Under the Microscope
In an industry where business models often promote outsourcing of health care services, San Diego-based blood and laboratory services company Accumen Inc. is growing quickly by doing the opposite: partnering with hospitals to make the most of their in-house blood transfusion and lab-testing operations.
Since its first business deal five years ago this month, Accumen says its revenue has climbed 20 percent to 50 percent per year — unremarkable for a young company until you consider it became profitable its second year, paid cash in spring for a Michigan laboratory consulting company and expects to add about 20 people by year’s end — a fifth of last year’s payroll — just to keep up with a sharp increase in new accounts.
Now CEO Jeff Osborne says the company is considering additional acquisitions as soon as next year to address clients’ requests for help with services such as genetic testing, radiology and big data analytics.
“You never know at this point, (but) if we can find somewhere we can add value, we might” buy another company in 2017, Osborne said. He added Accumen is not currently in due diligence preparing for an acquisition, though it always keeps two to three potential purchases “on radar.”
The Business Model
The company’s business model involves completely assessing a new partner’s lab and blood program. Accumen examines things such as purchasing and the speed and accuracy of lab tests before setting up a computer scorecard system by which physicians and staff can compare their performance against that of their peers.
Any savings are then divided between Accumen and the hospital. Osborne says the arrangement generally results in cost reductions averaging between 15 percent and 25 percent, which can amount to tens of millions of dollars annually for a large hospital system.
In the case of blood management, Osborne said, physicians are trained to set aside what many were taught in medical school, which is that more is generally better when it comes to transfusions. Not only is blood too precious to use lavishly, he asserted, but many physicians don’t appreciate how often human bodies reject blood as they might with an organ transplant.
To help change attitudes, Accumen encourages hospitals to set up committees that come up with transfusion guidelines. With those in place, medical professionals who place an order for blood that puts them outside the hospital’s guidelines trigger an electronic alert.
“We don’t want to hard-stop to where they can’t order the blood,” he said. “It’s more of a, hey, we just want to put that in front of them.” He likened the process to the way the U.S. manufacturing industry achieved quality improvements in the 1980s by focusing on eliminating waste.
Real Time Data
With respect to improving lab efficiency, Accumen’s senior medical director, Dr. Irwin Gross, said the company’s approach gives doctors information they can act on quickly.
“Their decisions will be based on real -time data,” he said. “Appropriate care will be delivered faster at the bedside. Diagnostic accuracy is improved and the patient’s stay in the hospital is shortened.” “Conversely, an inefficient lab can handicap a doctor’s ability to make the best and most informed decisions for their patients,” he said. “Information delayed leads to patient care denied.”
Accumen’s first customer, San Diego-based Sharp HealthCare, figures the two companies’ partnership has resulted in 6,000 fewer patient transfusions and l owered its blood product acquisition costs by 30 percent since the companies entered an agreement in 2011.
A case study done by Accumen and Sharp found that during a three-year period, the health system with four acute-care and three specialty hospitals saved millions of dollars as the number of patients transfused per month declined from a little more than 1,000 to fewer than 700.
“With Accumen’s guidance in patient blood management, we have accomplished what we could not do on our own,” the chief pathologist at Sharp Memorial Hospital, Dr. Christopher Wixom, said in the study.
Insourcing Lab Management
Accumen’s strategy of “insourcing” hospital laboratory management differs sharply from the approach taken by some of its largest competitors, such as Quest Diagnostics Inc., a New Jersey-based company that charges hospitals for testing services.
Sharp Coronado Hospital CEO Susan Stone said by email that Accumen’s national perspective sets it apart from other companies, and that the two partners “have found mutual benefit” working together, in-house, to come up with data management systems that improve overall lab performance.
“Working alongside our own team members, Accumen has brought national best practice expertise in patient blood management, outreach laboratory service growth, laboratory-specific performance improvement/Lean Six Sigma and contracting services,” she wrote.
By Accumen’s count, it delivered direct value totaling $100 million this year to the company’s nearly 200 health system customers, up from about $77 million in 2015. Osborne said about 80 percent of the money this year came from cost savings, and the rest resulted from its partners’ laboratories performing more tests, profitably, than they used to.
Some of the growth can also be attributed to having more customers: Accumen reported adding at least a half-dozen new health care system clients in the past year. One of these involves a multiyear agreement, announced Aug. 2, with St. Louis-based Mercy Health, whose 46 acute-care and specialty hospitals have more than 30 laboratories.
Another driver of growth has been Accumen’s acquisition, disclosed April 5, of Ann Arbor, Mich. -based Chi Solutions Inc. The deal gave Accumen 25 to 30 employees who Osborne said didn’t have to be trained on laboratory services.
“The integration has been tremendous and seamless because our cultures are so similar,” he said.
While the two companies’ cultures and specialties may be alike, Osborne acknowledged that their business models are not. Whereas Accumen focuses on partnerships that involve sharing financial risk, Chi offers a variety of consulting arrangements, some of which are subscription -based, some project- oriented.
Despite this distinction, the two companies complement each other well, Osborne said. Chi personnel may be called in if a hospital doesn’t want the three – to five-year “cohabitation” Accumen generally advocates as part of a hospital laboratory’s “transformation.” Or, he said, Chi may send its people to keep an eye on things after a hospital’s agreement with Accumen has timed out.
“We can use the Chi consulting team to come back in and help keep (the hospital) on track,” he said.
Given how quickly the Chi transaction came together — it concluded about six months after talks began, Osborne said — another transaction might not be far off.
“You never know how fast it’ll move, but it wouldn’t surprise me” if Accumen acquires another company in 2017, he said. He added that any such transaction would be guided by his company’s desire to avoid taking on debt.
By: John Cox, September 8, 2016
Note: This article originally appeared in San Diego Business Journal