New Market Research Report on U.S. Clinical Laboratory Market

New Market Research Report on U.S. Clinical Laboratory Market

New Market Research Report on U.S. Clinical Laboratory Market

Laboratory Economics has just released The U.S. Clinical Laboratory  Industry Forecast & Trends 2023-2025. With this special report, you can 
tap into 100+ pages of proprietary market research that reveals critical  
data and information about key business trends affecting the U.S.
laboratory testing market.

The report reveals that the U.S. laboratory testing market represented
an estimated $125 billion of revenue in 2023 with a long-term annual
growth rate of 3-4%. Growth is currently being driven almost entirely by
increased PCR-based microbiology testing.

The U.S. laboratory testing market faces unprecedented challenges,
including the post-pandemic employee wage inflation, greater utilization
management and claims denials by private payers and persistent
reimbursement pressure. Despite these challenges, the U.S. lab industry
has shown persistent growth.

“The adoption of new higher-priced PCR-based test panels for respiratory
viruses, UTIs and STDs is helping to offset price and volume pressure on
routine clinical lab tests,” according to Jondavid Klipp, President of
Laboratory Economics.

The report includes:

  • More than 100 charts and graphs
  • U.S. lab market size and growth rates for 2012-2025
  • Detailed estimates for market subsets like hospital-based labs,
    independent labs, and physician-office-based labs
  • In-depth analysis of the PCR-based testing market size, growth rate,
    and highest-volume laboratories
  • Top 50 hospital outreach labs by Medicare CLFS and PFS payments
  • Detailed reimbursement rate information from Medicare CLFS, Aetna,
    Cigna, UnitedHealthcare, etc.
  • Comprehensive lab M&A valuation metrics by revenue and EBITDA
  • Results from Laboratory Economics Clinical Lab Trends Surveys from
    2014 through 2023
  • The biggest challenges and opportunities for labs

Laboratory companies highlighted include:

  • ACL Laboratories
  • ARUP Laboratories
  • Exact Sciences
  • Fulgent Genetics
  • Labcorp
  • Mayo Clinic Laboratories
  • Myriad Genetics
  • NeoGenomics
  • Northwell Health Labs
  • OPKO/BioReference Labs
  • PathAI/Poplar Healthcare
  • PathGroup
  • Quest Diagnostics
  • Sonic Healthcare

The U.S. Clinical Laboratory Industry: Forecast & Trends 2023-2025 is
published by Laboratory Economics (www.laboratoryeconomics.com), an
independent market research firm focused exclusively on the business of
pathology and laboratory medicine.

FDA Won’t Extend Comment Period on LDT Regs

FDA Won’t Extend Comment Period on LDT Regs

FDA Won’t Extend Comment Period on LDT Regs

The FDA has announced that its standard 60-day comment period for its proposed regulation of laboratory-developed test (LDTs) will not be extended past December 4. Several trade groups, including CAP and ACLA, had requested to stretch the comment period to 120 days. An extension would have potentially delayed implementation of the rule while giving Congress more time to pass LDT reform legislation. The FDA has indicated that a final rule could be published as early as April 1, 2024.

The FDA estimates that there are approximately 12,000 U.S. labs performing high-complexity testing and that 10% of these are marketing LDTs. These 1,200 labs are currently offering 80,400 LDTs and 7,776 new LDTs are coming to the market each year. The FDA estimates that labs will generate $28.6 billion of revenue from LDTs in 2023.

One of the biggest concerns is the FDA’s capacity to review and process as many as 80,000+ LDT applications over the next few years. For example, the FDA gave marketing authorization to a grand total of only 765 medical devices, including lab tests, in 2022, according to the FDA’s Center for Devices and Radiological Health 2022 Annual Report. The FDA’s ability to process tens of thousands of LDT applications in a timely manner, even with the help of third-party reviewers, is doubtful.

During an October 24 call with investors, Jim Davis, Chief Executive of Quest Diagnostics, said that Quest agrees with the long-standing assertion of the American Clinical Laboratory Assn. (ACLA), “that the FDA does not have the statutory authority to unilaterally regulate LDTs under its existing medical device authority.” Davis noted that by volume, LDTs account for less than 10% of Quest’s overall testing business. Quest performs the majority of its LDT testing at three ISO-certified labs, including San Juan Capistrano, CA; Chantilly, VA; and Lewisville, TX.

On an October 26 conference call, Labcorp CEO Adam Schechter said that LDTs account for less than 5% of Labcorp’s volume and less than 10% of its testing revenue. “If you look at the rigor that we go through with our laboratory-developed tests, we think we do the vast majority of what they [FDA] would be asking for anyway.” Schechter said FDA regulation could have unintended consequences. LDTs “are sometimes the most important test for new specialty areas. And getting those tests to patients quickly is what’s most important.”

One group in favor of LDT regulation is AdvaMed (Washington, DC), whose members include Abbott, BD, Bio-Rad Laboratories, bioMerieux, Hologic, Illumina and Roche. “We like the rule….This is really about making sure there’s a level playing field when you’re talking about diagnostics tests and having everything go through a similar pathway,” said AdvaMed CEO Scott Whitaker at an October 10 press conference. “Either you raise the regulatory standard, or you lower the regulatory standard, but you do it across the board without stifling innovation,” he said.

The last major effort by the FDA to formally regulate LDTs came in October 2014, when the agency issued draft guidance. But after collecting comments and facing two years of stiff opposition, the agency chose not to issue final guidance. One of the strongest critics was ACLA, which challenged the FDA’s authority over the tests by filing a citizen petition and making clear its intent to sue if necessary.

Pathologist Job Openings Remain Near Record-High

Pathologist Job Openings Remain Near Record-High

Pathologist Job Openings Remain Near Record-High

The biggest online job board for pathologists, PathologyOutlines.com, currently has 705 pathologist jobs listed. That’s near the site’s all-time record of 706 pathologist job ads reached in February 2022. Prior to 2020, the average number of job openings was between 300 and 400.

Rich Cornell, President and Founder of the life sciences recruiting firm Santé Consulting (St. Louis, MO), says it’s important for labs to understand that the shortage is not going away soon. Cornell says, “Labs must establish an internal sense of urgency in the hiring process in order to hire effectively in this market. The total actual number of U.S. pathologist openings is currently closer to 1,000 when including jobs that are not advertised on PathologyOutlines.com. The biggest competition exists for jobs in the subspecialties in highest demand: cytopathology, hematopathology and gastrointestinal.

According to Cornell, only about 600 pathologist residents and fellows graduate each year. A large percentage of those graduates will require visa sponsorship, but only about 1/3 of visa requests will likely get accepted. In other words, the market is out of balance and will continue this way for the next several years, says Cornell.

So what should labs do in this tight job market? Cornell says it boils down to these two things:

1. The interview-to-hire ratio has changed. Pathology practices should expect to interview an average of five candidates in order to successfully hire one pathologist. That’s the new average.

2. Young millennial pathologists (age 27-42 years) are seeking low stress working environments and a quick interview timeframe. They expect offers within 48 hours after an interview. The timng and pace of your offer are crucial once the interview takes place.

How are other labs advertising for pathologist openings in light of this severe shortage? Here are some recent examples from PathologyOutlines.com:

$100K Sign-On Bonus
A large independent pathology practice in Connecticut is offering $100,000 sign-on bonuses in an effort to hire one or more full-time surgical pathologists with subspecialty training in gastrointestinal pathology, breast or hematopathology. The annual salary range is highly competitive with four weeks vacation. Current fellows, pathologists straight out of fellowships and experienced pathologists are encouraged to apply.

22 Pathologists Needed at HCA Healthcare
HCA Healthcare has ads for 22 pathologist job openings—mostly for its hospitals in Florida, Georgia and Texas. HCA Healthcare is offering sign-on bonuses of up to $30,000. Other organizations with a large number of job ads include Sonic Healthcare (21 pathologist openings), Rutgers New Jersey Medical School (11 openings) and Northwell Health in New York (10 openings).

Cornell says that many groups are struggling because of their hiring process, or lack thereof. “We recently worked with a large healthcare system with more than 20 pathologists. They needed four additional pathologists to handle their workload volume increases. However, their internal process prevented them from being successful. They would take 4 weeks to make an offer once the interview had occurred. Candidates would lose interest because they were left waiting for too long after they were interviewed. Younger candidates expect feedback from employers immediately following the interview.”

Walgreens to Pay $44 Million to Theranos Customers

Walgreens to Pay $44 Million to Theranos Customers

Walgreens to Pay $44 Million to Theranos Customers

Walgreens Boots Alliance (Deerfield, IL) has agreed to a $44 million settlement to resolve class-action claims related to its partnership with Theranos.

The proposed settlement, which needs court approval, will provide consumers who participated in the lawsuit with “approximately double their out-of-pocket damages,” lawyers for plaintiffs said in a court filing in federal court in Phoenix on September 6.

The class-action lawsuit accusing Walgreens of being “willfully blind” to the fraudulent company, which claimed to offer hundreds of lab tests with only a few drops versus vials of blood thanks to its proprietary technology, called Edison. Walgreens partnered with Theranos in 2013 and installed sample collection kiosks in 40 stores in Arizona and one store in Palo Alto, California,
without validating its technology.

Theranos formally dissolved nearly three years after The Wall Street Journal uncovered discrepancies about the once-valued $9 billion company in 2015. Walgreens ended its partnership with Theranos in 2016 and shut down all testing locations.

Although Walgreens agreed to settle the class-action lawsuit against it rather than go to trial, the pharmacy chain maintains it too was duped by Theranos.

Elizabeth Holmes, age 39, founder and CEO of Theranos, was convicted of fraud in 2022 and sentenced to 11.25 years in prison. Ramesh “Sunny” Balwani, 58, former Theranos President, was also found guilty and is serving a 13-year sentence.

Labcorp to Buy Tufts Outreach Lab Assets

Labcorp to Buy Tufts Outreach Lab Assets

Labcorp to Buy Tufts Outreach Lab Assets

Tufts Medicine (Boston, MA) is selling its clinical lab outreach business to Labcorp for an undisclosed amount. The transaction, which
does not involve anatomic pathology services, is expected to formally
close in October. Tufts says the sale is the first step towards a broader
partnership with Labcorp. The announcement comes as Tufts endures
prolonged financial difficulties that led Fitch Ratings to downgrade its
debt rating from BBB+ to BBB earlier this year.

Tufts Medicine (TM) includes three hospitals in the Boston area, including Tufts Medical Center (405 beds), Lowell General Hospital (390 beds) and Lawrence Memorial Hospital of Medford (216 beds). It also includes Tufts Medicine Integrated Network, which has more than 1,800 affiliated community and academic physicians.

The annual lab department budget at TM’s three hospitals is a combined $122 million, according to Medicare Hospital Cost Reports. Laboratory Economics estimates that TM’s clinical lab outreach business has annual revenue of roughly $30 million. Labcorp is expected to make job offers
to nearly all 574 TM lab employees affected by the sale.

TM lost $399 million on operations in the fiscal year ended Sept. 30, 2022. TM management estimates that approximately $129 million of the losses were related to one-time items, including the stoppage of elective surgeries due to the pandemic (a $58 million loss of revenue) and installation of the electronic medical records system Epic ($71 million). The largest component of the rest of the operating loss was $217 million for increased staffing costs. The amount TM paid for contract labor increased an incredible 1,423%, to $155 million in the 12 months that ended Sept.
30, 2022, compared to pre-pandemic in 2019.

In addition, TM is facing stiff competition for hospital patients from Massachusetts General Hospital (Boston), which is aggressively competing for managed care contracts.

Sizing Up the Boston Lab Market
The Boston-Cambridge-Newton metropolitan area has a population of 4.9 million with an estimated physician lab services market of $650 million per year.

Quest Diagnostics has by far the largest market share in the Boston area. Quest purchased the Worcester-based clinical lab outreach business of UMass Memorial Medical Center in 2013. Quest then consolidated testing at a new 200,000-square-foot lab in Marlborough (30 miles west of Boston). Quest has a total of more than 100 patient service centers in the Boston area. It generates an estimated $350 million in revenue from physician office clients in the Boston area.

Labcorp has 15 PSCs in the Boston area and estimated physician client revenue of $50 million… per year (excluding Tufts Medicine deal). Labcorp’s nearest major regional lab is located in Raritan, New Jersey (~5-hour drive)

Mass General Brigham provides lab outreach testing at several hospitals in the Boston area, including Massachusetts General Hospital (1,019 beds), Brigham and Women’s Hospital (812 beds) and Newton-Wellesley Hospital
(273 beds). Total estimated annual lab outreach revenue from the physician office market is $75 million.

Beth Israel Lahey Health operates its biggest hospital-based outreach
labs at Lahey Hospital and Medical Center Burlington (345 beds), Beth
Israel Deaconess Medical Center (743 beds) and Winchester Hospital (194 beds). Total estimated annual lab outreach revenue from the physician office market is $60 million.