Edmonton’s on-again, off-again plan to build a private “super lab” for medical testing was on again in early November just days after the provincial health authority appeared to call it off. Alberta Health Minister Fred Horne confirmed the province will issue a 15-year, $3-billion tender to construct and run the centre, likely by the end of 2013. His message was only slightly diluted by the fact that Duncan Campbell, the CEO of the Alberta Health Services, had indicated the opposite was true three days before.
Shambolic though its rollout has been, the Edmonton superlab plan belies a larger trend that has some in the health-care sector worried. The lucrative private medical diagnostics industry, which performs everything from routine blood tests and X-rays to DNA paternity testing, is growing and consolidating like never before. In October, Toronto-based LifeLabs Medical Laboratory Services closed a deal to swallow rival CML Healthcare Inc. in a friendly $1.2-billion takeover. Though the deal was vetted and approved by the federal Competition Bureau, the combined company now controls two-thirds of Ontario’s private medical testing industry and as much as 85% of that in B.C. It ranks as the fourth-largest medical testing company in the world.
Sue Paish, LifeLabs’ CEO, says the need to fund new, more expensive lab infrastructure is one factor driving the consolidation push. “The capital-intensive nature of the business suggests, and some would say demands, a certain of level of scale,” she says.
Not everyone views that as a good thing. A coalition of smaller lab companies in Ontario—headed by former Liberal MP Gerard Kennedy, who now serves as CEO of Ontario’s Alpha Labs—fought a noisy battle against the LifeLabs-CML merger. In Alberta, meanwhile, unions and some pathologists have objected to the super lab concept, saying it could hurt patient care.
Paish insists her company will never compromise care, no matter how large it gets. She also believes there’s still plenty of room for minnows in the increasingly whale-dominated lab pool. “What’s incumbent on every provider is to have a good value proposition,” she says.
LifeLabs, which has a partnership with an Alberta testing company, has given no indication it will bid on the new facility in Edmonton. But if all goes as sketched out, the lab will be designed, built and run by a single firm. Once it is operational, that company will conduct the lion’s share of non-hospital diagnostics in the capital region, a hub for all of northern Alberta. Whoever wins the contract for the super lab, in other words, is more likely to be huge than little or even mid-sized.