“April 5, 1999 Intelligence:  Late Breaking Lab News”

As consolidation of hospital ownership goes, so goes laboratory consolidation. The big trend driving consolidation of hospital ownership is the formation of integrated healthcare systems (IHS). According to SMG Marketing Group, a Chicago-based healthcare information and marketing company, there are now 604 IHS, a number which increased by 40% between 1995 and 1998! More importantly, the rate at which hospitals are joining systems increased at twice the rate. SMG says that 3,760 hospitals were in systems by January 1999, an 83% jump from 2,060 hospitals in April 1995.

ADD TO…INTEGRATED HEALTH SYSTEMS

This migration into integrated health systems is a phenomenal trend and so new that the pace of hospital lab- oratory consolidation should continue at a fast clip. This will affect employment levels in the lab industry. It will also change the way reference laboratories, software vendors, and diagnostics manufacturers sell their products to hospital-based laboratories.

PRUDENTIAL TO REIMBURSE FOR AUTOPAP

Chalk up another win for NeoPath, Inc. in its bid to gain acceptance for its automated technology. On March 17 it was announced that Prudential HealthCare, one of the nation’s largest health insurers, will offer reimbursement for the AutoPap® Primary Pap Smear Screening System.

MORE ON…AUTOMATED CYTOLOGY

NeoPath Chairman Alan Nelson tells THE DARK REPORT that the new CPT codes for automated Pap smear procedures are having a positive impact. Three months into the new year, he reports that the payments for the claims submitted early in the year are starting to show up. Reimbursement levels for the new CPT codes are ranging from $12 to $45. If this trend bears out through the course of the year, it will improve the economics of acquiring and using automated Pap smear technology. Remember the hoopla about Herceptin® as a therapeutic for metastatic breast cancer? There is a diagnostic side to this story. Recently Genentech, Inc. and IMPATH, Inc. agreed that IMPATH will provide “information services and analytical services relating to breast and other cancers that may benefit from treatment with Herceptin.” IMPATH is now positioned for a double ben-efit. First, it will be paid to provide data to Genentech from its databank of 450,000 analyzed cancer cases. Second, IMPATH naturally becomes a preferred source for diagnostic tests. IMPATH can make money from both dimensions of the relationship. This is also a market transaction based around pharmacogenomics. (See TDR, September 8, 1998).

Joint Purchasing Corporation (JPO) selected Specialty Laboratories of Santa Monica, California to be a clinical laboratory service provider. The contract, effective March 1, 1999, gives Specialty access to JPO’s 800 hospitals, most of which are located in the Northeast United States.

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