Slashing send-out costs with lab formularies

But when it first came online, the system wasn’t so decked out with features. “In order to make CareLink more palatable, because it was acknowledged that it would take increased provider time, it was kept as streamlined and bare bones as possible—and we opted not to include decision support such as drop-down boxes or pop-ups on what you should order,” Dr. Warren explains. Those kinds of enhancements have been added in recent years in the context of the formulary operation and other programs.

Concerns about expense and complexity continue to surround the order-entry system, but from a formulary perspective, “We have been happy with the progress we’ve made by focusing on very expensive send-out tests in particular,” Dr. Warren says. The formulary committee meets monthly, with its major order of business typically being the vetting of current or proposed new laboratory tests. Then the committee might decline or restrict authorization; a recent count showed that of 47 tests or panels it evaluated, it decided to not offer or restrict in 27 instances. Alternatively, the committee might choose to include pop-up messages on UM-CareLink, such as “Recommend one test X per admission” or “Test X should be ordered in consultation with neurologist.”

The most effective use of the formulary has been to reduce what the institution is paying for lab tests that are sent to Mayo, ARUP, Specialty Labs, and a variety of smaller esoteric labs. “The direct costs for tests we send out that we literally package up and send to a reference lab, or as we like to say, up the food chain, were around $7 million a year in 2008,” Dr. Warren says. That made reference testing an attractive target. “It’s more tractable. It’s more of a controllable domain, and that’s why we focused on send-out tests initially almost exclusively in our committee.”

“Every one of those really expensive tests where you improve utilization is a real savings in cost avoidance,” Dr. Warren points out. He credits the formulary’s success to use of peer-reviewed medical evidence, input by medical content experts, excellent cooperation by the medical staff, and close oversight by the pathology department’s send-out laboratory.

The formulary committee makes it a goal to respond to changes in medical practice and appeals of committee recommendations. For example, in July 2009 the committee found that utilization of vitamin D test orders was appropriate, then in October 2012 revisited that position and decided to recommend that it be ordered only in patients “at risk” of vitamin D deficiency.

The send-out laboratory maintains an annual lab test line-item expense budget that shows the impact of the test formulary over the past six years. To calculate the impact of the formulary in a useful way, Dr. Warren says, one of the challenges was taking into account changes in overall institutional activity and clinical patient mix. So the committee employs a metric called “adjusted discharges” that hospital administrators use across the country to combine inpatient discharges with outpatients. Using that metric, the hospital has been able to show a drop in send-outs linked to use of the formulary even in the face of annual increases in adjusted discharges.

He and other committee members start with the monthly spreadsheet they get from the reference labs to decide which tests should be vetted. “We literally say, hey, we’re spending $12,000 a month on test X. That might be an opportunity to reduce our expense. So I might call the microbiology lab and if they say there could be some over-ordering or questionable ordering practices, we would call the specialists in that area and ask them, ‘Did you know what we’re spending on this and would you mind coming to the formulary committee to explain when this test should be ordered?’ And nine times out of 10, there’s no hesitation at all.”

At the same time, a billing and finance person in pathology administration would look at utilization of the test in detail to determine how often it is ordered, for what order sites, and by whom. “That helps us know and even predict whether the test is being ideally used or not. In the end the committee could decide that only infectious disease physicians could order the test, or that it’s being well utilized, and we’ll let it go.”

A recent example of how the formulary works concerned leukemia patients. “We see around 70 to 90 new patients a year here with acute myelogenous leukemia, a pretty uncommon diagnosis. And there’s a company that offers four genetic tests that can subdivide and prognosticate within that subpopulation of patients. But the test is very expensive and should only be used in a certain subcategory.”

Oncologists at the medical center who care for these patients came to the committee and said they would like to be able to order the test, and the committee asked for literature with scientific support, and asked the clinicians to make their case at a formulary committee meeting. “And we decided that yes, this testing should be made available. But the only people who should order this test are three oncologists out of dozens that we have here.”

On the other hand, the committee has found that some tests have no value. “They’ve become popularized because the company that developed the test is really good at marketing, and there is really no legitimate medical reason the test should be ordered,” Dr. Warren says. In such a case, “we might actually delete that test from the online ordering system so you can’t find it. To order it, you would have to verbally talk us into it. And that does dramatically drop the volume.”

Among the high-volume, high-expense tests removed from the formulary that have had a big impact in reducing cost was a proprietary inflammatory bowel disease panel, Dr. Warren says. Myelin basic protein and a Crohn’s disease prognostic test were examples of tests that the committee restricted or removed after finding they were much less needed than people realized.

In general, however, the committee makes a conscious effort to set a tone of decision support, education, and careful use of resources, rather than one of restriction. “We send out 50,000 tests a year, so we obviously can’t have a discussion about every one. But if a physician wants to order a test and calls me or one of the other pathologists to discuss it, I will almost assuredly say it’s fine and authorize the send-out,” Dr. Warren says.

“When there is controversy over a test that’s been taken off the formulary, it’s usually just because a restriction was put in and somebody basically didn’t get the memo. It’s usually not so much that they disagree, but they want to know how did this get changed without their having an opportunity to weigh in.”

Now that the formulary committee has restricted or removed most of the easier targets, it has moved to vetting several complex algorithmic testing cascades, Dr. Warren says. “The best example is celiac disease. Basically, rather than having providers go through a half-dozen serologic tests that exist for screening for celiac disease, we have a preset where they can just order the algorithm and we’ll test in a logical sequence.” That was implemented about six months ago.

As medical practice has become more and more complicated, particularly with the advent of genetic testing in oncology, clinicians need better tools to support their testing decisions, he emphasizes. He is now working on developing tools to help providers better use laboratory testing.

In the meantime, Dr. Warren notes, he has gotten a couple dozen inquir-ies about how to set up a formulary since publication of his article, “Laboratory test utilization program: structure and impact in a large academic medical center” (Am J Clin Pathol. 2013;139:289–297). “A formulary can actually have a tangible impact on patient care, and corollary to that, a better utilization of resources. When you undertake these administrative efforts to perform better, you always have that nagging doubt you’re wasting your time. But we’ve actually seen and quantified the impact of this formulary, and it’s gratifying to know that it can work.”

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Anne Paxton is a writer in Seattle.