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:
- 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.
- 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.
- 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
- 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.
- 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.
- 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.
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.
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.