Blog | 6/12/2025

Winds of Change: The Forces Reshaping the Clinical Lab

By Donna Hochberg, PhD, Chris Karras, Peter Origenes, Martha O’Neill, Ivan Hristov, Jenna Harding, PhD, Alfonso Barrios, PhD, Henry Chan, PhD, Nicholas Cadirov, PhD, Rebecca Podolsky, Nick McConnell, PhD, and Elle Ferguson 

The clinical lab industry is on the precipice of a transformation, driven by a convergence of trends that are intensifying and reshaping the landscape. While some trends (e.g., declining skilled labor, growing test volumes) have been with us for some time, we posit that in a post-pandemic world and with the political and economic environment as it is, we have reached an inflection point that will result in more significant changes over the next 10-15 years.

The trends buffeting the industry fall into three main categories:

As these trends converge, they are propelling the clinical lab industry into a period of transition that holds the potential to dramatically evolve the way labs operate. This dynamic environment suggests that the Lab of the Future may look very different than those of today, opening the door to a world of possibilities for innovation and improvement. In this blog post, we provide a deep review of the many of trends shaping the lab industry and start to hypothesize what the subsequent changes maybe be for labs around the world (and for the diagnostics manufacturers that serve them). Join us in extending the discussion of implications from these trends at our 16th Annual ADLM (formerly AACC) Cocktail Reception and Panel.

 

 

Increasing Healthcare Costs

Healthcare expenditures are continuing to rise and are on pace to become unsustainable in both the US and EU. Total healthcare spend in the US and EU has increased ~50% over the last 9 years.[1]

 

Managing spending will continue to shape virtually every aspect of healthcare over the next two decades. Efforts to constrain spending growth are driving care delivery to lower cost settings, influencing both how providers are paid (capitated and value-based models versus fee for service) and who the payer is (increasing role of the patient/consumer), leading to the combination of clinical and cost considerations in coverage decisions. These forces also inform how labs of the future will operate in the broader healthcare ecosystem.

Focus on Preventative and Personalized Medicine

A broad push in healthcare towards preventative and personalized medicine to improve patient outcomes while optimizing cost and efficiency is emerging. Testing plays a critical role in this paradigm by providing early and actionable insights required for clinical decision-making.

In response to this shift, the Lab of the future may see: 1) increasing testing volumes from screening or from tests to inform treatment decisions, 2) different sample types that are more patient-friendly to collect, 3) different technologies that integrate disparate diagnostic disciplines, and 4) need for digital capabilities to generate insights for clinicians.

Consumerization of Healthcare

The consumerization of healthcare, accelerated by the advent of patient-focused health websites and digital tools such as telemedicine, continues as the general population seeks convenience and more control over the management of their own health. As an example, post pandemic 72% of consumers have used at least one type of at-home test.[2]

 

Already the size of the global direct to consumer testing (DTC) market has been valued at $1.6B and is expected to grow at a rate of 12.5% through 2029 including point of care (POC) testing broadly as well as at-home self-tests and sample collection kits.[3] A variety of solutions contribute to this growing segment including genetic testing (e.g., Ancestry), novel sample collection technologies (e.g., Teal Wand^TM, Tasso+), consumer testing labs and other services (e.g., Everly Health, Lets Get Checked, Function Health) and moves by leading commercial labs (e.g., Quest, Labcorp) to offer patient initiated-testing services.

The lab of the future will have to evolve to meet the unique demands consumer involvement brings, including potentially 1) Engaging consumers directly 2) simplifying sample collection, instructions for use, and testing procedures 3) providing holistic solutions including links to follow-up professional care, 4) and more broadly enhancing accessibility and user-friendliness around financial elements (e.g., payment methods accepted, provision of documentation for reimbursement via insurance, HAS, FSA). 

Shifts in Care Settings

Patient care is shifting away from hospital inpatient settings to outpatient settings driven by cost, technological advancements, and convenience.

The average cost for a primary care treatable condition can be more than ten times less at an urgent care clinic or physician office compared to a hospital visit. Hospital inpatient utilization has decreased 19% in the US from 2000-2023 and outpatient visits have increased 31%.[4] In the US, both the number of urgent care locations and the claims attributed to them have risen 90% over the past decade.[5] Alternative care settings also continue to gain popularity in other countries, with England implementing its national Community Diagnostic Centre (CDC) Program in 2021 in an effort to provide triaging capabilities and easier access outside of the hospital setting.

The obvious implication of decentralization of healthcare delivery, particularly when considered in the context of consumerization, is the myriad of opportunities opened up for POC testing. However, we can’t ignore the potential impact this will have on the lab itself including shifts in test mix, volume, urgency of results for tests performed, need for the lab to be prepared to integrate POC results into reflex and other follow-up testing protocols, and the general responsibility (or not) of the lab to oversee the quality of POC testing. 

Health System Formation

Consolidation of hospitals, physician offices, and other care settings into integrated health networks is occurring in many countries around the globe, driven by the need to achieve efficiency in healthcare delivery, the increasing complexity of care, and consumer/patient expectations around what good looks like in a healthcare team across their care journey.

The US in particular has seen a steady trend toward consolidation. In 2024 we reached an inflection point where more than 50% of both hospitals and physician offices are now part of networks.[6]

This trend has several potential impacts on the lab industry. At the macro level, we are already seeing more centralization and consolidation of testing as well as a drive to standardize and integrated services among labs within a health system. That said, other changes are likely needed for labs to fully adapt to meeting the needs of an integrated care model (e.g., additional wrap around services to integrated test results into the whole patient journey).

 

Increasing Test Volumes in the Face of Declining Skilled Labor

The aging population, driven by declining birth rates and increased life expectancy in most parts of the world, puts a greater strain on healthcare resources generally. In the US and EU5, laboratory analyses have seen an average of 3% year-over-year growth since 2019. [7] This trend is expected to continue as new tests become available, the population continues to age, and attention shifts to preventative healthcare.

At the same time, clinical labs are facing a steady decline in skilled lab professionals vital to their function. As of 2022, the average vacancy rates for US laboratory technologists reached 14%, with some laboratory disciplines experiencing rates as high as 18%. This gap is expected to result in an annual openings of 24,000 clinical laboratory professionals.[8]

As these trends continue, clinical laboratories face increasing challenges in maintaining service levels with legacy organization models and approaches to laboratory staff training and utilization. The lab of the future will need to seek alternative solutions to staffing, leveraging AI tools and automation. Some may also turn to “stewardship” programs to reduce unnecessary testing to direct lab resources to testing with higher clinical and economic value.

Regulatory Pressure

Historically, laboratory developed tests (LDTs) have played a critical role in the lab by bridging gaps where commercial IVD tests are unavailable. This is particularly common for higher complexity testing like next generation sequencing and clinical areas with unmet medical needs where novel tests can quickly solve clinical issues.

Over the last several years, regulators in Europe and the US have taken a hard look at the role of LDTs. While the recent ruling from the Federal Court vacated the FDA rule on LDTs, IVDR in Europe still stands. European labs have and are expected to continue to decrease their reliance on LDTs. In the US, some institutions, hedging bets on the future, are also following this strategy in situations where they can easily adopt an IVD test.

While policy may have settled for the near-term, labs must operate in a preparatory state, expecting to keep a close eye on future changes and considering carefully when to take the step to validate LDTs, which are likely to remain a source of higher value content. 

Commoditization of Testing

The diagnostics industry has seen some level of commoditization in the past, particularly around low-cost routine testing (e.g., glucometer testing, pregnancy tests, sexually transmitted infection testing). But as we head into 2026, we expect PAMA-induced cuts to further impact labs (and diagnostics test manufacturers). Similarly, the across-the-board cuts to reimbursement in Germany and France heading into 2025 have the potential to recur in the future. The unfavorable impact on lab margins is significant.

Declining reimbursement and increasing competition are likely to add significantly to the forces reshaping the lab. For example, innovative technologies, tests, and services that can command higher reimbursement based on enhanced clinical value and economic utility are likely to become more critical to the average lab and not just the most sophisticated and advanced testing sites. Labs are also likely to have to be open to new business models to capture value.

Commercial Lab Consolidation

Driven by broader healthcare system consolidation, financial pressures, and rising regulatory demands, smaller laboratories are expected to continue combining with others to form ever larger laboratories that reap scale advantages with broader offerings and wider service coverage.

Since 2019, the number of completed lab acquisitions has hovered around 20 per year, but the average transaction value has increased 12% annually, from around $3.4B in 2019 to $6.1B in 2023 which included Labcorp’s $4.6B spinoff of Fortrea. Labcorp and Quest Diagnostics account for about 25% of the transactions since 1993, spending over a combined $25B and have generated more than half their revenue growth from acquisitions. [9]

Continued consolidation may lead to a few dominant players controlling most testing, potentially leading to technologies that fuel efficiencies but raises concerns about access, pricing, and innovation for low volume tests and labs.

Sustainability

While not at the top of the list of concerns or trends labs are thinking about, the influence of sustainability on lab operations is increasing. Initiatives in laboratories are gaining momentum including efforts to reduce single-use plastics, adopt energy efficiency-efficient equipment, and implement processes that minimize resource consumption and waste, especially that of hazardous chemicals. While cost increases will be a hurdle, a large portion of life sciences customers show willingness to spend at least 10% more for sustainable options.[10]

As cultural shifts and policy changes toward more sustainable processes, labs must be prepared to seek cost offsets or reallocate budgets in order to incorporate environmentally friendly products and workflows.
 

We are at a unique point in time when technological advances have the potential to address many of the challenges resulting from the pressures on laboratories discussed above. In this next section we will cover just a few examples of the next generation tools and tests we think could be influential.

AI, Data Integration, and Connectivity

Over the past several years, improvements in computational power, data management, and algorithms have accelerated AI’s capabilities; the technology now touches almost every aspect of our lives. Just a few examples include: 1) therapy chatbots have been shown, in clinical trials, to improve symptoms in patients suffering from major depressive disorder, 2) deep research agents can query vast amounts information in minutes to generate detailed reports, and 3) adaptive learning platforms are tailoring education to each student’s style and pace.

In the lab, AI and machine learning technologies are already being used in both clinical and operational applications. On the clinical side, AI is used as part of generating the test result or as part of result interpretation through clinical decision support, and on the operational side, it streamlines many historically tedious processes, such as quality control and revenue cycle management.

While AI is already seeing widespread use across this vast array of applications, we are just beginning to imagine how AI driven tools will shape the lab of the future.

Lab Automation

Demand for laboratory automation has been around for some time, and robotics companies and diagnostics OEMs have developed highly sophisticated solutions. The backbone of these solutions is automation tracks to move samples throughout the lab link multiple sample-to-answer automated analyzers. As of 2023, over 90% of large hospital labs globally had adopted some form of automation for core lab testing disciplines.[11]

We now see companies continually enhancing the automation solutions available to clinical labs to expand coverage of different steps of the workflow (e.g., pre-analytical), expand coverage of different testing disciplines (e.g., sample-to-answer NGS), and provide more flexibility across lab types (e.g., autonomous mobile robots).

Use of automation across workflows is expected to continue in the future, augmented by AI tools to monitor processes and quality to optimize efficiency.

Enhancements to Detection Technology and Instrumentation

Diagnostics OEMs continue to innovate enhancing result quality, user-friendliness, workflow efficiency, and cost efficiency. Several advancements have the potential to significantly impact the future of lab testing:

• End to end automation of mass spectrometry and next-generation sequencing (NGS), on the horizon
• Improved performance, turnaround time, and multiplex capability, and COGS position for POC platforms
• Digital whole slide imaging (digital pathology/cytology) accompanied by AI driven algorithms/tests
• Potential for multimodal tests (e.g., immunoassay and molecular, in vivo and in vitro, etc.)
• Rapid antibiotic susceptibility testing (AST)

As enhancements to laboratory instrumentation enable broader access to testing technologies, the testing performed in the lab of the future will evolve. 

 

• With all the trends currently influencing the clinical lab industry, we are in a time of transition that could lead to the landscape looking very different 10-15 years from now than it does today.
• Will we see the complete bifurcation of testing into fully automated mega-labs labs and near-patient and at-home testing?
• Will the walls between disciplines and modalities come down to bring clinical pathology, anatomical pathology, and even in vivo imaging together to enable more holistic views on each patient?
• Will all types of labs have to focus on high value/more novel and complex tests to retain value, leading to more democratized use of technologies like NGS or more testing to enable preventative and personalized medicine?
• Will the skillset of laboratory staff evolve to include more competence in IT, bioinformatics, and biomedical engineering to manage ‘big data’ analytics and automation?
• Will lab of the future capture value from the test result itself or need to provide more holistic solutions and insights?

Join us at ADLM 2025 to start the conversation on which of these, or other, possible scenarios will take hold and how long it will take us to get there.

If you’re interested in learning more about our insights on the clinical lab industry, please contact us at diagnostics@healthadvances.com.

Sources

[1]      Eurostat and US National Health Expenditure Data.

[2]      Rock Health, The New Era of Consumer Engagement: Insights from Rock Health’s Ninth Annual Consumer Adoption Survey, March 18, 2024.

[3]      Direct-to-Consumer Testing Industry: Global Markets, BCC Research, June 2024. Excludes at-home pregnancy tests, fertility tests, COVID-19 tests, and provider-dependent home testing.

[4]      Key Facts About Hospitals, KFF, February 2025.

[5]      United HealthGroup, Urgent Care Association, Fair Health.

[6]      Physicians Advocacy Institute, Definitive Healthcare.

[7]      National Databases.

[8]      Bureau of Labor Statistics, U.S. Department of Labor, Occupational Outlook Handbook, Clinical Laboratory Technologists and Technicians, April 2025.

[9]      Laboratory Economics.

[10]    Bioinformatics.

[11]    Health Advances analysis.