CEO SUMMARY: Even as commercial laboratories struggle to maintain financial solvency, Urocor displays phenomenal growth in specimen volume, market share and revenue during the last five years. It is no accident that this laboratory is succeeding. Urocor’s executives use sophisticated management techniques, with remarkable results.
PROBABLY THE MOST SPECTACULAR success story in the clinical laboratory industry is a company which is unknown to most laboratory executives, doesn’t describe itself as a clinical laboratory and is based in the unlikely location of Oklahoma City!
Yet this same company earned a ranking on Inc. Magazine’s 500 Fastest Growing Companies list in each of the past four years. Not only has it grabbed a significant market share for its chosen menu of diagnostic testing, but it is poised to grow at a blistering pace for several more years.
This high-performance laboratory is Urocor, Inc. It specializes in providing diagnostic testing services to urologists. UroCor represents a viable model for laboratories in the future. The characteristics of this laboratory model will be a market niche strategy accompanied by disease management products for that market niche. Such laboratories are frequently referred to as “boutique” laboratories to distinguish them from commercial laboratories which offer a broad menu of tests to all clinical specialities.
UroCor, however, is something different from today’s boutique laboratory. UroCor is organized to offer a full array of disease management services and business products for its target market: urologists.
Recently THE DARK REPORT traveled to Oklahoma City to investigate first-hand the management secrets at UroCor. Executives at Urocor shared their story in detail.
“UroCor is a company dedicated to serving the needs of urologists,” stated Socrates Choumbakos, Senior Vice President, Corporate Planning and Development at UroCor. “However, we go beyond simple diagnostic testing. We offer services in disease management which are unique to UroCor. In order to understand what UroCor is, it is important to know that we are organized around four integrated business initiatives.
“They are UroDiagnostics, Uro-Therapeutics, UroSciences and Disease Management Information Systems,” he explained. “Each business initiative supports UroCor’s primary mission, which is to provide urologists with all services necessary to run a clinically effective practice.”
“We believe that UroCor, Inc. is one of the most highly evolved and successful companies in the emerging field of disease management.”
-E. Keaney & M. Elwood
Volpe, Welty & Company; June 20, 1996
“Our UroDiagnostics Group currently is the primary source of revenue to our company,” explained Choumbakos. “This initiative generates 95% of UroCor’s total revenues. We concentrate our services on four disease states: prostate cancer, bladder cancer, microhematuria and kidney stones.”
Evaluating Prostate Cancer
“Among the disease management products we offer is UroScore®, for evaluating prostate cancer,” said Choumbakos. “This is a proprietary, computer-assisted analysis that provides the urologist with a prediction of whether or not the tumor is confined to the organ.”
Such information has high value to clinicians and payers. Retrospective studies show that cancer had already metastisized in at least 40% of patients undergoing radical prostatectomy. If the prostate cancer has already metastisized, the procedure, averaging $12- $16,000, does little to extend life expectancy in such patients.
“We believe this is ‘value-added’ medicine for specialists,” added Choumbakos. “Urologists using these tools can make more informed decisions about patient care. We have similar disease management products for other types of urology-related diseases.”
“Because our sales force already calls on urologists, we believe it is appropriate to provide therapeutic drugs in addition to our diagnostic services,” said Choumbakos. “These will be offered through our second initiative, the UroTherapeutics Group. For us, this is a logical tie-in. Our staff already works with individual urologists to interpret the diagnostic test results and develop effective treatment plans for individual patients. It is a natural complement for UroCor to provide access to therapeutic drugs.
“UroSciences is the third initiative within UroCor,” he continued. “We feel this business initiative makes us unique among our competitors. We are funding research and development which is done here at our corporate headquarters. We also collaborate with researchers at such institutions as M.D. Anderson Cancer Center, Johns Hopkins, Baylor College of Medicine and others.
UroCor’s fourth business initiative also sets it apart from competitors. This is the Disease Management Information Systems Group. “This group has two initial priorities,” Choumbakos explained. “First is to improve how our clinical data is warehoused and accessed by our physician clients. Second is the type of practice management services we can offer the urologist, including a billing/receivables management service.
“Our long-term mission is to integrate diagnostic and therapeutic data with the client’s information system. If we do this right, we can integrate the entire decision tree for the clinician. This system aids the urologist to better triage the patient, regardless of how many different specimens and different tests are involved in a particular case.
“We are also launching a service to manage the billing and account receivables for urology practices,” explained Choumbakos. “It is a new product for us and we are just now establishing this service with our first customers.”
By offering urologists a contract billing service, UroCor is following a high-risk strategy. Failure to properly bill and collect the urologist’s accounts can lead to an unhappy client who sends diagnostic testing to another laboratory.
“You correctly point out the risk,” responded Choumbakos. “But the upside far outweighs the risk. We know the needs of urologists and we want UroCor to be a total solution for both their clinical and business needs.”
Choumbakos’ answer reflects the management culture at UroCor. It is a key factor in UroCor’s phenomenal growth. UroCor is fanatic about meeting and exceeding the expectations of their urologist customers. To guarantee success, they do something unheard of in the clinical laboratory industry.
Executive Team Visits
“All of our senior executive team spends plenty of time in the field visiting urologist clients,” noted Choumbakos. “In order to understand their needs, we regularly visit clients in their offices, watching what takes place on a daily basis.
“In fact, our President and CEO, William Hagstrom, spends one full month every year visiting urology offices,” added Mark Dimitroff, Vice President and General Manager of UroDiagnostics Group. “He will put on a white coat and actually work as a staff member for as long as four to eight hours in a urologist’s office.
“Because we are close to our customer in this way, we understand precisely what types of products and services they need to be successful,” Dimitroff said. “Not only is it excellent market research, but it also motivates us to provide perfect service, since we are personally familiar with our clients’ problems and needs.”
Dimitroff is responsible for UroCor’s sales and marketing program. Unlike the sales teams at most clinical laboratories, it is tightly managed, professionally supported and generates consistent results year after year. (See market penetration table below.)
UroCor knows their numbers, which is another management key to success. Each quarter, when UroCor releases financial results, it includes full information about the number of urologist clients, average sales per urologist and number of multiple product users. Few laboratories have comparable information about their market penetration and how many laboratory services are used by their clients.
UroCor’s rapid growth also fuels a demand for pathologists. The company currently employs twelve full-time pathologists. Financial analysts believe UroCor may have the largest urologic pathology practice in the world. UroCor seems ahead of competing lab- oratories in their understanding of how to market anatomic pathology services in such a way as to complement diagnostic testing and still generate profits.
UroCor Is Reorganized From CytoDiagnostics
FOUNDED IN 1985, UroCor was originally known as CytoDiagnostics, Inc. It was launched with tumor diagnostic technology developed at the University of Oklahoma.
The company offered a single proprietary diagnostic test, but never found economic success. New management was brought on board in late 1989 and CytoDiagnostics filed a Chapter 11 bankruptcy reorganization plan in November 1990.
From that date forward, new CEO William Hagstrom focused CytoDiagnostics on the urology marketplace. In 1994 the company adopted the new name of UroCor, Inc. to reflect its chosen market niche in urology.
Market Channel Strategy
According to Choumbakos, UroCor developed its urology market niche by concentrating on three successive steps. “Our first strategic wave was to develop a market channel,” he explained. “Starting back in 1991, this meant we would offer simple services, but deliver them well. We concentrated on providing a full menu of urology-relevant diagnostic tests while maintaining good turnaround time and error-free service. At that time we had no products which were proprietary. We simply wanted to outperform our competition.”
Choumbakos overlooks the fact that UroCor has done several innovative things to provide a service advantage. For example, to properly diagnose the potential recurrence of kidney stones requires a physical and chemical analysis of serum, urine and the stones.
Different Testing Services
Urocor noticed that urologists typically sent these three specimens to different testing services, such as hospitals, local labs, national GRLs and specialized regional stone labs. Urologists would spend several weeks coordinating the return of test results before they could proceed with a final diagnosis.
UroCor committed itself to be a single source provider, offering a maximum three-day turnaround for an integrated analysis and report. In the two years since its introduction, this kidney stone panel is now used by over 300 urologists. It is an example of how UroCor takes an existing situation and gives it “added value” to the urologist.
“Our second strategic wave involves technology,” said Choumbakos. “This relies on our ability to develop proprietary diagnostic tests which urologists find useful. Our UroScore product is one example of our second-wave technology strategy.
“Our third-wave strategy revolves around information resources,” he continued. “We want to take the best clinical practices today and expand their effectiveness and efficiency. That is why we are investing heavily in hardware and software. We not only want to capture and warehouse useful data, but we want to use that data to feed our clinical algorithms and similar products.
“One example is our ‘information suite’,” added Choumbakos. “This integrates clinical and economic information. Using internet access, the urologist can access their patient files with one ‘screen click.’ Urologists find it useful because it means they won’t have to take charts home at night.”
UroCor’s revenue growth during the past six years provides dramatic evidence that they are doing many things right. At a time when clinical laboratories are cutting back and shrinking, UroCor is expanding. UroCor’s example demonstrates that effective management can sustain success in a declining marketplace.
Although UroCor’s market niche strategy is not adaptable by most clinical laboratories, certainly much of UroCor’s management strategies and tactics can be emulated by other laboratories throughout the United States. After all, good strategic planning, effective implementation and successful sales are essential to any laboratory’s success.