Lab Industry Easing Back to Financial Stability

IT MAY NOT BE JUBILATION, BUT THERE’S CERTAINLY LESS DESPERATION among laboratories around the United States. In travels around the country, both commercial laboratories and hospital laboratories tell THE DARK REPORT that the 2000 was unusually free of crises. It was also a more productive financial year than those of the 1990s.

Of course, most lab executives and pathologists know the stock prices of public lab companies made a strong showing during 2000, reflecting improved financial performance during the year. (See pages 9-14.) Share prices for both Laboratory Corporation of America and Quest Diagnostics Incorporated broke above $100 for the first time. Late in 2000, both Specialty Laboratories, Inc. and Dynacare, Inc. successfully closed initial public offerings (IPO). These were the first IPOs for clinical lab companies in many years.

But what is less known is that a large number of the remaining independent commercial labs consider 2000 to be one of their strongest financial years ever. Excepted from this group would be some lab companies located in unique managed care markets like Los Angeles and San Francisco and those smaller independent labs lacking a critical mass of specimen volume.

The most aggressively-managed hospital labs report similar good news, particularly those with professional sales outreach programs. Budget reduction pressures eased last year and it became easier to attract new client accounts among physicians’ offices. The decline in the number of hospital mergers and acquisitions during 2000 also contributed to a calmer working environment for hospital laboratory administrators.

Certainly there are still obstacles and industry-wide problems which elude solutions. The shortage of trained med techs is now having a growing impact in laboratories across the country. Onerous regulatory and compliance requirements—backed by the threat of aggressive enforcement action—still place ongoing pressure on lab administrators. And don’t forget declining lab reimbursement! There is no clear evidence that wide- spread downward pressures on pricing for lab testing have ceased.

The relative peacefulness of the current marketplace for laboratory testing services shouldn’t be mistaken for a general turnaround in lab industry finances. But it is certainly unmistakable proof that the worst of these problems may be past for the clinical laboratory industry.