Building the Better Mousetrap for Lab Outreach

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IS THERE A BLUEPRINT for building a thriving, successful hospital outreach program in a new market? If so, it would certainly be a best seller among hospitals seeking new sources of revenues and profits from outreach testing.

While it’s not exactly a blueprint, Pathology Associates Medical Laboratories (PAML) of Spokane, Washington, has developed both a unique strategy and the “better mousetrap” for hospitals wanting to create a new lab outreach program or significantly expand an existing outreach program. At the same time, PAML demonstrates that it is possible to build a series of long-lasting laboratory joint ventures with hospitals—joint ventures that grab market share from national labs and return ample cash distributions to their partners.

This is significant for the laboratory industry. Lab executives universally recognize that hospital laboratory outreach programs can consistently compete with the best laboratory companies in the nation. That is, if they are properly capitalized, professionally managed, and good at both service and sales. What PAML has figured out is a way to offer precisely those four things to hospitals willing to partner with it in a laboratory joint venture.

Seen from this perspective, the newly-formed laboratory joint venture between PAML and two hospitals of the MountainStar Health Network in Salt Lake City, Utah, is the latest validation of PAML’s vision and business strategy. (See TDR, November 19, 2007.) As you will read in our interview with PAML executives on pages 10-16, PAML invested gobs of money on service enhancements and integrated software solutions that allow it to provide world-class levels of service to referring physicians—and install this same service infrastructure into its different laboratory joint ventures.

I believe PAML is creating a new business template for laboratory joint ventures between hospitals and independent lab companies. Its success over the past 12 years with multiple laboratory JVs indicates that the business model has staying power. But can other independent laboratories emulate the more successful aspects of PAML’s approach to developing and managing laboratory JVs? If they can, then the stage would be set for more hospitals and health systems to participate in such laboratory outreach joint ventures. As that happened, it would also increase the number of local laboratory testing options for patients and physicians.

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