Time for Labs to “Step Up Their Game”—The Transition to “Lab 2.0”

The Protecting Access to Medicare Act of 2014 (PAMA) puts more pressure on laboratories as reimbursements are expected to dwindle, yet laboratory testing continues to be at the heart of patient diagnosis and treatment planning. The question, then, is in which labs will that testing take place? With the current industry in flux—shifting to value-based care—it becomes more important than ever for labs to “step up their game” and demonstrate their value beyond lab results.

“There is a very urgent need for laboratories to establish value in the eyes of their owners. One way or another, the laboratory has to be an asset to its owner, whether through earning revenue via traditional fee-for-service or through contribution to bundled care or capitated arrangements. In either scenario, the lab is on the line to demonstrate its contribution and why it should be an essential part of that organization.”
–Bob McGonnagle, Publisher, CAP TODAY

Project Santa Fe Calls for Lab 1.0 to Upgrade to Lab 2.0

A collaborative group of innovative laboratories—“Project Santa Fe”—is pushing the needle on demonstrating lab value, and it emphasizes  the need for labs to “upgrade” from Lab 1.0 (transactional) to Lab 2.0 (integrative) in line with healthcare’s shift to a focus on value and improved patient outcomes. The group touts that laboratories, by engaging in leadership opportunities that integrate the laboratory in population health management (PHM) and patient care improvements, can be instrumental in identification of at-risk patients and tracking of patient progress. In addition, laboratorians can collaborate with clinicians about risks and care gaps, evidence-based guidelines, and guiding clinical actions based on test results. In order to accomplish this paradigm shift, laboratories must understand how lab data relates to clinical outcomes and costs of care throughout the entire care continuum.1

Spending 3%, Impacting the Other 97%

Of the overall spending in healthcare, the lab portion is only about 3%. However, labs that understand how data is used outside the lab can engage in projects that impact the other 97% of costs. For example, rapid turnaround time of a particular lab test allows avoidance of an unnecessary hospital admission, which can save thousands of dollars. Shifting from a transactional lab focused only on putting out results to an integrative lab that is involved in supporting the provider in patient care improvements is the next move for innovative labs in value-based healthcare models. Moving from “Clinical Lab 1.0” to “Clinical Lab 2.0” will establish the impact of laboratory diagnostics on the full 100% spent in American healthcare, not just the 3% attributed to in vitro diagnostics.1

“Specifically, in the transition from volume-based to value-based health care, clinical laboratories are called upon to provide programmatic leadership in reducing total cost of care through optimization of time-to-diagnosis and time-to-effective therapeutics, optimization of care coordination, and programmatic support of wellness care, screening, and monitoring.”
–Crawford et al., 2017

Orchard’s White Papers: Keeping you Informed

Orchard is working on the next informative white paper focused on helping labs maneuver through the changes taking place in healthcare. The new paper will showcase the Lab 2.0 concept and discuss the importance of laboratory stewardship. Watch for in it 2018!

Our Commitment

Orchard Software is committed to keeping you informed and being a trusted resource that you can turn to for industry-related education. As always, we welcome your feedback. Follow us on Twitter at @OrchardSoftware, and feel free to respond to this post by emailing us at news@orchardsoft.com.


Crawford, J. M., Shotorbani, K., Sharma, G., Crossey, M., Kothari, T., Lorey, T.S., …Fisher, N. (2017). Improving American healthcare through “clinical lab 2.0”: A project Santa Fe report. Academic Pathology, 4, 1-8. http://dx.doi.org/10.1177/2374289517701067

Kim Futrell, BS, MT(ASCP)
November 17, 2017