April 19, 2022 – The largest nonprofit health system in the U.S. agreed to a deal in February with Labcorp for its hospital-based laboratories to be managed by Labcorp in 10 states. St. Louis-based Ascension is the latest partner in a trend for outside clinical laboratory networks with health systems. Labcorp also acquired select assets of Ascension’s outreach laboratory business in the transaction that’s expected to close in the first half of this year.
The deal applies to Ascension’s hospital laboratories in Alabama, Florida, Kansas, Maryland, Michigan, New York, Oklahoma, Tennessee, Texas and Wisconsin. But there’s significant room to scale as Ascension’s 142 hospitals deliver care in nine more states.
Outsourcing functions like laboratory services to companies like Labcorp has become increasingly popular for health systems, especially after the pandemic turned testing upside down.
“Labcorp is going to continue to look for opportunities to acquire laboratories,” said Akiva Faerber, senior principal, advisory services for laboratory and blood consulting at Vizient, Inc. “The same is true for Quest Diagnostics. This isn’t a secret. Covid was an opportunity for them.”
Vizient has been asked by some hospitals to reduce costs and identify new opportunities to build better and stronger in-house laboratories to represent to hospital administration.
“If a hospital doesn’t know its true unit costs and hasn’t done a good job of building coding and compliance, then they’re doing work but not capturing revenue,” Faerber said. “They aren’t aware of what their costs should be, and they aren’t working on reducing them where appropriate, and that puts them in a vulnerable, compromised position.”
Read more in the latest issue of The Journal of Healthcare Contracting.