“February 1, 1999 Intelligence:  Late Breaking Lab News”

Are the financial fortunes of the national laboratories about to take a turn for the better? Financial analysts at FMR Corp. must think so. Last month the company disclosed that it had purchased 3 million common shares in Quest Diagnostics Incorporated, giving it a 10.3% ownership stake in the laboratory firm. FMR is the parent company of Fidelity Management & Research Co., the mutual fund giant. At $18 per share, FMR’s investment in Quest would be around $54 million dollars.

Whistleblowers may have tapped out the clinical laboratory piggy bank. If so, that will be a relief to laboratory executives everywhere. The Inspector General of the U.S. Department of Health and Human Services reported a significant drop in settlements involving Medicare Fraud and Abuse for 1998. Payments to the feds totaled only $516 million for the year, compared to $1.2 billion in 1997. Criminal fraud convictions were up however, from 215 in 1997 to 261 in 1998.

LABONE HITS $100 MILLION MARK

Congratulations are in order for Thomas Grant II, Chairman, President, and CEO and Robert Thompson, CFO at LabOne, Inc. of Lenexa, Kansas. Their laboratory reported that 1998 was the first year in its history that revenues topped $100 million. LabOne has enjoyed blistering growth in recent years. The company’s revenues in 1995 were only $57 million. It shows that, despite managed care, opportunities still exist for laboratories with strong sales programs.

Speaking of the OIG and laboratory investigations, there remains one unresolved piece of “fraud and abuse” business. The OIG supeona, issued to Nichols Institute in 1993, has yet to be settled. Quest Diagnostics Incorporated, which purchased Nichols in 1994, has a sizeable reserve set aside for any eventual settlement.

Every now and then, tangible evidence surfaces to demonstrate reimbursement differences in California versus other states. Average employee premiums in Los Angeles in 1998 were the lowest in the United States, at $3,375. New York City was the highest, with premiums at $4,743 per employee. Since premiums reflect the “cost” of healthcare in that market, providers in Los Angeles seem to be getting some 29% less reimbursement than their counterparts in New York City. Figures are from William M. Mercer, Incorporated’s 1998 National Survey of Employer-sponsored Health Plans.

Last Christmas morning, the laboratory industry lost a true gentleman. Lemuel J. Bowie, Ph.D. passed away. He had been diagnosed with colon cancer earlier in 1998. Lem was Director of Clinical Laboratories at Evanston Hospital in Evanston, Illinois. But he may best known for his term as President of the American Association of Clinical Chemistry in 1993.

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