An estimated 80 pathologists will now work for larger pathology superlabs as part of the deals, bringing stiffer competition to independent anatomic pathology groups
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Consolidation among private practice anatomic pathology groups continues with news that two large regional pathology groups decided to sell to larger pathology companies. The first transaction announced was on Dec. 16, 2021, when Sonic Healthcare of Sydney, Australia, disclosed that it had acquired Dallas-based ProPath. Sales price and other terms were not announced.
The second transaction happened last month. On Jan. 24, Nashville-based PathGroup announced it had bought Pathology Consultants of Greenville, S.C. Price and terms of this transaction also were not disclosed.
Pathology Consolidation Continues
The decision by two of the nation’s leading regional pathology groups to sell themselves to larger pathology entities confirms that the trend of consolidation is continuing within the pathology profession. It is also a sign that smaller pathology groups will find it increasingly difficult to compete and stay profitable as new technologies transform the surgical pathology profession, such a digital pathology platforms.
ProPath was considered a financially strong regional super-group, as it operates facilities in three states and has 50 pathologists and 500 employees. Sonic noted that ProPath’s annual revenue was about $110 million.
It should be noted that graduating pathology residents and fellows are tech-savvy and want to work in practices that have all the latest technologies in histology, scanning, and digital pathology. This observation plays into the consolidation of the market.
Clinical pathology laboratories often find it difficult to get accurate information about various molecular and genetic assays
Because of advances in automated molecular systems and less complex technologies, it is now possible for more clinical pathology laboratories in community hospitals to establish their own molecular diagnostics testing program. This is particularly true of testing for infectious disease and cancer.
At the same time that local pathology and clinical laboratories have this opportunity to provide useful new molecular and genetic tests to physicians in their community, questions often remain about how to assess the clinical value of performing a molecular diagnostic test versus the cost of performing that assay. Adequate reimbursement is another equally important part of the decision to offer a new molecular or genetic test.
With each new advance in molecular diagnostics, local laboratories and pathology group practices find it easier to set up and offer molecular assays to their own clientele. That’s because newer generations of instruments automate steps and make it feasible to support this testing with a relatively small volume of specimens.
Challenges still remain, however. Payer coverage and reimbursement for many molecular assays remain inconsistent and unpredictable. In some cases, laboratories need technical skills which are either difficult to recruit or expensive to hire. Yet, where a molecular assay has clear clinical value, physicians want access to this test, particularly from a laboratory in their own community. It is this value added dimension to a molecular testing program which has helped a number of progressive pathology groups expand market share and revenue.
One such pathology group is ProPath of Dallas, Texas. With 30 pathologists, a cornerstone of its business strategy is to have subspecialist pathologists to serve its clients. Since the inception of molecular pathology, ProPath has reviewed new technologies and assays. It is willing to invest in three dimensions to bring up and offer specific molecular tests. It will acquire the instruments and equipment, it will hire or develop the technical expertise needed to run these tests and consult with physicians, and it will put money into a sales and marketing program to educate physicans and help them use these tests to the advantage of their patients. ProPath’s Executive Director, Krista Cruse, will present a case study at the upcoming Executive War College on Laboratory and Pathology Management and discuss ProPath’s success secrets in building a profitable molecular testing program.
To help both clinical laboratories and pathology group practices identify the best molecular testing opportunities for the marketplace they serve, Mary Steele Williams, COO & Director of Scientific Programs at the Association for Molecular Pathology, Bethesda, Maryland, will speak at the Executive War College specifically on the topic of which molecular assays are heading to market and likely to be both clinically useful to physicians and financially lucrative to the laboratories which offer such tests. In her role at the Association of Molecular Pathology, Williams gets a privileged look at emerging molecular assays, so her advice and insight can be invaluable for any laboratory wanting an insider’s view of today’s market for molecular testing.
Of course, The Dark Report has often written about the emerging business model in anatomic pathology that is now competing with local pathology groups for specimens. That is the specialty esoteric testing company. One of the most recent entrants into this category is RedPath Integrated Pathology of Pittsburgh, Pennsylvania. In the first 24 months of its business launch, it has grown to $5 million per year in revenues. RedPath’s innovation is patented technology that allows it to support both the diagnosis of cancer and the planning of treatment across multiple organ systems. The technology allows RedPath to work from a range of specimens, including traditional chemically-fixed slides, fluid aspirates, and cytology smears. Sydney F. Finkelstein, M.D., the pathologist who developed this technology and became RedPath’s founder, will be at the Executive War College to discuss how RedPath is giving community-hospital pathology groups additional molecular tools that they can use to add value to their client physicians.
As these examples demonstrate, molecular diagnostics and molecular pathology each can offer plenty of upside and opportunity for local laboratories and pathology groups. But there is also risk, because of unpredictable reimbursement and other factors. What is common to the laboratory case studies described above is that these pathology labs did careful market research. Lab directors and pathologists interested in developing a profitable, thriving molecular testing program should reserve a place at the upcoming Executive War College on May 10-11, 2007 in Miami. It’s an opportunity to meet Cruse, Williams, and Finkelstein and get first-hand access to their insights, advice, and recommendations.
PS: To get the latest news and effective strategies dealing with new trends, join us in Miami on May 10-11, 2007 for the 12th Annual Executive War College. You can access the full details using the links below. Take action today to reserve your place.
Physicians continue to migrate toward larger group practice settings. Consolidation of physician group practices continues, although the pathology specialty seems to be resisting this trend. The American Medical Association reported in 2005 that about 40% of physician groups had 3 or 4 physicians, but those groups employed only about 11% of all group-practice positions. Conversely, only 1.4% of these groups had 100 or more doctors, but they represented almost 32% of the 247,000 physicians in group practices. By contrast, the predominant group practice model in pathology tends to be four physicians or less.
This gradual migration of physicians away from one to three doctor groups and into larger group practice settings has long term implications for both clinical laboratories and community hospital-based pathology groups. Larger physician groups refer greater volumes of specimens and this larger volume can help a laboratory justify adding customized services that add value to the referring clinicians.
For anatomic pathologists, in particular, consolidation of physician groups into regional super-groups comes with an interesting downside. Urology and gastroenterology groups, particularly those with eight or more physicians, generally have enough specimen volume to profitably internalize their biopsy referrals. That is why many of these groups are establishing in-house anatomic pathology laboratories. Because urology and GI group mergers were extensive during past decade, supergroups in these specialties control a proportionally larger volume of anatomic pathology case referrals. Thus, when they build their own laboratory, the loss of business to pathology labs can be significant.
Dark Daily observes that anatomic pathology groups are now seeing some unpleasant consequences from the lack of group practice consolidation in pathology during the 1990s. Even as their physician colleagues in the local community were merging and creating larger groups – primarily to gain leverage in managed care contracting – hospital-based pathology groups resisted this trend. After all, they often had patient access through their hospital’s managed care contracts.
During the 1990s, just a small number of regional pathology “super-practices” emerged. Examples of these groups, with more than 20 pathologists, are Bayless Pathmark Pathology in Cleveland, Ohio; ProPath in Dallas, Texas; UniPath in Denver, Colorado; and Pathology, Inc in Torrance, California. However, these pathology groups report greater success compared to their smaller peers. Their size allows them to finance sales programs to increase specimen volume and revenues, as well as to set up and offer new molecular pathology tests. With more resources, these pathology supergroups have tended to weather the healthcare storms with more stability.
Experts tend to believe that consolidation among physician groups will continue. There are many economic forces which make such mergers attractive. Not the least is the ability to spread the cost of EMR (electronic medical record) and practice management software systems across more doctors. The clinical laboratory industry has already undergone extensive consolidation. That is one reason why there are many competitive hospital laboratory outreach programs in the market today. Multi-hospital health system laboratories have more resources with which to develop an outreach program.
The question mark is what will happen to the private pathology group practice based in community hospitals. For the past 12 years, “bigger is better” has been a major strategy by all classes of providers and most medical specialties. How long will the profession of anatomic pathology resist the same market forces that motivated other physician specialties to merge and consolidate as a strategy to protect income and access to patients?