As the reimbursement and regulatory landscape of the US healthcare system continues to experience tremendous change, hospitals are seeking new sources of income. A laboratory outreach business can be a powerful driver of new income for hospitals, but is it reasonable to be optimistic that they can be successful? We asked lab outreach industry thought leaders Sonny Varadan and Dr. Kathy Murphy whether they think it makes sense for hospitals to start a laboratory outreach business from scratch in today’s healthcare environment.
Kathy Murphy, PhD — Chief Executive Officer at Chi Solutions
I’d say absolutely, provided that it’s a well-run business. And the key driver of success for a new startup is going to be that they are price-sensitive — that they not try to bill under the hospital’s fee schedule and get that premium of reimbursement, because that’s not sustainable.
And we’ve talked about transparency. There was a bit of a hit to patients under the old model. I can tell you in the past year, we have worked with two hospital clients that are looking at starting up outreach programs now, and based on using the independent lab fee schedule, they can still be very profitable over the next five years. But it requires that they run it like a serious business; it’s not the mom-and-pop.
So, not everybody will be successful in that model, but it is still very viable, and one of the few sources of new revenue that’s available to hospitals today. Everybody thinks new revenue is dead, and it’s not.
“Everybody thinks new revenue is dead, and it’s not.”
Sonny Varadan, MBA, PMP — Director for IT Strategy and Client Connectivity at a major reference laboratory
One of my sayings is: You’re either in lab outreach management or you’re not. You cannot try to dip your feet in and come out. It doesn’t work very well. And the reason I say that is, I worked on several of these initiatives which hospitals have proposed, and starting a lab outreach if you’ve never been in it is not a cheap endeavor, given the competitive landscape, the expectations of the provider base, and the patients in terms of the services required and the infrastructure needed to set it up.
So, definitely looking at the geography of where you’re trying to start an outreach program when you’ve never been in outreach, not only understanding your competition, but the bottom line is critical. You either want to get in with both feet, or not get in at all. In terms of trying to test the water, it doesn’t work that way, because it becomes one of those wishy-washy deals, which, it turns out, your management is not committed to.
“You’re either in outreach or you’re not. You cannot try to dip your feet in and come out. It doesn’t work very well.”
To read more of Sonny and Kathy’s insights into the future of laboratory outreach, download “Where Do We Go From Here? Laboratory Outreach in a Value-Based Era“.