Oct 11, 2006 | Laboratory News, Laboratory Pathology
There was plenty of reaction to last week’s news that UnitedHealth Group had awarded an exclusive, ten-year, national lab testing contract to Laboratory Corporation of America. That contract award excluded Quest Diagnostics Incorporated.
Across the laboratory industry, pathologists and lab directors are keenly interested to learn how this may affect the market for physicians’ office-based lab testing in their communities. Phones and e-mails have been flying into our offices with questions and comments. Two words describe the general reaction to this announcement: “total surprise.” That’s because laboratory professionals understand the range of challenges that UnitedHealth and LabCorp must overcome if this exclusive national lab testing contract is to prove successful.
Even the investment community was not certain how to understand this startling development- but pundits did seize the chance to engage in word play. At BusinessWeek online, the headline was “A Negative Result for Quest Diagnostics.” Over at The Motley Fool, the UnitedHealth contract award story was titled “Great Chemistry at LabCorp.”
However, the harshest criticism came from TheStreet.com. It has a regular feature named “The Five Dumbest Things on Wall Street This Week.” Listed at number four for last week was Quest Diagnostics Incorporated. TheStreet.com noted that Quest Diagnostic’s CEO, Surya Mohapatra had told the financial community that, following one year of negotiations with UnitedHealth, it had suddenly “changed direction” and demanded the right to make an eight-year deal. The Street.com continued “‘If we had signed that contract,’ Mohapatra bristled, according to Dow Jones, ‘it would have been irresponsible not only for us as a company but for the whole industry.'”
TheStreet.com next observed rather dryly that “LabCorp investors are surely applauding that principled stand.”
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It then rated the Quest Diagnostics situation thusly:
“Dumb-o-Meter score: 85. ‘Choosing a diagnostic lab with a focus on patients and quality makes a difference for your health,’ Mohapatra warns.” |
It is not often that events in the laboratory industry catch the attention of Wall Street. It is even less common for a laboratory company to do something that earns it recognition on a list of “The Five Dumbest Things on Wall Street This Week.” Judging by the 18% drop in Quest Diagnostics’ share price that followed news of the UnitedHealth contract, it seems that a number of smart investors believe LabCorp made the smartest move in this round of the chess game.
At Dark Daily, we are of the opinion that the new UnitedHealth lab testing contract strategy will be long-term negative for the entire laboratory industry. If that proves true, then both Quest Diagnostics and LabCorp will have more to lose in coming years than any immediate gains as a result of this contracting strategy.
Jun 7, 2007 | Laboratory News, Managed Care Contracts & Payer Reimbursement
Laboratory Corporation of America (NYSE: LH) announced yesterday that it had executed a multi-year clinical laboratory services contract renewal with CIGNA HealthCare (NYSE: CI). An important facet of the renewal, noted in LabCorp’s press release, is that “LabCorp will no longer be contractually restricted from marketing that the Company is a fully participating, in-network provider to CIGNA HealthCare for all services in all major markets.”
“This agreement is important because we will no longer be prohibited from marketing to doctors and patients that we are a participating, in-network provider to all CIGNA HealthCare members and plans in all major markets,” said David P. King, President and Chief Executive Officer of LabCorp. “We welcome the opportunity to compete for CIGNA HealthCare business on a level playing field with all other contracted laboratories. Of course, CIGNA HealthCare’s participating physicians may continue to send all of their work to LabCorp, giving choice to those physicians who prefer using a single high-quality, full-service laboratory.”
What Dark Daily finds notable about this contract renewal is that it is not exclusive to LabCorp, so Quest Diagnostics Incorporated (NYSE: DGX) continues to be a provider for CIGNA HealthCare. CIGNA HealthCare membership grew by 3% in 2006, to 9.4 million beneficiaries. It is experiencing rapid growth in consumer-directed healthcare plans (CDHPs), with enrollment in CDHPS growing from 100,000 members in 2005 to over 250,000 in 2006, according to Cigna’s 2006 Annual Report. Cigna is also greatly expanding its membership outside of the United States. This is another example of how healthcare is globalizing.
This is also the first time since last fall that a national health insurer, when renewing national contracts for laboratory services, has not entered into an exclusive agreement with one laboratory company. In October 2006, United Healthcare (NYSE: UNH) granted an exclusive national contract to LabCorp. In May of this year Aetna (NYSE: AET) selected Quest Diagnostics to be its exclusive national laboratory provider. At the end of 2006, UnitedHealth and Aetna had 26 million and 15.4 million members, respectively.
Related Articles from Dark Daily:
LabCorp Ousted from Aetna’s National Contract
Judging the UnitedHealth Decision to Drop Quest Diagnostics in Favor of LabCorp
United Health Disrupts the National Contract Status Quo Between the Two Blood Brothers
Jun 1, 2007 | Laboratory Management and Operations, Laboratory News
Thanks to everyone who participated in our first Dark Daily reader survey earlier this month. We got a fantastic turnout for our first survey and got some great feedback which we will certainly be able to use to improve Dark Daily. As promised, we wanted to share some of the results with you.
• 44% of our readers found out about Dark Daily from The Dark Report, 20% found out from a colleague of theirs, 14% from a Web search, and 13% from the Executive War College.
• 50% of our subscribers have been with us for less than 6 months! Only 10% of our subscribers have been with us for over a year.
• The vast majority of our readers are likely to read their Dark Daily e-briefings Monday through Friday, but not on Saturdays or Sundays.
• 85% of Dark Daily readers thought the frequency of Dark Dailies was just right, with an even split of the rest of our readers thinking there were too many or too few Dark Dailies.
• Our Dark Daily readers’ favorite category was, by far, Laboratory News. A close second was Laboratory Management and Operations. Other notables were Laboratory Sales & Marketing, Laboratory Compliance, Legal & Malpractice, and Laboratory Managed Care, Contracts, and Payer Reimbursement. None of Dark Dailies categories had less than 35% of our audience feeling that the category was not useful.
• The distribution of our laboratory readers is fairly evenly spread among those that work for hospital laboratories, small independent laboratories, large independent laboratories, and laboratory chains (such a Quest Diagnostics and Laboratory Corporation of America).
• We were surprised to discover that some of our most vocal readers are from outside the United States and have requested more items that pertain to an international audience. We will try to comply as we see relevant international laboratory news!
• A number of our readers cited their favorite Dark Dailies as the e-briefings based on the continuing issues resulting from the exclusive national contract between United Healthcare and LabCorp (see Judging the UnitedHealth Decision to Drop Quest Diagnostics in Favor of LabCorp and United Health Disrupts the National Contract Status Quo Between the Two Blood Brothers).
As always, we welcome your personal responses to the survey results, your ideas for other reader surveys, and your ideas for new Dark Daily e-briefings. Thanks again for your participation!
Your Editors,
Robert Michel and Sylvia Christensen
