EVENTS NOW UNFOLDING IN DALLAS, TEXAS, SIGNAL A DIFFERENT DIRECTION for pathology and clinical laboratory testing. As you will read on pages 3-9, in May, just weeks from now, a new laboratory company, funded with $40 million from an unlikely combination of four partners, is about to become operational.

The primary business objective of the new partnership between Pathologists Bio-Medical Laboratories, Baylor Health Care, Texas Oncology, and US Oncology is to build a state-of-the-art reference and esoteric laboratory, to be known as MedFusion. First the partnership will offer this testing to hospitals and other clients in the Dallas area, before expanding across Texas and into other parts of the United States.

I want to focus on another intriguing aspect of the new business relationship among these four unexpected bedfellows. Within the same building where MedFusion's laboratory is located, US Oncology is building its own laboratory that will focus on providing oncology testing for its 1,300 oncologists who practice in Texas and in 38 other states across the country.

Because it currently serves about 720,000 cancer patients per year in this country,US Oncology has the ability to refer a huge volume of biopsies and cancer tests to its new laboratory, currently under construction in Dallas. At the same time, the pathologist-owners of Pathologists Biomedical Laboratories (PBL) in Dallas have positioned themselves to become the primary and preferred source of pathology subspecialty expertise to analyze and diagnose these specimens.

The obvious conclusion is that US Oncology represents the first wave of oncologists ready to cut into the pathologists' revenue pie, just as dermatologists, urologists, and gastroenterologists have done during the past two decades. I think that conclusion—even if true—is rather simplistic and misses a more subtle and important insight.

Personalized medicine and companion diagnostics are making the diagnosis and treatment of cancer and other diseases more complex. I believe the Dallas pathologists at PBL have their sights on amuchmore valuable prize. They are positioning themselves to become an essential part of the cancer care team. In coming years, this means that they evolve into necessary consultants on every case of cancer, from diagnosis to selection of therapies and monitoring the patients' progress. As that happens, I predict these Dallas pathologists will earn more compensation by providing services that have significant value to patients and their care teams.

Baylor Pathologists Form Lab with US Oncology

Four partners prepare to open two sizable new laboratory businesses to be based in Dallas

CEO SUMMARY: In Dallas, Pathologists Bio-Medical Laboratories is part of a new laboratory partnership that includes Baylor Health Care System, Texas Oncology, and US Oncology. The four partners ponied up a total of $40 million in cash and debt to build a state-of-the art laboratory in a 172,000 square foot building. To be called "MedFusion," the laboratory partnership expects to provide reference and esoteric testing to Baylor Health, hospitals, other clients, and to clinical trial service organizations.

Two New Pathology Models Will Soon Be Tried in Dallas

Goal is to deeply integrate laboratory testing into healthcare continuum in ways that add value

CEO SUMMARY: There are notable aspects to how and why four unlikely partners are banding together to invest $40 million and create the nation's newest reference and esoteric testing laboratory. It was the pathologists at Baylor University Hospital in Dallas, Texas, who originated the vision and initiated conversations with the other three partners. This new business shows how pathologists can leverage their knowledge and play a greater role in advancing personalized medicine.

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Multiple disruptive forces are actively reshaping clinical laboratory testing and anatomic pathology

Laboratory medicine is about to find itself between the two jaws of a powerful vise. One jaw is pending major legislative overhaul of the entire healthcare system, along with dwindling reimbursement as Medicare and Medicaid runs out of money. The other jaw is personalized medicine, companion diagnostics, and expensive molecular testing. As these jaws squeeze tighter, clinical laboratories and anatomic pathology groups will need effective response strategies.

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