Our latest assignment is to provide strategic consulting services to a lab company doing business nationwide. The lab industry has changed drastically in recent years, resulting in substantially lower reimbursements and increased regulatory pressures.
These industry circumstances has caused this lab company to shrink down to about a $12 million run rate, running at about breakeven on an EBITDA basis.
The CEO retained us to examine his operations and financials. Employees knew that I’d been retained to help the CEO and an am independent third-party advisor. We have spent the last several weeks talking and drilling down to the fundamentals of the business with all business department heads, assisting in a potential acquisition and developing an operating plan to improve operations and profitability.
This industry reminds me of the home health business back in 1998-2000. Reimbursement changes from Medicare caused about 1/3 of all home health businesses to close. The other 2/3rds held on but were badly damaged.
Today the lab business is dominated by Lab Corp & Quest. Most smaller labs have closed, or been acquired, or are struggling to find significance within this huge industry.
Mr. Villwock is working with this company’s CEO to become one of the survivors in this industry with the goal of transforming the company into a nicely profitable $25-30 million business in the next two to three years.