CEO SUMMARY: After four years of working with SmithKline Beecham Clinical Labs as its sole designated laboratory provider, Cigna Healthcare recently opened the door to Laboratory Corporation of America. THE DARK REPORT believes this development is first evidence that the nation’s largest managed care companies are finding sole source lab contracts may be overly restrictive for their patients.
MAYBE A LITTLE COMPETITION IS a good thing. News that CIGNA Healthcare, Inc. added Laboratory Corporation of America to its national provider panel indicates a shift in thinking at the healthcare giant.
This is the first time in four years that CIGNA is contracting directly with another national laboratory besides SmithKline Beecham Clinical Laboratories (SBCL), now owned by Quest Diagnostics Incorporated.
“This new agreement with CIGNA is right in line with our strategy of establishing relationships with anchor health plans in regional markets where LabCorp already has a strong presence,” stated Pamela Sherry, LabCorp’s Vice President of Investor Relations.
CIGNA’s Business Goals
“By design, LabCorp and CIGNA designed this relationship to be complementary with CIGNA’s national business objectives, while flexible enough to meet the local needs of CIGNA’s regional plans,” observed Karen McFadden, Vice President, National Managed Care for LabCorp. “It’s a good example of the ‘think global–act local’ business strategy.”
Tailored Local Services
According to McFadden, the new CIGNA agreement gives LabCorp the opportunity to approach local CIGNA health plans. LabCorp will work with them to create a specific laboratory services package that supports each local plan’s needs in its regional market.
“We expect this agreement will be rolled out market-by-market,” explained McFadden. “Local CIGNA plans will have the option to choose between SBCL and LabCorp. Regions where LabCorp already has a well-developed service infrastructure will be at the top of the list.
One important aspect of this new contract involves laboratory data. “CIGNA was particularly interested in the fact that LabCorp is already delivering more than just utilization data to its managed care clients,” McFadden stated. “Beyond the test results, CIGNA will get data packaged by individual parameters. This will allow them to assemble the data sets needed to meet HEDIS and NCQA requirements.”
“LabCorp’s advanced information management capability translates into worthwhile savings for CIGNA,” continued McFadden. “For example, frequently insurers like CIGNA must pay $20 to $30 to pull and audit individual patient charts to get data needed for HEDIS and NCQA reports. Our information management package gives them the necessary lab test data sets without requiring audits of the patient’s file.”
Another interesting aspect to the LabCorp-CIGNA agreement is the linkage of patient eligibility data with LabCorp’s billing and collections. “CIGNA will regularly refresh its beneficiary eligibility file for us. Nightly we will run that file against that day’s new test requisitions.”
“This will allow LabCorp to identify the specific health plan for the patient,” she continued. “Is a patient’s particular policy reimbursed by capitation? Discounted fee-for-service? Are there co-pays or deductibles? Matching CIGNA’s eligibility file directly against our test requisitions will allow us to correct a large number of billing issues before they occur.
“When it comes to national contracts, LabCorp is ready to deliver the next generation of information management tools. We believe payers, physicians, and even patients will recognize the added value LabCorp offers.”
VP, National Managed Care
“The benefits are obvious. Patient satisfaction with CIGNA increases, because its lab test bills are accurate,” said McFadden. “There are reduced costs for both CIGNA and LabCorp in submitting and processing claims for laboratory testing.”
Laboratory executives and pathologists should take careful note. As LabCorp delivers these types of advanced laboratory information management capabilities, it is helping its users (payers, physicians, and patients) extract extra value from laboratory testing.
Moreover, these services help both the payer and the laboratory lower the cost of providing care. It demonstrates that the benefits from value-added laboratory services benefit customer and laboratory alike.
Sole Source Lab Contracts
From the larger perspective, THE DARK REPORT believes CIGNA’s move to expand its laboratory provider panel for the first time in four years indicates that sole source lab contracting has failed to fully meet either CIGNA’s needs or expectations.
Further, the arrangements between CIGNA and LabCorp to move data management above the level of basic results reporting, utilization monitoring, and claims processing reflect an important development. The marketplace is raising the bar of customer expectations. Winning labs will respond to these changed expectations.
It brings the laboratory industry another step closer to prediction of THE DARK REPORT: that the value of clinical laboratory services will move beyond simply producing a high quality test result at a fair price. Instead, sophisticated lab information services will be the primary source of revenues and profits.