hospital laboratories can become profit centers
DESCRIPTION
Transitioning Hospital Laboratories into Commercially Viable Profit CentersTRANSCRIPT
ASCENDING FROM THE BASEMENT
……Hospital Laboratories Can Become Profit Centers
Market Insight
January 2012
A Break-Even Analysis Defines a Business Opportunity
…. But What are the Pivotal Questions to Pose?
2
WHY ?
HOW ?
WHAT ?
In 2011, Frost & Sullivan crafted a research analysis to
gain insight into the business strategies hospital
laboratory directors implemented to realize a profit.
A convenience sample of 40 directors from a national panel
participated in a web survey
Results were compared to opinions expressed by key informants
from five of the largest commercial laboratories in the United States
Strategies streamed from one core value concept – laboratory test
services are not a commodity
Call to Action
Right Service
to the
Right Patient
at the
Right Time
for the
Right Price
The Practice of Medicine is both an Art and a Science
In a hospital setting, laboratory test services are a principal part
of the arsenal that enable physicians to determine appropriate
care for a consumer.
Laboratory test services are labor-intensive, in varying degrees.
Medical and clinical staff interpret and analyze results in light of
patient history and symptom presentation.
In a hospital setting, lab orders are often “STAT,” and in some
cases, findings will be transmitted to surgical suites or intensive
care units.
Reimbursement does not reflect the value of laboratory test
services. Most hospital laboratories are cost centers. A growing
number, however, have implemented business strategies to
become profitable. Source: Frost & Sullivan
Key Questions
Paths to
Profitability
In general, are hospital laboratories
considered cost centers or profit
centers?
Is your hospital laboratory considered a
cost center or a profit center?
67 Percent Perceived Hospital Laboratories in General as Cost Centers
How has the demand for hospital
screening, diagnostic and esoteric tests
changed in the past 12 months?
How would you described the value
proposition of your laboratory?
What are your expectations in forging
relationships with community providers
or a reference laboratory?
How price sensitive is the market for
outreach test services and referral test
services?
What are the three principal reasons for
referring test services to a commercial
laboratory?
How important is the pathologist’s
consultative role in assisting physicians
in testing or treatment decisions?
54 Percent Reported their Laboratories as Profit Centers Source: Frost & Sullivan
Hospital Laboratory Value Proposition
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3. Income
Generator 1. Critical and
Essential
Service
4. Service
Orientation
2. Profit Center
(Outreach
testing)
88 percent believed the market
was extremely (33 percent) or
highly (55 percent) price sensitive
Source: Frost & Sullivan
Value as a Critical and Essential Service
7
……Since laboratory decisions are the basis for about 80 percent
of all medical follow-up, the Laboratory is a critical partner in the care
of patients Nonprofit, New York Hospital (300 to 500 beds)
…… Laboratory test results needed to ensure optimal patient care
and safety are available on a timely basis and on site
Government Massachusetts Hospital (300 to 500 beds)
…… Leverages much of hospital decisions regarding patient care
delivered within the first 24 hours of admission Nonprofit, North Carolina Hospital (701 to 900 beds)
…… We provide 70 percent of the testing information required for
the physicians decisions/treatment/diagnosis of their patients Nonprofit, Colorado Hospital (300 to 500 beds)
Source: Frost & Sullivan
Value as a Profit Center
8
…… A profit center because even though we do not recover all
revenues, we do recover the majority of outpatients revenues.
Nonprofit, Florida Hospital (701 to 900 beds)
…… Incremental volumes from outpatient and outreach work will
help the hospital with added revenues with low incremental expenses
Nonprofit New Hampshire Hospital (300 to 500 beds)
…… With the growth in outreach there is a lot of value in the
hospital laboratory….typically turn around time of most tests are
faster than that of reference labs Nonprofit, Georgia Hospital (501 to 700 beds)
…… Hospital labs can be a profit center if outreach is ventured
properly Private, Florida Hospital (501 to 700 beds)
Source: Frost & Sullivan
Business Case for Joint Ventures with Commercial
Laboratories that Can Support Outreach Marketing
9
78 percent Cost Efficiency for Low Volume Tests
70 percent Breadth of Test Menu
65 percent Test Turnaround Time
53 percent Medical Expertise
48 percent LIS and HIS Connectivity
10 percent C-level Decision
Lab Directors Opinion
Factors that can secure outpatient testing contracts Source: Frost & Sullivan
Change in Demand Reported by Hospital Lab Directors
for Test Services in the Past 12 months
10
60 percent reported an Increased Demand for Diagnostic Tests
60 percent reported an Increased Demand for Screening Tests
75 percent reported an Increased Demand for Esoteric Tests 1
2
3
Source: Frost & Sullivan
Next Steps
11
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For more Information on this Research
13
Source: Frost & Sullivan
Britni Myers
Corporate Communications
Healthcare
210.477.8481
Virginia Cardin, Dr.P.H.
Senior Research Consultant
Healthcare and Life Sciences
210.247.3814