“March 15, 1999 Intelligence:  Late Breaking Lab News”

As expected, the wave of hospital mergers and acquisitions is slowing. During 1998, the number of mergers and acquisitions fell 28% from 1997. This is the first time since 1993 that the number of transactions declined. As reported by the Hospital Acquisition Report, only 144 transactions were done during 1998, compared to 197 purchases in 1997. This will slow the pace of laboratory consolidation in the hospital industry.

ADD TO…HOSPITAL MERGERS

Columbia/HCA Healthcare Corp. and Tenet Healthcare Corp. slowed their own acquisition programs. That’s allowing non-profit transactions to dominate the market, accounting for 75% of all mergers and acquisitions since 1995.

LabOne Inc.’s improved financial performance has encouraged its parent, Lab Holdings, Inc., to purchase the 19.5% of the stock it currently doesn’t own and col- lapse the holding company structure. The goal is to give LabOne maximum capability to maintain growth.

MEDICARE HMOS GET BIG BOOST IN REIMBURSEMENT

Politics continues to mix with medicine. HCFA announced that payments to Medicare HMOs would increase by a significant amount for 2000. The increases range from 2% to 12.9%, depending on the particular county. In California, Fresno County will see a 12.9% increase. Overall Medicare payments to HMOs will rise by 5.4% for the year 2000, according to Clinton administration officials.

MORE ON… MEDICARE HMOS

Many analysts believe that PacifiCare Health Systems Inc. will reap the greatest benefit from increased Medicare HMO reimbursement. This is based on the location of Pacificare’s Medicare enrollees. Any development which helps HMOs maintain adequate profit margins will indirectly benefit clinical laboratories. If HMOs are profitable, it is easier for them to improve reimbursement for laboratory testing from year to year.

Beckman Coulter, Inc. and Immunomedics Inc. disclosed that their partnership, IBC Pharmaceuticals, LLC,
received venture capital funding and will start operations shortly. The joint venture intends to develop a two-step process to irradiate cancer cells. Step one is to inject a bispecific antibody that targets the cancer. Step two is to inject a radiolabeled carrier that will bind with the antibodies. This project shows how diagnostic technologies are being adapted for therapeutic and monitoring applications. As these research initiatives succeed, they will generate increased testing for clinical laboratories.

Clinical laboratories looking for testing niches that can boost revenue might consider providing testing to employers in support of their wellness programs. Studies by Hewitt Associates in 1992 revealed that just 14% of the firms surveyed offered incentives or disincentives to employees to promote corporate wellness. That number jumped to 39% in 1998.

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