IF YOU TAKE THE TIME TO STUDY THE FINANCIAL PERFORMANCE of certain public
laboratories in 1999 and into 2000, you will be struck by the strong growth and profit numbers. That is contrary to the popular wisdom, which says that the clinical lab industry is in financial doldrums.
But the strong financial gains posted by companies such as DIANON Systems, Inc., IMPATH, Inc., LabOne, Inc., Quest Diagnostics Incorporated and others in 1999 and the first two quarters of 2000 illustrate an undeniable fact: professional management, diligently applied, gets results. Even the executives from these lab companies will agree that reimbursement for testing is declining; that test utilization patterns are changing, usually for the worse; and that basic costs are rising year-by-year faster than lab test reimbursement.
So why do some of these companies show revenue and profit growth ranging from 20% to 40%? And why do these companies financially outperform most of their independent commercial lab and hospital lab outreach competitors? I believe it is because they are ahead of most laboratory organizations in shedding the old management conventions of the prior generation of technically-trained lab administrators. In their place, these lab companies are adopting new models of professional corporate business management.
For example, these companies are willing to declare a growth goal of 10% or 30% per year. Then they ask their managers and employees to contribute in making that goal a reality. I mention this first because, if your lab team doesn’t have a goal, it can’t achieve things which might be considered improbable or even impossible. Yet an essential part of professional management is to establish goals, then help the organization achieve those goals.
I would be remiss in failing to also point out the important role of sales and marketing to professional management. Organizations need to grow to retain their vitality and momentum. Yet in most hospital lab outreach programs, sales and marketing is underappreciated and fails to get the support it should from senior administration. This despite the fact that increased test volumes usually mean employment stability, career opportunity, and increased profits for expansion.
I believe today’s most successful laboratory organizations are possessed of good management discipline. The strong financial performance of these lab companies during 1999 and into 2000 demonstrates that professional management methods do make a positive difference!