Despite Tough Anatomic Pathology Market, Bostwick Opens New Laboratory

Noted uropathologist says Granger Diagnostics aims to innovate, while holding lab costs down

CEO SUMMARY: Once again, entrepreneur and pathologist David G. Bostwick, MD, is starting up a new lab company. Granger Diagnostics is now open and is located in North Chesterfield, Virginia. It is designed to be an anatomic, clinical, and molecular pathology reference laboratory. In an exclusive interview, Bostwick identified three substantial changes that have happened to the anatomic pathology market in recent years and how Granger Laboratories intends to respond to those trends.

THERE’S A NEW LAB COMPANY, founded by pathologist-entrepreneur David Granger Bostwick, MD. Last month, he announced the formation of Granger Diagnostics, LLC in North Chesterfield, Virginia.

“Granger Diagnostics is a CLIA-certified anatomic, clinical, and molecular pathology reference laboratory that, like Bostwick Laboratories, specializes in the diagnosis and treatment of cancer and related conditions and has a strong focus on prostate cancer,” stated Bostwick in an exclusive interview with THE DARK REPORT.

Nationwide Lab Network

Tests include anatomic pathology, FISH, molecular tests, and next-generation sequencing through a nationwide network of labs and affiliated labs. In addition to the lab in North Chesterfield, Granger has affiliated labs in Hapeville, Georgia, and it plans to open an affiliated lab in Orlando.

Granger Diagnostics launched with six employees, including Bostwick and one other pathologist, Jun Ma, MD, formerly of Bostwick Labs. Rosalind Baskette is the Director of Laboratory Operations. “We project having 25 employees, including five pathologists, by year end,” stated Bostwick.

Granger Diagnostics currently has a hybrid sales staff of employees and contractors who operate along the east coast, in Arizona, and in other parts of the Southwest, he said. Plans are to expand to a sales force with nationwide coverage.

“It is time to return to my greatest passion in medicine: prostate cancer diagnosis and translational research,” declared Bostwick. As he did at Bostwick Laboratories, which he founded in 1999, David Bostwick will serve as the Chief Medical Officer and will hire and train veteran pathologists and laboratorians.

“Here at Granger, we will have similar services as those that Bostwick had, meaning urologic and gynecologic pathology,” he said. “The reason I left Bostwick Labs was that I sold the company in 2011 to Metalmark Capital LLC, a private equity firm. Metalmark then brought in a new team to run the operation.

“Although I remained at Bostwick after the sale, I wanted to run my own lab again,” explained Bostwick. “Once my non-compete agreement ended, I started this new lab company. I currently have no role at Bostwick Laboratories.

“Investors helped us get the new lab company up and running,” he noted. “We also have a working relationship with American International Biotechnology (AIBioTech) of Richmond, Virginia. This is a genetics testing company that I’ve worked with for the past four years.

Sharing Common Services

“Granger Diagnostics is located in a building owned by AIBioTech and, on a contractual basis, we share their billing team, human resources, and some of their support staff to help us,” noted Bostwick.

Despite all the market forces that have made anatomic pathology a difficult environment for pathologists, Bostwick has a positive outlook, noting, “In part, this is because we operate with a Lean management structure, allowing us to devote a greater proportion of our resources to delivering clinical services.

“There have been three substantial changes in the anatomic pathology market over the past few years, and most of them are negative,” observed Bostwick. “The first change was the government’s decision to allow clinical labs to pay for electronic medical record systems for referring physicians. That practice is no longer legal. But when it was legal to do so, it put tremendous pressure on independent laboratories to market and pay for EHR systems.

“Independent labs had a difficult time competing against larger labs that had the resources to put those EHR systems in place wherever they needed them,” he added. “In my opinion, implementing those EHR systems ultimately accomplished little or nothing for labs that did that for their clients.

“Second, the reimbursement rates for AP services have dropped considerably in recent years,” he continued. “Price cuts to some AP services were so draconian that reimbursement is substantially less than what it costs a lab to perform those tests.

Fortunately, reimbursement for other tests has risen so that—on balance—it is still possible for labs to make ends meet.

“However, for pathology labs to survive in this difficult financial environment, it is essential that overhead and all the costs of doing business be kept to a minimum,” added Bostwick.

“Take the example of an independent anatomic pathology lab business with multiple managers and executives at the top,” he said. “If these individuals are paid huge salaries while not contributing to revenue, that lab business will have trouble. The only way to make that overhead work is to be a very large laboratory with huge specimen volumes, such as Quest Diagnostics or LabCorp.

Restricting access to Care

“The third significant change was the continued pressure by insurers and the government to restrict access to medical care and dictate what a physician and a pathologist can and cannot do,” observed Bostwick. “By that I mean, for example, that payers told pathologists that they would be paid for a set number of prostate biopsies despite the number submitted by the urologist. At the same time, there were some important and contributory special stains that were prohibited or are now reimbursed at minimal rates.

Seeking Improved efficiency

“This puts pathologists in the center of an interesting clinical and financial dilemma,” Bostwick noted. “On one hand, the healthcare system demands that pathologists deliver more and more diagnostic services that are more complex and expensive. On the other hand, reimbursement is down. So pathologists must make up for that lower reimbursement with volume, and that requires running a highly efficient operation.”

Contact David G. Bostwick, MD, at DBostwick@GrangerDiagnostics.com.

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