Sonic Healthcare USA: Under the Umbrella
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Written by Eric Slack   
Saturday, 01 August 2009
Sonic Healthcare USA: Under the Umbrella
Since 2005, this medical diagnostics company has grown from having no US presence to seven geographic divisions and eight brands through smart acquisitions and top performance.


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The primary role of an umbrella is to keep you dry, but in reality it does so much more. It protects you from the elements and lets you safely and confidently go about your day. Such is the existence of Sonic Healthcare USA, the umbrella organization that oversees Sonic Healthcare’s American operations.

Sonic Healthcare USA: Under the Umbrella
David Schultz, president and COO
“Sonic Healthcare started in Australia with a federated model of doing business that allows local delivery, allowing individuals to operate their business as they see fit for that particular medical community,” said David Schultz, Sonic Healthcare USA’s president and COO. “I believe an individual at the local level has a better understanding of what it takes to deliver service to clients than I ever would from a central office.”  

The model for success
Founded in 1987, Sonic Healthcare is one of the largest medical diagnostics companies in the world, providing laboratory and radiology services. In addition to the US, it has operations in Australia, New Zealand, the UK, Switzerland, and Germany.

Sonic Healthcare USA came into existence in 2007, two years after Sonic Healthcare entered the American market after acquiring a majority interest in Clinical Pathology Laboratories, which was the largest privately owned routine pathology laboratory in the country.

“I was the president there before the acquisition, and we subsequently acquired other entities in the US,” said Schultz. “We created Sonic Healthcare USA to oversee all the operations within the US. It is more of a coordination entity than anything else.”

This federated model of doing business means Sonic Healthcare USA facilitates communication and collaboration among its members while looking for acquisition opportunities. Care is provided locally, but the resources and best practices of a much larger entity can be shared across regions.

“We contract on a local basis with pathologists to direct the labs and place a great deal of emphasis on their leadership in quality oversight,” said Schultz. “We have indicators we track and summarize for each testing location in the company, and we assist if divisions need help with quality control, quality assurance programs, or proficiency testing. We don’t try to standardize, but we provide comparative information so everyone can see what is going on, do the best they can, and constantly seek improvement.”

Today, Sonic Healthcare USA is divided into seven geographic divisions and represents eight different brands: Sunrise Medical Laboratories, Fairfax Medical Laboratories, Mullins Laboratory, Cognoscenti Health Institute, Pathology Laboratories, American Esoteric Laboratories, Clinical Pathology Laboratories, and Clinical Laboratories of Hawaii. The newest lab in the fold, the Hawaiian company was acquired last year.

“We are a pathology-oriented company, and that lab was owned and operated by a pathologist,” Schultz said. “It had services on all the islands in the state, provided quality lab services, and had a substantial share of the market, so it fit our model well.”

To fit the model, each brand must share the Sonic Healthcare vision by providing the highest quality laboratory testing with personalized service centered on meeting the needs of the local medical community. Each entity has control and authority over internal staffing, controlling its recruitment processes with support provided by Sonic Healthcare USA.

This decentralized management philosophy mirrors what Sonic Healthcare had previously done outside the US. Schultz reports directly to Dr. Colin Goldschmidt, CEO of Sonic Healthcare Ltd.  Sonic Healthcare USA’s staff is made up of people overseeing financials, IT, compliance, and medical leadership, all helping Sonic Healthcare USA serve as a resource for its divisions and support their growth and improvement.

Although the markets it serves vary because of things like geography or local laws, each market has a high degree of competition. All of Sonic Healthcare USA’s entities have sales staff or account executives reaching out to physician and client offices. Schultz said Sonic Healthcare USA’s divisions don’t typically advertise, preferring to make local contacts by participating in local events like educational seminars. Sonic Healthcare USA does help its divisions with equipment and IT investments, but Schultz believes personal involvement of individuals on the ground is more important than IT upgrades. “Our motto is: ‘We take it personally.’ We want people in our organization to deliver our services on a personal level and improve constantly for the client,” he said.

In the end, the resources Sonic Healthcare USA brings to the table are substantial parts of the continued growth of the entities it has acquired. The future will see a combination of organic and acquisitive growth as the umbrella organization shares with each entity the resources they need for organic growth and makes acquisitions when opportunities arise. The company is continuing to pursue acquisitions, but no potential moves are ready to be announced.

The challenges for the company and its divisions are similar to those facing most companies in the industry. With likely changes coming in the healthcare system, questions about delivery, reimbursement, the push for consolidation, an increase in demand for services, and growth in the number of tests offered to the public all remain questions without definitive answers.

One area the company is working on is improving its supply chain oversight. Sonic Healthcare recently assigned an individual to serve as a global procurement officer out of Australia, and procurement officers in the US and beyond are creating a coordination process that will allow the entire company to take advantage of the volumes being acquired. This will certainly help the American umbrella organization serve its divisions and prepare for growth within its current entities and expansion into virgin territories, and that is fine with Schultz.

“We continue to seek opportunities to enlarge the group because we want to grow our presence in the US,” he said. “We are pleased with what we have in the country now as far as performance, but we will always be challenged with continuing to improve, whether that is with the service we provide to clients, the quality of the product, or financial results.” 
 
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