Pathology Associates Medical Laboratories LLC, the Spokane-based diagnostics laboratory, is positioned to raise its standing among national leaders in sophisticated medical testing, says Francisco Velazquez, its new CEO.

Velazquez says PAML, which is owned by Seattle-based Providence Health & Services and Englewood, Colo.-based Catholic Health Initiatives, will carry on the goal envisioned by former CEO Tom Tiffany to pursue joint ventures and acquisitions under and outside of the umbrella of its parent organizations.

Part of PAML's growth strategy is to expand its role as a reference laboratory for its joint ventures with community hospitals and medical networks, meaning it aims to handle much of the nonroutine tests requiring more specialized equipment and highly trained personnel than individual joint partners can afford to acquire.

"We will probably have to acquire more technology, and that will be a good opportunity for employment for highly skilled people," Velazquez says.

PAML currently employs about 840 people in Spokane County and another 560 people elsewhere. It generates annual revenues in excess of $200 million.

PAML has seen a drop in routine medical testing, which has been offset largely by an increase in more sophisticated—or esoteric—testing, resulting in flat revenues in recent years, Velazquez says.

"We're seeing a trend toward high-end tests increasing, and that's the direction we're going anyway," he says.

As a reference laboratory, the types of routine tests that PAML does include standard urinalysis, blood counts, and blood chemistry panels. Examples of esoteric testing that it's doing with growing frequency include genetic, molecular, and infectious disease testing.

PAML occupies 72,000 square feet of floor space at its main lab at 110 W. Cliff Drive, near the Providence Sacred Heart Medical Center & Children's Hospital campus. It conducts more than 11 million tests a year there. Velazquez is based in PAML's administrative offices, which take up about 44,000 square feet of space at 611 N. Perry on the Iron Bridge campus.

Velazquez, who took the helm at PAML last month, comes to PAML from Quest Diagnostics, a New Jersey-based diagnostics giant that recently reported 2011 revenues of $7.5 billion. Behind his experience as a physician executive, he holds a medical degree from the University of Central del Caribe School of Medicine in Bayamon, Puerto Rico, and a master's degree in health-care management from Harvard University.

At Quest, he headed up three Southern California business lines that each could have been stand-alone companies, he says.

One of those was San Juan Capistrano, Calif.-based Nichols Institute, Quest's largest reference lab. Nichols Institute and PAML are competitors in esoteric testing, Velazquez says.

One big difference between the two labs is that Nichols Institute is a publicly traded entity, while PAML is owned by two nonprofits.

"My interaction at Nichols Institute was more of a corporate relationship," he says.

Because PAML is owned by health care systems, it's closer to where care is being provided, Velazquez asserts.

"As a physician, that's important to me," he says.

While PAML is a for-profit corporation and has a fiduciary responsibility to act in the best financial interests of its owners, it doesn't have the same bottom-line pressure as a publicly traded company, Velazquez says.

"The bottom line is important, but we're not driven by it," he says. "Health care is an expensive proposition, and the goal is to make sure it remains affordable."

PAML is one of the 10 largest reference testing labs in the U.S., Velazquez says. Of those, PAML is one of only three that are owned by health-care delivery organizations. The others are ARUP Laboratories, an enterprise of the University of Utah; and Mayo Medical Laboratories, an affiliate of Rochester, Minn.-based Mayo Clinic.

PAML's growth strategy involves becoming part of the communities it enters, such as through the eight joint ventures it's involved in, Velazquez says.

"That generates regional brands and provides knowledge to provide better service," he says.

PAML's farthest endeavor from Spokane so far is Kentucky Laboratory Services, a joint venture formed last year with Lexington-based St. Joseph Health System to serve central and eastern Kentucky.

Its joint ventures in the Pacific Northwest are PACLAB Network Laboratories, which serves Western Washington; Alpha Medical Laboratories, in North Idaho; Tri-Cities Laboratory, in south-central Washington; and Treasure Valley Laboratory, in the Boise area.

Outside of the Northwest, PAML's joint ventures involve MountainStar Clinical Laboratories, in the Salt Lake City area; Colorado Laboratory Services; and California Laboratory Associates.

The joint ventures retain identities within their communities as they collaborate with PAML, Velazquez says.

PAML also provides laboratory-management resources, which include its proprietary electronic system that tracks samples and specimens throughout the testing process via hand-held devices. Additionally, PAML provides expertise and infrastructure for connecting electronic medical records.

"We facilitate connections with various hospitals so your information will follow you," Velazquez says. "It's one of the most important issues. If we don't have information, we can't be effective."

Velazquez says other potential joint ventures are in the works.

"In my first week here, we were approached by two different entities," he says. "The goal is to be very strategic and not enter a market in which we can't be the best."

Velazquez says he would like to see PAML develop more clinical research trials in collaboration with its joint-venture partners.

"To be a leader, we may also have to be first to market with tests," he says.

PAML is positioned to evolve as the Patient Protection and Affordable Care Act unfolds, Velazquez says.

"A lot of people have been deferring care," Velazquez says. In trying to hold down costs, providers have been more cautious about ordering tests and prescriptions, he says.

While routine tests are down in medical labs across the U.S., Velazquez says he expects the rise in esoteric testing to continue under the Affordable Care Act.

"Today, labs have a lot more specificity," he says. "They can tell exactly the issue with the patient with fewer tests."

Velazquez says PAML will focus its growth in health-related areas that affect communities the most, such as heart, cancer, and genetics and genomics testing.

He sees PAML incorporating its capabilities in a continuum of care which includes testing for disease risk, early detection, diagnosis, and effectiveness of treatments.

"Diagnostics is one of the best investments in health care dollars," Velazquez asserts, adding most of the information that leads to treatment and assess treatment results comes from diagnostics.