A deal between Quest Diagnostics and an HCA system in Denver shows that hospitals are continuing to question the costs that come with managing their own labs.
Madison, N.J.-based Quest announced Tuesday an agreement with HealthOne to manage laboratory operations at its six Denver-area hospitals. Financial terms of the agreement were not disclosed, but Quest executives confirmed the deal is the company's first comprehensive partnership with an HCA system.
Quest will manage labs at the following Denver-area medical centers: The Medical Center of Aurora; North Suburban Medical Center; Presbyterian/St. Luke's Medical Center; Rose Medical Center; Sky Ridge Medical Center; and Swedish Medical Center.
Experts say hospital leaders need to decide whether to invest in improving their existing lab operations or let a more sophisticated company such as Quest or Laboratory Corporation of America handle it. Quest estimates that its deals save hospitals 10% to 20% on lab costs, meaning a five-hospital system spending an average of roughly $60 million a year could save $6 million to $12 million annually on lab-related expenditures.
Quest's recent string of deals with systems such as Barnabas Health, Hartford HealthCare and MemorialCare Health System show many sizable systems are deciding to relinquish control of their labs to cut costs, and in some cases, improve quality. Quest currently has deals with nearly 120 hospital or health system labs across the country, including management deals and laboratory acquisitions.
“If you look at the for-profit hospital sector, sometimes similar to some of the more stressed not-for-profit sector, this is becoming one of the strategies that hospital executives are looking at to cut costs,” said Dr. Jon Cohen, Quest's senior vice president and group executive. “We always say to (our customers), what's your lab strategy? What's your plan moving forward?”
Cohen said Quest has a relatively large team focused on lab management and acquisition opportunities at hospitals across the country. He called the HealthOne deal “a pretty big one.” The system didn't immediately respond to a request for comment.
“This is a growing part of our business,” Cohen said. “There's a lot of resources behind it, and this is yet another proof point.”
As of early Tuesday afternoon, Quest's stock was selling for $76.97 a share, down just slightly from its opening price.