Risks and Rewards of Pathology Innovation: The Academic Pathology Department as a Business Incubator

Through spin-off businesses, the academic pathology department has a special role in creating the future for the field of pathology. This topic has not been discussed in any depth in the pathology literature.Universities can recruit and mentor faculty members and nonprofessional employees who have the potential to start spin-off companies and who, thus, can make a difference through invention, creation, and commercialization of their ideas.12 Strong leadership and a commitment to entrepreneurship are important in maintaining a departmental environment conducive to innovation. This article presents case studies of laboratory businesses emanating from The University of Arizona's Department of Pathology, which has had a strong track record in entrepreneurship for more than a quarter of a century.The “Tucson Pathology Cluster” describes a group of independent companies with roots in the Department of Pathology at the Arizona Health Sciences Center and its University Medical Center in Tucson, Arizona. Academic principals in these companies were active contributors to an annual review series, Advances in Pathology and Laboratory Medicine, which I edited with Dr Ramzi Contran and others for years. I served as department head of pathology for 17 years in Arizona (1990–2007). Before that, I was chair of the Department of Pathology at Rush Medical College in Chicago, Illinois, for 15 years (1975–1990). During the 32 years I served as an academic pathology chair, I was personally engaged with start-up companies in positions ranging from CEO to scientific director. I had a bird's-eye view, from the dual perspective of a university insider and an entrepreneur, of some of the activities related to pathology department spin-off companies.In this Futurescape presentation, I will describe 3 companies that were all spin-offs out of The University of Arizona's Pathology Department. Additional spin-offs of the Department of Pathology are not included for lack of space. For purposes of disclosure, I had no direct equity involvement in the first 2 companies, Sunquest Information Systems, Inc, and Ventana Medical Systems, Inc; I cofounded the third company, DMetrix, Inc, and do have equity in that company.Sunquest Information Systems, Inc, was actually one of the first spin-off companies of the new Arizona Health Science Center and its University Medical Center, in Tucson. The Arizona Health Sciences Center was created around 1966 to house Arizona's first and only College of Medicine. Sunquest Information Systems, Inc, was cofounded in 1979–1980 by James E. Peebles, BA, then director of Information Systems at The University of Arizona Health Sciences Center; Sidney Goldblatt, MD, a pathologist from Johnstown, Pennsylvania; and Robert Morrison, an engineer from Tucson, Arizona.Mr Peebles was educated as a mathematician and, after earning a BA degree in mathematics from the University of Virginia (Charlottesville), he started his career in computers at the prestigious Applied Physics Laboratory at Johns Hopkins University in Baltimore, Maryland. By the time he was in his mid-20s, Mr Peebles had developed a reputation as a wunderkind in computers. The University of Arizona College of Medicine was founded in 1966. Jack M. Layton, MD, the founding Department of Pathology chair, was recruited from The University of Iowa (Iowa City). He was a gifted educator as well as a talented recruiter of outstanding faculty members. Also, to his credit, Dr Layton would prove to be a supporter of departmental entrepreneurship as well. One of Dr Layton's primary goals for the laboratory at the new university hospital was to have an automated laboratory information system when the hospital opened.The founding dean of The University of Arizona College of Medicine, Merlin K. DuVal, MD, a surgeon recruited from the University of Oklahoma (Norman), wanted to create a university medical center that would eventually be entirely paperless. He envisioned a new hospital, our University Medical Center, that would leverage emerging computer technologies into a state-of-the-art clinical facility. Dean DuVal was a visionary in a number of ways.Dean DuVal heard of Mr Peebles from other faculty members and personally assisted in recruiting him to Arizona. Mr Peebles' reputation was that of being the “best-of-breed” of young computer system integrators. Dean DuVal gave him the green light to build the laboratory information system of the future. Dr Layton was a key member of the search committee that recruited Mr Peebles and was instrumental in supporting the vision for information systems.Initially, when the hospital opened in 1971, a commercial product, DECLab12, was purchased from Digital Equipment Corporation and installed. This product, although limited in functionality and hardware technology, supported the institution during the formative years.Mr Peebles spent much of the late 1970s spearheading the creation of a more flexible hospital laboratory system for The University of Arizona's University Medical Center. As a matter of record, the new dean's vision resulted in a significant investment by the University Medical Center in developing a paperless laboratory system. As it evolved and was showcased, this laboratory system created quite a stir in the laboratory information system community of the late 1970s, resulting in visits from other early adopters of automated laboratory information systems.Sunquest Information Systems, Inc, likely benefited from what today would be referred to as intellectual property related to the leading-edge laboratory information system that Mr Peebles and his staff, along with faculty members from the Department of Pathology, had created at the University Medical Center and later commercialized at Sunquest.34 All of this was ethical, legitimate, and allowable in 1980. Today, The University of Arizona Office of Technology Transfer might get involved in spin-off activities involving such intellectual property. The Sunquest spin-off from the university occurred well before such technology transfer was regulated at Arizona's universities, and it was approved by appropriate University of Arizona authorities.Recent interviews with some of the people involved with the spin-off of Sunquest Information Systems identified 2 pathologist faculty members from The University of Arizona's Pathology Department who had special roles in designing features of the information system that were subsequently recycled in the Sunquest laboratory information system product. Other than receiving some small consulting fees along the way, neither of the pathology faculty members apparently benefited financially from Sunquest in the form of equity in the company.Sam Paplanus, MD, a pathologist recruited to The University of Arizona from Johns Hopkins Medical School, in Baltimore, Maryland, worked with Mr Peebles and his team in developing some of the specifications for the overall architecture of the University Medical Center laboratory information system. According to Kenneth J. Ryan, MD, Dr Paplanus had a role in creating some of the “physician friendly” features for the information system at the University Medical Center, including the design of the computer-physician interfaces. Dr Paplanus also developed a surgical pathology module that was not carried over to the Sunquest laboratory product but was successfully implemented at University Medical Center for many years.Kenneth J. Ryan, MD, Director of the Microbiology Laboratory at the time of the Sunquest spin-off from University Medical Center, had a lot of input in the development of a highly innovative microbiology laboratory information system that Sunquest eventually emulated and marketed as a separate module of the Sunquest clinical laboratory information system.34 This microbiology module became a popular feature of the Sunquest system. Mr Peebles worked with Dr Ryan, then a junior faculty member who had been recruited to Arizona in 1971, right after a stint in the US Army. This followed Dr Ryan's training as a microbiologist at the University of Washington in Seattle, Washington. Years later, Dr Ryan served as my vice chair of the Department of Pathology and the medical director of the University Medical Center Laboratories. He eventually rose to the position of interim dean of the College of Medicine. Dr Ryan is best known in the academic world as editor of Sherris Medical Microbiology: An Introduction to Infectious Diseases, the leading textbook in the microbiology field.According to Dr Ryan, who I recently interviewed as part my preparation for this Futurescape presentation, 2 features of the Sunquest clinical laboratory system are traceable to a University Medical Center laboratory information system development project he worked on in the 1970s.3–6 These features were incorporated into a Sunquest product after Mr Peebles left the University Medical Center to become president and chief executive officer of Sunquest Information Systems, in 1980.One of Dr Ryan's innovations was the introduction of single keystrokes to control specific functions, a novel concept for laboratory information systems in those days.34 Dr Ryan's second innovation involved directly transferring results from the microbiology analytical machines into databases and patient reports.56 Until that time, microbiology results from automated instruments were recorded on paper and then reentered into reports. Mr Peebles and Dr Ryan directly linked analytical machines to their laboratory information system at the University Medical Center. Dr Ryan, as the first laboratory microbiologist hired at the University Medical Center, signed out most of the microbiology laboratory reports himself in those days. He observed that 99% of the data coming from the automated instruments was identical to what went into his written laboratory reports. The exceptions were cases in which diagnostic information and antibiotic susceptibility information were inconsistent. Dr Ryan set up a computer matrix for comparing diagnostic and susceptibility information coming from the automated instruments. Discrepant findings that needed further analysis were flagged by the computer system for review by the laboratory microbiologist.56 This is an example of an early clinical decision-support system that worked.While an employee at the University Medical Center, Mr Peebles began to develop a laboratory information system to replace the existing DECLab12 system, using techniques and design concepts that were later used to develop the commercialized Sunquest system. He then left the University Medical Center, later followed by several members of his information system group, to work full time at Sunquest. In some measure, the Sunquest information system was a clone of the University Medical Center laboratory information system.Academic activities of the personnel at The University of Arizona helped to put its University Medical Center's state-of-the-art laboratory information system on the map and catalyzed the creation, and some of the subsequent successes, of this spin-off company.56 Of course, memories of this fade with time. Today, new employees at Sunquest are often unaware of the university origins of their company.Back in the 1970s, Mr Peebles and Dr Ryan presented their work on the microbiology laboratory module, built for University Medical Center, at national meetings and then, by invitation, at other hospitals and universities. Their work together was published in the early pathology informatics literature.3–6 These presentations and publications initially led to invitations to share the technology with other institutions and then encouragement to commercialize the system. As Mr Peebles tells the story today, the first customer for Sunquest's laboratory information system product was the Hershey Medical Center in Hershey, Pennsylvania, where the laboratory department was chaired by Dr Arthur Krieg. At that time, Dr Krieg was a nationally recognized laboratory information system user and a proponent of continued automation of the laboratory. He had published extensively and was considered an authority in this area. Hershey Medical Center had an early laboratory system, similar to the DECLab12 product that was installed in Arizona. Recognizing the limitations of the existing systems and technology, Dr Krieg and his staff had developed an extensive specification for the “laboratory system of the future,” which provided for considerable flexibility and growth as compared with existing products at that time. There is no doubt that Hershey Medical Center and Dr Krieg took a huge risk by contracting with a new and unknown company in Tucson, to develop a system to their Dr Krieg had the of the system at Arizona and, in was by what Mr Peebles had The of the development and the of the system at Hershey were to the future of Sunquest. Other early adopters of the Sunquest system included the and Medical Center, all of significant input to the continued of the system, which benefited Goldblatt, for I have is a talented with in pathology informatics and the pathology training at the in Johnstown, Pennsylvania, for He had been on in medical informatics and had in automation head of at the in Maryland, which is part of the of Dr and his staff were early of the DECLab12 system initially installed at Arizona in and a to the by Mr Peebles during their for a new laboratory Peebles, Mr Morrison, and Dr into a and cofounded Sunquest. The early growth of the company was from of In as Mr Peebles tells the Dr out the Peebles and in Sunquest. for Tucson, Dr not the company to Johnstown, the company by Johnstown, Pennsylvania, and Tucson, Arizona. As a the of the company, was by Mr Peebles' who first the Sunquest on the of an in Tucson, and it E. Peebles, Sunquest Information Systems is in Tucson, in a in a commercial that the College of According to their Sunquest Information Systems, Inc, has more than employees with more than involved in and The company has a of diagnostic for and Sunquest's share is more than of US including more than US hospitals and commercial Sunquest Information Systems is by of a with more than of University Medical Center Sunquest in our Pathology Department Mr Peebles and the Sunquest spin-off story and in with Mr Peebles left he founded company in Tucson, a technology that to the The company is The University of Arizona and the University Medical Center became separate around Tucson, Sunquest Information Systems, Inc, as a spin-off company of the Department of Pathology of The University of Arizona College of Medicine. Dr Goldblatt, who is not on The University of Arizona became chief executive officer of Sunquest in and the company in Tucson, Arizona. 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