Some Hospitals and Health Systems Get Bigger in Bid to Increase Efficiency and Profit Margins

Meanwhile, financial pressures mean smaller budgets for hospital laboratories

When it comes to multi-hospital health systems, the biggest are getting bigger. But many health systems are not covering their costs. These were the findings from a recent annual survey of health systems by Modern Healthcare magazine. It confirms what pathologists and clinical laboratory directors see in many regional markets.

As we wrote in Dark Daily on June 29, three factors are driving this growth trend: federal healthcare reform, mandated spending on health information technology (HIT), and the economic contraction from 2007 to 2009 that pushed smaller hospitals to merge with larger health systems. This is the analysis reported by Modern Healthcare. (See Dark Daily, Modern Healthcare’sTop 10 Largest Health System Rankings also Reveal Nation’s Largest Hospital-Based Laboratories, June 29, 2011.)


Novartis To Pay $470 million To Buy Pathology Testing Company Genoptix

Cancer Testing and Molecular Diagnostics Are Main Drivers in This Transaction

In a deal with implications for independent clinical pathology laboratories, pharmaceutical giant Novartis (NYSE: NVS) announced that it would acquire pathology testing company Genoptix, Inc. (NASDAQ: GXDX). Novartis will pay $470 million in cash to acquire all the shares of Genoptix.

Although the total amount of $470 million to be paid for Genoptix is nearly one-half billion dollars, one financial analyst who quickly responded to the news believes that Novartis did not pay a premium price for Genoptix. At William Blair & Company, Analyst Amanda Murphy, CFA, wrote that “…the valuation [of Genoptix] is below what esoteric/specialty labs have been sold for in the past (closer to 10 times or more), which might reflect the company’s recent operational issues and/or potential reimbursement pressure from a shift to in-network status with payers.”