Alberta Health Services plans to buy out the private laboratory testing company Dynalife and transfer the services back to the province, effectively ending private lab services in the province.

Sources have told CBC News that under an agreement expected to be announced soon, AHS will pay Dynalife $50 million when its recently extended contract ends March 31, 2022.

AHS is expected to hire all Dynalife staff, including unionized lab workers and non-unionized managers. Dynalife employs about 1,200 people and provides lab testing services for Edmonton and northern Alberta.

Under the agreement, AHS will pay Dynalife another $15 million during the life of the contract to ensure equipment is upgraded. It is expected Dynalife will continue to lease space for its main laboratory in Edmonton from AIMCo, the investment arm of the Alberta government.

AHS and Dynalife are expected to have a transition plan in place by Oct. 1, 2018 and a system for working out any disagreements.

The transition of laboratory services back to the public sector was signalled more than a year ago when Health Minister Sarah Hoffman abruptly cancelled negotiations with an Australian company, Sonic Healthcare.

Sonic had been chosen over Dynalife for a $3-billion, 15-year contract by the previous Progressive Conservative government.

The government spent about $4.5 million on the request for proposal process. Nearly $3.75 million of that was spent under the Tory government. Hoffman's cancellation of the contract incurred a penalty of more than $800,000.

Health minister ordered study

Dynalife had provided lab services under contract to the province for more than 20 years. It had appealed the Sonic decision, arguing the request for proposal process was fatally flawed. An AHS panel conducted a review and agreed with Dynalife.

Alberta Health Services plans to buy out lab testing firm Dynalife, CBC has learned. Hoffman subsequently allowed Dynalife to continue providing lab services while a study was conducted to determine whether a private company, the government, or a combination of the two could best provide lab services.

In an interview with CBC News in August 2015, Hoffman dismissed opposition criticism that she already had enough information to make an informed decision.

"I would assert that the opposite is in fact true," Hoffman said. "I think the important thing for me to do as a minister is to do my due diligence in choosing a model moving forward, so that it can be well staffed and supported, and that Albertans and the health professionals who rely on those services can have confidence that they will be there when they need them."

Hoffman said she "wasn't confident" in the information used to choose Sonic, "so that is why we are doing this study; to make sure that we can make the best decision for all Albertans."

Last month, Alberta Health Services announced it would extend Dynalife's laboratory services contract for another five years, a decision Hoffman said would allow an AHS administrative team to explore options for an "integrated system provincewide."

Dynalife runs northern Alberta's primary testing facility and 27 community sample collections sites in Edmonton and surrounding area, along with five collection sites and four health centre locations in northern and central Alberta.

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