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Complete Issue > Volume XVII, Number 8, Monday, June 1, 2010 (June 1st, 2010 — $ 36.00)
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R. Lewis Dark: California's Legal Challenge to Discount Pricing

PROBABLY NO TOPIC IN THE LAB TESTING INDUSTRY generatesmore controversy than discounted pricing for physicians, managed care companies, and IPAs (independent physician associations). Almost every pathologist and laboratory executive decries the corrosive effects of below-cost pricing.

Yet, many of these same lab executives quietly continue to solicit new clients by dangling deeply discounted, and often money-losing-prices to physicians and health insurers. Competing labs recognize that often the prices are at marginal cost which means that the lab doesn't recoup its fully loaded cost of performing the test. Sometimes a lab company will even offer prices that are less than the lab's marginal cost to perform the test.

The only way the lab can offer these money-losing prices is because it "pulls through" enough Medicare and other fee-for-service specimens to offset the losses incurred for testing the discount priced tests. Typically it is national lab companies or investor-owned labswhich aremostwilling to play this price game. Local labs, hospital lab outreach programs, and pathology groups continously grumble about these business practices. Among these laboratory professionals, price discounting particularly if the lab test price is less than the offering lab's marginal cost to perform the test is seen as a form of inducement or kickback.

The lab gives the discount for one part of the client's test referrals, and gains access to the Medicare and other fee-for-service specimens in exchange. At the federal level, there has never been enforcement action that draws a clear boundary as to where a deeply-discounted lab test price falls on the wrong side of the law. That allows a number of laboratory companies to operate in the grey area, while labs with conservative compliance policies lose a competitive edge in the market. I point all this out because the deeply-discounted lab test pricing game might soon get a new set of rules in California.

Last year, Attorney General Jerry Brown unsealed the whistleblower lawsuit that alleges seven lab companies in California defrauded theMedi-Cal program. Now there is news that one laboratory has signed a settlement, and two others may have also settled. Brown argues that California state law requires a lab to bill Medi-Cal at the same lowest price for a test that the lab offers its other clients. If Brown gets the other four to six labs to settle and agree to bill Medi-Cal in this manner, then hemay disrupt a long-standing lab industry practice in California. For that reason, the progress of this whistleblower suit bears watching.


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Westcliff Labs Announces BK and Sale to LabCorp

Chapter 11 bankruptcy reveals huge losses at what was once a profitable independent lab

CEO SUMMARY: Subject to court approval, Laboratory Corporation of America is poised to acquire the assets of California-based Westcliff Medical Laboratories, Inc., which just filed a Chapter 11 bankruptcy action in federal court on May 19. In a separate transaction, LabCorp has an agreement to acquire Diamond Reference Laboratory of Diamond Bar, California. The two acquisitions will build LabCorp's share of the market for laboratory testing in California.



AG Jerry Brown Settles With Westcliff Med Labs

First look at the settlement agreement reveals how the AG may want labs to price tests to Medi-Cal

CEO SUMMARY: In California, Attorney General Jerry Brown is making progress in the whistleblower lawsuit alleging that seven lab companies in California violated state law by not giving Medi-Cal, the state's Medicaid program, the same lowest lab test prices they extend to physicians, managed care plans, and IPAs. Westcliff Medical Laboratories, Inc., is the first of the seven defendants to publicly acknowledge that it finalized a settlement agreement with the State of California.



Did Wrong Strategy Sink Westcliff Medical Labs?

California's third-largest commercial lab firm took just 46 months to slide into bankruptcy court

CEO SUMMARY: All sorts of people will argue all sorts of opinions about the financial demise of BioLabs, Inc., and its subsidiary, Westcliff Medical Laboratories, Inc., and why it ended up in a California bankruptcy court. Documents filed in the case indicate that, from the birth of the new company in June, 2006, it never produced an annual profit. During the 46 months of BioLabs/Westcliff's business life, its owners worked with two different management teams, each of which had a different strategy for growth.



Taming the Blood Beast With Better Utilization

Rapid yearly increases in blood product cost motivates hospital labs to educate physicians

CEO SUMMARY: For hospital labs, explosive increases in the cost of blood products is a budget buster. At St. Vincent Indianapolis Hospital, a multi-year blood management program is paying big dividends. Patient safety has improved, even as utilization of blood dropped by 7,000 units per year. Annual savings from this innovative blood management program now total $4 million. One key element behind this succes was for the lab to engage and educate physicians in a multi-disciplinary approach..


INTELLIGENCE: Late & Latent

BIO-REFERENCE GROWS 27% IN ITS SECOND QUARTER

MORE ON: Kaiser

Complete Issue > Volume XVII, Number 7, Monday, May 10, 2010 (May 10th, 2010 — $ 36.00)
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R. Lewis Dark: Irish Labs Are at an Important Crossroads

GLOBAL OUTSOURCING OF CLINICAL LABORATORY TESTING IN IRELAND has entered its second phase. The Irish Health Service Executive (HSE) granted Quest Diagnostics Incorporated a contract for an additional two-years of cervical cancer screening tests while awarding 25% of the nation'' annual Pap testing to Sonic Healthcare Ltd. in a similar two-year contract.

These developments are significant, because as long as the Irish outsourcing experience is favorable, it makes it easier for other nations to outsource laboratory testing to lab testing companies located in other countries. But there is another dimension to the lab testing story in Ireland which fascinates me even more. As clients and regular readers of THE DARK REPORT know, the Irish HSE has announced a complete restructuring of laboratory services throughout the country. (See pages 6-8 and The Dark Report, January 25, 2010).

I'd like to make two observations about this ambitious project, which is a typical government health official approach to saving money. First, veteran pathologists and lab managers know all too well that, over the past 25 years, there are more disasters than successes when a government health system decides that it can take out costs by consolidating pathology testing, laying off medical technologists, and reducing the number of labs and blood collection centers serving a community. Certainly the cost of lab testing did go down in the short term in these cases. But it was physicians and patients in these communities who often endured service deficiencies, glitches in the process of consolidating lab testing, and even serious problems in the accuracy and trustworthiness of lab test results.

Second, I'll guess that the Irish Health Service Executive, in developing its "total laboratory consolidation" plan with a consulting company from England back in the years 2004-2007, did not spend much money sending a team of experienced pathologists, laboratory scientists, and healthcare policy makers on a tour to several countries to do first-hand investigations of successful, innovative regional laboratories, along with an on-the-ground visit to some of the larger-and often not-sosuccessful- laboratory consolidation projects.

If this assumption is true, it is an interesting comment on the due diligence of Ireland's healthcare leaders that they would embark on a major makeover of the nation's pathology service without having invested a rather modest amount of time and money to send their laboratory profession's best and brightest out on a factfinding tour of the world's best examples of lab testing. To the contrary, might it be true that the HSE, for the cost of a consulting fee to an English company, has gotten the answer it wanted and is proceeding with a laboratory restructuring and consolidation plan that was likely pre-ordained as early as 2004?


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Optimism & Opportunity at Executive War College

This year's gathering was high-energy and marked by a positive outlook for lab testing

CEO SUMMARY: Instead of our annual review of key speakers as a source of emerging trends and common themes, this year we assess the attitudes, opinions, and activities of the pathologists, laboratory administrators, managers, and industry executives in attendance at the 15th Annual Executive War College. These people are the grass roots of laboratory medicine and they are ready to tackle all the coming challenges in healthcare and the laboratory testing marketplace. ALL SESSION AUDIO RECORDINGS ARE AVAILABLE NOW!



Sonic Health Wins Irish Contract for Pap Testing

First nation in the world to outsource 100% of its Pap testing also renews contract with Quest

CEO SUMMARY: Evidently the Irish Health Service is satisfied with its decision to outsource all the nation´┐Żs cervical cancer screening tests. In recent weeks, it announced that two international laboratory companies would handle Pap testing for the next two years. Sonic Healthcare, Ltd., won a contract to perform 25% of Ireland's 300,000 Pap tests annually. Quest Diagnostics renewed its contract and will perform the balance. Both lab companies indicate they will build laboratory facilities in Ireland.



Pathologists Can Still Earn Medicare PQRI Incentives

Federal program offers pathologists a 2% bonus during 2010 for reporting required quality measures

CEO SUMMARY: During 2010, the Medicare Physician Quality Reporting Initiative (PQRI) will pay a 2% bonus to pathologists who register and report data on 80% of their cases for the specified CPT codes. However, independent pathology laboratories still cannot participate in the PQRI program. Also, PSA, LLC, reports it can be challenging to audit the Medicare PQRI bonus amount paid at year's end against the actual amount that was billed to Medicare by individual pathologists for the CPT codes included in the PQRI program.



French Company Buys Pittsburgh-Based RedPath

ExonHit Therapeutics acquires Redpath´┐Żs proprietary molecular test and its CLIA laboratory

CEO SUMMARY: Here's a deal that is all about proprietary molecular assays and access to new markets. With its purchase of RedPath Integrated Pathology, ExonHit Therapeutics, S.A., of Paris, France, gains a CLIA laboratory and access to the U.S. market, even as the new owner opens the door to the European market for RedPath. As announced by the two companies, ExonHit will spend $22.5 million to acquire RedPath Innovative Pathology and will pay an additional $9.5 million if RedPath achieves certain sales targets.



LETTER TO THE EDITOR: Letter to Editor on EMR Donations, Deeply-Discounted Client Prices

Starting 10 years ago, physicians in Bristol, England alerted NHS officials about problems in lab test accuracy



EMR Donations, Client Bill Issues in Anatomic Path

Federal law has lots to say on EHR donations and discounted client bill pricing to referring docs

CEO SUMMARY: In today's market for anatomic pathology services, local pathology practices are facing tough competition from national pathology companies that are quite aggressive at using EHR donations and discounted client bill arrangements to win new clients. Attorney Jane Pine Wood of McDonald Hopkins identifies federal safe harbor requirements governing EHR donations involving laboratories and referring physicians, then discusses compliance issues triggered by discounted client billing arrangements.

INTELLIGENCE: Late & Latent

PERKIN ELMER PAYS $90 MILLION TO BUY SIGNATURE GENOMICS

MORE ON: Aurora

Complete Issue > Volume XVII, Number 6, Monday, April 19, 2010 (May 7th, 2010 — $ 36.00)
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R. Lewis Dark: Is Laboratory Industry Ready for Facebook and MySpace?

WHO COULD HAVE IMAGINED, JUST A FEW YEARS AGO, that social networking sites such as Facebook.com, MySpace.com, and YouTube.com would become a useful platform that allows clinical laboratories, pathology groups, and in vitro diagnostics (IVD) companies to engage in two-way conversations with patients and customers?

After all, in those days, the preponderance of active users of these social networking services were young people. There were no obvious business reasons why a clinical laboratory might want to establish its own page on any of these sites. If that was the popular wisdom then, it is not accurate today.

In my neighborhood, even the retired ladies now maintain Facebook or MySpace pages and regularly communicate with each other via this medium. Of course, since elderly folks tend to have a variety of health problems, there is plenty of conversation taking place about these topics. I suspect that is why certain lab companies, like Myriad Genetics with its predictive genetic test for breast cancer, have established a presence on these social networking sites and find themuseful for communicating with women concerned about breast cancer.

On pages 3-6, THE DARK REPORT provides the lab industry's first briefing about why IVD companies and certain clinical laboratories are consciously incorporating social networking activities into their marketing and business development programs. I suspect it will surprise many pathologists and lab managers at how rapidly social networking has become a useful conduit for organizations to directly conduct two-way conversations with patients, customers, and prospects.

In fact, it might be smart for clinical labs and pathology groups to invite their Generation Y pathologists and medical technologists to enlighten the marketing and sales teams at their labs about how social networking works. An even bolder move would be to empower themost enthusiastic of these Gen Y laboratory professionals to help design social networking programs in tandem with the lab's sales and marketing team.

By way of full disclosure, this aging curmudgeon acknowledges that he doesn't surf such social networking sites as FaceBook.com and MySpace.com. However, he has learned that he can go to YouTube.com and easily find entertaining clips of musical performers popular during his youth. With just a couple of mouse clicks, performances by Mitch Miller and Patti Page can be accessed!


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Social Networking Is New Laboratory Marketing Channel

Clinical labs and IVD companies encourage customer dialogue at Facebook, YouTube, Twitter

CEO SUMMARY: Using social marketing sites on the Web allows labs and IVD manufacturers to interact with customers in ways that were not possible years ago. Marketers use these interactive web sites to supplement traditional methods of advertising. Inviting customers to discuss your company and products on a Facebook site can result in powerful word-ofmouth testimonials. But proceed with caution! Negative comments about your company or laboratory can pop up as well.



Pre-authorization Coming For Pricey Molecular Tests

Health insurers ready to control utilization of expensive genetic and molecular tests

CEO SUMMARY: In response to the steep ramp-up in the utilization of genetic and molecular testing, the nation's largest health insurers are preparing to institute new guidelines for coverage and reimbursement. These will include pre-authorization by physicians, a more effective genetic test coding arrangement for claims submission by laboratories, and implementation of evidence-based medicine (EBM) guidelines. All of these developments create opportunities for clinical laboratories to step up and add value in new ways to payers.



ISO 15189 Accreditation Requires Specific Steps For Global Recognition

CEO SUMMARY: This intelligence briefing is the third in an ongoing series about quality management systems (QMS) and their role in advancing the performance of clinical laboratories and improving the quality of the testing services they provide. ISO 15189 is a set of standards for medical laboratories based on the ISO 9001 quality management system. It provides a way for medical laboratories to demonstrate to outside examiners both conformance to the QMS and competence in the performance of laboratory testing services.


Competitive Bidding Update: Two Years Later, CMS Still Holds Labs' Competitive Bid Documents



LAB QUALITY: Errors in Surgical Pathology Surface in the United Kingdom

Starting 10 years ago, physicians in Bristol, England alerted NHS officials about problems in lab test accuracy


INTELLIGENCE: Late & Latent

FIRE DESTROYS TACOMA FACILITY OF STERLING LABS

HBO BIOPIC ABOUT JACK KEVORKIAN TO AIR ON APRIL 24





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Complete Issue > Volume XVII, Number 5, Monday, March 29, 2010 (March 29th, 2010 — $ 36.00)
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R. Lewis Dark: For Better or for Worse: Nation Has New Health Law

CONGRESS AND THE CURRENT ADMINISTRATION HAVE THEIR HEALTH LAW. Whether this new law serves the citizens of this country for the better or for the worse will not be known for several years into the future.

I suspect that many of our elected officials in the House and Senate do not fully understand the major elements of the health bill that has just become law. I believe I amalso on safe ground to state the opinion that few of these "servants of the people" actually took the 2,700+ pages of the bill and perused themcarefully before deciding how to cast their vote.

Therein lies the rub. First, these legislators have exempted themselves and their Congressional staffs from the health mandates that they are imposing on the remainder of the country. They know this insulates themselves and their families from whatever negative consequences develop fromthe parts of the new law which prove detrimental to the healthcare system. As an American citizen of good standing, I find it sad that our political leaders deliberately take themselves out of the legislative solution they consider best for the nation.
 
Second, in coming years, none of us should be surprised when various unintended consequences of this health law become obvious and troublesome. Expect these same senators and representatives to tell news reporters that "I didn't know that was in the bill," or "I didn't understand how this specific mandate would cause health providers to change the way they practiced medicine."

Forgive me for being skeptical about these developments. Like many of you, early last year I was hopeful that the goal of improving our nation's health system would include a robust exploration of innovative ways to organize healthcare.

Healthcare's "best practices" examples, such as Mayo Clinic, Cleveland Clinic, Kaiser Permanente, and Geisinger Health, would be studied by policymakers and legislators. As part of the health bill, seed funding to encourage similar "health innovation incubators" would be authorized with the goal of covering more people at lower cost while achieving improved health outcomes.

On this point, I am not aware of any provision in the new law that financially encourages a health system, hospital, or physician group to experiment with innovative ways to organize and deliver healthcare. I amwilling to be proven wrong on this point. If you know of such a provision, contact me at our editorial offices. In the meantime, like most of you, I am reserving judgement about whether this health law is good for our country. Like the residents of Missouri, I say "Show me."






2.3% Medical Device Tax Hits Clinical Labs in 2013

Newly-enacted health reform bill requires medical device companies to pay excise tax

CEO SUMMARY: One aspect of the massive new health bill is that medical device companies will pay a 2.3% tax, effective January 1, 2013. Students of economics know that it is customers who invariably end up paying such direct taxes. Thus, clinical laboratories in the United States should prepare to see this 2.3% tax show up as a line item on sales contracts and in the form of higher prices for in vitro diagnostics analyzers, lab equipment, reagents, consumables, and even medical software.



Business Advantages From Whole Slide Imaging

*

WSI creates ways to significantly improve collaboration between pathologists and physicians

CEO SUMMARY: Whole slide imaging (WSI) is a niche product today, but it offers the potential to redefine the practice of pathology. That's the opinion of pathologists presenting at a digital pathology workshop last month. One pathologist explained how WSI significantly improves collaboration between pathologists and referring physicians. Another pathologist explained how regulators soon may require standards for WSI and why such standards are likely to result in a call for standards for light microscopes as well.



Use of Point-of-Care Testing Reduces Mortality by 50%

In a thinly-populated region the size of Texas and New Mexico combined, an integrated clinical care program based on point-of-care testing (POCT) has delivered impressive gains in health outcomes. For rural residents, mortality rates from cardiovascular disease have fallen by 50%. There were comparable declines in hospital length of stay and the rate of readmissions. A reliable test result and speed to answer fromPOC testing is a major factor in these improved outcomes.


Serious Problems Plague Newfoundland Laboratory

Inaccurate cyclosporine test results trigger lab director resignations and more media scrutiny

Newfoundland's St. John laboratory was rocked by revelations in February that its cyclosporine testing was flawed, exposing patients to the harmful affects from inappropriately high doses of the immunosuppressant drug. Within weeks of this news, the Chief of Laboratory Medicine resigned. Now a team from Toronto's University Health Network (UHN) is at the laboratory to conduct a review of operations and make recommendations to the health authority.



INTELLIGENCE: Late & Latent

JUAN ROSAI, MD'S CASES TO BE PUT IN DIGITAL ARCHIVE

PHLEBOTOMIST GETS LUCKY, WINS $111,250






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Complete Issue > Volume XVII, Number 4, Monday, March 8, 2010 (March 8th, 2010 — $ 36.00)
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R. Lewis Dark: Oncologists Cut Into Pathologists' Revenue Pie

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´┐Żeven if true´┐Żis 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.


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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.



Multispectral Tests Use "Smart" Systems To Analyze Tissue

Pathology Updates: Pathology Errors in Canada Make National News Once Again

Mastectomy on a patient who didn't have cancer triggers suspension of one pathologist, review of cases


Preparing for New Lab Role In Personalized Medicine

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.


DARK INDEX: Assessing the Year-End Financials For Nation's Biggest Lab Companies

Quest Diagnostics, LabCorp, Sonic Health, and Bio-Reference Labs report performance


INTELLIGENCE: Late & Latent

DLS IN HONOLULU BUILDS NEW LAB

LENETIX LAB SELLS TO BIO-REFERENCE






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Complete Issue > Volume XVII, Number 3, Monday, February 15, 2010 (February 15th, 2010 — $ 36.00)
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R. Lewis Dark: New Cycle Begins for Lab and Pathology Acquisitions

THERE'S A NEW TRANSITION JUST GETTING STARTED in the laboratory testing industry. For the past two decades, laboratory acquisition activity has primarily centered around independent clinical laboratories-often owned by local pathologists. This was true in both the size of the transactions and in the volume of transactions. Our stories on pages 3-9 describe these processes.

That is about to change. From 2010 onward, laboratory acquisition activity is likely to center around two different segments of the laboratory testing industry. One segment involves the laboratory outreach businesses owned and operated by hospitals and health systems. The second segment is comprised of the regional and local anatomic pathology laboratories and group practices owned by pathologists. For both segments, a new cycle of acquisition activity is now beginning.

In segment one, in the 14 months since January 2009, four significant acquisitions of hospital/health system-owned lab outreach businesses have taken place. Plus, there is the investment by Catholic Health Initiatives (CHI) in Pathology Associates Medical Laboratories (PAML) that happened in November 2009.

Collectively, these laboratory acquisitions and investments demonstrate that hospitals and health systems are waking up to the substantial value that is created from a profitable laboratory outreach program. It is reasonable to expect that-as hospital CEOs learn about these acquisitions and the prices realized by the sellers-more hospitals and more health systems will be willing to entertain the sale of their laboratory outreach businesses.

For segment two involving anatomic pathology laboratories, the simple fact that will drive laboratory acquisitions is the pending retirements of baby boomer pathologists who are partners in these laboratories and pathology group practices. Thatmotive played a role inmost of the pathology laboratory acquisitions announced during the past 14 months. (See table on page 5.)

I believe the longer-term impact of these developments will be the further consolidation of both segments of the laboratory testing industry. Deal-by-deal, hospital laboratory outreach business will be sold and resold into the hands of the nation's largest lab operators. A similar process will unfold in anatomic pathology. It will take some time to consolidate the 3,300 independent pathology practices that exist today, but that cycle of change is now under way.


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Pace of Lab Acquisitions Increased during 2009

Lab buyers show strong interest in acquiring both clinical labs and anatomic pathology groups

CEO SUMMARY: After two years of relatively slow sales of clinical labs, there is pent up demand for lab acquisitions and a declining supply of independent labs available for sale. That's the assessment of one expert on laboratory mergers and acquisitions, who predicts that the accelerating pace of clinical lab and anatomic pathology practice acquisitions seen in the second half of 2009 is likely to carry on well into 2010. Professional investors continue to look for opportunities to buy into the laboratory testing market.



Predict 2010 To Be Busy For Lab Owners & Buyers

Capital gains tax rates may rise next year and that may motivate laboratory sellers to do deals soon

CEO SUMMARY: Along with a recovering economy, the possibility of an increase in the capital gains tax rate for 2011 may encourage owners of clinical labs and anatomic pathology companies to sell their businesses during 2010. That could make 2010 a busy year for laboratory mergers and acquisitions, particularly if valuations for laboratory companies hold or increase from current levels. A growing number of credible buyers is another reason why laboratory sellers are likely to make 2010 a busy year for laboratory M&A.

(LIVE! Mergers and Acquisitions Audio Conference Recording by Chris Jahnle - LEARN MORE)



Multispectral Tests Use "Smart" Systems To Analyze Tissue

Research Pathologists Use Next Research Pathologists Use Next Generation Methods

CEO SUMMARY: ogists at the Hospital of the University of Pennsylvania are using a new system that combines image analysis software and algorithms to evaluate images containing numerous stains and biomarkers. Pathologists teach the system to identify tumor cells and distinguish them from non-tumor cells. Now used for research purposes, this sophisticated digital pathology system is designed to do much of the manual activity required of a pathologist when assessing an image while producing highly accurate quantitative data.


LAB BRIEFS: BECKMAN COULTER REPORTS EARNINGS THAT INCLUDE OLYMPUS
ANTHEM CRITICIZED AFTER RAISING PREMIUMS BY 39% IN CALIFORNIA
LABCORP EXPANDS ITS BILLING OPERATIONS IN GREENSBORO, NC
MEDTOX REPORTS GAIN IN CLINICAL LAB VOLUME AS DRUG TESTING DECLINES


INTELLIGENCE: Late & Latent

ADD TO: GENETIC & MOLECULAR TESTS

TRANSITIONS: Philip Chen, M.D., Ph.D., resigned from Sonic Healthcare





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Complete Issue > Volume XVII, Number 2, Monday, January 25, 2010 (January 25th, 2010 — $ 36.00)
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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

ADVAMED CREATES NEW DIAGNOSTICS ADVOCACY EFFORT

MORE ON: NeoGenomics, Inc., of Ft. Myers, Florida,






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R. Lewis Dark: Lab Medicine's Potential Versus Its Challenges

WE ARE STARTING A NEW YEAR. But is it the start of a new decade? That depends on how one decides to determine the first year of a decade. Even Webster's Dictionary recognizes this difference of opinion as to the start year of a decade.

For the word "decade," Webster's Dictionary offers a definition with two distinctions, as follows. "...2) a period of ten years; esp., in the Gregorian calendar: a) officially a ten-year period beginning with the year 1, as 1921-1930, 1931- 1940, etc.; and, b) in common usage, a ten-year period beginning with a year 0, as 1920-1929, 1930-1939, etc. "Therefore, Webster's provides cover to advocates of either method for measuring the start and finish of an individual decade.

Having provided you with an argument you can use to defend either method of defining the start of a decade, I'd like to share some thoughts on what lies ahead in laboratory medicine for the years that run from 2010 to 2019 (a decade as defined by "common usage," according to Webster's).

First is the opportunity. All of us in laboratory medicine will be part of history´┐Żs first-ever exploration of the human genome and all the processes associated with the mysteries of life. Science is peeling back the secrets of DNA, RNA, and the human proteome, while at the same time learning practical was to use this knowledge to heal the sick and improve the health and life of every individual, potentially from the moment of conception to death.

This is an unprecedented opportunity for laboratorymedicine. Pathologists and laboratory scientists are poised to contribute immense value to individuals and to society at large. Itmeans that entrepreneurs in lab testing should do well in the coming years by recognizing how to adopt laboratory businessmodels in the new ways necessary to package and deliver valuable diagnostic, therapeutic, and patient-monitoring services to the healthcare system.

On the other hand, the challenge for labmedicine will be how to overturn the resistance to change that is a trait of healthcare in the United States so that the best new genetic science can find its way into clinical diagnostics. It is a challenge built around the adage of "follow the money." Expect the folks getting themoney today to resist changes to the status quo which favor rapid adoption of new genetic and molecular testing technologies. Therefore, whether you agree that the new decade starts in 2010 or 2011, what remains true is that the next 10 years have the potential to make pathology a pre-eminent clinical service because of how it delivers life-saving and life-enhancing genetic/molecular information.



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New Clinical Lab Trends To Shape Events in 2010

Trends point to more emphasis on excellence in clinical laboratory management and operations

CEO SUMMARY: In presenting this list of macro trends for clinical laboratories, several themes are in play. They range from a continued emphasis on improving lab operations to the need to acquire and deploy sophisticated information technology. During the next few years, the long-predicted retirement of Baby Boomers will kick in. That will aggravate the existing shortage of medical technologists and skilled lab professionals. It is just one of several critical issues soon to challenge lab executives and pathologists.



LAB INDUSTRY MACRO TREND FOR CLINICAL LABORATORIES

No 1: Quality Management Systems Now an Option for Clinical Laboratories

No 1: Quality Management Systems Now an Option for Clinical Laboratories

No 2: More Labs Use Lean Six Sigma To Improve TAT, Performance

No 3: Work Flow and Work Processes Become a Management Driver

No 4: Automation Serves Lab Goals To Improve TAT, Quality, Service

No 5: Automation Is New Option In Micro, Histology, Molecular

No 6: Hospital Lab Outreach Programs Become Service-Rich Offerings

No 7: As Docs Adopt EMRs, Labs Offer E-Prescribing, Imaging Orders

No 8: EMR Funding Incentives Open Door to New Compliance Issues

No 9: Middleware Comes into Its Own And Gives Labs Extra Function

No 10: SaaS and Cloud Computing Gaining Acceptance by Laboratories

No 11: Molecular Testing Contributes Ever More Clinical Value

No 12: Consumers Step Up Interest In Ordering Their Lab Tests

No 13: Home Brew Testing Grows, As Does FDA Intent to Regulate

No 14: Patient Satisfaction Surveys Raise Competitive Bar

No 15: Clinical Labs Get Creative To Maintain Med Tech Staff Levels

No 16: Point-of-Care Testing Poised To Make Bigger Contributions

No 17: Multi-Modality Diagnosis Makes Early Progress

No 18: Many Local Labs Still Access Managed Care Contracts

No 19: Underfunding for Laboratory Testing Can Undermine Quality







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R. Lewis Dark: Lab Utilization Is Healthcare's Ticking Time Bomb 

TODAY I WOULD LIKE TO SPEAK TO ONE OF THE ELEPHANTS IN THE LAB INDUSTRY'S ROOM. It is the ticking time bomb of lab utilization. Sometime in the next 36 to 60 months, this time bomb will go off. It will catch both health policy makers and payers unprepared and, the consequences will be corrosive to the laboratory testing profession.

Going forward, three trends will drive utilization of lab testing. One trend is the increased volume of lab tests ordered by physicians who are responding to pressures and financial incentives to provide all the recommended care to 100% of their patients. For example, think of 100%of diabetic patients getting HgA1c tests annually at the same time that doctors diligently work to diagnose more of the tens of millions of undiagnosed diabetics in this country. The increased utilization of lab tests is a result that is desired by the health system.

Second is the natural uptake of lab testing that occurs as baby boomers leave their fifth decade of life and push into their sixth decade. Both payers and laboratories that bid private Medicare contracts know that, on average, an individual 65 years and older, uses more than four times the number of lab tests per year than a commercial life. Again, this increased utilization is a natural consequence of the aging process and the system should ethically be prepared to provide those services, as appropriate.

Third is the ongoing addition of new diagnostic tests to the existing lab test catalogue. As physicians have new diagnostic assays that support more precise and earlier diagnosis for an expanding number of diseases, they will naturally and appropriately order a higher volume of tests. As with the two other trends, this trend underpins higher diagnostic and treatment accuracy-which benefits the healthcare system by reducing the overall cost per episode of care.

However, in THE DARK REPORT'S travels across the United States and a number of other developed countries in Europe and the Pacific Rim, it has been unable to identify any government health system or healthcare policy maker which recognizes and discusses these approaching developments. This lack of perceptive analysis about the essential value of clinical laboratory testing, in the context of the three trends described above, represents a "black hole" for the lab medicine profession. It means that health policy makers are not likely to establish budgets and reimbursement for lab testing based on the most relevant factors. As that happens, further underfunding for lab testing will occur.



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2009's Top Ten Lab Stories Reflect Some Good, Bad

Year unfolds with a mixed bag of developments even as economic recession dampens activity

CEO SUMMARY: As the closing year of the first decade of the new century and the new millennium, 2009 brought neither disruption nor upheaval to the majority of laboratories in the United States. Rather, it was marked by at least two themes. One was how public disclosure of problems with lab testing services generated media headlines. The other was economic, and ranged from the effects of the recession to how specific healthcare reform proposals might negatively affect the financial status of laboratories.



Quest Diagnostics' Vitamin D Test Alert/Retest Effort Makes Headlines

Quest Diagnostics Pays $302 Million To Resolve Federal Qui Tam Lawsuit

Hospitals Prune Budgets, Causing Laboratories to Rein in Spending

Labs Dodge $750 Million Annual Tax Proposed in Baucus Reform Bill

Labs Experience Quiet Fall Flu Season Despite More Cases of Novel A/H1N1

Testing Failures in Canadian Labs Are Warning to Govt. Health Programs

Cost of Whole Genome Sequencing Falls as Low as $20,000 per Person

Auckland Lab Contract Decision Disrupts Physicians and Patients

Companion Diagnostics Activity Gains Momentum During 2009

Catholic Health Initiatives Invests In Pathology Associates Med Labs



DNV Offers Accreditation For Both CMS and ISO

DNV offers hospital accreditation that combines CMS CoP with ISO 9001 compliance

CEO SUMMARY: For about a year, hospitals and health systems have had a new choice formeeting the Medicare Conditions of Participation. This new choice is Det Norske Veritas (DNV). Because DNV offers a dual process for achieving Medicare accreditation and ISO 9001 certification, it brings client hospitals a different bundle of benefits. As hospitals adopt ISO 9001, it will require the clinical laboratory to align management and operations to the standards of this quality management system (QMS).


Lab Briefs: DNA NANOCHIP IS GOAL OF IBM SCIENTISTS, QIAGEN NV POISED TO BECOME NEXT IVD FIRM TO TOP $1 BILLION DOLLARS, HEALTH INFORMATION ON THE INTERNET CHANGES PATIENT-DOCTOR TALKS


The Dark Index: Laboratory Merger & Acquisitions Saw Several Deals during 2009

Sonic and LabCorp remain opportunistic buyers, some pathology groups tap private equity capital



Catholic Health Initiatives Ramps Up Lab Outreach

78-hospital health system says lab outreach is right vehicle to support integrated patient care

CEO SUMMARY: Catholic Health Initiatives (CHI) wants to expand its presence in outpatient and outreach services. It sees hospital laboratory outreach programs as a key component of this strategy. It will use an equity investment in Pathology Associates Medical Laboratories (PAML) as the foundation of a series of laboratory outreach joint ventures between its 78 hospitals and PAML. Along with generating a new source of revenue, CHI expects these lab JVs will help it establish tightly-integrated electronic links with office-based physicians.

INTELLIGENCE: Late & Latent

TRANSITIONS Aperio Technologies, Inc., of Vista, California,

MORE ON: Fraud The criminal complaint states that Adeyemi stole the identities of more than 150 of his coworkers.

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R. Lewis Dark: The $1,000 Genome and Laboratory Testing

IT WAS 1953 WHEN JAMES D.WATSON AND FRANCIS CRICK, working from X-ray data collected by Rosalind Franklin, described the double helix structure of the DNA molecule. That discovery inspired scientists to begin investigating the genetic basis of life.

In the 56 years since Watson and Crick published their findings, there has been steady progress at cracking open the human genome. One useful marker for this progress is the declining expenses required to sequence a base pair of DNA. In 1990, it cost $10 to sequence one base pair of DNA. Currently, Knome, Inc., says it will sell a whole genome sequence to anyone for $20,000. That represents a cost of $0.0003 per base pair of DNA.

But wait! That's not all... Complete Genomics, Inc., is selling a whole human genome for $20,000. That is a further reduction of 80% in the cost to sequence one base pair of DNA. (See pages 13-16.) These two examples demonstrate that both the cost and time required to sequence the entire human genome are rapidly falling to the goal of $1,000 and one hour.

I predict this will have a profound effect on laboratory medicine as we know it today. For the first time in human history, it will be economically feasible and scientifically possible to sequence the entire genome of individual humans. As many of you are aware, this is expected to revolutionize the prescription drug industry. It will also play a role in helping physicians make pre-symptomatic diagnoses for a variety of diseases.

But, it is the second application of cheap, fast, accurate gene sequencing that will be disruptive to pathology and laboratory testing as we know it today. Imagine the ability to use a lab-on-a-chip, operated within a handheld device, to do sophisticated molecular analysis of a patient's specimen, for pennies per gene, that produces highly sensitive results in minutes.

Tome, this is themore significant point about the race to the $1,000 whole human genome, sequenced in one hour or less. The same technologies which enable this achievement will be downsized and miniaturized for the express purpose of supporting sophisticated molecular assays to be performed in clinical laboratories, physicians' offices, point-of-care (POC) settings, and maybe even for patient self-test purposes. Although this will be disruptive to existing clinical and business models for pathology and clinical lab testing, it will also create tremendous new opportunities for the pathology profession.



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Costs Falling Swiftly for Whole Genome Sequence

Complete Genomics says it is now selling $20,000 sequences to researchers and pharma

CEO SUMMARY: Several companies want to be first to achieve the holy grail in sequencing: an accurate whole human genome sequence produced in an hour for $1,000. Complete Genomics announced earlier this month that it could sequence the full human genome for a materials cost of $4,400 (not including labor and overhead). Another competitor, Illumina, is selling whole genome sequences for $48,000 to private individuals- and has customers!



Explaining Certification Versus Accreditation

ISO standards make it important for labs to understand the meaning of each term

CEO SUMMARY: Early signs are that the quality management systems (QMS) most likely to find favor with hospitals and clinical laboratories in the United States will be those that meet standards developed by the International Organization for Standardization (ISO. Many hospitals and clinical labs are considering adopting ISO 9001 or ISO 15189, respectively. As they do, it will be important to understand how the terms "accreditation," "certification," and "registration" are used in the application of standards published by ISO.



Geisinger's Use of EHR Creates Opportunity for Lab to Add Value

Integrated EHR allows clinicians to use lab test data to greater effect

CEO SUMMARY: Every health reform proposal makes it a high priority to implement a universal electronic medical record (EHR). Because lab test data is the essential component of a successful EHR, laboratory managers and pathologists may soon have a once-in-alifetime opportunity to use EHR implementation to boost the value to lab testing services. This is exactly what the laboratory at Geisinger Health has achieved in the 15 years since the system first implemented its integrated EHR solution.


Molecular Update: "Liked the Product-Bought the Company," BD Acquires HandyLab and Jaguar System


Health IT Update: Xerox, Dell, and Hewlett-Packard Each Buy Into IT Outsourcing Market

Growth opportunities are expected in outsourcing of information technology services to providers


INTELLIGENCE: Late & Latent

TRANSITIONS Aperio Technologies, Inc., of Vista, California,

MORE ON: Fraud The criminal complaint states that Adeyemi stole the identities of more than 150 of his coworkers.



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R. Lewis Dark: PAML's "Magic Touch" with Hospital Lab JVs

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.



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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.,



 



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R. Lewis Dark: Why Choice is Important in Healthcare

THESE ARE INTERESTING TIMES IN HEALTHCARE AND LABORATORY TESTING both here and across the globe. In the United States, elected officials in Congress are busy assembling 1,000-page bills to make over the nation's entire healthcare system under the guise of extending coverage to those who are currently uninsured.

Overseas, the healthcare systems of other developed countries are showing cracks caused by a demand for health services that exceeds existing capacity, along with a rate of growth in health spending that is not only unsustainable, but is causing fiscal and political crises in some nations.

The American public remains oblivious to these many important stories about healthcare crises, innovations, and issues-and the analysis needed to understand them-because today's media outlets have migrated to milking the spectacular pop culture story of the moment, whether it is the death of Michael Jackson or the revelations concerning David Letterman's blackmail threats and his philandering with interns and other younger females on his staff.

For our part, THE DARK REPORT is working to fill that information vacuum by offering our clients and regular readers coverage of events outside the United States that directly touch pathology and laboratory medicine in both negative and positive ways. It is my view that pathologists and laboratorymanagers in this country can benefit from knowledge about how other health systems are handling laboratory testing in their own country.

Two notable examples are featured in this issue of THE DARK REPORT. On pages 3-5, you will read about the latest developments in Auckland, New Zealand, involving the troubled start-up of Labtests, the new monopoly lab granted an eight-year contract by the region's District Health Boards.

Patients and physicians are unhappy with Labtests' service deficiencies. But because it is the only lab provider in the metropolitan area, they have no other option. Similarly, on page 16, we provide an update to the Irish pap smear outsourcing program. In recent weeks, flaws in the design of the government plan for cervical cancer screening have surfaced. Many physicians are publicly criticizing these deficiencies. But since it is the only major source for cervical cancer screening in Ireland, they and their patients lack the ability to choose another solution.

My message from these two stories is that "choice" is an important element in our American health system. As both patients and providers, each of us benefits from how choice fosters competition, which encourages good service!



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Auckland Health Boards Give DML Some Testing

Responding to problems at Labtests, officials return 10% of testing to Diagnostic Medlab

CEO SUMMARY: Auckland's chaotic lab testing situation just became more complicated. Today the Auckland District Health Boards announced a four-year contract to allow Diagnostic Medlab to perform 10% of the area's test volume, primarily for private hospitals and private specialists. Its purpose is to take some pressure off Labtests by having Diagnostic Medlab perform the more complex and sophisticated assays.



Expert Says Time is Now For Labs to Adopt QMS

Growing number of reasons argue in favor of labs embracing a quality management system

CEO SUMMARY: Laboratories in the United States are knowledgeable about the use of quality control (QC) and quality assurance (QA) programs. But QC and QA represent only two small parts of a comprehensive quality management system (QMS), says Lucia Berte, an expert in lab quality. One benefit for clinical laboratories using a QMS is that it can become easier to meet the requirements of multiple regulatory bodies. Use of the QMS will also help the laboratory respond more effectively to unannounced inspections.



Scripps' Tumor Board Finds Value in Digital Imaging of Slides

Surprise Hit with Other Participating Physicians

CEO SUMMARY: When the Pathology Department at Scripps Memorial Hospital in La Jolla, California, was considering the purchase of a digital imaging system, it gained unlikely allies. Non-pathologist physicians participating in the department's tumor boards advocated for the purchase after seeing a demonstration. Pathologists at Scripps are preparing for a future in which digital imaging systems will encourage more interaction with referring physicians. These systems also could foster a move away frombatch processing in pathology and toward real-time continuous flow.


Global Lab Update: Bureaucratic System in Ireland Affects Access to Pap Testing


GSK and Abbott Team up For Companion Diagnostic

Example of companion diagnostic strategy demonstrated by GlaxoSmithKline and Abbott

CEO SUMMARY: Although GlaxoSmithKline PLC is several years away from having a deliverable product from its Antigen Specific Cancer Immunoassay (ASCI) Program, it has a development deal with Abbott Laboratories to produce a companion diagnostic test for ASCI-based products. The interesting twist in this arrangement is that the resulting companion diagnostic assay will be designed to run on Abbott's m2000 molecular system. That would allow an expanded number of labs to run this test kit.


INTELLIGENCE: Late & Latent

CARIS ADDS 22 PATHOLOGISTS

MORE ON: Reform


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R. Lewis Dark: Less Money for Labs Is International Trend

TOO OFTEN THESE DAYS, labs are asked to accept less money. This is true in the United States and in many developed countries around the world.

Many of you know that the latest version of the Senate health reform bill recently released by Max Baucus (D-Montana) calls for all providers to pay a "fee" as one source of revenue to fund the proposed expansion of healthcare services. In the case of laboratory testing, the Senate bill pencils in laboratory testing for $750 million in annual fees. That would be a unique new source of government revenue and would be assessed even as the same Senate bill mandates a reduction in fees paid for lab testing services. It presents clinical labs and anatomic pathology groups in this country with a revenue double-whammy. (See pages 7-8.)

However, compared to what's happening to private laboratory testing companies in New Zealand, U.S. pathologists and laboratory executives should consider themselves fortunate that they still have the opportunity to provide laboratory testing services to patients and physicians. In New Zealand, the government health service, at both the national and local levels, is acting as if "profit" is an element that saps money out of available funding for health services.

Beginning early in this decade, at a regional level, district health boards in some regions began awarding exclusive, multi-year contracts. In these communities, to bid andwin, competing private pathology labs had to join together and forma single lab provider company. In return, the government granted the new lab joint venture a monopoly in that market for the term of the contract.

Where it gets interesting is at the end of thesemonopoly contracts. In the case of Auckland, as that first lab testing contract ended, under questionable bidding circumstances the district health boards awarded the next eight-year contract to a brand new lab company-which had no laboratory and no staff in Auckland to service this contract! This new lab company offered a bid that was 20% lower than what was offered by the existing contract holder. (See Pages 3-6.)

As you read this, the patients and physicians in greater Auckland are experiencing the first consequences of this new money-saving lab testing contract, which became effective September 7. Critics will be watching to learn if the district health boardswill truly realize the projected reduction in the cost of lab testing, without causing a serious decline in the quality of lab testing services.



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Lab Test Fiasco Unfolding In Auckland, New Zealand

District Health Boards scramble to address deficiencies in performance of the new lab provider

CEO SUMMARY: This may be the shortest lab testing contract honeymoon ever. Just ten days after LabTests became responsible for an exclusive, eight-year lab testing contract covering the Auckland area, problems with its service and operation caused District Health Board (DHB) officials to put the lab on notice. DHB employees are also now working inside LabTests to oversee safety and quality assurance. Meanwhile, the press is airing the complaints of patients and physicians.



Audacious Lab Contract Shows Downside Risks

Auckland patients and physicians now coping with the "lowest cost" laboratory testing company

CEO SUMMARY: In Auckland, New Zealand, unfolding events may soon reveal the answer to a long-standing question in pathology: is there a point where deep cuts to payment for lab testing causes such a decline in quality and service that other health services undergo disruption? District Health Boards, to save about 20% of their lab budget, replaced a highly-rated lab testing company with a new entrant to Auckland. Since the changeover on September 7, patients and doctors have voiced their complaints.



$750 Million Lab Test Tax Proposed in Senate Bill

Latest Senate health reform bill includes tax on lab tests, along with reduction in reimbursement

CEO SUMMARY: A bill that may be the U.S. Senate's framework for reforming the U.S. healthcare system calls for a tax of $750 million per year to be paid by lab testing companies. The proposed bill also calls for a reduction in Medicare reimbursement for lab testing. One positive element was that reinstatement of the Medicare lab test co-pay was dropped from this version of the health reform bill. THE DARK REPORT provides details of how the Senate bill would determine the amount of tax each lab testing company would pay annually.


Textbook Marketing Fuels Demand for BRCA Test

Direct-to-consumer advertising is one tool Myriad uses to drive sales of cancer risk testing

CEO SUMMARY: In today's lab testing marketplace, the hot ticket is to introduce a proprietary or patent-protected molecular test for cancer. The sales and marketing model inspiring many of these new lab testing companies is that used by Myriad Genetics, Inc. since it introduced its BRACAnalysis test for breast cancer back in 1996. A new report by William Blair & Company, LLC, analyzes Myriad's successes. Pathologists and lab administrators will find useful insights about techniques they can use to market their own specialized lab testing services.



Clinical Study Update: Some Docs Fail to Tell Patients About Critical Results 25% of Time


Medicare Pays Doctors To Switch to E-Prescribing

Medicare incentive adds 2% for e-prescribing in 2009 and 2010, then changes to 1% for 2011

CEO SUMMARY: It's a major step on the road to integration of healthcare informatics. During the next few years, the Medicare program is offering financial incentives to encourage office-based physicians to adopt e-prescribing. This is a positive development for local laboratories and hospital lab outreach programs. Early-adopter labs are already taking steps to enable e-prescribing as part of the electronic lab test order/results reporting systems they offer to client physicians.



Informatics Update:
E-Prescribing Functions that Labs Can Offer Office-Based Physicians

E-prescribing Is Example of Need For Labs to Support Connectivity


INTELLIGENCE: Late & Latent

UCSF AND ABBOTT PARTNER TO IDENTIFY UNKNOWN VIRUSES

ADD TO: VIRUS ID





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R. Lewis Dark: Pap Testing in Ireland & Massachusetts

IT IS PURELY COINCIDENTAL that, in this issue, you will read intelligence briefings about Pap testing in Ireland (see pages 3-5) and Massachusetts (see pages 10-15). Yet, both stories, taken together, send an important message to laboratory executives and pathologists.

Because of ongoing evolution in healthcare, laboratories must continuously innovate and improve specifically tomaintain their value propositionwith referring physicians and payers. Ongoing change is rapidly becoming the prime directive for clinical laboratories and pathology groups. This dynamic is illustrated differently in the stories about Pap testing in Ireland and Massachusetts.

In Ireland, last year health authorities outsourced all the nation's Pap testing to a laboratory in the United States. This situation came about because Irish laboratories-for a variety of reasons-had allowed turnaround time for Pap test results to stretch out to six months, and sometimes even longer. Independent of other considerations, this created the opportunity for Irish health officials to fix this problem in a radical manner. Their solution was to outsource all the country's Pap tests to a laboratory in the United States that committed to meet a 10-day turnaround time.

I submit that, had Irish laboratories enthusiastically embraced quality management techniques-such as Lean, Six Sigma, and rapid process improvement- in recent years, they would have made great strides in slashing Pap test turnaround time. Using a proactive focus on meeting and exceeding customer expectations, Irish labs would likely have dramatically cut lengthy reporting times for Pap tests. In turn, this would have eliminated TAT as a justification by health system authorities to outsource all Irish Pap testing to an overseas lab. 

By contrast, our Massachusetts Pap test story is the opposite of the Irish lab experience. At Baystate Medical Center in Springfield, the lab team, on its own initiative, introduced Lean methods. A first project was to reduce average turnaround time for Pap tests-specifically to better compete for outreach specimens. In a 60-day Lean project, it reduced average Pap test turnaround times by 50%.

These two laboratory management case studies make the point. In today's fast-changing world, every laboratory should think, act, and execute in a forward- looking, proactive fashion. It is smart management to protect and enhance the value proposition the laboratory delivers to physicians, patients, and payers.



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Bostwick Builds New Lab Around 25 Ex-AFIP Paths

Bostwick Labs' new pathology business unit intends to offer subspecialty services nationally

CEO SUMMARY: In an opportunistic business move, Bostwick Laboratories is recruiting up to 25 pathologists and a similar number of staff members from the Armed Forces Institute of Pathology (AFIP). AFIP is scheduled to close in 2011, at which time it will transition to the new Department of Defense Joint Pathology Center (JPC). Bostwick is calling its new business "American International Pathology Laboratories," (AIPL). It will operate from a new laboratory facility located in Silver Spring, Maryland.



Lab Market Update: New Lab Company Is Launched By Geisinger Health System

"Proven Diagnostics" is the name of the new firm Geisinger created to tap the lab outreach market



Irish Labs Appeal to Keep Pap Smear Expertise

Decision to outsource nation's Pap tests overseas makes it tough to train new doctors in cytology

CEO SUMMARY: In Ireland, pathologists are asking the government to return enough Pap tests back to the country to support and sustain medical training programs in gynecologic cytology. It was 2008 when the Irish government outsourced all Pap testing to a U.S. lab company. That forced Ireland's major cytology laboratories to shut down their cervical cancer testing, leaving them without access to the specimens needed to support medical training programs in cervical cancer screening and diagnosis.



Using Lean to Cut Pap Test TAT Pays Off At Baystate Medical

Lean ABN Fix Is Another $1 Million Home Run

CEO SUMMARY: It took only one 60-day Lean project for the laboratory at Baystate Medical Center to slash the average turnaround time for Pap tests by 50%, thereby improving its competitive position in the outreach market. Almost simultaneously, another 60-day Lean project attacked sources of write off from missing Advance Beneficiary Notices (ABNs) and incomplete insurance information and produced an additional $1 million in collected net revenue! Both examples of Lean successes demonstrate how innovative clinical laboratories are raising the competitive bar.



Third Laboratory Earns ISO 15189 Accreditation

Empowered lab staff, continuous improvement are two benefits for Blanchard Valley Hospital lab

CEO SUMMARY: In June, the laboratory at Blanchard Valley Hospital became third in the nation to be accredited to ISO 15189:2007. The 150-bed acute facility in Findlay, Ohio, is the only hospital laboratory of its size to achieve accreditation to the ISO 15189 standard. Implementing these standards directly benefited the lab by lifting what was already a top-performing organization to a higher level of achievement. The ISO standards also support an effective culture of continuous improvement that challenges the lab to repeatedly raise the bar.


INTELLIGENCE: Late & Latent

APERIO EARNS ISO 13485 CERTIFICATION

QUEBEC REVIEWING BREAST BIOPSIES



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R. Lewis Dark: Getting Vitamin D Right for the Doctor and Patient

MOST OF YOU ARE FAMILIAR with how. Edwards Deming and Japanese manufacturers demonstrated the power of understanding customer expectations and organizing one's business to deliver products and services which meet and exceed those expectations.

For the past four decades, one thing that many of the world's most successful organizations have in common is an exceptional ability to meet and exceed the expectations of their customers. It is not a coincidence that, about the time that The Joint Commission joined the Leapfrog Group earlier in this decade, it raised the profile of patient satisfaction surveys as a component of the hospital accreditation process. (See TDR, January 28, 2002.)

In recent years, as laboratories and hospitals in this country adopted Deming-based qualitymanagementmethods, pathologists and labmanagers in those organizations have begun to regularly consider patient expectations and satisfaction. Another aspect of Deming-based quality management methods, such as Lean and Six Sigma, is the use of errors-per-million-events as a way to measure performance and as a guide to eliminating the source of waste, defects, and errors.

Working in a complementary fashion, these quality management methods are going to cause the analytical science of laboratorymedicine tomore directly intersect with the expectations of patients and physicians. As this occurs, it will demand additional rigor from the analytical phase of lab medicine.

Our editor provides an example of why this will happen on pages 10-16 of this issue of THE DARK REPORT. One day this spring, he had blood collected, properly processed, and sent 24 times to nine different laboratories to be tested for Vitamin 25 (OH) D. Of course, our expectation as laboratory professionals- as are the expectations of doctors and patients-is that the same blood should produce essentially the same result when tested by an accepted methodology. This should be true within the same lab, as well as across all labs testing the same patient's blood.

However, that is not what happened to our editor's blood. One methodology- the FDA-cleared immunoassay-did deliver a tight spread of results. By contrast, the home brew tandem mass spec method produced a much wider spread of results. My view is that our editor's unique real-world experiment demonstrates why the lab testing professionmust strive to improve in ways that fully meet the expectations of physicians and patients.






Plain Talk about Current "Health Reform" Effort

Media coverage and public discourse fail to evaluate various options to improve healthcare

CEO SUMMARY: It appears that a determined effort to reshape and restructure the entire American healthcare systemis unfolding in Congress. Missing in public discourse about this vital topic is informed, intelligent discussion about the types of alternative healthcare delivery models and options that might successfully address problems in the current U.S. healthcare system, without a total makeover of healthcare as it exists today. This is a big stakes issue for the entire laboratory testing industry.



Using Lean at Henry Ford Transforms Pathology TAT

Henry Ford Production System and Lean methods used to unlock major improvements in pathology

CEO SUMMARY: Long-standing work flow traditions in anatomic pathology provide fertile ground for improvement with Lean and similar process improvement methods. That was the case at Henry Ford Health System, where empowered teams in the pathology laboratory employed the principles of single-piece/small batch work flow, "pull", and standard work. The outcomes were reduced defects, improved productivity, and a reduction in average turnaround time in specimen processing of up to 50%!



Our Editor Gets His Vitamin D Test Results From 9 Different Labs

Do different Vitamin D methods confuse doctors?

CEO SUMMARY: Editor-In-Chief Robert L. Michel gave blood for the cause and it's another laboratory industry first! To understand what doctors and patients see as national labs use different methodologies and reference ranges to report Vitamin 25(OH) D results, his blood was tested 24 times by nine laboratories. The results were unveiled at the Executive War College last May in New Orleans. These results are published here, along with comments from the All-Star Vitamin D Panel experts who discussed reasons why doctors might be confused and might misinterpret Vitamin D lab test results.



New Lab Player Launches In Breast Cancer Market

Its proprietary assay evaluates 70 genes to predict odds of breast cancer recurrence

CEO SUMMARY: Having opened its CLIA-licensed laboratory in Huntington Beach, California, Agendia, Inc., becomes the newest competitor to enter the market for breast cancer testing. Its proprietary assay looks at 70 genes to assess the risk of recurrence. The company expects to collaborate with local pathologists, as its test requires fresh tissue and can provide a diagnostic answer for untreated patients, including both ER-positive and ER-negative patients. Agendia executives are pursuing Medicare coverage for the assay.


INTELLIGENCE: Late & Latent

RAPID A/NOVEL H1N1 FLU TESTS HAVE LOW DETECTION RATES

MORE ON: Digital Path





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R. Lewis Dark: Vitamin D's Laboratory Magazine Trifecta

WITH APOLOGIES TO FANS OF HORSE RACING, I OBSERVE THAT THE SUBJECT of Vitamin D has just achieved a noteworthy trifecta in laboratory medicine. In recent months, at least four of the bigger controlled-circulation magazines widely-read by laboratory professionals have run major cover stories on Vitamin D and Vitamin D testing.

It is not often that a single topic becomes a headline story for the majority of controlled-circulation laboratory magazines within such a tight window of time. That makes this development noteworthy as a sign of an important industry trend. Because these controlled-circulation magazines are advertising-driven, they want topics that will draw eyeballs (and attract related advertisers). So their decision, somewhat independently of each other, to headline stories about Vitamin D testing, means that their market research has uncovered strong interest in this topic among their readers.

Using the amount of news space devoted to a single topic as a way to identify trends is an accepted practice. Those readers who share my age and perspective, will recall amega-best-selling book in the early 1980s by the title of "Megatrends." The author, John Naisbitt, calculated the amount of news space given to certain topics by newspapers, magazines, and television news broadcasts. He correctly understood that, as news reporters increased their coverage of specific topics, this would be an early marker for a trend that would become highly influential in society.

For the record, back in 1982, Naisbitt correctly called these three trends. One, a rapid transition fromthe industrial age to the information age. Two, the dominance of the global economy, requiring nations to open their national economies to global trade.Three, networks as the processwhichwould open up commercial and public access to goods, services, and information across the globe. (Today, we have the Internet as the ultimate network.)

If you follow my chain of thought, the recent laboratory industry magazine coverage of Vitamin D testing is the marker for a major trend, still in its early stage. I will make a stab at a prediction. The physician and consumer hubbub that we now see over Vitamin D levels is the visible sign of a shift in both physician and consumer behavior. They are shifting from reactive healthcare to proactive healthcare. Vitamin D is the current example because it is relatively simple for consumers to cure a deficiency with an easy-to-take supplement.




All-Star Vitamin D Panel Looks at Lab Challenges

Special EXECUTIVE WAR COLLEGE session inspires major stories in CAP Today and Clinical Lab News

CEO SUMMARY: Need proof that the issues surrounding today's Vitamin 25(OH) D are of keen interest to laboratory professionals? Not only did the EXECUTIVE WAR COLLEGE'S in depth sessions on Vitamin D draw a large audience and enthusiastic participation by attendees, but within weeks, two of the lab industry's most-watched magazines published headline stories about Vitamin D issues, built in-part around interviews with the All-Star Vitamin D panelists, as well as several other lab experts.



UMass Lab's Experience With Vitamin D Methods

Along with the established immunoassay, UMass Lab developed a home brew LC-MS assay

CEO SUMMARY: As it developed a home brew mass spec assay for Vitamin 25(OH) D to meet the request of some client physicians, the laboratory at the University of Massachusetts Medical Center quickly recognized several challenges. First, there were fundamental differences in the numbers generated on the same population by the internally-developed LC-MS assay compared to the established immunoassay. Second, physicians were not alert to these differences when results were reported to them.



Lab M&A Deals in June Show Market Direction

Buyers support labs offering unique tests for companion diagnostics and personalized medicine

Despite a dismal economy, the month of June spawned two interesting merger/acquistion transactions in the lab testing industry. In one case, a blood brother gobbled up a specialty diagnostics company. In another transaction, two cross-town neighbors in Kansas City merged to form an enhanced specialty diagnostics laboratory company. The common theme behind both transactions was motivation to acquire resources and technology in companion diagnostics and personalized medicine.



New Flu Strain Expected In Upcoming Flu Season

Nation's public health laboratories continue influenza testing at relatively high volumes

CEO SUMMARY: Public health labs continue to monitor for new cases of the A/Novel H1N1 flu,while preparing for what may be a difficult flu season this fall. Having coped with a 10-fold increase in testing volume, public health labs are assessing the lessons learned from the April/May flu outbreak. At the Association of Public Health Laboratories, activities are underway to better coordinate the services of public health labs in different regions of the country, as well as to develop contingency plans to ensure ample supplies and reagents for any future outbreak.



Elevating Lab Testing At Policymaking Table

CDC engages Battelle Corporation to identify and publish laboratory medicine best practices

CEO SUMMARY: With the help of contributing clinical laboratories, the CDC has launched an ambitious effort to gather data, apply evidence review methods used in clinical studies, then identify and publish best practices in laboratory medicine. The goal is to advance the value of laboratory medicine. Some lab experts believe this effort may produce the type of credible information that helps lab testing move away from commoditybased pricing in favor of value-based reimbursement.

INTELLIGENCE: Late & Latent

PRISON TESTING IS GOOD NICHE BUSINESS AT BIO-REFERENCE LABS

TRANSITIONS: ARUP Laboratories, Inc.

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R. Lewis Dark: Why You Rely on a Vigilant Lab Industry Press

AS YOU WILL READ ON PAGE 9 of this issue, THE DARK REPORT was recently honored by a national news association, which awarded it first place for "Best Investigative Reporting" against some tough competition.

Indulge me, for a moment, as I explain to you why this is a big deal. As a laboratory leader, you cannot make the best decisions if you lack accurate and timely news and understanding about current developments in the laboratory testing marketplace and the healthcare system it serves.

In fact, when there is a lack of informed news and understanding, it becomes easier to make the wrong business decision, with dire consequences to your laboratory, your loyal employees, and probably your personal career status. And that is why THE DARK REPORT, and its peer news sources covering the lab testing industry, are essential partners in your success.

Every day with every patient specimen, your laboratory has the power to change the course of that patient's life. It can be for the better if an accurate result aids the clinician in making a difficult diagnosis. But, it can be for the worse if the lab test result is inaccurate due to the lab's internal deficiencies and failures, thus misleading patient and doctor. Every lab professional knows how a single wrong lab test result can cause irreversible-and sometimes lifelong-harm to the patient.

It may not have occurred to you that your preferred source of lab news and analysis faces similar risks. You rely on your lab news provider to cover all the stories that are important. You trust your lab news source to get the facts right, and provide objective and unbiased reporting of these news events. Simply put, you want to trust your source of laboratory news just as patients and physicians want to trust the accuracy of the lab test results reported by your laboratory.

That is why it is important to you as a reader that THE DARK REPORT has won its second national journalism award for "Best Investigative Reporting." This is validation by an indendent panel of journalists that THE DARK REPORT is both covering the stories that are important to the laboratory industry and reporting them accurately.

I hope you will join me in congratulating editor Robert L. Michel and the entire team at THE DARK REPORT for this national recognition. It is a sign that there is a free and independent press reporting on the stories that are important to the laboratory testing profession.




Healthcare Reform and Threats to Lab Testing

Laboratory testing industry will face threats from two primary aspects of health reform process

CEO SUMMARY: Annual healthcare spending now pushes past $2.5 trillion and this summer's debate about how to best reform healthcare in the United States will be raucous and emotional. For the laboratory testing industry, the stakes are immense. THE DARK REPORT identifies two primary threats to the lab testing profession. One is spending cuts to existing government lab testing programs to free cash for other purposes. The second is the potential for closed provider networks in new health programs.



Lab Briefs:
NEW PATHOLOGY LABS OPEN ON EAST COAST AND WEST COAST, NEW TECHNOLOGY ENABLES WESTERN BLOT BY DIGITAL IMAGING, DNA DIRECT TO ADMINISTER HUMANA'S GENETIC TESTING



New Phlebotomist Policy Achieves Zero Error Rate

For more than a year, Nevada medical center cuts contaminants in blood cultures to zero

CEO SUMMARY: It's not often when a hospital laboratory can use a patient safety project to achieve zero defects for more than one year. But that's what happened at Desert View Hospital in Las Vegas, Nevada,when it went an entire year with no contaminants in draws for blood culture. DVH has 25 beds and does 110 blood culture draws each month. Nationally, the average rate of blood culture contamination is 3% to 5%. The financial benefits to the hospital supported the cost of adding more phlebotomy staff to achieve this goal.



DARK REPORT and Editor Michel Earn National Reporting Award

News association bestows "Best Investigative Reporting" for coverage of unprecedented Vitamin D test inaccuracies

In Washington, DC, last month, at the Specialized Information Publishers Association (SIPA) annual conference, Editor Michel learned that judges had bestowed the First Place award.



Educated Consumers Buying 250-Bioassay Lab Test Panel

Biophysical Corporation of Austin, Texas, Enjoys Growing Market

CEO SUMMARY: Biophysical Corporation is creating a new, direct-to-consumer market for laboratory testing. Its unique approach is to offer 250-bioassay test panels-along with a staff physician review of results-to the educated, informed consumer. Testing multiple biomarkers makes it possible to identify disease and predict risk in asymptomatic patients. High profile customers such as Oprah Winfrey and Martha Stewart have discussed their positive experiences with this testing in television interviews.



Teamwork Between Labs Helped NYC Flu Response

City's public health laboratory worked closely with hospital labs to handle A/Novel H1N1 testing

CEO SUMMARY: Shaped by the experiences of 9/11 and the anthrax outbreak in 2001, the New York City Department of Health and Mental Hygiene revised and improved its preparedness plan. With the outbreak of influenza A/Novel H1N1 this spring, the Public Health Department benefited from effective collaboration with area hospitals and commercial laboratories. The public health laboratory, although testing as many flu specimens in a day as it typically tests during one year, kept pacewith the incoming sample flow and provided timely results to health officials.

INTELLIGENCE: Late & Latent

GE ANNOUNCES $6 BILLION TO FUND HEALTH INITIATIVES

GENETIX ACQUIRES SLIDEPATH LTD


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R. Lewis Dark: Dodging the A/H1N1 Influenza Bullet 

DID THE UNITED STATES AND THEWORLD DODGE A BULLET because the first outbreak of A/H1N1 influenza was neither as lethal nor as virulent as long-predicted by public health officials? That might be true today. But wait until the next flu season.

No one knows if the A/H1N1 virus will mutate in ways that make it more virulent and more lethal. Only time will provide the answer. Meanwhile, this spring's relatively short-lived A/H1N1 influenza outbreak has lessons for the laboratory testing industry and many are described in this issue of THE DARK REPORT. Three separate intelligence briefings detail some rather remarkable stories of how laboratories and lab industry vendors met the unexpected challenges presented by the A/H1N1 outbreak. First is an analysis of how clinical laboratories and public health laboratories coped with the surge of influenza specimens. Influenza assays currently available to clinical laboratories are less than ideal when a new influenza strain like A/H1N1 appears. Also, the supply chain can be quickly overwhelmed, as laboratories increase their orders and vendors struggle to keep enough lab supplies in the distribution pipeline. (See pages 3-5.)

Second is a fascinating story about how the testing capacity and capabilities of many public health labs were increased literally overnight! A unique collaboration involving the Centers for Disease Control and Prevention (CDC), the Association of Public Health Laboratories (APHL), and Applied Biosystems, a division of Life Technologies Corporation, led to the installation and validation of 40 new molecular test systems in public health labs in this country because of a 24/7 crash program. (See pages 6-8.)

Third, THE DARK REPORT interviews two laboratory professionals about how their organizations stepped up to meet the increased volume of flu specimens that needed testing during the peak of the A/H1N1 outbreak. Both lab companies are gearing up for a busy flu season this fall and have useful advice to share with other pathologists and lab directors. (See pages 17-18.) In my view, the United States and the laboratory medicine profession got a lucky break with this outbreak of A/H1N1. Similar to the SARS outbreak in 2003, this country avoided a serious epidemic for reasons unrelated to preparedness.

However, the good news is that the public health establishment has greatly enhanced its ability to respond to similar outbreaks in the future.


Influenza A/H1N1 Outbreak Offers Lessons for Labs

Lack of influenza test capacity at peak demand is warning to private labs and public health labs

CEO SUMMARY: As influenza A/H1N1 spread, clinical labs nationwide learned that they did not have the capacity to test for an outbreak of flu that generated a 10-fold increase in sample volume. To move the samples through the system, many clinical labs ran extra shifts and ran short of supplies. It was a similar situation at public health laboratories, which were inundated with influenza specimens and sometimes a week behind in reporting results. In turn, that meant health officials were often days behind tracking the flu outbreak.



CDC, Public Health Labs Added Flu Test Capacity

Crash program beefs up capacity & capabilities of public health laboratories in U.S and abroad

CEO SUMMARY: Discovery of the A/H1N1 strain of influenza made it imperative that public health laboratories in the United States, Mexico, Canada, and other countries have more molecular testing capacity and capabilities in support of efforts to track and control the outbreak. Applied Biosystems, a division of Life Technologies Corporation, stepped into the breach, upgrading existing public health lab instrument systems while installing 40 more instruments in the United States and 60 additional instruments in countries across the globe.



FDA Enforcement Update: 35 Firms Get FDA Warning Letters Regarding Various Swine Flu Claims



Accreditation with DNV Helps Hospital Raise Inpatient Volume

Earns Dual Medicare and ISO 9001 Accreditation

CEO SUMMARY: In Utica, New York, 201-bed St. Elizabeth Medical Center was the first hospital in New York State and one of the first five hospitals nationwide to meet the new accreditation standard from DNV Healthcare, of Cincinnati, Ohio. St. Elizabeth administrators credit use of this new accreditation process in helping the hospital improve efficiency, patient satisfaction, and employee retention. Meeting the DNV accreditation standards was relatively easy because the facility was already accredited for ISO 9001 and ISO 14001 from the International Organization for Standardization (ISO).



Lab Marketing Update: Mickey Mouse to Educate Kids About Allergy Lab Test Options

Early-stage molecular companies are recruiting experienced lab administrators, pathologists, MTs



Influenza A Test Is a Help When Screening for H1N1

In anticipation of the next flu season, some labs are expanding flu test capacity and capabilities

CEO SUMMARY: ViraCor Laboratories is preparing to handle expanded volumes of influenza testing prior to the start of the next flu season. It will use added instrumentation and expanded working hours to expand capacity. Another strategy is to use influenza A testing as a way to reduce the overall number of influenza specimens that might need to be referred for additional testing. New molecular tests offering better sensitivity for influenza are also entering the clinical marketplace.


INTELLIGENCE: Late & Latent

GE ANNOUNCES $6 BILLION TO FUND HEALTH INITIATIVES

GENETIX ACQUIRES SLIDEPATH LTD



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R. Lewis Dark: Inaccurate Lab Results: What Happened in Canada?

MANY OF YOU HAVE HEARD ABOUT THE WIDELY-PUBLICIZED PROBLEMS with laboratory testing in several locations across Canada in the past few years. We update the situation with a fascinating intelligence briefing on pages 9-12.

The first lab scandal to catch the public's attention was the discovery that, between 1997 and 2005, an anatomic pathology laboratory in St. John's, Newfoundland, had gone seriously off course with its estrogen receptor (ER) and progresterone receptor (PR) testing program. Subsequent reviews determined that at least 396 breast cancer patients got inaccurate results. Just last month, four years after these problems were identified, the parent health system announced it had "discovered" another 43 breast cancer patients who should have had their lab tests reviewed, but were missed by the review team. So even at the provincial health level, there were failures to accurately audit and identify all breast cancer patients tested during the 1997-2005 period.

However, what fascinates me is the second chapter in this story. In the wake of the public disclosures about ER/PR testing failures in Newfoundland and Labrador, several other provincial health systems in Canada did reviews of pathologists practicing within their region. In three hospitals in three provinces, these reviews uncovered serious failures in anatomic pathology test accuracy and reliability. As you will read, in at least two cases, it was the hospital's head of pathologywhowas determined to have done deficientwork, reaching back at least two or more years! One pathologist had an error rate of about 5% in the initial review of past cases. Another's error rate was 6%.

Critics are quick to point out that, in Canada, laboratory accreditation, certification, and proficiency testing is a matter left to the provinces. One consequence of this arrangement is that Canada lacks national laboratory quality standards. However, I have a more fundamental question: has reduced funding for anatomic pathology services contributed to these serious breaches in laboratory test integrity across multiple hospitals and laboratories?

Could it be that salaries are inadequate to attract and retain competent pathologists in some Canadian provinces? Has the health system cut back on pathology training slots in medical schools as a way to save money in the short term, while negatively affecting patient care in the long term? My hunch is that 30 years of serious cost reductions to lab testing services across Canada may have finally reached the point where inadequate financial resources devoted to lab testing contributes to further breakdowns in the quality of patient care.




Despite the Recession, Many Local Labs Thrive

Secret is priority emphasis on lab operations, complimented with strong outreach sales effort

CEO SUMMARY: Each year, the Executive War College offers useful perspectives on the current lab testing marketplace. This year's gathering took place as the recession deepened. Yet that didn't dampen the optimism and energy of 60 speakers and more than 450 attendees from 12 countries. Collectively, the 60 sessions offered credible evidence that those labs emphasizing operational excellence in tandem with a professional outreach sales effort are holding their own, despite the tough economy.



CMS Refuses to Return Competitive Bid Docs

Labs and trade groups are concerned that CMS will use the proprietary information in other ways

CEO SUMMARY: The Acting Secretary of Health and Human Services (HHS) has refused the request of three San Diego area labs for the return of their bid documents even though the competitive bidding demonstration project was repealed by Congress last July. The HHS Acting Secretary says he has no obligation to return the documents and he intends to use the information in the bid applications for "analysis purposes," according to court papers filed last month.



Pathology Innovations: Using Cellphones Like Microscopes To Help Lesser-Developed Countries

Researchers create "microscopes without lenses" that can transmit pathology images using cell phones



ER/PR Testing in Canada Continues to Make News

Cameron Report cites deficiencies, yet Canada seems slow to implement tighter lab accreditation

CEO SUMMARY: In Canada, the story about inaccurate breast cancer testing just won't go away. In March, the Cameron Report was made public with its assessment of lab testing failures in Newfoundland and Labrador. In April, the health system in those provinces admitted that it needed to review and possibly retest another 43 breast cancer patients. Calls for a uniform system of laboratory proficiency testing and accreditation have not yet motivate federal and provincial health officials to tackle this issue.



Biotech Start-Up Firms Hiring Lab Professionals

Early-stage molecular companies are recruiting experienced lab administrators, pathologists, MTs

CEO SUMMARY: It may be a tough job market right now laboratory professionals. But investors, lured by the potential personalized medicine and molecular diagnostics, continue pour investment capital into new companies. In turn, these companies are actively recruiting experienced clinical lab managers, pathologists, and technical staff. One management recruiter specializing in biotech placements offers insights and advice on clinical lab professionals can tap these job opportunities.



New Report: POC Market Will Grow 30% by 2013

New technology and smaller instruments offer advantages to patients, providers, health systems

CEO SUMMARY: It will be no surprise to lab directors and pathologists that Kalorama Information, in its latest report on point-of-care (POC) testing, estimates that glucose testing comprises 67% of this market segment. What is notable is Kalorama's prediction that worldwide POC testing will grow by 30% during the next four years. Because of new portable and handheld instruments, POC testing is migrating from hospitals to workplaces, homes, disaster sites, and convenience clinics.


INTELLIGENCE: Late & Latent

MORE PEOPLE USE CELL PHONES THAN LAND LINES

ADD TO: Uninsured

 

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R. Lewis Dark:  A Global Flu Emergency

Next comes our intelligence briefing on the chaos unfolding in Mexico. Its inhabitants are reacting to the news that patients usually considered less vulnerable to influenza-young andmid-adult aged individuals-have died. What was originally classed as "atypical pneumonia" now has been identified as influenza virus A/H1N1. This is a new combination of genetic material from human, pig, and bird flu strains. It was just last Friday that the CDC issued its first public alert about the threat posed by this new form of influenza. By Saturday, the World Health Organization (WHO) was cautiously characterizing the known outbreaks in Mexico and in two U.S. border states as a "public health emergency of international concern." (See pages 7-8.)

However, health officials are privately discussing the possibility that, because containment is unlikely at this stage, there continues to be the potential for A/H1N1 influenza to evolve into a pandemic.As a challenge to clinical labs in the United States and across the globe, the emergence of A/H1N1 is another reminder like SARS in 2003 that virulent diseases remain an ever-present threat to public health. Physicians who must diagnose and treat patients with these new diseases rely on accurate reliable laboratory testing. In turn, that is a reminder that laboratories should never betray the public trust.





Puzzling New Flu Strain Causes Concern in Mexico

WHO, CDC, other health agencies take action to understand the never-before-seen A/H1N1 virus

CEO SUMMARY: In recent weeks, health authorities in Mexico became aware of a new strain of influenza, A/H1N1, because of unexpected deaths from "atypical pneumonia." As early as April 19, the CDC had identified similar cases in Texas and California. By last Friday,WHO, Canada's PHAC, and the CDC had posted public alerts about this new form of influenza. All clinical lab directors and pathologists should stay current with announcements from the CDC and local public health labs.



Competitive Bidding Update: San Diego Labs Pursue Return of Bids from Medicare Officials




Kaiser in Colorado Uses Lab Test Data to Improve Cardiac Care

Achieves 73% Fewer Deaths from CAD!!

CEO SUMMARY: Proud of a 73% reduction in mortality among patients with coronary artery disease (CAD) at Kaiser Permanente Colorado, clinical care teams there demonstrate how integrated care and more effective use of laboratory test data can lead to remarkable improvements in patient outcomes. Key themes in this achievement are the combined use of an extensive electronic health record (EHR) system and disease registries to give providers instant access to patient information, including real time access to patients' laboratory test results.



Why Wall Street Likes Histology Lab Business

Professional investors recognize opportunity for sustained growth in specimens, plus ample profits

CEO SUMMARY: Over the past two decades, investor-owned anatomic pathology companies captured significant market share from community hospital-based pathology groups while delivering profits to their owners. Despite the recent downturn in the economy, Wall Street believes histology laboratories remain an attractive investment for investors. Financial analyst Kemp Dolliver explains the reasons why professional investors remain ready to invest in anatomic pathology firms.


INTELLIGENCE: Late & Latent

MORE ON: Drug Tests

BEA ARTHUR AS MED LAB TECHNICIAN



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R. Lewis Dark: Expanding Lab Market Share in a Recession

IT IS UNCHARTED TERRITORY FOR CLINICAL LABS AND PATHOLOGY GROUPS.A recession now officially exists in the United States. The last time this nation experienced an extended and painful economic recession was between July 1981 and November 1982, according to www.wikipedia.org.

That means it has been more than 26 years since anyone has managed a clinical laboratory during an economic recession! Few of us old-timers are still around to share the experience and wisdom gained during those challenging years. That means an entire new crop of laboratory managers and pathologists are about to undergo their trial by fire. To cope with the poor business environment, they will need good business strategies to keep their laboratories financially solvent and profitable.

Of course, the immediate pressure is to reduce operational costs in the face of slackening test volume, payer reluctance to settle claims in a timely fashion (since they want to hang on to the money), and the inability or unwillingness of larger numbers of patients to promptly and fully pay their bills to their lab test and pathology providers. Fortunately, clients and longtime readers of THE DARK REPORT know that quality management methods, including Lean and Six Sigma, are highly-effective tools to eliminate unnecessary costs while improving productivity and quality.

That covers the cost/operations side of the ledger. The other way to sustain financial stability is to grow the laboratory business in a cost-effective manner. This means expanding lab outreach market share. In speaking to laboratory executives across the country, there is a consistent message: in most regions, well-managed laboratories continue to see strong rates of growth in new client accounts, additional specimen referrals, and net revenue.

Two public laboratory companies offer proof that a well-executed sales strategy still produces good results. Bio-Reference Laboratories, Inc. (BRLI) reported its first quarter of fiscal year 2009 on March 5. It enjoyed a net revenue increase of 13%. Specialty test provider Clarient, Inc. reported its fourth quarter 2008 earnings on March 11. Clarient saw a net revenue increase of 76.4%, along with an increase in specimen volume of 39%.

These two examples should inspire hospital lab outreach programs and pathology groups. Even in a tough economy, a well-executed sales/marketing program can produce growth, along with increased profits!



Attorney General Brown Sues Seven Calif. Labs

He joins whistleblower lawsuit, claims labs did not give Medi-Cal program their lowest prices

CEO SUMMARY: California Attorney General Jerry Brown made a big splash last month by accusing seven lab firms of committing "massive fraud and kickbacks" under state Medicaid laws. However, he is relying on a legal theory that has not prevailed in some prior court cases involving discounted billing for laboratory testing. Nonetheless, it appears that a multi-year legal battle is now under way, with the substantial resources of the California Attorney General arrayed against the seven defendant lab companies.




Patient Safety Update: Diagnostic Errors Get Attention As Next Patient Safety Goal

Errors in diagnosis estimated to be responsible for between 40,000 and 90,000 deaths yearly



Warning: Three-Fold Rise In EMR Adoption Predicted

Stimulus plan sets aside $20 billion for physicians who install certified EMRs

CEO SUMMARY: Doctors are responding to news that up to $20 billion in federal funding is now available to help pay for their adoption of electronic medical record (EMR) systems. Demand for EMRs is expected to increase three-fold in the coming years. That means clinical labs and pathology groups must step up their EMR interface capabilities´┐Żor lose clients as physicians move their business to laboratories who do a better job of interfacing with physicians' EMRs.




LABORATORY BRIEFS: INVERNESS ACQUIRES TEST BUSINESS FROM ACON: MAKING LAB DATA LIQUID FOR ALL USERS

Resollved 10-Year Issue off Hemolyzed ED Specimens!!




Gene Testing: Navigenics Buys Clinical Lab From Affymetrix Last Month

Direct-to-consumer genetics testing vendor now has in-house laboratory testing capabilities




Hey Doc! How Do You Rate With Zagat Health Survey?

Zagat Health Survey designed to help WellPoint's patients select their physicians

CEO SUMMARY: Once patients become involved in managing their healthcare, they actively seek information that can help them make informed decisions. Health insurers are providing tools to helpmake this job easier. WellPoint teamed up with Zagat Survey to create the Zagat Health Survey. This unique tool offers consumers a snapshot of a physician from the patient point of view. It is available exclusively to members of WellPoint's affiliated plans and other participating Blues Plan members.




Medically Unlikely Edits Are Back and a Problem!

CMS instituted 100 new MUEs on January 1, then carriers began rejecting laboratory claims

CEO SUMMARY: On January 1, 2009, CMS implemented Phase VIII of its policy on medically unlikely edits (MUEs) involving about 100 laboratory CPT Codes. It also began to deny whole claims, not just the "medically unlikely" parts of claims. After hearing of the problem in early March, ACLA, CAP, and other lab groups stepped in to work closely with CMS officials to resolve the problem. Claims are expected to be paid in full until new revisions to MUE rules are implemented.



INTELLIGENCE: Late & Latent

MORE ON: Regence

CLARIENT LINES UP NEW INVESTOR IN A $50 MILLION DEAL



Complete Issue > Volume XVI, Number 4, Monday, March 16, 2009 (March 16th, 2009 — $ 36.00)
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R. Lewis Dark: Information is Power for Lab Leaders!

YOU'VE ALWAYS RELIED ON THE DARK REPORT to keep you at the cutting edge of developments in laboratory management and the broader healthcare system. We've consistently been first with the essential, intelligence, and analysis you need to keep your laboratory at its financial and clinical acme.

Once again, in this issue of THE DARK REPORT we are first to identify and describe a trend which already touches large numbers of hospital and health system laboratories in the United States. Even though the majority of hospitals have yet to experience a crash in inpatient admissions or higher levels of patient bad debt, they are in a cash conservation mode! It's causing hospital labs to pull in spending.You can learn why by reading the intelligence briefing on pages 3-6.

You and I probably agree that leadership and management success are closelylinked to having access to timely, high-quality information. That is one reason why you rely on THE DARK REPORT for relevant alerts and market insight unavailable from any other source in our industry. Because our country is now in the midst of an unprecedented economic decline, it becomes even more important for you and your laboratory teamto have rational, detailed intelligence on unfolding events.

At THE DARK REPORT, our response to the deteriorating economy and the probability of major healthcare reform legislation is to recast the upcoming Executive War College on Lab and Pathology Management to provide you with up-to-the minute insights and strategies. This highly-respected gathering of national and global lab industry leaders is now focused on the current critical issues linked to unfolding economic and political events.

If you agree with me that "knowledge is power", then you will want to be with us at the 14th Annual Executive War College in New Orleans on April 28- 29. Expect to learn the latest fromWashington insiders about the likely direction for healthcare reform, how it may positively or negative affect laboratories, and ways that you might shape the debate. Hear from labs that are implementing strategies to conserve cash, improve productivity, and refocus outreach sales to sustain profitable new business.

Am I asking the impossible? With hospitals capping travel and education spending, that may be true. On the other hand, true leaders always find a way to get the information they need to make the right decisions. That is why I hope you convince your administrators that this Executive War College is a good investment a "must attend" opportunity for you to learn and to bring back strategies that generate huge savings for your lab and hospital!



Unprecedented Times Lie Ahead For Labs

Start with the huge financial hit to hospitals, which has slowed capital spending by laboratories

CEO SUMMARY: Here's a lab industry first: insight and analysis about why hospital/health system laboratories are already feeling the financial pinch as their parent organizations scramble to conserve and accumulate cash. That's bad news for IVD vendors and other lab industry suppliers. And that's not all! Healthcare reform proposals carry the potential to further hamstring the finances of clinical labs and pathology groups.




Lab Management Update: Cleveland Clinic Unveils Plan For New National Esoteric Lab

Target is to serve send-out testing needs of hospitals, health systems, and other labs



Olympus Diagnostics Unit Sold to Beckman Coulter

More consolidation among IVD companies as Beckman boosts its presence in chemistry

CEO SUMMARY: For Beckman Coulter, the opportunity to acquire the diagnostics business of Olympus Corporation was compelling for at least two reasons. One, the chemistry and automation products of both companies are quite complementary. Two, in a steadily-consolidating in vitro diagnostics (IVD) industry, Beckman's acquisition of the Olympus diagnostics unit was an important strategic response. It signals to financial analysts and laboratory customers that Beckman Coulter intends to continue as an aggressive competitor.




Boston's Beth Israel Scores Improvement Gains with Lean

Resollved 10-Year Issue off Hemolyzed ED Specimens!!

CEO SUMMARY: Lean methods are helping laboratories resolve aggravating problems that have been unresolvable for as long as 10 years. At Beth Israel Deaconess Medical Center in Boston, improvement teams involving the laboratory and ED staff addressed high rates of hemolyzed specimens. Collaboration among departments and the use of Lean methods produced swift results. The rate of hemolyzed specimens collected in ED has fallen dramatically and now is comparable with rates across the entire hospital. Even the Beth Israel CEO has celebrated this success.




Competition in Rapid Tests Means Value to Labs

As number of rapid test solutions increase, IVD manufacturers look for ways to add value

CEO SUMMARY: One of the hottest market segments in in vitro diagnostics (IVD) is rapid testing. However, because labs now often have multiple choices when selecting a rapid test, IVD manufacturers recognize the need to differentiate their products by adding additional features and benefits. In the case of 3M's new rapid test for influenza, the ability of the system to deliver results directly into the laboratory information system is one such product differentiator.




Aperio, Cerner Interface Digital Path and Path LIS

Interface allows pathologists to integrate digital pathology system with anatomic path system

CEO SUMMARY: For pathologists watching the market acceptance of digital imaging and digital pathology systems, another milestone has been reached. The nation's largest health IT companies are beginning to develop interfaces between their anatomic pathology laboratory information systems and digital pathology products. One such interface is now available to interface Cerner Corporation's CoPathPlus with the Aperio Technologies' Spectrum pathology (PACS) software.



INTELLIGENCE: Late & Latent

MORE ON: Serco JV

TRANSITIONS : Laboratory Corporation of American

 

 

Complete Issue > Volume XVI, Number 3, Monday, February 23, 2009 (February 23rd, 2009 — $ 36.00)
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R. Lewis Dark: Are Labs To Be Punished for Vitamin D Testing?

HERE'S AN INTERESTING QUESTION: Are labs to be punished because patients want to know if their Vitamin D levels are sufficient? Consider this: THE DARK REPORT predicted last year that labs might suffer a backlash from payers as a result of increased demand for Vitamin D testing.

In a briefing titled: "Vitamin D Test Volumes Double in Past Year," published on July 28, 2008, we said, "Across the nation, labs report a near doubling in the volume of Vitamin D tests they are performing. Will Medicare and private payers recognize that, per evidence-basedmedicine guidelines, this testing is justified and labs should not be punished for increased utilization?"

Now comes news that National Government Services (NGS), one of the nation's largest Medicare contractors, is taking steps to make that prediction become reality by its proposal to stop paying for routine testing for Vitamin D insufficiency. In its proposed local coverage determination (LCD), NGS said it would cover Vitamin D testing only for patients with chronic kidney disease, osteomalacia, hypercalcemia, and rickets. Other testing for Vitamin D would be denied. Is this short-sighted bureaucratic thinking? Or is it part of a shrewd, long-term strategy to reshape utilization of laboratory testing in this country? (See pages 7-8)

After all, if Medicare patients must pay out of pocket for Vitamin D testing, then many will forego these tests, putting themselves at risk for longterm chronic conditions. Eventually, Medicare will need to pay to treat patients who have these chronic and costly conditions. For that reason, NGS' proposal to deny coverage for routine Vitamin D sufficiency testing puts Medicare squarely at odds with its stated goal of supporting early detection and preventive medicine. So much for a $40 Vitamin D test once every year or two and its potential to save the healthcare system tens of thousands of dollars per patient in downstream costs.

More importantly for the laboratory industry, this ill-conceived proposal to deny coverage for a test that is relatively non-controversial should be viewed for what it is: less an effort to guide clinicians via appropriately coverage guidelines and more a deliberate step to constrain increases in the cost of care by shifting the burden away from Medicare and onto both patients and the laboratories that provide their physicians with these tests.



Molecular Advances Soon To Reshape Anatomic Path

Predictions that pathology is to become more quantitative because of new technologies

CEO SUMMARY: Early this month, the second annual Molecular Summit assembled molecular first movers and early adopters to discuss their efforts to integrate molecular imaging and molecular diagnostics in patient care. One clear message emerged from two days of presentations and discussion: a host of new technologies is ready for clinical introduction and is likely to rapidly transform both radiology and pathology.




Medicare Carrier Proposes No Pay for Vitamin D Test

Proposal restricts coverage for Vitamin D tests to four diseases and no allowance for screening

CEO SUMMARY: Medicare contractor NGS wants to end payment to labs and physicians for routine Vitamin D testing. In a proposed local coverage determination (LCD), the Medicare carrier says it would cover Vitamin D testing only for patients with chronic kidney disease, osteomalacia, hypercalcemia, and rickets. All other testing for Vitamin D would be denied. Endocrinologists responded by labeling the NGS proposal as "flawed and incomplete, a factor that would shortchange current medical practice."




Ten Years Ago: Quest Diagnostics Agrees to Buy SmithKline Labs

Strategic move in 1999 put Quest at the top of the lab services marketplace in the United States



Local Labs Have Opportunities To Increase MC Patient Access

Managed Care Pricing Trends and New Strategies

CEO SUMMARY: Although the nation's two largest laboratory companies have achieved a dominant managed care position, opportunities remain for regional labs to do more business with managed care plans. Two experts provide an update of managed care pricing trends for laboratory testing services. For independent labs and hospital lab outreach programs seeking to expand access to managed care patients, they also offer several simple, but effective, simple business strategies.




Need Rigorous Validation For Home Brew Assays

Challenge is for laboratory to verify accuracy, then report results that clinicians easily understand

CEO SUMMARY: National headlines about erroneous Vitamin D results are a reminder to the lab industry of the imprecision and risks associated with home brew testing. According to one laboratory expert, every laboratory-developed test (LDT) must meet two high standards. One, accuracy, reproducibility, and transferability of the test result number. Two, a reference range that is easily-understood by clinicians and consistent with published studies and existing lab test methodologies.



INTELLIGENCE: Late & Latent

FLU ANTIBODIES PROMISE UNIVERSAL PROTECTION

MORE ON: Genetics

Complete Issue > Volume XVI, Number 2, Monday, February 2, 2009 (February 2nd, 2009 — $ 36.00)
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R. Lewis Dark: Lab Test Methodology and Widespread EMR Use

IN BIRMINGHAM, ENGLAND, LAST WEEK to participate at the Frontiers in Laboratory Medicine (FiLM) conference, Editor Robert Michel picked up an interesting theme that connects to current laboratory events here in the United States.

"General practice (GP) clinics in England are establishing electronic medical record (EMR) systems as a preliminary step toward the goal of a national patient health record (PHR)," explained Michel. "Consequently, pathologists and clinical biochemists who run the nation's laboratories are beginning to foresee how one longstanding practice in laboratory medicine has the potential to create confusion among physicians and patients.

"In each city across the country, individual laboratories have always selected their test methodology, then used specimens collected from local residents to validate the test and develop reporting ranges," he continued. "Now, some lab professionals realize that,when a national patient health record becomes a reality, the individual patient's record will contain lab test data produced by several different labs. Because of different methodologies and different reporting ranges for the same test, they can foresee how physicians and patients, as they consult the individual's electronic medical record, will find the presentation of these cumulative lab test results to be confusing and not easy to understand. This realization by forward thinkers in the laboratory profession is causing some to predict that greater standardization of testmethodology and reporting guidelines across all laboratory sites will need to occur as a consequence of a single national system of electronic medical records."

Michel's observation about this development in the United Kingdom has a parallel here in the United States. Wider adoption of a universal patient health record that is transportable across different providers, hospitals, and health insurers will raise the same issue in this country. The explosion of interest in Vitamin 25(OH) D testing may provide our health system with a first example of the problem generated by the use of different test methodologies. Today, different labs are using different methodologies to test for Vitamin 25(OH) D. They use locally-collected specimens to establish reporting ranges. This means that clinicians and patients, looking at Vitamin D results from different labs, cannot automatically assume that one lab's result means the same as another lab's result. Evidence exists that this situation has caused confusion among some physicians and patients during the past two years-a time when interest in Vitamin D testing grew dramatically.



When Does Cost Cutting Affect a Lab's Quality?

Pathologists understand that any lab's quality and performance requires a careful balancing act

CEO SUMMARY: Many lab professionals note the irony that a laboratory so publicly committed to Six Sigma quality management methods is now identified with the single largest episode of systemic failure in lab test accuracy. Looking in from the outside, some pathologists suggest that a decade of aggressive cost cutting and the current campaign to remove another $500 million of costs in 36 months,may be a contributing factor in the 18-month period of systemic deficiencies.




Laboratory Industry Has "Elephant in the Room"

In January, a major lab failure was national news, but the story went unremarked by most lab sources

CEO SUMMARY: In almost every laboratory across the United States and in several countries around the globe, one much-discussed topic in recent weeks has been the Vitamin D testing program deficiencies at Quest Diagnostics Incorporated. Yet, even as rank and file laboratorians actively talked to each other about what this story means, the lab industry's professional associations, societies, and publications were silent on this matter, with few exceptions.



Quest's Deficiencies Trigger QA/QC Questions

Problems in test accuracy should be studied and relevant lessons shared with lab industry

CEO SUMMARY: Experts in laboratory QA/QC and proficiency testing (PT) are following the news that Quest Diagnostics admitted to an 18-month problem with lab test accuracy in its home brew Vitamin 25(OH) D assay. It is recognized as a major failure in the existing system of laboratory licensure, accreditation, and proficiency testing. However, to improve current lab quality standards, more needs to be known about how quality systems failed at Quest Diagnostics.




Got a Lab Test Question? Call an ASCLS Lab Guru!

ASCLS service gets 115 queries every day, almost 42,000 a year´┐Żand patients love it!

CEO SUMMARY: Each year since its launch in 2001, the ASCLS Consumer Response Team serves increasing numbers of patients and physicians. Clinical Laboratory Scientist volunteers from the American Society for Clinical Laboratory Science provide answers and help patients understand the meaning of their lab test results. After sending a question by e-mail, these patients get answers within 24 hours. This non-commercial, peer-reviewed, patient-centered site is helping fill a gap in care delivery.





Staunch Laboratory Advocate Retires After 31 Years of Service

Joe Boone, Ph.D., stepped down last month from his position at CDC´┐Żs Division of Lab Services





Denver's UniPath Sells Its Histo Labs to APP

UniPath and American Pathology Partners announce a two-part business agreement

CEO SUMMARY: UniPath ended a long search for a business partner with ample capital and resources to help it continue its aggressive rates of growth in specimen volume, market share, and revenue. UniPath announced the sale of its technical laboratories to American Pathology Partners of Brentwood, Tennessee, along with a business agreement to provide pathology professional services. The agreement leaves UniPath in full control of its professional corporation.




Did CMS Err in Issuing New Anti-Markup Rules?

CMS commentary creates uncertainty about whether technical component supervision is needed>

CEO SUMMARY: In the latest anti-markup rules that took effect on January 1, CMS may have unintentionally stated that the anti-markup rule doesn't apply when a pathologist is reviewing histology slides. While the rule itself is unclear, the commentary that accompanies the rule says that supervision is not required. This ambiguity has been noticed by experts. It means that patholologists, lab directors, and their attorneys must act carefully to ensure compliance.



INTELLIGENCE: Late & Latent

NHS BRANDED AS "AGEIST" BY CRITICS

MORE ON: UK's NHS

Complete Issue > Volume XVI, Number 1, Monday, January 12, 2009 (January 12th, 2009 — $ 36.00)
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R. Lewis Dark: Primum non nocere, or: First, Do No Harm!

"FIRST, DO NO HARM!" IS KNOWN TO EVERY HEALTHCARE PROFESSIONAL. However, I was surprised to learn that this famous phrase is not from the Hippocratic Oath!

In checking wikipedia.com as I wrote the headline above, I learned that "the phrase expresses one of the principal precepts allmedical students are taught in medical school and is a fundamental principle for the emergencymedical services." Wikipedia has an interesting discussion of early references to this sentence and its use in medicine, but does note that, by around 1900, it was in common use within the medical community here in the United States.

I wanted to call your attention to this precept of "First, do no harm!" in the context of the disclosure by Quest Diagnostics Incorporated that it had, for 18 months during 2007 and 2008, reported inaccurate Vitamin 25(OH) D results to tens of thousands of patients and had instituted a voluntary notification and retest program for patients who had received inaccurate test results. In speaking to THE DARK REPORT (which was first to break this important story) and the national press, Quest Diagnostics is downplaying the potential negative consequences to patients. One Quest pathologist even told a reporter that he doubted that patients would have suffered any harm from the problem! A written Quest statement read on a television news broadcast declared that, following its notification campaign, "we have not been made aware of any adverse impact to patients." 

I personally find this a disappointing public face to the problems created by the inaccurate test results Quest Diagnostics sent to patients and their physicians.

The New York Times reporter quoted one doctor who said, "There was a patient we put on vitamin D and all of a sudden, for the first time ever, the patient came back with what seemed to be a toxic level of vitamin D. "When the patient had his Vitamin D tested by another laboratory, the "value was considerably lower." On disease-specific bulletin boards and discussion groups, it is not difficult to find postings dating back two years by concerned patients who are upset by odd or discordant values on their Vitamin D tests performed by Quest.

By repeatedly stating "no harm to any patients (that we know of)," Quest shows a lack of respect for the turmoil it has caused to patients and physicians. Of course, lawyers have a hand in these public statements. Still, I come from the old-fashioned school of values, where admitting amistake is the right thing to do and the first step to rebuilding trust withmy customers andmy friends.



Inaccurate Results + Quest Dominates News Cycle

From the New York Times to CNN News, Quest's Inaccurate Vitamin D testing is a big story

CEO SUMMARY: Most laboratory professionals don't know it yet, but significant changes occurred to the entire lab industry last week. After Quest Diagnostics Incorporated acknowledged that it was retesting tens of thousands of patients because 7% of the Vitamin D results it reported during an 18-month period were inaccurate, a blitz of newspaper headlines and television news coverage of the story alerted Americans to the problem.




Labs Need to Respond To Inaccurate Results

In 2004, ongoing failures in HCV, HIV testing at a Baltimore hospital lab became national news

CEO SUMMARY: What does a lab do when it discovers that it has reported inaccurate test results? In 2004, a turnaround team arrived at the laboratory of Maryland General Hospital in Baltimore to deal with the consequences of a failed infectious disease testing program. For about two years, the lab had reported inaccurate HCV and HIV results. One member of that turnaround team shares lessons learned that pathologists can use to develop effective contingency plans for their own labs.



Dennis Monahan of ARUP Dies on Christmas Eve

He was ARUP's first sales representative and contributed to the lab's growth for 24 years



Lab Conserves Blood When Drawing Patients

Rhode Island hospital laboratory has lead role in encouraging adoption of transfusion-free medicine

CEO SUMMARY: New attention on both the risks associated with blood transfusions and the cost of blood products is triggering action by the nation's hospitals. At the 719-bed Rhode Island Hospital, the laboratory is on the front line of the hospital's blood management initiative. One change in longstanding practices is to encourage phlebotomists to draw only the minimum amount of blood required for lab testing. However, smaller specimens require changes to lab operations.



ASCP Awarded PEPFAR II Funds for Lab Assistance

ASCP members now serving 15 PEPFAR countries to help improve lab testing services

CEO SUMMARY: With new Congressional authorization and funding of $48 billion, PEPFAR II-a second five-year initiative to help targeted countries battle HIV, AIDs, tuberculosis, and malariais about to get under way. To better support diagnosis and management of HIV/AIDs patients, some PEPFAR funds are designated to expand laboratory testing services in countries with high prevalence rates of HIV/AIDS. ASCP's funding award will support laboratory training events and technical assistance to labs in 12 PEPFAR countries.


INTELLIGENCE: Late & Latent

DOUBLE-DIGIT GROWTH AGAIN AT BIO-REFERENCE

BIOIMAGENE SELLS 100 DIGITAL PATHOLOGY SYSTEMS

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