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News Article
John Muir Health opens new lab; Stanford looks for sale
East Bay Business Times
- by Marie-Anne Hogarth
John Muir Health, with campuses in Walnut Creek and Concord, has opened a $35 million "core" laboratory in Concord's NorthPointe Business Park to process more tests more quickly for its own doctors, as well as to serve a growing number of sites outside of the health system.
The move comes as another Bay Area health system, Stanford Hospital & Clinics, is hoping to sell its "outreach laboratory" business after just five years.
The lab testing industry is a precarious one that requires significant up-front investment on the part of hospitals, as well as competitive pricing.
"It is not for the faint of heart," says Kathy Murphy, president of the Michigan consulting firm Chi Solutions Inc. She would not comment specifically since her firm represented John Muir and is working with Stanford on its sale. "Many organizations are expanding their programs and making further investments in them, because they realize that it is a good source of investment and income for hospitals. Organizations that are strapped for cash or for strategic reasons have occasionally chosen to get out of the business."
John Muir, which got into the hospital lab outreach business in 1994, currently processes tests for 1,000 doctors at out-patient facilities throughout Northern California and some 300 skilled nursing facilities.
Its business serving players outside its own hospital walls now amounts to just 6 percent of the Bay Area's $700 million outreach market, according to the trade publication Laboratory Economics. Stanford has about 5 percent and Quest Diagnostics Inc. of Madison, N.J., has 60 percent of the market.
There's very little overlap between the markets served by John Muir and Stanford, said Scott Liff, vice president of laboratory services for John Muir.
Liff, a former director of operations wit SmithKline Beecham, now GlaxoSmithKline, came to MuirLab in 1999 to assess and build up what was already a growing lab business for John Muir. He brought with him hospital experience as well, having climbed the ladder from a job as a phlebotomist, drawing blood samples, to hospital lab director, before moving into the laboratory industry.
Over the last 14 years, Muir's laboratory business has grown from 400,000 tests a year in 1994 to 2 million in 1999 to 11 million today. John Muir's new lab, located about three miles from the Concord hospital campus, at the intersection of Bates Avenue and Commercial Circle, will handle about 8 million of these.
The 56,000-square-foot lab, which has been fully operational for about a month, employs 400 workers over three shifts.
The core lab boasts a 163-foot automated sample distribution line, which John Muir says is the biomedical instrument manufacturer Beckman Coulter Inc.'s longest in North America. This line, which uses robotic clamps to pick up samples and move them automatically from centrifuger to analyzer to refrigerator, can process a single sample in approximately 20 minutes.
John Muir predicts the system will increase its testing capacity by 50 percent to 100 percent and decrease turnaround time for lab results by 25 percent to 50 percent. In addition to processing "outreach tests," Liff said, the new lab will ease the burden of John Muir's two hospital-based labs by processing batches of the more-work-intensive bio medical tests, like throat cultures, as well as more esoteric tests like HIV tests.
That in turn will free up the hospital-based labs in Concord and Walnut Creek to process time-sensitive tests of samples for its blood bank, intensive care unit, emergency department and surgical departments.
About three-quarters of hospitals in the United States provide "outreach" testing to their communities. Sutter Health, a Sacramento health system with 26 hospitals in Northern California, opened its own facility in Livermore last year and employs approximately 60 people. The Sutter lab does work for most of the group's hospitals and some of its physician foundations, although not for doctors outside of the Sutter system. This "Shared Lab" performs about 170,000 tests a month and is designed to support a capacity of as many as 350,000 to 400,000 tests a month, according to Sutter.
Stanford has been talking to several interested buyers, according to spokesman Gary Migdol. He said that the hospital would likely hang on to its hospital-based laboratory in Palo Alto, as well as to some specialized services such as surgical pathology and hemapathology.
According to an article in Laboratory Economics, as Stanford grew its outreach lab business it was in the red for the first four years, despite optimistic revenue projections.
(Posted July 23, 2008)