Lab leaders on moving markets and tipping points

July 2023—Digital pathology, the pathology workforce, and the clinical demand for subspecialty expertise were some of what Compass Group lab leaders took on in their June 6 conversation, with CAP TODAY publisher Bob McGonnagle leading the way. And Stan Schofield, VP and managing principal of the Compass Group, painted a picture of the precarious situation clinical labs are in: “Everyone I talk to says capital equipment is being cut, and staffing costs are increasing dramatically if you want to retain staff. Cost base is going up, reimbursement pressures will continue, and there is no margin left.” 

The Compass Group is an organization of not-for-profit IDN system laboratory leaders who collaborate to identify and share best practices and strategies. Here is what they shared last month.

At the Pathology Informatics Summit in May, Alverno CEO Sam Terese gave an excellent presentation on Alverno Laboratories’ decision to go completely digital. Wally Henricks, where is digital pathology today at the Cleveland Clinic?
Walter Henricks, MD, vice chair, Pathology and Laboratory Medicine Institute, and laboratory director, Cleveland Clinic: We use digital pathology for subspecialty case review conferences and consultations. It enables participation from all hospitals in our system. For direct clinical purposes, we do an increasing number of digital consultations, mostly for international and increasingly for domestic. We’ve validated it for frozens at small-volume offsite locations. We haven’t deployed it widely because of limitations in technical staffing at the sites. We’ve validated it for rapid onsite evaluations but haven’t done much because slide interpretations take longer than on a scope, and the communication between cytopathologists and clinicians in a busy environment is not satisfactory. As we are asked to cover rapids at lower-volume sites, we are considering it to support those.

We signed an agreement with a digital pathology and AI company to develop a digital slide library that’s well curated and well annotated. This will be used to support future image-based AI development.

We created a new center in our pathology and laboratory medicine group that’s focusing on AI and machine learning projects.

Can you comment on where the hype and reality are on AI, and what the timeline is on it?
Dr. Henricks (Cleveland Clinic): I tend to be skeptical about the hype. I do think we will see valid applications. I think it will be slower than people expect. I’m oversimplifying here—the way most of these work is you have an idea, build an algorithm, have data on which it’s trained, do your best to train and validate it against the gold standard—and what the gold standard is is an element of that—and implement it. And then many of these will continuously “learn” or at least that’s the idea. But what is acceptable performance? What is it trying to do? So much of that is based on the data being used, not only for the training set but also in the field. How well does it do in the real world compared to the training world?

The regulatory environment is another big piece. In 2019 the FDA published a proposed framework for regulation [of AI/machine-learning–based software as a medical device] with the acknowledgment that some of these algorithms change continuously as they learn [https://bit.ly/04022019-FDA_AI-ML-frmwk]. The FDA’s previous way of handling software as a medical device was to provide guidance about when it’s necessary to do a premarket submission for a change to an existing software product. With AI algorithm changes, the FDA realized that the algorithms under the old version would require premarket submission with every update, which would be very burdensome. Hence the framework. Then the FDA issued an update in 2021 [https://bit.ly/012021-FDA_AI-ML-actplan].

Most significant is the draft guidance issued in April 2023 [https://bit.ly/04032023-FDA_AI-ML-draft] for how machine learning and AI algorithms will be evaluated; it’s called a predetermined change control plan. It’s a fusion of a manufacturer’s general quality systems, which may have been evaluated up front as part of the original premarket clearance or approval for an AI system. The idea, I believe, is to qualify the company and its quality management systems and also qualify the predetermined change plan that the company will be allowed to use with certain controls so as not to have to make a premarket submission every time it changes. That’s going to be the model. The guidance has different sections to look at the details of what might go into the predetermined change control plans, and this idea of a total product life-cycle approach. It is seen as a positive development, I believe, because it’s not realistic to submit a premarket submission every time the algorithms change.

Real-world performance is another point. Laboratories know how to evaluate these things because they are like lab tests, but the rigor in the laboratory world differs from what it is in some areas of the clinical world where these systems are being contemplated.

Johan Otter, where is Scripps at with digital pathology?
Johan Otter, DPT, assistant VP, Scripps Health, San Diego: We got our scanners before we had our histology lab, which is not the way to do it. We’re looking at three scanners that are not up to speed with what we will need for the future, so we have to update our fleet.

We are still far away from adopting it for primary diagnosis everywhere. We’re doing a few sign-outs now. We’ve used it for tumor boards across the system.

From a staffing and real-world application perspective, it’s not as simple as it sounds. Our legal department wants us to maintain slides used for primary diagnosis for at least seven years, which requires an enormous amount of storage and is where a lot of the cost is.

Much of the discussion around digital pathology at the Pathology Informatics Summit had to do with the shortage of pathologists. Pete Dysert, what are your thoughts around digital and its relationship to an adequate pathology workforce?
Peter Dysert, MD, chief, Department of Pathology, Baylor Scott & White Health, Dallas: I’d like to think digital pathology will help with staffing, but it remains to be seen. I’ve heard people say recently that there are a thousand open jobs for pathologists around the country, which is probably the most it has been in a while. In our experience, the people who are being trained tend to want a narrower span of responsibility as far as surgical pathology. Most don’t want to pursue the general pathology role.

I seem to be chasing the growing clinical demands for our subspecialty expertise in the form of accreditation and recognition for Baylor’s clinical programs. Through the American College of Surgeons, there are various program plans for what it will consider a recognized center of expertise and its requirements to have a card-carrying, fellowship-trained pathologist in that arena. Almost all of them translate into more conferences for us.

There are similar clinical aspirations in our system to have a recognized center of expertise in areas like bone and soft tissue. The problem is there’s a point you have to cross to be able to afford someone who will do just bone and soft tissue. In the past a lot of us had an interest in that and grew the expertise while we practiced general surgical pathology and in other areas. Nowadays people come into the market and want to land in that spot.

Between the open jobs, the demographics of new pathologists and what their aspirations are, the continued development of clinical centers of excellence that require our services, and the decline in reimbursement, it’s a tough position for me to be in.

CAP TODAY published an article in the May issue on gene panels for oncology, and it’s an interesting discussion about how payment to pathologists, professionally, has been neglected. Patients, drug companies, and people who sell next-generation sequencing instruments and software are benefiting, but pathologists and their laboratories are left holding the bag. Does that resonate with you, Pete?
Dr. Dysert (Baylor Scott & White): Yes, it does. As our clinical colleagues have incorporated what we represent into their outpatient practices—gastrointestinal and genitourinary, for example—the number of those cases being billed goes up tremendously. Payers must look at pathology reimbursement as a zero-sum game, so they turn around and reduce the reimbursement rates for our traditional services.

There hasn’t been an evolution of billing in pathology to keep up with the new roles we’re playing in the clinical care of patients. The disconnect adds to the financial pressure, along with the big, heavily capitalized entities that tend to present what we represent from a contractual perspective as a commodity.

Jim Crawford, what is your reaction to this?
James Crawford, MD, PhD, professor and chair, Department of Pathology and Laboratory Medicine, and senior VP, laboratory services, Northwell Health, New York: There are convergent issues that create fundamental challenges to delivering laboratory services and pathology. The New York area is a ferocious example of it. The competition for pathologists is fierce. The market is moving dramatically, which is a financial compensation statement, particularly for entry-level people but also for retention of mid-career to senior pathologists. The clinical workload is coming through the door whether you’re appropriately staffed or not. That’s problem number one.

Problem number two is what Peter described, which is that within an integrated delivery network, the fulfillment of mission duties of pathologists falls well short of payment for it, and that’s internal to the organization as well as with payers. It’s not helped by the fact that it’s harder to run the trains on time because of the challenges of technical staffing in the laboratory.

I presented at the New York State Society of Pathologists annual meeting in May on the laboratory and pathology workforce, and a question from the floor was, “Are digital pathology and AI going to cover this shortfall of pathologists?” My comment is that the jury is out on AI giving pathologists greater efficiency. But besides digital pathology reducing the need for having couriers run immunohistochemistry slides between sites and waiting four hours to get a glass consult from one of our system hospitals, we hope, with our installation of digital pathology, to be doing load balancing before the end of the year. We found in our 23-hospital system that the model of having a pathologist group in every community hospital—and I strongly believe that the practice of medicine is local—is now disassembling because you have to bring the work to the pathologists as opposed to bringing the pathologists to the work. This requires rapid adjustment, even daily, to successfully load balance. We’re hoping digital pathology helps us load balance so we can optimize deployment of our pathologist workforce.

The glass half-full approach is that we are a laboratory in an integrated health system and conversations about finance, staffing, and strategy are always with senior health system leadership. They know as much as we do how essential pathology and laboratory services are to the institutional mission. We’re weeks away from budget season 2024. The knuckles always get bloody, but I still have fingers left when we get to the Tuesday before Thanksgiving, when the board of trustees for the health system brings the gavel down for the next year’s budget. Whatever our approved budget is, for Northwell Health Laboratories as well as the department, that’s the budget we’re supposed to perform against. The zero-sum game is at the health-system level, not at the laboratory and department level. With an approved annual budget, whatever the actual bottom line, we then have opportunity to earn our value every day. The dollars count, but supporting the clinical mission of the health system is what saves the day.

Dr. Dysert (Baylor Scott & White): The situation in radiology at Baylor has given me pause about digital pathology providing pathologists with the ability to work from home. They’re having trouble recruiting radiologists who want to be in a hospital environment. Everyone wants to be on the outpatient side. We’re seeing that happen without digital pathology in the GI space. Most GI pathologists seem more interested in working in a non-hospital environment, being paid by the case, and having 8 am to 5 pm hours with no conferences, no residents, no call. We see the GI pathology space bifurcating into a hospital-based pathology versus an outpatient model. I wonder if digital pathology will have the same impact on us as it’s had on radiology in terms of workforce.

Dr. Crawford (Northwell): We are finding in our recruitment, and this is with mid-career not just early career candidates, an expectation of a “four plus one” is now coming into view occasionally, where the plus-one day is either remote from home with work or even at home without work and still being paid full time. We need to be prepared for a dynamic in our marketplace that we’ve not experienced previously, which is the expectation for hybrid activities. The secret sauce for these conversations is being fully staffed. If you’re short staffed, creativity like this fails quickly. We’re between a rock and a hard place—you can’t recruit into that model unless you have a full complement of pathologists, and if there are pathologists who won’t come without that model, you won’t recruit them.

Sarah Province, as systems look to add new capabilities in clinical care, a lot of the capabilities are esoteric and advanced, and many executives don’t appreciate the demands placed on pathology and the clinical laboratory. Do you think the lab is a bit neglected when the grandiose clinical initiatives are being planned?

Sarah Province, director of laboratory operations, AdventHealth, Orlando, Fla.: We’re caught off-guard sometimes, but more and more we are at the table and have a better connection with our C-suite just by having hallway conversations about what’s going on. I feel privileged to know more about the vision and be able to put in my needs for the laboratory.

We’re still looking for a central lab. We’ve outgrown our space two times over. It’s been elevated to a higher level of consciousness now, and we have some traction on getting a consulting company to look at it more closely. The space, the staffing, everything that goes along with providing better services is needed.

Wally, can you comment on this?
Dr. Henricks (Cleveland Clinic): We have the same problem with space, and administrators are beginning to ask, “Radiology does all that offsite. Why can’t pathology?” And “We don’t have space; can you convert to digital?” OK, how will the additional expense be justified? There are many hidden and indirect costs. The equipment is only one piece. Many process things are underestimated, and the fact is it decreases the average pathologist’s efficiency compared with looking at glass, especially for typical, routine cases. Those factors are underappreciated and sometimes hard to articulate.

What are thoughts on the availability of pathologists who are suited to and qualified to function as active CLIA laboratory directors and their willingness to take on the role? Most of the laboratory director’s work isn’t signing out cases, and there are more and more administrative challenges, much of it in clinical laboratory medicine. Often people don’t have adequate training to be a laboratory director.

Stan Schofield, is there adequate accounting for the demands put on laboratories and pathologists by the plans of health systems? And is there a growing shortage of pure laboratory directors who know how to run the enterprise of the clinical laboratory?
Stan Schofield, VP and managing principal of the Compass Group (formerly of NorDx/MaineHealth): The payers have not helped a lot in maintaining the viability of laboratories, and we are back in the precarious situation we had before COVID. COVID hit and the lab became a hero, then it became the piggy bank, and now it’s, “What are you going to do for me next week?” That is not going to get better.

Almost everyone I know in the lab business is at the lowest possible margin because COVID has fallen through the floor. Reimbursement is going down, and the activity that was floating the boat for the past three years is over. Labs are going to be stressed, and now we have health systems in which 70 percent of the hospitals are still losing money due to contract nursing labor and other contract labor costs, and there’s going to be a tipping point that we would’ve seen two or three years ago had COVID not become a pandemic. Everyone I talk to says capital equipment is being cut, and staffing costs are increasing dramatically if you want to retain staff. Cost base is going up, reimbursement pressures will continue, and there is no margin left.

That is not an attractive scenario for leadership in laboratories. A lot of competent, capable people at high-level–performing organizations have moved on in the past five years. There is a void of leadership and people coming into the lab who want to advance into management. There is a real presence of, I want to do my job, go home, and I don’t want to be responsible, because staff and personnel management is difficult and more complex compared with 10 to 15 years ago. You can’t motivate people, or you can motivate people but it’s short term.

Laboratories have to invest in leadership and management development to be successful. You’re going to have to work hard and not just promote the best technologist because they’re technically good but people who can manage staff and complex problems in an ever-changing environment.

Health systems will consolidate and bigger labs will become even bigger, and those will have good leadership because they have the resources. Smaller to midsize labs without resources and economics to support leadership and personnel development will be problematic five and 10 years from now.

As far as quality, service, and performance, all will be difficult because people in leadership are not going into the lab field; they have many more choices now. Grinding it out and leading large organizations with all these personnel issues takes a toll. It’s not going to be favorable unless there’s strong lab leadership at a health-system level to stand up for the lab and get counted. Otherwise you’re going to get rolled up and sold off, and no one will worry about it, except the local providers who won’t get the lab services they need to perform the highly technical, specialized services we’ve been talking about.