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
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.
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.
Feb 2, 2007 | Laboratory News, Laboratory Pathology
Quest Diagnostics Incorporated announced yesterday that it purchased Sweden-based HemoCue for about $420 million. This purchase marks Quest Diagnostics’ first serious entry into the in vitro diagnostics (IVD) market and positions it in an unexpected segment of diagnostic testing.
HemoCue has global revenues of about $90 million per year, according to Quest Diagnostics. Its products are sold internationally. It provides point-of-care blood tests for hemoglobin, along with products for professional glucose and microalbumin testing. HemoCue’s handheld systems are used to screen for anemia and other conditions in physicians’ offices, blood banks, hospitals, diabetes clinics, and public health clinics. The company is currently developing hand-held systems to measure white blood cell count. Quest Diagnostics purchased HemoCue from a European-based private equity firm, EQT II BV.
Quest Diagnostics intends to integrate HemoCue’s handheld systems with its Care360 Portal, which gives doctors access to lab and medication records, patient medical history, and remote ordering of lab testing or prescriptions. Quest Diagnostics also said the deal will allow it to expand into international markets. “Technology is enabling diagnostic testing to move closer to the patient, and the acquisition of HemoCue and its exciting product pipeline gives us a strong presence in this emerging market,” said Surya N. Mohapatra, Chairman and CEO of Quest Diagnostics.
Dark Daily notes that Quest Diagnostics has been under stress to defend the business it gets from doctors who serve United HealthCare patients. The timing and nature of this acquisition have the appearance of a strategic move to shift the attention of investors away from Quest’s challenges with its United HealthCare book of business. As well, HemoCue’s $90 million in annual revenues will also help to replace revenue that Quest Diagnostics is expected to lose as a result of being excluded as a UnitedHealth provider in most markets since January 1, 2007.
