“Distributed” Lab Model Soon to Become Reality

POC testing to be more revolutionary than laboratory automation technology

CEO SUMMARY: During the 1990s, laboratory automation was expected to have the greatest impact upon the structure and organization of laboratories. However, like the famous race between the tortoise and the hare, it’s our prediction that point-of-care testing technology, quietly advancing in the background, will have a more revolutionary impact on the way clinical laboratories are organized and operated.

IT’S TIME TO RECOGNIZE and welcome what may be the most transformational technology to hit the clinical lab industry in three decades.

With the arrival of CARESIDE, Inc.’s revolutionary point-of-care (POC) technology for routine chemistry and hematology testing, a new force for change has been unleashed within the clinical laboratory industry.

THE DARK REPORT predicts that CARESIDE’s arrival in the marketplace will trigger a fight by diagnostics companies to control the market for high-volume, routine testing. CARESIDE’s goal is to move the 70 most frequently ordered routine tests out of the centralized core laboratory and into the point-of-care setting.

Moving Routine Testing

CARESIDE will need to demonstrate the viability, performance, and economic justification for its products. Even as that happens, competing diagnostic companies will be rushing to introduce their own solutions for moing routine testing out of centralized labs and into the point-of-care setting.

For that reason, THE DARK REPORT expects that the next 24 months will see the introduction of a variety of innovative POC products and systems. Existing competitors cannot cede the routine testing market to new entrants like CARESIDE.

Economic Rationale

But there will be a far greater impact to the clinical laboratory industry than increased competition for POC testing solutions. The ability to move routine testing outside the centralized laboratory will trigger the next revolution in clinical laboratory practices. POC testing undermines the existing clinical and economic rationale behind centralized laboratory testing.

For that reason, POC technology has the potential to recast the structure and organization of clinical laboratories. Once the economics of doing routine chemistry and hematology testing at the point-of-care are demonstrated and validated, the era of total lab centralization, supported by rapid response lab networks, will be at an end. Emerging will be a new era dominated by what some lab futurists already term the “distributed” laboratory.

Simply put, the distributed laboratory organization is embedded within all segments of the integrated healthcare system. The majority of lab tests do not flow to a central, or core, laboratory. To the contrary, the preponderance of lab testing is done literally at any site where care is provided.

Although “distributed lab” seems to the the more popular term to describe this type of laboratory system, THE DARK REPORT believes that “dispersed” is an equally descriptive term for the next generation of lab organizations.

Whether distributed or dispersed, what this POC technology will do is force laboratorians to leave their centralized laboratory citadels. They will naturally migrate out into the general clinical environment. CARESIDE’s W. Vickery Stoughton discusses some of the ways this will occur in his exclusive interview, found on pages 9-13.

Change The Lab Industry

Thus, THE DARK REPORT has two fundamental predictions to make about how POC technology will change the clinical laboratory industry during the next 24 to 48 months.

First, CARESIDE’s point-of-care testing system for chemistry and hematology will stimulate a competitive war among diagnostic companies.By making it economically feasible to move routine testing out of the core laboratory, CARESIDE threatens the revenues and profits of the billion-dollar diagnostics giants.

Roche Diagnostics, Abbott, Ortho-Clinical Diagnostics, Beckman-Coulter, and others will not stand idly by and watch CARESIDE and similar POC competitors steal their routine testing business.

Defend Their Business

It is reasonable to expect that these companies will devote considerable resources to adapt their existing diagnostics technology and develop their own versions of POC instruments. Their goal will be to rush these to market and defend their existing business from CARESIDE and similar POC vendors.

The consequence of this will be self-fulfilling. The variety and range of POC solutions for routine, high-volume test- ing will improve the economics of decentralization. This will literally force laboratory administrators and pathologists to realize those cost savings by decentralizing their laboratories.

How quickly will this POC product race play out? CARESIDE engineered its solution from scratch in about 36 months, and for an investment of only about $20 million! It would be reason- able to expect that the billion-dollar diagnostic giants, with their existing intellectual property, patents, and access to capital, can cut this time in half.

Changes Within 24 Months

So, just like the web-based lab test ordering/results reporting that we discussed in the last issue of THE DARK REPORT, we believe that FDA-cleared products to support routine chemistry and hematology testing at the point-of-care will begin appearing within 24 to 36 months.

Which brings us to our second prediction. The economics and availability of reliable POC testing for chemistry and hematology will launch a revolution in the structure and organization of clinical laboratories.

For the first time in the modern era of laboratory medicine, it will actually be better to have the test done outside a centralized laboratory. The total cost per reported result will be lower. The quality will be equal if not better (not the least because the specimen is tested within minutes of collection), the doctors and nurses can have results within minutes of drawing blood, and the QA/QC of the instrument can be monitored remotely by trained laboratorians.

Certainly, this is a revolution in the management, organization, and structure of clinical laboratories. It raises the survival stakes for both hospital and commercial laboratories. Those labs which move decisively to implement valid POC technology for routine testing will have the competitive edge over those labs which do not.

POC Not The Only Force

POC technology will not be the only force driving laboratory decentralization. Web-based lab test ordering/reporting makes it easier to connect remote instruments with the laboratory. And remember “lab on a chip?” Companies like Affymetrix continue efforts to miniaturize test technology.

Expect the cumulative effect of these technologies to reinforce one dominant trend: reducing the size of the centralized laboratory by making it possible to do sophisticated, reliable lab tests in near-patient and point-of-care settings.

THE DARK REPORT is aware of other technologies and changes to laboratory management which reinforce these broad themes. Stay tuned for additional
intelligence and analysis.

DARK REPORT Predicts Three Revolutionary Changes

IT WILL BE QUITE A MILLENNIUM for the clinical laboratory industry. THE DARK REPORT predicts three revolutionary changes will occur during the next few years.

1.WEB-BASED LAB TEST ORDERING AND REPORTING:

OUR PREDICTION: Within 24 months, virtually every physicians’ office in the United States that generates a significant volume of lab tests will be using a web-based system for test ordering and results reporting.

PROBABLE IMPACT OF THIS CHANGE: Commercial laboratories and hospital lab outreach programs will need to offer this service to their physician clients, or lose that account to competitors. Nimble labs can use web-based lab services to capture market share from slower competitors.

2.POC TESTING FOR HIGH-VOLUME, ROUTINE LAB TESTING

OUR PREDICTION: During the next 36 months, CARESIDE and diagnostics competitors will introduce a variety of effective POC instruments that enable high-volume, routine tests to be done outside core laboratories, at lower cost and with equal or better quality.

PROBABLE IMPACT OF THIS CHANGE: As new POC technology demonstrates its cost and quality advantages, both hospital and commercial laboratories will decentralize routine testing. Core labs will continue to perform reference and esoteric testing.

3. LABORATORY AUTOMATION:

OUR PREDICTION: The arrival of POC technology for routine testing means that laboratory automation loses its importance, and its potential, to significantly lower costs in the centralized laboratory.

PROBABLE IMPACT OF THIS CHANGE: total laboratory automation (TLA) and modular/workstation automation will become focused on supporting reference and esoteric testing.

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