Labcorp Completes Outreach Lab Deal With RWJBarnabas Health

Labcorp Completes Outreach Lab Deal With RWJBarnabas Health

Labcorp Completes Outreach Lab Deal With RWJBarnabas Health

Labcorp has completed its acquisition of RWJBarnabas Health’s outreach laboratory business and select related assets (see LE, August 2022). RWJBarnabas Health (West Orange, NJ), which has 12 acute-care hospitals with 4,357 staffed beds, is New Jersey’s largest academic health system. Financial terms of the transaction were not revealed.

Clinical lab outreach testing from RWJBarnabas Health will be shifted to Labcorp’s regional laboratory in Raritan, New Jersey. Some STAT and same-day testing will be performed at select RWJBarnabas Health hospitals. Anatomic pathology services are not part of the deal and will not be affected.

In addition, any potential future reference testing relationship with RWJBarnabas Health would be independent of this transaction, according to a Labcorp spokesperson.

“This strategic business decision will provide a high-performing, streamlined outreach network to support our community,” according to John Doll, Senior Executive Vice President and Chief Operations Officer of RWJBarnabas Health. The arrangement is also expected to reduce out-of-
pocket lab costs for RWJBarnabas patients.

RWJBarnabas Health’s decision to sell its clinical lab outreach business comes as it struggles with investment losses, rising labor costs and inflation. In the six months ended June 30, 2022, RWJBarnabas Health reported a net loss of $489 million vs. a net gain of $325 million in the same period a year earlier; total revenue was up 14% to $3.651 billion.

Investment losses at RWJBarnabas Health totaled $729 million in the six months ended June 30, 2022. In addition, salaries and employee benefits increased by $264,375 or 18%; physician fees and salaries increased by $79,207 or 22%; and supplies and other expenses increased by $191,781 or 17%.

RWJBarnabas Health collected total Medicare Part B CLFS revenue of $6.3 million in full-year 2021. Laboratory Economics estimates that Medicare Part B CLFS represents 25% of the overall revenue at RWJBarnabas Health’s clinical lab outreach business (total annual revenue estimated at
$25 million).

Top 25 Hospital Outreach Labs for 2019

Top 25 Hospital Outreach Labs for 2019

Top 25 Hospital Outreach Labs for 2019

The table below lists the top 25 hospital-based outreach labs as measured by Medicare Part B CLFS and Physician Fee Schedule anatomic pathology test payments in 2019. Overall, the top 25 hospital labs had $169 million in Part B payments, which was down approximately 8% from 2018 due to the PAMA-related CLFS rate cuts.

Top 25 Fastest-Growing Labs by Medicare Part B Volume of Services

Top 25 Hospital Outreach Labs for 2019

Top Hospital-Based Outreach Labs by Medicare CLFS Payments

Top Hospital-Based Outreach Labs by Medicare CLFS Payments

The vast majority of hospital laboratory outreach programs uses its hospital’s NPI and finance department for billing and is now required to report their private-payer data to CMS under PAMA. The table below lists the top 25 hospital-based labs based on their Medicare CLFS payments for outreach lab testing in calendar-year 2018. Medicare CLFS payments typically represent roughly 20% to 30% of total revenue generated by hospital-based outreach labs.

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