September 5, 2006 “Intelligence:  Late Breaking Lab News”

On August 14, AmeriPath, Inc. released its second quarter earnings report. Revenues were $191.7 million, an increase of 35% from $143.6 million posted in second quarter of 2005. These numbers reflect the acquisition of Specialty Laboratories, Inc., which AmeriPath acquired on January 31, 2006. (See TDR, October 3, 2005.) Quarterly revenues for Specialty Laboratories was $40.2 million. For the six months ending June 30, 2006, AmeriPath’s revenues were $362.6 million. Six-month revenues for Specialty Laboratories was $66.6 million. AmeriPath stated that same store revenues had increased 6.7% and 8.7% for the second quarter and the six-month period, respectively.

TRI-PATH & BD

On August 14, Becton, Dickinson and Co. (BD) offered to purchase TriPath Imaging Inc. for a price valued at $350 million. BD currently owns 6.5% of TriPath. Negotiations were ongoing as of press time.

MORE BIG EMPLOYERS CONTRACT DIRECTLY WITH DOCTORS

For several decades, many large corporations have self-insured their health benefits plans as a way to better control costs and improve employee satisfaction. Now there is evidence that a growing number of major companies are bypassing managed care companies and contracting directly with physician groups to provide care for employees and their families. In Houston, Texas, Waste Management Inc. (WMI) signed such a contract in 2005 with Kelsey-Seybold Clinic. “KelseyCare is essentially an HMO product, but it’s one in which doctors, not insurers, decide on patient care,” observed Ben Hoffman, M.D., Medical Director and Vice President at Waste Management. WMI employees can opt for KelseyCare or a Cigna PPO program.

ADD TO: Direct Contracting

Waste Management’s contract with Kelsey-Seybold Clinic saved considerable amounts of money. It was determined that the direct contract with Kelsey’s doctors would cost WMI 16% less than a contract with a traditional health insurance company. In Overland Park, Kansas, Sprint Nextel has contracted directly with doc- tors and four local hospitals since 2001. Savings have been in the range of 5% to 10% less than health benefit plans offered by managed care companies in the region. This trend demonstrates how large corporations are willing to bypass traditional health insurance companies to deal directly with providers if the savings are substantial. It points to the possibility that large employers would find it worthwhile to contract directly with clinical laboratories that offered discounted prices and good service.

Genomic Health, Inc., of Redwood City, California reported second quarter revenues of $8.4 million, com- pared to $1.2 million for second quarter 2005. Demand for its Oncotype DX test is increasing, with “3,250 test services delivered in the second quarter of 2006, com- pared to more than 1,300 in the second quarter of 2005.”

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