Outreach Labs Remain Profitable Despite Antiquated Systems & Lack of Exec Respect

Hidden within the basement of your average hospital is a $24 million business, one that provides a top quality, must-have service and operates at a margin of around 25% to 30%. That business is the hospital lab. The so-called outreach model seeks to leverage this potential by positioning the hospital lab as a business and profit center. And if you’re into (or thinking about getting into) outreach, you should check out the new report from a firm that’s been tracking the sector for 16 years.

The Chi Study
The report, entitled “16th Annual National Hospital/Health System Laboratory and Outreach Survey Findings,” comes from national consulting firm Accumen Inc. and its subsidiary Chi Solutions Inc. and is based on a proprietary survey system that tracks key metrics of outreach performance and business trends. The goal: Help hospital and health system execs leverage their own labs.

The Positive Findings
The upshot of this year’s report: Outreach labs are continuing to perform well despite the difficult business environment and fierce competition from national labs. This year’s survey respondents also report that:

  • They have the capacity to take on additional testing;
  • Operating margins remain at or above historic levels as a result of aggressive cost cutting and synergies from consolidation; and
  • They have the opportunity to cut costs and improve strategic performance by reducing blood and/or test utilization.

The Negative Findings
The report also finds that outreach labs face significant challenges not just from the outside but within their own hospitals and health systems. One is the lingering perception of executives of the lab as “cost center” rather than “profit center.” Another is the lack of adequate systems for billing, connectivity, incentive compensation and monitoring profitability.

Future Growth Opportunities
The key strategic takeaway from the report is the finding that the physician office business is the most profitable market segment for outreach and its most promising opportunity for future growth.

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