Hospital System Acquires Labs In ACO Strategy

Genesis Health acquires laboratory assets from Metro Lab to better integrate lab services

CEO SUMMARY: Moving to deliver services as an accountable care organization (ACO), Genesis Health System of Davenport, Iowa, has acquired the laboratory assets in two hospitals previously operated by Metropolitan Medical Laboratory, PLC, a lab company owned by local pathologists. Genesis aims to improve data integration to support CPOE. It also plans to pursue cost savings and economies of scale in the five hospital laboratories within its health system serving the Quad Cities area.

CONTINUING TO POSITION ITSELF to deliver more efficient healthcare, the Genesis Health System in Davenport, Iowa, is integrating the service elements needed to operate as an accountable care organization (ACO).

On July 1, Genesis, which operates the Genesis ACO, acquired the assets of clinical laboratories operated in two of its five hospitals in the Quad Cities area. The seller was Metropolitan Medical Laboratory, PLC. Genesis Health is a five-hospital system that also owns a 170-physician practice, along with other health care providers. It serves a 12-county region in Eastern Iowa and Western Illinois.

Genesis is hiring all 90 lab employees employed by Metro Labs in the two facilities. Metro Labs will continue to operate labs throughout Davenport, continuing a tradition that goes back to 1914 when the clinical lab services company was formed.

The 14 pathologists who currently work at all five Genesis sites will continue to serve as contractors providing laboratory directorship and pathology services through Pathsource Diagnostics and Quad Cities Pathologists.

“This lab acquisition positions Genesis Health to become part of accountable care organizations that are already operating,” commented Keith Wachter, MT (ASCP), the Director of Laboratory Services for Genesis Health. “There are four important reasons to acquire the assets of these two labs. “First, it will allow us to have better integration of patient data,” he noted. “As part of our long-term strategy, we anticipate sharing data. That requires information to be interchangeable, as it should be in an ACO.

“Although Metro Labs has its own freestanding laboratory information system (LIS) that is interfaced to our hospital information system (HIS), that interface is not ideal,” noted Wachter. “As currently configured, the HIS has a limited ability to take full advantage of all of the capabilities of the LIS.

“Ideally, the HIS should be able to use the data from the LIS for decision support and it can’t do that,” he explained. “However, now that Genesis owns both the HIS and the LIS, we can format the lab data in a way that allows the two systems to interact in the best, most efficient way.

“The second reason we did this acquisition was to pursue further cost savings,” stated Wachter. “After analysis internally and from two consulting firms, we believed there is the potential to run these two labs with modest savings. Ownership of these labs allows us to further standardize across the system and pursue more economies of scale in lab services across all five hospitals.

Retaining the Lab Business

“That leads to the third reason we did this deal,” he continued. “We believe that by acquiring the assets of these two labs, we can retain the business within the Genesis system instead of contracting that business out to others.

“This strategy is part of a system-wide initiative—whether it’s physical therapy, home care services, hospice care, or laboratory testing,” continued Wachter. “We believe that keeping our service offerings inside the health system will serve us over the long term.

“Our fourth reason is to achieve better integration of clinical services,” he said. “Now we will have a lab team dedicated to serving the Genesis Health System. Not that there was anything wrong with the previous arrangement, but by owning the assets of these two labs, everyone can work together to control test utilization and costs.

“Having said all that, an important part of this deal is our ability to maintain the long-term relationship we have had with the pathologists from Metro Labs,” emphasized Wachter. “We anticipate that the new structure will allow us to work more efficiently with the pathologists on Genesis-related issues.”

This lab acquisition is an early example of how many hospitals and health systems are expected to develop the integrated clinical services needed to support ACOs in their communities.

Lab Acquisition Doubles Test Volume at Genesis

AS A RESULT OF A LAB ACQUISITION announced July 1, Genesis Health System of Davenport, Iowa, doubled its lab test volume almost overnight. Genesis has five hospitals serving patients in 12 counties in two states, and each hospital has a clinical lab.

“Metro Labs ran the labs in 252-bed Genesis Medical Center, East Rusholme Street, and at 174-bed Genesis Medical Center, West Central Park,” noted Keith Wachter, MT(ASCP), the Director of Lab Services for Genesis Health System. “Genesis was already operating the labs in three facilities: 150-bed Genesis Medical Center, Illini Campus in Silvis; and critical access hospitals of 11 beds in DeWitt, Iowa, and 22 beds in Aledo, Illinois. All Genesis facilities are called Genesis Medical Center.

“Combined annual volume at the two Davenport hospital labs is about 800,000 billable lab tests,” stated Wachter. “The volume at the Illini Campus in Silvis is 600,000 billable tests annually, and the two critical access hospitals do about 100,000 billable tests each per year. Therefore, the total lab test volume has doubled, going from about 800,000 tests to 1.6 million tests per year.”

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