Honolulu Lab Pursuing Pacific Rim Business

Laboratory sees good market opportunity in serving the Greater Pacific Basin area

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CEO SUMMARY: With one laboratory already operating in Guam, Diagnostic Laboratory Services, Inc. (DLS) is poised to expand its services in the Pacific Rim area. Now a major competitor within Hawaii, DLS sees the island archipelagos of the Pacific Ocean as a natural extension of its existing service area. It’s a business strategy that matches DLS’s core competencies with the unique needs of tropical populations.

PROVIDING CLINICAL LABORATORY services to the island nations of the Pacific Ocean creates unusual business challenges for Diagnostic Laboratory Services, Inc. (DLS) of Honolulu, Hawaii.

“We are probably the largest island-based laboratory organization in the United States,” stated John Edwards, M.D., President of DLS. “Within Hawaii itself, we operate a core lab in Honolulu and satellite labs on the islands of Oahu, Hawaii, Molokai, and Kauai.

Complicated Logistics

“As you can imagine, our logistics between the different Hawaiian Islands can be complicated,” noted Dr. Edwards. “To the west, we now operate a laboratory on Guam, which is 3,700 miles from Honolulu and on the other side of the international date line.”

Diagnostic Laboratory Systems is a good example of how a hospital-based lab organization can expand to fill unmet needs in its marketplace. DLS is owned by two healthcare systems. The Queen’s Development Corporation, a subsidiary of the Queen’s Health System, holds 90% ownership. The balance is held by Kuakini Health Systems.

DLS was founded in 1985 to serve the needs of the Queens Medical Center. Like many hospital-based laboratories on the mainland, it’s a stand-alone business unit which provides inpatient testing to three hospitals and provides outreach lab testing to 67% of Hawaii’s physicians. It recently relocated to a brand new core lab and corporate office near downtown Honolulu.

Within Hawaii, the last national laboratory competitor was SmithKline Beecham Clinical Laboratories (SBCL). SBCL sold its lab operations to DLS in 1994. A strong local competitor is Clinical Laboratories of Hawaii (CLH). Rivalry between DLS and CLH is intense, so neither lab gets a free pass in the Aloha State marketplace.

THE DARK REPORT recently toured Diagnostic Laboratory Services to learn more about the Hawaiian market and how it differs from that on the mainland. Besides the unusual requirements for developing an island-based courier system, DLS’s focus on developing new business from the Pacific Ocean area sets it apart from other integrated health system lab organizations.

“We’ve seen steady growth in the volume of specimens originating from our Pacific clients,” observed Dr. Edwards. “We now have two sales reps working in that market area. The DLS laboratory in Guam anchors that segment of our business.

“Currently the DLS executive team is evaluating our management priorities,” he continued. “We have three important business initiatives.

“First, we want to grow the business through effective sales and marketing. Besides the Pacific, we want to explore other markets for expanding revenues and test volume,” explained Dr. Edwards.

“Second, we have an RFP process under way to identify a vendor for Web-based lab test ordering and results reporting,” said Dr. Edwards. “We want to move expeditiously to develop this service. We will use Web-based information services to deliver enhanced lab services to our physician-clients. We also expect Web-based informatics to help us lower our costs.

Diagnostic Lab Services At-A-Glance

  • Core lab in Honolulu (40,000 sq. ft.)
  • 12 Satellite testing sites
  • 36 Primary phlebotomy sites
  • Manages labs at Queen’s, Wilcox, Kuakini, and Molokai hospitals
  • Handling approximately 21,000 specimens per week
  • 540 Employees
  • 8 Marketing/Sales employees
  • 9 Client service representatives
  • Diagnostic Laboratory Services offers clinical laboratory services in Midway, Saipan, American Samoa, Kwajalein, Johnston Island, Yap, Palau, Guam
  • Almost 99% of all testing done locally. 1% of testing is referred out

ISO-9000 Certification

“Third, DLS will proceed to become ISO-9000 certified,” declared Dr. Edwards. “Our goal is to use this management system to reduce errors, lower costs, and provide an enriched menu of services to our physicians and hospitals. In the process, we expect ISO-9000 management principles will make DLS an even more appealing work environment for our staff.”

DLS’s strategic business priorities are consistent with those seen by THE DARK REPORT at the nation’s better- managed hospital-based laboratories. There is an emphasis on an external strategy of boosting outreach specimen volumes. This lowers the average cost per test and provides more operating profit for the laboratory.

The move by DLS to implement Web-based lab test ordering and results reporting reflects an awareness that the lab’s value-added edge will come from enhanced information services.

Finally, working towards ISO- 9000 designation should give DLS a competitive position in the marketplace. Operating from a management system which eliminates errors, lowers costs, improves quality, and meets the needs of lab customers is an advantage in today’s healthcare marketplace.

Despite its location in a tropical paradise, Diagnostic Laboratory Services is certainly not taking a “laid back” attitude towards its business. To the contrary, it is working hard to be a lean, tough competitor throughout the
Pacific Rim marketplace.


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