Economic Impact of a Computer-based Centralized
Organization in a Clinical Laboratory
BERL NUSSBAUM, M.D., TATE MINCKLER, M.D., ROBERT ROBY, M.S.E.E., AND EUGENE ACKERMAN, Ph.D.
Nussbaum, Berl, Minckler, Tate, Roby, Robert, and Ackerman, Eugene: Economic impact of a computer-based centralized organization in a clinical laboratory. Am J Clin Pathol 67:
149-158, 1977. The Department of Laboratory Medicine,
University of Washington, has explored various management
and organizational approaches over the past seven years. The
Centralized Processing Area supported by a computerized
information system has evolved from these efforts. Despite a
decrease in U.W. hospital usage since 1968-69, laboratory
volume hi;s steadily increased. The cost of these services is
shown in relation both to three successive management systems
and to the impact of inflation on laboratory costs. Chemistry
and hematology costs per procedure, including administration
and computer costs, are compared with microbiology cost per
procedure, where the management system was not used. There
is growing acceptance of the intangible benefits of computerization in the laboratory. Economic benefits are often presumed
but have not been proven. Favorable economic effects of the
Centralized Processing Area together with the computerized
information system are demonstrated. (Key words: Computer;
Automation; Information system; Economics of computerization.)
Department of Laboratory Medicine,
University of Washington, Seattle, Washington 98195
Some authors have written about evaluation of
computer systems, 26 and others about medical systems
and technology. 12 ' 131517 ' 25 Particular attention should
be called to two papers by Flagle 9,10 that we have found
most useful in understanding the complexity of
evaluation of technologic systems used in health care.
The current paper is concerned with the economic
impact of the computer systems within the clinical
laboratories that are operated by the Department of
Laboratory Medicine at the University Hospital and at
Harborview Medical Center. It is not possible to
distinguish between the impact of the computer-based
information systems per se and that of the laboratory
organization necessary to make optimal use of these
systems. Within this limitation, it is our hypothesis that
the use of computer technology has led to reduced costs
per test simultaneously with the provision of a wide
variety of benefits to the medical staff using the
laboratory results. It is our hope that by providing
specific data, the methodologies described can be used
to compare the performances of other systems and
other clinical laboratories.
COMPUTER-BASED INFORMATION systems have
become a part of a variety of health care delivery
systems. The era when such applications were of
interest for their novelty and their promise of future
benefits is long past. Rather, the real current benefits
of such systems have been well documented. 3_s,na4,23 ' 24
However, less is known about the economic impact
of automated information systems on the clinical
laboratories in which they are embedded. Only a few
investigators have presented such evaluations. 2 ' 16 ' 22 On
the other hand, the number of papers dealing with the
importance of evaluation of medical systems is large.
Methodology
Received July 29, 1975; received revised manuscript March 25,
1976; accepted for publication March 25, 1976.
This study was performed while Dr. Ackerman was on a year's
sabbatical leave from the Department of Laboratory Medicine and
Pathology, University of Minnesota, Minneapolis, Minnesota 55455.
Dr. Minckler is presently Administrator, Pathologist, Mad River
Community Hospital, Areata, California.
Address reprint requests to Dr. Nussbaum.
149
It is possible to take a variety of approaches to the
evaluation of the economic impact of automation in the
clinical laboratories. Probably the most important is to
determine the effects on the care provided to individual
patients. This, however, is far beyond any means
available today. A related approach is in terms of costbenefit ratio. This implies some method of assigning
monetary values to the various benefits obtained by use
of a computer-based information system. While this is
possible in theory, it involves major subjective judgments.
150
A.J.C.I'. . February 1977
NUSSBAUME7/1Z,.
Alternative approaches more closely related to a
cost-effectiveness ratio are discussed by McLaughlin.16
We have followed some of the types of approaches
recommended by him. Specifically, we have used cost
per determination and cost per patient day as important
variables. Cost as opposed to revenue seems significant,
because revenue involves administrative decisions
having little direct bearing on laboratory performance.
Total cost of laboratory operations is confounded by
the changes in total numbers of tests performed. Cost
per labor hour is also difficult to delineate based on
the records available, although in a prospective study
this would seem an important measure. Thus, the measures described in the previous paragraph have proven
most useful.
In some analyses of economic impact a micro approach is taken, wherein the unit cost of each specific
type of determination is considered or even subdivided
further. McLaughlin mentions that a macro approach,
lumping the costs of large subsections of the laboratory,
is more useful. This is particularly true due to the widespread and multifaceted interactions of a computerbased information system with the clinical laboratory.
Our report differs from McLaughlin's study, however,
in several respects. One is the availability of appreciable longitudinal data. Another is the existence of an
internal, largely non-automated, laboratory, which provides a certain measure of control. A third is that due
to the staggering rate of inflation in recent years, we
have provided data both as raw dollars and as constant 1969 dollars.
Our basic approach in this study has been to examine
cost and census data for each fiscal year, starting with
1969 (July 1, 1968, to June 30, 1969), one year prior
to the installation of the first computer system, and
ending with 1975 (two years after the installation of the
current system).
The raw data consist of: (a) laboratory direct costs
and number of procedures performed (SMA-12 battery
= one procedure, urinalysis = one procedure, etc.),
which were obtained (with breakdown by division
where necessary) from annual laboratory reports and
other financial records; (b) total admissions, census
days and outpatient visits, obtained from annual hospital
reports. Each of our final measures (average cost per
procedure, tests per patient day, etc.) is derived by
calculation from these raw data.
Several major features of these data should be noted.
First, only direct laboratory costs are included, since
figures for such laboratory necessities as space, light,
heat and power (indirect costs) are both arbitrarily
assigned by the hospital and difficult to obtain. Second,
few major capital equipment purchases occurred during
the period of the study: (a) Coulter S and GeMSAEC
analyzers at University Hospital in 1969 and 1973, respectively, and an SMA 12/60 at Harborview in 1971.
These are included in our figures. However, the cost of
each is depreciated over ten years; as such, capital
equipment expenditures represent less than 2% of
laboratory costs during any single year. Third, the portion of faculty salaries paid from the Laboratory Medicine budget is included. As the faculty has grown in the
years of this study, so has this absolute cost increased.
However, since the increase has been proportional to
the rest of the laboratory budget (and since faculty are
certainly in a position to influence laboratory efficiency!)
we have chosen not to exclude all faculty salaries from
our figures.
In addition, billing data have been excluded since
they indicate more about administrative assessment of
typical charges in the community than how the laboratories function.
Before looking further at this information, it is helpful
to have an overview of the hospitals, the laboratories,
and the information systems involved.
Hospital Setting
The University of Washington has two primary
teaching hospitals: University Hospital (UH) and
Harborview Medical Center (HMC). University Hospital, a 297-bed facility, is the major referral center for
the Western Washington region. It is physically
proximate to the University of Washington School of
Medicine, and has a clinical research service that
admits 300-500 patients per year. Other notable features include a newborn intensive care unit and an
active transplant surgery department. Admissions have
been approximately stable at about 10,000 per year,
while outpatient visits have increased in this period.
Harborview Hospital is a 245-bed county hospital
(down from 364 beds in 1968-69) serving Seattle.
Like the University Hospital, it has a small clinical
research center. However, it has no obstetrical or
newborn service and no inpatient pediatric service;
it has a satellite neighborhood clinic, a busy emergency room, and a walk-in clinic, which together see
nearly 50,000 patients per year. Admissions, most of
which are through the emergency room, have declined in this period. Combined statistics for the two
hospitals are discussed in detail later.
Clinical
Laboratories
The University of Washington Department of
Laboratory Medicine (separate and distinct from the
Department of Pathology) operates the laboratories at
both Harborview and University Hospitals. Thus,
within a single department there is considerable overlap
in tests performed at the two sites, particularly in
Vol. 67 . No. 2
ECONOMICS OF COMPUTERIZED LAB OPERATION
general chemistry and hematology, e.g., both hospital
laboratories have Coulter counters and 12-channel
AutoAnalyzers. On the other hand, all coagulation
and immunology tests are done at the University
Hospital, while all toxicology tests are performed
at Harborview.
From the fiscal point of view, there are five major
divisions of the Department of Laboratory Medicine
with which this study is concerned: Chemistry, Hematology, Microbiology, Computer, and Administration.
A significant feature here is the further separation
of the first three divisions into routine and developmental units. The developmental units include Coagulation, Genetics, and Hemolysis (whose fiscal data
are included under Hematology), Immunology and
Steroids (whose data are included under Chemistry)
and Virology (included with Microbiology). In a real
measure, the existence of the developmental laboratories allows the entire Department of Laboratory
Medicine to fulfill its mission as part of a university
health sciences teaching complex. Several economic
features distinguish these developmental laboratories.
One is the purchase of some equipment that is
included in our direct cost figures completely within
the year of the purchase. Another is the intensive
use of technologists in test development. This results
in very low numbers of procedures per technologisthour and very high direct costs per procedure as
compared with the routine laboratories.
Central Processing Areas
In an effort to streamline laboratory specimen and
data flow and to obviate performance of clerical and
nonanalytic tasks by registered medical technologists,
a computer-assisted Central Processing Area has been
established at each hospital. Staffed by certified laboratory assistants or the equivalent, the Central Processing Area performs virtually all laboratory functions
except specimen analysis and entry of results into the
computer.1820 These functions include blood drawing
and separation of serum, log-in of patient and specimen
data to the computer at time of receipt, distribution
of specimens and worklists to the various laboratories
and of reports to the floors, clinics and physicians,
and telephone handling and information service. Of the
160 full-time equivalent persons employed in the two
laboratories (1973-74), 35 are central processing
technicians.
The overall organizations of the Central Processing
Areas are virtually identical for the two hospitals.
Differences in the day-to-day operation of the two
laboratories arise from the differences in the hospitals.
Thus, University Hospital, being larger and a referral
151
center, tends to have a higher volume (about 650
requests/day, 25% stat) and a more efficient hospital
communications system. Harborview, by contrast, has
a significantly higher percentage of stat laboratory
requests (about 35% of total volume) and a smaller
volume (about 450 requests/day).
Reports and Specific Computer Functions
Among the principal benefits of the computer system
is the large variety of report formats available for
both hospital and laboratory use. A cumulative summary is printed daily for each patient and placed in
the patient's chart. In addition, interim reports containing only new data (for ward or clinic use) are
printed once or twice a day. Reports are printed
several times a day for all tests requested in the
"TODAY" category (expedited handling). Physician
reports are printed daily. Finally, upon completion of
all of a patient's tests a chartable discharge report
that becomes part of the patient's permanent record
is generated.
Within the laboratory, printed worklists and specimen lists are made periodically through the day.
Pending test lists are made daily. A blood collection
list is made twice daily, and specimen labels are
printed at the time of log-in.
Cathode-ray tube terminals (CRT) are used by
Central Processing Area staff to inquire into patient
records when information requests are received by telephone. Finally, a cartridge disk copy of all system
information is made several times a day, to function
as a back-up in the event of a system failure.
Microbiology Division
The Microbiology Division operates completely independently of the computer of Central Processing
Area. It currently maintains its own specimen handling
and records at each hospital; billing and reporting
are done manually. Within the next two years, it is
anticipated that microbiology will be incorporated into
the computerized operation. For the purposes of this
study, however, it functions as an internal control.
Computer Systems
The original laboratory computer, which began
operation in March 1970, was a batch-oriented system
based on an IBM 1800 processor. This system, which
supported both Harborview and University Hospital,
provided several laboratory computer functions for
Chemistry but provided only billing for Hematology.
The FORTRAN application programs were developed
by the Computer Division staff, which at that time
152
A.J.C.I'. . Fchn n> 1977
NUSSBAUMET/tZ..
I
300
200
280
190
260
180
18.0
240
170
17.0^
220
160
16.0
200
150
15.0
20.0
69
&
<f
~~-A
70
71
72
73
Fiscal year
•£>
74
75
FIG. 1. Hospital use at the University of Washington. These data
show changes from 1969 to 1975 in admissions, census days, and
outpatient visits. The values shown on this figure as well as all
other figures in this paper represent combined data for the University
Hospital and Harborview Medical Center.
consisted of two programmers and four computer
operators. Laboratory Administration provided three
keypunch operators, for a total of nine full-time
equivalent persons directly involved with computer
operations. The system functioned well, but by late
1971 it was evident that the growing laboratory workload would soon exhaust its capabilities, and a search
for a new system was instituted.1"
This search culminated in the selection of a system
offered by Automated Health Systems, Inc. (now Advanced Medical Services).1 It was decided to install
individual Automated Health Systems computers at
Harborview and University Hospital. Due to advances
in mini-computer technology, the cost of both new systems was less than the cost of the single original system. Moreover, because the new systems were more
compatible with the Central Processing Area concept,
fewer computer personnel were needed to maintain and
operate the new system. At the present time the direct
computer staff consists of four full-time equivalent
persons: a computer systems manager, two programmers, and one maintenance specialist.
Because the computer system configurations at the
two hospitals are very similar, a description of the
Harborview system will suffice. The basic hardware
consists of Digital Equipment Corporation PDP-11/45
processor with 28K of core memory. Peripheral devices include a fixed-head disk system (one million
16-bit words), two cartridge disks (2.4 million 16-bit
words), a seven-track magnetic tape, a 350-line/min
line printer, a label printer, eight on-line cathode-ray
tube terminals, and two teletypes. Data acquisition
from automated laboratory instruments (SMA-12/60,
Coulter Model S) is supported by the PDP-11/05 preprocessor interfaced with the main processing unit.
The operating system is a multi-user single-language
system known as MUMPS (Massachusetts General
Utility Multiprogramming System). The application
programs, known collectively as MULTILAB, provide both laboratory computer functions (some of
which have already been described) and management
information functions, including billing and usage
statistics.
The billing functions are initiated at the time of log-in
of each specimen, and culminate in the daily production
of a magnetic tape, which is conveyed to the hospital
computer system for integration with the rest of the
patient charges. Special MULTILAB programs exist
to permit crediting and billing for grants, to provide
for outside hospitals and for unusual tests, and to print
cumulative lists of such transactions.
Tallies of laboratory tests, categorized by request
priority (stat, today or routine), test name, patient
location (inpatient or outpatient or outside hospital),
and laboratory division (chemistry, hematology, immunology, etc.) are printed daily. Other functions
include daily patient tally by ward and monthly divisional tallies.
Throughput times (time between log-in and completion) for a variety of laboratory functions (e.g., blood
gases) and computer error trap (a listing of all program errors occurring during the preceding 24 hours)
are available. Many of the foregoing are performed
2.00n
1.75
-6
1.25-
0.75-
0.50
0.25
FIG. 2. Intensity of laboratory usage. Over the period fiscal 1969
to fiscal 1975 there has been an approximate doubling in both
procedures per inpatient day and procedures per outpatient visit.
153
ECONOMICS OF COMPUTERIZED LAB OPERATION
Sol. 67 • No. 2
during the so-called midnight function, a nightly
supervisory program lasting several hours that coordinates a variety of discharging, editing, tallying and
condensing functions.
Mathematical, administrative and tab data functions
are available for use at any time, and provide capabilities for, respectively, calculations, examination or
alteration of patient demographic or administrative
data, and examination or alteration or addition of
tests, test filing structure or codes.
4 50-1
4.00
/
s
3.50-
3.00-
J/
2.50-
Results and Analysis of Data
A Hematology
• Chemistry
Hospital Baseline Statistics
The evaluation of factors affecting laboratory
economics is complex, due in no small part to the everchanging milieu in which the laboratory functions.
Among the more significant influences are some general
hospital characteristics that have been in flux over the
period of this study. In company with many hospitals
across the country, the University of Washington has
experienced a shift from horizontal toward vertical
health care, that is, from inpatient to outpatient
emphasis.
Figure 1 illustrates a tendency to declining annual
admissions (a 10% decrease over the seven years),
and an even larger decline in inpatient census days
(15% decrease). The relatively larger decrease in
census days is due to constant pressure to shorten
°
•
A
*
600-i
Total lob procedures
Chemistry divisions
Hematology divisions
Microbiology divisions
<3
400
300-
1.50100-
0 50
71
72
Fiscal Year
FIG. 4. Costs per procedure. The curves express the costs of the
chemistry, hematology and microbiology divisions, as well as the
lumped administrative costs associated with all three of these and
the computer costs for the chemistry and hematology divisions.
Data for both routine and developmental laboratories are included.
All data are expressed as cost per procedure.
Intensity of Laboratory Usage
200
100T
69
<§
the average stay of each inpatient. The average stay
during the two-year period 1968-70 was 9.5 days,
whereas during 1973-75 the corresponding figure was
8.5 days.
Also shown in Figure 1 is the increase in outpatient
visits from 238,000 in 1968-69 to 248,000 in 1974-75.
The additional 10,000 annual outpatient visits represent a 4% increase.
500-
|
* Microbiology
D Administration (CPA + )
• Computer
2.00-
70
72
Fiscal
73
A-
*
74
75
Year
FIG. 3. Laboratory procedures per year. Illustrated are time
courses of the changes in laboratory procedures per year in the
clinical laboratories of the University of Washington hospitals. The
curves show the totals for fiscal 1969 through fiscal 1975, as
well as the separate values for the major divisions, namely chemistry,
hematology, and microbiology.
The intensity of use of laboratory procedures as
shown in Figure 2 has more than compensated for declining admissions. Because of this, the trend of laboratory volume has been upward. Figure 3 demonstrates
that all areas of the laboratory have participated in
this increasing volume, although in different proportions. Total laboratory volume has increased about 62%
in the seven-year study period; however, in each of
the last two years the annual volume increase exceeded
10%. The combined Chemistry Divisions have seen a
95% increase, while the combined Hematology Division volumes have increased only 34%. In both these
Divisions the principal changes have occurred in the
A.J.C.P. • February 1977
NUSSBAUM£TAL.
154
4.00-
tenance of the two laboratory computers and related
gear, paper and supplies, and the salaries and fringe
benefits for the computer staff. The total of these
direct expenses is divided by the combined total of
Chemistry and Hematology procedures only, since
Microbiology is not currently serviced by the Computer Division.
• Chemistry
A Microbiology
A
Hematology
3.50-
/
3.00-
/
7 *'
2.50-
\^.-,-/
Developmental divisions
Inflation Factor
h^
_
S 2.00-
Central processing area
SMA 12/60
Coulter "S"
1.50-
First computer
100-
New Lob computer
Dept Lab Medicine
050
69
70
71
72
Fiscal Year
D
Administration
•
Computer
73
74
75
FIG. 5. Adjusted cost per procedure. This figure is similar to
the preceding one, except that the data in Table 1 have been used
to adjust for inflation to constant fiscal 1969 dollars. Also illustrated in this figure are certain major laboratory milestones.
last two years. Microbiology volume has increased 53%
in steady increments.
It should be remembered while reviewing these data
that procedures are "lumped" in our statistics, i.e.,
complete blood counts, SMA-12, urinalysis, electrolytes, etc., are each one procedure. Were we to count
individual elements of procedures, the laboratory
volume for 1974-75 would exceed 1.7 million tests.
Direct Expense per Procedure
As suggested by McLaughlin, one means of assessing laboratory cost-effectiveness is the computation
of cost per procedure, which is presented in Figure 4.
The per-procedure costs for Chemistry, Hematology,
and Microbiology are derived by dividing the total
direct expenses for each by the number of procedures
done by each. Direct expenses in our institution include salaries, wages, and fringe benefits, and all
operating costs such as lease and rental, minor equipment, and all supplies.
The Administrative cost per procedure is obtained by
dividing the Laboratory Administration Expenses by
the total procedures done by the department. The
Laboratory Administration budget includes the Director's office staff and the Central Processing Area
staff plus all related direct costs including, for example, all blood-drawing supplies used in the hospitals.
The Computer Division costs include lease and main-
Evaluation of the data in Figure 4 is made difficult
by the impact of inflation, with which we are all
familiar. In order to provide a comparison baseline
against which to interpret changes more meaningfully,
we have recalculated the cost per procedure data
adjusted for inflation, which for 1974-75 is 145%
of the 1968-69 value. Figure 5 presents information
identical to that in Figure 4 but, using United States
Government inflation statistics, the data in Figure 5
have been computed to standardized 1968-69 dollars.
These are what the cost per procedure curves would
show if there had been no inflation since 1968-69.
Table 1 shows the inflation figures from which the
adjustments have been made. This table represents a
modification (to show statistics for fiscal years) of the
Consumer Price Index,21 which in the original uses
1967 as the baseline and in which figures are given for
calendar years. Thefigurefor fiscal 1975 is a projection.
Obviously, the shape of the adjusted curves is dependent upon the particular index of inflation employed. We chose, somewhat arbitrarily, the Consumer
Price Index (the purchasing power of the dollar for
all items, at the consumer level). Various alternatives
exist. Among these are wage statistics and the Wholesale Price Index, which are, like the CPI, compiled by
the U.S. Labor Department. Annual statistics (University of Washington Hospitals) for laboratory billing
per procedure and hospital billing per visit or per
patient day are also available and could be used to
show inflation. These latter have the ostensible advantage of reflecting local events more closely.
Table 1. Inflation Rate by Fiscal Year*
Fiscal year
Inflation Rate, %
(Rounded to Nearest
whole Number)
1969
1970
1971
1972
1973
1974
1975
100
106
111
115
121
131
145
* The data in this table are based on the U.S. Labor Department's figures for the
Consumer Price Index.21
155
ECONOMICS OF COMPUTERIZED LAB OPERATION
Vol. 67 • No. 2
150
Clearly, none of these alternatives is entirely satisfactory since, in one way or another, each reflects
events and decisions unrelated to the laboratory or to
laboratory costs as such. As it turns out, many of these
measures have risen more or less in step with the
Consumer Price Index, which in the aggregate appears
to be a reasonable and accessible convention to
employ.
Separation of Routine from Developmental Cost
per Procedure Data
As has been discussed elsewhere, there is a large
developmental component in our University Laboratory activity. For comparison, Figure 6 looks at the
cost-per-procedure data of the three divisions, considering routine (not developmental) costs and procedures. The developmental divisions did not begin
until fiscal 1971, so that data for 1969 and 1970 are
identical to those in Figure 4. The routine cost per
procedure curves show less dramatic increases, as
might be expected.
Also in Figure 6 are shown the same routine costper-procedure data adjusted for inflation. These data
ROUTINE
4.00
COST/TEST
/
/
72
73
Fiscal Year
FIG. 7. Relative volume and cost per procedure. The growth and
relative changes in cost per procedure for the three major divisions,
chemistry, hematology, and microbiology. All values are expressed
as percentages of the fiscal 1971 values. Data are for the combined
routine and developmental laboratories and are not adjusted for inflation. The latter adjustment (not illustrated) causes a marked drop
in the relative costs per procedure for chemistry and for hematology
for fiscal year 1975, while eliminating the sharp rise in the cost per
procedure for microbiology following fiscal 1972.
/
/'
3.50-
71
y
3.00;
2.50• Chemistry divisions
A Microbiology divisions
^ Hematology divisions
2.00-
Rates of Change in Volume and Cost per Procedure
1.50-
2 00'
ROUTINE COST/TEST
ADJUSTED FOR INFLATION
.50
69
also compare with those in Figure 5. It can be seen
that while Microbiology costs remained fairly stable,
both Chemistry and Hematology costs per procedure
have declined since 1971.
70
71
72
73
Fiscal Year
74
75
FIG. 6. Cost per routine procedure. Both raw data and inflationadjusted data are presented. These curves differ from the corresponding ones in Figures 4 and 5 in that the present figure includes only
data for the costs of the routine laboratories and excludes developmental laboratories.
Another means of assessing cost effectiveness is to
compare percentage changes in volumes of procedures
over time against percentage change in cost per procedure over time. These relationships are presented
in Figure 7 for the three divisions—1971 has been used
as the baseline of 100% because that is the year that
the first computer and Central Processing Area became
effective and also the year that the developmental
division began. Developmental data are included in
these curves, which are not adjusted for inflation.
All divisions show volume increases of about 25%
since 1971. Both Chemistry and Hematology have less
cost increase than volume increase, whereas Microbiology shows a considerably greater increase in cost
than in volume.
NUSSBAUMET/4Z..
156
Discussion
The most outstanding feature of the economic data is
that the Chemistry and Hematology costs per procedure increased at slower rates than inflation, while
the corresponding values for Microbiology increased at
a rate comparable to inflation. It is tempting, therefore,
to assign the favorable behavior of Chemistry and
Hematology to their use of computer systems or, at any
rate, to the organization of specimen flow and information pathways made possible by the computer and the
Central Processing Area. A number of factors might
influence this conclusion. The more important ones
are discussed in the following paragraphs.
First, one might look for an abrupt decline in cost
per test when the original computer became operational
in 1970 and another when the current Automated
Health Systems model was installed in 1973. Such
sharp breaks are missing from the data. In part, this
is due to lumping data by fiscal years rather than
analyzing them on a month-by-month basis. A more
important contributor to the absence of a sharp
decline is the gradual phase-in of the computer system
and the correspondingly slow changes in the patterns
of laboratory personnel task assignments. There also
has been a gradual, stepwise build-up of the support
the computer systems offer to the laboratory. Thus,
these curves show trends rather than abrupt changes.
The data for University Hospital and Harborview
Medical Center are so entwined that there appeared
no way to separate them realistically. The division
into procedures done at both locations and those performed at one location for both hospital complexes
has represented to a major extent administrative decisions having little or no bearing on the computer
system details or performance. Thus, all the treatments
in this manuscript represent macro-economic data.
Were microeconomic data available, these might permit the assessment of the relative effectiveness of
the computer and the Central Processing Area for different tests and different processes (e.g., log-in,
result entry, and cumulative reports). However, microeconomic data require more subjective interpretations
and are confounded to a greater extent by administrative decisions. Accordingly, the data presented
appear to be optimal for displaying the overall economic impact of the computer-based automation and
the Central Processing Area.
In the last regard, particular attention should be
called to the method of inclusion of the procedures on
the SMA 12's and on the Coulter S. A complete set of
12 test results on the SMA 12's or any subset thereof is
counted as one procedure, and all seven Coulter S
A.J.C.I'. . Fchniiii) 1977
values or any subset thereof are counted as one procedure.* In this fashion the use of these automated
devices leads to a cost per procedure higher than the
laboratory average. (If, on the other hand, an SMA
12 battery were counted as 12 determinations, then
the cost per determination would be much lower than
the laboratory average.) Since the fraction of laboratory determinations performed on SMA 12's and the
Coulter S has increased slightly during the period
studied, our method of accounting would be expected
to show an increase in the average cost per procedure
due to this change. That in constant 1969 dollars there
was a reduction in cost per procedure adds emphasis to
the effectiveness of the laboratory computer system
and Central Processing Areas in reducing the real
costs of laboratory operation.
A closely related question is whether the improvements noted in this report could have resulted from
greater economies associated with the increased test
load. Were space included in the costs, a major reduction in cost per procedure could be anticipated due
to the more intensive utilization of the same equipment
and space. However, this is not part of the data
presented in this paper. The growth in test volumes
necessitated an increase in numbers of technologists,
since there is normally no slack time. The only
direct savings due to larger numbers of tests accrue
from reduced set-up time and reduced set-up reagent
costs. These types of expenses represent a small part
of the total laboratory cost even at the levels existing
at the beginning of our records. Any reduction iii this
small fraction would probably be hard to detect on the
scale on which the figures are plotted. Thus, the reductions seen in the costs per procedure in our figures do
not seem to be significantly influenced by the growth of
laboratory utilization.
A major change in test mix could conceivably alter
the cost patterns. Within the routine laboratories such
alterations did not occur. The effects of the developmental laboratories are discussed in succeeding paragraphs. A major change in administration and in personnel started in fiscal 1969. It is impossible to separate
this from the effects of the computer and of the centralized processing organization.
The growth of the developmental laboratories, in
which intensive use of labor and equipment tends to
(variably) raise the cost per procedure, further frustrates attempts to attribute savings to one feature or
another of our laboratories management. We have at* Actually each complete blood count was counted as one procedure whether the Coulter S was used or other methodologies
were employed.
\ o l . (.7 • No. 2
ECONOMICS OF COMPUTERIZED LAB OPERATION
tempted to correct for the effects of these portions
of the laboratory expenditures (see Fig. 6).
On the one hand, large laboratories of this type, and
particularly university clinical laboratories, are likely
to require some mechanism for innovation and development of new procedures. It should be noted, then, that
the economies produced by the use of the computer
information system at the University of Washington
have helped make both space and dollars available to
support the developmental laboratories (as have the
SMA-12's and Coulter S).
A major deficit in the results reported in this paper
is the absence of a discussion of procedures per
technologist hour. Those data are available for the last
two years of this study only. Such management data
acquisition was made economically feasible by the
availability of computer programming support. It represents a byproduct of the introduction of computer
technology that can support laboratory management
and planning. Prior to the last two years of the study
it was felt that the economies that could be achieved
from such data were less than the cost of acquiring
and analyzing the data.
Both the data on procedures per technologist hour
and the growth of the developmental laboratories depended critically on the existence of a flexible computer
system. However, flexibility in itself is not sufficient;
it is also necessary to have local control to introduce
the necessary programming changes when they are
needed. Thus, flexibility and local control of the computer system helped make the developmental laboratories possible. This not only fulfilled the department's
university role but also encouraged the growth of the
laboratories as a referral center. The latter, in turn,
helped to increase laboratory utilization. Computer
cost per procedure (as opposed to laboratory cost per
procedure) tends to decrease with increased utilization. Thus, a circular process arises in which the computer, by aiding the upgrading of the laboratories,
becomes in itself.more cost-effective.
The computer system produces many benefits that
do not show in the cost figures presented. Benefits to
the physician and paramedical personnel include more
timely reporting of data, specialized reports, and a
well-organized daily cumulative patient report. Benefits to the hospital include well-verified billing records
on magnetic tape and legible discharge summaries.
Benefits to laboratory management include daily and
weekly unfinished-test lists and detailed usage statistics.
These appear to total to such major contributions that
the computer system could be justified on the basis of
a cost-benefit ratio even if the cost per procedure
were increased. That the use of the laboratory com-
157
puters and the Central Processing Areas seems to have
produced these added benefits simultaneously with a
decrease of cost per procedure in constant 1969 dollars
is truly noteworthy.
Summary
The Department of Laboratory Medicine of the
University of Washington has explored various
management and organizational approaches over the
past seven years for the laboratories at its two hospitals. Starting in 1971, a Central Processing Area
concept was introduced. This was supported by a batchoriented computer system. In the following years this
concept was strengthened and the computer system
was replaced by two terminal-oriented systems, one in
each hospital.
In recent years clinical laboratory procedures have
rapidly increased in variety and number. Computers
have been employed to assist in the coordination and
distribution of the growing amounts of associated data.
Significant changes in the organizational structures of
those laboratories that use computers have been commonly reported; however, improvements in overall
laboratory efficiency—i.e., the cost-effectiveness
of the computer—are more often presumed than
proven. There is a paucity of published information on
this subject.
Many factors contribute to the efficient operation of
a clinical laboratory, including administration and overall system design, intensity of use, automated analytic
instruments, test mix, and so on. It is correspondingly
impossible, in a rapidly growing laboratory, to prove
categorically that diminished cost per procedure is a
direct consequence of computerization.
Nevertheless, taking changes in equipment, intensity
of use and administrative structure into account, and
also observing the changes in the "computerized" as
opposed to "non-computerized" (Microbiology) sectors of the laboratory, we can state that the introduction of the computer and Central Processing Area in
the University of Washington clinical laboratory has
not only had a favorable economic impact but has also
exerted at least a permissive effect, allowing the scope
and scale of the laboratory operation to increase substantially without major net increases in average cost
per procedure.
Such an interpretation almost ironically ignores—
simply because it cannot be conveniently expressed
in dollars and cents—the major benefit of the system:
the creation of timely, legible, well-organized laboratory data for the patient's record and for the physician's
use.
NUSSBAUM£7/1Z..
158
Acknowledgment. Without the help of Professor K. Clayson, some
of the data for this paper could not have been obtained.
14.
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