News, Analysis, Trends, Management Innovations for
Clinical Laboratories and Pathology Groups

Hosted by Robert Michel

News, Analysis, Trends, Management Innovations for
Clinical Laboratories and Pathology Groups

Hosted by Robert Michel
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Private Equity Firm General Catalyst to Buy Integrated Delivery Network Summa Health as Testing Ground for New Venture

Switching from non-profit to for-profit may affect how clinical laboratories operate in the new healthcare system

Shifting away from fee-for-service payment models and towards value-based healthcare is the goal of many non-profit hospital systems. One such transformation is underway at Summa Health, one of the largest integrated delivery networks (IDNs) in Ohio. On January 17, venture capital firm General Catalyst announced that its subsidiary—Health Assurance Transformation Corporation (HATCo)—had entered into an agreement to purchase Summa Health.

“HATCo’s investment into Summa Health will drive not only near-term benefit to the organization and the patients it serves but also sustainable, long-term transformation through a true shift to value-based care and access to new revenue streams, resources, innovations, and technologies,” states a General Catalyst news release penned by Marc Harrison, MD, CEO of HATCo.

Harrison was formerly President and CEO of Intermountain Healthcare, a 33 hospital not-for-profit IDN in Salt Lake City, Utah. This is a noteworthy fact because Intermountain Health has a national reputation as an innovative multi-hospital health system. Some observers believe that Harrison’s involvement signals that General Catalyst believes it has a care model that can deliver better patient care in a profitable manner.

“Under its new structure, Summa will become a for-profit organization, and General Catalyst says it will introduce new tech-enabled solutions that aim to make care more accessible and affordable,” CNBCreported.

“This is the first time that anybody has done anything quite like this,” Harrison told CNBC. “There are many digital health solutions that are out there as point solutions. This is the first holistic transformation of a health system to a thoughtful combination of digital and in-person care.”

“Our intent is to build on and augment the system’s considerable strengths. First and foremost, we share Summa Health’s commitment to serving all members of the community,” wrote HATCo CEO Marc Harrison, MD (above), in a news release. “The Summa Health team also shares our belief that achieving healthcare transformation will require a shift to value-based care … Together, we intend to demonstrate that a model that is better for patients can also be good for business, creating a blueprint for other health systems to effectively serve all people in their communities.” How this shift will affect Summa’s clinical laboratories remains to be seen. (Photo copyright: General Catalyst.)

Betting on Healthcare

In 2023, General Catalyst, an American venture capital firm headquartered in Cambridge, Mass., unveiled its Health Assurance Transformation Corporation (HATCo) and began shopping for a health system to buy.

HATCo has 20 healthcare systems in a network that spans 43 states and four countries, according to Healthcare Dive. The company’s news release states it has been focused on three areas since its start-up:

  • Helping its partners on their “transformation journeys.”
  • Using technology to build an “interoperability model.”
  • Planning to “acquire and operate a health system for the long-term.”

“The goal of the purchase is for the health system to act as a proving ground for General Catalyst to test ways to improve hospital operations and patient care, without risk aversion or cash shortfalls, management said,” Healthcare Dive reported.

Thus, the firm’s announcement to purchase a health system last October “sent shockwaves through the healthcare industry” according to Healthcare Dive.

“At its core, General Catalyst’s long-term Health Assurance thesis is that value-based care not only is good for patients, but also can be a successful business model if deployed with innovative technology at meaningful scale. Its rationale for buying a health system is a belief that it can improve on the traditional model of not-for-profit health system governance and management by embedding new incentives,” wrote Christopher Kerns, CEO and co-founder of Washington, D.C-based research firm Union Healthcare Insight, in a blog post analysis.

General Catalyst’s HATCo may offer up “a profit motive, a longer time horizon, and a channel for dozens of innovative companies to demonstrate value,” he noted.

“The single biggest barrier to promising young healthcare companies is an inability to scale. Many of their innovations—in digital health, patient engagement, revenue cycle workflow, etc.—require willing health system partners who are famously conservative in their investments and service providers, and rarely take risks on newbies. The addition of Summa provides an open laboratory for those innovations,” Kerns added.

Is the Summa Health Deal Good for Healthcare?

Some in the industry were taken aback by General Catalyst’s announcement.   

“A lot of people feel like a PE (private equity) or venture capital company owning a hospital is kind of like asking Freddy Krueger to come babysit your kids. It just makes people a little nervous, and it doesn’t feel quite aligned with this concept of healthcare being a human right,” John Bass, CEO of Hashed Health, a Nashville, Tenn.-based healthcare venture studio, told CNBC.

Nevertheless, it’s a moot point. HATCo is moving forward with its purchase of Summa Health.

“For this bet to work, Summa will have to be a solid proving ground for [General Catalyst’s] portfolio companies. And that means either Summa itself will have to grow, or it will have to act as a force multiplier for its other value-based portfolio companies to justify the considerable capital expended. I have to say, that’s a tall order, but not an insane one,” said Kerns in the Union Healthcare Insight blog post.

Healthcare managers may find it interesting to follow HATCo and Summa Health on their planned journey. The results may speak for themselves. Either way, clinical laboratories and anatomic pathology group practices in HATCo’s health system may be in for some interesting changes.

—Donna Marie Pocius

Related Information:

Our Acquisition of Summa Health

Summa Health and General Catalyst’s HATCo Announce Plans for Acquisition That Will Transform the Future of Healthcare

General Catalyst to Acquire Ohio Nonprofit Summa Health

The Big Bet of General Catalyst and Summa Health

4 Takeaways on General Catalyst’s Plan to Acquire Summa Health

General Catalyst’s New Health System Company to Acquire Summa Health

Venture Capital’s Firm’s Plan to Buy Nonprofit Hospital System Has Ohio Community on Edge

Intermountain Posts $135M Operating Income

General Catalyst’s HATCo Plans to Purchase Ohio Healthcare System Summa Health

Summa Health Fields Concerns Over General Catalyst Acquisition

Summa Health Sold to General Catalyst’s Health Assurance

Executive War College Keynote Speakers Highlight How Clinical Laboratories Can Capitalize on Multiple Growth Opportunities

From ‘new-school’ rules of running a clinical laboratory to pharmacy partnerships to leveraging lab data for diagnostics, key industry executives discussed the new era of clinical laboratory and pathology operations

Opening keynotes at the 28th Annual Executive War College on Diagnostics, Clinical Laboratory, and Pathology Management taking place in New Orleans this week covered three main forces that healthcare and medical laboratory administrators should be preparing to address: new consumer preferences, new care models, and new payment models.

COVID-19 didn’t change a whole lot of things in one sense, but it accelerated a lot of trends that were already happening in healthcare,” said Robert L. Michel, Editor-in-Chief of Dark Daily and its sister publication The Dark Report, and Founder of the Executive War College, during his opening keynote address to a packed ballroom of conference attendees. “Healthcare is transforming, and the transformation is far more pervasive than most consumers appreciate.

Disintermediation, for example, is taking traditional service providers and disrupting them in substantial ways, and if you think about the end of fee-for-service, be looking forward because your labs can be paid for the value you originate that makes a difference in patient care,” Michel added.

Another opportunity for clinical laboratories, according to Michel, is serving Medicare Advantage plans which have soared in enrollment. “Lab leaders should be studying Medicare Advantage for how to integrate Medicare Advantage incentives into their lab strategies,” he said, highlighting the new influence of risk adjustment models which use diagnostic data to predict health condition expenditures.

Robert L. Michel

Opening sessions at this week’s annual Executive War College on Diagnostics, Clinical Laboratory, and Pathology Management, presented by Robert L. Michel (above), Editor-in-Chief of Dark Daily and its sister publication The Dark Report, discussed demand for delivering healthcare services—including medical laboratory testing—as consumer preferences evolve, new care models are designed, and as payers seek value over volume. While these three forces may be challenging at the outset, they also create opportunities for clinical laboratories and pathology groups—a focal point of the Executive War College each year. (Photo copyright: The Dark Intelligence Group.)

Medical Laboratories Must Adapt to ‘New-School’ Rules

During his keynote address, Stan Schofield, Vice President and Managing Principal at The Compass Group, noted that while the basic “old-school” rules of successfully running a clinical laboratory have not changed—e.g., adding clients, keeping clients, creating revenue opportunities, getting paid, and reducing expenses—the interpretation of each rule has changed. The Compass Group is a trade federation based in South Carolina that serves not-for-profit healthcare integrated delivery networks (IDNs), including 32 health systems and 600 hospitals.

Schofield advised that when it comes to adding new clients under the “new-school” rules of lab management, clinical laboratory directors must be aware of and adapt to hospital integrations of core labs, clinical integrations across health systems, seamless services, direct contracting with employers in insurance relationships, and direct-to-consumer testing. Keeping clients, Schofield said, involves five elements:

  • Strong customer service.
  • A tailored metrics program for quality services based on what is important to a lab’s clients.
  • Balanced scorecards that look at the business opportunity and value proposition with each client.
  • Monitoring patients’ experiences and continuous improvement.
  • Participation in all payer agreements.

As to the problem of commoditization of laboratory goods and services, Schofield said, “Right now, we’re facing the monetization of the laboratory. We’re going to swiftly move from commoditization to monetization to commercialization.”

Pharmacies Enter the Clinical Laboratory Market

In another forward looking keynote address, David Pope, PharmD, CDE, Chief Pharmacy Officer at OmniSYS, XiFin Pharmacy Solutions, discussed the “test to treat” trend which could bring clinical laboratories and pharmacies together in new partnerships.

Diagnostics and pharmacy now intersect, according to Pope. “Pharmacists are on the move, and they are true contender as a new provider for you,” he said. “An area of pharmacy that is dependent upon labs is specialty medications.”

Specialty medicines now account for 55% of prescription spending, up from 28% in 2011, driven by growth in auto-immune and oncology, Pope noted. Other examples include companion diagnostics required for targeted treatments pertaining to all major cancers, and new areas like thalassemia (inherited blood disorders), obesity, next-generation sequencing, and pharmacogenomics, in addition to routine testing such as liver function and complete blood count (CBC).

Federal legislation may soon recognize pharmacists as healthcare providers who will be trained to perform specific clinical services, Pope said. Some states already recognize pharmacists as providers, he noted, explaining that pharmacies need lab data for three primary reasons:

  • Service—Pharmacies can act as a referral source to clinical laboratories. When referring, pharmacies may need to communicate lab test results to patients or providers to coordinate care.
  • Value-based care—Pharmacies would draw on data to counsel, prescribe, and coordinate care for chronic disease management, among other services.
  • Diagnostics and pharmacogenetics—Specialty medication workflows require documented test results within a specific timeframe prior to dispensing.

Another point Pope made: Large pharmacies are seeking lab partners. Labs that can provide rapid turnaround time and good pricing on complex tests provide pharmacies with partnership opportunities.

Using AI to Create Patients’ ‘Digital Twins’ That Help Identify Disease and Improve Care

High-tech healthcare technology underlies many opportunities in the clinical laboratory and pathology market, as evidenced throughout the Executive War College’s 2023 curriculum. An ongoing challenge for labs, however, is how to produce the valuable datasets that all labs have the potential to generate.

“It feels like we’ve come so far,” explained Brad Bostic, CEO of hc1 during his keynote address. “We’ve got the internet. We’ve got the cloud. All of this is amazing, but in reality, we have this massive proliferation of data everywhere and it’s very difficult to know how to actually put that into use. And nobody’s generating more data than clinical laboratories.

“Every single interaction with a patient that generates data gives you this opportunity to create the idea of a ‘digital twin.’ That means that labs are creating a mathematical description of what a person’s state is and using that information to look at how providers can optimally diagnose and treat that person. Ultimately, it is bigger than just one person. It’s hundreds of millions of people that are generating all this data, and many of these people fall into similar cohorts.”

This digital twin opportunity is heavily fueled by medical laboratory testing, Bostic said, adding that labs need to be able to leverage artificial intelligence (AI) to:

  • Improve lab operations.
  • Identify disease earlier.
  • Personalize treatment.
  • Run predictive analytics.

“I recommend lab leaders sit down with their teams and any outside partners they trust and identify what are their lab’s goals,” Bostic stated. “Think about how this technology can advance a lab’s mission. Look at strategy holistically—everything from internal operations to how patient care is affected.”

Lab and pathology leaders are invited to continue these and other conversations by joining the Executive War College Discussion Group and The Dark Report Discussion Group on LinkedIn.

Liz Carey

Related Information:

Executive War College on Diagnostics, Clinical Laboratory, and Pathology Management

Report to Congress: Risk Adjustment in Medicare Advantage

Executive War College Press

Cambridge University Researchers Develop and Administer Lab-developed Red Blood Cells in Clinical Study with Promising Results for the Blood Supply

Sickle cell patients and others who need long-term blood transfusions provided by clinical laboratories and others would benefit most from successfully lab-grown blood

Administering lab-developed red blood cells in humans in a clinical study conducted in the United Kingdom (UK) is being hailed as a significant step forward in efforts to supplement the supply of whole blood through the development of synthetic blood products. Of interest to those clinical laboratory managers overseeing hospital blood banking services, researchers were able to create this new blood product from normal blood pints collected from donors.  

What caused this clinical study to gain wider attention is the fact that previous attempts to create synthetic whole blood products have proved to be unsuccessful. For that reason, this new research has raised hopes that lab-grown blood may be just around the corner.

The initiative, known as RESTORE, is a joint research project conducted by scientists from the UK’s:

According to the researchers, it is the first such clinical trial performed in the world. Partial funding for this clinical study was provided by an NIHR grant, according to an NHS press release.

Most hospital laboratories also manage a blood bank. Thus, this breakthrough will be of interest to many clinical laboratory managers and blood bankers who are concerned about the shortage of blood products. Plus, blood products are quite expensive. This research could develop solutions that both ease the tight supply of blood and lower the cost of these critical products while improving patient care.

Neil O'Brien

“This research, backed by government investment, represents a breakthrough for patients and means treatment could be transformed for those with diseases including sickle cell,” said Neil O’Brien (above), Minister of State for Health, in an NHS press release. “Once again this shows the UK is leading the world when it comes to scientific innovation and collaboration while delivering high quality care to those who need it the most,” he added. If the lab-grown products prove clinically viable, medical laboratories in the UK may soon suffer less from a shortage of available blood. (Photo copyright: UK Parliament.)

Manufacturing Blood from Stem Cells

“This world-leading research lays the groundwork for the manufacture of red blood cells that can safely be used to transfuse people with disorders like sickle cell,” hematologist Farrukh Shah, MD, Medical Director Transfusion, NHS Blood and Transplant, told BBC News. “The need for normal blood donations to provide the vast majority of blood will remain. But the potential for this work to benefit hard-to-transfuse patients is very significant.”

The process of manufacturing blood cells starts with a normal donation of a pint of blood. The researchers then use magnetic beads to single out flexible stem cells that can become red blood cells. Those flexible stem cells are grown in large quantities in the lab and then guided to transform into red blood cells.

“This challenging and exciting trial is a huge stepping stone for manufacturing blood from stem cells,” said Ashley Toye, PhD, Professor of Cell Biology at the University of Bristol in the NHS press release. “This is the first-time lab grown blood from an allogeneic donor has been transfused and we are excited to see how well the cells perform at the end of the clinical trial.”

The process to create the lab-grown blood cells takes about three weeks, and a pool of approximately half a million stem cells can result in 50 billion red blood cells. These cells are then clarified further to reap about 15 billion red blood cells that are at the optimum level to transplant into a human patient.

“Some blood groups are extremely rare, to the point that only 10 people in a country can donate blood,” Toye told BBC News. “We want to make as much blood as possible in the future, so the vision in my head is a room full of machines producing it continually from a normal blood donation.”

Transforming Care for Patients Who Need Long-term Blood Transfusions

To date, only two patients have taken part in the clinical trial. Next, the researchers plan to perform two mini transfusions on 10 volunteers at least four months apart. One transfusion will contain traditional donated red blood cells and the other will consist of the lab-grown cells. This experiment will show which blood cells last longer in the body. The findings could ultimately allow a patient to receive fewer transfusions and prevent iron overload, which can be a side effect of blood transfusions.

“We hope our lab-grown red blood cells will last longer than those that come from blood donors,” said Cédric Ghevaert, MD, Senior Lecturer in Transfusion Medicine at the University of Cambridge, in the NHS press release. “If our trial—the first such in the world—is successful, it will mean that patients who currently require regular long-term blood transfusions will need fewer transfusions in the future, helping transform their care.”

More research and clinical trials will be necessary to validate the efficacy and safety of these lab-grown blood products. However, such a breakthrough could potentially revolutionize treatments for patients with blood disorders, complex transfusion needs, and rare blood types, as well as reduce healthcare costs and curb blood shortages.

At the same time, this technology would also contribute to expanding the supply of useful blood products, a development that would be welcomed by those pathologists and clinical laboratory professionals overseeing the blood banks in their respective hospitals and integrated delivery networks (IDNs).   

JP Schlingman

Related Information:

First Ever Clinical Trial of Laboratory Grown Red Blood Cells Being Transfused into Another Person

Lab-grown Blood Given to People in World-first Clinical Trial

Lab-grown Red Blood Cells Transfused into People in First Trial—NHS

Laboratory-Grown Blood Has Been Put into People in a First Clinical Trial

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