09/03/2013 05:43 EDT | Updated 11/03/2013 05:12 EST

No plans to stop merger of two large lab testing companies: Matthews

TORONTO - Ontario Health Minister Deb Matthews says she has no plans to stop a takeover that will give one company a big chunk of medical testing services provided outside hospitals in the province.

"I have no reason to believe now that quality or access will be compromised," she said in a recent interview.

"I've met with the presidents of both those organizations and they've assured me that there are no plans to close labs or specimen collection centres."

But Matthews said she will "definitely need to be assured that quality and access considerations are being met and will not be jeopardized."

A group of smaller community labs say the $1.2-billion takeover of CML Healthcare Inc. (TSX:CLC) by LifeLabs Inc. — two of the largest private operators of publicly funded community medical lab services in Ontario — would create a virtual monopoly that would cripple competition and diminish patient care.

The deal, which was approved by CML shareholders Tuesday, means LifeLabs would run about 60 per cent of patient service centres in Ontario. They also run 80 service centres in British Columbia.

The Ontario Coalition for Lab Reform is calling on Matthews to halt the takeover or at least hold public hearings to better understand its potential impact on health care.

"The world won't end if the merger takeover happens, but it will be enormously harder to put back an ecosystem that will really serve the public, because the government will be over a barrel," said OCLR spokesman Gerard Kennedy, who also serves as CEO of Alpha Healthcare/Alpha Laboratories.

"And this company will have so much control over so much of the testing, the government loses its leverage."

NDP health critic France Gelinas, who represents a northern Ontario riding, said she has concerns about the merger too.

Small and rural communities are well served by a little bit of competition between the big players, she said. But she said she's seeing more centralization of services now, which means people have to travel longer distances to get to a central lab or pay a fee for a home visit.

"With having one big player with 60 per cent of basically the lab budget guaranteed to them, it's worrisome that access in smaller communities will be further and further away," Gelinas said.

But LifeLabs — which is indirectly owned by the Ontario Municipal Employees Retirement System (OMERS), one of Canada's largest pension plans — said it won't reduce services.

"LifeLabs will not be closing any patient access centres at all, either the licensed ones or the unlicensed ones where patients can get services directly through their doctor's offices," said CEO Sue Paish.

Patients will actually have better services, she said. LifeLabs wants to expand its online appointment booking system to the CML labs, and is planning new protocols so fewer people will need to fast and show up first thing in the morning to take a blood test.

The Ontario Society of Medical Technologists also asked questions about what the merger could mean for patients, and said it was satisfied with LifeLabs' response.

"Of course it's really unpredictable," said executive director Blanca McArthur. "How can you tell what's going to happen a year down the road."

LifeLabs has integrity, but the ministry must ensure that the same level service is maintained, she said.

"We're really counting on the ministry to ensure that all the mechanisms are in place to ensure there's no reduction in access to services and to services," McArthur said.

The Competition Bureau, which was required to review the proposed deal, has said it would take no action.

But the governing Liberals could still intervene even after the shareholder vote since the deal is contingent on the provincial licences being transferred to LifeLabs, said Kennedy.

They could attach conditions to the licences or give notice to the company that it's going to take another look at their assigned market share, said the former Liberal leadership candidate.

LifeLabs will be held accountable to provide access to quality services, Matthews said.

"We will hold companies to those standards no matter who owns those labs."

But Kennedy said the government should at least revisit a 15-year-old provincial regulation that provides locked-in market shares to large private companies.

It's allowed them to profit by trimming their service — such as closing centres and withdrawing from doctors' offices — because they're guaranteed to be paid, he said. Patients have to wait longer and travel further for services.

"I'm pretty sure that's not what people had in mind when they designed the lab sector for Ontario — that it was meant to be a cash cow for investors or whatever — that there are better uses for those dollars," Kennedy said.

"We're hoping that this will strike people as the right time to look at it, before it's too late."

Gelinas said the current system is flawed.

"They're starting to trade that access to public dollars and that always worries me," she said.

"There is money to be made there. That money does not provide care for you or I. That money is strictly going to make some lab richer."

Matthews said the government is looking at the industry cap arrangement as part of its larger review of the whole lab sector, but couldn't pinpoint when it will be completed.

Last year, OHIP paid $660 million for community lab tests.