TABLE OF CONTENTS

1. Overview 5
1.1 Objectives of the Report 5
1.2 Methodology 6
1.3 Scope of the Report 7
1.4 Executive Summary 8

2. IVD Clinical Laboratory Market 10
2.1 Introduction 10
2.2 Key Players for Independent Clinical Labs 11
2.3 Medical Expenditures 12
2.4 Medicare Clinical Lab Services Spending Trends 14

3. The Clinical Laboratory Testing Market 17
3.1 U.S. Market 17
3.1.1 Hospital-based Clinical Laboratories 19
3.1.2 Commercial Clinical Laboratory Testing 20
3.1.3 Physician Office Laboratories (POLs) 21
3.2 Clinical Lab Testing Key Players 24
3.2.1 Commercial Clinical Labs 24
3.2.2 Hospital Lab Collaborative Ventures 25
3.2.3 Specialty Labs 26
3.3 Revenue and Reimbursement 27
3.4 Outlook for Clinical Laboratory Testing 30
3.4.1 Long-term Changes 30
3.4.2 Market Drivers 31
3.4.3 Barriers to Successful Clinical Laboratory Operations 32
3.4.4 Key Technologies 35
3.4.5 Conclusion 36

4. Hot Sectors in the Clinical Lab Testing Market 37
4.1 Workplace Drugs-of-Abuse Testing 37
4.2 Clinical Toxicology 38
4.3 Clinical Testing for the Pharmaceutical Industry 38
4.4 Heavy Metal, Trace Element, and Solvent Analyses 38
4.5 Diabetes (Glucose) Testing 39
4.6 Molecular Diagnostic Testing 39
4.7 Cardiac Markers 39
4.8 Blood Bank Screening 39
4.9 Genetic Testing 39
4.10 Predictive Medicine Testing 40
4.11 Personalized Medicine 42
4.12 Cancer Testing 42
4.13 Cell-based Cancer Testing 43
4.14 Monitoring Technologies 43
4.15 Anatomic Pathology 44

5. Important Technology Trends 45
5.1 Technology Platform Innovations in Point-of-Care Testing 45
5.2 The New Paradigm 45
5.3 Consolidated Workstations 45
5.4 Automation in the Laboratory 47
5.5 Laboratory Information Systems 48
5.6 New User-friendly Interface 49
5.7 Data-Management Issues 49
5.7.1 Wireless LANs 50
5.7.2 Data and Workflow Management Systems 50
5.7.3 Beckman Central Command 51
5.7.4 Clinical IT More Widely Available in Physician Practices 51
5.7.5 Physician Electronic Health Records (EHRs) 52
5.7.6 Specimen Tracking and Processing 53

6. Business Trends in the Clinical Laboratory Testing Sector 54
6.1 Key Developments 54
6.2 Sector Consolidation 54
6.3 Acquisition Pricing 54
6.4 A Closer Look at Recent Lab Deals 55
6.5 Acquisition, License Agreements, Internal Development and Partnerships 55
6.6 Merger, Acquisition, Financing and Partnering Activities in the Clinical Lab Industry 56
6.7 Comparison of Quest and LabCorp 58
6.7.1 Acquisitions 58
6.7.2 Quest's Growth 58
6.7.3 Laboratory Corporation of America 58
6.7.4 LabCorp's Growth 59
6.7.5 Competitive Advantages of National Labs like Quest and LabCorp 60
6.7.6 National Managed Care Companies 60
6.7.7 Billing and Collection Management 63
6.7.8 Lower Reagent and Supply Costs 63
6.7.9 Esoteric Testing Capabilities 63
6.7.10 Ability to Invest in Web-based Connectivity Solutions 64
6.7.11 Competitive Disadvantages of Quest and LabCorp 64
6.7.12 Difficulties with Turnaround Times and Stat Services 64
6.7.13 Physician-Laboratory Communication 64
6.7.14 Specimen Pickup Scheduling Inflexibility 64
6.8 Regulation of Clinical Laboratory Operations 65
6.8.1 CLIA and State Regulations 66
6.8.2 Drug Testing 66
6.8.3 Controlled Substances 66
6.8.4 Medical Waste, Hazardous Waste and Radioactive Materials 67
6.8.5 FDA 67
6.8.6 Occupational Safety 67
6.8.7 Specimen Transportation 67
6.8.8 Corporate Practice of Medicine 67
6.9 Hospital Outreach Programs 67
6.10 Supply Chain and GPO Contracting 68
6.11 Specialty Labs 68
6.12 Expansion of Hospital-based Labs and Hospital Outreach Programs 69
6.13 Managed Care 69

7. Company Profiles 70
7.1 ACM Medical Laboratory 70
7.2 American Esoteric Laboratories (Sonic Healthcare) 70
7.3 American Pathology Partners 70
7.4 AmeriPath (Quest) 70
7.5 ARUP Laboratories 70
7.6 Athena Diagnostics (Thermo Fisher Scientific) 71
7.7 Aurora Diagnostics 72
7.8 Bio-Reference Laboratories, Inc. 72
7.9 BioTech Labs (Laboratory Partners) 72
7.10 CBLPath, Inc. 72
7.11 Centrex Clinical Laboratories, Inc. 73
7.12 Clarient, Inc. 73
7.13 Clinical Laboratories of Hawaii, LLP (Sonic Healthcare) 73
7.14 Clinical Reference Laboratory 73
7.15 Clongen Laboratories, LLC 73
7.16 CompuNet Clinical Laboratories, LLC 74
7.17 Diagnostic Systems Laboratories (Beckman Coulter, Inc.) 74
7.18 Enzo Biochem, Inc. 74
7.19 Esoterix 75
7.20 Focus Diagnostics 75
7.21 Fresenius Medical Care AG & Co. KGaA 75
7.22 Geneva Laboratories 76
7.23 Genomic Health, Inc. 76
7.24 Genzyme 76
7.25 Integrated Regional Laboratories (IRL) 78
7.26 LabCorp 78
7.27 LifeLabs 79
7.28 MEDTOX Scientific, Inc. 80
7.29 Meriter Health Services 80
7.30 Mid America Clinical Laboratories (MACL) 80
7.31 Monogram Biosciences, Inc. 80
7.32 Myriad Genetics, Inc. 81
7.33 National Jewish Medical and Research Center 81
7.34 Parkway Clinical Laboratories 81
7.35 Pathology Associates Medical Laboratories (PAML) 81
7.36 Psychemedics Corporation 82
7.37 Quest Diagnostics, Inc. 82
7.38 RDL Reference Laboratory 83
7.39 Satellite Laboratory Services 83
7.40 Spectrum Laboratory Network 83
7.41 Sonic Healthcare 84
7.42 ViraCor-IBT Laboratories 84

8. Clinical Laboratory Testing Sector Trends and Forecasts 86
8.1 Home Care Analysis 86
8.2 Non-Traditional Collection for Laboratory Testing 86
8.3 New Systems for Critical-Care and Near-Patient Testing 86
8.4 Shift to Preventative Medicine 86
8.5 Mergers of Diagnostic Companies 86
8.6 Information Management Advances 86
8.7 Test Ordering Patterns 86
8.8 Patient Satisfaction 86
8.9 Move Away from Central Laboratory 87
8.10 Healthcare Cost Controls 87
8.11 Competition for Services 88
8.12 Drivers and Barriers of Clinical Laboratory Testing 90
8.13 Confluence of New Technology 90
8.14 New Trends in Clinical Laboratory Testing 90
8.14.1 Trends in Reimbursement Practices 90
8.14.2 Managed Care 94
8.14.3 Point of Care Testing 94
8.14.4 Satellite Facilities 95
8.14.5 Billing Practices 95

9. Key Clinical Lab Business Strategies 98
9.1 Strategy 1: Acquisitions 98
9.2 Strategy 2: Parallel Businesses Development 98
9.3 Strategy 3: Larger Labs 99
9.4 Strategy 4: Develop Specialty Areas of Testing 99
9.5 Strategy 5: Marketing 100
9.6 Strategy 6: Capitalize on a Unique Position within the Clinical Testing Market 100
9.7 Strategy 7: Lead in Providing Medical Information 100
9.8 Strategy 8: Scientific Differentiation 101
9.9 Strategy 9: Drive Quality 102
9.10 Strategy 10: Deliver a Superior Patient Experience 103

Appendix 1: Reference Laboratory Directory 104
Appendix 2: Current List of Laboratories which Meet Minimum Standards to Engage in Urine Drug Testing for Federal Agencies 109
Appendix 3: FDA/CLIA-Currently Waived Analytes 114

INDEX OF FIGURES

Figure 2.3: Part B Spending on Clinical Laboratory Services, 1991-2007 14
Figure 3.1: Lab Revenue by Lab Type 18
Figure 3.2: Lab Revenue by Test Type 18
Figure 3.3: Number of New Tests Granted CLIA-waived Status, 2000-2008 22
Figure 3.4: High-Volume Waived Tests 23
Figure 5.1: Percentage of Physicians in Practices with IT for Specific Clinical Activities 52
Figure 8.1: Reimbursement Distribution for Clinical Lab Service Payers 93

INDEX OF TABLES

Table 2.1: Drivers for Overall Medicare Spending 12
Table 2.2: Medicare Part B Expenditures, 1970-2008 12
Table 2.3: Projections of Medicare Part B Expenditures, 2009-2080 13
Table 2.4: Medicare Spending for Clinical Lab Services, 2000-2009 15
Table 3.1: U.S. Clinical Laboratory Testing Sector Revenue, 2005-2015 17
Table 3.2: U.S. Clinical Laboratory Testing Sector Segments, 2009 17
Table 3.3: Esoteric Tests Performed in the Clinical Laboratory 19
Table 3.4: Growth Rates of Test Types 19
Table 3.5: Drivers of Clinical Lab Testing Volume 19
Table 3.6: Independent Commercial Laboratory Testing Test Volume, 2005-2015 20
Table 3.7: Physician Office Laboratories Tests 24
Table 3.8: Revenue at Leading Publicly-traded Lab Companies, 2009 24
Table 3.9: Payer Group Percentage of Total Volume of Requisitions and Net Revenues 27
Table 3.10: Barriers to Successful Clinical Lab Operations 32
Table 5.1: Applications for Wireless LAN Technology 50
Table 6.1: Major Managed Care Players for Clinical Laboratory Services 61
Table 6.2: Drivers for Managed Care Spending for Clinical Laboratory Services 63
Table 6.3: Revenue for Quest Diagnostics, 2000-2009 65
Table 6.4: Revenue for LabCorp, 2000-2009 65
Table 6.5: Clinical Lab Quality Assurance Programs 66
Table 8.1: Key Elements of Clinical Lab Service 89
Table 8.2: Key Competitive Activities for Clinical Lab Service 89
Table 8.3: Challenges to the Clinical Lab Testing Industry 89
Table 8.4: Medicare Billing Guidelines for Multi-channel Clinical Laboratory Tests 91
Table 8.5: Factors for Estimating Collectibility for Clinical Lab Services 93
Table 8.6: Classes of Lab Service Payers 93
Table 8.7: U.S. POCT Market, 2000-2012 95
Table 8.8: U.S. POCT by Performance Location, 2008 95
Table 8.9: Billing Difficulties Required of Clinical Labs to Bill Third Party Payers 96