Asia-Pacific Pathology Practice

ASIA-PACIFIC FOCUSWHAT CAN WE LEARN FROM OUR REGION?

Tony Landgren

Chief Pathologist & Medical Director

Healthscope Pathology

• Personal perspective derived from comparative analysis of diagnostic practices operated by Healthscope in the Southeast Asia Pacific region.

• Analysis is not intended to be judgemental or critical but rather to identify and understand differences as a means of improving diagnostic performance and business performance in diverse environments.

• Healthscope is an Australian registered public company operating in Australia, New Zealand, Malaysia, Singapore and Vietnam with >20,000 staff, >40 hospitals, >60 human and veterinary laboratories and >60 medical centres.

Asia Pacific Region

• Australia *• Brunei Darussalam• Canada• Chile• People's Republic of China• Hong Kong, China• Indonesia *• Japan• Republic of Korea• Malaysia *• Mexico• New Zealand *• Papua New Guinea *• Peru• The Republic of the Philippines• The Russian Federation• Singapore * (Secretariat APEC)• Chinese Taipei• Thailand *• United States of America• Viet Nam *

Australian Pathology Activity in Southeast Asia-Pacific Region

• Laboratory services

- Sonic Healthcare - Australia, New Zealand

- Healthscope - Australia, New Zealand, Vietnam, Malaysia & Singapore

• Pathology Data Centres

- Primary Health (India)

- Healthscope (Malaysia)

• Quality Assurance Programs and pathologist training programs (RCPA)

• Numerous equipment, reagent/consumable and service suppliers

Pathology Service Diversity

• Disease

• Government health policy

• Economic factors

• Referrer expectations

• Patient expectations

• Operating environment & opportunity

• Cost

Disease Diversity - Communicable

• Developing Countries- Immunisation variability -> consequences - Gastroenteritis- Hepatitis- Malaria- Dengue- Tuberculosis- Sexually transmitted diseases inc. HPV- HIV

Disease Diversity - Non-communicable

• Emerging with improved nutrition, increasing age……

- Diabetes

- Obesity

- Hypertension & ischaemic heart disease

- Chronic renal disease

- Malignancy

- Smoking related disease

Government Health Policy

• Heavily weighted to communicable diseases

• Public health programs – housing, nutrition, security of water supply, sanitation, education, vaccination, primary health care……

• Private health care – most primary health care, fertility, child health, fitness to work, aesthetic surgery……

• Diagnostic pathology – education, regulation, limited direct funding of testing…..

Health Economics - What did we learn from the GFC?

• Regional decline in utilisation of laboratory services was an immediate response and in direct proportion to economic decline.

• Regional recovery in utilisation of laboratory services highly variable and does not seem to be aligned to economic improvement.

• Major impact on disease monitoring testing - HbA1C…….

• Minor impact on microbiological testing.

• Doctors and patients appear to have made a choice to use fewer and more limited services.

Diagnostic Markets

• Local partnerships

- the facilitation problem

- the bureaucracy problem

• Clinician gate keepers

- pathology request

- specimen collection

- patient billing

* drug prescribing, dispensing, billing

What do referrers expect?

• Australia & New Zealand

- Quality/reliability

- Accessibility for patients – collecting arrangements

- Fast turn around time

- No out of pocket expenses to patient

(plus pathology service choice linked to rent paid)

• Singapore & Malaysia

- Quality/reliability

- Fast turn around time

- Competitive price -> margin for referring doctor (mostly self collection)

What do patients expect?

• Assume high quality/reliability

• Best price (or no out of pocket expense)

• Referring doctor will make decisions regarding necessary testing

Laboratory Management Models

• Operational and financial skills

• Medical and scientific diagnostic skills

• Customer relationship and marketing skills

Strong marketing, commercial contract and debt management skills

Economics of Diagnostic Testing

• Average Fees

• Pricing arrangements

• Billing arrangements

• Labour mix and costs

• Other operating costs

• Operating margins?

Market Distortions

• Who are the customers?

• Who are the payers?

• What are the ancillary commercial arrangements?

• What is the fee schedule history?

Economics of Diagnostic Testing

Average episode fee in $AUS

• Australia $65-75 (State variability)

• New Zealand $45 (75% community pathology)

• Singapore $30

• Malaysia $15

• Vietnam $5

Pricing of Diagnostic Testing

Pricing arrangements

• Government determined fee schedule – Medicare

• Contract determined fee schedule – health services, referrers…

• Laboratory determined fee schedule

• Market competition determined fee (individual client and schedule)

Billing and Paying for Diagnostic Services

Billing Arrangements

• Test related (Singapore & Malaysia)

• Episode related (point in time) Australia & New Zealand

• Mostly episode related (health event) Vietnam

Payer Arrangements

• Government (Australia, New Zealand + public health elsewhere) – Individual patient account to payer(s).

• Patient indirect through referring doctor (Singapore & Malaysia) – Monthly account to doctor.

• Patient direct (Vietnam) - off schedule or uncontracted elsewhere)

Labour Management

Labour cost as a percentage of average fee

• Australia 45-55%

• New Zealand 38-42%

• Singapore 32-42%

• Malaysia ~ 30%

• Vietnam ~ 20% (local component)

~ 80% (exported component)

Labour Management

Pathologist/Scientist/Technical Officer/Laboratory Assistant Mix

• Australia 2/58/25/15%

• New Zealand 2/48/30/20%

• Singapore 2/3/40/55%

• Malaysia 2/3/35/60%

• Vietnam 0/1/19/80%

Other Operating Costs

• Equipment/Reagents/Consumables (25-30%)

• Rent (5-20%) collecting centres and laboratories

• IT (5%)

• Regulatory compliance - EQA, IQA, Accreditation….(1-2%)

Diagnostic Service Difficulties

LABORATORY EVENT NOTIFICATIONS MALAYSIA/SINGAPORE 2013 (>400)- Infrastructure problems dominate (>x100 Australia and New Zealand)

• Pre analytical error 25% • Analytical error 22%• Electricity supply failure 12%• Water supply failure 12%• Transport delay 10%• Data transmission failure 8%• Reagent storage failure 5%• Waste disposal unavailability 2%• Export & import of materials delay 2%• Other

Operating MarginsNot a secret!

Singapore>New Zealand>Malaysia>>>>Australia

Improving Diagnostic Performance

• Education (external & laboratory based)

• Competency Certification (point in time and continuing)

• Accreditation (NATA, IANZ…)

• Internal Quality Assurance

• External Quality Assurance (QAP….)

• Regulation

What have we learnt?

• Business of pathology is hard in Southeast Asia Pacific region but it is of high quality and profitable despite:

- Complex political and health policy environments

- Developing and vulnerable economies

- Developing regulatory environments

- Long investment timeline

- Interesting referrer relations

- Variable business law & ethics

- Challenging diagnostic demands

- Technical support and infrastructure problems

What have we learnt?

• Pathology practice viability irrespective of the local economic environment depends on managing operating expenses because income is relatively fixed and/or driven by market competition.

• Labour management is critical to control of costs.

What have we learnt?

• Management skills must align with the external operating environment.

• Medical and scientific diagnostic knowledge and skills while critical to the internal operating environment do not necessarily align with the external operating environment.

• Australian pathology funding and regulatory model does not support rational use of diagnostic testing or laboratory viability.

• Australian concerns about free market influences on pathology practice are not supported by my experience of Eastern Asia Pacific private sector operation or New Zealand community pathology competitively tendered environment.

What have we learnt?

• Distortions in funding and operating models effect the viability and quality of diagnostic services.

• Managers in Australia look to laboratory operational changeto make savings not the external service infrastructure necessary to market, collect and transport the specimens.

• Managers in Southeast Asia Pacific look to customer service improvement to increase business and maintain pricing.

What have we learnt?

• In Australia uncontrolled collecting centre rent and capital contribution arrangements coupled with an inflexible and outdated laboratory staffing model and a distorted pricing schedule when compared to our near neighbours threatens the viability and internationally recognised high standard of our laboratory services. (This is despite a strong economy in a highly developed social and regulatory environment.)

What can we learn?

• Stressed systems tend to throw up innovative ways of doing things to survive.

• Engaging commercially and professionally with our neighbours has significant mutual benefit.

Acknowledgements

• Healthscope Pathology

• Melbourne Health – Royal Melbourne Hospital

• University of Melbourne – Department of Pathology

• Royal College of Pathologists of Australasia

• RCPA QAP

• National Health and Medical Research Council

• Australian Council on Health Care Standards