LabCorp Loses A Hospital Lab Joint Venture

LabCorp Loses A Hospital Lab Joint Venture

ONE OF THE NATION’S LONGEST-RUNNING LAB OUTREACH JOINT VENTURES involving a public lab company and a major hospital came to a quiet end on June 30. That’s the day when United/Dynacare Laboratories, LLC, ceased to exist.

This was a joint venture in Milwaukee that was established in 1997 by 550-bed Froedtert Hospital and Dynacare, Inc., then a public lab company. In 2004, Dynacare was acquired by Laboratory Corporation of America., which then continued as a partner in the lab outreach joint venture. Neither party has commented publicly on the termination of the JV. It is not known whether any money was paid by one party to the other as part of the division of assets, including the lab facility, equipment, and client book of business.

Froedtert Hospital and a yet-to-be-named partner will continue to operate the existing laboratory outreach business. Since July 1, it has operated as Wisconsin Medical Laboratories. It is believed that LabCorp does not have a non-compete as part of the terms of the JV’s dissolution. That could mean a competitive sales battle may be about to commence in the Milwaukee regional market between LabCorp and Wisconsin Medical Laboratories.

What is noteworthy about this development is that the two blood brothers have regularly told Wall Street analysts and investors that hospitals are looking to outsource their lab services. The termination of this lab joint venture would be a market example of the opposite happening—where a large regional hospital wants full control of its outreach lab program and is willing to go it alone without a public lab company partner.

Moreover, for those lab executives who have tracked the relatively small number of true lab JVs that came into existence since the mid-1980s, the dissolution of this JV is consistent with the pattern of the hospital partner eventually ending the joint venture so as to regain full control of its lab outreach program. Many lab outreach deals done in recent years have actually involved a public lab purchasing a health systems’ lab outreach program to then be its sole owner and operator.

One interesting speculation about Froedtert Hospital’s willingness to go it alone with its lab outreach program may be associated with how it is assembling an integrated healthcare delivery system. Administrators at Froedtert may recognize the value of having a single, unified lab test record that covers patient data from inpatient, outpatient, and outreach settings.

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