If I have excess capacity in my laboratory it seems like I should just scale my laboratory back:

The problem is that the laboratory is probably already scaled back as far as possible.  Hospitals have learned that they can only trim the laboratory so much and beyond that the money that is saved on testing is more than lost in missed or late diagnoses, late discharges, extended patient stay days, degraded patient care, patient out-migration, etc.  The fact is that hospitals need full service laboratories in order to keep the doors open.

Why hasn’t my laboratory already done this?

Chances are, your laboratory staff does not have the necessary skill sets and infrastructure to do this on their own.  While they understand and probably support the concept, building a successful outreach program has generally not been part of the responsibility of the Laboratory Director.

What is the opportunity in financial terms?

Generally speaking there is excess of $140 / year of physician office laboratory testing for every person in the US with a total market in excess of $55,000,000,000.  Because of the value of laboratory testing to patient care and the new testing being introduced the current expectation is that this market will grow to approximately $100,000,000,000 in 2018. 

I know that we do some Outreach Testing but know very little about it:

This is a normal occurrence.   Eighty percent of hospitals in the US are doing some Outreach Testing; usually as a result of requests by local physicians or institutions.  In the vast majority of these situations there has been very little focus on the program and little is known about its performance, not to mention that the vast majority of the opportunity has not been captured.

How can our hospital possibly compete with the national commercial laboratories?

The fact is that many of the physicians in your geographic area already have a relationship with your hospital, and are familiar with your laboratory and staff.  They would generally prefer to send their testing to you if you can provide a service level that is comparable to the commercial laboratories.  For programs that focus on the opportunity it is not uncommon for them to capture in excess of 60% of the market.

But the commercial laboratories can certainly perform this testing on a more profitable basis because of their factory like operations:

Yes, the fully allocated cost of testing for a large commercial laboratory will most likely be less than yours, but since you have already invested in space, equipment, and staff your incremental cost of testing is generally limited to reagents and disposable supplies.  Your costs associated with acquiring, servicing, and billing for the work should be comparable to the commercial laboratories and your logistic costs should be considerably less.  The net result is that while you are filling available capacity, you can actually do this work on a more profitable basis than the commercial laboratories.

Helping Community Laboratories serve their patients across the continuum of care