Shiel Medical Lab Grows In Tough NYC Market

Flying under the radar screen, lab firm builds market share to achieve yearly sales of $50 million

CEO SUMMARY: There’s a new lab player emerging in the New York metropolitan market. Shiel Medical Laboratory of Brooklyn, New York, is growing steadily and now reports $50 million in annual revenue. It is taking full advantage of the managed care contracting turmoil and adding new clients at a surprising rate. During the first 12 weeks of 2007, Shiel Medical Laboratory says nightly specimen volume increased by 50%.

PROVING THAT IT IS POSSIBLE to profitably grow even in a challenging market for laboratory testing services, Shiel Medical Laboratory has quietly experienced strong growth in New York City over the past 10 years.

Shiel is a thriving regional laboratory located within the city limits of New York. It is posting impressive rates of growth in specimen volumes and revenue. Shiel Medical Laboratory went from 600 specimens per night in 1998 to 5,000 per night today. “In that time, we also went from about $6 million in revenue to about $50 million in revenue today,” said Tod Schild, Shiel’s Senior Vice President.

Recent turmoil in the New York market is helping a number of regional labo- ratory companies in the area grab increased market share from the national laboratories. THE DARK REPORt has chronicled the successes of several, including Sunrise Medical Laboratories in Hauppauge, New York, and Bio-Reference Laboratories, Inc., in Elmwood Park, New Jersey. (See TDR, July 16, 2007.)

Shiel Medical Laboratory can be added to this list. While working off the radar screen of the lab industry and many financial analysts, Shiel Medical Laboratory, based in Brooklyn, New York, boosted its nightly specimen volume from 3,000 to 4,500 just in the first quarter this year!

That 50% increase in nightly specimen volume in just three months is attributed to two factors. First is a direct mail campaign linked to unfolding events in the New York markets. Second is Shiel’s announcement on January 1 that it would continue to be a contract provider for the United Healthcare and Oxford Network. It was on that date, of course, that Quest Diagnostics Incorporated lost the United Healthcare and Oxford Health Plans business. (See TDR, February 19, 2007.)

Contract Provider For Aetna

In July, Shiel announced that it would provide lab services to all of Aetna, Inc.’s HMO and PPO patients. Its sustained growth and provider status with key man- aged care plans are signs that this regional lab, in business since 1919, is becoming an important competitor for lab testing business in New York City and surrounding areas.

“Shiel’s success is based on three key elements,” Schild explained. “ They are fast turnaround times, good customer service, and strong information systems. These strengths help us differentiate ourselves in the market.”

Strategic Hiring Philosophy

Another point of differentiation, accord- ing to Schild, is that Shiel Medical Laboratory has developed its staff in a strategic manner. The goal is to bring in skilled staff that have experience in the local communities. This helps Shiel build close working relationships with its referring physicians.

“We provide laboratory testing services to physician practices, nursing homes. and some institutional accounts,” noted Schild. “We had a significant spurt in growth over the last year as a result of some key hires, and from the consequences of Quest Diagnostics being de-selected from the UnitedHealth network.

“Upon news of the UnitedHealth decision, we did a mass mailing to physicians in the New York metropolitan area, followed by a second mailing several weeks later,” he continued. “The response was positive for us as many physicians clamored for other lab options for their UnitedHealth patients besides Laboratory Corporation of America.” (See sidebar at right.)

Effective Sales/Marketing

“The key to any lab’s success, besides pro- viding good laboratory service, is a stable and effective marketing organization,” Schild continued. “In the nine years that I have been with Shiel, we have retained all of our top-performing sales people. Retention of key employees is critical. With few exceptions, we tend to hire only mature, seasoned laboratory reps with strong relationships.

“Several of our sales reps have many years of service with us and have built strong books of business,” added Schild. “Their ongoing success has made Schiel Medical Laboratory look attractive to experienced sales reps from other laboratories. It makes it easier to recruit top talent as we expand our sales team.”

Schild arrived at Shiel Medical Laboratory in 1998, at a time when CEO Jack Basch, as the new owner, was reor- ganizing the lab at all levels. “That year, I left one of the national laboratories to become Shiel’s sales manager. At that time, I was actually the only one on the sales team,” Schild related. “When I arrived, most of the $6 million in annual revenue was from nursing home business. As a district sales manager for my former laboratory, I covered Brooklyn, Queens, and Staten Island. Thus, I was familiar with the local market, as well as the sales people who were competing for business in these communities.

Developing Client Services

“At the time of my arrival, Shiel had no client service department,” he continued. “In those days, lab techs answered the phones. And, we had no information technology department either. In fact, I served as the IT department along with some outside help.

“The strategic plan was to sell accounts and build the infrastructure needed for Shiel to evolve into a full service laboratory,” Schild explained. “As specimen volume and revenue increased, we beefed up our sales, administrative, and technical staff.

“Earlier this year, we hired a new Medical Director, Patricia Romano, M.D., formerly of Quest Diagnostics and Clinical Diagnostics Services (CDS),” Schild added. “We now employ more than 300 people, have implemented client automation solutions, and have successfully inked managed care contracts that many of our regional competitors have not been able to secure. The recent growth in specimen volume and market share now makes Schiel one of the major lab players in the New York metropolitan market.

“Today, we are a full service clinical and pathology laboratory serving private physicians, group practices, union and industrial accounts, long-term care facilities, and home care agencies in the five boroughs of New York City,” Schild said. “We also serve Nassau, Suffolk, Westchester, and Rockland counties in New York, and northern and central New Jersey. We will expand geographically as we continue to grow.

Differentiation Strategy

“Many factors contribute to a lab’s growth, including quality customer service and strong customer relationships,” observed Schild. “However, a regional laboratory needs to clearly differentiate itself from competitors to achieve ongoing success.

“Use of technology can be one way to differentiate your lab from competition,” he added. “All labs today sell technology. But often they only offer their most advanced information technology to new clients. That ignores their existing client base—who may be on an older system or no system at all. Our sales team often targets these types of competitor accounts.

“To help us differentiate ourselves in the technology area, Shiel recently upgraded our physician interface. It is robust and packed with features,” noted Schild. “It has the ability to interface to most EMR, billing, and practice management systems. We made it a priority to deploy this advanced technology to our existing client base. They like having the latest technology and it protects us from eager competition. Our system is home-grown and tailored specifically to the needs of our clients.

Connecting To EMRs

“To respond to the trend of physicians adopting electronic medical record (EMR) systems, we created an interface gateway that is simple, and it is driving sales right now,” observed Shiel. “We believe enhanced information technology will increasingly drive sales in the laboratory services market in coming years. Every physician using an EMR system in his or her practice quickly realizes the benefits of having both lab test results and lab orders flow seamlessly between the EMR and the laboratory provider. Labs which offer that connectivity—and make it easy for the physicians—will have an advantage in the market.

“We try and do another thing to out-compete the national laboratories,” he continued. “These labs make great efforts to take care of their client physicians, but it is difficult for them to maintain a comparable ongoing presence as a local laboratory like us. We are in the neighborhood and we staff specifically to build personal relationships with our clients at all levels of the laboratory. Plus, because our turnaround time is faster on the routine work and Pap smears than most of our competitors, we play that card to its maximum advantage.”

Developing Client Services

Shiel Medical Laboratory’s achievement in reaching annual sales of $50 million is evidence that there is plenty of opportunity for regional labs to compete and succeed. The fact that Shiel Medical Lab has done this in the Greater New York City market area—one of the nation’s most challenging—further reinforces that message.

Direct Mail Campaign Generates New Clients

RECOGNIZING THAT THE MANAGED CARE CONTRACTING WARS in New York would create a major opportunity for regional labs, Shiel Medical Laboratory of Brooklyn, New York, turned to direct mail to help it jump start its sales and marketing offensive.

“We knew that Laboratory Corporation of America would be stretched thin as it built up its infrastructure and staff in the Northeast,” explained Shiel’s Senior Vice President Tod Schild. “We expected that there would be dissatisfied physicians and they would look for alternative laboratory providers.

“Late last year, we did a direct mail campaign to physicians across the New York metropolitan market. A follow-up mailing was sent to these same physicians several weeks later,” stated Schild. “Responses from these physicians opened the door for our sales team to call on them. We had a flood of physicians interested in opening accounts with us. As a result, our volume went up significantly, almost to the point where we would not have been able to handle the increased volume.

“We sent the mailing to our entire service region,” Shild continued. “This included the five boroughs of New York City, the New York counties of Nassau, Suffolk, Westchester, and Rockland, as well as to northern New Jersey. Each mailing was about 15,000 pieces and was sent to every physician in about 12 medical specialties, including cardiologists, pediatricians, gastroenterologists, endocrinologists, urologists, general practitioners, and internal medicine specialists.

“Timing for the direct mail campaign was perfect,” recalled Schild. “We got a tidal wave of calls. In some cases, our sales reps actually opened new accounts over the phone! We added about 1,500 specimens per night in just 12 weeks, which was a dramatic increase for us!”

 

Shiel Wants to Create Competitive Differentiation By the Use Of Proprietary Reference Assays

TO FURTHER DIFFERENTIATE ITSELF from competing laboratories, Shiel Medical Laboratory of Brooklyn, New York, wants to add selected reference and esoteric tests to its menu. Cardiology testing is a starting point for this strategy.

“At this time, we are unique in our ability to offer the Oxidized LDL/HDL Ratio Test (OxLDL/HDL),” explained Tod Schild, Shiel’s Senior Vice President. “This test is pending FDA approval. A number of credible clinical studies offer evidence that this is an effective indicator of cardiac risk. A major pharmaceutical com- pany is interested in oxidized LDL and is engaging us to perform clinical trial testing.

“We introduced this test early last year,” he continued. “It was available for research use and recently Shiel Medical Laboratory got this OXLDL/HDL test validated by the New York State Department of Health. We are launching a marketing campaign to educate clinicians about its appropriate use.

“Our evidence demonstrates that the Oxidized LDL/HDL Ratio Test is a powerful bio- marker for distinguishing patients with coronary artery disease (CAD) from non-CAD patients,” explained Shild. “Currently, we believe we are the only lab in the world offering a combination of oxidized LDL with an HDL ratio.

“Other labs offer the oxidized LDL test, which is a commercially available kit, but we have two additional features that distinguish how our assay is used,” Schild said. “We have automated the platform for processing these results—and we believe no other lab has yet to automate this assay. Further, we have been fortunate to work with Dr. Harold Bates, Ph.D., a researcher who is known for developing tests that later became standards of care. Over the course of many years, Bates introduced a number of tests to MetPath/Corning/Quest. Now he’s working with Shiel and has developed a way to couple oxidized LDL with an HDL ratio.

“The resulting test produces a coronary risk assessment factor based on those two values,” Schild said. “We have a study that shows the combination of oxidized LDL and the HDL ratio is better as a risk assessment factor than using the traditional lipid biomarkers. We’re excited about the growth possibilities for this test and how it is likely to advance the standard of care in the assessment of coronary risk.”

 

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