Market Upheavals Around The Corner

Market Upheavals Around The Corner

In reviewing the galley proofs for this issue of THE DARK REPORT, I am struck by the potential for significant market upheaval in two areas of laboratory medicine: pathology and the clinical laboratory marketplace of California. The stories about AmeriPath, Inc. and California laboratories contain some interesting market analysis and predictions about future events.

For pathologists, AmeriPath’s arrival as a publicly traded, pathology-based physician practice management (PPM) company is highly significant. Now that AmeriPath’s shares are publicly traded, the company will be extremely sensitive to its stock price. AmeriPath must show consistent growth in revenue and earnings if it is to encourage investors to bid ever- higher prices for its shares. Traditionally, Wall Street likes annual growth rates to be consistently 8% to 15% per year. This is how it should be, as investors buy stock to make profits.

But the profession of pathology has traditionally been a quiet, stable corner of the healthcare community. How will AmeriPath, and those pathology PPMs yet to follow, achieve growth rates never before seen by pathology-based businesses? I am curious as to how the marketplace answers that question.

Short term, acquiring new pathology practices and aggregating revenues will produce growth. This is how Columbia/HCA and MedPartners grew so rapidly. But, at some point AmeriPath must take its existing pathology practices and show “same store”? growth from one year to the next. Since pathology practices generally are not perceived as good sales and marketing vehicles, most of the pathology profession is waiting to see if this can be accomplished. It is AmeriPath’s innovative strategies to capture more pathology revenues which will trigger the market upheaval in pathology which I predict.

For clinical laboratories in California, I concur with our editor’s assessment. Major changes are ahead, and some surprising events will occur sooner rather than later. Having worked with large multi-practice specialty clinics in Southern California, I can tell you that managed care crippled the clinical laboratory business in this state. My colleagues and professional associates all have stories of poor service, lost specimens, improperly reported test results and billing confusion among the laboratories serving them. Changes clearly need to be made if laboratory clients are unhappy and laboratories themselves find it impossible to generate sufficient profits to remain open and offer a superior level of service to their physician clients.

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