Kaiser’s National Lab Business Awarded to American Medical Laboratories

Quest Diagnostics loses major reference contract to upstart laboratory company from Virginia

MANY EXECUTIVES in the laboratory industry will be surprised to learn that American Medical Laboratories, Inc. (AML) of Chantilly, Virginia has aced out Quest Diagnostics Incorporated to become the primary reference laboratory for all divisions of Kaiser Permanente across the United States.

As of press time, there was no public announcement about the contract award. THE DARK REPORT estimates that Kaiser’s national reference account probably generates around $20 million per year in send-out testing, but no one at AML or Kaiser would confirm that number. It’s believed that the contract term is for at least five years.

American Medical Laboratories’ success in capturing Kaiser’s national business certainly boosts its credibility as the Virginia-based company pushes to become a national reference laboratory. This contract award also subjects AML to closer scrutiny. There are many naysayers in the lab industry who believe that AML is not up to the task of serving the far-flung Kaiser organization and they will be watching for any signs of problems.

Testing Was Divided

Prior to this contract, Kaiser’s business was divided. West coast divisions used Quest Diagnostics. This was a legacy account from the former Nichols Institute. Kaiser’s east coast divisions used AML.

Kaiser launched an RFP process with the goal of combining all its send-out testing into a single national contract. Observers believed that Quest Diagnostics had the inside track, for very good reasons.

At Kaiser’s annual awards ceremony this winter, Quest Diagnostics won recognition as the second best vendor within Kaiser’s national system. Also, seven of the eleven votes on the reference laboratory selection committee were individuals working in labs directly serviced by Quest Diagnostics.

Overcame Long Odds

Given the satisfaction and respect Quest Diagnostics had earned with the Kaiser organization, AML certainly overcame long odds in its successful effort to win Kaiser’s national reference testing contract.

As stunning as this development is to long-time observers of the laboratory industry, it is also a warning to competing laboratories that AML intends to wrestle itself a place at the table.

In recent years, both Specialty Laboratories, Inc. and ARUP Laboratories, Inc. have enjoyed sustained revenue growth, solid profits, and a good reputation with hospital laboratories. Now, another aggressive, noisy competitor is serving notice that it intends to crash the party.

For hospital lab administrators, these developments should be welcome news. As noted elsewhere in THE DARK REPORT, a credible new competitor in the national market will only serve to raise service levels offered by reference labs to their hospital clients while keeping a lid on immediate price increases.

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