The Rochester Consortium

The laboratories of the six hospitals in Rochester, New York worked together to bid on laboratory services for local managed-care contracts. Their primary goal was to keep shrinking health-care dollars in the Rochester community while providing quality laboratory services for managed-care payers. The six laboratory providers formed a cooperative Consortium that enabled them to compete successfully with national commercial laboratories for referral laboratory testing for outpatients and nonpatients. In 1995, the Consortium was approached by a Rochester-based health maintenance organization (HMO) offering an exclusive contract opportunity based on requirements that included cost reduction and a switch from a fee schedule to a capitated payment method. The Rochester laboratories each agreed to contract terms with the HMO, then followed this success by working with a second, significantly larger HMO, agreeing to provide exclusive laboratory services under a similar, capitated arrangement. The formation and work of the Consortium may provide other hospitals facing daunting competition from large commercial laboratory enterprises with a cooperative arrangement model to provide community-wide laboratory services.