Hospitals may boost outsourcing of lab services: UBS poll

Dive Brief:

A growing number of hospitals plan to increase laboratory service outsourcing in response to the Protecting Access to Medicare Act (PAMA), according to a survey conducted by UBS.
The latest survey data show 23% of hospitals expect to increase outsourcing of laboratory services, up from 4% when UBS asked the same question in April.
LabCorp may benefit most from the increasing use of service providers, with nearly 10% more respondents expressing an interest in working with the company rather than rival Quest Diagnostics.

Dive Insight:

Although both LabCorp and Quest have criticized the reimbursement rates imposed by PAMA, they have also discussed the potential for the legislation to drive market share gains.

Survey responses gathered by UBS from hospital CEOs and CFOs in April cast doubt on the idea that PAMA would be a big driver of outsourcing. At that time, 4% of respondents said they planned to increase outsourcing, either by stepping up their use of reference laboratories or offloading all their work to third parties. A further 7% of respondents outlined plans to follow a mixed strategy defined by increased use of both reference laboratories and lab outreach.

The July data diverge significantly from those earlier results. In the most recent survey, 23% of people said they expect to increase outsourcing, although none of the respondents are planning to only use third parties for their lab testing needs.

If that proportion of hospitals push ahead with plans to increase outsourcing, LabCorp and Quest are likely to pick up a sizeable slice of the work. The survey found 42% of respondents who plan to outsource more are considering working with LabCorp. Quest was less popular, with 33% of respondents expressing an interest in outsourcing work to the company.

However, the survey also detected signs of a weakening of LabCorp and Quest's dominance. In April, none of the polled executives said they were considering outsourcing work to labs other than LabCorp and Quest. In the latest poll, 17% of people said they may work with other service providers.

What, if anything, the survey results mean in practice may become a little clearer next week when LabCorp and Quest release their second quarter results. Both companies grew volumes in the first quarter but factors including pricing pressures constrained growth.