Saturday, November 9, 2002

Health Alliance puts lab service on market

Officials: Sale a `cash infusion' for projects

By Tim Bonfield
The Cincinnati Enquirer

The Health Alliance of Greater Cincinnati has put its highly successful central laboratory service - one of the largest nonprofit medical labs in the nation - up for sale.

A requests for proposals from potential buyers is going out this month, with bids expected in December, officials announced Friday. A decision to sell could come in February.

The potential sale raises questions about the fate of about 800 employees who analyze about 7.2 million pap smears, blood tests, urine, stool and tissue samples a year for all six Health Alliance hospitals, about 60 percent of physician offices in town and many nursing homes. The Health Alliance claims that the lab is the second-largest nonprofit medical lab in America.

The plan also raises questions about whether any out-of-town, for-profit buyer could maintain the high levels of satisfaction doctors report about the quality and turnaround speed of Alliance Laboratory Services.

"This is devastating," said Patricia Webb, practice administrator for the For Women Inc. obstetrics and gynecology group.

"We send more than 80 percent of our lab work there, and the only reason we don't send it all is because some managed-care insurance plans make us send lab work somewhere else," she said. "Nobody else in Cincinnati does lab service as well at the Health Alliance."

The Health Alliance lab evolved primarily from a lab developed years ago by Jewish Hospital to provide services to area doctors, in addition to running tests for hospital patients.

When Jewish Hospital joined the Health Alliance in January 1996, one of the first things that occurred was to merge all the other Alliance hospital lab services into the old Jewish Hospital facility to form an even bigger central lab.

When officials closed the Jewish Hospital Avondale campus in November 1997, one of the few things that stayed was the lab.

In fact, when the hospital closed, Health Alliance leaders cited the continued lab activity in Avondale in an effort to soothe concerns raised by City Hall and neighborhood leaders about the loss of an important source of jobs.

The lab comprises about 600 of more than 1,500 jobs based at the Avondale campus.

Other lab employees are scattered among other Health Alliance hospitals and outpatient testing sites. The Health Alliance includes the Christ, University, Jewish, St. Luke and Fort Hamilton hospitals.

Now, officials say they want to sell the profitable service because they need to raise money for unspecified capital improvements. A recently completed five-year financial plan projects "significant financial shortfalls in the near future," according to a memo to lab employees that was distributed Wednesday.

Health Alliance officials refused to elaborate on the details of the five-year projections. But the shortfall is projected even though the Health Alliance reported a $12.4 million gain in net income in the fiscal year ended June 30, and has reported improved revenue from contracts with commercial health insurance plans.

"Reimbursements are not rising as fast as our costs," said spokeswoman Gail Myers. "Our buildings are older than average and our technology needs are constantly growing. The sale of the lab could give us a needed cash infusion."

There have been other outsourcing arrangements made at the Health Alliance since May 2001, when new chief executive Ken Hanover took office. A purchasing unit was outsourced about a year ago.

This summer, the Health Alliance started farming out its clinical engineering services, which provide maintenance for hospital equipment.

There may be a buyer already in the wings for the lab service, but Ms. Myers said the Alliance wasn't ready to name potential buyers.

"There has been interest expressed in buying the labs for several years," she said.

The Health Alliance would not predict how many employees would lose their jobs.

Some local employees would be retained by any buyer because some lab samples cannot be shipped long distances and many "stat" tests for patients in emergency departments or intensive care have to be done on-site.

Nonemergency tests done for patients visiting doctors - about half of the lab's total business - are a different story. How many, if any, of those tests would be done locally or shipped out-of-town depends heavily on who buys the lab.

Ms. Webb said she doubted that selling the lab could result in improved service.

"I would expect an immediate downgrade in service," she said. "I'm very concerned about this."


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