Today in Renton, Washington, Valley Medical Center announced a new comprehensive contractual relationship involving medical laboratory services with PACLAB Network Laboratories of Bellevue, Washington. This is a significant development in the Greater Seattle market for several reasons.

First, it means that Quest Diagnostics Incorporated (NYSE:DGX) has lost another important hospital relationship in Greater Seattle, once again to PACLAB. It was back in December, 2003, when 244-bed Evergreen Hospital Medical Center of Kirkland, Washington, similarly terminated its comprehensive laboratory testing relationship with Quest Diagnostics and became part of the PACLAB regional laboratory network.

Second, PACLAB Network Laboratories gains an important foothold in South King County because of its new affiliation with 328-bed Valley Medical Center. As part of this laboratory testing relationship, PACLAB will provide laboratory outreach sales and marketing services on the Valley Medical Center campus and surrounding communities.

Third, with the addition of Valley Medical Center as a member of PACLAB, this regional laboratory network again demonstrates that it has a business and clinical solution for laboratory testing services that appeals to community hospitals. PACLAB has a track record of establishing long-term relationships with its participating hospitals.

Fourth, Valley Medical Center becomes the fourteenth participating hospital in PACLAB Network Laboratories. This regional lab network has grown steadily since its founding in 1996 with just six hospital partners. (Pathology Associates Medical Laboratories is also a member of PACLAB and provides administrative, business, and reference testing services.)

Finally, since its formation in 1996, PACLAB has shifted the competitive balance in Seattle’s market for laboratory testing services. It now holds managed care contracts with all the region’s major health insurers. By market share, estimates are that PACLAB, Quest Diagnostics, and Laboratory Corporation of America (NYSE:LH) now have about 30% each of physicians’ office testing business across Greater Seattle.

Dark Daily recalls that, in the second half of the 1990s, hospital labs across the nation were enamored by the concept of regional laboratory networks. In almost every region, there were efforts to organize such networks. Most have fallen by the wayside. In 2009, PACLAB (founded in 1996) and Joint Venture Hospital Laboratories (Detroit, Michigan-founded in 1992) provide the best examples of how this lab testing business model can succeed and prosper.

Insider’s FYI: Hospital lab managers have an opportunity to learn, first-hand, how PACLAB grows the lab testing outreach business of each member hospital. PACLAB Area Business Manager Tim Amato will speak at the Executive War College next week on “Building the Top-Performing Marketing & Sales Program: Success Secrets for Lab Outreach.” You can still register for the Executive War College with this link: Registration now available online

Related Information:

Valley Medical Center Joins PACLAB Network

PACLAB Network Laboratories

PACLAB and Evergreen Healthcare Announce Agreement

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