Spotlight Interview With PathGroup CEO Ben Davis

by Jondavid Klipp | Sep 11, 2020 | PathGroup

Spotlight Interview With PathGroup CEO Ben Davis

Originally founded by pathologists in 1965, PathGroup (Brentwood, TN) has grown to become the nation’s largest privately-held lab company. PathGroup, which currently has 2,200 employees, is owned by Pritzker Private Capital, company management and pathologists. Laboratory
Economics recently spoke with long-time Chief Executive Ben Davis, MD, to discuss PathGroup and its growing role in Covid-19 testing.

When did PathGroup initiate Covid-19 PCR testing and how many are being performed?
We began Covid-19 PCR testing on April 1st with an initial capacity of 2,000 tests per day using the Hologic Panther and Roche cobas 6800 platforms. We are currently performing an average of about 7,500 tests per day with capacity of up to 14,000 tests per day. Demand is coming from physician clinics, state health departments, employers, schools, universities, hospitals and nursing homes. Peak demand came in early July when we received specimens in excess of our capacity for several days.

How have positivity rates trended?
On July 6 our positivity rate peaked at 17%. That’s dropped to a current average of about 10%, including 12.5% for patients under age 30 and 9% for those 30 and above.

What is your turnaround time for Covid-19 PCR testing?
Our turnaround time from specimen collection to result reporting is consistently 24 hours for all clients. We have limited new client additions in order to maintain a 24-hour turnaround time. The location of our main 150,000-square-foot lab—adjacent to Nashville International Airport—has also helped.

Could PathGroup do more Covid-19 PCR tests if it had more supplies?
Yes. The current shortages of specimen collection devices and test kits are keeping us below instrument capacity. We’ve kept in close touch with our suppliers on changing situations and plan accordingly.

Are most private insurers matching Medicare’s $100 reimbursement rate for Covid-19 PCR testing?
Yes.

Describe the NIH grant that PathGroup was awarded and how it will be used?
PathGroup has received a $20.75 million grant from the National Institutes of Health (NIH) under its Rapid Acceleration of Diagnostics (RADx) program. The grant funding will be used to purchase new high-throughput liquid handling, robot and automated testing equipment from Illumina, LGC, Hologic and Thermo Fisher. We also plan to hire an additional 100 to 200 employees with the goal of expanding our Covid-19 PCR testing capacity to 80,000 tests per day. Importantly, we’ll be diversifying our supply chain to mitigate risk against supply chain constraints as fall/winter approaches.

Which Covid-19 antibody test does PathGroup perform?
Roche’s cobas serum antibody test. We’re performing about 400 tests per day.

Have non-Covid-19 clinical and pathology test volumes bounced back from the lows?
Yes. In late March/early April, our volumes had declined temporarily by 75% with anatomic pathology case volume hit the hardest. But in May, as physician offices started re-opening and elective surgeries resumed, we saw a sharp rise in non-Covid-19 volumes that are currently back at 100% of pre-pandemic levels, maybe even a little higher.

What precautions have you taken for your employees?
About 15% to 20% of our 2,200 employees are currently working from home. All people entering our lab facilities have their temperature checked and must wear masks. We are also offering Covid-19 testing on a voluntary basis to any employee that requests one, whether symptomatic or asymptomatic.

Do you think Covid-19 will come back in a severe way this fall/winter?
I would not want to predict severity, but the disease is likely to continue to spread this coming fall/winter. A vaccine will help, but Covid-19 is not going away. One of my biggest fears is that the disease will adapt and mutate into a more virulent strain, such as SARS-CoV-1 in 2003 and the MERS-CoV in 2012.

Quest Diagnostics Mid-Year 2020 Review

by Jondavid Klipp | Aug 15, 2020 | Quest Diagnostics

Quest Diagnostics Mid-Year 2020 Review

Quest Diagnostics (Madison, NJ) reported net income of $284 million for the six months ended June 30, 2020, down 27.2% from $390 million in the same period for 2019. Overall, Quest’s reported half-year revenue was down 5.1% to $3.649 billion. Looking specifically at Quest’s lab testing business: revenue was down 4.8% to $3.508 billion, including 0.7% gained from acquisitions. Here’s a summary of some key topics discussed during the company’s July 23 conference call with analysts.

Test Volume Trends
Quest reported a 10.2% decline in its requisition volume for the first six months of 2020 versus the same period in 2019. Non-Covid-19 requisition volume fell by approximately 19%.

Quest CEO Steve Rusckowski said volumes were rebounding strongest at primary care offices, including Ob/Gyns, and also for anatomic pathology testing. He said that the weakest volume trends were in life insurance testing, pre-employment drug screening and wellness program testing
for employers.

At the low end of its outlook, Quest is assuming an average 20% decline for its non-Covid-19 requisition volumes through the remainder of the year.

Covid-19 Testing
Quest has performed a total of roughly 8.5 million Covid-19 PCR-based tests year to date through June 30. Quest currently has the capacity to perform up to 130,000 Covid-19 PCR-based tests per day and plans to expand its capacity to 150,000 by early September.

Pooling patient samples for Covid-19 PCR-based tests will help expand capacity. Quest has begun combining four patient samples for pooled testing in locations where Covid-19 positivity rates are less than 5% (e.g., the Northeast). Quest has stated that it plans to bill for four tests when it performs pooled testing on four patient samples.

Meanwhile, Quest has performed a total of more than 2.5 million Covid-19 antibody tests year to date through June 30. Quest is currently performing about 20,000 antibody tests per day, well below its capacity for 200,000.

UnitedHealthcare’s Preferred Lab Network
Rusckowski said that as a member of UnitedHealthcare’s Preferred Lab Network, Quest had secured business from more than 180 out-of-network UHC labs.

Lab Acquisitions
“If anything, the pandemic could be an additional catalyst to help drive industry consolidation. Some transactions in the pipeline that were paused
because of the pandemic are being revisited,” said Rusckowski. Quest acquired Memorial Hermann Diagnostic Labs for $120 million on April 6, and completed its purchase of 100% of the joint venture Mid America
Clinical Labs in early August.

LabCorp Mid-Year 2020 Review

by Jondavid Klipp | Aug 15, 2020 | Labcorp

LabCorp Mid-Year 2020 Review

LabCorp (Burlington, NC) reported a net loss of $86 million for the six months ended June 30, 2020, down from net income of $376 million in the same period for 2019. Overall, LabCorp’s reported half-year revenue was down by 1.4% to $5.593 billion.

Looking specifically at LabCorp’s lab testing business, revenue was down 2.5% to $3.395 billion, including 1.4% gained from acquisitions. On July 28, the company held a conference call with analysts and investors to discuss its mid-year results. Here’s a summary of some key topics discussed:

Volume Trends
Total volume (measured by requisitions) decreased by 12%, as organic volume declined by 13.4%, partially offset by acquisition volume of 1.4%. The decline in organic volume included a 21% reduction in base business (due to the pandemic), partially offset by Covid-19 testing of 7.6%. LabCorp reports that its base business improved to an approximate decline of 17% in the month of June versus a year ago, which was more than offset by Covid-19 testing, which contributed roughly 23% to total volume in June.

Pooled Covid-19 PCR Testing
As of the end of July, LabCorp was performing an average of roughly 125,000 Covid-19 PCR tests per day and had capacity to perform up to 180,000 tests per day. LabCorp says its average turnaround time for hospitalized patients was at 1-2 days, with 2-3 day TAT for other patients.

On July 24, LabCorp received FDA emergency use authorization (EUA) to perform pooled Covid-19 PCR testing on up to five patient samples at a time. A positive result would require each sample to be individually retested “I believe that the standard PCR testing in the fall will remain the most significant by far of the testing that we do for PCR. But, I do think that the pool testing will add to our capacity and give us additional capabilities,” said LabCorp CEO Adam Schechter.

Covid-19 Antibody Testing
As of the end of July, LabCorp was performing an average of approximately 8,500 Covid-19 antibody tests per day and had capacity to perform up to 300,000 tests per day.

New Acquisitions
LabCorp acquired RDL Reference Laboratory (Los Angeles, CA) in mid-June. RDL was formed in 1977 by two UCLA-trained rheumatologists, Robert Morris, MD, and Allan Metzger, MD. RDL specializes in rheumatologic and autoimmune testing with the majority of its business coming from Southern California.

In July, LabCorp acquired the outreach testing business and entered into a comprehensive laboratory services contract with Franciscan Missionaries of Our Lady Health System (Baton Rouge, LA), one of the largest health systems serving Louisiana and Mississippi.

Medi-Cal Seeks Approval To Slash Lab Rates

by Jondavid Klipp | Aug 15, 2020 | CLFS, Medi-Cal

Medi-Cal Seeks Approval To Slash Lab Rates

California’s Department of Health Care Services (DHCS) has completed its
latest private-payer lab rate survey and is seeking federal approval to lower
Medi-Cal fee-for-service (FFS) rates for more than 60 high-volume lab and pathology services (effective retroactive to July 1, 2020 upon federal approval). DHCS estimates that the proposed rate cuts will save Medi-Cal approximately $12 million annually from the $212 million per year it currently spends on FFS payments for lab and pathology services. If finalized, Medi-Cal rates for high-volume lab and pathology codes will fall to a range of as little as 17% current Medicare rates to a maximum of no more than 80%.

California’s Medi-Cal lab fee schedule has been pegged to private-payer rates since 2015. The new proposed rates are based on DHCS’s fourth private-payer rate survey, which required approximately 300 independent labs, hospitals and pathology groups in California to submit their 10 lowest private-payer rates received in calendar year 2018 for approximately 270 high-volume lab and pathology CPT codes.

Only 132 providers actually wound up submitting their pricing data, including 14 hospital labs and 118 independent labs. DHCS has the authority to suspend providers that don’t report. However, no lab suspensions have occurred to date.

DHCS took the submitted private-payer pricing data, threw out any rates higher than 80% of the current national Medicare rates, and then calculated its proposed Medi-Cal rates based on a weighted average of the remaining private-payer survey data.

The most severe rate reductions that will occur as a result of the latest survey include an 80% reduction in the Medi-Cal rate for CPT 84402 (Free Testosterone) to a proposed rate of $4.45. If finalized at $4.45, then Medi-Cal will be paying a rate equivalent to only 17% of the current Medicare rate of $25.47 for CPT 84402. This proposed rate is so low that it suggests a calculation error, notes Laboratory Economics.

Other codes with proposed Medi-Cal rate reductions so extreme that they may be erroneous include 84681 (C-Peptide), equivalent to 22% of Medicare; CPT 88307 (Surgical pathology-Level V), equivalent to 27%; and 88312 (Special Stains Group 1), equivalent to 25%.

California Clinical Lab Assn. Seeks Elimination of 80% Cap
In a letter to DHCS, the California Clinical Laboratory Association (CCLA) said that now is not the time to be substantially lowering reimbursements to labs which are playing a critical role in the fight against Covid-19. CCLA is supporting a bill (AB 1327) from California Assemblywoman Cottie Petrie-Norris that would eliminate the 80% of Medicare cap on Medi-Cal FFS rates for lab and pathology services. This bill was first introduced in February 2019.

CCLA attorney Kristian Foy says that there is no justification for the 80% cap given that Medicare CLFS tests were reduced by 10% per year between 2018 and 2020 under PAMA. Removal of the cap might allow Medi-Cal rates for some lab and pathology test codes to rise to up to 100% of current Medicare rates. Foy says that the 80% Medicare cap applied to California’s pricing data survey is undermining the purpose behind developing Medi-Cal’s California-specific market-based rates.

Furthermore, Quest Diagnostics, which is the biggest Medi-Cal lab provider (see page 4), has argued that national Medicare rates should not dictate rates in California because the implementation of PAMA relied on flawed and incomplete survey data. Other organizations supporting the Petrie-Norris bill include the California Association of Public Health Lab Directors, California Medical Association, LabCorp and Planned Parenthood Affiliates of California.

Finally, CCLA is also asking that the Assembly Bill 97 (AB 97) 10% reduction to Medi-Cal lab and pathology rates be eliminated. The AB 97 10% payment reduction, which applies to most Medi-Cal providers, was enacted during the California’s budget crisis of 2011 and has no sunset date.

A decision from CMS on the current proposed Medi-Cal lab and pathology rates is expected soon. The next DHCS private-payer data survey is scheduled to occur in 2022, and will be used to establish the July 1, 2023, Medi-Cal lab and pathology rates.

Meanwhile, Medi-Cal’s transition to using private-payer lab rates has helped it reduce its expenditures on lab testing for its two million fee-for-service (FFS) members from $314 million in 2012 to $212 million in 2019. Medi-Cal lab expenditures have also been tempered by a steady movement toward Medi-Cal managed care plans. Managed care plans are paid on a capitated basis, and they manage member care and negotiate and establish their own rates with their contracted providers. There are currently 10.3 million Medi-Cal members covered by managed care plans.

Medi-Cal Rates for Covid-19 Testing
Medi-Cal reimbursement rates for the new Covid-19 testing codes, including diagnostic testing (U0003 and U0004) and antibody testing (86328 and 86769), has been established at 100% of corresponding Medicare rates. In addition, the AB 97 10% reduction has been waived for the duration of the coronavirus crisis. Upon expiration of the public health emergency or national emergency, Medi-Cal rates for these codes will be lowered to 80% of Medicare and the AB 97 10% reduction will be applied.

Top 20 Medi-Cal Laboratories
The largest Medi-Cal lab provider is Quest Diagnostics, which received $32.5 million of Medi-Cal FFS payments in 2019, up 10.3% from $29.4 million in 2018, according to data from DHCS.

Planned Parenthood, which tests for sexually transmitted diseases, received $29.6 million, up 19.8% from $24.7 million in 2018.

The Genetic Disease Screening Program (GDSP) of the California Department of Health is the third largest, with $27.6 million, down 6.5% from $29.5 million in 2018.

The Genetic Disease Screening Program provides prenatal and newborn testing services to Medi-Cal recipients.

LabCorp received $10.3 million of Medi-Cal payments in 2019, up 16.6% from $8.8 million in 2018.

The fastest-growing laboratory was Regents of the University of CA (aka UCLA Outreach Lab), where Medi-Cal payments jumped by 180% to $3.5 million in 2019. In total, the top 20 lab organizations collected $135.1 million of Medi-Cal lab test payments for FFS patients in 2019, up 6.7% from $126.6 million in 2018.

Top 25 Lab and Pathology Companies Receiving PRF Payments

by Jondavid Klipp | Jul 15, 2020 | BioReference Labs, Exact Sciences, Labcorp, Quest Diagnostics

Top 25 Lab and Pathology Companies Receiving PRF Payments

Not surprisingly, Quest Diagnostics ($65 million) and LabCorp ($56 million) top the list in terms of highest PRF payments received by lab and pathology companies. Exact Sciences, including Genomic Health, received $23.5 million, while Sonic Healthcare, including Aurora Diagnostics, received $12.4 million. In total, the top 25 lab and pathology companies received $222.6 million in PRF payments.

Top 25 Fastest-Growing Labs by Medicare Part B Volume of Services