Decreasing inappropriate laboratory test utilization: controlling costs and improving quality of care.

Laboratory directors, hospital administrators, managed care plans, insurance companies, and governments continue to grapple with the competing demands of controlling health care costs, maintaining or improving quality of care, and addressing demands for increased access to newer expensive technologies. Although annual expenditures for laboratory tests are a relatively small part of total health care costs, clinical laboratory testing has not been spared from cost containment efforts. Controlling laboratory costs can be divided into two categories: good business practices and management systems that are part of stewardship of resources, along with systems designed to control laboratory utilization. Much has been written about the latter, but our understanding of how to do this without adversely affecting patient safety or quality of care is incomplete. Moreover, although a number of approaches to controlling laboratory utilization have been used, it is not known which approach is the most effective or how to integrate these approaches with other systems designed to control laboratory costs. Perhaps the most common approach to control expenditures on laboratory services is simply reducing reimbursement rates. This approach can be effective in the short run but has several fundamental flaws. The first of these is that there is an irreducible minimum cost to perform any test, so laboratories can only reduce costs before they start losing money each time they perform the test. Many laboratories already operate on all too thin margins, with little or no room to cut costs further. Moreover, once reimbursement rates fall below the cost of performing a test, it is not sustainable for laboratories to lose even more money each time reimbursement rates fall. It has been argued that this approach can work if laboratories use positive margins from some tests to subsidize tests with negative margins, but this is specious reasoning in an era when overall reimbursement rates continue to drop (or reimbursement is being eliminated altogether in some settings). A second flaw is that decreasing reimbursement rates is not tied in any way to medical necessity, appropriate test utilization, emergence of new technologies, or changes in health care delivery. A third flaw is that decreasing reimbursement rates may have the adverse long-term outcome of forcing laboratories to use the least expensive testing method, which may result in poorer test quality. In an ideal world, reimbursement rates would take into account all of these factors, but this has remained an elusive goal. One approach that …