IMPATH Creates Its Brand Of Value-Added Pathology

Fast-growing firm offers a comprehensive package of anatomic pathology services

CEO SUMMARY: IMPATH Inc. is a pathology company with an interesting twist. It doesn’t compete directly with community hospital-based pathologists like some national AP providers. Instead, it offers AP services which supplement the capabilities of the local pathologist. The formula must work. During IMPATH’s short life, it has grown rapidly. Revenues are up, profits are up, and the future looks bright.

IT’S NOT OFTEN THAT SOMEONE IN THE pathology business hits a financial home run. But the executives at IMPATH Inc. in New York City seem to have done precisely that.

Such success is no accident. IMPATH accurately spotted a market opportunity within the pathology profession several years ago. It organized itself to pursue that market opportunity and has never looked back.

A $10.1 million dollar company in 1994, IMPATH will post annual revenues approaching $55 million for 1998. Its profits and earnings are up, as are the number of cases referred. More importantly, many financial analysts expect IMPATH to continue its growth, becoming a dominant force in both anatomic pathology and oncology disease management.

There is good reason for these predictions. Approximately 1.4 million new cases of cancer are diagnosed annually in the United States. In 1998, over 100,000 cancer cases were referred to IMPATH for follow-on diagnosis and prognostic assessment by the pathologist who made the primary diagnosis. It has received case referrals from more than 1,670 hospitals nationwide.

This means that IMPATH is already involved in 7% of all new cancer cases diagnosed annually in this country! And 34% of the nation’s 5,000 hospitals have sent cases to IMPATH. These are impressive market share numbers, particularly for such a young company.

Continued growth at IMPATH will only increase its existing market share. For pathologists interested in the future of their profession, IMPATH provides an excellent case study of how market opportunity, good business management, and anatomic pathology services can be combined to create a successful enterprise.

The company’s business proposition is simple. “IMPATH is a company organized around ‘difficult-to-diagnose’ cancer,” stated Anu Saad, Ph.D., President and CEO at IMPATH. “We provide a full range of advanced, sophisticated anatomic pathology services to community hospital-based pathologists throughout the United States.”

Difficult-To-Diagnose Cancer

Besides difficult-to-diagnose cancer cases, IMPATH handles a significant number of cases involving breast cancer, lymphoma, and leukemia. It is fielding a growing volume of prostate cases.

“IMPATH is among the world leaders right now in providing patient-specific prognostic information,” Dr. Saad noted. “Further, we are developing our resources in lymphoma and leukemia analysis so they integrate with disease management activities involving these patients.”

IMPATH recognized that community hospital-based pathologists had many patients where, once the primary diagnosis of cancer was made, there was the need for additional testing. Traditionally, local pathologists would refer these cases to pathology subspecialists at academic or tertiary care centers.

Opportunity To Add Value

“We saw the opportunity to add value in these case referrals in two ways,” explained Dr. Saad. “For example, when a lymphoma case is referred to a major academic center, it may have four procedures (immunohistochemistry, flow cytometry, molecular analysis, and cytogenetic analysis) done in three different departments.

“The local pathologist would have to refer three specimens to three different departments,” she continued. “After two or three weeks he would have to track the results down. He might also find that the results may or may not correlate with each other.

“When such a case is referred to IMPATH, the pathologists sends specimens to one location and gets his results back generally within 48 hours. The reports are integrated and if the local pathologist has questions, a single contact here can get the answers for him.”

For the local pathologist, IMPATH’s speed, responsiveness, and integrated clinical services mean a savings in time, less aggravation, and a faster answer to the referring physician and his patient.

The second way of adding value is IMPATH’s clinical capabilities. “Over the last ten years we’ve added technologies such as molecular pathology, cytogenetics, flow cytometry and more,” stated Dr. Saad. “This means we provide a wide range of appropriate and cutting- edge technologies for cancer diagnosis.

Large Cancer Caseload

“Combine these in-house capabilities with the fact that our pathologists and clinical specialists diagnose large volumes of cancer cases,” she continued, “and we provide pathologists based in community hospitals with a very sophisticated level of clinical expertise.”

Dr. Saad offered another benefit. “Among those who refer cases to us are a number of pathologists who realize their value to the clinician increases as they, in the role of anatomic pathologist, provide the clinician with more than a simple diagnosis that the patient has cancer.”

Dr. Saad explained, “these local pathologists appreciate the fact that IMPATH can provide them, in their community hospital setting, with rapid answers on more than diagnostics. For certain types of cancers, IMPATH can provide the referring pathologist with prognostic and treatment-defining information about the patient.

“This means that the local pathologist remains involved longer with the clinician, in ways that the clinician finds invaluable,” she added. “That, in turn, makes it a win-win situation, where IMPATH adds value to the local pathologist, who in turn can add value to the clinician and his patient.”

Another key element in IMPATH’s business success, as well as a source for future revenue growth, is its emphasis on data collection. “Currently we have more than 400,000 cancer cases in our data base,” said Dr. Saad. “Not only is this the largest cancer data base in the world today, but it is growing at the rate of 100,000 cases per year. More importantly, IMPATH’s cancer data base is not simply demographic data based on age, geography, and similar information. It contains biological profiles on over 400,000 patients.”

Dr. Saad is describing an invaluable asset. THE DARK REPORT is convinced that laboratory data will become the “gold ore” for integrated healthcare. Clinical laboratories which move ahead on mining, refining, and marketing this “gold ore” will have a product worth millions of dollars to managed care plans, integrated healthcare systems, and clinicians. IMPATH recognized this opportunity early in the 1990s. It has steadily upgraded its ability to capture cancer data and convert it to useful information.

“Our goal with acquisitions during 1998 was to begin linking our patient data with treatment decisions made on these patients and the outcomes of their case,” said Dr. Saad.

“This is important because our clients [pathologists and oncologists] are under increasing pressure to demonstrate the value of what they do,” continued Dr. Saad. “Patients, payers, and employers all want clear evidence that the cost of chemotherapy and other treatment procotols are not only medically optimal, but cost-effective.

“Another use for our data base, when combined with outcome data, is in pharmaceutical research,” she added. “These companies have a huge appetite for any clinical data which is useful to their research into new oncology drugs.”

IMPATH Inc. should be seen as a relevant model for how anatomic pathologists can create added value in the marketplace. Since 1994, the company’s rapid growth in case volume demonstrates that an untapped demand for useful anatomic pathology services exists.

The facts speak for themselves. At a time when the American Cancer Society says 1.4 million new cases of cancer are diagnosed per year in the United States, IMPATH is involved in more than 100,000 of those cases. That is market clout, in an environment where pathology is fragmented into small provider units.

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Key Success Drivers

THE DARK REPORT recommends that pathologists understand the key drivers behind IMPATH’s success, because individual pathology practices can adopt these same drivers to their practice.

First, develop a win-win value proposition for clinicians. IMPATH’s 48-turnaround time, for example, allows their client pathologists to deliver an answer to clinicians and patients without waiting weeks to get results from cases sent out to academic centers.

Second, understand the value of laboratory data and convert it to useful information for the clinician. This should include a cost-benefit analysis so the clinician can better defend his treatment decisions to payers and patients.

Most importantly, pathologists should appreciate the value of sales and marketing in building their practice revenues. It’s impossible for your prospects to use your pathology services if they don’t know you exist or don’t understand why your services are better than those of competitors. Sales and marketing is a critical success factor for pathology practices.

Improving Accuracy At Primary Diagnosis

As new developments in clinical procedures make it possible to diagnose cancer earlier than ever before, misdiagnosis becomes an issue.

Cases referred to IMPATH demonstrate that a significant number of misdiagnoses still occur in certain types of cancer. During 1997, for example, 9,589 suspected lymphoma cancers were referred to IMPATH. More than 12% were determined to be infection or inflammation, rather than cancer.

Providing the referring pathologist with this information spared the patient a possible misdiagnosis of cancer, with the accompanying trauma, risk, and cost associated with unnecessary treatment. Not only is such diagnostic accuracy appreciated by the local pathologist, but clinicians soon notice the difference in a pathologist’s misdiagnoses rate. Clinicians consider it added value when a pathologist can document demonstrably superior diagnoses rates, combined with a lower misdiagnosis rate, than those of competing pathologists.

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