R. Lewis Dark: Lab Testing Hits Two Home Runs For Patients

MANY OF US POINT OUT THAT LABORATORY MEDICINE is an undervalued and under-utilized asset within the American healthcare system. Lab testing is generally a minimal cost relative to the total episode of care, yet lab testing provides essential knowledge to help clinicians make a quick, accurate diagnosis and confidently select appropriate therapies.

Like the late comedian Rodney Dangerfield,many lab directors and pathologists feel like "I don�t get no respect!", particularly when negotiating contracts withmanaged care plans. Seldomis the true value of laboratory testing acknowledged by payers, particularly in the form of adequate reimbursement.

However, this situation may be on the verge of changing. In this issue of THE DARK REPORT, we provide intelligence briefings on two important home runs hit by laboratories during the past 24 months. First up is our coverage about the explosion in vitamin D testing. Labs across the country are reporting that vitamin D test volumes have doubled and tripled over themost recent 12months! ARUP Laboratories tells us that about one-third of the vitamin D test results indicate that the individual is vitamin D-deficient. This fact is evidence that physicians are using the test appropriately. (See pages 3-5.)

That remarkable lab testing home run is followed by the story of another, even * more amazing lab testing home run. At Washington Hospital Center (WHC) in Washington, DC, a rapid PNA FISH test for bloodstream infections, combined with real-time results reporting to the attending physician, has contributed to an 83% drop in patient mortality in ICU settings�and a 53% overall reduction in patient mortality related to bloodstream infections! (See pages 6-9.)

The unique twist to the WHC experience is that these dramatic reductions in patient mortality only came after the procedure for reporting the PNA FISH tests was changed to incorporate a personal phone call to the attending physician, to ensure he/she got the results in real time. Now comes the next challenge for the lab industry. Will Medicare and private payers recognize this value provided by labs to their referring clinicians?

Will Medicare and private payers establish reasonable reimbursement for these testing services? Too often in the past, payers publicly promote the importance of patients getting these tests, while, in private, they excoriate labs for not controlling test utilization and financially penalize them for the higher volume of testing that was performed.

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Vitamin D Test Volumes Doubled in Past Year

Growing awareness about vitamin D deficiency causes patients and physicians to order more tests

CEO SUMMARY: Across the nation, labs report a near doubling in the volume of vitamin D tests they are performing. This is a success for laboratorymedicine and an appropriate use of diagnostics tests as physicians strive for early detection and early intervention of vitamin D deficiency. However, the next chapter in this story will be equally important. Will Medicare and private payers recognize that, per evidence-based medicine guidelines, this testing is justified and labs should not be punished for increased utilization?

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53% Drop in Mortality From Lab Report Change

Study links use of rapid molecular test and real-time results reporting to improved outcomes

CEO SUMMARY: At Washington Hospital Center, it was unclear if the use of a rapid molecular assay for blood infections was changing outcomes until a new, real-time lab results reporting protocol required the lab to deliver the test results personally to the attending physician in real time. A study with a control group provided convincing evidence that use of the rapid molecular test, in combination with real time test reporting,may be associated with dramatic reduction in mortality and improved patient outcomes.

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NEWSMAKER INTERVIEW: Labs Should Build Payer Relationships To Improve Commodity Pricing

CEO SUMMARY: At the most recent Executive War College, Kerry Kaplan, President of Healthcare Connections in Natick, Massachusetts, discussed the results of his national survey of health plan executives on their attitudes toward clinical laboratories. It will be no surprise that these managed care executives consider lab testing services to be a commodity. What will be a surprise are Kaplan�s recommendations on how laboratories and pathology groups should develop partnerships with selected payers, rooted in added value services that generate ample reimbursement. In this first of a two-part series, Kaplan also delivers a dose of reality to laboratories as he advises them on how to prepare for the marketplace changes coming in the next five years.

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CMS Anti-Markup Rules Target In-Office Ancillaries

Changes ahead for specialist doctors using TC/PC arrangements or operating AP labs

CEO SUMMARY: Medicare officials are again attempting to rein in what they consider to be potentially abusive forms of inoffice ancillary services, including anatomic pathology. Proposed new rules published this month would clarify and perhaps expand the application of the Medicare anti-markup for purchased diagnostic testing services and for diagnostic tests provided by an ordering physician or supplier, including the professional and technical components.

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INTELLIGENCE: Late & Latent

GENOME PROJECT ADDS 3 COMPANIES

MORE ON: UroPath

R. Lewis Dark: Era of Digital Pathology Steadily Approaches

IMMEDIATELY AFTER GENERAL ELECTRIC ANNOUNCED its partnership with the University of Pittsburgh Medical Center (UPMC) on June 5 to develop a fully integrated digital pathology system,we took a closer look at how some pioneering pathologists are using digital imaging systems in their daily clinical practice. What we found is that the technology is fairly well developed and, in some other countries, pathologists already use digital pathology images for primary diagnoses on a regular basis. That won�t happen in the United States until the FDA clears this type of technology for clinical applications.

To share what we learned with you, we provide an intelligence briefing on pages 12-13 about how pathologists at the University Health Network (UHN), in Toronto, Ontario, have used digital pathology for frozen sections with great success for several years.Using ScanScope, a digital imaging system from Aperio Technologies, Inc., the UHN pathologists have improved workflow and patient care. They now regularly use the system to transmit images over the Internet from surgical sites around the corner or from a hospital 400 miles north of Toronto. By allowing pathologists to work remotely, the system supports the pathology needs of hospitals where no regular pathologist is on-site.

To be sure, companies developing fully-integrated digital pathology systems face plenty of hurdles. That's the topic of our second intelligence briefing, found on pages 15-18. We interviewed two CEOs of companies that sell pathology imaging products and systems to learn their views about howthe pathology profession is likely to react to digital pathology technology which holds the potential to eventually move pathologists away from glass slides and microscopes.

Repeatedly over the past decade, THE DARK REPORT has reminded its clients and regular readers about the strategic implications of baby boomer demographics.As experienced pathologists begin retiring in significant numbers, it will be new technologies�including fully-digital pathology imaging systems�that will become useful tools for increasing the productivity of individual pathologists. These same technologies will also contribute to improvements in the clinical quality delivered by pathologists to physicians and patients. As you will read in this issue, the sustained success of Toronto's UHN pathologists in using fully-digitized, whole-slide pathology images for frozen sections offers some fascinating reasons why the era of digital pathology may be closer than we all think.

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NY & California Act to Stop Web Gene Testing Firms

Regulators in New York and California target certain Web-based genetic testing companies

CEO SUMMARY: Events in the past month indicate that a war is developing between Internet-based companies offering genetic tests to consumers and state and federal health regulators. New York state authorities have sent letters to at least 31 such companies in recent months. Then, on June 9, the California Department of Health sent cease-and-desist letters to 13 Web firms. Just days later, the Federal Trade Commission disclosed two investigations of genetic testing companies.

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Hospital Trends: Growth of Medical Tourism May Become Political Issue

Americans going overseas for healthcare mean fewer patients visiting hospitals in this country

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HealthPartners Promotes Same-Day Lab Test Results

In Minneapolis, walking urine collection cup educates consumers about speedy lab reports

CEO SUMMARY: Patient focus groups told HealthPartners that they had anxiety as they waited days for lab test results. That encouraged HealthPartners to redesign workflows in its pathology department. Once it could deliver same-day lab test results electronically,HealthPartners launched a uniquemarketing campaign to educate consumers about this benefit in early May.Already,HealthPartners reports a 28%increase in the number of patients going on-line to access their lab test results.

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Toronto Pathologists Use Whole-Slide Imaging

Digital pathology and whole-slide imaging increase concordance and pathology productivity

CEO SUMMARY: It was the �frozen section problem� and productivity issues that led pathologists at the three-hospital University Health Network (UHN) in Toronto to implement a fully-digital pathology system with whole-slide imaging in 2006. Use of digital, whole-slide images makes it faster to report results to the surgeon,while making it easier to involve colleagues in difficult cases. Now UHN's pathologists use the system to support hospitals 400 miles away.

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Is Digital Path Imaging Ready for Prime Time?

FDA clearance of digital pathology imaging is one factor that will encourage wider adoption

CEO SUMMARY: Digital pathology imaging systems are finding uses in all phases of drug discovery (discovery, preclinical, clinical trials), as well as education, research, and clinical. One hurdle to widespread adoption of fully digitized, whole-slide pathology imaging systems is FDA clearance that allows the use of this technology for primary diagnosis. Executives at two of companies offering digital pathology systems offer their predictions about how this market will evolve.

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INTELLIGENCE: Late & Latent

SPENDING CUTS ADVERSELY AFFECT CANADIAN LABS

CANCER-DETECTING MICROCHIP UNVEILED

R. Lewis Dark: Era of Digitized Pathology Systems Approaches

SURGICAL PATHOLOGISTS SHOULD GET READY! I predict that they will soon have the opportunity to purchase and use fully digital, automated pathology systems that can perform primary diagnosis.When that happens, it will mark the final cycle of the era when the principal method of diagnosing tissue was that of eyeballs fixed to microscopes, scanning cells as glass slides are pushed around the stage.

The introduction of digital pathology systems capable of primary diagnosis will likely be the single most disruptive event to anatomic pathology in the past two decades. That�s because automation of the primary diagnosis of tissue will upend current work flow and clinical practices in surgical pathology.

I make this prediction, based on two market developments in anatomic pathology. One development is the success of Aperio Technologies, Inc., in placing fully digital pathology systems in as many as 375 laboratories in 25 countries. This company is finding a ready market for its digital solutions that support existing pathology work flow and clinical practices.

The second market development is the long-awaited entry of General Electric into laboratory medicine. As you will read on pages 9-11, GE Healthcare is partnering with some of the best minds in digital pathology at the University of Pittsburgh Medical Center (UPMC) to create Omnyx, LLC. The aim is to develop digital pathology systems that can integrate the transmission and use of digitized pathology images across the care continuum, support improved workflow, and contribute to increased clinical quality� as well as automate primary diagnosis. The two partners estimate that the market for digitized pathology systems will be about $2 billion per year.

I suspect GE is making this move now because it believes it has digital and other technologies that can be transformational to anatomic pathology. It wants to leverage its experience at digitizing radiology and evolving radiologists into a fully digital work flow by doing the same in anatomic pathology. In the 1990s, such companies as NeoPath, Inc., and Neuromedical Systems, Inc., privately showed THE DARK REPORT how digital cytology systems and software algorithms could do accurate, automated primary diagnosis on a variety of tissue types. Now the question is: are surgical pathologists ready to accept digital pathology systems that can move them away from microscopes and in front of computer screens? GE's entry into thismarketplace is evidence that it believes the answer is: "Yes!"

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NPI Rules Slow Payments To Pathology Groups, Labs

Private payers and Medicare carriers kick out high volume of claims for incorrect NPI compliance

CEO SUMMARY: New rules requiring use of National Provider Identification (NPI) numbers took effect on May 23. Since then, Medicare carriers and payers nationwide have rejected claims from pathologists and other providers that do not comply with the new NPI rules. A missing NPI on just one claim will result in the front end rejection of the entire submission file to Medicare. Cash flow to some pathology groups and other physicians has dropped. It may be another month or more before normal cash flow is restored.

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GE, UPMC Create Company For Digital Path Imaging

Joint venture estimates market potential is $2 billion for fully-digitized pathology systems

CEO SUMMARY: It's a new joint venture with the potential to transform surgical pathology. General Electric Healthcare has extensive experience at supporting physicians' work flow with digitized imaging systems, plus ample experience with molecular biomarkers. The University of Pittsburgh Medical Center's pathology department is a world leader in whole-slide imaging and digitized pathology systems. Together, the two partners hope to gain FDA approval for a fully digitized pathology system in about two years.

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New Senate Bills Include Repeal of Competitive Bid

Bills would kill lab competitive bidding demo, eliminate cut to physician fees, and extend TC

CEO SUMMARY: One proposed Senate bill would repeal the laboratory competitive bidding demonstration project, replace the 10.1% cut to physician fees with a 1.1% increase, and extend the so-called technical component (TC) grandfather clause. Senator Max Baucus (D-Montana), Chairman of the Senate Finance Committee, is sponsor of the bill (called S 3101). Congress is under pressure to pass a Medicare funding bill before July 1, 2008, when the 10.1% reduction in physician fees will occur.

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ISO 15189 Work Advances At Meeting in Vancouver

Delegates to ISO Technical Committee 212 gathered for their annual working session

CEO SUMMARY: Laboring quietly out of the public eye, an international work team of professionals, including representatives from the CDC, the FDA, and global in vitro diagnostics (IVD) manufacturers, has spent the past 14 years developing an important series of quality and safety standards for medical (clinical) laboratories. Here�s a report on events at the most recent international assembly of ISO Technical Committee 212, which gathered earlier this month in Vancouver, British Columbia.

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CMS Expected to Revise Condo Lab & TC/PC Rules

Rule changes could come this summer and may also involve physician self-referral

CEO SUMMARY: Expectations are that the Centers for Medicare & Medicaid Services (CMS) will take further action to rein in anatomic pathology arrangements used by physicians to capture revenue from their patient referrals. This may happen as soon as next month, when CMS publishes the 2009 Medicare Physician Fee Schedule (MPFS) Update and requests public comment on proposed new rules. Attorneys tracking these developments believe that both anatomic pathology condo labs and TC/PC arrangements are likely to be the subject of these new rules.

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INTELLIGENCE: Late & Latent

GENOME PROJECT ADDS 3 COMPANIES

SONIC ACQUIRES GERMAN LAB FIRM

R. Lewis Dark: Customer-Focused Labs Are Successful

AS YOU READ THIS ISSUE, YOU WILL BE AMONG THE FIRST in the laboratory industry to learn that more than 50% of the nation's hospitals are financially deficient and "technically insolvent or at risk of insolvency." That's according to Alvarez & Marsal of New York City, which analyzed the financial performance of 3,900 hospitals and released a report on its findings. (See pages 10-14.)

Certainly for hospital-based lab directors and pathologists, this may be one of the most significant intelligence briefings we bring you this year. It is a sobering fact that, by Alvarez & Marsal's estimate, "2,044 hospitals, or 53% of the sample, had negative patient care profitability." That means revenues from treating patients are not enough to cover expenses at these struggling hospitals. Alvarez & Marsal observe: "A 'flight to (perceived) quality' is occurring by both physicians and patients—creating a bigger gap between the fiscally strong and fiscally weak hospitals in a given market." Why are successful hospitals consistently profitable and capturingmarket share from weaker hospitals? Experts such as Alvarez & Marsal and McKinsey & Co. say the better hospitals succeed because they are close to their customers and offer quality care, an attractive facility, and customerfocused personal service to patients.

Success from a customer-facing and customer-focused business strategy is one common theme heard in many of the presentations delivered at this year’s Executive War College on Lab and Pathology Management, which took place in Miami earlier this month. As you will read on pages 3-6, lab industry leaders, innovators, and healthcare experts from such diverse, respected companies as Microsoft, Cerner Corporation, and DNA Direct all had a common element in their strategic recommendations to lab directors and pathologists. It was that providers and laboratories must be close to their customers to survive and thrive as ongoing reforms alter and transform the American healthcare system.

If you askme, it’s not a coincidence that, in two different intelligence briefings in this issue of THEDARK REPORT—and within two entirely different segments of healthcare and laboratory medicine—the “customer-focused” strategy is identified as a critical success factor. Observant lab executives and pathologists will want to act upon this highly useful insight. It can play a vital role in contributing to clinical excellence and financial viability in the coming, tough years.

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War College 2008 Theme: Get Close to Customers!

What's hot in laboratory and pathology is customer-facing organizations and integrated IT

CEO SUMMARY: Over the course of two days, pathologists, lab directors, and other laboratory professionals repeatedly heard speakers urge them to work hard to ensure that customers are the top priority for their laboratory organization. Another theme is the need for labs to organize their data so that they can send actionable information to referring physicians and other partners in the healthcare system. Forward-looking labs and pathology groups are already forging ahead with enriched consultative services for client physicians.

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Lab Industry’s First Mergers & Acquisitions Day Reveals Lots of Interest, More Lab Sales Ahead

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Cerner's Market-Driven Employee Health Program

Meet "Healthe", Cerner's innovative effort to motivate employees to improve their health

CEO SUMMARY: Cerner Corporation is using a variety of strategies to reduce the cost of health benefits and improve the quality of care for its workers and dependents. Gluing the entire effort together is an integrated patient health record (PHR) and a host of electronic services, ranging from real time eligibility verification and claims adjudication for physicians to preventive and wellness programs for employees. Last year, Cerner tracked $2.6 million in savings from this Healthe initiative. It also began selling this innovative health benefits program to other corporations.

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New Report Says Half Nation's Hospitals Have Financial Woes

Not Enough Patient-Care Revenue to Cover Costs

CEO SUMMARY: In a groundbreaking study just released, consulting firm Alvarez & Marsal determined that as many as half of the nation's hospitals are failing to generate enough patient revenue to sustain expenses! With a median occupancy rate of 43%, these hospitals are likely to experience a wave of bankruptcies, financial restructurings, and forced mergers. This is the second major report in 24 months to describe how and why many hospitals are failing to compete effectively against physician-owned facilities and why consumers are voting with their feet.

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Ruling Against UroPath Signals More Fed Action

Expect CMS to develop new anti-markup regs, based on federal court ruling in UroPath case

CEO SUMMARY: It was a signal win for federal healthcare officials when a federal district court judge in Washington, DC, dismissed a case brought by UroPath, LLC. UroPath had sued HHS Secretary Michael Leavitt seeking to challenge the physician fee schedule final order and the anti-markup rule. The judge’s decision provides Medicare officials with useful guidance on how to craft new regulations to possibly further limit the way anatomic pathology condominium (pod) labs operate. Two lab industry attorneys offer insights about what may happen next in this case.

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Federal Court Rules on Specimen Ownership

Growing research value of human specimens leads to lawsuit between physician and university

CEO SUMMARY: Recently, a federal appeals court affirmed a district court ruling concerning who owns human tissue specimens that are stored for research and other uses. While most clinical laboratories routinely discard many types of human specimens after use, any research facility or IVD manufacturer that retains specimens should review the new legal issues raised by this court decision. The case of Washington University versus Catalona demonstrates how legal battles over ownership and control of human specimens may lead to significant new legal precedents.

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INTELLIGENCE: Late & Latent

MORE ON: Cell Phones Aid Diagnostics

RFID TO TRACK LAB SPECIMENS

R. Lewis Dark: Battles Continue Over Doctor Mark Up of Lab Tests

FROM THE SHADOWS OF A PARKING GARAGE, Deep Throat suggests to reporter Bob Woodward, "Follow the money." In this scene from the movie, All the President�s Men, Woodward gets the right advice he needs from an unnamed source to pursue the Watergate case, a huge political scandal of the 1970s.

"Follow the money" is also good advice for lab managers and pathologists tracking the battles over physician mark-ups of clinical laboratory testing and anatomic pathology (AP) services. Efforts of the federal Centers for Medicaid & Medicare Services (CMS) to implement proposed rules preventing physicians from marking up certain laboratory, pathology, and radiology services have been widely publicized. Now legislators in Missouri are considering changing state law to prohibit physicians from marking up fees for pathology services."In some medical practices across Missouri, doctors are turning a profit from lab work done by other doctors. And most patients and their insurance companies don�t know about it," says an article in the Springfield News Leader in Missouri on April 30."It�s called 'indirect billing' or 'pass-through arrangements,' and a bill in theMissouri legislature would outlaw the practice."

The sponsor of Senate Bill 817 is Missouri state Senator Jack Goodman (R Mount Vernon). He believes it�s unethical for physicians to mark up fees for work performed by other physicians. A similar measure, House bill 1990, is expected to be assigned to a committee. Two earlier efforts to pass such bills failed. Missouri physicians have testified in favor of retaining the ability to mark up test fees, saying it allows them to negotiate discounts with labs and guarantees their patients a set package price for in-office tests and lab work. They claim this can allow them to pass on discounts to low-income and insured patients. But no one has stepped forward with evidence documenting that physicians do, in fact, pass these discounts along to self-paying patients.

I suspect federal officials will prevail in their efforts to prohibit physicians from marking up laboratory tests, anatomic pathology services, and radiology procedures not performed in their offices by board-certified physicians who are partners/employees of the medical group. As that happens, private payers will fall into line with similar anti-markup requirements. After all, if you follow the money, Medicare, Medicaid, and private health insurers have much more to lose than office-based physicians have to gain from banning mark-up arrangements.

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Lab Automation Advocates Gather in Kobe, Japan

Sixth Biannual "Cherry Blossom Symposium" provides look at the cutting edge of lab automation

CEO SUMMARY: CEO SUMMARY: Everything relating to automation in clinical laboratory operations was the theme of the sixth "International Conference of Laboratory Automation and Robotics," conducted last month in Kobe, Japan. Because laboratories in Japan, Korea, and Taiwan have two and three decades of experiencewith extensive automation, presentations at this gathering are quite sophisticated and reveal that these laboratories are continuing to push forward in their use of automation.

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University of Tokyo Hospital Lab Has Plenty of Automation

Phlebotomy is supported by extensive automation, most interesting is the automated urine transport line

CEO SUMMARY: In Japan, many clinical laboratories are in their third decade of using automation. At the University of Tokyo Hospital, total laboratory automation (TLA) was first implemented in 1991. Now on its fourth generation TLA system, this laboratory was worked upstream to automate specimen collection and urine collection, transport, and specimen preparation. The result is automation solutions not seen in the United States.

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Technology Update: Healthcare Has First Standards for Use of Bar Codes and RFID

ANSI and two healthcare groups collaborate to develop standards to support these technologies

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Managed Care Update: Cell Phones to be Used to Report Patient Self-Test Results

CareFirst Blue Cross Blue Shield of Maryland ready to launch diabetes management service

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Implementing Best Practices Across 27 Hospital Labs

Management Strategies to Share "Best Practices" Across All Lab Sites

CEO SUMMARY: It is always challenging to ensure consistency and high productivity across the different labs in a consolidated lab organization. To help staff focus on quality and efficiency, Alverno Clinical Laboratories LLC uses Lean methods to improve quality and timely delivery of lab results in its regional core laboratory and the labs in the 27 affiliated hospitals in Illinois and Indiana. This strategy helped Alverno save almost $11 million last year while turning out 14 million billable tests.

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PhyTest Assists Doctors With Lab Testing Revenue

Georgia-based company has exclusive focus to help doctors with laboratory testing programs

CEO SUMMARY: PhyTest, Inc., created a unique business model upon its founding in 1998. It primarily specializes in handling laboratory test billing and collection services to office-based physicians. It also provides evaluation, consulting, and implementation services to help physicians in client-bill states establish discounted billing relationships with reference laboratories. To avoid Stark Law issues on physician self-referral, these arrangements do not involve laboratory testing done for patients covered by Medicare or other federal health programs.

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INTELLIGENCE: Late & Latent

JAPAN�S HEALTH SYSTEM TACKLES PREVENTIVE CARE

MEDICAL JOURNAL HITS MISDIAGNOSIS