Benchmarking pathology services: implementing a longitudinal study

This paper details the benchmarking process and its application to the activities of pathology laboratories participating in a benchmark pilot study [the Royal College of Pathologists of Australasian (RCPA) Benchmarking Project]. The discussion highlights the primary issues confronted in collecting, processing, analysing and comparing benchmark data. The paper outlines the benefits of engaging in a benchmarking exercise and provides a framework which can be applied across a range of public health settings. This information is then applied to a review of the development of the RCPA Benchmarking Project. Consideration is also given to the nature of the preliminary results of the project and the implications of these results to the on-going conduct of the study.

The cost-effectiveness of routine pathology consultation in knee arthroscopy

Regulations in Ontario, Canada, as in most provinces and states in North America, require human tissues (with few exceptions) removed at surgery to be sent to a pathology laboratory for examination and report. We hypothesized that this practice is inconsistently followed and that routine pathological consultation is costly and rarely results in a change in treatment for patients undergoing knee arthroscopy. Chiefs of pathology, orthopaedic surgeons, and orthopaedic operating room nurse managers in Ontario hospitals that perform arthroscopic knee surgery were surveyed for compliance. We determined cost using pathology department procedure codes and evaluated effectiveness as the correlation between the postoperative diagnoses of orthopaedic surgeons and pathologists for 1,036 consecutive knee arthroscopy cases. In only one case (0.1%) was it felt that pathology consultation had the potential to significantly alter patient care. The total cost of pathology consultation for the 1,036 cases reviewed was $234,147.00 (mean cost per case, $226.00). Ninety percent of hospitals do not comply with the regulations regarding the processing of these tissues. Poor compliance is justified by the lack of diagnostic value and the need to contain health care costs.

Intranets: virtual procedure manuals for the pathology lab

A novel system exists for replacing standard written operation manuals using a computerized PC-based peer-to-peer network. The system design is based on commonly available hardware and software and utilizes existing equipment to minimize implementation expense. The system is relatively easy to implement and maintain, involves minimal training, and should quickly become a financial asset. In addition, such a system can improve access to laboratory procedure manuals so that resources can be better used on a daily basis.

[A model for estimation of productivity and costs at a deparment of histopathology]

Two cost calculation models were used. The "top down" model calculated an average cost of all investigations; this proved suitable for the calculation of the costs of autopsies and electron microscopical specimens. The "bottom up" model calculated the cost of an individual investigation, depending on the resources used in handling each particular specimen; it was necessary to adopt this model for specimens sent for microscopy. Information about the type of specimen and technical details were registered in a computer system. Production was registered in points and the costs were distributed between the clinical departments. The study showed that the cost of the histological specimens varied considerably depending on the material received from the clinical departments. A model using points for technical details in a department of cyto- and histopathology is suitable for calculating production and cost.

Investment in new technology research can save future health care dollars

OBJECTIVE

To perform a cost analysis of the emerging technology of lymphatic mapping for patients with malignant melanoma.

DESIGN

A retrospective, computer-aided chart and financial cost and charge review of consecutive patients with the diagnosis of melanoma registered at a cancer center from December, 1995 to March, 1996.

PARTICIPANTS

73 consecutive patients with the diagnosis of Stage 1 and 2 melanoma (cutaneous disease only) had nodal staging of their disease with either a sentinel node (SLN) biopsy or an elective complete node dissection (ELND). This was determined largely by patient choice and the protocol in operation at the time of the presentation of the patient to the clinic.

OUTCOMES MEASURED

There were no deaths in the series. Patient morbidity endpoints included rates of infection, incidence of extremity lymphedema, development of a seroma in the regional nodal basin wound and wound healing. Clinical outcome was measured by the ability to obtain complete nodal staging information with the new lymphatic mapping technology, and recurrence rates in the nodal basin after a negative SLN biopsy. Total charges, direct costs and total costs were calculated from all hospital, OR, pathology and lab charges. Professional fees were included in the analysis.

RESULTS

Group 1 patients (50) had melanomas greater than 0.76 mm in thickness treated with a wide local excision (WLE), lymphatic mapping and SLN biopsy under general anesthesia. Five patients (Group 2) had their procedure performed under a straight local anesthesia. Group 3 patients (18) had nodal staging performed with an elective node dissection. In Groups 1 and 2, if the SLN was positive for micrometastases, the patients were taken back to the OR for a complete node dissection. The total charges per patient were $13,835, $6,853 and $19,285, respectively. Significant dollar savings were achieved if the nodal staging could be accomplished with the lymphatic mapping technology (p = 0.001). Morbidity was significantly less in Groups 1 and 2 compared to Group 3. After a mean follow-up of three years, only one patient has recurred in a SLN negative basin.

CONCLUSIONS

With 38,300 new cases of melanoma diagnosed each year in the United States, a projected savings of $172 million per year (general anesthesia) and $350 million per year (local anesthesia) could be realized if this new mapping technology could be incorporated into the care of the melanoma patient. Patient morbidity is minimized, nodal staging is complete and patients return to work sooner. Recently approved adjuvant therapy can be applied in a selective fashion, treating only those patients in which a documented benefit has been obtained, saving the health care system more dollars. Initial investment in defining the technology was minimal.

The pathologist and managed care. Integration into the new health care delivery system

As the health care system evolves, managed care plans are expanding rapidly, and pathologists face radical changes in contractual relationships and payment methodology. As a result, entirely new relationships will often need to be negotiated to adapt successfully. The experience of pathologists in areas where there is already high market penetration by managed care plans can be used in strategic planning, learning to gain entry to negotiations, and planning what and how to negotiate. Proper preparation is critical to successful negotiations in our new health care system and requires an understanding of capitation, contracting risks, and opportunities.

Academic medical centers and managed care

Academic medical centers are threatened by the expansion of managed care. Hampered by their higher cost, lack of primary care capability and specialist orientation, organizational sluggishness and inflexibility, and relative lack of managerial expertise, these organizations, long a national resource in education, research, and clinical care, face an uncertain future. Academic pathology departments must aggressively manage their resources and maximize their market advantages to compete effectively.

A market analysis approach to bidding for capitated clinical laboratory and pathology services contracts

Traditional episodic, fee-for-service medical care and indemnity-type insurance are rapidly being replaced by managed health care plans that often include financial risk assumption by health care providers. This paper describes the application of marketing principles to the evaluation and capture of capitated clinical laboratory and pathology services contracts. It includes a method for developing capitation rates and describes advantages enjoyed by hospital-based laboratories that enhance their competitiveness in the marketplace.

The hospital-based group in a managed care environment. Reading the terrain

The root-level changes in health care delivery that are in progress will make demands on pathologists that are almost without precedent in the post-Medicare era. Their turbulent pace and uncertain direction confer an added sense of urgency to the need for an effective response. For pathologists, the most uncomfortable changes may involve assuming responsibilities that are a marked departure from traditional training and practice. Chief among these are a need for more familiarity with the ways a corporate structure operates, a more thorough understanding of the needs and wants of buyers of physicians' services, and the ability to manage a practice successfully as an enterprise. Despite the variety of current approaches to managed care, there are common themes that invite the careful consideration of pathologists. Many of these reflect basic problems with which care managers must cope routinely. Of equal importance to the future success of pathology practice is the need to develop a high level of skill in constantly evaluating the strengths, weaknesses, and future directions of one's own practice.

Practicing pathology as a health care contractor. Business planning for managed care

Managed care requires a pathology practice to take on the role of a health care contractor whose existence depends on obtaining, managing, and renewing competitively bid contracts for the group's services. This presentation is a primer on how to write a formal business plan for a pathology practice using a model case study to illustrate, among several business issues, the differences between and the key elements for success in operating a pathology practice in both fee-for-service and capitated managed care environments.

Kaiser Permanente. An insider's view of the practice of pathology in an HMO hospital-based multispecialty group

The practice of pathology in a physician-driven health maintenance organization can be professionally and personally satisfying. Much of what The Permanente Medical Group has learned is applicable, comforting, and helpful to other pathologists. The organization of Kaiser Permanente, the largest health maintenance organization in the United States, is presented, as are some of the pertinent practice parameters of its pathologists.

Managing opportunities under managed care

Health care reform is driving significant changes in associations between physicians, hospitals, insurers, and patients. This restructuring of the delivery of care will affect the practice of pathology. At these crossroads, practices have to decide to continue without change or to adopt new approaches. Horizontal mergers between pathology practices offer one opportunity under health care reform. Such mergers reflect the general trend toward consolidation of operations as a cost-effective approach to health care delivery. They will require a reevaluation of the manpower needs in pathology. The move to consolidated health plans also suggests that pathology practices should consider vertical integration with other physicians. Restructuring of practices is not the sole answer to addressing health care reform. Practices must become involved in cost-saving strategies in the systems.

A pathologist is as a pathologist does. Changing roles in a changing time

Managed care challenges pathologists to a paradoxical cultural transition requiring clinical participation in the community while refining competitive managerial skills to maintain a livelihood. This presentation explores several role changes that a pathologist may undertake to acquire perceived clinical and economic value in a managed care system.

Intensive care costing methodology: cost benefit analysis of mask continuous positive airway pressure for severe cardiogenic pulmonary oedema

Costing data for intensive care admissions is important, not only for unit funding, but also for cost outcome analysis of new therapies. This paper presents an intensive care episode costing methodology using the example of a cost-benefit analysis of mask CPAP for severe cardiogenic pulmonary oedema (CPO). This analysis examines the intervention of admitting all patients with severe CPO to the intensive care unit for mask CPAP, compared with the previous practice of admitting only patients failing conventional non-CPAP treatment and requiring mechanical ventilation. The episode costs were determined from a prospective study which showed mask CPAP reduced the need for mechanical ventilation from 35% to 0%. The mean cost of a mask CPAP episode was $1,156, with a mean stay of 1.2 days, compared with ventilated patients, $5,055 and 4.2 days. The major contributors to cost in both groups were nursing and medical salaries, and hospital overheads. The cost of previous estimated yearly caseload of 35 ventilated patients ($176,925) was greater than the cost associated with an increased caseload of 100 mask CPAP patients ($115,600). We conclude that, despite an increase in admissions, mask CPAP for severe CPO is cost-effective.

Public hospital pathology--at what cost?

Public hospital laboratories have in the past fended off financial scrutiny and accountability on the grounds of their complexity and lack of compelling need. However, the cost of providing diagnostic laboratory services has now come under intense scrutiny because of budget reductions and options for private sector competition. Costing of pathology services is not difficult, but their organisation and outputs do have unique features that need to be understood and defined to ensure that the costing model used provides robust data that accurately reflects how resources are consumed. The cost data generated for diagnostic services can then be compared to the various benchmarks widely used for activity-based funding, such as the Commonwealth Medical Benefits Schedule and the pathology component of the AN-DRG Service Weights System, while the requirement and funding for other activities can be rationally determined.

The hospital cost of total hip arthroplasty. A comparison between 1981 and 1990

The change in the hospital cost of total hip arthroplasty over a ten-year period at the Lahey Clinic was evaluated by comparison of the hospital bills for forty-four hip replacements that had been performed in 1981 with the bills for 104 such operations that had been done in 1990. Each hospital charge was converted to cost with use of government-mandated hospital-specific cost-to-charge ratios. The average actual hospital cost for total hip arthroplasty increased 46.5 per cent, from $8428 in 1981 to $12,348 in 1990. However, in inflation-adjusted dollars, the cost increased only 1.9 per cent. During this period, the cost for a patient room decreased from 50 per cent of the hospital cost in 1981 to 37 per cent of the hospital cost in 1990. In sharp contrast, the cost of hip prostheses increased from 11 per cent of the hospital cost in 1981 to 24 per cent of the hospital cost in 1990. The actual dollar cost of the hip prostheses increased 212 per cent, and the inflation-adjusted dollar cost increased 117 per cent. The hospital cost of total hip arthroplasty during the 1980's was controlled by decreases in the length of stay in the hospital and in the volume of services delivered. The unit costs of supplies and, specifically, the cost of hip prostheses were not controlled. In the 1990's, efforts to control the hospital cost of total hip arthroplasty must concentrate on decreasing the cost of the prostheses and on controlling the unit costs of personnel and of hospital supplies.

Is public hospital pathology worth preserving?

Public hospital pathology departments are perceived to be inefficient, in terms of cost-effectiveness of performing tests, when compared to the private sector. Is there a place for public hospital pathology to be contracted out to the private sector? This paper critically examines the worth of public hospital laboratories in terms of the service provided and their role in teaching and research. It concludes that there is a place for maintaining the public hospital pathology system. However, the public hospital laboratories need to become much more financially accountable. Steps have to be taken to reduce costs. Budgets should reflect the volume of tests performed with due allowance for teaching and research. The departments also have to develop an academic excellence that sets them apart from the private sector.

A spreadsheet program measuring laboratory productivity in several ways: an application of College of American Pathology scores and other data to assess the overall economics of clinical laboratories

A spreadsheet has been designed that measures the productivity of hospital or other clinical laboratories using several methods, one of which, used as a yardstick, is based on College of American Pathology (CAP) workload test scores with some departures from CAP conventions. In this method the CAP-assessed proportion of a laboratory's time utilised in performing pathology or other tests is compared with the time allocated to non-testing departmental activities as a group. A premise in the approach is that variation in the time allocated to these latter activities, in addition to variation in the efficiency of testing, also contributes significantly to the productivity and economics of hospital laboratories. The workload measure of productivity used in the study is referred to as total staff-paid-productivity (TSPP)--allied to paid-productivity of the CAP Manual 1991--and it is suggested that it be used together with several other result parameters to assess laboratories. However, there are two differences from CAP in the TSPP parameter: the salaries and hours of all staff whether medical, technical or scientific are included; and the professional component (time necessary for test interpretation) is also included where applicable. Necessary data include the goods and services costs, the total test-generated income, the total number of full-time staff equivalents and their hours in each unit or work group, the numbers of tests and raw CAP scores and in addition, an estimation of the professional/interpretive component of each test until the generation of a report. The method is illustrated with examples from six different departments with total staff-paid-productivities covering a wide range beyond the typical values of 65 per cent to 75 per cent. When the data for the laboratories are compared, it is observed that the various admixtures of non-testing activities are a stronger influence on differences in total staff-paid-productivity than the interpretative components of tests, although the latter vary markedly from discipline to discipline. When the interpretative components are included in workload measurements, it enables the productivity of different laboratories to be compared across disciplines. It is suggested that for laboratories to generate ongoing productivity they should be staffed at a rate that produces approximately a maximum total staff-paid-productivity of about 75 per cent.