BY ANY MEASURE, MAJOR CHANGES ARE COMING to the profession of laboratory medicine. I assume that you are familiar with most of the trends, healthcare reforms, and significant reductions in lab test reimbursement that appear regularly in the headlines.
Many of these developments are unfavorable to the status quo in today’s lab testing marketplace. At the same time, such changes create opportunities for nimble labs to capture new customers and increase revenue from different sources.
Thus, I am prepared to see unexpected bedfellows doing deals together in the next 12 to 24 months. One example of this is a letter of intent announced last week. Pathology Associates Medical Laboratories (PAML) of Spokane, Washington, will purchase a minority ownership interest in CellNetix LLC, the pathology laboratory company based in Seattle, Washington. PAML and CellNetix say they plan to create a jointly-owned molecular pathology esoteric testing division. CellNetix has 45 pathologists on its staff.
There are several reasons why this deal surprised laboratory professionals in Washington State. First, PAML has always had a close working relationship with Incyte Pathology, Inc., also based in Spokane. Its 25 pathologists hold contracts with 25 hospitals in Spokane and across the Northwest. Incyte and CellNetix are viewed as competitors because of their size and expertise.
Second, in the Seattle-Tacoma Metropolitan area, PAML is the general partner in the PACLAB, a long-established regional laboratory network that includes 10 hospital laboratories. PAML has carefully remained neutral in its dealings with the different pathology groups that serve the PACLAB member hospitals. Thus, its just-announced alliance with CellNetix may be viewed in unfavorable ways by some of these pathology groups.
On the other hand, PAML and CellNetix are looking at the re-alignments taking place in healthcare today. They are willing to develop a new business strategy that they believe will allow them to jointly develop additional lab test business from sources that they could not individually win.
Further, it is significant that the goal of the two partners is specifically to work together to create a sophisticated molecular pathology esoteric testing capability. It is more evidence that specialized expertise in molecular and genetic testing will be a critical success factor for pathology laboratories.