September 2011 that will allow patients to have direct paper or electronic access to their laboratory results from the performing laboratory. Many arguments have been made in favor of and opposing this rule (10). If the rule is implemented, changes in both the CLIA and HIPAA regulations will need to be made, and the impact on laboratory operations and costs is likely to be significant.

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The continuing push to improve quality and patient safety coupled with cost control mechanisms will increasingly limit payment to laboratories and pathologists, although the impact on the latter is more likely to mirror reductions in payment to all physicians. Medicare’s Physician Quality Reporting System (PQRS) has been in place for several years as a form of pay-for-performance. The latter is a generic approach to payment for hospital and professional services that provides additional payments for demonstrated performance of certain indicators. It is inevitable that the carrot of additional payment will eventually morph into the stick of reduced payment if indicators are not met successfully. This methodology is an early manifestation of a general move for bundled payment for services to replace fee-for-service. While this methodology of “payment for performance” has not yet materialized in the clinical laboratory arena, there are now five PQRS measures for pathology (use of reporting templates for breast, colon, and prostate cancer; documentation of Barrett’s esophagus; documentation of HER2 testing for breast cancer), and additional measures can be expected.

Issues Affecting Research and Academic Laboratories The future of academic laboratories—the traditional source for much of the innovation and new knowledge that has infused American medicine—remains cloudy and is linked to the future of academic health centers (12, 6). This uncertainty reflects many realities, including the fiscal perils facing academic health centers as they attempt to fulfill their traditional missions of patient care, education, and research in the face of decreasing clinical revenues, flat or diminishing support for teaching activities, and heightened competition for research funding as NIH research support declines.

Stem Cell Research An area of research and laboratory practice that will be critically impacted by political developments, and therefore by complex and interrelated legislative, regulatory, and administrative events, is stem cell research and, eventually, the application of so-called cloning technology to medical practice in two broad areas: tissue and organ transplantation and reproductive technology. The cloning research issue is closely tied to the highly emotional controversy over abortion and genetic manipulation and has elicited strong and conflicting opinions from various constituencies, including the research and medical community, religious groups, and organizations committed to the research and treatment of specific diseases. Absent some compromise solution to this controversy, the continuing uncertainty of funding and the threat of federal and state restrictions on research in both reproductive and stem cell cloning will

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impede research into stem cell technology and may drive investigators to other countries that are more supportive of stem cell research. The highly specialized technology suggests that clinical applications of stem cell research will take place in dedicated laboratories. However, over time, some of these functions may migrate into larger general laboratory settings to take advantage of the economic and operational advantages of centralization.

Biorepositories Concurrent with the explosive growth of molecular genetic testing and the development of “personalized” medicine, the need for biospecimens that can be used for research linking particular therapies to specific disease entities such as neoplasms has become imperative. The increasing research and clinical demands for validated biospecimens can be expected to lead to significant growth in the number and size of biorepositories. Although many of these will be located in academic and research settings, it is possible that other clinical and commercial entities may establish such facilities as well. Although many biorepositories (biobanks) have established policies and procedures that ensure appropriate specimen sourcing, identification, accessioning, storage, processing, and distribution, there is little data concerning the overall compliance of biorepositories with good practice. The College of American Pathologists has recently inaugurated an accreditation program that attempts to provide documentation and confirmation of good practices (see http:// www.cap.org/apps/docs/laboratory_accreditation/lap_info/ bio_brochure_042011.pdf, accessed June 30, 2012).

Restrictive Patents and Restraints on Use of Human Tissues Two other areas of concern to research and clinical laboratory practice are restrictive patents and excessive restraints on the use of human tissue and data for research and clinical purposes. In general, the laboratory community has opposed attempts to patent life forms and has argued that attempts to do so will impede scientific progress, lead to high laboratory testing costs, and impede access of patients to necessary testing. This view is strongly supported by professional and public organizations in the United States, Canada, and Europe, but industry and portions of the academic research community argue that to eliminate genetic patenting will impede research. Recent decisions by the Supreme Court that the human genome cannot be patented will undoubtedly have a major impact on the ability of laboratories to develop modifications of genetic tests previously restricted by patents as well as spur competition by alternative suppliers. However, there remains considerable uncertainty about the ultimate impact of the decision on the ability to patent diagnostic tests based upon genetic principles.

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Summary Political, social, and economic trends and events are inextricably intertwined and often interact with the legislative and regulatory arena in unpredictable ways. The economic future of healthcare funding in the United States remains uncertain and subject to continuing competition for resources within and external to the healthcare industry. As U.S. healthcare costs continue to rise and significantly exceed costs in other developed economies, it is predictable that legislative and regulatory mandates as well as market forces will constrain that rate of growth and impose significant reductions on available resources for all areas of healthcare including the laboratory and pathology. It is also predictable that the allocation of resources will increasingly take into consideration the value and effectiveness of services that are delivered. As hospitals respond to increasing economic pressures by seeking reductions in costs, laboratory services will be required to implement immediate and long-term reductions in costs. These may include, in addition to reduction in services and attempts to control utilization, enhanced deployment of front-end and tube-specific automation, robotic technologies, and consolidation of technologies on unitary testing platforms, middleware, and miniaturization. These initiatives will be inevitably accompanied by increasing concentration within the healthcare delivery and laboratory industry. Parallel phenomena will include increasing “commoditization” of the laboratory product, the growth of point-of-care testing, “consumerism,” and self-directed healthcare, including direct-access testing. All of these phenomena will occur in the context of the globalization of communication and other components of healthcare and laboratory practice. In tandem with those mandates, the medical model will shift to one dominated by a medical effectiveness and “a need to know” strategy that will compel a linkage between the gathering of patient data (testing), available therapeutic and management options, and positive outcomes (clinical relevance). Although the progression may be less rapid than predicted by some, I believe that the database of pathology and laboratory medicine—currently characterized by static and discontinuous phenotypic, quantitative, and morphological observations—will be superseded by an augmented and integrated continuum of morphologic, immunophenotypic, genetic-proteomic, and clinical information. All of these will be linked by increasingly sophisticated information systems that will integrate alphanumeric, graphic, and digital data in real time. Thus, the paradigm will shift from morphological and other classification schemata based on laboratory data to classification hierarchies that recognize biological heterogeneity and clinical relevance with an increased emphasis on specific disease entities susceptible to targeted therapies (“personalized or precision medicine” and “companion diagnostics”).

An interesting and important side effect of this emphasis for the laboratory and pathology community will be the blurring of the traditional distinction between anatomic and clinical pathology. The time frame in which these predictions will take place will be influenced by the rate of development of technology, by the extent to which healthcare will remain as a social contract or will be replaced by a purely marketplace ethic, and to an unpredictable extent by external events totally unrelated to healthcare. KEY POINTS Laboratory practice is currently constrained and will be increasingly so in the coming years by political, social, economic, and regulatory considerations. ■ The most important of the regulatory constraints will be CLIA ’88, HIPAA, OSHA, and enforcement under the Stark regulations as well as related fraud and abuse statutes. ■ Funding and payment restrictions, concerns about legal liability, patient safety, and a changing medical model emphasizing effectiveness and evidence-based care will also significantly impact how laboratory services will be delivered. ■

GLOSSARY Centers for Disease Control and Prevention (CDC) The federal agency within the Department of Health and Human Services with broad responsibility for disease monitoring and prevention, epidemiology and statistics, and laboratory practice. Centers for Medicare and Medicaid Services Formerly the Health Care Financing Administration. The federal agency within the Department of Health and Human Services with primary responsibility for payment and payment standards for the Medicare and Medicaid programs. Clinical Laboratory Improvement Amendments of 1988 (CLIA ’88) A federal law and regulations constituting the foundation of regulation and accreditation of all laboratory testing in the United States. The amendments are applicable to all testing performed on humans in all locations. Complexity categories are based upon analyst training and experience as well as operational characteristics of testing that is performed. They include (i) high complexity (e.g., histopathology, cytopathology, cytogenetics, blood banking, histocompatibility, and complicated chemistry, hematology, and microbiology procedures); (ii) moderate complexity, for the bulk of routine hematology and chemistry procedures; (iii) provider-performed microscopy, encompassing a limited number of procedures (e.g., microscopic urinalysis) commonly performed in physician offices in conjunction with patient visits; and (iv) waived testing, performed in any location with minimal quality control and personnel requirements and without any inspection requirement. In 2003, a final rule was issued in the Federal Register that defined some new regulations and changed the categorization of tests to two categories (waived and nonwaived tests).

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Evidence-based medicine An approach to the teaching and practice of medicine that utilizes literature review and outcomebased studies of effectiveness and possible harm to patients, rather than tradition or anecdotal experience, to guide diagnostic and treatment interventions.

5. Brennan, T. A., A. Gawande, E. Thomas, and D. S. Studdert. 2005. Accidental deaths, saved lives, and improved quality. N. Engl. J. Med. 353:1405–1409.

Health Insurance Portability and Accountability Act of 1996 (HIPAA) Federal regulations establishing conditions for eligibility and transferability of health insurance and provisions for “administrative simplification” that promulgate far-reaching standards concerning electronic transactions of health data and the privacy and security of protected health information.

7. Duncan, H. 2008. An update on the Clinical Laboratory Improvement Amendments of 1988. Lab. Med. 39:69–72.

Indirect provider Under the HIPAA regulations an indirect provider is an entity or individual (e.g., laboratory or pathologist) without a direct treatment relationship to a patient. The indirect provider delivers healthcare based on the orders of another provider and typically provides services or reports the diagnosis or results to another provider.

6. Campbell, E. G. 2009. The future of research funding in academic medicine. N. Engl. J. Med. 360:1482–1483.

8. Evans, J. P., and J. S. Berg. 2011. Next-generation DNA sequencing, regulation, and the limits of paternalism. JAMA 306:2376–2377. 9. Fung, C. H., L. Lim, C. Mattke, and P. G. Shekelle. 2008. Systematic review: the evidence that publishing patient care performance data improves quality of care. Ann. Intern. Med. 148:111–123. 10. Giardina, T. D., and H. Singh. 2011. Should patients get direct access to their laboratory test results? JAMA 306:2502–2503. 11. Hudson, K. L. 2011. Genomics, health care, and society. N. Engl. J. Med. 365:1033–1041. 12. Iglehart, J. 2011. The uncertain future of Medicare and graduate medical education. N. Engl. J. Med. 365:1340–1345.

OSHA A federal standard for occupational exposure to bloodborne pathogens requiring the use of protective equipment and other safeguards for employees at risk of occupational exposure.

13. Institute of Medicine. 1999. To Err Is Human: Building a Safer Health Care System. National Academy Press, Washington, DC.

Stark regulations Federal regulations prohibiting referral of laboratory and other health services to entities in which the referring provider has a financial interest.

15. Leape, L. L., and D. M. Berwick. 2005. Five years after To Err is Human. JAMA 293:2384–2390.

REFERENCES 1. Bachner, P., and W. B. Hamlin. 1993. Federal regulation of clinical laboratories and the Clinical Laboratory Improvement Amendments of 1988. Part I. Clin. Lab. Med. 13:739–752.

14. Kundera, M. 2002. The great return. The New Yorker. May 20.

16. Leape, L. L., D. M. Berwick, and D. W. Bates. 2002. What practices will most improve safety? Evidence-based medicine meets patient safety. JAMA 288:501–507. 17. Mitchell, J. M. 2012. Urologists’ self-referral for pathology of biopsy specimens linked to increased use and lower prostate cancer detection. Health Affairs 31:741–749. 18. Spackman, K. 2002. SNOMED CT unlocks the power of clinical data for pathologists. Lab. Med. 33(3):1–4.

2. Bachner, P., and W. B. Hamlin. 1993. Federal regulation of clinical laboratories and the Clinical Laboratory Improvement Amendments of 1988. Part II. Clin. Lab. Med. 13:987–994.

19. Wachter, R. M., N. E. Foster, and R. A. Dudley. 2008. Medicare’s decision to withhold payment for hospital errors. Jt. Comm. J. Qual. Patient Saf. 34:116–123.

3. Berwick, D. M., and L. L. Leape. 1999. Reducing errors in medicine. BMJ 319:136–137.

20. Wilson, M. L. 2002. Education and training: practice makes perfect. Am. J. Clin. Pathol. 118:167–169.

4. Bierig, J. R. 2002. Liability and payment issues in the selection of pathology assays. Arch. Pathol. Lab. Med. 126:652–657.

21. Yost, J. 2012. CLIA update: what’s on the agenda for 2012? Natl. Intelligence Rep. 12(6):4–7.

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APPENDIX 51.1 Websites Centers for Disease Control and Prevention CDC regulations concerning guidelines for reporting select agents potentially utilized for bioterrorism. http://www.cdc.gov/od/ohs/1rsat/possess.htm (accessed June 30, 2012)

U.S. Department of Health and Human Services Federal rules concerning patient privacy regulations contained in HIPAA law. http://www.hhs.gov/ocr/privacy/hipaa/understanding/summary/ index.html (accessed June 30, 2012)

College of American Pathologists Description of new CAP accreditation program for biorepositories. http://www.cap.org/apps/docs/laboratory_accreditation/lap_info/ bio_brochure_042011.pdf) (accessed June 30, 2012)

U.S. Department of Labor Federal rules concerning prevention of infection with bloodborne pathogens. http://www.osha.gov/SLTC/bloodbornepathogens/index.html. (accessed June 30, 2012)

52 Introduction Essential Role in Healthcare • Other Continuing Imperatives • A New Workforce • Laboratory Paradigms • The Old Laboratory • The New Laboratory • The Changing Workforce • Creating Conditions of Good Work

The Changing Nature of Work

The Future of the Clinical Scientist Workforce Diana Mass and John R. Snyder

The Consultation Role and Process • Consultant Skills • The Internal Consultant

Summary KEY POINTS GLOSSARY REFERENCES

OBJECTIVES To describe laboratory practices that provide value-added services To discuss the information society as it relates to clinical laboratory services and patient safety needs To define the “knowledge worker” and advocate the benefits of clinical scientists who perform this role To compare and contrast the old laboratory and new laboratory paradigms and determine the value of the new laboratory as it improves patient safety To describe conditions of good work, which can have a positive impact on current clinical laboratory vacancy rates To explain the consultation process and determine the benefits in clinical laboratory practice as it relates to patient safety To apply systematic reviews (ask, acquire, appraise, analyze, apply, and assess) in determining evidence-based decisions To characterize four interactive skills that contribute to the effectiveness of consulting practice To describe the various competencies of successful consultants To assess the benefits to the healthcare delivery system when clinical scientists act as consultants The task is not so much to see what no one yet has seen, but to think what nobody yet has thought about that which everybody sees. Arthur Schopenhauer, 1788–1860

Introduction

Clinical Laboratory Management, 2nd Edition Edited by L. S. Garcia ©2014 ASM Press, Washington, DC doi:10.1128/9781555817282.ch52

Today’s laboratory manager faces a unique set of challenges in a healthcare environment shaped by financial constraints and increasing federal regulation. An imperative exists to ensure quality while exercising prudent fiscal responsibility, and this within the context of a dramatically changing workforce (12, 38) that must better serve patients in an era of expanding knowledge and rapid change. Further, “value-added” laboratory services continue to be today’s watchword because customer (patients, physicians, administrators, etc.) satisfaction is necessary to achieve the goal of long-term sustainability and economic success for the laboratory (22, 38). The focus of this chapter is this value-added service, that is, service that addresses effectiveness (Does it work?) as well as cost and efficiency. This can only be accomplished if the right test is ordered and interpreted properly. Regardless of how accurate and 907

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precise the result is, it is of no value unless it contributes to appropriate and timely diagnosis and treatment (4). Thus, the future workforce not only must provide accurate and reliable laboratory results but also must be prepared to interact with healthcare providers in a consultative manner regarding appropriate test utilization (20, 22, 31, 38).

Essential Role in Healthcare Traditionally the information provided by the clinical scientist (clinical laboratory scientist/medical technologist) workforce has been essential in supporting the diagnosis and treatment of patients. There is no doubt that their expertise has provided information that physicians require to make critical decisions regarding their patient care responsibilities (4). In 1985, Strandjord estimated that 45% of medical decision making relied on information generated by laboratory tests (52). Today this number is estimated to be 70% (21). The Mayo Health System demonstrated that the laboratory contributes as much as 94% of the objective data in a clinical record. Furthermore, this information is accessed as often as 200,000 times per day as evidenced by retrievals from an electronic medical record (22). Thus, there can be no doubt that laboratory services are essential to the delivery of healthcare. Additionally, a knowledgeable and committed workforce that provides clinical laboratory consultative services by communicating directly to healthcare providers regarding appropriate testing options is now increasingly essential. A recurring theme is the need to improve laboratory services particularly in the preanalytical and postanalytical phases of the laboratory service continuum (3). Studies have shown that the greatest number of errors occurs in the preanalytical and postanalytical phases (6, 7), and thus the practices in these services provide the greatest opportunity for improvement. The Laboratory Medicine Best Practices (LMBP) Initiative, sponsored by the Centers for Disease Control and Prevention since 2006 (8), seeks to change the status quo. The overall purpose of this effort is to improve the quality of laboratory medicine by promoting the use of effective, evidence-based practices. Using methods adapted from other tested systematic review methods, the LMBP method referred to as the A-6 cycle (10) has conducted systematic evidence reviews to evaluate and identify practices that improve healthcare quality outcomes consistent with the Institute of Medicine’s quality aims (safe, timely, effective, efficient, equitable, and patient-centered) (27). An evidence-based approach is applied through the systematic synthesis and appraisal of existing evidence to answer questions and solve problems. The A-6 cycle has six steps: ask, acquire, appraise, analyze, apply, and assess. This evidence is used to evaluate practice effectiveness and thus help clinical scientists and other healthcare stakeholders determine what is effective, for whom, and in what settings. With this type of evidence, consultants can

recommend medical laboratory strategies to change protocols, procedures, or practices (50). Engagement in the preanalytical and postanalytical phases of laboratory service signals a fundamental shift in the nature of laboratory work. The shift is away from a sole focus on technology and the performance of procedures and toward an enhanced focus on the generation of laboratory information, an “information revolution” in laboratory medicine. Inherent in this information revolution are new tasks related to gathering, distributing, and adding value to the information provided by clinical laboratories (25, 46). More than 20 years ago, Peter Drucker foresaw the transformation from an industrial society to an information society (15, 16). He noted a new era in information technology, one in which information concepts would take the place of a focus on data collection, storage, transmission, and presentation. Drucker proposed that the question, “What is the meaning of information and its purpose?” would help define a hierarchy of information. Indeed, data as simply raw descriptors may help diagnostic and patient management efficacy. Data in context becomes information improving the care of patients. Information in light of experiences and judgment becomes knowledge, improving therapeutic efficacy and effectiveness. Outcome-based testing protocols support enhanced service and aggregate cost savings but do require workers with expanded roles. Drucker coined the term “knowledge worker” for those fulfilling these expanded roles by gathering, distributing, and adding value to information. Throughout this chapter, the imperative for an information revolution in laboratory medicine practice will be described with corresponding implications for a future workforce composed of clinical scientists as knowledge workers.

Other Continuing Imperatives The Pew Health Professions Commission Report (1995) described an emerging transformation of traditional healthcare practice into “systems of integrated care that combine primary, specialty, and hospital services” that require extraordinary collaboration skills across all levels and types of healthcare professions (31). Almost two decades later this concept has materialized in the accountable care organization (ACO), a major component of current healthcare reform proposals (http://www.healthcare.gov/news/ factsheets/2011/03/accountablecare03312011ahtml, last accessed October 19, 2012). Nowhere is the change more urgent than in the clinical laboratory, where institutional goals can be achieved only by effectively collaborating with other healthcare practitioners to enhance the quality of diagnostic and therapeutic decisions. Subsequent to the Pew Report, the 1999 Institute of Medicine report To Err Is Human: Building a Safer Health System (27) was published, stating that as many as 98,000 people die annually in U.S. hospitals as a result of medical

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errors. This stunning statistic does not even represent the additional deaths associated with missing a diagnosis from failing to order a laboratory test or incorrectly interpreting test results (29). Two years later, in 2001, the Institute of Medicine report Crossing the Quality Chasm: A New Health System for the 21st Century reinforced the critical necessity to decrease medical errors (26). The requirement for educating physicians to utilize the appropriate tests and understand their clinical significance may never have been greater than it is now. This is not a new issue. The call for the laboratory to accept the responsibility to directly communicate to physicians regarding proper test utilization has been discussed for over 30 years (13). Unfortunately, the will and courage in laboratory management to do so have been lacking. The parochial view of providing only test results and algorithms will not lead to optimal patient care or financial success. Appropriate utilization of the clinical scientist workforce will contribute to enhanced patient safety and help to ensure that fiscal objectives are met (12). Now the clarion call is to be patient-centered. Progressive management is looking for ways to implement practices that improve patient outcomes and are patientcentered. Clinical laboratory scientists/medical technologists have for decades been taught clinical correlation with disease status but have only recently been expected to apply this knowledge in practice. In part this may reflect resistance from the physician community but may also reflect insufficient leadership on the part of the laboratory community to further this agenda. Consequently, an underutilized laboratory workforce may be one of the factors contributing directly to some of the safety, efficiency, and effectiveness problems plaguing healthcare. Engaging laboratory scientists in the pre- and postanalytical phases of testing requires a fundamental shift in operations. Few scientists are engaged in the input subsystem (physician order and requisition) despite their unique understanding of the subtle differences in testing procedures. Similarly, few scientists are consulted on the output subsystem (physician review, interpretation, and appropriate action) despite their knowledge of predictive value and potential limitations of laboratory results (28). To prepare and deploy a knowledge-based laboratory workforce, and indeed legitimize the clinical scientist worker title, laboratorians must be engaged in the testing process as a scientific process, from posing hypothetical answers, through generation and analysis of information to illuminate those answers, to considering the patient care outcome of those answers. If the clinical scientist staff is more appropriately deployed in an interactive, consultative role in improving test utilization, it is expected that unnecessary testing will diminish, which will have a very positive impact on the laboratory’s budget. Additionally, a laboratory is most cost-effective if

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the staff is used at the highest level of capability and potential, not their lowest (31).

A New Workforce The emergence of clinical scientists as consultants represents a natural evolutionary growth in the role of the clinical laboratory profession as it adapts to a changing environment. This emerging role is being fostered not only by the need to improve laboratory test utilization (34), as already discussed, but also by the extraordinary growth of decentralized testing (47). In addition, the vast growth of molecular testing, not only for familiar analytes or organisms, but for specific new and esoteric disease markers, has created a need to improve communications between clinical scientists and healthcare providers. The increasing complexity of the clinical laboratory sciences is causing many physicians to seek information and to use interpretive guidelines, such as disease-specific care maps, necessary to make optimal and cost-effective use of the laboratory. These guidelines were first evidenced following the diagnosis-related group initiatives as a means to reduce costs and provide more consistent patient care (53). Rapid advances in clinical laboratory technology and diagnostics have made it nearly impossible for physicians and other healthcare providers to stay abreast of available tests and their implications for diagnosis and treatment (54). As primary care increasingly devolves to nonphysician providers, the need for guidance from the laboratory will certainly increase. Fueling this process are the medical-necessity guidelines released by the Centers for Medicare and Medicaid Services, formerly known as the Health Care Financing Administration, which prohibit Medicare and Medicaid from reimbursing for Part B services that are not medically necessary and reasonable for the diagnosis and/or treatment of the disease suspected (2). These guidelines have directly affected laboratory test utilization; however, there still are cases of misutilization and, more importantly, underutilization. The clinical scientist is a natural link between the clinical laboratory and other providers or patients on matters of test selection, specimen collection, interpretation of test results in light of specimen quality and sources of interference, and patient education. Laboratory professionals should be able to provide information, solve problems, analyze situations, and implement decisions related to laboratory testing (29). A good example is sepsis, a primary cause of death in hospitals and a condition in which early organism identification and antimicrobial susceptibilities are vital to survival. Clinical scientists have a critical opportunity to consult with healthcare providers regarding various diagnostic tests that can identify the cause of sepsis in the early stages, thus improving patient outcomes (17). The second development, decentralized and pointof-care testing, reflects a variety of incentives and

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technological innovations that have caused a shift of diagnostic testing outside of hospital and private laboratories. Decentralized testing continues to grow with respect to types and numbers of tests because of the increased availability of less labor-intensive, more compact, and inexpensive equipment as well as reliable diagnostic kits that offer a wide range of testing. At these sites, physicians and other healthcare providers require advice and instruction on clinical laboratory practice and management (35). An example of this is the emergency department’s use of different cardiac markers and other analytes to diagnose specific conditions in patients presenting with shortness of breath (48). This new consultative role will enrich the work of clinical scientists who desire new responsibilities that are beyond the process of producing a test result. Now an additional set of skills is also valued: skills to determine whether a test should be done at all and that assist physicians and other healthcare professionals to use the laboratory appropriately. Clinical scientists are well practiced in problem solving. Now we need to take these skills outside of the laboratory to the source of potential problems and begin to prevent problems by interacting with physicians and other healthcare providers to ensure better patient care and patient safety (31, 36). It is important to recognize that clinical scientist knowledge workers do both knowledge work and “manual work” (16). Performance of a laboratory procedure constitutes manual work. Knowledge work related to the laboratory procedure begins with data analysis and the use of personal intellectual capital (experience). Knowledge work also includes consultation with other clinical service providers (pooled intellectual capital) and electronically available intellectual capital. This new workforce of clinical scientist knowledge workers has some unique characteristics, which managers will need to recognize and support (15, 49): • Knowledge workers are specialized. • They are able to acquire and supply theoretical and analytical knowledge. • They are learning-based, prepared through formal education. • They exhibit the habit of lifelong learning. Figure 52.1 The new interactive laboratory model. Adapted from reference 3. doi:10.1128/9781555817282.ch52.f1

• They are effective in teams. • They seek meaning in their work and advancement opportunities. • They require flexible, fully networked and connected environments. • They reach decisions by consensus, not command. Obviously, development and retention of knowledge workers in laboratory medicine poses a challenge.

Laboratory Paradigms Before describing specific consultative roles, it is useful to discuss the new interactive laboratory and compare it to the old, or traditional, laboratory. The concept of the new interactive laboratory was formulated (4) prior to the Clinical Laboratory Improvement Amendments of 1988 (CLIA ’88) (19); however, regulations promulgated under this law defined a total testing process as a continuum in laboratory practice that has been universally accepted by the laboratory community. The CLIA ’88 concepts of preanalytical, analytical, and postanalytical activities serve as benchmarks for laboratory practice. These three phases as they occur in the new laboratory are described by Barr’s (4) model of laboratory utilization (Fig. 52.1) as input, process, and output. The Old Laboratory Today, many clinical laboratories still operate according to the traditional laboratory model (Fig. 52.2), which is a linear, unidirectional flow process of one activity preceding the next activity. The major concern in this model is the quality of the test performance and the production features and internal organization of the laboratory (analytical phase). In the traditional model, the focus is on the science and technology and quality of test performance, and communication is almost nonexistent prior to the test request or after the result is released. In this model, the clinical laboratory is not concerned with clinical appropriateness or interpretation of test results (4). The New Laboratory The new laboratory model (Fig. 52.3) is an interactive process, and the scope of laboratory services is broader. In this model, the focus is not only on the quality of test

Input (Preanalytical)

Process (Analytical)

Output (Postanalytical)

Test Ordered

Test Performed

Test Interpreted

CHAPTER 52. THE FUTURE OF THE CLINICAL SCIENTIST WORKFORCE

Input (Preanalytical)

Process (Analytical)

Output (Postanalytical)

Test Ordered

Test Performed

Test Interpreted

data generated (process/analytical) but also on the clinical appropriateness of test requests (input/preanalytical) and the correct interpretation of and response to laboratory information (output/postanalytical). The involvement of the laboratory in the entire total testing process will have a positive impact on patient outcomes, improve the clinical relevance and value of the laboratory’s service, and greatly enhance the cost-effectiveness of the laboratory operation (4). To demonstrate how appropriate test utilization will promote a better integration of laboratory services into the patient care process, Barr’s model is briefly described. In the input phase, one must question if the test is appropriate for the stage of the clinical condition and if the time of

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Figure 52.2 Traditional laboratory model. Adapted from reference 3. doi:10.1128/9781555817282.ch52.f 2

specimen collection is correct. During the process phase, one must determine if, within clinically relevant guidelines, the test result is accurate and precise and timely with respect to the turnaround time needs of physicians. Finally, in the output phase, one must evaluate if the results are properly interpreted and integrated into patient care or if data overload is confusing or misleading physicians. An expanded role in this case is to determine the effectiveness of the laboratory services and the impact on patient outcomes. Barr’s model identifies the factors that affect the clinician’s decisions or actions at each step of the laboratory use process. It also demonstrates appropriate roles for the clinical scientist at each step of this process. Starting with the

Figure 52.3 Model of laboratory utilization. MT/CLS, medical technologist/clinical laboratory

scientists. Adapted from reference 14. doi:10.1128/9781555817282.ch52.f3

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clinician’s assessment of the patient’s condition, the laboratory utilization process proceeds in seven steps, which result in the application and integration of the test results into patient care. If a test is not clinically indicated or the laboratory’s precision is insufficient for that needed for clinical judgments, or if the result is misinterpreted, then an accurate and precise laboratory result is of no value. It must be acknowledged that such tests are of no value because they unnecessarily consume resources and may lead to diagnostic and therapeutic delay and patient harm (4, 31). Medical laboratory sciences and medical technology educational programs have historically included pathophysiology, clinical correlation, algorithms, and more recently clinical pathways in the curriculum (34). This clinical knowledge was always a part of the graduates’ knowledge and skill mix, but they have not been called upon to use it due to many historical factors including the laboratory management’s lack of vision regarding the role of this knowledge in the total testing process.

The Changing Workforce The clinical laboratory profession continues to experience unprecedented vacancy rates that will not be resolved in the near future (56). Statistical projections show that an overall expanding population that includes a large elderly group with chronic health problems will require a greater supply of healthcare professionals that currently are in short supply (11). Meeting staffing needs has become the laboratory manager’s most pressing problem on a daily basis. As the shortage of certified medical technologists/ medical laboratory scientists continues to grow due to fewer graduates entering the workforce and baby boomers beginning to retire, laboratory managers are evaluating staffing patterns needed for various testing methodologies. While laboratory managers prefer to hire the most highly educated personnel, the fact that these personnel are dwindling is causing managers to assess the requisite skills necessary to perform more routine procedures and hire less educated personnel to fill this need (5). The appropriate role of the various levels of clinical laboratory personnel is the focus of much discussion and contention today. While the staffing shortage is creating much debate about the appropriate personnel levels required to perform various types of testing, the concerns about patient safety are linked to the need to improve utilization in order to improve patient outcomes. These two concurrent challenges must be faced with creativity, innovation, and courage by laboratory management to provide laboratory services that not only are reliable but will also add value to patient care. Pontius interviewed the chief executive officers of the major laboratory industry manufacturers in a series of published articles. It is not surprising that most chief

executive officers believe that technology, automation, and robotics will substitute for large numbers of personnel (39–45). Indeed, this has been industry’s mantra for over 30 years (34). Many laboratories have moved to increasingly automated operations including front-end automation. This direction, however, has proved inadequate, as the demographic reduction in the workforce has deprived laboratories of individuals with the cognitive abilities necessary to provide accurate laboratory information for direct patient care. It is increasingly evident that technology and automation cannot substitute for qualified personnel to the extent originally suggested (37). Various factors, including the absence of state personnel licensure for clinical laboratories, have altered the mix of people with various levels of training and credentialing and have created serious problems for laboratory management. In a profession dictated by stringent rules regarding test performance, it is ironic and troublesome that rules regarding personnel are so ambiguous and inconsistent. The implementation of CLIA ’88 in 1992 forever changed laboratory management’s perception of the laboratory workforce. In essence, CLIA ’88 regulations gave many laboratory managers permission to use less qualified personnel to perform moderate-complexity tests. This option allowed these managers to hire individuals with less training and experience. In some laboratories, such as large reference laboratories, this option may work well if there is sufficient oversight. In other laboratories, particularly community hospital laboratories, this experiment may have proven to be problematic. Forecasting or speculation regarding workforce needs has almost become sport in various circles. Laboratory financial officers claim that they can effectively operate a laboratory with individuals who can simply function routinely. It is a fact that workforce needs can vary according to laboratory function and tasks. For example, a high-volume chemistry department in an urban reference laboratory with highly automated, sophisticated instrumentation may use support-level personnel to operate the equipment. However, if the instrumentation is highly sophisticated and complicated, supervisory oversight is even more necessary. Every laboratory operation will need to determine the appropriate staffing pattern for its unique analytical processes (5). Assuming that test information is reliable and accurate, the more important question with regard to service to the physician, and thus the patient, will be, What does this result mean with respect to patient care and safety (8)?

Creating Conditions of Good Work Contributing to the unprecedented vacancy rates in the clinical laboratory is not only the lack of graduates and predictable retirements but also the purposeful defection of qualified people for other opportunities that grant them

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respect, value their intellectual worth, and financially reward their contributions (38). In the search for profit or cost containment, clinical laboratories have neglected to provide meaningful and challenging opportunities for their workforce, who may feel justifiably underutilized. In the global economy, and now within the broader scope of laboratory practice as described above, knowledge workers are identified as the route to success (49). Using the clinical scientist workforce as one group of knowledge workers in ensuring patient safety will lead to clinical scientist careers that are viewed as meaningful, challenging, and rewarding (22). In addition, the fulfillment of good work leads to personnel recruitment and retention, which contribute to a much-needed stable workforce that will improve the budget’s bottom line (38). By the same token, support personnel with appropriate oversight can perform the more routine analytical processes in the laboratory. However, it should be kept in mind that there are analytical processes that require a more educated scientist because of the requirements for problem solving and diagnostic interpretation. Best conducted a task analysis to determine the appropriate staffing levels for various types of tests and found that in the laboratory environment there is a need for clinical scientists to perform various functions that are scientific and technical in nature as well as myriad roles in a supervisory and administrative capacity (5). Many talented scientists prefer work that typically exists in the traditional laboratory (internal operations and sophisticated technical analytical processes), while others prefer to be involved with patient care in a consultative capacity. All functions are necessary, however, and the latter needs to be cultivated and encouraged (22). Limiting laboratory work to the application of technology to produce patient care results, devoid of the connection to why the information is requested or how the information is used, has led to more than just underutilization of people; it has led to a sense of “invisibility,” to a lack of recognition, and ultimately to declining self-worth and the search for more challenging work. For work to be intrinsically rewarding to individuals, there must be a link between behavior and reward with the following psychological conditions (24): • Experienced meaningfulness • Experienced responsibility • Knowledge of results Unfortunately, job design for laboratory personnel has traditionally been accomplished using a technical approach based in scientific management rather than a psychological approach. The technical approach extracts “maximum efficiency from workers by designing narrow, repetitive jobs” (9). By contrast, a psychological approach to job design seeks

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to motivate workers with responsibilities that are broad and relatively autonomous from supervisors. Proponents of the technical approach advocate that simplifying work enables the worker to develop proficiency through repetition of tasks, producing a highly skilled, productive worker. Advocates of the psychological approach argue that repetitive tasks are not rewarding to individuals and that work should represent whole tasks with which the worker can identify, e.g., the preanalytical through postanalytical process in laboratory testing. Additional insight about creating conditions for good work is found in the motivating potential of a job. Hackman et al. (24) expressed a job’s motivating potential score (MPS) as follows: MPS = (skill variety + task identity + task significance) × autonomy × feedback The higher the MPS, the higher the motivation for the employee. Knowledge workers with a strong need for achievement and personal development will be most motivated if they are given a full opportunity to use their education and potential through consultative activities and have a sense of accomplishment in how patient care was affected by laboratory information rather than simple accomplishment of a procedure.

The Changing Nature of Work The Consultation Role and Process Consultants are individuals with recognized expertise who are asked by a client, in this case a healthcare provider, to apply their knowledge and skills to a given situation. A consultant is a facilitator and a specialist in determining needs and identifying resources. The primary value of a consultant lies in the expertise to accurately identify, analyze, and resolve the problems and needs of the client. Consultants can be categorized as either internal or external. Internal consultants are employees of the organization for which they consult, and many clinical scientists have been serving in this capacity without being formally identified as such in a job description. External consultants are proprietors of private consulting businesses. These individuals have total responsibility, authority, and accountability for their professional practices (33). The acceptance and legitimization of clinical scientists as consultants have been demonstrated by the federal regulatory authority of CLIA ’88, which specifies the position of a “technical consultant” who is responsible for the technical and scientific oversight of laboratory testing in moderate-complexity laboratories (19). In the last few years, clinical scientists have performed the functions as outlined in the regulations and have proven their abilities to occupy this role. Now, this role must be internalized in the clinical setting,

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where test utilization questions require the clinical scientist’s input to ensure good patient care and safety. The consultation process can involve the following general functions: evaluation of a problem, research, advising, planning, implementation, supervising, training, and evaluation of problem resolution. Consulting is aimed at helping a person or a group deal with problems and efforts to change. “Change” is the operative word, because effective consultants deal primarily with the effect of change on an organization and on its staff. Consulting involves people dealing with people, as opposed to people dealing with machines or mathematical solutions. Successful consultants understand organizational dynamics and the unique functions and boundaries of the consultant role. They are aware of the effects and conflicts of using new technologies. They understand change processes and the powerful influence of individual and organizational resistance. They are clear about the boundaries of their role, and they do not become involved in unproductive conflicts over authority and responsibility. They avoid using a narrow set of techniques without evaluating their relevance to a particular situation. The inability to understand these concepts and to apply these skills can produce barriers to positive outcomes, resulting in consultant services that are ineffectual (18, 23, 30, 33, 55).

Consultant Skills The consultant’s potential to affect the quality of laboratory testing depends on the effectiveness of the consulting practice. A combination of four interactive skills makes a successful consultant. A consultant must excel in the area of technical knowledge and skill. The successful consultant translates expert knowledge into useful application. The consultant’s knowledge must encompass the leading edge of the client’s technology; he or she should be aware of emerging technologies and should evaluate their application. If consultants have the best information and approach, or the most effective solution to a problem, but they do not have the ability to work with the client, then the result is negative and failure is inevitable. Therefore, a consultant must excel in interpersonal skills, the second area, which includes skills in leadership, communication, understanding value structures, conflict resolution, and teamwork. Good conceptual skills are another important requirement. A consultant must be able to see beyond the immediate problem, relate all of the pieces, and integrate them into a conceptual working whole (33). And finally, empowerment skills enable the consultant to demonstrate the confidence necessary to influence others (38). Consultative competencies have been identified and grouped according to the knowledge, skills, and attitudes necessary for success. These competencies are identified in Table 52.1 (30, 36). If we examine these competencies and relate them to a similar set for clinical laboratory sciences,

Table 52.1 Consultant competencies Knowledge areas Foundation in administrative philosophies, policies, and practices Knowledge of educational and training methods An understanding of the stages in the growth of individuals, groups, and organizations Knowledge of how to design and help a change process Knowledge and understanding of human personality, attitude formation, and change Knowledge of oneself: motivations, strengths, weaknesses, and biases Skill areas Communication skills: listening, observing, identifying, and reporting Teaching and persuasion skills: ability to impart new ideas and insights effectively Counseling skills to help others reach meaningful decisions Skill in designing surveys, interviewing, and other datacollecting methods Skill in using problem-solving techniques and in assisting others in problem solving Ability to work with groups and teams in planning and implementing change Ability to be flexible in dealing with all types of situations Ability to form relationships based on trust Attitude areas Attitude of a professional: competence, integrity, feeling of responsibility Maturity: self-confidence; willingness to take necessary risks; ability to cope with rejection, hostility, and suspicion Open-mindedness, honesty, intelligence Possession of a humanistic value system

we will find a great disparity. Since the traditional role and environment of clinical laboratory personnel are remarkably different from those of a consultant, this should be expected. Consulting is based on the behavioral sciences, an area that has not been stressed in the highly technical education of clinical laboratory personnel.

The Internal Consultant Internal consultants include clinical scientists who attend patient rounds in teaching hospitals and advise physicians on the selection of laboratory tests and those who work for reference laboratories as sales or client representatives and advise physicians on proper screening methods with appropriate reflex (follow-up) testing. The internal consultant role is one that usually does not require the establishment of a formal consultant-client relationship each time service is provided. When clinical scientists who are internal consultants earn the respect of their colleagues in the organization, they often become essential participants on the healthcare team.

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In an effort to retain qualified laboratory scientists, the University of North Carolina Hospital Core Laboratory developed the Laboratory Ambassador Program in 2004. This program provides a more challenging work experience and at the same time improves communications between the laboratory and nursing services. The goals of the program are to enhance employee satisfaction, modernize laboratory services, and improve patient outcomes. Clinical scientists are selected who demonstrate many of the characteristics listed above under Consultant Skills. Following a training program, the ambassadors visit the units and solve problems that potentially impede patient care (51). The consultant within the hospital environment can function in a variety of ways to improve patient care and enhance the efficiency of the facility. Too often the role of the laboratory has been perceived to begin with receipt of a specimen and end with reporting a result. On the contrary, there are numerous opportunities in the preanalytical and postanalytical phases of the testing process that require consultation in addition to clarification regarding the various aspects of the analytical phase. One important utilization activity that should be increased is the clinical scientist’s involvement in interpreting and integrating laboratory information in the management of the patient’s condition. Recent studies conducted at the Center for Quality Improvement and Patient Safety confirm this need (57). A successful program to improve laboratory utilization described by Luckey and Davis uses clinical scientists as “laboratory resource consultants.” Initially the program focused on the more frequently ordered tests and diagnosis-related groups. With time, the program expanded and provided other needed services. Refer to Table 52.2 for an example of internal consultant functions conducted by the laboratory resource consultant (31). Clinical scientists should be involved in providing guidelines for the selection of tests. What test will provide the most information? What type of specimen should be Table 52.2 Laboratory resource consultant tasksa Monitor utilization reports of high-volume test usage patients Communicate opportunities for improved utilization to case managers, physicians, and service line administrators Assess need for involvement of pathologists/administrators in utilization issues Review care paths to affirm appropriate laboratory utilization Consult with physicians, nurses, and laboratory professionals on current guidelines and protocols for proper test ordering Educate physicians and nursing groups on current and new policies and procedures regarding laboratory utilization, medical-necessity, and compliance issues Consult with laboratory administrators and practitioners about current laboratory utilization practices a

Adapted from reference 31.

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obtained? Under what conditions should the specimen be collected? When and how often? Involvement in discussions with physicians about the patient’s situation could avoid delays and inadequate or inappropriate samples, reduce the patient’s trauma due to unnecessary venipunctures, and improve the cost-effectiveness of patient care. Today there is a flurry of discussion that revolves around proper test utilization, and opportunities abound for clinical scientists to provide valuable information (1). The laboratory’s responsibility does not end when an accurate test value is obtained. The clinical scientist must ensure that the physician, nurse, therapist, pharmacist, or other healthcare provider understands the meaning of the results. The care these people give depends on such understanding. Whenever the test results are inconclusive or appear to be inappropriate, subsequent steps are indicated; the clinical scientist should discuss these steps with the physician or follow up with institutionally sanctioned protocols (4, 31, 32).

Summary It is clear that today both the nature of work in laboratory medicine and the workforce that performs testing and provides relevant information are in transition. Spurred by continued demands for efficiency and effectiveness and new demands for safety and better utilization, managers are challenged to rethink the development and role of clinical scientists. The broadened role of clinical scientists will include engagement with other healthcare providers in an interactive process about the relevance of clinical tests (input/ preanalytical), the generation of value-added test data and information (process/analytical), and the correct interpretation of and response to laboratory information (output/ postanalytical). The laboratory manager of the 21st century has the obligation not only to introduce a new laboratory paradigm but also to create, foster, and nourish a new workforce to bring about substantive change. KEY POINTS ■

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Work and the workforce in laboratory medicine are in transition. The broadened role of clinical scientists will require those who can gather and distribute information with a value-added component. The total testing process will become very interactive; the focus will encompass the preanalytical (appropriateness of test requests), analytical (generation of test data), and postanalytical (correct interpretation of and response to laboratory information) aspects of testing.

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Only clinical laboratory personnel effectively collaborating with other healthcare practitioners to enhance the quality of diagnostic and therapeutic decisions can achieve institutional goals. In the global economy and now within the broader scope of laboratory practice, knowledge workers (those who are specialized, acquire and supply theoretical and analytical knowledge, possess learning based on formal education, engage in lifelong learning, are effective team players, seek meaning in their work, are fully networked and connected, and reach decisions by consensus) will be identified as critical to achieving success.

GLOSSARY Barr’s model of laboratory utilization A model that identifies the factors that affect the clinician’s decisions or actions at each step of the laboratory utilization process. Clinical laboratory consultative services Services that provide direct communications to healthcare providers regarding appropriate testing protocols. Clinical Laboratory Improvement Amendments of 1988 (CLIA ’88) technical consultant One who is responsible for the technical and scientific oversight of laboratory testing in moderatecomplexity laboratories, while the director is responsible for the overall oversight of the laboratory. Clinical scientist A title that currently represents the clinical laboratory scientist/medical technologist. Some states and certifying agencies use the term to reflect a generalist rather than a specialist (chemist, microbiologist hematologist, toxicologist, etc.). Consultants Individuals with recognized expertise who are asked by a client, in this case a healthcare provider, to apply their knowledge and skills to a given situation. Information revolution in laboratory medicine A change in laboratory services that includes tasks related to gathering, distributing, and adding value to the information provided by clinical laboratories. Knowledge work Work that begins with data analysis and the use of personal intellectual capital and includes consultation with other clinical service providers. Knowledge workers Those who fulfill expanded roles by gathering, distributing, and adding value to information. New laboratory model A model that describes the total testing process as an interactive process; the focus is not only on the quality of test data generated (process/analytical) but also on the clinical appropriateness of test requests (input/preanalytical) and the correct interpretation of and response to laboratory information (output/postanalytical). Value-added service Laboratory service that addresses effectiveness as well as cost and efficiency.

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23. Gallessich, J. 1982. The Profession and Practice of Consultation, p. 1–85. Jossey-Bass, San Francisco, CA.

44. Pontius, A. 2002. Talking with Rob Bush, president of Orchard Software Corporation. MLO Med. Lab. Obs. 34(8):16, 19.

24. Hackman, J. R., R. Janson, G. R. Oldham, and K. Purdy. 1975. A new strategy for job enrichment. Calif. Manag. Rev. 17(4):57–71.

45. Pontius, A. 2002. Rolf Classon, president of Bayer Diagnostics, shares his views. MLO Med. Lab. Obs. 34(9):22–23.

25. Hanson, C. A. 2012. Helping clinicians maneuver through the diagnostics maze. Crit. Val. 5(2):16–19. 26. Institute of Medicine. 2001. Crossing the Quality Chasm: A New Health System for the 21st Century. National Academy Press, Washington, DC.

46. Quaseem, A., P. Alguire, P. Dallas, L. E. Feinberg, F. T. Fitzgerald, C. Horwitch, L. Humphrey, R. LeBlond, D. Moyer, J. G. Wiese, and S. Weinberger. 2012. Appropriate use of screening and diagnostic tests to foster high-value, cost-conscious care. Ann. Intern. Med. 156(2):147–149.

27. Institute of Medicine. 1999. To Err Is Human: Building a Safer Health Care System. National Academy Press, Washington, DC.

47. Rock, R. C. 1991. Why testing is being moved to the site of patient care. MLO Med. Lab. Obs. 23(9S):2–5.

28. Krieg, A. F. 1978. Laboratory Communication, p. 25–33. Medical Economics Company Book Division, Orsdell, NJ. 29. Laposata, M. 2002. Laboratory Medicine. American Society for Clinical Pathology Press, Chicago, IL.

48. Schwartzstein, R. M. 2011. Patient information: shortness of breath (dyspnea) (beyond the basics). http://www.uptodate.com/ contents/shortness-of-breath-dyspnea-beyond-the-basics (last accessed October 19, 2012).

30. Lippitt, G., and R. Lippitt. 1978. The Consulting Process in Action. University Associates, La Jolla, CA.

49. Snyder, J. R. 2001. Managing knowledge workers in clinical systems. Clin. Leadersh. Manag. Rev. 15:120–123.

31. Luckey, L., and B. Davis. 1999. Clinical laboratory utilization: implementation, p. 17–36. In B. Davis, D. Mass, and M. Bishop (ed.), Principles of Laboratory Utilization and Consultation. W. B. Saunders, Philadelphia, PA.

50. Snyder, S. R. 2010. Laboratory medicine quality improvement: a research practitioner’s view. Crit. Val. 3(4):20–25.

32. Lundberg, G. D. 1998. Changing physician behavior in ordering diagnostic tests. JAMA 280:2036. 33. Mass, D. 1988. The clinical laboratory scientist’s transition to consulting, p. 1–16. In J. R. Crowley (ed.), A Manual for the Clinical Laboratory Scientist Consultant. American Society for Medical Technology, Washington, DC.

40. Pontius, A. 2002. Talking with Mark Smits of Abbott Diagnostics. MLO Med. Lab. Obs. 34(3):10–11.

51. Stanford, E. J. 2012. Behind the test result: promoting the profession within the walls of the hospital. http://laboratorian.advance web.com/Columns/ASCLS-Voice/Behind-the-Test-Result.aspx. 52. Strandjord, P. 1985. Laboratory medicine—excellence must be maintained, p. 214–225. In E. Bermes, Jr. (ed.), The Clinical Laboratory in the New Era: Quality, Cost, and Diagnostic Demands. AACC Press, Washington, DC.

34. Mass, D. 1993. Medical technologists of the future: new practice, new service, new functions. Lab. Med. 24:402–406.

53. Title VI, Section 1886(d). 1983. Prospective payment of inpatient hospital services. Social Security Amendments of 1983 (P.L. 98-369) (enacted 20 April 1983).

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54. Title III, Division B. 1984. Deficit Reduction Act of 1984. The Medicare and Medicaid Budget Reconciliation Amendments of 1984 (P.L. 98-369) (enacted 18 July 1984).

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55. Turner, A. 1982. Consulting is more than giving advice. Harv. Bus. Rev. 60(5):120–129.

37. Mass, D. 2002. The manpower shortage: what next? Lab. Med. 33(7):505–510. 38. Mass, D. 2002. Staff retention and empowerment: functions of leadership. Clin. Leadersh. Manag. Rev. 16:391–398.

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53 Introduction Electronic Health Records Definition and Components • Status of EHR Use

Federal Regulations Related to EHRs and Their Implications for Laboratories Meaningful Use: the EHR Incentive Program • Meaningful Use Requirements Directly Relevant to Laboratories • EHR Certification Program: Functional Criteria and Data Standards • Certification Criteria and Standards Most Relevant to Laboratories

Concerns/Implications for Laboratories Related to Increased Use of EHR Systems Results Management • Test Result Management when Multiple Laboratories Serve a Single EHR System • Computerized Provider Order Entry • EHR-LIS Interfaces • Technical Aspects of Interfaces: HL7 and LOINC • Operational Challenges for Laboratories with LIS-EHR Interfaces

Strategies for Laboratories To Succeed in Laboratory Information Management in the EHR Era Steps To Increase Involvement and Influence in EHR Processes Related to the Laboratory • Tactics for Working with EHR Support Staff • Laboratory Involvement in EHR Selection and Implementation

Electronic Health Records and Their Implications and Opportunities for Laboratories Walter H. Henricks OBJECTIVES To describe the basic components of electronic health record (EHR) systems To describe recent federal regulations aimed at increasing the use of EHRs, including the criteria for meaningful use of EHR technology and federally directed certification of EHR systems To recognize potential concerns and regulatory impact of increased use of EHRs in physician practices for pathologists and laboratories To anticipate the pertinence to laboratories of requirements that are expected in future stages of regulations and the expansion of EHR uptake To describe strategies for laboratories to succeed in laboratory information management in the EHR era

Summary KEY POINTS GLOSSARY

In the middle of difficulty lies opportunity. Albert Einstein

REFERENCES

E

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lectronic health records (EHRs) are transforming the delivery of healthcare and the practice of medicine. Governmental actions, technological advancements, and economic and other factors are driving greater use of EHRs on the part of hospitals and physician practices. The proliferation of EHR use presents laboratories with new challenges and opportunities in meeting their core mission: to deliver to healthcare providers information that is pivotal to clinical decisions and patient care. EHRs are the new “portal” through which clinicians interact with laboratory information, and in a sense, with the laboratory. For decades, laboratories have relied on their internal laboratory information systems (LISs) to support and to manage operations inside the laboratory. In addition, laboratories have in the past had greater control over upstream and downstream information flows. For instance, laboratories could design their own requisitions to capture test order information, and laboratories designed the format of laboratory result reports based on definitions they set up in the LIS. The EHR represents a new intermediary, of sorts, between the laboratory and the clinician. In a sense, laboratories will depend on EHRs for preanalytic and postanalytic data management and processes just as they depend on LISs for data management and operations inside the laboratory. Test order information coming to the laboratory will increasingly originate in the EHR, and laboratory test results will be presented to clinicians in the context of the EHR. Consequently, it is crucial to their success that laboratories, at minimum, have an

CHAPTER 53. ELECTRONIC HEALTH RECORDS

awareness of how the EHR affects laboratory information management and processes. Moreover, active engagement by laboratories can influence EHR issues in their environments that affect laboratory operations or the delivery of laboratory results. This chapter provides an overview of EHRs and their relevance to laboratories.

Electronic Health Records Definition and Components An EHR is at its core a longitudinal record of a patient’s medical history. An EHR, however, is much more than just an electronic or computerized representation of the paper patient chart. In a 2003 landmark report (19), the Institute of Medicine (IOM) described a vision for EHR systems in which, in addition to information about an individual’s healthcare, EHRs also include population-level information, decision support tools that enhance the quality and efficiency of patient care, and support of efficient processes in healthcare delivery. Specifically, the IOM report defined eight core functionalities for an EHR system, which are summarized in Table 53.1. While all of the core EHR functionalities described by the IOM in one way or another could relate to the laboratory, the components of the EHR that are most directly relevant to the laboratory are health information, results management, computerized provider order entry (CPOE), and decision support. Health information provides laboratories with access to clinical information that can be important to interpreting tests correctly and to the laboratory’s role in patient management. Results management functions determine how laboratory results are displayed

Table 53.1 Core functionalities for an electronic health record

systema Health information and data: information about the individual patient and records of his or her healthcare Results management: automated display of current and previous test results of all types Order entry/order management: capture of healthcare providers’ orders directly into the EHR through CPOE Decision support: rule-based alerts, recommendations, and reminders presented to the user in context; access to knowledge bases Electronic communication and connectivity: sharing data within and across organizations Patient support: computer-based patient education, communications, reminders; facilitation of telemedicine Administrative processes: scheduling of appointments and procedures, insurance authorization Reporting and population health management: public health and private sector reporting for safety and quality indicators a

From reference 19.

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and available to clinicians. Order entry functions are the means by which clinicians order laboratory tests. Decision support tools provide the laboratory with an opportunity to participate in development of rules or alerts that affect test selection and utilization. Recent federal legislation also sets forth an EHR definition that mirrors some of the functionalities and themes from the IOM report. Section 3000 of the Public Health Service Act (30) defines an EHR as an electronic record of health-related information about an individual that includes: • Patient demographic and clinical health information, such as medical history and problem lists • Clinical decision support • CPOE • Capture and query of information relevant to healthcare quality • Capability to exchange and integrate electronic health information with other sources

Status of EHR Use Although EHRs have existed in various forms for years, use of EHRs has remained relatively low until recently. Recent data indicate that implementation of EHRs is increasing in healthcare organizations and medical practices, presumably in large part owing to recent federal programs aimed at stimulating EHR use (see later section). In the most recent data available from the Centers for Disease Control and Prevention (CDC)/National Center for Health Statistics (16), an estimated 55% of office-based physicians were using a “basic” EHR system in 2011, up from 10% in 2006. In the most recent survey of healthcare information technology leadership performed by the Healthcare Information Management Systems Society, in 2011 (12), 27% of healthcare organizations reported that they had a fully operational EHR system in place across their organization (up from 17% in 2009), and 26% stated that they had an EHR system fully operational in one facility. In the same survey, only 2% of organizations had not yet begun to plan EHR implementation. A note on terminology is in order. The term “electronic medical record” (EMR) is widely used interchangeably with “electronic health record.” Some strict definitions of EMR confine the term to mean those elements of the medical record that document patient diagnosis and treatment in one practice or institution. EHR, on the other hand, may be said to be a more comprehensive term that encompasses a broader data set from all providers involved in a person’s healthcare as well as the ability to share information across sources. As stated, there remains considerable overlap in the practical usage of these terms. EHR is used in this chapter and is the term that the Office of the

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National Coordinator for Health Information Technology (ONC) uses almost exclusively.

Federal Regulations Related to EHRs and Their Implications for Laboratories Recent landmark federal legislation and regulations have dramatically altered the healthcare information technology (IT) landscape, with the aim of spurring utilization of EHRs. EHRs are the key component of the federal government’s goals for improving healthcare (28): • Improve the quality, safety, and efficiency of healthcare and reduce health disparities • Engage patients and families in their healthcare • Improve coordination of healthcare • Improve population and public health • Maintain the privacy and security of health information • Reduce costs The Health Information Technology Economic and Clinical Health Act, or HITECH Act, was signed into law as part of the American Recovery and Reinvestment Act (ARRA) of 2009. The HITECH Act promotes the use of health information technology (HIT), specifically EHRs and electronic exchange of health information. Based on the HITECH Act provisions, two agencies within the Department of Health and Human Services (HHS)—the Centers for Medicare and Medicaid Services (CMS) and the Office of the National Coordinator for Health Information Technology (ONC)— subsequently developed related programs and regulations intended to increase the use of EHRs. The CMS and ONC worked together to develop and to coordinate two programs—the Electronic Health Record Incentive Program, commonly known as “meaningful use,” and the Certification Criteria for Electronic Health Record Technology. The relationship among HITECH, meaningful use, and certification criteria is depicted in Fig. 53.1. EHR certification criteria ensure that certified EHR technology has the functional capabilities that enable a user to meet requirements for meaningful use of the EHR. In short, meaningful use objectives define how an eligible provider or hospital must use an EHR system, and EHR certification criteria define what an EHR system must be able to do.

Meaningful Use: the EHR Incentive Program In 2010, the CMS issued a final rule entitled Medicare and Medicaid Programs; Electronic Health Record Incentive Program (29). This program has become known as “meaningful use” because it establishes the criteria, reporting requirements, incentive payments, and penalties for eligible providers (i.e., individual practitioners) and for hospitals

CMS Rule

EHR Incentive Program (“Meaningful Use”)

ONC Rule

EHR Standards and Certification Criteria

HITECH Act (part of ARRA)

Figure 53.1 Relationships between the HITECH Act and the

CMS and ONC EHR-related programs. ARRA, American Reinvestment and Recovery Act; HITECH, Health Information Technology for Economic and Clinical Health; CMS, Centers for Medicare and Medicaid Services; ONC, Office of the National Coordinator for Health Information Technology. doi:10.1128/9781555817282.ch53.f1

necessary to achieve meaningful use of EHRs. The CMS published this final rule in conjunction with a final rule from ONC that established criteria for EHR certification (see following section). Providers and hospitals can achieve meaningful use only through the use of certified EHR technology. The CMS will implement meaningful use objectives in three stages: • Stage 1: Data capture and sharing • Stage 2: Advanced clinical processes • Stage 3: Improved outcomes Each stage of the meaningful use roll-out will introduce additional user requirements and functional and technical capabilities for CEHRT. The 2010 rule describes stage 1 requirements applicable to 2011 and 2012. CMS published stage 2 requirements in September 2012 (29a), with the requirement deadline pushed back to 2014. The expected release date for stage 3 is uncertain. Eligible providers and hospitals meet the definition of meaningful use of EHRs by demonstrating that they use EHR technology to meet certain specific EHR use objectives defined in the regulation. Objectives are a combination of required core objectives and, in stage 1, an optional menu set of objectives from which providers and hospitals must choose. Examples of objectives include using e-prescribing for medications, recording vital signs, maintaining a problem list, and providing patients with summaries of their visit or discharge. In future stages, objectives will become increasingly rigorous, and optional menu objectives will shift to core requirements. The CMS EHR meaningful use program provides for incentives and penalties for hospitals and eligible providers. As incentives, eligible providers who meet requirements can receive up to $44,000 in incentives over five years in the Medicare program and $63,750 in the Medicaid program (if

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participating by 2012). Hospital-based providers are not eligible to receive incentive payments. In both programs, eligible hospital incentive payments begin with a $2 million base payment and may go up from there, depending on variables such as number of acute care inpatient discharges and number of inpatient bed-days. In 2015, penalties start for providers who have not demonstrated meaningful use of EHRs, with a 1% reduction in the Medicare physician fee schedule amount for professional services. Penalties increase to 2% in 2016 and to 3% for 2017 and each subsequent year.

Meaningful Use Requirements Directly Relevant to Laboratories The stage 2 meaningful use objective that is most directly relevant to laboratories is that more than 55% of all clinical laboratory tests whose results are in either a positive/ negative or numerical format are incorporated in certified EHR technology as structured data. The regulation describes “structured” in this context only as a requirement for the system to be able to identify the data as providing specific information, such as by creating fixed fields within a record on file, but not solely accomplished in this manner. For example, each result in a chemistry panel should be stored in the EHR system as a discrete value with a discrete reference range, etc., as opposed to being entered into the EHR by digitally scanning in an image of a printed laboratory report that would have no data structure in the EHR. Another stage 2 objective that directly affects laboratories in the inpatient setting is to submit electronic data on reportable laboratory results to public health agencies, where applicable. While this requirement refers to submission from the certified EHR that is in use, it is possible that, if the hospital LIS in use is certified as an EHR module (see later section), hospitals could choose to use submission directly from the LIS to the public health agencies to satisfy this requirement. The use of CPOE for at least 30% of laboratory test orders is a new requirement in stage 2. This new objective applies both to eligible providers and to hospitals. The rule does not explicitly require electronic submission of laboratory test orders from the EHR to the laboratory, although it highly encourages electronic exchange. EHR Certification Program: Functional Criteria and Data Standards In 2010, ONC published the Final Rule: Health Information Technology: Initial Set of Standards, Implementation Specifications, and Certification Criteria for Electronic Health Record Technology (45 CFR Part 170) (31). This regulation (i) defines functional and technical capabilities that an EHR system must possess to ensure that users can use it to achieve stage 1 meaningful use criteria and (ii) sets forth the health IT data standards that HHS deems to have been adopted. The data standards include:

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• Data exchange standards, including HL7 version 2.5.1 • Vocabulary standards for representing electronic health information, such as ICD-9-CM, SNOMED CT, and LOINC (Logical Observation Identifier Names and Codes) • Data security and encryption standards In support of meaningful use stage 2 requirements, in September 2012 ONC published an updated set of EHR Standards and Certification Criteria, known as the 2014 Edition (31a). Furthermore, ONC specified that LIS-EHR interfaces be implemented in accordance with ONC’s recently developed Laboratory Results Interface (LRI) Implementation Guide (12a), which involves use of LOINC, HL7 v2.5.1, and SNOMED-CT. An analogous Implementation Guide of specifications for laboratory orders (LOI) is in development (Standards and Interoperability [S&I] Framework Laboratory Orders Interface Initiative, http:// wiki.siframework.org/Laboratory+Orders+Interface+ Initiative 2013 [last accessed July 18, 2013]). EHR systems may be certified as “complete” EHR systems or as a combination of separate EHR “modules” that in aggregate meet the criteria. Some laboratory information systems have achieved certification as EHR modules. ONC also established a certification program (32) through which it authorizes third-party organizations to certify that EHR systems meet the criteria as specified in the final rule. ONC maintains a publicly available Certified HIT Product List (33), which as of this writing lists 3,478 certified ambulatory EHR products and 1,161 certified inpatient EHR products.

Certification Criteria and Standards Most Relevant to Laboratories The EHR certification criteria that most directly relate to laboratory testing require that the EHR must be able to: • Receive clinical laboratory test results electronically in a structured format and display such results in a human-readable format (in support of the corresponding meaningful use objective) • Display all the information for a test report specified in the Clinical Laboratory Improvement Amendments (CLIA) rule (Table 53.2) (26) • Attribute, associate, or link a laboratory test result to a laboratory order or patient record Some amplifying points relevant to these criteria are important for laboratories. First and foremost, the requirement for result reports is only that all CLIA-mandated elements of the test report are displayed; there are no further requirements as to formatting or other factors that may affect usability for test results. Second, the rule does not impose specific requirements for what constitutes a “structured” format for laboratory data in this context.

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Table 53.2 CLIA-required information for test reports Patient’s name and identification number or unique identifier and identification number Name and address of the laboratory location where the test was performed Test report date Test performed Specimen source, when appropriate Test result and, if applicable, the units of measurement or interpretation or both Any information regarding the condition and disposition of specimens that do not meet the laboratory’s criteria for acceptability

Other EHR certification criteria correlate with meaningful use requirements involving laboratory tests. EHRs must have the capability to transmit reportable laboratory results to public health agencies (inpatient setting). The capability to support CPOE for laboratory testing is a certification requirement, to support the analogous requirement in stage 2 of meaningful use. Some other certification criteria speak to secondary uses of laboratory results within the EHR, such as decision-support rules based on laboratory results and providing patients with online access to clinical information that includes laboratory results. The data standards in the regulation that are most important for the laboratory are HL7 v2.5.1 and LOINC. The use of HL7 v2.5.1 is required for transmitting reportable laboratory results to public health agencies. Hospitals may choose to meet this requirement through the use of an LIS that has been certified as an EHR module. LOINC is specified as a vocabulary standard for representing laboratory test results. The current requirements are that certified EHR technology must be able to reuse a LOINC code when it has been received from the laboratory and that such a code is accessible in the EHR. An important point for laboratories is that ONC has indicated that broader requirements for the use of HL7 v.2.5.1 and LOINC will be incorporated into future editions of the certification criteria and data standards. Given the importance of electronic transmission of laboratory results between laboratories and EHRs, laboratories can expect that such requirements will increasingly apply to LIS-EHR interfaces. Laboratories are advised to monitor developments in these requirements closely to ensure that their LISs and interfaces comply with the required data standards.

Concerns/Implications for Laboratories Related to Increased Use of EHR Systems EHR systems and CPOE have profound implications for the management of laboratory information across the healthcare enterprise. The EHR is the portal through which clinicians receive, provide, and interact with laboratory

information. Laboratory information is among the most important EHR data elements used in clinical decision making. An earlier study by Forsman found that 94% of information in the Mayo Clinic EHR was laboratory data (6). A commonly used (although debatable) estimate is that 70% of data in the EHR is laboratory-related and that laboratory data influence 70% of treatment decisions (5). A study in a major healthcare institution found that a primary care physician on average reviews 930 pieces of chemistry/hematology data and 60 pathology/radiology reports per week (24). Although laboratory data are among the most important elements in an EHR, significant limitations may exist in how EHRs are able to present laboratory results and test request information. Such issues are magnified in an integrated delivery network setting in which multiple laboratories and facilities feed an EHR. Administratively, EHRs are outside of the control of the laboratory, and pathologists and laboratories stand to lose influence over the manner in which laboratory information is conveyed to clinicians. Yet problems with presentation of laboratory information in the EHR may negatively affect clinician perceptions of laboratory service quality and potentially compromise patient care. Compared to traditional laboratory reports emanating from an LIS, the concept of a “report” is different in the era of electronic data elements that may be presented in different ways or through various channels. Integration of information from multiple data feeds, and possibly multiple laboratories, will occur at the level of the EHR. Not only hospitals but also individual offices will expect that pathology and laboratory information be integrated seamlessly into their EHRs.

Results Management EHRs vary in the modes and effectiveness of their display of laboratory results. The constraints of EHR design, including formatting, font, and arrangement of data elements, often dictate the presentation of laboratory results in the EHR. Laboratory results are not homogeneous data types, and some level of laboratory domain expertise is necessary in the configuration of laboratory results in EHR systems to foster appropriate presentation and reduce risk for misinterpretation. Failure to account for laboratory discipline-specific considerations or requirements in the display of the data could increase the potential for missed data or misinterpreted results. EHRs typically have multiple types of formats for result display. For instance, a list of clickable links to the results for each test ordered on a selected patient may be presented, with each test on a different line. The result and all other information related to the selected test appear on a new screen after the clinician clicks on the link. This method for reviewing information has the advantage

CHAPTER 53. ELECTRONIC HEALTH RECORDS

that the person doing the viewing can see all information, such as reference ranges, comments or footnotes, and performing laboratory name and location, on one screen. Disadvantages are that lists of results may not be further categorized and that individual test results must be reviewed one at a time. A common format for displaying laboratory test results in an EHR is a cumulative results view. In this grid type of display, laboratory test names are listed in rows along the left side of the screen, and corresponding results for each test are displayed in columns for successive dates, typically in reverse chronological order, left-to-right across the screen. The organization of the test names and groupings will greatly affect the usability of such displays and may affect the clinicians’ ability to find laboratory tests. For example, it would not make sense clinically to list the rows of tests alphabetically by name; rather, grouping of tests by laboratory discipline (e.g., chemistry, hematology, etc.) and by hierarchy (e.g., WBC as a component of CBC) is more intuitive for the clinician to find results of interest. In cumulative result displays, determining appropriate test groupings, and more importantly, deciding into which categories individual tests are placed, can be challenging. A good example is serologic testing for infectious diseases (e.g., viral hepatitis serologies). A decision will be necessary as to whether infectious serology results should be placed with other noninfectious serologic tests, with nonserologic infectious disease tests, or generically with all microbiology results. Determination of such test groupings is at minimum an issue about which the laboratory needs to be aware and is preferably seen as an opportunity for the laboratory’s active participation in laboratory result management in the EHR. Cumulative results displays have the advantage of providing results from many tests on a single screen but have a number of issues important for the laboratory to understand. A disadvantage of the cumulative results display is that to maximize the number of results, the space available for each result is limited, typically to only the numerical value and symbols that might represent abnormal flags or the presence of an explanatory comment. Such displays, therefore, are best suited for the display of results that have a numerical or positive/negative format. To see more information, such as reference ranges and comments, requires additional action on the part of the user, such as clicking on the result. The steps required of the user to display reference ranges may not be immediately evident. Visual cues must be available on the cumulative display for a given result to alert the user to the existence of comments or other additional information, when present, lest they be overlooked and important interpretive or clarifying information be missed, leading to possible misinterpretation. A common example is a footnote in which note is made of hemolysis in a blood sample in which the serum potassium level is elevated.

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The laboratory has a crucial role to play in the validation of laboratory reports as they are presented in the EHR. The display of laboratory results in the EHR must accurately reflect what is reported from the laboratory. Such validation is important not only for best patient care but also to comply with regulatory requirements (see section below). Questions to address during validation include: • Does the EHR present laboratory results accurately? • Are all required data elements present? • Are results displayed in a manner that may be misleading to the clinician? While the display of a column of numbers such as chemistry panel results is relatively straightforward in a cumulative display format as described above, laboratory results are more heterogeneous than simply columns of numbers. Table 53.3 lists laboratory result types that may be subject to suboptimal display in EHRs and merit inclusion in laboratory validation procedures. Many types of tests in Table 53.3 require presentation of numerical values and interpretive text in the same report. Other types of reports are entirely text-based. An example of a problem is incorrect or inappropriate splitting (“carriage returns” or line breaks) of text lines that can lead to misleading or confusing sentences or display. In addition to the test result itself, other data elements in laboratory reports are important to test interpretation. Verification of the manner in which the EHR handles such data is also an important part of validation. Table 53.4 lists such data elements. With EHRs come new mechanisms for clinicians to review and to filter new laboratory results. In the past, the arrival of a printed laboratory report served as both a prompt and a filter for newly available results. In the EHR system, clinicians cannot be expected to look up every patient every day (or multiple times a day) to check for new results. Laboratory results in the EHR can be missed (25, 34). EHR systems typically have some type of filtering or alerting function that presents to clinicians only those results that are new since the previous inquiry. Such a function requires correct configuration in the EHR system, and the institution (or practice) may have the option of tailoring the rules for different settings. For instance, an

Table 53.3 Types of laboratory reports with

unique display considerations in EHRs Microbiology Transfusion medicine/blood bank Molecular and genetic testing Coagulation panels Electrophoresis Drug peak and trough identification Anatomic pathology

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Table 53.4 Laboratory report elements subject to variation in EHRs Cumulative result display and format Reference ranges Abnormal result flags Result comments and footnotes Name and address of performing laboratory Preliminary reports Corrected reports

institution may determine that it is not desirable to send notifications for inpatient chemistry tests while ensuring that notifications are sent for all anatomic pathology results, inpatient and ambulatory. Tests may be missed if the clinician does not receive notification of results or if information is routed to the wrong clinician. Such errors happen if settings in the EHR are not configured appropriately (36) or if rigorous procedures are not in place to maintain currency of information about responsible physicians and patient status. To ensure optimal communication of laboratory results, and to reduce the chance that laboratory results are missed in the busy clinical work flow, laboratories need to understand how such an alerting/filtering function works in their institution’s EHR system. Key questions in the laboratory’s assessment of a test notification function in an EHR include: • Are there any types of results that do not fall under the function? • Does the function work differently in the inpatient vs. ambulatory environment? • Do notifications go to all physicians listed on a test order (as “copy to”) or just to the ordering physician? • Do corrected reports and addenda trigger notifications as new results?

Test Result Management when Multiple Laboratories Serve a Single EHR System In an integrated delivery network (IDN) that has implemented a standardized EHR across the enterprise, issues in laboratory result management may arise in the EHR system if multiple laboratories in the network are delivering results to the unified EHR. A uniform EHR across an IDN implies an integrated, longitudinal view of laboratory results regardless of data sources. Multiple laboratories serving an IDN, however, may have disparate legacy LISs and nonstandardized test methods, both of which impact integration of laboratory information in the EHR. Standardization of IDN laboratories on a single LIS utilizing multifacility capability can be a step toward integration of laboratory information in the EHR (13). Workman

et al. (35) described benefits that accrue from standardizing the LIS in an IDN and contrasted other IDN consolidation projects that did not realize full savings due to failure of integrated LIS implementation. While standardizing on a single LIS platform reduces variations stemming from different LIS databases and interfaces, a common LIS alone does not address test result integration issues arising from differing test methodologies. A major challenge in integrating laboratory results when an EHR receives results from multiple laboratories occurs when multiple methodologies for the same analyte are in use. Reference ranges and possibly units of measure may differ among methods in use in different laboratories. Each result typically carries its reference range and units of measure with it dynamically in the interface to the EHR. The display and definitions in the EHR must account for these differences and present the results unambiguously with the reference range and units of measure appropriate for each individual result. Static definitions for reference ranges and units of measure in the EHR will not accommodate the need to display the reference range and units of measure appropriate to each individual result. The laboratory will likely need to raise awareness among clinicians about the implications of differing methodologies and reference ranges in the EHR for the same analyte. Results from different laboratories with different methodologies may appear side by side in a cumulative results display. These results may (appropriately) have different reference ranges listed for them. Furthermore, it is possible that on the same screen could appear a numerical result for a given test that has an abnormal (out of range) flag in one instance but no flag for the same numerical result performed in a different laboratory with a different reference range. Such apparent discrepancies may prompt questions from clinicians and require clarification from the laboratory, particularly if the name of the performing laboratory is not obvious in the results display. Potentially of greater importance, comparing all results in an EHR over time for a given analyte may not yield appropriate comparisons or could lead to misinterpretation of trends (or lack thereof) when the tests are generated from different methods. These issues may be particularly problematic with decentralized or point-of-care testing.

Computerized Provider Order Entry The use of CPOE has significant implications for how laboratories receive and process laboratory test orders. With CPOE, clinicians enter test requests directly into the EHR. Test orders may then reach the laboratory via an electronic interface with the LIS or on paper forms printed from the EHR. The configuration of CPOE screens and sequences in the EHR determine the process for generating laboratory orders and the content of such orders. Effective laboratory operations require laboratories to be involved in how the

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EHR handles laboratory test order/requisition information. Improperly designed or configured CPOE processes can result in negative consequences for the laboratory, including incorrect, incomplete, and/or inappropriate test orders as well as inefficiencies owing to CPOE problem resolution (9, 23). Elements of CPOE that are unique to laboratory testing and merit the laboratory’s attention include CLIA-mandated test request information, the need for test-specific information in some requests, and test menu management. The CLIA rule mandates that the laboratory ensure that test requests solicit specific information items that are listed in Table 53.5. The laboratory must ensure that the CPOE system meets these requirements. The requirement to provide test-specific additional information relevant to timeliness, accuracy, or interpretation of results can be challenging to address in CPOE systems. One way such information is solicited is through “ask at order entry” questions that the user must answer as part of the CPOE process. Examples include provision of an actual time period for timed (e.g., 24-hour) urine collections and demographic information for interpretation of cystic fibrosis genetic testing. For microbiology tests in particular, clinical information on test requests is important for appropriate testing and interpretation (10). CPOE sequences must enable the user to provide the laboratory with information such as specimen type and source. Data fields for such information in the CPOE system may be configured to allow the user to enter free text or may constrain the user to choices in a dropdown menu. The laboratory’s expertise is important to determining (i) the type of data format that is appropriate for a given test (or question) and (ii) accurate, complete, and appropriate choices for responses to a drop-down pick-list. One of the most important aspects of CPOE is managing the menu of test order choices available to the clinician in the EHR. The choices available in the menu reflect the test definition entries in the data definition tables of the EHR. Laboratory involvement will contribute to ensuring that the test choices and their nomenclature in the EHR match correctly with corresponding tests as defined in the Table 53.5 CLIA-required information for test requests Identifying information of person or laboratory requesting the test Patient’s name or unique patient identifier Sex and age or date of birth of the patient Test(s) to be performed Source of the specimen, when appropriate Date and, if appropriate, time of specimen collection For Pap tests, the patient’s last menstrual period and indication of previous abnormal report, treatment, or biopsy Any additional information relevant and necessary for a specific test to ensure accurate and timely testing and reporting of results, including interpretation, if applicable

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LIS. Such congruence is necessary to ensure that the test that the clinician thinks he or she is ordering is actually the one that gets performed in the laboratory, particularly where orders are interfaced between the EHR and LIS. CPOE enables types of laboratory test orders that affect preanalytic laboratory processes—future orders and standing orders. Future orders are test orders for which the patient is to return at a later time, either at a follow-up interval or prior to a scheduled return office visit. Standing orders are related to future orders in which the ordering clinician enters an order for recurring testing to be performed at specified intervals (e.g., prothrombin time every two weeks for a patient on an anticoagulant). In the preCPOE era, these types of orders were of less consequence to the laboratory because the patient would appear with a paper requisition at each encounter, and the laboratory would enter an order manually into the LIS. In the environment where CPOE orders are interfaced into the LIS, the laboratory must understand the logic and timing of how future and standing orders are transmitted to the laboratory. The key need is for a mechanism to be in place that ensures that a test order that was placed via CPOE at some date in the past is available to the phlebotomy site when the patient appears for blood draw. Anatomic pathology (surgical pathology, cytopathology) orders differ in complexity and content compared to routine clinical laboratory orders. Although ordering processes for surgical pathology specimens may not be routinely present in EHR/CPOE currently (4), such processes can be reasonably expected to be part of comprehensive CPOE functions in the future. Proper configuration of CPOE in the EHR for anatomic pathology orders will require expertise from the laboratory. Pap testing (cervicovaginal screening) is more amenable to CPOE owing to the uniformity of process and specimens. In anatomic pathology, a single pathology report is issued for cases that may consist of multiple discrete specimens. An anatomic pathology order must be able to accommodate and convey accurate part-specific information about multiple specimens from one or multiple organs. In addition, there is the need to provide clinical information applicable to the entire case (e.g., “history of cancer”). In addition to the value generated by laboratory involvement in the CPOE workflow issues described above, CPOE offers opportunities for the laboratory to create value in managing the test ordering process. Decision support tools in the form of rules and alerts make it possible to intervene at the point of test order entry to facilitate appropriate test selection and utilization. Table 53.6 summarizes CPOE methods to improve test utilization as reviewed by Baron and Dighe (4). An evolving trend in laboratories leading test utilization efforts is the development of laboratory test formularies (22, 34a). A laboratory test formulary, analogous to a medication formulary, defines what

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Table 53.6 CPOE-based methods to improve test utilizationa CPOE ordering templates and order sets Alerts for redundant orders Constraints on recurring orders Display of previous laboratory results during ordering process Integration of practice guidelines, care maps/care pathways Corollary test recommendations Display of test costs Unbundling of test panels into individual components a

Table 53.7 Concerns for laboratories regarding EHR interfaces Limitations of EHRs in laboratory test order and result handling Lack of control or involvement in the EHR management at physicians’ sites Expenses of interface implementation and maintenance Laboratory responsibility for transmission and validation of laboratory results to EHR; compliance with federal and state laws Poor process design resulting in laboratory testing problems being blamed inappropriately on the laboratory

Modified from reference 4.

laboratory tests can be ordered and/or by whom certain tests can be ordered, such as by specialists, or restricts ordering by some user category such as resident physicians or physician assistants without attending physician approval. Laboratory test formularies may be used to curb the use of high-cost send-out tests. Rules and choices reflecting the laboratory test formulary are encoded into the CPOE test menu and possibly its decision support configuration.

EHR-LIS Interfaces Laboratories exchange test orders and results with EHRs through electronic interfaces. An interface consists of software and connections that translate electronic messages so that otherwise incompatible systems can exchange information (20). In the EHR environment, correct functioning and management of LIS-EHR interfaces becomes a crucial success factor for laboratories. LIS-EHR order entry interfaces transmit test order information from the EHR/ CPOE system to the LIS. LIS-EHR result interfaces transmit test result information from the LIS to the EHR. These interfaces also typically transmit status information such as “specimen received” back to the EHR. Potentially the single greatest impact to laboratories of the federal meaningful use regulations and the greater use of EHRs is that laboratories can anticipate a dramatic increase in requests for LIS-EHR interfaces from physician practices and other settings (14). Having gone to the expense and effort of installing an EHR, clinician groups will expect direct electronic exchange with laboratories and integration of results into their EHR system. This greater need for interfaces has important business, technical, and operational implications and challenges for laboratories. Table 53.7 summarizes the concerns for laboratories regarding LIS-EHR interfaces. Establishing LIS-EHR interfaces is a complex undertaking that has technical, operational, and financial elements, all of which contribute to the time and costs required for interface implementation (21). Laboratories will need to establish some type of network connectivity with sites to be interfaced. Interface software in both the LIS and EHR systems to be interfaced must be purchased and installed. Such software manages the interface messages for outgoing

and incoming messages for the specific interfaces. These software modules have acquisition costs and will add to incremental ongoing software maintenance fees. Definition work is required to match test codes between systems (see below). Extensive testing and validation are necessary to ensure accuracy and reliability of data exchange. Interface engines are widely used in laboratories and healthcare organizations and can facilitate interface deployment (8). An interface engine is a hub of sorts that routes and translates messages among disparate computer systems. Interface engines eliminate the need for numerous point-to-point interfaces among multiple systems. Rather, an interface for each system is developed once for the interface engine. Messages are routed through the interface engine to and from all other systems. When any one system is changed or upgraded, only the interface to the interface engine or hub needs to be redone instead of multiple point-to-point interfaces to numerous other systems. Whether laboratories interface directly from their LIS to EHRs or interface through some type of integration services provider or interface engine, laboratories will need the capability to establish interfaces with a wide variety of EHRs and vendors. As of this writing, the ONC website lists 3,478 certified ambulatory EHR products and 1,161 certified inpatient EHR products.

Technical Aspects of Interfaces: HL7 and LOINC LIS-EHR interfaces generally use the HL7 interface standard. A standard (in the context of information systems) is a set of agreed-upon rules, specifications, and/or conventions that govern the design and function of information systems, with the intent that systems that adhere to a given standard will be compatible with other systems that adhere to the same standard (1). HL7 (Health Level 7) is a standard for electronic data exchange among healthcare systems and is ubiquitous in healthcare system interfaces (15). The HL7 standard defines syntax and rules for healthcare data messages, including laboratory test orders and results. HL7 facilitates interface development by providing common ground for disparate information systems to exchange data. The use of HL7, however, does not eliminate technical challenges encountered in developing interfaces. LIS and

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EHR vendors develop HL7 interface software for their own systems, and HL7 interface specifications from one vendor typically do not exactly match those of another vendor. So when developing an interface, the two vendors must still cooperate to resolve differences. Additionally, healthcare organizations can add local modifications to the HL7 protocol to meet site-specific needs. HL7 does not define the content of individual data fields, such as laboratory test codes. Test codes are defined in data definition tables in the LIS and EHR, and often, the different information systems use different names and codes to define the same test. For instance, serum sodium may be defined as “SNa” in one system and as “NaS” in the other. The translation table in the interface is necessary to cross-reference the different test codes. LOINC (Logical Observation Identifier Names and Codes) is a data standard that defines a set of universal codes for identifying laboratory tests (and other clinical observations) in computer systems (18). LOINC is aimed at enabling exchange and comparison of laboratory data across different information systems. More than 30,000 LOINC codes have been defined. LOINC is one of the healthcare IT data standards that ONC has formally adopted. LOINC codes can standardize laboratory test codes in HL7 messages, provided the interface systems share LOINC codes, and can theoretically eliminate the need for laborious development of translation tables in LIS-EHR interfaces. Barriers exist, however, to the widespread use of LOINC to achieve interoperability of laboratory data. Laboratories must assign LOINC codes to all tests, a process that can be laborious. The LIS must have a data field available for assigning LOINC codes, and LOINC codes must be accommodated in the interface software. LOINC by itself does not ensure compatibility because even when LOINC is used, inconsistencies in data elements and LOINC code assignments can limit interoperability (17).

Operational Challenges for Laboratories with LIS-EHR Interfaces Laboratories must pay attention to operational aspects of LIS-EHR interfaces. Table 53.8 summarizes operational considerations in LIS-EHR interfaces. Personnel with dedicated time and with LIS system experience or expertise are required to carry out interface implementation, definition, testing, and validation steps. In addition, such people must interact closely with counterparts at the referring (EHR) site and also with vendor technical support personnel, often including EHR vendor support. A significant challenge with LIS-EHR interfaces may be a lack of contact or expertise at referring (EHR) sites, particularly in smaller physician offices with newly implemented EHR systems. Once an interface is established, it is not “set and forget.” Monitoring by someone in the laboratory and/or clear communication if nonlaboratory IT personnel are monitoring

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Table 53.8 Operational considerations in LIS-EHR interfaces Maintenance of EHR settings related to laboratory tests Change control and communication (e.g., test definition updates) Troubleshooting and client support Training of EHR users in test result viewing and (eventually) test ordering Handling of corrected results Monitoring or quality of service Client site contact and engagement

the system is required to detect, correct, and communicate problems with the interface. Attention to change control is important to prevent service interruptions. Sufficient lead time is required for clients to make changes (definitions, reference ranges, and new tests) in their EHR systems. Methods are needed for (i) how laboratory changes that affect the interface are communicated to clients, (ii) how clients communicate problems to the laboratory, and (iii) how the laboratory will address reported problems. CLIA regulations place a responsibility on the laboratory to ensure accurate transmission of laboratory results in interfaces: 42 CFR 493.1291(a) The laboratory must have adequate manual or electronic system(s) in place to ensure test results and other patient-specific data are accurately and reliably sent from the point of data entry (whether interfaced or entered manually) to final report destination, in a timely manner. This includes the following: . . . (2) Results and patient-specific data electronically reported to network or interfaced systems [italics added]

To assist laboratories and other stakeholders exchanging laboratory data, the CMS recently published “Issuance of Revised Survey Procedures and Interpretive Guidelines for Laboratories and Laboratory Services in Appendix C of the State Operations Manual” (27). In this document, the CMS provides guidance for interpretation of and compliance with CLIA requirements for laboratory result reporting and laboratory information exchange. The guidance includes information on data retention and management of corrected reports and an extensive frequently asked questions (FAQ) section.

Strategies for Laboratories To Succeed in Laboratory Information Management in the EHR Era In the past, the laboratory had greater control over the information inputs, i.e., test orders (through design or generation of test requisitions) and outputs (printed test reports). Going forward, EHRs impact the laboratory’s ability to achieve its mission by affecting upstream data

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sources (orders) and the output stream (result display). EHRs dictate many aspects of how test orders are created and delivered to the laboratory and how the laboratory’s product—test results and interpretations—is delivered and used. Laboratories will be well served to develop organizational and administrative strategies to succeed in the EHR environment. The laboratory will likely be viewed as responsible for aspects of laboratory testing, from order entry through result distribution, whether or not the laboratory participated in development of the systems and procedures involved or whether it has control over such. Busy physicians cannot be reasonably expected to dissect whether a problem they encounter with a laboratory testing process is truly a laboratory problem or the result of an issue in the EHR or in the interplay between the EHR and the LIS. The manner of presentation of laboratory information in the EHR may affect clinician perceptions of laboratory service quality. Operationally, problems with CPOE lead to delays and errors in patient testing, leading to patient care problems and physician dissatisfaction. A central challenge to laboratory involvement in laboratory information management in the EHR is that the EHR lies outside of the administrative control of the laboratory. In hospitals and integrated delivery networks, the EHR is typically under the control of a centralized IT organization or is possibly even outsourced to a third-party organization. As EHR use in physician practices proliferates, laboratories will face an ever greater diversity of groups and expertise levels and commitment of people/staff that are responsible for the management of the EHR in these outpatient settings. Lack of laboratory-specific expertise among nonlaboratory staff that implement and support EHRs may compound the challenges. Despite the probable lack of direct control over EHR management and processes, the laboratory has an important role to play in laboratory information management issues regarding the EHR. The laboratory possesses the domain expertise necessary to convey the intricacies and nuances of laboratory processes and information requirements (e.g., requisition requirements, reference ranges, test groupings, addendum reports). Such involvement is important not only for the laboratory but also to promote optimal laboratory information management in pursuit of the best care of patients. Barriers include lack of time, skill sets, inclination, and compensation to participate in such activities. How the laboratory meets the organizational needs of laboratory information management of the EHR depends in part on the approach that the laboratory uses to manage its LIS. Because laboratories have depended on LISs for decades as a crucial tool for successful laboratory operations, laboratories typically have people who are expert in the LIS application, even if the hardware and infrastructure for the LIS are managed by a centralized IT group. The LIS support

people have LIS support as part of their responsibilities in addition to other management or bench work. Some laboratories have a group solely dedicated to all aspects of LIS support, a concept first set forth by Friedman in the earliest definition of the field of pathology informatics (7). More recently, the American Society for Clinical Pathology (ASCP) has developed a certification program for qualification in laboratory informatics, in recognition of the importance of this expertise (3). In addition, the American Association for Clinical Chemistry (AACC) offers an on-line certification program in basic principles and architecture of laboratory information systems (2). It is from the expertise pool of laboratory staff members who provide LIS support that laboratories can draw the experience and skill sets necessary to work on laboratory information management issues in the EHR system. Such individuals combine knowledge of laboratory operations, work flow, and requirements with an understanding of laboratory information systems and their databases and interfaces. As such, they are the natural people to become involved in EHR issues and can be invaluable in interacting with the EHR support team(s). A key strategy for laboratories in the EHR setting will be to cultivate and support such expertise if it is lacking in their environment. Activities that translate well from the LIS to the EHR laboratory information support domains include: • Test definition in the LIS database • Interface implementation and maintenance • System testing and validation appropriate for laboratory information • Change control practices

Steps To Increase Involvement and Influence in EHR Processes Related to the Laboratory To influence EHR-related issues, laboratories must become active beyond the laboratory and establish credibility with groups at the institutional level. Among the most important of the latter are those groups that are responsible for oversight and support of the EHR system. The ways that laboratories can establish credibility over time include: • Anticipating challenges in EHR-laboratory information management • Providing laboratory resources to troubleshoot and resolve EHR-laboratory issues as they arise • Raising awareness of EHR-laboratory issues with clinicians and IT support staff Laboratories can insinuate themselves into EHR processes through formal and informal methods. The laboratory can ensure that it is represented on EHR-related formal committees or other groups. Cultivating key relationships at various levels of the organization is one of the

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most important ways for the laboratory to influence EHRrelated issues. The laboratory director or designee can establish relationships with the institution’s chief information officer. Pathologists and laboratory scientists can build or leverage existing peer relationships with clinicians who are interested or influential in EHR issues. Examples of such people include the chief of staff, the safety officer, the quality officer, and other clinicians who carry weight in the institution. Increasingly, organizations are hiring chief medical information officers (CMIOs) to oversee EHR matters, and a CMIO would be a natural person with whom the laboratory could develop a peer relationship (11). The LIS personnel can reach out and establish relationships at peer levels with EHR system support analysts. Another place to which the laboratory can reach out for assistance in EHR issues is the compliance office. As noted above, there are regulatory requirements related to laboratory information that impact configurations in the EHR, including data required for test orders, billing compliance (e.g., ICD codes), and report requirements (data elements in the report, performing laboratory). The compliance office can aid in endorsing and reinforcing laboratory requests for configurations or changes in the EHR when necessary to meet regulatory requirements.

Tactics for Working with EHR Support Staff A good working relationship at the “grassroots” level between the laboratory and the systems analyst team(s) responsible for EHR application support can be key to addressing EHR-laboratory information management issues. The EHR analysts (or application/technical support staff), on a day-to-day basis, create the EHR definitions and configurations that directly affect user experience. Such individuals are also responsible for EHR testing and change control processes. Initiative on the part of the laboratory will likely be necessary to reach out and build such ties, although it is possible that the EHR support group will reach out to the laboratory, particularly if there have been problems that required laboratory expertise. The laboratory can seize such opportunities to build relationships and influence. The laboratory should use every opportunity that presents itself to demonstrate to EHR support staff (and to others in the institution) the benefit of having laboratory subject matter experts involved with the EHR. Opportunities often present when problems arise and the laboratory is involved in resolution. Other opportunities arise in the course of laboratory representation on EHR-related committees (as mentioned above). Not working with EHR support staff potentially leaves laboratory-related decisions in the hands of people who may not understand laboratory needs or the implications of EHR design or configuration decisions, with negative consequences for the laboratory testing cycle.

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In a busy laboratory with many competing demands for people’s time, the laboratory’s contributions in such situations can go underestimated or forgotten as people move on to the next issue. A tactic to prevent this and to build the case for laboratory involvement in the EHR is to keep track of the lab’s efforts in such instances and in situations otherwise related to EHRs. For instance, the laboratory might keep a log of brief descriptions of EHR-related problems and the laboratory’s role in troubleshooting and resolution. Doing so and communicating such examples in the appropriate venues can help the laboratory build a case over time for greater influence and involvement. When this is done, however, it is important to avoid fingerpointing (if possible) but rather to emphasize the need and benefit of collaboration in pursuit of optimal patient care. Periodic, scheduled meetings between appropriate laboratory and IT staff may be beneficial.

Laboratory Involvement in EHR Selection and Implementation EHR purchases and implementations are high-stakes and high-cost initiatives for healthcare institutions, and participation in them is an opportunity to be an integral part of the success of a strategic project. Furthermore, participation will demonstrate the laboratory’s commitment and expertise as well as potentially set the groundwork for roles in future EHR efforts such as advanced decision support and guideline development. Strategically, political power accrues to those subunits of an organization that are best able to solve its strategic problems (7). Conversely, lack of laboratory input may lead to overlooking issues that result in adverse operational consequences for the laboratory and the institution. Selection and implementation of a new EHR provide golden opportunities for the laboratory to increase its involvement and influence with respect to the EHR. The laboratory should participate actively in the EHR selection process. Institutions typically will convene some type(s) of selection committee and/or one or more work groups for an EHR evaluation and selection project. These are venues in which the laboratory can have peer representation that may include the laboratory director at higher levels and laboratory operational or IT representatives on the work groups. Opportunities during the EHR selection process include contributing laboratory-oriented considerations and functional requirements to the development of the institution’s request for proposal for the new EHR system. Institutions may develop “use cases” or clinical scenarios (e.g., patient admitted to emergency department with chest pain) against which to judge candidate vendors’ offerings. Since such use cases would include laboratory testing, laboratory participation can be integral to their development. At minimum, the laboratory should attend EHR vendor demonstrations and provide evaluations.

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Once a new EHR has been selected, the laboratory will have important roles in its implementation. As in the selection process, the institution will likely convene committees and work groups on which the laboratory should expect to have formal representation. Such teams will typically work through the configurations and definitions in the EHR system that will underpin clinical work flow and documentation. Key areas for the laboratory include configuration of order entry (CPOE) processes and results management. The laboratory has a vital role to play in testing EHR processes and interfaces. Considerations for these issues were outlined earlier in this chapter. A particular area, for instance, in which the laboratory can provide valuable input is the design of the structure and display of screens for cumulative display (by date) of laboratory results, in particular how tests are grouped logically by discipline (e.g., chemistry, hematology, etc.). The implementation phase is when the laboratory can work with the EHR implementation team to establish processes for change control and communication for laboratory test definition changes or new tests. Doing so is necessary to ensure correct mapping and data exchange between the LIS and EHRs.

Summary The use of EHRs has profound implications for laboratories. The core mission of the laboratory is to provide information for patient care decisions; the EHR dramatically affects preanalytic and postanalytic laboratory information management. EHRs are more than just computerized versions of the paper chart. EHRs employ functions that directly affect not only laboratory information management but also laboratory processes. EHR design dictates the display and handling of laboratory results. Order entry in the EHR is a dynamic function that affects the receipt and processing of laboratory orders and has implications for laboratory operations. Proper functioning and management of the interface(s) between the LIS and EHRs is necessary to ensure appropriate data flow between the laboratory and the clinician. Regulatory requirements include laboratory responsibility for ensuring accurate delivery of test results. EHR uptake by physicians and hospitals has been relatively slow in the past but is gaining momentum. Two major recently enacted federal programs—the CMS’s EHR Incentive Program (commonly known as “meaningful use”) and the ONC’s related EHR certification criteria and data standards—aim to spur greater use of EHRs by hospitals and individual providers. These programs have specific elements that are directly relevant to laboratories. More broadly, laboratories can anticipate increasing expectations for electronic interfaces to EHRs. Going forward, involvement in EHR-related issues will likely be an important success factor for laboratories.

To influence EHR issues, laboratories must become active outside of the laboratory. The importance of having laboratory personnel with informatics expertise dedicated to LIS-EHR issues cannot be overemphasized. Such activities, however, require commitment of time and resources. The laboratory can establish credibility at the institution level by contributing its unique subject matter expertise to EHR matters related to laboratory information management. By reaching out to other key stakeholders, including EHR oversight groups, clinicians, and others, the laboratory can raise awareness of EHR-laboratory issues. KEY POINTS ■ Electronic health records (EHRs) are transforming information management in healthcare and have substantial implications for the mission of the laboratory to deliver information for patient care. ■ Recent federal regulations and programs aim to drive more widespread use of EHRs and define criteria for “meaningful use” of “certified” EHRs that eligible healthcare providers and hospitals must meet in order to qualify for payment incentives and to avoid future penalties. ■ The EHR is the mechanism, or “portal,” through which clinicians will interact with the laboratory and laboratory information. ■ The components of EHRs with most relevance for the laboratory are laboratory results management, computerized physician order entry (CPOE), and interfaces between laboratory information systems (LISs) and EHRs. ■ Constraints or limitations in how EHRs manage laboratory results and test order information may negatively impact the use of laboratory information in patient care, the processing of laboratory test orders, and clinicians’ perception of the laboratory. ■ As EHR use by hospitals and provider practices expands, laboratories can expect to see a great increase in expectations for electronic exchange of laboratory data and LIS-EHR interfaces. ■ Deployment and ongoing support of LIS-EHR interfaces require attention to technical, operational, and financial considerations. ■ Although the laboratory may lack direct control over the EHR system, the laboratory possesses the domain expertise to contribute to the optimal handling of laboratory information in the EHR. ■ Laboratories can develop organizational approaches and allocate resources toward influencing EHR-related issues in their institutions.

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GLOSSARY Certified EHR An EHR (single or combination of EHR modules) that has been tested and certified in accordance with the certification program established by ONC as having met all applicable ONC certification criteria. CMS (Centers for Medicare and Medicaid Services) U.S. federal agency that administers the Medicare and Medicaid national health insurance programs. CPOE (computerized provider order entry) Electronic functions that enable healthcare providers to enter orders, such as laboratory test orders or medication orders, directly into an information system. EHR (electronic health record) Longitudinal, computerized collection of health information related to an individual’s health and healthcare; EHRs include functions that include computerized provider order entry (CPOE), decision support, and capabilities for electronic exchange of health information. EHR module A system that meets at least one of the ONC EHR certification criteria and that can be tested and certified in accordance with the ONC EHR certification program; combinations of EHR modules can be used to meet the definition of certified EHR technology. HITECH Act Health Information Technology Economic and Clinical Health Act; federal law that aims to promote the use of interoperable health information technology and electronic health records.

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EHR technology to meet specific objectives defined in the regulation. ONC (Office of the National Coordinator for Health Information Technology) U.S. federal agency, in the Department of Health and Human Services, in charge of national efforts to advance the use of health information technology. Standard In the context of information systems, a set of agreedupon rules, specifications, and/or conventions that govern the design and function of information systems, with the idea that systems that adhere to a given standard will be compatible with other systems that adhere to the same standard.

REFERENCES 1. Aller, R. D. 1996. Software standards and the laboratory information system. Am. J. Clin. Pathol. 105(4 Suppl 1):S48–S53. 2. American Association for Clinical Chemistry (AACC). 2012. Basic principles and architecture of laboratory information systems certificate program. http://www.aacc.org/development/certificates/ LISCertProg/Pages/default.aspx# (last accessed August 6, 2012). 3. American Society for Clinical Pathology (ASCP). 2012. Qualification in laboratory informatics, QLI. http://www.ascp.org/ Board-of-Certification/Qualification/Step-1/Qualification-in-Lab oratory-Informatics-QLI.html (last accessed July 8, 2012). 4. Baron, J. M., and A. S. Dighe. 2011. Computerized provider order entry in the clinical laboratory. J. Pathol. Inform. 2:35.

HL7 (Health Level 7) Widely used standard for electronic data exchange in healthcare; specifies format and syntax for data messages in system interfaces.

5. Becich, M. J. 2000. Information management: moving from test results to clinical information. Clin. Leadersh. Manage. Rev. 14:296–300.

Interface Software and connections that translate electronic messages so that otherwise incompatible systems can exchange information.

6. Forsman, R. 2000. The electronic medical record: implications for the laboratory. Clin. Leadersh. Manage. Rev. 14:292–295.

Interface engine Hub-like system that translates and routes electronic messages among multiple disparate systems. It reduces the number of individual interfaces needed for multiple systems. Laboratory test formulary List or menu of laboratory tests that are approved or available for ordering by providers in a healthcare organization. LIS (laboratory information system) Interrelated software programs and hardware that provide electronic data processing and information management functions necessary to support laboratory operations. LIS dictionary LIS database table that stores data definitions that determine conventions, names, formats, and rules for information processing in the laboratory. LOINC (Logical Observation Identifier Names and Codes) A data standard that defines a set of universal codes for identifying laboratory tests (and other clinical observations) in computer systems; aimed at enabling exchange and comparison of data across different information systems. Meaningful use Typically refers to the CMS’s Electronic Health Record Incentive Program; meaningful use is the use of certified

7. Friedman, B. 1990. Informatics as a separate section within a department of pathology. Am. J. Clin. Pathol. 94:S2–S6. 8. Gendler, S. M., B. A. Friedman, and W. H. Henricks. 1996. Using hub technology to facilitate information system integration in a health-care enterprise. Am. J. Clin. Pathol. 105(Suppl 1):S25–S32. 9. Georgiou, A., J. Westbrook, J. Braithwaite, R. Iedema, S. Ray, R. Forsyth, A. Dimos, and T. Germanos. 2007. When requests become orders: a formative investigation into the impact of a computerized physician order entry system on a pathology laboratory service. Int. J. Med. Inform. 76:583–591. 10. Georgiou, A., M. Prgomet, G. Toouli, J. Callen, and J. Westbrook. 2011. What do physicians tell laboratories when requesting tests? A multi-method examination of information supplied to the microbiology laboratory before and after the introduction of electronic ordering. Int. J. Med. Inform. 80:646–654. 11. Hagland, M. 2012. Ramping up to leadership CMIOs’ profile keeps growing. CMIOs take on new responsibilities as patient care organizations move through the quality journey. Healthc. Inform. 29:10-2, 14, 16. 12. Health Information Management Systems Society. 2011. 22nd Annual HIMSS Leadership Survey. http://www.himss.org/2011Survey/ healthcareCIO_home.asp (last accessed July 7, 2012).

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12a. Health Level 7 International. 2012. HL7 Version 2.5.1 Implementation Guide: S&I Framework Lab Results Interface, Release 1- US Realm. http://www.hl7.org/implement/standards/product_brief.cfm ?product_id=279 (last accessed July 18, 2013). 13. Henricks, W. H. 2000. Information system issues facing clinical laboratories serving complex integrated delivery systems. J. Healthc. Inf. Manag. 14:55–67. 14. Henricks, W. H. 2011. “Meaningful use” of electronic health records and its relevance to laboratories and pathologists. J. Pathol. Inform. 2:7. 15. Huff, S. M. 1998. Clinical data exchange standards and vocabularies for messages. Proc. AMIA Symp. 1998:62–67. 16. Jamoom, E., P. Beatty, A. Bercovitz, D. Woodwell, K. Palso, and E. Rechtsteiner. 2012. Physician adoption of electronic health record systems: United States, 2011. NCHS Data Brief 98, p. 1–8. 17. Lin, M. C., D. J. Vreeman, and S. M. Huff. 2011. Investigating the semantic interoperability of laboratory data exchanged using LOINC codes in three large institutions. AMIA Annu. Symp. Proc. 2011:805–814. 18. McDonald, C. J., S. M. Huff, J. G. Suico, G. Hill, D. Leavelle, R. Aller, A. Forrey, K. Mercer, G. DeMoor, J. Hook, W. Williams, J. Case, and P. Maloney. 2003. LOINC, a universal standard for identifying laboratory observations: a five year update. Clin. Chem. 494:624–633. 19. National Research Council. 2003. Key Capabilities of an Electronic Health Record System: Letter Report. National Academies Press, Washington, DC. 20. Pantanowitz, L., W. H. Henricks, and B. A. Beckwith. 2007. Medical laboratory informatics. Clin. Lab. Med. 27:823–843. 21. Pantanowitz, L., W. Labranche, and W. Lareau. 2010. Stepwise approach to establishing multiple outreach laboratory information system-electronic medical record interfaces. J. Pathol. Inform. 1:5. 22. Paxton, A. 2012. For slimmed-down send-outs, data in the driver’s seat. CAP Today 26:36–44. 23. Peute, L. W., J. Aarts, P. J. Bakker, and M. W. Jaspers. 2010. Anatomy of a failure: a sociotechnical evaluation of a laboratory physician order entry system implementation. Int. J. Med. Inform. 79:e58–e70. 24. Poon, E. G., S. J. Wang, T. K. Gandhi, D. W. Bates, and G. J. Kuperman. 2003. Design and implementation of a comprehensive outpatient results manager. J. Biomed. Inform. 36:80–91. 25. Poon, E. G., T. K. Gandhi, T. D. Sequist, H. J. Murff, A. S. Karson, and D. W. Bates. 2004. “I wish I had seen this test result earlier!”: dissatisfaction with test result management systems in primary care. Arch. Intern. Med. 164:2223–2228. 26. U.S. Centers for Medicare and Medicaid Services. 2004. 42 CFR Part 493 laboratory requirements (CLIA regulations). http:// www.gpo.gov/fdsys/pkg/CFR-2004-title42-vol3/pdf/CFR-2004 -title42-vol3-part493.pdf (last accessed July 7, 2012). 27. U.S. Centers for Medicare and Medicaid Services. 2010. Clinical Laboratory Improvement Amendments of 1988 (CLIA): issuance of revised survey procedures and interpretive guidelines for laboratories and laboratory services in Appendix C of the state operations

manual to facilitate the electronic exchange of laboratory information. http://www.cms.gov/SurveyCertificationGenInfo/downloads/ SCLetter10-12.pdf (last accessed July 7, 2012). 28. U.S. Centers for Medicare and Medicaid Services. 2010. Medicare and Medicaid EHR incentive program: meaningful use stage 1 requirements overview. https://www.cms.gov/EHRIncentivePrograms/ Downloads/MU_Stage1_ReqOverview.pdf (last accessed July 7, 2012). 29. U.S. Centers for Medicare and Medicaid Services. 2010. 42 CFR Parts 412, 413, 422 et al. Medicare and Medicaid programs; electronic health record incentive program; final rule. http://edocket .access.gpo.gov/2010/pdf/2010-17207.pdf (last accessed July 7, 2012). 29a. U. S. Centers for Medicare and Medicaid Services. 2012. 42 CFR Parts 412, 413, and 495. Medicare and Medicaid Programs; Electronic Health Record Incentive Program—Stage 2. Final Rule. http://www.gpo.gov/fdsys/pkg/FR-2012-09-04/pdf/2012-21050.pdf (last accessed July 18, 2013). 30. U. S. Code. 2009. Title 42 Part 300jj Section 3000. http://www .hhs.gov/ocr/privacy/hipaa/understanding/coveredentities/hitechact .pdf (last accessed August 2, 2013). 31. U.S. Department of Health and Human Services. 45 CFR Part 170. 2010. Health information technology: initial set of standards, implementation specifications, and certification criteria for electronic health record technology; final rule. http://edocket.access .gpo.gov/2010/pdf/2010-17210.pdf (last accessed July 7, 2012). 31a.U.S. Department of Health and Human Services. 2012. 45 CFR Part 170. Health Information Technology: Standards, Implementation Specifications, and Certification Criteria for Electronic Health Record Technology, 2014 Edition; Revisions to the Permanent Certification Program for Health Information Technology; Final Rule. http://www.gpo.gov/fdsys/pkg/FR-2012-09-04/pdf/2012-21050.pdf (last accessed July 18, 2013). 32. U.S. Office of the National Coordinator for Health Information Technology. 2011. Certification programs. http://healthit.hhs .gov/portal/server.pt/community/healthit_hhs_gov__home/1204 (last accessed July 8, 2012). 33. U.S. Office of the National Coordinator for Health Information Technology. 2012. Certified health IT product list. http://oncchpl .force.com/ehrcert?q=chpl (last accessed July 18, 2013). 34. Wahls, T. L, and P. M. Cram. 2007. The frequency of missed test results and associated treatment delays in a highly computerized health system. BMC Fam. Pract. 8:32. 34a. Warren, J. S. 2013. Laboratory test utilization program: structure and impact in a large academic medical center. Am. J. Clin Pathol. 139:289–297. 35. Workman, R. D., M. J. Lewis, and B. T. Hill. 2000. Enhancing the financial performance of a health system laboratory network using an information system. Am. J. Clin. Pathol. 114:9–15. 36. Yackel, T. R., and P. J. Embi. 2010. Unintended errors with EHR-based result management: a case series. J. Am. Med. Inform. Assoc. 17:104–107.

54 Introduction Chemistry Core Laboratory • Rapid-Response Laboratory and Point-of-Care Testing • Noninvasive Testing

Hematology Automation in the Routine Laboratory

Current Trends in Instrumentation and Technology: Outlook for the Future

Coagulation Laboratory Routine Coagulation • Point-of-Care Testing • Molecular Testing

Sheshadri Narayanan and Audrey N. Schuetz

Microbiology Molecular Testing

Blood Bank Automation • Molecular Testing

Outlook for the Future Driving Forces • Miniaturization and Microfluidics • Biochips • DNA Sensors

Summary KEY POINTS GLOSSARY REFERENCES APPENDIXES

OBJECTIVES To provide the reader with an overview of current trends in instrumentation and technology in the clinical laboratory (chemistry, hematology, coagulation, microbiology, blood bank, and molecular, point-of-care, and noninvasive testing) To acquaint the reader with current trends in miniaturization and micro- and nanofluidic technology and their impact on microarray and chip technology in a lab-on-a-chip format To provide a perspective on how these developments and other new ultrasensitive technologies are and will be shaping the laboratory of the future As in life, so in science; our incredibly wild prophecies of today become the routine realities of tomorrow. Anonymous

T

Clinical Laboratory Management, 2nd Edition Edited by L. S. Garcia ©2014 ASM Press, Washington, DC doi:10.1128/9781555817282.ch54

his chapter examines current trends in instrumentation and technology in key disciplines in the clinical laboratory. It also provides an outlook for the future based on the driving forces toward technology for miniaturization and microfluidics, with applications ranging from bedside analysis geared toward instituting prompt and optimal therapy to molecular analysis of pathogens and the study of mechanisms of malignancy. Before beginning a discussion of current trends in instrumentation and technology in each key laboratory discipline, it is appropriate to briefly touch upon the physical organization of the clinical laboratory. The Japanese model of clustering automated chemistry and hematology instruments around a belt line is the model that has been generally emulated by some of the highly mechanized large-volume core and reference laboratories without walls. Depending on the turnaround time and the throughput needed, automation extends also to the preanalytical process. However, unlike in Japan, where a shortage of medical technologists made it necessary to innovate in the direction of total automation including the preanalytical process, in the United States, total laboratory automation (TLA) has been limited to a few of the large medical centers and corporate reference laboratories. A 2002 College of American Pathologists survey listed fewer than 200 sites in which TLA including automated centrifugation was in place (5). Daunted by the huge costs of TLA and the long time frame needed to achieve returns on investments, there has been a focus on the front end of automation primarily 933

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confined to specimen sorting, decapping, aliquoting, and even centrifugation steps. As needed, instruments can be added to the automated line in a modular approach. There are, however, some who question the economics of this piecemeal approach and favor TLA. Without going into the merits of the modular approach versus TLA, suffice it to say that while the extent of automation varies depending on the needs and cost constraints of specific laboratory operations, the trend is toward integration of compact instruments with laboratory information system (LIS) functions under one roof. Thus, typically even a rapid-response laboratory would be expected to be configured in one room with blood gas instruments, chemistry, hematology, coagulation, and urinalysis instruments nestled side by side. The synergy between the LIS and the intelligent computerized instruments contributes to the efficiency of total automation from the time of accessioning and receipt of specimen to analysis and reporting of the results to the physician’s workstation. Indeed, the computerized instruments are able to perform many tasks, such as the application of quality control rules, delta checking, and reflex testing, without the aid of the LIS. As laboratory automation evolves, the challenging task will be not only to closely integrate the functions of the LIS and the highly intelligent automated instruments that it serves, thereby eliminating redundancy by ensuring minimal overlap of functions, but also to bring under its umbrella a variety of analyzers currently ensconced in separate locations. The level of sophistication in the clinical laboratory has been made possible with advances in instrumentation and technology, going hand in hand with great expectations for doing “more for less” in a cost-conscious healthcare environment. With this introductory background, let us now turn to the exploration of the current trends in instrumentation and technology in key laboratory disciplines and how these trends can predict the future.

Chemistry Core Laboratory Although we are not there yet, we are rapidly progressing toward a single analyzer incorporating multiple measurement principles ranging from spectrophotometric, potentiometric, fluorometric, nephelometric, and turbidimetric to chemiluminometric, to list a few. While the bulk of routinely assayed clinical chemistry analytes are still traditionally measured on a single analyzer with spectrophotometric, fluorometric, and potentiometric (ion-selective electrodes) detection capabilities, the technology for immunoassay detection has proliferated. While hitherto dedicated immunoassay instruments measured a limited profile of analytes, it is now possible by incorporating multiple detection technologies in a single instrument to be

able to measure a wide selection of analytes ranging from therapeutic drugs and hormones to tumor, cardiac, hematological, and infectious disease markers and to detect autoimmune disease (3). Just as homogeneous enzyme and fluorometric immunoassays and fluorescence polarization immunoassays revolutionized the measurement of therapeutic drugs and drugs of abuse over the last two decades, chemiluminescence and other ultrasensitive immunoassays have expanded the scope of detection to a wide range of diagnostically relevant analytes. Indeed, hormones such as thyrotrophin can be measured at levels as low as 0.001 mIU/ml with chemiluminescent labels. Likewise, the newer high-sensitivity troponin I (hs-cTnI) assays can achieve a sensitivity of 0.0028 µg/liter at the 99th percentile level (37). Evolution of ultrasensitive immunoassay technologies. As ultrasensitive technologies have been introduced, their limitations have also been uncovered, thus leading to a refinement of the original assays. Using chemiluminescence technology as an example, it is appropriate to review some of the problems associated with chemiluminescent labels. Conventional acridinium esters that are widely used as chemiluminescent labels, when attached to small molecules in a competitive assay, result in the formation of poorly chemiluminescent products with very short half-lives. In addition, at alkaline pH, nonchemiluminescent products called “pseudobases” are formed and can affect the sensitivity of the assay. However, since chemiluminescence can only be initiated at strong alkaline pH (12.0 to 13.0) in the presence of hydrogen peroxide, it is necessary to preincubate the acridinium esters with hydrogen peroxide at a pH range of 5 to 7 to ensure the reconversion of any preformed pseudobase back to the acridinium ester prior to rapidly increasing the pH with strong alkali (sodium hydroxide) to initiate the chemiluminescent reaction (66, 75, 78). Problems have also been encountered with other chemiluminescent labels. For instance, the chemiluminescent label luminol, when attached to antibodies and small molecules, can reduce the amount of chemiluminescence and hence decrease the sensitivity of the assay. The reagent blank itself can contribute to nonspecific light emission. The water used in the preparation of buffer should be free from contaminants to avoid a high background signal. Even the type of buffer should be chosen with care to ensure that it does not contribute to a high background signal or noise. Some of the problems associated with luminol have been partially circumvented by labeling the antibody with an enzyme such as horseradish peroxidase. Luminol is then used as a chemiluminescent substrate, which is oxidized by hydrogen peroxide and alkali in the presence of peroxidase label to generate chemiluminescence. The efficiency of chemiluminescence generated with adamantyl dioxetane phenyl phosphate and alkaline phosphatase

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to cleave the phosphate group can be enhanced by energy transfer from the resulting chemiluminescent meta-oxybenzoate anion to fluorescent surfactants, such as micelles formed from cetyltrimethylammonium bromide and 5-(Ntetradecanoyl) amino fluorescein (75). The implication for an assay that does not use such surfactants for enhancing chemiluminescence is the possibility of contamination with extraneous surfactants to overestimate a constituent that is measured due to the apparently increased intensity of chemiluminescence that is generated. The type of solid matrix that is used in immunoassays, such as antibody-coated magnetic beads versus antibody-coated wells, is also a consideration in the assessment of interference in ultrasensitive immunoassays. In general, the larger the sample volume, the greater is the likelihood of seeing interference. The efficiency of the washing step in the assay is critical to the elimination of specimen matrix effects (81). Another limitation of conventional chemiluminescent labels is their insolubility in aqueous buffers, which makes the labeling of antibodies or proteins complicated. These labels have a limited shelf life due to their instability and contribute to inconsistent background signal and noise. With the recognition of the above problems, attempts have been made to increase the stability and water solubility of acridinium derivatives. The choice of acridinium (N-sulfonyl) carboxamides, which provides increased quantum yield of chemiluminescence, has increased the sensitivity of the assay. The sulfopropyl substituent has the advantage of reducing background interference while also increasing water solubility and shelf life (92). Besides chemiluminescence, the resolving power of time-resolved fluorescence coupled with the relative absence of competing fluorescent interfering substances has provided the impetus for the development of time-resolved fluorescence immunoassay instrumentation. The basis for this specificity lies in the wide separation, nearly 250 nm, between the excitation and fluorescence emission wavelengths of the rare-earth lanthanide chelates such as europium and terbium, compared to a mere 25-nm separation of the two wavelengths for fluorescein. Furthermore, these rare-earth labels have long fluorescence lifetimes on the order of 10 to 1,000 µs, as opposed to nanoseconds for conventional fluorescence labels. Additionally, the fact that the fluorescence emission wavelengths of europium (excitation, 308 nm; emission, 614 nm) and terbium (excitation, 307 nm; emission, 544 nm) are different makes them attractive for use as dual-label probes for the simultaneous immunoassay measurement of two constituents in the same sample. However, of the two labels, europium has a clear advantage over terbium in terms of long fluorescence decay times (1,020 µs for europium versus 148 µs for terbium), low background signal (420 counts/s for europium versus 4,490 counts/s for terbium), and detection limit (1 pmol/liter for europium versus 40 pmol/liter for terbium).

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Table 54.1 Ultrasensitive immunoassay techniques Chemiluminescence: labels used Acridinium esters Acridinium (N-sulfonyl) carboxamides Luminol Adamantyl dioxetane phenyl phosphate Ruthenium (II)– tris(bipyridyl) complex (electrochemiluminescence) Time-resolved fluorescence: labels used Lanthanide chelates: europium and terbium

Table 54.1 presents a listing of representative ultrasensitive immunoassay techniques. Automation of time-consuming heterogeneous immunoassays with multiple steps, such as enzyme-linked immunosorbent (EIA) assay, and refinement of immunoassay formats have improved the quality of immunoassays. However, potential problems from either hemolyzed samples or fibrin can still be encountered. For instance, some assays capture the antibody-analyte-label antibody complex on a fiber matrix. Theoretically, this step should permit washing away of the unbound label, so that in the next step when the substrate is added, the signal produced due to the formation of product can be directly related to the concentration of analyte in the sample. However, erythrocyte membrane fragments produced during hemolysis could cause nonspecific absorption of labeled antibody to the fiber matrix, thus artifactually overestimating the concentration of analyte, as was reported with troponin I (TnI) (79). In such cases, filtration of hemolyzed samples could eliminate the interference. A similar artifactual increase in TnI has been reported to be due to residual fibrin strands becoming trapped on a fiber matrix containing the immobilized monoclonal antibody (99). A major problem with immunoassays using mouse (murine) monoclonal antibodies is the interference due to the presence of human anti-mouse antibodies (HAMA) in patients’ sera. Patients who either are receiving immunotherapy with mouse monoclonal antibodies, are exposed to imaging techniques, or handle experimental animals such as mice are apt to develop HAMA. While many strategies are available to overcome interference due to HAMA, one attractive strategy that may gain wider acceptance is the substitution of a chimeric antibody for the commonly used murine monoclonal antibody as the assay reagent. This strategy is based on the premise that most of the circulating HAMA is directed to the Fc portion of mouse immunoglobulin G (IgG). Thus, the use of chimeric antibody where the Fc portion is of human origin can overcome the interfering effect of HAMA, which is a serious problem associated with the widely used murine monoclonal-based two-site immunoassays in the clinical laboratory (61, 78).

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Chromatography–mass spectrometry. We have witnessed the evolution of chromatographic techniques in the clinical chemistry laboratory since the days of the 1952 Nobel laureates Martin and Synge’s pioneering work in partition chromatography dating to the 1940s. Paper chromatography began to be used for the detection of aminoacidurias and melliturias. Thin layer chromatography (TLC) found a niche in the toxicology laboratory for the identification of drugs. Progress has been made in the detection of drugs by TLC with the availability of systems with drug standards incorporated in thin layer plates that permit comparison of relative migration and staining characteristics of unknown drugs to standard drugs (54). TLC has also been applied in the determination of fetal lung maturity and in screening for aminoacidurias. The progress made in liquid chromatography leading up to the development of high-performance liquid chromatography (HPLC) has led to the use of automated HPLC instruments in the laboratory to perform analysis ranging from various classes of drugs to hormones, amino acids, and vitamins. HPLC itself has evolved since the 1970s when columns packed with 10-µm irregularly shaped particles were used to bond stationary phases and the pressure used to pump solvents through the column was in the 5,000 to 6,000 pounds per square inch (psi) range. In the 1990s, while the pressure used to pump solvents through the column virtually remained unchanged, particle sizes were reduced to a 3.5 to 5.0 µm range, and column packing materials became more uniform. Reducing the particle size further, while it will no doubt increase the efficiency of separation, would require higher pressures to pump solvents through the column. In 2004, we witnessed the birth of ultra-performance liquid chromatography (UPLC) that uses a porous silica-based bonded phase with particle size down to 1.7 µm, and pressure to pump solvents through the column increased to 15,000 psi. While providing excellent separation, UPLC has also resulted in the shortening of the analytical run, thus allowing more samples to be analyzed. Monolithic column packing materials synthesized directly in a chromatographic column are being introduced that offer significant advantages over conventional particlebased bonded phases in terms of the efficiency of separation and speed. As for applications in the clinical chemistry laboratory, dedicated HPLC instruments are in use for the measurement of hemoglobin A1c and hemoglobin variants using ion-exchange chromatography (56). Amino acid analysis with picomole to femtomole detection limits is now possible with dedicated HPLC amino acid analyzers (15). As noted earlier, the list of analytes that can be measured by HPLC is extensive, ranging from hormones to a variety of drugs and vitamins such as vitamin D. Separation of molecules based on their attraction to a specific ligand bound to derivatized agarose is the basis of affinity chromatography. An application of affinity

chromatography in the clinical laboratory is the separation of hemoglobin A1c on boronic acid derivatized agarose (74). Hemoglobin A1c bound to the column is subsequently eluted with sorbitol, a competing sugar, and measured. Separation of molecules based on size and shape is the basis of gel permeation or size-exclusion chromatography, which has found a research application in the initial purification step of labile hormones and proteins (74). Prior to the advent of sensitive immunoassays, drugs were measured by gas chromatography. Fatty acids, carbohydrates, and steroids were amenable to measurement by preparation of derivatives that could be rendered volatile after sample injection into the gas chromatograph. The availability of sensitive detectors such as the electron capture detector made it possible to measure amino acids and catecholamines by means of their fluoro derivatives (74). Even to this day, law enforcement authorities have used head space analysis using gas chromatography to confirm alcohol consumption. While a gas chromatograph can provide identification of a constituent based upon the time it emerges from the gas chromatographic column (retention time), it cannot provide positive identification. This can be performed by coupling the gas chromatograph to a mass spectrometer that can in turn analyze fragment ions emanating from the mass spectrometer to provide structural information on the constituents separated initially by the gas chromatograph. Thus, during the advent of mass spectrometry instruments, capillary gas chromatography–mass spectrometry (GC-MS) found its niche in the toxicology laboratory for the positive identification of drugs of abuse, which coincided with the availability of high-efficiency capillary columns for use in gas chromatographic separation (74). Table 54.2. lists the types and principles of various chromatographic techniques. Mass spectrometry. The first mass spectrometers were expensive, bulky magnetic sector–based instruments. Over the last two decades, there has been considerable progress in not only the instrument design, such as the development of quadrupole-time-of-flight analyzers, but also ionization techniques. The enormous potential of mass spectrometry was realized with the introduction of atmospheric pressure ionization (API), electrospray ionization (ESI), and matrix-assisted laser desorption/ionization (MALDI) techniques. That mass spectroscopy has come of age was recognized with the award of Nobel prizes in 2002 to John B. Fenn for his seminal work on ESI and Koichi Tanaka for his soft laser ionization technique, which was later applied to MALDI (which was actually invented by German scientists Franz Hillenkamp and Michael Karras). Before the discovery of these ionization techniques, mass spectrometry was limited to the analysis of small molecules. The availability of API and ESI techniques made it possible to couple

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Table 54.2 Types and principles of chromatographic techniques Thin-layer chromatography: Adsorption chromatography. Gel permeation chromatography: Separation based on size and shape of molecules. Affinity chromatography: Separation based on the affinity of a ligand to its target, such as an antibody to detect antigen or vice versa or boronic acid attached to derivatized agarose to detect HbA1c. Ion-exchange chromatography: Separation based on charge. High-performance liquid chromatography (HPLC): High performance achieved by using high pressures in the 5,000–6,000 psi and 3.5–5.0 µm particle size to bind the stationary phase. Ultra-performance liquid chromatography (UPLC): Ultra-performance achieved by pressures as high as 15,000 psi and particle size down to 1.7 µm to bind the stationary phase. Gas chromatography (GC): Separation based on the solubility of a constituent in a liquid phase bound to a solid support packed in a column. A gas is used to bring the constituents partitioned in the stationary phase to the detector based on the relative solubility of each constituent in a sample to the stationary phase. Detectors used in GC: Thermal conductivity, flame ionization detector, nitrogen phosphorus detector, and electron capture detector. The electron capture detector is most sensitive but is limited to samples containing a fluoro group such as fluoro derivatives of amino acids and perfluoro derivatives of catecholamines.

liquid chromatography to mass spectrometry. Thus, liquid chromatography–tandem mass spectrometry techniques made possible the introduction of the sample emerging from the liquid chromatograph into the first mass spectrometry instrument, with further fragmentation and detection of the separated ions in the second mass spectrometry instrument. Both HPLC and UPLC instruments coupled to tandem mass spectrometry instruments are gaining acceptance in the laboratory for the therapeutic monitoring of immunosuppressive drugs such as cyclosporin A and tacrolimus, antibiotics such as tobramycin, antiepileptic and antidepressant drugs, drugs of abuse, and a variety of other analytes ranging from amino acids to vitamin D. Table 54.3 lists the types of instruments and ionization techniques used in mass spectroscopy.

Refining manual assays: protein electrophoresis and urinalysis. Protein electrophoresis. Protein electrophoresis is one area in the core laboratory that could benefit from the elimination of staining steps. This can be achieved by the technique of capillary electrophoresis on fused silica columns. In this technique, the separated protein fractions are monitored by the measurement of absorbance in the ultraviolet (UV) region at 254 nm as they are eluted from the column. This technique can also be used to monitor monoclonal gammopathies by using a technique called antibody subtraction, which eliminates the UV absorbance of the specific antiserum-adsorbed monoclonal species (either immunoglobulin G [IgG], IgA, or IgM, kappa or lambda).

Table 54.3 Mass spectrometers and ionization

Urinalysis. It is surprising that the screening, diagnostic, and monitoring potential of urinalysis has not received the same degree of attention as serum, plasma, or wholeblood analysis. To paraphrase the famous comedian Rodney Dangerfield, it is as if urinalysis “don’t get no respect,” a situation that, however, is slowly changing. Indeed, we have progressed from the automation of urine dipstick analysis by reflectance measurements to total automation of urinalysis, including video camera detection of formed elements and elegant detection of specific gravity by harmonic oscillation. Flow cytometric principles have been adapted to automated urine cell analysis of formed elements. Thus, particles are double stained for DNA and membranes and identified by the measurement of fluorescent light intensity, forward light scatter, and the widths of these signals. Quantitative enumeration of formed elements such as red blood cells (RBCs), white blood cells

techniques Types of Instruments Magnetic sector Quadrupole time-of-flight (TOF) Tandem mass spectrometer (MS-MS) LC-tandem mass spectrometer GC-MS Ionization techniques Electron impact Chemical ionization Fast atom bombardment Atmospheric pressure ionization (API) Electrospray ionization (ESI) Matrix-assisted laser desorption/ionization (MALDI)

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(WBCs), large epithelial cells, bacteria, and casts is possible by this elegant approach (60).

Rapid-Response Laboratory and Point-of-Care Testing Even the instruments in a rapid-response laboratory dedicated to critical care testing, such as blood gas analyzers, are undergoing considerable refinement in terms of ease of use, quality control functions, and options to display and print out nomograms of acid-base status. Besides being able to perform pulse oximetry measurements, these analyzers also have the ability to measure electrolytes, lactate, glucose, and bilirubin from the same whole-blood sample. Sophistication in technology for blood gas analysis ranges from the use of disposable-cartridge-based systems complete with sensors (potentiometric and amperometric), calibrants, and sealed waste containers to the use of fluorescent indicators to measure pH, pCO2, and pO2. Some blood gas analyzers provide conductivity-based hematocrit measurements. Dedicated benchtop instruments with a comprehensive test menu that includes stat analytes, therapeutic drugs, nutritional and anemia markers, glycated hemoglobin (HbA1c), specific proteins, and hormones bring the capability to perform most of the tests needed in a rapidresponse laboratory. Some of these instruments have positive sample identification capability and the ability to transmit results to the LIS (4). The varied menu offered by some of the benchtop analyzers is made possible by the use of photometric, potentiometric, and turbidimetric techniques and measurement techniques based on a variety of immunoassay principles. Many rapid-response laboratories also have introduced cartridge-based immunoassays to perform whole-blood analysis of cardiac markers (TnI, creatine kinase [CK]-MB isozyme, and myoglobin) and analysis of drugs of abuse in urine. A recent innovation is the use of automated biochip array immunoassay technology with chemiluminescence detection for the measurement of a panel of specific markers, such as fertility and other hormones, tumor markers, cardiovascular disease markers, cytokines, and drugs of abuse. Signal from each region of the biochip containing immobilized reagent (antibody) and applied sample is captured by a charge-coupled device (CCD) camera, and the image-processing software relates the signal to the concentration of the analyte in the sample applied to each discrete region of the biochip. Such a technology with its miniaturization offers the potential for rapid testing at the bedside with no more than a drop of blood or body fluid (37a). Noninvasive Testing Noninvasive testing can be accomplished either with an ex vivo monitoring device or through implantable in vivo monitoring sensors. Ex vivo monitoring sensors are ideal for use in the critical care monitoring of blood gases at

the bedside. Fiber-optic technology (fiber-optic chemical sensors or optodes) with either absorption (color indicators) or fluorescence intensity (fluorescent indicator) sensors lends itself readily for use in a tubing set that can be connected to the patient’s arterial line. In this arrangement, blood can be withdrawn from the patient over the sensors to obtain pH, pCO2, and pO2 measurements, following which blood is returned to the patient. Use of such devices permits a nearly continuous monitoring of blood gases in a patient at, in some cases, 2-min intervals, while also conserving blood, which is returned to the patient (68). The sensors, however, have a limited lifetime and need to be replaced after a set number of determinations or hours of use. Ex vivo sensors can also be used in the extracorporeal circuit, thus permitting continuous monitoring of blood gases and, with appropriate sensors during a cardiopulmonary bypass procedure, also electrolytes, including ionic calcium and magnesium, glucose, lactate, and hematocrit. Ex vivo monitoring sensors can also be used to measure a sample of dialysate when the sensors are connected to the extracorporeal loop of hemodialysis machines. In contrast to ex vivo monitoring, in vivo monitoring through implantation of a device, such as a glucose-oxidase sensor in the abdominal area for continuous subcutaneous monitoring of glucose, has been problematic. Problems such as sensor stability, drift, and particularly, the lack of correlation between extracellular and blood glucose levels are some of the issues with in vivo subcutaneous glucose monitoring (101). In spite of the potential hurdles associated with in vivo monitoring, instruments for in vivo intravascular monitoring of blood gases requiring insertion through a catheter of a probe containing sensors (pH, pCO2, and pO2) in the radial artery have been made commercially available (110). In recent years, considerable efforts have been made to achieve a noninvasive measurement of glucose by monitoring its near-infrared spectrum. However, such a device for routine use remains yet to be perfected. Given the potential benefits of noninvasive testing at the patient’s bedside, progress in this area continues, and with refinements in technology, noninvasive testing is expected to gain greater acceptance in the future.

Hematology Automation in the Routine Laboratory According to the so-called Coulter principle enunciated by Wally and Joseph Coulter in the early 1950s, when cells suspended in an electrolyte are passed through an aperture, they offer resistance to current flow. Also, the amount of resistance can be related to the number of cells, while the amplitude of signal can be related to the cell volume. These facts paved the way for automated cell counting by

CHAPTER 54. TRENDS IN INSTRUMENTATION/TECHNOLOGY

the impedance method. In the decades that have followed, technology has progressed in steps from cell counting and enumeration of red cell indices to first a three-part WBC differential count and later a five-part WBC differential count. Today, the hematology analyzer has incorporated flow cytometric principles, and the scope of its measurement is expanding year by year. One of the features of flow cytometry instrumentation adopted by these analyzers is the ability to analyze cells in single file by the hydrodynamic focusing principle. Essentially this involves injecting cells into the center of the flow stream using a sheath fluid, so that the cells pass into the instrument one behind the other in single file. This feature also prevents two cells from passing together through an aperture and being counted as one, which would introduce “coincidence error” and, in turn, result in an underestimation of the cell count. The major automated instruments in today’s hematology laboratory have some subtle differences that are worth noting for the way they generate a five-part WBC differential count. These differences become apparent in the process of surveying the design of some of the currently widely used hematology instruments (30, 113). One of these analyzers relies on volume (impedance), conductivity, and laser light scatter measurements. The familiar impedance measurement estimates cell volume. Conductivity measurements involve probing the internal structure of the cell with high-frequency current so that WBCs can be classified based on their cytoplasmic and nuclear content. Laser light scatter at 10- to 70-degree angles permits the differentiation of the granulocyte populations, since the extent of light scatter is related to granularity. This enables the differentiation of coarsely granular cells that scatter more light from finely granular cells. Another analyzer uses a combination of direct current and radio frequency measurements to arrive at a WBC differential count. Direct current (impedance) measurements provide an estimate of cell size. Radio frequency measurements reflect nuclear size and density. Actually, this analyzer produces initially a three-part differential count (lymphocytes, monocytes, and granulocytes). Eosinophils and basophils in the granulocyte population are subsequently resolved from the neutrophils by differential temperature treatment using two different buffers. A further refinement of this technology made possible by exploiting the use of radio frequency and direct current to detect chemical and electrical differences between immature and normal WBCs allows estimation of WBC immaturity. Multiangle polarized scatter separation is another approach to automated WBC differential analysis. An analyzer based on this principle uses a combination of small-angle forward light scatter and 90-degree (orthogonal) light scatter to differentiate the granulocyte populations. Neutrophils are differentiated from eosinophils, since the latter

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depolarize the 90-degree light scatter, while 10-degree light scatter allows for discrimination of basophils. An instrument principle different from the ones discussed so far is the basis of an analyzer that utilizes cytochemical staining in combination with forward-angle light scatter measurements. In contrast to the impedance method, the RBCs and platelets are isovolumetrically sphered and fixed. The size or volume of the RBC is determined at low-angle light scatter (2 to 3 degrees), while the hemoglobin concentration within each RBC is determined by the absorbance at high-angle light scatter (5 to 15 degrees). Various red cell indices are subsequently calculated. Platelets and their volume (mean platelet volume) are computed from a plot of low-angle versus high-angle light scatter. After lysis of the RBC, a separate hemoglobin measurement is made by spectrophotometry as the released heme is reacted with cyanide to produce cyanomethoglobin. Thus, the instrument provides both a total hemoglobin value and an estimate of the amount of hemoglobin within each RBC. WBCs are fixed with formalin after the lysis of RBCs and stained for peroxidase. The intensity of staining will vary, since neutrophils, eosinophils, and monocytes contain various amounts of peroxidase. These cells are then classified based on their degree of light scatter and absorption (staining intensity). Lymphocytes and large cells without peroxidase are not stained. In a separate channel called the basophil/lobularity channel, basophils are counted after the cell membrane and cytoplasm of neutrophils, eosinophils, lymphocytes, and monocytes are stripped off at low pH, leaving only the bare nuclei of these cells. The degree of nuclear segmentation is computed by a combination of low-angle light scatter, which estimates size, and high-angle light scatter, which estimates nuclear segmentation or lobularity. The ratio of segmented or polymorphonuclear nuclei to mononuclear nuclei estimates the degree of nuclear segmentation, which can be of diagnostic value, such as a shift to the left. Data presentation, both numerical and in the form of histograms and scatter plots, is a common feature of the various hematology analyzers. Hematology analyzers exploiting the unique design features of each of their instrumentations are constantly adding more tests. Thus, the ability of a fluorescent dye to bind DNA within the nucleated RBC (NRBC) has been exploited to enumerate NRBCs (33). The ability of live cells with intact membranes to exclude a fluorescent dye such as propidium iodide is the basis of enumeration of nonviable (or dead) WBCs, which are stained by the dye, thus providing a measurement of percent nonviable WBCs. Furthermore, today, virtually all of the major hematology analyzers are able to stain residual RNA within the reticulocytes with fluorescent dyes and not only provide a reticulocyte count but also classify the reticulocyte population based on differences in maturity, thereby providing an assessment of the immature reticulocyte fraction. The

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clinical utility of some of these measurements has not yet been established. Enumeration of reticulated platelets has also been introduced. Simultaneous measurement of the volume and the refractive index of platelets using two angles of laser light scatter have significantly improved platelet counting. By this two-dimensional analysis, platelet counts of less than 50 × 10 9/liter can be measured, allowing discrimination between platelets and interfering nonplatelet particles (24). Automated peripheral blood smear preparation is also a current option available on several hematology analyzers. Advances in image analysis have permitted capturing the microscopic images of stained WBCs on a screen prior to review and acceptance by medical technologists. If intelligent microscopy of stained WBCs can be performed rapidly, it could conceivably replace the way a five-part WBC differential count is currently performed on automated analyzers. Instruments that permit digital imaging of cells obtained on automated blood film analysis are currently commercially available, and new ones are in development. They not only provide an automated WBC differential count but also provide images of cells for review and verification by technologists. Images of various kinds of cells including erythrocytes are available for review. Erythrocytes can be sorted by their size and shape and hemoglobin content, which becomes valuable when assessing hematological disorders (22). While automated hematology analyzers and imaging systems have proven to be a boon to laboratory testing and patient care, one must not lose sight of the fact that certain conditions such as the presence of extremely low parasitemia may go undetected. A listing of currently available hematology analyzers including digital imaging systems has been published (30). Given the flow cytometry capabilities of hematology analyzers, the measurement of cell surface markers using monoclonal antibodies is a logical extension. Indeed, a study of platelet activation markers such as p-selectin (CD62-p), which is not found on the surface of the resting platelet, and the measurement of the decrease in the platelet surface expression of glycoprotein Ib-V-IX complex (CD42) upon platelet activation could conceivably be added to the capabilities of current hematology analyzers (77). We should expect the hematology instrument of the future to possess software that would be able to correlate traditional hematology results to a flow cytometry panel of leukemia/lymphoma markers that was also analyzed on the same instrument. Indeed, the hematology instrument of the future would also serve the special hematology laboratory by being able to assess neutrophil and monocyte function, thus providing the clinician valuable information for the assessment of neutrophil and monocyte defects. Table 54.4 summarizes the principles and some of the features of automated hematology analyzers.

Table 54.4 Principles and features of automated hematology

analyzers Volume (impedance), conductivity, and laser light scatter Direct current (impedance), radio frequency (nuclear size, cell density): Allows detection of chemical and electrical differences between immature and normal WBCs. Permits estimation of WBC immaturity. Can be used to enumerate NRBCs by dye binding of DNA. Multiangle polarized light scatter: Measures percent nonviable WBCs by ability of live cells to exclude a fluorescent dye. Can be used to enumerate NRBCs by fluorescent dye binding of DNA. Isovolumetric sphering, low- and high-angle light scatter, and cytochemical staining: Two-dimensional platelet counting by simultaneous measurement of volume and refractive index of platelets at two angles of laser light scatter. Can be used to enumerate reticulated platelets. Virtually all of the hematology analyzers can count and classify reticulocytes according to maturity. Automated slide (peripheral blood smear) is also an optional feature.

Coagulation Laboratory Routine Coagulation The mainstay of many routine coagulation laboratories is still the prothrombin time (PT) and activated partial thromboplastin time (aPTT) and tests such as fibrinogen and thrombin time. With rapid instrumentation available, the menu of automated tests is constantly increasing. Currently instruments are available that have the capability to perform chromogenic substrate tests for antithrombin, factor Xa inhibition (to monitor heparin), protein C, and factor VIII activity, to list a few. Adding to this list, the capability to measure other key parameters, such as D-dimer by EIA assay, factor V Leiden (activated protein C resistance), antiphospholipid antibodies, protein S, and fibrinolytic assays tPA and PAI-1, enables the coagulation analyzer to provide a full coagulation and fibrinolytic profile on a patient. Indeed, we may expect a multipurpose coagulation analyzer to offer a broad menu of tests and add to the existing menu of coagulation and fibrinolytic profiles the ability to monitor newer anticoagulants, such as direct thrombin inhibitors like hirudin and argatroban, and markers such as tissue factor pathway inhibitor. Chemiluminescence assays have been adapted for use in coagulation analyzers for the automated analysis of anticardiolipin antibodies (IgG and IgM) and beta 2 glycoprotein 1 (IgG and IgM) for the evaluation of antiphospholipid syndrome. To overcome interference by lipemia, hemoglobin and icterus (bilirubin) in clotting assays measured by photooptical systems measurements can be taken at a wavelength of 671 nm, at which such interferences are negligible. A current listing of coagulation analyzers and their features has been published (29). The list of new anticoagulants for therapeutic use is expanding with the approval of new direct thrombin inhibitors such as dabigatran etexilate and factor Xa inhibitors

CHAPTER 54. TRENDS IN INSTRUMENTATION/TECHNOLOGY

such as rivaroxaban and apixaban (83). Our knowledge of platelet inhibitors that target the platelet P2Y12 ADP receptor, such as clopidogrel, which belongs to the thienopyridine class of drugs, has expanded, revealing the effect of mutations that affect the metabolism of this drug. Thus, it has become important not only to monitor the efficacy of this drug but also to characterize the mutation that a patient may have, which will determine the optimum dosage. We have also become aware of the fact that some patients are resistant to aspirin. Cartridge-based microparticle agglutination technology using turbidimetric-based optical detection is now available in the laboratory to determine resistance to aspirin and to assess the efficacy of P2Y12 ADP receptor inhibitors such as clopidogrel (91). A widely used automated system, designed for point-of-care testing, consists of an analyzer and disposable assay cartridges consisting of fibrinogencoated polystyrene microparticles, platelet activators, and buffer. Separate cartridges with specific agonists are available to measure either aspirin or clopidogrel’s inhibition of the platelet P2Y12 ADP receptor (83, 91). As whole blood is added to these cartridges, the platelet agglutination process results in an increase in light transmittance that is measured. Inhibition of platelet aggregation by either drug will result in a decrease in light transmittance. Results are expressed in “aspirin reaction units” for aspirin resistance or P2Y12 reaction units for clopidogrel. However, since it is based on the agglutination of fibrinogen-coated beads by activated platelets, the assay cannot be used for patients who may be taking GPIIb-IIIa receptor inhibitors. Inhibition of platelet P2Y12 ADP receptors by clopidogrel and other thienopyridine classes of drugs can also be followed by flow cytometry measurement in whole blood of intracellular platelet vasodilator-stimulated phosphoprotein (VASP) phosphorylation (1). The rationale for this testing lies in the fact that the phosphorylation of the intraplatelet actin regular protein VASP is dependent on the level of activation of the platelet P2Y12 ADP receptor that is inhibited by clopidogrel and other thienopyridine classes of drugs. VASP is phosphorylated when platelets are not activated. The assay uses prostaglandin E1 (PGE1), which, by signaling through the PGE1 receptor, phosphorylates VASP, and the platelets are inactivated. However, if the platelets are incubated with PGE1 and ADP alone, VASP is dephosphorylated and the platelets are activated by ADP binding to the P2Y12 ADP receptor. Citrated whole blood from a patient on clopidogrel is incubated with PGE1 in both the presence and absence of ADP. After incubation, the sample is fixed with formaldehyde and permeabilized and labeled with a primary antibody to phosphorylated VASP. It is then stained with a fluorescein isothiocyanate (FITC) conjugated antibody and counterstained with antibody against platelet surface marker CD61, and the fluorescence is measured in a flow cytometer.

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Clopidogrel is a prodrug that is metabolized by cytochrome P450 (CYP2C19) isoform in the liver to its active form that inhibits ADP from binding to the platelet P2Y12 ADP receptor, thus preventing platelets from aggregating. Subjects with mutations in alleles *2 to *5 of CYP2C19 are poor metabolizers of clopidogrel and present a risk of thrombosis, compared to those with the wild-type *1 allele, who are normal metabolizers. Thus, the dose of the drug has to be increased in subjects with these mutations, in whom the standard dose would be ineffective. In contrast, people with a mutation in allele *17 of clopidogrel are ultrarapid metabolizers in whom less than the standard dose is required. Thus, it is imperative that clopidogrel therapy be tailored to a person’s genotype. This has been made possible by using an automated test to detect mutations in alleles *2, *3, and *17 of CYP2C19 (71, 83). The test involves PCR amplification, and alleles are distinguished using allele-specific primer extension. Fluorescent CY5-dCTP is incorporated during primer extension, and the extended primers are hybridized to capture probes immobilized to a film chip microarray. The fluorescence signal is measured by scanning the microarray (90). This automated test can also be used to detect mutations in other cytochrome P450 (CYP) isoforms such as CYP2C9 and mutations in vitamin K epoxide reductase complex subunit 1 (VKORC1), both of which affect the metabolism of warfarin. Hybridizing labeled PCR products to a microarray and scanning them to detect signal is another approach to detect mutations that affect the metabolism of clopidogrel (90). CYP2C9 and VKORC1 mutations that affect the metabolism of warfarin can also be detected by using a DNA microarray to which amplified DNA is hybridized. Electrochemical detection is used to detect hybridization. The procedure is performed in a microfluidic cartridge (90). Another advance in the coagulation laboratory that deserves mention is the introduction of automated fluorescencebased methods for the measurement of thrombin generation that measure peak thrombin generation (maximal thrombin concentration) and the area under the thrombin generation curve that is a measure of the endogenous thrombin potential (8). Table 54.5 lists newer techniques used in coagulation.

Point-of-Care Testing Considerable progress has been made in recent years in conducting at-the-bedside tests to measure such parameters as activated clotting time (ACT), PT, and aPTT. Instruments first developed for point-of-care testing (POC) utilized tubes containing reagents specific for a test together with a magnet into which blood is drawn. Subsequent to blood collection, these tubes were inserted into a magnetic-sensing, temperature-controlled (37°C) testing well that sensed clot formation, and hence the clotting time, as the motion of the rotating magnet in the tube

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Table 54.5 Newer techniques in coagulation Instruments to monitor the efficacy of clopidogrel and other platelet ADP P2Y12 receptor inhibitors and aspirin resistance Flow cytometry measurement of phosphorylation status of vasodilator-stimulated phosphoprotein (VASP) to monitor efficacy of clopidogrel Instruments to detect mutations in alleles *2 to *5 and *17 of the CYP2C19 isoform that affect metabolism of clopidogrel Hybridization of labeled PCR products to microarray and detection of mutations in alleles *2 and *3 of the CYP2C19 isoform that affects metabolism of clopidogrel Hybridization of amplified DNA to a DNA microarray and electrochemical detection of mutations that affect warfarin metabolism Automated fluorescence-based methods to measure thrombin generation

slowed down upon clot formation and moved out of alignment with the magnetic sensing device. A refinement of this system uses only 50 µl of whole blood, in contrast to 2 ml with the earlier system. It also utilizes cuvettes containing reagents specific for a test and uses optical sensors to monitor clot formation to signal the clotting time (7). In addition to the type of instrument described above, instruments using test cards and test strips for specific tests are also currently available. These devices generally contain iron oxide particles and reagents specific for a test. When blood (citrated or noncitrated) is added to the cards or strips and inserted into the instrument, coagulation is initiated upon contact of blood with the reagent. As the clot forms, the motion of the iron oxide particles slows, which is monitored optically as a decrease in reflectance (89). The measurement of ACT permits monitoring of heparin therapy during cardiopulmonary bypass and hemodialysis. Low-range heparin concentrations (0.05 to 0.70 kIU/liter) typically found in extracorporeal membrane oxygenation, a modified form of heart-lung bypass used for treating critically ill infants, can also be measured by variations of ACT, such as in the low-range heparin management test. However, a poor correlation between absolute clotting times and heparin concentrations has been reported in addition to patient-to-patient variability (6). Some patients, however, showed a good correlation between absolute clotting time and heparin concentration across instruments. These POC instruments, however, do have utility for monitoring changes in clotting time with changes in heparin dosage. While aPTT is not quite optimal as a test for monitoring heparin therapy even on laboratory-based instruments, which incidentally evidenced just an 82% agreement between lab-based aPTT and heparin concentrations, the agreement between POC instruments and heparin concentrations was further reduced to between 64 and 65% (104). POC instruments for monitoring PT differ in the type of thromboplastin used and algorithms employed to

display the results. Thus, one instrument displays results that would have been obtained with a traditional, less sensitive high-international-sensitivity-index thromboplastin. Another instrument displays a PT result that would have been obtained on a laboratory instrument, even though the actual clotting time obtained on the POC instrument was longer. While failing to meet the current World Health Organization–recommended limit of 3% for coefficient of variation for slope set for conventional PT testing, PTtesting POC instruments are able to meet a coefficient of variation of 5% (89). A listing of coagulation analyzers intended for POC and self-monitoring has been published (2). Table 54.6 summarizes the features of representative coagulation analyzers intended for POC testing. Among other tests that have been developed for POC testing, a rapid enzyme-linked immunosorbent assay (ELISA) for the measurement of D-dimer deserves mention (94). The D-dimer test is useful to rule out venous thromboembolism in an outpatient setting. An elegant approach to the assessment of platelet function has been addressed in an instrument that uses disposable cartridges containing either collagen and epinephrine or collagen and ADP. The former is sensitive to qualitative platelet defects, including aspirin (acetylsalicylic acid)– induced abnormalities, while the latter is insensitive to aspirin and detects only thrombocytopathies and von Willebrand disease, a hereditary bleeding disorder caused by a deficiency of von Willebrand factor, to which platelets have to adhere to initiate coagulation. The procedure involves aspirating citrated whole blood into an aperture in the membrane of the cartridge, which is coated with specific reagents. The time in seconds that is required for blood to occlude the aperture (no more than 300 s) is the test endpoint and is reported as closure time (69). If this screening test for platelet function is abnormal, the patient can be monitored further with tests such as platelet aggregometry to establish a diagnosis.

Molecular Testing Molecular methods lend themselves to the detection of specific mutations. Thus, a mutation in the factor V gene (factor V Leiden: c.1691 G:A) that results in the substitution of arginine (R) for glutamine (Q) at position 506 (p.R506Q) as a result of the replacement of guanine for adenine in the mutated factor V gene can be detected by both PCR- and non-PCR-based methods. Methods involving Table 54.6 Features of POC coagulation analyzers Magnetic sensing of clot formation Optical sensors to detect clot formation Test cards and test strips containing iron oxide particles: clot sensing by the decrease in reflectance with the slowing of motion of iron oxide particles

CHAPTER 54. TRENDS IN INSTRUMENTATION/TECHNOLOGY

multiple steps have all been simplified, including PCR amplification, restriction enzyme digestion that cleaves only one of two mutated or normal alleles, and electrophoresis. By electrophoresis, one can visualize the digested bands that reveal the presence or absence of mutations; this process requires a minimum of 4 to 6 h. On the other hand, real-time fluorescence genotyping of the c.1691 G>A mutation can be accomplished by rapid-cycle PCR amplification in closed tubes in approximately 30 min by analysis of melting curves to distinguish between mutant (homozygous, heterozygous) and normal sequences. Steps such as restriction enzyme digestion and electrophoresis are eliminated (63). A non-PCR method for the detection of factor V Leiden is performed isothermally in a microtiter plate, relying on Invader® probe hybridization and cleavage by a thermostable endonuclease (Cleavase VIII). In this assay, a specific upstream Invader® probe and downstream sequence-specific (mutation or normal) probes hybridize in tandem to a complementary DNA template to form an overlapping structure. Only the structure created by the mutant probe is recognized by the Cleavase enzyme and is cleaved. The cleaved probe in turn serves as an Invader® probe to direct cleavage of fluorescence resonance energy transfer (FRET) probes in a second invasive cleavage reaction. The cleavage of FRET probes results in an accumulation of target-specific (normal and mutated sequences) fluorescent signals. The high temperature used in the reaction promotes primary probe turnover. By maintaining an excess of signal probes, multiple probes are cleaved for each target sequence that is present, producing a linear increase of signal over time. The ratio of normal to mutant fluorescence is used to establish the genotype (48). Patients with mutations in the prothrombin gene (20210 G>A) together with factor V Leiden (and possibly the mutation in the methylene tetrahydrofolate reductase [MTHFR] gene c.677C> T mutation, which leads to an increase in homocysteine, a putative risk factor for coronary artery disease) are at much greater risk for thrombosis than those having an isolated factor V Leiden mutation. Both the multiplex PCR and non-PCR methods described above for the study of factor V Leiden mutation are suited to the study of mutations in both the prothrombin and MTHFR genes. Depending on the need, molecular testing in the coagulation laboratory can also extend to the study of other mutations, such as protein C and protein S, which are also risk factors for thrombophilia (77). In addition to the rapidcycle PCR amplification and real-time fluorescence genotyping and melting curve analysis method and the non-PCR method described above, other molecular techniques, ranging from an electronic microarray method to pyrosequencing, are available for the genotyping of various mutations encountered in thrombophilia (121).

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The electronic microarray is performed on a nanochip. Each nanochip is made up of 10 × 10 arrays of platinum electrodes coated with streptavidin that in effect create 100 distinct electronic pads in a 2-mm2 area. Biotinylated PCR products are anchored to the streptavidin-coated pad when the electronic pad in the array is activated. Subsequent to the attachment of the PCR product, two fluorescently labeled reporter probes for mutant and normal alleles are added together with a stabilizing oligonucleotide. The stabilizing oligonucleotide stabilizes the binding of the matching reporter probe to its target. The reporter probe bearing a mismatching base at the 3′ end binds to its target weakly and will be removed during a subsequent washing step. The probe still bound to the target will fluoresce. The ratio of the signals from the mutant to normal probes is analyzed to establish the genotype (121). Finally, DNA testing has made it to the bedside to test for a mutation in allele *2 of the CYP2C19 isoform, which results in slow metabolism of clopidogrel. The sample is obtained with a cheek swab. The test enables the physician to identify individuals who carry this specific mutation and thus allows adjustment of the clopidogrel dosage (98). Table 54.7 lists molecular assays for the evaluation of thrombophilia.

Microbiology There has been much evolution in the development of automated blood culture systems over the years. Radiometric systems designed to detect 14CO2 released from 14 C-labeled substrates into the headspace of the sealed blood culture bottle as a result of microbial metabolism have given way to less hazardous nonradiometric detection instruments where the infrared spectra of CO2 released from nonradiolabeled substrates are measured (17, 32, 88, 95). Aspiration of headspace CO2 for measurement is obviated with the use of an instrument with a colorimetric indicator embedded at the bottom of the culture bottle (17). The indicator is sequestered from the growth medium by a gas-permeable membrane. This arrangement permits the instrument to continuously monitor cultures by taking reflectance measurements as color changes occur due to bacterial growth. Table 54.7 Molecular assays for the evaluation of thrombophilia Non-PCR method that relies on Invader® probe hybridization, enzymatic cleavage, and fluorescence detection Rapid-cycle PCR amplification, real-time fluorescence genotyping, and melting curve analysis Pyrosequencing Electronic microarray performed on a nanochip Bedside testing to detect mutation in allele *2 of the CYP2C19 isoform that affects clopidogrel metabolism

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Blood culture systems that use fluorescence sensors for CO2 detection and instruments that detect the consumption and/or production of gases by microbes growing in the culture broth are other approaches for detection of microbial growth. A variety of automated instruments are available for identification and antibiotic susceptibility testing. One instrument relies on plastic cards, each with 30 wells containing either substrates for microbial identification or antimicrobials for susceptibility testing. Different cards are available, depending on the type of organism to be detected. The turbidity that results as microorganisms grow is monitored by the resulting decrease in light transmittance. Cards that contain chromogenic substrates can be used for anaerobic identification and for Neisseria and Haemophilus identification. The cards are monitored by increases in color (absorbance) as bacteria cleave the substrates. For antibiotic susceptibility testing, cards containing a variety of antibiotics to test against either Gram-positive or Gram-negative organisms are included. The turbidity from bacterial growth is related to the decrease in light transmittance. The growth in each well is compared to the growth in the positive control well. Slopes are computed for each well, ranging from zero for no growth (indicating that the organism is susceptible) to 1 (indicating growth equivalent to that obtained in the positive control well). Regression analysis is used to compute the minimum inhibitory concentration (MIC) of a particular antibiotic for the test organism. A newer version of the above instrument uses fluorescence-based technology with cards that are monitored by kinetic fluorescence measurements every 15 min (65). Identification data are available in approximately 3 h, while susceptibility testing takes approximately 8 h to complete. Instrument software allows data analysis and automated reporting of results. Contamination is avoided in this closed system. Fully automated instruments for identification and susceptibility testing that use 96-well microtiter plates containing a wide range of fluorescence-quenched biochemical substrates and antibiotics are available. Fluorescence is generated as microbial enzymes resulting from growth cleave the fluorogenic substrate, thus identifying the organism. Antibiotic susceptibility is determined by comparison of fluorescence in the well containing the mixture of antibiotic, inoculum, and fluorogenic substrate with that in the well containing only the bacterial suspension and fluorogenic substrate. With this instrument, identification results can be obtained in 2 h, while the susceptibility testing results are completed in 3.5 to 15 h (97). Table 54.8 summarizes the features of automated microbiology instruments used for bacterial identification and/or susceptibility testing. Other automated instruments, each with its own unique features, have been introduced in the clinical laboratory. A novel approach used by one instrument is

Table 54.8 Features of automated microbiology instruments Automated blood culture systems: types of CO2 detection Radiometric Infrared Colorimetric (reflectance) Fluorescence Identification and antibiotic susceptibility testing Plastic cards with wells containing substrates for microbial identification or antimicrobials for susceptibility testing: Turbidity due to microbial growth monitored by decrease in light transmittance. Antibiotic susceptibility monitored by decrease in turbidity (increase in light transmittance). Chromogenic substrates used for anaerobic identification. Fluorescence-based technology: Kinetic fluorescence measurements every 15 min. 96-well microtiter plates containing fluorescence-quenched biochemical substrates and antibiotics: Fluorescence measurements to monitor growth. Antibiotic susceptibility computed by comparison of fluorescence in well containing antibiotic, fluorogenic substrate, and bacteria to fluorescence in well containing only bacteria and fluorogenic substrate. Automated instruments for plating microbiological specimens including specimens collected in elution swab with transport media. Total laboratory automation incorporates plate selection, labeling and transport, inoculation and spreading, incubation, and digital image analysis functions.

the interpretation of reaction in each well with the aid of a video camera. With automation tremendously improving the efficiency of the microbiology laboratory, and thus advancing the quality of patient care, the current trend is toward more novel approaches to optimized automated detection, identification, and susceptibility testing and the automation of the preanalytical phase. In short, total laboratory automation is now entering the arena of the microbiology laboratory. The diagnostic value of a microbiological test is influenced by a number of preanalytical factors, among which are proper specimen collection and transport of specimens (45). Improvement of collection and safe transportation of swab specimens is being effected with new devices. One such device utilizes a flocked nylon elution swab for sample collection and 1 ml of modified liquid Amies transport medium (109). The swab elutes the entire sample into the liquid phase and allows multiple tests to be performed from the same specimen since 10 identical 100-µl aliquots of the sample suspension are available for analysis. The system also facilitates automated liquid handling. The viability of aerobic, anaerobic, and fastidious bacteria is maintained for up to 48 hours at both room and refrigerated temperature. Plating of specimens from sterile tubes, urine specimens, and swab tubes has been automated with an instrument that can also subculture enrichment broths

CHAPTER 54. TRENDS IN INSTRUMENTATION/TECHNOLOGY

(18). The absence of cross-contamination, the reproducibility, and the accuracy of this instrument are promising. A step toward TLA can be found in a barcode-reading instrument that can perform hitherto manual preanalytical steps such as decapping, labeling and delivery, inoculation, streaking, incubation, and recapping (70). Inoculation and streaking are performed by a magnetic bead instead of a manual inoculation loop or similar device. This procedure isolates discrete colonies for further identification and antibiotic susceptibility testing. Incubation is performed in a slow laminar flow incubator that allows maintenance of stable temperature while also reducing dehydration of the plates. Digital image analysis of plates can also be performed and stored. In development is a colony-picking technology that can be dedicated to MALDI-TOF (timeof-flight) MS analysis. Besides the instrument described above, the performance of three other automated instruments has been reviewed (44). Each of these four instruments allows efficient and accurate inoculation of samples, but they differ in the type of inoculation device, the method of inoculation, the type of dispensable devices, the agar plate loading process, and the sample loading capacities. In three of the four instruments, the decapping and recapping functions are automated. The final choice of an ideal automated system will eventually depend on the particular needs of a laboratory and the number and types of samples that the laboratory typically processes by the automated instrument.

Molecular Testing The potential of molecular methods for the rapid diagnosis of bacterial and viral infections has been successfully exploited in the microbiology laboratory. Indeed, instruments dedicated to specific nucleic acid amplification technologies, such as PCR, ligase chain reaction, nucleic acid sequence-based amplification, and branched-chain DNA assay, have been used to measure both human immunodeficiency virus (HIV) and hepatitis C virus (HCV) viral load (75, 76). Other amplification assays that have applications in infectious disease detection include transcription-mediated amplification (TMA) and strand displacement assay (119). Nucleic acid amplification methods have been used to detect Mycobacterium tuberculosis in respiratory specimens and Chlamydia trachomatis and Neisseria gonorrhoeae in urethral swabs. Table 54.9 provides a listing of some of the currently used molecular methods for bacterial and viral detection. The amplification of the 16S rRNA gene, which is found in multiple copies in the genomes of human bacterial pathogens, has been used for the detection of various organisms, such as M. tuberculosis, Neisseria meningitidis, Escherichia coli, Haemophilus influenzae, Streptococcus pneumoniae, and Listeria monocytogenes. Since the 16S rRNA gene is present in multiple copies, with many

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Table 54.9 Molecular methods for bacterial and viral detection PCR Ligase chain reaction Nucleic acid sequence-based amplification Branched-chain DNA assay Transcription-mediated amplification Strand displacement assay

bacterial species possessing up to seven copies of the gene, the detection of a very small number of causative microorganisms is facilitated compared to an assay for the detection of a single-copy gene. Another advantage is that there is sufficient variation within the 16S rRNA gene to allow for species-specific distinction among various organisms (93). However, contamination with DNA from bacterial sources, such as the polymerase enzyme (Taq polymerase) used in PCR and other reagents and plasticware, can cause sensitivity problems with 16S rRNA gene PCR amplification procedures (27). Indeed, such assays for the detection of M. tuberculosis have been restricted by the Food and Drug Administration for use with only sputum specimens positive by acid-fast stain on the smear. Furthermore, since amplification tests amplify both dead and live organisms, such tests have limitations in monitoring therapy. An application of molecular technology that is ideally suited to the simultaneous detection of various drug resistance mycobacterial genes is the DNA microarray. In a typical assay, fluorescently labeled amplicons derived from a specimen that is positive for mycobacteria are applied to a DNA array containing nucleic acid probes based on 82 unique 16S rRNA sequences. The assay can provide discrimination among 54 mycobacterial species and 51 sequences containing unique rpoB gene mutations. The rpoB gene codes for the b subunit of RNA polymerase, to which the antibiotic rifamycin binds and inhibits transcription. Mutation in the rpoB gene confers resistance to rifamycin (41, 107). A variety of molecular assays have been introduced for the detection of M. tuberculosis complex and drug resistance genes (118). A few of them, such as line probe assay, loop-mediated isothermal amplification, and oligonucleotide microarray, deserve mention. In the line probe assay, DNA is extracted from mycobacterial isolates or directly from clinical specimens, and the specific nucleic acid sequences are amplified by PCR using biotinylated primers. The labeled PCR products are hybridized to oligonucleotide probes immobilized on a nitrocellulose strip. The strips are developed colorimetrically by the addition of alkaline phosphatase-conjugated streptavidin and substrate to visualize the lines where the probes are located. The line probe assay allows for rapid screening of patients at risk for multidrug-resistant TB (118). The loop-mediated

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isothermal amplification technique results in the generation of a sufficient amount of DNA to permit visual detection of fluorescence. The technique, while highly sensitive for smear-positive specimens, is of low sensitivity for smear-negative specimens (14). The oligonucleotide microarray allows simultaneous detection of multiple genetic sequences. This permits detection of conserved sequences that can be used to detect microorganisms. It also allows detection of mutations in sequences that confirm the drug resistance of an isolate (14). Biochips have also been developed to detect rifampin resistance in M. tuberculosis (21). A self-enclosed PCR device is available for the rapid detection of rifampin resistance in M. tuberculosis (13). The device correctly identified 97.6% of rifampin-resistant isolates and 98.1% of rifampin-susceptible isolates. However, one cannot currently test for and identify isoniazid resistance. One drawback of assays with rapid turnaround time is that they do not eliminate the need for mycobacterial cultures. Most of these assays are unreliable with smearnegative specimens. Conventional antibiotic susceptibility testing is still commonly used to confirm cases of multidrug resistance and extremely resistant TB. Resistance testing of drugs other than rifampin and isoniazid still needs to be performed to rule out multidrug-resistant TB. Finally, none of these rapid methods detect all resistant strains. Table 54.10 lists molecular assays for the detection of M. tuberculosis complex and drug-resistant genes. The molecular methods available for the typing of microbial organisms are legion. At least five variations of PCR have been used for DNA typing of microbial organisms (84). Some of the PCR-based methods are easy to use, while others are of moderate complexity. In contrast, while DNA sequencing is considered a “gold standard” for viral typing, the size of DNA that needs to be sequenced becomes a limiting factor when typing bacteria and fungi. The prohibitive costs associated with automated DNA sequencers and the high degree of technical skill needed to perform gel-based DNA sequencing also make this approach limiting. However, these limitations can be circumvented by the use of non-gel-based sequencing methods that are applied to amplicons hybridized to gene-specific DNA chips (107). An electrophoretic method that has been used to separate DNA fragments exceeding 20,000 bp resulting from restriction fragment length polymorphism analysis has Table 54.10 Molecular assays for detection of M. tuberculosis

complex and drug-resistant genes Line probe assay Loop-mediated isothermal amplification Oligonucleotide microarray Biochips to detect rifampin resistance in M. tuberculosis

also been used for DNA typing of microorganisms. The method is called pulsed-field gel electrophoresis (PFGE). While this method is of moderate complexity, is easy to interpret, and has, because of its high discriminating power, also come to be considered a gold standard, the procedure is time-consuming, requiring two to three days for completion (84). Intact DNA is required for this procedure. Conventional DNA isolation methods involving sheared DNA are unsuitable. Hence, bacteria are trapped in agarose plugs with the PFGE technique and then lysed with enzyme and detergent, which protects the DNA from degradation. Another variation of restriction fragment length polymorphism (RFLP) is ribosomal DNA RFLP analysis, also referred to as ribotyping, which targets the rRNA gene. In this automated procedure, restriction fragments generated after treatment of DNA with restriction enzymes are blotted onto nylon filters and detected with labeled probes (16). The technique has less discriminatory power than either PFGE or some PCR methods. Other PCR-based methods that deserve mention are arbitrarily primed PCR (AP-PCR), randomly amplified polymorphic DNA (RAPD), and repetitive-sequence-based PCR (REP-PCR). In AP-PCR, primers are used to anneal randomly to regions located within a few kilobases (kb) of each other to create PCR products. In RAPD, primers that have no homology to the target sequence are used. Amplification is performed at low stringency (primers annealing at 36 to 45°C), thus allowing primers to anneal to several locations on two strands of target DNA. REP-PCR allows amplification of repetitive sequences located at multiple sites in the genome. PCR generates different-sized fragments based on primer binding and the ability of the DNA polymerase enzyme to span the distance between the primers. The amplified fragments are separated by size and charge, usually within a microfluidics-based electrophoresis chip. Inside the chip, the amplified DNA fragments bind to an intercalating dye. As the fragments separate, their fluorescence intensity is monitored, thus providing a “fingerprint” pattern of repetitive elements. The automated technique takes approximately four hours to perform compared to the time-consuming PFGE technique (64). Nucleotide sequence-based methods used for typing include single-locus sequence typing (SLST), multilocus sequence typing (MLST), amplified fragment length polymorphism (AFLP), and pyrosequencing. SLST involves analysis of a particular gene that shows variability. Single nucleotide polymorphisms (SNPs) are noted. For example, in staphylococcus protein A gene (spa) typing, a variable number of 24-bp repeat regions flanked by well-conserved regions are sequenced after PCR amplification. The technique is robust, rapid, and easy to use (52). MLST compares nucleotide sequences of regions of at least seven housekeeping genes. A sequence of 450–500 bp

CHAPTER 54. TRENDS IN INSTRUMENTATION/TECHNOLOGY

in the coding region of each gene is sequenced after PCR amplification in an automated gene-sequencing instrument (67). Genetic polymorphisms in sequences are considered as distinct alleles. Each isolate is defined by the alleles at the loci that are the sequence type. Isolates with the same allelic profile are considered as members of the same clone. The relatedness of the isolates is portrayed in a dendrogram that is assembled using a matrix of pairwise differences between their allelic profiles. The technique allows for the identification of broad population-based relationships but is less discriminatory in a clinical setting. Among the advantages of the technique is the fact that sequence data have little ambiguity and have good discriminatory power to differentiate isolates. There is good agreement with existing methods, and MLST has excellent resolution. The disadvantages lie not only in terms of cost, time, and the labor-intensive nature of the technique but also in the lack of consensus for examined loci. AFLP involves treating genomic DNA with restriction endonucleases, and a subset of the restriction fragments is selected to be amplified by PCR. The amplicons are electrophoresed and sequenced in a sequencing instrument (84). The technique is robust within a laboratory, but it cannot be compared between laboratories. Pyrosequencing is essentially sequencing by synthesis, in contrast to the Sanger technique of chain termination, and is performed after real-time PCR amplification. Single-stranded DNA is hybridized to a sequencing primer and is incubated with four enzymes (DNA polymerase, ATP sulfurylase, luciferase, and apyrase) and two substrates (adenosine 5′-phosphosulfate [APS] and luciferin). One of the deoxynucleotide triphosphates (dNTPs) is then added. If the specific dNTP is complementary to the base on the DNA template, it is incorporated by DNA polymerase, and a pyrophosphate is released that in turn is converted by ATP sulfurylase in the presence of APS to ATP. ATP and luciferase convert luciferin to oxyluciferin, which produces a luminescent signal that is captured by a camera. Unreacted nucleotides and ATP are degraded by the enzyme apyrase, allowing for iterative nucleotide addition and the continuation of the sequencing process (55). Pyrosequencing is limited to the sequencing of short sequences of 300–500 nucleotides, in contrast to the 800–1000 nucleotides that can be sequenced by Sanger sequencing. Table 54.11 lists molecular methods for DNA typing of microorganisms. The applications for molecular methods in the microbiology laboratory are constantly expanding, with such testing in the future increasingly expected to take place at the bedside upon admission to permit prompt identification of the causative microorganism, determine antibiotic resistance, implement isolation, and institute appropriate therapy. In recent years, the trend has been to couple PCR to mass spectroscopy techniques such as ESI-MS and

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Table 54.11 Molecular methods for DNA typing of

microorganisms Pulsed-field gel electrophoresis Ribosomal DNA RFLP (ribotyping) Arbitrarily primed PCR RAPD (random amplified polymorphic DNA) REP-PCR (repetitive sequence-based PCR) Nucleotide sequence-based methods: Single-locus sequence typing (SLST) Multilocus sequence typing (MLST) Amplified fragment length polymorphism (AFLP) Pyrosequencing

MALDI-TOF/MS. PCR/ESI-MS has been used to characterize bloodstream infections directly from positive blood culture bottles for rapid results (44). Broad-range primers used in the PCR portion of this technique are specific for groups of microbes rather than a particular species. Additional primer pairs are used to target identifiable genes for antibiotic resistance or other features of pathogenic relevance. In the ESI-MS instrument, the mass-to-charge ratio (m/z) of the target PCR amplicon is measured. The molecular weight of the forward and reverse strand of each amplicon is calculated, and an algorithm is used to obtain the amplicon base composition. Software is used to compare the data to a library of known database composition, and a confidence score is computed. Data meeting an 87.5% confidence threshold for microbial identification are reported (57). Thus, PCR/ESI-MS allows one to characterize a mixture of organisms directly from raw culture broth without having to subculture to isolate colonies of organisms or to approximate the microbial burden of infections. The results are obtained rapidly within five to six hours, in contrast to the time frame of one to five days for culture with biochemical characterization required to confirm the identification of microbes. However, a relatively high false-negative rate of 24% has been reported for this technique due to the fact that primers used in PCR could rapidly saturate DNA from the most abundant organism; in such cases, organisms in lower titers might go undetected. The PCR/ESI-MS technique has been used for the detection and genotyping of a wide range of bacteria and fungi (10, 35, 36, 46, 108, 120). PCR/ESI-MS permits the prompt administration of targeted antibiotic therapy, aiding in control of bloodstream infections by making it possible to rapidly identify microorganisms directly from positive blood culture bottles. The MALDI-TOF/MS technique has also been used for the detection of a wide range of microorganisms. This technique also permits rapid identification of bacteria from positive blood culture broths (64). This random access, automated technique measures the m/z values of proteins expressed by microorganisms. Mass spectra that are

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obtained in the analysis are correlated to a database of experimental data collected from culture collection strains. In most instances, however, a bacterial isolation step is required before analysis, thus increasing the time it takes to obtain results. Currently the system does not have the capacity to identify mixed samples. The technique is unable to detect less than 104–105 colony-forming units. PCR/ ESI-MS can identify antimicrobial resistance genes, such as the β-lactam-resistance genes for Staphylococcus species (mecA), the vancomycin-resistance gene for Enterococcus species (vanA/vanB), and the carbapenem resistance gene for Klebsiella species (blaKPC). However, with MALDITOF/MS, the highly abundant proteins directly associated with these antibiotic resistance genes are not routinely measured. Even with some of these limitations, MALDITOF-MS technology continues to enjoy a wide appeal for applications in microbiology, as can be gleaned by a selected sampling of literature on the subject (25, 53, 73). The introduction of mass spectroscopic techniques in the clinical microbiology laboratory will lead not only to rapid detection of the causative organism and prompt institution of antibiotic therapy, but also will result in cost savings even after considering the initial expense of purchasing the instrument. In one study, it was found that the introduction of mass spectroscopy led to a cost saving of 90% and a reduction in laboratory waste from >1,400 kg to