CEO SUMMARY: By cutting out smaller, regional labs, UnitedHealthcare appears to want to shift an unknown percentage of its lab test volume to Quest Diagnostics Inc., which it recently restored to its national provider network. Clinical lab directors should be concerned about this development because UHC is the nation’s largest health insurer and because other health insurers are likely to follow its lead. Another factor may be UHC’s goal of getting more accurate and complete lab test data from national labs.
ONE OF THE NATION’S LARGEST HEALTH INSURERS is taking steps to jettison smaller and regional laboratories from its network as it prepares to hand over a big part of its business to Quest Diagnostics, according to laboratory consultants.
In the past few months, UnitedHealthcare (UHC) has been putting its new partnership with Quest into place. On Jan. 1, 2019, Quest will become a preferred, in-network provider for approximately 49 million UHC members nationwide. Laboratory Corporation of America is already a national provider for UHC.
“We’re fielding some concerned calls from regional, non-national laboratories indicating that their UnitedHealthcare contracts are being terminated,” said Andrew Stimmler, Managing Partner of the Shipwright Healthcare Group, LLC, a lab consulting company in Greensboro, N.C.
“Some labs getting these termination letters have been in-network UHC providers for a decade or longer,” added Shipwright Managing Partner Steve Stonecypher.
Asked to comment, UnitedHealthcare said it was preparing a response to questions The Dark Report sent. As of press time, the health insurer had not yet responded.
Labs should be concerned about this development for two reasons, Stimmler and Stonecypher commented. First, with almost 49 million members, UHC is the largest health insurer in the United States, and second, other health insurers could follow suit.
Aetna Culled Labs in Past Years
Years ago, Aetna underwent a similar culling of in-network labs and may do so again given that it has a new contract it signed with LabCorp earlier this year. Both new lab contracts (Quest with UnitedHealthcare and LabCorp with Aetna) will be effective Jan. 1.
In 2007, both Quest and LabCorp locked up exclusive deals with the health insurers when LabCorp partnered with UHC and Quest joined forces with Aetna.
Since then, smaller, regional laboratories and some hospital lab outreach programs have filled the gaps in UHC’s network, particularly in geographic areas where LabCorp and Quest were not present. But now UHC appears to be moving its business toward the two largest lab companies, Stimmler and Stonecypher said.
“These moves potentially signal the first fallout of the pending addition of Quest Diagnostics to the UHC’s network,” Stimmler explained. “For labs that are losing these contracts—some of which have been in place for longer than 10 years— UHC is citing the need ‘to adapt to the ever-changing healthcare environment’ as the reason for terminations.”
Changes at Aetna, UHC
In May, Quest announced that it will lose its exclusive contract with Aetna but will become a preferred provider for UHC. At the time, LabCorp also announced that its 10-year-old exclusive lab testing agreement with UHC was ending and that it would be an in-network provider for Aetna.
When it announced the new deals, UHC said its lab services contracts “will include a broad range of value-based programs” and that it will use lab test data “to drive more personalized care support.”
“One obstacle for smaller and regional labs is that many cannot provide the data health insurers may soon demand in their efforts to succeed under value-based contracts,” explained Stimmler. “But LabCorp and Quest can deliver consistent volumes of data to payers.
“UnitedHealthcare has an increasing appetite for lab test data in part because it has a subsidiary—Optum Healthcare,” he added. “Optum is a health information technology company that specializes in using data to manage costs and quality associated with certain disease states. This need for data is one reason UnitedHealthcare wants accurate and complete sets of lab test results on all of its beneficiaries.”
Stonecypher agreed, saying another reason UHC may be cutting labs from its network is the need to contain costs and promote quality initiatives. “These decisions are not about any one lab’s capabilities as much as they are about the volume that these two large lab companies bring to the table,” he explained.
“Consider the New York City area, for example,” he added. “If you’re UnitedHealthcare, do you want data from 30 different labs in 30 different formats? Or do you want most, if not all, of that data coming from larger labs, who can deliver everything you need in the correct format?”
The decisions to cut certain labs could be an early signal that more changes will result from UnitedHealthcare contracting with both national labs for the first time in 11 years. “This may be the first round under the new contracts,” he commented. “And it shows that all—or at least most— of the lab work is being promoted to the bigger labs.
Standardized, Complete Data
“From LabCorp and Quest, payers get large quantities of data in single files,” Stonecypher added. “Typically, smaller labs have trouble providing the data payers need in the normalized way that large health plans want.
“The smaller labs have trouble matching what LabCorp and Quest provide because labs and other healthcare providers are big data companies,” he commented. “That’s essentially what labs are, data companies that do lab testing.”
“Quest and LabCorp will have massive amounts of useful lab test utilization data that will be of great value to UHC versus the somewhat limited and disparate information that regional labs might offer,” observed Stimmler. “That data proposition makes Quest and LabCorp far more attractive as network labs to larger health insurers than most regional labs, regardless of how long they’ve been in business or how many years they have worked with UHC.”
Earlier this year, Quest Diagnostics and LabCorp characterized the new deals with UHC and Aetna as being about delivering value-based care, which for insurers means low costs, high customer service, and reams of data to help the insurers fill gaps in care.
Horizon Includes National Labs
Not only did UnitedHealthcare and Aetna announce that they had entered into agreements with both LabCorp and Quest to be providers in their respective networks, but just weeks later, Horizon Blue Cross Blue Shield of New Jersey issued a press release stating that its network would now include LabCorp and Quest Diagnostics. (See TDR, July 30, 2018.)
The fact that all three major health insurers—after excluding one of the national labs from their respective networks for more than a decade—took steps to restore that lab as a network provider is significant. As Stimmler and Stonecypher noted, two obvious reasons may have motivated these actions.
One is the benefit from the lower test prices that the restored national lab offers, compared to regional labs. Second is the benefit of getting regular feeds of utilization data and lab test results that are more complete and more uniform than what these health insurers get from regional labs.
But another reason behind these decisions to include both national lab companies to their provider panels may be the growing use of value-based payments to other providers. Payers may see that the national labs are better positioned to support physicians that have value-based payment arrangements.
Do Non-Network Labs Have Alternatives?
WHEN A HEALTH PLAN CUTS LABS FROM ITS NETWORK, there are steps the labs can take. “But it is best that labs prepare before a payer makes such a move,” said Steve Stonecypher of the lab consulting firm Shipwright Health Group.
“It is a smart strategy to identify the advantages your lab brings to a health plan,” he advised. “Your lab needs some significant factor in its favor—something besides geography.
“Does your lab do something different to control costs, for example? If so, then highlight that,” he continued. “Does your lab have a big specialty group or a large health system under contract? If so, that would be important to mention to payers.
“Does your lab have key clinical opinion leaders on your side?” he asked. “If so, bring them into the discussion or have them at least write letters to the health insurer on your behalf.
“It is essential to have already prepared an analysis of the strengths and weaknesses in your market,” noted Stonecypher. “This should be updated on an ongoing basis because UnitedHealthcare is not the only health plan that will look to eliminate high-cost labs, even if they do good work.”
Shipwright’s Andrew Stimmler agreed. “It’s a good idea to be pre-emptive with all of your lab customers. What are your pathologists doing to help reduce costs, for example, both within the lab and with referring physicians? What is your lab doing to support value-based care contracts? How does the role you play in your community or geography make you distinct or unrivaled?
“Your lab should consider your singular or unusual value proposition because LabCorp and Quest have largely complete service footprints nationwide and are more cost competitive than most smaller regional labs,” concluded Stimmler.
Contact Andrew Stimmler at astimmler@ shipwrighthg.com or 267-297-0090; and Steve Stonecypher at 980-444-3296 or firstname.lastname@example.org.