The a16z Show - Labs for Diagnostics: Then, Now, and Next

Episode Date: March 17, 2020

A lot's going on in the world of healthcare right now, and one topic that's especially relevant is how diagnostic labs work. In this episode with Dave King, Executive Chairman of Lab Corp (one of the largest clinical lab networks in the world) and a16z's General Partner Jorge Conde and Hanne Tidnam, we cover the evolution of the modern lab over the past 50 years, especially as new technologies and new tests are added; how tests go from specialized to mainstream and widely available; and who pays for most tests and how reimbursement affects all this. We also discuss where lab information flows—in electronic health records and in the health system at large—and touch on what the lab of the future might be like.  Stay Updated:Find a16z on YouTube: YouTubeFind a16z on XFind a16z on LinkedInListen to the a16z Show on SpotifyListen to the a16z Show on Apple PodcastsFollow our host: https://twitter.com/eriktorenberg Please note that the content here is for informational purposes only; should NOT be taken as legal, business, tax, or investment advice or be used to evaluate any investment or security; and is not directed at any investors or potential investors in any a16z fund. a16z and its affiliates may maintain investments in the companies discussed. For more details please see a16z.com/disclosures. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Hi and welcome to the A16Z podcast. I'm Hannah. A lot's going on in the world of health care right now, and one topic that's especially relevant is how diagnostic labs work. The conversation that follows, which was actually recorded at our A16Z Innovation Summit in November, covers everything from the evolution of the modern lab over the past 50 years, especially as new technologies and new tests are added, how tests go from being specialized to mainstream and widely available, to who pays how, and how reimbursement. works. We also discuss where information from the lab flows in electronic health records or elsewhere in the health care system, a topic we've covered before on this podcast, so be sure to check out those past episodes with general partner Julie Yu, and touch on what the lab of the future might be like. Joining this conversation with me and general partner Jorge Condé is Dave King, executive chairman and previous CEO and president at Lab Corps, one of the largest clinical laboratory networks in the world. So where should we begin when we talk about the evolution of the modern lab? What's the history and what do you think of as the timeline of where we began to what brought us to the

modern lab today? Our original founder, Dr. Jim Powell, was talking about why he came up with the idea of a reference lab. And he's a pathologist. And one of the things he pointed out is that in the day in 1969, when a test was sent to a laboratory, sometimes it would be five, six days before a response came back and the patient either had progressed or as he said, you know, progressed, released, or died. Too slow. Too slow, not super reliable or reproducible in terms of, you know, overall quality. A lot of work was done in hospitals or small laboratories. Jim's idea was, let's put the instruments in one place and bring the specimens instead of sending the specimen somewhere and waiting for the answer to come back. And obviously that's evolved over the course of time

into reference laboratories that look like warehouses. I mean, they look manufacturing facilities. You know, large numbers of very high throughput instruments, very IT and tech connected. We have a robotic sorting machine that we're putting into all of our laboratories, which basically replaces all of what we used to do with the front end manually, uncapping, shaking, pouring off. And so the business has not changed a lot over the 50 years what we do, but the way in which we do it and the quality and the...

scope and the breadth of our business has changed quite dramatically. What is the sort of like the spectrum of diagnostics for each lab? How do you specialize in different labs or not? Like what does that look like, that lay of the land? So we perform about 4,400 different tests. Not all labs have a menu as big as ours. There are also some highly specialized labs that do, for example, oncology testing, or do coagulation testing for blood cancers, or do thyroid testing.

We think of an esoteric test as anything that is performed by sort of non-standard methodology. So if you come to our laboratories, there's a huge set of chemistry instruments that just, they run chemistry tests all day long, glucose, potassium. There's a huge set of hematology instruments that run CBCs. We look for infections and high white blood cell counts. And then there are DNA tests, which are in the esoteric category. There are specialized thyroid testing. There's allergy. All things kind of outside what we would consider the norm of basic wellness testing. And so over time, you would imagine, the definition of a test will move from esoteric to non-esoteric as it becomes more commonly used.

Absolutely. Yeah. There's definitely an arc when you introduce, you know, when ACOG dictated that within their guidelines, all pregnant couples should be tested for cystic fibrosis. I mean, we had offered cystic fibrosis for years. Nobody ever ordered it. Now all of a sudden, it exploded. And so it really went from being a pretty esoteric test. that was not commonly ordered to very much a routine part of prenatal screening and care.

And there are many examples like that over time. So how does that happen? How does a new test get integrated into this system? Is it partially about whether you have the tools available or whether the demand for the test is there? What is the driving factor? We always start with what's the unmet clinical need. I mean, obviously market size matters because there has to be enough market demand to justify bringing up a test, but what is it unmet clinical need?

So if you look at non-invasive prenatal testing for you. example. The unmet medical need was that invasive prenatal testing, whether amnio or CVS, you know, pose risk to both mother and the fetus. And as the technology improved to where this could be done through blood testing, it clearly made sense to integrate that into the sort of the more standard test menu. When you do it through blood, it's a simple, relatively painless process. There's literally no risk to the mother or the fetus. The results come back faster and the reliability is very much concordant with the more invasive procedure. So that's a good example of where there was a clear clinical need

for a better way of doing what we're doing. Other tests like companion diagnostics where a drug comes out and we're able to demonstrate either in the clinical trial or through use in the marketplace that there's a diagnostic test that can tell you whether this drug is going to be efficacious for this patient with this condition. There, the clinical need is almost always very compelling because you're talking about potentially a very expensive drug,

and you want to know, is it going to work for this patient, or is it just going to be more health care resources that are not going to be well spent? So how about the information flow? In some ways, the lab is sort of the ground truth, and that it doesn't mean anything if that information doesn't go somewhere and have an effect. So can you describe to us,

is it more complicated than we think, or is it just lab to provider? What is the kind of information flow at the moment? How does that work in the system? That's one of the big changes that's occurred. When I started a lab corps, we still used to drive around with paper reports in the courier vans and drop them off at the doctor's offices. In most cases, you know, we'd drop them the next day.

And those were the days when the doctor would have the folder out. The test would go in the chart and the, you know, so now I think upwards of 85% of what we return is returned in some electronic fashion. And it may flow directly back into the doctor's medical record, you know, electronic health record, it may go back in some other electronic fashion where it goes to the doctor's office, but it doesn't directly integrate into the health record. And this, in my opinion, is actually one of the big obstacles to a more seamless coordination of care system for patients. Because I agree with you, the lab is the ground truth. I mean, you know, 70% of clinical diagnoses

start with a laboratory result. And doctors always, you come into the doctor and you say, I'm not feeling well. The first question is, well, you know, let's look at the labs and see what they say. Do you have an infection? If you're overtired, is it your thyroid? The problem is we have many participants in the system who don't facilitate the exchange of information. And so, you know, we have local hospitals near our headquarters that won't allow us to return information electronically into the medical record. Is that still happening? Oh yeah. And if the doctor wants to order from Lab Corps, like my physician works at a local hospital, you know, he receives the reports back as a PDF. Those hospitals want to use their own labs, essentially. Very much so, because this is where

the interest in the system are not well in line. The hospital labs are able to command much higher pricing from the payers than we are, so they have a vested interest in using their own labs. And, you know, I think this will evolve as we, two things happen. One, we move into the value-based care environment where the dollar cost of services is less relevant than the overall kind of bundle of care and outcomes. And number two, Health care is a truly unique ecosystem because we don't have pricing transparency. You don't know what it's going to cost you to have a service done. We have our phones.

We can tell exactly what we're going to pay for this service or for this product. We can compare us and shop. We don't have that in health care. And all of the pricing transparency work that's being done now is more about list price than it is what it's going to cost the patients. You know, the consumer is smart. They can make sound both economic and quality decisions about their labs. But it does feel like I hate when I get a test result back directly through my medical chart, you know, without it having been seen by the doctor because it feels like so often there's

this context that I don't have. So like something will come up and I'll like Google, okay, there's some range here and this looks a little weird, you know, and then the doctor will be like, well, X, Y, and Z. That's why it's totally fine. You know, in that information flow, how do you think about both the translation and the context when it's going direct to consumer like that? I think some test results are binary. I mean, you tell the consumer you have or you don't have, and that's fairly simple.

Things that are much more nuanced, you know, thyroid stimulating hormone, the difference between 0.3 and 0.4 is probably pretty much irrelevant. But the difference between, you know, 0.3 and 1.3 can be quite relevant. And I think two things are critical there. One is, you know, as we move more into direct consumer, we need to figure out in a more comprehensive way how we provide content. context. So one of the things I've always thought is it would be great to be able to provide a link on the report that goes to the patient. So I don't just go to Dr. Google, who's terrifying, always. Everybody goes to Google and you'll find a lot of chat groups where people say, oh, yeah, you know, I had a 1.3 and the next thing I knew I was in the hospital for two months. So I think

that's really important. And again, part of that runs up against the current regulatory environment and what you can do in terms of claims for the testing or how you can interpret the test. testing when you're not a physician in the practice of medicine. But it's an area that we need to get our arms around because it's only going to grow and consumers are only getting more and more interested in it. Yeah, that's the direction. Absolutely. One of the things you mentioned was physicians themselves being well positioned to interpret tests. When you look at something like genetic testing, the vast majority of physicians can't go very, very deep on interpreting those results. And so as a result, there's a need for genetic counselors and the like.

So actually on the topic of the consumer, what's your view in terms of what consumers should be able to order directly? Because there's been a rise of direct-to-consumer diagnostics-type services. And, you know, the pro argument is consumers should have control over their own information. It is their health care data. They are the ultimate decision-makers. The con argument is that consumers may not be equipped to fully comprehend what a diagnostic test is telling them. Where would you come out on that? I am not a believer in the sort of paternalistic healthcare system of, you know,

everything has to go through some learned third party who's going to interpret it. The truth is, with the explosion of genetic information, for example, there are many physicians who practice in the community who are not fully informed about what these tests mean or how they should be ordered or interpreted. So it's really, in my view, a little short-sighted to say, well, the consumers, you know, quote-unquote, doesn't have the information to be responsible for the consequences of the testing. The other side of that, which I, you know, fully respect the regulator's position is consumers need to understand and we need to help the consumer understand. Like a lot of these tests are complicated.

And so if you get a result that says that you have sensitivity, for example, to Warfarin or you're a fast metabolizer, gosh, the consumer can't go out and adjust their own dose with that information. So there's a fine balance, health and wellness, sexually transmitted diseases, things that I would say are more kind of in the mainstream of what the consumer would be able to understand. But you have to respect the fact that consumers want more information and the broader flow of information is a positive for decision making and for our system. But what does it look like the push towards value-based or outcome-based care and the health care system overall where we're all trying to maybe shift towards valuing those outcomes instead of. paying per price per service. In my view, the fundamental challenge with providing well-coordinated care is the total lack of alignment between the interests of the parties in our health care system.

We have the largest cohort of genetic counselors in the United States as a result of the Genzyme Genetics acquisition, and we do not get reimbursed for genetic counseling services for the most of the case. Yeah. Wow. Because most of the genetic counselors are advanced doctorates. They have a doctorate degree or they have an advanced degree, but they're not physician. So they can't get paid off the physician fee schedule, and there's no code.

on the clinical fee schedule to pay people for the test interpretation. This is really a vexing problem because, you know, again, our system categorizes people as you're a doctor so you can get paid for this or you're a lab, so you can get paid for that. And, you know, the genetic counselor provides just as much interpretation to the physician as they do directly to the patient. But you can't get paid because you're kind of in that Never Neverland. It should be in the interest of the payers to pay for genetic counseling.

We've had a lot of pushback from the payers about, well, the genetic counselor has a conflict of interest because they work for you. We've done a study that shows that there are more instances in which our genetic counselors recommend against a genetic test than when outside genetic counselors are used by the payers. What do you attribute that to you? Because our genetic counselors, their sole responsibility in their view is to the patient. The outside genetic counselor is in a much more difficult position because if they recommend against the test, hey, you work for Blue Cross, you work for United, you're recommending against my test. You know, the physician gets angry, the patient gets angry.

much more of a default of, you know, let's just go with it even though it might not be valuable. And in my personal experience, you know, I've had an instance in which a physician ordered a test for a family member that really exactly replicated a different test that had been done, genetic test, you know, from a SNIP microarray to a gene sequence. And nobody other than, you know, once we sent it to our laboratories, they're like, you've already done this test. There's no point doing it again. So yes, genetic counseling, I still think it's vastly underutilized, and it will be more and more important as people get deeper into genetics and more is known about the genome and how it's interpreted.

You mentioned you have a menu of 4,400 tests. What tests do you think are underutilized, generally speaking, that would help physicians make better decisions, right? Because the old axiom is the only reason you would order a diagnostic is if it's going to somehow change a decision that your physician would make in terms of your care. So the opposite is probably also true that there are probably tests, out there that the physicians would order would change the direction in which they manage your care.

Is there sort of an underutilized category of tests in your mind? You know, again, if you think about the payer's interest, it's pretty simple. You know, we want you to provide more services for less price. From the patient's perspective, you have the sick, the chronically sick, you have the worried well, so, you know, what should be the balance between what's ordered and what's paid for? And from the provider perspective, you have a whole array of new tests. that come to market all the time, and what's the right way to introduce them and to educate doctors and patients about their use? I think the most underutilized tests are actually probably

the most common test, so I think thyroid testing is very much underused and not well understood by most primary care physicians. I think hemoglobin A1C for management of patients with chronic diabetes, which, of course, when you have diabetes, most patients have two or three other comorbidities. I think the whole menu of tests around chronic kidney disease is vastly underutilized because we know that most patients, most consumers with chronic kidney disease, don't even find out about it until they're beyond stage two and potentially into stage three of their kidney disease. And yet the simple EGFR test, you know, indicates when your kidney is not performing adequately.

So there's a whole range of what you and I would characterize as kind of quote unquote routine core tests that could be much better used if we had a willingness on the payers part to make that investment. So can we stay on that for a second? You talked about price, value. There's one thing that I think characterizes the diagnostics industry, at least historically, is that reimbursement has always been under pressure, in many cases, declining. The ability to capture value has been somewhat challenging or limited.

If you look from the companion diagnostic side, at least historically, and this is changing, pharmaceutical companies actually had little interest or limited interest in having companion diagnostics that would exclude patients from undertaking a therapy, although I think that is shifting. So when you take all of that together and you combine that with the fact that you in some ways have a frenemy in the hospitals, right, because they have their own labs, so they want to keep as much of the testing that they can themselves and they will send stuff out to you when they have to or need to. What do you think the future of this industry looks like? look, one of the things that I've observed in my career in health care and in the lab industry is

our industry hasn't changed much in terms of what we really do. And, you know, yes, it's changing how we deliver it. It's changing the throughput of the instruments. But basically, the industry hasn't changed much. Why is that? It's because we are, you know, the foundation of diagnosis and care. And so you can see a health care system in which there are way fewer hospitals and much more is done in the home or is done in outpatient centers, and the hospitals are facing that

reality. You can see a system in which there are, you know, way fewer independent physicians and they work for somebody or you can't see a system, but I just can't envision a system in which there's no lab. So our position in the infrastructure is essential. Let's talk about reimbursement pressure. How do you get paid today? What do you get paid for? Who pays you? There's always going to be reimbursement pressure in health care. I mean, we were engaged in a discussion. recently with an analyst who said, well, I don't understand why you can't get three to four percent price increases a year because you know you're the low-cost provider and you bring high value. And you know, it's just not a realistic way to look at healthcare and say people are going

to get three or four percent price increases. And we know that, you know, the drug companies are under pressure about their pricing and the hospitals are under pressure about their pricing. And so we have to assume that prices will continue to be under pressure and that new innovative things that have a decent price set will erode over time. Government is actually the largest payer and the payer of default in our system today. I don't think a lot of people realize that. No, that is surprising.

Medicare Advantage, which is a government-run program that's administered by private companies, Medicaid, which is a traditional fee-for-service program, and then manage Medicaid, which, again, is a government-funded program that's administered by private companies. Then you add in federal employee benefits, railroad retirement. You know, I mean, there's just enough. So there is... It sounds pretty straightforward.

Yeah, exactly. just send out a bunch of bills and hope somebody pays them. So the government is the largest payer, and then managed care is the second largest payer, the large managed care plans. We have our CFO, who's now been with the company for five years, came from the industrials world. And he's a terrific CFO, but we were talking about the billing system,

and he said, well, I don't understand why we just don't go out to Oracle or somebody just buy one and put it in. It just can't be that complicated. You send a bill, they pay. I said, oh, no, it's a little more con. You send a bill. They adjudicate it. It may go to the patient's deductible.

back to the patient. It may be that the service is not a coverage service. It may be that there's a coverage policy that hasn't been met. It may be that, you know, they pay part of it and you have to send part of it. So billing is a huge and complex area for us, and we have over 2,000 people who just manage the billing side of our provision of services. And lengthy. I mean, it sounds like much, much time passing. Which is super frustrating for the patient, because by the time they get a bill, it may be months after they had the service. And I can't tell you how many complaints we get about, I don't even know who Lab Corps is,

my doctor drew some blood, and the next thing I know I'm getting a bill from you. So it's a very complex billing system. So to your earlier question, Jorge, about, you know, what we do about margins. I mean, our laboratories are only a small part of our infrastructure. We have several thousand cars and couriers that pick up specimens. We have our own aircraft.

You know, there's a whole logistics piece that underlies it. We have 17,800 patient service centers where people can come and get their blood drawn. We have people sitting in doctors' offices. All of that has to be coordinated underneath the testing. We're working on how do we make that more automated, more digitized, how do we take paper out of the process so that we can actually deliver the customer a better experience. We moved from, you used to go to LabCore and get there, and it was a laborious process. You had your requisition for your lab test.

You had to get a driver's license, your insurance card. We scanned it. You fill that information. Now we have check-in kiosks. You can check in online. I went and had my blood drawn not long ago. I checked in online for my testing. When I got to the patient service center, I had a QR code.

I think that's what they're called on my phone. I scanned it at the kiosk. I was checked in. That's it. And, you know, five minutes later, I'm called. Testing's done and I'm through. So these are ways in which we're working on preserving our margin. And at the same time, providing a better experience for the consumer.

And I know it's 4,400 tests. It's a pretty broad range. So it's going to be an overgeneralization. But on average, what do you get paid per test? And on average, what is the sort of collections rate? Because that's one of the things that I think is so shocking to people outside of the health care system that a significant number of percentage of bills just go unpaid. Yeah.

So our average in counter price is about $45. We do about 2 million patient encounters a week, and so it's a big, high-scale, high-throughput business. We see about 110 million patients encounters a year. In terms of the bills, you know, our bad debt rate, our non-collected rate, is in the range of 4%. But when you think about that, first of all, it's a very substantial amount, and almost all of it comes from the patient side of the equation. But what that doesn't speak to is the amount of service that we provide that physicians order that patients need that doesn't get paid. for to begin with because that doesn't actually get down to the bottom line that all gets adjusted out at the sales level so payer policies you know we only cover a vitamin D test with these

diagnoses or we have a payer that only covers prenatal screening for women if the putative father appears at the appointment which when you think about the Medicaid population or the underserved population the chances of getting the putative father at the appointment are pretty small and yet we know that it's important for that patient to have the genetic screening that the physician is ordered. So there's a lot of leakage in the system of, you know, where we're, and look, you know, we're a public company, we're a for-profit organization, we have to try to maximize what we can do for our shareholders, but we also have a real sense of the mission of improving patients' health and lives. And so we do a lot of things that do benefit patients, even though we get frustrated with

the payers that they have restrictive policies. So in this model where the test is ordered, it's paid for, and then the information goes on, and there's lots of leakage in the system, as you say, and there's problems with this model, but it is a very entrenched model. How do we move towards this value-based or outcomes-based shift where we're trying to value what happens as a result of all these things in the future? What would that look like in the lab? So to me, what that looks like is the hospitals think about their laboratory,

and instead of saying, well, gee, I can run a thyroid panel in my hospital lab and get paid three, $300 for it. And maybe the patient gets a bill for $16. To the doctor, it looks like I have a bundle of dollars here to spend on this patient. I'm at risk if I spend more than is allocated, but I also have potential upside if I spend less than allocated. So I'm completely good with sending the test to Lab Corps for $40 and using the hospital lab in a different way, which is supporting the emergency room, supporting the operating

theaters with pathology. I'm actually optimistic that as we move to value-based care, there'll be a much more rational approach to how we think about, you know, where the site of service should be for everything, right? I mean, we do way too many non-acute things in the hospital today. You should be paid the same price by Medicare for doing the same service at every site. The hospital shouldn't make more for doing a colonoscopy in the hospital than they get from doing it at an ambulatory surgery center. The doctor should not be getting paid more for doing chemotherapy in the office than it can be done at a remote cancer center. Yeah, that does feel appropriate. And certainly, the hospital should not be getting paid more for doing chemotherapy in the hospital setting,

which is the worst setting for the patients to get chemotherapy in than for doing it in a less acute environment. So in my mind, it will bring real economic rationality. It has the potential to bring, if done right, real economic rationality to the ancillary service as part of the system. So you touched on something really interesting that, you know, healthcare delivery is being sort of pushed out of sort of the four walls of the monolithic hospital out into the periphery. The consumer is increasingly becoming more empowered, or at least it's demanding more of health care system as they in turn are being demanded to pay more for their own health care employers as well. What do you think the coming decades look like from a technology standpoint for the laboratory diagnostics industry?

I can see how technology will make coordination of care easier. I can see how it would make logistics more efficient. I can also imagine how technology will enable us to test for things that we can't test for today, to derive insights that we don't have today. But I can also imagine that at some level, as technology gets better, it will make less sense to send a sample to the diagnostic, and it will become increasingly feasible to send a diagnostic to the sample. So is sort of point-of-care diagnostics technology, is that an existential threat,

Or will there always be things that have to be done in a centralized lab setting, even if there are more things over time that can be done in a sort of point of care setting? So are you asking essentially, will the lab be unbundled too? Yeah, my question is, will the lab disappear? There will always be some tests that need a venous blood draw, that need a relatively significant amount of specimen, and that can only be done in the lab environment. And particularly, you know, the complex and esoteric testing, in my mind,

there will always be a central laboratory. So you're not worried about genome sequencing on the iPhone? Not today. It's funny. Years ago, I was at a personalized medicine conference, and one of the panelists was talking about, oh, you know, within three years, you're just going to put your saliva on the iPhone,

and it's going to measure all your vital signs, including all your laboratory values. But it didn't come to pass. So many things in health care, it's way slower than people think. But I'm a big believer in, you know, laboratory testing needs to be democratized. I mean, part of the reason that we, don't have as much of an impact on patient care as we should is when you think about the way the

system works. So you go to the doctor. Now, my doctor actually is, I was actually very impressed. He sent me the lab slip before my appointment to have the blood drawn so he could have the results. But there's a good chance he knows who you are. Yeah. Yeah. I mean, he's probably. That's right. That's right. He does know who I am. But most of the time you go to the doctor, you get your blood drawn. You get the results back three days later. Now it's like, well, now I got to call the doctor, I got to figure out the interpretation, or you get the lab slip, you went to the doctor, you weren't feeling so great on a Friday, you woke up Sunday morning, you felt okay, and the lab slip just kind of, you know, goes in the trash. A shocking number of drug prescriptions never get filled,

and obviously the drug you don't take cannot work. Do you have a sense of what percentage of diagnostic tests that are ordered by a physician are actually done? I don't. I don't. I don't. I don't. And it's a major point of frustration for me that most physicians and health systems have a follow-up system for ancillary services. Like if you go to the doctor and they say get an MRI and you don't show up for the MRI, you're going to get pestered. Or you get a referral for physical therapy, you're going to get pestered. If they give you a lab slip and you don't do the labs, you probably never hear anything about it. There's, you know, kind of urban lore about, oh, you know, 10, 15 percent never get performed. There was a study done years ago at Harvard Medical School.

Even there, there was a relatively high noncompliance rate, as I remember, you know, 15, 20%. And so I think that being able to move care closer to the patient, if, this is a big if, if the technology is good enough that it is clinically relevant, that it's reproducible, and that the quality is there, that's a good thing for patients, and it's a good thing for our industry. We can collect testing in the home, and as long as it's performed in our, main laboratory, we can integrate that into the patient's health record. So one of the big issues with point of care testing has always been, you know, you do it, and then you get a print out, and, you know, unless you literally staple it to the patient's forehead and they go to the doctor's office,

half the time it never gets to a place where it's going to be well interpreted. So the information flow gets messed up. And I don't think there's going to be sort of, you know, the quote unquote, killer app that's going to just completely turn the business upside down. Because believe me, enough people have tried to find it in the last 10 years, and so far we're not there. But the technology will change bringing lab testing closer to the patient is an imperative just to make lab testing more effective and more valuable in the system. And in the value-based care model, when we're engaged with patients in their homes around not only your actual health, but your social determinants of health, then we're going to have much more opportunity to bring those tools to the patient and actually

help them manage their care. So when we think about the lab and the way it's changed over time, from, you know, pipettes and beakers to microarrays, what do you see coming next as the big new tools or the new innovations that you're trying to think about how to integrate? So from a technological standpoint, obviously the increasing miniaturization of instruments, the tabletop instruments, which again goes back to what we talked about with democratizing the range of services. Sequencing as a tool for diagnostics, you know, the cost of sequencing is rapidly coming down. The competitive landscape is becoming much more competitive than it has been historically and so genetic testing that we have traditionally done, you know, again, I remember when

we started with cystic fibrosis, you know, we looked at 30 markers, and then it was 60 markers, and it was 90 markers. And now we just sequenced the cystic fibrosis gene, and there's way more information in there, which has pluses and minuses. The plus is there's way more information in there, the minuses. A lot of it is not well understood. And so, you know, that takes me to what I think is really going to be what's revolutionary in the next 10 years is the understanding of the data and the integration of the data that comes from laboratory medicine, that's going to be the huge transformation in our business. It's not going to be the underlying technology. People think, oh, you know, sequencing, that's a great new thing. Sequencing is just another methodology to do

many of the things we already do today. It's a more efficient methodology. But what comes out of the sequence is a wealth of information that we haven't been getting historically. And integrating that information into the coordination and the arc of patient care is going to be where we're really going to see diagnostics shine in the next five, ten years. So as we look five, ten years into the horizon, if I'm an entrepreneur starting out, and I have an idea or a technology that I think is applicable as a diagnostics or applicable to the diagnostics industry,

what do you think are the opportunities or the blue sky opportunities for entrepreneurs coming into this industry today? I mean, there are so many areas of diagnostics that we just, fertility is an area that we just don't have really good tools. And so an entrepreneur who could bring to the market something that would increase the rate of success in IVF, great area. Great What are some of the other ones? I think that, you know, emerging infectious disease is an area of real concern. I mean, you know, the public health services were overwhelmed with Zika testing, so they ended up sending it to the commercial labs without going through full regulatory processes,

the test that they were doing, because they just couldn't handle the specimens. Anything that addresses new and emerging disease states, in my mind, is a real area of opportunity. The caution is, one, the history of the diagnostics industry is littered with the small laboratory that offered one test and had a great arc at the beginning and then ran up against the reality, which is that the doctors want to order everything from one place. So go back to non-invasive prenatal testing. There were three companies that did non-invasive prenatal testing. All of them were independent.

And now, you know, one of them is independent. One of them was bought by Rosh and one of them was bought by us. Why? Because the OBGYNs who were doing the non-invasive prenatal testing didn't want to have to put a box over here, a specimen over here, to go to that company, and everything else from my office goes to Quest or everything goes to LabCorp. So the distribution channel is really, really. critical. And the second thing that's really critical is reimbursement. You can't imagine how many people come with a really cool test and great data, but the payers just, you know, they're just not going

to pay for things that, even if they should, you know, broad-based screening for whatever disease it is of the asymptomatic population, payers don't want to pay for it because there'll be too many false positive, too much treatment, and while saving the long run for screening the whole asymptomatic population, I'm not going to do well. But, in a value-based care model in which the reward is for early detection and early treatment, then payers should be enthusiastic to pay for early detection and early screening. So the reimbursement piece and the distribution channel are really critical for the entrepreneur who comes up with a great idea.

And so in that spirit, how does an entrepreneur work with Lab Corp? Do I knock on your front door? So there's two ways. One is we invest in ideas that we think are interesting. And often those are ideas that are, well, the whole goal of it is invest in ideas that are disruptors invest in ideas that are potentially competitive so we can see what's going on and understand the landscapes. That's one way. The other way is, you know, we're not a research company. We're a development company. So we take other people's good ideas and we scale them so

we can run them, you know, 100 million times a week if we need to. And that's why we welcome the idea of entrepreneurs doing things that will enhance the value of diagnostics in general. So yes, essentially come knock on your front door. Knock on our front door. Knock on the side door. We got plenty of doors. We welcome it. Thank you so much for joining us on the A16Z podcast. Thank you. It's been great being with you. Thank you.