Most of you know that 2002 was an unexpectedly active year for public laboratory company acquisitions. The entire rank of mid-market public laboratory companies actively selling routine testing services to physician's offices was swept from the board by Quest Diagnostics Incorporated and Laboratory Corporation of America.

Our office has been fielding a steady flow of questions from clients and regular readers of The Dark Report asking"what comes next?" The answer to that question shouldn't be a surprise. It is"more of the same." In other words, the two blood brothers have a voracious appetite for specimen volume and market share. For that reason, they will continue to to pursue acquisitions whenever and wherever they can find them.

The market segment of anatomic pathology will be attractive. LabCorp has already acquired DIANON Systems. AmeriPath's interest in selling to either of the blood brothers is ongoing. IMPATH is having hiccups and may be a possible acquisition. All of these represent long-term threats to local pathology groups and the existing client base they serve.

The most fascinating source of acquisitions will be in small, even tiny, private laboratory operations. We've written about the disappearance of the stand-alone independent commercial laboratory. There's only a handful that remain doing more than $20 million per year in business. But there remain a substantial number of small lab operations. Many serve only a single medical office building. It is these types of labs which will feed the acquisition appetite of the two remaining national lab companies. Dynacare was using these types of acquisitions to feed its growth and there's evidence that Quest Diagnostics and LabCorp intend to seek out similar opportunities.

The two blood brothers will not ignore hospital inpatient testing opportunities and hospital lab outreach programs. Anytime an opportunity presents itself to bid on this testing volume, one or both of the national labs shows up

Taken collectively, I believe the nations' two billion-dollar lab giants will continue to do acquisitions at a steady pace. But these deals, by definition, will be smaller. However, the end result will be the same as in the past. The two blood brothers will continue to buy market share as a way to sustain growth in specimen volume and revenues.

Needless Mastectomy Draws National Attention

Slide mix-up at pathology group practice leads to a wrong breast cancer diagnosis

CEO SUMMARY: This widely-reported case of misdiagnosis at an Allina hospital in St. Paul, Minnesota is a powerful reminder to pathology practices and clinical laboratories that breakdowns in medical quality will draw increasing attention and scrutiny. Both the patient and the community are questioning why the pathologist who made the mistake will apparently be allowed to continue to practice without serious sanctions.

LabCorp Starts Tinkering With DIANON Systems

Will LabCorp preserve the elements that made DIANON such a successful growth engine?

CEO SUMMARY: For almost two decades, DIANON Systems supported one of the most successful sales and marketing programs in the public laboratory sector. However, despite its pre-acquisition statements that it would retain DIANON's operational integrity, LabCorp has already begun to implement subtle changes to DIANON Systems. Time will tell whether or not these management decisions prove beneficial.

Labs In United Kingdom Study U.S., Canadian Labs

Management strategies exchanged At laboratory War College in London

CEO SUMMARY: It was a groundbreaking first for both sides of the Atlantic. Senior pathologists and laboratory directors in the United Kingdom spent two days learning from their North American counterparts about the challenges and difficulties in laboratory consolidation and regionalization. For their part, the North American faculty gained useful insights about the way laboratory medicine is practiced in Great Britain.

Quest Ready To Move On Unilab, Announces Its 2002 Earnings

Nation's largest laboratory company expects to close the long-delayed Unilab acquisition

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