Agreement calls for both parties to collaborate in offering esoteric and reference anatomic pathology services nationally
It is an effort to align their clinical laboratory and anatomic pathology services to the evolving needs of hospitals, physicians and other providers. To achieve this goal, two laboratory organizations in the Pacific Northwest finalized months of negotiations and inked an agreement that involves an equity investment and the creation of a new esoteric anatomic pathology collaboration.
Yesterday, PAML, LLC, of Spokane, Washington, and CellNetix, based in Seattle, Washington, announced that PAML had completed a minority investment in the technical laboratory business division owned by CellNetix. The two companies also stated that they entered into an agreement to work together to form a “jointly owned national Esoteric Anatomic Pathology reference laboratory offering.”
One Business Response to Changes in Pathology Reimbursement
For anatomic pathologists across the nation, this new agreement is notable. Independent pathology laboratory companies and private pathology group practices are dealing with a series of serious hammer blows to reimbursement for key anatomic pathology procedures that have happened over the past 18 months. Facing significant declines to important sources of revenue, these pathology organizations are looking for effective business strategies they can use to sustain financial viability.
As a response to the deterioration in reimbursement for anatomic pathology testing services, many experts predict that there will be a wave of acquisitions, mergers, and consolidation among anatomic pathology organizations. From that perspective, aspects of the deal between PAML and CellNetix may be a harbinger of things to come.
This announcement involving PAML and CellNetix was expected. In December, 2012, both companies had issued a press release that revealed the existence of a letter of intent between PAML and CellNetix that involved a minority investment in CellNetix by PAML.
Pathologists at CellNetix Sold Minority Interest in Their Histology Lab
DarkDaily understands that the pathologists at CellNetix have sold a minority interest in the technical (histology) laboratory they own. They have kept 100% ownership in their professional corporation.
From that perspective, this is similar to the deals that were done in past years by American Pathology Partners of Nashville, Tennessee. However, what was different with APP’s strategy is that it purchased 100% ownership of the technical laboratories owned by the selling pathologists, who kept 100% interest in their professional corporations.
As stated in their press releases about this new agreement, PAML and CellNetix intend to develop a unified offering rooted in esoteric and reference anatomic pathology services. The two collaborators want to serve the national marketplace.
Medical Laboratories Need to Support Efforts to Integrate Clinical Care
This would be consistent with the trend toward greater integration of clinical services. It is also complementary with the market forces encouraging the formation of accountable care organizations and medical homes, for example.
Architects of this new collaboration are Francisco R. Velazquez, M.D., S.M., who is President and Chief Executive Officer at PAML, and Don Howard, M.D. Ph.D., Chairman and Chief Executive Officer at CellNetix. Velazquez was quoted in the press release as saying “In order to adapt and evolve in a fast changing world, we need to think differently about comprehensive care delivery models. PAML, LLC and CellNetix have done exactly that.”
Because PAML has a presence in a substantial number of regional markets across the United States, it can open doors for Seattle-based CellNetix in this markets. For its part, CellNetix brings 50 pathologists to the collaboration. These pathologists have expertise in 25 different subspecialties.
PAML Is Pursuing New Business Strategies
Since his arrival at PAML in early 2012, Velazquez has worked to position this large, independent clinical laboratory company to play a larger role as a provider of reference and esoteric testing.
Velazquez has made changes to the executive team at PAML and the company sports a new logo. The minority investment in CellNetix is the first such transaction PAML has announced to the public since Velazquez assumed his executive duties last year.
The public statements of both laboratory companies emphasize their common plan to ramp up a menu of reference and esoteric testing services centered upon advanced molecular diagnostics and genetic testing. This will position the collaboration to provide sophisticated medical laboratory testing services to clinicians that support advanced diagnosis of disease and play a role in guiding therapeutic decisions, particularly for cancer.