By Stanley J. Geyer
03/31/08

Drawing information from a recent G-2 comprehensive pathology study, this article will focus on market forces and business strategies that are shaping today's anatomic pathology practices. The information presented should also improve understanding of how to manage an anatomical pathology practice and provide insight into what the industry will look like in the future.

About the Survey

"There were 190 responses from pathologists, laboratory managers, and hospital administrators across the country to G-2 Report's National Market for AP Services survey. The respondents were asked what they thought of current market trends. Invariably, they almost also said that they expected increased test volumes and that the largest growth would occur with fluorescent in situ hybridization (FISH) and polymerase chain reaction (PCR) testing. In addition, they concomitantly expected their workload to increase and for Medicare reimbursements to fall between 6 and 10 percent from 2006 to 2007. While the survey data is a little old, since most of us know that Medicare reimbursements have fallen, respondents did anticipate this,"says Stanley J. Geyer, MD, Pathologist, Geyer Pathology Services.

Achieving Growth

"All categories of respondents—pathologists in hospitals, independent laboratories, and pathology groups—anticipated growth. Of all the respondents, they expected an 11 percent growth in FISH testing, followed by a 10 percent increase in PCR-based testing, 8 percent in molecular tests, and 5 percent in 88305s (biopsies). Finally, they expected a 5 percent growth in automated imaging and interpretation of PAP smears."

To achieve and manage increased testing, which the respondents anticipated and wanted, more than half expected to increase physician-to-physician marketing." Many pathologists feel that they are the most effective sales and marketing force and that by speaking with their colleagues they will be able to gather more work. Second, they expected to improve the delivery of reports. This refers to the distribution of reports through an electronic medical record or over the Internet, which ever way will get the report most rapidly into the clinician's database so the data can be accessed."

Third, they expected that the most effective way to grow the business was to have computers interfaced to a pathology-based computer system in the physician office for order entry and results delivery." Most respondents realized that it's a two-way street—i.e., that to get reports out fast you need a system that also makes it easy for the physician's office staff to put orders directly into the computer system. Finally, many respondents (half or more), cited the need to improve marketing and outreach in specific subspecialty areas and through the efforts of a professional sales and marketing force independent of physician-to-physician marketing,"Geyer says.

"Inpatient work is captive, but obtaining hospital outreach business requires a thoughtful effort. There is sometimes a lack of cooperation between the hospital and pathology groups about how to go about marketing. In addition, the respondents sometimes felt that hospitals did not always appreciate the monetary value of increasing outreach work. In the absence of a hospital's support, whether it is a capital contribution to purchase equipment or hiring technologists, improved outreach and marketing will not be as successful as possible,"he remarks.

Less than half of the respondents indicated that same day turnaround for small biopsies was important for growth." For medical reasons, it is not really necessaryessential to have same day results for a breast biopsy. However, from a marketing standpoint, it is a brilliant strategy. From the patient's perspective, it responds to potential anxieties of waiting a week for results. In addition, it prevents the patient from escaping from your system—i.e., going to an oncologist in another hospital or healthcare center rather than staying within your system. Same day turnaround for small biopsies may not always be relevant for improving the quality of care, but it is important for improving marketing and the communication between pathologists and clinicians,"Geyer says." Same day turnaround time requires work redesign in histology, which improves the efficiency of the lab's operation."

"Other than blood banking, the only thing that the laboratory generates is information—the result is the sole output. Imagine if we could provide information in real time to an anxious patient at the other end. Many of the survey respondents cited same-day turnaround for small biopsies because they recognize that when we improve communication, either through better choice of words or more timeliness, we improve our recognition and value in the eyes of clinicians,"he adds.

Another area that was cited often, but by less than half of respondents was the addition of images to reports." This is similar to same day turnaround; while adding images to reports doesn't improve quality of care, it adds a great deal to marketing. Having a picture of a prostate, for example, does not do much for an urologist who can show it to the patient. Seeing a picture is not going to make a cancer diagnosis more accurate or meaningful. The images do not enhance our sole output of improved information. However, images are great additions that have been recognized for many years by commercial labs as a way to improve marketing."

Respondents also cited connectivity to medical records as a way to increase growth." Finally, a few respondents cited expanding their geographic territory as a way to increase work. While that might be an appropriate response, labs participate in a zero sum game. In other words, if I expand my territory and improve my outreach, it is going to come at the expense of other labs. It increases competition and may or may not be a meritorious way for pathologists and laboratories to achieve growth."

Other factors cited include increasing histology automation and hiring more technicians." A constrained qualified technical workforce in many markets is certainly a barrier to achieving an increased workload. In addition, a number of respondents cited consolidation of labs and multi-hospital systems. This does not necessarily increase workload, however, it might increase efficiency by creating centralized services where you can operate 24 hours a day with three different shifts,"he explains.

"One person responded that he would manage an increased workload by working harder and pointed out that his associates would have less vacation time. That might be a strategy, but it is not the optimal one for managing increased work. Another individual cited cross training technologists. This individual pointed out that his lab had a lot of cytopathology work and that the cytotechnologists were being cross-trained to work in other areas where they were not optimally utilized. In my opinion, these last few responses—consolidating labs, working harder, and cross-training technologists—have limited benefit in how we achieve increased testing and they are not optimal solutions for managing increased testing."

• Challenges and obstacles to achieving growth. "Medicaid and Medicare reimbursements are declining, which makes many people respond that they will make up declining revenue with increased volume. However, once revenue declines you can't simply make up all lost income in volume—you have to find new ways to do business."

To that end, respondents cited expanding and developing new client business, competitive pricing, and developing and acquiring new technology." New technology offers opportunities to deal with this unstable marketplace and it provides a way to manage increasing growth while still allowing people to take vacations. Finally, they cited competing for managed care contracts as a solution. This happens even in cases where a lab has inpatient, outpatient, and outreach work integrated in a single medical record. Competing for managed care contracts is important because the payers currently control much of the outreach market,"he notes.

• Hospital and independent lab advantages in outreach. "One of the top advantages cited was the close relationship between pathologists and clinicians. This relationship adds value since you get better patient outcomes and physician satisfaction when you have the pathologist or the technologist and the lab work close to the patient. However, the payer does not always appreciate the value of this relationship. Pathologists, technologists, and laboratory leaders can go a long way in helping to sell the value that is added when they can call a clinical and discuss a biopsy or report. Conversely, it is difficult to track down a pathologist in a commercial lab to have that conversation. This close relationship adds value to clinicians because it makes their life easier—it provides direct correspondence with the pathologist and enables the integration of all the patient's work through one department and one group of employees. Of course, there is added value in integrating a PAP smear, a biopsy, chemistry, and other test results in one place."

Another advantage that was cited for hospital and independent labs was turnaround time." My sense is that having work done locally actually does improve turnaround time. You eliminate transport time and the work can be done on site in an integrated way that provides better relationships with the physician. However, the more important question is whether it is relevant to have a lab result in 12 hours less than what might be provided by a commercial lab. The answer is mixed—it depends on the urgency of patient care and the expectation of the clinician,"Geyer says.

"Respondents also noted that an advantage was the relationships with third-party payers. Many pathologists who responded pointed out that they go out and speak with third-party payers (i.e., insurers). I did not think this was commonplace, which begged the question whether pathologists should be talking to insurers. It is a bit of a rhetorical question, however, it makes sense if pathologists want insurers to understand the value they add by their relationships with physicians and their fast turnaround time. It makes sense because the payer certainly is not going to learn this from the hospital administrator. Laboratories can help themselves by being their own advocates and developing this type of relationship with the people who pay the bills,"he notes.

Finally, integrated inpatient and outpatient results were cited as an advantage." Again, being able to look at a cervical biopsy, PAP smear, and the uterus provides an integration of results that might not be achieved by a commercial lab. There is a certain value in keeping work locally through the integration of results, faster turnaround time, and pathologist/physician interaction."

• Hospital and independent lab advantages in outreach. "The chief disadvantage cited was a lack of knowledge or understanding by the hospital on outpatient lab profitability—which is certainly controversial. A number of respondents noted that hospitals do not really appreciate the degree of profitability and are therefore unwilling to invest in the sales and marketing that is necessary to gain more outreach. After all, the lab is a cost center and not a revenue center. In reality, however, there is a great deal of variation among hospital administrators in their response to expanding laboratory outreach—especially if you can show a business plan that demonstrates how outreach can pay for the sales force and produce income."

Geyer does agree with the next disadvantage cited, ineffective billing and collections." I think you will get a good result if you form a new company that can do it's own billing and it's feet are held to the fire for profits and the amount of billing and collections.
On the other hand, if billing is handled by hospital finance, which is also billing for surgery and radiology, the laboratory represents only 3 percent of the hospital's budget and may not get quite as much attention. In short, the $5 glucose bill may not get as much attention as the outstanding $50,000 cardiac surgery bill. The issue of who handles billing can lead to effective or ineffective outcomes,"he illustrates. 

Other cited disadvantages include having a small or no dedicated sales force and a lack of IT solutions." As mentioned previously, there is a recognized need for connectivity to the physician's office for order entry and for the delivery of results. However, a lack of IT solutions on the hospital's end certainly creates a disadvantage for laboratories and pathology in outreach."

• Achieving growth through mergers." One respondent talked a great deal about merging groups and noted that this could achieve economy of scale and that it requires the designation of leaders who represent each site that's involved. One suggestion was to hire experts if local expertise did not exist within the group. Lawyers can help with contract negotiations and accountants understand the size of the business of each group and will be able to determine how assets, costs, and profits will be distributed as the merger proceeds. Developing trust is a lot like apple pie—everybody loves it and agrees with it. There is not much to say about it, except that a trustworthy relationship works much more effectively than one that is filled with suspicion. However, everyone needs to learn to compromise in a merger. There is not necessarily a correct way to do things and give and take on everyone's part will result in success."

In addition, establishing a governance organization early is important so people know who is in charge and what has been delegated to whom." Other key points included paying attention to details and emphasizing quality. Business, whether it is within the hospital or outreach, rises and falls on the clinicians' perception of quality. It is also important to create equity for all partners in a merger and to understand the value and assets of each group so that assets, profits, and losses can be distributed proportionally. It may sound self-evident, but it is important to align goals in a new entity so that a small secondary hospital understands the role of the large tertiary or quaternary hospital, and vice versa. It is about understanding everyone's mission so that all can work toward achieving the common goal of the merged group. Finally, it was also noted that it is important to employ a great billing and collections company and to communicate with all parties so that issues are open to full disclosure."

Technology Issues

The survey dealt with a number of technology-related issues, including the types of technology that will be important in the future and whether this technology was currently used or anticipated to be used in the next two years. The following five technologies were cited as being the most important for shaping the future of the delivery of pathology and laboratory medicine services.

1. Informatics. In the survey, 49 percent of the 190 individuals noted that they already use some form of informatics—i.e., computer-based and electronic-based information that enhances the management and analysis of clinical and research information, or a database that enhances interfaces between the physician, physician offices, electronic medical records, and laboratories." In short, this is taking simple information and integrating in ways that create new sources of information,"Geyer adds.

"For example, I worked at Intermountain Healthcare (Salt Lake City), which has one of the most sophisticated hospital-based electronic medical records and management information systems. An Enterprise Data Warehouse connects various databases with another. While there, I was I was working on a PAP smear project and I wanted to know about the outcome of women with ASCUS (Atypical Squamous Cells of Undetermined Significance), which was stored in an anatomic pathology database. I also wanted to know about laboratory testing, particularly HPV, which was stored in a different database. In addition, I wanted to know about any follow up, which was stored in a clinical database. One of the computer programmers was able to create a program that pulled out the anatomic pathology, virology, and clinical data and linked it together to answer my specific question. The Enterprise Data Warehouse, where data from different sources are linked together, is the epitome of informatics,"he illustrates.

The typical inputs for informatics include demographics, billing, ordering, and specimen attributes. The typical outputs include reports, images, and comments." As mentioned, our sole output is information that is put into a written or electronic report. The goal of informatics is to take these inputs and create an output in a report that can be usable in the hands of the person who has to make a decision about patient care. It can't just be a correct report—it has to be readable and have as much interpretable information as possible,"Geyer notes.

Another example of informatics is synoptic reporting." This a terrific tool since it uses templates and will ensure consistent and complete reporting of all important elements—diagnosis, staging, grading, and therapeutic information. For example, pathologists will fill out information on a cancer diagnosis for breast cancer in the same way, recording tumor size, lymph node status, whether there are any known metastases, staging, hormone receptors, and anything else that is pertinent. This really speaks to the issue of standardization, which is one way to elevate a practice. Having any number of pathologist in a group practicing in a consistent and predictable way so that each provides the same answer on the same case, demonstrates standardization of care and that the right conclusion was reached since they all have developed a consensus on what needs to be reported and how,"he explains.

According to Geyer, synoptic reporting is an element of informatics that is underutilized but has great potential and costs nearly nothing." It can be easily set up in all standard anatomic pathology reporting systems and support tools are available. In many ways, it is my opinion that the failure to adopt standardization and synoptic reporting represents an element of negligence in some ways. If you can use synoptic reporting that standardizes care and achieves consistency—i.e., it produces a report on hormone and lymph node status in every patient—you are doing a great service. However, if you do not do it in the same way for each patient, then some are getting less quality care."

Other elements of informatics might include digital imaging, as well as the inclusion of gross images, microscopic images, gel electrophoresis, and dot plots from flow cytometry." For example, the cornerstone of hematopathology diagnosis is the ability to integrate information from anatomic pathology by way of a bone marrow biopsy and aspirate with information from the clinical lab on a hematogram (the hemoglobin hematocrit white blood cell count), cytogenetics, and flow cytometry. A specimen for a patient with leukemia will be split in four, going to the hematology clinical lab, anatomic pathology, flow cytometery, and genetics, which result in four different reports. Hopefully, all four reports substantiate or support the same diagnosis or, at least, do not contradict one another. It would be a great tool to integrate genetics, hematology, hematopathology, and flow cytometry into one common interpretive report."

2. Histology automation and real-time pathology. The current standard procedure is demonstrated in the following flow chart:

"Generally, in most labs this procedure is done in big batches and perhaps repeated up to three times in one day. The technologist likely started at 4:00 a.m. morning and the slides are ready at about 7:00 a.m. The pathologists come at 8:00 a.m., cases are signed out by 2:00 p.m., and special stains are ordered. However, with real-time processing using some contemporary techniques, you can do continuous rapid tissue processing. You can coordinate the pathologists and the technologists schedule in such a way that you can get cases signed out the same day that the tissue came into the lab. This is important in terms of improving efficiency in the process, creating a marketing and sales opportunity for a clinician who wants to hold on to a breast biopsy patient, and reducing patient anxiety from having to wait over a three-day weekend for a report,"Geyer illustrates.

With a continuous rapid tissue process, processing takes about one hour, specimens can be loaded every 15 minutes, and turnaround time for reporting was reduced to same day for approximately 80 percent of cases in one study." The reduced turnaround time results in point of care anatomic pathology. In short, it creates tremendous value in the eyes of the radiologist, surgeon, and oncologist and enables you through lean management to have a more efficient and effective lab operation.

3. Telepathology. Telephathology can be static, dynamic, or a hybrid." Static means that an image is transmitted form one location to another. Dynamic means that someone in the remote location can move a slide around in real time and examine it in motion. This may use images of gross microscopic, electron microscopic, electrophoresis or dot plot-type. In the survey, 15 percent of respondents said they currently use telepathology and approximately 30 percent expect to use in the next two years. A recent article in CAP Today talked about the use of telepathology in a Henry Ford system where images can be transmitted from one floor of a hospital to another. Telepathology may mean pathology over a distance that might be as long as 1,000 miles or as short as four floors in the same building. However, it is another way to make labs more efficient—which will allow labs to improve quality, standardize practice, and remain competitive in a world where workload is growing and reimbursements are declining."

4. Molecular diagnostics. "Access Genetics practices telediagnostics whereby specimens are processed all over the country and come in through a physician portal where they are distributed to a couple of pathologists who can review the images and sign out cases or provide consultation to a pathologist who wants to sign out his or her own cases. In this distribution model, the cost has declined so much that it is no longer a barrier for entry into performing molecular diagnostics. Even small labs that are aggressive about their outreach have opportunities through reduced cost and simplicity of performance to develop a molecular diagnostics repertoire. The current barrier to entry is finding qualified technologists to conduct the testing. In the survey, 35 percent of respondents currently do some type of molecular diagnostic testing and an additional 28 percent plan to add it over the next two years. This was an area second only to FISH where respondents expected to encounter growth,"he says.

5. Automated image analysis. This refers to microscopes that are capable of multi-spectral imaging—i.e., they can detect multiple colors on a single slide. As an example, I consult for a company that uses acousto-optic tunable filter (AOTF) technology. This allows you to put as many as eight different fluorochromes, organic or quantum dots, on a single slide. The AOTF filter has some complex physics built into it that enables it to separate wavelengths in ten nanometer segments. As a result, green, red, blue, aqua, purple, and other colored dyes can be sorted as individual points (pixels) on a slide. A sophisticated coupling device in the camera can remix the pixels and recreates where those eight different colors are located on a slide. The significance is that when you have leukemia patient you would expect perhaps three different chromosomal rearrangements and you want to know whether each one is present. However, instead of staining three slides, you can locate all three on one,"Geyer explains.

Another relevant example is Urovision, a test marketed by Abbott Laboratories for detecting recurrent bladder cancer or for screening in high-risk individuals, particularly individuals with hematuria." The test uses four different chromosome probes with four different colors. A different color is attached to each chromosome probe. It would be very laborious and create eyestrain for a technologist to sit and screen for these. While it is time consuming and works reasonably well, instruments can automate the process. The automation can see those four different colors, count the number of dots, and produce an interpretation using an algorithm that sorts through the cells from those that are the most abnormal to those that are not abnormal at all. The pathologist looks at this screen, picks out the most abnormal, and can determine whether a case is consistent with cancer using the Abbott algorithm. This automated image analysis presents an opportunity to enhance standard H&E (hematoxylin and eosin stain) pathology, not replace it. It will have a broad applicability in the next five to ten years."

According to the survey, 31 percent already use this technology—a number that surprises Geyer since there are only two approved multi-color tests, UroVision and AneuVision. Abbott also makes the latter for the detection of chromosomal abnormalities in amniotic fluid. In addition, 23 percent planned to add multi-spectral imaging or image analysis over the next two years.

"As Yogi Berra said, it's difficult to make predictions, especially about the future. This applies to how future technology will look. However, as many respondents noted, we will see more informatics, telepathology, and rapid automation of histology, molecular diagnostics, and multispectral imaging. Clinical interest in molecular diagnostics is growing rapidly and that trend will continue. Clinicians also seek molecular indicators of prognosis and response to therapy, often referred to as theranostics. In addition, multiplex biomarker panels will offer a cost effective means for evaluating wellness and disease."

Geyer comments that one of the key points is that clinical labs need to manage and lead the technological revolution." Many years ago, I was the Chief of Laboratory Medicine at Georgetown where we had multiple laboratories—obviously this was before CLIA. I was charged with reducing the large number to one and to get all the testing done in a centralized lab. I think that molecular diagnostics technology has an opportunity to create a very bright and brave future for pathology and laboratory medicine. However, if pathologists recoil from their responsibilities, there is an opportunity for PhDs who are employed by cardiology to develop a pharmacogenetics lab that would determine whether patients have a genetic predisposition to be rapid or slow metabolizers of coumadin. In addition, there is an opportunity for pain management to develop a toxicogenomics lab to determine sensitivity to Fentanyl, for an infectious disease specialist to do herpes testing, and for a gynecologist to conducts HPV testing. Some of these tests will be reduced to, or come close, to being point of care. The questions is, who is going to own the technology. In short, pathologists and laboratorians can lead the way in the molecular diagnostics revolution or see their roles diminished from a failure to invent, introduce, and manage new technologies,"Geyer says.

Other technology advances will include the emergence of whole slide imaging as an important means of diagnosis, as well as the use of hyperspectral imaging as an adjunct, or perhaps a replacement, for brightfield microscopy.

"Quality improvement and legal issues don't necessarily go together. However, respondents had difficulty separating them and it is understandable since failure to deliver quality sometimes results in legal issues. In the survey, 92 percent of the respondents felt that measuring quality and effectiveness was important or somewhat important. Of that number, 91 said it was important. They noted that quality was the basis of credibility and increasing revenue. In addition, it was cited as being critical for maintaining referrals and as the basis for patient safety. One respondent indicated that measuring quality is difficult. While it may be difficult to measure, it is easier to measure ‘disquality.' In other words, it's easier to measure a bad outcome and very hard to say to a clinician, ‘I got 99.99 percent of my frozen sections right last year.' The expectation is that you will get them 100 percent right. While it is easier to measure what went wrong, it does not mean that we shouldn't measure quality,"Geyer asserts.

Perhaps, he adds, the Internet is a perfect tool for developing informatics for quality measurement." Having such a tool would provide insights on quality, innovation, how we compare to one another, as well as an opportunity to correspond easily and quickly and compare vendors' products. While reasonable measures might be available, it should not preclude us from thinking about it—quality is just as important as technology."

The survey noted that some of the roadblocks to quality related to monitoring, including a lack of national standards, training (e.g., root cause analysis), understanding of all lab processes, resources, and personnel." I think we need to put those aside and if they are legitimate barriers, find a way to break them down and find a useful tool that serves our profession,"he comments.

"What we have to keep in mind is the reason quality improvement is important and who we are we doing this for. We all have an obligation that our work is for patients and, therefore, our goal is to make our work as high quality and safe for them as possible. Sometimes, however, we get lost with profit and business motives. We should care about quality assurance because it means taking pride in the output of our work. If we do not do it, regulators may do it for us—i.e., through pay for performance. Moreover, if we allow regulators, legislators, and non-laboratorians to lead the effort in managing quality and deciding pay for performance, then we have abdicated our responsibilities as professional caregivers. It is imperative to maintain the professionalism in pathology and laboratory medicine for the patient and for us,"Geyer comments.

Concerning legal issues, 141 people responded that malpractice and diagnostic errors were of great concern, 98 cited patient safety and credibility, and 70 cited financial concerns from rising premiums, time spent defending a frivolous lawsuit, or preparing for a deposition. Other legal issues included contract negotiations, inadequate use of and faulty interpretation of immunohistochemistry stains, clerical errors, lost specimens, and keeping abreast of best practices.

Geyer points to a paper that appeared in 2005 in Archives of Pathology and Laboratory Medicine, describing an insurer's perspective on malpractice." The author, Dr. Troxel, said the judicial system definition of medical error or injury caused by negligence is that practice falls below the standard of care. The standard of care is what would be expected of a prudent, careful, and informed practitioner. There is some debate as to whether that standard is nationally based. The answer is pretty simple—the jury will decide. It is also difficult to differentiate standard of care from best practices. In fact, best practices are not very well defined. It would be difficult to find a definition of best practices for pathology procedures in the medical literature. For instance, what is the best panel of immunohistochemistry stains to use to differentiate adenocarcinoma from mesothelioma?  I have seen approximately many cases in the last year and they come with different kinds of panels of immunohistochemistry stains. However, pathologists and laboratorians can go a long way in improving our profession by thinking about the concept of best practices and trying to define them in ways that we can begin to standardize practice between different states and different departments."

From the insurer's perspective, 85 percent of legal claims fell into repetitive patterns, primarily false positive or false negative diagnoses of cancer. The specimen categories that created the most legal claims included pigmented skin lesions, breast biopsies, PAP smears, and gynecologic pathology. Moreover, in all four cases there were concerns about over and under diagnosing cancer.

"The legal system cannot replace the prudent judgment of professional laboratorians who must create and deliver the standards of care. As is the case with technology, if we do not manage and lead the way with quality, somebody will do it for us. It might be CMS in adopting pay for performance or an attorney or jury in deciding a legal suit. However, if we take an active interest in quality and defining standards of care, we improve the future of laboratory medicine,"he says.

"In summary, workload is growing and reimbursement is not. In fact, it is declining. We need to embrace new technology before somebody takes it away from anatomic pathology labs. Finally, always strive to improve quality and practice with prudence, which is good advice for anybody,"Geyer concludes.

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