How do pathology laboratories maintain service quality with decreased budgets?

By Antti Leino

Economic pressures have resulted in government budgets becoming more constrained and debt levels rising. This has affected the public healthcare sector in particular. Due to decreased budgets for pathology organisations, we are seeing a trend of consolidation incentives in order to cope with change.

Finding ways to operate more efficiently and deal with reimbursement policies has led to the consolidation trend, where providers are required to do more with less and cope with the economies of scale. (2014, Healthcare consolidation on the rise; Dvorak, Katie).

he consolidation of services enables the organisation to improve productivity, efficiency and quality, while achieving savings on their annual budget. In the pathology industry, the difference in the cost per test between organisations is caused by two main factors:

  1. the scope of operations; and
  2. the deployment of staff.

Bigger organisations can allocate their fixed cost across a larger number of tests performed. There is also stronger purchasing power for a bigger company in terms of equipment and reagents. This means the difference in equipment cost per test would be twice as much for a laboratory processing 4-million tests per annum compared to one processing 30-million tests, for example.

Equipment utilization can fluctuate between 20% and 80% and this can be improved significantly through consolidating more tests on to fewer analytical platforms. The management of demand and capacity becomes more effective through allocating resources against sample arrival peaks, as well as absorbing more samples at times when traditionally no work is being processed. A further benefit of consolidation is an increase in the productivity of current staff in the laboratory, as well as more effective allocation of the required FTEs and the use of their skill-mix (DoH, Consolidation of Pathology Services, 2009).

Are your expectations realistic when it comes to consolidation?

In our experience, having completed multiple consolidation projects across the world, we have seen most organisations have already analysed or implemented the merger of specialist departments around technology where possible. This has made it troublesome to extract additional savings through consolidation, which is why we are likely to see movement toward a future where technology alone does not drive consolidation. Understanding consolidation in the current environment, especially within the public sector, becomes more difficult as savings start to lessen and become harder to achieve. The next savings are not as obvious as before and there is a greater risk to the organisation in achieving the benefits of consolidation. This is where accuracy and certainty are critical factors.

There have been successes and failures through a standard route of trial and error in consolidation within pathology organisations. However, when the risks become greater than the perceived reward of a successful consolidation project, there are two options for an organisation to follow:

  • do not proceed due to high risk and cost of failure; or
  • be absolutely certain about the impact of change through consolidation prior to implementation, in order to realize quantified savings.

How can a pathology director be absolutely certain that the consolidation incentives will be realized in their laboratory?


Introducing pTAT — a means to understand your predictable turnaround time as performance measure.

When a consolidation initiative is taken on board by an organisation, it is important to understand the exact impact of volume changes with regards to resource capacity and predictable turn-around time, or pTAT. There are multiple variables in the pathology laboratory, rendering accuracy in decision making critical. Our clients also cite the importance of knowing not only where resources become available, but also the increased impact on existing resources performing current tasks in specific departments.

PinpointBPS® is a movement of forward-thinking laboratories and organisations in healthcare, focused on identifying real improvement and cost-saving opportunities in complex environments, such as diagnostic laboratories. PinpointBPS® is a critical factor in any Lean and Six Sigma initiative, in that it can accurately test and quantify your decisions about the future of the laboratory before any implementation takes place. It has been specifically developed to provide pathology directors with the required level of accuracy and detail to support every decision. Through PinpointBPS®, we have the capability to analyse the technical feasibility of consolidation in depth within an organisation, while also providing expert support and advice until it has been achieved. This has enabled identification of exact departments where the minimum required resources are needed due to workload changes and where resources can be reallocated to achieve maximum savings. The certainty provided by PinpointBPS® enables decision makers to follow through with implementation while understanding the holistic impact of change initiatives on their laboratory.