CareTinuum Advisors

Shifting Focus From Lab Industry To Lab Medicine

LabacoEconomics™ – A New and Necessary Concept

For lab leaders industry-wide, the changing healthcare economy is top-of-mind as is adapting to it. Technology, business acumen, and data all serve as new points of departure in a lab’s quest to continually increase value, relevance and patient benefit.

But until now, one broad concept has been left relatively untouched: the idea of fundamentally shifting the way laboratorians view their role in delivering services across the community’s continuum of patient care.

Labs have the power and potential to profoundly influence outcomes and overall patient care. Achieving that shift represents the essence of LabacoEconomics.

What’s in a Word

While a new concept for labs, “LabacoEconomics” actually derives from “PharmacoEconomics.”

Back in the ’90s, drug manufacturers and hospital pharmacists shifted focus away from the cost of a single medication or dose to its impact on the entire episode of care. The value of a drug was reinterpreted and elevated to what it meant for the patient in terms of outcomes.

So Why LabacoEconomics

This sort of change has never been more pressing for our profession.


Because tidal forces are at work that threaten to maintain labs as cost centers or worse to become outsourced. Historically, many felt they had little choice but to go along with the focus on cheap tests in isolation from patient care because many of the associated inefficiencies were sources of revenue in fee-for-service. Patients and our national economy cannot tolerate these misaligned incentives any longer.

The practice of laboratory medicine with a LabacoEconomics focus can positively impact these inefficiencies. LabacoEconomics helps to rethink the current pricing strategies that are a race to the bottom. At present, lab contracts continue to be awarded to the lowest cost bidder rather than the highest value provider. If unaddressed, this will continue to hamstring the truly unique contributions your lab can offer to patients, while preventing the true strategic value of your lab from being realized.

Penny-wise, But Pound-foolish

What sort of contributions are we talking about?

Let’s begin with the fact that labs touch nearly every patient’s treatment experience in some way, as lab data represents 70% of the patient’s diagnostic information.

Decisions made simply on a cost per-test basis, instead of how data can impact ongoing care and outcomes or how local diagnostic services can improve health system efficiencies, touches only the tip of an immense clinical iceberg. Increasing your accountability for the entire care continuum means taking a bigger-picture view of healthcare economics.

Shifting Focus

We Must Think Bigger

So how does one start down the LabacoEconomic path?

First, change your mindset.

Realize that you are no longer in the laboratory industry-you are practicing laboratory medicine. Your role as a caregiver impacts the clinical picture in significant ways.

Second, assist your staff in unlearning what they have been told throughout much of their careers.

Your colleagues may still be confining themselves to the notion of individual tests and quality results in isolation. Encourage them to start viewing results as part of a larger whole, a sequence of events that results in an ultimate outcome. This can encourage them to “get out on the floor” and in the community – interacting with, and demonstrating their value to the entire care team.

Third, understand that the funding to implement these changes may first come from growth and your own budget.

New thinking begins with you, and that’s where fee-for-service is still your friend.

Consider working with hospital leadership to channel some of incremental fee-for-service revenue into new initiatives and functionality-like the IT infrastructure needed to track patients post discharge to reduce 30-day unplanned readmissions as an example. That will get the ball rolling, and your value will aggregate over time.

As part of the process, it will be important that hospital leadership sees the attractive ROI associated with these investments.

Moving Forward

Remember, significant and fundamental change is occurring in healthcare and it will do nothing but accelerate. As part of this change, labs must recognize the critical role they can and should play in this transition to value-based care by taking more responsibility for enhancing service levels to patients and providers while lowering episode of care costs.

Once local laboratory expertise is positioned as a core competency across all service lines and community care settings, you will have a significant opportunity to:

  • Position your institution for the evolving “at risk” reimbursement environment
  • Generate incremental revenue and margin during this game-changing point in healthcare history
  • Have the biggest impact where it matters most on patient outcomes

Your lab has the innate strength, skills, and resources to achieve truly remarkable things on a much larger playing field.

With LabacoEconomics, you can accelerate on your journey to reinvent the laboratory’s approach to service delivery and empower your staff to engage in even greater innovation.

Enjoy the journey!

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Keith Laughman