"HIPAA Update"

Sonic Healthcare Acquires Labs from Aussie Competitor

Just as in the United States, lab consolidation is ongoing in Australia with this $100 million deal

LABORATORY CONSOLIDATION continues in Australia with news that Sonic Healthcare Limited of Sydney, Australia, has agreed to acquire three clinical laboratory business units from competitor Healthscope, Ltd., of Melbourne, Australia.

The acquisition was announced on May 16. In three separate transactions, Sonic will pay A$100 million (US$99.4 million) for the Healthscope pathology operations in Queensland, Australian Capital Territory, and Western Australia. These businesses represent annual revenue of about A$105 million.

This deal comes on the heels of an earlier lab transaction between the two companies. In February, Sonic, the largest pathology company in Australia, acquired Healthscope’s Tasmanian pathology business. At the time, Colin Goldschmidt, M.D., Sonic’s CEO, said he was considering other acquisitions.

Sonic Has Global reach

Sonic Healthcare is one of the world’s largest pathology and clinical laboratory companies. It has operations in Australia, New Zealand, the United States, Germany, and the United Kingdom. Healthscope runs hospitals in Australia and pathology services in Australia, New Zealand, Malaysia, Singapore, and Vietnam.

In recent years, Healthscope has made aggressive efforts to build market share in the pathology business. But, as reported in The Wall Street Journal, Healthscope was selling its pathology businesses after it failed to achieve “critical mass.”

However, Healthscope does foresee a strong future for its pathology businesses in the states of Victoria, South Australia, and the Northern Territory. Robert Cooke, Healthscope’s Managing Director, said his company will retain these operations.

Tough Lab Test Market

The Australian newspaper reported that pathology companies have been under significant pressure since restrictions governing collection centers were lifted two years ago. But in that time, Sonic has reported strong revenue growth and improved profit margins, the newspaper said.

In Australia, the clinical laboratory market has been dominated by three firms: Sonic Healthcare, Primary Health Care Limited, and Healthscope. By selling some of its pathology business to Sonic, Healthscope is reducing its market share in Australia, leaving Sonic and Primary as the two major national competitors.

In the United States, Sonic Healthcare has been an opportunistic acquirer of both clinical lab companies and anatomic pathology laboratories. It entered this country in 2005 by paying US$300 million to purchase Clinical Pathology Laboratories of Austin, Texas.

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