Labcorp to Buy Tufts Outreach Lab Assets

by Jondavid Klipp | Aug 18, 2023 | Labcorp, Hospital Outreach Laboratory, Lab Acquisition

Labcorp to Buy Tufts Outreach Lab Assets

Tufts Medicine (Boston, MA) is selling its clinical lab outreach business to Labcorp for an undisclosed amount. The transaction, which
does not involve anatomic pathology services, is expected to formally
close in October. Tufts says the sale is the first step towards a broader
partnership with Labcorp. The announcement comes as Tufts endures
prolonged financial difficulties that led Fitch Ratings to downgrade its
debt rating from BBB+ to BBB earlier this year.

Tufts Medicine (TM) includes three hospitals in the Boston area, including Tufts Medical Center (405 beds), Lowell General Hospital (390 beds) and Lawrence Memorial Hospital of Medford (216 beds). It also includes Tufts Medicine Integrated Network, which has more than 1,800 affiliated community and academic physicians.

The annual lab department budget at TM’s three hospitals is a combined $122 million, according to Medicare Hospital Cost Reports. Laboratory Economics estimates that TM’s clinical lab outreach business has annual revenue of roughly $30 million. Labcorp is expected to make job offers
to nearly all 574 TM lab employees affected by the sale.

TM lost $399 million on operations in the fiscal year ended Sept. 30, 2022. TM management estimates that approximately $129 million of the losses were related to one-time items, including the stoppage of elective surgeries due to the pandemic (a $58 million loss of revenue) and installation of the electronic medical records system Epic ($71 million). The largest component of the rest of the operating loss was $217 million for increased staffing costs. The amount TM paid for contract labor increased an incredible 1,423%, to $155 million in the 12 months that ended Sept.
30, 2022, compared to pre-pandemic in 2019.

In addition, TM is facing stiff competition for hospital patients from Massachusetts General Hospital (Boston), which is aggressively competing for managed care contracts.

Sizing Up the Boston Lab Market
The Boston-Cambridge-Newton metropolitan area has a population of 4.9 million with an estimated physician lab services market of $650 million per year.

Quest Diagnostics has by far the largest market share in the Boston area. Quest purchased the Worcester-based clinical lab outreach business of UMass Memorial Medical Center in 2013. Quest then consolidated testing at a new 200,000-square-foot lab in Marlborough (30 miles west of Boston). Quest has a total of more than 100 patient service centers in the Boston area. It generates an estimated $350 million in revenue from physician office clients in the Boston area.

Labcorp has 15 PSCs in the Boston area and estimated physician client revenue of $50 million… per year (excluding Tufts Medicine deal). Labcorp’s nearest major regional lab is located in Raritan, New Jersey (~5-hour drive)

Mass General Brigham provides lab outreach testing at several hospitals in the Boston area, including Massachusetts General Hospital (1,019 beds), Brigham and Women’s Hospital (812 beds) and Newton-Wellesley Hospital
(273 beds). Total estimated annual lab outreach revenue from the physician office market is $75 million.

Beth Israel Lahey Health operates its biggest hospital-based outreach
labs at Lahey Hospital and Medical Center Burlington (345 beds), Beth
Israel Deaconess Medical Center (743 beds) and Winchester Hospital (194 beds). Total estimated annual lab outreach revenue from the physician office market is $60 million.

Quest To Buy Outreach Lab In Maine

by Jondavid Klipp | Jan 5, 2023 | Hospital Outreach Laboratory, Quest Diagnostics

Quest To Buy Outreach Lab In Maine

Quest Diagnostics has agreed to acquire certain outreach lab assets from
Northern Light Health (Brewer, ME), an integrated healthcare system,
in an all-cash transaction. In addition, Quest will manage nine of Northern
Light Health’s inpatient hospital labs, along with its cancer center lab at
Northern Light Cancer Care in Brewer, Maine.

Northern Light Health’s outreach lab services business does business as Northern Light Laboratory (formerly named Affiliated Laboratory Inc.). It has 225 employees and is based at a core laboratory in Bangor, Maine. It serves 250 physician practices throughout the region and provides
reference testing services to more than two dozen hospitals.

Northern Light Laboratory is operated as a hospital-owned independent lab. It collected $1.5 million of Medicare Part B Carrier allowed revenue from 135,489 allowed tests in 2020 (the latest year of available data). Laboratory Economics estimates that overall revenue for Northern Light Laboratory is between $10 million and $20 million per year.

Northern Light Health has a systemwide laboratory department budget of $88 million, according to hospital cost reports for 2021. Its largest inpatient lab is at Northern Light Eastern Maine Medical Center (377 staffed beds), which has a lab department budget of $35 million per year.

Non-urgent routine clinical lab testing and reference testing now performed by Northern Light Laboratory will be shifted to Quest’s regional lab in Marlborough, Massachusetts (about 250 miles from Bangor). A Quest rapid response lab in the Bangor area and select Northern Light Health hospital labs will perform tests requiring rapid results.

Northern Light employees working in the labs will become Quest employees, and no one is being laid off, according to Northern Light spokesperson Suzanne Spruce.

In addition, Spruce says that the agreement with Quest will not affect anatomic pathology services that are now provided at Northern Light Health by Dahl-Chase Pathology Associates (Bangor, ME).

“This agreement will bring Quest scale in Maine. This market is largely a white space for Quest and the transaction makes strategic sense to both parties. It will create a low-cost consolidated lab in a state currently dominated by NorDx Laboratories,” observes David Nichols, President of
Nichols Management Group (York Harbor, ME).

Quest To Acquire Summa Health’s Outreach Lab Business

by Jondavid Klipp | Oct 18, 2022 | Hospital Outreach Laboratory, Lab Acquisition, Quest Diagnostics

Quest To Acquire Summa Health’s Outreach Lab Business

Quest Diagnostics (Secaucus, NJ) has agreed to acquire select assets of Summa Health’s (Akron, OH) clinical lab outreach business, which does business as LabCare Plus, in an all-cash transaction. Summa picked Quest as a buyer after a competitive bid. The purchase price has not been disclosed.

Summa Health operates four hospitals and a multi-specialty medical group with 300 physicians at 100 offices in northeast Ohio. Summa Health will continue to own and operate its hospital labs, which serve inpatient and hospital-based outpatient departments. In addition, Summa will maintain its pathology department and services.

Summa’s LabCare Plus outreach business is based at its flagship Summa Health System—Akron Campus (648 beds). LabCare Plus has 19 patient service centers in the greater Akron area. It generated $1.5 million in Medicare CLFS payments in 2021. Laboratory Economics estimates that the overall outreach business has revenue of $5-10 million per year.

Quest plans to shift the acquired outreach test volumes to its labs in Twinsburg, Ohio (22 miles north of Akron) and Pittsburgh (111 miles southeast).

The transaction is expected to close in the fourth quarter of 2022.

Labcorp Completes Outreach Lab Deal With RWJBarnabas Health

by Jondavid Klipp | Sep 20, 2022 | Hospital Outreach Laboratory, Labcorp

Labcorp Completes Outreach Lab Deal With RWJBarnabas Health

Labcorp has completed its acquisition of RWJBarnabas Health’s outreach laboratory business and select related assets (see LE, August 2022). RWJBarnabas Health (West Orange, NJ), which has 12 acute-care hospitals with 4,357 staffed beds, is New Jersey’s largest academic health system. Financial terms of the transaction were not revealed.

Clinical lab outreach testing from RWJBarnabas Health will be shifted to Labcorp’s regional laboratory in Raritan, New Jersey. Some STAT and same-day testing will be performed at select RWJBarnabas Health hospitals. Anatomic pathology services are not part of the deal and will not be affected.

In addition, any potential future reference testing relationship with RWJBarnabas Health would be independent of this transaction, according to a Labcorp spokesperson.

“This strategic business decision will provide a high-performing, streamlined outreach network to support our community,” according to John Doll, Senior Executive Vice President and Chief Operations Officer of RWJBarnabas Health. The arrangement is also expected to reduce out-of-
pocket lab costs for RWJBarnabas patients.

RWJBarnabas Health’s decision to sell its clinical lab outreach business comes as it struggles with investment losses, rising labor costs and inflation. In the six months ended June 30, 2022, RWJBarnabas Health reported a net loss of $489 million vs. a net gain of $325 million in the same period a year earlier; total revenue was up 14% to $3.651 billion.

Investment losses at RWJBarnabas Health totaled $729 million in the six months ended June 30, 2022. In addition, salaries and employee benefits increased by $264,375 or 18%; physician fees and salaries increased by $79,207 or 22%; and supplies and other expenses increased by $191,781 or 17%.

RWJBarnabas Health collected total Medicare Part B CLFS revenue of $6.3 million in full-year 2021. Laboratory Economics estimates that Medicare Part B CLFS represents 25% of the overall revenue at RWJBarnabas Health’s clinical lab outreach business (total annual revenue estimated at
$25 million).

Top 25 Hospital Outreach Labs for 2019

by Jondavid Klipp | Nov 15, 2020 | Carolinas Medical Center, Hospital Outreach Laboratory, New York Presbyterian Weill Cornell, Northwestern Medicine

Top 25 Hospital Outreach Labs for 2019

The table below lists the top 25 hospital-based outreach labs as measured by Medicare Part B CLFS and Physician Fee Schedule anatomic pathology test payments in 2019. Overall, the top 25 hospital labs had $169 million in Part B payments, which was down approximately 8% from 2018 due to the PAMA-related CLFS rate cuts.

Top 25 Fastest-Growing Labs by Medicare Part B Volume of Services

Top Hospital-Based Outreach Labs by Medicare CLFS Payments

by Jondavid Klipp | Dec 15, 2019 | CLFS, Hospital Outreach Laboratory, Laboratory Economics, Medicare, PAMA

Top Hospital-Based Outreach Labs by Medicare CLFS Payments

The vast majority of hospital laboratory outreach programs uses its hospital’s NPI and finance department for billing and is now required to report their private-payer data to CMS under PAMA. The table below lists the top 25 hospital-based labs based on their Medicare CLFS payments for outreach lab testing in calendar-year 2018. Medicare CLFS payments typically represent roughly 20% to 30% of total revenue generated by hospital-based outreach labs.