South Zone Laboratory Service Model

Transcription

1 Business Case South Zone Laboratory Service Model Latest Revision: April 2, 2013 Version Control: Vs 1.3 Draft Prepared By: Dorothy Ward, Bradley Sieben, Cheryl Hetchler Sponsoring Department: Business Coordinator: Executive Owner: South Zone Laboratory Dorothy Ward Tammy Hofer

2 Table of Contents 1. Executive Summary Opportunity Initiative Type Objectives In Scope Out of Scope Analysis Current State Target State Identification of Options Comparison of Alternative Options Patient Care Benefits Operational Benefits Financial Analysis Assumptions Constraints Risks Dependancies Required Resources & Stakeholders Recommendation Approvals Management Approvals: Executive Approvals: Appendix A: Cost Breakdown... 1 Document Change Log Date Version # Revision Description February 18, Initial document creation February 27, Document edits March 06, Document edits April 12, Revised financial analysis

3 1. Executive Summary Alberta Health Services (AHS) is re-negotiating a laboratory services contract with the Dr. Wai Kwan Chow Professional Corporation, which operates the Medicine Hat Diagnostics Laboratory (MHDL) since fall In South Zone East, MHDL currently provides outpatient and mobile collections and testing in Medicine Hat and Brooks as well as courier services within Medicine Hat AHS Laboratory Services. Medicine Hat Regional Hospital (MHRH) Lab and Brooks Health Centre Laboratory provide inpatient/acute testing services as well as collection and testing services for ambulatory patients and those community patients who choose to use the hospital collection services. The original contract was signed in 1995 with the former Palliser Health Region and has continued in 12- month renewal terms since The current contract does not reflect the changes to the actual activities and services that MHDL provides for AHS. This has resulted in unclear expectations, and no system or forum to agree to changes to services for both parties. As a consequence payments to MHDL have increased year over year. This arrangement is no longer sustainable. The outcome of this is a redundant and costly duplication in lab services in Medicine Hat and Brooks. MHDL s contract has increased by approximately 77 % from 2004/05 to 2009/10. This growth is not in alignment with the expectations for cost savings for AHS Laboratory services. Within the negotiations AHS proposed a basket of services similar to other private laboratory contracts with a 20% reduction in funding based benchmark costs for both public and private services. In the follow up negotiation meeting with Dr. Wai Kwan Chow Professional Corporation on December 10, 2012, MHDL was not able to meet the requested 20% reduction to align with provincial benchmarks, nor come up with a counter proposal for system saving to achieve savings.. Continued negotiations to reduce the operational costs of Medicine Hat Diagnostic Laboratory have stalled. Repatriation of services must be considered to achieve aggressive savings targets in South Zone Direction has been given to transfer the services offered at MHDL back into AHS, through repatriation to Medicine Hat Regional Hospital Laboratory and / or Calgary Laboratory Services (CLS). A team has been established to determine the options to accomplish this repatriation. This document contemplates options of this repatriation initiative. The recommended option is to offer MHDL a reduced contract for community and mobile collections, community urinalysis testing in Medicine Hat and Brooks and a courier service in Medicine Hat. The majority of outpatient testing services would be transferred to MHRH Laboratory with microbiology and esoteric (specialized) testing referred to CLS. This option provides an ROI at nearly 460%, a payback period of less than 1 year and a net benefit of nearly $4 million over 5 years. Additionally, the combined option enhances the existing service model and eliminates a vast amount of duplication. While from a financial standpoint it may not be the best option, from a political and community option there is significantly less impact. The implementation plan would involve giving MHDL the required 180 days notice of the dissolution of the current contract and a negotiated reduced contract with pricing that reflects benchmark costs for provision of those services. The expected timelines for this notification is early April. There have been ongoing communications with AHS Executive including South Zone ZEL s outlining the negotiations, outcomes of the negotiations and AHS Laboratory proposed recommendations. Briefing notes have been forwarded to AHS Executive, South Zone ZEL s and the Minister of Health outlining the current situation and associated risks. Page 1 of 1

4 2. Opportunity: 2.1. Initiative Type Replacement Growth Facility Improvement Revenue Growth, Revenue Retention, or Cost Reduction The new item will replace an item that is necessary to provide the current level of service. Functionality of the replacement is similar to the original item. Additional office/laboratory equipment is required for newly approved staff and/or volume growth. The project will allow CLS to provide improved services to its customers and/or allow its internal workforce to work more effectively. Acquisition of the item will result in increased revenues, the retention of revenues, or reduced costs for CLS. FTE Efficiency Quality/Process Enhancement Acquisition of the item will result in decreased FTEs to complete similar workload. Acquisition of the item will result in: i) increased quality of patient care, and/or ii) faster turnaround times, and/or iii) decreased costs, and/or iv) increased efficiency or accuracy Objectives With the current status of negotiations, the requirement is for AHS Laboratories to develop a short term contingency plan as well as a long term plan to ensure continuity of community services. The goals of these plans will support: Timely and accurate results for community patients Cost savings Continuation or improvement of current service levels including community patient access Alignment with the Laboratory Test Matrix developed for the Rural Hospital Clinical Services Capability Framework Manual 2012 Limit duplicate data entry and back entry of results Eliminate duplicate testing and associated activities including quality assurance and control Meet required accreditation standards and guidelines. Transparency in planning and implementation of changes as feasible Page 1 of 13

5 2.3 Phasing and Timeline A phased approach is proposed to successfully implement this initiative: Phase 1: Completion and approval of Business Case that outlines options for a reduced basket of services contracted to MHDL and repatriation of testing services into AHS and CLS that meets the needs of patients, clients and ensures sustainable cost effective services. Phase 2 / Week of March 11, 2013: Approval of Briefing Note to proceed with contingency and longer term planning from CPSM, Legal, Finance, Communications and AHS Executive. Phase 3 / Week of March 18, 2013: Communication on status and risk of negotiations to AHS Executive, Minister of Health and key players Phase 4 / April 4, 2013: Negotiations with MHDL to invoke the 180 day termination notification and negotiate with Dr. Wai Chow the continued provision of community and mobile collection services in Medicine Hat and Brooks including urinalysis testing; courier service within Medicine Hat and the installation of Meditech laboratory information system at two Medicine Hat and one Brook s collection sites. Phase 5 / Immediate April 30, 2013: Develop a comprehensive transition and communication plan for recommended option. Conduct a thorough review of the MHDL S locations, services and operations including a site visit. Prepare a gap analysis between MHDL and AHS laboratory s services to assist with continuity during transfer of services. Phase 6 / May 1 October 1, 2013: Prepare MHRH and Brooks Health Center sites and operations for the repatriation of testing beginning October 2, In Scope: Community collections performed by MHDL in Medicine Hat, Brooks and Foremost Existing courier services within Medicine Hat Mobile and Community collections Outbreak testing STAT/urgent service Clinical trails Seamless (as possible) data entry and delivery of lab results, concentrating as much patient data entry and results reporting in one LIS system as possible Out of Scope Should MHDL agree to the proposed reduced service contract: Third party contracts or provision of services not funded by AH or AHS Fees for services rendered covered by AH (example, ECG collections) Page 2 of 13

6 3. Analysis 3.1. Current State Medicine Hat Diagnostic Laboratory is owned and operated by: WAI KWAN CHOW AND WAI KWAN CHOW PROFESSIONAL CORPORATION carrying on business under the firm name and style of MEDICINE HAT DIAGNOSTIC LABORATORY and MEDICINE HAT DIAGNOSTIC LABORATORY MHDL operates three sites, two in Medicine Hat and one in Brooks, which perform about 60% of the area s outpatient services. Community work is collected in Foremost by MHDL and couriered into the MHDL testing site in Medicine Hat. These four sites perform around 800,000 tests/annum at a cost of $8.7M; AHS Medical Affairs pays MHDL for 0.8 FTE pathologist services. MHDL provides a wide range of medical diagnostic services including, but not limited to: comprehensive testing menus in hematology, immunology, microbiology, chemistry, nongyne cytopathology, anatomic pathology, toxicology, endocrinology for community patients as well as Public Health Testing on-line and phone booking system services to family practice and specialist physicians, long-term care facilities, medical researchers, corporations, and government agencies mobile collection services to nursing homes and the private residences of disabled, elderly, terminally ill, immobilized and housebound patients employment related and occupational health testing pre-employment drugs of abuse collections laboratory physician consulting services laboratory support to research projects and clinical trials Courier service within Medicine Hat MHDL operates a standalone laboratory information system (Keane) and transmits results via AHS to both NetCare and Physician Office Systems. MHDL and MHRH both provide testing for chemistry, hematology, microbiology and anatomic pathology, resulting in a duplication of services offered. Currently, MHDL provides these services for community patient population and MHRH provides these services to acute, ambulatory and some outpatient clients. The current contract was negotiated in 1995, with a contract affiliate agreement between MHDL and former Palliser in 2008 to satisfy the requirements of HIA. MHDL responded to an expression of interest in 2011 for provision of Community Services in Medicine Hat and area and continued with provision of Community Services under the auspices of the 1995 contract with agreement to negotiate an amendment to the contract. Negotiations began in fall of The current contract does not meet standard AHS contract language and Appendix A does not reflect current service provision. The result is that AHS pays baseline funding and makes separate payments for extra testing not included in Appendix A of the contract; a year end top up based on 46% of e-code schedule and a 0.8 pathologist position funded by Medical Affairs. MHDL is slated for an additional top up of approx $1.0M for fiscal 2012/13. This translates to a 77% increase in funding since 2004/05. Page 3 of 13

7 When comparing laboratory test costs with Calgary Laboratory Services, DynaLIFE Dx and AHS services of similar size, the cost is valued at 20-40% above benchmark data. In on-going negotiations with MHDL, on November 26, 2012, AHS Laboratory proposed a new contract with the goal of reducing the overall contract payment by 20% to bring costs in line with provincial benchmarks and to introduce a contract term of March 31, These negotiations involved an agreed to basket of services with a contract price reduction and cost of living increases in line with other private laboratory providers. A follow up meeting with Dr. Wai Kwan Chow Professional Corporation on December 10, 2012, resulted in MHDL not being able to meet the requested 20% reduction to align with provincial benchmarks. Negotiations with Dr. Wai Kwan Chow Professional Corporation to reduce the operational costs of Medicine Hat Diagnostic Laboratory have stalled. A plan to repatriate services must be considered to achieve aggressive savings targets in South Zone 3.2. Target State AHS needs to repatriate the testing for Medicine Hat and Brooks to MHRH Laboratory and/or CLS. This repatriation of services will allow for greater economies of scale resulting in reduced costs. AHS intends to proceed with cooperative negotiations with MHDL that will: Allow MHDL to maintain existing community and mobile collection, urinalysis testing including other tests that can be performed by medical laboratory assistants and courier services within Medicine Hat with their existing infrastructure. There would be a requirement within the new contract that MHDL implement the current South Zone laboratory information system, Meditech that implementation cost would be borne by AHS Laboratory Services. Consolidate all chemistry, hematology, coagulation, microbiology, non-gyne cytology and anatomic pathology testing currently performed by MHDL to AHS facilities. These facilities may include MHRH Lab, CLS or a combination thereof as: a. Current infrastructure of the MHRH is inadequate to absorb the entire volume of work currently performed by MHDL would require a onetime investment of up to $2.2M in equipment and facility renovations. b. To avoid costly renovations and facilitate a timely transition, microbiology, some high volume testing as per test matrix, non-gynecological cytology, esoteric testing and referral testing will be sent to CLS. Repatriation of laboratory testing services from MHDL will have no clinical or quality impacts to community physicians in the South Zone. AHS does not have capacity within existing infrastructure to take on the community collections, nor the ability to quickly lease and develop adequate facilities. As outlined above, the intent is to offer MHDL the ongoing contract to continue community and mobile collection, urinalysis, and courier services. Should MHDL refuse the offer to continue community collection services (annual revenue of $3M), AHS will renew the existing contract for one final year and plan for full repatriation in April This provides ample time to scope, lease and fit out community collection facilities in Medicine Hat and Brooks. This initiative will accomplish the following objectives: Meet the AHS goals of access, sustainability and quality. Reduce overall cost of provision of laboratory service by 20% Uphold AHS values by making the planning process inclusive of MHDL Provide employment for % of current MHDL staff through continued employment with MHDL or new employment with MHRH Align the on-site test menus with the Laboratory Test Matrix Page 4 of 13

8 Meet the needs of the patients, clients and stakeholders Align with laboratory strategic plan for Laboratory Services Will meet AHS policies and procedures, provincial, municipal and federal regulations and guidelines that govern laboratory (CPSA accreditation, AHS Laboratory Quality and Safety policies and practices) Provide 24 hour on call pathologist support for rural physicians 3.3. Identification of Options To meet the proposed target state, multiple options are available for consideration. These potential scenarios have been separated into pre-analytical (1.1, 1.2 and 1.3) and analytical (2.1, 2.2 and 2.3) options. Any pre-analytical option can be combined with any analytical option. Each potential combination is explored in the financial analysis component of this document. Option 1.0: Pre-analytical Option 1.1: Pre-analytical, MHDL Provides OP facilities, mobile collections and Urinalysis a) Dr. Wai Chow Corp is offered a contract to provide outpatient services including outpatient collections, mobile collections, urinalysis testing for Medicine Hat and Brooks. Urinalysis will include those tests that can be performed by a Medical Laboratory Assistant in the three current outpatient collection sites. b) Require Dr. Wai Chow Corp to implement Meditech as the LIS at MHDL c) MHDL Lab provides courier service within Medicine Hat Option 1.2: Pre-analytical, MHRH Provides OP facilities, mobile collections and Urinalysis a) MHRH lab provides outpatient collections in 3 of the current MHDL sites through a lease agreement with Wai Chow Corp. b) Meditech LIS system implemented by MHRH at OP facilities c) MHRH Lab provides courier service within Medicine Hat Option 1.3: Pre-analytical, CLS Provides OP facilities, mobile collections and Urinalysis a) CLS provides outpatient collections in 3 of the current MHDL sites with rental agreement with Wai Chow Corp b) Meditech LIS system implemented by CLS at OP facilities c) CLS provides courier service within Medicine Hat Option 2.0: Analytical Option 2.1: Analytical, MHRH performs testing at MHRH a) MHRH Lab performs all testing including Chemistry, Hematology and Coagulation, Histology, non-gyne Cytology, most Microbiology, Blood cultures and STAT community work. b) CLS performs select M2 and M3 Microbiology testing as outlined in appendix A c) CLS retains current referral service d) MHRH Lab will be renovated and additional equipment acquired to accommodate increased volumes Page 5 of 13

9 Option 2.2: Analytical, MHRH performs testing at MHRH and Micro at MHDL site a) MHRH Lab will perform all testing including Chemistry, Hematology and Coagulation, Histology, non-gyne Cytology, most Microbiology, Blood cultures and STAT community work. b) CLS performs select M2 and M3 Microbiology testing as outlined in appendix A c) CLS will retain current referral service d) MHDL site will be leased to provide space for Microbiology Lab Option 2.3: Analytical, MHRH performs majority of testing, select testing sent to CLS a) MHRH Lab will perform testing as per Laboratory Test Matrix for a regional laboratory including Chemistry, Hematology and Coagulation, Histology, Blood cultures and stat community work. b) MHRH Lab will perform select Microbiology testing as outlined in appendix A c) CLS will perform non-gyne Cytology, Microbiology and Chemistry, Hematology and Coagulation testing not in test matrix for regional site. d) CLS will retain current referral service 3.4. Comparison of Alternative Options Patient Care Benefits Reduction in the number of laboratory information systems will mean patient data will be entered into and housed in two LIS systems rather than current three. This will reduce the opportunities for data entry error and gain efficiencies. All options will allow for immediate improvements in non-gynecological cytology as we would move to liquid based cytology rather than current manual method. Turnaround times for Hem/Chem/Coag and Histology will not be impacted as this testing remains in Medicine Hat. Isoteric testing and microbiology testing turnaround times will meet the recommended turnaround times for community patient specimens. Patient experience will be seamless as they will see the same collection sites and processes currently in place Will allow through negotiated contract or AHS services for extended outpatient collection service hours Operational Benefits Reduction in costs. Increased capacity as patient testing flowing into system that has increased capacity as well as contingency. Reduces duplication of testing, quality assurance and quality control activities Eliminates duplication for Quality Assurance Program, Safety Programs and training programs which can account for 10 % of all staff time as well as supplies and reagents. Page 6 of 13

10 3.5. Financial Analysis The options outlined in the preceding sections consist of multiple components and cost drivers. Based on the financial analysis, nearly all options will offer a positive return on investment (ROI) over 5 years and payback of the initial capital expense within 24 months. Below, table 1 provides a summary of the capital expenses and operational expenses for each individual option. Table 1 Option Summary Option 1.1: Pre-analytical, MHDL Provides OP facilities, mobile collections and Urinalysis $504,900 $2,899,371 Option 1.2: Pre-analytical, MHRH Provides OP facilities, mobile collections and Urinalysis $684,900 $2,074,018 Option 1.3: Pre-analytical, CLS Provides OP facilities, mobile collections and Urinalysis $661,100 $2,413,548 Option 2.1: Analytical, MHRH performs testing at MHRH $2,191,416 $4,619,483 Option 2.2: Analytical, MHRH performs testing at MHRH and Micro at MHDL $1,712,000 $4,643,983 Option 2.3: Analytical, MHRH performs majority of testing, select testing sent to CLS $712,000 $3,924,893 Table 2 Included in the capital column of Table 1 for options 1.1, 1.2 and 1.3 is the one time staff expense of implementing Meditech. These costs are broken out in Table 2 below. Cost Breakdown One time Staff Other Option 1.1: Pre-analytical, MHDL Provides OP facilities, mobile collections and Urinalysis $214,500 $290,400 Option 1.2: Pre-analytical, MHRH Provides OP facilities, mobile collections and Urinalysis $214,500 $470,400 Option 1.3: Pre-analytical, CLS Provides OP facilities, mobile collections and Urinalysis $214,500 $446,600 Table 3 To understand the ROI, payback period and anticipated savings, the options must be analyzed in pairs to provide an accurate representation of the cost and figures. Below, table 3 summarizes the combined capital and operating costs, ROI, payback period and 5 year savings for each potential combination of options. This table presents the options from highest to lowest ROI. The ROI, Payback and cumulative benefit assume an 8% discount rate and annual 5% increase in operating costs. Additionally, the ROI is calculated over a 5 year period. Option Combination Cost Cost ROI % Payback (years) Cumulative 5 year benefit 1.2 & 2.3 $1,396,900 $5,998, % < 1.00 $7,222, & 2.3 $1,373,100 $6,338, % < 1.00 $5,759, & 2.3 $1,216,900 $6,824, % < 1.00 $3,787, & 2.2 $2,396,900 $6,718, % 1.36 $3,073, & 2.1 $2,876,316 $6,693, % 1.67 $2,701, & 2.2 $2,373,100 $7,057, % 1.72 $1,610, & 2.1 $2,852,516 $7,033, % 2.14 $1,237, & 2.2 $2,216,900 $7,543, % none -$361, & 2.1 $2,696,316 $7,518, % none -$733,522 Page 7 of 13

11 The following tables provide additional detail on each of the potential combination of options, including the yearly cumulative cost or savings. Option 1.1 and 2.1 Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Cost -$2,696,316 Cost -$6,961,902 -$6,768,516 -$6,580,501 -$6,397,710 -$6,219,996 Benefit $8,091,464 $7,492,096 $6,937,126 $6,423,265 $5,947,468 Cumulative -$1,566,754 -$843,173 -$486,549 -$460,994 -$733,522 Option 1.1 and 2.2 Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Cost -$2,216,900 Cost -$6,984,587 -$6,790,571 -$6,601,944 -$6,418,556 -$6,240,263 Benefit $8,091,464 $7,492,096 $6,937,126 $6,423,265 $5,947,468 Cumulative -$1,110,023 -$408,498 -$73,315 -$68,607 -$361,403 Option 1.1 and 2.3 Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Cost -$1,216,900 Cost -$6,318,763 -$6,143,242 -$5,972,597 -$5,806,691 -$5,645,394 Benefit $8,091,464 $7,492,096 $6,937,126 $6,423,265 $5,947,468 Cumulative $555,800 $1,904,654 $2,869,184 $3,485,758 $3,787,831 Option 1.2 and 2.1 Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Cost -$2,876,316 Cost -$6,197,686 -$6,025,528 -$5,858,152 -$5,695,425 -$5,537,219 Benefit $8,091,464 $7,492,096 $6,937,126 $6,423,265 $5,947,468 Cumulative -$982,538 $484,031 $1,563,005 $2,290,844 $2,701,093 Option 1.2 and 2.2 Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Cost -$2,396,900 Cost -$6,220,371 -$6,047,583 -$5,879,594 -$5,716,272 -$5,557,487 Benefit $8,091,464 $7,492,096 $6,937,126 $6,423,265 $5,947,468 Cumulative -$525,807 $918,707 $1,976,238 $2,683,231 $3,073,212 Option 1.2 and 2.3 Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Cost -$1,396,900 Cost -$5,554,547 -$5,400,254 -$5,250,247 -$5,104,407 -$4,962,618 Benefit $8,091,464 $7,492,096 $6,937,126 $6,423,265 $5,947,468 Cumulative $1,140,017 $3,231,859 $4,918,738 $6,237,596 $7,222,446 Option 1.3 and 2.1 Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Cost -$2,852,516 Cost -$6,512,065 -$6,331,174 -$6,155,309 -$5,984,328 -$5,818,096 Benefit $8,091,464 $7,492,096 $6,937,126 $6,423,265 $5,947,468 Cumulative -$1,273,117 -$112,196 $669,622 $1,108,559 $1,237,930 Option 1.3 and 2.2 Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Cost -$2,373,100 Cost -$6,534,750 -$6,353,230 -$6,176,751 -$6,005,175 -$5,838,364 Benefit $8,091,464 $7,492,096 $6,937,126 $6,423,265 $5,947,468 Cumulative -$816,386 $322,480 $1,082,855 $1,500,946 $1,610,049 Option 1.3 and 2.3 Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Cost -$1,373,100 Cost -$5,868,927 -$5,705,901 -$5,547,404 -$5,393,309 -$5,243,495 Benefit $8,091,464 $7,492,096 $6,937,126 $6,423,265 $5,947,468 Cumulative $849,437 $2,635,632 $4,025,355 $5,055,311 $5,759,283 Page 8 of 13

12 Further detail including the breakdown of both capital and operating expenses is provided in Appendix A: Cost Breakdown. Financial Analysis Assumptions: The analysis is exclusive of overhead costs MHDL capital costs for Meditech implementation will be funded by AHS MHDL cost is calculated based on CLS cost plus a 20% margin ($16.99) Meditech and IT costs in community facilities assume 3 locations if operated by MHDL and 2 locations if operated by MHRH or CLS MHRH to implement Meditech Microbiology module at former MHDL site M2 and M3 Microbiology and Hepatitis B testing to be referred to CLS in all options MHRH and CLS community facility costing assumes 2 locations, Medicine Hat and Brooks Lease costs for community facilities are based on figures provided by AHS accommodation planning, and are inclusive of lease and building management o Medicine Hat, $35/ft 2 o Brooks, $30/ft 2 Renovation and retrofit costs for community and MHRH Lab facilities: o Collection lab, $130/ft 2 o Diagnostic lab, $313/ft 2 Community facility collection volumes o Medicine Hat: 570 per day o Brooks, 100 per day Additional assumptions are listed in Appendix A: Cost Breakdown ROI and Payback include: $8.7 million annual savings resulting from the termination of existing MHDL contract Annual increase in expenses of 5% for each option Annual discount rate of 8% was used ROI period of 5 years 3% increase/annum for contracted laboratory services was not included Page 9 of 13

13 4. Assumptions Dr. Wai Chow agrees to contract for Medicine Hat and area community patient collections, mobile collection services, courier and urinalysis testing using current sites and infrastructure with a requirement to implement Meditech LIS. If Dr. Wai Chow waives contract opportunity, AHS or CLS provider can maintain current community infrastructure by renting from Dr. Wai Chow. Proposed options produce expected cost savings MHDL staff agree to come on board as AHS or CLS employees Required implementation of new equipment and LIS/IT software solutions happen on time to support changes. Should we not be able to utilize current outpatient collection spaces at MHDL sites, would need to ensure required space leases and renovations can happen within time constraints. AHS Clinical Contracting, AHS Laboratory Services and MHDL agree to and signs new contract in a timely manner. 5. Constraints Lack of AHS space for laboratory outpatient collections in either Brooks or Medicine Hat Cost savings can be achieved as expected. Current nimbleness within AHS to lease space and perform required leasehold improvements to outpatient services Lack of financial and human resources in IS/LIS to implement Meditech in outpatient settings in MH and Brooks. Unknowns related to data provided from MHDL as it relates to outpatient collections, testing numbers and costs as there is not bench mark for apples to apples collection of data. 6. Risks Risks if Initiative is Implemented Ability to achieve cost savings Dr. Wai Chow does not agree to reduction in service contract MHDL does not agree to a collaborative approach for a new contract and repatriation plan IT cannot implement Meditech LIS solutions in a timely manner because of other competing priorities MHDL staff does not want to come on board as AHS employees Community and local physicians vocalize dissatisfaction with solution Required equipment for repatriation in MHRH Lab cannot be purchased and implemented in Potential Mitigation Implementation plan houses accurate data and costing information Alternate options include either MHRH lab or CLS providing Outpatient collections Alternate options include either MHRH lab or CLS providing services in as seamless manner as possible LIS/Lab Leadership has an agreement to prioritize this work MHRH lab reduces community work it repatriates and refers to CLS Communication plan to educate and inform physicians and other stakeholders as well as communication plan to clients. This work is well underway with meetings with South Zone ZEL and impacted South Zone VP s and Medical Leadership. Current backup equipment will be utilized as an interim solution until new equipment is placed. Page 10 of 13

14 timely manner Delay in CLS Service Level Agreement finalization Delay in specimen transport to CLS because of climate conditions, courier breakdown etc Labour relations related to on-boarding of MHDL staff Risks if Initiative is Not Implemented Current MHDL contract costs increase by at least 3% per annum, which is not sustainable in current climate Dr. Wai Chow expresses desire to close MHDL as he is of retirement age and is unable to sell MHDL with current climate. With current growth in laboratory testing and shrinking dollar, other essential lab services need to be reduced or stopped to achieve savings Current back up equipment cannot be a permanent solution it does not have capacity and the required safety features. Agreement in principle to SLA, CLS is currently actively involved with SZ Service Model Planning so are aware and engaged with plans Ensure specimen integrity is maintained, perform required testing at MHRH lab, communicate contingency plans to stakeholders. Work with AHS Human Resources on a Labour relations plan to bring non-unionized staff into a unionized environment. Potential Mitigation Look at system savings and reduce contract costs accordingly. Repatriate services at this time Implement SZ Laboratory Services Model. 7. Dependencies AHS IS/LIS department workload and priorities Management priorities and workload to implement minor renovations for new equipment or required renovations to new space AHS Real Estate and Leasing priorities and ability to respond to laboratory needs CPSM Equipment s ability to buy and place needed equipment 8. Required Resources & Stakeholders AHS Laboratory Services AHS IT/LIS AHS Management AHS Real Estate and Leasing FME CPSM non- Clinical Contracting, Equipment and Clinical Contracting AHS Legal and Privacy AHS Fleet Vehicles CLS Keane LIS Solutions (current MHDL LIS service provider) MHDL and Dr. Wai Chow Corporation Vendors Page 11 of 13

15 9. Recommendation From a purely financial perspective, a combination of option 1.2 and 2.3 offers the most substantial ROI at nearly 517%, a pay back period of less than 1 year and a net benefit of $7.2 million over 5 years. Additionally, the combined options enhance the existing service model and eliminate a vast amount of duplication. Additional risk assessment will be performed prior to implementation to provide a clear understanding of the impact to the community and optics of the initiative. A combination of option 1.1 and 2.3 offers an ROI of 311%, a payback period of less than 1 year and a net benefit of nearly $3.8 million over 5 years. Additionally, the combined options enhance the existing service model and eliminate a vast amount of duplication. While from a financial standpoint it may not be the best option, from a political and community option there is significantly less impact and is therefore the recommended option being put forward. costs of option 1.1 are based on CLS outpatient operating costs in Calgary plus a 20% margin. This is a cost assumption only. Option 1.2 provides a benchmark for pre-analytic costs in Medicine Hat and should be used to negotiate pre-analytic services with MHDL. Page 12 of 13

16 10. Approvals Management Approvals: Signature Date South Zone Laboratory Director South Zone Clinical Co-Lead Laboratory BAS Manager Dorothy Ward Dr. Michael O Connor Lori Johnston 10.2 Privacy and Security, Communications: AHS Legal Counsel AHS Communications, Laboratory Lead Kevin Gault Haydon Dewes 10.3 Executive Approvals: Vice President Laboratory Services Provincial Medical/Scientific Director South Zone Senior Vice President South Zone Medical Director Executive Vice President & Chief Officer Executive Vice President & Chief Medical Officer Tammy Hofer Dr. James Wesenberg Sean Chilton Dr. Vanessa Maclean Chris Mazurkewich Dr. David Megran Page 13 of 13

17 Appendix A: Cost Breakdown Option 1.1: Pre-analytical, MHDL Provides OP facilities, mobile collections and Urinalysis Option 1.1: Cost Summary MHDL OP collection, urinalysis, mobile collections and courier by MHDL $0 $2,896,421 Implementation of Meditech/IT - Software and Hardware $290,400 $2,950 Implementation of Meditech/IT - Labour $214,500 $0 Grand Total $504,900 $2,899,371 Option 1.1: Cost Details MHDL Implementation of Meditech/IT TOTAL $504,900 Software and Hardware $290,400 Computers/Printers/Cabling - MH Main $90,552 Computers/Printers/Cabling - MH Dunmore $81,374 Computers/Printers/Cabling - Brooks $81,374 Lab Instrument Interfaces (MDI for Urinalysis analyzers) $10,500 Client Registry/Netcare Interface (MRI.OV) $2,500 Events Repository Interface (ADM.ADT) $2,500 PTH data conversion (Extract Data) $20,000 Meditech Annual Maintenance Costs (10% cost of interface) $1,550 Misc equipment interfaces $3,000 Extraction of estimated operating cost -$2,950 IT Labour Costs $214,500 Meditech LIS Modules Set-up (Estimate 3 months) $37,500 Lab support for Set-up & UAT (Estimate 6 months) $75,000 Meditech MIS Set-up (users/pc's/printers etc) (Estimate 1 month) $12,000 Lab/LIS Labour costs to Import data into Meditech $37,500 Meditech End User training and Post live support for MHDL staff $37,500 Lab Instrument Interfaces (MDI for Urinalysis analyzers) $9,000 Client Registry/Netcare Interface (MRI.OV) $3,000 Events Repository Interface (ADM.ADT) $3,000 Option 1.1: Cost Details MHDL OP collection and urinalysis at MHDL TOTAL $2,896, ,478 collections x $16.99/collection $2,896, ,728 tests performed by MLA blended in above $0 Implementation of Meditech/IT TOTAL $2,950 Meditech Annual Maintenance Costs (10% cost of interface) $1,550 Misc annual expense $1,400 Assumptions Meditech cost assumes 3 sites, 2 in Medicine Hat & 1 in Brooks OP collection cost of $16.99 is based on CLS cost + 20% margin and includes courier service $504,900 capital cost of Meditech at MHDL will be funded by AHS

18 Option 1.2: Pre-analytical, MHRH Provides OP facilities, mobile collections and Urinalysis Option 1.2: Cost Summary MHRH OP collection, urinalysis, mobile collections and courier by MHRH $180,000 $2,071,418 Implementation of Meditech/IT - Software and Hardware $290,400 $2,600 Implementation of Meditech/IT - Labour $214,500 Grand Total $684,900 $2,074,018 Option 1.2: Cost Details MHRH OP collection, urinalysis, mobile collections and courier by MHRH TOTAL $180,000 Urinalysis equipment with autovalidation $125,000 4 Centrifuges (1 refrigerated) $27,000 2 ECG $28,000 Implementation of Meditech/IT TOTAL $504,900 Software and Hardware $290,400 Computers/Printers/Cabling - MH Main $90,552 Computers/Printers/Cabling - MH Dunmore $81,374 Computers/Printers/Cabling - Brooks $81,374 Lab Instrument Interfaces (MDI for Urinalysis analyzers) $10,500 Client Registry/Netcare Interface (MRI.OV) $2,500 Events Repository Interface (ADM.ADT) $2,500 PTH data conversion (Extract Data) $20,000 Meditech Annual Maintenance Costs (10% cost of interface) $1,550 Misc equipment interfaces $3,000 Extraction of estimated operating cost -$2,950 IT Labour Costs $214,500 Meditech LIS Modules Set-up (Estimate 3 months) $37,500 Lab support for Set-up & UAT (Estimate 6 months) $75,000 Meditech MIS Set-up (users/pc's/printers etc) (Estimate 1 month) $12,000 Lab/LIS Labour costs to Import data into Meditech $37,500 Meditech End User training and Post live support for MHDL staff $37,500 Lab Instrument Interfaces (MDI for Urinalysis analyzers) $9,000 Client Registry/Netcare Interface (MRI.OV) $3,000 Events Repository Interface (ADM.ADT) $3,000 Option 1.2: Cost Details MHRH OP collection, urinalysis, mobile collections and courier by MHRH TOTAL $2,071,418 Labour (21.5 MLA I, 1.5 Courier, 1.0 MLA II) $1,603,217 Vehicle Lease, 4 vehicles x $550/month x 12 months $26,400 Supplies cost, 170,478 x $1.80 $306,860 On site Urinalysis, 44,728 x $2.40 $107,347 ECG supplies cost, 5,985 x $2.00 $11,970 ECG recovery, 5,985 x $ $136,877 Brooks Lease, 1,000 sq $30 $30,000 2 Medicine Hat Leases, 3,500 sq $35 $122,500 Implementation of Meditech/IT TOTAL $2,600 Meditech Annual Maintenance Costs (10% cost of interface) $1,200 Misc annual expense $1,400 Assumptions Assumes lease and bulding management fees of $30/ sq ft in Brooks Assumes lease and bulding management fees of $35/ sq ft in Medicine Hat Meditech cost assumes 3 sites, 2 in Medicine Hat & 1 in Brooks Assumes existing locations are suitable as is and may be leased from MHDL. Should MHDL not lease space to AHS, and additional $130/sq ft capital cost will be required to build out new OP collection sites.

19 Option 1.3: Pre-analytical, CLS Provides OP facilities, mobile collections and Urinalysis Option 1.3: Cost Summary CLS OP collection, urinalysis, mobile collections and courier by CLS $156,200 $2,410,948 Implementation of Meditech/IT - Software and Hardware $290,400 $2,600 Implementation of Meditech/IT - Labour $214,500 Grand Total $661,100 $2,413,548 Option 1.3: Cost Details CLS OP collection, urinalysis, mobile collections and courier by CLS TOTAL $156,200 Urinalysis equipment with autovalidation $125,000 4 Centrifuges (1 refrigerated) $27,000 Courier Vehicle Setup $4,200 Implementation of Meditech/IT TOTAL $504,900 Software and Hardware $290,400 Computers/Printers/Cabling - MH Main $90,552 Computers/Printers/Cabling - MH Dunmore $81,374 Computers/Printers/Cabling - Brooks $81,374 Lab Instrument Interfaces (MDI for Urinalysis analyzers) $10,500 Client Registry/Netcare Interface (MRI.OV) $2,500 Events Repository Interface (ADM.ADT) $2,500 PTH data conversion (Extract Data) $20,000 Meditech Annual Maintenance Costs (10% cost of interface) $1,550 Misc equipment interfaces $3,000 Extraction of estimated operating cost -$2,950 IT Labour Costs $214,500 Meditech LIS Modules Set-up (Estimate 3 months) $37,500 Lab support for Set-up & UAT (Estimate 6 months) $75,000 Meditech MIS Set-up (users/pc's/printers etc) (Estimate 1 month) $12,000 Lab/LIS Labour costs to Import data into Meditech $37,500 Meditech End User training and Post live support for MHDL staff $37,500 Lab Instrument Interfaces (MDI for Urinalysis analyzers) $9,000 Client Registry/Netcare Interface (MRI.OV) $3,000 Events Repository Interface (ADM.ADT) $3,000 Option 1.3: Cost Details CLS OP collection, urinalysis, mobile collections and courier by CLS TOTAL $2,410,948 Labour (20 MLA I, 2.0 Courier, 2.0 MLA II, 1.0 Manager, 3.0 Mobile Collections) $1,873,876 Supplies cost, 170,478 x $1.80 $306,860 On site Urinalysis, 44,728 x $2.40 $107,347 Courier Operational and Vehicle Costs (2) $41,626 Mobile Collections Vehicles (3) $37,048 ECG cost, 6,000 x $4.82 $28,910 ECG recovery, 6,000 x $ $137,220 Brooks Lease, 1,000 sq $30 $30,000 2 Medicine Hat Leases, 3,500 sq $35 $122,500 Implementation of Meditech/IT TOTAL $2,600 Meditech Annual Maintenance Costs (10% cost of interface) $1,200 Misc annual expense $1,400 Assumptions Assumes lease and bulding management fees of $30/ sq ft in Brooks Assumes lease and bulding management fees of $35/ sq ft in Medicine Hat Meditech cost assumes 3 sites, 2 in Medicine Hat & 1 in Brooks Assumes existing locations are suitable as is and may be leased from MHDL. Should MHDL not lease space to AHS, and additional $130/sq ft capital cost will be required to build out new OP collection sites.

20 Option 2.1: Analytical, MHRH performs testing at MHRH Option 2.1: Cost Summary MHRH Accessioning $39,486 Chemistry $20,000 $3,120,964 Cytology (non-gyne) $72,402 Hematology $272,000 $140,460 Histology $56,000 $65,635 Microbiology $514,000 $859,025 Client Services and Store Clerk $181,511 Referrals to CLS $140,000 Renovations to Diagnostic Lab space at MHRH $1,199,416 Renovations for new Collection Lab Space at MHRH $130,000 Grand Total $2,191,416 $4,619,483 Option 2.1: Cost Details MHRH Chemistry $20,000 Backup Water System $20,000 Hematology $272,000 Mirror Image CBC analyzer (Sysmex XE2100) $162,000 Coagulation analyzer $110,000 Histology $56,000 Embedding Station $35,000 Microtome $21,000 Microbiology $514,000 Automated Streaker PREVIA $150,000 Malditoff $336,000 Lab Fridge $8,000 Incubator $20,000 Renovations to Diagnostic Lab space at MHRH $1,199,416 3,832 sq $313/sq ft $1,199,416 Renovations for new Collection Lab Space at MHRH $130,000 1,000 sq $130/sq ft $130,000 Option 2.1: Cost Details MHRH Accessioning $39,486 Labour, 0.6 FTE MLA I $39,486 Chemistry $3,120,964 Labour, 4.5 MLT, 5.2 MLA I, includes differentials. $892,032 Supplies, $2.40/CLPL x 776,957 tests $1,864,697 Supplies, $5.00/CLPL x 72,847 tests $364,235 Cytology (non-gyne) $72,402 Labour, 0.1 MLT I, 0.1 MLT II. $17,853 Supplies, $49.50/CLPL x 1,102 tests $54,549 Hematology $140,460 Labour, included in Chemistry $0 Supplies, coagulation (excl D-Dimer), $1.50/test $31,761 Supplies, D-Dimer, $11/test $4,125 Supplies, Hematology, $1.50/test $104,574 Histology $65,635 Labour, 0.5 MLA I $32,905 Supplies, $10/test $32,730 Microbiology $859,025 Labour, 3 MLA I, 3 MLT I $548,473 Supplies, $13.42/CLPL $310,552 Client Services and Store Clerk $181,511 Labour, 1.0 MLT I $115,701 Labour, 1.0 MLA I $65,810 Referrals to CLS $140,000 Referrals to CLS $140,000 Assumptions Supplies estimated at $5 per CLPL for increased complexity Chem testing Microbiology is exclusive of Chlam/GC testing, to be centralized Renovations to Diagnostic $313/sq ft Renovations to Collection $130/sq ft MHRH additional Chemistry, Cytology and Microbiology costing is taken from previous version of proposal

21 Option 2.2: Analytical, MHRH performs testing at MHRH and Micro at MHDL Option 2.2: Cost Summary MHRH Accessioning $39,486 Chemistry $20,000 $3,120,964 Cytology (non-gyne) $72,402 Hematology $272,000 $140,460 Histology $56,000 $65,635 Microbiology $1,364,000 $883,525 Client Services and Store Clerk $181,511 Referrals to CLS $140,000 Grand Total $1,712,000 $4,643,983 Option 2.2: Cost Details MHRH Chemistry $20,000 Backup Water System $20,000 Hematology $272,000 Mirror Image CBC analyzer (Sysmex XE2100) $162,000 Coagulation analyzer $110,000 Histology $56,000 Embedding Station $35,000 Microtome $21,000 Microbiology $1,364,000 Automated Streaker PREVIA $150,000 Vitek 2 $100,000 Malditoff $336,000 Lab Fridge $8,000 Meditech Micro Module $750,000 Incubator $20,000 Option 2.2: Cost Details MHDL Accessioning $39,486 Labour, 0.6 FTE MLA I $39,486 Chemistry $3,120,964 Labour, 4.5 MLT, 5.2 MLA I, includes differentials. $892,032 Supplies, $2.40/CLPL x 776,957 tests $1,864,697 Supplies, $5.00/CLPL x 72,847 tests $364,235 Cytology (non-gyne) $72,402 Labour, 0.1 MLT I, 0.1 MLT II. $17,853 Supplies, $49.50/CLPL x 1,102 tests $54,549 Hematology $140,460 Labour, included in Chemistry $0 Supplies, coagulation (excl D-Dimer), $1.50/test $31,761 Supplies, D-Dimer, $11/test $4,125 Supplies, Hematology, $1.50/test $104,574 Histology $65,635 Labour, 0.5 MLA I $32,905 Supplies, $10/test $32,730 Microbiology $883,525 Labour, 3 MLA I, 3 MLT I $548,473 Supplies, $13.42/CLPL $310, sq $35/sq ft $24,500 Client Services and Store Clerk $181,511 Labour, 1.0 MLT I $115,701 Labour, 1.0 MLA I $65,810 Referrals to CLS $140,000 Referrals to CLS $140,000 Assumptions Supplies estimated at $5 per CLPL for increased complexity Chem Microbiology is exclusive of Chlam/GC testing, to be centralized Require 700 sq ft of space for Microbiology and will be able to lease Renovations not required in MHDL diagnostic lab space Renovations not required in MHRH Diagnostic and Collection lab spaces MHRH additional Chemistry, Cytology and Microbiology costing is taken from previous version of proposal

22 Option 2.3: Analytical, MHRH performs majority of testing, select testing sent to CLS Option 2.3: Cost Summary MHRH CLS Total Accessioning $65,810 $0 $65,810 Chemistry $20,000 $2,582,737 $287,956 $20,000 $2,870,693 Cytology (non-gyne) $64,308 $0 $64,308 Hematology $272,000 $140,460 $196 $272,000 $140,656 Histology $56,000 $65,635 $56,000 $65,635 Microbiology $364,000 $163,531 $372,749 $364,000 $536,280 Client Services and Store Clerk $181,511 $0 $181,511 Grand Total $712,000 $3,199,684 $0 $725,209 $712,000 $3,924,893 Option 2.3: Cost Details MHRH Chemistry $20,000 Backup Water System $20,000 Hematology $272,000 Mirror Image CBC analyzer (Sysmex XE2100) $162,000 Coagulation analyzer $110,000 Histology $56,000 Embedding Station $35,000 Microtome $21,000 Microbiology $364,000 Lab Fridge $8,000 Incubator $20,000 Malditoff $336,000 Option 2.3: Cost Details MHDL Accessioning $65,810 Labour, 1.0 FTE MLA I $65,810 Chemistry $2,582,737 Labour, 3.8 MLT, 3.8 MLA I, includes differentials. $718,040 Supplies, $2.40/CLPL x 776,957 tests $1,864,697 Hematology $140,460 Labour, included in Chemistry $0 Supplies, coagulation (excl D-Dimer), $1.50/test $31,761 Supplies, D-Dimer, $11/test $4,125 Supplies, Hematology, $1.50/test $104,574 Histology $65,635 Labour, 0.5 MLA I $32,905 Supplies, $10/test $32,730 Microbiology $163,531 Labour, 1.0 MLT I $115,702 Supplies, $13.42/CLPL $47,829 Client Services and Store Clerk $181,511 Labour, 1.0 MLT I $115,701 Labour, 1.0 MLA I $65,810 Assumptions Excludes any renovations at MHRH Diagnostic and Collection lab CLS operational costs are based on calculated per test costs and are inclusive of supplies and labour Existing referrals are excluded and assumed to remain the same as current state Excluded Urinalysis tests from Chemistry supplies, as will be performed at OP site and costed there

23 Testing to be referred to CLS in option 2.1 & 2.2 ANTI-HBS CHLAM NAAT SWAB CHLAM NAAT URINE GIARDIA GONO NAAT SWAB GONO NAAT URINE HBS AG MRSA SCREEN MYCOPLASMA PARASITOLOGY ROTAVIRUS SYPHILLIS Testing to be retained by MHRH in option 2.3 ANAEROBIC CULTURE BLOOD CULTURE C DIFF TOXIN EAR CULTURE EYE CULTURE GIARDIA MRSA SCREEN PINWORM EXAM SEMINAL - CELLS SEMINAL - INFERTILITY SEMINAL - POST VAS STOOL CULTURE STOOL MICROSCOPY (WCB) VRE WOUND CULTURE

24 Business Case - Addendum South Zone Laboratory Service Model Latest Revision: August 24, 2015 Version Control: 2.1 draft Prepared By: Dorothy Ward, Lori Johnston, Shelley Rawlake Sponsoring Department: Business Coordinator: Executive Owner: South Zone Laboratory Dorothy Ward Shelley Rawlake

25 1. Executive Summary Alberta Health Services (AHS) and the Medicine Hat Diagnostic Laboratory (MHDL) entered on October 6, 2014, into a three-year, final agreement that expires on March 31, The new agreement allows for the status quo for about 30 months with a reduction in services provided by MHDL six months prior to the contract end of March 31, Services currently provided by MHDL will transition to the Medicine Hat Regional Hospital Laboratory during the last six months of the three-year agreement. This includes testing, collection, mobile and courier services that are presently contracted to MHDL. The community collection sites in Medicine Hat, Brooks and Foremost will also be maintained by AHS. Funding of $2.2 million had been approved for both renovations and equipment to enable Medicine Hat Regional Hospital to take on the work. The original Business Case recommended that AHS offer the community collections contract to MHDL. AHS decided against this based on a number of factors: there are risks with MHDL s ability to maintain staff levels, lack of a succession plan; there is risk that MHDL can not continue to provide service and because of AHS purchasing power, there is belief that AHS can provide these services at a lower cost. As a result the recommended options and financial analysis has been updated to reflect this adjusted approach. 2. Selected Options Option 1.2: Pre-analytical, MHRH Provides OP facilities, mobile collections and Urinalysis a) MHRH lab provides outpatient collections.. b) Meditech LIS system implemented by MHRH at OP facilities c) MHRH Lab provides courier service within Medicine Hat Option 2.1: Analytical, MHRH performs testing at MHRH a) MHRH Lab performs all testing including Chemistry, Hematology and Coagulation, Histology, non-gyne Cytology, most Microbiology, Blood cultures and STAT community work. b) CLS performs select M2 and M3 Microbiology testing as outlined in appendix A c) CLS retains current referral service d) MHRH Lab will be renovated and additional equipment acquired to accommodate increased volumes Page 1 of 5

26 3. Financial Analysis Year 1: Initial Investment and Costs Option Summary $'000 One-time Costs Y1 Option 1.2: Pre-analytical, MHRH Provides OP facilities, mobile collections and Urinalysis Option 2.1: Analytical, MHRH performs testing at MHRH TOTAL Initial Investment and Y Nominal value of future cashflows/cost reduction $'000 Option 1.2 and 2.1 Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Cumulative Total Cost and One Time IT and Minor Equipment Purchases Cost including 3% assumed inflation Benefit including 3% assumed inflation Cost reduction Annual Cost (Increase)/Reduction including Initial investment Payback in years using Nominal values 1.35 Notes and Assumptions: Initial and One time costs detailed in Appendix Inflation adjustments have been applied annually at 3% starting in Year 2 for Cost and Benefit. Cost reduction is the jointly agreed upon reduction in contract payments to MHDL prior to transition of Lab Services to AHS. Page 2 of 5

27 Appendix: Detail of requirements for transition of LAB Services to AHS in South Zone. Option 1.2: Pre-analytical, MHRH Provides OP facilities, mobile collections and Urinalysis MHRH Onetime OP collection, urinalysis, mobile collections and courier by MHRH $146,040 $266,595 Implementation of Meditech/IT - Software and Hardware $0 $262,075 Implementation of Meditech/IT - Labour $0 $199,500 Total $146,040 $728,170 Option 2.1: Analytical, MHRH performs testing at MHRH Option 2.1: Cost Summary Onetime Accessioning $54,512 $57,500 Chemistry $0 $0 Cytology (non-gyne) $0 $0 Hematology $405,600 Histology $154,097 Microbiology $194,654 Urinalysis $13,734 Renovations to Diagnostic Lab space at MHRH $600,000 Total $1,422,597 $57,500 Grand Total for 1.2 and 2.1 Consolidated Summary Onetime OP collection, urinalysis, mobile collections and courier by MHRH $146,040 $266,595 Implementation of Meditech/IT - Software and Hardware $0 $262,075 Implementation of Meditech/IT - Labour $0 $199,500 Accessioning $54,512 $57,500 Chemistry $0 $0 Cytology (non-gyne) $0 $0 Hematology $405,600 $0 Histology $154,097 $0 Microbiology $194,654 $0 Urinalysis $13,734 $0 Renovations to Diagnostic Lab space at MHRH $600,000 $0 $1,568,637 $785,670 $2,354,307 Page 3 of 5

28 Option 1.2 MHRH Onetime OP collection, urinalysis, mobile collections and courier by MHRH TOTAL $146,040 $223,209 moved to MHRH Centrifuge and fridge/freezers - MH Collections $21,860 1 Centrifuge and fridge/freezers - Brooks Collections $10,603 4 ECG - 2 new and 2 purchased through MHDL - MH $35,000 2 ECG - 1 new and 1 purchased through MHDL - MH $17,500 Brooks Equipment (2 microscope, 1 centrifuge, 1 fridge, 1 freezer) $61,077 Other equipment and furnishings - MH $146,480 Other equipment and furnishings - Brooks $76,729 Implementation of Meditech/IT TOTAL $0 $461,575 Software and Hardware $0 $262,075 Data Network $61,457 Voice $36,399 Telehealth $1,650 End Device $60,339 Data Network $19,517 Hardware $32,684 7 interfaces in total for each piece of equipment $27,300 PTH data conversion (Extract Data) $20,000 Meditech Annual Maintenance Costs (10% cost of interface) $2,730 IT Labour Costs $199,500 Meditech LIS Modules Set-up (Estimate 3 months) $37,500 Lab support for Set-up & UAT (Estimate 6 months) $75,000 Meditech MIS Set-up (users/pc's/printers etc) (Estimate 1 month) $12,000 Lab/LIS Labour costs to Import data into Meditech $37,500 Meditech End User training and Post live support for MHDL staff $37,500 Option 1.2 MHRH Onetime OP collection, urinalysis, mobile collections and courier by MHRH TOTAL $0 $43, FTEs (temp MLA) $39,186 3 Vehicles and Equipment $4,200 Page 4 of 5

29 Option 2.1 MHRH Total Accesssioning $54,512 2 CellGard $24,000 2 Fridge $11,720 Centrifuge $18,792 Onetime Total Hematology $405,600 Mirror Image CBC analyzer (Sysmex XE2100) $275,000 2 Microscopes $28,600 2 Coagulation Analyzers $102,000 Total Histology $154,097 Embedding Station $58,097 Microtome $21,000 Special Stainer $75,000 Total Microbiology $194,654 Automated Micro Specimen Plater $135,000 Microscope $14,300 Gram Stainer $13,000 2 Incubators $32,354 Total Urinalysis $13,734 Analyzer - backup $7,500 Centrifuge $6,234 Renovations to Diagnostic Lab space at MHRH $600,000 3,832 sq $313/sq ft $600,000 Option 2.1 MHRH Onetime Accessioning $0 $57, FTE (MLT, MLA I, MLA II) Installation and Minor Equipment $57,500 Page 5 of 5