Healthcare waste makes up a massive 34% of the total $3.2 trillion spent on healthcare in the United States. Nearly half of this arises from unnecessary expenses such as excessive imaging and laboratory tests. Much of this clinically unwarranted waste can be eliminated by paying for value. What does it take to reduce variation in ordering these tests?

1. Scanning Lab
Variation Through
a Cost and Quality
Lens

2. Healthcare waste makes up a massive 34% of total $3.2 trillion spent on healthcare in the United
States.1
Nearly half of this arises from unnecessary expenses such as excessive imaging and laboratory
tests. By paying for value, much of this clinically unwarranted waste can be eliminated.
The Unjustified Lab Services Challenge
Laboratory and pathology testing accounts for 4% of total annual healthcare costs (over $60 billion) with an
annual increase of 15% to 25%. Additionally, Medicare spending on all Part B laboratory services
increased by 29%.2
This increase is significantly disproportionate to the average 10% increase in
enrollment in Medicare Part B.2
A substantial volume (~42%) of laboratory testing can be regarded as a
wasteful spending. Commonly ordered tests such as CBC and urinalysis are often cited as being overused,
and redundant testing alone accounts for $8 billion annually.3
Reduction in unnecessary lab tests by
establishing acceptance criteria and ensuring adherence is one approach to both reduce costs and
improve quality of patient care.
Lab tests should be ordered with the goal of providing high-quality and cost-effective care after evaluating
the clinical necessity of the test and with improved patient care as the primary driving force.
Variation Reduction Scaffold
Redundant testing, one of the primary causes of inappropriate utilization, occurs when tests are ordered by
multiple clinicians for a given patient. Such unnecessary tests crop up when repetitive orders are placed
without periodic assessment of clinical necessity. Furthermore, unnecessary tests also happen when
orders are repeated within a time span that is too short to detect any clinically relevant change. Ordering
the wrong test is not only wasteful but also potentially harmful to patients. High frequency of blood draws
can be disruptive and lead to interruption of normal sleep patterns for inpatients. In intense cases, frequent
blood draws can also lead to hospital-acquired anemia. Lab test overutilization can also lead to an increase
in false-positive results that again drive other inappropriate lab or defensive diagnostic testing.
Furthermore, unnecessary testing can divert nursing and phlebotomy teams from their core tasks.
Inadequate education and awareness of standards at the point of care for physicians can be attributed to
such inappropriate lab service utilization. Patient preparation is equally important and challenging as it
includes factors (diet and posture/exercise) that may lead to variation in results. The patient needs to be
informed regarding the risk associated with such factors before arriving for sample collection.
There are three steps involved to effectively curtail a significant number of these unwarranted tests and
help providers use lab testing more efficiently:
(1) A data-driven approach to isolate lab services, benchmark physicians, examine the variability of lab test
utilization, and present the data to understand the source of care variation.

3. (2) Physician education campaigns emphasizing the degree of overuse of lab services and its potential for
harm to create a roadblock to repetitive ordering and inappropriate ordering behavior. Develop talking
points for physicians to discuss with patients and create online resources to house the tools and content.
(3) Efficient patient education interventions by disseminating patient education materials to address patient
demands.
Optimizing lab service utilization involves numerous interventions that encompass ordering and monitoring
combined with influencing patient preparation to get the best results. A data-driven approach to understand
the test patterns and deviations from guidelines and actively engage physicians with relevant clinical
content is necessary to reduce unnecessary lab utilization and generate cost savings.
Variation IQ Can Help
Learn how we can help to understand your total cost of care using your cost and clinical data, unearth the
improvement opportunities, engage your physicians, and deliver practice change. We look forward to
opportunities to apply Variation IQ tools and processes to enhance the healthcare of your patients, while
improving your operational efficiency and margins.
References
1. Berwick DM, Hackbarth AD. Eliminating waste in US health care. JAMA. 2012;307(14):1513-1516.
doi:10.1001/jama.2012.362
2. Murrin S. Questionable billing for Medicare Part B clinical laboratory services. Department of Health
and Human Services. 2014. https://oig.hhs.gov/oei/reports/oei-03-11-00730.asp Accessed September
24, 2014.
3. Improving safety and eliminating redundant tests: cutting costs in U.S. hospitals.
(http://content.healthaffairs.org/content/28/5/1475.full )

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