CHAPTER

14 Laboratory Management

contents Outline 1028

➤ Nature of Management
➤ Management Processes
➤ Regulatory Elements
➤ Managing Finances
➤ Quality Management
Review Questions 1041
Answers and Rationales 1047
References 1056

1027
1028 ■ CHAPTER 14: LABORATORy MANAgEMENT

I. NATURE OF MANAGEMENT
A. Information Age: Management has changed from supervision of “factory” workers to
coordination of knowledge workers.

B. Organizational Structure

II. MANAGEMENT PROCESSES

A. Managerial Roles and Functions
1. Managerial functions include planning, organizing, directing, decision making/
problem solving, coordinating, and communicating.
2. Managerial roles include the following:
a. Represent the organization
b. Hold formal authority
c. Develop and implement strategies to accomplish mission and goals of the
organization
d. Manage personnel
1) Evaluations
2) Hiring
3) Promoting
4) Mentoring
5) Empowering
e. Manage financial responsibilities
1) Budget
a) Capital
b) Operating
2) Revenue
3) Expenses
f. Facilitate communication: Employees, supervisors/team leaders, colleagues
(internal and external), and patients
g. Motivate: Employees, supervisors/team leaders, colleagues, and self
h. Implement time management strategies
i. Oversee customer service
j. Implement innovative ways to expand services, expand or redirect customer
base, and fulfill the bottom line
k. Demonstrate servant leadership

B. Planning
1. Definition: Develop strategies/pathway(s) to accomplish the organization’s
mission and goals using resources and time
2. In order to plan for the future, one must first determine where the
organization stands. A SWOT analysis should be performed to determine both
internal and external factors.
 MANAgEMENT PROCESSES ■ 1029

a. Internal factors
1) S: Strengths of the organization
2) W: Weaknesses of the organization
b. External factors
1) O: Opportunities available to the organization
2) T: Threats to the organization
3. Once the SWOT analysis is complete, the manager can plan a course of action for
the organization to follow that will accomplish its goals and mission.
4. Formulating goals
a. Written goals allow all employees to work toward a common result.
b. Goals should be broad; objectives are written to achieve specific tasks.
5. Writing objectives
a. Objectives are tasks to achieve goals.
b. Objectives are focused on achieving one goal.
c. Each objective deals with one task.
d. Objectives are very specific.
e. Objectives are written using action verbs.
f. Objectives are evaluated against specific and specified numerical criteria.
6. Types of plans
a. Short range or tactical plans cover a 1- to 5-year period and focus on tasks
that can be completed in this time frame.
b. Operational planning may be for 1 year or one budget period and concerns
operations.
c. Strategic planning maps out the course of an organization for approximately
5–10 years. Strategic plans involve tactical and operational plans as well
as forming alliances and partnerships with key players (sometimes even
competitors). This plan is evaluated and modified yearly.

C. Organizing
1. Time management
a. Laboratorians have their work dictated by the healthcare system—patient
admissions, emergency patients, and outpatients. Managers have more
flexibility to plan their work because it is dictated by administration
(organization).
b. Managers have more control over their workload and, therefore, they must
identify, control, and eliminate or curtail specific situations that rob them of time.
1) These tasks may require most of a manager’s resources. Identify important
tasks, and make sure these are accomplished first.
2) Develop skills necessary to facilitate use of manager’s time.
a) Managerial skills: Organized, ability to delegate, knows when to say
“no,” takes control, effective planning, ability to prioritize, conducts
effective meetings, exhibits good listening skills, articulate giving clear
and concise instructions, and understands team dynamics
1030 ■ CHAPTER 14: LABORATORy MANAgEMENT

b) Educated: Self-study through seminars, management journals,

experience, on-line webinars, access to list serves, or formal
management course work
c) Awareness of the work culture: Knows the organization and/or
goals, able to see the “big” picture
d) Controls interferences: Avoids lengthy unnecessary phone calls,
“drop-in” visitors, reading junk mail, and too much socializing
e) Decision-making capabilities: Controls perfectionism, able to make a
decision, appropriately detail oriented
f) Develops resources: Adequate money in budget, functional and up-to-
date equipment, adequate staff, and support from the administration
g) Self-discipline: Avoids procrastination, inappropriate socializing, meets
deadlines, behavior sets example for employees
h) Servant leadership: Focuses on the growth of the employee and the team
2. Structure
a. The manager develops a structure that allows plans to be carried out and
objectives accomplished.
b. The organizational structure is based on authority, responsibility, and
accountability.
1) Authority
a) Formal: Assigned by organization or administration
b) Informal: Gained informally through competence or leadership qualities
that encourage teamwork within the immediate team and across the
organization
2) Responsibility: Assigned by administration through delegation
3) Accountability occurs when the person responsible for completing a task
is evaluated to determine if the task was completed.
3. Reengineering
a. Definition: Reorganizing work processes in an organization
b. Use of Lean principles and tools including flow diagramming the specific work
processes to determine if more effective processes could be implemented
c. Examples of reengineering
1) Use of robotics to automate (particularly specimen processing)
2) Computerization
3) Pneumatic tube system to transport specimens
d. Benchmarking is a process of measuring a service or process in one
organization against those of another considered the best in the industry to
identify internal opportunities for improvement.
e. Examples of benchmarking
1) Cost per test
2) Number of tests performed per FTE (full-time equivalent/employees) paid
for 2080 hours per year
3) Number of corrected reports
 MANAgEMENT PROCESSES ■ 1031

4. Inventory management
a. Objective of an efficient laboratory is to experience few shortages in testing
reagents, supplies, and materials.
b. Requisitions for contract and purchase orders to obtain necessary quantities of
materials, etc., in suitable time frames
c. Managers are responsible for purchasing laboratory instruments and service
contracts to maintain instruments.
d. Instrument selection includes technical evaluation and cost comparison of
instruments from various instrument manufacturers.
e. Many hospital laboratories contract with outside agencies to provide blood
products for patients.
f. Hospitals contract with outside companies to manage biohazardous waste
and/or hazardous waste disposal.

D. Directing
1. Definition: Persuading employees to effectively perform the tasks that help the
organization accomplish its mission and goals
2. Techniques of directing
a. Authoritative encompasses issuing orders and telling someone what to do. It
does not allow employee to decide how best to accomplish task.
b. Coaching allows the instilling of confidence and motivation into an employee
about accomplishing a task. The employee has more “say-so” in how to
accomplish a task.
c. Empowerment allows an employee to determine what task and how to
accomplish the task to help the manager solve a problem or to allow an
organization to come closer to accomplishing their mission and goals.
Employees are allowed to be creative and innovative to solve problems.
Employees are allowed to take risks without fear of admonishment for failing.
3. Communicating
a. Face-to-face spoken communication
1) Advantages
a) Immediate message conveyed
b) Feedback immediate
c) Can determine other factors: body language, tone of voice, eye contact,
and implied meanings
d) Encourages buy-in, volunteerism, cross-fertilization of ideas
2) Disadvantages
a) Cannot save the communication
b) Receiver interpretation of message may be different from that of
speaker’s intentions.
c) Body language, tone of voice, and eye contact may confuse recipient or
sender.
d) Cannot retract spoken words
1032 ■ CHAPTER 14: LABORATORy MANAgEMENT

e) Gender, age groups, ethnicity, professional, emotional state, and other

biases exist for effective communication.
f) Perception of favoritism
b. Written communication
1) Advantages
a) Can save communication encounter
b) Deliver same message to many receivers
c) Can add graphics to explain or clarify message
d) Readers can review, interpret, and thoughtfully respond to initial
message.
2) Disadvantages
a) Feedback delayed
b) Tone of written message is interpreted by the reader.
c) Can be impersonal
d) Final
e) Memos and e-mail are considered informal communication; letters are
considered formal communication.
c. Listening
1) Active listening components
a) Privacy
b) Eliminate (reduce) physical barriers
c) Listen to words, but look at behavior, and interpret implied meaning.
2) Restate what you think you have heard to ensure accuracy and capture any
implied meanings.
3) Remain objective, but give signals (nod, keep eye contact, say “go on”) to
show speaker that you are listening.
4) Identify what the sender wants from the listener.
5) Summarize the plan for action and the time when action will be
complete.
4. Motivating
a. Definition: Influencing a person to act in a particular way and to generate
initiative within that person
b. Motivators include the following:
1) Reward (i.e., bonus)
2) Empowerment
3) Praise
4) Recognition
5) Salary
6) Encouragement
7) Career development opportunities
5. Delegating
a. Definition: Assigning responsibility, authority, and accountability for a task to
an employee
 MANAgEMENT PROCESSES ■ 1033

b. Effective delegation occurs when the manager selects the right task for the
right person, prepares an overview of exactly what must be done, allows time for
the task to be completed, and then provides recognition for performing the task.
6. Coaching
a. Create an atmosphere of trust
b. Allow employees to take risks and not be reprimanded for failures
c. Make everyone feel that he or she is important
d. Work through emotions of players
e. Seek feedback by asking questions

E. Giving Directives and Managing Change

1. Managerial function that enables the manager to get his or her people to do the
most and their best
2. Work done through employees with management development of their work skills
3. Good directives
a. Reasonable: An employee is able to, desires to, and has resources to do so
b. Understandable: The employee has clear expectations and can repeat the
directive in his/her own words accurately.
c. Appropriately worded and delivered in a nonthreatening tone; presented in
the form of a suggestion or recommendation; avoid giving orders
d. Important for getting the job done; requests should not be made for personal
gain of supervisor.
e. Time limits should be included in directives and should be of reasonable length.
4. Major techniques for directives
a. Autocratic
1) Detailed instructions given of exactly how and what is to be done.
2) The manager’s way is the defined expectation, and employees need not
think of another way to complete the task.
3) This inhibits employees from thinking for themselves. They lose interest
and initiative. Ambition, creativity, and involvement in daily job will be
diminished or lost.
b. Consultative
1) Also called participative, democratic, permissive, or empowered
management
2) Views employees as eager to do a good job and equipped with the skills to
do so
3) Believes employees will become more motivated if left alone to do their job
4) Input is sought from employees to help solve a problem or tackle a project.
They perform the job and know best the challenges.
5) Employees are consulted about tackling a project. When in agreement,
an employee is assigned to the project and needs to complete it within
a specific time frame. The employee decides how the project is to be
accomplished.
1034 ■ CHAPTER 14: LABORATORy MANAgEMENT

6) Information must flow back and forth freely between manager and
employee. Good ideas need to be explored, no matter who thinks of them.
7) Employees are allowed to think for themselves and make worthwhile
contributions to the organization.
8) Atmosphere is created of mutual confidence in which the employee can call
on the manager when necessary with no fear of reprisal.
9) It is similar to active learning, which is more effective than passive learning.
Employees work out solutions to problems and projects more effectively
than management giving them the solutions.
c. Change and influence
1) Organizations are constantly changing in leadership positions to capture
more market share and to meet technological advancements.
2) The degree and complexity of changes vary among departments in
organizations.
3) Change is best accepted by employees if presented in a nonthreatening way.
Managers must promote change and keep morale high.
4) Explaining the reasons for change may lead to acceptance by many
employees.
5) Reasons people resist change
a) Uncertainty: They do not want to be moved out of their comfort zone,
because it will take effort on their part to analyze the change, learn new
procedures, or perform additional tasks. There is concern of failure.
b) Perception: Everyone has particular life experiences, values, and
perceptions. Each individual has a different perception of the same
event.
c) Loss: Within the organization, there exist relationships among all
workers that are built upon respect, trust, and expertise. Change can
destroy all those relationships and make people lose status or perceived
status among peers.
d) Self-interests: Change disturbs the current state of affairs. Even though
it may not be perfect, people have arranged their lives so their need
satisfaction is stable. Change produces instability and uncertainty.
e) Insecurity: Job security and being able to earn a wage that will allow an
individual to pay the bills and maintain a decent standard of life is why
people work. Change usually produces insecurity because people see
their jobs threatened or taken away from them.
6) Overcoming resistance to change
a) Managers should allow ample time for the change and not expect to
follow a rigid timeline for implementing the change.
b) Employees deserve to know why changes are being made. Managers
should give employees plenty of time to have their questions and
concerns answered. The manager should also state the desired effects of
the change. Communicate, communicate, communicate at all times.
 MANAgEMENT PROCESSES ■ 1035

c) Managers should involve employees in planning and implementing

the change. When employees take part in making something happen,
they are more likely to take ownership and accept the change more
readily.
d) Change is stressful for everyone. It is important to include stress
management techniques to help decrease the stress of change. Be
available to the team.

F. Leadership
1. Essential component of every organization; different from management
2. Purpose: Leadership produces change.
a. Management involves planning and budgeting, organizing and staffing,
controlling, and problem solving.
b. Leadership involves establishing direction, aligning, motivating, and
inspiring people.
3. Structure of leadership
a. Purpose: To create leadership processes and help produce changes needed to
cope with a changing environment
b. Content: Can vary from very focused to very broad
c. Assignment: Roles are assumed or assigned in a more fluid way in businesses
that change often.
4. The origin of leadership
a. Personal characteristics: High drive/energy level, good intelligence and
thinking skills, articulate, good mental and emotional health, and integrity
b. Career experiences
1) Promote leadership: Challenging assignments early in a career, visible
leadership role models who are very good or very bad, assignments that
broaden a person’s experience
2) Inhibit leadership: A long series of narrow and tactical jobs, vertical
career movement, rapid promotions, measurements and rewards based on
short-term results only
5. The following steps can assist a leader in producing meaningful change in an
organization:
a. Establish direction: A vision of the future of the organization is established,
and strategies are developed and implemented to bring the organization closer
to that vision.
b. Align people: Communicate the vision and strategies to other people using
words and deeds so that the vision and strategies are understood and accepted.
Be sensitive to diversity issues.
c. Motivate and inspire: Energize people to implement the vision and strategy
changes by satisfying basic needs (achievement, belonging, recognition, self-
esteem, and a control of one’s life) that may go unmet.
d. Foster Servant Leadership: A main goal of the leader is to serve.
1036 ■ CHAPTER 14: LABORATORy MANAgEMENT

III. REGULATORY ELEMENTS

A. Definitions
1. Accreditation: The approval of an institution, part of an institution, or program,
demonstrating that it meets all formal standards as defined by the accrediting body
2. Certification: Official acknowledgement of the passing of a qualifying examination
3. Licensure: The process by which a competent public authority grants permission
to an organization or an individual to engage in a specific professional practice,
occupation, or activity
4. The body of laws that govern the practice of laboratory medicine is the Clinical
Laboratory Improvement Amendments of 1988 (CLIA ’88), the legislation
that mandates the conditions that must be met for laboratories to be certified. All
laboratories performing laboratory testing, regardless of where the labs are based,
must maintain an active CLIA license and be subject to inspections by their State
branch of the federal CLIA agency. The requirements cover quality assurance,
quality control, proficiency testing, record retention, complexity of tests (high,
moderate, and waived), job categories, and personnel requirements to perform
testing, supervise, and direct laboratories.

B. Regulatory Agencies
1. American Association of Blood Banks (AABB) is an international association
established to promote the highest standards of care in all aspects of blood
banking. Blood Bank laboratories that are part of hospitals can be accredited and
inspected jointly by AABB and CAP.
2. American Society for Clinical Pathology (ASCP) is a professional organization
for individuals working in clinical laboratory medicine. The ASCP Board of
Certification (BOC) offers examinations for clinical laboratory personnel.
3. CMS, Centers for Medicare & Medicaid Services, oversees many federal health
care services, including laboratory medicine, assessing best practices to ensure
patient safety. . . . College of American Pathologists (CAP) accredits laboratories
under deemed authority from CMS, thus eliminating a CMS inspection. The
survey is on a 2-year cycle with interim participation in proficiency testing
required to assure ongoing quality of all laboratory test procedures.
4. Food and Drug Administration (FDA) reviews and approves new analytical
methods prior to marketing by the manufacturer to laboratories. The FDA also
inspects all blood banks to assure the ongoing safety of the nation’s blood source.
5. The Joint Commission evaluates and accredits most of the healthcare
organizations in the United States under deemed authority from CMS. If the
laboratory is accredited by CAP, the on-site inspection of the facility by the
Joint Commission will include only the transfusion service, safety, and employee
competency and education. The Joint Commission can accredit laboratory
services. NAACLS, National Accrediting Agency for Clinical Laboratory Sciences,
is an international agency for accreditation and approval of educational programs
in the clinical laboratory sciences and related health professions.
 MANAgINg FINANCES ■ 1037

IV. MANAGING FINANCES

A. Principles
1. Budget statement
a. Income statement or revenue/expense spreadsheet
1) Shows revenue generated and expenses incurred over a period of time
(month, quarter, year)
2) Net income = revenue generated - expenses incurred
b. Balance sheet
1) Shows the financial situation of the organization at a specific point in
time
2) This sheet contains current assets (cash, patient receivables, inventory), cur-
rent liabilities (accounts payable, accrued salaries), property and equipment
(land, building, equipment, and instruments), and long-term obligations
(bonds payable, loans).
3) Equation is: assets = liabilities + net worth
c. Cash-flow statements
1) Show the inflow and outflow of cash for a specific period
2) These statements show the net cash flow from operations, net flow from
investments, and net cash flow from financial activities.
d. Miscellaneous data needed by managers: Test volumes per laboratory section,
supply costs, labor costs, cost per billable test, workload, rejection rates,
contamination rates, repeat frequency and productivity
2. Budgets
a. Usually done annually as a plan for spending for the next year
b. Incorporates workload data, new (or eliminated) programs, test costs, previous
year revenues, previous year costs, capital equipment costs, operating expenses,
labor costs, and equipment maintenance costs
c. Most organizations use data from the previous year, then estimate increased
costs for the coming year and add this figure to the budget.
d. Zero-based budgeting involves starting the budget process from a zero figure
and justifying and researching every cost that will be incurred before arriving at
the final budget.
3. Revenue
a. Medicare and Medicaid
1) The federal government pays healthcare organizations for providing
care to beneficiaries using a method called Prospective Payment
System (PPS).
2) Healthcare organizations are paid a lump sum for services according to
the Ambulatory Payment Classification (APC) for outpatient services
and the Diagnosis-Related Group (DRG) for inpatient services.
Current Procedural Terminology (CPT) is a Medicare coding system
for reimbursement at the procedural level.
1038 ■ CHAPTER 14: LABORATORy MANAgEMENT

3) The government established a database and derived average costs for many
illnesses based on the International Classification of Disease (ICD-10).
The APC and DRG are based on ICD-10 codes.
4) The government develops a payment schedule, and this is the amount an
organization is paid.
b. Commercial payers
1) Insurance providers contract with hospitals to provide services for the
patients whose lives they are contacted to cover.
2) Capitated contracts—Negotiated between the hospital and the insur-
ance provider for outpatient services, the healthcare provider is paid
a set fee to provide specific services per HMO enrollee. For example,
if a plan has 300 enrollees (covered lives), it may contract with the hos-
pital to provide X-ray, laboratory, and physical therapy services for its
patients at $100/patient per year.
3) This method is called capitated reimbursement; it is based on the num-
ber of enrollees at a specific payment amount per enrollee.
4) For inpatient services, a specific amount is paid per day (per diem) based
on the admitting ICD-10 code.
4. Operating Costs
a. Operating costs are what it costs to produce test results. This includes direct
and indirect costs.
b. Direct costs are directly associated with producing test results. These include
supplies, quality control materials, and labor.
c. Indirect costs indirectly contribute to producing laboratory tests. These
include electricity, water, paper towels, soap, bleach, computer software, and
the labor that supports these services, as well as supervisory, managerial, and
administrative labor.
d. Fixed costs remain the same from month to month no matter how many tests
are produced—an example is instrument service contracts.
e. Variable costs change with the amount of work performed—an example is
test reagents.
f. Capital costs are related to purchasing equipment or instruments that have
a life span of more than 1 year and cost more than a set dollar amount.
This figure is determined by the organization and usually ranges from
$3000 to $5000. Key to organizational approval of capital expenditure
for instrumentation is a return on investment (ROI) document including
instrument payback calculation.

B. Cost Management
1. Definition: Keeping cost as low as possible without compromising the quality of
care delivered to patients
2. Employees become very valuable sources for suggestions to increase efficiency
and effectiveness of work patterns.
 QUALITy MANAgEMENT ■ 1039

C. Cost Analysis
1. Cost per billable test entails gathering data on wages, collection and handling
fees, reagent cost, control and reference materials cost, disposables cost,
instrument maintenance, depreciation, miscellaneous costs, and indirect costs.
2. Cost per billable test calculation
Cost for testing = instrument cost + administration costs + supplies + labor
Revenue pertest = total revenue , total number of tests
Profit = revenue per test - cost per test

D. Breakeven Analysis
1. Breakeven analysis = where revenues equal expenses
2. Calculation
Breakeven 1 BE 2 test volume = annual fixed costs , 1 test price - variable costs per test 2
BE minimum price per test = 3annual fixed costs + (test volume * variable costs per test) 4 ,
test volume
BE minimum revenue = annual fixed costs , 3(test price - variable costs per test) ,
test price]

E. Cost Accounting
1. Definition: Systems that study costs associated with performing tests
2. Focuses on internal processes

F. Cost Containment
1. Focuses on ways of first reducing costs, then maintaining quality
2. Centralizing services is one way to control costs.
a. Centralized purchasing
b. Centralization of jobs or the location where the test is performed
3. Decreases unnecessary testing
4. Encourages employee retention, retraining, cross training, and flexible wage and
benefits programs

V. QUALITY MANAGEMENT
A. Championed by Deming, Juran, Crosby, and Shewhart
B. Quality Programs
1. Components
a. Statistical analysis is especially important in production control. It is used
to analyze the quality of results. In the laboratory, statistical analysis includes
internal and external quality control.
b. Training and education: Employees need adequate training and education
to perform the best possible job. Inadequate training and education leave
1040 ■ CHAPTER 14: LABORATORy MANAgEMENT

an employee unprepared to perform their best. Development plans direct

employee corrective actions.
c. Evaluation: Quality programs establish goals or targets. The progress toward
accomplishing these goals is assessed. If satisfactory progress toward a goal
is not achieved, then the process needs to be changed or modified to achieve
satisfactory progress toward a goal.
d. Feedback: This is a continuous process. Monitoring and evaluation takes place
for several indicators.

C. Performance Improvement (PI)

1. Synonyms and processes:
a. Total quality improvement (TQI), total quality management (TQM),
and continuous quality improvement (CQI): The focus is on looking at the
system processes when evaluating errors and determining opportunities for
improvements.
b. Executive management must be committed to performance improvement for
it to work.
c. The data teams generate are vital and important to the process, but the success
of PI is dependent upon using this data to improve existing processes.
d. Lean thinking focuses on removing waste and increasing the value of the
service. Only do things that add value and eliminate all other activity. Kaizen is
an activity that continuously looks for ways to eliminate waste by standardizing
processes. Lean processing does not require a lot of mathematical analysis.
e. Six Sigma focuses on reducing the variation in a process to remove error. Six
Sigma uses a disciplined methodology that is data driven.
2. The cycle of quality improvement that was developed by Deming:
a. P.D.C.A.: Plan S Do S Check S Act
b. Feedback is a crucial step in this cycle. Without feedback, there is no
improvement.
3. Tools used in evaluating quality management opportunities include Pareto charts,
flowcharts, cause-and-effect charts, fish-bone diagrams, and value stream analysis.
 review questions
review
questions

INSTRUCTIONS Each of the questions or incomplete statements that follows is comprised of four
suggested responses. Select the best answer or completion statement in each case.

1. Which of the following sections of the 3. A number of management styles are used
clinical laboratory is regulated by the Food by supervisors in laboratories. Which of the
and Drug Administration? following is a management style that includes
A. Chemistry the employee in decisions about how to
B. Blood bank accomplish tasks and encourages creativity?
C. Serology A. Autocratic
D. Hematology B. Persuasive
2. In order to plan for the future, one must C. Empowerment
first determine where the organization D. Democratic
stands. A SWOT analysis should be 4. What is the meaning of the abbreviation
performed to determine both internal and FTE?
external factors. The term “SWOT” stands A. Full-time equivalent
for which of the following? B. Full-time expenditure
A. Successes, Weaknesses, Opportunities, C. Fixed total expenditure
Threats D. Fixed-timely equivalency
B. Strengths, Weaknesses, Opportunities, 5. Most laboratories have a definite structure
Threats that establishes the formal setup of the
C. Strengths, Weaknesses, Opportunities, various departments and levels. Which of
Testing the following refers to this structure?
D. Successes, Wastes, Opportunities, A. Administration table
Threats B. Laboratory directory
C. Report of contact
D. Organizational chart
1041
1042 ■ CHAPTER 14: LABORATORy MANAgEMENT

6. In a budget, which of the following termi- 10. A proper understanding of why a labora-
nologies is used to describe money spent tory may become liable for the actions of
for a nonexpendable item that has a life its personnel requires a basic knowledge
expectancy greater than one fiscal year? of the laws involved. This area is known as
A. Expenditure tort law and involves three types of wrong-
B. Annual cost ful conduct. Which of the following is
C. Capital expenditure considered wrongful conduct?
D. Depreciable item A. Occupational injuries
7. Which of the following governmental leg- B. Negligent acts
islations has had the greatest impact on the C. Personal leaves
regulation of the laboratory industry? D. Requesting work reassignment
A. Clinical Laboratory Improvement Act 11. DRG is a commonly used abbreviation.
B. Medicare and Medicaid Which of the following statements is
C. Fair Labor Standards Act associated with DRGs?
D. Occupational Safety and Health Admin- A. Capitated contracts for services
istration Act B. Diagnosis and payment
8. Which of the following is the process by C. Lean 6 Sigma strategies
which a competent public authority grants D. Decision-making responsibilities of
permission to an organization or an indi- managers
vidual to engage in a specific professional 12. Which of the following is associated
practice, occupation, or activity? with the outpatient PPS system of
A. Accreditation reimbursement?
B. Certification A. DRG
C. Licensure B. Capitated rate
D. Credentialing C. APC
9. Delegation is a responsibility of most D. PPO
laboratory managers. Effective delegation 13. Which of the following factors is needed
occurs when: for an effective employee performance
A. The employee is given the freedom to appraisal?
decide what to do A. Employee–supervisor discussion with
B. The employee has a limited time to written evaluation
complete the assignment B. Organization standards
C. The manager assigns responsibility, C. Current cash flow documentation
authority, and accountability to the D. Kaizen review
employee 14. Which of the following is associated with
D. The manager offers the assignment to benchmarking?
the most senior employee A. Measurement of labor-hours with
worked and paid productivity
B. Employee safety records
C. Performance standards
D. CAP accreditation
 REVIEW QUESTIONS ■ 1043

15. Which of the following is a part of the 21. Which of the following is considered a line
budget-making process as related to item of the laboratory budget?
laboratories? A. Labor union dues
A. ICD-10 codes B. Legal fees
B. Performance standards C. Maintenance and repair of instruments
C. Organization chart D. Electricity
D. Projected volume of testing 22. Which of the following agencies is gen-
16. Which of the following areas of question- erally responsible for the inspection and
ing in the interview process is inappropriate accreditation of clinical laboratories in the
or illegal? United States?
A. References A. CAP
B. Age B. NCA
C. Education C. CDC
D. Experience D. ASCP
17. Which of the following should be included 23. What is the strategic process of attracting
in a job description? and maintaining a customer base called?
A. Incumbent name A. Marketing
B. Promotion potential B. Discretionary factors
C. Qualifications and job duties C. Market environment
D. Job securities D. Product differentiation factors
18. Disciplinary action is a responsibility of 24. For marketing purposes, which of the fol-
supervision. Which of the following char- lowing terms best describes the laboratory
acteristics should be included for discipline customer?
to be effective and positive? A. Captive market
A. Public B. Patient–physician as partners
B. Casual C. Discretionary buyer
C. Timely D. Person or organization paying the bill
D. Written 25. Assume that the chemistry analyzer in the
19. Which of the following voluntary agen- laboratory of a 500-bed hospital yields
cies develops and implements blood bank 60,000 profiles per year made up of 10
practices for the clinical laboratory? results each. The number of quality control
A. OSHA (QC) tests performed per year numbers
B. FDA 2400, and the total direct labor cost is $1.50
C. AABB per test. The cost for a year’s supply of QC
D. PPS reagents is $3000. What are the QC direct
20. Which of the following is associated with labor cost per profile and the QC consum-
the goals of a laboratory continuing educa- able cost per profile, respectively?
tion program? A. $0.05, $0.06
A. Cost-cutting measures B. $0.06, $0.05
B. Elimination of promotional opportunity C. $0.08, $0.05
C. Staff development D. $0.60, $1.25
D. Increased workload
1044 ■ CHAPTER 14: LABORATORy MANAgEMENT

26. Your lab has added a new test. It is impor- 30. Which of the following established
tant that you determine what the breakeven the Equal Employment Opportunity
point is in the number of tests. The reve- Commission (EEOC)?
nue per unit has been $10.00, whereas your A. Title VII of the Civil Rights Act of
fixed cost is $400.00 and your variable cost 1964
is $2.00. What is the breakeven point, if B. Age Discrimination Employment Act
you expect your net income to be zero (no of 1967
profit and no loss)? C. Rehabilitation Act of 1973
A. 45 D. The Equal Pay Act of 1963
B. 48 31. Which of the following refers to a program
C. 50 where the overall activities conducted by
D. 52 the institution are directed toward assuring
27. A laboratory has 14,159 total hours paid. the ongoing quality of the products and
Of the total hours paid, 1263 hours are services provided?
nonproductive hours. Assuming that a full- A. Quality control
time employee works 2080 hours annually, B. Cost containment
what is the total number of FTEs needed C. Value stream analysis
to run the laboratory and the number of D. Continuous quality improvement
productive FTEs, respectively? 32. Who introduced the use of statistical tools
A. 6.2, 5.8 in decision making, in problem solving,
B. 6.8, 6.2 and for troubleshooting the production
C. 7.4, 6.8 process?
D. 11.2, 10.2 A. Philip Crosby
28. As a result of fraud and abuse identified by B. Joseph Juran
the Office of the Inspector General (OIG), C. James Westgard
what are laboratories required to develop? D. Edward Deming
A. Chemical hygiene plan 33. Your laboratory is considering expansion.
B. Compliance plan You will have to buy land and build a new
C. PPE plan lab. One of the financial aspects to consid-
D. Quality control plan er is the annual depreciation of the project.
29. Which of the following refers to the por- The total cost of the project is $800,000
tion (percentage) of the cost of an item or ($200,000 for the land and $600,000 for the
service that the Medicare beneficiary must building). At current estimates, the building
pay? is expected to be used for 20 years, with a
A. Deductible salvage value of $40,000. What is the an-
B. Balance bill nual depreciation of the project?
C. Coinsurance A. $38,000/year
D. Reasonable charges B. $30,000/year
C. $28,000/year
D. $10,000/year
 REVIEW QUESTIONS ■ 1045

34. Which of the following processes is de- 39. Influence exerted through the control of
signed to measure the value (level of suc- support services, such as a safety officer or
cess) of performing diagnostic tests and quality assurance coordinator, which pro-
other services related to the improvement vide recommendations to the manager and
of a patient’s disease or condition? set policies, is a type of authority known as:
A. Clinical pathways A. Staff
B. Outcomes assessment B. Line
C. Clinical practice guidelines C. Formal
D. Quality assurance D. Functional
35. Which of the following categories of 40. What is horizontal communication?
personnel is required in laboratories A. The official communication message
performing tests using high-complexity generated by the business activities of
methodology? the organization
A. General supervisor B. The formal messages that are channeled
B. Clinical consultant through the hierarchical network of the
C. Technical consultant organization
D. Director C. The activity that occurs during the nor-
36. Which of the following is not contained in mal conduct of business among depart-
the standard operating procedure manual ments, managers, and staff
(SOPM)? D. Live discourse in which all parties
A. Literature references exchange ideas and information and
B. Control procedures receive spontaneous feedback
C. Reference ranges 41. Which of the following agencies develops
D. Personnel requirements and monitors engineering and work prac-
37. When a manager does not possess the ex- tice controls?
pertise or knowledge to implement change A. The Centers for Disease Control and
and the resisters have significant power to Prevention
impede the efforts, which of the following B. Occupational Safety and Health
strategies for change will be used? Administration
A. Facilitation and support C. The Joint Commission
B. Participation and involvement D. College of American Pathologists
C. Negotiation and agreement 42. Which of the following refers to the
D. Manipulation and co-optation continuum of care under one common
38. The struggle is underway, and the behavior computerized communication channel that
of the participants makes the existence links hospitals, labs, pharmacies, physicians,
of the conflict apparent to others who are employers, payers, and medical information
not directly involved. What is this stage of systems?
conflict known as? A. Common Healthcare Integrated Network
A. Perceived B. Continuum Health Internal Network
B. Felt C. Community Health Information Network
C. Manifest D. Computerized Health Information
D. Latent Network
1046 ■ CHAPTER 14: LABORATORy MANAgEMENT

43. Which of the following budgeting pro- 48. What is the primary coding system that is
cesses attempts to set expenditures on a used by the federal government to deter-
variable workload volume? mine levels of reimbursement at the proce-
A. Operational dural level for Medicare services?
B. Capital A. CAP codes
C. Project B. CPT codes
D. Flexible C. Modifiers
44. In addition to preparing a capital budget for D. ICD-10 codes
the institution’s own use, federal and state 49. Your laboratory wants to buy a new hema-
regulations require healthcare facilities to tology analyzer. In determining the total
submit capital plans on certain projects for cost per test analysis, you need to know
approval and to obtain a: what the cost will be for equipment per
A. Certificate of Approval test. The analyzer costs $55,000 and has
B. Certificate of Need a useful life of 7 years. After the 1-year
C. Capital Budget Appropriation warranty expires, the annual maintenance
D. Capital Need Assessment contract will cost $8000. You estimate that
45. What will be the payback period be for a you will perform 3500 tests per year on this
new chemistry analyzer that costs $150,000 analyzer. What is the equipment cost for
and produces an annual income of each test performed?
$420,000? A. $1.38
A. 2.3 months B. $2.10
B. 2.8 months C. $2.81
C. 4.3 months D. $4.20
D. 33.6 months 50. Which of the following styles of directing
46. Which of the following is not a part of the allows an employee to determine the task
calculation of the total cost per test? and how to accomplish the task in order to
A. Direct and indirect labor help the manager solve a problem?
B. Direct and indirect materials A. Coaching
C. Equipment and overhead costs B. Autocratic
D. Depreciation C. Empowerment
D. Authoritative
47. Which of the following best describes the
role of a team leader?
A. Decision-maker
B. Taking minutes at team meetings
C. Leading, guiding, and teaching
D. Terminating employees
 &

answers & rationales

answers
rationales

1. from their staff. Managers who are democratic are

Theory Y managers and are participatory in their
B. Immunohematology (blood bank) is the only
leadership style. Empowerment is the style that
laboratory section that is regulated by the Food
includes the employee in decisions about how to
and Drug Administration (FDA). The FDA
accomplish tasks and encourages creativity.
enforces the Food, Drug, and Cosmetic Act. This
Act regulates the preparation of blood and blood
products as well as the facilities, including hospital 4.
laboratories and transfusion services, where prep-
A. “Full-time equivalent” (FTE) is a term routinely
aration occurs.
used by every laboratory, particularly during the
budget process. An FTE equals 2080 person-hours
2. paid in 1 year’s time. An FTE combines productive
hours and nonproductive hours (i.e., vacation, hol-
B. In order to plan for the future, management
iday, and sick time). The FTE is based on a 40-hour
must first assess where the organization stands.
workweek and is more easily used in a discussion
A SWOT analysis should be performed to deter-
of personnel and hours worked. In one FTE, one
mine both internal and external factors. Internal
full-time person or two or more part-time persons
factors include strengths and weaknesses of the
may occupy the 40-hour position.
organization. External factors include opportu-
nities available and threats to the organization.
5.
3. D. The organizational chart shows the lines
of supervision, relationships of various staff
C. The word “liberal” is not descriptive of the
members, and interrelationships of the various
type of leadership style used by laboratory man-
departments. There are generally three types of
agers. “Autocratic,” “consultative,” “persuasive,”
organizational charts: vertical, horizontal, and cir-
and “democratic” are words that describe the
cular. Most hospital administrations use the ver-
styles routinely used, although rarely as purely one
tical chart, which is a summary or a snapshot of
style; instead, a combination of various styles is
the structure of the organization. It is also used by
used generally. Managers who are autocratic hold
many levels of laboratory management.
Theory X philosophies and allow for little input
1047
 1048 ■ CHAPTER 14: LABORATORy MANAgEMENT

6. 9.
answers & rationales

C. The term “capital expenditure” refers to the C. Delegation is defined as assigning responsibil-
money spent for nonexpendable items having a ity, authority, and accountability for a task to an
life expectancy of more than one fiscal year. Capi- employee. Effective delegation occurs when the
tal expenditures are generally for permanent items manager selects the right task for the right per-
of equipment and laboratory improvements in the son, prepares an overview of exactly what must
physical setup of the laboratory. Very often such be done, allows time for the task to be completed,
equipment items are high-cost items and require and then provides recognition for performing the
the approval of the institution’s budgetary admin- task.
istration.

10.
7. B. Negligent acts are defined as the failure to do
A. Although Medicare and Medicaid legislation something that a reasonable person, guided by
has had the greatest influence on the health care the considerations that ordinarily regulate human
industry, the Clinical Laboratory Improvement affairs, would do or not do. Strict liability applies
Act has had the greatest impact on the labora- to product liability and to the performance of a
tory industry. The CLIA 88 legislation mandates service.
the conditions that must be met for laboratories
to be certified. All laboratories performing labo-
ratory testing, regardless of where the labs are 11.
based, must maintain an active CLIA license and B. DRG stands for diagnosis-related group. These
be subject to inspections by their State branch of groups of diagnoses were developed by the fed-
the federal CLIA agency. The requirements cover eral government in the 1970s and adopted in the
quality assurance, quality control, proficiency test- 1980s. The groupings provide a method of deter-
ing, record retention, complexity of tests (high, mining reimbursement for Medicare patient care
moderate, and waived), job categories, and person- by the federal government and have been used by
nel requirements to perform testing, supervise, hospital management for budgeting and planning.
and direct laboratories.

8.
C. Requiring a license is the most restrictive form
of government regulation of professional prac-
tice. Licensure makes it illegal for an unlicensed
organization or individual to provide a profes-
sional service within a scope of practice that is
defined by statute. Licensing is designed to protect
the public from inadequate manufacturing prac-
tice and incompetent practitioners.
 ANSWERS & RATIONALES ■ 1049

12. 15.

answers & rationales

C. On August 1, 2000, the Centers for Medicare D. Cost analysis, forecasting, determination of
and Medicaid Services (CMS) and the Office of fixed and variable costs, projected volume of test-
Inspector General (OIG) instituted the use of ing, and breakeven analysis are all parts of the
an outpatient prospective payment system (PPS) budget-making process. These tools must be used
known as Ambulatory Payment Classification in the determination of all costs before any intel-
(APC). Mandated by the Omnibus Budget Recon- ligent forecast or budget can be made. All have
ciliation Act (OBRA) of 1990, APCs comprise an become increasingly important in today’s climate
outpatient PPS that parallels the inpatient DRGs. of stringent reimbursement methods.
PPS rates are established for each group of ser-
vices provided in hospital outpatient departments
for the diagnosis and treatment of Medicare ben- 16.
eficiaries. Services are grouped by the APC groups, B. Questions regarding race, age, and childcare
which categorize services according to similarity of needs are all inappropriate in an interview; only the
clinical diagnosis and resource use. The capitated applicant’s experience is relevant. There are many
rate is a fixed rate of reimbursement for health care other areas, such as marital status, arrests, credit
organizations to a minimum amount per covered history, religious affiliation, and spouse’s occupa-
life. This is a process used by managed care organi- tion, that also should not be discussed. Education
zations and insurers. Under capitation, a payer pays and past employment experience as well as inter-
a provider a fixed amount for each member of the ests and short- and long-range plans are appropri-
plan who is assigned to receive services (laboratory, ate areas in which to concentrate.
radiology, cardiology, etc.) during any given month.

17.
13. C. Job descriptions will vary from one institution
A. A good performance appraisal should include to another. However, the position title, job respon-
a complete job description, performance stan- sibilities, necessary qualifications, and job relation-
dards based on the job description, and a regularly ships should be part of any job description. Some
scheduled evaluation using the first two factors. other aspects that may also be covered include
The performance appraisal system as a whole immediate supervisor, limitations or hazards,
should combine the evaluation process with a training, working conditions, skills, shift worked,
thorough discussion with the employee once he/ and section or division assigned.
she has had time to review the written evaluation.
The appraisal should occur on a regular basis, and
at a minimum of once a year. 18.
C. Positive discipline should involve privacy, be
timely, and be progressive, although it is not neces-
14. sary that it be in a written format. Discipline can be
A. Benchmarking is the process whereby the best informal and oral in the early stages, and it should
process in one organization is modified to fit simi- always be private. Disciplinary action may prog-
lar processes in another organization. Generally, ress through the following stages: oral, informal
a business case is developed for making changes talk; oral warning or reprimand; written warning;
that will result in improvements. Examples of disciplinary layoff or similar penalty; demotional
benchmarking data utilized in the laboratory envi- downgrading; and discharge.
ronment include cost per test, productivity, tests
performed per FTE, number of corrected reports,
and capital expenditures.
 1050 ■ CHAPTER 14: LABORATORy MANAgEMENT

19. 22.
answers & rationales

C. The Food and Drug Administration (FDA) is A. The College of American Pathologists (CAP)
the only compulsory agency that currently devel- accredits hospitals and associated laboratories.
ops and implements standards and practices for CAP inspects clinical laboratories every 2 years.
blood banks. The American Association of Blood The FDA is responsible for the inspection of
Banks (AABB) is also an agency that performs blood banks, and this is done on an annual basis.
these functions, but it is a voluntary, not com- In the event a laboratory is not accredited by CAP,
pulsory, program. The Occupational Safety and the Joint Commission will handle the inspection as
Health Administration addresses safety practices part of the overall hospital assessment.
in the laboratory overall but does not develop spe-
cific practices for blood banks. The Prospective
Payment System has to do with Medicare reim- 23.
bursement and is not an agency dealing with blood A. Marketing, as a specific function of manage-
banks. ment, may be defined as the strategic process of
attracting and maintaining a customer base. With-
out success in this area, the very survival of the
20. organization may be placed in jeopardy. Marketing
C. Staff development that generally improves the has to do with how the laboratory deals with the
capabilities of the laboratory worker, improvement new reimbursement and the restructuring of the
of laboratory functioning through in-service pro- laboratory delivery system.
grams, and the meeting of accreditation require-
ments are important goals of a continuing education
program. These goals may be accomplished by 24.
means of seminars, journal clubs, lectures, work- C. There is no question that the person toward
shops, and so forth. Participation in continuing whom the laboratory directs its professional con-
education programs is the responsibility of every cerns is the patient. However, the laboratory must
laboratory professional and should be maintained also identify the customer—the entity that sends
throughout the career. the patient to the laboratory. The discretionary
buyer is the entity that decides where a service is
performed. The discretionary buyer may be the
21. patient, a physician, a third-party payer, or even
C. Employee salaries, supplies, repair and main- another institution. Market research shows that
tenance of instruments, and fixed expenses are the mother is usually the one who decides where
line items in a laboratory budget. Also consid- the family receives medical care. For this reason,
ered line items are employee benefits, purchased much of healthcare’s promotional focus is on the
services, allocations, and miscellaneous expenses. mother and on women in general and associated
The aforementioned items can be further broken family issues.
down into smaller, more specific components; for
example, employee benefits include such items as
life and health insurance, vacations, holidays, sick
leave, and pensions.
 ANSWERS & RATIONALES ■ 1051

25. For this particular problem, the values are as

follows:

answers & rationales

B. Product costs are an integral part of cost
accounting. Labor and consumables are product x = breakeven point:this is the unknown
costs. To calculate the cost per test of a particular that you are trying to determine
assay, you must include quality control (QC) mate-
r = +10.00 per test
rial as part of the total cost to perform a particular
assay. When calculating the QC direct labor cost v = +2.00
per test, you need to know the total number of f = +400.00
QC tests performed each year, the total profiles c = 0 1 net income with no profit and no loss2 .
performed per year, and the total direct labor cost.
Therefore, the QC direct labor cost per profile So
would be as follows:
10 1 x 2 = 21 x 2 + 400 + 0
1 2400 * +1.50 2 10x - 2x = 400
= +0.06>profile.
60,000 8x = 400
To calculate the QC consumable costs, you need to x = 50.
know the cost for a year’s supply of QC reagents The laboratory would have to perform a minimum
and the total profiles performed per year. There- of 50 tests to reach the breakeven point and meet
fore, the QC consumable cost per profile would be both the fixed and variable costs. Once the lab
as follows: determines that the test should be included in its
+3000 menu, the next step might be to determine what
= +0.05>profile. net income is necessary to maintain the test.
60,000

26.
C. Breakeven analysis is used to determine how
many units, or in this case tests, you must run to
recoup your costs (both fixed and variable) and
make your net income (in this case, zero). A labo-
ratory might use this to see how much a new test
would cost them to implement. The formula to
calculate the breakeven point is as follows:
rx = vx + f + c,
where
r = revenue per unit
x = breakeven point
v = variable costs
f = fixed costs
c = net income.
 1052 ■ CHAPTER 14: LABORATORy MANAgEMENT

27. 29.
answers & rationales

B. An important concept in salary and wage C. Coinsurance is the portion of the cost of an item
management is the calculation of full-time or service that the Medicare beneficiary must pay.
equivalents (FTEs), which can be used for setting Currently, the Medicare Part B coinsurance is gener-
and measuring budgeting and staffing goals. ally 20% of the reasonable charge for the item or
To calculate FTEs, divide the number of hours service. Typically, if the Medicare reasonable charge
(total = productive and nonproductive) by 2080, for a Part B item or service is $100, the Medicare
the number of hours a full-time person works in beneficiary (who has met the deductible) must pay
1 year (40 hours per week * 52 weeks = 2080). $20 of the physician’s bill and Medicare will pay $80.
In this example, in order to calculate the total FTE
needed, you need to know the total hours paid and
the number of hours an FTE works in a year: 30.
A. The Equal Employment Opportunity Commis-
14,159 total hours paid sion (EEOC) was established by Title VII of the
= 6.8 total FTEs.
2080 hours>person Civil Rights Act of 1964 and began operating on
July 2, 1965. The EEOC enforces the principal fed-
To calculate the productive FTE, you need to eral statutes prohibiting employment discrimina-
know the productive hours worked. This is deter- tion, including Title VII of the Civil Rights Act of
mined by 1964, the Age Discrimination in Employment Act
14,159 total hours paid - 1263 nonproductive hours of 1967, the Equal Pay Act of 1963, Title I of the
Americans with Disabilities Act (ADA) of 1990,
= 12,896 productive hours.
and Section 501 of the Rehabilitation Act of 1973.
The number of productive FTEs equals:
12,896 productive hours 31.
= 6.2 productive FTEs.
2080 hours>person D. Continuous quality improvement programs
assure the ongoing focus on quality of the prod-
ucts and the services provided.
28.
B. The Office of Inspector General (OIG) and 32.
other federal agencies charged with responsibility D. Edward Deming is often credited with provid-
for enforcement of federal law have emphasized ing the Japanese with the information and training
the importance of developing and implementing that brought them to their position as the world’s
compliance plans. In recent years, the OIG has leader in the production of quality products. A
been asked to supply guidance as to the elements statistician who worked with Walter Shewhart
of a model compliance plan. The purpose of this introduced the use of statistical tools in decision
issuance, therefore, is to respond to those requests making, problem solving, and troubleshooting
by providing some guidance to health care provid- the production process. Deming is also frequently
ers that supply clinical laboratory testing services cited as the source of most of the concepts and
for Medicare and Medicaid beneficiaries. methods contained in the total quality manage-
ment (TQM) model.
 ANSWERS & RATIONALES ■ 1053

33. 35.

answers & rationales

C. Straight-line depreciation is a method based A. A general supervisor, who must be responsible
on the time element. As a product grows older, its for day-to-day supervision, is stipulated for labo-
value decreases and maintenance costs increase. ratories doing high-complexity testing. This is a
This method can be used for all capital items, but laboratorian with an associate’s degree or higher
it is usually used to establish depreciation rates for in medical laboratory technology and 2 years of
buildings and other structures with an extended training and experience in a high-complexity labo-
life expectancy (i.e., greater than 10 years). Land is ratory. The director and technical consultant must
considered to last forever and is never depreciated. be a doctoral-level scientist with an appropriate
Therefore, laboratory specialty or a physician with training
Annual depreciation = or experience in laboratory medicine. A physician
or doctoral-level clinical scientist may provide the
cost of project - salvage value
services of a clinical consultant.
Life expectancy
Annual depreciation = 36.
+800,000 - 1 +200,000 + +40,000 2 D. Personnel requirements are not required to be
20 years part of the Standard Operating Procedure Manual
(SOPM). Tests are categorized by waived, mod-
+800,000 - +240,000 erate complexity, and high complexity. The type
=
20 years of personnel allowed to perform testing is deter-
mined by these categories as described by the
= +28,000>year. Clinical Laboratory Improvement Amendments
(CLIA) of 1988.
34.
B. Clinical practice guidelines are published by 37.
professional medical groups, insurers, federal B. Participation and involvement allows subordi-
agencies and departments, and other groups that nates to be part of the planning or implementation
recommend when a selected medical procedure, of change. It is an excellent method when the man-
test, or practice should be used. Clinical pathways ager does not possess the expertise or knowledge
are developed by hospitals for specific diseases or to implement change himself /herself, and the
conditions (e.g., pneumonia, hip replacement) by resisters have significant power to impede the man-
the medical staff and other healthcare personnel. ager’s efforts. Participation often generates com-
They may include some of those practice guide- mitment by the participants to the change process.
lines determining what test, procedure, or practice This approach can also result in time-consuming
should be used when treating a patient with that compromise that does not fit the organizational
disease or condition so that quality treatment is needs. It must be carefully handled, because once a
consistent from patient to patient. Quality assur- decision has been made by the group, it is difficult
ance is a program in which the overall activities for the manager to push it aside.
conducted by the hospital are directed toward
assuring the quality of the products and services
provided. The outcomes assessment is used to
measure the value of the clinical practice guide-
lines, clinical pathways, and quality assurance pro-
gram that the hospital has decided to put in place.
 1054 ■ CHAPTER 14: LABORATORy MANAgEMENT

38. down through the bureaucratic hierarchy and the

responses and other information that make their
answers & rationales

C. Conflict does not usually appear overnight. It

way back up through the same network. Horizontal
often festers without the knowledge of the recipi-
communication occurs in the course of the nor-
ent party. Conflict usually passes through several
mal exchange of services, information, and work
progressive stages before it manifests itself to oth-
orders, when managers and staff talk to each other
ers. The parties may be at different stages of the
as peers.
conflict cycle, which complicates management of
conflict. The manager must have a keen sensitiv-
ity to and understanding of his/her work environ- 41.
ment to deal effectively with conflict at all stages.
B. Engineering and work practice controls involve
taking physical steps to isolate or remove any
39. possible pathogen hazards from the workplace.
The Occupational Safety and Health Administra-
A. Staff authority is exercised through such posi-
tion (OSHA) requires specific engineering action
tions as the lab safety officer or quality assurance
by employers. Some primary areas where these
coordinator—those areas that provide supportive
actions are required include hand-washing facili-
services in a more indirect fashion, where ability
ties, needles and sharps, and procedures that mini-
to implement change depends on the action of
mize splashing, spraying, and generating aerosols.
the section supervisors. They exercise their influ-
Although work practice controls are developed
ence by making recommendations, providing
by OSHA, the Joint Commission and the College
specific support services, giving assistance and
of American Pathologists (CAP) also require that
advice in technical areas, facilitating paperwork
these work practice controls be in place to become
and other procedures, and developing general lab
accredited. The Centers for Disease Control
policies. Line authority is supervisory responsi-
and Prevention (CDC), just like any other lab, is
bility assigned through the formal delegation of
required to follow the same work practice controls.
authority—in the lab this is from administration to
department head to supervisor to staff. Functional
authority is the power to enforce directives, such 42.
as physician’s medical orders, within the context
C. The Community Health Information Network
and boundaries of a clearly defined specialty and
(CHIN) links all healthcare participants involved
span of control. Formal authority is the official,
in the continuum of care under one computerized
sanctioned lines of authority assigned by the own-
communication channel. This channel, or electronic
ers of the organization.
highway, serves as the information’s translation
medium. It enables members of the healthcare
40. community to talk to one another without leaving
their computer terminals, learning another
C. Members of organizations receive communi-
computer language, or buying another computer
cations from two sources, formal and informal.
system. A sophisticated security system allows only
Formal comes from two directions in a company—
authorized users to access information contained in
from above or below. Vertical communications take
various databases at its members’ systems.
the form of memos and other directives that come
 ANSWERS & RATIONALES ■ 1055

43. 46.

answers & rationales

D. At a certain patient census, the hospital should D. Depreciation is not part of the total cost per
have a specific number of employees. When the test but is part of the overall budget. The way
number of patients increases, more staff is hired; depreciation is determined and recorded has a
when the census drops, employees are laid off. direct impact on the financial status of the com-
In practice, this has been difficult to implement pany as a whole. The total cost per test can be
because of recruitment and retention problems. determined by adding together direct and indirect
Even supplies must be ordered in advance to labor, direct and indirect materials, and equipment
ensure adequate levels. For this reason, a flexible and overhead costs. Direct labor cost includes the
budget similar to the forecast method is prepared cost of technical personnel who actually perform
and then closely monitored to ensure that projec- the testing. Indirect labor cost represents the cost
tions are on target. of all other laboratory support and supervisory
personnel. Direct material includes reagents, sam-
ple cups, and pipette tips. Indirect material cost
44. encompasses the cost of shared equipment and
B. The process of submitting capital plans for gov- supplies that cannot be directly allocated to indi-
ernmental approval is required for projects, equip- vidual tests, such as the cost of the LIS, centrifuge,
ment, or buildings above an established monetary or refrigerator. Overhead cost includes the hospi-
level. Most states have set this limit at $150,000, tal’s allocation for utilities, housekeeping, adminis-
following federal guidelines. A certificate of need tration, and other costs.
(CON) must also be obtained before new services
such as oncology or obstetrics can be offered. This
program was established in an attempt to control 47.
medical costs and to avoid duplication of services C. The team leader, to be successful, must be
and the overbuilding of hospital beds. skilled at leading, guiding, and teaching the team.
Basic knowledge of the project area and skills for
getting cooperation from multiskilled and multi-
45. disciplinary team members are crucial.
C. Payback period = P/I, where P = purchase
price of project and I = annual income gener-
ated. Many investors and lenders perform this cal- 48.
culation to determine the length of time needed to B. The CPT is actually Level I of the HCPCS
recover their investment. Businesses use this same codes. CPT is authored by the American Medical
formula to assist in determining the affordability Association and, therefore, most codes are his-
of a project. By the nature of the business, labora- torically identified physician provided procedures.
tory instruments need a relatively shorter payback They relate to signs, symptoms, and conditions;
period because of the rapid technological obsoles- their use is important in substantiating procedural
cence in the field. orders. Modifiers are attached to CPT codes to
further describe a procedure. They can be alpha
+150,000
Payback period = or numeric in nature. An example used in lab pro-
+420,000>year cedures is modifier “91,” indicating that the same
12 months procedure was performed more than once on the
= 0.36 year * same date of service.
1 year
= 4.3 months.
 1056 ■ CHAPTER 14: LABORATORy MANAgEMENT

49. Equipment cost =

answers & rationales

D. Equipment cost is an essential part of deter-

mining the total cost per test. In order to deter- 3 +55,000 { (+8000 * 6) 4 >7
= +4.20
mine the equipment cost per test, you need to 3500
know the cost of the equipment, the useful life of
the equipment, the annual maintenance cost after
warranty expiration, and the estimated number of 50.
tests to be performed by the equipment you want C. Empowerment allows an employee to deter-
to purchase. mine what task and how to accomplish the task
31 E , L2 + M 4 to help the manager solve a problem or to allow
Equipment cost = , an organization to come closer to accomplishing
A
its mission and goals. Employees are allowed to
where be creative and innovative to solve problems. Em-
ployees are allowed to take risks without fear of
E = Cost of equipment
admonishment for failing.
L = Useful life of equipment
M = Maintenance costs
A = Annual tests performed .

REFERENCES
Toussaint, J. (2015). Management on the Mend: The Healthcare Executive Guide to System Transformation.
Theda Care Center for Health Care Value, Appleton, WI.
Optum360. (2017). Coding and Payment Guide for Laboratory Services. OptumInsight, Inc., West Valley
City, UT.