| R. Lewis Dark:
Intense Competition for Market Share in New York
ONE OF THE MOST TURBULENT MARKETS FOR LAB SERVICES TODAY is New York
City and the Tri-State area of New York, New Jersey, and Connecticut. This
is ground zero in the fight for market share between Quest Diagnostics
Incorporated and Laboratory Corporation of America and competition is
intense. The stakes are highest for Quest Diagnostics. It has long held a dominant
market position in New York City, so it has the most to lose.
Adding to the competitive pressure are the submarkets to the east and to
the west of New York City itself. Located to the west, across the Hudson
River, is Bio-Reference Laboratories, Inc., (BRLI), which is enjoying record
revenue and operating profit. (See pages 7-9.) East of New York City, Sunrise
Medical Laboratories is prospering on Long Island. (See pages 3-4.) And
now that Sonic Healthcare Limited of Sydney, Australia, will acquire
Sunrise, the level of competition just got “kicked up a notch,” as the famous
New Orleans chef Emeril Lagasse is fond of saying.
Generally, competition is good for physicians and patients. But Thomas
Rafalsky, President of the New York State Clinical Laboratory Association
(NYSCLA), observes that the currentmanaged care contracting war between
the two blood brothers may have a long-term negative financial effect on
NYSCLA’s independent laboratorymembers. (See pages 10-11.)Rafalsky also
notes that, when national managed care contracts for lab testing services are
priced on a formula that is a discount from Medicare fee schedules, it can be
used by Medicare officials to support Medicare’s plan for competitive bidding
of lab testing services. And, the deeper the contract discount from
Medicare fees in such contracts in the private sector, the stronger the argument
Medicare officials have to support competitive bidding.
What intrigues me is how New York City and the Tri-State region have
quickly evolved into probably the nation’s most competitive market for lab
services. LabCorp’s national contract victory with UnitedHealth led it to open
several hundred patient service centers and expand its network of rapid
response labs, couriers, and sales force across Greater NewYork. That has been
a direct challenge to Quest Diagnostics.Meanwhile, a handful of independent
labs in the region, such as Bio-Reference and Sunrise, have scrambled to take
advantage of the fact that changes to managed care lab networks have caused
physicians to reconsider their choice of laboratory provider.
Sonic Lands In New York
With Sunrise Purchase
Australia's Sonic Healthcare inks its seventh laboratory acquisition agreement in 24 months
CEO SUMMARY: Sonic Healthcare Limited of Sydney,
Australia, continues to open its checkbook and purchase independent
laboratory companies here in the United States. The latest
deal is its agreement to purchase Sunrise Medical
Laboratories of Hauppauge, New York, for as much as $168 million.
This gives Sonic Healthcare a solid foothold in the Tri-State
market of New York, New Jersey, and Connecticut.
GE's Deal for Abbott IVD Collapses Last Week
Analysts believe that, during due diligence, GE decided that $8.13 billion was too much to pay
CEO SUMMARY: Both companies have said little about
their mutual decision, announced last week, to kill the pending
sale of Abbott Diagnostics and Point-of-Care businesses to
General Electric. One probability is that GE decided, during due
diligence, that its willingness to pay a premium price—15
times EBIDTA—was unjustified by the quality of the assets and
Abbott’s current affairs with the Food and Drug Administration.
BRLI Seizes NYC Share In Two-Stage Effort
Regional lab company benefits from turmoil from managed care contract changes in NYC
CEO SUMMARY: Bio-Reference Laboratories, Inc., (BRLI)
reported record financial results for its most recent fiscal quarter
last month. Much of this success is rooted in BRLI’s discipline
in defining itself as a local laboratory and using enhanced
lab testing services to align itself as a clinical and operational
partner with client physicians in the community. Here is an
assessment of why this business strategy is proving effective.
Exclusive Lab Contracts Have Consequences
Recent contract awards by UnitedHealth and Aetna drive intense competition in New York
CEO SUMMARY: During the past seven months, competition
in the Northeast has intensified. Decisions by UnitedHealth and
Aetna to exclude a national laboratory from their respective
provider panels has forced many physicians to reconsider their
choice of laboratory provider—creating an opportunity for indendent
lab companies that are regional network providers. However,
acceptance of contract prices based on a discount from Medicare
fees may have negative consequences.
Lean/Six Sigma In Labs Becomes More Common
Lab Quality Confab in Atlanta on Sept. 19-20
is first conference devoted to quality management
CEO SUMMARY: Across healthcare, laboratories, hospitals,
and health systems are leading the drive to incorporate quality
management methods into clinical services and daily operations.
This fall, in Atlanta, the Lab Quality Confab will provide a detailed
look at this trend,with 50 speakers,master classes, case studies,
full-day workshops, an exhibit hall, and even Lean and Six Sigma
poster sessions with trophies and cash awards.
Growing NeoGenomics
Offers FISH Test TC/PC
Growing lab company emphasizes
complex genetic and molecular assayst
CEO SUMMARY: This specialty lab testing company now has
laboratories in Fort Meyers, Florida; Nashville, Tennessee; and
Irvine, California. It recently beefed up its executive ranks and is
adding to its menu of genetic and molecular assays. In December,
2006, NeoGenomics rolled out a nationwide TC/PC program in
FISH testing that allows community hospital-based pathologists
to perform and bill for professional component (PC) services.
Lakewood Pathology
Changes Leadership
Doug Berg assumes CEO duties,
Tim Brodnik joins the Board of Directors
CEO SUMMARY: Following the arrival of a new majority
owner and a capital commitment of $50 million last year,
Lakewood Pathology Associates has taken additional steps to
pursue growth. Lakewood plans to acquire small to mid-sized
companies that are complementary to its position in the
anatomic pathology markets, particularly in the subspecialties
of hematology and oncology.
INTELLIGENCE: Late & Latent
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