Robert Michel put the clinical laboratory profession in the spotlight decades before the pandemic. A career marketer, with no formal training in laboratory medicine, Robert Michel worked for several Fortune 100 companies prior to founding The Dark Report in 1995. Twenty-seven years later, he runs the Dark Intelligence Group, the organization that brings education and strategic vision to the clinical laboratory industry through The Dark Report publication, the DarkDaily free e-briefing service on lab management and operations and the Executive War College, the premiere annual laboratory conference. Why such a passion for lab that he shifted his entire career to focus on the strategic direction of this critical element of healthcare? Robert sits down with HPI to provide insights into why, how, and what he has planned next.
In the healthcare consulting work he was doing early in his career Robert could see that, across the nation, many independent lab leaders and hospital administrators of clinical laboratories didn’t necessarily have a business or management network. They had very good scientific and lab medicine networks, but they needed a business intelligence service that focused on the independent clinical labs, the hospital-based labs, and the anatomic pathology groups. And they needed insights into industry trends that would impact their work. Enter Robert Michel.
To be in the forefront of laboratory trends you have to watch. I find who all the first mover laboratories are, or the early adopter laboratories in some area of something that’s new, that’s innovative, that’s untried, and learn from their experience. If it’s working, it’s something we can write about and share with the rest of the industry. If it’s not working, we can also share that. Robert continues with three key areas he thinks are, and have been, key to watch throughout the decades.
Back in the mid ’90s, everyone in the clinical lab world was worried about total lab automation (TLA) – the concept that you could take a specimen coming into the lab and once put on the line by accessioning, the specimen would move through the analytical stage, reporting, and storage, without a human hand touching it. We interviewed some of the first hospital labs that embraced this to share their lessons learned about how these first TLA installations performed. Throughout the 2000s, islands of automation in labs and task-oriented automation that moved specimens from one area to the next area came onto the scene as well. We were on the forefront of this story in the nineties and 2000s, able to cover what did and didn’t work, as this technology ultimately changed the industry.
The value of the Hospital Lab
I am a big supporter of bringing together lab and hospital management, highlighting the need for elevation of the clinical laboratory as a priority specifically in the health system. The fact that most hospital administrations fail to recognize the full potential of clinical lab and pathology to contribute to improved patient outcomes and a lower cost of care has been a real issue for the laboratory medicine profession for decades. Simply put, the lab might be 3 cents on the healthcare dollar or 3-4% of a typical hospital or health system budget. But the test data created by the lab comprises 70 to 80% of the patient’s permanent health record and drives the majority of the decisions on how to diagnose, selection of the most appropriate therapies, and monitoring treatment. Leaders in clinical lab have not been effective at selling their message upstairs.
Robert walks through the two decision-makers: in a hospital health system setting it’s the health system c-suite while in an independent lab it’s the health insurance plans and major employers in the area. The latter entities think of a lab test as a commodity product, looking to buy it at the cheapest price because they assert a chemistry panel result from one lab is equal to a chemistry panel result. The issue then becomes how people in the lab sell a strategic value message to the decision makers above them.
I think it should be the prime directive for the entire house of lab medicine over the next several years to move from fee for service to value based payments at the hospital health system level, at the doctor’s office level, and at the ancillary service level. Clinical laboratories need to sell their value proposition so that they get an appropriate share of that fixed per patient per month payment.
Robert expands on this thought process, highlighting a recent survey on crisis readiness of US health systems (run by Accumen and reported on by Modern Healthcare) illustrating that 45% of lab leaders said cost reduction was their top strategic priority for 2021 while 46% did not have any cost benchmarking in place and 21% were uncertain if they even had access to cost benchmarking.
If we look at the hospital industry, chief financial officers in hospitals since 1984 have set up accounting systems that were very good at maximizing claims, the accuracy of claims submitted, and the number of claims reimbursed. However, this does not allow the lab manager in a hospital to accurately see inputs for materials and supplies, labor, capital, costs of space, etc. That same phenomenon has marked clinical labs. Clinical labs are very well organized to generate high volumes of specimens that allow higher volumes of claims to be submitted. However, knowing the actual cost per test for each analyte has not been a priority. Within the United States, there are a number of laboratories that have moved fairly aggressively over the last 10 years to implement Lean and Six Sigma practices. We interviewed lab leaders in the early 2000s to call attention to the first major hospital labs that had successfully done major lean make-overs of their high-volume core labs, having improved labor productivity by 40%, reduced errors by 40% and improved turnaround times by 40%.
So, there is a path forward for costs in an environment where you’re not paid fee for service, but where you’re paid proportional to the value that you contribute to patient care. Where the parent organization is being paid a fixed per member per month fee, accurate cost accounting will be a critical success factor for labs and pathology groups going forward.
Hospital Lab Outreach
In the same survey report Robert highlights above, the number one reason noted for not having hospital lab outreach program were startup costs or lack of capital while concerns about competition and profitability were highlighted by only 18 and 12% of respondents, respectively indicating that most healthcare systems still consider outreach a solid business, even if they don’t currently have the resources to start one. Another subject that Robert has been passionate about influencing, he speaks to why – and the writing on the wall for hospitals.
The clinical lab typically shuts down in the hospital at about 5:00, but all the instruments are there. What if you could do outreach and bring in specimens from the doctors’ offices and the community around the hospital, and those specimens come in at 6:00, 7:00, 8:00 PM at night for testing by a second shift? You can argue that your marginal cost of running those specimens after 6:00 PM is simply consumables and med tech labor. Therefore, these outpatient and outreach specimens generate a larger profit margin because your lab’s capital base is already installed. And from that perspective, hospital lab outreach programs can be financially very lucrative.
Enlightened hospital administrators of the last 25 years or so recognized that opportunity. Sometimes they had an enlightened lab administrator or clinical pathologist who helped in that model and they’ve run very effective hospital lab outreach programs. They’re profitable. They’re high service. They compete with commercial labs quite effectively. And we cannot forget that a doctor likes to be loyal to his or her local hospital. If the local hospital has an outreach lab that offers services that at least are equal to national labs, those doctors prefer to give their hospital lab that outreach business.
The wild card in this transaction is whether the hospital outreach lab can be an in-network provider for that doctor’s major source of patients. So, what’s changing now is the movement away from fee for service medicine, to value-based reimbursement and proactive care. And in that environment, the outreach program supports the integrated health system. Examples of integrated health systems operate everywhere in the United States. Some examples are Baylor Scott and White in Dallas, Kaiser Permanente in Northern California, and Henry Ford Health in Detroit.
The health system is transitioning to cradle to grave care – from pre-natal care all the way to geriatric care. As this happens, there is huge value ton that health system having a single clinical lab using the same test methodology. It means that, whether the patient was treated as an inpatient, an outpatient, or an outreach patient, just one clinical lab did all that testing and so there is a longitudinal lab test record in the patient file that’s the same test methodology. As multi-hospital health systems acquire office-based physicians and work to integrate the care pathways, they no longer want to contract with the cheapest lab provider who may not deliver test results for 72 hours even at a really low cost per test.
And of course, COVID
Noting Robert’s strategic skills and visionary impact on the lab industry for decades, we asked him to weigh in on the pandemic’s impact on the clinical laboratory, specifically the dichotomy between the multi-billion-dollar lab organizations and the local, community hospital lab.
The COVID pandemic has drawn the curtain open to the American public that an accurate lab test with a fast time to answer is an essential and necessary good.
The decision was made at the highest levels of our government early in the pandemic, that if you needed large volumes of SARS-CoV-2 tests, the fastest way to meet that goal was to favor the nation’s largest labs. Federal and state officials thinned out the supply chain, by redirecting the COVID-19 test kits, collection supplies, and transport media. Meanwhile, hospital and health system labs were quick to bring up tests but could not get enough of the supplies they needed to do testing that would allow them to do a same day test on hospital emergency department patients and on inpatient admissions. COVID-19 has revealed that local clinical lab testing has its benefits and the cheapest price per test may not be the overall lowest price that you pay for getting a test and ending up with an accurate diagnosis and a fast time and start the therapy. A hospital or health system-based lab is embedded in the community and can often do same day testing that’s relevant for patients. This improves the delivery of care with faster time to diagnosis, faster time to treatment.
The COVID-19 pandemic also forced a pivot of in-person conferences to virtual formats this year. This was no different for the Executive War College, as Robert turned a two-day event with 900 people and 125 speakers into a 12 week format with 2-4 hours of general sessions or management masterclass each week, allowing the busy lab leaders the opportunity to continue learning in this critical time. Robert shares key learnings from the near complete conference.
I can share with you as a takeaway from this format is that the pandemic has been totally consuming for any laboratory that is performing COVID-19 tests on top of its normal routine testing menu. Second, while COVID-19 demands are providing some new revenue opportunities because of the volume coming in, normal healthcare is coming back and needs to be supported. Patients that may have chronic conditions and put off going to see their doctor in their regular routine appointment and checkup—as well as people who are ready to be diagnosed with something chronic—are starting to come back to see their doctors because they don’t feel so good. And third, as more physicians are now comfortable doing virtual exams, more virtual healthcare will be delivered to patients and will be wanted by consumers, particularly Gen Z and Gen X. As part of this trend, digital pathology adoption is likely to increase – an easy prediction for me to make. When many anatomic pathologists were furloughed in March and April, during the collapse in routine tests’ referrals in pathology groups, they suddenly appreciated that they had access to a digital pathology system and whole slide images to diagnose patients from their home office.
We don’t know what’s next with the COVID-19 pandemic. We don’t know if there will be a next wave, enough supplies, or enough oversight of chronic patients needing care. What we do know is that the clinical laboratory is critical to navigating through it all. And Robert Michel is not slowing down on his efforts to drive enduring change that will keep the clinical laboratory, and ultimately timely patient care, in the spotlight.
Insert applause. We see you Mr. Michel and we appreciate your work.