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
Mar 12, 2007 | Compliance, Legal, and Malpractice, Laboratory News, Laboratory Pathology
Last Friday brought an interesting twist to the question about whether UnitedHealth would follow through and fine doctors $50 for each of their patients who had laboratory tests done at out-of-network laboratories, effective March 1, 2007. The Associated Press published a news story revealing that the New Jersey Department of Banking had requested that UnitedHealth suspend any attempts to fine physicians under this program, pending its investigation in the situation.
The New Jersey Department of Banking said it was “not satisfied with the legality of these protocols” in an article entitled UnitedHealth suspends MD fines in N.J.. The American Medical Association has also expressed concerns about the policy because physicians can’t control where patients choose to get their medical tests. The AMA also noted that this situation is the first time a doctor could be financially punished for a patient’s behavior.
In response to the New Jersey Department of Banking and Insurance’s request, UnitedHealth spokesman Tyler Mason said the suspension was voluntary and will be temporary. He added that the company expects the review to be finished shortly and in a manner favorable to the insurer.
New Jersey regulators are responding to the negative backlash from doctors after UnitedHealth replaced Quest Diagnostics with LabCorp as their preferred laboratory for tests (see United Health Disrupts the National Contract Status Quo Between the Two Blood Brothers) effective January 1, 2007. Although the fine policy has been on file since March 1, there has been no public disclosure of whether or not UnitedHealth has actually exercised their right to fine doctors as of this date.
New Jersey’s action triggers some important new questions. If New Jersey insurance regulators decide that UnitedHealth’s policy of fining physicians in this type of situation is illegal, will this prove helpful to Quest Diagnostic’s in its efforts to hang on to as much UnitedHealth business as possible. Further, if New Jersey insurance regulators determine that such a practice is illegal, would other state insurance commissioners follow this lead and make similar determinations? On the other hand, if UnitedHealth prevails in its legal arguments in New Jersey, will this open the door for other payers to copy UnitedHealth and begin fining physicians whose patients end up getting testing done by out-of-network laboratories?
This newest episode in the three-way contest between UnitedHealth, LabCorp, and Quest Diagnostics demonstrates how the precedents established in this new contractual relationship have the potential to be copied by other national health insurance companies. Unfortunately, many of these types of precedents prove detrimental to the interests in independent lab companies and hospital outreach programs. Stayed tuned for the next chapter in this fast-moving story.
P.S. Keep Dark Daily alerted to developments in your own community. We welcome your news tips. Your local developments help us develop regional and national patterns that can help your laboratory develop effective strategies and responses to all of these trends. Please forward your news to Robert (rmichel@darkreport.com) or Sylvia (sylvia@darkreport.com).
Mar 2, 2007 | Laboratory Instruments & Laboratory Equipment, Laboratory Pathology
Like other areas of clinical laboratory operations, phlebotomy must perform flawlessly. That’s particularly true because phlebotomy is often the only point of contact a patient has with the laboratory. Phlebotomy has its own complexities which often take a dedicated phlebotomist years to master. That’s why a clever new invention may be of interest to clinical laboratory managers and phlebotomists everywhere.
The invention is called the order of draw bracelet. These bracelets are created with brightly colored beads to remind phlebotomists of the appropriate order of draw for Vacutainer/Syringe draws. The beads come in a variety of types and sizes, and the bracelets are appropriate for both women and men.
Pam VandeDrink, a Phelbotomist for Laboratory Corporation of America, came up with the idea for order of draw bracelets when she was a student at Boston Reed College in Napa, CA. She witnessed a little girl beading pipe cleaners and plastic beads to match the order of draw colors in her textbook. “At the time, I was trying to use a color story that I had taught myself as a memory device for the order of draw colors,” said VandeDrink. “The bracelet became a much faster, easier, and more visible way for me to remember.”
In manufacturing the order of draw bracelets, VandeDrink keeps the materials she uses modest so that the cost of the bracelets is low. That’s because students and newly-trained phlebotomists often do not have much money coming out of school. However, VandeDrink plans to launch a “fancier” version of the bracelet for more established phlebotomists in the future.
Order of draw bracelets are becoming popular with phlebotomy instructors, who purchase them as graduation gifts for their students. Fletcher Allen Health Center in Burlington, VT “bought the order of draw bracelets for our team of 44 phlebotomy staff, both inpatient and outpatient,” according to Lynn Bryan of Fletcher Allen. “We partner in training students from the University of Vermont Laboratory Sciences program and the bracelets really help as a visual aid for the students.”
Dark Daily wanted to recognize VandeDrink for her invention and her entrepreneurial spirit. VandeDrink’s order of draw bracelet is the kind of low-tech, high value idea that simplifies a complex process and improves quality of care. Clinical laboratories are always looking for solutions and opportunities to improve quality and benefit patients. Order of draw bracelets are certainly a cost-effective solution to the further reduction of phlebotomy errors. It’s not surprising that labs like Fletcher Allen are making them available to their entire phlebotomy staff.
PS: Dark Daily is always interested in the clever management ideas and inventions that generate great benefit in clinical laboratory operations. Feel free to contact us with your laboratory’s innovations and successes.
PPS: One hospital which has achieved a zero error rate for patient identification with lab-managed phlebotomists is Ingalls Memorial Hospital in Harvey, IL. Marilyn Nelson, Director of Laboratories at Ingalls, will be at the Executive War College on May 10-11 to share how this was achieved, using a tightly-integrated informatics system that cues phlebotomists at the time of the draw, then guides the specimens directly into the lab and onto the analyzers. Full details on Nelson’s presentation can be found at http://www.executivewarcollege.com/agenda.htm.
Mar 1, 2007 | Laboratory Management and Operations, Laboratory News, Laboratory Pathology
In the heavyweight championship fight taking place between the two blood brothers, Quest Diagnostics Incorporated has just won the next round. Earlier today, Laboratory Corporation of America issued a terse press release titled: “LabCorp Notified by Aetna of Contract Termination.”
LabCorp acknowledged that “it will no longer be a contracted laboratory provider for Aetna Inc. (NYSE:AET), effective July 1, 2007.” LabCorp further disclosed that it expects the loss of its contract relationship with Aetna to be the primary reason why it expects earnings per share in 2007 will decline from a projected $0.16 to $0.12 in 2007. That’s a 25% reduction.
This breaking development is not a total surprise. Quest Diagnostics found itself excluded from almost all UnitedHealth contracts last October (United Health Disrupts the National Contract Status Quo Between the Two Blood Brothers) and from New Jersey-based Horizon Blue Cross Blue Shield in January. In both cases, LabCorp had negotiated an exclusive relationship.
Now it’s tit for tat. Quest Diagnostics is likely to announce that it has an exclusive national contract with Aetna, effectively denying LabCorp access to Aetna’s 16 million members. Aetna is one of the five largest health insurance companies in the United States.
Each of these national managed care contracts has implications for clinical laboratory management. That’s because both of the blood brothers want to negotiate a national contract with insurer that include terms designed to exclude regional independent laboratories and hospital laboratory outreach programs. To help lab directors and pathologists stay on top of this emerging trend, this year’s Executive War College on Laboratory and Pathology Management has several sessions devoted exclusively to the latest developments in managed care contracting.
In particular, LabCorp’s new CEO, David P. King, will be discussing how managed care companies are altering their strategies for contracting laboratory testing services. This will be a unique opportunity to hear, first hand, what is likely to unfold in the next 24 months. That’s particularly important, since the developments of the past five months are pointing to a managed care contracting environment which is increasingly excludes independent lab companies and hospital laboratory outreach program in favor of the national laboratories.
Stay tuned to Dark Daily for more updates on both this story and this rapidly unfolding trend. Once LabCorp used its exclusive pact with UnitedHealth to break the managed carecontracting status quo between it and Quest Diagnostics, it set in motion forces which are already propelling the laboratory industry into uncharted territory.
PS: To get the latest news and effective strategies dealing with new trends, join us in Miami on May 10-11, 2007 for the 12th Annual Executive War College. You can access the full details using the links below. Take action today to reserve your place.
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Feb 21, 2007 | Compliance, Legal, and Malpractice, Laboratory Pathology
Quest Diagnostics recently filed a lawsuit against Brian Kiesche, a former Quest Diagnostics account sales representative, for downloading a list of New York and New Jersey doctors that detailed the amount of business that Quest did with each doctor. Kieschie apparently downloaded the list shortly before he left the company. The list included customers with the highest volume patients of United Healthcare.
Kiesche resigned from Quest on December 14 and went to work for Laboratory Corporation of America. Quest Diagnostics argues that its ex-employee is using the stolen information to help his new employer to “price products and services at rates designed to undersell Quest Diagnostics” and to “determine which customers to pursue,” based on which are the most profitable and have the largest sales.
Unfortunately for Kiesche, he seems to be caught in the middle of the Battle Royale for UnitedHealth Business between Quest and LapCorp. Had he left a year ago, the fact that he downloaded the lists might have not triggered a lawsuit by his former employer. But because Quest Diagnostics recently lost its contractual business with UnitedHealth to LabCorp, the company is working earnestly to retain its existing business.
Kiesche denies the allegations and says in an affidavit, “although I did download some information,” some of it was already available to the public on the Internet. He denies sharing any of the information with LabCorp. Quest argues that when he joined Quest in 2004, Kiesche signed documents that forbid him to solicit any of the business of a Quest customer for 2 years.
Since the announcement in October 2006 that UnitedHealth had selected LabCorp as its exclusive lab, competitors have regularly raided the sales force of Quest Diagnostics, as many Quest sales reps likely became interested in opportunities with other lab companies. It is believed that Quest Diagnostics has lost a considerable amount of sales talent and knowledge about individual clients, just at a time when such expertise and client relationships would have greatest value to Quest Diagnostics in protecting its existing business.
By suing a former sales rep for violating the terms of his contract, Quest Diagnostics is sending a message to the remainder of its sales force. Sales reps leaving Quest Diagnostics are now on notice that they should carefully review their contract with Quest Diagnostics and make sure that they are not in violation of that employment agreement. Clinical lab sales reps familiar with similar lawsuits are welcome to notify Dark Daily about the details. Just email schristensen@darkdaily.com with information. Also, feel free to forward this e-briefing to others who would find it useful.
