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Office-Based Testing:
Wise Investment or Road to the Poor House?
by Dr. Sheila Dunn


The previous article focused on how physicians came to view lab testing in their offices. Once convinced that it was easy to do, accurate, and a great way to generate revenue, they bought lab equipment like crazy. Most of you "old timers" are still reaping the rewards -the "juice" business or reagent trail- unless you lost it to CLIA objections or a competitor. (In that case, go back and read last month's article).

Now, threatened by the purported demise of Medicare (lab reimbursement from Medicare actually increased 2.7% January in 1997) as well as the uncertainty about managed care compensation (both capitation and reduced fee for service), many physicians are seeking reassurance before they invest in capital equipment.

As medical sales consultants, we need to show physicians and integrated delivery systems that on-site testing is indeed a profitable venture - even in a predominately managed care environment- because it's better for the patient!! What a novel idea!

POL testing achieves the objectives of today's business of healthcare because it: Increases The Quality Of Life.

For those of you that are as weary as I am of hearing the word "quality" bantered about, (It's right up there with paradigm, empowerment and rightsizing), think about what it actually means in a healthcare setting.

Quality in healthcare boils down to two issues:

1. the patient (customer) gets better faster, and
2. the patient is satisfied with his medical experience.

Both translate into the real objective of today's healthcare system: it costs less, i.e., it saves money!

Consider the following example: You have 3 children. The youngest woke up this morning with a sore throat, a stomach ache and fever. (Resist the temptation to reach for that brown plastic bottle of antibiotics left over from your kid's last infection). It's a weekday so both you and your spouse need to get up and go. You, having the most flexible job, offer to skip a few hours of making calls and take the child to the doctor. You visit the doctor and are informed that you'll need to wait at least one day for the test results (CBC, strep test, and maybe a mono test or a few chemistry tests). Why? Because your insurance company requires tests to be sent to a commercial lab. So you take the child home and do phone work for the rest of the day.

The next day, you feel achy all over and your oldest child is complaining of a sore throat. You call his school to tell them that he'll be absent. You continue to do phone work while awaiting that call from your doctor with the verdict. At 2PM, you finally break down and call the doctor. After listening to elevator music while on hold for 5 minutes, the receptionist says that she'll have to call the lab and see what happened to little Biffy's test results. At 4 PM, you still haven't heard back from the doctor, so you call and get the service - they're closed for the day1 Your once-peaceful house now resonates with the sounds of coughing, sneezing, whining, and whimpering. Your spouse comes home and asks you what's for dinner. To make matters worse, in a few days, you'll be busier than a one-armed paperhanger trying to catch up on all your work.

Whoa.... did your company save a bundle of money on that health plan! The fact that you've missed two days of work will end up costing them (and you) lots more than the $5.00 per month they saved on the PPO plan premium.

Did you experience quality health care? In this case, did the health care customer get better quicker? Is the customer satisfied with his encounter with the health care system? As the customer (for a change), consider how you would react. Switch doctors? Complain to your manager about the health insurance your company provides? Change insurance plans? Also consider another outcome: your child's abdominal pain could have been due to appendicitis which, because it was not quickly diagnosed (using a CBC test), developed into a very dangerous and very expensive case of peritonitis.

I'm sure you can think of many other scenarios where on-the-spot test results provide superior quality. If you need inspiration, see Table 1 for more reasons why POL testing does, in the long run, cost less or save money. Many manufacturers of lab products are providing distributors with a "disease management" selling strategy to justify performing certain tests such as glucose, CBCs, hepatic, and lipid profiles at the point of care.

Do you now see why a $20.00 test performed in an office lab may be less expensive to a payor than one performed in a referral lab for $2.00? Both the payor and the MD will lose business if patients (customers) are inconvenienced, unhappy, or get medically worse1

See also Figure 1 which demonstrates why office-based testing saves money from a workflow perspective. Remember, time is money and a provider's time is the most valuable commodity in a practice.

Maybe a managed care plan only pays $8.00 to a physician office for doing a test (e.g., a rapid strep test costs $3.50 and many POLs are accustomed to a reimbursement along the lines of about $25.00), but if the nurse saves 10 minutes, the doctor saves 5 minutes, and the patient was spared hours of hassles and time off work, the savings generated for the practice by doing the test in-house is worth a bundle!

In the previous example featuring you and Biffy, the managed care plan stipulated that all tests (or all but a few simple tests) be referred out to a mega-lab. This limitation on office-based testing is becoming a reality in some areas of heavy managed care penetration. Even so, a physician can usually negotiate to get paid for all tests on a fee-for-service basis. The worst outcome of the negotiation would be that the physician is asked to accept the same capitated payment as the referral lab. In this case, the managed care plan will pay the POL a capitated amount for lab testing that sounds ridiculously low (most mega-labs accept less than $1.00 per member per month), yet it may still be quite profitable for a POL.

Often, physicians don't understand capitation, and in the above example, think they will be paid less than $1.00/test1 Of course they can't afford that1 In reality, their payment for lab testing will be:

(capitated payment) x (98 of patients in the plan on any given month), or, e.g.,
($0.75) x (3000 patients) = $2250/month or $27,000/year.

To help your accounts succeed, the most valuable skill you can develop is to "change the shape of money". When you demonstrate how a product can not only make money in a fee for service environment, but at the same time save your accounts money in a managed care environment, you become a valuable sales consultant because you've demonstrated how to change the shape of money.

This means learning new ways of presenting products besides the old: "This little gizmo pays for itself in _____ months and after that, you'll generate $______ in revenue per month". This routine only works in a fee for service environment. Accounts with a moderate amount of managed care will politely (or not so politely) suggest you take your story elsewhere. Instead, supplement this story with a product justification based on how it makes patients better faster or less expensively or that it makes patients happier or that it is less expensive than what's currently used. If a product can't do any of these things, don't waste valuable time selling it!

For the nuts and bolts of accomplishing this as it regards lab sales, stay tuned to next month's article. Be there......

Table 1: Why POL Testing Saves Money
  • Traveling to an outside lab and then playing phone tag with the physicianFriday, January 23, 1998s office for test results wastes patient's time and money.
  • Returning for follow-up care is also costly and inconvenient.
  • Patients who were formally "haves" may suddenly become "have-nots" after joining a plan that prohibits in-office testing. Patients may switch to other health plans in which the physician may not participate. Both the plan and the physician lose a customer.
  • Patients may need to take time from work to travel to a drawing station, to come in for a follow-up office visit, or to pick up a prescription.
  • If test results are delayed, a patient's condition may worsen and result in more time off from work.
  • Test results in the office allow faster diagnosis and treatment.
  • Delayed test results cause the office staff to spend valuable time charting results and contacting patients for follow-up. (Figure 1)
  • Delayed test results force the physician to spend valuable time reviewing results and altering treatment plans. More efficient practices can see more patients.
  • Patients are treated during the first office visit when test results are available from a POL. Patients may be difficult to contact once leaving the practice.
  • Drug therapy can be adjusted before patients leave the office.
  • Patients are counseled immediately regarding the significance of the test results and changes to their plan of care, which enhances patient compliance with therapy.
  • Test result delays may cause additional payments to other health care providers in the form of hospital admissions, emergency room visits, expensive specialists, and unnecessary or inappropriate prescription drugs.
  • An adverse incident due to a delay in diagnosis and treatment could cost the health care system a huge amount of money.
  • Transporting lab specimens often damages blood/urine specimens causing inaccurate results. Occasionally, specimens are lost in transit or switched with other patient's tests.

(Return to the text.)


Figure 1: Time Is Money For POL Testing!


MD: Order tests on patient chart.

Staff: Take patient chart (or test requisition) to office lab.

Staff: Collect specimen from patient. Label.

Staff: Log test request in POL.

Staff: Test specimen.

Staff: Put test results on the chart. Verbally communicate results to MD.

MD: Interpret test results while the patient's condition is fresh in his mind. If more tests are needed, run now OR redraw the patient while still in the office.

MD: Use test results to help confirm diagnosis or select proper treatment for patient.

Staff: File patient chart.

Staff: Bill patient for lab test and office visit.


MD: Order tests on patient chart.

Staff: Check which health plan the patient belongs to and determine which referral lab is mandated. Locate a referral lab requisition slip.

Staff: Fill out requisition slip to include patient name, age, sex, date, type of specimen, etc.

Staff: Collect specimen from patient. Label.

Staff: Log test request on a referred test log. File a carbon copy of the test request.

Staff: Prepare specimen for transit (centrifuge chemistry test specimens, wrap with request slip, then bag or box).

Staff: Take specimen to the refrigerator or "metal box."

Staff: Re-file patient chart, or put in a "pending reports" stack.

Staff: Receive test results returned from the referral lab.

Staff: Locate the carbon copy of the test requisition.

Staff: Note on referred test log that results have been returned. Inspect log to see if all test results from the past have been returned. If not, repeat entire process.

Staff: Locate patient chart and attach test results to proper location on the chart.

Staff: Transport chart to ordering physician.

MD: Interpret test results, review chart to correlate results with exam from 1-2 days ago. If more tests are needed, reschedule patient and repeat entire process.

Staff: Communicate test results to patient (letter or phone call). If treatment is required, phone Rx to pharmacy.

Staff: Re-file patient chart.

Staff: Bill patient for lab tests and office visit.

Staff: Pay referral lab for tests.

(Return to the text.)

About the Author:
Dr. Sheila Dunn heads Quality America, Inc., an Asheville, NC-based company that assists medical manufacturers and distributors as well as healthcare professionals to survive and prosper in this rapidly evolving industry. Quality America's publications include "Managed Care: Strategies for Success", "Lab Testing: Get Your Fair Share From Managed Care", and "Satisfaction Guaranteed1", a patient satisfaction primer. For information about Quality America's products or services, call 828-645-3661. (Go to detailed Dunn biography)

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