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September 26, 2017

How Vanderbilt University Medical Center saved $1M (and counting) on lab tests

Daily Briefing

Vanderbilt University Medical Center (VUMC) created a Laboratory Formulary Committee to help providers order "the right [lab] test, at the right time, and in the right environment to ensure optimal patient care"—and saved more than $1 million in 2016 as a result, VUMC's Mary Zutter, Julie Field, and Gordon Bernard write in the New England Journal of Medicine's "Catalyst."

Get ready for reference pricing: Understand imaging pricing pressures

How VUMC built its formulary committee

According to the researchers, the costs of diagnostic tests in the United States are rising by up to 14 percent each year, far outpacing the 4 to 5 percent growth rate of overall health care costs.

To address cost concerns and improve patient care, VUMC established a Laboratory Formulary Committee in 2014 to oversee all inpatient and outpatient lab testing. According to the researchers, the committee "is responsible for reviewing evidence, consulting with content experts, and developing guidelines, substitutions, or restrictions to promote the appropriate utilization of diagnostic and laboratory testing across the enterprise."

The committee includes stakeholders from multiple departments and disciplines, including a pathologist, and it is assisted by an implementation team "consisting of laboratory medical directors, administrators, medical center finance representatives, laboratory information systems (LIS) specialists, health IT developers, data analysts, genetic counselors, and project managers." The setup enables "the clinical laboratories [to] serve as both initiators and effectors of formulary implementations," the researchers write.

Three ways the committee has improved practices

The committee has enacted new policies that saved VUMC more than $1 million in 2016 alone, the researchers write, including through:

  • Elimination of unnecessary tests: According to the researchers, the committee at its inception in 2014 began eliminating clinically limited or non-gold-standard tests from the lab menu. For instance, the committee eliminated a certain Vitamin D test and saved $102,842;

  • Restrictions on ordering tests with long turnarounds: According to the researchers, many tests—especially genetic tests—have a turnaround time that's longer than the average hospital stay, which means the results rarely "meaningfully contribute" to acute care. As such, the committee now requires that all tests with a median turnaround of more than seven days receive approval from an on-call lab medical doctor before the order is submitted. "In 2016, this restriction resulted in a 48 percent decrease in the ordering of tests that were unlikely to contribute to inpatient care, with an estimated cost savings of $257,745," the researchers write; and

  • Requirements that genetic tests undergo expert review: The committee also implemented a process in which all genetic test orders undergo review by a panel of genetic counselors and pathologists, who collaborate with the ordering clinician to modify or cancel the order if needed. According to the researchers, this review process in 2016 saved an estimated $394,625.

Lessons learned

According to the researchers, establishing and running the committee led to key lessons learned, including the importance of:

  1. Collaboration between pathologists and ordering clinicians, which helps ensure ordering practices can be integrated in the clinical and lab settings;

  2. Collaboration among the lab, clinical departments, finance department, and health IT department, which helps ensure cross-departmental buy-in;

  3. Following the data, which helps "avoid costly implementations with minimal impact and without overburdening ordering providers and clinical staff with unnecessary restrictions"; and

  4. Focusing on lab testing, which enables the organization to both control testing costs "at an institutional level while at the same time improving the appropriateness of test ordering" (Zutter et. al, "Catalyst," New England Journal of Medicine, 9/20).

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