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Related Experiment Videos

Laboratory cost and utilization containment.

J W Steiner1, J M Root, D C White

  • 1Chi Laboratory Systems, Ann Arbor, MA.

Clinical Laboratory Management Review : Official Publication of the Clinical Laboratory Management Association
|August 7, 1991
PubMed
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Laboratory costs for Medicare inpatients exceeded expected levels by 24%, contributing significantly to hospital losses under fixed reimbursement. This highlights the need for careful laboratory cost analysis and prospective budgeting.

Area of Science:

  • Health Economics
  • Clinical Laboratory Management
  • Healthcare Finance

Background:

  • Medicare inpatient laboratory costs were analyzed at an academic medical center from 1989-1990.
  • Historical data (1981-82) established pre-Diagnostic Related Groups (DRGs) laboratory costs at 9.5% of total inpatient costs.

Purpose of the Study:

  • To evaluate current laboratory costs and utilization in relation to expected costs and reimbursement for Medicare inpatients.
  • To compare the hospital's laboratory costs and utilization with those of other large teaching hospitals.

Main Methods:

  • Analysis of 3,771 Medicare inpatient cases using the Hospital's Decision Resource System database.
  • Comparison of actual laboratory costs (11.5% of total costs) against an adjusted expected cost (9.3% of total costs) based on 1990 case mix.

Related Experiment Videos

  • Benchmarking against large teaching hospitals for direct cost per test and inpatient tests per inpatient day.

    • Main Results:

    • Actual laboratory costs were 24% higher than expected, representing 11.5% of total inpatient costs.
    • Laboratory costs constituted 12.9% of DRG reimbursement, exceeding the expected proportion by 39%.
    • The hospital incurred an average loss of $1,091 per DRG inpatient, with the laboratory contributing 29% to this loss. The hospital also had higher test utilization (58% above mean) compared to peers.

    Conclusions:

    • Laboratory costs significantly exceeded expected levels and reimbursement targets for Medicare inpatients.
    • High laboratory utilization and costs contribute substantially to hospital losses under fixed reimbursement systems like DRGs.
    • Future healthcare financial strategies should focus on prospective, zero-based laboratory budgeting informed by DRG-based utilization patterns.