aLabs Now Manages Labs for Major Health Systems

Created by a venture capital firm, aLabs has agreements in Milwaukee and San Diego

CEO SUMMARY: Established with a unique business plan unseen to date in the lab testing industry, aLabs has already entered into laboratory management services contracts with major health systems in Milwaukee and San Diego. This is an impressive start for a newly-formed company that has no prior experience in clinical laboratory operations. aLabs is recruiting an interesting mix of executives. Some hires are coming from outside the lab industry. Others are experienced lab managers.

EVEN BEFORE IT LAUNCHED OPERATIONS, aLabs had inked agreements with several sizable health systems to provide “laboratory management services.”

These contracts were negotiated and executed with little notice across either the hospital industry or the lab testing industry. Yet both deals involve well-respected health systems and represent an important new development in the laboratory testing marketplace.

aLabs was created by Accretive, LLC, a private equity firm located in New York, New York. Its distinguishing characteristic is that it does not want to purchase or acquire lab assets in exchange for cash. Rather, it wants to manage hospital laboratory operations and share the reduced costs and improved operating margins with that lab’s parent institution.

Aurora and Advocate Pact

In the midwest, aLabs entered into a contract to provide management services to ACL Laboratories (ACL). This is the lab organization jointly owned by Aurora Health Care and Advocate Health Care.

This is a major development. Aurora, based in Milwaukee, Wisconsin, has 15 hospitals in its network. Advocate, located in Chicago, Illinois, has 13 hospitals. Both systems have an active laboratory out-reach program that is managed by ACL.

The second agreement held by aLabs is with Sharp HealthCare of San Diego, California. This laboratory services management contract covers the four acute care hospitals operated by Sharp, along with its outreach lab testing program.

It is believed that both contracts became effective on January 1, 2012. Neither Accretive nor aLabs have issued press releases. Executives at aLabs have regularly declined requests to comment on their new business. For this reason, most lab administrators were not aware of aLabs’ existence, nor the fact that it had successfully negotiated these two contracts. The information provided in this intelligence briefing was assembled from a number of sources, including public records.

As part of aLabs’ business strategy, it has gone outside the traditional clinical laboratory industry to recruit executives who can bring fresh perspectives to the management and operation of hospital laboratories. This is contrary to the popular wisdom in the lab testing profession, which says that it is essential that experienced laboratory managers and executives be retained to operate a clinical laboratory.

Some examples include John Thomas, who is reported to be Vice President of Lab Operations for aLabs. His previous job was as Executive Vice President of Global Supply Chain Operations for Hertz.

In the position of CFO at aLabs is John Adams. He was previously COO at Acxiom and held positions at Eclipsys, AT&T, and Electronic Data Systems Corporation. The Director of Finance at aLabs is Christopher Hayes. He had previously held several positions at Accenture.

Lab Industry Executives

aLabs has also recruited a number of lab industry executives. Described as a founding director of aLabs is P. Thomas Hirsch. He is credited with being the architect of Path Lab, Inc., based in Portsmouth, New Hampshire.

This successful lab company was owned by several hospitals and provided inpatient and outreach testing services around New Hampshire. After Path Lab’s sale to Laboratory Corporation of America in 2001, Hirsch started Laboratory Billing Solutions and has served as its President since that date.

Other veteran lab executives at aLabs include Rob Albert as aLabs’ Vice President and National Lead; Bret Awbrey as Senior Manager, Lab Operations out of San Diego; and Joe McGann, Lab Operations out of Milwaukee.

It is believed that aLabs has not taken an equity interest in the laboratory organizations of its client health systems. Rather, the primary revenue to aLabs will come from sharing in cost reductions achieved by streamlining lab operations and by increased revenue generated from a growing laboratory outreach program.

If aLabs is operated according to Accretive’s past business formula, the longer-term objective is to win enough contract business from the nation’s larger hospitals and health systems to make it possible for aLabs to conduct an initial public offering and sell stock to the public. That is how Accretive would be able to realize profits from the venture and pay off its private equity fund investors.

Accretive’s Plan for Hospital Laboratories

IF THE NAME “ACCRETIVE” IS FAMILIAR, it may be because Accretive, LLC, was instrumental in creating Accretive Health, now a public company that provides revenue cycle management services to hospitals and health systems.

Accretive’s new venture, aLabs, is organized along the business characteristics described by www.VentureBeatProfiles.com as:

Founded in 1999, private equity firm Accretive LLC leads a number of industries by making enduring investments in superior companies. With a long-term approach to ventures, Accretive LLC spends up to several years researching market fundamentals to develop strategy for every individual project.

The experienced team at Accretive LLC does not participate in a business’ daily management; instead, Accretive LLC partners provide capital, recruit additional talent, evaluate business opportunities, conduct industry research, and offer strategy and guidance.

Accretive LLC currently features several well-known, robust companies in its portfolio. Among the firms Accretive LLC invests in is Accretive Health, a purpose- built company created by Accretive LLC team members to thrive in its selected industries. Accretive LLC’s Accretive Health provides outsourced revenue cycle management to large hospital chains.

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