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.