Anne Ford
September 2025—Angela Vetch, MPH, DLM(ASCP), is tired of reading about large commercial labs buying hospital laboratories’ outreach business.
“There is an alternative to that story,” said Vetch, director of laboratory services at Kootenai Health, a three-hospital system in Coeur d’Alene, Idaho. And that alternative happens to be hers.
At the Executive War College meeting in April and in a recent CAP TODAY interview, Vetch explained how Kootenai has successfully insourced its outpatient laboratory testing over the past three years, seeing as a result what she calls “pretty astronomical growth.”
How astronomical? Test volume rose by 40 percent. EBIDA (earnings before interest, depreciation, and amortization) increased by $10 million from fiscal 2022 through fiscal 2024. For 2025, the laboratory is projected to hit its EBIDA target of $42 million—an almost $10 million increase from last year’s budgeted EBIDA.
A quick lay of the land: Kootenai’s main laboratory is a core lab with special chemistry, chemistry, hematology, coagulation, urinalysis, and blood bank. Its services include microbiology and point-of-care testing. Pathology services are not provided in-house but by Incyte Diagnostics, and the primary reference laboratory is Mayo Clinic Laboratories.
“We are a level two trauma center, and given our regional position in north Idaho, we do see a lot of referrals from critical access hospitals that we also work with closely,” Vetch said. “Our hospital also is engaged in a number of joint ventures for imaging, outpatient surgery, and urgent care, and with rehab hospitals in the area.” Kootenai added more than 170 new providers from 2022 through 2024.
Historically, Kootenai partnered with PAML in a joint venture agreement. Under the terms of that agreement, PAML was responsible for the preanalytics and billing, while Kootenai handled the testing, “and then results would file back through our LIS into the EMRs for the different clinic offices through PAML’s arrangements with them as well,” Vetch explained. Revenue was split 50/50.
Things changed in 2017, when Labcorp purchased PAML and turned that joint venture with Kootenai into a cooperative testing agreement. The previous 50/50 arrangement became “Labcorp kind of owning everything,” Vetch said. “They did still do the pre- and postanalytical workflows. We performed the testing on their behalf and would bill them.” In addition, Kootenai entered a five-year noncompete agreement (three years for its employed outpatient providers) that prevented it from independently providing outpatient testing in the community.
Though Labcorp was the sole owner of the outpatient testing business, the cooperative testing agreement had a few pros for Kootenai, which was able to retain some outpatient volume. “It didn’t incredibly adversely affect our lab volumes and some of the equipment agreements we had in place at the time,” Vetch says. “We could keep a lot of that testing local,” and continue to provide local providers with fast turnaround times. “Results for the testing we performed on Labcorp’s behalf were in our hospital EHR.” And Labcorp had interfaces in place with the community practice electronic records.
The cons, however, were considerable. Kootenai went from the previous 50/50 split to “having payment for many of the tests not even cover the cost of what we were paying for reagents,” Vetch said. “And there were some areas, like microbiology, where we saw steep drop-offs in testing volumes because that went to Labcorp instead of us as it had been historically. And then we were paying a share for specimen processing space for the Labcorp location across the street to do the work of preparing specimens to come to us and reordering everything in their system. We were losing money. There were also some inefficient workflows that created a lot of headache for our team.”
For example, Kootenai’s laboratory would collect a blood specimen, hand-label it, and transport it by tube to a nearby Labcorp location, where it would be entered into the Labcorp system, relabeled, and sent back to Kootenai to run for any test that fell under the cooperative agreement. “So there was a lot of transport and not super-streamlined processes,” Vetch said.
In addition, many of the provider practices that worked with Labcorp had their own special orders and panels. “We had four different versions of a lipid panel that we would have to build to maintain what was required for the cooperative testing agreement,” Vetch said. Then, too, staff spent time determining whether a patient’s ordering provider fell under the Labcorp agreement or was eligible to order testing directly with the laboratory. “It led to a lot of confusion and potential for errors,” she said.
To add to the difficulty, during the same period Kootenai Health acquired several new practices, each of which had its own EHR. “So we ended up having 14 different EHRs in the clinics,” Vetch said. “That would be a big challenge to try to interface each of those on our end.”
The laboratory converted from Meditech to Epic Beaker in March 2022, “and the cooperative testing agreement spanned that conversion,” she said, creating a separate workflow and new challenges.
Small wonder that Vetch and her team received complaints from physicians about lost specimens, delayed results, and other service problems, about which little could be done. “I think our providers view the lab as the people who can go fix something, but if we don’t have direct ownership over that service, it’s hard to try to impact that,” she said. “It was a lot of trying to coordinate with people outside of our organization.”
Fortunately, a remedy—a big, ambitious remedy—was in the works. Kootenai Health administration decided in 2019 that it would insource outpatient laboratory testing once the noncompete agreement expired.
Kootenai in 2017 partnered with Mayo Clinic Laboratories for its inpatient reference lab testing. Kootenai’s prior lab director (Vetch joined in October 2021) worked with Mayo’s outreach team to plan for the insourcing of outpatient clinic work.
As part of the next growth phase, Mayo’s Outreach Insights group in 2022 did an assessment of outreach potential. “Our CEO, CFO, CMO were all in this session where Mayo had essentially looked at the number of community providers out there and what our capability long term would be to bring in some of that testing, the opportunity that was out there, and made the case for why it makes sense to invest in outreach,” Vetch said.
“That assessment looked at our courier capabilities, billing, and potential changes we might want to look at if we’re increasing our outreach volume,” she tells CAP TODAY. “They gave us a scorecard of where we needed to direct our efforts, and then also they were able to put together a pro forma for the next five years with an estimate of what staffing we might want to add based on the volume we anticipated adding every year to show that with minimal additions to staffing, you can accommodate significant additional volume.”
The big day came on Friday, March 11, 2022, when Labcorp ended its operations in the three patient service centers that had been serving Kootenai patients, and which Kootenai had now acquired.
On that Saturday and Sunday, Kootenai’s facilities team updated signage, installed equipment, brought in supplies, got IT up and running, and did everything else needed to open the doors on Monday. During the same weekend, the hospital went live with Epic and the laboratory with Beaker.
Earlier in the process, Vetch and her team had done mountains of prep work, such as hiring and training, validating hundreds of new reference lab tests in Epic, coordinating with couriers and billing staff, educating the clinics’ providers on the new workflow, and creating a process for pre-Epic order access. “We also had to figure out how we were going to get orders from those 14 different EHRs. So a lot of work”—in the middle of the pandemic.
They hired some eight phlebotomists to staff those locations initially and pulled many of them from the hospital phlebotomy team. “So then they were pretty short, and we ended up having to hire a few travelers,” she said.
“Monday we opened the patient service centers for our new Kootenai Health Laboratory Services. Hopefully that’s a once-in-a-lifetime situation. I would not recommend it if you want to have hair on your head ever.”
Much of what made everything so hair-raising was that neither Vetch nor anyone else at Kootenai had a firm idea of how much work they’d been missing out on—nor how much of it was likely to return now that the noncompete agreement had ended.
“We had anticipated at least kind of a positive profit margin once insourcing this,” Vetch said. “But I think we quickly saw there was a lot more opportunity than even we knew about at the time.”
In-house billable test volume for the patient service centers was projected to be 186,000, “based on just what we knew from the testing performed for Labcorp.” In 2022 (from mid-March on), it was 221,906. In 2023, it was 248,313, and in 2024, 290,567. First quarter data for 2025, annualized as a projection, puts the in-house billable test volume at 310,456—a 40 percent increase in volume in the past three years. The overall billable inpatient and outpatient test volume rose 30 percent in the past three years.
Other opportunities came in the form of greater provider and patient satisfaction. “We’ve heard a lot of great comments about this change from both groups,” Vetch said.
One example: Kootenai began in 2024 to provide services to local skilled nursing facilities at their request. It’s a move that Vetch said has kept 10 to 12 patients a month out of the ED. That is because prior to Kootenai’s lab servicing the facilities, each one had arrangements with different laboratories. If a patient in one of those facilities could have labs drawn only on Tuesdays, and the provider wanted a lab drawn stat, in some cases that patient would be sent to the ED for a workup, Vetch said. “By having lab results back in a timely fashion and in the same EHR, even if they did have to go to the ED, they would have better continuity of care and not have to retest the same things that had already been done at another lab or that type of thing. So they’ve been very happy with that improvement, and I think our ED staff has been as well.”
Had the Kootenai lab not insourced its outpatient business and expanded its services, “we would not have been able to accommodate this,” Vetch says.
On the patient side, Kootenai’s new patient service centers “had extended hours versus what the Labcorp locations had had historically,” she said. “We opened earlier, we didn’t close for lunch, and we stayed open a little later to try to immediately differentiate our service there and make sure we were accessible.”
Looking to the future, Vetch said the laboratory is planning to expand its test menu “always and forever.”
“We’ve added 16 to 18 tests in the last year with our new chemistry analyzers, and we have 10 more just in chemistry in the pipeline,” she said. Many are high-volume tests sent to Mayo, “so if it’s something that can be performed on an analyzer we have, we’ll try to bring that assay in-house.” Other tests have been requested by providers—protein electrophoresis, for example. “A lot of that is definitely bolstered by the outpatient testing we were able to bring in and the high volumes associated with that.”
Despite the strong growth, “we’re not even to the true outreach place where at least I want us to be,” Vetch said. “We’re three years out from going live with our outpatient services, and we’re still not to that point where we can easily interface with community providers. We’re still working on some of the IT solutions we need to expand long term around interfaces.”
She was referring to the Clinisys Atlas middleware, which Kootenai began implementing last year and has so far implemented for two smaller local hospitals that send Kootenai all their laboratory work. “And then we have more sites in the works because it’s a lot of coordination of if their IT teams are ready and we have the capacity at the same time to work on that interface,” Vetch tells CAP TODAY. “So we’re kind of stacking those up right now.”
Another ongoing challenge: integrating outreach specimens into Kootenai’s workflow. “We’ve been doing some limited outreach for many years with a couple of the local hospitals that send us their labs,” Vetch says. “So we did have a fairly stable process for that.” In contrast, the skilled nursing facilities that have come to Kootenai for help with their laboratory services have resulted in what she calls “a little bit more hands-on type of work needed preanalytically.” That has meant making sure the laboratory’s client services team and outpatient and outreach presence are shored up, as well as making sure the lab has clear instructions on dealing with such issues as specimen rejection and the increase in volume.
They’re working, too, to streamline reference laboratory processes for all clinics and urgent care sites.
In the meantime, Kootenai is striving to stay competitive with Labcorp. “We have probably hired 10 of their staff in the last couple years, and they have shut down a lot of their locations, but they do still have other locations in our community,” she said. “Historically, we’ve been pretty competitive on the self-pay front, but that has changed in the last year or so” as some prices have increased.
How do you attract patients knowing they’re going to pay more versus Labcorp? “We work on it; it depends on the patient and their insurance,” she says. But it’s largely good customer service. “Some patients, particularly in our older population, say they come to us because we have a person at the front desk and not a kiosk. We have a little more of a personal touch.” Still, for some, it comes down to cost.
Under the new arrangement, Kootenai’s laboratory has seen patient numbers far beyond what anyone expected. The projected number of visits was 44,880. The actual number was 61,650 in 2022 and 65,999 in 2023. “In 2024, we were up to 82,000,” at the three locations, Vetch said, noting a fourth has since been added. And as for the billable test volume increases, “We don’t see that slowing down at all. I think it’s only getting more aggressive, if anything.”
“We’ve still seen consistent growth on the inpatient side as well,” she adds. It’s notable given that Kootenai recently reduced its average inpatient length of stay from more than five days to a little over four days, lowering its average daily census essentially by 20 percent.
But Vetch’s favorite number is that approximately $10 million jump in Kootenai’s EBIDA. “That’s an additional $10 million we’ve contributed to the bottom line of the hospital, which has been essential in helping us get out of some of the financial pressures that a lot of hospitals were in post-pandemic,” she said. “We’re not out of the woods entirely yet, but that’s the impact the lab can have on the bottom line.”
Anne Ford is a writer in Rochester, NY.