CEO SUMMARY: Nashville hatched another pathology-based physician practice management firm. This newest competitor was capitalized by pathologists. Its arrival in the competitive marketplace signals further changes to the traditional practice of pathology. Increasingly, it will be business skills, not clinical skills, which feed pathology success.
PATHOLOGY CONSULTANTS OF AMERICA (PCA) is the newest pathology-based physician practice management (PPM) company to launch operations.
Based in Nashville, Tennessee, PCA already has management contracts with three pathology practices, involving 30 pathologists. The company issued a press release today announcing its formation.
“Our distinguishing feature is that we are owned by pathologists,” stated PCA Chief Operating Officer Jim Billington. “Not only are we physician-owned, but pathologists comprise a majority of our board of directors.”
Billington revealed that pathologists provided most of the start-up capital at PCA. “The pathologists themselves were the ones who funded this business. It demonstrates a high degree of confidence in our business plan that pathologists were willing to take the investment risk to form this company.”
Haywood D. Cochrane, Jr. is Chairman. He was formerly President and CEO of Allied Clinical Laboratories prior to its acquisition by National Health Laboratories. He is currently President and CEO of Meridian Occupational Healthcare Associates, Inc. and a director at Unilab, Inc. PCA’s President and CEO is Brian Carr. Most recently he was director of corporate services at PhyCor, Inc. He also served at Allied Clinical Laboratories under Mr. Cochrane.
“Our board feels that the big driver in our business plan is the fact that we are owned and operated by physicians themselves.”
Chief Operating Officer, PCA
“We have management contracts with three pathology practices,” noted Billington. “They are Pathology Group of the Mid-South, P.C. in Memphis; Columbus Pathology Associates in Columbus, Mississippi; and Colorado Pathology Consultants, P.C. in Denver.”
“Negotiations are under way with several other pathology practices,” he added. “It would be safe to say that we expect to announce additional management contracts before the end of the quarter.”
According to Billington, the business design of PCA is that of a standard equity model PPM. “Our physicians are vehemently opposed to employment-model PPMs. By choosing to organize this company around the equity model, all participating pathologists will shoulder the risk of both success and failure. This creates an incentive based on performance.”
Equity Model PPM
Like other equity model PPMs, PCA seeks to acquire the assets of pathology practices, as well as execute contracts to provide fundamental business services. Terms will vary according to the circumstances of individual practices and their local healthcare market.
The addition of a new pathology-based physician practice management company brings one more competitor into the marketplace. To make money for its investors and the participating pathology practices, PCA will need to demonstrate growth in specimen volume and revenues within each local market area.
Pathologists Will Compete
Local pathologists should begin to understand that shortly they will be forced to compete against PCA and other pathology PPMs. The era of quiet, collegial relationships between traditional pathology practices in a city is coming to an end. A new era of “dog eat dog” competition is emerging.
Whether the economics of pathology support a PPM business model or not, in the near future these competitors will radically reshape how pathologists organize themselves to contract for, and provide pathology services. PCA is the latest arrival, and demonstrates that market forces are working to transform traditional pathology business models.
Who are the other Pathology PPMs?
PATHOLOGY CONSULTANTS OF AMERICA will compete against several other pathology PPMs. Each has a different business strategy.
AmeriPath, Inc. is the largest and best-financed. Based in Florida, it is an employment model PPM. It ended 1997 with 17 practices and 134 board-certified pathologists. It completed a public offering in October, 1997 and its stock trades on NASDAQ.
American Pathology Resources is based in Nashville. Because it has operated for a number of years, APR is familiar to most pathologists, The company operates a number of pathology practices in Tennessee and several other states.
Pathology Service Associates (PSA) is not a PPM. Rather, it is a physician network model. Originally formed in South Carolina to pursue managed care contracts, PSA now has affiliate networks in the states of North Carolina, Tennessee, Florida, California and Washington.
Physician Solutions, based in Nashville, is an equity model pathology PPM which recently announced a commitment for venture capital funding of $18 million. Physician Solutions has yet to announce any investments financed by the venture capital commitment.
Another PPM model which has yet to make a public announcement is PathGroup, Inc., in Nashville. This is a pathology PPM which has a unique twist to the PPM business model. It seeks to create a national company by pooling the equity of participating pathology practices.