CEO SUMMARY: In the span of four days in September, Quest Diagnostics agreed to buy two lab companies and the lab testing service line of a third firm. In August, it purchased wellness company Provant Health, which had earlier filed a bankruptcy action. Each of these transactions helps Quest concentrate more on proprietary products and market share. The real gem in this buying spree is PhenoPath, the specialty pathology practice and reference laboratory that is widely-respected for its expertise.
With its purchase of two lab companies, Quest Diagnostics Inc. is continuing the trend of consolidation in the clinical laboratory marketplace. It also acquired two other healthcare companies.
On Sept. 27, Quest Diagnostics purchased PhenoPath, PLLC, in Seattle. Days earlier, it announced the acquisitions of ReproSource in Woburn, Mass. (on Sept. 24) and the lab services business of Oxford Immunotec Global PLC, a company in Oxford, England (on Sept. 25). At the end of August, Quest also acquired a bankrupt wellness company called Provant Health, a company in East Greenwich, R.I.
Of these four acquisitions, PhenoPath is probably the best-known within the clinical lab profession. Founded by pathologist Allen Gown, MD, in 1998, it is a physician-owned specialty pathology practice and reference laboratory in Seattle.
PhenoPath offers diagnostic and contract research services to pathology and oncology practices, hospitals, biopharmaceutical companies, and research institutions in the United States, Canada, and around the world, the company said on its website. It offers immunohistochemistry, flow cytometry, fluorescence in situ hybridization tests, molecular assays, and chromosome analysis, it added.
The PhenoPath acquisition is particularly important because this AP provider has a long and distinguished history in the Pacific Northwest. Under terms of the deal, PhenoPath will become part of AmeriPath, a division of Quest that focuses on anatomic pathology.
Reason for PhenoPath’s Sale
In a letter to its customers, PhenoPath said it agreed to become part of AmeriPath, because the physicians at PhenoPath wanted to continue to provide patients with “the most advanced services.”
In the letter, PhenoPath CEO Tim Rich and Quest Senior Vice President, Commercial, Everett Cunningham, said that AmeriPath and PhenoPath will offer, “an expanded network of renowned pathologists both at the PhenoPath facility in Seattle and the existing Quest Diagnostics operation in nearby Portland, Ore., coupled with Quest’s national pathology community.”
The other lab company Quest acquired was ReproSource, a specialty fertility services company in Woburn, Mass. ReproSource offers diagnostic tests to women seeking fertility services, including genetic-based ovarian health and recurrent pregnancy loss assessments, Quest said. In an effort to bolster its offerings in women’s health and reproductive services, Quest said it will offer ReproSource’s services nationwide.
Quest did not disclose terms for any of the deals it announced in September.
The third acquisition Quest made involved the lab services business of Oxford Immunotec Global PLC, a company in Oxford, England, that Quest described as being a “global, high-growth diagnostics company.”
The company offers tuberculosis and tick-borne disease testing services at laboratories in Memphis, Tenn., and in Norwood, Mass. Under the terms of the deal, Oxford Immunotec will sell its TB test kits to Quest under a long-term supply agreement. The two companies hope to see an increase in testing for TB in the United States.
Company in Bankruptcy
At the end of August, Quest also acquired a bankrupt wellness company called Provant Health, of East Greenwich, R.I., that claims to be the largest publicly-traded, health and well-being provider in the United States.
Under an asset purchase agreement, Quest will acquire substantially all of Provant Health’s assets and will continue to offer the company’s wellness services to corporate and other clients. If the bankruptcy court agrees with the terms of the transaction, it is expected to close in October.
Quest’s acquisitions of PhenoPath, ReproSource and proprietary tests from Oxford Immunotech show that consolidation and the concentration of market share continues in both the in vitro diagnostics (IVD) and clinical lab sectors, as companies buy up smaller firms.
Quest Purchased MedXM in January
IN THE FIRST QUARTER OF THIS YEAR, Quest Diagnostics acquired Mobile Medical Examination Service (MedXM), a company in Santa Ana, Calif., that provides home-based health risk assessments.
This acquisition and Quest’s emphasis on closing gaps in care is significant as the billion-dollar clinical lab company works to position itself as a resource and a partner to health insurers delivering population health services outside of hospitals and other traditional sites of care.
MedXM has a network of more than 1,700 medical professionals operating nationwide who provide what Quest described as “a high-touch personalized approach that engages members, often at home, in assessing their health and risks.” These are patients who have been hospitalized or who may need to be hospitalized but are being cared for in lower-cost settings.
“Health plans use data from assessments to coordinate with physicians to ensure they take preemptive actions to reduce identified risks,” Quest said about MedXM earlier this year. “Data from the assessments may also aid risk scoring and quality tracking of managed populations.”
At the time, Quest touted the ability of MedXM to expand its ability to close gaps in care, saying, “The acquisition will expand Quest’s scale and reach in the mobile and home segment and bolster its overall capabilities in extended care.” With the MedXM deal, Quest said it would “focus on connecting with patients in homes, retail stores, and other convenient settings.”