Chapter 1

Laboratory Structure and Function

Roger L. Bertholf

Although its origin is obscure and many variations exist, writers and speakers com-
menting on laboratory quality often recite the phrase: The right result, on the right
test, on the right patient, at the right time. It is a catchy phrase that captures the four
most important considerations in medical laboratory services: integrity of labora-
tory results, efficient use of laboratory tests by medical staff, safeguards against
patient identification errors, and timeliness. One might add at the right price to this
list, since the economics of healthcare delivery are important considerations in clin-
ical laboratory services, as well (discussed in Chap. 2). The importance of labora-
tory tests in the diagnosis and medical management of patients is widely
acknowledged. Some have attempted to quantify the laboratory contribution towards
medical care, often citing a statement attributed to Rodney Forsman, the
Administrative Director and Assistant Professor of Laboratory Medicine and
Pathology at Mayo Clinic College of Medicine in Rochester, MN, that 70 % of all
medical decisions are based on laboratory data. Forsman’s assertion may be true,
but whether clinicians make 70 % of their decisions based on laboratory data, regard
70 % of laboratory results as contributing to their decisions, or assign a 70 % weight
laboratory tests in their decision-making process is debatable, and mostly superflu-
ous. Results of laboratory tests are elements in the equation that determines diagno-
sis and treatment. In some cases, they may dominate the equation. In other cases,
their contribution may be minimal or nonexistent. Or perhaps more commonly,
laboratory tests provide information that makes subtle changes in the trajectory of
clinical decisions, sometimes lending support to the initial clinical impression, and
other times revealing medical conditions that are not clinically evident.

R.L. Bertholf (*)

Department of Pathology and Laboratory Medicine, University of Florida Health
Science Center, 655 West 8th Street, Jacksonville, FL 32209, USA
e-mail: roger.bertholf@jax.ufl.edu

© Springer New York 2017 1

R. Molinaro et al. (eds.), Clinical Core Laboratory Testing,
DOI 10.1007/978-1-4899-7794-6_1
2 R.L. Bertholf

The right result. “Quality is Job One” was the advertising slogan adopted by Ford
Motor Company in 1982, in response to the perception that Japanese and European
auto manufacturers had surpassed American made brands in the quality of their
products. The slogan has always been relevant to clinical laboratories. The integrity
of test results is the foremost priority for every medical laboratory professional. To
ensure quality, surveillance programs are put in place to monitor the performance of
analytical methods. Quality control (also discussed in Chap. 4), always the staple of
good laboratory practice, has evolved from a process that included controls with
each batch of specimens to a periodic assessment at regular intervals, typically daily
or every 8 h, since modern automated methods used in clinical laboratories have
greater stability than the manual methods that preceded them. Newer approaches to
quality control, currently being incorporated into regulatory and accreditation stan-
dards, may reduce the frequency even further. A key concept that emerged was
standardization, which can be assessed through inter-laboratory agreement. Inter-
laboratory agreement between analytical methods, which at one time was poor, has
been greatly improved by the widespread implementation of proficiency testing (in
Europe, Canada, and Australia these programs are called “external quality assess-
ment,” or EQA). The idea of inter-laboratory harmonization was hatched by the
eminent clinical pathologist Dr. F. William Sunderman in the 1930s. His strategy for
periodic proficiency challenges was codified into federal regulations when the
Clinical Laboratory Improvement Act of 1967 was enacted. When the legislation
was revised in 1988, with the Clinical Laboratory Improvement Amendments, pro-
ficiency testing was overhauled, and the requirements became stricter. Three rounds
of proficiency challenges per year were required, and successful performance on 4
of 5 (80 %) challenges in any round for regulated analytes was required. In addition,
successful performance on two of any three consecutive rounds was required. In
some cases, 100 % pass rates are required, such as the case in blood banks where
blood products are given to patients. Failure is not allowable in these cases since
giving the wrong type blood to a patient may lead to catastrophic problems and even
death. Laboratories that failed proficiency testing were subject to suspension from
Medicare reimbursement, and failure to incorporate proficiency challenges into the
normal workflow, involving all testing personnel and prohibiting any procedure that
would subvert the intent for proficiency testing to reflect the quality of routine test-
ing, were subject to criminal penalties. Clinical laboratories adapted to these
requirements, and also developed quality assurance programs that addressed other
aspects of quality such as reference interval validation and periodic assessment of
linearity in quantitative methods.
The right test. Overutilization of laboratory services increases the cost of health-
care. In the USA, few checks exist on the patterns clinicians adopt for ordering
laboratory tests on their patients. “Medical necessity” rules were implemented in
the 1990s, requiring that certain clinical criteria be met when a particular laboratory
test is ordered, and also requiring that patients consent to the laboratory tests, with
the understanding that they may not be reimbursed. The traditional unfocused
“shotgun” approach to laboratory assessment was curtailed, and disease-specific
laboratory profiles were created. A laboratory test needed a reason to be ordered,
1 Laboratory Structure and Function 3

and patients needed to be informed that they might be financially responsible for
unjustified laboratory tests. In principle, it was a genuine effort to limit the health-
care costs associated with laboratory testing, but in practice, there is little evidence
it has reduced the cost of healthcare. This may be the biggest challenge to clinical
laboratories, to promote more efficient use of laboratory resources. Laboratory
directors and administrators focus on the most efficient ways to provide services,
but often neglect the advantages to be gained by more prudent utilization (see Chap.
2 for more on test utilization).
On the right patient. Errors occur in all areas of medicine and the clinical laboratory
is not immune to these faults. Some are analytical, some may be due to misinterpre-
tation of a laboratory result, and some are due to improper collection of the speci-
men submitted for laboratory analysis. Many errors, however, are due to
misidentification of the patient. Patient identification is one of the goals identified
by The Joint Commission as essential to patient safety. Data on the frequency of
patient identification errors suggest that it is a significant problem that may be
underestimated because methods to detect mislabeled specimens, such as delta
checks (discussed in Chap. 3), lack the sensitivity to reliably identify specimens that
have been labeled with the wrong patient ID. Specimen labeling at the point of col-
lection often is beyond the control of the laboratory unless phlebotomy services are
within the domain of laboratory administration. Engineering controls are available
that eliminate the need to relabel a specimen once it reaches the laboratory, greatly
reducing the risk of mislabeling by laboratory staff.
At the right time. The timeliness of laboratory results, particularly in hospital-­based
clinical laboratories, has always been the focus of great attention by laboratory
administrators and clinical staff. Results of certain tests may be required for urgent
medical interventions; other laboratory tests may be required before a patient can be
admitted or discharged, and timeliness of laboratory results often has a greater
impact on operational efficiency than the quality of medical care. But regardless of
the reason, laboratories are under constant pressure to improve the turnaround time
for test results. One consequence of this desire for immediate results is the develop-
ment and proliferation of point of care (POC) tests, which now comprise a signifi-
cant fraction of all laboratory testing. It is an example of an entire industry that is
based on a single perceived benefit—rapid turnaround time—because the unit cost
of POC tests is higher, and the analytical performance is poorer, than corresponding
tests performed in the clinical laboratory. For tests performed in the central labora-
tory, however, a design that promotes rapid transportation of specimens to the lab,
efficient processing of the specimens once they reach the lab, and analyzer through-
put that avoids delays in reporting results are essential considerations towards the
goal of providing the shortest turnaround times for laboratory results.
In clinical laboratory practice, no amount of operational efficiency can compen-
sate for inaccurate test results; the analytical integrity of lab tests remains the first
priority. In this chapter, however, we will focus on how to most efficiently deliver
the “right result,” with the assumption that proper attention has been given to select-
ing the appropriate analytical methods and ensuring their proper function with ade-
quate surveillance (QC, PT, validation studies, etc.).
4 R.L. Bertholf

Preanalytical factors such as specimen collection, labeling, and handling prior to

delivery to the lab are estimated to cause over half of all errors in laboratory results
(Plebani, 2006). The laboratory has limited control over preanalytical errors, but
specimen collection and receipt procedures typically address these sources of error.
The design of clinical laboratory services involves many components. This
review will focus on the economics, layout, logistics, and overall design of clinical
laboratory services.

Types of Clinical Laboratories

There is a diverse array of strategies for providing clinical laboratory services to

physicians:
• Physician office laboratories (POLs) typically serve physicians in single or
group practices, are located within the practitioners’ office facilities, and provide
limited laboratory services exclusively for their private patients.
• Hospital laboratories mostly serve inpatients and emergency departments, but
often receive specimens from outpatient clinics too.
• Referral laboratories provide services that may be local, regional, or national in
scope, and accept specimens from other laboratories or physicians’ offices.
• Research laboratories offer esoteric tests that may be useful in certain clinical
scenarios.
For decades, physicians have performed laboratory tests—microscopic examina-
tion of urine sediment, KOH preparations for fungal infections, blood smears for
erythrocyte morphology, hemocytometric differentials, fecal parasites, and wet
mounts of vaginal discharge for trichomonads—in their offices. When dry reagent
technology was developed by Helen Free1 at Miles Laboratories for measuring glu-
cose in blood and urine, another simple means for laboratory assessment was avail-
able to physicians. Benchtop chemistry and hematology analyzers became available
in the late 1970s, and were aggressively marketed to POLs. Until CLIA ’88 was
enacted, physician office laboratories were unregulated, but the new requirements
created by the amendments were more than most POLs could satisfy. Microscopy
was particularly affected by CLIA ’88, which created a specific category of regu-
lated laboratory procedures, “Provider-Performed Microscopy” (PPM), to address
competency requirements for healthcare providers performing these diagnostic
laboratory procedures.

1
After graduating with a BS degree in chemistry from the College of Wooster in 1944, Helen
Murray began working in the research department at Miles Laboratories under the direction of Dr.
Alfred Free, whom she married in 1947. Helen Free is credited with the development of the dry
reagent technology that was incorporated into many products marketed to clinical laboratories,
including the Dextrostix, Uristix, Ketostix, Labstix, and a still-currently marketed urine dipstick
product, Multistix. Helen Free was elected president of the American Association for Clinical
Chemistry in 1990, and president of the American Chemical Society in 1993.
1 Laboratory Structure and Function 5

Medical care of hospitalized patients requires uninterrupted availability of clini-

cal laboratory services. Hospital laboratories are required to provide urgent results
for critical patients, routine tests for monitoring therapy, and esoteric tests for dif-
ficult diagnoses. Hospital laboratories serve many needs, usually functioning as
POLs for on-site outpatient clinics, referral laboratories for remote clients, a STAT
laboratory for the emergency department, and as a referral center to send out labora-
tory tests that are available only in research laboratories. The many demands on
hospital laboratory services create challenges in the allocation of resources to pro-
viding both urgent and routine tests.
Most hospital laboratories offer services to remote clients, usually termed “out-
reach” work. Outreach laboratory services usually include providers within the
healthcare network of the hospital, but may involve independent providers, too. In
an environment of capitated reimbursement for hospitalized patients, outreach ser-
vices have become an essential source of revenue for hospital-based laboratories,
since many patients visiting private physicians’ offices have insurance that pays for
laboratory tests on a fee for service basis. The challenge for hospital laboratories is
to balance their responsibility to provide services to inpatients with the operational
demands of outpatient laboratory services that often require nontechnical staff to
transport, receive, and register specimens from patients who are not already regis-
tered as hospital inpatients with accompanying insurance information. In addition,
outreach programs based in hospital laboratories compete with referral laborato-
ries, and often economies of scale exist which put hospitals at a disadvantage in
that arena.
Consolidation of laboratory services is an effective strategy for minimizing costs.
Referral laboratories have the advantage of scale; the cost per test decreases as vol-
ume increases. Regional referral laboratories used to be common, but many have
been absorbed by national reference labs that can take advantage of greater volume
to minimize the cost of individual tests, and provide services such as conveniently
located collection stations that are too expensive for smaller laboratories to estab-
lish. Referral laboratories are high-volume operations that leverage economies of
scale to offer services at competitive prices. Laboratory economics are discussed in
the next section but it is important to note, when comparing the different types of
clinical laboratory services, that certain costs are fixed and therefore the higher the
volume of tests performed, the smaller the fixed cost of laboratory operations is as a
component of overall laboratory expenses. In a low-volume laboratory, overhead
expenses—utilities, management, amortization of capital investments in equipment,
service contracts, and other fixed costs described in the next section—are a signifi-
cant fraction of the cost of producing a laboratory result. As volume increases, the
contribution of fixed expenses to the cost per test decreases. Referral laboratories
can operate at a lower margin per test, and therefore have the capability to offer
laboratory services at a lower incremental cost than smaller laboratories can afford.
Referral laboratories are essential services because some tests are too expensive
to offer unless the volume is high (e.g., frequently measured tumor markers). The
unreimbursed overhead expenses involved in performing some of these laboratory
tests include quality control, proficiency testing, expensive instrumentation, and
6 R.L. Bertholf

sometimes personnel with advanced skills. These tests can only be economically
performed when the volume is sufficient to offset the cost of maintaining the ser-
vice, and referral laboratories, which serve a large patient population, have the capa-
bility of offering tests that wouldn’t be economically feasible for smaller labs.
Some diagnostic tests are only available from the research laboratories where
they were developed. Esoteric laboratory tests provide diagnostic information that
is not routinely offered by clinical laboratories. Although some of these tests are
FDA approved, many have not yet received approval. For example, when molecular
methods were developed to probe genetic information that was diagnostically use-
ful, the technology for these tests was at first limited to research laboratories.
Molecular diagnostics are now widely deployed in clinical laboratories, but many of
these methods are not FDA approved; some fall into a category that has been given
the name “Lab Developed Tests,” or LDTs. Accrediting agencies are trying to keep
up with the challenge of validating these new methods.

Clinical Laboratory Economics

History

Although federal funding of healthcare was debated by congress throughout the first
half of the twentieth century, the Medicare program as it currently exists wasn’t estab-
lished until President Johnson signed H.R. 6675 into law in 1965, creating a federally
funded healthcare insurance program for anyone over the age of 65. The legislation
was included with Title XIX amendments to the Social Security Act, created in 1935.
The same legislation created Medicaid, a federally subsidized state program provid-
ing healthcare insurance for low-income citizens who could not afford the expense of
medical care or insurance. In 1965 healthcare in the USA for everyone over the age of
65, and for those whose income was below a certain threshold, was for the first time
in history insured by either the federal or state government.
Medicare and Medicaid reimbursement of medical expenses coincided with a
revolution in clinical laboratory technology (Chap. 5). Radioimmunoassay had been
described only a few years earlier by Yalow and Bersen in 1960, and the ability to
measure hormones transformed endocrinology into routine medical practice. The
introduction of solid state microprocessors accelerated the development of auto-
mated chemistry analyzers in the early 1970s. Flow cytometry was developed in the
1950s, and provided the basis for automated hematology analyzers introduced a
decade later. These technological advances ensconced the clinical laboratory as a
routine and essential component of medical care because laboratory tests were not
just available, suddenly they were abundant and rapidly available. What is more, the
vast majority of laboratory tests were reimbursed by Medicare, Medicaid, or private
insurers. The economics of clinical laboratory services were weighted towards
expanding laboratory facilities, staff, and utilization, and there was a proliferation
of local, regional, and national medical laboratories.
1 Laboratory Structure and Function 7

Spiraling costs of medical care forced changes in reimbursement strategies in the

1980s. Two innovations were introduced:
• Prospective payment based on diagnosis-related groups (DRGs), in which pay-
ment for healthcare was determined by the diagnosis rather than the specific
services rendered.
• Health Maintenance Organizations paid a flat fee per enrolled member to health-
care providers, and these contracts were sometimes referred to as “full risk.”
These reimbursement models had a dramatic effect on the financial impact ser-
vices such as laboratory, radiology, and pharmacy had on hospital budgets. In a
fee-for-service model, these departments were revenue centers for hospitals because
each individual service generated revenue. However, prospective payment and full-­
risk contracts created a financial environment in which these services were costs
measured against predetermined reimbursement and laboratories were forced to
minimize both the cost and the utilization of their services.
Nowadays, healthcare reimbursement is a mixture of prospective payment, full-­
risk, and fee-for-service models, and facilities attempt to balance and maximize
these sources of revenue. Fee-for-service is the most financially attractive model for
healthcare providers, but is mostly limited to private insurers. Many hospitals serve
populations that include significant numbers of uninsured patients and those cov-
ered by full-risk contracts mandated by local governments for medical care of con-
stituents unable to afford health insurance. An unfavorable mix of fully insured,
full-risk, and uninsured patients puts great pressure on healthcare facilities to mini-
mize their costs.
A 2007 Washington G-2 Report cited by the Centers for Disease Control and
Prevention (Terry, 2007) estimated that laboratory tests account for only 2.3 % of
healthcare expenditures in the USA, yet laboratory budgets often are the target of
cost-cutting initiatives. The following discussion will focus on the budgetary strate-
gies that can minimize the operational costs of clinical laboratories.

Personnel

As with the rest of the healthcare system, personnel costs are the largest component
of a laboratory budget, and consequently receive the greatest scrutiny when labora-
tory budgets need to be cut. Qualified staff is a requirement for laboratory accredita-
tion, and several states license medical laboratory personnel based on training,
experience, and certification by state or national examinations. CLIA ’88 estab-
lished minimum educational requirements for laboratory personnel performing
waived, moderately complex, or highly complex procedures. These requirements
drive the portion of laboratory budgets devoted to personnel costs. Under federal
law, waived tests can be performed by personnel with a high school education as
long as competency requirements are met. Highly complex tests require technical
personnel with at least an associate’s degree or 60 h of college credit with minimum
8 R.L. Bertholf

requirements in laboratory sciences or a degree in medical laboratory technology

from an accredited institution. The education and experience requirements under
CLIA ’88 for personnel performing moderately complex tests are considerably
more flexible, ranging from an associate’s degree to a high school diploma with
documented experience, training, and competency.
In 2003, the CLIA law was revised, and the classification of laboratory tests was
simplified to “waived” and “non-waived,” effectively eliminating the distinction
between moderately and highly complex tests; the latter category now applies
mostly to tests that have not been FDA approved, or have been modified for uses not
included in the 510K application approved by the FDA.2
Some states require laboratory technical personnel to be licensed, and the
requirements for licensure may exceed the federal standards. Agencies that accredit
medical laboratories also apply minimum qualifications for technical personnel that
may go beyond the federal standards. The balance between technical (laboratory
staff who report results) and nontechnical (support staff assigned to specimen pro-
cessing, phlebotomy, and clerical functions) is an important consideration that will
greatly impact the laboratory budget since technical personnel command salaries
that are twice or more the salaries of nontechnical staff. Recent data place the
median salary of medical technologists certified by the American Society for
Clinical Pathology (ASCP) at nearly $60,000.3 Medical laboratory technicians
(MLTs), for which certification is offered but educational and training requirements
are not as demanding as for medical technologists, typically earn around $30,000.
Uncertified laboratory personnel usually earn less than MLTs.
Partly due to economics, and partly due to a shortage of qualified technologists,
there has been a gradual shift towards lesser qualified technical personnel in clinical
laboratories since the 1980s. The newer requirements under CLIA ’88 classified
most laboratory tests as moderately complex (and later, simply “non-waived”),
which could be performed by staff with minimal training. Most laboratories still
employ certified medical technologists, but often have MLTs on their staff, as well.
Staff who function in supervisory or managerial capacities are required to meet
higher standards of education and training.

2
In the pharmaceutical industry deviations from FDA-approved indications is termed “off-label,”
but in laboratory practice, it generally means any modification of the manufacturer’s specifications
for performing an approved test. The FDA approves laboratory tests for in vitro diagnostic use
based on validation data in the manufacturer’s 510K application. The diagnostic interpretation of
laboratory tests, and their appropriate use, is not restricted. Only the way the test is performed is
subject to FDA restrictions. Use of non-FDA approved tests by clinical laboratories currently is a
controversial issue, focusing primarily on molecular diagnostics. “Lab-Developed Tests,” or LDTs,
are the focus of intense scrutiny by regulatory agencies, and a consistent set of criteria for their
validation has not yet been developed.
3
The ASCP is one of several organizations that certify medical laboratory professionals, but it is
the oldest and most widely recognized certifying agency. The American Board of Bioanalysis
(ABB) and American Medical Technologists (AMT) also certify medical technologists.
1 Laboratory Structure and Function 9

Many laboratories engage PRN4 (part time, as needed) technologists so they can
be flexible with staffing. Part-time employees are less costly to the institution since
they ordinarily do not receive benefits, and are used only when work volume is high
enough to need them. Full-time employees inevitably experience certain times when
the workload is low and the laboratory is, for a period of time, overstaffed. Using
PRN employees allows laboratory administration to increase and decrease staff
within a relatively short period of time in response to changes in the workload.

Analytical Platforms

In the automated areas of a clinical laboratory (chemistry, hematology, and perhaps

urinalysis), the proper choice of analyzers (the “analytical platform”) is critical to
the long-term success of the laboratory operation. Choosing a platform with suffi-
cient throughput to dispatch specimens quickly even during the periods of highest
work volume is one of the most important considerations. An analyzer that is only
just able to generate test results sufficient to keep up with the average pace at which
specimens are received will rapidly be inundated if there is a sudden spike in the
number of specimens, or if unanticipated maintenance is required on the instrument,
allowing specimens to accumulate. Other than personnel, the instrument and reagent
costs of performing the tests are the largest expense for clinical laboratories, and a
poor choice of an analytical platform can result in greater than necessary expenses,
poor turnaround times, greater demands on staffing, and substandard quality of the
laboratory services.
There is a balance between throughput and cost of analytical platforms. Low
throughput instruments are typically less expensive to purchase, but often have a
higher operating cost per unit because reagents are packaged in smaller quantities
and many low-volume instruments require greater use of disposable components
compared to instruments designed for higher throughput. On the other hand, high-­
volume instruments are considerably more expensive to purchase, but due to econo-
mies of scale the reagent cost per unit is often minimized. For this reason, often it is
more economical in the long run to purchase an analytical platform that has greater
throughput than the work volume requires because of lower operating costs.
There are three principal approaches for financing automated chemistry or hema-
tology analyzers:
Capital purchase: In this approach, the equipment is purchased with capital funds,
much the same as purchasing an automobile with cash rather than a loan.
Lease/purchase or reagent rental: In a lease/purchase agreement, a monthly lease
payment is paid for the equipment, which is amortized over, typically, 5–7 years.
This would be equivalent to leasing an automobile, and some of these agreements
have a buyout clause that allows purchase of the equipment for its residual value at

4
From the Latin pro re nata, meaning “in the circumstances” or “as the circumstance arises.”
10 R.L. Bertholf

the end of the lease. Reagent rental agreements are similar to a lease, except the
laboratory agrees to purchase a minimum amount of reagents, and the cost of the
equipment is built into the cost of reagents. To some extent, the distinction between
these two approaches is only important because of where the costs appear in the
budget and get accounted for by the institution. In both cases, the vendor is placing
the equipment in the laboratory for an agreed upon price, which is spread out over
several years in either lease payments or reagent surcharges.
Cost per test: In this type of agreement, the laboratory pays for neither the instru-
ment nor the reagents, but instead pays the vendor for every result that is reported.
The equipment is wholly owned by the vendor. Unlike most lease/purchase agree-
ments, in the cost per test contract the laboratory builds no equity in the equipment
over time. All reagents and supplies are provided to the vendor, and the laboratory
pays a fee to the vendor for each test result reported.
These three models represent the spectrum from least overall cost to most costly,
and correspondingly the most risk to least risk. By far the most economical way to
purchase equipment is with capital funds. Any other method entails some form of
financing that inevitably will inflate the price. Outright purchase of equipment does not
require a contractual obligation to purchase reagents from the same vendor, and alter-
nate reagents from competing vendors are sometimes compatible with the platform
and available at a lower price. By purchasing the equipment, the laboratory retains
bargaining leverage, both in the price of the instrument and the reagents to operate it.
Along with the cost advantage, however, capital purchase of laboratory equipment
involves the greatest risk to the laboratory because once the platform is purchased it
becomes a depreciable asset5 of the organization over the term of its useful life—typi-
cally 5 or 10 years, depending on the total value of the asset. If the laboratory’s needs
for an analytical platform change within that period due to, for example, expansion or
reduction of services, the institution is left with few options for replacing the platform
without having to write off the residual value of the equipment. Occasionally, the
analytical platform does not perform to expectations and becomes a drain on labora-
tory resources, sometimes even compromising the quality of laboratory services.
These are the risks of capital purchases. As when purchasing an automobile with cash,
where the owner accepts all the risk in the event the vehicle is a lemon, rectifying the
bad investment will involve a substantial loss. Therefore, a laboratory should have
complete confidence that the analytical platform will meet their needs over the depre-
ciated lifetime of the asset before making the investment. But when the equipment
performs as expected, and meets the needs of the laboratory and institution over its
useful lifetime, the capital investment offers the greatest financial advantage.
A fully automated chemistry or hematology platform for a clinical laboratory
serving a moderately sized hospital (e.g., approximately 600 beds) is likely to cost

5
Depreciation is an accounting mechanism for businesses to deduct the decrease in value of a capi-
tal asset from their profits, thereby recovering some of the cost of their investment. US tax laws
allow this deduction to encourage businesses to invest their capital in assets that enhance
productivity.
1 Laboratory Structure and Function 11

$1–2 million, and many hospitals do not have sufficient capital reserves to make that
kind of investment (just like many people don’t have enough savings to pay cash for
an automobile). In circumstances where capital funds are not available payment has
to be spread out over several years. Lease and reagent rental agreements provide
alternatives that do not require capital but instead shift the cost of the equipment into
the operating budget, in payments spread out over the useful life of the platform.
Lease and reagent rental agreements represent shared risk among the vendor and
purchaser. These contracts can be complex, involving many performance standards
for the analytical platform and rights to terminate the agreement with notice. The
leverage retained by the laboratory is that payments can be discontinued without
loss of the entire value of the equipment if the terms of the contract are not satisfied.
The contracts often contain language that provides for upgrades when new technol-
ogy is available that may benefit the laboratory operation. A good analogy is renting
an apartment: if the landlord does not maintain the property in a manner guaranteed
in the lease, the tenant has the option of breaking the lease without significant finan-
cial loss, other than the unanticipated expense of moving to another apartment and
costs associated with entering into another lease.
For the flexibility of changing analytical platforms as the laboratory needs evolve,
or because the platform does not perform to expectations, the laboratory accepts a
higher cost of both the equipment and the reagents it uses. The difference between
lease and reagent rental agreements is largely superficial; in either case the vendor is
charging a financing fee for the use of the equipment. In a lease agreement, the total
of the lease payments will exceed the price for which the equipment would be offered
in a capital purchase. In a reagent rental agreement, the lease payments are added as
a surcharge to the cost of supplies and reagents, with a minimum sales volume stipu-
lated in the contract to ensure the vendor is compensated for the cost of financing the
equipment. These agreements result in higher operational costs for the laboratory, but
no capital investment has been made, so the financial risk to the institution, and the
operational risk to the laboratory in the event the analyzer does not meet its needs, is
less than if the analytical platform had been purchased. The vendor accepts the risk
that the installed equipment may not perform to negotiated specifications, resulting in
loss of the contract. In addition, capital the vendor has invested in the equipment is
paid back slowly over time, and is not available for immediate reinvestment.
In a strictly cost per reportable result agreement, the vendor provides the equip-
ment, supplies, and reagents, accepting the risk that the test volume will generate
adequate income to compensate them for the value of the instrument. The labora-
tory has little risk in these agreements, since it has not expended capital and relies
on reimbursement for the laboratory tests to offset the cost paid to the vendor when
a chargeable result is generated. For laboratories that operate in healthcare
­environments where reimbursement for laboratory tests is mostly guaranteed, these
contracts are attractive. However, laboratories that serve patients insured under full-
risk or prospective payment models incur high costs for laboratory tests under cost
per reportable agreements since the cost to the laboratory for each reported test is
maximized to include equipment amortization and the overhead accepted by the
vendor for providing all of the resources necessary to do the test.
12 R.L. Bertholf

Generally, cost per reportable result contracts are not an attractive option for
central laboratory services. These arrangements are most suited to physician office
and satellite laboratories where space and personnel limit the choices of analytical
instruments that can be used.
A final consideration in the cost of an analytical platform is service. A clinical
laboratory that serves a hospital offering emergency and acute care services must
have testing available at all times, and therefore technical problems with analyti-
cal equipment have to be resolved as quickly as possible. Newly purchased
equipment ordinarily is covered under a manufacturer’s warranty for at least a
year, and the warranty should ensure that service personnel will respond promptly
to any problems with the equipment. Beyond the warranty period, the laboratory
will have to pay for a service agreement that ensures the same response to ser-
vice issues. The price of the service contract usually increases as the instrument
gets older, since more frequent service is expected. Lease and reagent rental
contracts typically include the cost of the service agreement in the annual mini-
mum specified in the contract. Cost per reportable test arrangements usually
include any service required.

The Laboratory Budget

A laboratory operating budget includes two primary components: fixed costs, which
are independent of test volume, and variable costs, which are determined by the
number of tests performed. Not all expenses fit neatly into one or the other of those
categories; some costs are partly fixed and partly variable.
Examples of fixed costs are:
• Building and equipment amortization
• Service contracts on equipment
• Utilities
• Accreditation
• Facility maintenance
• Licensure (where applicable)
All of these costs are influenced, to some degree, by the volume of work pro-
duced in the laboratory. A small laboratory, for example, has lower utility and main-
tenance costs than a large laboratory. Accrediting agencies usually adjust their fees
based on the work volume. Small, low-volume laboratories have lower building and
equipment costs than larger laboratories. However, within the environment a par-
ticular laboratory operates, these expenses will not vary substantially from month to
month or year to year, even if the laboratory experiences fluctuations in work vol-
ume. There are strategies to reduce these fixed costs, such as energy efficient build-
ings and limiting equipment to the minimum necessary to produce the work required
of the laboratory, but personnel and variable expenses provide the most fruitful
opportunities for minimizing costs.
1 Laboratory Structure and Function 13

Personnel costs, the largest portion of any laboratory budget, are partly fixed
and partly variable. Salaries for administrative and managerial personnel are
mostly fixed, and are determined by the institutional and accrediting agency
requirements for oversight of laboratory services. Although in general larger labo-
ratories require a larger administrative and managerial staff, within the broad cat-
egories of clinical laboratory services—e.g., hospital, referral, physician
office—certain positions are necessary to ensure the laboratory has sufficient
supervision. The same is true for some nontechnical support personnel, such as
clerical, phlebotomy, and specimen processing personnel. Some staffing adjust-
ments can be made when work volume increases or decreases, but for the most
part salaries for the nontechnical, administrative, and managerial staff are fixed
expenses in the laboratory budget.
Salaries for technical staff are the most variable among personnel expenses.
Clinical laboratories closely monitor work volume to ensure that staffing is appro-
priate. When work volume increases significantly, additional technical staff may be
required, and the opposite is true when work volume decreases. These adjustments
ordinarily are made during the annual budget cycle, although staffing adjustments in
mid-year can be precipitated by significant changes in the laboratory work volume
such as adding a new, large, outreach client or the closure of a hospital service that
previously generated a large volume of laboratory work. The variable component of
personnel costs is not incremental, as are the strictly variable costs discussed below,
but instead is stepwise as staff positions are added or eliminated in response to
changes in the workload. It was mentioned earlier that PRN staff are an efficient
way to adjust personnel to short-term changes in workload, but it is difficult to bud-
get PRN wages since most times, the changes in workload cannot be predicted. In
practice, PRN staff are mostly used to cover for full-time salaried staff on vacation
or sick leave.
Variable laboratory costs include:
• Reagents to perform tests
• Disposable supplies such as collection tubes, transfer pipettes, labels, etc.
• Distilled water, bottled gas
• Forms, printer paper, toner
Next to personnel costs, reagents usually are the largest component of a clini-
cal laboratory budget and vary from a few cents to over $100 per test. Managing
reagent costs is one of the most important strategies for operating cost-effective
laboratory services. Reagent costs are affected by the instrumental platforms cho-
sen and the mechanisms by which the analytical instruments are financed, as dis-
cussed in the previous section. Capital purchase of the analytical platform
minimizes reagent costs, whereas low-risk cost per test contracts are the most
expensive. Often, a ­central laboratory service has a mixture of purchased and
leased equipment, and perhaps some low-volume platforms that are used on a cost
per test basis.
Decades ago it was common for clinical laboratories to make their own reagents,
either because commercial products weren’t available or because it was cheaper to
14 R.L. Bertholf

make their own reagents than to purchase the premixed reagents from a vendor.6
That approach is no longer practical since diagnostic reagents are subject to exten-
sive validation requirements, and most laboratory methods use reagents approved
by the FDA. Prepackaged diagnostic reagents are standard, and comprise an essen-
tial component of laboratory budgets.
The reagent budget for a clinical laboratory is not entirely variable because
quality control (QC), calibration, and proficiency challenges consume reagents and
are required to make patient tests available, but are not related to the number of
patient tests performed. For all but cost per test contracts, the expense of reagents
to periodically calibrate the method, perform QC, and report proficiency assess-
ments to satisfy accreditation standards represent unreimbursed overhead that is
mostly independent of workload. Low-volume tests that are not urgent can be
scheduled in a way that minimizes the overhead, but some tests need to be available
at all times and there are circumstances when the cost of calibrating and running
QC exceeds the cost of analyzing patient specimens. For high-volume tests the
impact of overhead costs are minimized as a proportion of the overall cost of pro-
viding the service.7
Other factors influence the unit cost of reagents. High-volume accounts usually
receive favorable pricing, and discounts often cross platforms (i.e., when reagents
are purchased from a single vendor for multiple tests and platforms). There is con-
siderable incentive for the vendors of laboratory equipment and diagnostic reagents
to pursue contracts that establish them as the principal source of multiple labora-
tory platforms for a healthcare facility, and consolidation of reagent purchase con-
tracts with a single vendor gives leverage to the laboratory for negotiating more
favorable terms.
Alignment with a purchasing consortium is another way to take advantage of
volume to get favorable pricing on analytical reagents. Vendors of clinical labora-
tory diagnostic equipment and reagents negotiate contracts with consortia for
­discounted prices that are commensurate with the scope of the overall agreement;
the larger the consortium, the more favorable the terms of reagent contracts.

6
Those in the older generation of laboratory professionals may recall when the DuPont ACA (auto-
mated clinical analyzer) was introduced and required the use of vendor-provided distilled water;
use of any other purified water was not supported under the terms of the service agreement. This
caused some indignation among laboratory directors, since all laboratories had a supply of distilled
water, and paying for it as a reagent seemed unnecessary. It was a harbinger of things to come,
however. Laboratory reagents nowadays are sold as a complete package, and modification of any
component is not allowable under the terms of FDA approval.
7
This is a generalization that ordinarily holds true, but exceptions exist when a test requires fre-
quent calibration and QC because the method is unstable. Overhead can increase when the test
volume increases if, for example, QC is required every few specimens to ensure analytical drift has
not affected results. But that circumstance is unusual, and mostly limited to manual tests that
involve errors associated with technique. An example is a chromatographic method that requires
controls in parallel with every patient specimen.
1 Laboratory Structure and Function 15

Laboratory Design

Each subspecialty in laboratory medicine requires unique skills. Transfusion medi-

cine services perform relatively few laboratory tests, but are responsible for issuing
blood products for therapeutic use. Microbiology laboratories involve mostly man-
ual diagnostic methods to identify pathogens in blood, urine, or other specimens.
Hematology, chemistry, and immunology are highly automated and represent the
largest volume of routine laboratory tests. Molecular diagnostics and flow cytome-
try involve automation, but these methods usually require specialized training of the
technical personnel and interpretation by a qualified pathologist or molecular
biochemist.

Services and Laboratory Consolidation

Historically, the design of clinical laboratories segregated the various services, but
that approach involved the highest personnel costs; each laboratory needed suffi-
cient technical and supervisory personnel to ensure both compliance with accredita-
tion standards and that services were available at all times. Modern laboratory
designs consolidate services to minimize space and the number of technical and
supervisory personnel required. In smaller laboratories, technical personnel may
perform tests in multiple laboratory areas—e.g., microbiology, transfusion services,
hematology, and chemistry. In larger laboratories, however, this approach is not
practical because the technical expertise required in each area of a clinical labora-
tory that offers extensive services is too demanding to expect technologists to
remain proficient in more than one or two areas. The core laboratory concept, which
combines the highly automated areas of chemistry and hematology, emerged in the
1980s and dominates the clinical laboratory landscape today.
Grouping automated laboratory procedures into a core laboratory had several
advantages. First, it simplified the logistics of specimen distribution in the labora-
tory since the highest volume procedures were concentrated in one area. Second, it
allowed essential resources such as centrifuges, printers, and workstations to be
shared between chemistry and hematology, avoiding duplication of those resources.
Finally, the core laboratory encouraged cross-training of chemistry and hematology
technologists, which allowed more flexibility and efficiency in scheduling staff.
Since both specialties depended primarily on automated platforms, chemistry and
hematology shared many aspects of laboratory practice, and therefore were easily
combined.
Microbiology is the highest volume area of the laboratory after the core labora-
tory (chemistry and hematology), but is unique in several respects. The equipment
required for microbiology, such as biohazard hoods, incubators, and microscopes, is
not widely used in other laboratory areas (with the exception of microscopes in
16 R.L. Bertholf

hematology). Most of the microbiology procedures are manual8 and involve skills
that do not translate easily into a core laboratory environment, which focuses pri-
marily on high-volume testing.
Transfusion services are unique because in addition to performing laboratory
tests, they also issue blood products for therapeutic use. The number of laboratory
procedures performed by transfusion services is limited, and most are manual. When
their function includes modification or relabeling of blood products, there is an addi-
tional layer of regulatory oversight; in addition to compliance with CLIA require-
ments, these laboratory services must comply with FDA regulations. The FDA
regularly inspects blood collection centers to ensure compliance with standards rec-
ommended by the Blood Products Advisory Committee. Transfusion services that
neither collect their own blood products nor modify or relabel products they pur-
chase and issue are not regularly inspected by the FDA, although they are subject to
unannounced inspections. Like microbiology, the workflow and technical skills
characteristic of transfusion services are mostly incompatible with core laboratory
designs, so these services are often segregated from other parts of the laboratory.
Two laboratory services have characteristics that are intermediate between the
highly automated core laboratory and manual test-oriented microbiology and trans-
fusion services: serology/immunology and urinalysis. Most serological tests are
automated on immunoassay platforms, and therefore may be incorporated into the
chemistry services, which also include immunoassays. Many chemistry/immunoas-
say platforms have serological tests available, and performing these tests in the core
laboratory provides all the advantages of consolidation described above. However,
states that license medical technologists typically do so only in the specialties in
which the licensee is qualified. Graduates of accredited medical technology schools
who have passed national certifying exams usually are licensed in all specialties,9 but
continuing education in each specialty may be required to maintain licensure in all
areas. As a result, some laboratory staff maintain only one or two specialties on their
license, to reduce the burden of meeting the CE requirement. This presents a problem
if, for example, a technologist with a license only in chemistry is performing serol-
ogy tests on the automated chemistry platform, since a license in serology may be
required by the state for the technologist to perform those tests. This is only a con-
cern in states that regulate clinical laboratories and license laboratory personnel.
Urinalysis might logically be located in chemistry, hematology, or microbiology.
Clinical laboratories that process many urine specimens typically use an automated

8
Automation of some microbiology procedures may be on the horizon. There is growing interest
in using matrix-assisted laser desorption ionization/time-of-flight (MALDI-TOF) mass spectrom-
etry to identify microbes by their protein signatures (Lay, 2001).
9
The terminology for medical technology training programs is changing, and many programs now
are called “Medical Laboratory Science” or “Clinical Laboratory Science” programs. The termi-
nology used by certifying agencies also has changed. The credentials awarded by the ASCP to
those who pass their medical technologist exam used to be MT(ASCP), but this was changed to
MLS(ASCP) when the ASCP Board of Registry merged with the National Credentialing Agency
(NCA) in 2009.
1 Laboratory Structure and Function 17

urinalysis platform, and in those laboratories urinalysis is most conveniently located

in the core laboratory. Manual urinalyses might fit better in microbiology laboratory
because of the microscopy component.
Molecular diagnostics are still evolving from their beginnings as primarily a spe-
cialty service operated by laboratory professionals trained in the emerging science
of molecular biology. Molecular methods now are in the mainstream of clinical
laboratory services, and the instrument platforms available for these assays are pro-
gressing towards automation. At some point, molecular methods may fit into core
laboratory services as another automated platform, but that point has not yet been
reached. Currently, molecular diagnostics laboratory services usually have dedi-
cated staff and may be located in facilities remote to the main laboratory. With
regard to diagnostic use, there is substantial overlap between molecular pathology
and other clinical laboratory services. Molecular methods may be used to amplify
and characterize DNA from infectious agents, complementing microbiology ser-
vices; identify genetic mutations associated with tumors, complementing biochemi-
cal markers of neoplasia; and to reveal pharmacogenetic polymorphisms to optimize
drug therapy, complementing therapeutic drug monitoring services.

Support Services

Laboratory support services can include phlebotomists, specimen processing clerks,

laboratory assistants, phone operators, and other personnel not involved in the tech-
nical component of laboratory testing. Support personnel usually are needed in all
but the smallest of laboratories to receive, label, centrifuge, and distribute specimens
to the analytical areas. In addition, support personnel often are responsible for
answering phone calls to the laboratory, preparing specimens to be sent to other labo-
ratories for referral tests, delivering laboratory reports when electronic delivery is not
available, restocking laboratory supplies, and various other nontechnical duties.
In the design of a clinical laboratory, a common error is failure to allocate suffi-
cient space for specimen processing. The more crowded the specimen processing
area, the greater the likelihood of specimens being misplaced or overlooked. There
should be generous space to sort and organize specimens arriving in the laboratory.
When there is insufficient space for efficient specimen processing, it often becomes
a bottleneck in the overall workflow of the laboratory. The advantage of high-­
throughput automated analyzers is lost if significant delays occur between the time
a specimen is received and when it gets distributed to the analytical area. A goal of
laboratory design should be to minimize the time required for delivery of specimens
to technical personnel because they are the highest paid employees working in the
laboratory; technologists’ time that is wasted when they wait for specimens already
in the lab is more expensive than, for example, time spent by nontechnical personnel
waiting for specimens to be delivered to the lab. Another way to state this principle
is that productivity of the highest paid employees should be maximized at the
18 R.L. Bertholf

expense of less productivity in lower paid staff, if necessary. Achieving this goal
may mean adding another specimen processing clerk to the staff, which may give
them all less to do, but ensures that no delays occur in getting specimens to the tech-
nical personnel.
Not all laboratories provide phlebotomy services. Referral laboratories almost
always establish phlebotomy stations strategically located throughout their market.
Hospital laboratories may provide phlebotomists, or the hospital may depend on
nurses and medical assistants to collect blood specimens. Phlebotomists are skilled
professionals,10 although few states require licensure of phlebotomists. In hospitals,
whether blood collection is performed by laboratory employees, patient care staff,
or some combination of the two is mostly an institutional decision. There are several
advantages to having phlebotomists part of the laboratory staff:
• The laboratory trains the phlebotomists and monitors their competency.
• The logistics for deployment of the phlebotomists is determined with laboratory
workflow in mind.
• Changes in phlebotomy procedures can be rapidly implemented.
• The laboratory can control the utilization of phlebotomy supplies.
The advantages of having phlebotomists as part of the laboratory staff are diffi-
cult to overstate. Within the laboratory services, phlebotomists’ training will be con-
sistent and address the principal quality issues associated with blood collection:
proper patient identification, collection of a sufficient volume of blood in the appro-
priate container, phlebotomy techniques that minimize the risk of hemolysis, and
proper labeling of the specimen to avoid the need for relabeling when the specimen
reaches the laboratory. Specimens that need to be relabeled in the laboratory, and
particularly specimens that cannot be analyzed due to improper collection, have
enormous impact both on the efficiency of workflow in the lab and on good patient
care, since re-collection causes unnecessary discomfort and risk to patients. In addi-
tion, mislabeled specimens present a risk of misdiagnosis and improper treatment.11
Rigorous, consistently enforced patient identification procedures minimize this risk.
A phlebotomy staff has significant impact on the laboratory budget, however, and
it is tempting for laboratory administration to transfer those costs to other departments

10
There are several national organizations that certify phlebotomists, including the National
Healthcare Association, National Center for Competency Testing, and National Phlebotomy
Association.
11
In reference to laboratory specimens, “mislabeled” can have several meanings, including labels
that do not have sufficient information, or barcode labels that cannot be scanned because they are
not properly affixed to the collection tube. In this context, however, “mislabeled” refers to a speci-
men labeled with information identifying a patient different than the one from whom blood was
collected. A few studies have estimated the frequency of mislabeled (“wrong blood in tube” or
WBIT) specimens received in hospital clinical laboratories. These studies are difficult to design
and conduct because without sophisticated (and expensive) genetic analysis, it often is not possible
to determine whether the blood in a collection tube belongs to the patient whose name is on the
label. Studies have consistently identified specimen mislabeling as a common source of error in
laboratory results, and estimate that the frequency of WBIT is between 0.05 and 0.1 % (Ansari &
Szallasi, 2011; Wagar, Tamashiro, Yasin, Hilborne, & Bruckner, 2006).
1 Laboratory Structure and Function 19

such as nursing or other patient care services in an effort to reduce laboratory person-
nel costs and thereby improve productivity metrics that are based on revenue per
employee. Efficiency of workflow, minimizing unnecessary re-­ collections, and
improving patient care by reducing risks associated with mislabeled specimens are
difficult to quantify and are not usually reflected in simple calculations based on total
revenue and personnel costs in a laboratory budget. However, these factors should be
given serious consideration when deciding how best to provide phlebotomy services
in hospital settings.

Laboratory Automation

Several manufacturers of clinical laboratory instruments offer automated systems

that are capable of performing certain specimen processing tasks prior to, and after,
analysis. The sophistication of these systems ranges from specimen input stations
that serve multiple analyzers and direct specimens based on information contained
in the bar-coded label, to fully automated systems (total laboratory automation,
TLA) that process specimens from the time they are delivered to the laboratory to
archived storage following analysis. TLA systems represent the extreme in a spec-
trum of automated specimen processing systems, where a specimen arriving in the
laboratory is placed on an automated track that reads bar-coded information on its
label including the patient ID and the tests to be performed; the specimens are
routed to a processing station that may include centrifugation and transfer of ali-
quots to additional test tubes, the processed specimens are directed to a track lead-
ing the appropriate automated analyzer, the tests are performed, and the remaining
specimen is transported along another track to an archiving facility that logs its
location so it can be retrieved for subsequent laboratory requests, if necessary.
Technologists monitor the laboratory results and intervene only when required, such
as when results are critical or otherwise needing attention. Most laboratories that
use automated specimen processing systems do not have a TLA-type system, but
have some degree of automation that eliminates the need to perform certain speci-
men processing steps manually.
The principal advantage of automated specimen processing systems is they per-
form tasks that otherwise would require personnel. Although automated systems are
expensive to purchase and service, laboratories with sufficient workload to justify
automation can achieve significant savings due to reduction in the number of sup-
port staff needed to process specimens. As an example, if an automation system
­eliminates the need for six support personnel (two per shift), each earning $25,000
annually, the savings over a 10 year lifetime of the system is $1.5 million, which is
sufficient to offset the cost of all but the most expensive systems.
A second advantage of automated specimen processing is consistency. When
specimens are processed manually, preanalytical variables are introduced that may
have an effect on the analytical results. These variables include the time between
receiving the specimen and performing the analysis, centrifugation speed and time,
20 R.L. Bertholf

pour-off technique and volume, and whether specimen tubes are maintained upright
or horizontal (i.e., lying on a bench top). Automated systems treat all specimens the
same way, reducing the chance that preanalytical factors will cause variability in
analytical results. Automated systems are not necessarily faster than manual pro-
cessing, but are generally more reliable and consistent.
Finally, automated specimen processing systems offer the advantage of better con-
trol of the workflow because the location of a specimen in the laboratory is traceable
at any time. This is a useful feature when, for example, the laboratory receives an
inquiry about the status of a particular test that has been ordered. Without automation,
laboratory personnel may have to leave their workstation to search for the specimen,
whereas automated systems track the location of every specimen in the laboratory,
and the information is easily retrievable. Automated systems also generate data that
can be used for quality assurance and performance improvement initiatives. For every
progression a specimen makes through the automated system a time stamp is recorded,
so in-laboratory turnaround time data can easily be retrieved and monitored.
For laboratories that have sufficient work volume to justify it, some degree of
automated specimen processing technology usually is a good investment that
reduces the number of nontechnical staff required and improves the overall labora-
tory performance.

Point of Care Testing

Certain types of laboratory tests are deregulated if they meet the criteria set forth in
CLIA ’88 (Subpart A Section 493.15 F.C.):
• Are cleared by FDA for home use
• Employ methodologies that are so simple and accurate as to render the likelihood
of erroneous results negligible or
• Pose no reasonable risk of harm to the patient if the test is performed incorrectly
If a laboratory test meets these criteria, the FDA may grant it a “waiver,” which
effectively exempts the test from regulation under CLIA.12 Waived tests proliferated
under these new rules, and now comprise a large segment of laboratory testing in
the USA.
Because they often are used outside of a central laboratory, waived tests have
been variously called “near patient” or “point of care” (POC) tests; the latter term is
more common. POC tests include blood glucose, urine hCG to detect pregnancy,

12
Healthcare facilities, including private physicians’ offices, are required to obtain a Certificate of
Waiver from CMS before performing waived tests, but the tests are otherwise unregulated by the
government. However, accrediting agencies such as The Joint Commission and CAP apply certain
standards to waived tests. These accreditation standards for waived tests include specifications for
training and periodic verification of competency, QC, documentation of results and reference
ranges, and needs assessment.
1 Laboratory Structure and Function 21

urinalysis by solid reagent (dipstick) technology, fecal occult blood, drugs of abuse,
and a few other tests that have been granted a waiver by the FDA. Not all laboratory
tests performed outside the central laboratory are waived; there are no federal
restrictions on where laboratory tests can be performed, so any test can be per-
formed at the point of care as long as the regulatory and accreditation standards are
met. Hence, POC does not necessarily refer to waived tests, but the vast majority of
tests performed at the POC are waived. Exceptions include several non-waived plat-
forms that are portable (either on a cart or hand-held) and perform blood gas, elec-
trolyte, cardiac marker, lactate, and a few other tests.
Non-waived laboratory tests performed outside of a laboratory nearly always
involve higher direct costs, and are subject to the same regulatory and accreditation
standards, as tests performed in a laboratory. This creates significant overhead costs.
Therefore, implementing non-waived POC tests in a healthcare facility that has a
central laboratory offering the same tests at lower cost requires careful consider-
ation of the quantifiable benefits that justify performing the tests at greater cost at
the POC. Two settings where non-waived POC tests are particularly useful are the
emergency department (ED) and operating room (OR). In the ED, rapid results are
helpful in triaging patients to appropriate areas, which improves efficiency of emer-
gency medical treatment. In the OR, rapid assessment of coagulation, blood gas,
and electrolyte status is essential for keeping anesthetized patients stable during
surgery. In both of these settings, a core laboratory has difficulty providing the turn-
around time that is either beneficial (ED) or essential (OR) for proper medical care.
Implementation of non-waived POC tests in other healthcare settings, when central
laboratory services are available, is more difficult to justify, since it is more of a
convenience to healthcare providers than an overall improvement in patient care.
There is one advantage of POC testing, however, in virtually all healthcare set-
tings. The instruments designed for non-waived POC tests use very small volumes
of blood compared to collection tubes for laboratory tests performed on automated
platforms. This is a particular advantage with pediatric patients.
Most POC tests are waived, so the regulatory and accreditation requirements are
less than for non-waived tests. Although many of the waived POC tests have higher
direct costs compared to the same tests performed in the lab, the difference is not as
large as for non-waived tests. Hence, waived POC testing is very common in health-
care settings. Blood glucose is by far the most common POC test performed on
hospital inpatients, since there have been studies indicating that prevention of
hyperglycemia in hospitalized patients improves outcomes (Van den Berghe et al.,
2001). Although the value of glycemic control in hospitalized patients has been
questioned (Boyd & Bruns, 2001; Wiener, Wiener, & Larson, 2008), currently it is
considered the standard of care.
A caveat associated with waived POC tests is that the analytical performance
standards to which they are held during the FDA approval process are far less than
standards for non-waived tests. Waived devices for measuring blood glucose, for
example, only need to meet a ±20 % accuracy standard, whereas most clinical labo-
ratory glucose methods are accurate within 1–2 %. Clinicians may not understand
that difference, and expect POC glucose results to match laboratory results, when
22 R.L. Bertholf

often there will be considerable bias between the two. Another misconception with
regard to glucose devices is that certain waived blood glucose meters have been
approved “for professional use,” and presumably are more accurate than “home
use” devices that diabetic patients use to monitor their own blood glucose. The FDA
does not have dual standards for waived blood glucose devices; all waived glucose
devices are merely required to meet the ±20 % standard for accuracy. Manufacturers
may label these devices as “home” or “professional” use, but the distinction is for
marketing purposes, and does not necessarily reflect any difference in analytical
performance. “Professional” devices usually have connectivity capabilities that
make it possible to capture data in the laboratory or hospital information system.
Since waived tests, by definition, are subject to minimal regulation, administra-
tive oversight of a waived POC testing program does not require the input of labora-
tory professionals, and at one time many institutions managed POC testing
independently from the laboratory. However, about a decade ago the accreditation
standards for waived testing became stricter, and the input and participation of labo-
ratory professionals in managing waived POC testing became more important.
Laboratory directors, managers, and supervisors are accustomed to the process of
laboratory accreditation and are better suited than non-laboratory personnel for
ensuring that waived testing complies with accreditation standards.

Summary

Laboratory tests have been a part of medical care at least as long ago as the time
when Hippocrates practiced, around 300 BC. The first clinical laboratories were
established late in the nineteenth century. The results of clinical laboratory tests are
used to diagnose disease, determine appropriate therapies, detect toxins, monitor
therapeutic drug concentrations, and assess overall health. Laboratory tests con-
sume a very small fraction of total healthcare spending, but have great influence
over medical decisions. There is little doubt that laboratory services are essential to
adequate healthcare, and their role is certain to increase as clinical applications of
new technologies such as proteomics and molecular diagnostics expand.
Clinical laboratory services are provided in a variety of settings: physicians’
offices, clinics, hospitals, and regional and national referral centers. Each of these
settings has unique requirements for diagnostic laboratory services; therefore the
design of laboratory services depends highly on the environment in which it oper-
ates. Virtually every consideration in clinical laboratory design and function—per-
sonnel, equipment, automation, consolidation, test menu, location, etc.—is influenced
by the type of services the laboratory needs to provide. The greatest challenges in
clinical laboratory design and function are faced by hospital laboratories because
they serve the most diverse set of laboratory needs: inpatient, outpatient, critical,
routine, referral, and outreach.
A well-designed laboratory service is an asset to the institution it serves, providing
timely laboratory results that are used to improve patient care. In addition, prudent
1 Laboratory Structure and Function 23

choices for equipment and personnel, and attention to designing efficient processes
that do not waste time or resources, benefit the institution by producing an essential
service at a competitive cost. In some circumstances, a greater investment results in
long-term savings. Also, assigning laboratory-related services such as phlebotomy
and POC testing to supervision by laboratory staff has potential benefits for both the
laboratory and institution.

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