CEO SUMMARY: When routine testing volume declined sharply last winter and spring, one of the nation’s largest anatomic pathology groups added testing for COVID-19 and boosted revenue significantly. Since then, the laboratory has become the first in the nation to gain an Emergency Use Authorization (EUA) to do pooled testing with 20 samples in one tube. Employers and local and state governments are using pooled testing to reopen schools and businesses.
SINCE THE PANDEMIC BEGAN LAST SPRING, the clinical service mix at Poplar Healthcare in Memphis has changed significantly. As a result of the changes the pathology lab made, it now has a strong financial base despite substantial revenue losses in the first months of the SARS-CoV-2 outbreak.
Much like other anatomic pathology groups in the United States, Poplar Healthcare saw the flow of tissue referrals and clinical lab specimens decline by as much as 80% in March and April when patients stopped seeing physicians for regular care because of the COVID-19 pandemic. The fall-off in case referrals and revenue happened just as the pathology lab was deploying a new digital pathology (DP) and whole slide imaging (WSI) system throughout its facilities.
Confronted with the collapse of specimen referrals and cash flow, the pathology group and its 25 pathologists made radical business decisions to stave off financial collapse in March and April. Then, they took steps to use the lab’s molecular testing instruments to run assays for COVID-19.
Nine months later, specimen referrals and cash flow from regular patient care are nearly back to pre-pandemic levels, easing the cash flow crisis. Also, despite the interruptions caused by the pandemic, Poplar Health’s implementation of digital pathology and whole slide imaging is now complete.
The unexpected factor in the business fortunes of Poplar Health is that their laboratory now has a COVID-19 testing business that generated revenue at an annualized rate of $40 million in just five months. Poplar Healthcare’s lab executives expect this segment of the business to continue to grow into the first half of 2021, and they say it gives the pathology lab a solid financial base going forward.
‘Normal’ Went Out the Door
“When COVID-19 happened, all of healthcare turned on a dime,” commented Poplar Healthcare’s Chief Executive Officer James P. Sweeney during a presentation at The Dark Report’s Executive War College in September. “‘Normal’ immediately went out the door and, like other pathology laboratories throughout the United States, we found ourselves with a fully staffed lab, but few tissue referrals and inadequate cash flow.
“We were uncertain about what would happen next with the pandemic and had to decide whether to continue to implement our new digital pathology system,” he added.
Throughout March and April, medical clinics were closing, and hospitals were postponing elective surgeries. It was on March 19 when Tennessee Gov. Bill Lee banned elective surgeries and dental procedures to conserve medical supplies.
“We watched cash flow dry up, forcing us to cut salaries by as much as 50% for our 375 employees,” noted Sweeney. “The lab also cut the number of hours employees worked each week from 40 to 30 and asked 50 employees to accept furloughs. We also suspended sales commissions, bonuses, and the company’s 401(k) match.”
The lab used internal funds and applied to the federal Small Business Administration’s Paycheck Protection Program to survive the drop in cash flow.
Responding to the Pandemic
Fortunately for Poplar Healthcare, Sweeney had extensive experience in a variety of executive positions over more than 30 years in healthcare diagnostic and information technology businesses. Before getting into healthcare, Sweeney served five years as an officer in the U.S. Army Corps of Engineers. The leadership and management skills acquired in those years served Poplar well.
“That third week in March was very interesting—in part because everything I remember from the military came back to me,” he said. “In those early days, we had to make many quick, hard decisions in a matter of hours. Then, we had to implement those decisions in a day or two, and in each case, we did so successfully.”
Last month, The Daily Memphian newspaper reported that in March, the demand for Poplar Healthcare’s specialized diagnostic testing services dropped by about one third, bringing with it a corresponding revenue decline. Those specialized services include testing for cancer and sexually transmitted diseases. The 25 members of its physician staff specialize in anatomic pathology and genetic testing, including gastrointestinal, dermatopathology, oncology, and women’s health.
Existing Molecular Testing
Seeing the drop in specimen volume, Sweeney and the lab team decided to use the lab’s existing instruments and clinical expertise in molecular diagnostics and genetics testing. Much of these molecular testing capabilities came to the pathology lab starting in 2011. Since then, the lab continued to expand that capability through the early months of this year.
“We recognized that the demand for rapid molecular COVID-19 testing could be a significant financial benefit for us,” recalled Sweeney. “In a matter of weeks, our genetics and management team collaborated to pivot our existing molecular laboratory to perform SARS-COV-2 tests.
“We had to be nimble to do two things on an accelerated timeline,” he continued. “First, our lab team needed to validate the COVID-19 tests and the instrument platforms to support this testing. Second, at the same time that this was happening, our sales team had to put the word out that we had supplies and kits to do COVID-19 tests.”
COVID-19 Testing Business
In a matter of weeks, Sweeney’s team built a multi-million-dollar COVID-19 testing business. Since then, the lab has added pooled testing to support schools, workplaces, state and city employees, and other locations that Poplar’s pathologists serve nationwide. Sweeney also noted that Poplar has added antibody testing and continues to implement the digital pathology and WSI systems.
“There is a saying that ‘fortune favors the prepared mind,” said Sweeney. “Yes, we did have the equipment, the manpower, and—more importantly—the technical know-how to do COVID-19 molecular testing.
“In that regard, our lab was prepared,” he added. “But the other reason this strategy succeeded is that our team understood both the clinical and financial opportunity. They were willing to support investing scarce cashflow into SARS-CoV-2 testing, despite the uncertainties of how long the pandemic might last.
“I couldn’t be prouder of our lab team,” noted Sweeny. “For example, one group of people worked for 72 hours over one weekend to bring up a genetic testing platform for COVID-19. In turn, that allowed us to submit to the Food and Drug Administration (FDA) a request for an emergency use authorization (EUA) for COVID-19 testing. Once we submitted the EUA for approval, we were in the game and off to the races with COVID-19 testing.”
At the end of March, Poplar Healthcare announced it was processing COVID-19 PCR tests in its 113,000-square-foot high-complexity CLIA-certified and CAP-accredited laboratory using Roche’s cobas SARS-CoV-2 test on the cobas 6800 System. Roche got its EUA for that test on March 13. In addition, Poplar has been running its own EUA-submitted PCR test on the Roche cobas z480 analyzer and gained EUA approval for pooled testing on the Hologic instrument in early August.
Poplar’s 90-Degree Pivot
“I describe what we did to start testing for COVID-19 as pivoting the company, but not pivoting 180 degrees,” he added. “It was more like a 90-degree turn.
“After we got involved in PCR testing for COVID-19, we began calling area hospitals and Memphis city officials because there was much concern about how COVID-19 would affect the community,” he noted. “We felt it was our civic duty to make the investment to get heavily involved in COVID-19 testing.
“Looking back on it, I think from a civic pride and a financial perspective, we made a smart decision to do that testing,” Sweeney commented.
Digital Pathology Launched
“But at the same time, we did not want to stop or derail the launch of our digital pathology system,” he added. “So, while we were doing COVID-19 testing, we were also working with our anatomic pathologists and with Gestalt Diagnostics to build the digital pathology capability and get the scanners and systems in place, validated, and into full operation.
“For our lab, the COVID-19 testing has been a godsend,” Sweeney commented.
The $40 million that Poplar Healthcare generated in run-rate revenue from such testing through August allowed the lab to return all of the funds it received under the Paycheck Protection Program to the federal Small Business Administration.
“Unlike some labs, we were very fortnate to be able to give that money back,” Sweeney said.
“In closing, I’ll just say that we learned a variety of business lessons from COVID-19,” he said. “I’m very proud of the team here. Everybody that worked on it taught me a lot about what you can do when your back is against the wall. We had to learn quickly how to implement new testing when it is needed. Those skills will help us continue to grow and support our efforts to launch digital pathology systems as we go forward.”
In Memphis, Poplar Healthcare Currently Performs 7,000 COVID Tests per Day; Does Pooled Testing
NOW THAT POPLAR HEALTHCARE HAS ADDED TESTING FOR THE NOVEL CORONAVIRUS,it has the capacity to do more than 7,000 COVID-19 tests a day, said CEO James P. Sweeney. The lab is approved to run COVID-19 PCR tests on four different testing platforms.
“In August, we became one of the first labs to gain an Emergency Use Authorization (EUA) from the Food and Drug Administration to do pooled testing,” he said. “That was for our Hologic platform. Since then, we have submitted a request for an EUA to do pooled testing on the Roche cobas equipment.
“For our pooled testing, we began running seven specimens in each pool as part of our initiative to support testing for the City of Memphis,” he commented. “We’ve become a close partner with the city to test first responders and teachers.
“For many of the schools that have tried to reopen, we’ve expanded our capability to do pooling,” Sweeney noted. “We’re now doing up to 20 specimens in each tube because the cost savings this generates could allow some public schools to open more classrooms. Also, we added antibody testing in August.”
Manoj Jain, MD, MPH, a Hospital Epidemiologist and infectious disease consultant in Memphis, commented that the testing Poplar Healthcare is doing is significant. “Everything they’re doing is a potential game changer,” he said.
In September, Jain, Sweeney, and other members of the Poplar Healthcare lab team met with officials from the FDA, the city of Memphis, the Shelby County school system, and the Chamber of Commerce to discuss how to increase pooled testing, which is called assurance testing.
The Daily Memphian newspaper reported that Poplar Healthcare was the first lab to submit an EUA for pooled testing of 20 samples at a time and clearance to use specimens from 20 patient swabs in one tube. The lab also is developing saliva tests for COVID-19. The goal is to reduce the cost of COVID-19 testing from about $100 per test to $5 per test, Sweeney told the newspaper. Poplar Healthcare has since validated all of these testing protocols under College of American Pathologists and CLIA validation guidelines.
Memphis Mayor Jim Strickland had high praise for Poplar Healthcare’s efforts. “They built a testing program from scratch right when we needed it,” he said. “And they were among the first labs in the country to get approval for pooling, which will be crucial in our efforts to reopen schools. We could not have done any of this without Poplar Healthcare.”
City of Memphis Uses Pooled COVID-19 Tests
IN NOVEMBER, THE CITY OF MEMPHIS started a new program of COVID-19 testing. It describes the program as “pod testing” and Poplar Health is one of the the labs that performs the tests for this effort.
City councilman Jeff Warren, MD, (a family practice physician) set up his own pod test site. Fox13 News reported that, “Dr. Warren set up in his Midtown neighborhood earlier this month, as neighbors walked up to get tested. He says 76 people were tested in two days, with all results coming back negative.”
As described in news reports, each individual does their own nasopharyngeal swab, while being watched in person or remotely by a healthcare professional. Specimens are sent to Poplar Healthcare Labs and the results are reported in 24 hours. The goal is to allow neighbors to be confident that there are no COVID-19 cases.
The term “pod testing” describes a pooled testing arrangement for COVID-19. Fox13 News noted that Dr. Warren said, “There are 20 tests in each pod kit for $100. He said the conversation now is about possibly introducing this method outside of individual neighborhoods.”
Contact James Sweeney at 901-474-0684 or email@example.com.