Managed Care Contracts

Managed care is a health care delivery system organized to manage cost, utilization, and quality. Every healthcare provider must settle on a managed care contract between itself and the payer.

According to, the contract between a clinical laboratory or other health care professional and a managed care organization (MCO) such as a provider-sponsored network, integrated delivery system, health maintenance organization, or other health care plan, is the fundamental document which frames, defines and governs their relationship. Contractual provisions can affect payment, office organization, practices and procedures, and confidential records as well as clinical decision-making.

Findlaw states, “A good managed care contract, like any other form of business agreement, is clear, consistent, comprehensive, and concise. It will conform to both the intent of the parties, setting out their respective rights and responsibilities, and the requirements of state and federal law.”

For example, Medicaid managed care provides for the delivery of Medicaid health benefits and additional services through contracted arrangements between state Medicaid agencies and managed care organizations (MCOs) that accept a set per member per month (capitation) payment for these services.

Depending on the market share of the health plan and the services offered by the healthcare provider, the negotiability of the contract will vary. Well-established managed care plans that have a large market share typical use form contracts. Newer managed care plans that have little market share and want broad provider participation are generally more willing to negotiate terms.

The Patient Protection and Affordable Care Act and the move toward accountable care has put a much greater emphasis on quality measures than in previous years.

Healthcare providers must prove in contract negotiations how well they manage quality and cost; such proof is usually provided with a comprehensive set of quality measures reported directly from the electronic health record (EHR). This can be straightforward for a single practice using the basic reporting functionality of its EHR, a more complex managed care plan might require features that an EHR vendor doesn’t offer.

Preserving Competition Is Goal of California Lawsuit

CEO SUMMARY: Once again, the use of deeply-discounted lab test pricing to win exclusive managed care contracts is involved in a court case. However, this latest private lawsuit is different from earlier cases because it seeks to preserve competition in the lab testing and the managed care…

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LabCorp’s BeaconLBS Aims To Manage Genetic Tests

CEO SUMMARY: BeaconLBS is a new business created by Laboratory Corporation of America. It says it wants to help health insurance plans manage molecular diagnostics and genetic testing. BeaconLBS is now recruiting other clinical labs to join its network and is meeting with payers to offer …

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Aetna Sues LabCorp Over Lab Marketing Practices

CEO SUMMARY: Aetna, Inc., sued Laboratory Corporation of America in federal court, seeking injuctive relief for actions taken once LabCorp became an out-of-network laboratory provider for Aetna in July 2007. LabCorp is also accused of a “malicious scheme to continue to receive …

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Local Labs Have Opportunities To Increase MC Patient Access

CEO SUMMARY: Although the nation’s two largest laboratory companies have achieved a dominant managed care position, opportunities remain for regional labs to do more business with managed care plans. Two experts provide an update of managed care pricing trends for labo…

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Labs Should Build Payer Relationships to Improve Commodity Pricing

“Health plans are interested in improving outcomes and saving money on complex, expensive cases because that’s where the money is. At the same time, that’s an opportunity for labs to help health plans cut costs while also improving quality. ” —Kerry Kaplan, Presi…

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Exclusive Lab Contracts Have Consequences

CEO SUMMARY: During the past seven months, competition in the Northeast has intensified. Decisions by UnitedHealth and Aetna to exclude a national laboratory from their respective provider panels has forced many physicians to reconsider their choice of laboratory provider—creating an op…

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Quest Wants It Both Ways with Payer Contracts

CEO SUMMARY: Once again, public laboratory companies are pursuing short-term strategies that promise competitive advantage to themselves. But these strategies also carry long term risks that could burden the entire laboratory industry. Contradictions in the current cycle of competition fo…

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Labs Can Be Misguided by Pull-Through Test Myth

CEO SUMMARY: For the first time in almost eight years, there are major disruptions to the status quo in managed care contracting for laboratory testing services. As was true in the 1990s, national lab companies are pursuing exclusive national contracts with the nation’s…

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Aetna Says: LabCorp Is Out & Quest Diagnostics Is In

CEO SUMMARY: January 1, 2007 can be considered the start of a new epoch in managed care contracting for lab test services. News of Aetna’s decision to favor Quest Diagnostics Incorporated with a five-year contract as its only national laboratory provider shows the direction this new epo…

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Quest Acknowledges Loss of United Business

CEO SUMMARY: In the boxing world, prize fights between heavyweight contenders always grab the world’s attention. The same is true in the lab industry, where the current fight between the industry’s two heavyweights has the potential to reshape several important aspects of the national…

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