Number of Employee Pathologists Grows Even as Private Pathology Groups Do Well
Demand for pathologists is strong and growing. That’s good for the profession, but makes it more challenging for labs and pathology groups to recruit top talent. Lots of bidders for the best pathology talent means that skilled pathologists-particularly those with subspecialty expertise-are commanding more money and richer compensation and benefits packages.
“In certain respects, it is a boom time in pathology,” stated Rich Cornell, President of Santé Consulting of St. Louis, Missouri. Cornell has more than two decades of experience in recruiting pathologists for many of the nation’s leading laboratory companies. “This decade has seen a tremendous increase in opportunities within the anatomic pathology profession. New diagnostic technologies, particularly in oncology, are fueling steady increases in test utilization. That means more work for pathologists, particularly for those with subspecialty skills in molecular diagnostics.
“Two other factors contribute to this the current strong demand for skilled pathologists,” continued Cornell. “One is the impending retirement of the baby boomer generation. Pathology groups recognize the need to recruit pathologists to replace partners who are soon to retire. Second, there is a relative shortage of middle-aged pathologists in today’s market because of the reduced number of pathologists who graduated from medical schools during the 1990s-a time when managed care and other financial pressures made anatomic pathology less attractive.”
Another phenomenon that is reshaping the pathology profession is the growing number of pathologists who are employees. Traditionally, most pathology was performed in private practice settings, typically in community hospitals. “Over the past 15 years, many of the new job opportunities in pathology have been created by national pathology companies and specialized testing laboratories-particularly those with patent-protected or proprietary tests,” observed Cornell. “This is one trend that has deep roots and looks like it will continue for some time in the future.”
Cornell has advice for laboratories actively recruiting pathologists, as well as individual pathologists interested in finding their ideal practice setting and compensation package. “It is important to recognize that today’s supply-demand situation does not reward all pathologists equally,” he noted. “To negotiate a win-win package, both the hiring lab and the candidate pathologist should understand how each of these elements plays a role in the specific partner/employment opportunity being considered.
“First, consider compensation,” said Cornell. “Subspecialists generally can negotiate a higher compensation package than generalists. But there are differences even across the subspecialties in pathology. Also, it is important to recognize the advantages and disadvantages of private practice positions compared to employment positions. Younger pathologists, for example, are much more open to employment opportunities compared to the baby boomer pathologists when they were the same age.
“Second, productivity is now a key factor, more than it has ever been in the past,” explained Cornell. “Sustained downward pressure on reimbursement means that both lab companies and pathology practices are linking compensation ever more tightly to the productivity of the individual pathologist. This trend will intensify with each passing year.
Third, any pathology group or laboratory in the recruiting and hiring mode needs to be smart about the market demand for the particular pathology skills and experience they seek,” he stated. “I often see intense bidding for particularly productive, effective pathologists. That may be good for the candidate, but means the hiring group may end up paying more than it had budget for this position.
“This same advice applies to individual pathologists,” continued Cornell. “If you are looking for a position, you’ll negotiate a better position and compensation package if you understand who else is actively in the market looking for the same opportunities as you.”
Rich Cornell will share these, and other secrets, at the upcoming audio conference titled, “Emerging Trends in Pathologist Compensation, Productivity, and Job Prospects.” It will take place on February 18, 2009 at 1 PM EST, 12 PM, CST, 11 AM MST, 10 AM PST.
This is a high-value conference for both laboratories preparing to hire new pathologists and for pathologists entering the job market. Best of all, your entire laboratory team can listen with you to this important audio conference. Reserve your participation in this highly valuable audio conference by registering today at http://www.darkreport.com/Audio/2.18.09/Improve-Pathologist-Compensation.htm
HOW TO REGISTER:
2. Call toll free: 800-560-6363
Registrations accepted until Wednesday, February 18, 2009, noon EST.
Cancellations before 5:00 p.m. EST on Monday, February 16, 2009 may receive a full refund less a $25 service charge.
Your audio conference registration includes:
- A site license to attend the conference (invite as many people as you can fit around your speakerphone at no extra charge)
- Downloadable PowerPoint presentations from our speakers
- A full transcript emailed to you soon after the conference
- The opportunity to connect directly with our speakers during the audience Q&A session
In the United States and many countries around the world, primary goals for healthcare reform commonly center on better patient safety, improved health outcomes, and higher quality services. As clinicians in these countries actively work to achieve these goals, the clinical laboratories that serve them must respond to these efforts with appropriate lab tests and services.
Last week, Dark Daily Editor Robert Michel traveled to New Jersey to participate in a lab management meeting specifically organized to look at healthcare globalization and identify how this globalization trend is influencing clinical laboratory services. It was the annual meeting of the Customer Advisory Board (CAB) for the Pre-Analytical Services division of Becton, Dickinson and Company (BD) (NYSE:BDX) of Franklin Lakes, New Jersey. To foster productive discussion about globalization in healthcare and laboratory testing, BD arranged for presentations via teleconference from laboratory experts in India, South Africa, Belgium, and Mexico. Here are noteworthy points from each presentation:
INDIA: Healthcare services in this country are provided through government programs and the private sector. Annual spending on health is about US$37 billion. Government health services are delivered at the state level and India has 22 states. Experts identify the need for 896,000 more hospital beds in this nation and the private sector is responding to meet this goal. Because of the lack of healthcare resources in rural areas, telemedicine services are being pushed because it extends the reach of physicians and greatly increases their productivity. In the laboratory sector, there may be as many as 40,000 independent labs. Consolidation and acquisitions have created at least five major laboratory companies. There is a shortage of laboratory technologists. Phlebotomy is performed by medical technologists, each of who must have a four-year degree. Laboratory accreditation often involves an ISO standard and ISO 15189 is gaining favor.
SOUTH AFRICA: This government provides a minimum health insurance program to individuals who fall below a certain level of income. Above that income, private health insurance is the major source of healthcare. One challenge for the country is that it has at least 13 different races which are genetically unique. As genetic medicine advances, personalized services appropriate to these patients must be developed. HIV is a major factor in South Africa. Up to 90% of government health spending goes to HIV positive patients who undergo treatment for other health conditions. There is a shortage of pathologists in the public hospital sector of South Africa. Phlebotomy is done by trained nurses who attended college. Because it can take two or three days to move a specimen from some areas of the country, there is strong interest in point of care testing. (POCT). ISO 17025 is often used by private sector hospitals and laboratories for accreditation.
BELGIUM: As a developed nation with aging demographics, healthcare in this country faces many of the same challenges as the United States. Hospitals have their own laboratories and independent lab companies serve physician offices. There has been some consolidation of the independent lab sector. There is a shortage of both pathologists and technical laboratory staff in Belgium. Laboratories must be accredited with a quality management system (QMS) and ISO 17025 has been used. However, up to 20% of the nation’s laboratories are using ISO 15189 for their accreditation. Lean and Six Sigma is gaining wide acceptance and integrates well with accreditation under ISO standards.
Phlebotomy must be done only by physicians, nurses, and medical technologists.
MEXICO: Healthcare in this country reflects the extremes of wealth and poverty among the population. The government’s social security system provides minimum health benefits to everyone with a job. However, self pay and private health insurance play significant roles in the Mexican healthcare system. A national health priority is extending health services to remote areas of the country. There are still deaths from diseases such as cholera simply because individuals in these areas have no access to healthcare. Phlebotomy is done by nurses and medical technologists. Physicians do not draw blood in their offices, but refer patients to the collection sites operated by independent laboratories. Laboratory accreditation is mandatory in Mexico and ISO 9000 has been used. ISO 15189 is an option to meet accreditation requirements and growing numbers of laboratories are using ISO 15189.
Not surprisingly, everyone participating at the BD meeting on healthcare globalization was fascinated by the similarities and differences in healthcare and laboratory services in each of these four international presentations. Observation number one: Across these four countries, it was obvious that standards of care are tightening. Accreditation of laboratories is one example. In this regard, the quiet inroads being made by ISO 15189 in all four countries caught the attention of the American lab managers participating at this meeting. They recognized that other countries are moving rather rapidly to bring their laboratory services up to the level seen in developed countries.
Observation number two is that the adage “all healthcare is local” remains true. That was illustrated by the different national objectives. In India, use of telemedicine to support rural needs is different than in Mexico, where there are major efforts to create healthcare infrastructure in regions totally lacking any health services whatsoever. Similarly, In South Africa, meeting the health needs of so many HIV positive patients is the primary objective, whereas Belgium’s healthcare system is preparing to serve the many aging, but reasonably well-off individuals soon to reach their retirement years.
Further, it was pointed out that the demand for reliable and cheap point of care (POC) diagnostic tests by countries such as India, South Africa, and Mexico as a way to support rural care, would make these attractive and sizable markets for the IVD industry. Thus, more innovation in POC testing innovation is likely to occur first in those countries, rather than in the United States or Europe.
Your Dark Daily Editor,
With demand driving prices to record levels for clinical laboratory companies and anatomic pathology practices, merger and acquisition (M&A) activity in the lab industry continues to grow across the United States.
Just two weeks ago, Sonic Healthcare, Ltd. announced that it was purchasing Clinical Laboratories of Hawaii, LLP for an estimated $121 million dollars. That sale is expected to be completed by the end of third quarter this year. (See Dark Daily, June 30, 2008)
Still unannounced as of this date are the winning bidders for the laboratory outreach business of Stanford University Medical Center and the laboratory testing division of Carilion Clinic. Earlier this year, officials from both institutions disclosed that their laboratory businesses were up for sale. (See Dark Daily, April 15, 2008)
At this year’s Executive War College in May, attendees participated in the lab industry’s first-ever conference on “Mergers & Acquisitions in Clinical Laboratories and Anatomic Pathology,” a program designed to bring potential sellers of clinical labs, pathology groups, and hospital lab outreach programs together with experts in law, valuation, negotiation, and financial planning.
Two speakers attracted particular attention: Doug Brown, Managing Director of Wachovia Securities and attorney Antony Konkoly, Esquire, of McDonald Hopkins.
Brown provided a concise review of the factors supporting higher valuations for laboratory assets and discussed details of some recent noteworthy lab acquisitions. According to Brown, lab owners need to recognize that there is no simple way to establish a single value for their laboratories because different buyers will place different values on a lab company’s existing assets and future growth prospects.
Brown also discussed details of the 2007 acquisition of AmeriPath, Inc. by Quest Diagnostics, Inc. for approximately $2 billion. With annual revenue of $750 million, it was estimated that the multiple paid in this transaction was as high as 17 times EBITDA (earnings before interest, taxes, depreciation, and amortization). Brown pointed to several unique factors, including market timing, that supported AmeriPath’s top-of-market valuation at the moment the deal was inked. He also explained that these same factors were not likely to be seen in the laboratory industry again anytime soon.
In this same session, Antony Konkoly offered some important M&A do’s and don’ts based on his considerable experience representing various parties in the sale of laboratory businesses, the establishment of laboratory joint ventures and the formation of new lab companies.
If you weren’t able to participate in this exciting new M&A conference, here’s another opportunity to hear Doug Brown’s take on the current state of mergers and acquisitions in laboratory and pathology.
Attorney Antony Konkoly, Esq. will once again join Doug Brown in this discussion. From Konkoly, you’ll learn about the mistakes lab sellers often make, and how you can fix those issues before offering your laboratory for sale. You’ll also get several proven recommendations on how to minimize tax consequences and maximize the net proceeds from the sale.
Whether you’re a lab owner or pathologist, you won’t want to miss this comprehensive new audio conference. Join Dark Daily and The Dark Report as they present, “Lab and Pathology Mergers & Acquisitions: Must-Have Essentials To Learn Before You Buy Or Sell A Lab,” on Wednesday July 30, beginning at 1:00 p.m. EDT (10:00 a.m. Pacific) and running for 90 minutes.
Don’t miss this special audio conference and your chance to listen to and ask questions of these two veteran lab industry dealmakers.
Register on or before July 18, 2008 and you’ll save $50. So don’t wait-Register today! http://www.darkreport.com/Audio/7.30.08/audio-register.htm
It was major news yesterday when the public learned that UnitedHealth Group Incorporated had awarded an exclusive, 10-year national contract for laboratory testing services to Laboratory Corporation of America. UnitedHealth is the nation’s second largest health insurance company, with approximately 26 million beneficiaries. LabCorp says it should see an additional $3 billion in revenue during the 10-year term of its pact with UnitedHealth.
This new contract takes effect on January 1, 2007. After that date, Quest Diagnostics Incorporated ceases to be a contract provider of laboratory services to UnitedHealth beneficiaries, with a few exceptions. Quest Diagnostics acknowledges that its UnitedHealth book of business represents 7% of total revenues, or about $385 million per year. That business is now at risk, for a number of reasons.
What is big news for LabCorp and Quest Diagnostics is likely to be a “ho hum” for most other laboratories. That’s because they are already excluded from lab testing contracts with UnitedHealth. What may be of more immediate impact to hospital lab outreach programs and independent laboratory companies is the fact that LabCorp will be developing contract networks for UnitedHealth in selected regions around the United States. Depending on the prices and terms of such contract networks, local labs may find it advantageous to participate to gain access to UnitedHealth beneficiaries.
As to the two blood brothers, Dark Daily predicts the capture of UnitedHealth’s business by LabCorp will intensify competition between the two billion-dollar behemoths. Quest Diagnostics will not lie down and cede the UnitedHealth business to LabCorp. Nor will LabCorp be anything but aggressive about exploiting this opportunity. From this perspective, news that LabCorp has been granted an exclusive, 10-year lab testing services contract with UnitedHealth Group is just the first round. Stay tuned, because the battle is about to get nasty. Check out coming issues of The Dark Report for additional intelligence about this tectonic shift in national lab contracts.