Labs shaking hands with molecular
  middleman

July 2005
Feature Story

When it comes to molecular testing, there are two options: send the work out or start your own molecular diagnostics laboratory. For most labs, the startup option isn’t an option at all.

That’s why some are turning to a third alternative that borrows a bit from the other two.

Take Physicians Laboratory, Ltd., in Sioux Falls, SD. A growing, private, single-specialty pathology group, Physicians Laboratory wanted not only to reduce the turnaround times for its molecular tests, but also to bump up its revenues.

"We looked around, both within and outside our ranks, to see what was available among trainees for the expertise necessary to do this," says Henry Travers, MD, pathologist and member of the board of directors of Physicians Laboratory, which serves numerous hospitals, physician offices, and clinics in rural South Dakota, Iowa, Minnesota, and Nebraska. "We discovered that the timeframe to acquire the necessary expertise, whether one of us went off for a year for additional training or we waited to recruit somebody, was a minimum of two years. But the technology was "already out there," he says, and his group didn’t want to wait two years to bring these services in-house.

While their existing vendors would have been happy, of course, to do the pathology group’s molecular testing, Dr. Travers and his colleagues were searching for a model of a different sort—one that Access Genetics, of Eden Prairie, Minn., provided. "Access Genetics offered us the opportunity to take the expertise we did have, fill in the gaps with people who had the expertise we needed, and put that together in a cooperative way that allows us to get the appropriate tests out to our clients very quickly," Dr. Travers says.

The four-year-old Access Genetics is a medical technology services company that partners with labs to help them bring molecular diagnostics testing in-house. Gary Reed, administrator of Physicians Laboratory, says Access Genetics was unique in that its partnering labs acquire some of the technical aspects of molecular testing and perform the testing on site, giving the lab control over quality, costs, and workflow. This appealed to Physicians Laboratory. "For one, we would be able to control quality on site. In addition, we believed this partnership would allow us to provide better patient care and improve our market position," Reed says.

Access Genetics has 15 lab partners now and offers seven different tests that its laboratories can bring in-house, with the option to have Access Genetics perform the analysis of the gels via a telemedicine type of setup. "We’ve grown our business by 134 percent since the beginning of 2004, and our goal for this year is to show another 100 percent to 150 percent increase," says Ronald McGlennen, MD, president, medical director, and founder of Access Genetics. Dr. McGlennen says many of Access Genetics’ partner labs are small labs or pathology practices that are working hard to survive, and that the Access Genetics model helps them expand their test menu by enabling them to perform molecular tests they would not otherwise have the resources to do.

"We primarily decided to partner with Access Genetics because they offered us an opportunity to provide polymerase chain reaction testing in our laboratory," says John Compagno, MD, medical director of West Coast Pathology Laboratories, Hercules, Calif. His laboratory is performing HPV Detect and HPV ID as well as tests for chlamydia, gonorrhea, cystic fibrosis, and inherited thrombophilia. Physicians Laboratory started with only HPV testing and recently added chlamydia and gonorrhea testing from Access.

"The liquid-based Pap smear followed by an HPV test is becoming the standard of care in many places, and we’re working to combine HPV test results with cytology results on a single report," Dr. McGlennen says.

Labs decide for themselves what tests they want to bring in-house when they team up with Access Genetics, though the company specializes in high-volume assays like human papillomavirus. Access comes into the lab, sets up the necessary equipment for the tests the laboratory wants to offer, which is purchased by the lab or leased from Access, and then trains lab employees in the proper procedures for extracting DNA from samples and using the instruments.

"In our situation, we lease the equipment, pay a monthly bill for reagent and other costs, and then pay an interpretation fee for each gel Access Genetics reads," says Paige O’Keefe, MT(ASCP), lead medical technologist of infectious diseases and serology in the central laboratory at HealthPartners in Minneapolis, an HMO consisting of about 25 clinics, one hospital, and five outreach centers that serve more than 630,000 members in Minnesota and western Wisconsin. Dr. McGlennen reads the gels using Access Genetics’ proprietary Web-Enabled DNA Testing System. "They’ve installed a computer that takes a picture of the gel and sends it through software to wherever Dr. McGlennen is so he can read it," O’Keefe says. For now, testing for cystic fibrosis is the only molecular procedure HealthPartners lab is offering in conjunction with Access.

Once the instruments and software are up and running, Access Genetics trains the partner lab’s employees. In most labs, the training takes one to two weeks. "Assuming that a lab has a medical technologist or a cytotechnologist to work with, the training takes a relatively short amount of time." But, Dr. McGlennen says, it’s an "intense and comprehensive hands-on experience, beginning with a scientific overview of how DNA chemistry works."

Early on, Access Genetics helps its labs set up standard operating procedures, validation plans, and anything else they might need to comply with CLIA ’88 regulations. "They provide us with all of the required procedures needed for us to write the NCCLS format," says Shirlee DeHaan, CT (ASCP), cytology and molecular pathology supervisor at Physicians Laboratory. She adds, "We’ve discussed the CAP checklists with them on the phone. They’re very helpful in determining the best way to meet the regulations."

In fact, since Access Genetics does not make analyte-specific reagents, the building blocks of in-house developed tests, it can help its partner labs use them appropriately, unlike ASR manufacturers, who are prohibited from placing instructions on how to use an ASR in product labeling. "Because the cystic fibrosis test we do is performed using an ASR," O’Keefe says, "ASR manufacturers are not able to assist us with certain aspects of the test because of how it’s classified by the FDA. Having Access teach us what to do made us feel much more confident in our skills, and made us believe we can do molecular testing." Though the test for cystic fibrosis is the only ASR HealthPartners is using now, it is planning to do more work using ASRs in-house.

From a CLIA standpoint, Dr. McGlennen acts as a consultant in the testing process for most labs. "The current procedure for reviewing technical as well as medical data is that there is at least a two-point review," he says. "So a set of data comes to Access Genetics from a partnering laboratory, and a medical technologist certified in molecular genetics reviews that data first, and the data is then forwarded to me, at which point I review it technically as well as for its medical content. Then that gets forwarded to the laboratory that’s working with us, along with my observations." From the moment the data are created, he adds, "we get the answer out in one to two hours."

State-based differences in laboratory regulations, however, have resulted in slight modifications to this process. In California, for example, a laboratory cannot bill for an interpretation it did not perform. Consequently, for Dr. Compagno’s lab, Access Genetics is not doing the interpretations; rather, it has transferred that knowledge and experience to Dr. Compagno. "For example, I now know what a negative result looks like for the tests we perform, so if it’s totally negative, I can sign out a test result. If there is any question in my mind, however, then I consult with Dr. McGlennen, and that’s perfectly legal," Dr. Compagno says.

Laboratories that want to partner with Access Genetics must first set up their equipment with Access’ help, and this can cost a lab with no molecular testing equipment as much as $40,000 if it decides to purchase the equipment rather than lease it. "When we go to some of the more sophisticated hospitals, however, they already have a lot of the different pieces of instrumentation necessary, and we do site visits so that we help them pick through what they already have that they can use. In these cases, those startup costs are much less," says Terri Poindexter, MT, CLS, vice president of marketing and sales at Access Genetics.

Whether a laboratory can realize cost efficiencies by partnering with Access Genetics versus sending tests to a reference laboratory varies from lab to lab. "Across the country, reimbursement amounts for molecular testing are quite varied, and that can affect whether or not a lab loses money or makes money," Dr. McGlennen says. Before Access partners with a lab it performs an extensive financial review of whether the laboratory would benefit financially. "We can very precisely calculate what a lab would deal with in terms of front-end costs, what their reimbursement picture is looking like, what their labor costs will be, and what will then be their return on investment to do this," he says.

The analysis may suggest for some laboratories that forming such a partnership may not be in their financial interest. "In terms of cost-effectiveness, this is not a great model for all groups," Dr. Travers says. For a large group practice or for one with expertise in molecular pathology, he says, it may be more advantageous and less expensive to set up your own molecular pathology laboratory. "When you are in a rural area, like we are, and your clinicians want to be able to provide the best service and use the kinds of technologies that are resulting in dramatic decreases in things like false-negative fraction or the predictability of invasive cancer, this may be a relatively straightforward way of doing it," he says.

For some, the cost efficiencies may be within sight but not immediate. "We’re analyzing our financial status right now with the help of Access Genetics," Dr. Compagno says, but preliminary numbers indicate that because labor and other costs are so high in California, the model may not now be cost-effective for each individual test. "However, that doesn’t mean that it won’t be profitable over time," he says, "and cost wasn’t our main reason for doing this anyway—turnaround time was."

In fact, as test volumes have grown at a number of Access’ other partner labs, so has income, and the Access model appears to help nudge volumes upward. "In almost every example where we’ve introduced a test at a certain time, volumes have grown steadily and are often multiples of the send out tests within six to eight months," Dr. McGlennen says. "Also, when you look carefully at the operations and the truly transparent costs of doing this, we find that the volumes necessary to make this a thriving endeavor are relatively small."

What Dr. Travers and his colleagues like most about the model is that it has shortened turnaround time and enabled the lab to report virus types for HPV at a lower cost. Dr. Travers estimates that if Physicians Laboratory were sending HPV by PCR with subtyping to a reference laboratory, its costs would be about 20 percent higher than what it costs them to perform the test in-house. Moreover, the laboratory is able to set its own prices for the tests it performs, which it did not do when the tests were sent to a reference lab.

"The HPV value-added is that we are able to provide with Access Genetics’ help the specific HPV virus type," Dr. Travers says. "We decided to do that based on our belief that virus type will become an important piece of information in the management of women with abnormal Pap smears."

In addition, DeHaan says, the clients of Physicians Laboratory like the shorter turnaround times: "We can get the results out now in 24 to 48 hours. Before, when we were sending it out, it was about a five-day turnaround time."

Credibility seems to be an extra plus—perhaps one not foreseen. "One of the concerns we had when we did this," Dr. Travers says, "was that Physicians Laboratory may lose some of its identity to Access Genetics, and that, in fact, Physicians Laboratory isn’t the one doing this test—we’re just sticking our logo on it and someone else is doing it." But the opposite seems to have happened: The lab’s identity has grown stronger. "The fact that we have made the choice to partner with Access and the quality of that company raise our stature in the eyes of our clients," he says.

Yes, Access’ Poindexter says, the pathology groups they’re doing business with "become the face of molecular testing to those doctors."

"Our partners become the front of expertise to their ordering physicians, and we support them in the back," she says.

Sue Parham is a writer in Edgewater, Md.