Hospital labs are often viewed as a stepchild—those ancillary services in the basement that have to be charged against a diagnosis related group (DRG). In fact, laboratory data is part and parcel of three-quarters of all health care decisions, and advanced diagnostic testing now in the works will make labs even more crucial to medical care.

Increasing workloads and shortages of skilled lab technicians, as well as pressure from doctors for faster turnaround on lab tests, have prompted significant advances in automation and computerization. That’s led to more standardized quality and results and lower per-test costs. Point-of-care testing is pushing some traditional lab functions out to the patient bedside.

But breakthroughs in lab technology don’t inspire the same hoopla as a spanking new MRI or surgical robot, and many labs, especially in community hospitals, have trouble making a case for sophisticated computer systems and automated testing equipment. The result is what clinical consultancy Sg2 calls “the lab of the ’60s.”

“Hospitals need to move from focusing on just what’s going on within the four walls of the lab and more on how lab-based diagnostic testing improves patient flow throughout the whole organization,” says Leslie Wainwright, vice president and head of lab operations at Chicago-based Sg2.

Automation is the key. Systems that resemble a modern manufacturing plant move blood samples from the emergency department and patient floors to the lab. Bar codes on specimen tubes are read by computers, which then direct them to the right instrument for testing. Results are automatically entered into the laboratory information system, and electronic reports are sent to physicians. For many routine tests that don’t require a pathologist’s analysis, human hands never touch the specimen.

Because the lab of the future resembles an assembly line, lab directors are turning to process improvement tools such as Six Sigma and Lean Manufacturing. Process redesign  can improve productivity, but experts caution that a top-to-bottom analysis should be done before opening the checkbook for any new equipment. “The most powerful way to get the most out of any type of automation initiative is to incorporate the process redesign part of it,” Wainwright says. “There’s no sense in automating a bad process. Without doing a combined, very detailed workflow analysis, automation will only get you part of the way.”

Automation and sophisticated testing instruments pay off financially, as well. More accurate testing that leads to more detailed diagnoses can help boost Medicare prospective payment or insurer per diems. For example, a significant number of hospital patients are discharged with a diagnosis of DRG 420, fever of unknown origin. But if improved testing such as automated bacterial culture systems can identify the cause of those fevers, more detailed coding can be made on a claim—and that means more reimbursement.

An Sg2 report analyzing clinical lab operations shows how: If lab testing reveals that a fever resulted from septicemia, DRG 416 (septicemia) can be coded. Medicare’s base reimbursement for DRG 416 in 2005 was $7,192, while DRG 420 paid $2,709—an additional $4,483 for each case. Moreover, since DRG 416 is one of the codes that CMS is especially watchful of for upcoding, lab documentation makes it easier to show medical necessity.

Point-of-care testing is another advance that’s helping physicians make better, faster decisions. Rapid test results in such critical areas as the emergency department can save lives, says Tony Kurec, lab administrator for University Pathologists Laboratories, Syracuse, N.Y., which is affiliated with the State University of New York.

“Thirty-five years ago, if you could get lab results back to a physician in two or three hours, that was pretty good. Today, they want the results in 10 or 15 minutes,” says Kurec, who also is editor of the Clinical Laboratory Management Association’s scientific journal. Even so, certain complex tests can’t be done at the bedside and must still be sent to the lab. “So you’re still going to have to wait a half-hour or 45 minutes for the rest of the lab results before you can start treating the patient,” Kurec says.

Few can argue with success, though. After Boston’s Massachusetts General Hospital established a point-of-care satellite testing lab in its ED to perform routine tests such as urinalysis, glucose levels, cardiac markers and tests for strep and pregnancy, turnaround times were reduced by 87 percent and patient stays fell by 41 minutes. An added bonus for the bottom line: ED diversions dropped.

Point-of-care testing can be a touchy subject among lab managers. Some resent the loss of the testing volume, while others question the accuracy of results of tests performed by non-lab staff who are not intimately familiar with the equipment. Others, however, say anything that improves the patient care process is good.

“We can sit all we want in our ivory tower in the lab and say the only test that’s good is the one you send to the lab,” says Rick Panning, administrative director of Fairview Laboratories, part of Fairview Health System, Minneapolis. “But that’s not true anymore. There’s very good technology out there that gives high-quality results in real time.”

Sg2’s Wainwright acknowledges that point-of-care testing performed by other staff can put the lab in an awkward position. “There are a lot of quality and regulatory hurdles the lab is responsible for, and in some cases it might not be the certified lab techs who are actually performing the tests,” she says. “That means while you can lose some control over the process, you’re still responsible.”

One of the fastest-growing segments in the lab business—molecular diagnostics—could prove to be one of its most challenging. Research scientists have fully sequenced more than 120 bacterial and viral genomes, and are working on dozens more. That data quickly turn into novel diagnostic tools that will drive growth in molecular diagnostics.

Molecular diagnostic testing today is done largely in outpatient settings such as physician offices. But Sg2 predicts that within two years, most hospitals will need to to be able to perform molecular testing. For instance, cancerous tumors will no longer be designated as breast, lung or prostate, but instead on their genetic or proteomic profiles. Targeted medical therapies will be prescribed based on molecular signatures.

Reimbursement poses perhaps the most vexing challenge to progress in the clinical lab. Payment already is dismal for routine lab tests, says Don Young, M.D., vice chair of laboratory medicine at the University of Pennsylvania Health System, Philadelphia, and the outlook is even more bleak when it comes to molecular diagnostics, proteomics and similar tests. While academic medical centers like Penn lead the charge into new medical frontiers such as genetic testing, they’re usually impelled more by the science, not the money, at least initially. Medicare and Medicaid refuse to reimburse for new services such as molecular testing, and commercial payers often take the government’s lead, says Young.

“It becomes a never-ending loop,” he says. “There’s no reimbursement until a new test shows clinical utility. But how do you get to the point of showing clinical utility when you can’t get paid for doing it?”

Workforce issues could prove even more daunting. Demand for qualified lab techs is growing rapidly. Many current staff members are approaching retirement age, and the number of people entering the profession is much lower than the number leaving. Money is short, and lab directors complain that lab salaries haven’t kept up with pay increases in other health care professions such as nursing and pharmacy. Employees also are demanding more job satisfaction in an environment that can be monotonous.

“We can do all the automation and process improvement we want,” says Panning. “but we still need people.”

Some see molecular diagnostics, proteomics and other advanced testing as a ray of hope for workforce concerns. Kurec says these developments will allow lab experts to become more involved with caregivers and elevate lab staff to a role of adviser, much the way pharmacists’ roles have evolved. “There is a level of respect that’s beginning to grow for laboratorians,” he says. “That’s better than years past, when we were basically locked up in the basement and nobody knew who we were or what we did.”