It was The Dark Report’s headline story ten years ago this month!
Introducing a new feature: Ten Years Ago in The Dark Report
To give Dark Daily readers better context about unfolding events in the laboratory industry, we are pleased to introduce this feature which will appear regularly. Each month, we will dive into our archives and share with you the key events of ten years ago, along with an update to those companies and laboratory executives.
American Medical Labs Merges with Associated Pathologists Lab in 1999
In its September 20, 1999 issue, The Dark Report disclosed that Las Vegas-based Associated Pathologists Laboratories (APL) would be merging with American Medical Laboratories (AML) of Chantilly, Virginia. This bi-coastal merger created the third largest commercial laboratory organization in the United States.
The merger was expected to be significant. The combined resources of APL and AML would help both of them improve routine testing. It also created an operational base for AML west of the Rockies. It also put AML in an excellent air-hub (Las Vegas), which made it easier to support reference testing clients.
At the time, TDR noted that this merger reflected ongoing consolidation in the commercial laboratory industry. It was an effort by the owners of both AML and APL to achieve critical mass and improve their competitive position relative to their national laboratory competitors.
However, the high expectations of AML and APL didn’t last long! Just 26 months later, AML was itself acquired by Quest Diagnostics Incorporated (NYSE:DGX). The sales price of $500 million was believed to be slightly greater than 12 times AML’s cash flow. Not only was this too good for AML’s owners to pass up, but it also showed that laboratory valuations were recovering from low prices paid during the last half of the 1990s.
In 1999, AML’s revenues were $143.4 million. After the 1999 merger, AML reported an instant jump in revenue to $260 million. At the time, TDR and others saw the AML/APL merger as a possible blueprint to show how independent labs could combine resources to increase size and scale as a way to better compete against the two blood brothers.
Other laboratory news in September 1999
- Why growing numbers of hospital administrators were attempting to reduce or eliminate payments for Clinical Pathology Professional services. In particular, TDR identified corporate policies at one of the for-profit hospital corporations as one major factor in this trend.
- Cytyc Corporation finally announced an agreement with Aetna/U.S. Healthcare, then the nation’s largest health insurer, to cover its ThinPrep test. This was a major achievement for Cytyc, sinceAetna was one of the last major payers that was not covering the ThinPrep pap test.
- TDR was the only lab industry source to predict the impending death of capitated contracts. TDR recognized that a growing number of hospitals were rejecting capitated contracts. From this time forward, managed care plans began to emphasize enrollment in Preferred Provider Organizations (PPOs).
Do you have any recollections of laboratory news and events from 1999? Write us using the e-mail response form on DARKDaily.com. Look for our next installment of “Ten Years Ago This Month in The Dark Report”!
Speak Out! Please leave your comments for our editor below and be heard.
- Was the AML-APL merger a smart business move back in 1999?
- Are there important unreported facts or outcomes relating to the AML-APL merger that remain unknown to the lab industry?