Marketplace Rewards Those Who Get It Right

INTELLIGENCE BRIEFINGS IN THIS ISSUE REVEAL INTERESTING DEVELOPMENTS in our industry. I would agree with our Editor’s assessment that a new cycle of investment in laboratory companies is about to occur. There is also confirmation that laboratories which offer HMOs more than simple lab test data can get a leg up on their competitors.

On the East Coast, DIANON Systems, Inc. has inked a pact with Aetna/U.S. Healthcare and SmithKline Beecham Clinical Laboratories (SBCL) to provide anatomic pathology services across a number of states covered under SBCL’s contract with Aetna. Attendees at our Executive War College in May 1998 heard Arthur Steinberg, M.D., the architect of DIANON’s value-added information product (known as CarePath™), outline how and why this service was designed to meet the needs of patients, physicians and managed care plans.

One year later, DIANON Systems accomplished its business objective. CarePath is singled out by Aetna’s Medical Director as one reason why the company was selected to be a sole source AP provider in three states, and a preferred AP provider with Aetna/U.S. Healthcare plans in other parts of the country.

On the West Coast, the purchase of Unilab Corporation by Kelso & Company, a respected LBO (leveraged buyout) firm, for almost one half billion dollars provides evidence that big money players on Wall Street believe the clinical laboratory industry is on the verge of a financial turnaround.

What these events, three thousand miles apart, tell us is that the marketplace is evolving. DIANON Systems is not sitting tight, doing the same things in 1999 that it did in 1996. Instead, it is investing in new services and paying sales people to educate their potential customers about the benefits of these services. As a result, this proactive management plan has harvested “sole source” arrangements with Aetna and Oxford Health Plans during the last six months.

Expect a similar story with Unilab. New owners are going to insist that this once-troubled laboratory proactively go into the marketplace with new products. As it does, the competitive market will change, for better or for worse. Along the way, the marketplace will reward those laboratories and pathology practices which got it right!


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