Public Health Laboratories and Health System Change

Prepared by Roy Ahn, Daniel S. Gaylin, Alison Keiller, Daniel N. Mendelson, Adil Moiduddin, and Robert J. Rubin, M.D. of The Lewin Group under the direction of Cheryl Austein, Project Officer for the Office of Health Policy, within the Office of the Assistant Secretary forPlanning and Evaluation (ASPE), Department of Health and Human Services. October 6, 1997

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Introduction

This study examines the role of public health laboratories (PHLs) in the changing health care market, with an emphasis on delineating the relationship between PHLs and managed care. The topic is becoming the focus of considerable attention, particularly as the growth of managed care continues to alter the landscape of health care, and as emerging infectious diseases remain priority issues in public health. The current and future role of PHLs in this changing health care environment has not been studied systematically.

The Office of the Assistant Secretary for Planning and Evaluation (ASPE), Office of Health Policy, within the U.S. Department of Health and Human Services initiated this study in order to better understand the relationship between PHLs and managed care organizations (MCOs). Of particular importance to the Department is: a) understanding the role of state PHLs relative to new actors in the health care system; b) identifying and characterizing interactions between PHLs and MCOs (e.g., contracts for testing, information reporting and policy development); and (c) defining the unique value of PHLs in the promotion of public health.

There are three target audiences for this study. The first audience is state PHL directors. Our goal here is to compile a resource for this audience on timely PHL policy issues, and to educate those in the managed care community about the role and unique value of PHLs. We highlight existing and emerging arrangements between MCOs and PHLs as a model to help both the public and private sector develop better working relationships.

The second target audience for this study is state policy makers. We seek to inform state health agency (SHA) and regulatory deliberations that center on laboratory services. As state scrutiny of laboratory services and other expenditures on public health intensifies against the backdrop of cost reduction, identifying ways in which the PHLs add value will be critical. We emphasize the unique value of PHLs, as well as the potential for, and feasibility of, public-private collaboration in clinical laboratory services.

The third audience is federal policy makers. Our intent here is to characterize the federal role in PHL-related issues. We report on the interactions between PHLs and federal health agencies. Among the Public Health Service (PHS) agencies, the Centers for Disease Control and Prevention (CDC) and the Food and Drug Administration (FDA) have been most involved in PHL activities, particularly in the area of disease reporting. The Environmental Protection Agency (EPA) also typically works closely with the labs in many states. Other PHS agencies have been indirectly involved in PHL issues (e.g., testing revenues from Medicaid programs have partially supported state PHLs).

To inform these deliberations, ASPE contracted The Lewin Group to review published and other literature on PHLs and health market change; carry out interviews with key laboratory representatives from the public and private sector; and conduct several case studies of states to characterize PHL efforts and experiences with managed care and health system change. Specifically, we focus on four central questions:

1. What is the role of the state PHL relative to new actors in the health care system?
2. What are the interactions between state PHLs and managed care organizations (e.g., contracts, collaborations)?
3. How has managed care's presence in the area of laboratory services changed or affected the practices and/or functions of PHLs?
4. What are some of the other major health market changes or trends affecting PHLs (e.g., hospital consolidation, privatization)?

To bound our scope of work, we restricted the focus of this study to state PHLs rather than to the full range of PHLs (e.g., local health department laboratories, EPA laboratories). State PHLs are of particular interest currently because: (1) state health agencies (SHAs) are a central part of the public health infrastructure; and (2) many states are currently grappling with issues related to government management and service delivery of health care (e.g., privatization of public health functions). We acknowledge, however, that many other PHLs (e.g., local and federal) serve critical roles in maintaining and enhancing the public health infrastructure, and should be studied as well in the context of further research efforts.

This document is organized into four main sections. First, we describe our study methodology and analytic approach. Second, we provide an environmental scan of PHLs and the factors in the health care market that are currently affecting or may in the future affect PHLs in order to provide ASPE with some context and background of the clinical laboratory landscape. Third, we present our analytical results derived from our literature review, interviews with laboratory experts, informal poll of PHL directors, and case studies of states. Finally, we discuss our conclusions on the current state of PHLs in the health care market and describe the impact of health market changes on the PHLs' practices and functions.

Study Methods

Due to the novelty of the topic and the consequent paucity of published information, it was necessary to go beyond the available literature by conducting interviews of public and private experts in clinical laboratory issues. We also performed case studies of states with PHLs that have had experience in dealing with health market change in order to better characterize the range of existing interactions between PHLs and other organizations (e.g., private clinical laboratories, MCOs, government organizations).

This study was performed on contract for the Office of the Assistant Secretary for Planning and Evaluation (ASPE), Office of Health Policy, within the Department of Health and Human Services (DHHS). We received input throughout the study from other federal and state government organizations, including the Centers for Disease Control and Prevention (CDC) and the Food and Drug Administration (FDA). We were also assisted by the leadership of the Association for State and Territorial Public Health Laboratory Directors (ASTPHLD), the primary association for state lab directors. Finally, we also solicited review and support from private sector interests (e.g., the American Clinical Laboratory Association).

Literature Review

Because our subject matter has not been widely studied, we initiated a broad literature review consisting of four components: (1) search of peer reviewed literature; (2) search of grey literature; (3) internet search; and (4) review of the CDC's Morbidity and Mortality Weekly Report (MMWR). We also accessed literature by asking our interviewees for additional sources, as described below.

We searched peer-reviewed sources using bibliographic databases of the National Library of Medicine (MedLARS). We performed direct search of MedLINE (citations of peer-reviewed journal literature), HealthSTAR (citations of journal literature and other sources in health services research, technology assessment, and health planning), and HSRProj (citations of recent and ongoing health services research funded by government and the private sector). The search covered English-language publications. We used a number of the MeSH (Medical Subject Headings)¹ terms and key word combinations to identify relevant articles:

Figure 1: MeSH Terms Used

• laboratories and managed care organizations
• public health laboratories
• public/private partnership and managed care
• public health department and private sector
• public health lab and health market change
• lab and delivery of health care
• public health lab and delivery system
• lab and health care market

We also searched grey literature from newsletters, press releases, specialty business and medicine journals, on-line materials, and other sources, including:

Lexis/Nexis -- Contains major archives of federal and state case law, statutes of all 50 states, state and federal regulations, and public records from major U.S. states. Lexis/Nexis contains national and international newspapers, newswires, magazines, trade journals, and business publications.

DialogTM  -- An on-line service that contains over 450 electronic libraries covering a broad range of disciplines. These libraries contain documents from the scientific and technical literature, trade journals, newspapers, and newswires (includes HSRProj, a database of ongoing health services research activities).

Lexis/Nexis searches were restricted to the past two years and the search terms had to appear in either the abstract, leading paragraph, or title.

The search strategy and key words for these searches were as follows:

Figure 2: Key Search Words

• public health laboratories and managed care
• public health laboratories and United States
• {public/private partnerships or
• private/public partnerships or
• public health service AND private sector or
• public health department AND private sector}AND
• {managed care } AND
• {laboratories or laboratory}

For the Internet searches, we scanned the Yahoo! and Infoseek search engines for articles using the following keyword search terms:

Figure 3: Internet Search Terms

• public health laboratories,
• public health & safety    or
• diseases & conditions   or
• environmental health

We also wanted to identify literature pertaining to the involvement of managed care relative to PHLs in the areas of disease surveillance and outbreaks. To facilitate this, we manually searched the MMWR from 1994 through the end of 1996 for titles related to managed care and disease outbreaks. Overall, we found two articles describing outbreaks in WA and NM that precipitated limited interaction between MCOs and public health agencies involved in responding to the outbreaks.

We also requested relevant literature on PHLs from the Association of State and Territorial Public Health Lab Directors (ASTPHLD); the Clinical Laboratory Management Association (CLMA); and from Dr. Michael Skeels, the Director of the Oregon State PHL, who is actively engaged in relevant research. The counts presented below include relevant articles identified by examining the bibliographies of articles located through the search engines.

In total, we identified 140 articles in our literature search. We excluded articles that did not contain information relevant to our key study questions. We found a total of 24 relevant articles that were directly applicable to clinical laboratories, health system change, and PHLs (see Figure 4 below).

Figure 4: Literature Search Results

Source of Information	Number of Articles Identified	Number of Relevant Articles Summarized
MedLARS	40	4
Nexis/Lexis and DialogTM	81	5
Internet Sources	4	4
MMWR	2	2
Other Sources*	13	9
Total	140	24

*Literature from ASTPHLD, Oregon State PHL Director, Clin. Lab Manufact. Association, and Goldman Sachs

A complete bibliography is contained in Appendix A. Key points from the literature with specific relevance to our study are footnoted throughout this report.

Policy Context and Background: Environmental Scan

The purpose of this environmental scan is to provide some general context on public health laboratories and the laboratory services marketplace. In this section, we report on the components that constitute the laboratory services marketplace. We describe the PHL's role as part of the public health infrastructure; provide an overview of PHL activities, functions, and organization; provide an overview of the private clinical laboratory services market; and discuss the emerging role of information technology in the laboratory services environment.

Diverse stakeholders in the clinical laboratory market interact with (and affect) the operations of state PHLs (see Figure 6). First, county public health laboratories often work closely with state PHLs. Second, government agencies at the federal level (e.g., CDC, FDA, USDA, EPA, HCFA(now known as CMS)) and state level (e.g., state health agencies) can also interact with PHLs as funders, supervisors, and collaborators. Third, private laboratories (e.g., physician office laboratories, hospital-based laboratories, or large independent reference laboratories), which provide services that may overlap with those functions traditionally performed by state PHLs, are sometimes regulated by the PHLs, and typically have disease reporting responsibilities to the state health agencies. Finally, MCOs, Medicaid/Medicare, and other health care providers can be users or clients of PHL services.

Figure 6: Landscape of the Laboratory Services Marketplace

Rapid changes in the health care market have profoundly affected the market for clinical testing services, and, consequently, the environment facing PHL services. An important trend in health care has been the growth of managed care, both in terms of the number of traditional staff-model MCOs and, more recently, in other looser managed care models such as IPAs. Managed care places greater emphasis on cost effectiveness and quality monitoring in health care and has prompted an increased demand for patient utilization, cost, and outcomes information. Beyond managed care, consolidation of hospitals and the growth of commercial laboratories have also affected the practices and functions of PHLs.

Environmental factors shaping government involvement in health care also affect PHLs. For example, there is much debate over the issue of privatizing and outsourcing traditional public health functions (e.g., health care service delivery) as spending constraints continue to hamstring state government health programs. A second government factor has been the introduction and growth of managed care in public programs, such as Medicaid, Medicare, and CHAMPUS. A third government factor is the changing regulatory environment for providers of health services (i.e., licensure changes). Finally, initiatives to re-invent government programs (e.g., GPRA) are helping to support the formation of public-private partnerships and encouraging a greater customer focus in government.

Technological change and innovation in the laboratory environment are also affecting clinical laboratories. The advent of the laboratory information system and other advanced technologies is moving clinical laboratories closer to automating their operations. In addition, improvements in laboratory information technology have important implications for better disease surveillance and monitoring in the future.

These key components and forces in the PHL operating environment exert important influences on the PHLs, and each of these components is described in this section. Prior to discussing these environmental factors, we first provide an overview of PHLs, their functions, and their role in the overall public health infrastructure.

The Public Health Infrastructure

Before discussing the specific activities of PHLs, it is first important to characterize the larger public health infrastructure in which PHLs reside. In a 1988 report entitled The Future of Public Health by the Institute of Medicine (IOM), the report attributed many of the major improvements in the health of the American people to the success of public health measures.²

The services and functions provided by national, state, and local public health agencies cover a broad range of population-based activities and direct personal services. The value of a strong public health infrastructure has been realized in the decline of communicable diseases such as syphilis, improvements in the nation's drinking water, and increased awareness of the importance of environmental health issues.

The public health infrastructure is comprised of an extensive network of federal, state, and local health agencies. On the national level, the agencies of the Public Health Service (e.g., CDC, Health Resources and Services Administration, Indian Health Service), provide federal leadership through policy development and funding. At the next level of government, state health agencies (SHAs) serve as the major link between federal health priorities, funding, and the local delivery of personal and population-based health services. Regardless of their organizational structure, SHAs have a responsibility for ensuring core public health services either directly or in coordination with local health departments. Local health departments and agencies provide the most direct level of public health service through the provision of direct health care services and the support of population-based public health activities.

The public health community has identified three core functions of public health agencies: assessment, policy development, and assurance. The IOM report on the future of public health recommended that public health agencies should be responsible for conducting the following three core functions:

1. Assessment: Each public health agency should regularly and systematically collect, assemble, analyze, and make available information on the health of the community, including statistics on health status, community health needs, and epidemiologic and other studies of health problems.
2. Policy Development: Each public health agency should exercise its responsibility to serve the public interest in the development of comprehensive public health policies by: (a) promoting use of the scientific knowledge base in decision-making about public health, and (b) leading development of public health policy. Agencies must take a strategic approach that is developed on the basis of a positive appreciation for the democratic political process.
3. Assurance: Each public health agency should assure its constituents that services necessary to achieve agreed upon health goals are provided, either by encouraging actions by other entities (private or public sector), by requiring such action through regulation, or by providing services directly. Also, public health agencies should involve key policymakers and the general public in determining a set of high-priority personal and community-wide health services that governments will guarantee to every member of the community. This guarantee should include subsidization or direct provision of high-priority personal health services for those individuals who cannot afford them.

The structures and functions of state and local public health agencies vary greatly. The organizational relationships between local health departments and state health agencies range from independent local health departments that have contractual and financial relationships with an SHA, to local health departments that function as sub-units of an SHA. Although most public health agencies perform some personal and population-based health services, the extent to which public health agencies perform these two types of services differs among states and, in some cases, localities. For example, some states, such as Minnesota, have focused their public health activities on population-based health services (i.e., disease surveillance, health education, and community action planning). Other states, such as Tennessee, have a broader focus on direct health services, investing their resources and personnel into the provision of personal health care.

PHL Structure, Organization, and Activities

The PHL is a central part of the public health infrastructure. PHLs support the public health infrastructure in each of the three core public health functions. Descriptions of PHL activities within these core functions have been previously described by the CDC and the ASTPHLD:^{3, 4, 5}

1. Assessment -- includes laboratory testing for infectious diseases, reference testing related to exotic diseases, and highly specialized esoteric tests. PHLs often perform tests unrelated to individual treatment but significant for public health reasons, (e.g., serotyping of bacteria). Other assessment measures include gathering of test results, documentation of food- and water-borne infection, environmental testing, and research. Epidemiologic work by public health agencies is often dependent on PHL testing and analysis of specimens received from private providers, public health clinics, hospitals, and even private laboratories.
2. Policy Development -- includes consulting in technology, testing, and research needs for program and policy development on health issues such as HIV/AIDS, sexually transmitted diseases (STDs), and tuberculosis. PHLs can play a role in environmental health policy by identifying health hazards through testing and developing policies to solve environmental problems. In some states, PHLs are responsible for developing and implementing regulations (e.g., CLIA ' 88) regarding operation of private laboratories in the state.
3. Assurance -- includes providing patient testing for indigent populations and persons unable to afford tests. State PHLs generally provide newborn genetic screening for state residents, laboratory personnel / facilities licensure, laboratory personnel training, and environmental monitoring. In addition, PHLs have a role in assurance through measuring the effectiveness of intervention programs.

PHLs differ dramatically in both structure and range of services. All fifty states and the District of Columbia operate their own state PHL.⁶ Generally, the state PHL operates under the leadership of the state health officer; however, the nature of the relationship between the health officer and the laboratory director varies by state.⁴ For example, in Oregon, the Center for Public Health Laboratories is one of the five main centers in the Oregon Health Division, and the laboratory director is an Assistant Administrator of the Health Division. In Tennessee, the Division of Laboratory Services is a unit directly under the supervision of the Commissioner of the Tennessee Department of Health. In contrast to these separate laboratory service divisions, Washington State has combined its laboratory services and epidemiology section into a central office called Epidemiology, Health Statistics and Public Health Laboratories; this office is one of the five main bureaus of the Washington Department of Health.

The size of state PHLs in terms of both staffing and funding varies by state. For instance, in fiscal year 1996, the Tennessee State PHL had a staff of 186 full-time equivalents (FTEs) and a budget of $9.5 million; Wisconsin's state PHL had 280 FTEs with a budget of $23 million; and Florida's state PHL had a statewide staff of 354 FTEs and a budget of $21 million (1995-96 budget). The revenue streams of state PHLs also vary in the proportion of funding that comes from federal, state, and other sources. For example, the Michigan and Wisconsin State PHLs receive 60 to 70 percent of their funding from state and federal sources and the remaining funding directly from generation of user fees. In comparison, the Tennessee State PHL receives 95 percent of its funding directly from the state; it collects fees for certain services, but the state PHL passes all revenues through to the general state administration.

Many states also operate regional laboratories that perform certain tests and act as liaisons for sending other samples to the central state laboratory. For instance, both Maryland and Tennessee operate four regional laboratories within their respective states. Regional laboratories may be full service extensions of the central state laboratory or smaller outposts. For example, one of the regional laboratories in Tennessee has a small staff of two FTEs and performs microbiology tests exclusively. In contrast, other states, such as Oregon and Wyoming, operate only one centrally located state public health laboratory.

One major difference among state PHLs is the extent to which state laboratories devote resources to direct patient testing for personal health services versus testing for population-based screening and surveillance. New York's PHL is called the Wadsworth Center, and it devotes one-third of its resources to the laboratory licensure program for private laboratories; one-third of its resources operating as a large basic grant funded research entity; and one-third of its resources for administration, testing, and environmental health monitoring. Other states like Tennessee have traditionally performed direct tests of patient specimens received from local health departments and other public health agencies.

The variations in functions and structures of state PHLs have a direct effect on how laboratories define their role in the public health infrastructure and how current market changes will affect the laboratories themselves. Some state PHLs that have traditionally performed tests for indigent patients seeking care in local health departments have noted that the number of specimens they receive is decreasing as states expand Medicaid managed care programs. In fact, private managed care companies that bid for and receive approval to enroll Medicaid clients often contract with large private laboratories for some or all clinical testing services. Therefore, many of the Medicaid and other indigent patients traditionally treated by local health departments are entering managed care plans where their tests are sent to private laboratories. Consequently, the state also may receive fewer samples for surveillance purposes.

In recent years, the public health community has tried to identify its role and responsibilities at all levels of government. Health care market changes, such as increased managed care penetration, hospital and other health system consolidation, and privatization, have stimulated public health agencies to review their community role and goals. Consolidation in the private laboratory market and increased managed care presence in serving Medicaid populations threaten to impose major changes on the way in which PHLs have traditionally served communities.

Federal Government Role in PHL Activities

Various federal government agencies are currently involved, directly or indirectly, in clinical laboratory issues. From direct oversight of the quality of clinical laboratories to coordination of disease reporting efforts, federal agencies play a vital role in the practices of PHLs. At the present time, the CDC and FDA work most closely with PHLs and have established relationships with PHLs. The EPA and U.S. Department of Agriculture (USDA) also have smaller, indirect roles in PHL activities, and the Health Care Financing Administration(now known as Centers for Medicare and Medicaid Services(CMS)) (HCFA(now known as CMS)) and the CDC play an important role in maintaining quality standards for all clinical laboratories through the Clinical Laboratory Improvement Amendment of 1988. This section reviews the current role of the federal government in PHL-related issues.

Centers for Disease Control and Prevention and PHLs

Because of the close tie between the PHL core laboratory functions and the disease surveillance and epidemiology functions of the CDC, the greatest potential for collaboration between PHLs and the federal government lies within the CDC. The PHL relationship with the CDC is robust, and one that is important for national disease surveillance.

The Division of Laboratory Systems (DLS) within the Public Health Practice Program Office (PHPPO) at CDC plays an important role in clinical laboratory issues at the CDC. With 90 FTEs -- laboratory scientists, statisticians, computer specialists, physicians, and administrative support personnel --DLS performs many functions on laboratory-related issues and coordinates many laboratory-related activities within the agency (see Figure 7). For example, DLS officials are represented on a newly formed working group on public health laboratory issues at CDC that serves on an advisory committee to the director of the agency. Other centers at CDC such as the National Center for Infectious Diseases (NCID) are also integrally involved in lab activities (see Figure 7).

Figure 7: Coordination of Laboratory Activity between CDC Centers and Division of Laboratory Systems
Name of CDC Center/Office	Lab-Related Functions	Relationship with DLS/Current Activities
Office of the Director	N/A	There is an advisory panel to the Director of CDC on issues concerning public health labs. Representatives from all CDC Centers, including the Director of PHPPO.
Office of Managed Care	N/A	This office is still assessing its role in regard to public health labs. A representative from DLS acts as an advisor on public health labs to the Office of Managed Care.
National Center for Infectious Diseases (NCID)	Conducts lab and epidemiologic research for prevention of emerging diseases (lab-based surveillance) Collects, analyzes, and interprets reports of nationally notifiable infectious diseases and outbreaks submitted by state/local agencies	This center has the directive to write guidelines for diagnosing infectious diseases and consults with DLS on laboratory testing included in those guidelines. In addition, as part of the DLS responsibility for writing and implementing regulatory standards for the Clinical Laboratory Improvement Act, DLS staff consult the NCID on regulations for infectious disease testing.
National Center for Environmental Health (NCEH)	Develops lab measurements of exposure to toxicants Conducts lab assessment of exposure and disease for health studies of toxicants (lead, mercury, dioxin, pesticides) Provides lab support during environmental health emergencies Provides technical assistance, training, and technology transfer to states	NCEH runs a blood lead program, and consulted DLS on the emergence of new hand-held technologies for field testing of blood lead.
Epidemiology Program Office (EPO)	Publishes MMWR Coordinates CDC Surveillance Efforts (collects/analyzes data, sends out epidemiologists during outbreaks) Operates a surveillance telecommunication system between CDC and all 50 states	This link is not as close as might be expected. EPO consults DLS when the issue concerns the actual management and running of the laboratories.
National Center for Chronic Disease Prevention and Health Promotion (NCCDPHP)	N/A	This center works jointly with DLS on implementation of the Fertility Clinic Success Rate and Certification Act of 1992. Specifically, DLS is developing and publishing the model certification program, mandated in the law, for embryo laboratories.

In terms of the types of relationships that have emerged between CDC and PHLs, the CDC's roles in laboratory issues have included: a) laboratory regulation; b) training of PHL personnel; c) disease surveillance; and d) other activities supporting PHLs.

Laboratory Regulation

Among DLS's most central responsibilities is implementing and authoring, with HCFA(now known as CMS), the Clinical Laboratory Improvement Amendment (CLIA) regulations. Congress passed CLIA in 1988 to establish baseline quality standards for all clinical laboratories in the United States. HCFA(now known as CMS) has the responsibility for registering laboratories and collecting fees, while CDC has responsibility for technical and scientific issues related to the regulation, such as test categorization, decisions on waivers, and evaluating the impact of the regulations on the public. HCFA(now known as CMS) and CDC share responsibility for authoring and refining the regulatory standards.

Training of PHL Personnel

DLS sponsors symposia on best practices in laboratory operations. In 1995, DLS sponsored The Institute on Critical Issues in Health Laboratory Practice. The Institute brought together presentations and discussions on different areas of laboratory practice research:⁷

• proficiency testing
• laboratory personnel
• quality assurance
• detection of problems affecting patient outcomes
• establishment of analytical performance goals for the laboratory
• measurement of the impact of change on laboratory testing
• laboratory-focused health systems research

In addition, DLS also has cooperative agreements with ASTPHLD to conduct laboratory training courses on clinical, environmental, and public health laboratory topics. The National Laboratory Training Network (NLTN), a joint venture of ASTPHLD and DLS, provides laboratory training courses in clinical, environmental, and public health topics to laboratory personnel.

Disease Surveillance

While exhaustive characterization of CDC disease surveillance activities is beyond the scope of this study, it is important to describe briefly the interplay between PHLs and the CDC on this issue. As the national health agency responsible for disease surveillance / epidemiology and disease prevention, the CDC's mission complements those of the PHLs.

PHLs play a critical role in national disease surveillance; the emergence of new infectious agents and the re-emergence of infectious disease threats are focusing attention on the need for a strong public health laboratory infrastructure.⁸ PHLs, along with other providers, report the occurrence of notifiable diseases to state and local health agencies. Requirements for reporting diseases are mandated by state laws or regulations, and reportable diseases vary by state.

The data generated by PHLs are necessary for monitoring disease trends and evaluating the effectiveness of public health interventions. More specifically, data on a number of infectious diseases are aggregated into a national database at the CDC called the National Notifiable Diseases Surveillance System (NNDSS). A list of diseases included in the NNDSS is provided below in Figure 8. The national data from the NNDSS are published weekly in the CDC's Morbidity and Mortality Weekly Report (MMWR). In addition to the NNDSS, other conditions of public health interest are provided by state health departments to the CDC through supplementary surveillance systems.⁹

Figure 8: Diseases in the National Notifiable Diseases Surveillance System (NNDSS)
Source: CDC Case Definitions for Public Health Surveillance. MMWR 39(RR-13), October 19, 1990.
AIDS Amebiasis Anthrax Aseptic meningitis Botulism Brucellosis Chancroid Cholera Congenital rubella syndrome Diphtheria Encephalitis Gonorrhea Granuloma inguinale Hansen's disease	Hepatitis A, B, non-A or B Legionellosis Leptospirosis Lyme disease Lymphogranuloma venereum Malaria Measles Meningococcal infections Mumps Pertussis Plague Poliomyelitis, paralytic Psittacosis Rabies	Rheumatic fever Rocky Mountain spotted fever Rubella Salmonellosis Shigellosis Syphilis Tetanus Toxic shock syndrome Trichinosis Tuberculosis Tularemia Typhoid fever Varicella Yellow fever

The interchange among providers, PHLs, state health agencies , and the CDC is illustrated in the example of the surveillance system for antimicrobial-resistant pneumococci. Figure 9 below shows an idealized flow of information through a computerized, laboratory-based surveillance system. The physician sends the patient's pneumococcal isolate to the PHL, which then performs susceptibility testing to determine the level of resistance of the isolate to various antibiotics. The susceptibility data are recorded electronically into the laboratory's database, which then transmits this information to the state health agency via an HL7 message. The state health agency communicates the local trends for pneumococci back to the physician and to the CDC. Finally, the CDC communicates the national trends on antibiotic resistance of pneumococci back to the state, physician, and public health community.¹⁰  Efforts to develop such a system are actively being pursued through a collaboration involving the CDC, Council of State and Territorial Epidemiologists (CSTE), and ASTPHLD.

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Figure 9: Idealized Information Flow in Electronic Disease Surveillance System

Source: MMWR, February 16, 1996, p. 8

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The CDC is also involved in helping state PHLs respond to disease epidemics and outbreaks. For example, during the 1994 Hantavirus Outbreak in the Four Corners region of the Southwest United States, CDC epidemiologists provided technical expertise in helping the state health agencies determine the cause of the outbreak. In general, the CDC provides as much assistance as the state health agencies request, which can range considerably. For example, during the recent E. coli outbreak in apple juice from California and Washington State, CDC involvement was minimal, while the FDA played a substantial role.

Other

In addition to the aforementioned functions, the CDC provides other ancillary support services for PHLs. For example, DLS often serves as a source of technical support for PHLs. In limited instances, the CDC funds PHL programs through grants. For example, the CDC's National Center for Infectious Diseases (NCID) recently provided a grant to the Washington State PHL and Office of Epidemiology to create an innovative system for electronic disease reporting in hopes of lessening the burden of reporting, improving accuracy, and expediting reporting.

Other Federal Agencies and PHLs

Most federal involvement with state PHLs is via the CDC. In addition, several other federal health agencies operate laboratories related to public health.

FDA, EPA, USDA

The FDA, the USDA, and the EPA may interact with PHLs on food safety and limited environmental issues.¹¹ In general, the USDA focuses on the safety of raw agricultural products, the EPA focuses on pesticides and associated acute toxicity, and the FDA focuses on finished food products (although they may help USDA with analytics in terms of testing). The interactions among the various players are multiple and complex, with shared communications and memoranda of understanding. Figure 10 depicts the interrelationships among these agencies in food safety functions, the primary area of interchange pertinent to this study.

Figure 10: Federal Agencies Involved in Food Safety Activities

The various federal agencies' roles during a food-borne disease outbreak offer some additional guidance for understanding their relationships and responsibilities:

• FDA focuses on collecting food samples, analyzing them, and working with industry to contain the problem within food products (e.g., pulling the product off store shelves).
• USDA focuses on examining raw agricultural products as a possible source of disease.
• CDC focuses on epidemiology B consulting with physicians and patients, tracing the source of outbreaks, and working with the FDA to establish links between food products and disease outbreaks where appropriate.

The FDA has primary oversight responsibilities for food product safety and applied nutrition, and for drugs, devices, biologicals, agricultural products, and veterinary products. Given these roles, the FDA activities bear directly upon PHL functions, and the remainder of this section will discuss relevant FDA activities. However, since the FDA is primarily focused on products and enforcement as opposed to medical/clinical testing, they essentially perform different operations than state PHLs, and the level of interaction with them is minimal. In addition, the FDA's role, by statute, is limited to interstate commerce (i.e., they have no purview over intrastate commerce).

The FDA and the CDC often provide assistance to state health agencies during food-borne disease outbreaks, especially those that cross state lines. For example, the FDA played a significant role during the recent outbreak of E. coli in Odwalla apple juice in California and Washington. While the Washington and California SHAs initially responded to the outbreak, the FDA used its regulatory authority to pull the apple juice from store shelves, helped locate where shipments of the apple juice had gone, helped the SHAs in the inspection of apple juice plants, and conducted its own microbiologic tests of apple juice samples to test for presence of E. coli. During the outbreak, the CDC's involvement was minor; it coordinated with the Washington State Office of Epidemiology to confirm the number of E. coli related illnesses.

Most FDA laboratory work is coordinated through field offices with laboratories, and centers around oversight and enforcement. For example, the FDA collects food samples to look for pesticides and pathogens. They also perform some analytical chemistry, often in cooperation with CDC and other agencies, to respond to food-borne disease outbreaks. The FDA also focuses on development of methods for laboratory testing of foods, since it is one of the primary organizations that engages in this activity extensively. Finally, the FDA is currently developing genetic markers and performing analyses that overlaps somewhat with the genetics work of state PHLs. The FDA is performing much less work than it had previously on chemical carcinogens and pesticide residues in food, and now places much more emphasis on more immediate microbiological concerns. In fact, the emphasis of the FDA is currently on acute toxicology, rather than chronic toxicity.

The FDA has eighteen field laboratories across the country that collect food samples and test them. The main emphasis of the laboratories is on food safety regulation, and the FDA central offices coordinate these activities. In addition, there are some food laboratories in Washington, D.C. that develop methods for food surveillance; and these are disseminated to and used by the field laboratories. The central office focuses more on immediate crises (e.g., outbreaks) and less on routine surveillance of industry. In addition, there are several FDA laboratories that serve as national research centers. For example, there is a large toxicology laboratory in Alabama that concentrates on inspecting seafood from the Gulf of Mexico. The FDA's National Center for Food Technology in Chicago also serves as a major testing development site and focal point for creating and overseeing the Hazard Assessment and Critical Control Points initiative, whereby industry implements quality control measures to ensure food safety. Finally, FDA maintains a primary research site (with no regulatory functions), the National Center for Toxicological Research, in Little Rock, Arkansas.

In addition to the activities described above, the FDA is involved with the CDC in a special public health program called the Sentinel Sites Initiative. The purpose of the Sentinel Sites Initiative is to obtain improved estimates of presence of food-borne disease agents. The program is being conducted by the CDC with support (both collaboration and funding) and coordination from the FDA and the USDA. The CDC program is coordinated through state PHLs, but county and city laboratories, private laboratories, and FDA field laboratories are also involved.

Under current surveillance procedures, the CDC collects epidemiologic data on many diseases. The CDC uses estimation techniques to multiply the reported numbers to reflect the likely actual number of cases for a given disease. The Sentinel Sites Initiative aims to improve these estimates by conducting extensive food culturing for four main pathogens (each of which causes similar diarrhea and feverish symptoms):

• E. coli 0157:H7

• Salmonella

• Campylobacter jejuni

• Listeria monocytogenes

The culturing, coupled with heightened disease surveillance, is intended to help establish stronger links between the presence of micro-organisms in foods and incidence of food-related illnesses. In turn, these stronger links and better data should allow for more precise estimation of the true incidence of food-borne illnesses, and ultimately the cost of these illnesses to society. The initiative should increase understanding of these diseases and their associated costs, and also help FDA, CDC, and PHLs justify their core functions.

HCFA(now known as CMS) Role In Public Health Laboratory-Related Issues

HCFA(now known as CMS) is the agency responsible for the licensing of all clinical laboratories in the United States, with the exception of research laboratories, through the Clinical Laboratory Improvement Amendments, 1988 (CLIA ' 88). Many state PHLs are the licensing entities for CLIA ' 88, thereby assuming responsibility for assuring the quality of clinical lab testing in the state. Two states (WA and OR) have full exemptions from HCFA(now known as CMS) to operate programs accepted as the equivalent of CLIA ' 88. CLIA ' 88 requires laboratories to obtain certification, and to comply with regulations in six broad areas of laboratory operations:

• proficiency testing
• personnel
• inspections
• patient test management
• quality control
• quality assurance

HCFA(now known as CMS) is responsible for the enforcement of CLIA '88, including the approval of proficiency testing programs, accreditation programs, and state exemption applications for clinical laboratories.¹² In order to comply with CLIA ' 88, clinical laboratories must first register themselves with HCFA(now known as CMS). After registration, HCFA(now known as CMS) surveys the laboratory and determines the laboratory's level of compliance with CLIA ' 88 guidelines. Upon determination of compliance, HCFA(now known as CMS) issues a certificate and collects the appropriate fees from the laboratory. In many instances, clinical laboratories can demonstrate compliance with CLIA ' 88 by using a HCFA(now known as CMS)-approved accreditation organization (e.g., Joint Commission on Accreditation of Healthcare Organizations, College of American Pathologists, Commission on Office Laboratory Accreditation).¹³

Private Clinical Laboratory Environment

As the private sector counterparts to PHLs, and also as an increasing source of competition, private clinical laboratories are a central element of the PHL operating environment. The American Society for Microbiology defines the clinical laboratory as,  "...a place where materials derived from the human body are examined for the purpose of providing information for the diagnosis, prevention, or treatment of any disease or impairment of, or assessment of, the health of human beings."(13) Clinical laboratories perform a wide range of services, from routine tests to sophisticated genetic tests, and many of them also perform various environmental testing services. There are also simple diagnostic test kits marketed to physician offices and, in some cases, directly to consumers. Clinical laboratories may be operated by universities, hospitals, physician offices, and free-standing facilities.

Several key trends in the competitive clinical laboratory testing marketplace today are overcapacity, increased outpatient testing volume, and intense price pressure from payers (e.g., managed care, Medicare). Private clinical laboratories, like their PHL counterparts, are struggling to meet the challenges of the rapidly changing health care market. The laboratory testing industry is restructuring rapidly and dramatically in response to these trends. Hospital laboratories are actively pursuing networking opportunities with outside laboratories to capture more testing volume, while others are consolidating their laboratory operations to reduce costs. In addition, large independent reference laboratories have emerged as major players in the industry, competing effectively on a national level for outpatient laboratory testing business.

This section presents a brief overview of the market for clinical testing services, including an estimate of market size, identification of the various laboratory stakeholders, and discussion of key trends in the industry. The section also describes how changes in the clinical laboratory market may affect PHLs.

Structure of the Market

Nationwide, the clinical testing market generates $30 billion in sales annually, and currently there are approximately 150,000 clinical laboratories in the United States (including PHLs). Clinical laboratories typically fall into one of three major categories: hospital-based laboratories, independent reference laboratories, and physician office laboratories.¹⁴

Previously an industry dominated by hospital-based laboratories, the clinical testing industry is rapidly consolidating, with larger independent reference laboratories acquiring increasing market share. In 1995, hospital-based laboratories comprised 55% of the total market, independent clinical laboratories made up 37% ($11 billion in sales for 1995), and physician office laboratories comprised 8% of the market. The independent reference laboratories represent the fastest growing segment of the clinical laboratory industry. ¹⁵

Figure 11: Market Share of Major Reference Laboratories, 1995

Several mergers and acquisitions in the clinical laboratory market during the past five years have resulted in the formation of large independent reference laboratories that now control a significant portion of the independent reference laboratory testing market (Figure 11). The merger of National Health Laboratories and Roche Biomedical Laboratories in 1995 to form Laboratory Corporation of America (LCA) created the largest laboratory system in the industry, with 1995 sales of $1.7 billion. ega-labs, such as LCA, SmithKline Beecham Clinical Laboratories, and Quest Diagnostics, have positioned themselves well to bid for managed care contracts because of their high volume, quick turnaround, and low cost-per-test approach to laboratory services.

Trends Affecting PHLs

The growth of managed care has had a significant impact on the operations and profitability of clinical laboratories during the past five years. Cost reduction is the major driving force in the industry, and laboratories are in the process of planning strategically to adapt to these changes. As a result, the key market trends in clinical testing services reflect the heavy influence of managed care. These trends include:

• a decrease in reimbursement for laboratory testing services
• a shift from fee-for-service to capitated, full-risk contracts for laboratory services
• rapid consolidation of hospital-based laboratories and emergence of large, independent reference laboratories Cincreases in types of services offered by clinical laboratories
• heavy investments in laboratory information systems

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Figure 12: Trends in Laboratory Revenues and Costs Over Three Decades

Adapted from: Ash KO, Clinical Chemistry 42:5, 822-826, 1996

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The steady decrease of laboratory revenues per test has been a major adverse trend for clinical laboratories in the 1990s. Coupled with an increase in the cost per test performed, profits have been shrinking, and clinical laboratories have been attempting to improve their operating efficiency in order to sustain their profitability (see Figure 12).

There are several possible explanations for these adverse trends. First, the emergence and rapid growth of managed care has resulted in an increase in the number of capitated testing contracts and a concomitant decrease in fee-for-service work. Fee-for-service work, in which the laboratory bills for every test it performs, generates a higher profit margin. (16)  In contrast, capitated contracts entail a fixed price to cover all of the testing for a client (often based on the number of covered lives), regardless of how many tests are actually performed. At Quest Diagnostics, capitation-based laboratory work increased approximately 20% in 1996 over the prior year; and while capitation currently makes up 15% of Quest's total volume, it generates only 6% of Quest's total net revenue.(17)  Quest, along with SmithKline Beecham and LCA, has lost money on some of its capitated contracts. These larger reference laboratories negotiated very low capitation rates to capture managed care contracts with the expectation that exposure to large numbers of physicians would allow the laboratories to acquire the fee-for-service testing business from physicians who participate in the managed care plans (most physicians serve a mix of managed care and fee-for-service patients). However, with a shrinking fee-for-service patient base, these expectations have yet to be realized.

Changes in government reimbursement of clinical laboratory services have also affected the revenue stream of clinical laboratories. Between 1993 and 1996, Medicare reduced its reimbursement rates for outpatient laboratory tests by 15%. Medicare is also controlling test utilization by requiring physicians to demonstrate that a test is medically necessary before it will reimburse for chemistry profiles.¹⁷

The emphasis on cost-reduction has resulted in another major industry trend: the consolidation of hospital-based laboratories and the emergence of large, independent reference laboratories. In 1985, there were over 7,000 independent clinical laboratories operating in the U.S.; today, only 4,500 exist.¹⁶ Hospital-based laboratories, in an attempt to offset the decline in inpatient tests and compete against large independent reference laboratories for outpatient tests, are consolidating their laboratory functions and, in many cases, networking with other laboratories to capture more testing.¹⁷ A common type of consolidation involves the formation of core laboratories, which run non-STAT ¹⁸ high-volume tests from a central laboratory, with rapid testing performance at laboratory branches located at each participating hospital. The recent mergers of seven large independent reference laboratories to form Quest, LCA, and SmithKline Beecham Clinical Laboratories have resulted in a re-shuffling of the market for outpatient tests. These three large laboratory networks currently hold 43% of the reference laboratory testing market and are aggressively pursuing the inpatient testing market that was once dominated by hospital-based laboratories.

The competitive nature of the clinical testing service market, along with the demands for efficiency and quality from managed care clients, has resulted in a rapid expansion of products and services of clinical laboratories. For example, LCA has developed a line of specialty laboratory services (see Figure 13 below):

Figure 13: LabCorp Specialty Services

Disease/Topic Area	Specific Laboratory Test
Source: LCA homepage, www.labcorp.com 1997
Allergy	Cost-effectiveness screening Regional profiles Immunotherapy
Ambulatory Monitoring	Holter ECG Blood pressure Patient-activated event monitoring
Oncology	DNA ploidy analysis Tumor markers Genetic oncology Serial monitoring PCR technology
Kidney Stone Management	Comprehensive metabolic evaluation profiles Computer-assisted diagnostic analysis Treatment evaluation
Paternity Testing	Paternity testing
Reproductive Evaluation	Andrology Endocrinology
Genetics	Molecular genetics Chromosome analysis Maternal serum screening
Substance Abuse Testing	Regulation compliance (SAMHSA/DOT) Extensive testing profiles Quality control Specimen retention
Biological Monitoring	Metals Solvents/Chemicals Pesticides PCBs Organ-specific probes
Industrial Hygiene	Air analysis Environmental analysis Drinking water Lead and asbestos

Several of our interviews with private laboratory stakeholders also noted that process improvements (e.g., rapid pick-up and turnaround on routine tests, expanded laboratory information system capabilities, enhanced customer service efforts), have been initiated in response to the needs of their customers.

Despite the obvious economies of scale in testing and the potential for quality control that large private clinical laboratories have, many in the public sector remain concerned about the private clinical laboratories' capacity to serve the public interest. On price, for example, some PHL directors point to the experience in neonatal screening, where some states have succeeded in offering more screens for a fraction of the price offered by private laboratories.

Whether such discrepancies are due to the efficiency of consolidation, public subsidy of testing, or clinical laboratory profits is an important analytic question that has not yet been addressed.

Computerization of Laboratory Functions

Automation of key functions promises to dramatically improve the way that laboratories operate in the future. Internal operations, epidemiologic surveillance, communication with private laboratories, and use of test results could all be enhanced through the implementation of consistent laboratory information systems (LISs). In the private sector, many laboratories are investing in the infrastructure necessary to communicate with MCOs and other important constituencies. A critical question from the perspective of this study is the degree to which PHLs are involved in automation of information systems.

The vision for the future of automated LIS in the context of PHLs is that of one element in a seamless web of public health data. Communication of test results and other information between the PHL and both public and private sector organizations will be accomplished through automated electronic transactions. An automated system would also be linked into sophisticated epidemiology information that would assist in tracking the geographic patterns associated with outbreaks. This vision was articulated by Washington State in their Draft Information Services Plan, as reproduced in Figure 14.

Figure 14: Future Electronic Laboratory Data Network, Five Year Vision

The CDC has recognized the public health need to improve information infrastructure, and has articulated the need for involvement from laboratories. The CDC's vision for integrated disease information reporting is discussed in MMWR (February 16, 1996), and grants to improve information infrastructure have been established through the National Center for Infectious Disease (NCID) and Information Network for Public Health Officials (INPHO) program.

Some leadership in this area has also emerged from a coalition between CDC, CSTE, and ASTPHLD focusing on electronic reporting of clinical laboratory data. In March 1997, this group convened to develop draft recommendations for standardization of electronic reporting of laboratory results, which articulated problems and solutions in the areas of data flow, message format, and message content. These draft recommendations have been formally approved by CSTE and ASTPHLD, and have also been reviewed and accepted by the Health Information Systems and Surveillance Board (HISSB) within the CDC.

Our interviews suggest that there may be a growing gap between the development of needed infrastructure in the public and private sectors. Despite the CDC's current programs, development activity in PHLs is not robust. While some PHLs operate LISs to automate information transfer within the laboratory, few reported the ability to efficiently report test results to providers, other public health agencies and the CDC. Many PHLs indicated they still used paper for reporting laboratory results, and some PHLs were only recently beginning to computerize the process of billing customers for testing services associated with a fee.

The following section reviews the status of PHL information systems development relative to that of the private sector. We begin by describing the status of a common laboratory reporting nomenclature B a prerequisite to automation. We then describe current activity along three dimensions: (1) internal laboratory information systems; (2) inter-laboratory communication; and (3) creation of integrated knowledge bases.

Universal Coding Systems for Clinical Laboratories

The creation of a standardized set of codes to describe laboratory tests and their results is a necessary prerequisite to efficient information exchange, and there have been a number of efforts to establish such codes. While laboratory services have been included in the establishment of general medical standards (e.g., ASTM, SNOMED, HL-7), the logical observation identifier names and codes (LOINC) database merits special mention.

LOINC is a public use set of codes and names for electronic reporting of clinical laboratory results developed by a committee consisting mostly of pathologists and laboratorians representing medical schools and commercial reference laboratories.¹⁹   The ultimate aim of LOINC was to create new efficiencies in the reporting of test results across institutions in an era of integration and managed care. The original goal of the committee was to develop a system of codes that would encompass at least 98 percent of the average laboratory's results, and would include an appropriate level of descriptive specificity. Tests that occupied their own columns on a clinical report or had clinical significance distinct from other closely related tests were assigned separate names and codes under the system.

Each test coded under the LOINC system is designated by a long test descriptive code and an associated numerical code. In addition to these descriptive and numerical codes, the LOINC name given to each test is associated with a six part description of the test, which includes the following name fields:

• Analyte/component name (i.e., what is the test looking for -- potassium, hemoglobin, Hepatitis C antigen)
• Challenge information (e.g., amount, route and timing of challenges)
• Special adjustments (e.g., pH)
• Special distinctions about the relationship of the measured entity to the patient
• Kind of property measured or observed (e.g., blood product unity, mass, mass concentration, enzyme concentration)
• Time aspect of measurement or observation (e.g., point observation v. observation integrated over time)
• System/sample type (e.g., urine, blood, serum)
• Type of scale of the measurement or observation (e.g., quantitative, semi-quantitative, or qualitative)
• Type of method used to obtain measurement or observation

To date, LOINC has been used predominantly as a means for communicating laboratory result information among hospitals, commercial laboratories, and providers who use the HL7 system as a convention for transmitting data to and from different computer systems; it has also been widely used throughout the LIS community and has been accepted by the American Clinical Laboratory Association (ACLA) as the recommended standard universal code for submitting laboratory results. Included in the list of institutions currently using LOINC to transmit laboratory data are:

• MetPath Laboratories
• Mayo Medical Laboratory
• ARUP Labs
• Quest Diagnostics Incorporated
• Laboratory Corporation of America
• LifeChem Laboratory Services

• University of Colorado
• University of Missouri
• Indiana University Laboratories
• Intermountain Healthcare
• LDS Hospital

The advantage committee members claim LOINC has over other systems for coding laboratory results is its multi-axis approach for identifying laboratory tests. Other laboratory test coding systems (e.g., SNOMED) lack, in some cases, the level of detail necessary in making clinically significant distinctions between the results of similar tests. In addition to the six part name description, the LOINC database contains 23 additional fields, including, among other things, synonymous terms allowing linkage to other systems for coding laboratory results.

While standardization of laboratory test reporting nomenclature through LOINC has been touted for its potential role in helping public health officials work with laboratory data for epidemiological purposes, it has not had an observable effect on computing within PHLs. Of the 46 members of the LOINC Committee, only one represented a state health agency, and an interviewee from the LOINC Committee was unaware of any specific activity linking LOINC to the recovery of utilization data for public health purposes.

Internal Laboratory Information Systems

Virtually all interviewees believe that automation can increase the efficiency of a laboratory. Automation of the commercial reference laboratory market is a well established industry whose vendors include Cerner Corporation, Citation, MediQuest, SMS, and SunQuest Information Systems, Inc. Commercial LIS systems were originally designed to assist automation and efficiency in reporting results back to providers. Most recently, LIS operators have focused on helping reference laboratories adapt to the demands of their managed care customers. One LIS focus involves helping laboratory service vendors use robotics to automate testing and reporting functions centralized on a regional or national level. Another, somewhat competing focus, involves satisfying the increasing demand for point of care testing facilities, which are monitored for quality through a central LIS system and are able to transfer data to and from a central database.

A few products are specifically targeted to PHLs. Epic Systems Corporation is one company offering such services to PHLs (current clients include the state PHLs in Michigan, South Dakota, Wisconsin and Texas). The standard LIS product is able to track specimens from collection to result reporting, and can produce detailed reports using statistics generated from the data. Additionally, the Epic LIS system's open architecture allows for the creation of additional fields and screens for the integration of data from non-laboratory sources (e.g., medical or pharmacy data). A representative from Epic reported that most of its PHL clients are able to use the open architecture to support broader data integration efforts within their state health agencies.

Some states have not relied on comprehensive products, but rather have developed the LIS environment internally (e.g., Washington). There are also a few more products for specialized laboratory areas. For example, Washington State recently purchased NeoMetrics, an automated system for use by PHLs in tracking neonatal screening samples (16 other states have this software currently). Finally, the CDC has also created a Laboratory Information Tracking System (LITS) for use by PHLs.

The State of Automation in Tennessee

Most environmental testing is automated. However, with the exception of newborn screening most microbiology testing is not automated. In part, this is because the more comprehensive testing offered by the state PHL does not readily lend itself to automation. In addition, the PHL's ability to obtain new equipment has been hampered by budget constraints (last major capital acquisition was in 1995).

The PHL does not use an LIS for its microbiology services. The laboratory is developing a contract with the company that created the Patient Tracking Billing Management Information System (PTBMIS) to obtain a system that can electronically transmit billing, ordering, and lab test information. The system will give the state PHL connectivity with its clients, including the county health departments and the CDC (for disease reporting). The acquisition of this system will depend on decision-making in the state's IRM budget planning.

The environmental side used its equipment budget to develop a LMIS, which has slowly replaced paper based records within the laboratory (including branch laboratories). Currently, the system is used to produce paper reports, which are disseminated to lab clients.

Despite the current lack of automation, the PHL reports no complaints about its turnaround time. Several years ago, the environmental side was generating complaints over slow turnaround times, but it has since corrected this problem.

Inter-Laboratory Communication

An important element of the public and private laboratory function is to communicate with other laboratories, health care practitioners, and public health officials. Electronic reporting of laboratory test results to the ordering physician has become routine in most large hospitals. But this function is also critical in PHLs, since much of the testing is referred from other laboratories, and a primary role is to support epidemiological surveillance.

The CDC has made efforts to help state and local public health laboratories comply with its own disease surveillance projects through the development of the Public Health Laboratory Information System (PHLIS).²⁰  PHLIS is information transfer software that allows officials at SHAs, local health agencies, and PHLs to electronically report information to the CDC in support of CDC surveillance programs. Additionally, PHLIS allows the CDC to issue tables and summary reports to all sites. The modest requirements for operating PHLIS (a PC with 512 kilobytes of memory and a modem) increase its potential effectiveness as a tool for collecting and disseminating information on disease incidence and potential outbreaks for public health laboratories with dissimilar or non-existent laboratory information systems.

Currently, PHLIS is used primarily by local and state PHLs and the CDC to communicate test results electronically. Within SHAs, the CDC has developed the NETTS system, which state epidemiologists use to transmit information about reportable diseases originating from PHLs, private sector laboratories, or other sources.

PHLIS operates using a modular approach, with a separate module dedicated to the subject of each CDC disease surveillance program. Modules are designed uniquely, and users interfacing with a particular module receive prompts detailing what information to enter and where within the module to enter it. Decisions regarding what types of information would be required for a given program were made by the CDC in conjunction with ASTPHLD and other medical epidemiologists. After entering the information required in a given module, the user is able to select "SEND TO CDC," which prompts the PHLIS to call a central communications computer, log on by responding to identification prompts, and transfer data. PHLIS currently includes modules for CDC programs designed to track incidence of Salmonella, Shigella, Campylobacter, and Mycobacteria, and all state and territorial public health laboratories have agreed to participate in the program.

The Washington State PHL is also involved in the creation of an innovative system for electronic disease reporting between private laboratories and the state health agency. The goal of the system is to automate reporting in hopes of lessening the burden of reporting, improving accuracy, and expediting reporting. The Office of Epidemiology has received a grant from the National Center for Infectious Disease (NCID) at the CDC to pilot the system. The Office of Epidemiology is working closely with the PHL, Group Health Cooperative of Puget Sound, and Laboratory Pathology Associates on clinical and technical issues involved in automated reporting. Current issues being addressed by this project include establishing a mechanism for data transfer between private sector and public sector organizations, protocols for data recording, and encryption / confidentiality of records.

Creation of Integrated Knowledge Bases

Many laboratorians interviewed suggested that the future of the commercial reference laboratory industry centered on the development of sophisticated informatics products that will be able to integrate laboratory results data with outcomes data from other health system players. Some large clinical laboratory companies have reported making large investments in information technology. For example, Quest Informatics has reported investing $20 million in relational databases in recent years. A fundamental issue for these systems is the lack of coordination with other sources of patient data (e.g., hospital, physician, and prescription pharmaceutical observations).

Despite some limitations, major clinical reference laboratory providers are already actively marketing their ability to provide software that allows MCOs to aggregate and index laboratory data, which is useful for assessing overall health status among members and developing disease management programs for specific therapeutic areas. In addition to the software products, laboratory services vendors may offer consulting services designed to implement Aquality improvement opportunities identified by their software. While it is likely that clinical reference laboratories will continue to market informatics products, the effectiveness of their tools have yet to be widely tested in health markets.

The longer-term vision for PHLs in the context of the broader public health safety net is to develop a comprehensive and integrated LIS that would facilitate epidemiologic surveillance as well as public health case support.²¹  The vision includes development of common community health indicators that could be monitored on a real-time basis to improve public health. Such a system would clearly require cooperation from other offices within a Department of Health (e.g., Epidemiology), as well as other state organizations involved in health (e.g., Medicaid) that track patient information. Some states, such as Washington, Missouri, and South Carolina, have created working groups to support realization of this vision.

An example of current PHL involvement in information transfer technology is the internet effort of Iowa's University Hygienic Laboratory, which serves as the state's PHL. While Iowa's site is still in development, it currently includes a description of the laboratory's activities, as well as a state-wide disease reporting system for respiratory tract pathogens. The system allows physicians using the site to click on the county in which they practice in order to view an updated list of the number of cases of respiratory infections reported in the county, along with the pathogens that caused the infections.

Other state PHLs are developing a presence on the web through SHAs, including internet accessible systems to provide health status indicator information to medical providers and local health agencies. These efforts have been monitored by the NCVHS. An example of this type of activity can be found at the Massachusetts State Laboratory Institute website.²²

Environmental Scan Conclusions

The growth of managed care is forcing clinical laboratories to produce rapid, efficient testing services and to focus on cost reduction. The clinical testing services market is highly competitive, with large independent reference laboratories increasing the standard in terms of technology, speed of testing, and price.

Public health laboratories need to be agile in adapting to change. They are also challenged by governmental change, such as fluctuations in state funding streams for laboratory services and change in expectations vis-à-vis personal testing in the Medicaid population. Other environmental factors such as the computerization of clinical laboratories and the federal government role in PHL-related issues will continue to challenge the ability of PHLs to accomplish their objectives. These factors contribute to the climate of uncertainty reported by many PHL directors, and underscore the importance of our key study questions

Study Findings: Analytical Results

This section characterizes the impact of managed care and health market change on the practices of PHLs, and describes how PHLs are responding to uncertainties in the clinical laboratory marketplace. While our findings are based on information from all the sources described in the methods section, the poll of PHL directors has been particularly useful in quantifying answers to our fundamental questions. Findings from our literature review, case studies, and interviews with laboratory experts provide more qualitative, descriptive findings that complement the poll results.

Impact of Managed Care on PHLs

The presence and growth of managed care has posed significant financial and organizational challenges to the clinical laboratory market as a whole. Because managed care organizations (MCOs) emphasize cost reduction, often have limited (or exclusive) arrangements with suppliers and service providers, and may tend to treat, not test, public health officials have been concerned that the growth of managed care would have negative impacts on the functions and practices of PHLs. Specifically, PHL stakeholders proposed two main hypotheses on managed care's possible adverse effects on the functions of PHLs:

• PHLs traditionally serving as the primary providers of diagnostic testing services to the Medicaid population will lose testing volume, and possibly entire testing areas, as these populations are covered by MCOs that have contracts with private clinical laboratories.
• PHLs traditionally playing a large role in disease reporting fear a lack of responsiveness to disease reporting requirements on the part of many MCOs. This lack of responsiveness, coupled with a possible approach of treating patients immediately rather than testing to identify the cause of an illness, may result in diminished disease surveillance and monitoring capacity.

Results of our poll show that PHL directors believe managed care is having an adverse effect on PHLs practices and functions. Twenty-one of the PHL directors (43%) stated that managed care had an adverse impact on their laboratories' functions (see Figure 15 below).

Figure 15: Managed Care Impact on PHLs

Reduced PHL Testing Volume

The most frequently reported impact of managed care was a reduction in the number of specimens submitted to the laboratory for testing. Seventeen of the 49 PHL directors (35%) reported that managed care had led to a decrease in the number of specimens sent to the laboratory. Reports of testing decrease as an impact of managed care were directly related to the level of managed care penetration in the state. PHLs in states with high managed care penetration had a greater probability of associating managed care with reduction in testing volume. Some PHL directors specified the types of tests for which volume was decreasing, and others indicated specific initiatives (e.g., Medicaid managed care) as contributing to a general decrease in testing at the PHL.The results from the poll are corroborated by our findings from the case studies and interviews. The Tennessee PHL director reported that TennCare, the state's managed Medicaid program, has indirectly resulted in a reduction in test volume for the state's PHL. The PHL traditionally conducted much of the patient testing for the Medicaid population. However, with the implementation of TennCare, Medicaid patients were covered by MCOs that chose to subcontract for laboratory services with large independent reference laboratories like LCA, thereby bypassing the PHLs.

Other state PHLs have also suggested that managed care is indirectly affecting their testing volume, either for all tests or for specific tests that are of public health importance and do not necessarily affect the treatment of individual patients (e.g., blood lead testing). Kansas's state PHL estimates that it has seen a 5-8% decrease in testing volume, due in part to the presence of managed care. States such as Connecticut, Maine, and Wisconsin have also noted decreases in the number of specimens seen by the laboratory. Four other PHLs have reported a decrease in the number of blood lead tests performed by their laboratories.

Concerns About Reporting

Another concern of PHLs is that MCOs' member-driven focus (rather than public health / population-driven focus) will reduce disease reporting and thereby hamper national disease surveillance activities. While we did not uncover any empirical evidence to support this contention, three PHL directors, two state epidemiologists, and a CDC official in laboratory systems expressed concern that MCOs may not be accurately reporting true infectious disease incidence in their populations to state health agencies (e.g., since they may be less inclined to test).

Difficulty in Obtaining Payment

Several PHL directors reported concern related to difficulty in obtaining reimbursement from MCOs for testing services rendered for their members. For example, Florida's PHL director reported that some managed care clients seek treatment at a county health department without authorization from the managed care organization, have tests performed by the PHL, then face MCO refusal to pay the PHL for testing services. Similarly, in New Hampshire, the PHL noted that it performed infectious disease testing for MCO providers B who sent specimens to the PHL for testing B only to have the MCOs refuse reimbursement because the PHL was not their contracted laboratory. The Texas PHL director echoed the problem of free-riding' off of PHL services by MCOs for their Medicaid members, and its inability to obtain reimbursement from MCOs for its testing services.

Inherent in this comment is the conviction of many PHL directors, as expressed in our interviews, that a central mission of PHLs is to provide laboratory services to disenfranchised populations, regardless of their ability to pay. While providers in the health care system will typically establish financial terms with payers before delivering services, the labs almost universally provide services first and seek payment retrospectively. As noted in some of our interviews and discussed later in this document, proactive establishment of relationships with MCOs and other payers would help to mitigate this problem.

Improved Collaboration With Private Constituencies

A few PHLs in our informal poll reported positive impacts from the growth of managed care. According to our informal poll results of PHL directors, among the positive impacts identified by PHL directors were increased collaboration between the PHL and the state health agency, and an increase in specialized types of reference testing by the PHL.

In Virginia, the recognition of managed care and the pressure to be cost conscious have prompted the state PHL to strengthen its partnership with the state health agency, particularly the Office of Epidemiology. In Kentucky, the state PHL has begun its strategic planning process for the laboratory, which coincides with the Kentucky Department of Health's overall strategy development initiatives in response to increased managed care presence.

Another example of collaboration, due in part to the growth of MCOs, is the Washington State Clinical Laboratory Advisory Committee (CLAC). With membership from both the public and private sectors, this program has assumed a proactive leadership role in shaping the laboratory delivery system in Washington state. Results from this program (described in more detail below) include improved communication, consensus on reimbursement issues, and pilot programs in the area of clinical guidelines.

Impact of Other Health Market Change on PHLs

In addition to the direct pressures that PHLs report from the presence of managed care, there are a number of other health market forces that may be contributing to the uncertainty of the laboratory services marketplace for PHLs.

The major concerns focus on potential privatization of public health functions, trends in the private clinical laboratory market (e.g., emergence of large reference laboratories, hospital laboratory consolidation), and diminishing fiscal viability of some PHL testing services. Specifically, PHL stakeholders proposed three main hypotheses on the possible impact of change in the non-managed care health market on the functions of PHLs:

• PHLs will lose testing volume as some privatization of laboratory functions occur, with subsequent outsourcing of testing services to private clinical laboratories.
• PHLs traditionally playing a large role in disease reporting fear a lack of responsiveness to disease reporting requirements on the part of large, independent reference laboratories, especially in cases where specimens are processed at regional branch laboratories outside of the originating geographic state of the specimen.
• PHLs may have increased testing volume for select services such as tuberculosis testing without a commensurate increase in laboratory revenue.

Figure 16: Impact of Other Health Market Changes

Our poll results found that PHL directors believe that non-managed care health market changes are having adverse effects on PHL practices and functions. Of the 49 PHL directors responding, 27 reported some impact on laboratory function due to non-managed care health market changes, with PHL directors from 20 states (41%) reporting adverse impacts on laboratory functions due to these changes (see Figure 16 above).

Reduced PHL Testing Volume

The most commonly reported adverse effect of non-managed care health market change was the reduction in specimens being sent to the PHLs for laboratory testing. Of the 15 PHLs reporting a reduction in testing volume, 8 attributed the decrease to increased presence of private laboratories, 2 attributed the decrease to both private laboratories and hospital consolidation, and 5 did not specify the cause of the testing decrease.

These findings were corroborated by our case studies and interviews. For example, South Carolina's (SC) PHL noted that commercial laboratories had become more aggressive in the market, expanding their product lines to include testing services previously associated with the PHL, consequently leading to a decrease in the PHL's testing volume. However, SC reported that other health market changes such as hospital consolidation did not have an adverse impact on the PHL's function. Also, Oklahoma reported that some county health departments sent specimens to the private laboratories rather than the state PHL based on cost. Other state PHLs, such as Ohio, New Jersey, and Missouri, reported that the combined effect of hospital consolidation and the growing presence of private laboratories (e.g., large, independent reference laboratories, niche specialty laboratories) have led to a decrease in the overall number of specimens sent to their laboratories for testing.

Other PHL directors reported the specific types of testing that were being affected by commercial laboratories and hospital consolidation. In New Mexico, the state PHL discontinued its pap smear testing service because private laboratories were performing most of them. In Minnesota, fungal serologies and testing for cytomegalovirus, which previously had been performed by the state PHL, are now being outsourced to Associated Research and University Pathologists, Inc. (ARUP), a private reference and esoteric testing laboratory in Utah. Finally, Rhode Island's PHL reports that it has lost some (approximately 10%) of its environmental testing volume due to commercial laboratories charging a lower rate for certain environmental tests.

Increase in Volume of Some Expensive Tests

Another reported effect of non-managed care health market changes has been an increase of PHL testing volume for very specialized, expensive tests. PHLs commonly perform tests that are clinically and epidemiologically important, but, due to high cost and low volume, are not commercially viable. Often characterized as the free-rider effect, PHLs report that commercial laboratories, in attempting to conserve resources, rely on PHLs to perform some esoteric tests at no cost. Wisconsin's PHL hypothesized that commercial laboratories basically drive prices down in a price sensitive market, thereby leaving the PHL with the most expensive tests to perform. The four PHL directors reporting an increase in testing volume attributed this increase specifically to hospital consolidation. Several PHL directors documented the case of tuberculosis testing as a prime example of this trend. New Hampshire's PHL noted that the hospital laboratory consolidation resulted in an increase in its testing volume for TB, and that one of the independent laboratories in NH discontinued its in-house TB testing function as a result. Michigan's PHL has also experienced increases in clinical TB specimens, and suspects that the reason for the increase is that the state PHLs do not charge fees for tests associated with diseases of public health importance.

Erosion of Disease Reporting

A third reported impact of non-managed care health market change has been the erosion of disease reporting efforts. Several states reported that large, national reference laboratories with regional testing centers pose a threat to the national disease surveillance effort. Michigan's PHL director noted that private, out-of-state laboratories are often unfamiliar with the disease reporting laws and regulations pertaining to the state from which the specimen originates. As a result, there are instances in which bacterial/viral isolates are not being submitted to state laboratories, thereby jeopardizing public health surveillance mechanisms. In Arizona, some physicians use private laboratories such as LabCorp and SmithKline Beecham for newborn PKU testing. These private laboratories send the tests out of state for testing, and the infants are lost to follow up by the state health agency. In other cases, Arizona's PHL director reports that some out-of-state commercial laboratories decline to report cases of reportable diseases altogether.

Potential Positive Effects From Consolidation

Despite the trend toward reporting negative impacts, a few PHLs in our informal poll reported positive impacts from other health market changes. According to our informal poll of PHL directors, among the positive impacts identified by PHL directors were increased collaboration between the PHL and other private laboratory entities, and a decreased burden of state PHL CLIA '88 responsibilities.

Once again, the interviews and case studies confirm the poll results. As a result of market changes, Washington's PHL has been able to forge a close working relationship with the University of Washington's Department of Laboratory Medicine on laboratory issues. Also, Kansas reported that because of hospital laboratory consolidation, the portion of CLIA '88-regulated laboratories that the state PHL must survey and monitor has decreased by 15%.

PHL Responses to Health Market Change

This section describes how state PHLs are responding to health market changes, including the growth of managed care. The types of responses range from specific subcontracts for select services negotiated between some state PHLs and private laboratories and/or MCOs, to various types of public-private collaborations (e.g., formation of public-private Clinical Lab Advisory Council in Washington State). In other instances, the PHL responses have involved proactive strategic planning of the laboratory's operations to better meet the needs of the MCOs and of the larger group of laboratory service purchasers. In addition, some state PHLs have discontinued certain types of laboratory services that directly compete with the larger, independent reference laboratories.

The collaborations between PHLs, MCOs, providers, and commercial laboratories vary tremendously in scope and duration. In our informal poll, 15 PHL directors (31%) reported either a contractual or other type of collaborative relationship with MCOs, providers, or private laboratories (see Figure 17) in their state, but information on the level of interaction suggested very limited and specific arrangements.

Of these contracted or other types of collaborative arrangements, most were between PHLs and private laboratories, with only five relationships reported between PHLs and MCOs. Interestingly, the probability that a state reported being involved in collaborations with managed care organizations or commercial laboratories was unrelated to the level of managed care penetration in the state. Of the 34 PHLs reporting no current involvement in contractual or collaborative relationships, seven reported an interest in future contracting with MCOs. However, it should be noted that failure to indicate a future interest in contracting with MCOs does not necessarily indicate that such an interest does not exist on the part of the laboratory.

Figure 17: Public/Private Collaboration

Our poll of PHL directors found six PHLs reporting involvement in collaborative arrangements with MCOs or commercial laboratories B three specified that the collaboration was with the MCOs, and three specified that the collaboration was with commercial laboratories. The nature of these collaborative arrangements included joint participation in disease surveillance programs, drug resistance surveys, and dialogue on clinical laboratory issues that affect both public and private laboratories.

Several of the collaborative efforts can be characterized as preliminary in nature. For example, in Vermont, the state PHL, 15 hospital-based laboratories, and a private commercial laboratory are beginning to meet formally to discuss laboratory issues of common interest. The North Carolina PHL is entering into a dialogue with private laboratories about the effect of hospital consolidation on all parties. New Mexico's PHL is also in the process of working with MCOs, the state health agency, and hospitals to conduct statewide surveys of anti-microbial resistance.

Collaboration Around Specific Public Health Priorities

While not reported in our informal poll, interviews with PHL directors revealed that state PHLs, North Dakota and Oregon, have worked specifically to open communication lines with MCOs and private laboratories to avoid duplicative efforts in laboratory services. In North Dakota, the state PHL director negotiated an arrangement with Blue Cross of North Dakota whereby Blue Cross would no longer pay for HIV, TB, and prenatal hepatitis testing, since the state PHL was already funded by the state to perform these tests.

In return, Blue Cross notified its providers to send these specimens to the state PHL, and the health department benefited from obtaining more specimens for disease surveillance purposes.

In Oregon, a state which did not report formal collaboration/contracting, the PHL works with private laboratories to ensure continuity of testing for tuberculosis. The PHL has the state's largest tuberculosis testing capacity. Under this arrangement, private laboratories generally culture the sputum sample and isolate an organism that might be suspected as TB, then send the sample to the state PHL, which performs genetic probing and confirmation testing for TB. The state also performs antibiotic resistance testing for TB. Since the state laboratory gets state funding for this type of TB testing, both the public and private parties benefit under this arrangement.

The CLAC: A General Model for Communication

In the State of Washington, a public-private venue called the Clinical Lab Advisory Council (CLAC) is shaping the laboratory delivery system. The CLAC was created by the PHL director in cooperation with the Office of Laboratory Quality Assurance and a range of private laboratory interests in the state. The CLAC was initially conceived as a response to the fragmented laboratory system and the need for dialogue between stakeholders in the laboratory community. It currently serves to address these needs, as well as a range of other issues raised by membership.

Council membership is composed of 16 representatives of the following groups: (1) major laboratory professions (i.e., laboratory scientists, laboratory managers, medical assistants, pathologists); (2) managed care organizations; (3) hospitals; (4) physician office laboratories; (5) independent reference laboratories; (6) other health or medical associations; and (7) the state department of health. Full meetings of the CLAC occur periodically; in addition, the Council has appointed advisory work groups to develop recommendations on issues such as:

• Structure and integration of the laboratory delivery system

• Practice guidelines / use of clinical labs in medical decision-making
• Reimbursement issues, including treatment of specific tests
• Licensure of laboratory personnel, training, and credentialing
• The role of the PHL relative to core public health function
• Emerging science policy (e.g., genetic and point-of-care testing)

Both public and private sector interests indicate that they have benefited significantly from the CLAC. The PHL also uses key members of the CLAC informally as a sounding board to test likely reaction to new policies and procedures.

Public-private collaborations or contracts in laboratory services B to the extent that they exist at all  -- are in their formative stages. Because of both the newness and limited number of examples of public-private collaboration in the laboratory field, the topic has not been thoroughly studied and is not well understood. Despite many PHLs reporting collaborations of some type, our interviews and case studies suggest that collaboration in this field has been progressing slowly as a whole.

Laboratory directors hypothesize that there are two key barriers to collaboration: (1) managed care's lack of awareness of PHL functions and capabilities; and (2) PHL directors' concern over private sector motives and priorities in procuring laboratory services. Several managed care interviewees in our study were, in fact, unaware of the traditional role of PHLs within the larger public health infrastructure. Moreover, cost-driven procurement of laboratory services was generally cited by both private and public stakeholders as catalyzing change in the industry, both in terms of increasing competitiveness and in decreasing activities for PHLs.

An alternative explanation for the lack of collaboration that was articulated in a few of our interviews with individuals from the private sector was that commercial laboratories or MCOs simply had little to gain from collaboration. As businesses, commercial laboratories are closely focused on turning a profit in an increasingly difficult and competitive environment.

PHL Contracts With MCOs and Private Laboratories

Nine PHL directors reported involvement in contractual arrangements: four specified contracts with MCOs, four specified contracts with private laboratories, and one specified contracting with a provider. In terms of the scope of these activities, five PHLs reported outsourcing testing services to commercial laboratories. Examples of these tests included adenovirus typing, liver enzyme typing, and other esoteric testing. In addition, four PHLs reported insourcing tests from commercial laboratories; one of these laboratories reported providing TB testing services for a private laboratory, while the other three did not specify the type of testing insourced.

The interviews and case studies lent further credence to the notion that, despite large reported numbers of interactions, public-private collaborations in the laboratory marketplace are limited in scope. The following examples describe contracts in which PHLs performed work on a contractual basis for MCOs and/or commercial laboratories:

Minnesota's PHL has had two contractual arrangements with MCOs and, recently, with private laboratories. However, both contracts have comprised a very small percentage of the laboratory's overall budget, and the contracts were not renewed. The PHL had a small contract with HealthPartners, an MCO in Minnesota, in 1995 to provide laboratory testing for pertussis. The contract was fee-for-service (i.e., billed per sample) and essentially covered the cost of materials used by the PHL. However, during the course of the contract, the PHL only received 250 samples to test, far fewer than originally projected. The second contract involved a company called Viromed, a private full-service microbiology laboratory, whereby the PHL was contracted to perform adenovirus typing tests. The state PHL is the only laboratory in Minnesota with the appropriate antiserum (provided to the laboratory by the CDC). In 1996, Viromed approached the state PHL regarding a purchase order arrangement whereby the PHL performed testing for 100-150 specimens at a per-culture cost for one calendar year, the contract was fulfilled at the end of 1996 and was not renewed for 1997.

In Tennessee, under the TennCare managed Medicaid program initiated in 1994, the state PHL was required to seek contracts with MCOs for testing that it provided to local health departments treating TennCare patients. In 1995, the state PHL sought contracts with all twelve TennCare MCOs, and obtained only three extremely limited contracts (revenues from these contracts comprise less than 5% of the overall PHL budget). In part, these contracts were precluded by the fact that one MCO operates its own laboratory, and two other MCOs have exclusive arrangements with private laboratories. The contracts with the MCOs are limited to the testing of specimens sent in from local health departments, and prices were negotiated based on what Medicaid had reimbursed prior to TennCare. As with all other user fees, revenues generated through these contracts were passed back to the state. The laboratory did not have a billing system to accommodate these tests, and subcontracted with the public health departments to provide this function. Thus, for every test, the laboratory paid the public health departments a $2.70 processing fee.

In California, with the advent of MEDI-CAL (California's managed Medicaid program), a private reference laboratory, UNILAB, has joined in a multi-faceted contracting arrangement with public providers of laboratory services in Alameda County. These contracts are designed to respond to MEDI-CAL cost-pressures. In order to go after MEDI-CAL contracts alone, each of the county providers and UNILAB would face redundancy and extension of areas of weakness within each organization. Thus, the strategy is to use joint contracting to develop full areas of laboratory services at sustainable rates. The arrangement specifies the following: a) public hospitals will do routine/emergency inpatient testing; b) the county PHL will provide its traditional services to county hospital and LHD clients, with expected volume increases from improved coordination; and c) UNILAB will perform more esoteric, complex, and less rapid turnover testing. UNILAB receives its testing volume through the county providers' established community presence, and in turn, UNILAB provides oversight and coordination for the system. However, despite reports from UNILAB that the contract has created initial Amutual gains@ for all parties, the county PHL reports that the arrangement has not produced the anticipated testing volume increases, and in some cases, testing volume has actually decreased.

New Jersey's PHL also performs some limited work for Roche Laboratories (now part of LCA). The contract includes performing viral isolations, tuberculosis reference work, and salmonella testing.

Several PHLs also have arrangements to outsource some of their laboratory testing to commercial laboratories. For example, in New Mexico, the state PHL outsources pap smear, chlamydia, and polymerase chain reaction (PCR) testing to private laboratories. In addition, Wyoming's PHL sends liver enzyme specimens for testing to Quest Diagnostic's testing center in Denver, CO. Finally, West Virginia's PHL reports utilizing private laboratories for overflow purposes. For example, West Virginia's PHL recently had staff turnover of cytotechnologists, and, subsequently, the PHL contracted with some private laboratories to process and conduct pap smear tests for a brief period of time until the cytotechnologists were replaced.

Several PHLs are in the process of obtaining contracts with MCOs. In Michigan, the state PHL recently entered into an agreement with the Michigan Department of Corrections to provide HIV viral load testing for their inmate patients, and, as a result, the parties are now discussing using the PHL as a laboratory testing subcontractor to the MCO that provides care to the inmate population. In addition, state PHLs in Arkansas, Florida, and Maine are looking at ways of bidding for MCO contract work for laboratory services in the near future.

Other PHL Responses to Managed Care and Health Market Change

Aside from engaging in contracting with MCOs and/or private laboratories for clinical services and collaborating on laboratory issues with the private sector, a number of state PHLs have, or are beginning, strategic planning efforts to address the changes in the clinical laboratory services marketplace. These responses include narrowing down the types of testing performed by the PHL and tailoring PHL testing services to suit potential managed care clients. The following examples illustrate some of the different state-level responses to managed care and other health market change that were uncovered by our interviews and case studies.

The Michigan state PHL (called the Bureau of Laboratories) is seeking to shape managed care activities to be responsive to public health needs. By narrowly defining their testing functions to encompass only tests of public health importance or specialized tests best centralized for purposes of cost and quality, the Bureau has enhanced its ability to establish collaborative relationships with private sector laboratories as well as other state and local public health agencies. The Bureau has used this ability to influence state policy, outlining the responsibilities of MCOs with regard to laboratory testing and disease reporting. Additionally, it has cultivated relationships with private sector laboratories to ensure that the Bureau can continue to serve its traditional public health functions even as hospital laboratory consolidation and other health system changes proceed.

Michigan is also engaging in collaboration activities as part of the state's overall response to health market change. The PHL in Michigan has traditionally avoided competing with reference laboratories by refraining from providing routine diagnostic tests. In addition, Michigan has formalized the notion of public-private collaboration in laboratory services by creating the position of Managed Care Coordinator at the PHL. The Managed Care Coordinator is responsible for maintaining communication with MCOs and private laboratories, and ensuring that MCOs support the state's testing and disease reporting programs as more of the state's Medicaid population moves to managed care. It should be

noted, however, that beyond the implementation of this position, most of Michigan's efforts are in the planning stages (see below).

Aside from strategically avoiding competition with the private sector, the Bureau's success can be attributed to its commitment to active advocacy for laboratory issues and its experienced leadership, which facilitates steady access to state funding and opportunities to participate in high level decision-making within the Department of Community Health. Recently, the Bureau played a significant role in drafting the state's latest request for proposal (RFP) for MCOs seeking to provide services to the managed care population. The Bureau ensured that issues relevant to disease reporting and specimen/isolate submission were included in the RFP. The part of the RFP most directly contingent on the Bureau's involvement was a table describing the various duties of the health plan, the local health department, and the Michigan Department of Community Health with regard to initial testing, reference testing, confirmatory testing, and disease reporting (see Michigan Case Study Report, Appendix D).

Other states that have used the approach of avoiding direct competition for select testing services with the private sector include Massachusetts and Vermont. Massachusetts's PHL recently decided to discontinue its Lyme Disease testing service because it was losing much of its business to the private sector laboratories in this area. Similarly, Vermont does not duplicate laboratory services, such as HIV testing and syphilis testing, which are performed by private laboratories in the state, and the PHL supported the state health department's decision to outsource chlamydia and gonorrhea testing to the private laboratories. However, Vermont's PHL has retained and continues to perform some testing services that the private laboratories do not currently perform (e.g., water testing, food-borne illness, salmonella, yersinia, hepatitis testing). New Mexico PHL officials, in anticipation of managed care, are prioritizing those functions specific to assessment, quality assurance, and policy development, and plan to discontinue clinical chemistry tests and other routine, patient-specific diagnostic tests that compete with private laboratories.

In New Jersey, on the other hand, the shift of health care delivery to MCOs has elicited a competitive response from the public health infrastructure, and the PHL in particular. Interviews indicated that PHL officials were not confident in their ability to rely on direct state funds to ensure long term financial stability, and, therefore, have embarked on a plan to improve efficiencies across all public health laboratories in the state (i.e., county and local laboratories as well as the state PHL) in an effort to obtain contract work from MCOs. In addition to streamlining processes across the state, the PHL has recently made capital investments, allowing it to perform clinical chemistry tests and other routine patient tests on a larger scale.

Conclusions

The PHLs we studied are operating in a highly fluid and challenging environment. While the function of PHLs varies from state to state (each is unique with respect to its approach, the services it offers, and its history), every PHL serves a pivotal role in linking the private and public sectors. Funded by public sources, PHLs are typically intertwined with the private sector as regulator, arbiter of policy concerns, and sometimes competitor as the provider of tests or services.

As detailed in this report, directors of PHLs see fundamental change on both the public and private sides of this complex ledger. On the private side, PHLs see managed care and independent laboratories growing in strength, as well as rapid technological change in both clinical and information technologies. On the public side, PHLs see a re-definition of the public health safety net, reliance on managed care to address public health needs, and tightening state budgets.

This study presents a framework for understanding PHLs in the context of the larger laboratory services marketplace and fundamental changes to the health care system. To develop this framework, we polled PHL directors from every state, interviewed numerous laboratory stakeholders in both the public and private sector, conducted in-depth case studies of three PHLs, and also carried out secondary research.

The purpose of this final section is to summarize what we learned through this study with reference to two fundamental issues: (1) strategic positioning of PHLs and their core functions relative to health system change; and (2) critical policy issues the state and the federal government will face over the coming decade. We also acknowledge the limitations of our study and suggest avenues for further research.

Impact of Managed Care

The initial purpose of the study was to characterize the relationships between PHLs and managed care organizations in the context of health system change. There is universal concern in the public health community about managed care. Despite some isolated examples of positive effects of managed care on PHLs, such as increased reference testing for select areas and better coordination with the state health department, our results suggest that managed care is creating considerable anxiety in PHLs. In most cases, the impact appears to be modest or even minimal, but the novelty of this topic suggests to PHL directors that we have only observed initial effects.

PHLs serving as traditional providers of testing services for Medicaid populations have seen reductions in testing volume and diminishing testing areas as these populations have entered coverage under managed care. Although this effect was reported in seventeen states, when quantified, its magnitude appeared to be relatively small. The effect did, however, vary with the strength of the managed care presence in a state - states with high levels of managed care penetration had a greater probability of reporting decreased testing volume due to managed care. Some PHLs report small reductions in all types of testing volume, while other states report reductions for only certain types of specimens (e.g., blood lead).

Several PHLs have reported difficulty in obtaining reimbursement from MCOs for testing services rendered to its members, and a number of PHL directors believe MCOs' lack of awareness of, and responsiveness to, disease reporting requirements are negatively affecting the PHLs' disease reporting efforts. We did not uncover any formal information to support this latter contention, but it may well be correct - establishing this link is beyond any of the data we encountered in conducting this study.

A critical shortcoming in the current debate (and a limitation of this study) is that there is currently no mechanism through which adverse effects on PHL function can be quantified. While there are data showing decreases in the number of samples for selected tests, this may well be due in part to reductions in unnecessary testing or the growth of commercial laboratories. Furthermore, despite constraints in many PHL budgets, there is no tangible indication that PHLs are having difficulty achieving their core objectives. This is an issue of major public health importance that merits further study.

In response to managed care's increasing reach, some PHLs have pursued contractual relationships with MCOs. However, despite much discussion on this topic at conferences and among the PHL directors, very few of these contracts currently exist:

• In Minnesota, the PHL has two limited contractual arrangements with MCOs: one in which it provides laboratory testing for pertussis, and a second in which it performs adenovirus tests. The first contract has produced only 250 specimens since 1995, and the second contract was fulfilled in 1996 and not renewed.
• In Tennessee, the state PHL has contracts with three of the twelve MCOs that cover beneficiaries from the state's managed Medicaid program, TennCare. The contracts, which constitute less than 5% of the PHL's annual revenues, create reimbursement vehicles for tests that the PHL provides for local health departments that have re-invented themselves to be TennCare primary care service providers in remote areas.
• In California, a PHL in Alameda County became a joint contractor with a private laboratory and county hospital laboratories to provide services to MCOs covering local MEDI-CAL patients. The venture was intended to avoid redundancy and create full service areas. However, the PHL reports that it has not produced anticipated test volume increases.
• The Colorado PHL has limited agreements with MCOs for selected services.

In addition to the above cases, a few states (e.g., Arkansas, Florida, Maine, and Michigan) have indicated that they are attempting to establish some type of contractual relationship with MCOs. These activities are currently in the discussion stage.

Our results clearly show the PHL directors are highly anxious about the impact of managed care. However, the adverse effects of managed care cannot be supported empirically, raising the possibility that these fears may in fact be misguided. Managed care is only a small part of broader changes affecting the laboratory infrastructure, which include consolidation of hospital labs and the growth of large commercial laboratories. Further, these changes present significant opportunities to improve the provision of laboratory services and the collection of meaningful data on which to base policy advice.

Our results also show that there has been little proactive leadership from the public sector in shaping the laboratory delivery system. With a few notable exceptions (e.g., the activities in WA state), lab directors, state decision makers, and the federal government have done little to strengthen the PHL infrastructure. There is no single and clear locus of responsibility for such matters within the CDC or elsewhere within HHS. At present, one of the weakest parts of this infrastructure appears to be information systems, but the entire system needs to be reviewed carefully to prevent deterioration of this important aspect of our public health infrastructure.

Evolution in Laboratory Infrastructure

While the initial focus of this study was to explore the relationship between PHLs and managed care, over the course of the study, other environmental factors proved equally, if not more, important influences on the PHL operating environment.

Private Clinical Laboratories

Hospital-based laboratories have traditionally dominated the private laboratory industry. However, as managed care strengthens, hospitals merge, and independent reference laboratories grow in prominence and market share, the laboratory industry - mirroring the health care system generally - is rapidly consolidating. Three large reference laboratories (Quest, LabCorp, and SmithKline Beecham) now control over 15% of the total clinical laboratory services market.

Cost pressures are a major catalyst of change within the industry. Important market trends include increasing costs per test as test methods have become more sophisticated; decreasing reimbursement levels per test; and a shift from fee-for-service testing to capitated contracts. Cost pressures have been created both by the private sector (as MCOs with huge market power have demanded volume discounts and risk sharing from laboratory vendors) and from the public sector (as HCFA(now known as CMS) cut its reimbursement rates for outpatient laboratory tests by 15% over the period 1993 to 1996).

The dynamics of the laboratory services marketplace bear directly on the operations of PHLs. PHLs are facing new competition in traditional service areas, and are seeing their established relationships with providers erode as increasingly powerful private laboratories take advantage of scale, capacity for quick turnaround of results, better information handling, and full service packages, to garner exclusive contracts with MCOs and their associated physicians and hospitals. In addition, private laboratories are tackling new testing areas (e.g., environmental testing) that initially lacked commercial viability, further encroaching on the traditional domain of the PHLs.

As with MCOs, PHLs are responding to these new pressures by attempting to form partnerships with private laboratories. These arrangements seek either to subcontract specialized services from the private laboratories to the PHLs, or in some cases, to delineate areas of activity by outsourcing key tests from the PHLs to the private laboratories. As with managed care, the partnering arrangements to date are few in number and limited in scope:

• The New Jersey PHL performs viral isolations, tuberculosis reference work, and salmonella testing for LabCorp (LCA).
• The New Mexico PHL outsources pap smear, chlamydia and PCR testing to several private laboratories.
• The Wyoming PHL contracts with Quest to perform liver enzyme testing.
• The West Virginia PHL has utilized private laboratories to deal with volume overflow during temporary periods of staff shortages.
• The Illinois PHL has a contract with private laboratories to provide clinical testing for Chicago public health clinics.
• In Kentucky, some esoteric tests required in support of local health department primary care clinic activities are performed by private labs under contract with the state PHL.

In sum, trends in the larger laboratory services marketplace are posing serious challenges to PHLs. This marketplace is characterized by overcapacity and consolidation, intense cost and price pressures, and increasing domination from large private laboratories. Managed care's impact on the PHLs is less a consequence of direct MCO interactions with PHLs than of a laboratory industry that is restructuring itself to respond to broader health market changes.

Laboratory Information Systems

Improvements in Laboratory Information Systems (LISs) are also transforming the laboratory services environment. In the private sector, large laboratory companies are making significant investments in the development of information resources in hopes of streamlining the core testing business and entering the healthcare data analysis arena. Development of such systems is being hastened by the presence of commercial software vendors and data standards such as LOINC.

Although there is strong interest in such ideas in the public sector, there is less activity and fewer resources to support existing enthusiasm. A few innovative pilot programs have been funded by the CDC, including a pilot study of the transmission of laboratory test results between managed care and the state PHL in Washington. The relatively small size of these markets has served as a deterrent to the development of more capable commercial software, and, while a few companies have ventured into this realm (e.g., EPIC), most PHL software has been developed in-house. The net result is that most PHLs are still using paper records for much of their activity.

On balance, it appears that PHLs may be falling behind in the construction of information infrastructure. If this proves true, it will be increasingly difficult for PHLs to continue operating efficiently. It will also hinder efforts to lighten the disease reporting burden of healthcare providers.

Models for Relationships

Our interviews and case studies revealed a number of models for relationships between PHLs, MCOs, and commercial laboratories that reflect different attitudes about the core functions of PHLs and the very different current configurations of PHLs relative to testing. These diverging (but not mutually exclusive) approaches also have implications for the federal role in promoting the public health infrastructure through laboratory services.

Provide Services As A Subcontractor To MCOs

As managed care's presence grows, PHLs can take advantage of their strengths by subcontracting with the new locus of care - MCOs. The array of state PHLs have both core areas of expertise (e.g., rabies testing, blood lead) and often close relationships with safety net providers that result in test volume (e.g., clinical testing for indigent populations served by LHDs). By obtaining subcontracts to perform testing in these areas for these populations, PHLs can preserve and fortify their key strengths. In Tennessee, the PHL has not been entirely successful in its bids to subcontract with the TennCare HMOs. Still, this lack of success appears to be largely a function of late action - the PHL did not approach the HMOs until well after TennCare had been implemented (the PHL generally feels it was left out of initial TennCare policy development). Other elements of the public health infrastructure in the state (e.g., the LHDs) have successfully re-engineered themselves to compete on the open market for HMO contracts.

Most of those interviewed believe that building tangible demand from managed care is not a viable model for PHLs in the long term. Dependence on user fees is potentially a major liability for the public health infrastructure in that it may put the state's capacity to respond to public health at the mercy of market demand. Furthermore, most PHL directors acknowledge that private concerns will ultimately be able to offer tests less expensively than the state can. For these reasons, most PHLs are reducing their capacity to provide patient care testing rather than increasing it.

Establish a Testing Network in Collaboration with Other Vendors

Another approach that PHLs might try is to develop joint contracting arrangements with other laboratory services vendors to create full service and full population coverage that is attractive to MCO clients. By formalizing its position in a local or regional network, leveraging its core functions, and partnering with other players to create "soup-to-nuts" laboratory services, a PHL can preserve and possibly grow its value proposition in the market. The UNILAB example in Alameda County does not appear to be living up to its initial promise, but most believe that this fundamental concept is logical and could prove successful with more effective implementation.

Actively Manage Activities of MCOs through Contracts

One option for future PHL positioning is to use state procurement vehicles to delineate different roles and responsibilities for key laboratory stakeholders. Michigan is using the Medicaid contracting process to define a constructive relationship between PHLs and MCOs that contract with the state. The approach entails identifying policy priorities (e.g., disease surveillance and reporting); specifying core roles for each segment of the public health department; and stipulating areas of, and processes for, interaction between the MCOs and the various public health entities. This is an activist role for the state, but one that appears to be palatable to the private sector, provided that the state is clear and reasonable about requirements.

Shape the Delivery System Through Dialogue / Collaboration

We uncovered some innovative models to stimulate dialogue and collaboration among laboratory stakeholders, often originating with, and guided by, forward-looking PHL directors. These models hold promise for ensuring private sector awareness and understanding of key public sector functions in laboratory testing. The most advanced example of this approach is Washington State, which has established a Clinical Lab Advisory Council (CLAC) to shape the laboratory delivery system and to open communication with the state. Its representation includes both public and private laboratory stakeholders throughout the state, and it has advisory groups that develop recommendations on a full range of laboratory issues, from integration to practice guidelines to licensure. The improved dialogue and interactions may facilitate PHLs' efforts to preserve vital elements of the PHL infrastructure.

Core PHL Function

A central concern of both state and federal actors is the definition of core PHL functions and activities. This subject has been closely studied over the years by the Association of State and Territorial Lab Directors (ASTPHLD) and by a number of PHL directors. As discussed above, the function of PHLs varies dramatically from state to state. The notion of a core set of activities is particularly charged, because it defines the appropriate role of the PHL in the safety net.

Traditional Definition of Core Services

Historically, public health laboratories (PHLs) have focused activities on specified core functions. Considered broadly, these functions encompass activities in support of the three charges of all public health entities: (1) assessment, (2) policy development, and (3) assurance.³ PHLs perform functions directly associated with these objectives, as well as testing activities that are excluded for various reasons from the practices of commercial laboratory service vendors. Examples of PHL core functions include:¹¹

• coordinating disease reporting activities among laboratories and providers in support of state disease tracking objectives
• responding to increased testing needs during times of disease outbreaks
• performing serological typing and other specialized tests useful for tracking disease and pathogen type across a population but insignificant to clinical therapy
• performing tests that are not commercially profitable
• performing environmental testing services
• performing quality assurance across all clinical laboratories
• conducting applied research in the areas of emerging infections
• verification of results from other laboratories

By performing these functions, PHLs provide state health officials with empirical information critical to assessing community health status, evaluating the success of existing public health initiatives (e.g., childhood lead abatement programs), and developing new policies related to disease prevention. Additionally, PHLs provide the specialized testing support needed in times of outbreaks or upon the occurrence of unusual diseases.

While the primary source of funding for state PHLs is state government, this varies by state. All states receive support from the CDC in the form of training and information, and some receive some outside funding from the CDC through grants. User fees (e.g., those associated with prenatal screening or other tests provided to the public) can be an important source of funding for some state labs.

Issues Inherent in Health Market Change

Changes in health markets and environment faced by PHLs naturally raise the question of whether the core functions of laboratories must change in response, or - to take a more activist position - whether more leadership from the laboratories can improve the public health. Our study suggests that while the overall charge of laboratories (e.g., involvement in assessment, assurance, and policy development) remains constant, many of the tactics used to achieve these goals must change in the context of health system and technological innovation.

There will always be a heated debate over what laboratory services belong in the public sector. PHL directors typically maintain that states can often provide services less expensively and of a higher quality because there is no profit motive. Commercial laboratories typically maintain the opposite position. We would not presume to judge this debate, but would point out that every situation is unique and that neither side is always correct.

There are some services that most agree belong in the public domain. These services typically include tests that are not commercially viable as well as those that are critical to ensuring that emerging infections are identified. Most MCOs will also not assume responsibility for environmental testing (e.g., lead and water) on their own, and it is unclear whether they will ultimately pay for population health management when there is no immediate payoff in reduced costs.

PHL viability in generating revenues is a central issue in defining core PHL functions. Public health officials are split on this issue between those that believe that PHLs need to show value and avoid "dumping" of patients by assessing user fees, and those that believe that user fees establish a perverse relationship with the private sector and may discourage indigent patients from seeking services and should not be assessed. Most states have established a middle ground by assessing user fees on some services in some cases; others leave the decision to the LHDs.

Another fundamental issue is whether direct patient care testing generally considered an "assurance" function is core. Over the years, many PHLs have done a considerable amount of direct patient care testing (e.g., STDs, HIV, TB, neonatal screening) and, in some cases, have derived significant revenues from such activities. Although such testing has often been provided in conjunction with counseling, case management, and other public health services, others have not. The debate in this area centers not around the reporting of results, but rather whether the state should be engaged in de-facto competition with the private sector.

Most neutral observers agree that quality assurance remains a critical function for PHLs. While regulators will never be popular with industry, assuring the quality and consistency of testing is a core public function, particularly in the area of infectious diseases. However, quality assurance needs to be updated relative to information technology; private sector stakeholders expressed strong and legitimate concerns about the cumbersome nature of regulatory intervention in most states.

Finally, policy development also needs to change in response to changes in the healthcare system. The notion of public-private partnerships has come into vogue, and, as the Washington experience shows, can be used proactively by states to help shape the delivery system. Policy development in laboratories also needs to come to terms with the growth of managed care, which is an important policy goal in most states. The Michigan experience demonstrates that states can use state managed care contracting proactively to forge a stronger safety net.

Positioning PHLs for the Future: The Federal Role

It was striking to us how many times interviewees stressed the need for federal leadership. While our report stresses the need for proactive change among states in defining, protecting, and enhancing the role of PHLs, some consideration of the federal role is clearly in order. The fragmentation of responsibilities vis-à-vis the labs within the CDC, as documented above, is of particular concern to effective support of PHL functions. The themes that emerge in this regard are laboratory system structure, information technology, and facilitation of communication.

Structure of Laboratory System

Just as the laboratory system in the private sector is consolidating in light of new technology and the need to achieve economies of scale, many believe that consolidation would also be desirable in the public sector. Why should there be 50 state PHLs when geographic borders bear little relation to population centers and disease burdens?

The argument for status quo is typically rooted in political imperative and the need for states to control the full scope of public health services. However, while there is undoubtedly a role for some form of laboratory in every state, this does not mean that all laboratories need to be equally capable. Indeed, there is already considerable variation across states in services provided, and, as we have shown, many states contract out to have tests carried out in other state or private laboratories.

The notion of regionalization needs to be more carefully studied by the CDC. Issues that need to be considered include the capacity of state laboratories to perform complex reference testing, economies of scale in purchasing new capital equipment, mechanisms for laboratory funding, the current role of Medicaid funding, and categorical grants.

Information Technology

A central finding of this report is that there appears to be a widening gap between the public and private sectors in the area of information technology. Private sector funding appears to be outstripping public funding, and, as a result, the information infrastructure is simply not being built in PHLs. While the CDC does have a number of small grants in this area, they have been insufficient to generate substantial activity. Building information infrastructure is a clear priority of the present Administration, and applications to public health function should be further explored by the CDC or DHHS.

Unfortunately, the locus for leadership in this area has yet to be identified on the federal level. Leadership might come from the Health Information Systems and Surveillance Board (HISSB) within the CDC. However, there are clearly other divisions and agencies that have a strong interest. In addition, commitment would also need to emanate from the states, as most PHL funding continues to come from state governments. Current interest in integrated information systems for public health and knowledge-based systems among SHAs affords an opportunity to strengthen information technology in PHLs, and significant focus on this issue from federal government is needed.

Outreach and Communication

One of the challenges faced by the PHLs is that their routine services - while clearly important contributions to the maintenance of public health - are generally outside of the public eye. Indeed, typical PHL operations imply that PHLs will rarely take center stage in any standard public health activities.

The more successful PHLs, and those that have more positive outlooks on PHLs' future, share some common features. These PHLs work hard at outreach and communication to ensure that public health agencies, state and local government, MCOs and providers, other laboratory stakeholders, and the general public are aware of and informed about the PHL's unique value and responsibilities. These PHLs are also actively involved in collaborative activities among stakeholders and strategic planning for such activities.

While the efforts of these few PHLs are noteworthy, national leadership is needed to heighten awareness of PHLs' importance, build ties among laboratory stakeholders, and help set the agenda for public-private cooperation. Individual PHLs cannot be expected to shoulder the entire burden of outreach and communication. Not only should effective national leadership help preserve core PHL activities, it should also buoy the morale and leadership within the PHLs, thereby helping them to help themselves.

Appendices

Appendix A: Bibliography

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Association of State and Territorial Public Health Laboratory Directors. Task force report on the public health laboratory - a critical national resource, 1/29/93.

Baker EL, Ross D. Information and surveillance systems and community health: building the public health information infrastructure. J Public Health Management Practice 1996;2(4): 58-60.

Bean NH, Martin SM, Bradford H. PHLIS: an electronic system for reporting public health data from remote sites. American Journal of Public Health 1992;82(9): 1273- 1276.

Boyles S. Diagnostics TB state labs outpacing nonstate facilities. Disease Weekly Plus 3/31/97.

Business Editors & Healthcare Writers Staff. Medi-Cal managed care initiative generates unique partnership; PathLab and Alameda alliance for health finalize public-private venture for clinical laboratory services. Business Editors & Healthcare, 4/20/95.

Centers for Disease Control and Prevention, Public Health Practice Program Office, Division of Public Health Systems. Environmental scan of privatization activities in state and selected urban health departments, 5/6/97.

Centers for Disease Control and Prevention, Public Health Practice Program Office, Division of Laboratory Services website. http://www.cdc.gov/phppo/dls, 1997.

Chapel TJ. The effect of mandated managed care for Medicaid populations on the practice of public health: the example of childhood lead poisoning prevention. April 1995.

Chi KS. Privatization in state government: options for the future. State Trends Forecasts. 1993;2(2):2-38.

Cooney M. Managing the risks of laboratory testing in an integrated delivery system. AJCP. 1995;104(4): S50-S53.

Cortese L and Kissel E. Competitive and strategic positioning of national clinical reference laboratories in response to managed care. Clinical Laboratory Management Review, Sept/Oct 1996: 545-550.

Denniston MM, Bird BR, and Kelley KA. Contrast of survey results between state and a cohort of nonstate mycobacteriology laboratories: changes in laboratory practices. Journal of Clinical Microbiology 1997;35(2): 422-426.

Diller W and Erickson D. To consolidate or network?: for laboratories, that's the question. In Vivo 1996;14(4):30-37.

Dowdle WR. The future of the public health laboratory. Annual Review of Public Health. 1993;14: 649-64.

Dupree WG and Bradford HB. New developments in mycobacteria identification: public health laboratory modernization. Journal of the Louisiana State Medical Society. 1992;144:379-382.

Forrey AW, Clement JM, DeMoor G, et al. Logical observation identifier names and codes (LOINC) database: a public use set of codes and names for electronic reporting of clinical laboratory test results. Clin Chem 1996;42(1): 81-90.

Forsman RW. Why is the laboratory an afterthought for managed care organizations? Clin Chem 1996;42(5):813-816.

Friedman BA. The challenge of managing laboratory information in a managed care environment. Am J Clin Pathol. 1996;105(Suppl 1):S3-S9.

Goldman Sachs. Quest Diagnostics Incorporated a turnaround story. Goldman Sachs US Research New York. 1/7/97.

Harris JR, Gordon RL, White KE, Stange PV, Harper SM. Prevention and managed care: opportunities for managed care organizations, purchasers of health care, and public health agencies. Mortality and Morbidity Weekly Report 1995;44(14):1-12.

Health Care Financing Administration(now known as Centers for Medicare and Medicaid Services(CMS)) CLIA website. http://www.hcfa.gov/medicare/hsqb/clia.htm, 1997.

Institute of Medicine, Committee for the Study of the Future of Public Health Division of Health Care Services The Future of Public Health. Washington DC: National Academy Press, 1988.

Jahn M. The managed care era strikes the lab. MLO. 1995;27:38-43.

Klaucke DN, Buehler JW, Thacker, et al. Guidelines for Evaluating Surveillance Systems. Mortality and Morbidity Weekly Report. 1988;37(S-5): 1-18.

Koo D, Wetterhall SF. History and current status of the national notifiable diseases surveillance system. J Public Health Management Practice. 1996;2(4): 4-10.

Lee PR and Toomey KE. Epidemiology in public health in the era of health care reform. Public Health Reports 1994;109: 1-3.

Macro International Inc. Batelle Public Health Foundation. The effects of health reform on public health programs and health information phase I synthesis paper. Volume 1: Site Visit Summaries and Cross-Site Analysis. August 1996.

Martin SM, Bean NH. Data management issues for emerging diseases and new tools for managing surveillance and laboratory data. Emerging Infectious Diseases 1995 1(4): 124-128.

Maryland Department of Health and Mental Hygiene. The current responsibilities of the laboratory administration. Partners for the Future Program Handout 3/26/97.

Maryland Department of Health and Mental Hygiene Environmental Chemistry and Environmental Microbiology. Guide to Laboratory Services March 1995.

Mendelson DN and Salinsky EM. Health information systems and the role of state government. Health Affairs. 1997;16(3): 106-119.

MMWR Staff. Update: Outbreak of Hantavirus Infection-Southwestern United States. Mortality and Morbidity Weekly Report. 1993;42(31): 612-616.

MMWR Staff. Defining the public health impact of Drug ResistantStreptococcus pneumoniae: report of a working group. Mortality and Morbidity Weekly Report. 1996; 45(RR-1).

Morris G, Snider D, Katz M. Integrating Public Health Information and Surveillance Systems. J Public Health Management Practice. 1996;2(4):24-27.

National Association of County and City Health Officials. 1992-1993 National Profile of Local Health Departments. 1995.

Roper WL, Baker EL, Dyal WW, Nicola RM. Strengthening the public health system. Public Health Reports. 1992;107:609-615.

Skeels MR. Public health laboratories build healthy communities. Laboratory Medicine 1995;26(9): 588-592.

Stroup DF and Thacker SB. Future directions for comprehensive public health surveillance and health information systems in the United States. American Journal of Epidemiology. 1994;140(5):383-395.

Thacker SB and Berkelman RL. Public health surveillance in the United States. Epidemiologic Reviews. 1988;10:164-190.

University of Michigan Medical School. Automated information management in the clinical laboratory, 15th annual symposium. Plenary Conference Notes. 1997;5/28- 5/30.

Vogt RL. Laboratory reporting and disease surveillance. J Public Health Management Practice. 1996;2(4): 28-30.

Valdiserri RO. Temples of the future: an historical overview of the laboratory's role in public health practice. Annu Rev Publ Health. 1993;14: 635-648.

Warren NG. Cordts JR. Activities and recommendations by the association of state and territorial public health laboratory directors. Clinics in Laboratory Medicine. 1996;16(3):731-743.

Wharton M, Chorba TL, Vogt RL, et al. Case definitions for public health surveillance. Mortality and Morbidity Weekly Report 1990;39(13): 1-41.

Appendix B: Aspe Public Health Laboratory Interview List

Interviewees

Federal Contacts
Rosemary Bakes-Martin Supervisory Health Scientist Division of Laboratory Systems Centers for Disease Control and Prevention	Anthony Moulton, Ph.D Manager Public Health Information Systems Public Health Program Practice Office Center for Disease Control and Prevention
Joseph Boone, Ph.D. Assistant Director of Science Division of Laboratory Systems Public Health Practice Program Office Centers for Disease Control and Prevention	Stuart Nightingale, M.D. Associate Commissioner for Health Affairs Office of Health Affairs Food and Drug Administration
Michael Friedman, M.D. Acting Director Food and Drug Administration	Albert E. Pohland, Ph.D. Strategic Manager for Research Liaison Center for Foods Food and Drug Administration
Robert Lake Division Director Office of Policy Planning and Strategic Direction Center for Food Safety and Applied Nutrition Food and Drug Administration	Jane Suen Health Systems Analyst Division of Public Health Systems Public Health Practice Program Office Centers for Disease Control and Prevention
Joseph Madden Division Director Strategic Manager for Microbiology Center for Foods Food and Drug Administration

State Public Health Laboratory Contacts

State Public Health Laboratory Contacts
Russell Alexander, M.D. Chief of Epidemiology Seattle King County Health Department	John Hunt, Ph.D. Clinical Unit Leader Public Health Laboratory Minnesota Department of Health
Carl Blank, Dr.P.H. Acting Executive Director Association of State and Territorial Public Health Laboratory Directors	Stan Inhorn, M.D. Medical Director Wisconsin State Laboratory of Hygiene
Pauline Bouchard, J.D., M.P.H. Public Health Laboratory Director Minnesota Department of Health	Michael Kimberly, Dr.P.H. Director of Laboratory Services Tennessee Department of Health
Henry Bradford, Jr. Ph.D. State Public Health Laboratory Director Office of Public Health Louisiana Department of Health and Hospitals	Robert Martin, Dr.P.H. Director Bureau of Laboratories Michigan Department of Community Health
Ron Cada, Dr.P.H. Director Colorado Division of Laboratories Department of Public Health	David Maserang, Ph.D. Bureau Chief Bureau of Laboratories Texas Department of Health
Jon Counts, Dr.P.H. Assistant Secretary Public Health Laboratory Washington State Department of Health	Marion E. Pierce Director, Public Health Laboratory Division of Public Health Services New Jersey Department of Health and Senior Services
Jack DeBoy, Dr.P.H. Deputy Director Public Health Laboratory Maryland Department of Health	Ralph Timperi, M.P.H. Director State Laboratory Institute Massachusetts Department of Public Health
Arthur Di Salvo, M.D. Bureau Chief Bureau of Laboratory Services Nevada State Health Division	Michael Volz, Ph.D. Assistant Deputy Director Laboratory Science California State Department of Health Services
Francis Downs, Dr.P.H. Managed Care Coordinator Bureau of Laboratories Michigan Department of Community Health	Burt Wilcke, Jr., Ph.D. Director State Public Health Laboratory Vermont State Department of Health (President, ASTPHLD)
Charles Hartwig, Sc.D. Chief Office of Laboratory Sciences Florida Department of Health and Rehabilitative Services	Ann Whilley, Ph.D. Director Division of Laboratory, Quality, and Certification New York State Department of Health

Other Contacts

Other Contacts
Gary Anderson Chief Executive Officer Epic Information Systems	Scott Merwin Medical Administrator M-Care Health Plan University of Michigan
Earl C. Buck Chief Executive Officer System Labs Samaritan Health Systems	Mike Osterholm, M.P.H., Ph.D. Chief Acute Disease Epidemiology Section Minnesota State Department of Health
Thomas Chapel Consultant MACRO International	Paul Pomerantz Executive Vice President Clinical Laboratory Management Association
Robert P. DeCresce, M.D. Director Rush-Presbyterian-St. Luke's Medical Center Laboratory	Lois Quinlan Associate Executive Director Operations and Finance Association of State and Territorial Public Health Laboratory Directors
Chris Dimitry Contracting Administrator M-Care Health Plan University of Michigan	Gary Sawyer, M.S. Laboratory X-Ray Services Administrator Multnomah County Public Health Laboratory
Willis Forrester Executive Director Council of State and Territorial Epidemiologists	Marc D. Silverstein, M.D. Director Center for Healthcare Research Medical University of South Carolina
Bruce Friedman, M.D. Professor of Pathology University of Michigan Medical School	Perry Smith Director Division of Epidemiology New York State Department of Health
Greg Gilmet, M.D. Associate Medical Director Blue Care Network of Southeast Michigan	Paul Stehr-Green, Dr.P.H. State Epidemiologist Washington State Department of Health
Grace Gorenflo Project Manager National Association of County and City Health Officials	David Sundwall, M.D. President American Clinical Lab Association
Ed Kauffman, M.D. Vice President and National Medical Director SmithKline Beecham Diagnostics	Karen Troccoli, M.P.H. Project Manager National Association of County and City Health Officials
Joel Kelly Director Health Service Operations	Marianne Watters Administrative Director Parkland Memorial Hospital Laboratories
Peter Mallon, Ph.D. Vice President, Medical Applications Quest Laboratories (formerly Corning Labs)	Ronald Weiss, M.D., M.B.A. Senior Vice President and Director of Laboratories ARUP Laboratories
	Kim Willis Director of Patient Services Chartered Health Plan

Telephone Protocol for Public Health Laboratory Interviews

For State Officials:

How many public health labs does your state operate?

What is the public health infrastructure with respect to public health labs (e.g., personnel, expenditures, other resources)?

What (if any) contractual arrangements exist between public health labs and MCOs, and to what degree do the functions of MCOs and public health laboratories overlap?

What effect is managed care having on disease reporting (e.g., effects on compliance, timeliness, and accuracy of reporting)?

To what extent is managed care having a disease-specific effect on disease reporting?

How has managed care's presence in the area of laboratory services changed or affected the practices and/or functions of public health laboratories?

How is information shared between the public health labs and MCOs (e.g., information systems)?

Have evolving relationships between MCOs and public health laboratories contributed to the development and utilization of laboratory information systems (LIS), and have these efforts resulted in cost savings?

For Federal And Private Sector Contacts:

What services do public health laboratories and MCOs provide to each other, what (if any) contractual arrangements exist between these organizations, and to what degree do the functions of MCOs and public health laboratories overlap?

Do MCOs generally conduct some of these lab functions in house, or contract with other private labs for most diseases? For exotic diseases, what are the contractual stipulations between MCOs and PHLs?

What effect is managed care having on disease reporting (e.g., effects on compliance, timeliness, and accuracy of reporting) as MCOs subsume some public health functions?

How has managed care's presence in the area of laboratory services changed or affected the practices and/or functions of public health laboratories?

Do they have any data on changes in national PHL lab capacity or budgets before and after introduction to managed care?

Have evolving relationships between MCOs and public health laboratories contributed to the development and utilization of laboratory information systems (LIS), and have these efforts resulted in any cost savings?

How many states have LIS systems in place? Are they centralized in some form?

Are there any public-private partnerships in LIS development? Who funds what portion? Impact?

Which states would be good candidates for case studies of managed care penetration and public health laboratory capacity? Why?

Should we also look to target diseases for specific states/regions?

Are there related topics you have observed in the marketplace with respect to emerging or existing relationships between MCOs and public health that you think would be particularly important for us to explore?

Is there any literature or organizational contacts which you feel would be timely or helpful to the project team?

specific gray literature that might inform us of trends

contacts within managed care organizations for specific states

any "partnerships" which may serve as models for how these organizations can work together

identify areas of potential "partnerships," and what each of the partners could bring to the table

identify barriers to collaboration

Appendix C: Poll of Public Health Laboratory Directors

Purpose

This informal poll recorded and analyzed the responses of state public health lab directors in 48 states and the District of Columbia to three basic questions assessing how, if at all, managed care and other health system changes have affected the function of their laboratory. In addition to helping the project team identify states which were good candidates for case study or further investigation, the responses from this poll summarize the effects managed care and other forms of health system change have on state public health laboratories across the nation.

Study Methods

The informal poll began on March 5, 1997. We e-mailed or faxed the following three questions to all state PHL directors:¹ Has managed care's presence in the area of laboratory services changed or affected the practices and/or functions of public health laboratories in your state? If so, how?

Have other market changes (e.g., commercial laboratories, hospital consolidation) had major impacts on the functions of public health laboratories? Please describe.

What (if any) contractual or collaborative arrangements exist between public health labs (state or other) and MCOs or commercial laboratories? Please describe.

Follow-up faxes were sent to public health laboratory directors who did not respond to the initial e-mail, and attempts were made to contact all of the public health laboratory directors who did not respond to e-mail or fax by phone. The study was concluded in early May, with 49 responses out of the 51 state and territorial public health laboratory directors polled.

Once gathered, the responses for each question were categorized by actor (the agent or organization having the effect on the PHL) and impact (the nature of the effect being described). Grouping responses into these categories allowed the detection of general trends across states for each of the three main question topics. The categorized responses were then coded, and statistical analysis software was used to perform tabulations, cross-tabulations, and other simple summary statistics on the data to flesh out and quantify the observable trends. Some simple multivariate analyses (logistic regressions) were used to control for important factors (census region and degree of managed care penetration) that may underlie some of the trends observed. Given that we had data from the census of states (except for Utah and Alabama), all differences reported can be considered to be statistically significant; however, we avoided highly specific quantification of multivariate analyses in favor of more generalizable results.

Study Limitations

In considering the results of this analysis (reported in the main text of this report) it is important to keep in mind the limitations of the instrument. The use of broad, open-ended questions has the advantage of eliciting unprompted opinions from PHL directors, but requires further analysis involving the synthesis of responses that are disparate in focus and level of detail. The anecdotal and vague nature of some of the responses complicated categorization efforts. As a result, a few responses between PHLs could not be compared directly, and the presence of a certain response from one PHL could not be contrasted with its absence from the responses of other PHLs. Despite these limitations, this analysis has revealed some important early impacts and actors in the relationship between PHLs and health system changes.

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¹ List of PHL directors in 50 states and the District of Columbia was obtained through the Association of State and Territorial Public Health Laboratory Directors (ASTPHLD)

Appendix D: Case Studies

Site Visit Protocols

Public Health Infrastructure And The Private Sector: Public Health Laboratories And Managed Care

Draft Site Visit Protocol

Questions for Public Health Laboratory Interviewees

State Public Health Laboratory Infrastructure

Laboratory Size, Organization, and Funding:

Briefly describe the size and organization of the public health laboratory.

How many branch offices are there?

How many FTEs?

What is the percent breakdown by labor category?

What is the organization of the public health laboratory with respect to the larger state public health infrastructure?

Do you have an organizational chart?

Can you provide a financial summary of the public health laboratory?

What is the annual budget?

Please describe the revenues and costs.

What are the sources of funding and what is the percentage of funding by source?

State

Federal funds

User fees

Which of these sources provide funds specific to particular laboratory functions (e.g., PCR testing, testing/surveillance of emerging infections)

What is the budget for laboratory equipment including laboratory information systems?

Over the past 2-3 years, has the public health lab budget increased, decreased, or remained the same?

What are some of the key reasons for changes in funding?

What effect, if any, have funding changes had on the number of FTEs or other lab resources?

How have other changes in the public health infrastructure affected public health laboratory resources?

Have you made any capital acquisitions for the lab during the last 2-3 years?

How, if at all, has the level of capital acquisitions been affected by health market changes?

Scope of Laboratory Services/Core Laboratory Functions:

What are the types of lab services provided/core functions of the public health lab today?

Which tests does the lab perform the most (by volume)?

List of tests performed by the public health laboratory?

Common tests such as: Syphilis, HIV, Gonorrhea, Chlamydia, TB, drug sensitivity for TB, Enteric pathogens (typing issue)

Actual figures for volume of tests performed or specimens processed? If not why?

Do core functions include screenings for chronic diseases or conditions?

Cancers

Hyperlipidemia

Newborn screenings

Does the lab provide reference testing for other labs?

For what particular pathogens?

Does the lab provide testing services for environmental quality?

Please give some examples of typical environmental tests performed by the public health laboratory.

As part of the core functions, does the laboratory engage in laboratory improvement activities or research?

What is the public health laboratory's role with regard to CLIA?

Have public health infrastructure changes affected the role of the public health laboratory?

Which changes in particular?

Which functions have they affected?

Have they had an affect on testing volume for specific tests?

Does state law mandate providers to send specimens to the state public health lab for initial testing or reference testing purposes?

For which tests are these submissions mandated?

Does state law mandate providers to report the incidence of specific diseases to the public health lab?

For which diseases?

Over the past 2-3 years, have the types or volume of testing increased, decreased, or remained the same?

What are some of the key reasons for the changes?

Could you provide us with specific data to support the changes in volume?

Is the lab involved with any research or training activities (use of new technology)?

Does your state have Medicaid Managed Care?

If yes, what impact (general and specific) has Medicaid Managed Care had on the core functions public health laboratory?

How has overall testing volume been affected?

For which tests has the public health lab seen increases/decreases in testing volume?

Have any tests been discontinued?

Public Health Laboratory's Role with regard to Emerging Infections:

Please describe the public health laboratory's role in detecting and controlling for emerging infections, e.g., E.coli, Mycobacterium tuberculosis, Salmonella, Borrelia burgdorferi (Lyme disease), Cryptosporidium, Hepatitis A, Cryptococcus (Meningitis).

Are independent reference laboratories or hospital laboratories required to submit isolates of specimens containing these pathogens to the public health laboratory for confirmation?

What is the process for identification and reporting of emerging infections to the state health agency?

How are these pathogens generally detected in your state?

Usually by the public health laboratory?

. Usually by hospital based laboratories?

. Usually by independent reference laboratories?

Has the volume of emerging infection isolates submitted for confirmation to the public health laboratories changed in recent years, and what types of evidence suggests this (quantitative, anecdotal)?

Laboratory Information System Resources/Process Automation:

What planning or strategy exists within the state public health lab for data infrastructure development?

How are laboratory testing results conveyed back to the customers (i.e., electronically through LIS or paper form)?

What electronic connectivity do you have with MCOs?

To what extent, if any, is your results reporting system designed to help MCO customers comply with HEDIS requirements?

What laboratory information system do you have in place currently?

How many requisitions are entered into your database daily?

Does your LIS have any relational databases?

What is your process of disease reporting to public health officials?

Do you have any electronic connectivity to the state epidemiology office?

What information system connectivity do you have with the Centers for Disease Control (CDC), e.g., PHLIS?

If you use PHLIS, what types of information are transmitted to CDC, and for which diseases, e.g., salmonella?

What system(s) do you use to code tests electronically, e.g., LOINC, SNOMED?

If you do have an LIS, has it resulted in any cost savings? If so, how much?

Do you have any funding, either from the federal or state government, for capital investments in laboratory information systems?

Please describe lab processes for a typical testing episode, from collecting the specimen to reporting test results.

What is the typical turnaround time?

To what extent is this dependent on the type of test being performed?

Provide examples of tests with shorter/longer turn around times.

Which parts of this process are automated?

What differences (if any) are there in the approach towards lab process automation between public health labs and private sector labs?

Differences in level of resources?

Differences in priority?

Importance of customer service?

Managed Care and Public Health Labs

Relationships between Public Health Labs and Managed Care Organizations:

Does the state public health lab have any contracts with MCOs (for-profit or not-for-profit) to provide testing services?

If so, please describe the arrangement(s).

For which services?

How were these contracts developed?

How, if at all, is the state public health lab reimbursed for these services?

Are there any plans to develop these relationships?

What have been some barriers to developing state public health lab/MCO relationships?

Does the state public health lab have any other interactions with for-profit or not-for-profit MCOs?

Is there a memorandum of understanding to share information on lab-related issues?

Are there any collaborative arrangements between public health laboratories and MCOs?

What is the nature of these arrangements?

Are future collaborations being considered?

What are some of the areas where public health labs and MCOs can work together?

What are some areas of need?

What are areas where there is duplication of functions between MCOs and public health laboratories?

Impact of Managed Care on State Public Health Lab

What is the market penetration of managed care organizations in the state?

What is the status of Medicaid managed care in the state?

Has the presence of public or private managed care programs affected the volume/types of services provided by public health labs?

Which of the services have been affected and how?

Has there been a decrease in per-capita clinical chemistry testing?

Has there been an increase in environmental testing?

Has there been a decrease/increase in other testing services?

Have any services been discontinued/started because of these effects?

What effect has public or private managed care had on public health laboratory's revenue supply?

Have they affected the amount of users' fees generated by the state public health lab? If so, how significantly?

Have they affected the level of capital acquisitions by the public health laboratory?

What trends have you seen in disease reporting in the state in light of managed care (i.e., quality and volume of reporting)?

What do you see as some of the possible impacts of these trends?

Lab Stakeholder Interactions in the State

Please describe the relationships between the various lab stakeholders in general:

State public health laboratory

State health department (including Medicaid/Medicare)

Other public health labs (county, federal labs)

Other labs: commercial, hospital, MCO, physician office, home testing labs

Federal health agencies (e.g., CDC, FDA, NIH)

Users of public health labs: providers, managed care organizations (MCOs)

Is the interaction between the state public health lab and clinical labs collaborative in nature or competitive?

For what types of tests do the state public health labs compete with the private clinical labs?

Which types of tests are only performed by the state public health lab?

Which are the types of tests that have been historically performed by state public health labs that are now being performed by other competing labs?

Are you exploring new areas of service in response to some of the competitors, or emphasizing certain types of services?

Please describe the roles of and relationships between the various lab stakeholders in terms of disease reporting responsibilities:

State public health lab

State health department

Local health departments

Other public health labs (county, federal labs)

Other labs: commercial, hospital, MCO, physician office, home testing labs

Federal health agencies (e.g., CDC, FDA, NIH)

Users of public health labs: providers, MCOs

Please describe the roles of and relationships between the various lab stakeholders during a disease outbreak:

State public health lab

State health department

Local health departments

Other public health labs (county, federal labs)

Other labs: commercial, hospital, MCO, physician office, home testing labs

Federal health agencies (e.g., CDC, FDA, NIH)

Users of public health labs: providers, MCOs

Other Issues Involving Health Market Change and Public Health Labs

Have hospital consolidations affected lab testing capabilities and capacity?

Has there been an increase/decrease in specific tests?

Have certain services been started/discontinued?

Have there been changes in the way specimens are processed?

With regards to the types of tests performed?

With regards to the focus of resources?

How have health market changes affected the development of laboratory information systems and other health information laboratory technologies?

Has the privatization, or the threat of privatization, affected your lab's operations?

Public-Private Collaborations in Clinical Laboratory Services

Is the state public health lab involved in any collaborative efforts with private laboratories or other private organizations (e.g., drug, computer, device companies)?

What are the terms of the arrangement(s)?

Are new arrangements being considered?

What are some of the areas where public health labs and other private organizations can work together?

What are the primary barriers to overcome for successful public-private collaboration?

What are some potential areas for public and private collaboration in lab-related issues?

In the area of disease reporting?

In the area of clinical laboratory standards?

Unique Value of the Public Health Labs

Would you agree or disagree that the unique value of public health labs are evident in the following functions?

provision of laboratory services with the public's interest in mind (i.e., there may be inherent conflict of interest in private labs providing public health services)

population level disease surveillance

response to disease outbreaks

performing tests unrelated to individuals treatment, but significant for public health reasons (e.g., serotyping of certain bacteria)

testing for diseases without commercial viability (e.g., orphan tests)

quality assurance for all clinical labs

evaluating and monitoring success/failure of public health programs through testing (e.g., childhood lead levels and lead abatement programs)

. serving as a conduit for transfer of new lab technologies to private sector

. serving as a reservoir for collection of important disease data

What public health lab core functions do you see remaining and disappearing in the next five years?

What are the implications of these core functions on size and resources devoted to public health laboratories?

How do you think the relationship between public health labs and MCOs will change in the future?

Questions for Independent Clinical Laboratory Interviewees

Market Environment for Clinical Laboratory Services

What is the number and market share of different types of private clinical labs in the state?

physician office labs

hospital-based labs

independent reference labs

how have the numbers and types of labs changed over time; what are the trends?

What is your estimate of the scope of services offered by each type of clinical lab?

For what types of tests do the state public health labs compete with the private clinical labs?

Which types of tests have historically been performed by state public health labs and are now being performed by other competing labs?

Which types of tests are only performed by the state public health lab?

Are there state mandates requiring specific tests to be conducted by the public health lab?

For which tests?

Are there state mandates requiring the reporting of certain findings to the state public health labs?

For which diseases/conditions?

Is the lab exploring new areas of service in response to some of the competitors, or emphasizing certain types of service?

What are some of the trends in the clinical laboratory market in the state?

Have these trends positively, negatively, or not affected the type/volume of services provided by public health labs?

Has the emergence of large, commercial labs affected the market for lab services in the state? If yes, how?

What effect has the presence of large commercial laboratories (e.g., SmithKline, LabCorp, Quest Diagnostics) had on the clinical laboratory market?

With respect to the tests performed by a typical clinical laboratory?

With respect to disease reporting?

What effect has the development of managed care organizations had on the clinical lab market?

Has testing volume for certain tests increased/decreased?

Have certain tests been started/discontinued?

What has been the effect of MCOs on disease reporting practices?

Public-Private Collaborations in Clinical Laboratory Services

Is the state public health lab involved in any collaborative efforts with your laboratory?

What are the terms of the arrangement(s)?

What are the primary barriers to overcome for successful public-private collaboration between public health labs and clinical labs?

What are some potential areas for public health lab and clinical laboratory collaboration in lab-related issues?

In areas of disease reporting?

In maintaining/monitoring clinical lab standards?

Is the interaction between the state public health lab and clinical labs collaborative in nature or competitive?

Lab Stakeholder Interactions in the State

1. Please describe the relationships between the various lab stakeholders in general:

state public health lab

state health department (including Medicaid/Medicare)

other public health labs (e.g., county, federal labs)

other labs: commercial, hospital, MCO, physician office, home testing labs

federal health agencies (e.g., CDC, FDA, NIH)

users of public health labs: providers, managed care organizations (MCOs)

2. Is the interaction between the state public health lab and clinical labs collaborative in nature or competitive?

For what types of tests do the state public health labs compete with the private clinical labs?

Which types of tests are only performed by the state public health lab?

Which types of tests have historically been performed by state public health labs and are now being performed by other competing labs?

Are you exploring new areas of service in response to some of the competitors, or emphasizing certain types of services?

3. Please describe the roles of and relationships between the various lab stakeholders in terms of disease reporting responsibilities:

state public health lab

state health department

local health departments

other public health labs (e.g., county, federal labs)

other labs: commercial, hospital, MCO, physician office, home testing labs

federal health agencies (e.g., CDC, FDA, NIH)

users of public health labs: providers, MCOs

4. Please describe the roles of and relationships between the various lab stakeholders during a disease outbreak:

state public health lab

state health department

local health departments

other public health labs (e.g., county, federal labs)

other labs: commercial, hospital, MCO, physician office, home testing labs

federal health agencies (e.g., CDC, FDA, NIH)

users of public health labs: providers, MCOs

Lab Practices and Resources

General Activities/Capabilities:

What services does your lab provide?

Can you tell us the list of services you provide?

How many FTEs do you have?

FTEs only involved in testing?

FTEs involved in disease reporting?

FTEs involved in providing other services (e.g., courier)?

Who are your major customers?

Hospitals/SNFs?

Physician Offices?

MCOs?

How are you generally reimbursed (capitation or FFS)?

What is your budget for capital investment for lab equipment, including lab information systems?

Laboratory Information System Resources/Process Automation

What planning or strategy exists within the laboratory for data infrastructure development?

Do you have plans to provide customers with information-driven services?

How are laboratory testing results conveyed back to the customers (i.e., electronically through LIS or paper form)?

To what extent, if any, is your results reporting system designed to help MCO customers comply with HEDIS requirements?

What laboratory information system do you currently have in place?

How many requisitions are entered into your database daily?

Does your LIS have any relational databases?

What electronic connectivity do you have with MCOs?

What system(s) do you use to code tests electronically (e.g., LOINC, SNOMED)?

What is your process for reporting test results to public health officials?

Do you have any electronic connectivity to the state epidemiology office?

What information system connectivity do you have with the Centers for Disease Control (CDC), e.g., PHLIS?

If you use PHLIS, which diseases/conditions (e.g., salmonella) and what types of information are transmitted to CDC?

If you do have an LIS, has it resulted in any cost savings? How much?

Please describe how the lab processes a typical testing episode from collecting the specimen to reporting test results:

What is the typical turn around time?

To what extent is the process dependent on the type of test being performed?

Please give examples of tests with shorter/longer turn-around times.

Which parts of this process are automated?

Unique Value of the Public Health Labs

Would you agree or disagree that the unique value of public health labs are evident in the following functions?

provision of laboratory services with the public's interest in mind (i.e., there may be inherent conflict of interest in private labs providing public health services)

population level disease surveillance

response to disease outbreaks

performing tests unrelated to individuals treatment, but significant for public health reasons (e.g., serotyping of certain bacteria)

testing for diseases without commercial viability (e.g., orphan tests)

quality assurance for all clinical labs

evaluating and monitoring success/failure of public health programs through testing (e.g., childhood lead levels and lead abatement programs)

serving as a conduit for transfer of new lab technologies to private sector

serving as a reservoir for collection of important disease data

What public health lab core functions do you see remaining and disappearing in the next five years?

What are the implications of these core functions on size and resources devoted to public health laboratories?

How do you think the relationship between public health labs and MCOs will change in the future?

Questions for Managed Care Organization Interviewees

Managed Care and Laboratory Services

What laboratory services are included in your enrollee benefits?

Does your MCO have internal laboratories?

What tests do they perform themselves?

What tests do they outsource, and why?

Does your MCO have contracts with clinical laboratories?

What services are generally covered under these contracts?

What is the typical mechanism for reimbursing clinical laboratory contractors?

What are the criteria your MCO uses when deciding how to choose laboratory service providers?

Automated processes?

Courier services?

Short turn-around-time?

Sophisticated information systems?

Are you connected electronically with your laboratory service contractors for purposes of information transfer?

To what extent does information connectivity with laboratory contractors help you comply with HEDIS requirements?

What do you think is the role of laboratory services in terms of the benefits you provide to your enrollees?

Purely for diagnosing disease conditions?

Broader purposes?

Managed Care and Public Health Laboratories

Relationships between Public Health Labs and Managed Care Organizations

Does the state public health lab have any contracts with your MCO (for-profit or not-for-profit) to provide testing services?

For which services?

Is the public health laboratory reimbursed for providing these services?

Is the reimbursement mechanism capitated or FFS-based?

If the state public health lab does not have any contracts with your MCO, are there any plans to develop these relationships?

What have been some barriers to developing state public health lab/MCO relationships?

Are there any state requirements (by law or contract) mandating MCOs to submit specimens for specific tests to the public health lab?

How is the mandate established?

For which specimens?

Are there any requirements (by law or contract) mandating MCOs to report the results of particular tests to the public health laboratory?

How is the mandate established?

For which specimens?

Does the state public health lab have any other interactions with your MCO (e.g., signing a memorandum of understanding to share information on lab-related issues)?

Managed Care Environment in the State:

What is the market penetration of MCOs in the state?

How (if at all) has the advent of Medicaid managed care affected your organization?

How has providing services to the Medicaid population changed your practices with regard to laboratory testing or disease reporting?

Has there been an increase in MCO offerings of preventive services and surveillance services that overlap traditional public health responsibilities?

What trends have you seen in disease reporting in the state in light of managed care (i.e., quality and volume of reporting)?

What do you see as some of the possible impacts of these trends?

Unique Value of the Public Health

Would you agree or disagree that the unique value of public health labs are evident in the following functions?

provision of laboratory services with the public's interest in mind (i.e., there may be inherent conflict of interest in private labs providing public health services)

population level disease surveillance

response to disease outbreaks

performing tests unrelated to individuals treatment, but significant for public health reasons (e.g., serotyping of certain bacteria)

testing for diseases without commercial viability (e.g., orphan tests)

quality assurance for all clinical labs

evaluating and monitoring success/failure of public health programs through testing (e.g., childhood lead levels and lead abatement programs)

serving as a conduit for transfer of new lab technologies to private sector

serving as a reservoir for collection of important disease data

What public health lab core functions do you see remaining and disappearing in the next five years?

What are the implications of these core functions on size and resources devoted to public health laboratories?

How do you think the relationship between public health labs and MCOs will change in the future?

Michigan State Case Study Summary

Background/Objectives

The Michigan case study consisted of four in depth interviews coordinated with the help of Robert Martin, Dr.P.H., Director of the State Department of Community Health's Bureau of Laboratories. In addition to his own two hour session with Lewin, Dr. Martin coordinated interviews with:

Francis Downs, Dr.P.H., Managed Care Coordinator, Bureau of Laboratories

Richard Murdoch, Department of Community Health's Medical Services Agency (the state's Medicaid office)

Fran Sklapsky, Administrative Director of Laboratory Services at Sparrow Regional Hospital

The interviews focused on uncovering specifics about the practices and goals of Michigan's Bureau of Laboratories, ("Bureau") with special emphasis on its efforts to work with managed care to achieve these goals. We focused particularly on the Bureau's involvement in the process of developing an RFP for managed care organizations seeking participation in the state's Medicaid managed care program, as well as the Bureau's relationship with commercial laboratories within the state.

Laboratory History and Philosophy

Michigan's Bureau of Laboratories serves as the statewide public health laboratory. Formerly a division of the state Department of Public Health's Bureau of Infectious Disease Control, the laboratory has had its own position in the state's organization chart since a re-structuring program consolidated the Department of Public Health with the Department of Mental Health and the Medical Services Agency. The new department, called the Department of Community Health, consists of six agencies and offices involved in developing or implementing state policies on drug control, behavioral health, health legislation, public health (e.g., epidemiology and health promotion), and medical services (e.g., Medicaid issues). The Bureau falls under the control of the Community Public Health Agency, alongside the Division of Immunization, the Division of HIV/AIDS/STD, and the Bureau of Epidemiology.

Historically, the Bureau of Laboratories has focused on supporting the state's public health infrastructure by conducting laboratory tests with significance to public health. Consistent with this objective, the Bureau provides a number of esoteric and reference testing functions, including molecular epidemiology, parasitology, and identification of unusual pathogens. Additionally, the Bureau conducts selected patient tests, including testing for chlamydia, gonorrhea, salmonella (testing and serotyping), shigella (testing and serotyping), TB (testing and serotyping), Lyme disease, rabies, genetic disorders (newborn screenings), and blood lead. The Bureau has intentionally avoided routine patient testing functions such as pap smears, lipid screenings, routine cultures, and blood chemistries, focusing instead on tests significant on a population level (e.g., serological typing of pathogens) or tests that are best centralized for purposes of cost and quality (e.g., newborn genetic screening, and HIV viral load testing). In addition to testing functions, the Bureau conducts applied research in areas of public health related testing, and develops some laboratory products (e.g., rabies reagents).

Since its testing is of primary significance to public health, the Bureau avoids direct competition with hospital laboratories and commercial laboratories for routine patient tests in support of direct delivery of primary health care. In this way, the Bureau seeks to establish cooperative relationships with commercial laboratories and ensure proper reporting of disease and submission of isolates in support of public health goals. By avoiding the provision of routine patient tests, the Bureau avoids the possibility of providers and managed care organizations "dumping" specimens on Bureau labs in an effort to reduce the cost of care. The Bureau said that because of the limited scope of service provided, "dumping" is not a large problem. It is, however, cognizant of the need to encourage hospitals to continue to update laboratory services and limit the incentives to abuse the Bureau's services. The Bureau plans to address this need by participating in coordination efforts between hospitals and hospital-based laboratories within the state.

The Bureau reports that it has no interest in serving as a sub-contractor to MCOs to provide services to enrollees. Instead, it seeks to encourage MCOs to cooperate with state public health initiatives. It has participated in efforts to require MCOs to mandate that their physicians and laboratory service providers report diseases and submit isolates in support of public health goals. These efforts have been exemplified in the Bureau's document entitled "Public Health Quality Assurance for Managed Care Organizations," its participation in the RFP process for managed care organizations seeking to provide benefits to the state's Medicaid population, and its creation of a special position entitled "Managed Care Coordinator" for the purpose of collaboration and quality assurance.

In pursuit of its goal of supporting public health, the Bureau dedicates important personnel to advocacy and policy issues. Each division within the Bureau is led by a division chief who deals primarily with policy issues and reports to the director. These division chiefs, along with the managed care coordinator and the director, assure substantial policy expertise within the Bureau, consistent lobbying for state funding, and input in policy decisions within the Department of Community Health.

Laboratory Situation, Funding, and Influence

The Bureau occupies a relatively favorable position, garnering influence and resources from the state while cultivating collaborative relationships with local health departments and commercial laboratory service providers in the area. This is due to such factors as the Bureau's commitment to policy and advocacy, the Bureau's reputation as a center of excellence for both research and testing, and the scarcity of managed care penetration in Michigan.

The Bureau has enjoyed a stable base of funding from the state's general funds and two states "sin taxes" (Healthy Michigan Fund and Healthy Michigan Initiative) during the past two to three years. Dr. Martin, who has served in a number of capacities within the public health system (including service as director of the former Bureau of Infectious Disease), has been successful in working with the state's funding sources to secure a consistent level of support. In addition to direct allocations and revenues from special taxes, the Bureau has benefited from the state's willingness to allow for leasing arrangements in the acquisition of laboratory equipment. The accessibility of state funds for the Bureau of Laboratories may be related in part to the laboratory's historic position as a revenue center for the state. While under the former Bureau of Infectious Diseases, the laboratory developed and sold vaccines. Currently, the division that develops vaccines is disassociating from the Department of Community Health and privatizing, but the Bureau continues to develop biological products, including reagents for specialized testing (e.g., rabies).

The Bureau's reputation as a center for excellence for research and testing for public health concerns has allowed it to obtain CDC funding for specialized functions, such as the provision of maternal HIV seroprevalence testing, Lyme disease testing, and reference testing for tuberculosis speciation.

Part of the state's success in avoiding direct competition and hostility from commercial laboratories may be related to the relatively minimal effect managed care has had on the clinical laboratory services market in Michigan. Our interview with Fran Sklapsky of Sparrow Hospital revealed that, relative to other markets, contracts between MCOs and commercial laboratories in the state tend to be favorable for the commercial laboratories. Because of their relatively strong position, hospital-based laboratories such as Sparrow's are willing to engage in collaborative efforts with the Bureau and other laboratories in the state.

Managed Care Activities

The Bureau created the position of Managed Care Coordinator in 1993 when it seemed that increased managed care penetration would impact on disease reporting practices in the state. Since that time, the Managed Care Coordinator has taken an active role in advocating the need for the Department of Community Health to hold MCOs accountable for participating in public health initiatives involving disease reporting and submission of isolates for reference testing.

One result of these efforts is a report, drafted in coordination with the other agencies within the Community Public Health Agency, entitled "Public Health Quality Assurance for Managed Care Organizations," which outlines MCO responsibility in mandating that physicians and laboratories report disease and submit isolates to the Bureau. The report encourages MCOs to mandate the following of their laboratory service providers and physicians:

submission to the Bureau of isolates for all specimens testing positive for tuberculosis or other pathogens that could potentially be involved in an outbreak

submission of specimens from all newborn enrollees for genetic error screening to the Bureau for standardized testing

compliance with state and federal (e.g., CDC and ASTPHLD) guidelines when testing for Lyme disease, tuberculosis, syphilis, chlamydia, gonorrhea, and HIV

reporting of positive tests results for tuberculosis, HIV, STDs, and other communicable diseases to the local public health agencies

Largely through its own proactive stance, the Bureau played a significant role in drafting the state's latest RFP for managed care organizations seeking to provide services to the managed care population. Richard Murdoch of the Medical Services Agency (the state Medicaid office) described a process wherein all public health agencies were invited to contribute to the development of the RFP; he stated that some agencies took a more active role than others. The Bureau continuously asserted itself in the process, ensuring that issues relevant to disease reporting and specimen/isolate submission were included in the RFP. The part of the RFP most directly contingent on the Bureau's involvement is a table describing the various duties of the health plan, the local health department, and the Michigan Department of Community Health. The table provides guidance on initial testing, reference testing, confirmatory testing, and disease reporting. The table includes the following responsibilities for MCO laboratories and physicians:

provide for specimen isolation and transportation to the Bureau in support of outbreaks of Salmonella, Shigella, E. coli, and other pathogens

submit isolates of TB to the Bureau for reference testing

submit all vaccine-preventable pathogens to the Bureau for confirmatory testing

submit blood specimens for all children to Bureau for lead testing

report all occurrences of TB and vaccine preventable illnesses to the local health department

MCOs also need to initiate and sign a memorandum of agreement with local health departments specifying that they will collaborate with key department initiatives.

While the RFP reflects the Bureau's input, Dr. Francis Downs, the Bureau's managed care coordinator, asserted there is still room for improvement in their involvement in the process of establishing reference testing and disease reporting requirements for MCOs. Dr. Downs expressed an interest in being able to talk directly to bidding MCOs, and to look at actual bids in order to evaluate the MCO's ability and willingness to comply with quality assurance and reporting standards; the Bureau performs neither of these activities in the current process. It is also unclear what role the Bureau will play in assuring compliance with disease reporting and specimen submission requirements, as well as assuring quality in laboratory services provided to the Medicaid population under managed care.

Other Relevant Findings

Regionalization

Consolidation of certain reference testing and surveillance services across a multi-state region was among the topics discussed. Dr. Martin identified a need for state lab directors to take a more active role in coordinating functions to maximize efficiency and quality of testing and surveillance. Dr. Martin cited molecular epidemiology, newborn genetic screenings, and parasitology as examples of specialized, esoteric testing functions best conducted across multiple states. He also identified the need for public health laboratory directors to take more responsibility in initiating regionalization, instead of relying exclusively on CDC leadership to set up and fund these activities. The Bureau currently serves as a CDC Sentinel Site for regional TB serotyping and surveillance.

User Fees

The Bureau performs most of its functions for free and is prohibited by state law from charging fees for services resulting in a net profit for the laboratory. Fees are used to subsidize patient-specific, clinically relevant tests that are standardized through the Bureau. For example, the Bureau charges $26 dollars per patient for conducting newborn screenings, which includes the cost of the card and the vial necessary for specimen collection and transportation, the cost of performing the tests, and follow-up and medical management; this is a substantial savings from the private sector, where the cost of PKU testing alone is nearly $10. Aside from improving the testing quality through standardization, centralizing newborn screenings through the Bureau also makes the provision more feasible. HIV viral load testing is another example of the Bureau's function as a centralized location for clinical testing. The Bureau performs viral load testing for around $75 per test, whereas the private sector charges between $150 and $300 for the same test.

Hospital Laboratory Consolidation

Consolidation of laboratory functions in the hospital laboratory sector is also under discussion in the Lansing market. The movement towards consolidating laboratory functions across hospitals and provider networks arose from the desire to co-contract for large employer-based health plan contracts. The Great Lakes Network is a potential arrangement where a group of hospital laboratories in the market would consolidate and coordinate testing functions among themselves, and the Bureau would serve as a regional MCO for a six county area. The Bureau would provide the esoteric, reference testing services it already performs (e.g., TB testing, TB serotyping, and HIV viral load testing) while also providing direction on how best tocoordinate testing and disease reporting within the network. Additionally, a representative of the coalition would potentially sit on the Bureau's advisory committee.

The Laboratory Services Market

Interviews revealed that the private sector laboratory market in Michigan, particularly in Lansing, is favorable to laboratory service providers relative to other regional markets. Competitive capitation rates for providing laboratory services for MCO beneficiaries hover around 80 cents per member per month, which is roughly twice the rate of other, more competitive markets. The interview with Ms. Sklapsky revealed that Sparrow Hospital Laboratory sub-contracts for reference and esoteric services with Mayo Medical Laboratories instead of less expensive laboratory providers such as Quest Diagnostics. Ms. Sklapsky cited Mayo's commitment to providing customers with consulting services, as well as philosophical reasons, for opting for the higher priced sub-contractor.

Conclusion

The Michigan Bureau of Laboratories is a useful model for other state labs seeking to shape managed care activities to be responsive to public health needs. By narrowly defining its testing functions to encompass only tests of public health importance or specialized tests best centralized for purposes of cost and quality, the Bureau has enhanced its ability to establish collaborative relationships with private sector laboratories as well as other state and local public health agencies. The Bureau has used this ability to influence state policy outlining the responsibilities of MCOs with regard to laboratory testing and disease reporting. Additionally, it has cultivated relationships with private sector laboratories to ensure that the Bureau can continue to serve its traditional public health functions even as hospital laboratory consolidation and other health system changes proceed. Aside from strategically avoiding competition with the private sector, the Bureau's success can be attributed to its commitment to advocacy on laboratory issues and its experienced leadership, which facilitates steady access to state funding and opportunities to participate in high level decision-making within the Department of Community Health.

Tennessee State Case Study

Background/Objectives

The Tennessee case study report consists of four sections: (a) PHL Interview Findings; (b) Private Clinical Laboratory Interview Findings; (c) MCO Interview Findings; and (d) TennCare Interview Findings.

The Tennessee case study focused on the experience of the state public health laboratory (PHL) with TennCare, the statewide Medicaid managed care program operating in Tennessee. Since TennCare's inception in January 1994, the state PHL has sought to obtain contracts with managed care organizations (MCOs) serving TennCare patients. The site visit consisted of four interviews with representatives from a number of organizations including: the state PHL, TennCare administration, a TennCare MCO, and a large private clinical laboratory. We met for four hours with Dr. Michael Kimberly, Director of the Tennessee state PHL, and his two assistant directors, who head the Microbiology and Environmental Laboratory divisions of the state PHL. The meeting included a tour of the Tennessee PHL facilities at the central office in Nashville. We then met with the following individuals for one to two hours each: Medical Director of TennCare, Vice President for Provider Relations of an MCO serving TennCare patients and contracting with the state PHL, and Regional Manager of a large private laboratory company operating in Tennessee.

The interviews were designed to gain a more thorough understanding of the following: (a) the TennCare contracts the state PHL maintains with three of the MCOs serving TennCare patients; (b) the political and financial issues surrounding the development of these contractual relationships; and (c) the impact TennCare and other health market changes have had on the Tennessee PHL. We met with a representative of the private laboratory industry to document the private laboratory environment in Tennessee. For all interviews, in addition to asking interviewees questions pertaining to their organizations' role in Tennessee's health care market and their relationships with the state PHL, we asked about their perception of the unique value (if any) of the state PHL.

Public Health Laboratory Interview Findings

Interviewees at the PHL included three laboratory officials: the Director of the Tennessee Public Health Laboratory, the Director of Public Health Microbiology Laboratories, and the Director of Environmental Laboratories. Our interview with these officials focused on following topics:

state public health laboratory infrastructure

managed care and public health laboratories

laboratory stakeholder interactions in the state

other health issues involving health market changes and PHLs

public-private collaborations in clinical laboratory services

unique value and the future of PHLs

State Public Health Laboratory Infrastructure

Tennessee's central state PHL is located in Nashville. The state also operates branch laboratories in Memphis, Jackson, Knoxville, and Johnson City. In total, Tennessee's state PHL staff consists of 186 full time equivalents (FTEs). The PHL's budget for FY 1996 was $9.5 million, and 95 percent of funding for state PHL activities in Tennessee is derived from state revenue. The laboratory originally requested a budget of $11.2 million, but has been regularly required to revert funding back to the state after certain budget line items (e.g., travel) have been frozen. In addition to these line item freezes, the state has required the laboratory to maintain a ten percent staff vacancy rate (i.e., no new hires) over the last several years. The PHLs budget from the state has remained constant since 1994, corresponding to reduction, in real terms, due both to inflation and the need for the laboratory to make accommodations for federal COLA adjustments. In the state legislature, while some public health services have been identified as possible candidates for privatization, no privatization of PHL functions has occurred. While the laboratory does generate fees for genetic and environmental testing services, the revenue from these tests is passed on directly to the state.

Scope of Laboratory Services/Core Laboratory Functions

The state PHL serves 89 state-run rural health departments and six metropolitan health departments, providing testing for their populations. The state PHL performs a range of testing, including: genetic screening, STD testing (e.g., syphilis, chlamydia, gonorrhea), HIV, TB, bacteriology (microscopy), immunology, and virology. In addition to conducting statewide genetic screening for Tennessee, the PHL conducts genetic screenings for the State of Mississippi, and (on a limited basis) for the nation of Colombia. In addition, the laboratory performs environmental testing services involving organic chemistry (i.e., pesticides, herbicides, PCBs), inorganic testing (including heavy metals, nutrients, air filters), and aquatic biology. The PHL also serves as a reference laboratory, performing speciation and typing of specimens. Finally, the PHL assumes responsibility for training its staff on state rules, regulations, and guidelines relevant to laboratory testing.

Laboratory Information System Resources/Process Automation

While the PHL has systems that automate environmental testing and newborn genetic screening tests, most microbiology testing at the laboratory is not yet automated. The comprehensive range of services offered and budgetary limits to the purchase of new equipment have precluded full laboratory automation.

The laboratory does not currently use a laboratory information system for microbiology testing services, however the laboratory is planning on contracting with the company that created the Patient Tracking Billing Management Information System to develop a system that will be able to electronically transmit billing, ordering, and other test specific information for the laboratory. The system will give the PHL electronic connectivity with all clients, including county health departments and the CDC (for the purpose of disease reporting).

The PHL currently operates a LMIS system for environmental testing services that has slowly replaced paper-based records within the laboratory (including branch locations). The state PHL reports that this system has contributed to improvements in test turn-around time. The system was paid for through the Department of Environmental Testing's equipment budget.

Managed Care and Public Health Labs

Prior to TennCare, there were no formal relationships between the PHL and any MCOs. With the creation of TennCare on January 1, 1994, the state cut local health department funding on the premise that patients who were previously cared for by the health departments would now be served by TennCare MCOs; this prompted state-run rural health departments to seek contracts with MCOs to serve as primary care providers, as did the metropolitan health departments. The state required the state PHL to obtain contracts with the MCOs for testing that it provides to TennCare patients. In 1995 the state PHL sought contracts with all of the (twelve) TennCare MCOs. However, it has only obtained three such contracts to date. These contracts were precluded, in part, by the fact that one MCO (Prudential) operates its own laboratory, and two other MCOs have exclusive arrangements with private laboratories.

The state PHL's three MCO contracts are very limited, covering only testing of specimens sent in from local health departments. In cases where confidentiality is paramount, the state PHL is often the provider of choice for local health departments, and in some cases, of private physicians. Prices were negotiated based on what Medicare had reimbursed prior to TennCare. As with all other user fees, revenues generated through these laboratory contracts are passed back to the state. The laboratory did not have a billing system to accommodate these tests, and subcontracted with the local metropolitan health departments to provide this function. Thus, for every test, the laboratory must pay the public health departments a $2.70 processing fee. The advent of TennCare, and the subsequent decreasing patient volume of the local health departments have resulted in a reduction in testing volume for the state PHL. The state PHL was not included in the TennCare planning process, and it feels that the limited contract opportunities that do exist are an "afterthought" to the entire TennCare planning process.

PHL Interactions with Other Organizations in the State

The PHL considers its relationships with the public health departments to be very strong. The laboratory considers its relationships with hospitals to be strong but often one-sided; when the hospital laboratories need assistance, they call on the state PHL, but the PHL reports that this situation is rarely reciprocated. The PHL also considers its relationship with the CDC to be somewhat one-sided in that it will often respond to CDC requests for assistance, but the PHL has difficulty obtaining information/assistance from the CDC. The state PHL believes that private laboratories consider the state PHL to be a source of competition for testing services. This is surprising to the state PHL because it does not perform clinical testing. In fact, the PHL reports that it has experienced hostility from private laboratories in the few situations where the laboratory has had direct contact with private laboratory personnel.

Public-Private Collaborations in Clinical Laboratory Services

According to the state PHL, no examples of public-private collaboration in clinical laboratory services have occurred in Tennessee.

Unique Value and the Future of Public Health Labs

The PHL confirmed the three core state PHL functions identified previously in this study. In addition, the PHL suggested that environmental testing services and the provision of testing services to the uninsured are part of PHL responsibilities.

The PHL believes that the future of state PHLs is in jeopardy and that they are an undervalued and vital public health resource. The PHL noted that when public health functions are operating effectively, the public is relatively unaware of them, and as a result, there is a lack of understanding of their importance. The future of the state PHL's core functions depends upon the ability of the lab to maintain a broad array of and capacity for more general laboratory services because specialized core functions cannot survive independently.

Private Clinical Laboratory Interview Findings

We spoke with the Regional Manager of a large private clinical laboratory serving the state of Tennessee and other regions of the United States.

Private Laboratory Practices and Resources

The private laboratory interviewed for this study performs 15,000 tests per day, and employs a 130 person staff in middle and western Tennessee. The laboratory operates two daily charter flights from Nashville (with a wide network throughout the state of ground couriers) to transfer samples on a daily basis to its central testing facility in Kentucky.

The private laboratory is automated in many areas of its operations, including billing, reporting, and tracking. In the future, the laboratory's information systems capability may become a service that provides analytic and information support to MCO clients.

Market Environment for Clinical Laboratory Services

There are three major independent clinical laboratories in the state. All laboratories provide the same basic services. The laboratories can be distinguished based on differences in the following support service criteria:

turn-around times

pick-up and specimen processing

pricing

LIS capabilities

ability to handle rapid response "stat testing"

The interviewee was unwilling to disclose specifics about the company's market share in the state. MCOs are increasingly requiring capitated laboratory contracts, which are financially unattractive for the laboratories. The more routine tests are often capitated (e.g., pap smears, urine tests, CBCs), whereas more specialized tests (e.g., oncology) remain fee-for-service. MCO business is treated as an opportunity for "pull-through" business. By offering services to managed care physicians, the laboratory gains access to testing for non-managed care patients. Private laboratories are lining up with hospitals to form alliances, and private laboratories are increasingly servicing clients in remote, rural areas.

Public-Private Collaborations in Clinical Laboratory Services

According to our interviewee, there are no collaborations in clinical laboratory services in Tennessee, and the lab does not see value in collaborations with PHLs.

Unique Value of the Public Health Labs

The interviewee had little formal understanding of traditional public health functions. The interviewee identified the role of the state PHL as serving as providers of testing services during disease outbreaks. The interviewee believes that even some of the traditional public health lab tests (e.g., rabies testing) could easily be taken over by private labs. The private laboratory felt that the state PHLs cannot offer the scope of services offered by private laboratories, and would have trouble competing on other factors such as price, capacity, and quality. For example, the state public health lab does not offer the specimen handling, economies of scale, capacity, or high service level that private labs offer.

Managed Care Organization Interview Findings

We spoke with the Vice President of Provider Relations for a managed care organization operating exclusively in Tennessee (primarily in middle Tennessee). The managed care organization offers commercial packages (serving approximately 260,000 members) and also serves 87,000 TennCare members.

Managed Care and Laboratory Services

The MCO provides medically necessary, non-experimental laboratory services to its members; these services are the same for both the commercial and TennCare MCO members. The MCO allows providers to use several different private and hospital laboratories in the state. Currently, the MCO contracts with any laboratory that will meet the MCOs fee schedule. In the future, the MCO may try to limit the number of laboratories in their network to negotiate better rates. The MCO also allows local health department (LHD) providers to send samples to the state PHL. LHDs are used by TennCare members of the MCO when there is a shortage of providers in an area. Additionally, a few select LHDs also provide specialty services where there is a shortage of providers.

The MCO is in compliance with all credentialing standards for its ancillaries, including the National Committee for Quality Assurance and CLIA. In terms of contracting, the MCO's contracts with labs are based on discounted fee schedules.

Managed Care and Public Health Laboratories

Relationships between Public Health Labs and Managed Care Organizations

The MCO does not consider the state PHL to be different from any private laboratory serving TennCare patients in that it believes that the PHL needs to market its services better in order to capture new MCO business. Furthermore, if the state public health lab wants to increase the amount of TennCare specimens, then the state public health lab needs to market its services.

Managed Care Environment in the State

HMO and PPO penetration in Tennessee is 18 to 20 percent. The interviewee believes that the state provides excessive regulatory oversight of MCOs within the TennCare network and that the state should minimize its role in the program once MCOs are awarded contracts. The MCO is currently reviewing its full-risk capitation contracts for laboratory services in order to determine their commercial viability for the future.

Unique Value of the Public Health Labs

The MCO interviewee had little formal understanding of traditional public health functions. The interviewee believes that the MCOs will perform more benchmarking, outcomes analysis, screening, and monitoring of their patient populations, and that this will largely replace public health monitoring activities. Although the state PHL provides specialty services such as serotyping, the MCO does not see any value in this information for its own strategic purposes. The interviewee felt that unless private labs are required by the state to perform some of the high-cost, unprofitable tests, the state public health lab will continue to have trouble competing in the Tennessee clinical testing services market.

TennCare Interview Findings

We interviewed the Medical Director of TennCare (Tennessee's Medicaid and managed care program) for this study.

Background

TennCare became operational on January 1, 1994. Originally there were 12 MCOs involved with TennCare. Today, there are 10 MCOs offering 11 plans (Blue Cross Blue Shield offers both BlueCare and BlueCare of East Tennessee) and a total of 1.2 million TennCare recipients.

TennCare provides a flat per member per month capitation rate to MCOs who provide the entire package of Medicaid services although long-term care and dual eligibles are carved out. The LHDs lost $15-20 million in funding with the implementation of TennCare under the rationale that previously uninsured patients would now be treated by TennCare MCOs instead of the LHDs.

The LHDs responded by obtaining contracts with TennCare MCOs to provide the following services: immunizations, STD screenings, family planning, TB treatment, and prenatal services. In addition, some rural local health departments (LHDs) geared up to serve as primary care providers. For years, LHDs had been real partners with Medicaid. Therefore, with the implementation of TennCare, LHDs worked almost immediately to develop relationships with TennCare MCOs. In contrast, according to TennCare, since the state PHL did not want to become revenue dependent, the PHL did not actively pursue similar relationships with MCOs. For example, our TennCare interviewee noted that the PHL did not and has not developed a billing system for tracking TennCare specimens and payments.

MCO contracting

All ancillary services for TennCare members are the responsibility of the MCOs. Our TennCare interviewee confirmed the points on laboratory service contracts that our MCO interviewee had made. The MCOs have developed a number of sub-contracting relationships (e.g., dental, pharmacy, laboratory services) to meet these needs. These sub-contracting relationships are a combination of fee-for-service and capitation. In terms of laboratory services, MCOs initially used any number of labs, but the current trend is increasingly towards exclusive relationships with large private labs. For example, LabCorp currently has an exclusive contract to perform all of the testing for state government facilities, including LHDs, in Tennessee.

Lab Stakeholder Interactions in the State

TennCare's interaction with the state PHL has been minimal. Most of TennCare's interaction with the state PHL occurs indirectly through the local health departments. Because TennCare contracts with MCOs for all medical services, TennCare administration does not work directly with laboratory stakeholders.

Future of TennCare

For the first two and a half years of TennCare, the state worked on developing a system for capturing accurate utilization data from the MCOs. Now the state is beginning to use this information for quality assurance analysis. TennCare will be able to create utilization patterns and profiling by MCO, regions, and providers at a very high level of detail. They are developing report cards based on core indicators, and laboratory testing is likely to receive some attention. The state is taking steps to revise the finances of TennCare to maintain financial viability and to re-open enrollment for the uninsured populations (currently, enrollment is limited to Medicaid eligible patients).

Unique Value of the Public Health Labs

Our interviewee felt that the state PHL needed to refocus its operation to better suit the needs of the market. The lab cannot continue to work as before because they need to adapt to the managed care environment. Operationally, this may require the lab to rethink its position of lack of reliance on user fees as a funding source. The state PHL does have an important role in ensuring patient confidentiality for certain types of tests. In addition, the PHL is also important for supporting some of the core functions of the public health community. Our interviewee also validated the core functions of PHLs. Finally, our interviewee noted that for some of the PHL's major core functions, such as outbreak surveillance, the lab needs to maintain a broad array of and capacity for more general laboratory services because specialized lab functions cannot survive independently.

Washington State Case Study

Background/Objectives

We interviewed the following individuals during our site visit to Washington State:

Dorothy Canavan, Lab Manager, Dynacare

Jon Counts, Dr.P.H., Director, Public Health Laboratories

Jac Davies, Health Services Administrator, Public Health Laboratories

Daniel Jernigan, Medical Epidemiologist, Public Health Laboratories

Paul Stehr-Green, State Epidemiologist, Department of Health

Jon Counts, Dr.P.H., Director, Public Health Laboratories, articulates clear goals for the public health laboratory in Washington state: (1) shift routine clinical testing to the private sector unless there is a direct role in enhancing community health or quality control; (2) provide efficient and cost effective service when the lab does engage in testing; and (3) play a leadership role in developing health policy and directing the evolution of Washington state's laboratory infrastructure. Of particular note (discussed in detail below) is the formation of the Clinical Laboratory Advisory Council (CLAC), a mechanism for facilitating dialogue between the public and private sectors, which Washington uses as a proving ground for achieving all three primary goals.

Public Sector

Financially, the state public health laboratory has been stable over time. Overall, Dr. Counts reports that the budget has remained about constant over the past 5 years, while the number of FTEs has dropped modestly to maintain COLA and other increases. Dr. Counts believes that the lab should not be reliant on user fees and charges only for newborn screening, and drinking water microbiology; fees account for less than 15% of the total budget. Capital acquisitions have not posed a problem -- the lab sets an acquisition plan annually, and does not feel constrained. Capital acquisition sometimes relies on lease / purchase plans, or sometimes relies on financial assistance from the CDC.

In keeping with its philosophy of avoiding patient testing, the lab provides no testing for cancers and hyperlipidemia. It does provide some STD, HIV, and TB testing in association with public health programs. Test volume for TB and E. coli in food have been rising due to increased incidence and lab consolidation. The lab also provides water, radiation, and blood lead testing around clinical studies; environmental chemistry test volume is decreasing as compliance testing is reduced. Chlamydia test volume has increased dramatically because the PHL is currently working on a study funded by the CDC. The lab provides inexpensive newborn screening for all infants born in Washington State, and volume has increased modestly due to population growth.

One of the primary issues facing the lab currently is testing for tuberculosis. The public health laboratory believes that most labs are not using the appropriate technology and do not have sufficient test volume to support the cultivation of expertise. As a result, samples have been shuttled between sites resulting in significant delays in diagnosis and increased exposure. This issue has been discussed through the CLAC, and the Director is currently crafting a plan through which only 6 facilities (2 state and 4 hospital) would serve as core testing facilities. The PHL would continue to serve as a reference testing lab. Centralization of doing sensitivity testing is a core aspect of the Director's vision for the delivery system.

Organizationally, PHLs reside within the department that houses the Office of Epidemiology, and report to the same Assistant Secretary within the Department of Health. While organizationally distinct, the offices work closely together, particularly on issues of infectious diseases. Of note, the Office of Epidemiology and the Labs also share information technology support. It is also important to note that the PHL is organizationally distinct from the Office of Laboratory Quality Assurance, although the two offices communicate frequently. Offices within the state PHL include:

clinical and environmental microbiology

environmental and radiation chemistry

newborn screening

operations and technical support

The interrelationships between the PHL and the Office of Epidemiology in addressing public health concerns has been illustrated in responding to outbreaks, including the Jack-in-the-Box and Odwalla Apple Juice E. coli 0157 outbreaks. During the 1993 Jack in the Box outbreak, testing occurred in the public health lab, but additional testing was carried out by the FDA, the University of Washington, Children's Hospital, and the Seattle / King County laboratory. The state PHL worked closely with the Office of Epidemiology, which assumed overall responsibility for the state's investigation.

In keeping with its goal of promoting efficient use of resources, the lab has also attempted to reduce duplication in public laboratory testing. The state PHL facilitated discussions between all government laboratories in the area, including federal laboratories (e.g., the FDA has a regional lab in Seattle), state laboratories, and university laboratories, and also published a directory of services. There is still significant redundancy in testing, although some duplication is necessary to ensure continuity of services.

The PHL has devoted significant time and resources to education and outreach. The primary venue for such activities is the Clinical Laboratory Advisory Committee (CLAC), described below. The PHL also publishes a free monthly newsletter entitled "Elaborations" to educate labs throughout the state on issues of public health importance, and to further the agenda of the CLAC. For example, a recent edition focused on tuberculosis in Washington State, and included an overview of TB with general statistics from the CDC and other sources, an article on advances in mycobacterium testing, and a practice guideline for TB screening derived from CDC guidelines and other publications.

Private Sector

The private market for laboratory services has not evolved as rapidly as it has in other states. The system is highly fragmented, with 1,300 physician office labs, 131 hospital labs, 97 commercial labs, 36 HMO labs (considered hospital-based labs for the purposes of regulation), and 279 ambulatory and community health clinic / local health department laboratories. SmithKline, LabCorp, and Dynacare are the three largest commercial labs in the state, but none is dominant -- each holds less than 20% of the total testing market. The aggressive capitation rates for lab services observed in some parts of the country (e.g., $0.30 PMPM) have not yet emerged in Washington.

Dynacare is a large full-service laboratory that agreed to be interviewed for this study. With over 500 employees, the lab performs primary patient care testing for Swedish Hospital, serves as a reference laboratory for the Hutchinson Cancer Center, and also performs a significant amount of contract testing for clinics, other hospitals, and physicians. Dynacare also serves as a National Institute of Drug Abuse (NIDA) laboratory, completing pre-employment drug testing and random screening for DOT and other state agencies in compliance with the drug-free workplace regulations. The laboratory has been very cautious about taking on capitated contracts, and has lost some managed care contracts to large commercials as a result.

The dominant player in managed care is Group Health Cooperative of Puget Sound (GHC). The PHL has a strong historical relationship with GHC; currently, GHC sits on the CLAC and is also working with the Office of Epidemiology and the PHL on an automated laboratory reporting system funded by the CDC (described below). Other MCOs are present, but those interviewed characterized the market as being in the early stages of managed care market penetration.

The Clinical Lab Advisory Council

The Clinical Lab Advisory Council (CLAC) is an innovative venue for shaping the laboratory delivery system in the State of Washington. The CLAC was created by Jon Counts, Dr.P.H., the state PHL director, in cooperation with the Office of Laboratory Quality Assurance and a range of private laboratory interests in the state. The CLAC was initially conceived as a response to the fragmented laboratory system and the need for dialogue between stakeholders in the laboratory community. It currently serves to address these needs, as well as a range of other issues raised by membership.

Council membership is composed of 16 representatives of the following groups: (1) major lab professions (i.e., lab scientists, lab managers, medical assistants, pathologists); (2) managed care organizations; (3) hospitals; (4) physician office laboratories; (5) independent labs; (6) other health or medical associations; and (7) the state department of health. Full meetings of the CLAC occur periodically. In addition, the Council has appointed advisory work groups to develop recommendations on issues such as:

structure and integration of the laboratory delivery system

practice guidelines / use of clinical labs in medical decisionmaking

Laboratory Information Systemsreimbursement issues, including treatment of specific tests

licensure of laboratory personnel, training, and credentialing

the role of the PHL relative to core public health function

emerging science policy (e.g., genetic and point of care testing)

Both public and private sector interests indicate that they have benefited significantly from the CLAC. The PHL also uses key members of the CLAC informally as a sounding board to test likely reaction to new laboratory policies and procedures.

Practice Guidelines

One of the areas of focus for CLAC has been practice guidelines (Washington PHL Newsletter, Elaborations, April 1996). The purpose of the guidelines has been to assist private laboratories in achieving appropriate levels and approaches to testing. The guidelines were prepared by PHL staff, a consultant (John C. Blanchard), and panels of clinical experts. Activities have included the formulation of clinical laboratory guidelines for testing in a variety of areas, including:

Tuberculosis (April/May 1997 Elaborations)

PSA / Urinalysis (March 1997 Elaborations)

Hepatitis (November 1996 Elaborations)

Dynacare indicated that these guidelines have been widely used. The PHL is currently studying usage of the thyroid and lipid guidelines in two large clinics, under the direction of Leonard Kargacin from the PHL.

Reimbursement Support

The CLAC also provides a venue through which labs can clarify and pursue reimbursement issues with the knowledge of state health officials. While the state takes no position on the level of reimbursement, the goal from the PHL's perspective is to help shape the reimbursement environment to promote cost-effective testing. The goal of this effort from the private laboratory perspective is to enhance the reimbursement environment through wider coverage of tests. The CLAC has been instrumental in facilitating discussions with Aetna and Medicaid on issues of reimbursement. In fact, the PHL reported that Aetna suggested that they may use the CLAC guidelines as a basis for reimbursement. This access has helped maintain and build enthusiasm for CLAC among private sector members.

Washington Clinical Laboratory Conference

The CLAC also runs an annual conference, in which it convenes public and private laboratory experts (e.g., from commercial labs, MCOs) to discuss various issues related to clinical laboratories. This venue enables the CLAC to set the agenda for discussion, and to promote rationalization of laboratory system in Washington State.

Managed Care and Public Health Laboratories

The PHL lab has historically had a strong relationship with the Group Health Cooperative of Puget Sound (GHC), and is actively working with them on a CDC-funded project on laboratory reporting (described below). In addition, relationships with primary managed care interests are being nurtured through the CLAC, and the PHL also informally monitors MCO activity.

Beyond these efforts, managed care, per se, is not a direct focus of the PHL's activities. Consistent with the philosophy of leaving patient care testing to the private sector, the state PHL has no contracts for services with managed care organizations, and no desire to initiate them. In addition, MCOs still enroll a small minority of the population in Washington, and there are no major laboratories that operate solely in the context of managed care. Of course, most hospital and commercial labs in the state do have capitated managed care contracts, and therefore interact with MCOs.

The Director anticipates that as MCOs' presence grows, the PHL will assume a leadership role in establishing relationships. They will look to the activities in Michigan (e.g., use of the managed care contracting process to promote compliance with basic public health goals, assignment of a managed care coordinator) as one model. Going forward, areas for collaboration with MCOs might include:

electronic reporting of lab results with public health interest

establishment of clinical practice guidelines for testing

lab testing policies -- quality improvement / quality control

outbreak investigation and disease surveillance

Laboratory Information Systems

The PHL is also involved in the creation of an innovative system for electronic disease reporting between private laboratories and the state health department. The goal of the system is to automate reporting in hopes of lessening the burden of reporting, improving the accuracy, and expediting reporting. The Washington State Office of Epidemiology has a grant from the National Center for Infectious Disease (NCID) at the Centers for Disease Control to pilot the system. The Office of Epidemiology is working closely with the PHL (under the leadership of Jac Davies), Group Health Cooperative and Laboratory Pathology Associates on clinical and technical issues involved in automated reporting. Current issues being addressed by this project include establishing a mechanism for data transfer between private sector and public sector organizations and developing protocols for data recording and encryption / maintaining confidentiality of records.

The PHL is also involved in internal efforts to improve information systems. Internal systems have been developed to track specimens and support some types of investigation. The state PHL recently obtained NeoMetrics, an automated system for use by PHLs in tracking neonatal screening samples (16 other states have this software currently). The PHL also recently obtained the Laboratory Information Tracking System (LITS) from the CDC, and is experimenting with this system.

The PHL's long-standing interest in LIS issues also led to the establishment of a medical informatics group. With representation from the University of Washington, and other interested organizations, the group runs a conference that facilitates communication across multiple stakeholders.

The longer-term vision, as articulated by Jac Davies, Health Services Administrator, Public Health Laboratories, is to develop a comprehensive and integrated LIS that could facilitate epidemiologic surveillance as well as public health case support. The vision includes development of common community health indicators that could be monitored on a real-time basis to improve public health. Such a system would clearly require cooperation from other offices within the state department of health, and the state has established a working group to support this vision. The current grant from CDC is a step in this direction, and we expect that Washington will be a cutting edge state in the development of such a system in the future.

Endnotes

¹ MeSH is the controlled vocabulary of some 18,000 terms used by the National Library of Medicine for its bibliographic databases, including MEDLINE and HealthSTAR. MeSH is a hierarchical controlled vocabulary arranged in a tree structure, in which broader MeSH headings lead to more specific MeSH headings.

² Institute of Medicine, Committee for the Study of the Future of Public Health Division of Health Care Services. The Future of Public Health. Washington, D.C.: National Academy Press, 1988.

³ Dowdle WR. The future of the public health laboratory. Annual Review of Public Health. 1993;14: 649-64.

⁴ Association of State and Territorial Public Health Laboratory Directors. Core functions of public health laboratories: a report to the Association of State and Territorial Public Health Laboratory Directors by a task force. Washington, D.C.: Association of State and Territorial Public Health Laboratory Directors, 1995.

⁵ Warren NG and Cordts JR. Activities and recommendations by the Association of State and Territorial Public Health Laboratory Directors. Clinics in Laboratory Medicine. 1996;16(3): 731-743.

⁶ While our report refers to the D.C. lab as a state lab, its capabilities and operations have traditionally been more characteristic of a local health department lab.

⁷ CDC, Division of Laboratory Systems homepage; www.cdc.gov/phppo/dls/institut.htm, 1997.

⁸ Dowdle WR. The future of the public health laboratory. Annu Rev Publ Health. 1993;14:649-64.

⁹ CDC Case Definitions for Public Health Surveillance, 1990.

¹⁰ MMWR Staff. Defining the public health impact of drug resistant Streptococcus pneumoniae: report of a working group. 1996;45(RR-1).

¹¹ Skeels M. Public health laboratories build healthy communities. Laboratory Medicine. 1995;26(9): 588-592.

¹² HCFA(now known as CMS) homepage, www.hcfa.gov/medicare/hsqb/clia.htm, 1997.

¹³ American Society for Microbiology homepage, , 1997.

¹⁴ Goldman Sachs. Quest Diagnostics Incorporated, a turnaround story. Goldman Sachs U.S. Research. 1/7/97.

¹⁵ Goldman Sachs, 1997.

¹⁶ Cortese L and Kissel E. Competitive strategic positioning of national clinic reference laboratories in response to managed care. Clinical Laboratory Management Review. 1996: 545-550.

¹⁷ Diller W and Erickson D. To consolidate or network?: for laboratories, that's the question. In Vivo. 1996;14(4): 30-37.

¹⁸ STAT is an acronym for on site immediate turn-around test. ¹⁹ Forrey AW, Clement JM, DeMoor G, Huff SM, Leavelle D, Leland D, et al. Logical observation identifier names and codes (LOINC) database: a public use set of codes and names for electronic reporting of clinical laboratory test results. Clin Chem. 1996;42(1): 81-90.

²⁰ Bean N, Martin S, and Bradford, H. PHLIS: An Electronic System for Reporting Public Health Data from Remote Sites. American Journal of Public Health 1992, Vol 82 No 9.

²¹ Mendelson DN, Salinsky EM. Health information systems and the role of state government. Health Affairs. 1997;16(3): 106-119.

²² Massachusetts State Laboratory Institute Website: www.magnet.state.ma.us/dph/bls.htm, 1997.