However, medical laboratory billing/collections is often weak, even at top-performing outreach programs
If there is one bright spot in the revenue picture for many hospitals and health systems, it is how well-run hospital laboratory outreach programs produce strong growth in net revenue and contribution margin. Because of double-digit growth rates for outreach and outpatient procedures, clinical laboratory programs that target office-based physicians can produce impressive results.
“In our annual survey of hospital and health system laboratory outreach programs,” a significant number of participating hospitals report very strong rates of growth in specimen volume and net collected revenue,” stated Kathleen Murphy, Ph.D., who is CEO of Chi Solutions, Inc., based in Ann Arbor, Michigan. “We are regularly surprised at how many of these better-performing hospital lab outreach programs are growing at rates of 12% to 25% per year, sustained over three to more consecutive years. (more…)
In Seattle, Washington, the two blood brothers are dealing with an upstart competitor—one that they cannot acquire nor make go away. Since it became operational in 1997, PACLAB Network Laboratories has directly challenged the national laboratories on what can be considered their “home turf,” since both national labs operate regional testing laboratories in Seattle. Not only has it made steady gains in market share, but PACLAB is poised to become the market leader in Seattle.
Since the year 2000, a growing number of community hospitals have launched laboratory outreach programs. The most successful of these lab outreach programs—with effective sales reps and a commitment to top service—are posting impressive gains in specimen volume and net revenue. These “best of class” lab outreach programs are fully competitive and, in the communities they serve, they are steadily eroding the market share of the national lab companies. PACLAB Network Laboratories should be included in this “best of class” list.
“Currently, we estimate that PACLAB holds a 30% share of the Seattle market for testing referred by office-based physicians,” stated Stewart Adelman, General Manager of PACLAB. “That makes us about equal to each of the two blood brothers, since we estimate that, in the Seattle metro, Laboratory Corporation of America (NYSE: LH) has about 30% and Quest Diagnostics Incorporated (NYSE: DGX) has about 30%. The remaining 10% of the market is shared among several other lab companies.”
Adelman made his remarks at PACLAB’s annual strategic retreat, conducted last week in Spokane. Dark Daily Editor Robert Michel was there to participate. “On several of the medical campuses of PACLAB member hospitals, we currently hold market shares of 80% and 90%,” observed Adelman. “It is powerful evidence that physicians will support their community hospital’s lab outreach program when it offers service levels that match or exceed that of competing laboratories.”
As a phenomenon, the mushrooming number of hospital laboratory networks is a natural market response to the lack of local independent laboratory companies in many cities across the United States. During the past 15 years, Laboratory Corporation of America and Quest Diagnostics Incorporated have regularly acquired any local or regional laboratory that achieved size and scale. Thus, it is not surprising that many community hospital administrators recognized the void in local laboratory services and organized a laboratory outreach program to provide more lab testing choices in the local community.
That is certainly one of the reasons why PACLAB Network Laboratories was organized. When it became operational in 1997, PACLAB’s equity members included eight hospital laboratories, with PAML, Inc. of Spokane as a partner and the manager of the regional laboratory network. During the past decade, it has grown to include 11 member hospital laboratories and serve all of the Seattle metro region, from Centralia in the south to Everett in the north.
PACLAB is also noteworthy for one other impressive achievement. It is living proof that hospital laboratories can band together and collaborate to their mutual benefit over the long term. In addition to paying for all expenses associated with the outreach business, each quarter, PACLAB distributes a sizeable dividend check to the CFO of each member hospital. Laboratory administrators and pathologists in other regions should study PACLAB as a business model that could advance the clinical and economic success of their own laboratory organizations.
P.S.: Dark Daily readers with knowledge of other successful, innovative and thriving laboratory outreach programs are invited to contact us with that information: firstname.lastname@example.org and/or email@example.com