Archived Issues

2003, Volume 14, Number 3

Co-tenancy and the Laboratory; Now More Than Ever?

By Dennis Hodges

I believe it was that entertainment icon, Kermit the Frog, who lamented "It’s not easy being green". Well the little fellow should be a clinical laboratorian for a few days. He’d really find out what "not easy" is all about.

When you consider the environment the clinical laboratory operates in, you would conclude the surface of Venus would be a friendlier place. A five year freeze on CPI adjustments and a looming threat for a costly and potentially damaging competitive bidding project were part of the recently passed Medicare reform bill. The OIG’s September 15th plan that would seek to exclude laboratories that bill claims with "excessive" charges, no letup in the laboratory workforce shortage, more proprietary arrangements in esoteric testing, intensified competition between independent laboratories and health systems; these are but a few of the challenges we face.

In the old days when danger lurked the call of "circle the wagons" was heard across the prairie. That would be good advice for hospital laboratories right now. This is not the time to stand alone. It is the time to find strength through cooperation!

Regular readers of the Warde Report will recall that in the fall of 1997 an agreement was signed that created what has come to be called "Michigan Co-Tenancy Laboratory" (MCL). The reason for this agreement was straightforward. If multiple hospitals (or systems) can agree to jointly own, use and govern an esoteric laboratory, there is a tremendous opportunity to gain efficiency and reduce costs for all involved. The original agreement involved six hospitals; there are now eighteen. The prophecy has been fulfilled.

MCL’s volume of testing today would have cost $4,000,000 per year more in 1997. Save a million here, a million there and pretty soon you are talking about some real money. More MCL participants are being actively sought. As the number increases, the benefit will compound. The fact that Michigan hospitals can see the defensive advantage in agreeing to work together was first demonstrated by Joint Venture Hospital Laboratories of Allen Park. This network of well over 100 members has become arguably the most successful contracting alliance in the United Sates. This spirit was furthered by MCL.

Society itself is based upon agreement and compromise. Isn’t it totally reasonable that hospital laboratorians find ways to join together, not just to talk about their mutual challenges, but to take action to overcome them? To not do so will be to see the enemy and realize it is us.