One medical testing company was led by a convicted felon, another was accused of delays and unreliable results
Like many states, Florida has worked hard to quickly ramp up diagnostic testing for SARS-CoV-2, the coronavirus that causes the COVID-19 illness. For the most part this has been a good thing. However, local media in that state reported problems with two no-bid contracts for clinical laboratory testing, including one with a Dallas-based company whose founder pleaded guilty last year to two felonies involving insurance fraud.
In a press conference announcing the two deals, Florida Governor Ron DeSantis said, “We have two contracts in place with two new labs that will increase our lab capacity by 18,000 samples per day.” He added that he expected a 24- to 48-hour turnaround.
“That’s a lot better than we’ve been getting from Quest and LabCorp,” he said. “These labs will be primarily where we send our samples that we collect in the long-term-care and assisted-living facilities and at the community-based walk-up sites.”
The announcement followed DeSantis’ March 9 emergency decree, which allowed state agencies to award contracts to companies without undergoing formal bidding processes, reported Florida Bulldog, an independent non-profit news site.
In his announcement, DeSantis did not identify the companies that had received the lab test contracts. However, Florida Bulldog reported that those companies were:
Indur Services, a Dallas-based health-coaching company, and
Southwest Regional PCR, a CAP-accredited lab in Lubbock, Texas, that does business as MicroGenDX Laboratory (MicroGen Diagnostics, LLC).
The Indur contract—initially valued at $11.3 million—included $10.2 million for 140,000 COVID-19 RT-qPCR test kits, plus additional payment for supplies, Florida Bulldog reported based on information from the state contract database. Later, the contract was reduced to $2.2 million solely for supplies.
The MicroGenDX contract—valued at $11 million—called for 8,000 tests per day for 14 days at a cost of $99 per test, Florida Bulldog reported. That contract was later cancelled due to concerns about reliability and processing speed.
Indur’s Legal Troubles
Indur is a self-described “health and wellness lifestyle and products company” founded in 2017 by Brandt Beal, according to Business Insider. In 2019, Beal pleaded guilty to two felonies involving insurance fraud in Texas and was given 10 years’ probation in each case, Florida Bulldog reported. He also was required to pay restitution. He pleaded guilty to a separate charge of felony theft in 2017 and was sentenced to nine years’ probation.
In an interview with Florida Bulldog, Beal claimed that “the man who pleaded guilty to those charges is actually his cousin with the same name.” However, Beal “would not provide requested contact information for his cousin,” the Florida Bulldog reported, which posted photos demonstrating that the Indur founder and the person who pleaded guilty to the felonies were the same individual.
Jason Mahon, Communications Director at the Florida Division of Emergency Management (above), told Florida Bulldog that Indur’s COVID-19 testing contract was scaled back in May “because Indur Services did not provide testing directly, but rather was providing testing services through another company.” The state then contracted directly with that clinical laboratory company to obtain the COVID-19 testing services. “Time is of the essence when securing these critical testing supplies for Floridians, and that limited time does not allow for the Division to vet every company’s executive leadership or board of directors,” Mahon told Florida Bulldog. (Photo copyright: LinkedIn.)
The amended contract, valued at $2.2 million, called for Indur to deliver swabs and vials. “To date, everything that’s been ordered they’ve delivered on,” said Jared Moskowitz, Director of the Florida Division of Emergency Management department.
Testing Delays Snag MicroGen Diagnostics
The state cancelled its contract with MicroGenDX on May 15, Florida Bulldog reported.
“As with any lab, we do our due diligence to ensure the company will be able to provide reliable services before sending any samples,” said Jason Mahon, Communications Director at the Florida Division of Emergency Management. “Upon further interaction with this vendor, the Division determined that the state could not be 100% confident in the results that would come from this vendor, or with the processing speed, which is critical for COVID-19 testing.”
This came as AdventHealth, a non-profit health system based in Altamonte Springs, Fla., was having its own difficulties with MicroGenDX.
On May 16, AdventHealth announced that it had terminated a COVID-19 testing contract with an unnamed third-party lab, claiming that the provider was “unable to fulfill its obligation.” Multiple media outlets later revealed MicroGenDX as the third-party lab, and USA Today reported that the FDA had launched an investigation.
“This issue impacts more than 25,000 people throughout Central Florida,” stated an AdventHealth press release. “This situation has created unacceptable delays and we do not have confidence in the reliability of the tests.” AdventHealth said it would contact affected individuals about the need for retesting.
However, MicroGenDX CEO Rick Martin refuted the health system’s claims. “You can go after me because I didn’t meet your capacity and I couldn’t deliver on your drive-through testing because of things that I couldn’t control, but don’t attack the reliability of my test,” he told the Orlando Sentinel.
According to MicroGenDX, the company received an emergency use authorization (EUA) from the FDA on April 23 for an internally-developed RT-PCR test that can be performed on nasal swabs or sputum samples, noted a press release. The tests are run in the company’s lab facility in Lubbock, Texas.
One factor in the dispute was the handling of patient samples, USA Today reported. Martin told reporters that representatives from AdventHealth had visited the lab and observed samples that were stored at room temperature. “[Martin] maintains the samples were still valid and that the delays were due to AdventHealth not providing proper patient data and the lab running out of plastic parts used in its equipment,” noted USA Today.
Mahon told Florida Bulldog that the state did not send samples to MicroGenDX for processing. And the Florida Bulldog reported that Martin said his lab was so “hammered with huge volumes of samples” that he would have turned down any requests, adding that Martin “stood by the reliability and accuracy of his firm’s testing and said he looks forward to a day of vindication after federal inspectors conduct any inquiries.”
Collectively, these news stories scratch the surface of a bigger situation involving COVID-19 laboratory testing. The fact that Congress authorized billions of dollars to fund COVID-19 testing was noticed by some individuals who saw the funding as an opportunity to “make a quick buck” if they could get contracts to provide COVID-19 testing—whether they owned a CLIA-certified complex laboratory or not.
Thus, it’s no surprise that more companies are bidding on COVID-19 testing contracts. What remains unknown is how many of those companies are actively soliciting COVID-19 testing contracts throughout the United States.
Given this situation, and the facts recounted above, it is reasonable to ask an obvious question: Why did Florida state officials not do a more rigorous check into the credentials of the clinical laboratory entities they were preparing to award no-competitive-bid contracts to for COVID-19 testing?
This research indicates consumers could increase their demand for clinical laboratory testing for genetic risk factors associated with addiction
Rutgers University researchers recently published a study of hundreds of college students that suggests there could be high future consumer demand for genetic testing related to addiction risk. What is significant is that the college students surveyed are members of Generation Z, people born between the mid-1990s and early 2010s.
Zoomers grew up knowing about the human genome, and they are likely aware of new genetic insights, new gene therapies, and new clinical laboratory tests that analyze genomic data to diagnose disease and/or identify the individual’s predisposition to certain genetic conditions.
Thus, consumer demand among Gen Z for clinical laboratories to provide such tests in the future could drive a new class of diagnostic testing that would generate a new revenue stream for clinical laboratories, while also enabling labs to deliver a value-added service to healthcare consumers and their physicians.
“Overall, the [study] results strongly encourage the notion that real genetic risk scores may prove helpful in preventing and treating alcohol addiction,” Danielle Dick, PhD, Director of the Rutgers Addiction Research Center and lead author of the study, told Neuroscience News. The results of the Rutgers study could lead to increased demand for clinical laboratory tests to determine addiction risk. (Photo copyright: Rutgers University.)
Methodology Used in Rutgers Study
To complete their study, the Rutgers researchers surveyed 325 college students and asked how they would react to learning about genetic test results indicating their risk for alcohol use disorder. The researchers found that despite the complexity of the genetic factors underlying addiction, respondents understood the connection between genetic risk and the likelihood of developing alcoholism. And most respondents indicated they would take precautions if they learned that they were at high risk.
The research “paves the way for studies using real genetic data and for integrating genetic information into prevention and intervention efforts,” the study’s lead author, Danielle Dick, PhD, Director of the Rutgers Addiction Research Center (RARC), Greg Brown Endowed Chair in Neuroscience, and Professor, Robert Wood Johnson Medical School/Psychiatry, told Neuroscience News.
The story notes that most genes associated with addiction have only been discovered recently. Commercial genetic testing services do not provide information about addiction risk, “so very few people have ever received genuine information about their genetic tendency toward addiction,” Neuroscience News noted.
The researchers obtained their data as part of a trial that sought to evaluate “the efficacy of educational information on understanding of polygenic risk scores for alcohol use disorder,” they wrote in the American Journal of Medical Genetics.
After recruiting the study participants, the researchers randomly assigned them to one of three groups:
A control group of 109 students that received no educational information.
A group of 105 students who were directed to a website with educational information about alcohol use disorder, “including a definition, consequences, and ways to reduce risk,” the researchers wrote.
A group of 111 students who were directed to a website with the same information about alcoholism, in addition to information about the role of genetics in addiction risk. This included information about “genetic variation, risk variants, how polygenic scores are created, and how they can be interpreted,” the researchers noted.
In all three groups, the survey asked respondents to imagine three hypothetical scenarios: that they had 1) a below-average genetic risk of developing alcoholism, 2) an average risk, and 3) an above-average risk.
For each level of risk, they answered a series of questions “that assessed psychological distress, perceived chance of developing alcohol use disorder, and intentions related to seeking additional information, talking to a healthcare provider, and drinking behavior,” the researchers wrote.
Results of the Rutgers Study of Genetic Risk for Alcohol Use Disorder
The researchers found that exposure to educational information had a minimal impact on the responses, which were generally consistent across all three groups.
With higher levels of risk for alcohol use disorder, respondents were more likely to indicate psychological distress, more likely to seek additional information, more likely to talk to a healthcare provider, and more likely to change drinking behaviors.
And “as the level of genetic risk increased, the perceived chance of developing alcohol use disorder significantly increased,” the researchers wrote.
Does Learning of Risk Alter Behavior?
Citing previous research, Dick said that addiction risk is roughly half determined by genetic factors, “but there’s no single addiction gene that’s either present or absent,” Dick told Neuroscience News. “Instead, there are thousands of interacting genes, so each person’s genetic risk falls somewhere on a continuum.”
The risk is distributed on a bell curve, she said, and most people fall in the middle. But despite this complexity, “study participants formed relatively accurate impressions of the risk for addiction associated with various genetic results.”
The researchers appeared to be most encouraged that the respondents indicated a willingness to take precautionary measures if they learned they had a high genetic risk of developing alcoholism.
“There was a hope that compelling information about elevated genetic risk would get people to change behavior, but we haven’t seen that happen for other aspects of health,” Dick said. “Initial studies suggest that receiving genetic feedback for heart disease, lung cancer, and diabetes does not get people to change their behavior. Getting people to alter their behavior is hard.”
Future Rutgers studies will investigate understanding of risk scores in other populations, Neuroscience News reported.
GI pathologists will be interested in how the Endoculus device uses tank-like treads to traverse the gastrointestinal tract, where it can capture images and perform biopsies
Gastroenterologists (GI) may soon gain a useful new tool for use in gathering both biopsies and diagnostic information when examining the gastrointestinal tract. Ongoing development of a new robotic device promises both capabilities using technology that will be of interest to GI pathologists and clinical laboratory scientists.
The minute robotic device uses tank-like treads to traverse the colon. While there, it can capture live images and perform biopsies under the control of a gastroenterologist. The researchers believe the robotic technology will benefit GIs performing the colonoscopies as well as the pathologists called upon to analyze biopsies.
“Currently, endoscopy consists of a gastroenterologist using a semi-rigid, long rope-like device and endoscope to propel through your colon manually,” Gregory Formosa, PhD (above) a member of the AMTL team that developed Endoculus, said in a YouTube video describing the device. “We think that a robotic capsule endoscope can replace conventional endoscopes by making them faster, safer, and more robust than a human operator can do currently with traditional techniques,” he added. (Photo copyright: University of Colorado.)
AMTL researcher Gregory Formosa, PhD, said the team’s goal is to “have a capsule-sized robot that can actively traverse [a patient’s] entire gastrointestinal tract and send out diagnostics in real time, as well as autonomously navigate itself to localize problematic areas within [the] intestinal tract.”
Formosa noted that colorectal cancer is “the third-most fatal and diagnosed cancer in the United States.” But if caught at an early stage, these cancers are “95% treatable,” he added. “So, if we can get people screened early, we definitely can reduce the fatality rate of colorectal cancers significantly.”
Currently about the size of a C battery, Endoculus (above) is a “fully packed medical device, complete with a camera, an air pump for inflating the colon, a water pump for cleaning, and a tool port for holding biopsy snares,” states a University of Colorado news story, titled, “A Robot May One Day Perform Your Colonoscopy.” (Photo copyright: University of Colorado.)
How Endoculus Works
One key to the device are the four treads, which are designed for traction on digestive tissue.
“You have to forget about everything you know from a locomotion standpoint because driving around inside the body is very different than driving around in a car,” said Rentschler in the University of Colorado news story. “The environment is highly deformable. It’s very slick. There are sharp peaks that you have to go over.”
The university news story noted the current availability of ingestible “pill cams” that can take photos as they travel through the digestive system. But once swallowed, their movements cannot be controlled.
“For our robots to be able to reach those regions that [can be] reached with a pill-cam—but also be able to stop and look around—that could be a big paradigm shift in the way we view these procedures,” said Micah Prendergast, PhD, an AMTL research team member.
Could Biopsies Be Diagnosed In Situ with Endoculus?
The researchers currently view Endoculus as a potentially better way to perform conventional biopsies. But could it lead to bigger advancements?
“Researchers continue to develop devices to help various specialist physicians—in this case GIs—do more when treating patients,” said Dark Daily Publisher and Editor-in-Chief Robert Michel. “This device fits that description. It is designed to improve the ability of GIs to evaluate the colon. Not only does this device do that, but it can also collect a biopsy at sites of interest. In this way, it is a device that can be a benefit to pathologists who will analyze the biopsy.
“With improvements in digital cameras and associated AI-powered analytical tools, the day might not be far off when a device like this can use the camera and artificial intelligence to diagnose the tissue of interest in situ,” he added. “This might create the opportunity for pathologists to be present in the exam room during the procedure, or even viewing the images remotely.
“Not only would that eliminate the need to collect a tissue specimen that must then be sent to a pathology lab, but it would create a new opportunity for pathologists to add value to patient care while shortening the time to diagnosis for the tissue of interest during these procedures,” Michel noted.
Though lenders and landlords may be willing to renegotiate terms, communication is key, the lawyers suggest
COVID-19 has vastly increased demand for clinical laboratory testing. But at many labs, the pandemic has caused much damage to the bottom line. Due to numerous factors—including reductions in elective procedures and increased operating costs—many independent lab companies have seen a 30% to 60% cut in revenue, says attorney Richard S. Cooper, JD, of McDonald Hopkins, a law firm that represents more than 350 medical laboratories across the US.
“Some of that was offset where clinical laboratory companies took on COVID testing. But in our experience, it was a partial offset at best,” he said in an exclusive interview with Dark Daily. Cooper is co-chair of the firm’s National Healthcare Practice Group.
To address these challenges, the firm has advised lab companies to take a hard look at their:
operations,
market conditions,
supplier relationships,
lender agreements, and
other elements of their businesses.
Lab executives, he says, should consider steps to reduce expenses or increase revenues, such as increasing prices if conditions permit. In extreme cases, medical laboratories may have to consider:
Chapter 11 bankruptcy,
Consensual out-of-court restructuring, or
Buyouts.
“I think lenders have been willing to work with borrowers, but I don’t think this has been a ‘get out of jail free’ card,” Richard S. Cooper, JD (above), co-chair of the National Healthcare Practice Group at McDonald Hopkins, told Dark Daily. “Lenders are going to look at borrowers that were struggling before the whole COVID-19 situation with a more critical eye. Lenders seem to be more willing to work with borrowers that were doing well, but then were hit with a temporary hiccup.” (Photo copyright: McDonald Hopkins.)
Cooper, and colleague Jason M. Smith, JD, elaborated on these points during the interview. Smith is chair of the Commercial Finance Group. “The vast majority of my work is representing either lenders or borrowers in credit relationships,” Smith explained.
Dealing with Lenders
For many lab companies facing financial distress, the most important action, the lawyers suggest, may be to review loan or credit agreements and get a better understanding of the lab’s obligations. Then, the lab can approach lenders for potential relief, such as deferred payments or temporary adjustments to reporting requirements.
Either way, “communication is key,” Smith said, adding that labs should first “come up with projections and cashflow analyses and figure out which of those requirements they are not going to be able to meet.”
Then, Smith added, labs should reach out proactively. “Lenders generally don’t like surprises,” he said. “They’re going to be a lot more willing to work with you when they find out about any issues directly from you, as opposed to after receiving financial statements and discovering the issues for themselves.”
Ultimately, clinical lab companies may be able to negotiate better terms, not only with financial institutions, but also with landlords, Cooper said. For example, labs may ask for rent abatement or payment deferrals. These steps “may reduce or eliminate the need to cut back on staff,” Cooper said, “which may be less disruptive of operations.”
When dealing with lenders, Cooper advises against a “Let’s throw everything at the wall and see what sticks” approach. Instead, labs should try “concrete, smaller lists of things that are really important. That’s the best way to come up with a reasonable ask for your lenders and have them take you seriously.”
When to Call Your Lawyer
Cooper says lawyers can play two different roles in these negotiations. “It’s important that lab executives discuss with their lawyers any potential violations of lease and lending documents, what the obligations are, and what the potential legal impact may be.” He added, “Labs should engage and discuss with a lawyer who’s experienced in those areas to understand how lenders and financial institutions might be willing to accommodate the lab’s financial situation by suspending or temporarily modifying the terms of those documents.”
Jason M. Smith, JD (above), chair of the Commercial Finance Group at McDonald Hopkins, told Dark Daily, “Clinical laboratory companies could approach their lender and/or landlord directly. You don’t necessarily need a lawyer to do that. On the other hand, a lot of clients prefer that their lawyer at least participate in any dialogue with the landlord and lender. But it’s not absolutely necessary. So, the lawyer can be an information resource or an active participant in negotiating.” (Photo copyright: McDonald Hopkins.)
The Bankruptcy Option
Clinical laboratory companies that are in serious financial trouble may have to consider drastic measures, such as bankruptcy. In a Chapter 11 bankruptcy, Cooper explains, you can continue to operate under supervision of the court while restructuring the business and renegotiating terms with lenders. But “there’s always a stigma attached to any kind of restructuring filing,” he said. “It’s public and it can raise questions among your suppliers and customers as to whether you’re sustainable. So, it would be more of a last measure.”
A more preferable course, he says, may be to negotiate a consensual out-of-court workout in which creditors agree to extend repayment terms or reduce debt.
A Good Time for Buyouts?
Another option for distressed lab companies may be buyouts. “We are starting to see a pickup in [merger and acquisition] activity,” Cooper says. “Some of it is normal activity not necessarily driven by financial distress. There’s a company that’s attractive in the marketplace and buyers are interested in that laboratory.”
In other situations, he noted, clinical laboratories might not feel compelled to sell, but “they want to become part of a larger platform with better capital resources to help them withstand the COVID-19 scenario and future market-altering events.”
Cooper continued, “there are other labs that basically say, ‘We’re not going to make it on our own. We need to find a buyer. We need to find capital.’ And then, of course, there are buyers that see market opportunities in labs which are available for acquisition that otherwise might not have been, and perhaps on more favorable terms.”
Some labs, he says, may wait for their revenues to recover, so they can “go to market in a stronger position.” But, “there clearly will be some labs out there that will be available, and available at a lower price than they would have been pre-COVID.”
Regardless of which path a financially-distressed clinical lab company chooses to take as a way to resolve the situation, it is best to take the initiative to consult with experienced attorneys, CPAs, and other advisors while there is still time to negotiate different solutions with lenders, landlords, mortgage companies, and others.
Another push for price transparency steps up pressure on medical laboratories and anatomic pathology groups to develop compliance strategies
Clinical
laboratories and anatomic
pathology groups are under increasing pressure to develop strategies for
making their test prices more accessible to patients. Those pressures are
likely to grow due to newly proposed federal regulations that aim to allow
patients to compare prices for healthcare services on their smartphones.
This new proposed rule comes less than a year after a rule
involving hospital prices was implemented. As of January 1, 2019, the federal
Centers for Medicare and Medicaid Services (CMS) required
US hospitals to post their prices online. Dark
Daily reported last year about the risks and opportunities posed by
that move.
“In our current health system, there is an asymmetry of information for patients. They have few ways if any to anticipate or plan for costs, lower or compare costs, and, importantly, measure their quality of care or coverage relative to the price they pay. Transparency in the price and cost of healthcare could help address some of those concerns by empowering patients with information they need to make informed decisions,” said Donald Rucker, MD (above), National Coordinator for Health Information Technology (ONC), in remarks delivered to the US Senate. (Photo copyright: ONC.)
Giving Patients Access to Their Health Information
In May, officials with those agencies discussed the
regulations in prepared remarks for a hearing of the HELP committee.
“A central purpose of the proposed [ONC] rule is to
facilitate patient access to their EHI on their smartphone, growing a nascent
patient- and provider-facing app economy,” he said, noting that this access is
impeded by a lack of interoperability between health information systems, as
well as restrictions on information exchange imposed by health IT developers.
The proposed rule will mandate use of common software
standards so that app developers can access health information systems from
different vendors. As a result, patients could choose their own apps to view
their data regardless of which electronic
health records (EHR) system their provider uses. The rule also includes
provisions for dealing with so-called “information blocking”
by vendors, Rucker noted.
If the proposed rule is implemented as currently written,
there would be a need for clinical laboratories and pathology groups to ensure
that their laboratory
information systems (LIS) meet the specifications of the new rule. This may
mean that, along with enabling two-way digital interfaces with physicians’
EHRs, labs also would need to be able to pass data to the apps and mobile
devices used by patients that are covered by the proposed new rule.
“ONC’s proposed rule primarily focuses on clinical data,” he
said. “However, advances in computer science and the maturity of data standards
are accelerating the convergence of medical data with billing and price data.
As such, the rule proposes to include such information as part of a patient’s
EHI that should be available for access, exchange, and use.”
Enabling cost comparisons will allow patients to make
more-informed decisions about their healthcare, Rucker added. But he
acknowledged that implementing this vision won’t be easy.
“Unfortunately, the complex and decentralized nature of how
payment information for healthcare services is currently created, structured,
and stored presents many challenges to achieving price transparency,” he said.
“This entire information chain is geared to retrospective payments rather than
prices.”
Rucker told the HELP committee that the [ONC] will be
seeking public input about how to capture price information and enable price
transparency. Once the rule is finalized and published, providers will have two
years to comply.
Medical Laboratories Need a Strategy for Providing Access
to Patient Records
The proposed CMS rule imposes requirements on payers to
provide electronic access to health claims and other information for their
enrollees.
In her prepared remarks
for the Senate HELP hearing, Kate Goodrich,
MD, Director of the Center for Clinical Standards and Quality (CCSQ) and
CMS Chief Medical Officer, said, “A core policy principle underlying our
proposals is that every American should be able, without special effort or
advanced technical skills, to see, obtain, and use all electronically available
information that is relevant to their health, care, and choices—of plans,
providers, and specific treatment options.”
That’s all well and good, however, as Fred Schulte, a senior
correspondent for Kaiser
Health News, wrote in his coverage of the two proposed rules, “Meeting
these goals could prove to be a tall order.”
He continued, “For well over a decade, federal officials
have struggled to set up a digital records network capable of widespread
sharing of medical data and patient records.” Not to mention the billions of
dollars already spent by the CMS and ONC incentivizing providers to implement
truly interoperable health
information exchange (HIE) systems nationwide.
Nevertheless, pressure for greater consumer data access and
price transparency will likely continue to build across the healthcare
industry, including on medical laboratories. Price transparency as a trend is
making steady forward progress, despite resistance by hospitals, physicians,
medical associations, and others.
All clinical laboratories should have a strategy to make lab
test prices readily available to patients. It is something that will become
common at some future point.
