Observations of Large Laboratory Outreach Programs – Part 2

In April 2015, the first in a series of two blogs (Observations of Large Laboratory Outreach Programs – Part 1) shared results of research conducted by Chi and presented at the 2015 G2 Intelligence Lab Revolution conference on how hospital-based outreach programs are confronting the new demands of healthcare. The April blog provided insights on revenue size, growth, and sources; medical staff employment; strategy focus; use of in-office phlebotomists; and types of sales representatives. Below are additional study findings with regard to the typical large laboratory outreach business:

  • 30% of respondents have at least one ACO client, but 50% have no plans to be involved with an ACO.
  • 75% of the businesses operate from a hospital-based core laboratory; the rest employ an offsite, stand-alone core laboratory. The number of hospitals supported by the core laboratory: 8.2 average, 7.0 median.
  • The most prevalent cost reduction strategies are reagent and supply contract negotiations and standardization across all laboratories.
  • Average revenue per billable test is $16.00 (median: $15.83). Average revenue per requisition is $52.04 (median: $48.87).
  • Billing is performed in-house and managed by the finance department for 85% of respondents, while 15% outsource their billing.
  • 80% secure managed care contracts by leveraging hospital contracts. Only 20% are part of a laboratory network.
  • The two biggest problems faced are the inability to interface quickly enough and fully (30% of respondents) and how to deal with replacing the aging workforce (25% of respondents).
  • 50% say they aren’t an acquisition candidate, 5% report they are because negotiation is underway, and the remaining 45% don’t know this status for their business.
  • 65% use a CRM for sales management, and 55% use one for problem resolution.
  • The most frequently mentioned competitive advantages are (1) great service reputation, (2) fast connectivity implementation, (3) being local, and (4) continuity of the medical record across all patient types.

The take-home messages include: large, successful outreach businesses have yet to depend on ACOs for business; most use hospital-based core laboratories; key cost reduction strategies rely on contract negotiation and laboratory standardization; managed care contracts are won via hospital contracting; and key competitive advantages are great service, fast connectivity, and being a local provider.

James M. Root, MBA
Advisor and Senior Consultant
Chi Solutions Inc.

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