Three Reasons Hospitals “Divorce” National Labs

A recent article by Robert Michel of the Dark Report highlighted two out of the three top reasons national laboratory partnerships with hospitals fail:
1. Service issues
2. Lack of local control

Over my consulting career, I have been called many times to help hospitals and health systems resolve “partnership issues.” The most common problem is physician dissatisfaction with turnaround times for results. This is no surprise since the lab partner has an incentive to consolidate testing at other owned facilities in the region to reduce cost. The trade-off is longer turnaround times for the local hospital.

This is often aggravated by the fact that the hospital no longer runs the lab. It has conceded local control to the national lab partner and is therefore unable to easily rectify service issues. It can take months to years of monitoring and negotiation.

The third reason that these partnerships fail is a dirty little secret. In fact, it is the common thread to why relationships, in general, fail. You guessed it—it’s about the money. How many marriages split up over different views about money? Lots! Money is one of the most common reasons for break-ups. The same is true with the national lab partnerships.

During the “dating” period, the national lab partner emphasizes its low cost structure and how it can save significant money for the health system. Over time, a different story emerges: “fee creep.” Health systems realize that they are paying more to outsource than to manage the lab on their own. In addition, they now must share profits for outreach. They start to ask themselves why they entered this relationship in the first place. So, if we’re not getting the same service, we’ve lost local control, and the relationship is no longer financially viable…

…that’s three strikes and you’re out!

Kathleen A. Murphy, PhD
Senior Advisor
Chi Solutions Inc., an Accumen Company

1Michel, Robert, “Quest Diagnostics Exits 31-Year-Old CompuNet Lab Venture.” The Dark Report, June 26, 2017.

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