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Companies in this industry provide analysis and diagnostic services by examining body fluids and producing images of the body for medical professionals and patients. Major US companies include Alliance HealthCare Services, LabCorp, Quest Diagnostics, and RadNet.
Demand is linked to the number of people receiving medical treatment. The profitability of individual companies depends on efficient operations and good marketing. There are large economies of scale in the operation of medical labs, which can receive samples from a wide geographical area. Small medical labs can compete effectively by providing specialized analyses, or by serving geographical regions with few medical facilities. Imaging centers don't have similar economies of scale because they must be located close to patients, so small firms can compete effectively with large ones in a particular area. The industry is fragmented: the 50 largest medical lab companies generate about 40 percent of segment revenue, and the 50 largest diagnostic imaging companies account for about 30 percent of segment revenue.
Medical labs (often called "clinical labs") receive specimens of body fluids (most often blood) or tissues collected from patients, and perform a wide variety of tests to determine the presence and amount of various biochemicals to help doctors diagnose and treat medical conditions. The tests performed are often classified as either "routine" or "esoteric/specialty," according to the difficulty of analysis and the frequency of use in medicine. As technology improves and medical knowledge advances, esoteric tests (such as HIV tests) can become routine. The large companies get 60 to 90 percent of their revenue from routine tests. Some companies, such as Specialty Laboratories, a subsidiary of Quest, and Esoterix, a subsidiary of LabCorp, operate only in the esoteric/specialty segment.
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