LabCorp CEO Speaks About Managed Care Contracting at Executive War College

May 14, 2007 | Laboratory Management and Operations, Laboratory News, Laboratory Operations, Management & Operations

For Dark Daily readers who didn’t make it to the Executive War College in Miami, Florida last week, you missed the first public appearance to the laboratory community by David King, now CEO of Laboratory Corporation of America. King took over as LabCorp’s new CEO on January 1, 2007. In his presentation, King spoke about a number of important trends unfolding across the American healthcare system, along with several insights about changes occurring within the managed care industry and how these changes are likely to alter contracting practices for laboratory testing services.

King stated that, if laboratories wanted to be innovative in creating value, it was time for them to recognize the specific ways that laboratory services in today’s marketplace are a commodity. High volume, routine testing is treated by purchasers as a commodity because, among other reasons, each laboratory’s testing services can be quite similar because of regulatory mandates and accreditation requirements. In fact, this is one reason why King argued that it is detrimental to the laboratory industry for smaller labs to badmouth the largest ones.

The only way that laboratories can differentiate themselves to physicians, to payers, and to patients, according to King, is by providing a superior level of service. Local and outreach labs, he continued, are often the better choice for local patients. One reason this is true is because local laboratories can often provide a continuous record of laboratory test data over the years. This enables physicians to see trends in a patient’s test results over time. By contrast, national laboratories, which are unlikely to perform laboratory tests on the same individuals year after year, have a more difficult time providing the cumulative record of test results on individual patients that allow physicians to identify trends that may indicate a developing problem with that patient.

Dark Daily notes that regional health information organizations (RHIOs) have the potential to close the gaps in the individual patient’s cumulative record of test results. That would help fix this weakness of national laboratories over time. As each individual in the United States has an electronic health record (EHR) that follows him or her around from state to state and through the years of his or her lifes, laboratory results from year to year will be readily available, regardless of which lab performed the tests. Indeed, laboratory test results are generally targeted to be among the first types of information stored in RHIOs and EHRs.

One suggestion that emerged from King’s presentation at the Executive War College was that, as a strategy to counter the commoditization of laboratory testing, small and large laboratories could work together to develop the types of value propositions that would encourage higher reimbursement from managed care companies. In a not-so-distant future, King hints, the large, national laboratories in the United States may call upon small and outreach laboratories for help with their workload, as well as develop new ways of adding value to laboratory testing services.

More substantial details about David King’s presentation at the Executive War College last Friday will be in today’s issue of The Dark Report, now at the printer. As a speaker, King came prepared and engaged the audience in a positive manner. If one of King’s goals in making a major address at the Executive War College was to open the door to further dialogue between his company and regional laboratories, then he certainly succeeded in catching the interest of a significant number of lab directors and pathologists sitting in the audience last Friday.

One thing was obvious about King’s participation at the Executive War College. He was most willing to spend time at the social events to meet people and hear their comments. He may be the type of leader who ends the long-standing isolation of the national commercial lab industry executives from their hospital laboratory counterparts. If he does, that can only have positive consequences for the entire laboratory profession.

Related Articles:

LabCorp Announces Succession Plan; David P. King To Succeed Thomas P. Mac Mahon As CEO On January 1, 2007