Recognizing What the Marketplace Teaches Us

IT IS ONLY IN HINDSIGHT THAT MOST PEOPLE UNDERSTAND THE TRUTH of a situation. Unfortunately for laboratory employees in New York City, the lack of foresight by their leaders must inevitably lead to job cutbacks at three recently constructed laboratories.

As you will read in our “Tale of Two Cities” starting on the next page, at the same time that laboratories in Los Angeles were feeling the full impact of managed care and cutting back on underutilized laboratory capacity, several prominent integrated healthcare systems in the Big Apple were embarking upon major projects to expand and automate their laboratories.

At the Executive War College in New Orleans last week, a number of New York-based laboratory executives spoke off the record to our editor about the situation in New York City. Even as LabCorp is eliminating underutilized capacity between its Raritan (New Jersey) and Mitchell Field (Long Island) facilities, the three hospital systems which built automated laboratories continue to subsidize their unproductive facilities.

I would remind our clients and readers of an important fact. Healthcare in the United States is undergoing a similar transformation in every metropolitan area. The pace of the transformation varies, as does its composition, given the unique healthcare resources in, say, Houston compared to Chicago. But the themes are constant: lower reimbursement, consolidation among providers, integration of clinical and operational systems, and demand for better information that can improve outcomes and lower costs.

Most experts agree that California is the cutting edge of this transformation. What happens in California is a reasonable indicator of how managed care will transform other cities as it grows in influence. Assuming the truth of that fact, how could laboratory leaders in New York City ignore events in Los Angeles during the mid-1990s that literally drove labs into bankruptcy and blithely proceed to build more laboratory capacity than New York City will need for years to come?

Whatever the answer, it is a lesson to the rest of us. It is important for laboratory executives to look outside their organization at the experience of labs in other cities and in other healthcare markets. We must all learn to recognize what the marketplace teaches us. The market is an unfailing guide to success strategies…but only if we heed its lessons.