News, Analysis, Trends, Management Innovations for
Clinical Laboratories and Pathology Groups

Hosted by Robert Michel

News, Analysis, Trends, Management Innovations for
Clinical Laboratories and Pathology Groups

Hosted by Robert Michel
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UnitedHealth Suspends Fines for New Jersey Doctors Who Continue to Use Quest Diagnostics

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 ( or Sylvia (

Doctors Tell News Reporters about their Frustration with UnitedHealths Choice of LabCorp

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.