R. Lewis Dark:
Anatomic Pathology's Likely Path of Transformation
RECENT DEALS INVOLVING PRIVATE EQUITY FIRMS and several of the nation's
larger pathology groups hint at a major transformation soon to come to the
pathology profession. No one should be surprised that pathologists of the
baby boomer generation will be an important trigger in this transformation.
It is the coming wave of retirements by baby boomer pathologists that
will provide the momentum for these changes to the profession. As you will
read on pages 13-14, our editor observes that many pathology group practices
will soon need money to cash out their retiring partner-pathologists. In
response to this need, a growing number of pathology groups will either
allow themselves to be acquired or will sell significant equity to outside
investors. In both cases, some of the money raised by these methods will be
used to purchase back the equity owned by the retiring partners.
I can see this having two direct consequences to the pathology profession.
First, it is likely to signal the end of the pre-eminence of the private pathology
group practice, usually anchored by one or more contracts with community
hospitals. Because of either outright sale of the practice or the sale of significant
equity to outside investors, private pathology practices-professional corporations
(PCs)-will begin to decline in numbers and influence.That's because the
buyers or new investors of these private practice groups will operate themusing
a different business model than the professional corporation.
Second, each time a private pathology group either sells itself to a buyer
or sells a significant share of equity to outside investors, these investors will
insist on one major change in the pathology group's business activity. That
change will be to increase the rate of growth in specimens and revenue. To
achieve this, these pathology groups will initiate their first-ever sales and
marketing programs or expand and intensify existing sales efforts.
Thus, the rather collegial pathology profession we see today, dominated by
private pathology group practices (often smaller groups serving community
hospitals and not funding a professional sales program) is about to undergo a
gradual transformation. If professional investors change anatomic pathology in
a similar fashion to how the clinical laboratory was changed between 1985 and
the present, then we should expect a fundamental restructuring of the
anatomic pathology sector. This may take more than 10 years to accomplish,
due to the pace of retirement by baby boomer pathologists.
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Ireland Is Restructuring National Lab Test System
Government health program plans to integrate,
consolidate, and regionalize lab testing services
CEO SUMMARY: Working from a consultant's report and
recommendations based on studies dating back to 2006 and
2007, Ireland's Health Service Executive is moving forward to
effect a comprehensive reconfiguration of clinical laboratory
testing across the nation. This may be the first time that the
government health program of a developed nation has
attempted to consolidate, regionalize, and integrate all the laboratory
testing services within its borders.
Predict 60,000 Doctors
To Adopt EMRs Each Year
Expanding EMR use by physicians creates
opportunity for clinical labs & pathology groups
CEO SUMMARY: Only about 180,000 U.S. physicians have
adopted electronic medical record (EMR) systems over the past
14 years-mostly in largermedical groups. Now experts believe
asmany as 60,000 physicians per year will begin to adopt EMRs
because of new federal incentives funded by the stimulus bill
passed early last year. This is amajor development and requires
a response by every clinical lab and pathology group practice,
since physicians will need their lab provider to enable electronic
lab test ordering and lab test reporting for their EMRs.
Health Market Update: Rate of Health Spend Increase
in 2008 Was Lowest Since 1960
Centers for Medicare
and Medicaid Services report says a total of $2.3 trillion was spent
on health during 2008, which is an increase of 4.4%
Two Big Pathology Groups
Tap Investors for Capital
Each deal infuses new capital in the group,
while leaving pathologists with significant control
CEO SUMMARY: Pathology supergroups in California and
Tennessee have each announced major recapitalizations. Both
groups will use some of the money to cash out retiring partners.
The balance of the new capital will be used to expand their businesses.
With so many baby boomer pathologists approaching
retirement, these two transactions are likely to be studied by
many pathology groups and should be considered early examples
of a trend that is soon to become more prominent.
Pathology Inc. Sells
Equity to Raise Capital
Pathology group accesses growth capital
by selling shares to professional investors
CEO SUMMARY: In looking how to propel its business to the
next level, the partners at Pathology Inc. opted not to sell their
pathology group practice. Instead, they chose to raise capital by
selling equity in their company to a group of investors. In this
exclusive interview, executives from Pathology Inc. share their
business strategy. Among the priorities are expansion of the
sales and marketing program, possible acquisitions of other lab
companies, and acquiring sophisticated information technology.
INTELLIGENCE: Late & Latent
MORE ON: NeoGenomics, Inc., of Ft.
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