America’s Fastest-Growing Labs

America’s Fastest-Growing Labs

America’s Fastest-Growing Labs

Phlebxpress (Temecula, CA) grew its Medicare Part B test service volume by 202% per year between 2015 and 2018, making it the fastest-growing independent lab company in America over the three-year period. Phlebxpress is a mobile phlebotomy company headquartered in Southern California that serves California, Nevada, and Texas. Its highest volume Part B test services included travel allowance (P9603 & P9604) and routine venipuncture (CPT 36415).

Two other mobile phlebotomy companies, Mobile Health Labs (Orlando, FL), up 63% per year, and Unique Lab Services (Fountain Hills, AZ), up 59% per year, rounded out the top three.

Two hospital-owned outreach labs, UCLA Outreach Clinical Lab (Panorama City, CA) and Pathology Laboratory (Ankeny, IA), owned by UnityPoint Health, were also among the fastest-growing lab companies.

Overall, some 2,900 independent clinical labs saw their Medicare Part B volume decline from 352.6 million test services in 2015 to 314.2 million test services in 2018. The decline was mostly driven by the introduction of new bundled codes for drug testing (G0480-G0483), which eliminated a large volume of individually billed drug tests.

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

Battle Continues Between Enzo And Harbert Discovery Fund

Battle Continues Between Enzo And Harbert Discovery Fund

Battle Continues Between Enzo And Harbert Discovery Fund

 Alabama-based investment management firm Harbert Discovery Fund continues to feud with Elazar Rabbani, PhD, Chairman and CEO of Enzo Biochem (New York City) over the future of the clinical lab and diagnostic products company.

Harbert is an activist investor fund that targets small-cap companies that it believes are undervalued. Harbert accumulated shares in Enzo from May to August 2019 at prices ranging from $3.07 to $3.65 per share. It currently owns 5.6 million shares, or an 11.7% stake, making it Enzo’s largest shareholder.

In February 2020, Harbert nominated and won Enzo board seats for two directors, Fabian Blank and Peter Clemens (see LE, March 2020). However, Clemens and Blank both resigned from Enzo’s board in November. “It appears that Chairman and CEO Rabbani has created such an extremely hostile environment that Pete and Fabian found their position untenable as minority members in opposition to Mr. Rabbani’s continued mismanagement,” according to a letter Harbert sent to Enzo’s board of directors on November 18. Harbert called for the resignation of Rabbani, followed by an immediate pursuit of the sale of the company. Harbert believes Enzo could be sold at a minimum of 2x its current annualized revenue, or $5.51 per share.

Dr. Rabbani, age 77, is a founder of Enzo and has served as the company’s Chairman and CEO since its inception in 1976. He holds a 4.1% stake in the company. His board seat is up for reelection to another three-year term this January.

In response to Harbert’s letter, Enzo filed a lawsuit against Harbert on November 27 in the Southern District of New York. Enzo alleges that Harbert has made material misrepresentations to Enzo’s shareholders and that its board nominees, Clemens and Blank, were unprepared and never proposed a single strategic plan to help Enzo. Enzo says that Harbert is seeking to “force a fire sale” to the detriment of shareholders. Enzo alleges that Harbert has made false or misleading statements in violation of Securities Exchange Act rules. Enzo is seeking a permanent injunction to stop Harbert from making future misrepresentations, correct past alleged false statements, and pay monetary damages to cover Enzo’s related proxy contest expenses and attorneys’ fees.

Enzo’s Revenue Jumps Driven by Covid-19 Testing
Separately, Enzo reported net income of $299,000 for the three months ended October 31, 2020 versus a net loss of $7.6 million for the same period a year ago; total revenue increased by 42% to $28.7 million.

Enzo’s Clinical Lab Division recorded a 66% revenue increase to $21.2 million. The improvement was driven by Covid-19 testing. Total volume grew to 300,000 accessions in the latest three month period  versus approximately 200,000 a year earlier. Average revenue per accession increased to more than $69 per accession versus $62 in the previous year’s period.

Enzo Got $7 Million PPP Loan
The CARES Act expanded the U.S. Small Business Administration’s (SBA) business loan program to create the Paycheck Protection Program (PPP), which provides employers with loans for the purpose of retaining employees and maintaining salaries. PPP loans are wholly or partially forgivable if spent on payroll and certain other operating expenses. Enzo, which has 408 full-time and 40 part-time employees, was one of four publicly-traded lab companies that received a PPP loan. Enzo received a PPP loan of $7 million in April, while Interpace Biosciences received $3.5 million, Psychemedics got $2.2 million and Aspira Women’s Health (formerly named Vermillion) got $1 million. 

Volume Surge Expected For High-Priced Covid-19 Test Panels

Volume Surge Expected For High-Priced Covid-19 Test Panels

Volume Surge Expected For High-Priced Covid-19 Test Panels

With the flu season underway, more test panels are becoming available that test for Covid-19 plus other respiratory viruses, including influenza A/B and respiratory syncytial virus (RSV). Labs have begun to submit the combo PCR tests codes for Covid-19, although volume is nominal at this stage, notes Lale White, Chief Executive at XIFIN Inc. (San Diego, CA).

The AMA has issued new CPT codes for Covid-19 PCR-based test panels (87636 & 87637) and Medicare contractors have set rates for both of these codes at $142.63 by crosswalking to the existing code 87631 (respiratory virus detection, 3-5 targets).

In addition, several Proprietary Laboratory Analyses (PLA) codes (e.g., 0223U, 0202U and 0225U) have been issued for larger Covid-19 test panels that include up to 22 pathogen targets. Medicare contractors have set rates for these codes at $416.78 by crosswalking to the existing code
87507 (infectious agent detection, 12-25 targets).

There are currently an average of 1.5 million Covid-19 PCR tests being performed each day in the United States at cost of roughly $150 million per day, or $50+ billion annualized. A transition toward combo test panels reimbursed at $142-$417 per panel could potentially push the annualized market to more than $100 billion. That would exceed the total U.S. market for all non-Covid clinical lab and pathology testing.

In June 2020, the Office of Inspector General (OIG) communicated its fear that many labs are performing medically unnecessary add-on tests when responding to orders for Covid-19. The OIG has added an analysis for potential fraud and abuse with Covid-19 add-on testing to its work plan,
notes Charles Root, PhD, President of CodeMap LLC.

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

Top 25 Hospital Outreach Labs for 2019

Top 25 Hospital Outreach Labs for 2019

Top 25 Hospital Outreach Labs for 2019

The table below lists the top 25 hospital-based outreach labs as measured by Medicare Part B CLFS and Physician Fee Schedule anatomic pathology test payments in 2019. Overall, the top 25 hospital labs had $169 million in Part B payments, which was down approximately 8% from 2018 due to the PAMA-related CLFS rate cuts.

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

CorePlus Details Its Use Of Artificial Intelligence For Prostate Cancer

CorePlus Details Its Use Of Artificial Intelligence For Prostate Cancer

CorePlus Details Its Use Of Artificial Intelligence For Prostate Cancer

Last month, LE briefly noted that CorePlus Servicios Clínicos y Patológicos LLC (Carolina, Puerto Rico) had become the first independent lab in the Americas to begin using artificialintelligence-assisted (AI) pathology for prostate cancer diagnostics. This month wegot in touch with CorePlus President Mariano de Socarraz to find out more.

Can you describe CorePlus?
We opened our CLIA-certified laboratory in Carolina, Puerto Rico in 2008. We currently have 115 employees, including four pathologists. CorePlus is full-service independent laboratory. Among our specializations is uropathology. We process approximately 3,000 prostate cancer cases (~36,000 slides) per year, representing more than half of all outpatient prostate cancer biopsies performed in Puerto Rico.

Is operating a lab in Puerto Rico different than in mainland United States?
No. Puerto Rico is a U.S. territory that must follow all federal lab regulations, including CLIA. Medicare and Medicaid insurance cover the majority of the 3.2 million people living in Puerto Rico and the biggest private insurer is Triple-S, which is an independent licensee of the Blue Cross Blue Shield Association. The biggest difference is probably reimbursement rates, which are substantially lower in Puerto Rico.

Among the competing clinical labs in Puerto Rico are Laboratorio Clinico Toledo and Laboratorios Borinquen. Anatomic pathology labs include Hato Rey Pathology and Puerto Rico Pathology. Quest Diagnostics has had a reduced presence following the damage to its lab facilities from Hurricane Maria in 2017. LabCorp transports specimens to its labs in Florida.

When did CorePlus transition to digital pathology?
We began digitizing slides using 3DHISTECH scanners in mid-2019. By late 2019 we had completed validation and by early 2020 our pathologists were reading digitized images for all our pathology cases, including all routine histopathology and stains.

What type of computer screens do your pathologists read the digital slide images from?
CorePlus validated the Dell UltraSharp 49 Curved Monitor – U4919DW. It’s a high-end, business grade monitor with a Delta E of <2 (color difference perception) and an aspect ratio of 32:9:0. This aspect ratio is the equivalent of two 27-inch monitors running at 2K.

And how did you get involved with AI-assisted pathology?
In August 2018, I read about a validation study conducted by University of Pittsburgh Medical Center which used an AI-based algorithm to detect and characterize prostate cancer from digitized slides. This study [recently published in The Lancet Digital Health] showed that an AI-based algorithm demonstrated 98% sensitivity and 97% specificity at detecting prostate cancer from 1,600 different tissue slide images that had been collected from 100 patients seen at UPMC who were suspected of having prostate cancer. It even spotted six potentially malignant slides that expert pathologists had failed to identify initially. This interested me, so I contacted the company that developed the algorithm, Israel-based Ibex Medical Analytics. We ran our own validation studies on 1,301 digitized prostate tissue slides and found results similar to those at UPMC. Overall accuracy was 99.4% with 96.9% specificity and 96.5% sensitivity.

How have you integrated AI into your pathology lab?
Our pathologists continue to read digitized images for every prostate tissue slide prepared by our lab. But starting in June, we also began sending digitized images of each slide to the Ibex cloud. Ibex runs its AI-based algorithm on each slide which provides 100% quality control on all prostate cases. This serves as a digital second opinion for our pathologists.

What happens when there is a discrepancy between the pathologist’s exam and the algorithm?

The pathologist goes back and reviews the slide(s) and/or orders an immunohistochemistry. I believe that we have reduced the potential for a misdiagnosis on prostate cancer biopsies to much less than 1%. This is significant given that even an expert uropathologist can miss 3%. So the AI
algorithm is acting as a failsafe that is catching cases that might otherwise be missed.

Was there any reluctance from your pathologists as you transitioned to digital pathology and AI for prostate?
The pathologists were always fully engaged in the transition. Our pathologists say they would never go back to the microscope, especially given their ability to read digitized slides at home during the pandemic. We have analyzed over 1,000 prostate biopsy cases using digital pathology with AI assistance to date. In real world practice it has helped identify lesions that would otherwise have been missed.

Will you apply AI-based algorithms to other cancers?
Yes, we are planning to start using an Ibex algorithm for second reads on all breast cancer cases within the next few weeks.

How does your lab get compensated for using digital pathology and AI to improve accuracy?
We do not get additional compensation and that is the problem with the current CPT-based feefor-service reimbursement model. AI increases accuracy and reduces utilization of immunohistochemistry and there ought to be some coding mechanism that fairly compensates labs that use it.
In the meantime, the increased efficiency that the combination of digital pathology and AI provides has helped offset the initial technology investment and development cost. In addition, the increased accuracy at CorePlus through its use of AI should lead to more clients. Knowing that 100% of prostate cancer cases sent to CorePlus are getting an AI second opinion should raise urologists’ confidence in our lab.

How will AI affect the practice of pathology over the long term?
After our current use of digital pathology and AI as a second read tool, I anticipate it will progress to be used as a triage tool and finally for primary reads with the supervision of a pathologist. The role of pathologists will evolve away from time at the traditional microscope toward selecting the
right AI algorithm to apply to a digitized slide and reviewing results in combination with a patient’s medical record to form a diagnosis.

Switching gears, is CorePlus performing Covid-19 PCR testing?
We started Covid-19 PCR testing on the Roche cobas 6800 platform in late April. CorePlus has been on an allocation of seven kits per week (equal to 1,344 tests). To compensate for the test reagent shortage, we began pooled testing for three specimens at a time in July. This has expanded our capacity to about 4,000 tests per week and we are preparing to increase our pool size to six specimens, which will double our capacity to 8,000 tests per week.

How do you see the Covid-19 pandemic ending?
It is not going away any time soon, even with a vaccine. Population immunity may take years.