Lab test prices across Europe differ enormously. Why?

The range in prices for tests across Europe is quite staggering. German lab managers point out that the total lab budget in Germany for public and private sectors at circa EUR5.5bn is less than that for France (EUR6-6.25bn). Yet Germany has 25m more people. Furthermore they claim that, on average, German doctors demand 60% more tests. In other words, French prices are twice those of Germany.  It doesn't stop there. Eric Souetre at Labco says that French prices are 30% higher on average than those in Spain. Meanwhile, we reveal here that tests in Southern Italy cost a staggering 2-3 times as much as tests in the North of the country.

The price differences reflect differing attitudes towards the business. In France, with its 4,200 labs, the business isn't a business, but a liberal profession with severe restrictions on ownership. In Switzerland over half all outpatient tests are still done in doctor's surgery. In Germany, prices have dropped and rationalisation has occured, but the whole structure is still supported by the extra high GOÄ price list, which is charged to patients with Privat Krankenversicherung (10% of outpatients and 20% of inpatients). The last time the GOÄ list was altered was 1996, because to do so, the Federal Government and Bundesrat have to agree - most of the time the two institutions are controlled by different political parties.

You would have thought that when lab tests were 2-4% of the healthcare budget, someone, somewhere, in Europe, would be plotting the price differences across the continent and coming up with sane policies.  Well, no. The industry, the European Health Observatory, The Standing Committee of European Doctors, the LSE - none of them have studied the area.

Three things stand out clearly:

1) Take doctors out of the money loop. German doctors used to be incentivised to prescribe basic tests. They were also often given skiing holiday packages of money by unscruplous labs if they were prepared to order 2 or 3 times as many tests as the average medic. The market saw a big drop when these practices were ended last year. Swiss doctors are still financially rewarded for carrying out their own tests. Conversely, Polish doctors have to pay for lab tests out of their own fees. As a result, test levels in Poland are a fifth of German levels and test quality is low.

2) Prices can drop a long, long way. As one private equity investor put it: "labs are the one sector in healthcare services where you can re-invent yourself, because you are shifting test tubes, not people."  The truth is that many small labs (as in France) are extremely inefficient. Consolidation can deliver huge savings. One private equity investor says that. despite dramatic price cuts. rationalisation has allowed margins to actually rise in the Belgian lab industry. All this, of course, explains the sector's interest to private equity investors.

3) Smaller labs means less quality control. I'm told the main reason why the French authorities are trying to reform the sector is to do with quality concerns. They are simply unable to effectively quality control an industry with over 4,000 small labs. This is the same driver behind reform in Southern Italy where there are 1,000 labs. Lab insiders say quality is often disastrous. We hear the same feedback from Poland. A big operator quipped: "In Poland the results of the test come back before the sample is delivered - they call it virtual testing." He maintains that this happens shockingly often as labs cut corners to deliver low prices and so win the business from Polish doctors.