EARLY ONLINE RELEASE Note: This article was posted on the Archives Web site as an Early Online Release. Early Online Release articles have been peer reviewed, copyedited, and reviewed by the authors. Additional changes or corrections may appear in these articles when they appear in a future print issue of the Archives. Early Online Release articles are citable by using the Digital Object Identifier (DOI), a unique number given to every article. The DOI will typically appear at the end of the abstract. The DOI for this manuscript is doi: 10.5858/arpa.2018-0569-SA The final published version of this manuscript will replace the Early Online Release version at the above DOI once it is available. © 2019 College of American Pathologists Special Article Northwell Health Laboratories The 10-Year Outcomes After Deciding to Keep the Lab Kendal J. Jensen, MD, PhD; Robert Stallone, BA; Michael Eller, MBA; Joseph Castagnaro, MBA; Hannah Poczter, MS, MBA; Richard Tesoriero, MBA; Jeanne Balzano-Kane, MS; Cari Gusman, BS; Tawfiqul Bhuiya, MD; Dwayne Breining, MD; James M. Crawford, MD, PhD Context.—Northwell Health Laboratories were estab- programs. Fourth, laboratory services were able to provide lished in 1997, serving the Northwell Health system. In leadership in innovative system clinical programming and 2008, the health system considered minority entry into a value-based payment programs. Fifth, the laboratories joint venture with a commercial laboratory. Based on became a regional asset, forming a joint venture affiliation arguments made by Northwell laboratory leadership, the with New York City Health þ Hospitals, and supporting decision was made to retain full ownership of the distressed hospitals in Brooklyn, New York. Lastly, North- laboratory. well Health Laboratories have become a reputational asset Objective.—To evaluate the 10-year outcomes of the through leadership in 2 consortia: The Compass Group and 2008 decision and assess the value of a fully integrated Project Santa Fe. laboratory service line for a regional health network. Design.—Ten-year outcomes were analyzed including Conclusions.—The 10-year outcomes have exceeded financial, volume, and value-based activities. projections made in 2008, validating the decision to retain Results.—First, a fully integrated laboratory service line the laboratories as a wholly owned system asset. The was created, with unified medical and managerial leader- laboratories are now well positioned for leading innovation ship. Second, Core Laboratory volumes and revenues grew in patient care and for helping to drive a favorable posture at annualized rates of 4.5% and 16.0%, respectively. for the health system under new payment models for Third, hospital-based laboratory costs were held either health care. constant, or grew in accordance with strategic clinical (Arch Pathol Lab Med. doi: 10.5858/arpa.2018-0569-SA) he Northwell Health Laboratories (Lake Success, New cost efficiencies of the then 8-hospital Northwell Health T York) were established as an in-system Core Labora- system. In the fall of 2008, the then 15-hospital health tory in 1997, for achievement of higher performance and system considered monetizing the laboratory by entering as a minority partner into a joint venture with a commercial laboratory. The decision was made not to do so. The year- Accepted for publication March 25, 2019. end close of 2018—and on the 10-year anniversary of this Department of Pathology and Laboratory Medicine, Donald and decision, with Northwell now a 21-hospital health system Barbara Zucker School of Medicine at Hofstra/Northwell, Hemp- stead, New York. with an extensive ambulatory network—gives opportunity The authors have no relevant financial interest in the products or to assess the outcomes of that decision. Specifically, what companies described in this article. were the arguments given in 2008 for retaining the Time-current forms of Figures 4 through 7 were presented at the laboratory service line as an in-system asset? Ten years following national meetings: The Dark Intelligence Group ‘‘Execu- later, have these arguments been successfully fulfilled? tive War College,’’ April 26, 2016, New Orleans, Louisiana; Health Industry Distributors Association, January 31, 2018, Coral Gables, This report comes at an auspicious time, since the not-for- Florida; and The G2 Intelligence Group ‘‘Lab Institute 2018,’’ profit sector of the laboratory industry faces challenges that October 25, 2018, Washington, DC. Figure 8 was presented at The threaten their status as in-system assets. Inpatient labora- Dark Intelligence Group ‘‘Executive War College’’; May 1, 2018; tory services are a cost center for hospitals; 2 key New Orleans, Louisiana. performance metrics are cost-per-test and total laboratory The North Shore-Long Island Jewish Health System was founded in costs for the hospital. Cost efficiencies and laboratory test 1997; the name derived from the 2 anchor tertiary hospitals, North Shore University Hospital and Long Island Jewish Medical Center utilization management are thus major considerations for (LIJ). In January 2016, the health system was renamed Northwell assessing hospital-based laboratory performance; perceived Health. In this article, the Northwell name is used unless otherwise failure to achieve satisfactory performance invites system required by the chronological account. consideration of alternative management arrangements. In Corresponding author: James M. Crawford, MD, PhD, Department the ambulatory environment, not-for-profit laboratory of Pathology and Laboratory Medicine, Donald and Barbara Zucker School of Medicine at Hofstra/Northwell, Northwell Health Labo- services face 2 strong market dynamics: competitive pricing ratories, 450 Lakeview Road, Suite M50, Lake Success, NY 11042 by major commercial laboratories and their network access (email: [email protected]). through national contracts with major payers; and industry- Arch Pathol Lab Med 10-Year Outcomes After Deciding to Keep the Lab—Jensen et al 1 Figure 1. Timeline for Northwell Health Laboratories. The creation and growth of Northwell Health Laboratories (1997–2018) are shown in the upper half of the diagram; establishment and growth of the Northwell Health system are shown in the lower half. Time-appropriate names are used for the health system and the laboratories. From 2015 onwards, 2 affiliate hospitals are included in the count of health system hospitals; Northwell Health Laboratories also entered into a reference laboratory affiliation with a nonregional partner in 2017. In chronological order, health care entities mentioned are as follows: North Shore Health System (Manhasset, New York); Long Island Jewish Medical Center (New Hyde Park, New York); NSLIJ (North Shore-Long Island Jewish Health System; Manhasset, New York); St. John’s Episcopal Hospital (Far Rockaway, New York; a nonaffiliated hospital); CLNY (Core Laboratory of New York; Lake Success, New York); and Coney Island Hospital (Brooklyn, New York; member of the New York City Health þ Hospitals system). wide downward pressure on revenues from ambulatory Presentation now of the 10-year quantitative outcomes of laboratory testing. As a result of these challenges, executives the Northwell decision to retain the full assets of the clinical of not-for-profit health systems are open to overtures from laboratories may further inform this national debate. As a commercial laboratories for divestment (and one-time guide for this report, a timeline for Northwell Health monetization) of their ambulatory laboratory assets, or Laboratories from 1997–2018 is given (Figure 1), to be entry into minority positions in joint ventures, while compared with dynamics in the health care industry during arranging for external managed services of their inpatient this same time period (Table 1). These dynamics reflect the clinical laboratories.1–3 growth of integrated health care delivery systems, and changes of the balance between ambulatory-versus-inpa- Northwell Health Laboratories have previously argued for 13 the value of an in-system laboratory network as a core tient health care delivery. system asset,4,5 as has laboratory leadership of the Mon- ESTABLISHMENT OF THE NORTHWELL HEALTH tefiore Medical Center (Bronx, New York).6 An overarching LABORATORIES 1993–2008 vision for valuation of in-system clinical laboratory services, termed Clinical Lab 2.0, was presented in 2017 by the Project The Northwell Health system began its existence in 1990 Santa Fe group.7 This vision emphasizes the favorable with merging of a tertiary hospital, North Shore University impact that clinical laboratories embedded within health Hospital (Manhasset, New York), with a community systems can achieve, both for population health outcomes hospital, Glen Cove Hospital (Glen Cove, New York), to form the North Shore Health System; further local and for the financial performance of the parent health community hospital acquisitions followed. The 1997 inte- systems. These arguments are echoed in a 2008 report from gration with the other major tertiary hospital in Nassau the Centers for Disease Control and Prevention, stating that County, namely, Long Island Jewish Medical Center (LIJ; laboratory services are underrecognized as an essential 8 New Hyde Park, New York), heralded the formation of the component and partner in health systems. Indeed, the North Shore-Long Island Jewish (NSLIJ) Health System potential negative impact on patient care and finances of composed of 2 tertiary hospitals and 6 community hospitals.