UHC, LabCorp Play Hard Ball With Texas Lab Contracts

For BeaconLBS program, UnitedHealthcare requires all Texas labs to be in lowest 25th percentile for costs

CEO SUMMARY: In launching BeaconLBS in Texas, UnitedHealthcare included a new, more onerous twist than it used for BeaconLBS in Florida. To be a BeaconLBS in-network ‘lab of choice,’ a lab must be in the lowest quartile for lab test prices. Any lab above the 25th percentile would have to renegotiate its contract with UHC and agree to be paid less to be a lab of choice, sources in Texas said. In effect, labs will compete aggressively against each other to drive down lab test prices, sources added.

DETAILS ARE EMERGING about how UnitedHealthcare intends to implement its laboratory benefit management program in Texas after the new year. As was the case in Florida, UHC will use BeaconLBS, a subsidiary of Laboratory Corporation of America, to administer the program.

In meetings with providers from Texas, including pathologists, UnitedHealth has announced that, beginning on Jan. 1, 2017, it wants physicians to begin using the BeaconLBS system to obtain pre-notification or pre-authorization for the 79 clinical laboratory tests that are listed on the UHC website.

enforcement Begins March 1

UnitedHealthcare also announced that on March 1, 2017, it will begin to enforce the requirement that lab test claims for these 79 tests must have a pre-notification or pre-authorization number from the physician, otherwise Texas laboratories in the UHC network, including laboratories in the “laboratory of choice” network, may not be paid.

UHC’s laboratory benefit management program is required for the approximately 500,000 members in Texas who are in fully-insured commercial plans.

There is additional unwelcome news for anatomic pathologists and clinical laboratories in Texas. In a letter to members of the Texas Society of Pathologists, society President Kevin Homer, MD, explained several problems with the UHC program that are of concern to the society. The most significant of these concerns is that to be included on the BeaconLBS “lab of choice” list, a laboratory must accept fees in the lowest quartile of UHC’s contracted labs. Any lab that has UHC rates above the 25th percentile cannot participate as a lab of choice.

Last month, representatives from the Texas Society of Pathologists participated in a meeting with officials from UHC, LabCorp, and BeaconLBS. Texas pathologists worry that UHC’s laboratory benefit management program may be more onerous for clinical laboratories than it was when UHC and LabCorp started the BeaconLBS system in Florida in April.  (See TDRs, January 5 and February 17, 2015.)

As in Florida, BeaconLBS is establishing a sub-network of Texas laboratories, called laboratories of choice. On the UHC website, currently only 20 labs are shown as labs of choice; none are based in Texas and a large proportion are lab companies owned by LabCorp.

Difficult For Labs To Get paid

In another similarity to the Florida program, the BeaconLBS system in Texas makes it difficult for laboratories to get paid each time a referring physician does not follow BeaconLBS’ protocols. Also, pathologists in Texas are concerned that the BeaconLBS program may upset longstanding patient referral patterns that physicians have with clinical labs in the Lone Star State.

“The notion that an insurance company can create a network within a network—steering referrals within a network of contracted providers based on the reimbursement accepted by that provider—should alarm all of us,” Homer wrote in a message to TSP in the society’s November issue of its newsletter. “BeaconLBS threatens physicians’ fundamental right of choice in the care of our patients, it unlinks cost from quality and steers patients to the lowest cost provider, and it provides a new mechanism by which insurance companies can deny payment of a ‘clean claim.’

“For these reasons, it is becoming increasing clear that we must prevent or delay implementation of Beacon in Texas,” Homer wrote.

He also called attention to a new, and more onerous twist that UHC and LabCorp have added to the list of criteria for what BeaconLBS calls its in-network labs of choice: These labs must be in the lowest quartile for lab test prices. In other words, in-network laboratories must be among the lowest-cost, highly efficient labs in Texas.

THE DARK REPORT interviewed a Texas pathologist who is familiar with the BeaconLBS proposal and who asked to remain anonymous. “One of our biggest concerns is that this system adds a whole new layer of bureaucracy to healthcare. While UHC says it is implementing the system to curb costs and to lower the total cost of care, the fact is that the BeaconLBS program will lower UHC’s expenses and their cost of care, but will actually increase the total cost of care,” the pathologist said. “It does this by requiring physicians and pathologists, when ordering lab tests, to do things they did not need to do before.

“I know from talking with pathologists and referring physicians in Florida that some of the larger physician groups had to hire new full-time employees just to handle the administrative burden of the BeaconLBS program,” he added.

“So, in effect, BeaconLBS will be paying physicians and pathologists in Texas less but will be asking us to do more,” the pathologist explained. “Basically, UHC and BeaconLBS are increasing the cost of care. What’s strange about this program is that everything UHC claims BeaconLBS will achieve seems possible by simply using their network-contracting process.

Quality Standards For Labs

“UHC says it wants to steer lab tests to labs that meet certain quality standards. For example, labs must be inspected by the College of American Pathologists or by The Joint Commission, and pathologists must be board-certified in subspecialties or have provisions for secondary pathology review,” he said. “UHC could require these quality standards of every contracted laboratory without using BeaconLBS.

“But, in addition, UHC officials said in-network labs also must meet certain efficiency standards, explained as accepting reimbursement in the bottom quartile of the network for their place of service,” noted the pathologist.

“In other words, if you are an independent lab, you’ve got to be in the bottom 25% of reimbursements for independent labs,” he said. “And, if you are a hospital lab, you’ve got to be in the bottom quartile for hospital labs; if you are a physician lab, you’ve got to be in the bottom quartile for physician labs.

“If lower cost is UHC’s goal, why is BeaconLBS necessary?” the pathologist asked. “Laboratories are price takers. Couldn’t UHC refuse to contract with labs at higher rates? If quality is UHC’s goal, why is BeaconLBS necessary? Couldn’t UHC refuse to contract with labs that do not meet its quality standards?

“It seems that the only real purpose for BeaconLBS is to create a barrier that makes it more difficult for physicians to order tests their patients need, and more difficult for pathologists to get paid for work they perform,” he added.

Take It or Leave It Terms

“In simple terms, UnitedHealthcare, LabCorp, and BeaconLBS have established a network within their own network,” he commented. “When you think about it, it’s a brilliant strategy. UHC has enlisted laboratories to do their (UHC’s, LabCorp’s, BeaconLBS’) work of driving down lab reimbursements.

“If my lab is in the 30th percentile for reimbursement and I want to be a lab of choice, then I have to go to UHC and renegotiate my contract,” he continued, “and accept a lower rate.

“So, now my lab might be in the 25th percentile or lower, but what have I done?” he asked. “I’ve just kicked some other lab higher up the price percentile curve, which means that lab may no longer be a lab of choice.

“That’s what I mean about how labs might cannibalize each other,” he explained. “It will be a dive to the bottom for lab fees in Texas—at least that’s what UHC, LabCorp, and BeaconLBS seem to want.

“Will it happen that way?” he asked. “Only time will tell. But in its effort to pay less for clinical lab tests, UnitedHealthcare is adding a whole new unnecessary layer of bureaucracy that only increases the total cost of care for everyone in Texas.”


Texas Pathologists Comment On Issues with BeaconLBS

TO INFORM ITS MEMBERS ABOUT THE ISSUES associated with UnitedHealthcare’s laboratory benefit management program that is coming to Texas on Jan. 1, 2017, the Texas Society of Pathologists posted two letters on its website.

In a letter to his colleagues, TSP president Kevin Homer, MD, wrote, “The TSP finds many facets of this program disturbing, not the least of which is the appearance of a significant conflict of interest. BeaconLBS is a wholly-owned subsidiary of LabCorp, and, not surprisingly, all LabCorp owned laboratories are ‘labs of choice.’ Although Beacon claims that program participation is open to all labs meeting its quality and cost standards, not many non-LabCorp labs make the preferred list.”

Another issue is UHC’s compliance mechanism. Homer wrote that, “If the referring physician fails to complete the online advance notification, the laboratory does not get paid for testing. Even if the testing is appropriate. Even if the laboratory has a contract with UHC to perform the testing. Even if the laboratory submits a ‘clean claim’ to UHC. Payment will be denied for an omission that is entirely out of the laboratory’s control. UHC expects the laboratory to enforce compliance with Beacon by hounding referring physicians to complete the Beacon submission, but compliance may not really matter to UHC. Either the referring physician complies with the program and the test is sent to the lowest cost laboratory, or UHC denies payment [to the lab] for testing. UHC may not object to either outcome.”


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