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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Healthcare Reform in the United States May Actually Increase Medical Tourism

More medical tourists may also contribute to further globalization of lab testing

Medical tourism continues to be a force with the potential to exert significant influence on healthcare in the United States. For that reason, experts have weighed in recently on how efforts to reform healthcare may either inhibit or encourage growth in the number of Americans opting to become medical tourists.

Just as medical tourism has the potential to be transformative to certain aspects of healthcare here in this country, Dark Daily believes that medical tourism may also encourage greater globalization of pathology services and clinical laboratory testing. For both reasons, pathologists and clinical laboratory managers will find recent commentary to be enlightening. (more…)

Comparative Effectiveness: It’s Here! It’s Now! And It’s Funded to the Tune of $1.1 Billion!

Effort will identify which clinical procedures actually benefit patients—and are cost-effective

“Comparative effectiveness research (CER)” is likely to be one method that healthcare reformers use to establish reimbursement for different medical technologies and treatments. This will apply equally to clinical laboratory testing and pathology professional services as well as other medical procedures.

There is a compelling reason why comparative effectiveness is likely to happen on this turn of the healthcare reform wheel. Congress put teeth into the comparative effectiveness movement earlier this year when it provided $1.1 billion to support the effort in the American Recovery and Reinvestment Act of 2009.


Regional Laboratory Networks Sprouting in the United Kingdom

BIRMINGHAM, ENGLAND – Here in the United Kingdom, regional laboratory networks are finally catching on. The number of “pathology networks,” as they are called here, has increased in recent years. As was true of Canada in the late 1980s and the United States and Australia during the 1990s, clinical lab leaders in the United Kingdom are finding regional laboratory networks to be effective business models to achieve tight integration of lab services, realize significant cost savings, and eliminate excess lab testing capacity in regional markets.

These achievements were confirmed by presentations delivered yesterday in Birmingham, England, at the sixth annual Frontiers in Laboratory Medicine (FiLM) conference yesterday. Produced jointly by the Association of Clinical Biochemistry and The Dark Report. Your editor, Robert Michel, is here and participating in all the sessions. Four regional laboratory networks presented their accomplishments yesterday.

In the northwest of England, the Greater Manchester Pathology Network, formed in 2005, is composed of laboratories from 16 hospitals and serves a population of 2.5 million people. In his presentation, co-presenters Neil Jenkinson, Ph.D., Network Director, and Keith Hyde, Ph.D., Deputy Director of Laboratory Medicine, reported how participating pathology laboratories (as clinical laboratories are called in this country) are progressively developing integrated lab testing services. One key objective is to develop a common laboratory informatics capability that allows the 16 hospital laboratories to more effectively serve primary care clinics in the region.

Local to the Birmingham area, Coventry and Warwickshire Pathology Services was created in May 2007, by two acute care trusts that had always been wary of each other, According to Neil Anderson, Ph.D., Director, this pathology network has 412 employees and provides lab testing services to a population of 950,000. Steps toward integration and consolidation of lab testing services centered around three areas of lab testing:

  • Blood sciences (Chemistry, Hematology, Transfusion medicine and Immunology)
  • Microbiology (Microbiology, Virology, and Laboratory Infection Control)
  • Cellular Pathology (Histopathology, Cytology and Mortuary services).

Anderson explained that, within two years, the pathology network had delivered £1.9 million (U.S.$2.8 million) in savings to its two parent trusts. As well, steps had been taken to install a common laboratory information system (LIS), and flexibility in staffing was contributing to improved levels of service to clinicians.

Two overseas regional laboratory networks were at FiLM to share their successes learned. In Australia, Sullivan Nicolaides Pathology Laboratories, a division of Sonic Healthcare, LTD, operates a regional laboratory network in Northeastern Australia that serves a population of 3 million people. With a central laboratory in Brisbane, it has 21 other laboratories located across a service area of millions of square miles in the states of Northern Territory, Queensland, and New South Wales. Executive Manager Tony Badrick, Ph.D., observed that, with an operating history of several decades, this regional laboratory network’s current objective is to quality management systems to advance the performance of operations. Sullivan Nicolaides is certified under ISO 9001 and ISO 15189. It is working on its ISO 14000 certification.

The fourth regional laboratory network presented at FiLM Tuesday was Calgary Laboratory Services in Calgary, Alberta, Canada. This case study was presented by Fred Swaine, M.D., Chief Operating Officer. This regional laboratory network was created back in the mid-1990s, when the government of Alberta mandated an immediate reduction of 35% in funding for laboratory services. Swaine described how this regional laboratory network is in the midst of its third cycle of lab consolidation and integration since 1996. It serves 1.2 million people and is currently comprised of one central laboratory, with rapid response labs in four hospitals.

Swaine noted that one notable accomplishment of the early network organization was to install a single laboratory information system (LIS). That has made it easier for Calgary Laboratory Services to collect, store, and provide access to laboratory data across its entire service region.

Dark Daily notes that these four examples of regional laboratory networks demonstrate how this trend has established strong roots. For almost two decades, operational regional lab networks in Australia, Canada, and the United States have proved to be effective providers in their respective service areas. It is expected that the number of pathology networks will continue to expand.

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There Ain’t No Such Thing as a Free Lunch (TANSTAAFL): Quality Costs Money

Wall Street has yet to grasp this essential truth of laboratory medicine-lab test quality comes with its own price tag

At this moment in time, Quest Diagnostics Incorporated‘s  (NYSE:DGX) advertised value proposition to other labs—”industry-leading quality and technical proficiency”—has diminished credibility with pathologists and lab industry executives. They are questioning how the nation’s largest lab company could allow systemic errors that caused it to report inaccurate Vitamin 25(OH) D test results to tens of thousands of patients for 18 months during 2007 and 2008.

These same pathologists represent an important source of reference and esoteric testing referrals to the nation’s largest lab company. Thus, the disclosure of systemic failures in its Vitamin D testing program may have implications for Quest Diagnostics over the long term. Many health systems, hospitals, and laboratories across the United States refer reference and esoteric tests to Quest Diagnostics. Quality and test result integrity are a primary buying motive for the pathologists and lab directors in these organizations. As scientists, they want confidence in the analytical integrity of the test results they provide to their own clinicians.

Two national reference laboratories with solid reputations for quality and lab test result integrity are ARUP Laboratories and Mayo Medical Laboratories. These reputations for quality and integrity are key assets at ARUP and Mayo. Both firms compete successfully against the two blood brothers because many referring laboratories believe the scientific integrity at ARUP and Mayo is not compromised in ways that may occur in publicly-traded lab companies. Of interest, both these laboratories earn adequate profit margins while competing effectively on price, service, and quality against the national lab companies.

Quest Diagnostics now finds itself facing a tough challenge in the reference/esoteric testing marketplace. Among its peers in the scientific and laboratory medicine communities, the quality and integrity of its lab test results will be seriously questioned. And because pathologists have long memories, this can be an issue for years into the future.

That has been the experience of Specialty Laboratories, Inc. During the 1990s, this was a go-go reference and esoteric testing laboratory. Fast-growing, it had a reputation for first-rank science and regularly introduced new proprietary assays to the medical community. But, in April, 2002, federal and state laboratory regulators yanked Specialty’s license to do business with Medicare. The story centered around internal whistleblowers and regulatory directives that were not fully addressed by Specialty’s executive team. There were questions about the integrity of test results for some lines of lab tests performed at Specialty. (“State, Federal Regulators Target Specialty Labs,” The Dark Report, April 22, 2002.)

Within a few months, Specialty Labs was able to reclaim its Medicare license after fixing deficiencies and passing its inspections. However, loss of its Medicare license was a body blow to Specialty Laboratories. Across the nation, pathologists and laboratory directors stopped sending specimens to Specialty Labs. Overnight, the company experienced a precipitous decline in specimen volume and revenue. Facing grim financial prospects, in January 2006 it was sold to AmeriPath. Ironically, Quest Diagnostics found itself the owner of Specialty Laboratories when it acquired AmeriPath last year.

The example of Specialty Labs illustrates why quality, integrity, and trust matter-a great deal! Pathologists and lab directors face personal liability if their laboratory delivers inaccurate results to patients and physicians. Their personal reputations ride on the performance of their laboratory. As physicians, they understand the consequences to patient care when a laboratory fails to report accurate test results. Their own laboratory must maintain its reputation for integrity and quality if it is to retain the trust of the clinicians and patients it serves.

Further, these same pathologists and lab directors regularly interview and hire scientists and medical technologists from both of the national laboratory companies. They hear lots of stories about the internal operations of these two billion-dollar lab companies. There are few secrets about events that unfold inside the two blood brothers. For example, lab scientists directing Vitamin D testing at their own labs quickly recognized, early in 2007, that Quest Diagnostics was struggling with its home brew mass spectrometry Vitamin D assay.

The lab community has watched both national labs continually cut costs over the past ten years. Competing labs conduct hiring interviews with the wave after wave of terminated employees hunting for jobs after each RIF (reduction in force) trims back staff to save money. Pathologists and lab directors understand the consequences of sustained cost cutting. Eventually, a laboratory’s cost cutting reaches a point where the resources, staff time, and operational capability required to sustain a high level of analytical accuracy and integrity can be compromised.

That is why many laboratory professionals are asking if the inaccurate Vitamin 25(OH) D results performed over an 18-month period on tens of thousands of patients is a sign that should not be ignored. Has Quest Diagnostics reached the threshold where further cost-cutting to satisfy Wall Street will undermine the quality and integrity of its lab test results?

Of all the customers of the two national laboratories, pathologists are the best informed about how constant budget reductions can undermine the quality and integrity of laboratory test results. They know that lab test quality is an expensive proposition.

Thus, no one should be surprised if, going forward, both national laboratories find it more difficult to expand the reference and esoteric business which comes to them from other laboratories across the nation. Should either firm experience even modest declines in the year-over-growth in this business segment, it will be a significant sign. Questions associated with test integrity may be motivating an important source of reference and esoteric testing to steer their specimens to other laboratory providers.

Should this happen, no one should be surprised. If a decade of sustained cost-cutting has finally reached the point where laboratory customers question the quality of the test results produced by major lab companies, it will only be the market imposing its discipline. The market will be reminding Wall Street investors that spending to sustain quality protects market share and profits. After all, as the libertarians say, “There ain’t no such thing as a free lunch (TANSTAAFL)”!

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Charles Roussel Selected as New Executive VP for College of American Pathologists

Major changes may soon be unfolding at the College of American Pathologists (CAP), based in Northfield, Illinois. On October 30, CAP announced that Charles Roussel would be its new Executive Vice President. In this role, Roussel is responsible for daily operations at CAP and he reports directly to CAP’s Board of Governors. But that’s just the starting point for this story.

Roussel is an organizational change agent. He has actively consulted with corporations in such industries as electronics, high tech products, and telecommunications. That means Roussel is likely to bring a decidedly non-healthcare perspective, as well as a pro-active mindset, to the strategic direction of the College of American Pathologists.

Roussel comes to CAP from The Atlantic Philanthropies, a $300 million non-profit organization. Earlier, he served for many years at Accenture, a major consulting firm. While at Accenture, Roussel led the Global Thought Leadership Program and was a partner with the Accenture Strategy Competency. Accenture described Roussel’s expertise as including “channel management, organizational design, strategic change management, mergers, acquisitions and alliances.”

These skills are sorely needed at the College. Over the past two decades, CAP found itself challenged on multiple fronts as the pace of change in healthcare accelerated. For example, since the adoption of DRGs by Medicare in the early 1980s, the College has struggled to craft an effective strategy to protect and enhance reimbursement for clinical pathology professional services. That area of pathology services and income continues to be attacked, particularly by private payers and hospital/health system administrators.

In recent years, this same pressure on clinical pathology professional service reimbursement has expanded into anatomic pathology (AP) professional services. Since 2003, the AP marketplace has seen the emergence of anatomic pathology condominium laboratory complexes (AP condo labs or “pod” labs), as well as numerous TC/PC schemes that permit specialist physicians to capture for themselves revenue from AP services provided to their patients. During this same period, competition for pathology specimens intensified as both the two blood brothers-and a growing host of regional and national pathology lab companies-sent sales reps into communities across the country to divert specimen referrals away from community hospital-based pathology groups.

However, the greatest challenge for the College of American Pathologists is not in countering the multiplying threats to the integrity and financial stability of the pathology profession as a medical specialty. The greater challenge is in crafting a strategy to favorably position pathology in the fast-approaching age of genetic medicine. Genetic testing represents the single greatest opportunity for pathology specialty in the past four decades. Here is where Roussel’s talents, experience, and insights may serve the members of the College best. Anticipating the future and positioning this organization to be the right resource for that future will require special leadership skills.

Finally, it must be noted that, among all the medical specialties, pathologists have a reputation for being extremely cautious when evaluating new business options. They are frequently reluctant to change the status quo in most areas of their private practice setting, whether it be expanding the test menu or making investments in their own medical practice. This reluctance to change means that, during the past 20 years, CAP’s membership has chewed up and spit out more than a few accomplished change agents. That includes a number of visionary pathologist-leaders who were unable to gain sufficient traction with their peers.

Thus, from the start of his tenure, it should be recognized that new Executive Vice President Charles Roussel faces what might be aptly characterized as a “Sisyphean” task. His success will come as much from his ability to persuade CAP’s member pathologists to embrace and execute daring new organizational strategies as it will come from the unique and market-appropriate strategies he may develop.

It is notable that the College of American Pathologists went outside healthcare to tap someone with Roussel’s qualifications. This step could turn out to be a positive gamebreaker for the pathology profession by helping it craft an essential role in the coming age of genetic medicine and integrated healthcare.

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College of American Pathologists Selects Charles Roussel as Its New Executive Vice President