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From margins to mergers, a long list of disruptors

November 2022—Volatile, uncertain, complex, ambiguous. Stan Schofield, president of NorDx and senior VP at MaineHealth, told Compass Group members at their September meeting in Albuquerque that those words describe the state of play for labs today.

“It’s a military term,” he said of VUCA and the four words it stands for. “Sounds pretty close to me how our days go on.”

Schofield, Compass Group managing principal, gave the Ron Workman Memorial Lecture at the group’s meeting. (Dr. Workman was an early member of the group.) He began his lecture with a list of disruptors for laboratories. Here they are:

• Workforce. “Where did 20 million people go?” he asks. “They’re mobile, they’re moving around. They don’t show up.”
  

  Schofield

  Laboratories used to compete for staff against labs and hospitals. “Now you’re competing against diagnostic companies and manufacturing plants with benefits. Drugstores with benefits. Restaurants with benefits and 401(k)s. There’s not a lot of differentiation except money.” Health care wages rose 14 percent in the past year, he said.

• Automation. “Everybody’s trying to automate—no touch points, no people, faster, cheaper—because you can’t get the body.”
• Payers. There used to be 40 insurers; there are now five. “They’re buying doctors, they’re buying drugstores, they’re changing.” Fewer payers, more leverage. Government payers mean more value-based contracts. “That’s like managed care with real data. It means financing problems, consolidations, and reductions in payment,” he said.
• Lost margins owing to increased cost for labor and materials coupled with declining reimbursement. Schofield said consulting company Kaufman Hall reported that 70 percent of the hospital market is in the red. “That, if it trickles down, is going to be on us if it’s not already.” The financial inflection point of the U.S. health care market now is contract labor, Schofield said, and it’s not laboratory contract labor. “It’s nursing because they can’t do it without the nurses. They think they can do it without the lab.”
• More mergers and acquisitions due to lost margins and contract labor costs. National reference labs are talking to hospital and health care CEOs and other executives, and “if they’re not talking to them, they will be soon because they have a lot of money, and your health systems don’t have anything they can do to generate new revenue.” Need more surgeries? Yes, but there isn’t enough staff. Get more staff? We can’t afford them.
• Assisted intelligence and informatics. Not “artificial intelligence,” he noted. “Assisted.” Everybody wants digital pathology. “How many can really afford digital pathology, and to do it right? It would be nice to have. But I’d like to have automated microbiology too.” What he really wants, he said, is an automated phlebotomist. Informatics—what are you doing with the data? Who wants the data? How are you going to slice it and dice it? And there’s the “never-ending cost of informatics.” Health care systems are spending millions more on cybersecurity, he said. “There’s a lot of stuff moving fast, and not a lot of stuff that’s cheap enough.”
• Crisis management. “Whoever thought we’d be in a pandemic? We made it through the pandemic because we had enough staff then.” If SARS-CoV-2 cases were to surge like they did in December 2021 and January 2022, “now we don’t have a workforce.” He said he had 90 open positions in late September, compared with 30 in 2021 and the more common 10 to 15 of prior years.
• Proliferation of consumer and urgent care delivery systems.
• Supply chain constraints. A shortage of COVID-related supplies was one thing, he said, but it was another to be unable to get a blue-top tube in 2021. “Now you can’t get rapid spin. Then the lab is faulted for not hitting its potassium turnaround time because it takes 30 minutes to clot the tube for the emergency department. The response: ‘You’re the lab. Fix it.’”

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