“January 11, 1999 Intelligence: Late Breaking Lab News”

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Not much has been heard from Neuromedical Systems, Inc.(NSI) recently. The company makes the PapNet® Testing System for Pap smear screening and is concentrating on obtaining approval from the FDA to use PapNet as a primary screener. It is currently approved for use as an adjunct test. This fall NSI announced a restructuring plan that involved the lay-offs of 20 employees and a related write-down. Most of NSI’s business activities are focused on Europe, where PapNet can be used in several countries for primary screening of Pap smears.

Someone got a nice Christmas present this holiday season. Laboratory Corporation of America disclosed that Richard L. Novak was promoted to Executive Vice President and Chief Operating Officer (COO). The announcement was made December 29. The position was newly-created and Novak continues to report to LabCorp Chair and CEO Thomas P. Mac Mahon. Novak moved to LabCorp in March 1997 after a ten year career at SmithKline Beecham Clinical Laboratories.


Is vertical integration of healthcare companies really the holy grail? Not according to one financial analyst. “Vertical integration sounds wonderful, but in reality it’s difficult. Hospitals should be hospitals, medical groups should be medical groups, and health plans should be health plans. It’s dysfunctional to put them together.”? These are the comments of Kenneth Abramowitz, healthcare analyst for Sanford C. Bernstein Co. of New York at the “InterHealthcare Congress and Exposition”? held in New York City this fall.

His recommendations? Abramowitz said that healthcare executives should pare back rather than consolidate. “Focus on your best properties, and close marginal hospitals, offices, and any- thing else,”? he advised attendees at the event. Hmm, sounds like THE DARK REPORT’S theme that “large size brings clout, but doesn’t guarantee profits and success.”? Could Abramowitz be reading TDR?

When the smell of money disappears, so do lawyers. In November, AmeriPath, Inc. was hit by government auditors with a Medicare refund demand of $2.95 million. Within weeks, a number of law firms filed shareholder class action lawsuits against the pathology PPM. AmeriPath successfully appealed there fund demand in December. (See TDR, November 30 & December 21, 1998.) After the settlement, it only took a matter of weeks before the various lawsuits were withdrawn.

Which was the fastest growing hospital or hospital system during the 1991-1996 time period? At a time when healthcare cutbacks are the norm, the Mercy Health System of Janesville, Wisconsin posted a five year growth rate of 177%, with revenues of $138 million in 1996. The runner-up was Dallas County Hospital District in the Parkland Health and Hospital System of Dallas, Texas. Its growth was 148%, with revenues of $280 million in 1996. It’s a sure bet that the clinical laboratories of these two institutions have been adding resources and not cutting back. (Statistics from Abendshien & Grube of Northbrook, Illinois.)


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