IMAGINE FOR A MOMENT THAT ONE OF THE TWO BLOOD BROTHERS inked a deal: 1) to set up a series of hospital laboratory joint ventures with a multi-billion health system that operated 50 to 100 hospitals in 15 to 20 states; and, 2) to be a primary source of esoteric and reference testing to all those hospitals. Wouldn't that be a major event among Wall Street analysts and investors?

I'll bet it would. We would see a flood of commentary praising the shrewd strategy of the blood brother executives to partner upwith hospitals. There would be rosy projections about increased specimens and revenue that would accrue from sequentially establishing commercial lab/hospital lab joint ventures in different markets-each done with the full support of the parent health system.

Armed with that thought, consider the lead story in this issue of THE DARK REPORT. Pathology Associates Medical Laboratories (PAML, owned by Providence Health & Services of Seattle, Washington) now has $6.8 billion Catholic Health Initiatives (CHI) as an equity owner and an agreement with CHI-which operates 78 hospitals in 20 states-to: 1) set up a series of hospital laboratory joint ventures with CHI hospitals; and, 2) be a primary source of esoteric and reference testing to all those hospitals.

This is a remarkable accomplishment for any lab organization in the United States. It validates the investment PAML has devoted to creating its "better mousetrap" of a high-service laboratory joint venture business template. With six successful, long-running, and ongoing hospital lab joint ventures under its belt (see page 5), PAML is poised to enter new regions of the United States and help its hospital partners build profitable laboratory outreach programs.

Lest anyone think this is a unique or one-off business deal between PAML and Catholic Health Initiatives, I would remind our clients and long-time readers of Mountain Star Clinical Laboratories in Salt Lake City. This is a laboratory joint venture between PAML and three hospitals owned by HCA, Inc., the $24.4 billion, for-profit hospital company. Started in early 2008, it is another example of a large hospital operator that sees opportunity in PAML's laboratory joint venture business model.

Not since the days of International Clinical Laboratories (ICL) in the 1980s has a lab company in the United States been as effective as PAML in developing laboratory joint ventures with hospitals. It seems that PAML has a "magic touch" in offering hospitals the right value proposition for JVs.

Catholic Health Initiatives Signs Pact with PAML

Goal is to pursue hospital lab joint ventures in multiple regional markets served by CHI hospitals

CEO SUMMARY: In concept, it is a simple deal. Catholic Health Initiatives (CHI), the nation's second largest Catholic health system, is taking a 25% equity position in Pathology Associates Medical Laboratories (PAML). However, the consequences may be significant. PAML now has an open door to develop laboratory joint ventures with the 78 hospitals operated by CHI. It also is positioned to become the primary esoteric and reference testing partner for the CHI hospitals.

Guest Commentary: FDA Advisory Panel Convenes To Assess Whole Slide Imaging

Editor's Note: Guest writer Martin Perry attended the FDA's advisory panel on digital pathology conducted earlier this month. He is CEO of The Perry Group and has extensive experience in imaging and healthcare. He offers his insights from the FDA proceedings on digital pathology imaging.

Health Info Exchange (HIE) Helps South Bend Lab

Lab gets many advantages from working with Michiana Health Information Network

CEO SUMMARY: Across the country, there are many efforts to create Regional Health Information Exchanges (HIEs). This has the potential to change the way laboratories connect electronically with referring physicians. This is true in South Bend, Indiana, where the Michiana Health Information Network (MHIN) has operated for 10 years. It turns out that MHIN has been beneficial to the area's major laboratory. South Bend Medical Foundation reports it has gained competitive market advantage from MHIN.

New Privacy Breach Law Requires Labs to Respond

HITECH legislation passed last February creates new compliance steps for privacy breaches

CEO SUMMARY: There were plenty of headlines about the passage of HITECH last February because of how it expanded funding for electronic medical records. But lesser known are new requirements that providers, including labs and pathology groups, must now take specific compliance actions in response to breaches involving protected health information (PHI). Enforcement of these new requirements by the Department of Health and Human Services begins on February 22, 2010.

Genomics Update: Physicians in Survey Recognize Lack of Genetic Test Knowledge

DC Area Labs Busy Hiring Subspecialist Pathologists

AFIP staffs up with five new hires, while local pathologists speculate about events at AIPL

CEO SUMMARY: When a mass exodus of at least 15 civilian subspecialist pathologists left the Armed Forces Institute of Pathology (AFIP) to join the newly-formed American International Pathology Laboratories (AIPL) in September, it triggered a number of consequences for both labs, along with a slew of rumors. AFIP reports that it is maintaining services and has hired five new pathologists to work during the interim before AFIP's transition to the Joint Pathology Center. At AIPL, no official statements have been made about recent events.

INTELLIGENCE: Late & Latent

PREDICT LABS TO BE SWAMPED BY FLU TEST TIDAL WAVE

TRANSITIONS RinaWolf has joined XIFIN, Inc.,

Call us today if you have Charter Membership questions at 800-560-6363 or 512-264-7103
The Dark Report intelligence briefing is delivered to your mailbox every 3 weeks!