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.
Sep 22, 2006 | Laboratory News, Laboratory Pathology
Enrollment in consumer-driven health plans or “CDHPs” has skyrocketed during the past 24 months. Now, UnitedHealth Group, the nation’s second-largest health insurance company, has announced membership growth increases of 75% in its CDHP and HRA (Health Reimbursement Account) offerings for the period between June 2005 and June 2006. Membership in UnitedHealth Group consumer-driven health plans has now surpassed 1.75 million people. Moreover, research suggests that even consumers working for employers that still offer more traditional health insurance options like PPOs and HMOs are choosing to enroll in CDHPs.
There is something else that is different about a CDHP-insured consumer: they tend to take a more proactive role in managing their healthcare. A UnitedHealth Group study suggests that individuals in consumer-driven health plans are more likely to be actively engaged in managing their health and making health care decisions, as compared to individuals with traditional health insurance. A joint study between Definity and UnitedHealth Group found that CDHP enrollees supplied with appropriate health care information have higher usage of preventative care services. They also less likely to pursue discretionary acute care services. As a result, they are hospitalized less and have fewer trips to the emergency room.
For clinical laboratories and anatomic pathology group practices, the growing number of consumers insured by a CDHP will be a sword that cuts both ways. On the negative side, laboratories will increasingly be billing consumers directly, often for the entire amount of the laboratory testing services performed. Experts expect that laboratories and pathology groups will see an increase in bad debt, as consumers either refuse to pay, or don’t have the money to pay, for up to 100% of their laboratory charges.
On the positive side, CDHP members will have increased freedom to choose their healthcare providers. Well-informed CDHP members may do research and actively select high-quality laboratories and acknowledged sub-specialist pathologists. The consumer will want a “world class” laboratory or pathologist to diagnose their case or provide a second opinion to their attending physician. Because of this fact, laboratories and pathologists who develop a public brand and increased awareness among consumers will likely have a competitive advantage.
Dark Daily predicts that consumer-driven health plans will have far-reaching consequences to the laboratory industry. Laboratories and pathology groups will need to learn and develop a service organization that can help CDHP members get answers to their questions, monitor the costs of tests and procedures, and research their health issues. Because it will be consumers choosing their providers, and not managed care companies as in past years, the overall trend of growing CDHP enrollment should benefit clinical laboratories and anatomic pathology group practices.