Laboratory Corporation of America Holdings, a medical testing provider, is making deep cuts in its local operations.
Burlington, N.C.-based LabCorp plans to move or cut 313 jobs at its main lab and office in Santa Ana starting later this month, according to a filing with the state Employment Development Department.
LabCorp administers tests and processes blood and urine samples for doctors at the Santa Ana office and 30 other labs and service centers in Orange County.
Local operations stemmed from the company’s $57.5 million buy of Westcliff Medical Laboratories Inc., which was based in Santa Ana and filed for bankruptcy in 2010.
The unit now is known as LabWest.
LabCorp officials didn’t return calls for comment.
Speculation on industry message boards suggested that LabCorp plans to move most of the testing accounts it inherited in the Westcliff deal to San Diego.
At the time of Westcliff’s bankruptcy filing it had 170 offices and labs, and about 1,000 employees throughout California.
Online commenters suggested Lab-Corp—which has about $5 billion in annual sales and a recent market value of $9.6 billion—might move some local operations into the Santa Ana building after job cuts there.
Court Win
The pending moves follow a win in court for LabCorp earlier this year, when U.S. District Judge Andrew Guilford of Santa Ana denied a challenge by the Federal Trade Commission to its purchase of Westcliff.
Regulators contended the deal would harm medical laboratory competition.
The FTC contended that if LabCorp were allowed to buy Westcliff, it would leave New Jersey’s Quest Diagnostics Inc. as the only other large laboratory serving Southern California.
Quest also owns Quest Diagnostics Nichols Institute in San Juan Capistrano.
On a call with investors and analysts, LabCorp Chief Executive David King said he was “scratching (his) head about how it could be perceived that (increasing) our market presence in the state where we had been significantly underrepresented could be viewed as anticompetitive.”
LabCorp argued that its buy of Westcliff “will take those failing assets and turn them into real efficiencies and cost savings for consumers that would dramatically outweigh any potential harm the FTC has alleged.”
The FTC eventually dismissed its complaint against the LabCorp-Westcliff deal. The commission said it still believed the deal “will result in anticompetitive effects” but decided that pursuing the case would not serve the public’s interest or justify the costs.
Westcliff Woes
Westcliff, which started in 1964, had been hit by the economic downturn as it tried to keep costs for its customers in check.
The company said in its bankruptcy filing that it lost $13 million on revenue of $97 million in 2009. It had been trying to sell itself since early 2009, hiring New York investment bank MTS Health Partners LP as an advisor.
At the time of the deal, Thomas Gallucci, an analyst with New York-based Lazard Capital Markets, said he expected LabCorp to help Westcliff cut expenses and regain profitability.
“Scale is vital in this high-fixed-cost business, (so) we anticipate that Westcliff’s absorption by a major player like (LabCorp) can help turn around margins,” Gallucci said.
LabCorp has been part of the medical laboratory picture here for several years. In 2005, it spent $155 million for U.S. Labs Inc., a cancer testing provider in Irvine.
Last year LabCorp spent $925 million for the genetic testing business of Cambridge, Mass.-based Genzyme Corp. It paid $87.5 million for Princeton, N.J.’s Orchid Cellmark Inc., another genetic testing company, earlier this year.
