Can a community lab succeed in today’s environment? Perhaps not, observed Richard Nicholson, chief executive officer of West Pacific Medical Laboratory, at last month’s G2 Intelligence Lab Institute. “A community lab like ours has probably a three- to maybe a 10-year life span,” he said. Although West Pacific has grown dramatically since its founding, Nicholson believes that the competition with large labs in a large metropolitan region is a challenge, particularly with pricing continuing to go down and industry giants such as Quest Diagnostics taking the time and money to redesign their draw stations solely to make a stronger brand statement. Labs are also being asked to pick up extra costs, such as paying to electronically connect with other providers—Nicholson estimated his lab has spent about $300,000 to do so. As a remedy, community labs have to be able to assert a strong presence and avoid competing on price. “You have to be strong in your market, and not just be picking up specimens from doctors’ offices in a wide area,” Nicholson said. And since community labs cannot compete with large labs on benefits, they have to be more willing to obtain input from their employees. Nicholson also recommended having […]
Can a community lab succeed in today’s environment? Perhaps not, observed Richard Nicholson, chief executive officer of West Pacific Medical Laboratory, at last month’s G2 Intelligence Lab Institute.
“A community lab like ours has probably a three- to maybe a 10-year life span,” he said. Although West Pacific has grown dramatically since its founding, Nicholson believes that the competition with large labs in a large metropolitan region is a challenge, particularly with pricing continuing to go down and industry giants such as Quest Diagnostics taking the time and money to redesign their draw stations solely to make a stronger brand statement.
Labs are also being asked to pick up extra costs, such as paying to electronically connect with other providers—Nicholson estimated his lab has spent about $300,000 to do so.
As a remedy, community labs have to be able to assert a strong presence and avoid competing on price. “You have to be strong in your market, and not just be picking up specimens from doctors’ offices in a wide area,” Nicholson said. And since community labs cannot compete with large labs on benefits, they have to be more willing to obtain input from their employees.
Nicholson also recommended having strong accounts management: If a payer is cutting reimbursement by $5, your lab should be cutting expenses by the same amount. Labs also should offer a discount for self-pay patients who pay at the time of service and should have cash reserves on hand if there is a technical glitch with a large payer that hinders cash flow.
Takeway: Community labs have to be creative and flexible in order to compete with large players.
