It’s a deal that is likely to trigger significant changes in the relationship between the laboratory outreach programs of major health systems and the two national laboratories. It was announced yesterday that Laboratory Corporation of America (NYSE: LH) will acquire DSI Laboratories, Inc. of Fort Meyers, Florida.
The parent of DSI Laboratories is NCH Healthcare System. It owns two hospitals in the Naples area, along Florida’s west coast. DSI was founded in 1984 as a stand-alone enterprise owned by NCH. DSI Laboratories manages the consolidated laboratory services for NCH. It also is a major provider of laboratory testing services to office-based physicians and has enjoyed steady growth in specimen volume and revenue in recent years.
What makes LabCorp’s pending acquisition of DSI Laboratories significant is that the parent health system is willing to “take the money and run” by selling the outreach component of its business. NCH will “retain internal, patient laboratory testing at its Downtown Naples and North Naples campuses, with LabCorp assuming the remainder of the operation.”
If, in fact, if NCH is motivated to sell its lab outreach testing business primarily to realize the capital value of that business, then it is the third health system nationally to take this step in recent years. In 2005, the health system owners of Spectrum Laboratory Network, in Greensboro, North Carolina, sold a majority interest in this laboratory company and its outreach testing business, to Apax Partners, LP. Dark Daily estimates that the health system owners realized more than $100 million cash in that sale. (See The Dark Report, November 14, 2005.) Another similar transaction was the sale by Cincinnati, Ohio-based Health Alliance of its laboratory outreach business to LabOne, Inc. (now part of Quest Diagnostics Incorporated). The sale, which occurred in early 2004, brought the selling hospital organization $43.9 million in cash. (See The Dark Report, February 23, 2004.)
In the upcoming issue of The Dark Report, which goes to press next Monday, we will provide more detailed analysis of LabCorp’s acquisition of DSI Laboratories. This unfolding story should be of keen interest to laboratory administrators and pathologists who are currently leading laboratory outreach programs in different regions across the country.
Laboratory Corporation of America(R) Holdings Agrees to Acquire DSI Laboratories from NCH Healthcare System