Acquisitions Bloom, at the Expense of Hospital Labs?

READERS WILL UNCOVER A THEME OF MERGERS AND CONSOLIDATIONS running throughout this issue of The Dark Report. Whether it be health systems acquiring or merging with each other or national laboratory companies seeking to run hospital lab businesses, it is an unstable time for just about any type of healthcare organization. 

This is consistent with a 2023 trend we identified in our Jan. 3 issue involving the acquisitions and mergers of hospitals and health systems. Multiple forces fuel this trend, ranging from supply chain disruptions and mandated cost cutting to increased labor expenses and high rates of inflation. These factors contribute to an environment in which mergers and acquisitions can blossom. 

Case in point is our story here about the pending merger between Sanford Health and Fairview Health Services. If the deal goes through, the new system will have 58 hospitals across five states. 

Fairview reported a loss of $562.9 million for the nine months that ended on Sept. 30, according to Becker’s Hospital CFO Report. Sanford, meanwhile, has its own payer arm, and it may believe that increasing its market reach is worth shouldering half a billion dollars in losses from this merger. Expect to see serious cost-cutting post-merger as duplicate and redundant services are axed. Talk of increased efficiencies might also lead health system administrators to examine clinical laboratory and pathology services, possibly as a service line to sell or outsource to a third party. 

Such an action would please the two Blood Brothers. They see taking over hospital laboratories as a major opportunity. For example, in 2022, Labcorp began running as many as 100 hospital laboratories for Ascension Health. The company also acquired certain assets of Ascension’s lab outreach business in different regions. Meanwhile, Ascension says it received $400 million for the lab outreach assets, which it may view as a win in the current financial climate. 

Clinical laboratory administrators and pathologists also should not overlook the significance of two big, multi-hospital health systems merging, such as the Sanford and Fairview deal. Each time two such health systems merge, odds are great that the merged organization will want to standardize, rationalize, and consolidate all clinical lab testing within the combined system. 



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