ON OPPOSITE COASTS OF THE UNITED STATES, two of the nation’s larger laboratory companies are charting very different courses. Yet, in this tale of two laboratories, each lab company has important lessons to teach hospital CEOs about the many benefits that accrue from a well-run hospital laboratory outreach program.
On the East Coast, Solstas Laboratory Partners (formerly Spectrum Laboratory Network and Carilion Laboratories) continues to grow steadily and build upon its founding roots as a laboratory outreach business launched by three major health systems in the Greensboro metropolitan area of North Carolina.
It was in the mid-1990s when the three health systems came together and built an off-site core lab and began to ramp up sales activity. They were: Moses Cone Health System, High Point Regional Health System, and Novant Health System. After floundering for a few years, Spectrum gained direction under a new CEO. By January 2006, a majority stake in this laboratory company was sold to a private equity company for a price that THE DARK REPORT estimates was between $160 million and $185 million.
For the three health system partners in the original lab company, this was a princely return on their outreach laboratory business. The proceeds from the sale could now be invested in furthering their mission of patient care.
Meanwhile, at about the same time in the 1990s, Pathology Associates Medical Laboratories, LLC (PAML), then owned by Providence Health & Services (PH&S), developed a unique approach to partnering with community hospital laboratories to jointly develop outreach laboratory programs.
It helped form PacLab Network Laboratories, which started with eight hospital laboratories in the Seattle metro. Today, PAML’s use of hospital laboratory outreach and joint ventures (see pages 7-9) has helped it grow into one of the nation’s largest privately-owned independent laboratory companies. More importantly, all the hospitals associated with PAML and its lab outreach joint ventures are enjoying the benefits of declining average cost of inpatient testing, stronger clinical bonds with office-based physicians, and increased income from a thriving laboratory outreach program.
Given the demonstrated multi-year successes at PAML and Solstas/Spectrum, it is a mystery as to why so many hospital and health system CEOs still fail to recognize the clinical value and revenue potential from a well-run hospital laboratory outreach program.