Pharmacoeconomics to the Clinical Laboratory

LabacoeconomicsTM : Applying the Concept of Pharmacoeconomics to the Clinical Laboratory

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

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

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

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

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

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

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

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

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

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

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

Additional Reading

The Community Clinical Laboratory of the Future

Shifting Focus From Lab Industry To Lab Medicine

Hospital Laboratory Outsourcing and its Unintended Consequences

Think Twice Before Selling Your Hospital Outreach Lab

Keith Laughman & Les Wold M.D.