Providence’s Local Outpatient Labs Will Be Sold to Labcorp, the ‘Walmart’ of Testing Labs, According to Humboldt County Health Care Workers
UPDATE, Jan. 18, 7:55 a.m.:
A spokesman from Labcorp this morning confirmed that the company will be taking over Providence’s Eureka lab:
Labcorp, a global leader of innovative and comprehensive laboratory services, has agreed with Providence that in Humboldt County Labcorp will acquire the Providence Medical Group site in Eureka on 23rd Street.
The companies anticipate closing the transaction by the end of first quarter 2024. Until that time, there will be no changes in operations or services.
Both organizations are committed to a thoughtful transition including lowering the cost of lab medicine, maintaining high level of quality and service and providing broader laboratory access for Providence’s physicians and patients through Labcorp’s expanded test menu.
Providence Health & Services, the not-for-profit Catholic health care system that operates both St. Joseph Hospital in Eureka and Redwood Memorial Hospital in Fortuna, reportedly plans to sell its local outpatient laboratory assets to Labcorp, a company which local health care workers describe as the Walmart of testing laboratories.
Christian Hill, communications manager for Providence Northern California, would neither confirm nor deny that such a deal has been made. Instead, when asked directly via email this morning, he replied that he was “Copying Neil Hirsch from LabCorp to address your question … . Looks like Neil is OOO [out of office] today and back tomorrow.”
Hirsch is the senior director of financial and strategic communications for Labcorp, which is headquartered in Burlington, North Carolina. One of the largest clinical laboratory networks in the world, Labcorp processed 2.5 million lab tests per week as of 2018, and in the intervening years it has entered into agreements to manage even more labs, including those belonging to Ascension, another major Catholic health care system.
Local health care workers say they saw a deal with Labcorp coming long ago.
“This has been the plan and in the works for years,” said Dr. Megan Smith-Zagone, a pathologist who’s been Mad River Community Hospital’s laboratory medical director for the past three years, following more than 14 years in that role at St. Joseph Hospital.
Smith-Zagone was one of several people we spoke with who said Labcorp is essentially the Walmart of testing labs, meaning they’re a nationwide company that’s considered cheap and serviceable, more or less, but with a reputation for poor quality.
‘Labcorp is in this to make money … so they’re going to do everything they can to reap profit.’
–Dr. Megan Smith-Zagone
“Labcorp is in this to make money,” she said. “Labcorp is a for-profit laboratory, so they’re going to do everything they can to reap profit.”
Chuck Petty, a former phlebotomy and pathology manager at St. Joseph Hospital, agreed that the writing was on the wall from the time Providence merged with St. Joseph Health in 2016.
“We went to a meeting [in which Providence personnel] said that their model was to move all non-essential services to centralized locations,” said Petty, who retired in 2022. “I think microbiology went first and after I left they moved pathology to Santa Rosa. So it’s no big surprise that they’re doing this.”
Marilyn Bazor, who managed the lab at St. Joseph Hospital (on the former General Hospital campus) until she quit in 2021, said the in-house labs at both St. Joseph and Redwood Memorial hospitals used to perform a standard set of basic tests, including complete blood counts, chemistry panels, urinalysis, tests to assess heart health and blood clotting, etc. More complex or esoteric lab work was either shipped south to the lab at Santa Rosa Memorial Hospital, which is owned and operated by Providence, or sent to a factory-style lab, like those owned by Labcorp.
For years, Bazor said, St. Joseph outsourced its complex testing to a company called Quest Diagnostics, which Smith-Zagone described as the Target to Labcorp’s Walmart — slightly higher quality, perhaps, but about the same. (The best of the bunch, she said, the “Saks Fifth Avenue” of testing laboratories, is probably Associated Regional and University Pathologists, Inc., or ARUP. “That’s for if you have a really tough case.”)
Bazor told the Outpost that sometime in the past year or so, Providence ended its contract with Quest and started sending local patient samples to Labcorp instead.
“This is no easy task as each of the tests need to be ‘mapped’ to the Laboratory Information System,” Bazor said, referring to the computer software that processes, stores and manages data from all stages of medical procedures and tests. “This change of alliance [from Quest] to Labcorp indicates that this move has been in the planning stage for years.”
Like Smith-Zagone, Bazor doesn’t think too highly of Labcorp.
“I’ve worked with them in the past,” she said. “They don’t have the best reputation; they lose samples.”
Bazor and Petty both expect that local patients needing lab work will likely experience longer turnaround times for test results under Labcorp since the samples will have to be shipped out of the county. The outsourcing of samples from St. Joseph Hospital already resulted in lost specimens less than a year ago when a courier carrying patient pathology samples on State Route 36 lost control of his vehicle in the wintery March road conditions and crashed off of State Route 36. The samples were never recovered.
“My experience with Labcorp is negative,” said Petty, who worked at the hospital for 40 years before his retirement. About three or four years ago, he said, it became apparent that “everything that could go out to a centralized lab somewhere was going to,” and only the most basic tests, like chemistry profiles and complete blood counts, would remain in-house.
Petty said Labcorp’s facilities function like mills, with employees loading samples onto conveyor belts for labs that “just pump out tests and get specimens from all over the country.” In his experience, Labcorp would lose, on average, two or three of the 50-60 specimens that St. Joseph sent out for testing each month.
This outsourcing of so much lab work has frustrated local physicians, Petty said.
“If they get a test result back, they used to just be able to call or St. Joe and get a doctor, a pathologist or microbiologist or a clinical laboratory scientist on the phone, and they could talk through [any] problem with the test or what the test results meant,” he said. “Now they have no one to talk to.”
‘[Remaining lab workers] now are basically reduced to millworkers.’
–Chuck Petty
It has also reduced satisfaction among the people who remained working at the local labs, including clinical laboratory scientists, who typically have advanced training and a bachelor’s degree in biology, chemistry or microbiology, “and now they’re basically reduced to millworkers,” Petty said.
The number of employees affected by this transition is likely between 30 and 50, according to estimates from Bazor and Smith-Zagone.
In its press release announcing its lab closures last week, Providence promised to retain all employees who support the outpatient lab service line with no changes to their wages or benefits, but Petty is skeptical. He expects that the affected lab workers will be offered much simpler jobs that don’t require their expertise — basic chemistry testing rather than microbiology, for example — with evening or graveyard shifts that are less desirable.
Underlying economic factors
St. Joseph and Redwood Memorial hospitals are not unique in outsourcing their lab work. In fact, they’re actually behind the curve of a nationwide trend that hit metropolitan-area hospitals years ago, according to Dr. Brad Feliz, the chief of pathology at the Queen of the Valley Medical Center, a Providence-owned facility in Napa.
Feliz has run laboratories in California for more than 20 years, and in a phone interview Tuesday he said that the way labs have been doing business since the creation of the Medicare Program in the 1970s is simply no longer economically viable.
Specific factors here in California include the difficulty finding qualified staff who can afford the cost of living, the rising cost of labor among unionized health care workers, increased costs for lab materials such as test reagents and decreased reimbursements from the government and insurance companies, Feliz said.
Those and other economic headwinds are hitting hospitals across the state and beyond, Feliz said, and the trend shows no signs of stopping.
‘Obviously, if they’re not doing outpatient work they don’t need as many scientists, and that’s a loss for the community.’
–Dr. Brad Feliz
“So many hospitals are on the verge of closing, to be honest … that I think this is only the beginning, unfortunately,” Feliz said, referring to the consolidation and outsourcing of lab services. “They’re going to be letting people go from these hospitals because obviously if they’re not doing outpatient work they don’t need as many scientists, and that’s a loss for the community — and they’re probably never going to return.”
The situation has led Feliz to a bitter turning point in his own life.
“I’ve been a physician in the state of California running laboratories for over 20 years, so I don’t know where my career even goes from here,” he said. “I don’t know where this stops. … But I feel like the last thing that [hospitals] need to protect, is the actual inpatient care.”
From that standpoint, Feliz said he understands why Providence would sell its outpatient lab assets and focus on maintaining essential inpatient services, like delivering babies.
“The amount of money [hospitals] get on inpatient [care] is significantly more than what they’re able to get in the outpatient laboratory,” he said. “Yes, health care has never been more expensive, but a lot of that is not making its way to certain sectors of medicine, like outpatient laboratories. … The amount that hospitals are getting for outpatient laboratories actually declines [by] double digits almost every year.”
According to Bazor, a major contributing factor to this state of affairs dates back a decade to a piece of federal legislation called the Protecting Access to Medicare Act of 2014, or PAMA. Designed to forestall cuts to physician reimbursements, the bill instead wound up dramatically cutting the reimbursement rate to outpatient labs, especially those operated by hospitals and independent physicians.
“So I knew that it was going to be more difficult … for the laboratory to be profitable for the hospital,” Bazor said.
She also seconded Dr. Feliz’s observation about the ever-increasing difficulty in hiring licensed staff for the lab. Bazor said she personally mentored aspiring clinical laboratory scientists (CLS) over the years at St. Joseph but few stuck around. One left Humboldt County. Another went to work at Mad River Community Hospital. Younger ones asked permission to work four 10-hour shifts rather than five eights and were denied.
The lab at St. Joseph Hospital typically employed 10 to 12 CLS, and Bazor said that by the time she left in 2021, more than half of those positions were being filled by temporary contract workers, aka “travelers.”
At one point, a colleague mentioned that Cal Poly Humboldt might want to start a CLS training program and suggested that Bazor should be an instructor. She declined.
“I decided [that] in all good conscience, I cannot recommend the career of CLS to anyone, because it is a career that is so damaged,” Bazor said. “It’s all about profit. They ask people to work overtime; there’s no quality of life.”
Community impacts
While the factors leading to Providence’s anticipated deal with Labcorp may be national in scope, local health care workers say the organization’s decision will have specific detrimental impacts here in Humboldt County.
In the short term, the lack of information about the deal has caused anxiety for patients.
Bazor said she has received calls and texts since last week’s announcement from a number of such people, including patients on blood thinners worried about when and where they’ll get their usual prothrombin time test to evaluate clotting.
“I know another lady who has thyroid cancer, and she has to get some tumor markers,” Bazor said. “Other folks that may have prostate cancer and have to have their markers checked every six months. Those are people that have come to me like, ‘What are we going to do?’”
What does she tell them?
“My best guess is that Labcorp will [set up] several draw stations throughout the community, and then most of the tough stuff will be sent out” to out-of-county labs.
Not only will this change in practice impact patient care but it will also take dollars out of the community, Bazor said.
Petty said that the existing amount of lab work outsourcing has already led to dissatisfaction among physician specialists working at St. Joseph and Redwood Memorial, several of whom have left in recent years.
“I mean, people just — if they’re not supported by the hospital they don’t want to work here,” he said, adding that the switch to Labcorp can only exacerbate that trend.
Smith-Zagone said she doesn’t expect the affected local lab workers will want to stay working for Providence, either.
“People are already pretty miserable working at St. Joe’s so, like, honestly, I’m kind of hoping that a couple of them decide to come over to Mad River,” she said. Mad River Community Hospital operates its own outpatient draw center and performs many of its lab tests in-house. “So we support the local economy. Everybody who works here is committed to the community, truly.”
Bazor said that type of community commitment is precisely what Providence lacks, despite promises to the contrary when they first came to town.
“I feel that through the years … there has been a covenant with the community: ‘You’re here for us and we’re gonna be here for you guys,’” she said in reference to the messaging from Providence. “I feel they truly have broken that covenant.”
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