PathGroup Buys Southeastern Pathology Associates

by Jondavid Klipp | Sep 15, 2019 | Lab Acquisition, PathGroup

PathGroup Buys Southeastern Pathology Associates

SEPA was started as an outpatient pathology laboratory in 1992 by its Medical Director Patrick Godbey, MD and Chief Medical Officer Mark Hanly, MD, who met while in training at the Medical College of Georgia. Over the next 20 years, their practice grew and they started to take on hospital contracts in central and southeast Georgia and northern Florida, and started a clinical laboratory.

SEPA sold its clinical laboratory business to LabCorp in 2013. Since then, SEPA has focused on its hospital contract business and to a lesser extent providing outreach anatomic pathology services to physician office clients. Its larger contracts include laboratory medical directorships at five hospitals
affiliated with Baptist Medical Center (Jacksonville, FL), and two hospitals affiliated with Southeast Georgia Health System (Brunswick, GA). SEPA’s main anatomic pathology lab is located in Brunswick and it has five smaller freestanding AP labs in Georgia, Florida and South Carolina.

Drs. Godbey and Hanly will continue in their current roles at SEPA and will also join a newlyformed Medical Executive Committee at PathGroup.

Pritzker Private Capital (Chicago, IL) took a majority stake in PathGroup in the summer of 2016. The size and pace of PathGroup’s acquisitions now seems to be accelerating, observes Laboratory Economics

Study: Cologuard Less Effective And More Costly Than Alternatives

by Jondavid Klipp | Sep 15, 2019 | Cologuard, Exact Sciences

Study: Cologuard Less Effective And More Costly Than Alternatives

Exact Sciences’ Cologuard test is less effective at saving lives and more costly than other CMSreimbursed colorectal cancer screening tests, according to a study published September 4 in PLOS One, a peer-reviewed scientific journal published by the Public Library of Science.

The study was requested by CMS and conducted by investigators at the Cancer Intervention and Surveillance Modeling Network. Lead authors were Steffie Naber, PhD, from the Department of Health Care Innovation & Evaluation at University Medical Center Utrecht in the Netherlands, and Amy Knudsen, PhD, from the Institute for Technology Assessment at Massachusetts General Hospital. No conflicts of interest were reported.

The researchers used three different models to simulate a cohort of previously unscreened 65-yearold Americans who are screened with Cologuard every three years, or one of six other CMS-reimbursed screening strategies.

Life Years Gained
Compared to no screening, triennial Cologuard testing resulted in an average of 82 life years gained (LYG) per every 1,000 simulated individuals. This was more than for sigmoidoscopy (80 LYG) at a five-year interval, but less than every other simulated strategy. The most effective strategy by far was a 10-yearly colonoscopy (104 LYG).

The reduction in lifetime risk of death from colorectal cancer was lowest for Cologuard (66%reduced risk) and highest for 10-yearly colonoscopy (84%).

Cost Effectiveness
The study found that at its 2017 reimbursement rate of $512, Cologuard was the most expensive strategy. Two of the models showed that reimbursement for triennial Cologuard testing would need to be drastically lower, in the range of $6–18 per test, for it to be cost-effective. In the third
simulation model, there was no level of reimbursement at which Cologuard would be cost effective (unless priced below zero).

The most cost-effective strategies were 10-yearly colonoscopy and an annual fecal occult blood test (either guaiac-based or FIT).

What can CMS do?
The Medicare Part B program spent $170 million on Cologuard testing in 2018 and analysts’ projections suggest Part B spending on the test will rise by 78% to about $300 million this year. But there isn’t a clear-cut way for CMS to change its reimbursement rate for Cologuard under PAMA regulations. However, private insurance companies are likely to jump on the study’s findings as rationale to cut their rates. Over the long term, this should lead to significantly lower Medicare rates for Cologuard.

Cancer Genetics Inc. Sells Businesses To Raise Cash & Lower Debt

by Jondavid Klipp | Aug 15, 2019 | Cancer Genetics, siParadigm

Cancer Genetics Inc. Sells Businesses To Raise Cash & Lower Debt

Cancer Genetics Inc. (Rutherford, NJ) has sold its clinical lab business to siParadigm LLC (Pine Brook, NJ) for an initial payment of approximately $1 million, plus an earn-out based on test volume over the next 12 months. Cancer Genetics’ clinical lab business specializes in cancer testing, and reported revenue of $7.4 million in 2018, down from $10.8 million in 2017.

siParadigm operates a cancer testing lab in northern New Jersey. The company was founded by its President Sherif A. Nasr, MD in 2003. Prior to founding siParadigm, Nasr was an Associate Medical Director at Quest Diagnostics.

In a separate transaction, Cancer Genetics sold its biopharma services business to Interpace Diagnostics (Parsippany, NJ) for approximately $23.5 million, including assumed debt. The biopharma business, which reported revenue of $14.8 million in 2018, performs molecular tests at labs in
Rutherford, NJ and Research Triangle Park, NC for cancer drug development clients.

Following these transactions, Cancer Genetics will focus on its remaining discovery services business, which performs preclinical studies and provides testing services to guide new drug development for biotech and pharmaceutical companies. The company’s discovery business generated
revenue of $5.2 million in 2018, up from $3.7 million in 2017.

Cancer Genetics aims to lower debt, raise cash and trim losses through the sale of the two businesses. Since its inception in April 1999 through March 31, 2019, Cancer Genetics has accumulated losses of $162 million. Most recently, the company reported a net loss of $4.7 million on revenue of $6.8 million for the three months ended March 31, 2019.

Cancer Genetics went public through an IPO in June 2013 and shortly thereafter its stock hit an all-time high of $21 per share giving it a market value of $100+ million. Most recently, its shares were trading at $0.12 for a market capitalization of $7 million.

AMCA Data Breach Victim List Continues To Grow—What A Mess!

by Jondavid Klipp | Aug 15, 2019 | AMCA, Cybercrime

AMCA Data Breach Victim List Continues To Grow—What A Mess!

The list of laboratories affected by the data breach at American Medical Collection Agency (AMCA), which filed for bankruptcy on June 17, continues to grow. So far, at least 24 labs and more than 25 million patients are estimated to have been affected by the incident.

AMCA had been the nation’s largest debt collector for past-due lab test bills. Hackers gained access to AMCA’s online payment system between Aug. 1, 2018 and March 30, 2019. The target was patient credit card information, which is now being sold on the dark web (see LE, July 2019).

In addition to Quest Diagnostics, LabCorp and BioReference Labs, other former AMCA lab clients affected by the hack include many of Sonic Healthcare USA’s subsidiary labs including Clinical Pathology Labs, Sunrise Medical Labs, CBLPath and American Esoteric Labs. In addition, Sonic acquired Aurora Diagnostics in January and many of its subsidiary labs had been AMCA clients as well. Other labs affected by the breach include CompuNet Clinical Labs, Inform Diagnostics, Natera and Penobscot Community Health Center in Maine.

The AMCA data breach is a huge headache for both the legal and information technology departments at affected labs. For example, Quest Diagnostics says that approximately 31 class action lawsuits related to the AMCA data hack have been filed against it. In addition, Attorneys General
offices from numerous states and the District of Columbia and certain U.S. senators are investigating the situation and requesting information from affected labs.

And finally, there is also the question of what happens to the legitimate past-due balances owed by more than 25 million patients to the affected labs? Assuming an average past-due balance of $20 per patient and a collection rate of 10% suggest there might be a total of $50 million worth of
writeoffs incurred by former AMCA lab clients.

True Health Files For Chapter 11 Bankruptcy

by Jondavid Klipp | Aug 15, 2019 | True Health

True Health Files For Chapter 11 Bankruptcy

True Health Diagnostics (Frisco, TX) filed for Chapter 11 bankruptcy protection on July 30, blaming CMS’s suspension of its Medicare payments since May 2017.

In its bankruptcy filing, True Health said it had less than $50,000 of assets, and more than $100 million in liabilities. The company’s largest unsecured creditors include the investment bank Houlihan Lokey Capital (owed $2 million), Roche Diagnostics ($1.8 million) and the law firm Perkins
Coie ($1.3 million).

True Health, which markets advanced lipid test panels, was founded in 2014 by its CEO Chris Grottenthaler. The company jumped in size when it purchased Health Diagnostics Laboratory (HDL-Richmond, VA) for $37 million from a bankruptcy court auction in late 2015. HDL went bankrupt in June 2015 soon after agreeing to pay the federal government $47 million to settle claims it paid kickbacks to physicians in the form of a $20 per specimen process and handling fee.

True Health operates a small lab and administrative office in the Dallas area and a 100,000-squarefoot lab in Richmond. Prior to its Medicare suspension of payments, the company had a total of 400 employees and estimated annual revenue of approximately $80-$100 million, including more
than $25 million from Medicare.

True Health’s problems began in May 2017 when CMS suspended its Medicare payments on the basis of “credible allegations of fraud.” As part of this suspension, CMS imposed a 100% hold of all Medicare payments to True Health for services rendered to Medicare beneficiaries. At the time, this
amounted to approximately $2 million per month, or about 30% of True Health’s total revenue.

In June 2017, CMS reduced the suspension to 35% of Medicare payments, withholding roughly $800,000 per month from True Health. But this June, CMS raised the suspension back up to 100% once again based on “credible allegations of fraud.”

True Health filed a lawsuit against CMS in early July seeking an emergency motion for a temporary restraining order. The company contends that it never received an adequate opportunity to challenge the merits of the suspension. “This Kafka-esque system, under which CMS can withhold over $20 million without an explanation or an opportunity to challenge the suspension, and continually extend and complicate the suspension…has left True Health in financial ruin,” according to the lawsuit.

A federal court dismissed True Health’s lawsuit on July 22, enabling CMS to continue withholding payments. True Health laid off 80 employees on July 29, and says that unless additional funding is found or a “white knight” appears, it may need to shut down by the end of September.

Prior to its problems with CMS, True Health had quickly risen to the top of advanced lipid testing labs. True Health served 66,890 Medicare beneficiaries in 2016 and received $41.2 million in Medicare Part B payments, according to data from CMS.