it's yet to make a flourish, but American Esoteric Laboratories, Inc. is now funded, open for business, and has $70 million to use in pursuing its business goals. Even as this new laboratory company makes its debut, an old issue continues to gnaw at the laboratory industry: competitive bidding.

Medicare continues to move towards its latest attempt to launch a competitive bidding project for Part B laboratory testing services. Meanwhile, Florida's Medicaid program has issued an RFP intended to award a single laboratory exclusive rights to perform all non-hospital lab testing done statewide for Medicaid patients for three years. (See pages 8-9.)

Add to the Medicare and Florida Medicaid examples another instance of competitive bidding. This time it's the British Columbia healthcare agency which turned to competitive bidding for laboratory testing as a way to reduce expenses. (See pages 10-12.) Taken together, the Medicare, Florida Medicaid, and British Columbia examples provide strong evidence that the laboratory industry has a big fight on its hands if it wants to oppose competitive bidding.

I predict this concept will continue to pop up. With demand for healthcare services and costs increasing at double-digit rates, competitive bidding will become an even more attractive option for the administrators of government health programs. One could say that momentum and inertia are on their side. Momentum comes from ever-increasing pressures to control costs and make limited budgets cover more beneficiaries. Inertia comes from the lack of creativity and the institutional barriers to innovation. From the government's perspective, competitive bidding is the path of least resistance.

The creation of a new laboratory company even as the spectre of competitive bidding comes closer to reality makes an undeniable contrast—and provides an opportunity to make a point. American Esoteric Laboratories represents new blood coming into our industry. It has ideas, energy, and capital. Whether it succeeds or fails, it will stimulate competing laboratories to improve their services and their capabilities. Everyone will benefit. In contrast, bureaucrats at these government health programs lack that same type of competitive pressure that encourages innovation and improvement. The result is more of the same, whether it really works or not. Unfortunately, competitive bidding falls in that category—and won't disappear.

New Esoteric Lab Firm Does Two Acquisitions

American Esoteric Laboratories, Inc. has plenty of cash and ambitious plans

CEO SUMMARY: Armed with $70 million, American Esoteric Laboratories (AEL) wants to build a national laboratory that offers a full menu of esoteric tests. It is building a primary laboratory in Dallas, which has one of the nation's best air transport hubs. ThromboCare Laboratories and Viral Diagnostics, both based in the Dallas area, are just the first of several acquisitions planned by the nation's newest lab company.

Growing Criticism Hits Maryland Gen. Hosp. Lab

Public responds to results of inspections of troubled hospital laboratory in Baltimore

CEO SUMMARY:"Like peeling back layers of rotten fruit, the deeper state and federal inspectors looked into the management of the hospital's lab, the more problems they found."–Editorial, Baltimore Sun, April 7, 2004. Public response to the inspection report of the Maryland General Hospital laboratory has triggered criticism of how providers and accrediting agencies like JCAHO and CAP inter-relate.

FL Medicaid Lab Bid Gets Slammed By Foes

Opposition builds to the planned award of a three-year, $100 million lab test contract