FNA Clinic Business Becomes Part of Unilab

California will have nation’s first chain of fine needle aspiration (FNA) clinics

CEO SUMMARY: Pathology has a new business model entering the marketplace. The goal of FNA Clinics of America, Inc. is to offer patients speedy access to the FNA procedure and provide referring physicians with a final diagnosis within hours of the FNA procedure. Unilab Corporation recognized the opportunity to support a value-added service and gain access to the follow-on testing.

ENTREPRENEUR RICK FERGUSON is about to find out if the healthcare system is ready for the business concept of a fine needle aspiration (FNA) clinic.

Unilab, Inc., California’s largest clinical laboratory, thinks enough of the concept that it purchased Ferguson’s start-up company, FNA Clinics of America, Inc. (FNA) and will provide the capital needed to expand the business. Unilab will also provide any follow-up lab testing ordered on specimens collected by FNA.

“Each FNA clinic will be staffed by a board-certified cytopathologist and a medical technologist,” stated Ferguson, who is President and CEO of FNA. “The cytopathologist will collect the specimen and also provide the diagnosis.

“Our goal is that patients have immediate access for FNA procedures in an outpatient setting that is pleasant and non-threatening,” he continued. “In fact, since the opening of our first FNA clinic last year in San Diego, California, we’ve actually done ‘walk-in’ patients. Following the appointment with their physician where a visible lump was detected, they came directly to our FNA clinic to have the procedure performed.

“We believe immediate patient access will be a competitive advantage. In many cities, it frequently takes five days to several weeks to schedule and perform an FNA procedure,” observed Ferguson.

“We expect speedy reporting to be another source of competitive advantage,” noted Ferguson. “We have the capability to provide a copy of the final report by fax or e-mail within two hours of the procedure. We’ve done this in our San Diego clinic. Our experience in these situations is that both the referring physician and patient are impressed and pleased to get definitive news so quickly.”

Enhanced Clinical Benefits

THE DARK REPORT has been following the development of Ferguson’s concept of the FNA clinic for more than a year. It represents one new approach toward making pathology services more accessible to patients, while giving referring physicians enhanced clinical benefits.

The benefits of FNA over other procedures are known to most pathologists. First, an FNA procedure spares the patient the anesthesia, stitches, pain, and fear that accompany a surgical biopsy. Second, an FNA collection done by a board-certified cytopathologist increases the likelihood that a good specimen was collected. Third, the diagnostic accuracy rate on FNA specimens approaches 92%.

The potential market for FNA services is significant. Ferguson estimates that three million biopsies are done annually in the United States. As many as 750,000 of these biopsies could be done with the FNA technique.

More FNA Clinics To Open

Now that FNA Clinics of America has become part of Unilab, things are happening quickly at the young company. “The build-out of our second clinic in Beverly Hills is almost complete,” stated Ferguson. “We are also selecting sites for clinics in Pasadena, Newport Beach, Rancho Mirage, and Scottsdale.”

As both a new venture and a new business concept, there is plenty of risk. Neither Ferguson nor Unilab know if this business concept will attract enough patients to make it profitable. Nor do they know if the economics of operating the clinics will prove viable. Future decisions by Medicare and private payers about reimbursement might also work against the financial success of the FNA clinic.

However, Ferguson is taking proactive steps to demonstrate to California’s managed care plans that fine needle aspiration procedures have both clinical and economic value. “We are about to launch a six-month study with a managed care plan located in Orange County,” said Ferguson.

“The study’s protocol will require that whenever a physician participating in the study detects a lump under the skin of the patient, he will refer the patient to the FNA clinic. The FNA procedure will be done before any radiology procedures,” he explained.

Two Study Objectives

“This study has two basic objectives,” added Ferguson. “First, what is the clinical accuracy of the FNA diagnosis and how does that compare to other methods? Second, what is the cost of the encounter of care that includes an FNA procedure virus one which incorporates radiology and other procedures?”

According to Ferguson, HMOs in Southern California are concerned about the spiraling costs of radiology services involved in diagnosing cancer. If a cancer diagnosis based upon an FNA procedure is more accurate, faster, and costs less money, they are interested in developing protocols that incorporate this knowledge.

It is noteworthy that an HMO has entered into a six-month study with FNA Clinics of America. It’s willing to invest time and money on ways to use diagnostic testing to improve clinical outcomes while reducing the over-all cost of the healthcare encounter.

The business plan of FNA Clinics of America also provides an example of how specialization will become increasingly important within the pathology profession. By advertising that only board-certified cytopathologists will do the FNA procedure and perform the diagnosis, it is expected that both clinicians and patients will recognize this benefit and select FNA over competing sources offering the same procedure.

Another element of FNA Clinics of America should not be overlooked. It intends to place a full-time sales representative in each clinical location. Since this sales rep will be paid on the volume of business he/she generates, this will be another competitive factor that will place pressure on hospitals, surgery centers, local pathology groups, and other physicians that offer FNA services.

Sign Of Change

THE DARK REPORT considers the business concept of FNA clinics to be an important sign of marketplace change. It represents the general move away from a small pathology group practice offering generalized services in favor of more specialization.

It also represents an attempt to offer referring physicians and patients a higher level of service than found in many existing markets. For patients, it is a less painful procedure done in a friendly setting—with a diagnosis that might come in just a couple of hours. For physicians, it allows them to accelerate appropriate treatment if necessary, thus improving the care they pro- vide to their patients.

Pathologists should not discount the consumer appeal that “speed” has upon patients. If it was your wife or daughter with a suspicious lump, what would they prefer? A specimen collection in two days to a week, with a diagnosis 24 to 48 hours later? Or an FNA collection within hours of the physician detecting the lump, and the possibility of a definitive diagnosis that same day? A yes answer to the second scenario puts you in agreement with the entrepreneur and the investors who believe FNA Clinics of America can be successful.

Clinics In Seven Cities

Ultimately, it will be the healthcare marketplace which provides the definitive answers to those questions. By the end of 2002, FNA Clinics of America will be operating in at least seven cities. If the concept is working, then the continued expansion of FNA clinics will be the confirming sign.

Unilab Positioned To Get Reference Tests

IN EVALUATING THE REVENUE POTENTIAL of the business concept of an FNA clinic chain, Unilab recognized that there would be additional testing required for many of the FNA specimens.

“Typically, about three out of every five FNA specimens will require follow-on testing,” explained Rick Ferguson., President and CEO of FNA Clinics of America. “These tests tend to have higher value because they include flow cytometry, molecular markers, and other types of sophisticated assays.”

During the next few years, as FNA Clinics of America attains a critical mass of FNA procedures, a significant volume of reference testing will be generated. Unilab should get the lion’s share of these tests. That’s an attractive benefit and shows how a niche strategy has the potential to generate new flows of lab specimens.

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