Jon Harol launched Lighthouse in 2003 as a recruiting company. He had just completed his military service following a tour in Iraq at same time his dad was exiting his career as a military recruiter. At first, their company was recruiting for just just about everything – engineers, plumbers, anything you could think of. In his quest to always be on the forefront of opportunity, one day Jon found himself reviewing a Department of Labor forecast highlighting a 30% vacancy rate of medical scientists in 2018. It all started there, as he began to formulate a plan for how Lighthouse could get ahead of the shortage with a database of scientists. He built an Excel spreadsheet of every scientist he could find and started emailing them. Over time, these emails grew to 170,000 people in the database. Today Lighthouse runs the largest groups of medical lab scientists in the world on LinkedIn (130,000+ scientists) and Facebook with over 37,000 in the group and nearly 100 requests coming in daily to join.
Three Key Lab Market Challenges
As Lighthouse expanded its reach, Jon continued to review opportunities to meet market needs, identifying three that he literally built his business around.
Challenge 1: Smaller labs can’t compete.
High complexity labs require an MD or board-certified PhD for oversight, a significantly burdensome cost to a small operation. Jon had an expanding network of lab directors at his fingertips – why not spread them over multiple labs, also sharing their salary? (By law, a lab director can oversee up to five labs unless there’s a state requirement noting otherwise). Lighthouse quickly established a subgroup of lab directors interested in overseeing multiple labs, allowing them the ability to provide a medical lab director to a lab for $25,000 a year instead of $200,000 a year. Jon reflects on the milestone: That was a really important point in the company’s history, enabling us to get involved at a strategic level with customers. We went from just staffing to getting into the oversight and management of labs. Today our lab directors direct 165 high complexity labs around the country.
Challenge 2: Reimbursement. Period.
Every year the clinical laboratory fee schedule changes – it’s not a free market where the lowest price wins or the competition sets the price. In the lab space, the federal government sets the rates which often sends ripples across the industry as labs try to figure out which tests to add or remove based on reimbursement. This challenge remains a work in progress according to Jon, recently including the addition of PAMA to the mix of confusion and issues.
When he looks in the mirror, Jon sees himself as an advocate for the lab industry – specifically for the lack of compensation and recognition the lab receives for the important role they play. He cites the 75% of medical decisions that are made based on laboratory data while only 2.6% of our healthcare spend is on the laboratory. I’ve historically had concerns about the way laboratory testing has been reimbursed – it really feels corrupt to me the way it’s all structured, where you have insurance companies that are determining what laboratory tests are going to be reimbursed, regardless of whether a physician is ordering it or not. They’re kind of messing with the game, where they’re only allowing certain labs, maybe the big ones to get in-network. The effect of that is a poor quality or turnaround time for the individuals that are ordering those tests. The savings happen for the insurance company, but the person who bears the brunt is the patient. Either they don’t have easy access to testing, experience a really long turnaround time, or have a test denied altogether. I think that laboratory testing should be made more available. If a physician thinks you need a laboratory test, I don’t think insurance should be rejecting those. Decisions that are made on how laboratory tests are reimbursed right now are very much profit driven on the insurance company side and not in the best interest of the patient. I’d love to see that change. I hope that the trajectory changes and we start to see those decisions driven by medical needs – not by profit.
Challenge 3: The untapped value in hospital labs.
While a seemingly altruistic element of healthcare, hospitals are a business. However, they don’t necessarily operate like one. The labs have to be open 24/7 and offer a broad line of testing – which is not something you would do if you were making your decisions based solely on profitability. Hospital labs do all of the hardest testing, including driving out to nursing homes to draw, spin, and drive back to the hospital to result out within hours – often times with unstable samples. The hospital works so hard to run low margin, highly commoditized testing. They run it all to best serve the community.
Conversely, the independent lab decides which tests they want to run, often times based on reimbursement. A lot of the independent labs are not able to get in-network, and have trouble getting paid. They typically get reimbursed on about 65% of the tests that they’re running. The other 35% they run at a loss to keep the complete book of business and take advantage of the high margin tests that pay 50-100 times more. Jon shares his vision for leveling the playing field. I still think there is a play to be had for having hospitals with in-network status service their local community and act as more of a reference lab, with some outreach capability to the groups in their area, and use the revenue that comes from that to offset other costs. I think hospitals are shy about getting into the outreach game because there were some bad actors in that space that bought small rural hospitals and put a ton of volume through them – but the opportunity is still sitting there.
Mobilizing to help fight COVID-19
There are very few conversations, especially those involving healthcare or lab testing, where COVID isn’t a part of the conversation. As our conversation with Jon naturally followed suit, he shared memories of early whiteboarding sessions that were focused on where Lighthouse could support front-line workers and be part of the testing solution. Fast-forward to today, Lighthouse has validated a COVID-19 LDT including FDA application in 14 labs and just finished building what will be the largest throughput COVID testing lab in the country, processing up to 200,000 samples a day using heavy robotics. (The lab was granted it’s EUA from the FDA on Monday, August 17. The location and entrepreneurial partner have yet to be announced.)
As we wrap up our time with Jon, he leans again on his glass-half-full view of the world, focusing on the opportunity the current crisis has provided the lab.
The lab has been elevated (because of the pandemic); the role that medical lab scientists play, and how crucial it is, has become something that everybody in America is aware of right now. I really hope that’s drawn attention to the important work that’s done in clinical labs. We shouldn’t be in a position (as a country) that if a pandemic hit, we’re not able to provide the testing that’s needed for our citizens. Let’s get to a place where our labs are built out and funded in a way that we are able to respond to emergencies and pandemics.
Call to action noted. Challenge accepted.