RECENTLY TWO OF THE NATION’S LARGEST HEALTH INSURERS abandoned a managed care contracting strategy that they adopted 11 years ago. Back in 2007, UnitedHealthcare and Aetna each were willing to grant exclusive national provider status to a single lab company in exchange for deeply-discounted lab best prices. (See TDRs, Oct. 16, 2006, Feb. 19, 2007, and May 29, 2018.)
In these exclusive contracts, UnitedHealthcare’s lab of choice was Laboratory Corporation of America. Aetna’s lab of choice was Quest Diagnostics. This status quo held for more than a decade. Yet, in May, each health insurer announced it had signed agreements, effective this Jan. 1, that make both LabCorp and Quest national providers in their respective provider networks.
Around the country, labs that compete against LabCorp and Quest are wondering what this means. Back in 2007, the popular wisdom was that these two payers wanted the lowest prices they could negotiate. Thus, granting one lab exclusive status as a national lab provider (while excluding the other lab) was the mechanism they used to extract the lowest lab test prices possible.
The fact that the relationships launched in 2007 were allowed to continue through the end of 2018 can be seen as evidence that there was truth to the assumption that lowest price was a major goal of health insurers when contracting for lab testing services. So what is different in 2018 that caused the end of these exclusive national lab test contracts?
Multiple experts involved in managed care contracting for lab testing services believe that, at least in part, health insurers today need to develop reimbursement arrangements that reward providers for delivering value to the insurers’ beneficiaries. Whereas, lowest price may be a prime objective when contracting in a fee-for-service system, in the coming era of value-based reimbursement, health insurers need to find hospitals, physicians, and labs that demonstrably produce improved patient outcomes in ways that measurably reduce healthcare costs.
If this is true, then local clinical labs and anatomic pathology groups now have the opportunity to demonstrate to payers how they contribute to improved patient care. As they do, they can regain network status with many of the national and regional health plans serving their communities.