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Northwell Health, NYCHH See Shared Lab Facility as Path to Lower Costs, Better Patient Care

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NEW YORK (360Dx) – With the opening this month of a shared $47.7 million clinical laboratory in Queens, Northwell Health and NYC Health + Hospitals are hoping to translate higher test volumes and enhanced automation to drive down costs and improve patient care.

According to the parties, the 36,000-square-foot Clinical Laboratory of New York is the largest non-profit, hospital-run lab in the country. Its development stems from an agreement negotiated in 2014 between Northwell and NYCHH under which Northwell will essentially serve as a core laboratory for NYCHH, with Northwell funding the facility and NYCHH paying Northwell on a per-test basis.

Northwell comprises 23 hospitals and more than 700 outpatient facilities on Long Island and in Queens and Manhattan. NYCHH runs 11 acute care hospitals, five postacute/long-term care facilities as well as numerous clinics in New York City.

Dwayne Breining, executive director of Northwell Labs, noted that the hospital system designed the facility and its business model to potentially accommodate other partners, as well, adding that the facility as set up could handle at least double its current test volume.

Northwell is also this month moving its core lab operations to a new facility in Lake Success, New York that will handle laboratory medicine, anatomic pathology, and administration, and will also run non-urgent tests for NYCHH as part of the two systems' partnership. Northwell Labs has around 1,300 employees and has added 90 new employees over the last year to handled the increased testing volume from the new laboratories. The Little Neck lab is outfitted with instrumentation with Kiestra, while the Lake Success lab uses Roche instruments.

The decision to build the new facility was driven by the need to handle test volumes that were rising due both to the NYCHH partnership and increased internal demand, Breining said.

Beyond that, the Northwell-NYCHH deal and decision to consolidate testing in the new facilities stemmed from many of the same economic pressures facing clinical labs nationwide.

In particularly, implementation of the Protecting Access to Medicare Act (PAMA) "is kind of driving everyone in the laboratory business to do the same thing," he said. "Everybody is aiming to use as much automation as they can and to aggregate as much testing as they can into one place to drive the cost of testing down as much as possible. So that's where it really made sense for two large organizations like ours to see if there was an opportunity to work together."

"There are economic forces in the industry that are pushing labs towards technologies that are more sophisticated," said Robert Boorstein, medical director at Lenco Diagnostic Laboratory, headquartered in Brooklyn. "And they have become very capital intensive, so you can't afford to have every type of technology in every location. In order to provide high quality advanced technologies, you need to develop this sort of central lab model where anything that is not needed immediately can be sent to a central location where it can be performed by a very automated and cost-effective system."

"I think some versions of this are occurring all over the country, having highly centralized automated labs servicing large numbers of hospitals," said Boorstein, who is not affiliated with either system.

In addition to economic pressures, testing consolidation and automation helps ease the pressures of lab staffing shortages facing facilities in both the New York City area and nationwide, said Kenra Ford, senior assistant vice president of laboratory services at NYCHH.

Ford said her organization planned primarily to move its non-urgent outpatient testing to the new labs, allowing the 11 acute care laboratories that it still operates to focus on more urgent tests.

While NYCHH is still working out which tests it will keep in house and which it will send to the new facility or to an outside reference lab, these decisions with primarily be driven by turnaround time requirements, Ford said.

"If our outpatient volume grows, then there will be more volume going to [Clinical Laboratory of New York], and if our inpatient volume grows, it will go to our internal laboratories," she said. She added that the hospital system is focused on expanding its outpatient care, which would suggest increased volumes for the shared facility.

Currently NYCHH plans to send around 6 million tests per year, around 20 percent of its overall volume, to the Clinical Laboratory of New York and Northwell's Lake Success facilities. NYCHH projects that the arrangement will save it more than $20 million annually.

The Clinical Laboratory of New York facility will focus primarily on microbiology, which Breining said was a decision driven by the highly manual nature of much clinical microbiology work and the fact that new technologies in the field like molecular testing and MALDI-TOF mass spectrometry are capital intensive.

For assessing "antibiotic resistance, for instance, we are still growing cultures on Petri dishes and squirting the antibiotics on it, and that is a high-touch, highly manual, highly inefficient process," he said. "It has gotten very difficult for a hospital laboratory to maintain around-the-clock staffing with expertise in microbiology to keep the service going as efficiently as it can go. By bringing it all to one place, you can have an on-duty microbiology staff 24-7."

Meanwhile, new technologies are making clinical microbiology more efficient, "but you need a certain test volume to drive the cost of implementing that equipment," Breining added.

Boorstein echoed these comments.

"Microbiology at this point is both very capital-intensive and skilled labor-intensive," he said. "And by servicing [multiple] hospitals from one location, they can be state-of-the-art in terms of new technologies and also maximize the use of skilled personnel and provide timely service."

Machelle Allen, chief medical officer at NYCHH, said that in addition to economic benefits, the partnership will help improve patient care, largely by improving test turnaround times.

"That's what [doctors] live and breathe on — if we can get a test result in a timely fashion and get it back to the patient and provide an intervention if it's needed in a timely way," she said

While the arrangement offers NYCHH efficiency gains and cost savings, Boorstein cautioned that outsourcing comes with potential pitfalls, as well.

"When you outsource you lose control of standards," he said. "It becomes a very complex IT and transport system, which adds cost to the system and may also add error."

"You also have to be on the lookout to make sure you don't develop workarounds where you set up parallel systems [in house] because the central lab isn't providing services as fast as you like," he said, noting that this could lead a hospital to set up point-of-care testing and satellite labs that would amount to a duplication of services.

Boorstein said that Northwell's decision to make a large investment in its own lab business counters a broader trend among New York-area hospital systems to outsource portions of their lab operations.

He said this suggests that Northwell sees value to its overall system to keeping these services in house. "They believe that the data provided by their laboratories is intrinsic to the good management of the whole hospital system."

"The question is, is [Northwell] going to add other hospital systems," Boorstein said, noting that between other area hospital systems like New York University, Mount Sinai, New York Presbyterian, and Montefiore Medical System, and commercial labs like Quest Diagnostics and Laboratory Corporation of America, there is significant competition for clients.

"I don't think they have the type of retail sales force that the commercial labs might have," he said.

Breining suggested that adding other systems is something Northwell would be interested in down the road.

"If new partners were interested in joining us, we certainly have that option open in the business model we have set up with NYC Health + Hospitals," he said. "Other medical systems or institutions could also join in and enjoy the benefits of aggregating [testing] in a low-cost, high-throughput model."