The “Business Case” for Digital Pathology

A work in progress . . .

Luke Perkocha, UCSF

What will I talk about today?• WSI mainly, though static and dynamic

telemed; gross imaging; teleconferencing; other IT applications, AP-LIS systems, maybe as important, as enabling technologies

• Clinical, educational apps. – not research

• A couple of basic business principles

• The “drivers” for digital radiology/PACS

• Some “niche” business cases now

• ? Catalysts for more rapid adoption

Who am I?(My perspective)

• Interested novice

• Career in Private Practice

• Dot-com Vet

• Recent career change – Academics

• “Thought experiments” – no data!

• Disclosure – Aperio MAB

Where am I?• Academic medical center

• Competitive market environment

• Only limited digital pathology now• Gross photos, not stored in LIS• Robotic scope for FS at home, Tx service, very

limited daytime use for consultation on FS• Manual quantification of ER/PR Her2• WSI Images used in teaching, still have scopes• No document management• No images in reports or LIS• No WSI imager in-house

Business principles:

Business principles:

Things that don’t work

“We’re losing money on every case – we can make it up on volume”

• Example: UCSF Teledermatology• Store and forward model• Underserved (under-insured) population• Phone calls, secretarial time, paperwork,

coordination, billing problems• Recognized and being addressed• Digital Pathology Dream: “The world is our

market!” – make sure it doesn’t take longer and cost more than mailed-in slides.

“I think this is the coolest thing – everyone will want it just as much

as I do!”

• Corollary: Everyone will be willing to pay (extra) for it.

• Developing the market for something new and different is within the financial capacity of the organization.

Business principles:

Things that work

Potential Profit Mechanisms1. Increase revenue:

– More $ for same thing: New CPT, extra pay for digital “enhancement” of what we do now (Thin Prep)

– More $ for new thing on same spec: New CPT, extra pay for digital analysis (extrapolation / quantification / CAD), what we can’t do now, but on same specimen (HPV)

– Virtualization expands geographic market: $ from new customers, increased volume from a new business channel

2. Lower costs:– Lab benefit - Increased productivity (↓cost/unit lab svc);

create capacity – Institutional benefit – in a dispersed multi-specialty

department, ↓TAT (even if ↑lab cost) may save $ on overall care delivery (Mayo model)

– Reduce non-productive costs (errors, losses, redos)

Looking at radiology – Early drivers

• Lost films – legal; staff time; re-do; patient care; lost revenue

• X-sectional images – radiologists quickly overwhelmed – PACS enabled “stack mode”

• Radiologist shortage

Source: Dreyer, et. Al. PACS, 2nd ed. 2006

Source: Dreyer, et. Al. PACS, 2nd ed. 2006

Source: Dreyer, et. Al. PACS, 2nd ed. 2006

Sunshine and Meghea. AJR 187: November 2006

Q:

1. Growth of imaging abated – No, up 23%

2. Non-radiologists doing more – No, rads up 15%

3. More offshore outsourcing – Yes, but Americans

4. Radiologists retiring later – No

5. More residents turned out – No

6. Fewer residents take fellowships – No

7. Radiologists working more hours – No

“CONCLUSION. Increased productivity is the predominant explanation of how the radiologist shortage eased. The contribution of other factors was, in comparison, small or even in the opposite direction.”

A:

Hypotheses Investigated

How is it that productivity increased enough between 2000 –

2003 to not only handle the increased workload, but ease the

shortage of radiologists?

• Hi tech – digital imaging and PACS, other technology (telephony, EMR results delivery, etc.)

• Lo tech – improvements in workflow, use of physician extenders – enabled by technology

Radiology – Unexpected drivers

• Productivity gain from digital + PACS workflow improvement ~ overall 30%

• Growth capacity with same staff

technical and pro fee revenue: a real ROI for radiologists, hospitals AND industry– Medicare: “contemporaneous reading

requirement”– Nighthawks – lifestyle issue

Tracked Costs EliminatedDigital Radiology• Labor: developing,

storing, retrieving, 24/7 staffing

• Capital: Developers, Film alternators, misc.

• Consumables: film, developer chemicals, film jackets

• Disposal: chemical waste, recycling

• Space: darkroom, film storage

Digital Pathology• Labor: ? courier• Capital: ? cars• Consumables: ?

recuts for lost slides• Disposal: ?• Space: ? glass slide

storage (legal to be solved)

Glass-based Pathology: Untracked Costs

• Pathologist productivity loss from “batch mode” operation, bad workflow – will pathology PACS fix this?

• Wasted staff time looking for lost tumor board slides; pulling old bx for compare, etc.

• Delay in diagnosis, waiting for sub-specialty consultation; courier slide transport from remote lab

• Patient safety / errors (if PACS forces machine tracking of assets)

• “Opportunity costs” of lost business due to slow TAT

Lost FilmsLost FilmsX-S Data ExplX-S Data Expl

Rad ShortageRad Shortage

DICOMDICOM

Comp Pwr, CostComp Pwr, CostProfit PotentialProfit Potential

Overt Cost ReductionOvert Cost Reduction

“Perfect storm” for adoption of digital radiology and PACS

Lost SlidesLost SlidesIPOX Data ExplIPOX Data Expl

Path ShortagePath Shortage

StandardStandard

Comp Pwr, CostComp Pwr, CostProfit PotentialProfit Potential

Overt Cost ReductionOvert Cost Reduction

+ / -

SOON

YES

“Perfect storm” for adoption of digital pathology and PACS?

• “Digital pathology is no longer a dream. Doctors have begun to diagnose diseases by using computers like microscopes… Pathology is just beginning to enter the digital era… It’s a change that promises faster diagnoses for patients and potential cost savings for hospitals.”– Story on PBS’s Nightly Business Report,

July 10, 2008

• “Doctors in the US and other countries have long practiced variations in telemedicine to provide care to …underserved locations. But in the future, telemedicine will be practiced more as a way of distributing work loads and lowering costs…Outsourcing and offshoring of medical services will increase, providing more …cost-effective healthcare.”– Wall St. Journal, Oct. 20, 2008

• “In the future, there will be three often overlapping modes of delivering healthcare services: …performed in person by humans … performed by people at a remote location … performed by computers without direct human involvement.”– Wall St. Journal, Oct. 20,2008

Storm clouds gathering in pathology?

• Patient safety media focus a “brand” issue for the institution

• Histotechnologist shortage “breakthrough” robotics (continuous flow)… or skip the glass …

• Path PACS perceived as a “growth market” by mega-technology companies?

• DICOM – 26 or other; bar code effort APIII• Demographics: newpath @ home• Disruptive biz models: off-shoring; e-Bay

for biopsies; “virtual” practice models

Applications Considered at UCSF• Medical Education: Students, residents, CME,

remote learning• Remote FS – nights, expert at other hospital• Virtual Consultation – distributed practice (may

have clinical ROI)• QC – IPOX• Tumor Boards – Spinosa study, requires PACS to

realize full potential cost savings• Quantitative image analysis• Other CAD applications• Routine digitization of all cases ???• New business models, enabled by virtualization

Education

• Med Student Histology / Pathology courses: improved quality, inexpensive, but no cost savings; other places get rid of scopes

• Resident frozen section / teaching archive: improved quality, inexpensive, but trivial cost savings from current system

• CME: cases distributed virtually, some cost savings w/o glass slides, improved revenue if attractive to registrants– Competitive advantage price of entry

A “Big Hairy Audacious Business Case”

Dot-com era justification to ask for ridiculous sums of money to

commercialize a hair-brained idea

Summary• No compelling business case now for full

digitization of routine cases in most labs• Niche business cases exist now

– Education, Remote FS / Consultation, IHC Quantification

– Tumor Boards, QC

• These may not apply in all settings – local cost/benefit must be assessed

• Routine digital path probably will make business sense in the future, but when?

• “Catalysts” that bring this about may not be the ones we now predict

Thanks !!

• Ron Arenson, David Avrin, Radiology UCSF, ASNR

• Paul Chang, Rads and Path, U Chicago

• APIII Faculty

• Bruce Wintrobe, Ilona Frieden, Dermatology, UCSF

• Abul Abbas, Linda Ferrell, Pathology, UCSF