Dive Brief:
- Labcorp said Wednesday it has finalized the acquisition of select outreach laboratory services from Ballad Health.
- The buyout, which Labcorp agreed to in September, expands the company’s laboratory and testing capabilities to communities in Tennessee, Virginia, North Carolina and Kentucky.
- Buying Ballad’s assets continues the consolidation that Labcorp and its rival Quest Diagnostics have driven through the acquisition of hospital outreach labs and regional players.
Dive Insight:
Ballad serves the Appalachian Mountains region, including rural communities in northeast Tennessee, southwest Virginia, northwest North Carolina and southeast Kentucky. Patients in those areas will now have access to Labcorp’s test menu, service centers and digital tools.
Labcorp CEO Adam Schechter discussed the thinking behind the Ballad acquisition on an earnings call in October, framing the deal as part of a push to be “a partner of choice for health systems.” The CEO discussed the Ballad deal alongside Labcorp’s collaboration with Naples Comprehensive Healthcare in southwest Florida and acquisitions of assets from BioReference and Alabama’s Lab Works.
The deals are part of a wave of consolidation that Labcorp and Quest started in 2019. The companies stepped up their dealmaking after determining that pressures such as the Protecting Access to Medicare Act could encourage hospitals and regional players to sell assets.
“We continue to be very optimistic about our pipeline of deals, particularly in hospital local regional laboratory businesses,” Schechter said. “If you look at what we've said that's going to happen in our longer-term outlook, we've actually increased the revenue growth that's going to come from the acquisition strategy.”
Historically, Labcorp forecast revenue growth of 1% to 2%. The current long-term forecast is for deals to add 1.5% to 2.5% to growth. Schechter said the increase “shows our confidence in the pipeline of deals that we have.”
Labcorp invested $458 million in acquisitions in the third quarter. Revenue rose almost 9% to $2.6 billion in the quarter. Acquisitions net of divestitures contributed 4% of the increase, with organic sales growth accounting for the other 5%.
