[00:00:00] Speaker A: Hi everyone. Today we'll discuss some of the E and C best practices that medical testing and Laboratory services company LabCorp brings to bear when handling mergers and acquisitions. I'm your host Bill Coffin and this is the Ethicast.
LabCorp is a global life sciences and healthcare company. Its industry leading diagnostic and drug development laboratory services help doctors, hospitals, pharmaceutical companies, researchers and patients make clear and confident medical and drug development decisions. To give a sense of LabCorp's impact in this space. In 2023, 84% of the drugs that gained FDA approval did so with LabCorp support and the company was one of the major developers and processors of COVID 19 testing during the pandemic developing the first at home COVID test At the height of the pandemic, LabCorp was processing more than 1 million Covid tests a week. LabCorp's robust ethics and compliance program fosters a strong speak up culture and also oversees the considerable compliance challenges that come with the company's active mergers and acquisition strategy. As a testament to LabCorp's commitment to running a best in class E and C program, the company earned Ethisphere's compliance leader verification recognition from from August 2024 through December 2025. Joining us today is LabCorps Chief Compliance Officer and Chief Privacy Officer Tracy Strong. Tracy has been with LabCorp since 2009, serving in multiple leadership roles within the company's compliance organization. Tracy, thank you so much for joining us.
[00:01:39] Speaker B: Thank you for inviting me to speak with you today, Bill. I'm very proud of the impact that LabCorp has had on healthcare and the world and I'm also proud of the successful partnership that we've invested enjoyed with Ethisphere over the years that have led to improvements in our compliance program.
[00:01:56] Speaker A: Well, my first question for you is how does your team approach the due diligence phase of merger and acquisition transactions and are there any practices that you feel do an especially good job of helping to reduce risk?
[00:02:09] Speaker B: We do a significant amount of transactions here and including a lot of due diligence on potential transactions that never consummate. Because of that we have a very well oiled machine for that process. We have a dedicated M and A team that coordinates all aspects of the transaction, working with the sellers and the brokers and they also assemble an internal team for due diligence that includes representatives from all the affected areas in the company like commercial operations, hr, it, revenue cycle management, and of course compliance and privacy.
So we've developed a due diligence checklist that we submit to the target for Documents that we ask them to provide in a data room, then that those documents are reviewed. And that checklist varies based on the type of the deal. So we're not always looking for the same information, but based on the size of the transaction, the geographic location, or the business type, we modify those questions.
The document review is then followed by functional calls. So we'll have a specific billing call or legal call or compliance call. And those those allow us to dig deeper into the information that we've received. And pre pandemic, we used to go on site for all of these diligence meetings. And in over the course of my 15 years here at LabCorp, I think I participated in over 80 transactions or potential transactions. So it's quite a lot of work. But for compliance, we're looking for practices that could potentially carry liability for us if we acquire the company or cause us not to do the deal. For example, if there's practices that don't meet LabCorp standards, if we discontinued that practice, would it affect the expected business that we're looking for in the deal? And then we're also looking with an eye toward integration.
For example, what would be a reasonable time, reasonable time frame to bring the practices in line with ours? And you know, if that is an extended time frame, does that bring carry risk for the company?
If the company is going to be operating as a standalone entity, then we also look at what controls and resources we'll need to assign to keep them aligned.
[00:04:26] Speaker A: So on the post transaction side, what is your team's approach towards integration? I know for so many organizations this is a real challenge to do once, let alone on a recurring basis.
[00:04:36] Speaker B: Again, we have fairly standardized processes given the number of acquisitions we do. So part of our M and A team includes an integration staff and they engage in project management to make sure all of the pieces of integration are flowing through, as well as tracking spend and best practices or areas for improvement for the next deal. A lot of our deals are called tech and fold, so we're just bringing them into our business. And they operated within our regional divisions within the company.
And my team has compliance officers in each of those regional divisions. So they participate on the due diligence and integration for each of the deals in their areas. And then we have a. We have an integration checklist that we follow for compliance.
But each deal team is made up of representatives from all different functional areas, as I mentioned, and they all make an integration plan which includes everything from onboarding employees to integrating and winding down systems, to marketing and sales plans for converting Clients operations and logistics for receiving our orders and specimens and processing them in the lab, establishing our managed care and government claims processes. And our compliance team is connected into each of those areas and each of those plans to make sure that our processes are being.
[00:06:00] Speaker A: So we often talk about how important it is for ENC professionals to have strong relationships with allied functions. And what you're talking about seems like a really good example of that. So can you talk about the working relationships between your team and the dedicated LabCorp M&A team and, and how does that partnership help LabCorp successfully execute mergers, acquisitions and other such transactions?
[00:06:24] Speaker B: So we have a compliance representative, either me or another senior leader from our team that engages in weekly calls with the M and A team so that we can stay apprised of deals that are coming down the pike and touch base on status of ongoing deals. And I think that's very helpful. But I think even more important is our relationships with other functions in the companies. The for a healthcare company, one of the most biggest focuses for acquisitions is billing, how we're billing for our services. So what kind of payer contracts will we be taking on?
How are we set up to bill the government? Are the billing processes compliant? So we work hand in hand with our revenue cycle management team throughout the deal to make sure that all of those processes are aligned. Another area is a focus for compliance is our relationships with referral sources. So the physicians and the healthcare providers that are referring laboratory testing to us. And so we work with the commercial team to make sure that any other relationships we have with those referral sources, such as leasing space or providing courier services or providing phlebotomists to collect specimens in their in their offices, that all of those meet our compliance processes and work with them to transition anything that needs to be changed under the broadened abuse and kickback laws.
And we also are tied in closely from our privacy team with the IT and particularly cybersecurity team to make sure we're focused on any potential risks in that area and also making sure that we're protecting the potential return on investment from the deals.
[00:08:09] Speaker A: So I'm particularly interested in what success looks like. So can you share an example of how you know, what does it look like when all of your M and A compliance practices come together especially well and how that helps build value for LabCorp.
[00:08:23] Speaker B: So I think we have a strong track record of success with all of our deals from a compliance perspective. I mean we've been able to scale our processes from the smaller tuck and fold small laboratories that we purchased to bigger and more complicated deals such as with a hospital system or even outside of the laboratory testing area in clinical research or data management.
Our method of diligence, I think keeps our internal business team well informed throughout the process so they're not surprised by anything that we're asking them to change or put in place following the consummation of the deal.
And we rarely end up with unpleasant surprises that we have to fix or mitigate after the deal. I think our biggest success is when we're able to help retain the clients transition the business to LabCorp from the selling entity with minimal compliance impact or change within the organization that affects the the business operations.
[00:09:36] Speaker A: Well Tracy, thank you so much for joining us and congratulations once again on LabCorp's compliance leader verification. It's been really great to hear you share your insights on the work that you and your team are doing at LabCorp.
[00:09:48] Speaker B: Thank you Bill for a copy of.
[00:09:50] Speaker A: LabCorp's latest corporate responsibility report, as well as helpful links to the company's ethics, integrity, compliance, data privacy and data security policies, please visit labcorp.com compliance and to learn more about the Compliance Leader Verification program, please visit ethisphere.com solutions this show is about showcasing excellence in action and the best thought leaders in the ethics and compliance community. If you'd like to appear as a guest on the Ethicast to share a best practice success story or proof point on how business integrity builds value, we would love to hear from you. Drop us a line at the links in this episode's show. Notes Bill I'm Bill Coffin and this has been the ethocast. We hope you've enjoyed the show. For more content like this every week, please subscribe here on YouTube, Apple Podcasts or Spotify. You can also get our free weekly
[email protected] ethicast and for even more free content, please visit the Ethisphere Resource center at ethisphere.com resources. Thanks so much for joining us. And until next time, remember, strong ethics is good business.
