Quest Diagnostics to Acquire Outreach Laboratory Services of OhioHealth

Rhea-AI Summary

Quest Diagnostics (NYSE: DGX) announced an agreement to acquire select outreach laboratory services from OhioHealth, aiming to broaden access to cost-effective and innovative lab services in Ohio. The deal is expected to close in Q3 2024, pending customary regulatory reviews. OhioHealth will continue to operate its hospital labs independently, while most outreach testing will transition to Quest's Pittsburgh lab. Quest aims to leverage its economies of scale to provide more affordable services and expand its presence in Ohio. Financial terms were not disclosed.

Positive

• Broadens access to cost-effective lab services in Ohio.
• Expands Quest's presence across Ohio.
• Leverages economies of scale for cost savings.
• Expected to generate growth through accretive outreach lab acquisitions.

Negative

• Financial details of the transaction were not disclosed.

Financial Analyst

Quest Diagnostics' acquisition of OhioHealth's outreach laboratory services is an intriguing move, likely to yield cost synergies and economic benefits. By integrating these services, Quest can leverage its existing infrastructure to reduce operational costs, potentially enhancing its profitability. This acquisition aligns with Quest's strategy to grow through accretive deals, which could lead to increased revenue and market share in the Ohio region.

Moreover, economies of scale should allow Quest to offer lower prices, appealing to cost-sensitive patients and insurance plans. In the short term, investors might see an uptick in Quest's stock due to positive market sentiment surrounding strategic growth initiatives. Long term, success will depend on Quest's ability to effectively integrate these new assets and maintain service quality while reducing costs.

It's also worth noting that while financial details of the transaction were not disclosed, the omission of such details leaves some uncertainty about the immediate financial impact. Investors should keep an eye on upcoming quarterly reports for more clarity.

Healthcare Market Analyst

The acquisition underscores a significant trend in the healthcare industry: centralization of diagnostic services. By acquiring OhioHealth's outreach laboratories, Quest Diagnostics is set to expand its footprint and enhance its service offerings. This is particularly relevant as healthcare systems continue to seek efficiencies through partnerships and acquisitions.

For patients, this consolidation means access to a broader and potentially more sophisticated range of testing services at potentially lower out-of-pocket costs. For healthcare providers, it can mean streamlined operations and more reliable service quality. In essence, Quest can capitalize on its robust service network and tech-enabled efficiencies, which smaller, standalone labs might struggle to match.

However, the transition phase could be challenging. Ensuring seamless service continuity while integrating new assets is critical. Any disruption could affect patient trust and provider relationships. Long-term success hinges on maintaining high service standards and effectively managing these logistical challenges.

Regulatory Expert

From a regulatory perspective, this acquisition will be closely monitored, although it is expected to pass without complications given the strategic benefits outlined. Regulatory reviews will focus on ensuring that the transaction does not negatively impact competition or lead to monopolistic behavior. Quest Diagnostics' history and footprint suggest that they are well-versed in navigating these regulatory waters.

The primary concern will be maintaining quality of care and service accessibility. Regulatory bodies will likely scrutinize how the acquisition impacts patient access to laboratory services, especially in underserved or rural areas. Quest's commitment to lower out-of-pocket costs and broad health plan coverage will be key factors in satisfying regulatory requirements.

In summary, while regulatory approvals are a procedural hurdle, the strategic alignment and potential benefits of this acquisition suggest it will likely proceed without significant issues, providing another avenue for Quest to reinforce its market position.

Goal to broaden access to cost-effective and innovative laboratory services in Ohio

SECAUCUS, N.J. and COLUMBUS, Ohio, July 10, 2024 /PRNewswire/ -- Quest Diagnostics (NYSE: DGX), a leading provider of diagnostic information services, and OhioHealth, a nationally recognized not-for-profit, charitable, integrated health system, today announced a definitive agreement for Quest to acquire select assets of OhioHealth's outreach laboratory services business.

The transaction will broaden access to cost-effective and innovative laboratory services in Ohio. After the acquisition's close, providers and patients will benefit from access to Quest's industry-leading test menu, network of patient service sites throughout the state, broad health plan coverage, and lower out-of-pocket costs for many services.

"As healthcare transforms, we need to ensure we can continue to provide high-quality care to our patients that also provides them value. As a trusted industry leader, Quest has the specialization and scale to ensure our patients have continued access to high quality lab services that, in many cases, will be more affordable for patients," said Chris Clinton, President, OhioHealth Regional Market and former Vice President, Shared Services. "Our relationship with Quest is the right strategic step to enable us to continue to deliver exceptional care to improve the health of those we serve."

"Quest has the expertise and economies of scale to deliver meaningful cost savings in lab services, while our patients continue to access the high quality of care they have been accustomed to from OhioHealth," said Juanita Swickard, Interim Vice President, Shared Services, OhioHealth.

"Our transaction with OhioHealth exemplifies our ability to attract and collaborate with high quality health systems seeking to optimize their lab services," said Jim Davis, Chairman, CEO and President, Quest Diagnostics. "Health systems are increasingly turning to Quest because of our unique ability to deliver laboratory testing that is innovative, accessible and cost effective. This transaction also delivers on our strategy, which includes generating growth through accretive outreach lab acquisitions, and will extend our presence across Ohio."

After the acquisition's close, most outreach testing performed by OhioHealth will transition to the Quest Diagnostics full-service laboratory in Pittsburgh, Pennsylvania. OhioHealth will continue to wholly own and operate its hospital labs, providing high quality laboratory services for inpatient and hospital-based outpatient care as well as anatomic pathology and oncology.

The parties expect to complete the transaction in the third quarter of 2024, assuming customary regulatory reviews. Financial details of the transaction were not disclosed.

About OhioHealth
Based in Columbus, Ohio, OhioHealth is a nationally recognized, not-for-profit, charitable, healthcare outreach of the United Methodist Church. Serving its communities since 1891, OhioHealth is a family of 35,000 associates, physicians and volunteers, and a network of 15 hospitals, three joint-venture hospitals, one managed-affiliate hospital, 200+ ambulatory sites and other health services spanning a 50-county area. For more information, visit OhioHealth.com.

About Quest Diagnostics
Quest Diagnostics works across the healthcare ecosystem to create a healthier world, one life at a time. We provide diagnostic insights from the results of our laboratory testing to empower people, physicians and organizations to take action to improve health outcomes. Derived from one of the world's largest databases of de-identifiable clinical lab results, Quest's diagnostic insights reveal new avenues to identify and treat disease, inspire healthy behaviors and improve healthcare management. Quest Diagnostics annually serves one in three adult Americans and half the physicians and hospitals in the United States, and our nearly 50,000 employees understand that, in the right hands and with the right context, our diagnostic insights can inspire actions that transform lives and create a healthier world. www.QuestDiagnostics.com.

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SOURCE Quest Diagnostics

FAQ

What is Quest Diagnostics acquiring from OhioHealth?

Quest Diagnostics is acquiring select assets of OhioHealth's outreach laboratory services.

When is the Quest Diagnostics and OhioHealth acquisition expected to close?

The acquisition is expected to close in the third quarter of 2024, pending customary regulatory reviews.

What benefits will the Quest Diagnostics and OhioHealth acquisition bring to patients?

Patients will benefit from broader access to Quest's test menu, more patient service sites, and lower out-of-pocket costs for many services.

Will OhioHealth continue to operate its labs after the acquisition by Quest Diagnostics?

Yes, OhioHealth will continue to wholly own and operate its hospital labs, focusing on inpatient, hospital-based outpatient care, anatomic pathology, and oncology.

Where will the outreach testing be performed after Quest Diagnostics acquires OhioHealth's lab services?

Most outreach testing will transition to Quest Diagnostics' full-service laboratory in Pittsburgh, Pennsylvania.