Laboratory Services

Expert Panel
Final
November 12, 2015

LABORATORY SERVICES EXPERT PANEL REVIEW 1

Acknowledgements

The Panel would like to offer our thanks to the many individuals in the community, hospital and public
health laboratory sector and to the many helpful officials within the Ontario government who were
responsive to our requests for rapid turn-around on material. Thanks also to the numerous
professionals who offered their time, expertise and ideas from across Canada to help bring this report
to fruition. Special thanks are due to the staff of the Program Development and Delivery Branch within
the Negotiations and Accountability Division at the Ministry of Health and Long-Term Care who
facilitated our multiple interactions with the field and within the Ministry. Finally, special recognition and
thanks go to Melissa Tamblyn, who was our most able project leader for this effort.

LABORATORY EXPERT PANEL REVIEW 2

Minister Eric Hoskins
Ministry of Health and Long-Term Care
10th Floor, Hepburn Block
80 Grosvenor Street
Toronto, Ontario M7A 2C4

Dear Minister Hoskins,

On behalf of our Panel, we are pleased to submit this report on recommendations for
modernizing the community laboratory services funding model in Ontario.
We appreciate your confidence in asking the Panel to undertake this review. We hope that our
report and recommendations will help to bring value to the patients of Ontario, the physicians
who order tests, and the Ministry of Health and Long-Term care who retain stewardship for
laboratory services.
We would be happy to follow up in any way regarding the recommendations in this report.

Yours sincerely,

Terrence Sullivan, Philip Gordon, Shahid Minto

Laboratory Services Expert Panel

LABORATORY SERVICES EXPERT PANEL REVIEW 3

Table of Contents
Acknowledgements....................................................................................................... 2
Executive Summary ...................................................................................................... 5
1.0 Introduction ............................................................................................................. 8
2.0 Panel Mandate and Approach .............................................................................. 11
2.1 Panel Mandate ....................................................................................................................11
2.2 Panel Approach ..................................................................................................................11
3.0 Key Findings .......................................................................................................... 13
3.1 Community Laboratory Sector .............................................................................................14
3.2 Broader Laboratory Sector ..................................................................................................23
4.0 Future State Criteria .............................................................................................. 26
5.0 Recommendations ................................................................................................ 27
5.1 Funding Model ....................................................................................................................28
5.2 Funding Model Supports .....................................................................................................31
5.3 Broader Community Laboratory Sector ...............................................................................34
5.4 Broader Laboratory Sector ..................................................................................................36
6.0 Conclusion ............................................................................................................. 39
7.0 Next Steps .............................................................................................................. 40
Appendix ...................................................................................................................... 46
Endnotes ...................................................................................................................... 88

LABORATORY SERVICES EXPERT PANEL REVIEW 4

Executive Summary
Laboratory services are core to the diagnostic process in health care and are essential to the
well-being of Ontarians. The province of Ontario has a mature laboratory service delivery
environment that yields, for the most part, good quality laboratory services. However, it has
been challenged by concerns around value, optimal access and appropriate utilization of
laboratory services. Ontario has also faced special challenges with respect to the introduction of
new laboratory testing technologies that have the potential to benefit the health care system and
patients alike.
In 2015, the Laboratory Services Expert Panel (Panel) was convened to conduct a review of
Ontario’s community laboratory sector, and to provide recommendations to improve and
modernize laboratory sector funding and services.
Over the past ten years, the community laboratory sector has seen significant consolidation of
ownership of supplier entities, resulting in two suppliers holding ninety five per cent of the
market. It has also seen continuous improvements in automation. Meanwhile, the Province’s
funding, delivery and management of laboratory services have changed very little.
A modern community laboratory sector model could best be described as one of “managed
competition”, where the government supports a system in which multiple providers compete and
are governed by a common set of expectations and levers to incent improved quality and patient
satisfaction, and to penalize where performance does not meet expectations.1 Adopting such an
approach in the Ontario community laboratory services market has a number of advantages,
such as stability and predictability. In addition, the current state of partnership with private
providers may offer some levers for improving productivity that are not easily available in the
public sector, such as financial capital, investment in and access to technology, and new
business models that have been successful elsewhere.2
However, the Panel feels strongly that the current status quo is not sustainable, does not meet
the goals for a future solution and should not be considered as an option going forward. The
imperative for change in Ontario’s laboratory sector is now pressing. The Panel has concluded
that there is much potential to extract greater value from both the community laboratory sector,
with expenditure close to $650 million annually, and the broader laboratory sector. Earlier
reports have identified potential savings from negotiated contracts or RFP as being at the high
end from $60 million to $110 million from negotiated contracts or RFP respectively, at the high
end.3 Data on hospital costing further supports potential savings on the community side of the
laboratory sector. Based on this, we believe the $50 million reduction proposed as part of the
2015 Budget prior to the commencement of the Panel’s mandate represents a reasonable
starting point for improving the value proposition of community laboratory services.
A number of opportunities exist to improve the accountability, transparency, effectiveness and
value of the supply of laboratory services. In addition, the Panel noted opportunities to better
manage the demand for laboratory services, particularly with respect to appropriate physician
utilization of laboratory services.

LABORATORY SERVICES EXPERT PANEL REVIEW 5

The challenge ahead lies not in a complete redesign of the community laboratory system, but in
a reorganization of the system to more effectively manage competition, to derive the efficiency
benefits of private sector delivery partnerships, and to remove barriers to the emergence and
availability of effective new testing technologies. Better management of the supply of
community laboratory services must be accompanied by better management of the demand for
community laboratory services if the full potential to improve the quality, cost and patient
experience is to be attained.
This report outlines a number of actions that should be taken to improve the current laboratory
services sector model. It calls for increased rigor, accountability and transparency in the
Province’s management of community laboratory services, specifically through more
competitive procurement, the implementation of performance-based agreements, and a robust
performance management process with suppliers. It highlights potential mechanisms to
streamline and better manage the demand for community laboratory services, including
mechanisms for assessing and ensuring appropriate utilization with leadership from the
community laboratories and relevant professional organizations. It also explores ways to
modernize the laboratory services sector through the orderly evaluation and integration of new
testing technologies, and the retirement of obsolete tests.
The report is focused mainly on findings and recommendations relating to funding, funding
supports and other issues pertinent to the community laboratory sector. As per our mandate, the
report also includes findings and some initial recommendations for modernizing the broader
laboratory sector as a whole. A full view of the recommendations of the Panel can be found in
section 5.0 of this report. In summary, the recommendations of the Panel are:
1. Negotiate long-term performance-based contracts (approximately 7 to 10 years, with
reopeners) directly with individual labs, with price discounts from present levels with a
deadline (six months) to come to agreement, failing which an RFP will be initiated.
2. Discontinue the Access and Performance Fund and Utilization Discount Modifier
3. Move to a single core funding envelope with test schedule, combining existing
segregated funding envelopes as market saturation occurs
4. Establish New Technology Testing Fund via RFPs open to new market entrants
5. Create a Small Labs Opportunity Fund to establish a level playing field for performance
measurement and reporting
6. Establish a provincial process to formally evaluate new laboratory tests, recommend or
not recommend such tests, and retire obsolete testing procedures within a regularly
updated Schedule of Benefits
7. Require public reporting of laboratory performance and accreditation results
8. Develop and deploy a Province-wide appropriateness / utilization program with
supporting tools (e.g. electronic order entry prompts)
9. Establish a focal point for Laboratory Program leadership within government and
strengthen capacity in contract negotiation and contract and relationship management,
supported by robust analytics and an appropriate audit / inspection regime
10. Modernize and streamline licensing requirements and processes

LABORATORY SERVICES EXPERT PANEL REVIEW 6

 11. Establish independence of the Institute for Quality Management in Healthcare and
develop a cost recovery model for accreditation
12. Remove impediments to e-ordering / e-signature and expedite implementation with
appropriate safeguards
13. Review policy on point-of-care testing and home and community collection to ensure
equity and consistency
14. Introduce independent and regular patient satisfaction surveys for laboratory services,
with sufficient breadth and depth to inform regional service adjustments
15. Conduct detailed assessment and develop recommendations on the approach to
optimizing value across the broader laboratory system as a next phase of study to cover:
a. Strategically position genetic testing services to meet current and future needs
b. Champion the role and contribution of Ontario’s research-intensive hospitals in
experimental test development as part of the process to assess and approve new
health technologies in Ontario
c. Identify opportunities to balance hospital outpatient testing and community
laboratory testing, where appropriate and more convenient for patients
d. Conduct a reference, full cost accounting study across the broader laboratory
sector (community, hospital and public health) to inform rationalization of test
menu across sectors
e. Provide quality oversight and develop comparable payment for physician in-office
testing in relation to community laboratory testing
f. Expedite OLIS for remaining hospitals, community laboratories and physicians
conducting in-office testing, and facilitate interoperability with local information
systems
g. Local Health Integration Network (LHIN) to take leadership in rationalization and
optimization of hospital laboratory capacity in geographically proximal areas
h. Explore opportunities to allow routine public health testing to be conducted by
community labs
This report also outlines a three-year implementation plan. Key to this implementation plan is
the immediate establishment of a working governance structure that can provide oversight for
the execution of our recommendations and ensure that the Community Labs Program responds
to the needs of Ontarians in a cost-effective and professional manner.

LABORATORY SERVICES EXPERT PANEL REVIEW 7

1.0 Introduction
Laboratory services are an essential component of our health care system. Internationally, the
pace of change in the laboratory sector has been swift over the past decade, with the
introduction of new testing technologies, significant growth in molecular and genetic testing, an
increased demand for point-of-care testing, the enhancement of electronic order entry and
signature systems, and mounting evidence for the safety and benefits of patient access to
results online. Laboratory testing provides a very large fraction of the information that physicians
use to make medical decisions.4
To establish a foundation for its work, the Panel looked to get a view of the full scope of
laboratory services across all sectors. The table below provides the most complete view
possible of all laboratory service facilities, test volumes and funding. Most notably the view of
the sector is organized by test provider with the exception of genetics, which has been managed
distinctly as a program on its own. The majority of genetic testing today is delivered in hospital,
although a large number of services are still performed out of country. The approach to
managing genetic testing requires special review on its own to develop a forward-looking plan.
However, it is the view of the Panel that genetic testing should be integrated into the overall
approach to laboratory services in a careful manner.

Today in Ontario, a mix of public and private sector organizations deliver laboratory services,
with the slight majority delivered through public hospitals. The sector as a whole has moved
towards varying degrees of consolidation and integration over the past decade. A significant
consolidation of ownership has occurred in the community laboratory services sector, where two
major commercial laboratory providers now account for approximately 95 per cent of all activity.
The distribution of all activity is depicted in table 1 below.
Table 1: Distribution of testing and funding across Ontario’s laboratory sector

LABORATORY SERVICES EXPERT PANEL REVIEW 8

Consolidation in the market and automated testing technology, have improved the potential for
consistency, speed and accuracy in laboratory services in Ontario. However, consolidation has
also proven sub-optimal for market competition, utilization management, and the growth of new
testing technologies. Little has been done to fundamentally address these gaps, or
inconsistencies in the funding, delivery and management of laboratory services.
There are moreover, a number of distributed centres of authority in the Ministry while this sector
requires an integrated approach to management. A single point of authority is required for the
sector, to enable forward scanning, an ability to anticipate change, and coordination across
relevant units in the Ministry of Health and Long-Term Care (Ministry). The Ministry has
historically lacked the processes, tools and structure to appropriately respond to changes in the
laboratory sector, match the pace of innovation, and derive optimal value. This is particularly
evident in the private community sector, where the Ministry has a very limited knowledge
regarding the actual costs incurred by the providers of services, making pricing and
reimbursement decisions challenging.
Despite the pace of change in the market and testing technologies, little has been done to
reform the approach to managing the community laboratories. This is not to say that change has
not been contemplated. In fact, the reform of Ontario’s laboratory sector has been studied and
reported on several times over the past two decades, with a high degree of consistency in
findings around the need for a more open market, performance-based contracts, and increased
access to new testing technologies. For a variety of reasons, the majority of the
recommendations put forth in these reports have not been fully advanced or implemented. A
number of other reports have also been developed over this same period to inform potential
change. 3,5,6,7 Figure 1 depicts this chronology.

Figure 1: A 20-year view of progress in Ontario’s community laboratory sector.

LABORATORY SERVICES EXPERT PANEL REVIEW 9

The imperative for change in Ontario’s laboratory sector is now paramount. Quality,
accountability, integration and funding reform dominate the health care agenda in the Province
and are central to the government’s New Action Plan for Health Care: Patients First8. The
Province is committed to an agenda of fiscal accountability and increasing value, to ensure that
health care is available for future generations. The Excellent Care for All Act (ECFAA) has
reinforced the need for good governance and transparent performance reporting to promote
high quality, patient-centered care. The Choosing Wisely Canada campaign has put a spotlight
on the importance of physician-patient communication to promote appropriate utilization of
diagnostics and the avoidance of unnecessary tests. In short, Ontarians are expecting, and
must receive, better value from their laboratory services.
In the spring of 2015, the Minister of Health and Long-Term Care established an independent
Laboratory Services Expert Panel to provide analysis, advice and recommendations on a
funding model for community laboratory services in Ontario. The resulting report would address
opportunities for funding reform and consider the broader implications of laboratory services
delivery to the public, with the principles of access, quality, value, accountability and
transparency at the forefront.
Over the course of four months, the Panel reviewed previous reports and analysis, examined
literature and evidence, undertook a jurisdictional scan, and conducted consultations with the
community and broader laboratory sector in Ontario. Through its research and consultations,
the Panel developed an assessment of the strengths and opportunities of the provincial
laboratory sector, with an emphasis on the issues to be addressed in the community laboratory
sector. Input from the sector and key stakeholders was key in developing an understanding of
the current state, and to developing and refining its recommendations.
The Panel concluded that there is much potential to extract greater value from both the
community laboratory sector and the broader laboratory sector. Specific to community sector
reforms, the Panel concurs with previously estimates of savings relating to the introduction of
negotiated contracts or RFP as being from $60 million to $110 million respectively, at the high
end.3 Data on hospital costing further supports potential savings on the community side of the
sector. Based on this, we believe the $50 million reduction proposed as part of the 2015 Budget
prior to the commencement of the Panel’s mandate represents a reasonable starting point for
improving the value proposition. A number of opportunities exist to improve the accountability,
transparency, effectiveness and value of the supply of laboratory services. In addition,
opportunities exist to better manage the demand for laboratory services, particularly with
respect to appropriate physician utilization of laboratory services.
This report provides a summary of the findings of the Panel, along with a set of
recommendations for advancing the funding and management model of Ontario’s community
laboratory services sector. The report includes a number of unattributed quotes based on actual
exchanges that were part of the Panel’s consultations. While the report is primarily focused on

LABORATORY SERVICES EXPERT PANEL REVIEW 10

achieving a necessary modernization of the community laboratory services, it also looks forward
to enhancing the broader laboratory sector to benefit all Ontarians.

2.0 Panel Mandate and Approach

2.1 Panel Mandate

The 2014 Mandate letter for the Minister of Health and Long-Term Care notes that as part of the
commitment to move forward on accountability and transparency, the Minister would “…explore
opportunities to optimize quality and value in
community laboratories and the broader laboratory “This modernization [of the community
sector”.9 Considering Ontario’s highly constrained lab sector] is expected to drive better
fiscal situation, the Ministry is seeking opportunities to value for money in lab services…while
ensuring high quality and public access.”
optimize the community laboratory sector, starting ~Ontario 2015 Budget
with an evaluation of its current funding model and
contribution to the delivery of high-value, high-quality,
accessible community laboratory services in the province. The 2015 Ontario budget announced
the establishment of a Panel to review the province’s community laboratory services and to
provide recommendations for funding reform. This process was intended to shift the focus from
physician-centred, volume-driven service delivery to improving patient outcomes.
Details of the Panel members and Terms of Reference may be found at the end of this report
and in Appendix A, respectively.

2.2 Panel Approach

The Panel was asked to build on previous external consultant recommendations relating to
funding options for the community laboratory sector, as well as experience from other
jurisdictions. It was asked to conduct an analysis of Ontario’s current funding model and
provide relevant and actionable recommendations for a procurement model for laboratory
services that is fair, sustainable, and predictable. The Panel was also asked to assess the
broader implications of its recommendations on the role of public health and hospital services.
As such, the Panel adopted an iterative consultative approach to the development of its
assessment and recommendations.
The following diagram outlines the Panel’s iterative and integrated approach to
recommendations development and final reporting.

LABORATORY SERVICES EXPERT PANEL REVIEW 11

Figure 2: Panel approach to developing recommendations and reporting on Ontario’s
community laboratory services.

In developing its recommendations, the Expert Panel reviewed previous reports and analysis,
conducted a literature and evidence review, and undertook a jurisdictional scan. A full summary
of the literature and evidence review can be found in Appendix C. A full summary of the
jurisdictional scan can be found in Appendix D.
Insight gathered from this review informed an in-person consultation phase with key
stakeholders and policymakers, which included meetings with over 25 organizations and
involved representatives of government and the community, the public health and hospital
laboratory sectors, external experts, and specialists from other jurisdictions. The primary focus
of the Panel’s review was an examination of the funding model for community laboratories
services, at the core of which is a fee-for-service payment structure with caps. The Panel
reviewed the limited existing community laboratory arrangements and related documentation,
and had extensive briefings on the current process for engaging and compensating community
laboratories, the details of which are included in section 3.0 of this report. See Appendix E for a
list of consultations.
Following its consultations, the Panel deliberated and developed a set of working directions for
discussion with core sector stakeholders. Meetings with community laboratory CEOs and the
Laboratory Advisory Forum concluded the review process, after which the Panel finalized its
recommendations in this report. All of this activity supported the conclusion that a move to
performance-based contracting is an essential modernization step for funding community
laboratories.

LABORATORY SERVICES EXPERT PANEL REVIEW 12

3.0 Key Findings
Through its process, the Expert Panel uncovered seven categories of key findings relating to the
community laboratory services sector. They are as follows:

COMMUNITY LABORATORY SECTOR

1. Funding, Procurement and Performance Management

2. Governance, Planning and Management

3. Licensing, Accreditation and Inspection

4. Appropriate Utilization

5. Innovation in Testing Technology

6. Innovation in Genetics

7. Patient Satisfaction and Engagement

In addition, a number of key findings relating to the broader laboratory sector emerged,
including issues pertaining to testing performed in hospitals, public health laboratories and
physician offices that may impact the overall funding and modernization of laboratory services in
Ontario.

BROADER LABORATORY SECTOR

1. Physician In-Office Testing

2. Hospitals and Public Health Laboratories

LABORATORY SERVICES EXPERT PANEL REVIEW 13

3.1 Community Laboratory Sector

Funding, Procurement and Performance Management

Evidence is mixed on the best approach to funding community laboratory services. Sources
indicate that fee-for-service models without overall caps lead to utilization issues,10 but that
competition on price may lead to collusion in a marketplace with high prices and few
competitors.11
Evidence on the impact of competitive contracts specifically is also mixed. The competition for
state-funded laboratory services contracts in New Zealand resulted in increased test volumes,
no price reductions and increased market instability.11 The OECD, however, notes the benefits
of competitive tendering for laboratory services. Stockholm, a jurisdiction marginally smaller
than Ontario, demonstrated a potential savings of 30 per cent or more from competitive
tendering, with no change in quality or quantity.12
Competitive bidding as a method to reduce costs and to procure services has been explored
extensively as an alternative to the current Medicare system by the United States.13 While there
are existing concerns around declining quality, access, and the subsequent elimination of
smaller laboratories, a number of experts suggest that a system change would be beneficial.14,15
However, it is imperative to first analyze the market and its structure before changing to a
competitive bidding system.16
Across Canada, there is a mix of funding models for laboratory services. While hospital
laboratory services are largely funded through global budgets across all jurisdictions, no unified
funding mechanism exists for outpatient laboratories. Public health laboratories are funded
through the operational budgets of their parent agencies. Funding models for community
laboratory services across Canada include fee-for-service models with caps depending on
market share, private out-of-pocket payments with reimbursement by insurance plans,
reimbursements on a per-test basis, as well as global budgets (see Appendix D for details of
each Province).17 We are currently seeing the probable emergence of a new agency for
laboratory services in British Columbia.
In Ontario, there are significant barriers to new market entry and expansion for current
suppliers. The market has experienced considerable consolidation over the past ten years, with
the pool of suppliers shrinking from 11 private laboratories in 2007 to only eight today. Two of
these vendors currently hold roughly 95 per cent of the market share.4
This mature market of eight well-established community laboratory service providers receives
payment largely through the Ontario Health Insurance Program (OHIP) on a fee-for-service
basis, with each supplier working within a designated market share or “corporate cap”. Total
expenditure on community laboratory services is also pre-determined for all services as the
“industry cap”, excluding agreements for specific tests (e.g PSA, FOBT testing, Lab Pilots for
specimen collection centre accreditation). Both are established in regulation in the Ontario
Health Insurance Act.
The process of payment for services works relatively efficiently, but the essential verification
functions of audit and inspection are underutilized. In addition, there is a practice of billing
beyond the corporate cap (“over cap”) by approximately 20 per cent, which may partially explain
LABORATORY SERVICES EXPERT PANEL REVIEW 14
anomalies around utilization management and an imprecise year-end utilization picture.
Currently, the Ministry imposes a Utilization Discount Modifier (UDM) to adjust each laboratory’s
eligible billings on an annual basis, reflective of physician ordering practice. Surprisingly, the
UDM places the onus on laboratories to reduce unnecessary ordering by physicians. The
laboratories are reluctant, or struggle to do so, given a lack of tools to support utilization
management. In practice, the application of the UDM has little impact on either inappropriate
utilization or the level of payments made as the majority of laboratories bill beyond their cap. In
all cases where labs do not bill to their cap, the portion of the unbilled cap is lost permanently in
the next fiscal year. The Panel believes that the UDM is an inappropriate tool to manage
utilization.
All tests performed by community laboratories are listed on the Province’s Laboratory Services
Schedule of Benefits (Schedule of Benefits). The Schedule of Benefits currently acts as the
reference point for all laboratory test
pricing for the purposes of the Ontario “Today the Ontario government pays private
Health Insurance Plan (OHIP) fee-for- corporations with public funds with no idea of
service billing process. The Schedule of actual cost or value...”
Benefits lists tests insured in the ~ Key Informant Interview
community setting as L-codes which are
licensed and provincially reimbursed, indicating their coverage under the Ontario Health
Insurance Act. The Ministry also licenses U-codes which are not provincially reimbursed in the
community setting. Suppliers submit billings on an ongoing basis and are paid monthly, with
quarterly and an annual reconciliation process up to the cap after the UDM is applied. These
billings are rarely audited or verified beyond the OHIP process today.
In this system, the Schedule of Benefits provides an important reference for tests in the
Province, regardless of coverage under OHIP, and serves as an important tool by establishing a
reference price and coverage for laboratory services. Unfortunately, the Schedule of Benefits is
not updated regularly. There is currently no formal process or infrastructure in place to regularly
review and update prices, de-schedule inappropriate tests, or evaluate new tests and determine
whether they are to be reimbursed. An exemplar process exists with the licensing, evaluation
and reimbursement of pharmaceuticals in Ontario. Earlier work from the consulting firm of
Deloitte suggests that the pricing of laboratory services outlined in Ontario’s current Schedule of
Benefits appears to be generous and provides a significant profit margin to community
laboratory service providers.
While there are some concerns with the current funding model, the payment mechanism and
cap system for community laboratories has enabled the Ministry to contain its overall costs.
Utilization and spending have remained relatively stable over the past five years, as the
following figure demonstrates.

LABORATORY SERVICES EXPERT PANEL REVIEW 15

Figure 3: Community laboratory service volumes and expenditures.

The Panel’s greatest concern lies in the complete absence of formal performance contracts and
service level agreements with individual laboratories to clearly identify roles and responsibilities
and deliver better value.
For example, there are currently no contracts directly with the individual laboratories for cap
funding, which amounts to approximately $650 million annually. Similarly, limited contracts exist
for the $23 million in out of cap funding that is distributed to the laboratories annually. In both
cases, framework agreements with the Ontario Association of Medical Laboratories (OAML) are
in place; however, not all laboratories are members of the OAML, nor do these agreements
serve to bind any individual laboratory to specific performance standards. It is also of note that
the Ministry funds the OAML to perform this intermediary role on behalf of the laboratories at a
cost of approximately $900,000 annually. In the view of the Panel, this process of direct
payment by the ministry should be discontinued to allow the laboratories to make their own
arrangement with respect to an association.
The existence of multiple, parallel funding envelopes for capped and non-capped services (e.g.
(e.g. FOBT and PSA testing) are not well aligned with a comprehensive management approach

LABORATORY SERVICES EXPERT PANEL REVIEW 16

and should be reconsidered.
All health sector organizations are facing increasing pressure to reduce costs while
implementing improvements in quality and operational performance. Many of them recognize
the importance of performance-based contracts and effective contract management as
consistent with good public policy. Performance-based contracting is a method of acquiring
goods and services that focuses on quality, outputs and results, rather than detailed processes.
The contracts include measurable performance standards and indicators, as well as financial
and non-financial incentives and penalties.18
Based upon consultations with various stakeholders and a review of good procurement
practices, the Panel is of the view that the establishment of long-term, performance-based
contracts with individual labs is vital if the Ministry is to achieve its stated goals of providing
quality lab services at more affordable costs. A key requirement for the success of the new
contracting regime is strengthening of the ability of the Ministry to administer and manage
performance-based contracts.
Other jurisdictions have benefitted from using specialized expertise in drafting and negotiating
new contracts. At a minimum performance contracts should19:
• Specify requirements in terms of results, outcomes and responsiveness in a service
level agreement.
• Contain clearly stated, measureable, verifiable and attainable quality and access
standards, which support goals and objectives including advanced booking times and
after-hours access for working people.
• Establish a reporting framework, which requires contractors to provide accurate,
relevant, timely and verifiable agreed-to performance data and reports.
• Set out the methodology and metrics, by which the performance of the contractor will be
assessed, and stipulate the need for providing periodic feedback.
• Clearly establish monetary and non-monetary incentives for exceeding performance
standards and penalties for under performance.
• Clearly specify the right of the purchaser to request data and documentation, and to
conduct verification audits and inspections.
• Establish a framework for continuous, targeted improvements over the life of the contract
and details of how financial dividends from technological and process improvements are
to be shared between the purchaser and the contractors.
• Establish a utilization appropriateness program.
The recently introduced Access and Performance Fund amounting to up to $50 million annually
required each laboratory to enter into a “We don’t know how much was gained from the
contract for funding, with performance last performance agreement and we are already in
standards. This is a step in the right the second half of this year and no discussion of
direction; however, the performance performance expectations or formula for payment.”
standards are not yet commonly defined ~ Key Informant Interview
and few independently verifiable targets

LABORATORY SERVICES EXPERT PANEL REVIEW 17

exist. In addition, the process to negotiate these agreements has been protracted, resulting in a
delay in the execution of agreements until close to the end of the year in which the agreements
apply. The Panel believes that the Access and Performance Fund is an inadequate tool to
generate sufficient performance improvement. The Panel also believes an overall redesign to
the process of contracting and managing laboratory services is required to maximize value.

Governance, Planning and Management

The absence of a rigorous regime for laboratory services contracting in Ontario is exacerbated
by weak governance and inadequate capacity for oversight within the Ministry. There is
currently no focal point in government providing direction for laboratory services in an integrated
and authoritative manner. In particular, the “There is a high degree of fragmentation in the
community laboratory sector lacks a clear and laboratory system today – people, funding,
transparent governance model with associated organization…the approach we take to the
roles and responsibilities. A number of laboratory sector needs to be integrated at all
levels – how we communicate to the sector,
fragmented funding, planning and how we manage it , how we fund it and how we
management functions are taking place in organize delivery…”
several units and at varying levels across the ~ Key Informant Interview
Ministry, including the Negotiations and
Accountability Management Division, eHealth Liaison, Claims Services, Public Health, LHIN
Liaison, the Health System Information Management and Health Services I&IT Cluster,
Strategic Policy and Planning Divisions, and Corporate Services.
In addition, the data required to manage the laboratory services system is not consistently
available to those who need it. For example, the Ministry does not have access to utilization
data from the Ontario Laboratory Information System (OLIS), nor is there a common data set
used to regularly view and monitor system activity and performance. While reports of system
quality and patient satisfaction appear good, they are limited. The Ministry is currently without
sufficient visibility into technical performance or sufficiently granular patient and provider
satisfaction required to generate meaningful regional improvement.

Licensing, Accreditation and Inspection

The Laboratory and Specimen Collection Centre Licensing Act governs the system of licensing
laboratory service providers. Both private and public suppliers receive licenses in order to
operate specimen collection and testing facilities and operations. Payments from public funds
requires either the allocation of a corporate cap within the envelope of an overall industry cap,
or payment through a separate program fund for specific testing services (e.g. FOBT, PSA
testing). Licensed private laboratories may also deliver privately funded services or clinical trials
services.
A number of challenges exist within the current licensing system. For example, the last time a

LABORATORY SERVICES EXPERT PANEL REVIEW 18

new license was issued to a new entrant with public reimbursement was at least 17 years ago
because there was no room in the corporate caps for a new entrant. As a consequence it has
not been possible for a new entrant to offer its services or for an existing supplier to increase its
share of the market, except by acquiring an existing supplier with corporate cap share.
At the same time, the current regulation of licensing does not allow for inactive licenses to be
revoked. Instead, licenses are indefinitely suspended. Close to 25 per cent of all licenses, or 88
licenses, are in a suspended status today.20
While the market value of licenses and the costs incurred by the Ministry for oversight have
increased considerably, the fees paid for licensing and renewal have not changed in more than
ten years. The annual lab licensing and renewal fee is currently $1,262, whereas the fee for
specimen collection centres is $572. Given the role the Ministry plays in the licensing
administration and inspection of these facilities, these fees obviously do not reflect the current
market or real costs of licensing.

The rigidity of the current licensing regime may also create barriers to point-of-care testing and
new testing technologies. This has had a negative impact on the development and use of
innovative solutions to provide better access and quality care.
The accreditation of laboratories takes place through the Institute for Quality Management in
Healthcare (IQMH), which is under the corporate control of the Ontario Medical Association
(OMA). The Ministry remains responsible for inspecting specimen collection centres. There is
currently a movement towards the IQMH accrediting specimen collection centres wherein a pilot
was completed in 2015 which is slated to “IQMH does good work, but they need to
expand in the coming years. support utilization management and
appropriateness….it feels a little like the ‘fox is
Currently, there is no public visibility into the in the henhouse’ on this one…”
results of laboratory accreditations or ~ Key Informant Interview
inspections. The Panel is concerned that this
OMA structure is lacking the degree of independence and transparency typically required from
accrediting institutions, and may create challenges with respect to appropriate utilization
management by physicians.

Additionally, the Ministry covers all accreditation costs and most of the proficiency test costs on
behalf of the community laboratories (approximately $4.6 million annually), which is not
consistent with other accreditation programs, such as Accreditation Canada.

Appropriate Utilization
The literature suggests that the number of inappropriate laboratory tests has increased over the
last decades. This challenge is not unique to the Ontario health system and is also prevalent in
other jurisdictions.21,22 Sources suggest that between 20 and 50 per cent of laboratory tests
ordered may be inappropriate.23,24 According to a recent US based meta-analysis using the 50
most frequently order tests at Beth Israel Deaconess Medical Center, mean rates of
LABORATORY SERVICES EXPERT PANEL REVIEW 19
overutilization are 20.6 per cent while underutilization stands at 44.8 per cent.25 According to the
broader literature, overutilization poses
significant financial and psychological “The fact that we do not monitor the requests
burdens on the health system and on from physicians is a lost opportunity….we need
meaningful evidence based demand side as well
patients, resulting in increased costs, longer as supply side management”
hospital stays, false positive diagnoses, and ~ Key Informant Interview
patient anxiety. 25,26,27 The potential for cost
saving lies not only with the reduction of inappropriate laboratory tests, but also with the
subsequent elimination of medical activities following the testing.28
While there seems to be an existing consensus around the goal to improve the appropriate
utilization of laboratory tests, as demonstrated by the increasing number of intervention
research activities in Canada and internationally, there is mixed evidence as to how to get
there.24,29
The most commonly used interventions to reduce inappropriate testing include the education of
physicians, feedback on individual test ordering patterns, modification of laboratory requisitions
forms, electronic-based prompts and system interventions, and incentives or penalties.30,31,32
Despite the variable success of these interventions, there have been some exciting results in
this area.30,33 Physicians who ordered referred-out tests in Calgary exceeding a threshold of $20
were requested to justify their order. This initiative led to a remarkable reduction of around 50
per cent of ordered tests.33 Other interventions including electronic prompts showing real time
pricing of laboratory tests on electronic health records, elimination of reflex testing, the review of
test requests by experts, feedback and peer performance comparisons, and laboratory profile
changes demonstrated improvements in the reduction of physicians’ orders 28,34,35,30,36. The
evidence suggests that multiple interventions and those focusing on fewer tests are the most
successful.30,32 A method to reduce inappropriate testing by assigning interventions to particular
tests is the laboratory test utilization management tool box.37 This is further described in
Appendix F.
In Ontario, we have witnessed the launch of Choosing Wisely Canada, a campaign to help
physicians and patients engage in conversations about unnecessary tests, treatments and
procedures. There are examples of the impact of utilization management on the use of tests in a
number Ontario hospitals upon which to build.
North York General Hospital (NYGH) is one of the early adopters of the Choosing Wisely
Canada campaign, launching in June 2014. Their campaign focuses on areas where evidence
overwhelmingly shows that a test, treatment or procedure provides little to no benefit to a
patient. Building on the success of its computerized physician order entry, order sets, pharmacy
and bed utilization initiatives, the NYGH program focused on improving lab and medical Imaging
utilization. Evidence to date shows gains in Emergency Department, Pre-Op Clinic and
inpatient laboratory testing. Unnecessary emergency Department laboratory testing has
decreased 40 per cent per month since September 2014. Pre-Op Clinic laboratory testing has
decreased 40 per cent per month since February 2015. Inpatient laboratory testing has
decreased five per cent per month since January 2015.38 Similar success has been achieved in
LABORATORY SERVICES EXPERT PANEL REVIEW 20
Hamilton where the Hamilton, Niagara, Haldimand Brant Local Health Integration Network
(LHIN) Laboratory Medicine Network (now known as CoLabs) has established a collaboration
across 17 licensed hospital laboratories to streamline and standardize processes and
continually improve the quality of service for their patients. In addition to saving over $1 million
annually through test consolidation and other collaborative efficiencies, CoLabs has also been a
leader in the implementation of Choosing Wisely and has been able to discontinue some testing
and improve utilization across the board.39
Despite these successes, much opportunity remains to enhance cost savings and improve
patient care through the demand side of the laboratory services equation, particularly in the
community sector. The Panel believes that as the health system increasingly relies on electronic
health records, a special focus should be put on electronic order entry prompts to manage
utilization.
Currently, there is variation in laboratory services utilization across Ontario, some of which may
relate to access and geography. As the table below indicates, laboratory services utilization
rates range from a low of 37.5 per cent in the North West LHIN to a high of 52.3 per cent in the
Central LHIN. Further work is needed to define appropriate ranges of laboratory services
utilization, adjusted for age and other relevant population factors.
Further work is also needed to find balance between underutilization of services, overuse of
services, and supply-induced demand. There is no evidence to suggest that increasing billing or
points of service reveal consumer preference. Opening new capacity or adding more doctors in
areas with low utilization may help foster appropriate utilization. Opening new capacity in areas
with high utilization requires caution, however, as it may be an invitation for supply-induced
demand.
Table 2: Community laboratory services rates in Ontario for fiscal year 2013-14, including
number of visits, number of claims, and billing value per patients by LHIN.

Population /o of Population
0 #of visits #of Tests B illing Value
Patient LHIN
Total with a lab test per patient per patient per patient

1 E.tie St. Clair 637.068 4 7.8°/o 2.9 17.8 $122.89

2 South West 966.406 42 .S0/o 2.7 14.9 $104.75
3 Watetloo We-llulglon 770.454 43.7°/o 2.7 16.5 $116.42
4 Hamilton Niagara Haldimand Brant 1.428,327 48.0°/o 2.8 17.7 $125.14
5 Central West 906.144 49.9°/o 2.5 17.6 $125.56
6 M ~sissauga Hatton 1.210,236 49.2°/o 2.5 17.6 $124.58
7 Toronto Central 1.245,715 45.S0/o 2.5 17.1 $126.52
8 Central 1.845,387 52.3°/o 2.6 18.2 $128.84
9 Central Eas1 1.589,294 51.2°/o 2.7 18.2 $128.55
10 South East 494.713 4 7.8°/o 2.8 15.5 $109.29
11 Champlain 1.306,232 4S.5°/o 2.6 15.5 S111.18
12 North Simcoe Muskoka 471.097 44.1°/o 2.8 16.8 $116.67
13 North East 565.575 37.7°/o 2.8 17.3 $117.26
14 North Wast 236 070 37.5°/o 2.6 15.5 S109.19
Ontari 13 672 718 48.So/o 2.7 17.2 • 121.75

Data Source: Claims History Database (CHOB). MOHlTC • extracted July 2015: Registered Person Database (RPOB), MOHLTC · extracted July 2015: 201 t
Census·based Ministry of Finance Population Estimates (201 I ·2013) and Projections (20141·204 t) f« Loe.al Health Integration Networks • updated Jat'Klaf)' 20tS:
Postal Codes to LHINs COO\tersion Fie, MOHlTC · updated 2013

LABORATORY SERVICES EXPERT PANEL REVIEW 21

Innovation in Testing Technology
Laboratory and testing technologies have evolved over the past decade, and continue to evolve
through new innovations. However, Ontario’s current system is lacking a formal and orderly
process to evaluate new testing technology for
its appropriateness and suitability for “How do we have confidence that the system
reimbursement. is bringing the best tests for the best value to
Ontarians today? We have no formal or
Point-of-care testing is increasingly becoming visible process….”
important for the delivery of certain tests. There ~ Key Informant Interview
is a rapidly emerging collection of new point-of-
care testing technologies, which are in different states of maturity.40 This is especially true for
rural and remote locations, where point-of-care testing has the potential to significantly increase
patient satisfaction and decrease community laboratory costs. However, point-of-care testing
has created challenges for Ontario’s current system, which separately licenses collection and
testing. Current regulations do not specifically address point-of-care testing, existing regulations
may restrict the adoption of new technologies and staffing models required to collect and
perform point-of-care testing. For example, health care providers seeking to offer low-invasive,
at-home testing are currently required to have a laboratory licence to perform the service.

Innovation in Genetic Testing

The fastest growing segment in laboratory medicine diagnostics is in the area of molecular
diagnostics, increasingly utilized in infectious diseases, oncology, pharmacogenetics, human
leukocyte antigen testing (HLA typing), and genetic disease screening. In Ontario, most genetic
testing is performed in hospitals, amounting to approximately $55.1 million in costs in the 2013-
14 fiscal year. Additional genetic testing is performed outside of Canada, amounting to $24
million in costs in the 2013-14 fiscal year.
The Genetics Testing Advisory Committee (GTAC) was established in 2014 conduct evidence-
based evaluations of new genetic tests for medical validity and clinical utility. An expression of
interest process is also taking place including all Ontario laboratory providers to patriate out-of-
country tests as a way of further increasing provincial capacity. To date, the ministry has
successfully repatriated a modest $11 million in genetic testing. However, there does not appear
to be a strategic plan to address the overall governance and funding and coordination of the
service system, and the optimal number and location of genetic testing sites in the province, or
the ability to capture, store and analyze the complex data generated by genetic testing
technologies (e.g. gene sequencing technologies) in an integrated manner.
Publicly reimbursed genetic testing is currently managed by each hospital in a separate and
somewhat unrelated manner to the rest of the laboratory sector, as genetic testing has grown
beyond the boundaries of traditional clinical genetics and into a spectrum of molecular and
genetic instruments. It is imperative that this portfolio be integrated into the overall view of
laboratory services within the Ministry going forward. This will ensure an integrated process to
formally evaluate and approve new testing or de-insure obsolete testing as necessary for
LABORATORY SERVICES EXPERT PANEL REVIEW 22
Ontario to move towards a modern laboratory service model. It is imperative that the Ministry
expedite this integration, as well as the pace of review and associated recommendations for
genetic testing.

Patient Satisfaction and Engagement

The emergence of electronic health technologies has had an impact on patient satisfaction and
engagement in health care. Increasingly, patients expect to be treated as members of the health
care team, with access to information that supports active health monitoring, self-care, and an
ability to participate in care planning and treatment decisions. These expectations are
reinforced by the value patient place on having access to health information. For example, a
recent study in British Columbia showed that providing patients with access to laboratory results
online (e.g. knowing the results of the most recent lab test and receiving results within a few
days) resulted in no increase to patient anxiety as compared to a control group.41
In Ontario, the use of online platforms to engage patients and improve the patient experience is
growing, but limited in the laboratory sector. To the best of our understanding, Ontario’s largest
community laboratory provider is the only supplier to offer patients online appointment booking
capabilities and, very recently, access to test results online.
There is currently no distinct, comprehensive program in place to measure patient satisfaction
with laboratory services. Efforts to date have allowed for the assessment of patient satisfaction
provincially, using non-stratified sampling as part of omnibus surveys. The Panel feels strongly
that information must be collected at a more granular level to understand patient access and
satisfaction with laboratory services at a regional level. Ontario needs a purpose-built patient
satisfaction survey that is statistically reliable and meaningful at a regional level.

3.2 Broader Laboratory Sector

Consistent with its mandate letter, the Expert Panel has also made a number of observations
about the current state of the broader laboratory sector, including hospital, public health and
physician in-office testing.

Physician in-office testing

Physician in-office testing is the fastest growing area of testing today in Ontario, growing from
$48.5 million annually in 2005/2006 to close to $100 million annually today. As Figure 4
demonstrates, over the past ten years the cost to the Ministry for reimbursement of physician in-
20
office testing has almost doubled.

LABORATORY SERVICES EXPERT PANEL REVIEW 23

Figure 4: Physician Office Laboratory Billings in Ontario Fiscal Year 2005/6 to FY 2014/15

The majority of testing is for fertility and methadone (Point of Care drug testing), with a
concentration of services in larger urban centres of the Province. There is also anecdotal
evidence that a number of these tests may be sent to community laboratories for confirmatory
testing, resulting in double billing which may not be required.
Quality oversight for physician in-office testing was flagged as an issue in the 2005 Auditor
General’s report.42 The other significant issue with physician in-office testing is its exemption
from the Licensing Act, which means that no accreditation or inspection of this testing is
required. In addition, physician in-office test result data is not captured in OLIS today. As the
figure above indicates, the escalation in volumes of physician in-office testing speaks to the
need for an appropriateness or utilization review of this activity, a process which does not exist
today.

LABORATORY SERVICES EXPERT PANEL REVIEW 24

Hospitals and public health laboratories
With respect to broader laboratory services sector in Ontario, an opportunity exists to look at the
rationalization of the test menu between hospitals, public health and community laboratories. A
full cost accounting exercise would be required to benchmark prices for a sample of common
tests across these environments. LHINs are well positioned to play a role in this process, and
any resulting consolidation of services.
In the hospital sector, there are already promising efforts underway to regionalize multiple
laboratory services to maximize productivity and efficiency, and to reduce idle time and
redundancy. Notable efforts include the Eastern Ontario Regional Laboratory Association
(EORLA) and initiatives underway in Hamilton and in process in the Kingston region. Some
hospitals are also shifting outpatient testing to community laboratories to realize cost savings
and a better patient experience. It is important to note that this practice may not always be
advantageous in small, rural and Northern communities.
.

LABORATORY SERVICES EXPERT PANEL REVIEW 25

4.0 Future State Criteria
The Panel developed a series of future state criteria to inform and refine its recommendations.

Figure 5: Future state criteria for community laboratory services in Ontario.

PERFORMANCE BASED ROBUST SUPPLY CHAIN

Clear roles, Diverse and stable
responsibil ~ies and suppliers
processes Minimize market dominance
Clear and simple Flexible & responsive
mechanisms for suppliers
accountability to payer
that include pen atties and Opportunities for new
incentives entrants
Public reporting on set ol
performance and quality
measures
Key performance metrics,
largets with timely,
verifiable results

PATIENT CENTRED
Accessible & convenient
VALUE ADDED Safe, elfectiv·e &
Financially sustainable appropriate
Timely services to physicians Stable and reliable service
Maximizes public value Consistent patient cost and
Delivery of medically necessary services in a coverage regardless ol
consistent and appropriate manner where service is accessed/
Provides opportun~ies lor innovation delivered

LABORATORY SERVICES EXPERT PANEL REVIEW 26

5.0 Recommendations
The Expert Panel was asked to develop recommendations on a funding model for community
laboratory services in Ontario that will act as a blueprint for funding reform. The Panel identified
specific recommendations for the funding model for community laboratory services and a series
of related recommendations that have a direct impact on the modernization of the broader
laboratory sector in Ontario.
The Panel felt strongly that the current status quo is not sustainable, does not meet the goals for
a future solution and should not be considered as an option going forward. The following
outlines the Panel’s 15 recommendations. Recommendations fall within one of the following
four categories.

CATEGORY DESCRIPTION

1. Community Funding Model Recommendations directly related to the way

community laboratory services are funded
and procured.

2. Community Funding Model Supports Recommendations related to enabling the

funding model to achieve its desired goals.

3. Broader Community Sector Supports Recommendations on the approach to

managing the community laboratory sector
that reinforce funding model
recommendations.

4. Broader Laboratory Sector Beyond Recommendations tied to the hospital, public

Community health, and physician components of the
laboratory sector that should be considered
as part of the overall modernization of
laboratory services.

LABORATORY SERVICES EXPERT PANEL REVIEW 27

Figure 6: Recommendations from the Expert Panel address four spheres of laboratory
sector funding and modernization.

5.1 Funding Model

Recommendation 1: Negotiate long-term performance-based contracts

(approximately 7 to 10 years, with reopeners) directly with individual labs, with
price discounts from present levels with a deadline (six months) to come to
agreement, failing which an RFP will be initiated.
The single largest recommendation of the Panel is to move to formal performance contracts
directly with each community laboratory service
“Performance Based Contracting is a
supplier. These contracts should be longer term to
results-oriented contracting method that
encourage price discounts and should include a set focuses on the outputs, quality, or
of consistent performance and service standards. outcomes that may tie at least a portion
Performance and service standards should be of a contractor’s payment, contract
extensions, or contract renewals to the
established by the Ministry in consultation with the achievement of specific, measurable
sector and should include standards and targets performance standards and
associated with access, quality, and ordering requirements. These contracts may
physician experience. In particular, contracts should include both monetary and non-
monetary incentives and disincentives.”
include a commitment to enhancing the patient ~ Public Procurement Practice – Performance
experience through access to online appointment Based Contracting. UK (CIPS) and US (NIGP);
2012
booking, test results delivery and after-hour
services. Samples of such indicators are outlined in Appendix G.

LABORATORY SERVICES EXPERT PANEL REVIEW 28

Contracts should be tightly managed to these standards, with failure to comply associated with
a set of pre-determined penalties. Some targets may also be established to incent additional
performance and be subject to financial rewards.
All contracts should be accompanied by a properly planned series of audits and inspections in
accordance with professional standards, and carried out on a rotational basis. This would help
provide assurance to management and taxpayers that value for money is being achieved and
that public funds are being spent with due regard to prudence and probity.
The introduction of negotiated contracts is a key vehicle to secure services and improve
performance with service level standards. Key parties to these agreements have expressed
their willingness to proceed to negotiations. As such, the Panel recommends the negotiation of
long-term contracts (i.e. approximately seven to ten years with each existing supplier, with a five
year re-opener) with all existing suppliers to achieve reduction targets with the condition that
failure to achieve agreements within 6 months would initiate a RFP as a means to procure
services or imposed price regulation. As part of the negotiation, the Ministry should clearly
stipulate upfront the minimum price discount it must obtain or conversely, the maximum price it
would be willing to pay. Such a negotiation would require professional support to ensure the
best outcome.
This option promotes stability and continuity, and would likely strengthen government-supplier
good faith relations. The end state contracts and associated pricing would represent a jointly
owned solution. The timeline imposed to reach an agreement would act as a preventative
measure to avoid protracted negotiations and stalling by all sides. All players would need to
participate in this process, and failure to achieve an agreement with the larger suppliers would
be a precondition to move toward an RFP or imposed regulation. Previous estimates on cost
savings associated with the RFP option range upwards to $60 million.3
As part of the contract negotiation scenario, current market share would be retained as per
corporate caps, and additional market could be grown through a New Testing Technology Fund.
It is the view of the Panel that a scenario in which contracts are negotiated and market caps are
removed may have the effect of supply-induced demand, where vendors compete to drive
demand. In addition, removing the caps entirely may also create a degree of instability in the
market that is undesirable.
While this option presents important elements of stability, it does not employ the market
discipline of a RFP, which would assess best price in the market. Negotiations will rely on the
best available information on the actual cost to laboratories in order to establish fair price. If
negotiations stall, this represents an opportunity cost to a final solution. This approach of
negotiation also does not provide an opportunity for new entrants to the market beyond those
currently providing service.
The RFP process is an important alterative option in the event that contract negotiations fail
following the closing of a negotiation deadline. An RFP would introduce new entrants into the
market. It allows for competition and the achievement of the best price and value for money for
a population of patients. In this scenario, existing corporate caps would be reset based on the

LABORATORY SERVICES EXPERT PANEL REVIEW 29

results of the procurement process. If this option were to be required, it is proposed that the
province be organized into approximately five regions with some comparability in population
scale, grouping existing LHINs together (see Appendix H for proposed options). The approach
to procurement would involve an RFP in two separate competitions with predetermined price
ceilings to ensure stability, continuity of service and affordability. The RFP would be open to all
qualified suppliers, including new entrants. Previous estimates on the savings from this option
are up to $110 million, depending on the approach to tendering.43
Because of the consolidation rationalization and growth of two players in the community
laboratory sector, it is our view that further consolidation should be checked in some way to
avoid anti-competitive behaviour. As such, it is proposed that no single organization could win
more than three of the five regions. The two largest suppliers currently in the market would not
be allowed to exceed their current combined market share. Current suppliers with less than
three per cent of current market share could participate in the competition individually or in
partnership, in which case winning may increase their market share, but risk their current base.
Alternatively, small laboratory providers could simply secure their existing cap as an alternate to
competition, but they would be required to meet the same service and performance standards
as larger laboratories. While this option presents important elements of market competition, it
likely will take longer to re-stabilize the market and may result in transition costs. Professional
procurement expertise would be required to manage a large RFP process such as this.

Recommendation 2: Discontinue Utilization Discount Modifier and Access and

Performance Fund
Discontinuation of the Utilization Discount Modifier has been recommended in previous reports
and is included here. This approach to addressing utilization and appropriateness issues is
woefully inadequate and does not align with the criteria of the future state funding model. While
the Access and Performance Fund has laudable objectives, it is also not currently the right
approach to achieving accountability and value in the sector. The goals of establishing access
and performance targets should be incorporated into performance-based contracts as a whole,
tying performance directly to all payment.

Recommendation 3: Move to single core funding envelope with test schedule,

combining existing segregated funding envelopes as market saturation occurs
The current system of multiple funding envelopes of capped and uncapped funding does not
align with an integrated approach to laboratory system management and stewardship.
Historically, genetic testing services have been managed as a separately, distinct from capped
and uncapped laboratory services. All funding should be rolled into a new, common industry
envelope, including funding for new testing technologies once appropriate market penetration
occurs. In addition, all community laboratory activity should be integrated into a common view of
service and expenditure. The Schedule of Benefits should act only as a reference test list for all
services.

LABORATORY SERVICES EXPERT PANEL REVIEW 30

Recommendation 4: Establish New Technology Testing Fund via RFPs open to
new market entrants
While all current services should be rolled into a single common industry funding, newly
evaluated and approved technologies are being frequently introduced to the market and require
case-by-case funding. Ideally, new technologies would adapt the process used to repatriate
genetic testing and go to public tender. The procurement would be open to community
laboratories, hospital laboratories and new market entrants or partnerships. This is an ideal way
to encourage competition and a robust and diverse supply chain within the Province, as new
tests alter the laboratory service landscape in the coming decades. As new testing technology
matures, funding for these services could be transitioned into the core funding envelope. This
proposed process is further detailed in section 5.2

Recommendation 5: Create a Small Labs Opportunity Fund to establish a level

playing field for performance measurement and reporting
Currently, some smaller laboratory service providers may not have the technology infrastructure
to comply with what we would expect from demanding new standards for advanced access
booking, access, quality performance and utilization management in long-term contracts as well
as patient notification of results. All laboratories would be expected to provide access for
appointment booking and results retrieval online, as well as additional performance measures.
A Small Labs Opportunity Fund could support smaller labs in meeting go-forward standards.
The fund would help support equity, as some smaller laboratories were unable to take
advantage of earlier government incentives and supports to join OLIS.

5.2 Funding Model Supports

Recommendation 6: Establish provincial process to formally evaluate new

laboratory tests, recommend or not recommend such tests, and retire obsolete
testing within a regularly updated Schedule of Benefits
There are a few processes to evaluate laboratory products coming into the Canadian
marketplace at the provincial level. New products developed by private organizations or
research-based hospital platforms are largely adopted and adapted without formal evaluation.
A provincial process to evaluate and procure newly approved test technologies for the Ontario
market should encompass all types of laboratory testing, including the repatriation of out-of-
country genetic testing currently conducted by the Ministry. The Ministry could look to either the
Ontario Health Technology Assessment Committee (OHTAC) or the Canadian Agency for
Drugs and Technologies in Health (CADTH) for support with this process, and develop the
process on a cost-recovery basis to ensure that new and cost-effective laboratory testing
innovations are gated and brought to the public market in Ontario in a timely manner.

LABORATORY SERVICES EXPERT PANEL REVIEW 31

Alongside this new process, the Schedule of Benefits has the potential to be an ongoing
reference point for a modernized lab system with regular updates. An evaluation of new testing
technology would include an examination of the cost-effectiveness of the test and its eligibility
for listing on the Schedule of Benefits. With regular reviews and updates, the Schedule of
Benefits would provide an important and current list of approved funded tests in Ontario, as well
as the coverage status for these tests (licensed or unlicensed).

It is recommended that the Schedule of Benefits be updated regularly and be evaluated by a

multidisciplinary group of experts, with expertise in cost effectiveness evaluation and budget
impact assessment.7 A parallel process for the evaluation of pharmaceutical products already
exists in Ontario, and is a good exemplar of this situation. A process not unlike that led by the
Executive Officer for Ontario’s Public Drugs Program could be envisaged to ensure a
responsible official as a final arbiter in stewarding the cycle of evaluation, and listing and
delisting eligible tests. This same expert group could assess and update the current Schedule
of Benefits.

Figure 7: Process for evaluating and procuring new test technologies in Ontario, from
test technology discovery to maturation.

LABORATORY SERVICES EXPERT PANEL REVIEW 32

Recommendation 7: Require public reporting of laboratory performance and
accreditation results
It is recommended that laboratories be listed as a schedule under the Excellent Care for All Act,
thereby requiring public reporting of performance results on meaningful key measures of
access, quality and value for money, including their IQMH accreditation status. The overall goal
is a system of accountability and transparency as part of Ontario’s Open Government efforts,
which include public visibility.

Recommendation 8: Develop a Province-wide appropriateness / utilization

program with supporting tools (e.g. electronic order entry prompts)
Currently there is no formal process to measure or manage the appropriateness of physician
ordering practice. As per Table 2, there are clearly non-trivial variations in utilization rates.
Laboratories have the potential to play more active role in this area, and achieve overall benefits
for the system. In fact, the current scope of the Lab Director role permits some degree of
latitude in questioning the appropriateness of the physician order, but this appears to be rarely
invoked. It is recommended that utilization and appropriateness management be built into
contracts and become part of the negotiation with laboratories as a gain-sharing opportunity.

A comprehensive program to ensure the appropriateness of each test ordered is recommended.

This program should be informed by best evidence and developed with leadership from the
community laboratories in conjunction with professional organizations. Ideally, a mechanism to
build standard diagnosis codes into laboratory requisitions could be developed to support
appropriateness assessment over the long term. A series of electronic prompts should be
implemented to confirm the physician’s intention to order, with embedded guidelines where
available. In the shorter term, audit and feedback mechanisms for physicians could be
implemented in conjunction with community laboratory source systems to begin to create
visibility into physician practice and identify outliers.

This solution would require fielding to an appropriately qualified expert organization, such as
Health Quality Ontario, or an expert panel with broad clinical input. These experts would be
responsible for convening laboratory leaders and outcome-focused researchers to build
guidance on the appropriateness of common tests as well as the most expensive tests ordered.

Recommendation 9: Establish a focal point for Laboratory Program leadership

within government and strengthen capacity in contract negotiation and contract
and relationship management, supported by robust analytics and an appropriate
audit / inspection regime
Key to the success of long-term contracting is the expertise to both negotiate and manage
contracts. These are two distinct skill sets. The Government of Ontario has the requisite
expertise in Infrastructure Ontario to support contract negotiations. It also has other experience

LABORATORY SERVICES EXPERT PANEL REVIEW 33

to draw upon to establish an effective contract management capacity. Relationship
management through a focal point in the Ministry is also important to the success of contract
management activity, as is the availability of timely information. In order to effectively manage
contracts, it is essential that the Ministry establish a focal point to provide oversight and
functional leadership, access and consolidate data holdings to support a new contract and
performance management process. As part of their contracts, the laboratories themselves
should also be responsible for providing accurate, relevant, timely and verifiable data to support
contract management. As of the time of finalizing this report, the Ministry is taking action to
consolidate laboratory leadership within the Ministry.

Recommendation 10: Modernize and streamline licensing requirements and

processes
Current pricing for licensing and license renewal does not align with the effort required to
conduct inspection and support licence administration. Fees should be increased to make the
activity cost-neutral, and a process for regularly updating fees should be established. Licensing
regulations should be modernized to streamline the number of licenses in circulation, but not
currently active.

5.3 Broader Community Laboratory Sector

Recommendation 11: Establish independence of Institute for Quality

Management in Healthcare and develop a cost recovery model for accreditation
The IQMH is a wholly owned subsidiary of the Ontario Medical Association and conducts the
accreditation of laboratories and, increasingly, specimen collection centres. IQMH is working
with the Ministry and community laboratories to integrate assessments of licensed specimen
collection centres (SCCs) with the regularly scheduled on-site assessments in licensed medical
laboratories. In order to remove any perception of conflict of interest, it is recommended that
the IQMH be established as a stand-alone entity or be placed in corporate alignment with the
College of Physicians and Surgeons of Ontario, as is common practice across the country.
It is also recommended that accreditation costs become the responsibility of the laboratories.
Currently, the Ministry pays IQMH approximately $4.6 million annually to conduct external
quality assessments of laboratories for each class of test and to implement its accreditation
program. Accreditation should become part of the business operations cost of the laboratories,
as is the practice with Accreditation Canada and other similar organizations.
In keeping with the recommendations of the 2005 Annual Report of the Auditor General of
Ontario, it will be important that the Ministry continue to receive notification of when a laboratory
is producing inaccurate or questionable test results for certain types of tests and when a
laboratory performs poorly on its external quality assessment.42 Such a requirement could be
built into agreements with the laboratories.

LABORATORY SERVICES EXPERT PANEL REVIEW 34

Recommendation 12: Remove impediments to e-ordering / e-signature and
expedite implementation with appropriate safeguards
Significant efficiencies are to be gained through the implementation of electronic ordering and
electronic signature practices. Originally part of the concept of the provincial OLIS solution, e-
ordering has significant potential to streamline processing and reduce errors in laboratory
requisition and handling. The current understanding of the Panel is that regulation may not
clearly permit this function, and privacy and security barriers may need to be addressed. The
Ministry should work to remove these barriers and ensure appropriate protections to support
improved laboratory test processing and patient-related process efficiencies, while preserving
privacy.
This advancement should be expedited for Ontario, along with other recent efforts to provide
better electronic service to patients. The current understanding of the Panel is that regulation
permits this function, but privacy and security barriers may need to be addressed.

Recommendation 13: Review policy on point-of-care testing and home and

community collection to ensure equity and consistency
Point-of-care testing is becoming a norm for test delivery and may be especially relevant in rural
and remote communities. However, an appropriate regulatory framework is needed to ensure
that clarity exists across all stakeholders on the requirements to ensure quality of care.
The Ministry should look to develop this framework, especially as it relates to improving access
in remote communities and at home, and consider the application of appropriate point-of-care
testing more broadly across the province.
The Panel also recommends that the policy around home and community collections be
examined for opportunities to standardize prices and establish eligibility criteria.

Recommendation 14: Introduce independent and regular patient satisfaction

surveys for laboratory services, with sufficient breadth and depth to inform
regional service adjustments
No dedicated patient survey or feedback mechanism exists today to support the Ministry in
managing laboratory services. Efforts to date have allowed for the assessment of patient
satisfaction provincially, using non-stratified sampling as part of omnibus surveys. Ontario
needs a purpose-built patient satisfaction survey that is statistically reliable and meaningful at a
regional level. This means a more specific, broad and deep survey of patients that includes a
population base in each LHIN.

LABORATORY SERVICES EXPERT PANEL REVIEW 35

5.4 Broader Laboratory Sector

Recommendation 15: Conduct detailed assessment and develop

recommendations on the approach to optimizing value across the broader
laboratory system as a next phase of study
In keeping with its mandate, the Panel identified a number of potential opportunities for further
improvements within the broader laboratory sector. It is recommended that these opportunities
be explored as a means to derive improved value in the laboratory sector, and integrated into a
comprehensive view of all laboratory services.

A. Strategically position genetic testing services to meet current and future needs

Given the rapid growth in molecular diagnostics and genetic testing, the Panel recommends that
a detailed program plan be developed as a high priority to address these challenges. This
would include optimization of the number and location of genetic testing sites, a rationalization
of testing, and a growth in capacity for the analysis of complex data.

B. Champion the role and contribution of Ontario’s research-intensive hospitals

in experimental test development as part of a process to formally assess and
approve new health technologies in Ontario

Historically, hospitals have played an important role in developing new testing technologies for
use in Ontario. An example of this is non-invasive prenatal testing (NIPT), which was
extensively studied and evaluated at Mount Sinai Hospital as a new alternative to
amniocentesis.

While hospitals are often not the best candidates to perform very high volume routine testing,
the Panel recommends that the role of hospitals in the innovation and discovery cycle be
explored in greater detail as part of a new process to evaluate and approve new testing
technologies for use in Ontario. This will ease the transition of research-based tests from a
clinical or academic setting into a production-oriented laboratory setting, for consideration on the
Schedule of Benefits.

C. Identify opportunities to balance hospital outpatient testing and community

laboratory testing, where appropriate and more convenient for patients and
providers

As previously identified in analysis and reports, some hospital outpatient testing may be more
conveniently and more economically performed in the community. In fact, this is a practice
already in place today in some hospitals. This practice may not be advantageous in small, rural

LABORATORY SERVICES EXPERT PANEL REVIEW 36

and Northern communities. The full cost benefit of this practice should be assessed, and
guidelines should be introduced to support this practice over time.

D. Conduct a reference full cost accounting study across the broader laboratory
sector (community, hospital and public health) to inform rationalization of test
menu across sector

A rationalization of the test menu would ensure the right test is assigned to the best supplier or
suppliers based on a number of criteria, including patient convenience, cost and quality.
Currently, a considerable degree of overlap in testing occurs across the broader laboratory
sector, where the same test could be performed in different settings. While there are
circumstances in which this is appropriate and redundancy is useful, there are examples where
a more rationalized approach is warranted. Testing should be performed where the best value is
realized in terms of clinical use, patient-centredness and price. A full study of test costs across
the sector would inform a rationalization of the test menu, and would also support ongoing
updates to the Schedule of Benefits.

E. Provide quality oversight and develop comparable payment for physician in-
office testing in relation to community laboratory testing

Physicians conducting in-office testing should be accountable for quality to an oversight body,
such as the College of Physicians and Surgeons of Ontario. The current physician exemption
20
from the Licensing Act should be rescinded.

F. Expedite OLIS for remaining hospitals, community laboratories and physicians

conducting in-office testing, and facilitate interoperability with local information
systems

OLIS has significant potential for a variety of purposes. The ability to access previous tests and
see patient history across multiple institutions and providers is a key benefit to clinicians. At a
system level, OLIS data also has the potential to support improved sector management. The
utility of OLIS is maximized when all test data is available. All remaining hospitals, community
laboratories and physicians conducting in-office testing should be brought onto the OLIS
platform, and efforts should be made to ensure interoperability between OLIS and existing
clinical information systems at the point-of-care to maximize adoption and use.

G. LHIN to take leadership in rationalization and optimization of hospital

laboratory capacity in geographically proximal areas
The major hospitals in Ontario have full service laboratories that provide high volume routine
testing and specialized esoteric testing to their hospital inpatients, emergency departments and
outpatient clinics. These services are funded through the hospital’s global budget.
The level of interaction between major hospital laboratories varies significantly across the

LABORATORY SERVICES EXPERT PANEL REVIEW 37

province. Multiple hospital laboratories in close proximity have an opportunity to achieve
efficiency in equipment, staffing and service delivery overall. Key areas of rationalization include
standardization and integration of processes, policies and procedures, staff, technology,
transportation, and infrastructure supports. While it has been a challenge, there are promising
initiatives underway through the Eastern Ontario Regional Laboratory Association (EORLA) and
in the Hamilton and Kingston regions.
There are significant opportunities to reduce unnecessary duplication and capture economies of
scale. Potential benefits include improved patient safety, quality, cost savings, academic
opportunities, better allocation of public resources and increased reliability due to increased
volumes in a common location. It is essential that the LHINs have full Ministry support in
leading this rationalization and optimization effort.
H. Explore opportunities to allow routine public health testing to be conducted by
community labs
There are likely additional savings to be gained by requiring community labs to perform routine
testing on the specimens currently collected for Public Health Laboratories. Community labs
could be required to perform the simpler level 1 and 2 tests with timely data transfer to the
Public Health Laboratory of results with no additional funding. This would allow the public health
labs and the Ministry to realize savings associated with reduced operating costs in public health
labs while maintaining quality. This opportunity should be explored in a manner that preserves
the important mandate of the public health laboratory during disease outbreak and for routine
surveillance at other times.

LABORATORY SERVICES EXPERT PANEL REVIEW 38

6.0 Conclusion
Ontario has a mature community laboratory services supplier market. However, issues around
funding, market dominance, governance and accountability, utilization and access to new
technology have limited the evolution of the sector and its ability to deliver optimal access and
best value to Ontarians.
The Panel believes that we must be vigilant in the large and plural environment that is Ontario.
We have provided a set of recommendations that we see as key to improving value for
Ontarians. We believe there is opportunity to provide greater value in the community laboratory
sector while at the same time improving quality and performance across the community
marketplace. We need to move from a transaction-based model to a value-based model, with
performance contracts as the key lever for transformation.
We also believe that the Ministry needs to strengthen, focus and consolidate its managerial
capacity generally and, in particular, for negotiating and managing performance-based
contracts. Strengthening Ontario’s capacity to foster and manage a robust and diverse
laboratory sector is essential to achieving high performance and appropriate utilization from its
laboratory service suppliers and physicians.
In the near term, the Panel believes that reform of Ontario’s community laboratory sector is
within our reach within the next three years. More open procurement, a direct performance-
based contracting model, commitments to transparent measurement, and a modernized
regulatory structure will all serve to produce a more efficient and higher value environment for
providers and patients alike.
This report focuses largely on opportunities in the community laboratory sector, but also
explores the broader laboratory sector as key to bringing Ontario the high quality, value-driven,
patient-centered laboratory services it desires.
The Panel has identified opportunities to strengthen the broader laboratory sector in hospital,
public health and other testing environments. Some specific areas for further exploration have
been recommended in this report. It is suggested that a subsequent phase of work be
undertaken to explore these broader lab sector opportunities and make more detailed
recommendations.

LABORATORY SERVICES EXPERT PANEL REVIEW 39

7.0 Next Steps
A key next step in advancing the modernization of the community laboratory funding model is
implementation planning. Below is a view of the proposed sequencing and critical path
dependencies for the implementation of our recommendations over the next three years.
This implementation plan proposes the discontinuation of the Utilization Discount Modifier and
Access and Performance Fund during the 2015-16 fiscal year. The 2015-16 fiscal year would
also serve as an important transition year for capacity building and foundational work, laying the
groundwork for key activities to take place the 2016-17 fiscal year.
This implementation plan is based on what is assessed to be reasonable and practical, given
the complexity of the laboratory sector and the recommended scale of change.

Figure 8: High-level timeline for next steps

LABORATORY SERVICES EXPERT PANEL REVIEW 40

 Detailed Implementation Activities

FY 15/16 FY 16/17 FY 17/18

• Discontinue Access and • Complete Implementation

• Implement Small Labs
Performance Fund and of Small Labs Opportunity
Opportunity Fund
Utilization Discount Modifier Fund
• Develop process to update
• Initiate Modernization of • Complete Modernization Schedule of Benefits as
Schedule of Benefits of Schedule of Benefits part of technology review
cycle
• Plan funding envelope
integration including
FUNDING MODEL

genetics • Integrate funding

• Implement new funding
• Integrate all funding model envelope for contracting/
cap under new contracting
governance infrastructure procurement and establish
regime
within the Ministry to updated industry cap
support funding
implementation

• Develop integrated new

technology review process • Begin implementation of • Complete implementation
with OHTAC new technology review of new technology review
• Include hospital role as part process process
of development

• Begin implementation of • Complete implementation

• Plan new technology
new technology of new technology
procurement process
procurement process procurement process
• Continue Negotiation or
• New contract
RFP option if necessary
• Initiate Negotiation implementation (either
• Complete negotiation or
option)
RFP if necessary

• Strengthen Ministry
FUNDING MODEL

Capacity/ Plan for Contract

SUPPORTS

Negotiation

• Develop plan for public

• Lab reporting on key
reporting and scheduling of • Schedule Labs in ECFAA
performance results
Labs in ECFAA

LABORATORY SERVICES EXPERT PANEL REVIEW 41

 FY 15/16 FY 16/17 FY 17/18

• Initiate appropriateness • Develop utilization • Implement appropriateness

program design management program program

• Update regulation to allow

• Increase license renewal • Develop approach for
for inactive licenses to be
fees ongoing license reforms
revoked

• Implement independent
• Develop plan for IQMH • Implement accreditation
independence of IQMH • Plan accreditation cost cost recovery
recovery

• Develop plan for patient • Design patient satisfaction • Implement patient

satisfaction assessment assessment mechanism satisfaction assessment
BROADER COMMUNITY SECTOR

• Conduct assessment and

• Implement phase 1 plan • Implement phase 2 plan for
develop plan for e-
for e-signature and e-signature and electronic
signature and electronic ordering
electronic ordering
ordering implementation

• Conduct policy review on point-of-care

• Implement policy changes
testing and home and community collection
• Assess necessary
• Re-set in-office testing changes to physician in- • Integrate updates for
physician in office testing
reimbursement rates to office rates based on
with Schedule of Benefits
align with community rates Schedule of Benefits review process
review
• Confirm organization and
mechanism to provide • Design in-office testing • Implement in-office testing
oversight to physician in- oversight oversight
office testing

• Initiate second phase of

BROADER LABORATORY

work to develop • Implement

recommendations for recommendations for
broader sector broader sector – hospital,
SUPPORT

• Report on public health

recommendations
• Identify opportunities to
move hospital outpatient
• Initiate reform to physician • Opportunity
testing to community
in-office testing implementation to begin
laboratories, where
appropriate

LABORATORY SERVICES EXPERT PANEL REVIEW 42

 FY 15/16 FY 16/17 FY 17/18

• Conduct a reference cost

study across the broader
lab sector and implement
• Initiate rationalization of
rationalization of test
test menu
menu across sector –
community, public health,
and hospital
• Develop plan to implement OLIS in all
• Implement OLIS in remaining hospitals and
remaining hospitals and approach for
in-office sites where available
physician in-office testing
• Identify regional • Facilitate optimization and
collaboration activity rationalization of hospital
across hospitals today inpatient laboratory
• Develop plan for provincial capacity in geographically
collaboration support proximal areas

LABORATORY SERVICES EXPERT PANEL REVIEW 43

About the Panel
Dr. Terry Sullivan, Panel Chair
Dr. Sullivan is the Chair of the Board of the Canadian Agency for Drugs and Technologies in
Health (CADTH). He chairs the board Quality Committee of the Hospital for Sick Children and
he is a Board Member of Exactis Innovation, a business led, Networks of Centres of
Excellence (NCE), targeting new therapeutics in cancer. He is the former Chair of the Board of
the Ontario Agency for Health Protection and Promotion (now Public Health Ontario) which now
operates the public health laboratories. From 2001 to 2011 he worked at Cancer Care Ontario,
including seven years as President and CEO.

From 1993 to 2001, Dr. Sullivan was the founding President of the Institute for Work & Health
(IWH). From 1986 to 1992, he held senior roles in the Ontario Ministries of Health, Cabinet
Office and Intergovernmental Affairs. He was Assistant Deputy Minister, Constitutional Affairs
and Federal-Provincial Relations during the Charlottetown negotiations. He served two
successive First Ministers of Ontario as Executive Director of the Premier's Council on Health
Strategy, including a period as Deputy Minister (1991).

A behavioural scientist, Dr. Sullivan is Professor at the Institute of Health Policy, Management &
Evaluation, Dalla Lana School of Public Health at the University of Toronto and Adjunct
Professor of Oncology at McGill University. He has provided a range of improvement advisory
services to client health care organizations in Canada and internationally.

Dr. Philip Gordon

Dr. Gordon graduated in Medicine at the University of Cape Town, South Africa, followed by
training in Internal Medicine, Hematology and Hematological Pathology at the University of
Birmingham, England. He worked in various leadership roles at the University of Alberta and
Capital Health Authority in Edmonton, serving as Professor and Chair, Department of
Laboratory Medicine and Pathology from 1993 to 1998, Associate Dean and Vice Dean, Faculty
of Medicine and Dentistry, University of Alberta from 1998 to 2004, and Regional Clinical
Program Director. Laboratory Services. At that time, he was a Member of the Joint Executive
Committees of the University of Alberta and Capital Health. From 2004 to 2010, Dr. Gordon was
Chief of the Department of Pediatric Laboratory Medicine at the Hospital for Sick Children and
Professor of Laboratory Medicine and Pathobiology at the University of Toronto. Dr. Gordon has
experience in laboratory residency training programs, Royal College of Physicians and
Surgeons of Canada, and medical laboratory technology training programs at diploma and
degree levels, as well as workforce planning for medical laboratory technologists. Dr. Gordon
was the medical lead in laboratory restructuring in Alberta from 1996, including oversight of the
public-private partnership, and an external consultant and reviewer in laboratory management
and restructuring across Canada. Most recently, he was Medical Lead of Toronto Central LHIN

LABORATORY SERVICES EXPERT PANEL REVIEW 44

Task Force review of Laboratory Services and a Member, Blue Ribbon Group, Alberta Health
Services Laboratory Services RFP.

Mr. Shahid Minto

A chartered accountant with a master's degree in political science and a professional degree in
law, Mr. Minto joined the Office of the Auditor General of Canada in 1977 and served as the
Assistant Auditor General between 1989 and 2005. He served as the Chief Risk Officer for the
Department of Public Works and Government Services for the following two years, when he was
appointed as Canada’s first Procurement Ombudsman. After 33 years of service, Mr. Minto
retired from the public service in 2010 to follow other interests. He is a highly experienced senior
financial and program Public Sector executive who has specialized in examining and adding
value to Canada's public policy and public administration by making fair and balanced
recommendations arising from financial, regulatory and compliance reviews.

Prior to joining the Office of the Auditor General, Mr. Minto was employed in the private sector.
He obtained his C.A. Designation while employed at Touche Ross & Co. Mr. Minto joined the
CARE Canada Board in 2010 and serves as the Chair of the Finance, Audit and Risk
Management Committee. In 2014 he was became a member of the Government of Canada’s
Audit Committee,

Independent Panel Support

Melissa Tamblyn provided support to the Panel in its research, consultation and report
development activity. With a Masters of Public Administration in Health Policy, she has worked
in health care for over 15 years and has a range of management and advisory experiences in
the public and private health care sector within Canada.

LABORATORY SERVICES EXPERT PANEL REVIEW 45

Appendix

LABORATORY SERVICES EXPERT PANEL REVIEW 46

Appendix A: Panel Terms of Reference: Expert Review of Funding in the
Community Laboratory Sector
Background and Context – The Need for Review
For several years the Ministry of Health and Long-Term Care (Ministry) has dialogued and
consulted with service providers in the laboratory sector (community, hospital and public health)
to identify laboratory service improvement needs and strategies for moving forward with
laboratory system reform. These discussions have included a full review of the laboratory
services system starting in 1992, and most recently with external consultant reviews that have
recommended modernizing components of the laboratory sector, in particular in the area of
funding.
The government’s commitment in health care is to put patients first. The Patients First: Action
Plan for Health Care focuses on four key objectives:
• Access: Improve access – providing faster access to the right care.
• Connect: Connect services – delivering better coordinated and integrated care in the
community, closer to home.
• Inform: Support people and patients – providing the education, information and
transparency they need to make the right decisions about their health.
• Protect: Protect our universal public health care system.

In 2012, Ontario’s Action Plan for Health Care laid the groundwork for health system
transformation-redesigning the system to allow for more flexible models of health care delivery
which promote access and quality but also allow for services to be provided in a fiscally
sustainable manner. Most recently, the 2014 Mandate letter for the Minister of Health and Long-
Term Care notes that as part of the commitment to move forward on accountability and
transparency, the Minister will “…explore opportunities to optimize quality and value in
community laboratories and the broader laboratory sector”.
Ontario’s laboratory sector consists of community laboratories (providing about 47% of
provincial volumes), hospitals and public health laboratories (combined provide 53% of
provincial volumes) and physician office laboratories. The Ministry spends $1.7B annually for
medical laboratory services, in which community laboratories account for the largest funding
envelope among the subsectors, with an annual budget, or industry cap, of approximately $687
million.
Starting in the 1990s, the Ministry introduced a cap to the community labs line (known as the
industry cap) followed by a corporate cap (an amount based on each lab’s market share) to
manage utilization and growth.
In the following decade, program funding outside the industry cap was introduced to support
specific Ministry of Health initiatives, and in 2011, performance-based funding was introduced to
incentivize labs to focus on delivering care in underserviced regions, reducing wait times at
specimen collection centres and fostering innovation in the sector.
Considering the highly constrained fiscal environment, the Ministry is seeking opportunities to
optimize the community laboratory sector, starting with an evaluation of whether the current

LABORATORY SERVICES EXPERT PANEL REVIEW 47

funding model enables the delivery of high value, high quality, accessible community lab care in
the province.
Mandate and Scope of the Expert Review
Role/Mandate
The Review will provide the Minister of Health and Long-Term Care, in consultation with
laboratory stakeholders, with analysis, advice and recommendations on a funding model for
community laboratory services in Ontario. The Review will establish a blueprint for potential
changes/reform in the funding of community laboratories and consider broader implications for
the funding and delivery of hospital and public health laboratory services. The recommendations
should be relevant and actionable. In preparing the recommendations, the external experts
undertaking the Review will ensure that the public interest is at the forefront in a system that
strengthens accountability and transparency.
Scope
• Building on previous external consultant recommendations related to funding options for the
community laboratory sector (namely the Deloitte 2012 Report and KPMG 2013 Report) and
experiences from other jurisdictions, the Review will provide analysis and recommendations
that address the following:

Funding Model(s)
o Analysis of the current funding model and its value for money to government in the
areas of industry cap, corporate cap and volume utilization.
o Recommendations for a procurement model for lab services that is fair, sustainable,
and predictable. Funding models to be explored will include, but not be limited to the
existing market share model, long-term contracts, tendering and managed
competition.
o Role of Schedule of the Benefits for Laboratory Services (SOB-LS) in proposed
funding models

Broader Impacts
o Role of public health and hospital lab services under each of the proposed models.
o Opportunities for community lab coordination with hospital and public health
laboratories
o A framework for how performance targets, currently captured through performance
funding agreements, such as reduced wait times, enhanced remote/rural service
delivery and innovation in patient experience can best be incorporated into a funding
model and through which community laboratories can be evaluated at regular
intervals.
o Impact of funding model reform on patient experience

Linkages to other laboratory modernization initiatives

Schedule of Benefits – Laboratory Services

LABORATORY SERVICES EXPERT PANEL REVIEW 48

The Ministry is working to modernize the SOB-LS. The Ministry engaged Deloitte to provide
recommendations on a renewed SOB-LS to be implemented April 1, 2015. Further modernization is
underway.

Program Review, Renewal and Transformation (PRRT)

The Review will identify opportunities for generating efficiencies which could contribute to the Ministry’s
savings targets.

Advisory Forum
As part of the community modernization initiatives that support the government’s goals of better value,
access and quality in health care; the Ministry has established an Ontario Laboratory Services Advisory
Forum (Forum). The Forum has members from all three laboratory subsectors (community, hospital and
public health), as well as professional (i.e., Ontario Hospital Association and the Ontario Association of
Medical Laboratories) and Ministry agency representation (Health Quality Ontario). The diverse
membership of the Forum will serve as a resource for the external expert undertaking the Review.

LABORATORY SERVICES EXPERT PANEL REVIEW 49

Appendix B: Sources Reviewed
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• Alberta Health Services [Internet]. Alberta: AHS; c2015. Laboratory bulletins & newsletters;
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• Ash J, Boss S, Goodman J, Stuart P, Tkachuk D. Ontario community labs introduce non-
fasting sample option for lipid measurement. Ont Med Rev [Internet]. 2013 Nov [cited 2015
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• Auletta K. Blood, simpler: one woman’s drive to upend medical testing. The New Yorker
[Internet]. 2014 Dec 15 [cited 2015 Aug]. Available from:
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• Avery G. Outsourcing public health laboratory services: a blueprint for determining whether
to privatize and how. Public Adm Rev [Internet]. 2000 Aug [cited 2015 Aug];60(4):330-7.
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• Baricchi R, Zini M, Nibali MG, Vezzosi W, Insegnante V, Manfuso C, et al. Using pathology-
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LABORATORY SERVICES EXPERT PANEL REVIEW 50
• Canadian Agency for Drugs and Technologies in Health. Funding of laboratory testing in
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performance: a multiple constituency approach. Health Care Manage Rev [Internet]. 2001
[cited 2015 Aug];26(1):40-53. Available from:
http://www.ncbi.nlm.nih.gov/pubmed/11233353

Additional internal government briefings, agreements and stakeholder submissions were

received. We are grateful to the community laboratory sector for their contributions to the work
of the panel in the form of face to face meetings and industry submissions.

LABORATORY SERVICES EXPERT PANEL REVIEW 58

Appendix C: Summary of MOHLTC Literature Review

For access to the Summary MOHLTC Literature Review, select this link

LABORATORY SERVICES EXPERT PANEL REVIEW 59

Appendix D: Jurisdictional Summary of Funding Models

Jurisdiction Governance Delivery Quality Funding & Performance

Funding and decision-making Laboratory services in Ontario Quality and accreditation of the Public laboratories in hospitals
for Ontario’s laboratory system are provided both publicly laboratory system in Ontario is are funded via hospital global
rests with the Ministry of (primarily through hospital accomplished by the Ontario budgets. Private laboratories
Health and Long-Term Care laboratories, but also through Medical Association (OMA) are funded through fee-for-
(MOHLTC). public health laboratories and through the Institute for Quality service based on a service,
physician offices) and privately Improvement in Healthcare funding, and accountability
(through community (IQMH). Each licensed agreement between Ontario’s
laboratories owned by private laboratory is subject to MOHLTC and the Ontario
companies). Public rigorous External Quality Association of Medical
laboratories are responsible for Assessment activities and Laboratories. Each private
Ontario all hospital-based testing Ontario Laboratory provider has a hard cap on
(inpatient and outpatient), Accreditation assessments. annual billings, which is based
while private laboratories are Accreditation certificates are on their historical market share
responsible for all community- issued for 1 to 4 year periods. (as of 1996-97). There are
based testing (outpatient). exceptions to the hard cap,
There are eight private such as introduction of new
laboratories in Ontario, and tests and pilot projects.
two of them, Dynacare and
LifeLabs, provide over 94% of
community laboratory test
volumes.

LABORATORY EXPERT PANEL REVIEW 60

Jurisdiction Governance Delivery Quality Funding & Performance
Outpatient diagnostic services, All inpatient testing is The College of Physicians and Inpatient testing is funded
which include outpatient performed by public providers, Surgeons section of BC’s through the global budgets
laboratory services provided while community-based testing bylaws made under the Health from the health authorities as
by public and private on outpatients is performed by Professions Act include a part of each hospital’s
providers, are governed by the both public and private section for the “Diagnostic operating budget.
Medicare Protection Act. The providers. The community Accreditation Program”. The
Act establishes the Medical laboratory services sector is section specifies that every Outpatient testing is funded
Services Commission (MSC) funded publicly and operated diagnostic facility must be through the MSP fee-for-
with responsibility to almost entirely privately, with accredited by the Diagnostic service mechanism, with
administer the Act, including the exception of rural areas, by Accreditation Program volume discounts within a soft
the establishment and two large and one small Committee, a committee of the cap.
approval of diagnostic facilities private laboratories, with College, before it can render a • Volume discounts: Discounts
to provide services. Under the LifeLabs being a major player. diagnostic service. The MSP are applied to a set of routine
Act, the MSC is also In order to improve access to requires that all diagnostic tests once certain volume
responsible for administering testing in rural areas, such as facilities be accredited by the thresholds are met. Volume
British and monitoring all aspects of in the interior or northern Diagnostic Accreditation thresholds and discount rates
Columbia British Columbia’s Medical regions of the province where Program and have a valid are applied at the individual
Services Plan (MSP), which private laboratory operators certificate of approval from the laboratory level for private labs
includes the provision and cannot profitably operate, the MSC in order to submit claims and at the health authority
payment of benefits rendered province operates many labs to the MSP. level for public labs.
in approved diagnostic itself with hospital Specimen • Soft caps: Expenditure
facilities by licensed medical Collection Centres (SCCs). targets are specified annually.
practitioners. If expenditures deviate by a
margin of + 1%, corrective
Hospital inpatient laboratory action is taken (i.e., parties
services are insured through negotiate changes to get
the Hospital Insurance Act, expenditures back within the
and administered and soft cap).
delivered by the five health
authorities (i.e., Fraser,
Interior, Island, Northern,
Vancouver Coastal).

LABORATORY EXPERT PANEL REVIEW 61

Jurisdiction Governance Delivery Quality Funding & Performance
In 2008, Alberta’s health care Alberta’s laboratory system is The laboratory system is The public laboratories and
system was restructured into a a mix of public and private accredited by the College of CLS are funded via global
single health authority, Alberta providers. The largest private Physicians and Surgeons of budgets from AHS.
Health Services (AHS), which provider, DynaLifeDX, is Alberta with required renewal DynaLifeDX is funded via fee-
is divided into 5 health zones contracted by AHS to provide every four years. Pathologists for-service with a hard cap and
(i.e., Calgary, Edmonton, all community outpatient are licensed by the College of MHDL funded via fee-for-
North, Central, South). AHS testing for the Edmonton zone Physicians and Surgeons of service with a soft cap soft cap
has the responsibility of and some inpatient testing (as Alberta and laboratory (i.e., discounted rates after a
determining the laboratory well as some outpatient testing technologists are regulated by threshold has been reached).
service delivery model, which in the more rural North and the College of Medical
varies by zone, as well as Central zones). The remainder Laboratory Technologists of Alberta is the only province
managing contracts with of inpatient testing in the Alberta. that indicated they used
private providers. Edmonton zone is provided by performance targets for
Alberta public laboratories. Another laboratory services.
private provider, Medicine Hat • Key metrics include patient
Diagnostic Laboratory (MHDL), wait times for community
operates a laboratory with 4 collections, test turnaround
collection sites in the South times, proficiency testing
zone. Calgary Laboratory performance, patient and
Services (CLS), a wholly- health provider satisfaction,
owned subsidiary of AHS, adherence to budget, and
provides all laboratory testing occurrence reporting.
in the Calgary zone. All
inpatient and most outpatient
testing in the North, Central,
and South zones is provided
by public laboratories.

LABORATORY EXPERT PANEL REVIEW 62

Jurisdiction Governance Delivery Quality Funding & Performance
Diagnostic Services Manitoba Manitoba’s laboratory system Pursuant to the Medical Act, Laboratory spending in
(DSM) is a provincial agency is predominantly public (i.e., the Council of the College of Manitoba is approximately
that has been appointed to 70% by volume), with one Physicians and Surgeons of $123 million. The public
manage laboratory services for major private laboratory and Manitoba has established a sector is funded by Manitoba
the entire province. This several other small private Program Review Committee, Health and run by DSM. Public
includes directly managing providers. Public laboratory which oversees the operation providers receive
public laboratories and services are provided by DSM, of the Manitoba Quality approximately $90 million in
integrating community a not-for-profit corporation Assurance Program block funding annually.
laboratories into a responsible for all hospital- (MANQAP). MANQAP has
comprehensive laboratory based testing (inpatient and adopted BC Diagnostic Private laboratory providers
service sector. It is envisioned outpatient) and community Accreditation Program are funded through a hard
that DSM's scope will one day outpatient testing in rural standards. The objective of capped fee-for-service model
be expanded to include areas. MANQAP is to establish by Manitoba Health. The
Manitoba responsibility for managing standards for diagnostic funding amounts are reviewed
contracts with the private Gamma Dynacare, the primary facilities, investigate and and adjusted quarterly to avoid
laboratories. private laboratory, provides inspect diagnostic facilities for funding jumps. Private
community outpatient testing in accreditation, and monitor laboratories provide high-
Winnipeg and Brandon. In compliance with established volume, routine testing in
addition, there are several standards. Public laboratory urban community laboratories
other small private providers are accredited by and do not significantly
laboratories, which each MANQAP. All private compete with public
operating one or two collection laboratories must use an laboratories that provide more
sites. external quality control complex tests. This cap has
program as part of MANQAP. resulted in annual savings that
Private collection sites are have averaged 12%, with
accredited by Manitoba Health. significant variation year by
year.

LABORATORY EXPERT PANEL REVIEW 63

Jurisdiction Governance Delivery Quality Funding & Performance
The 18 regional health boards In Quebec, all publicly-funded Quality control in Quebec is Public laboratories are funded
and 95 centres for health and laboratory services (inpatient undertaken by the through block funding provided
social services determine how and outpatient) are provided Laboratories de Santé to each of the 18 regional
funding is distributed and used by public laboratories. There Publique de Quebec (LSPQ). health boards by the Quebec
at hospitals and community. are private laboratories in The LSPQ is responsible for Ministry of Health and Social
Quebec (the largest two are performing targeted “phantom” Services. Laboratory services
Biron and Gamma-Dynacare), testing across Quebec’s are funded within the overall
whose services are paid out- laboratories, both public and block for all health care
Quebec
of-pocket or through private private. Quebec’s public services.
insurance plans. laboratories must now adhere
to ISO laboratory procedure
standards. Ordering
guidelines formerly developed
at the regional level are now
standardized and enforced at
the provincial level.

LABORATORY EXPERT PANEL REVIEW 64

Appendix E: Consultations
Community Laboratories

ORGANIZATION NAMES

Alpha Laboratories • Gerrard Kennedy (CEO)

• Dr. Joseph Kurian (President)
• Idelta Coelho (VP)

Bio-Test Laboratory • Asif Malik (General Manager)

• Asmat K. Malik (Managing Director)

Dynacare • Naseem Somani (President & CEO)

• Walt Stothers (VP of Finance & CFO)
• Brendon Lalonde (Director of
Commercial Strategy)

Eglinton Diagnostic Laboratories • Dr. Dhun Noria (Chief of Laboratory

Medicine)
• Naseem Somani (President & CEO of
Dynacare)

LifeLabs • Sue Paish (President & CEO)

• Frank Amodeo (SVP of Corporate
Services)
• Dr. Joby McKenzie (VP of Office of
Strategy Management)
• Sonya Lockyer (General Manager of
Laboratory Operations at CML)

Med-Health Laboratories • Suryakant Shah (Proprietor)

• 3 staff members from Med-Health

Medical Laboratories of Windsor • Jennifer Yee (VP of Operations)

Reese Nuclear Medicine Laboratory • Dr. Mike Kadour (Director of Pathology

and Laboratory Medicine)
• Dr. Mariamma Joseph (Professor of
Pathology and Laboratory Medicine)

LABORATORY EXPERT PANEL REVIEW 65

Broader Laboratory Sector

ORGANIZATION NAMES

Eastern Ontario Regional Laboratory • Craig Ivany (CEO)

Association

In-Common Laboratories • Kris Bailey (CEO)

• Isaac Gould (Director of Business
Development)

Institute for Quality Management in • Dr. Greg Flynn (CEO)

Healthcare

Ontario Association of Medical • Paul Gould (CEO)

Laboratories

Public Health Ontario • Dr. Peter Donnelly (President & CEO)

• Dr. Vanessa Allen (Chief of Medical
Biology)
• Mike Mendaglio (Chief Laboratory
Operations Officer)
• Donna Marafioti (VP of Laboratories
and Human Resources)

Government

ORGANIZATION NAMES

Ministry of Health and Long-Term • Raquel Jarabe (Licensing Investigator

Care at Negotiations Branch)
• Anne Bedard (Licensing Technologist at
Negotiations Branch)
• John Hill (Manager at Health Analytics
Branch)
• Elsa Ho (Senior Health Analytics
Branch at Health Analytics)
• Melissa Ramprashad (Data Analyst at
Health Analytics Branch)
• Lyn Sibley (Senior Health Analyst at
Health Analytics Branch)
• Edwin Yip (Senior Program Consultant

LABORATORY EXPERT PANEL REVIEW 66

 at Negotiations Branch)
• Maricon Sanelli (Manager at
Negotiations Branch)
• Yasmine Rattigan (Senior Negotiator at
Negotiations Branch)
• Dennis Pegoraro (Senior Program
Consultant at Negotiations Branch)
• Melissa Farrell (Executive Director of
Health System Funding and Quality
Division)
• Michael Stewart (Director of Quality-
Based Procedures Branch)
• Sherif Kaldas (Manager at Health
System Funding Policy Branch)
• Shengli Shi (Methodologist at Health
Analytics Branch)
• Kathryn Doresco (Senior Funding Policy
Advisor at Health System Funding
Policy Branch)
• Melissa Gibson (Counsel at Legal
Services)
• Simone Bittman (Counsel at Legal
Services)
• Dawn Ogram (Former Director of Lab
Services Branch)
• David Clarke (Director of Negotiations
Branch)
• Michael Barker (Manager at Provincial
Programs Branch)
• Sean Court (Director at HSPPD)
• Julie Ingo (Manager at Health Servies
Branch)
• Brend Gluska (Senior Program
Consultant at Health Services Branch)

Health Quality Ontario • Michelle Rossi (Director of Policy and

Strategy)
• Erik Hellsten (Specialist of Evidence
Development & Standards)
• Dr. Irfan Dhalla (VP of Evidence
Development & Standards)

Infrastructure Ontario • John McKendrick (Executive VP of

Project Delivery – Social and

LABORATORY EXPERT PANEL REVIEW 67

 Transportation)
• David Ho (SVP of Procurement and
Records Management)

Other Jurisdictions/External

ORGANIZATION NAMES

College of Physicians and Surgeons • Dr. Rocco Gerace (Registrar)

of Ontario • Dan Faulkner (Deputy Registrar)

Deloitte Consulting • Lisa Purdy (Partner at Deloitte)

• John Bethel (Consultant)
• John Gilmour (Consultant)

Hamilton Lab Integration Project • David Langstaff (Executive Director of

HNHB LHIN Laboratory Medicine Network)
• Joanna Ellis (Director of Strategic and
Operational Integration at HNHB LHIN
Laboratory Medicine Network)

University Health Network • Brad Davis (Executive Director of

Laboratory Medicine Program)

ICES • Dr. Michael Schull (President & CEO of

ICES)

Laboratory Services Advisory Forum • Naseem Somani (President and CEO of

Dynacare)
• Sue Paish (President and CEO of
LifeLabs)
• Frank Amodeo (SVP of Corporate
Services at LifeLabs)
• Idelta Coelho for Gerard Kennedy (CEO of
Alpha)
• Paul Gould (CEO of OAML)
• Craig Ivany (CEO of EORLA)
• Paul Rosebush (President and CEO of
South Bruce Grey Health Centre)

LABORATORY EXPERT PANEL REVIEW 68

 • Dr. Barry Guppy (OHA representative and
VP of Medical Affairs at Lakeridge Health)
• Mike Mendaglio (COO of Laboratory at
PHO)
• Dr. Vanessa Allen (Chief of Medical
Microbiology at PHO)
• Dr. Brendan Mullen (OMA representative
and pathologist)
• Neil Walker COO of North Simcoe
Muskoka LHIN)
• Carol Halt (Officer of Rehab and Complex
Continuing Care at North East LHIN)
• Sarah Hutchison (CEO of OntarioMD)
• Dr. Michael Toth (President of OMA)
• Michelle Rossi (Director of Policy at HQO)

Northeast Local Health Integration • Kate Fyfe (Senior Director of System

Network Performance)
• Carol Halt (Officer of Rehabilitation/
Complex Continuing Care/Physiotherapy
Reform)
• David Graham (VP of Corporate Services
& Chief of Planning and Development at
St. Joseph’s Health Centre Toronto)

Ontario Hospital Association • Lou Reidel (Director of Health Finance and

Research)
• Dr. Barry Guppy (Member of Physician
Provincial Leadership Council)
• Paul Rosebush (Member of Small, Rural
and Northern Provincial Leadership
Council)

Ontario Medical Association • Dr. Niki MacNeil (Chair of Department of

Laboratory Medicine)
• Kathy Bugeja (Path2Quality Consultant)
• Susanne Bjerno (Senior Policy Advisor of
Hospital Issues in Health Policy)
• Dr. Brendan Mullen (Chair of Laboratory
Medicine)

Ontario Public Service Employees • Sara Labelle (Regional VP of Central

Union Eastern Ontario)
• Sandi Blancher (Vice Chair of Hospital

LABORATORY EXPERT PANEL REVIEW 69

 Professionals Division)
• Michelle Harber (Researcher)

Provincial Health Services Authority • John Andruschak (VP & Consolidation

British Columbia Lead, Pathology & Laboratory Medicine of
Lower Mainland Laboratory Services)

LABORATORY EXPERT PANEL REVIEW 70

Appendix F: The laboratory test utilization management toolbox.
The laboratory test utilization management toolbox.

Strength Tool Target Strengths Weaknesses Example/References

Only useful for tests

Obsolete tests,
with broad
“Quack” testing,
This is the “Nuclear Option”, consensus as to lack
Legitimate tests Bleeding time and other
Strong Ban the test as it ensures a complete of utility, which is
used in “Antiquated” tests (42).
cease to ordering unusual. Specific
inappropriate
individuals may
circumstances
destroy consensus.

All tests,
especially those A uniform policy across a
with utilization system can be supported by Requires authority
that is a formulary, in the same and buy-in from
Laboratory test recognized, way as a pharmacy multiple factions in a University of Michigan
Strong
formulary after analytics, formulary. Exceptions to medical system, and (43).
to be above formulary can be vetted by likely participation by
what is a committee or individual multiple specialties.
expected or tasked with these decisions.
justifiable.

By far the most effective, as Logistically complex, Solomon meta-analysis

Combined the strengths of one as many parties (the (44), Massachusetts
Strong Any test
intervention intervention often laboratory, clinicians, General Hospital
complement the information services, Experience (45),

LABORATORY EXPERT PANEL REVIEW 71

Strength Tool Target Strengths Weaknesses Example/References

weaknesses of another. payer systems, hematology testing

etc…) need to be (46).
involved.

Depends on the
payment system
present in the
medical system.
Perceived as unfair,
Similar to banning tests, this especially if the payer Trends in
Stop paying for intervention is effective at decides to stop reimbursement shown
Strong unnecessary Any test nearly ceasing testing, paying for something here (47), example of
testing depending on who decides without adequate medical policy here
to stop paying. justification. A (40).
physician may not
and the cost could be
transferred to know
that a test will not be
paid for, the patient.

Worry amongst some

physicians that they Make repeated orders
Powerful method of might “miss difficult through
Ban repetitive Daily inpatient reducing automatic ordering something”. Actual computerized order
Strong
orders tests that providers often do not risk of missing entry (48), ban standing
even know is occurring. something clinically orders (49), limit tests
important if a to 24-hour period (50).
clinically indicated

LABORATORY EXPERT PANEL REVIEW 72

Strength Tool Target Strengths Weaknesses Example/References

repetitive test is
disallowed (i.e.
coagulation tests in
patients on
anticoagulants).

Limiting testing to
Complex single physicians who know how Multiple physicians Neurogenetic testing
tests, high unit to use a test increases the may want privileges, diagnostic yield ∼30%
Privilege ordering
Strong cost and/or prior probability in the tested even in the absence for very rare diseases
providers
difficult to patients, increasing cost of evidence that they when expert providers
interpret. effectiveness and diagnostic deserve them. order tests (51).
yield.

Time consuming for

Complex single
Laboratory providers can laboratory staff or
tests, high unit Large Genetics
Require high level have more insight into the director, especially if
Strong cost and/or Sendout Testing
approval utility of some tests than there are no
difficult to Intervention (52).
generalist providers. laboratory housestaff
interpret.
to take calls.

In the absence of a
Any test in a Computerized order cultural change Reducing testing in
Change supporting
system with changes can be made far coronary care unit (53).
Strong computerized order
computerized more difficult to subvert than modification of Change to routine
entry options
ordering. paper order form changes. ordering practices, a testing menu (54).
complete stop to a
specific order may

LABORATORY EXPERT PANEL REVIEW 73

Strength Tool Target Strengths Weaknesses Example/References

increase provider
abrasion. Unintended
consequences can
result if one is not
careful in designing
the intervention.

Requires an analyte
for which a cheaper
screening test exists.
Can work for computerized
If using paper forms,
or paper ordering. Is a form
one must realize that
Any test where of decision support that
paper forms have a
a cheaper allows physician to follow
significant half-life in Reflexive ionized
Offer reflexive screening test correct testing algorithm
Strong medical systems, and calcium (32),
testing. can be used with one order or click.
forms usually allow coagulation panels (55).
before a more Increases pre-test
providers to “write in”
costly test. probability for more costly
tests that they cannot
tests, making them more
find on the form, thus
interpretable.
allowing clinicians to
subvert the intent of
the reflexive panel.

Routine Provides data on ordering to No one has to read

Outpatient report cards
outpatient panel providers who may the report card,
Utilization report (56), intermittent
Moderate/Strong testing, daily otherwise have no idea how especially if it is not
cards feedback for physicians
testing on they order tests, and thus associated with an
(57,58).
inpatients. may allow them to make incentive.

LABORATORY EXPERT PANEL REVIEW 74

Strength Tool Target Strengths Weaknesses Example/References

informed decisions.
reimbursement/financial
Can be paired with
penalties, or associated with
peer feedback for added
strength.

“Pop-up fatigue”
occurs if too many
Selected tests Magnesium intervention
reminders are
with moderate (41), 1,25 dihydroxy
Computerized Can provide support in real implemented, leading
volume and Vitamin D email
Moderate reminders/decision time to physicians to to provider abrasion.
high likelihood reminder (59) [cited
support increase prior probabilities. Providers will also
of being example also uses
cease to continue to
misordered. privileging].
read pop-ups after
some time.

Selected tests
with moderate
volume and As opposed to pop-
high likelihood ups on computerized Redesigning test
Can provide support in real
Post guidelines on of being forms, written requisitions and
Weak time to physicians to
paper order forms misordered, but guidelines on a paper promulgation of
increase prior probabilities.
no are likely easier to factsheets (46,60).
computerized ignore.
ordering
available.

LABORATORY EXPERT PANEL REVIEW 75

Strength Tool Target Strengths Weaknesses Example/References

Required as a component of
Almost never works
nearly all successful
alone, or when it
utilization management
does, the effect Example showing effect
efforts. Interventions lacking
Education wears off over time or wearing off after time
an educational component
Weak alone/call for Any test completely (38), mixed effects of
risk failure due to lack of
enhanced vigilance disappears if new reminding physicians of
buy-in from interested
staff takes over (i.e. test costs (36–38).
parties who do not
in a teaching
understand the purpose of
hospital).
the change.

Source: Baird G. The laboratory test utilization management toolbox. Biochem Med [Internet]. 2014 Jun [cited 2015 Aug];24(2):223-234. Available from:
http://www.ncbi.nlm.nih.gov/pmc/articles/PMC4083574/

LABORATORY EXPERT PANEL REVIEW 76

Appendix G: Sample Key Performance Indicators

DOMAIN SAMPLE KPIs

• After hour service offering (e.g. evening and weekend
services)
• Distance to travel to an access point
• Patient wait time (appointment and walk in)
• Access • Maintain / increase hours of operation
• Point-of-care testing
• Home and community care collection
• Advanced online booking
• Online reporting results to patients
• Turnaround time
• Accreditation of specimen collection centres
• Accreditation of testing facilities
• Quality • OLIS data completeness, timeliness and accuracy
• Performance on STAT and time-sensitive testing
• Utilization management
• Corrected reports
• Online booking capability
• Patient and • Client response centre response rate
Ordering • Patient recalls
Physician • Patient satisfaction
Experience • Ordering physician satisfaction
• Patient confidentiality and privacy

LABORATORY EXPERT PANEL REVIEW 77

Appendix H: Scenarios Based on Community Lab Services by LHIN
Scenarios Based on Community Laboratory Services by LHIN

Community Lab Services by LHIN

The table below provides the data prepared by Health Analytics Branch at the Ministry of Health and Long-Term Care (MOHLTC) on
community laboratory services, separated by each of the 14 Local Health Integration Networks (LHINs). The sources of the data
include: Claims History Database; Registered Person Database; 2011 Census-based Ministry of Finance Population Estimates
(2011-2013) and Projections (2014-2041) for the LHINs; and Postal Codes to LHINs Conversion File at the MOHLTC.
POPULATION LAB SERVICES
Billing Estimated
Value Spend by
% % # (in LHIN**
# PATIENT LHIN Total ≥65 Rurality* Patients # Visits # Tests Millions) (in Millions)
Erie St. Clair 637,068 17.8 20.3 304,227 883,175 5,381,275 $38.9 $31.1
1
South West 966,406 17.7 28.7 411,297 1,090,449 6,129,466 $45.4 $36.3
2
Waterloo Wellington 770,454 13.9 12.2 336,486 911,778 5,527,584 $41.1 $32.9
3
Hamilton Niagara Haldimand Brant 1,428,327 17.9 12.0 685,957 1,950,160 12,071,171 $90.6 $72.5
4
Central West 906,144 11.6 6.8 452,357 1,150,452 7,893,555 $60.1 $48.1
5
Mississauga Halton 1,210,236 12.8 2.1 595,897 1,514,816 10,399,469 $79.2 $63.4
6
Toronto Central 1,245,715 14.8 0 568,586 1,439,179 9,622,576 $77.2 $61.8
7

LABORATORY EXPERT PANEL REVIEW 78

 Central 1,845,387 13.9 47.0 965,258 2,527,122 17,350,888 $132.8 $106.2
8
Central East 1,589,294 15.8 14.1 813,366 2,222,119 14,601,605 $110.1 $88.1
9
South East 494,713 20.6 45.9 236,524 670,824 3,652,050 $27.0 $21.6
10
Champlain 1,306,232 15.4 20.8 607,990 1,599,666 9,408,077 $71.0 $56.8
11
North Simcoe Muskoka 471,097 18.3 33.0 207,629 580,678 3,465,076 $25.7 $20.6
12
North East 565,575 19.3 30.4 213,324 605,738 3,659,210 $26.5 $21.2
13
North West 236,070 16.7 36.8 88,553 228,685 1,365,873 $9.9 $7.9
14
Unknown - - - 164,425 430,854 2,821,135 $21.3 $17.0

Ontario 13,672,718 15.6 14.9 6,651,876 17,805,695 113,349,010 $856.8 $685.5

* The rurality data are from the Demographic Analysis of Ontario’s Sub-LHIN Populations – a 2010 report prepared for the
Association of Ontario Health Centre. Rurality is defined as per Statistics Canada’s definition (i.e., areas as less than 1,000 residents
and a density of less than 400 people per square kilometer).
** For 2013-14, the community laboratories together billed for $856.8M (see the Billing Value total) whereas the total spend for the
sector was $691,352,766.94 (data from Negotiations Branch). This translates to approximately 20% reduction in the billing values on
the actual payout to the community laboratories, which is estimated for each LHIN in this column.

LABORATORY EXPERT PANEL REVIEW 79

Scenario 1
The LHINs were grouped into five groups of 2 to 3 LHINs based on billing value / estimated spend.
LAB SERVICES
Estimat
ed
Spend
Billing by
SUMME Value LHIN
TOTAL D% (in (in
POPULATI RURALI # Millio Million
COMBINED LHINS (% RURALITY) ON TY Patients # Visits # Tests ns) s)
●Central (47%), Erie St. Clair (20.3%) 2,482,455 67.3 1,269,48 3,410,29 22,732,16 $171.7 $137.4
5.0 7.0 3.0

●Central East (14.1%), North West (36.8%), Waterloo Wellington (12.2%), 2,595,819 63.1 1,238,40 3,362,58 21,495,06 $161.1 $128.9
5.0 2.0 2.0

●Hamilton Niagara Haldimand Brant (12.0%), North Simcoe Muskoka (33.0%), 2,865,830 73.7 1,304,88 3,621,28 21,665,71 $161.8 $129.4
South West (28.7%) 3.0 7.0 3.0

●Central West (6.8%), Mississauga Halton (2.1%), North East (30.4%) 2,681,954 39.3 1,261,57 3,271,00 21,952,23 $165.7 $132.6
8.0 6.0 4.0

●Champlain (20.8%), South East (45.9%), Toronto Central (0%) 3,046,661 66.7 1,413,10 3,709,66 22,682,70 $175.2 $140.2
0.0 9.0 3.0

The market share of the smaller labs (i.e., 5-6% excluding LifeLabs and Dynacare – see Appendix) has not been removed from the scenario.

LABORATORY EXPERT PANEL REVIEW 80

1. Erie St. Clair
2. South West
3. Waterloo Wellington
4. Hamilton Niagara Haldimand Brant
5. Central West
6. Mississauga Halton
7. Toronto Central
8. Central
9. Central East
10. South East
11. Champlain
12. North Simcoe Muskoka
13. North East
14. North West

LABORATORY EXPERT PANEL REVIEW 81

Scenario 2
The LHINs were grouped into five groups of 2 to 4 LHINs based on rurality.
LAB SERVICES

Estimat
ed
Spend
Billing by
SUMME Value LHIN
TOTAL D% (in (in
POPULATI RURALI # Millio Million
COMBINED LHINS ON TY Patients # Visits # Tests ns) s)
●Central (47.0%), Waterloo Wellington (12.2%) 2,615,841 59.2 1,301,74 3,438,90 22,878,47 $173.9 $139.1
4.0 0.0 2.0

●Central East (14.1%), South East (45.9%) 2,084,008 60.0 1,049,89 2,892,94 18,253,65 $137.1 $109.7
0.0 3.0 5.0

●Central West (6.8%), Erie St. Clair (20.3%), North West (36.8%), Toronto 3,024,997 63.9 1,413,72 3,701,49 24,263,27 $186.1 $148.9
Central (0%) 3.0 1.0 9.0

●Champlain (20.8%), Hamilton Niagara Haldimand Brant (12.0%), North 3,205,655 65.8 1,501,57 4,130,50 24,944,32 $187.3 $149.8
Simcoe Muskoka (33.0%) 6.0 4.0 4.0

●Mississauga Halton (2.1%), North East (30.4%), South West (28.7%) 2,742,217 61.2 1,220,51 3,211,00 20,188,14 $151.1 $120.9
8.0 3.0 5.0

The market share of the smaller labs (i.e., 5-6% excluding LifeLabs and Dynacare – see Appendix) has not been removed from the
scenario.

LABORATORY EXPERT PANEL REVIEW 82

1. Erie St. Clair
2. South West
3. Waterloo Wellington
4. Hamilton Niagara Haldimand Brant
5. Central West
6. Mississauga Halton
7. Toronto Central
8. Central
9. Central East
10. South East
11. Champlain
12. North Simcoe Muskoka
13. North East
14. North West

LABORATORY EXPERT PANEL REVIEW 83

Scenario 3
The LHINs were grouped into five groups of 2 to 3 LHINs based on geographical proximity and rurality.
LAB SERVICES

Estimat
ed
Billing Spend
SUMME Value by LHIN
TOTAL D% # (in (in
POPULATI RURALI Patient Million Millions
COMBINED LHINS (% RURALITY) ON TY s # Visits # Tests s) )
●Erie St. Clair (20.3%), Hamilton Niagara Haldimand Brant (12.0%), South 3,031,801 61.0 1,401,4 3,923,7 23,581,9 $174.9 $139.9
West (28.7%) 81 84 12

●Mississauga Halton (2.1%), North Simcoe Muskoka (33.0%), Waterloo 2,451,787 47.3 1,140,0 3,007,2 19,392,1 $146.0 $116.8
Wellington (12.2%) 12 72 29

●Central (47%), Central West (6.8%) 2,751,531 53.8 1,417,6 3,677,5 25,244,4 $192.9 $154.3
15 74 43

●Central East (14.1%), South East (45.9%), Toronto Central (0%) 3,329,722 60.0 1,618,4 4,332,1 27,876,2 $214.3 $171.4
76 22 31

●Champlain (20.8%), North East (30.4%), North West (36.8%) 2,107,877 88.0 909,867 2,434,0 14,433,1 $107.4 $85.9
89 60

The market share of the smaller labs (i.e., 5-6% excluding LifeLabs and Dynacare – see Appendix) has not been removed from the
scenario.

LABORATORY EXPERT PANEL REVIEW 84

1. Erie St. Clair
2. South West
3. Waterloo Wellington
4. Hamilton Niagara Haldimand Brant
5. Central West
6. Mississauga Halton
7. Toronto Central
8. Central
9. Central East
10. South East
11. Champlain
12. North Simcoe Muskoka
13. North East
14. North West

LABORATORY EXPERT PANEL REVIEW 85

Scenario 4
The LHINs were grouped into five groups of 2 to 4 LHINs based on geographical proximity, rurality, and billing value / estimated
spend.
LAB SERVICES
Estima
ted
Billin Spend
g by
SUMME Value LHIN
TOTAL D% # (in (in
POPULAT RURALI Patient # Millio Million
COMBINED LHINS (% RURALITY) ION TY s Visits # Tests ns) s)
●Erie St. Clair (20.3%), Hamilton Niagara Haldimand Brant (12.0%), 3,031,801 61.0 1,401,4 3,923,7 23,581, $174. $139.9
South West (28.7%) 81 84 912 9

●Mississauga Halton (2.1%), North Simcoe Muskoka (33.0%), 2,451,787 47.3 1,140,0 3,007,2 19,392, $146. $116.8
Waterloo Wellington (12.2%) 12 72 129 0

●Central (47%), Central West (6.8%) 2,751,531 53.8 1,417,6 3,677,5 25,244, $192. $154.3
15 74 443 9

●Central East (14.1%), South East (45.9%) 2,084,007 60.0 1,049,8 2,892,9 18,253, $137. $109.7
90 43 655 1

●Champlain (20.8%), North East (30.4%), North West (36.8%), 3,353,592 88.0 1,478,4 3,873,2 24,055, $184. $147.7
Toronto Central (0%) 53 68 736 6

The market share of the smaller labs (i.e., 5-6% excluding LifeLabs and Dynacare – see Appendix) has not been removed from the
scenario.

LABORATORY EXPERT PANEL REVIEW 86

1. Erie St. Clair
2. South West
3. Waterloo Wellington
4. Hamilton Niagara Haldimand Brant
5. Central West
6. Mississauga Halton
7. Toronto Central
8. Central
9. Central East
10. South East
11. Champlain
12. North Simcoe Muskoka
13. North East
14. North West

LABORATORY EXPERT PANEL REVIEW 87

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