COUNTY~ MEMORANDUM OF ~ ~ HEALTH AND ~ Placer ® County of Placer

TO: Board of Supervisors DATE: December 12, 2017 FROM: JeffreyS. Brown, M.P.H. , M.S.W., Director of Health and Human Services SUBJECT: Presentation Of Public Health Laboratory Services Study Results And Request To Negotiate A Contract To Join A Regional Public Health Lab

ACTION REQUESTED 1. Receive an update on the Placer County Public Health Laboratory and a study into the feasibility of a transition of public health laboratory services to a regional public health laboratory model.

2. Authorize the Director of Health and Human Services to develop proposals concerning the operation of public health laboratory services including negotiating contractual proposals with regional public health laboratories to later present to the Board for approval and direction.

BACKGROUND The Role of Public Health Laboratory Services Public health laboratory services play an important role in achieving the mission of public health agencies to protect the health of their community populations and their local environment. Public health laboratories (PHL) serve in multiple capacities that impact on communicable disease control, , , policy development, emergency response and training/education. The organization and function of PHL services vary at federal, state and local levels but their importance is reflected by their presence at all levels and in their historic contributions to the health of the US population.

The history of public health laboratory services in California has been shaped in unique ways in comparison to other States. The combination of a State mandate from the early 1900s that local health jurisdictions provide PHL services together with federal funding after WWII resulted in a large number of stand-alone PHLs serving small populations. In contrast, other states took regional or state-wide approaches resulting in much larger laboratories covering proportionately larger populations and catchment areas.

Pressures on the Current Public Health Laboratory Model The recent history of small and medium-sized PHL in California is that of an industry providing vital service but whose model of local organization and delivery is under increasing pressure. Those pressures originate from five areas:

1. Changes in laboratory technologies and economies of scale Laboratory science is rapidly changing at the "bench" where tests are performed and at the points of data storage, transmission and analysis. Many tests that have been standards for a generation or more are being replaced or sidelined by newer tests that leverage molecular technologies and advanced detection techniques. Small laboratories encounter challenges of large capital outlays to procure these technologies. Similarly, small laboratories are challenged to afford the digital-based laboratory reporting systems (LIMS) that are rapidly becoming the standard.

Many newer testing technologies incorporate semi-automation and can perform tests on multiple samples at the same time. This creates an economy of scale, adding only marginal labor and materials costs for laboratories processing large numbers of samples. Smaller laboratories performing fewer tests cannot leverage this scaling effect. Consequently, they have higher input costs/sample tested. 27 1 2. Changes in safety-net health care systems and reimbursements The role of County-provided direct health care services has dramatically changed following the emergence of Federally Qualified Health Care Centers (FQHCs), Rural Health Clinics, Indian Health Centers, and Medicaid Managed Care Organizations and the expansion of Medicaid coverage to virtually all individuals previously covered under the County Medical Services Program (CMSP). In their prior role as a safety-net health care provider, Counties often used their PHL as a clinical laboratory service and received generally favorable reimbursement for those services. As direct health care services for the safety-net migrated from County systems to Centers (CHC) , laboratory service contracts traveled along . CHC org anizations under managed Medicaid made frequent use of single..: source, low-cost commercial laboratory contracts that eliminated a significant source of testing and revenue for PHLs.

3. Rising Professional Standards and Competition for Laboratory Personnel The recent federal requirement for directors of PHLs to have an advanced degree is having a substantial impact on the ability of small and rural PHL to recruit qualified personnel. In addition, California requires PHL professionals to complete a lengthy training program offered at a few PHLs in the State. Both requirements limit the pool of qualified applicants in some areas of the State.

4. Cooperative/Regional Models of County-Based Services Emerging needs, demographic trends, travel and technology have combined to change the scale of public health work beyond traditional geographic borders. While these effects have posed challenges, they have also created opportunities for local health departments to form cooperative arrangements across a region to share resources and enhance services. Examples include public health laboratory services, animal control , communicable disease management and other public health activities.

5. Significant reductions in discretionary revenues dedicated to local public health core functions The increasing costs and decreasing revenues of local PHLs has resulted in local public health departments supporting PHL operations with very limited discretionary funding dedicated to public health core functions. The primary source of the discretionary revenues (1991 Health Realignment) supporting PHLs has declined precipitously over the last decade. Thus, public health jurisdictions have had to either request additional county general fund (CGF) support, reduce/ streamline public laboratory services, and/or reduce other vital public health services.

Analysis of the Placer County Public Health Laboratory and Potential Alternate Service Models In the context of these growing pressures on the current public health laboratory model, Placer County HHS contracted with Pacific Health Consulting Group to conduct an in-depth analysis of the Placer County Public Health Laboratory to evaluate current lab operations and potential operational efficiencies and/or changes in the service model that would support excellent, sustainable public health laboratory services for Placer County.

The principal consultant working on this analysis was Dr. Craig Lindquist. Dr. Lindquist completed his MD at the University of Iowa and his PhD and internal medicine residency at Yale, where he was co-founder of Yale's first HIV/AIDS outpatient services. He then moved to San Francisco to do a fellowship and then join the faculty at UCSF, where he worked in the Moffitt HIV/AIDS Clinic. In the early 1990s, Dr. Lindquist joined the Marin Department of Health and Human Services where he developed a County-based HIV/AIDS clinic and supervised an AIDS Clinical Trials program. He was an investigator on a number of drug trials, as well as a consultant to projects involving drug resistance and gene sequencing. After several years in that position, he assumed the position of medical director over all of the County's medical services and periodically served as the County Health Officer at the same time. Near the end of his tenure as Medical Director, Dr. Lindquist's interests turned to issues in health care design, delivery, and costs. Those interests led to post-graduate programs at the UC Berkeley School of Business and the Harvard Business School focusing on issues related to health care. He used his training to conduct an analysis of the Marin County Public Health Lab which helped to inform Marin's joining into the Napa-Solano-Yolo­ Marin Reg ional Public Health Laboratory. Dr. Lindquist subsequently retired from Marin County, and is currently a Visiting Scholar with the Stanford Clinical Excellence Research Center, in addition to doing some part-time consulting for Pacific Health Consulting Group.

28 2 The methods employed in Dr. Lindquist's analysis included a combination of numerous interviews with Placer County personnel, laboratory stakeholders including the Public Health Officers from all three counties (Yuba, Sutter, and Nevada) contracting with Placer PHL as well as several public health laboratory professionals in California. The scope of work for this analysis and context driving it were shared with Placer PHL staff prior to its initiation, and Placer PHL staff cooperated fully with the analysis at all phases. Dr. Lindquist met with PHL staff in Auburn as a group on 3 separate occasions. He also made himself available to meet with all PHL staff, and several stakeholders, as individuals. Data describing laboratory functions, testing volumes and financial data over a multi-year period were reviewed . Six key findings are described:

1. High Quality of Laboratory Staff The Placer PHL laboratory staff are well trained and experienced. They demonstrate a high level of professionalism and a keen sense of pride in their work.

2. High levels of satisfaction from laboratory customers Contracting Counties, agency colleagues and local customers report high levels of satisfaction with the Placer PHL services. Many cite the helpfulness of staff and the willingness to 'go the last mile'.

3. Sharp declines in laboratory testing over a multi-year period As shown in table below, the volume of laboratory tests performed in the Placer PHL have sharply declined over a multi-year period. From an annual high of 35K in 1998, testing volumes have dropped -85% to 3.5K in 2016. Further declines in clinical specimen testing are anticipated in 2017 as STD testing from the County Jail ends.

1998-2003 2003-2008 2008-2013 2013-Present 28-35K!year 24-27K!year 5-24klyear 3.5-5k/year

The precipitous declines in testing volumes in the Placer PHL occurred across multiple test types but the most significant declines were associated with the elimination of drug testing and reductions in HIV testing in the early 2000s. More recently, significant drops in water testing in the 2014-2016 period and the impending loss of much of the STD testing in 2017 have contributed to the continuing decline in testing. Testing volumes from surveillance tests in rabies, parasites and routine bacteriology show some year-over-year variation but are relatively unchanged.

The net effects of these declines are also illustrated in the concentration of the remaining test volumes on a small number of tests. Three common tests (lead, water and GC/chlamydia) accounted for more than half of all tests performed (-3,600) in 2016.

Test Type %of Total Tests Performed (2016) Lead 25% Water 24% GC/Chlamydia 22% Parasites 8% Rabies 7% TB 6%

4. Testing volumes vs. staff ratios of Placer PHL The ratio of staff/test volumes in the Placer PHL is higher than other PHLs in the region.

PHL Testing VolumesNear Staff FTE Placer -3,500 7.0 Marin (2012) -10,000 5.8 Solano/NapaNolo/Marin -25,000 9.0 Sonoma/Lake (2012) -16,000 8.8 Sacramento ->40,000 12.0 29 3 5. Challenging Financial Performance Like most other government services, PHL services do not generate an operating profit since much of its services/testing are performed in support of in-house public health functions. Placer County's PHL financial performance reflects a combination of its high staffing costs, low testing volumes and its modest revenues from payers, especially those from it four contracting Counties. The PHL has a very high input cost/ average test revenue: >$250 cost per test vs. -$45 revenue per test.

As a consequence of its financial performance, the Placer County PHL is highly dependent upon County/Department support. The 2017 budget proposes -$1.4 million in realignment funding be purposed to support the PHL.

6. Long-Term Facility Planning Necessitates New Lab Construction Initial planning is underway for the construction of a new facility to house Placer County Health and Human Services in Auburn, including virtually all of the programs in the Placer County Public Health Division. The Placer PHL facility is over 70 years old and currently occupies the proposed building site for a new HHS building. Consequently, a feasibility study by an outside architect for the construction of new laboratory facilities was completed in May 2016. The study concluded that probable construction costs for either of two potential locations were in excess of $6 million.

The analysis considered three general options and estimated both service and financial outcomes:

Option 1: Maintain current service model of a local PHL with current County contracts and local services Option 2: Modify current service model of a local PHL to enhance revenue and/or lower costs Option 3: Restructure PHL services to obtain laboratory testing through a regional PHL while maintaining local access.

HHS will provide more detail concerning these options at a future board meeting for Board direction. Specifically, staff recommends that the Board authorize the HHS Director to discuss and negotiate proposed contractual terms with the Sacramento County PHL and with the Napa-Solano-Yolo- Marin County PHL of a regional PHL, including Placer and our partner counties, for the Board's future consideration.

The analysis estimated that Option 1 would maintain the current level of satisfactory service under local governance. Option 1 would, however, require major short term capital investments to replace the facilities and that the service would continue to require substantial ongoing financial support due to the expectation of ongoing challenges with low testing volumes and high input costs.

The analysis identified several modifiers under Option 2 as actions to potentially increase test volumes, lower cost, and/or increase revenue. These included staffing adjustments, dynamic fee schedules, expanded test offerings and greater cost sharing with neighboring Counties. With the exception of greater cost sharing, the effect size of these modifiers was small . And the feasibility of greater cost sharing with contracting Counties or substantial increases in test volumes was found to be low. Thus, the analysis of Option 2 was estimated to be similar to that in Option 1.

The analysis of Option 3 found two large PHLs within a reasonable geographic range of Auburn as potential laboratory service providers for tests from Placer County, as well as from its current contracting counties. Both laboratories currently provide PHL services to other counties under arrangements described as satisfactory to all parties. These arrangements satisfy the statutory requirement that a county must provide PHL services. Local access to testing services is maintained through a combination of transportation services and electronic reporting. No significant gaps or deficiencies in services were reported by counties receiving PHL services in these arrangements. Some reported greater access to certain types of tests. The financial and contractual arrangements between the contracting and provider Counties differ in the two examples cited. The potential savings to Placer under Option 3 are subject to negotiation but are estimated to be substantial (estimated $800,000-$1 ,200,000 per year, and also avoid

30 4 the one-time cost of constructing a new public health laboratory), while preserving most of the key advantages of a local public health laboratory facility.

PHL Staff Input and Implications There are currently 7 permanent County-employees working in ou r Placer County Public Health Laboratory. This includes the Public Health Laboratory Director, a Public Health Microbiologist, two Senior Public Health Microbiologists, and three Laboratory Technicians. In addition, our PHL has historically employed 1-2 Public Health Microbiologist "trainees" as part of a training program that runs from January to June each year and is funded by the California Department of Pubii c Health's Emergency Preparedness Office. Extra-help staff to serve as instructors for the training program.

As mentioned earlier in this memo, our PHL staff our highly skilled and provide tremendous customer service, and are very passionate about the work they do. While most of our Lab employees have been clear in expressing their wishes that the current PHL model be preserved, they have been very helpful and cooperative in this effort. PHL staff have been included throughout the process from reviewing the scope of work back in February, meeting with Dr. Lindquist (both as a group and many staff as individuals) on three separate occasions over the last 10 months, providing documents and data as requested to Dr. Lindquist, reviewing and providing feedback on Dr. Lindquist's draft reports, and in preparing their own proposal of a "bare minimum lab" as an alternative to contracting with another regional lab.

It is premature to predict exactly what the implications of a transition to a regional PHL model might be for our current PHL staff. This would depend upon any negotiated contractual details. However, it is reasonable to assume that a transition to a regional PHL might impact at least some of our current PHL staff. Placer County currently has no other Public Health Laboratory Director, Public Health Microbiologist, Senior Public Health Microbiologist, or Laboratory Technician positions into which these staff could be moved. However, in the event that a transition to a regional PHL model necessitated the elimination of any of these positions, HHS would attempt to absorb the incumbents of these PHL positions into other positions within HHS for which these staff would be qualified. HHS leadership will return to your Board for further direction once a contract is negotiated and the implications for our PHL staff become clearer.

FISCAL IMPACT There is no fiscal impact as a result of negotiating a proposed contract with a regional health laboratory.

ATTACHMENTS Attachment A- Final Public Health Laboratory Feasibility Study by Dr. Craig Lindquist.

31 5 ~~Pacific Health ~rConsulting Group

December 1, 2017

A Memo Summarizing Analysis and Options RE: Placer County Public Health Laboratory

Prepared by Craig Lindquist, MD PhD

Overview

The Placer County Department of Health and Human Services (Placer HHS) engaged Pacific Health Consulting Group (PHCG) to review its Public Health Laboratory Services. Specifically, it was requested to review its recent history of operations and describe potential future options for laboratory services, to evaluate those options against key criteria and to highlight pros/cons and trade-offs. The purpose of this memo is to provide a detailed analysis that will enable HHS leadership to make strategic decisions for the future.

Key Take-Aways

>Public health laboratory services play a key role in promoting the health of the community and insuring the safety of the environment.

> Small local public health laboratories face several challenges including changes in service demand, advances in technology, the economics of scale and rising input costs.

>The Placer County Public Health Laboratory has performed well in promoting the health of Placer and surrounding Counties, but multi-year declines in testing volumes/revenues have seriously undermined the sustainability of the current model.

>Options to continue high quality public health laboratory services to Placer County are described and analyzed against key metrics of impact on community, feasibility and finance.

>The balance of trade-offs in the future options discussed in the analysis favor a regional service model to assure sustainable high quality public health laboratory services to Placer County.

32 Methodology

The enclosed analysis included both quantitative and qualitative data.

Individual interviews, Placer County

Jeff Brown Director, Placer HHS Rob Oldham, MD Health Officer and Public Health Director, Placer HHS Musau WaKabongo, PhD Director, Placer County Public Health Laboratory Staff Placer County Public Health Laboratory Wes Nicks Director, Placer Co. Environmental Health/ Animal Services Michael Romero Program Manager, Placer County Public Health Division, Wendy Taylor Communicable Disease Team Supervisor, Placer County Paul Breckenridge Senior Architect, Placer Co. Dept. of Public Works and Facilities Capt. Don Hutchinson South Placer Jail Commander, Placer County Sheriffs Office Fred Guither Placer County Sheriff's Office Lynette Brody Placer County Planned Parenthood Joanne Hendricks, RN Placer County Jail Medical Program Manager, CFMG Bob Dawson Placer Co. Dept. of Public Works and Facilities, Parks Division Mike Ottmann American Well Co. /Private Company Michelle Beauchamp Program Manager, Placer Co. HHS Admin. Services Division Allison Gonthier Infection Control Coordinator, Sutter Roseville Medical Center Capt. Mike Bradley City of Roseville Fire Department, HazMat Team

Individual Interviews with Counties Contracting for PHL Services

Lou Ann Cummings, MD Health Officer, Sutter County Celia Sutton-Pado, MD Health Officer, Sierra County Nicole Quick, MD Health Officer, Yuba County Ken Cutler, MD Health Officer, Nevada County Health

Individual Interviews with Other Public Health and Related Professionals Paul Kimsey, PhD Director, California State Public Health Laboratory Katya Ledin, PhD Director, Solano/Napa/Yolo/Marin Public Health Laboratory Anthony Gonzales, PhD Director, Sacramento County Public Health Laboratory Sheldon Fang Special Agent, Federal Bureau of Investigation Sharon Starling California Department of Public Health

2 33 Background and History of Public Health Laboratories

Public health laboratory services play an important role in achieving the mission of public health agencies to protect and promote the health of the population and their local environment. Closely tied to their home agencies at local, state and national levels, public health laboratories (PHLs) perform analytic tests on samples collected from humans, animals, the environment, and other select sources where infectious diseases and/or harmful agents pose a potential threat.

Public health laboratories differ from commercial laboratories in several respects, although some tests, especially those related to common communicable diseases, are often identical. The most distinctive characteristic of a PHL is that it is integrated within the structure and services of a public health agency. That integration insures access to appropriate tests, professional advice, and speedy communication and coordination with other public health activities.

While PHLs have been in existence in the United States for more than a century, the diversity in their charters, organizational structures, and size between states and communities presents a challenge to any brief summary. However, recent efforts by the Association of Public Health Laboratories have achieved a consensus defining core functions, capabilities and standards for the public health laboratory industry. These are articulated in 11 Core Functions' for a PHL (MMRW, Sept 20, 2002/51 :1-8):

· disease prevention , control, and surveillance · integrated data.management · reference and specialized testing · environmental health and protection · food safety · laboratory improvement and regulation · policy development · emergency response · public health-related research · training and education · partnerships and communication with community

The history of public health laboratory services in California has been shaped in several unique ways in comparison to other States. In the early 1900s California passed legislation requiring counties with populations over 50 ,000 to provide PHL services. Travel and communication technologies linking the far­ flung counties at that time were rudimentary, leaving each county largely on its own to provide laboratory services. Then in the late 1940's the Federal Hill-Burton Act spurred the construction of thousands of local hospitals and public health facilities across the US . Many counties in California used Hill-Burton funding to build a public health laboratory. This combination of statutory requirement and funding opportunity resulted in California having a large number of local laboratories each serving small-to­ medium sized communities relative to other states that elected state-wide or regional approaches.

Today roughly half of the California's 58 counties maintain their own laboratory while the remainder either refer testing to the California State Public Health Lab (those counties with very small populations) or have arrangements with other counties to supply PHL services. California's legacy of distributing PHL functions to the local level is illustrated in the following three-way comparison: The State of Missouri has one main laboratory facility and one branch serving a population of 6 million residents for a service area of 70,000 square miles. California's San Diego County has one PHL serving 3.0 million residents for a service area 4,500 miles. And Marin County, the fifth smallest County in California, maintained until

3 34 recently a PHL serving a population of 270,000 for a service area of 520 square miles. Arguably, the three examples of a State, a large urban County and a small semi-rural County have similar needs for laboratory services, but the historic design of laboratory systems have little relation to distance or population. ·

In many ways, the legacy of local public health laboratories has served small and semi-rural counties in California well. Access to tests relevant to public health, coordination with others within the local health department and 'high touch ' client services are widely acknowledged strengths of the service model. There are, however, growing challenges that threaten the sustainability of the small, local scale model. Changes in technology, the economics of scale and major shifts in the roles of local health departments in providing primary care have seriously eroded the demand volume and efficiency of many small laboratories. The following descriptions will briefly detail these issues:

Changing technologies Laboratory science is a rapidly changing field at the 'bench' where tests are performed. Many tests that have been standards for more than a generation are being replaced or sidelined by newer tests that leverage molecular technologies and advanced detection devices. These newer test platforms offer several advantages including speed, sensitivity and specificity. But small laboratories encounter challenges of large capital outlays to procure the equipment and they experience high unit costs that arise from performing small numbers of tests.

Similar challenges for small volume laboratories exist when they attempt to adopt advances in data storage and transfer. Prior methods of 'paper-rock-scissors' using paper reports /filing cabinets/FAX are rapidly being replaced with digital data/cloud/EMR interfaces. The high costs of acquiring and maintaining these digital systems can be managed in high-volume laboratories but become budget­ breaking for small-volume operations.

Economies of Scale Newer technologies have added advantages over older techniques in the form of semi-automation and scale. Many common tests can now be performed on multiple samples in a single process with only marginal additional inputs of materials or labor. The results have been to create advantages of scale for large volume testing leaving small volume operations to cope with excessive capital and operational costs per unit.

Evolving environment of health care systems and payments: The landscape of health care systems in many communities has changed dramatically with the emergence of Federally Qualified Health Care Centers (FQHCs) in the 1980s. FQHCs have greatly increased the access to healthcare for millions of low-income and underserved Californians while opening the door for alternatives to clinics run by Local Health Departments. These system-based changes in health care delivery to low income populations have been accompanied by shifts in the contracting practices for laboratory services. Many of these newer arrangements (FQHC, managed Medicaid, non­ County hospitals, etc.) use single-source, low-cost commercial laboratory contracts thereby ending their use of PHL services.

4 35 Placer County Public Health Laboratory Service

Physical Plant

Opened in the early 1950s, the Placer County Public Health Laboratory operates as a service unit within the Public Health Division of the Department of Health and Human Services. Located at at 11375 C Avenue, the main laboratory occupies a Quonset-style building (-4,000 square feet) constructed in -1940s by the U.S. Army. Attached to the main laboratory building is a smaller (-900 square foot) modular structure containing the Bio Terrorism Laboratory placed in 2005.

Management/Staffing

The Placer County PHL has a current staff of 7.0 FTE and one unfilled position (clerk) . The current staff includes:

PHL Director 1.0 Senior PHL Microbiologist 2.0 PHL Microbiologist 1.0 Lab Tech 3.0

. The Placer PHL laboratory staff are well qualified with two staff members holding doctoral degrees. The experience of the staff is further evidenced by four members having worked in the laboratory for more than 10 years.

Descriptions of Operations/Services

The Placer County PHL performs a range of services in coordination with health officials within the Placer Health Department and those of its contracting counties. While the range of its functions are broad as outlined under the "11 Core Functions" described above, its principal day-to-day work involve the many steps in performing analytic tests relevant to communicable diseases, environmental safety and potential agents used in bioterrorism threats.

Local Requests The principal sources of test requests come from local governmental agencies . Those agencies include Placer County's Communicable Disease Control Program , Animal Services Division, Environmental Health Division, and the Department of Public Works and Facilities. The next largest source of test requests are water-related , principally from two local commercial drilling companies. A third smaller source of local requests arise from lead screening tests performed on infants and children insured through MediCal or CHIP. The Placer PHL also processes some samples from local hospitals or prepares them for transfer to the State Public Health Laboratory.

Outside County Requests The Placer PHL currently provides PHL service under contract to four nearby Counties lacking their own laboratory. These include Yuba, Nevada, Sutter and Sierra Counties. The contracts with these Counties have similar terms, with Placer receiving payments on a per test basis (Placer County Fee Schedule) and a small monthly consultation fee. The volume of test requests from the four contracted Counties is variable but small. For example, over a one year period (7/15-7/16) Yuba County submitted 42 samples; Sutter County 40 samples; Nevada County 27 samples and Sierra County 16 samples.

LRN Laboratory Services: In 2005 Placer County voluntarily sought and received a Public Health Emergency Preparedness Grant. As a grant recipient, it received a stand-alone, pop-up laboratory facility

5 36 now attached to the ma in laboratory building as well as ongoing funding for a staff microbiologist and staff training. The Placer LRN laboratory is one of 15 LRN/PLH laboratories in California. The function of the LRN network is to have an effective laboratory capability to detect bioterrorism threats, typically in the form of 'white powders' or similar substances that have been weaponized. The Placer LRN laboratory receives 3-4 such samples per year for testing.

Six Key Findings from a Review of Operations/Services

Key Finding 1: High Levels of Satisfaction from Outside Stakeholders Using Placer PHL Services

Multiple stakeholder/users of the Placer County PHL were interviewed including the following :

../ Four Public Health Officers from Counties contracting with Placer County ../ Pa rks Department, Placer County ../ Local drilling contractors using the lab for water testing ../ Fire Chief for HazMat, Placer County ../ CFMG staff in Placer County Jail

All expressed confidence in the accuracy of tests performed in the laboratory and satisfaction with the timeliness of the service. Numerous comments referenced the responsiveness and friendliness of County staff.

Key Finding 2: Sharp Declines in the Volume of Laboratory Testing Over a Multi-Year Period

The volume of tests performed in the Placer PHL has declined significantly over a multi-year period . From an annual high of 34,638 tests performed in 2002, test volumes have plummeted - 90% to 3,611 tests in 2016.

Place r PHL Total Test Volumes by Year

40000

35000

30000

2 5000

20000

15000

10000

5000

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

The causes of the drop in test volumes are multifactorial but principally relate to sharp declines in orders for a few high-volume tests. Requests for two high volume tests (drug testing and HIV screening) ended entirely in 2008-2009. Requests for two other high volume tests (GC/Chlamydia and water testing) have declined -50% from their peak years in the early 2000s. And by report, requests for GC/chlamydia testing which accounted for 22% of test volume in 2016, ceased in mid-2017. These dramatic drops in requests can be traced to external factors. The principal sources of requests for these tests have either ended operations (County Clinics) or they have changed providers for laboratory services (CFMG and others) . The likelihood of reversing those changes is extremely low.

6 37 Key Finding 3: Concentration of Test Volumes on a Small Number of Specific Test Types

As the demand for some previously high volume tests waned, the remaining high-demand tests have narrowed significantly. As shown in the table below nearly three-quarters of the requested tests performed in 2016 were one of three types of tests (lead, water and STD screening). This presents a vulnerability to future significant declines should there be change in demand from one or more of the current consumers as has occurred in the case of drug testing. In fact, the requests for STD screening tests abrupted slowed in mid-2017 threatening a significant contribution to the laboratory's outside revenue.

The demand for a few low-volume tests (Not Shown) such as parasites, rabies and TB appear stable over a multi-year period and are likely to continue.

Test Type (2016) Number Requested %of Total Tests

Lead 901 25%

Water 850 24%

GC/Chlamydia (STD) 792 22%

Parasites 306 8%

Rabies 251 7%

TB 228 6%

Key Finding 4: Ratio of Testing Volumes vs. Staff Size

The efficiency of a laboratory relates to several factors including the types of tests performed, the equipment used, staffing and infrastructure support. As discussed previously, some tests and equipment offer scaling opportunities that enhance the efficiency of large volume work. While the mix of test types varies between laboratories the general effect of scaling may be seen in the comparisons below:

FACILITY TESTING STAFF FTE TESTS VOLUMES/YEAR PERFORMED/STAFF

Sacramento PHL ->40,000 12.0 -3,300

Solano/Napa/Yolo/Marin PHL -25,000 9.0 -2,700

Sonoma/Lake (2012) PHL - 16,000 8.8 -1 ,800

Marin PHL (2012) - 10,000 5.8 -1 ,700

Placer PHL - 3,500 7.0 -500

7 38 Key Finding 5: Challenging Financial Performance

Like most other government services, PHL services do not typically generate an operating profit since much of its service is performed in support of in-house public health functions. Placer's PHL financial performance reflects a combination of its high staffing costs, low testing volumes and its modest revenues from payers, including from its four contracting Counties. The PHL has a very high input cost/ average test revenue: >$250 cost per test vs. -$45 revenue per test. As a consequence of its financial performance, the Placer PHL is highly dependent upon County/Department support. The 2017 budget proposes -$1.4 million in realignment funding be purposed to support the PHL.

Key Finding 6: Planned Construction on the PHL Facility Site

The County is contemplating the construction of a new facility to house HHS staff and services. The subject site includes the current location of the Placer PHL which will require the construction of a new laboratory facility. Working from specifications provided by the PHL staff, the independent architecture firm Dreyfuss/Blackford proposed an expanded main laboratory plan of 7,682 square feet at an estimated construction cost of $6 ,947,808. A second proposed plan that included a new BT laboratory space was estimated at $7,734,728.

External Trends and Promising Practices

Local health departments have adopted new operational practices or models of laboratory service in response to the challenges described above. Examples of these trends and practices include:

Lowering input costs In general, Counties choosing to maintain their own PHL facility have few opportunities to substantively reduce fixed input costs. The engineering requirements for a laboratory facility are detailed and specific necessitating a high cosUsquare foot (-$700+/sq foot) . Adding to those fixed costs are the relatively large number and variety of equipment needed to perform the range of tests offered in a PHL. While the substantial majority of variable costs are related to labor, the Federal mandate for the Lab Director to have advanced degree and the high degree of technical training for most of the bench workforce create a large fixed component to labor input. Further accentuating the fixed nature of labor costs is the need for the laboratory to have a surge capacity to process samples in the event of an outbreak.

Despite these limitations, some Counties have lowered input costs by contracting for a part time laboratory director and/or have reduced staff to minimal levels. In recent years two Counties maintained PHL services using 2 FT or fewer staff. Both , however, relied on other laboratories to assist in providing basic testing and during surge events. And both of these minimally-staffed laboratories are in the process of joining another County PHL to continue services.

Enhancing revenues A few larger laboratories have found opportunities to provide some advanced testing capabilities to non­ County clinical providers. For example, the Napa-Yolo-Solano-Marin PHL laboratory offers advanced TB and fungal ID testing for several community hospitals. Sacramento County PHL provides the testing for the UC Davis tuberculosis clinics. In both examples the County PHLs have advantages of scale and technology to provide specialized tests. In addition to testing , some LHD laboratories receive small grants in relation to communicable diseases and training programs aimed at future public health laboratory workers.

8 39 Contracting out for PHL Services As mentioned above, some of smallest counties (<50,000 population) escape the statutory requirement of having a PHL service and rely upon the State PHL to provide testing or accept assignment to another PHL as directed by the State. Some Counties with populations above the statutory threshold of 50,000 residents but nonetheless with small populations or low demand contract laboratory services from a larger county within their region. The contracting arrangements that Yuba, Sutter, Nevada and Sierra Counties have with Placer are examples.

Regionalization In practice, regionalization of laboratory services has not been clearly differentiated from contracting out but some distinguishing features are emerging. Those features include joint management structures, data/planning sharing and close real-time coordination between the regional provider laboratory and the health officials in the partner County. Regionalization has gained interest in California especially as Local Health Departments develop other areas of collaboration and shared work with one another. Broadly speaking, these trends recognize that boundaries that define environmental and are expanding as patterns of commuting , travel and communications change.

Regionalization has raised concerns and debate given the importance of PHL services in promoting the health and safety of the public. In California, for example, regionalization was opposed by many PHL professionals. Intense opposition has been directed at Counties considering regionalization where laboratory closures would result in the loss of employment for laboratory staff. However, the California Association of the Public Health Laboratory Directors (CAPHLD) does not have an official position on PHL regionalization, and many CAPHLD members are now part of successful regional models.

In response to concerns raised by proposals to regionalize PHL services and other changes, the Center for Disease Control (CDC) and the Association of Public Health Laboratories (APHL) developed extensive guidelines for agencies and governments contemplating service changes. Issued in 2012 and entitled "A Practical Guide to Assessing and Planning Implementation of Public Health Laboratory Service Changes", the guidelines' authors acknowledge the need to " ... achieve long-term sustainability by adopting management practices that can improve their operating efficiency and strengthen their resilience in the face of financial or other challenges." The guidelines specifically address service changes that include shared services across state and jurisdictions; contracting and the full merger of regional or sub-state laboratories. Back in California, State Public Health officials have taken a neutral position demurring to the decisions of local governments while encouraging a thoughtful planning process that results in continuing access to PHL services.

The practice of regionalizing PHL services continues to unfold in California. Perhaps the most developed model is Solano County which joined with Napa County in 1998 under a Joint Powers Agreement. Since then Yolo County joined the model in 2011 and Marin County joined in 2014. The four Counties use the PHL operated by Solano County while sharing management, data/planning and other activities relating to public health. Other regional models but with less extensive integration include the Sonoma/Medocino/Lake Public Health Laboratory and the contracts between Sacramento and El Dorado Counties as well as the relationship between Stanislaus and San Joaquin Counties.

The performance of regionalized models for PHL services has not been systematically reviewed by the State or an independent agency. That said, the participants in these arrangements describe high levels of satisfaction with the service and economics of the regional model (private communication).

9 40 Future Options for Placer PHL Service

Option One: Retain Model of Local PHL Services

Option Two: Retain Model of Local PHL Model with Modifications

Option Three: A Regional PHL Service Model with Another County, Close Placer PHL

Evaluation Dimensions

>Impact on Community and Contracting Counties

>Implementation and Operational Feasibility

>Financial Impact

10 41 Option One Analysis: Retain Model of Local PHL Services, Status Quo

Option One retains the model of local PHL services using a County-owned facility and with current staffing/operational practices. A significant caveat to that description, however, is the anticipated need to relocate the laboratory facilities sometime in the next 2-5 years as the County re-purposes the current bu ilding site. It is beyond the scope of this analysis to propose specific solutions to maintain a local service during construction but it presumes that a temporary re-location or short-term contracting arrangement with another PHL is found .

Impact on Community and Contracting County Local Health Departments The impacts on the community and contracting counties regarding access to testing , results and communications are judged to be minimal-to-none during the time when the PHL is operational. The current local service appears to meet or exceed routine needs and consumers report high levels of satisfaction. High level demands during outbreaks of communicable diseases or off-hour responses for Hazmat calls are similarly predicted to be handled well by the current local arrangement. Too little information is available to predict the impact on the community/county partners during a period of temporary housing/relocation of the laboratory physical plant.

Implementation and Operational Feasibility The challenges facing the implementation and operational feasibility of Option One lay in its medium-to­ long range future. Those challenges appear in three ways:

Challenge 1 As mentioned above, the County anticipates a need to re-locate the current laboratory facilities sometime in the next 2-5 years. While no specific plan to maintain services during the re-location period is included in this report, there are numerous challenges to create and maintain a temporary physical plant meeting the requirements for laboratory operations.

Challenge 2 The laboratory staff turnover is low and staff preference for County employment versus alternatives appears high . Thus, maintaining the local service model with current staff is feasible in the short term. In the longer term , Placer may experience challenges in recruiting/retaining qualified staff, especially for the Laboratory Director position . It is a licensure requirement that a PHL Director have advanced doctoral degree. That has created significant challenges for small PHLs in rural areas to recruit qualified personnel. A State-sponsored program to enlarge the pool of laboratory management candidates is in place but reports continue to describe recruitment challenges.

Challenge 3 There are long-range feasibility/operational challenges to the current model of PHL services that arise from changes in technology. Technical advances in areas of laboratory testing for human pathogens are moving rapidly. In particular, molecular diagnostic approaches such as sequencing are proving relevant to understanding and managing outbreaks of communicable diseases. Another area of pioneering work is combining PCR-based tests using 'universal primers' with a second technology, mass spectrometry, to create test platforms capable of rapidly identifying a single pathogen from amongst hundreds of possible causes. In their current forms, the advantages of these technologies are only practical at scale. While these examples may be at the extremes of technical advances they are illustrative of the more general challenge of keeping pace with technology in facilities with very low volumes and/or intermittent demand. The low testing volumes experienced in the Placer PHL would present challenges to acquiring high cost future technologies.

II 42 Financial Impact

Continuation of the local model of PHL services will have substantial financial impact on the County. The current model of local PHL services is highly dependent on County funding due to low/declining revenues and high input costs. A recovery from the current low level of reimbursable tests or significant outside grants is unlikely. Therefore, a high level cf sustained dependence on County funding can be anticipated. Recent Placer PHL budgets have required -$1.4M of support. In addition , the construction of a new laboratory facility will necessitate a large capital expenditure estimated at -$7M.

Option Two Analysis: Retain Model of Local PHL Services, Modified

Option Two retains PHL services in the County as does Option One but it proposes several potential modifications to the current operations aimed at improving testing volumes/revenues and/or reducing input costs.

Potential Modification 1: Increasing Testing Volumes/Revenues As noted in prior discussions, the conventional mix of tests performed in a PHL largely reflects its supportive role to the mission and programs of the local health department itself. Sizable testing requests from parties outside of the health department system are typically related to a few specialized tests such as water testing , lead tests and tick examinations. Opportunities for PHLs to grow the market of tests sold to outside parties are limited . Local health departments that provide direct clinical services can leverage some of their laboratory business to their own PHL. Those departments lacking direct clinical services such as Placer County, rarely can compete for laboratory services to clinics/clinicians either because of cost or exclusive contract arrangements between the provider and a commercial laboratory. That said , there may be some potential to leverage the Placer PHL's resources around TB, fungal or some types of viral infections to provide testing to local hospitals. The testing volumes involved are typically small, occasional and they face competition from hospital or hospital chain laboratories.

Potential Modification 2: Increasing Revenue The laboratory revenues are a simple product of volume and price. The fee schedule for most PHLs are developed from an internal cost analysis and ultimately approved by the local Board. It appears that the fee schedule for the Placer PHL was last updated -2 years ago.

Potential Modification 3: Reducing Future Capital Expense As described above, the County anticipates re-purposing the current site of the laboratory facilities sometime in the next 2-5 years. Based upon input from the Placer PHL staff an outside architectural firm offered a plan increasing the size of the laboratory footprint by-2,800 square feet or nearly 60% greater than the current space. It is appropriate to review this proposal in light of declining or no-demand tests (STD testing station area). It is also appropriate to review the plan relative to other PHL facilities with similar test volumes.

Potential Modification 4: Reducing input costs Significant input costs for maintaining a laboratory include labor, supplies and service equipment contracts. Typically, labor costs constitute the substantial majority of input costs. Given the low volume of testing being performed in the Placer PHL and the lower ratio of tests-to-staff discussed above, a review of the staffing requirement is appropriate including a time study. Without the results of such a study, it is difficult to estimate the degree of staff reductions that may be feasible without compromising key functions but a reduction in the range of at least 1-1 .5 FTE would seem possible. Another avenue to reduce staffing costs is to explore ways to utilize staff in other areas of the Department with current vacancies. Still another route may be to time-share the Laboratory Director position with another laboratory.

12 43 Impact on Community and Contracting County Local Health Departments A discussion of the community impacts and political feasibility of Option Two largely track those of Option One and will not be discussed further.

lmplem~ntation and Operational Feasibility The implementation of the modifications discussed above are feasible and can be executed by · management. The net effect of any one or the sum of these mod ifications is, however, likely to be modest. A return to significantly higher numbers of tests is unlikely and adjustments to the fee schedule are bounded by the number of tests consumed and competition from other laboratory service sources (i.e. water). Staffing reductions, while appropriate and with larger net effect than other modifications, are limited by the need for staff even in low-volume operations and to insure surge or off-hour access.

Financial Impact The impacts of the modifications describe above would potentially enhance revenues, lower input costs and lessen the reliance of the laboratory service on County support. The effects would be positive but likeiy to be limited and they would have a similarly limited impact on reducing the costs of building a new laboratory facility.

Option Three Analysis: A Regional PHL Service Model with Another County, Close Placer PHL

Option Three is a fundamental change in the PHL service model. Option Three proposes that Placer County collaborate another County to create/join a regional PHL service model serving the PHL functions for both/member Counties. The local Placer PHL would close. Placer would retain a local site for sample drop-off/packaging. Samples would be transported from Auburn to the regional laboratory by some combination of commercial service, County/lab employee or other arrangement. Test results would be transmitted back to the requesting parties via phone, FAX, or a web portal. Regional laboratory staff would collaborate with Placer County HHS staff across a range of activities including consultations, policy development and Ql. The fees for PHL tests to the public would be set by the Placer County Board of Supervisors. The specific terms/conditions of the arrangement between Placer County and its partner counties would be negotiated between the parties and subject to Board approval from all counties.

Impact on Community The impacts on the community from Option Three relate largely to the loss of person-to-person contacts associated with the laboratory service. Local specimen drop-off would be maintained and daily specimen transfer can be scheduled. Turn-around times and access to report/results would be comparable. The types/range of tests available are generally comparable amongst most PHLs and includes tests for a range of communicable diseases, ticks, rabies exams and food/environmental toxins. In most cases, tests of local importance not available from another laboratory can be adopted without significant additional resources.

Impact on Other Counties Using the Placer PHL The closure of the Placer PHL would require the four Counties currently contracted with Placer to either join Placer's move to a regional service or to contract with another County PHL. Given that Placer would

13 44 retain a specimen drop-off site in Auburn , the option of joining Placer's regional service would have minimal impact.

Impact on LRN Services The closure of the Placer PHL would impact the Statewide LRN network by lengthening the transit time for specimens coming from Counties currently in the Placer catchment area. The LRN laboratory closest to Auburn is located in Sacramento thus adding 30-60 minutes to transit times. Discussions with representatives from the Sacramento LRN Lab, State and FBI indicate that they are open to discussions to insure that the network remains robust without the Placer site.

Implementation and Operational Feasibility To examine the feasibility of a regional PHL, the Laboratory Directors of two large PHLs in Northern California agreed to participate in a feasibility exercise. They were asked to estimate of the ability/impact of their laboratory to assume all of the testing performed in the Placer PHL. (Data from the 2016 operations in the Placer PHL were used.) In addition, the Laboratory Directors were asked to submit extensive information about their operations/services. The results of the feasibility exercise can be summarized as follows:

~ The laboratories surveyed are high functioning PHLs conducting high volumes of tests and have experience in providing laboratory services to other Counties. Both are within commuting distance of Auburn.

~ Both laboratories appear to be capable of assuming the volume and types of tests being performed in the Placer PHL with minimal adjustments to their staffing or test portfolio.

~ Both laboratories have Departmental leadership who are interested in regional models of cooperation and collaboration.

A more detailed summary of the feasibility survey appears in Appendix 1 attached to this memo.

Financial Impact The financial impact of Option Three and its regional model requires further discussions and agreements between the partnering Counties. Several options that determine the cost to Placer County exist. For example, the Counties could agree to use the public fee schedule of the regional laboratory as a cost basis. If that cost model were used and applied to the recent testing performed in the Placer PHL, the cost is estimated at $250-300,000. This compares with the recent net County costs of the Placer PHL operation of -$1.4 million. Alternatively, the Counties could agree to share the total costs of the regional model by another metric such as % of tests from each County or the % of total population within the catchment area. Lacking certainty as to which cost mechanism might be negotiated it is difficult to precisely estimate the financial impact Option Three, but substantial savings are likely.

14 45 Summary of the Analysis of Options

The following section reviews each of the potential options against the evaluation dimensions adding the pros/cons and open questions associated with each option .

PROS CONS Open Questions Option 1 •!• Proximity of lab facility •!• High cost/low efficiency of •!• How wi ll lab operate Retain Model of •!• High satisfaction from small laboratory during lengthy Local PHL Services current users •!• Very large capital investment construction phase? •!• Local control over required for new facility •!• Costs of re-locating lab? laboratory •!• 'Crowding out' of alternative •!• Retains County funding needs for Public Health employees

Option 2 •!• Same Pros as in •!• Improvements are likely to have •!• Same as for Option I Retain Model of Option I modest impact on finance Local PHL Model •!• Potential improvements •!• Staffing reductions may be with Modifications in efficiency and finance difficult •!• Same Cons from Option I

Option 3 •!• Continues avai labi lity of •!• Loss of local facility and face to •!• TBD contract or JP A Regional PHL high quality PHL service face contact with laboratory staff agreements between Service Model with in sustainable model •!• Requires 'systems changes' counties need to crafted. Another County, •!• Large potential cost at mu ltiple levels principally •!• TBD: Precise estim ate of Close Placer PHL savings with the communications, savings •!• Leverages scale of larger handli ng and transport of •!• TBD: timeli ne to transfer laboratory to stay abreast samples. service of advances in •!• Loss of some County employees technology •!• Enhances detection and data sharing across County lines

15 46 Appendix 1

Regional PHL 1 Regional PHL 2

Impact of Adding Testing from Placer PHL

Crossmatch of Tests Available in Placer Crossmatch Crossmatch- Water but will add vs . Regional PHL

Add itional Staff/Resources Needed to Estimated + 1-1 .5 FTE Lab personnel No additional personnel needed assume

LRN Lab Yes Yes

Specimen Transportation Dedicated in-house courier service Commercial transport, local drop off available. Daily pickup. option

General Description

Model of service Joint Powers Agreement Contract

Public Health Officers from member counties oversee operations

#of Counties Served 4 2 complete service and 2 limited service

Service area/population 3,105 sq miles 1,060,931 2,751 sq miles 1,602,789

Distance from Auburn to Lab -77 miles -35 miles Facility

Test Volumes/Year -25-35,000/year - 35-55,000/year

Physical Plant Size/Age -8,000 sq ft 2009 11 ,500 sq ft 2005

Back up generator Yes Yes

Special testing Capacities Molecular diagnostics for TB, semi- Molecular diagnostics for TB automated routine micro screening , HIV quantifications

Staffing

Lab Director 1.0 FTE Ph .D. 1.0 FTE Ph.D.

Assist Director/Supervisor 1.0 vacancies 1.0 FTE

Microbiologist 4.0 FTE + 2.0 vacancies 7.0 FTE

Lab Technician 2.5 FTE + 2 vacancies 1.0

Office Assist 1.0 1.0

Accounting Clerk 1.0 vacancy 1.0

Admin Assist N.A. 1.0

Total 10.5 FT + 4 vacancies 13.0 FTE + 3.0 on call

16 47 Essential PHL Service Review Regional PHL 1 Regional PHL 2

Disease prevention/control Large portfolio of available tests for ID of Large portfolio of available tests for ID of bacteria, fungi and viral pathogens bacteria, fungi and viral pathogens

Special testing Capacities Molecular diagnostics for TB, semi- Molecular diagnostics for TB automated routine micro screening , HIV quantitations

Environmental Health Drinking, sewer and recreational water Water testing capable. testing

Food Safety Multiple tests available Testing for food safety available

Lab Safety Training provided to local hospital labs Annual trainings to staff, available for community consults

Quality Improvement Participates in division-wide Ql program Ql in place

Emergency Response After hour and weekend on-call After hour emergency 'call down tree' schedule. All staff are disaster service workers.

Public Health Research Contributor to Statewide surveillance Contributor to Statewide surveillance database. Peer-reviewed publication . database. Peer-reviewed publication.

Training Training site for LabAspire program. Training site for LabAspire program. >40 graduates Trains sentinel labs in LRN network.

Community Partnerships Director participates in member County Long term partnership with Sac/Yolo Communicable Disease meetings and has MOU with two other County PHL

Surge capacity Surge plan in place, can add 29 hrs Surge plan in place for -300 tests/week capacity/week increase. Processed >5,000 in 2009 flu pandemic

Reporting LIMS system, secure ordering, results LIMS system (Apollo) secure ordering, access via web. Potential to connect to results access via web. Interfaced to 2 HIE and outside EMR systems.

17 48