Allina Health outsources some of its lab work to for-profit company Quest Diagnostics

Allina Health is shifting most outpatient lab work at the health system to Quest Diagnostics, the second time this year the Minneapolis-based nonprofit has transferred some in-house operations to a for-profit company.

Financial details of the agreement, which was announced last week, were not released.

Minneapolis-based Allina said in a statement that Quest Diagnostics will acquire select assets while handling most lab work in ambulatory clinics. The health system said it expects Quest will offer employment to all eligible clinic laboratory employees — about 200 people — at affected locations, subject to a customary screening process.

Allina will continue operating its central lab for running hospital tests and certain diagnostics performed in clinics.

Previously, Allina Health announced it would shift about 2,000 jobs in IT and bill-collection services in May to Optum, which is a division of Minnetonka-based UnitedHealth Group.

Based in New Jersey, Quest Diagnostics is publicly traded with nearly 50,000 employees.

“Quest is the right partner to build on this strength to ensure providers and patients can continue to access innovative and high-quality laboratory services,” Dominica Tallarico, the chief operations officer at Allina, said in a statement. “This new relationship with Quest will allow us to maintain excellent patient care, keep pace with rapidly evolving laboratory technology and reinvest our nonprofit resources to support our caring mission well into the future.”

Allina, which is the seventh largest nonprofit group in Minnesota, employs about 28,000 people across a network of clinics and hospitals including Abbott Northwestern in Minneapolis and United in St. Paul.

Last year, the health system reported its largest ever one-year loss on operations, but also saw significant improvement in financial performance during the fourth quarter. The health system eliminated about 350 jobs during 2023 in response to industrywide pressures, including high staffing costs and trouble discharging patients to step-down units.

Allina says changes with lab services won’t happen until the transaction is complete, which is expected this fall.

“Our transaction with Allina Health will extend access to Quest’s extensive service offerings in Minneapolis and throughout Minnesota and western Wisconsin,” Jim Davis, chair, CEO and president of Quest Diagnostics, said in a statement.

During the first quarter this year, Allina posted an operating loss of $19.5 million on $1.35 billion in revenue. This was a better financial performance than during last year’s first quarter, when the health system lost $101.6 million on operations.