Feb 16, 2007 | Laboratory News, Laboratory Pathology
When UnitedHealthcare decided to make Laboratory Corporation of America its exclusive national contract laboratory, effective January 1, 2007, it certainly set itself up for objections from doctors and patients who would be upset at the exclusion of Quest Diagnostics as a UnitedHealth laboratory provider.
Now UnitedHealth has triggered another round of complaints from physicians by suggesting that it could fine a doctor $50 if his or her patient has tests done by a laboratory other than LabCorp or one of the other in-network labs. Doctors with patients who go out-of-network could also be subject to lower reimbursement and even exclusion from UnitedHealthcare’s network.
The Associated Press wrote a story about these unhappy doctors and their criticism of UnitedHealth’s new policies limiting choice of laboratories and threatening penalties for non-compliance. In response to press inquiries, Tyler Mason, a UnitedHealthcare spokesman, said the policy is not intended to punish doctors for the choices of their patients, but to remind doctors to refer patients to labs in the network. He said UnitedHealthcare would not fine doctors if a patient defies their referrals and selects a non-network lab. Mason suggested that the fine scenario was “very unlikely.”
The news of this potential fine hit the airwaves the same day, February 14, 2007, as a press release from Quest Diagnostics that revealed the results of a study conducted by independent market research organization National Analysts Worldwide. The study interviewed a representative sample of physicians that had experience with both Quest Diagnostics and LabCorp over the past 6 months. It revealed that physicians with “a preference overwhelmingly chose Quest Diagnostics over Laboratory Corporation of America Holdings (LabCorp)… Physicians also were asked to rate Quest Diagnostics and LabCorp on 11 key elements of laboratory service. Quest Diagnostics outscored LabCorp on every measure.”
However, Quest Diagnostics has already told Wall Street analysts that it expects to lose 100% of its UnitedHealth lab testing business by the end of this year. Based on that fact, it appears that having network status as a contract laboratory trumps superior service – at least where UnitedHealth patients are concerned.
Dark Daily observes that UnitedHealthcare’s bold move to restrict a doctor’s choice of laboratories appears to be succeeding. The upcoming February 19 issue of The Dark Report will have an in-depth analysis of the market changes triggered by the January 1 effective date of the new UnitedHealth contract with LabCorp. What bears watching in the coming months is whether the protests of irate doctors and patients will be strong enough to cause UnitedHealth to backpeddle on its efforts to force contract compliance on laboratory referrals. Further, if UnitedHealth succeeds in lowering its laboratory testing costs by a significant amount because of this contract strategy, that success could embolden other payers to implement similar restrictive laboratory contracting arrangements.
Jan 3, 2007 | Laboratory News, Laboratory Pathology
New Year’s Day 2007 marked more than the start of the New Year. It was also the effective date for a new exclusive national laboratory services contract for Laboratory Corporation of America with UnitedHealth Group. Also on New Year’s Day, Quest Diagnostics lost its status as a national laboratory provider for UnitedHealth. (See the Dark Daily “United Health Disrupts the National Contract Status Quo Between the Two Blood Brothers” from October 4, 2007.)
Although New Year’s Day was the effective date for both major contract changes, the two national laboratories turned up the competition more than six weeks earlier. In New York City and selected cities around the United States, LabCorp and Quest have run radio ads and newspaper advertisements to get their message out to the public and the physician community. As well, LabCorp has scrambled to create the service organization it needs to compete for UnitedHealth beneficiaries in such cities as New York and Chicago.
Dark Daily observes that these advertising efforts by LabCorp and Quest Diagnostics represents the largest consumer advertising blitz ever mounted by clinical laboratories. The Internet is also now a marketing channel. Lab directors and pathologists interested in how LabCorp and Quest Diagnostics are advertising themselves in this battle over UnitedHealth patients can see the full media campaigns of both companies. Quest Diagnostics established the Web site “MyLabIsQuest.com” as an information center for physicians and patients. On this Web site, it has posted radio ads and print advertisements run during this advertising campaign.
Similarly, LabCorp created “ChooseLabCorp.com” as its Web site to present information to physicians and patients about the new UnitedHealth contract. This Web site contains radio ads, public statements, and other information about LabCorp. Of interest to lab executives and pathologists, LabCorp has created a sign-up page and a LabCorp welcome kit for physicians.
Now that the UnitedHealth-LabCorp national contract is effective, it means that the flow of reimbursement dollars will begin to change for both LabCorp and Quest Diagnostics. As the exclusive national network provider, LabCorp is working aggressively to sign up as many physician accounts as possible. At the same time, Quest Diagnostics is working just as aggressively to convince physicians to continue using it, even though it is an out-of-network laboratory for most UnitedHealth plans.
Related Articles:
United Health: Quest is “Out”-LabCorp Is “In”, The Dark Report, Vol. XIII, No. 14, October 16, 2006.
“LabCorp Selected Exclusive National Laboratory for UnitedHealthcare; Will also Develop and Manage Lab Networks Selectively Across the United States”
“Quest Diagnostics to No Longer Be a National Contracted Provider of Lab Services to UnitedHealthcare Effective 2007”
“Bio-Reference Laboratories Announces Extension of Provider Participation Agreement with United Healthcare to Include Oxford Health Plans Effective January 2007”
Oct 4, 2006 | Laboratory News, Laboratory Pathology
It was major news yesterday when the public learned that UnitedHealth Group Incorporated had awarded an exclusive, 10-year national contract for laboratory testing services to Laboratory Corporation of America. UnitedHealth is the nation’s second largest health insurance company, with approximately 26 million beneficiaries. LabCorp says it should see an additional $3 billion in revenue during the 10-year term of its pact with UnitedHealth.
This new contract takes effect on January 1, 2007. After that date, Quest Diagnostics Incorporated ceases to be a contract provider of laboratory services to UnitedHealth beneficiaries, with a few exceptions. Quest Diagnostics acknowledges that its UnitedHealth book of business represents 7% of total revenues, or about $385 million per year. That business is now at risk, for a number of reasons.
What is big news for LabCorp and Quest Diagnostics is likely to be a “ho hum” for most other laboratories. That’s because they are already excluded from lab testing contracts with UnitedHealth. What may be of more immediate impact to hospital lab outreach programs and independent laboratory companies is the fact that LabCorp will be developing contract networks for UnitedHealth in selected regions around the United States. Depending on the prices and terms of such contract networks, local labs may find it advantageous to participate to gain access to UnitedHealth beneficiaries.
As to the two blood brothers, Dark Daily predicts the capture of UnitedHealth’s business by LabCorp will intensify competition between the two billion-dollar behemoths. Quest Diagnostics will not lie down and cede the UnitedHealth business to LabCorp. Nor will LabCorp be anything but aggressive about exploiting this opportunity. From this perspective, news that LabCorp has been granted an exclusive, 10-year lab testing services contract with UnitedHealth Group is just the first round. Stay tuned, because the battle is about to get nasty. Check out coming issues of The Dark Report for additional intelligence about this tectonic shift in national lab contracts.
