Our recent webinar on utilization management covered how laboratories can optimize their test utilization management strategies to realize improvements in business operations as well as patient care. There’s a lot to say on the subject — more than we could cover in a brief webinar — so I wanted to expand on the topic.
The move to a value-based healthcare business model
It’s widely recognized that healthcare is rapidly progressing toward a value-based business model. Two recent surveys by Kaufman, Hall, and Associates, LLC show that over a six-month period:
- Use of value-based contracts increased significantly,
- The percentage of hospitals reporting that 10 percent or more of their revenue comes from value-based contracts nearly doubled, and
- The number of hospitals that anticipate that value-based contracts will constitute 50 percent or more of their revenue within the next 24 months tripled.
This move toward value-based reimbursement benefits patients, payers, and providers alike, as it encourages healthcare providers to deliver high-quality, cost-effective care.
Overutilization and underutilization are both challenges
According to a well-published study in which more than 1.6 million lab results for the most commonly ordered tests were analyzed, nearly a third were found to be unnecessary. Concurrently, approximately the same number of tests that should have been ordered weren’t, demonstrating that both over- and underutilization are clearly issues that need to be addressed.
The reason utilization management is so challenging is because of the consequences faced by clinicians of both over- and underutilization. Overutilization is characterized as healthcare that is provided at a higher volume or cost than is appropriate. When it comes to the laboratory specifically, this means the ordering of unnecessary or incorrect tests. While this is clearly inefficient and wasteful, the true consequence is that it can lead to misdiagnosis, incorrect treatment protocols, and dangerous clinical interventions for patients. In a single year, $750 billion was spent on unnecessary healthcare services, of which unneeded tests made up a substantial percentage.
However, over the past few years, with the change in reimbursement protocols, as well as the strong penalties for hospital readmission, underutilization has become an equally important and difficult issue. In fact, a single missed test can have dire consequences for an individual patient, and that same missed test can cost the hospital several thousand dollars per day in preventable patient stays.
Benefits of following utilization management best practices
While it’s good to have an understanding of utilization management, what does this mean for you, the laboratory leader? Following utilization management best practices results in the highest quality care at the lowest cost, supports Lean and Six Sigma initiatives, and saves significant time and money. In fact, a recent study showed that unnecessary medical tests cost the average American hospital more than $1.7 million per year. Not to mention what really matters — the reason we’re all in this business: appropriate utilization reduces patient risk and empowers organizations to provide the highest quality of care.
Dr. William Taylor of Beth Israel Deaconess Medical Center’s division of General Medicine and Primary Care sums this up perfectly:
“Because laboratory tests play such a crucial and ubiquitous role in medicine, efforts to identify opportunities for improvement in the selection of tests have the potential to contribute greatly to the care patients receive.”
The optimal lab test utilization strategies will ensure that the right tests are chosen for the right patients at the right time.
To learn more about this important topic, watch the webinar on demand: “How Lab Test Utilization Strategies can Increase Revenue and Improve Patient Outcomes”.