Identifying Future Lab Winners From Losers

TODAY I WOULD LIKE TO DO SOME CRYSTAL BALL-GAZING as a way to make a point about strategic business planning for laboratories. As you will read here, our Editor-In-Chief has analyzed the year-end balance sheets of the two newest publicly-traded laboratory companies.

The purpose of his intelligence briefing is to assess the balance sheet strengths and weaknesses of Specialty Laboratories, Inc. and Dynacare, Inc., and provide clients and regular readers of THE DARK REPORT with an understanding of why the business strategies of these two companies will unfold differently in the next couple of years. After all, both companies maintain a high-profile within the lab industry and both companies have differing business strategies with a common theme—each lab company wants to do more business with hospital laboratories.

Many hospital lab administrators and pathologists are personally touched by the business strategies of these two companies. It happens when Dynacare execs show up to discuss joint ventures with the hospital or when sales reps from Specialty Labs call to solicit reference testing business.

Of course, there are other commercial labs and other reference labs calling upon hospitals to pitch lab joint ventures or get more send-out business. Each of these lab competitors has a different mix of strengths and weaknesses–financial, operational, and geographical. But if a hospital lab is going to chose a joint venture partner or a new send-out lab, it wants to be confident that it understands the differing strengths and weaknesses of these potential partners and reference testing sources.

As you read the intelligence briefing on pages 15-17, I hope it gives you new insights about how a balance sheet can help or hinder a laboratory company. The different balance sheets of Quest Diagnostics Incorporated and Laboratory Corporation of America as of January 1997 partially explain the different business paths each company has followed since that date. The same will hold true for Dynacare and Specialty Laboratories, given their respective balance sheet positions as of December 31, 2000.

Having this type of business knowledge about potential joint venture partners and reference lab sources helps hospital lab directors make better decisions when considering RFPs (request for proposals). It is also a useful way to gain competitive business advantage when trying to sort out which labs will be winners and which labs will be losers in the future.