| R. Lewis Dark:
Blood Brothers Prepare to Go to the Mat
LIKE
MANY OFYOU, I WAS STARTLED BY THE NEWS that UnitedHealth
Group, Inc. was willing to cut Quest Diagnostics
Incorporated out of the health insurer’s national
contract for laboratory testing services. After all, there are many
reasons, like economies of scale, why these two companies should
be mutually interested in perpetuating their business relationship.
Nonetheless, it is now an announced fact that, as of January 1,
2007, Laboratory Corporation of America will be
the sole national contract
provider for UnitedHealth. As that date arrives, it will be a high-stakes
game for all three parties. Quest Diagnostics has acknowledged that
the
UnitedHealth business is about 7%, or $385 million, of its $5.5
billion
revenue. That business is going to be vigorously contested.
For its part, LabCorp has told Wall Street that it must spend more
than
$35 million in additional expenses and capital to put infrastructure
into
markets where UnitedHealth has beneficiaries and LabCorp has inadequate
resources. Further, for it to benefit financially from its new national
contract, LabCorp must convince large numbers of physicians who
currently use Quest Diagnostics for their UnitedHealth patients
to redirect those specimens away from Quest and over to LabCorp.
If you ask me, we are about to see one of the most interesting business
battles between commercial lab firms since the 1980s. LabCorp has
the challenge of executing its business strategy. It must swiftly
build patient service centers and rapid response labs in communities
where it currently has little presence. It must hire additional
sales reps to call on physicians and convince them to switch. LabCorp
must also create regional laboratory networks in selected areas
and develop collaborative
relationships with local labs in other markets.
Meanwhile, Quest Diagnostics will be doing everything in its power
to retain these physicians as clients. Its sales reps will aggressively
work to retain the status quo. Quest Diagnsotics is also likely
to experiment with some unexpected strategies and tactics to retain
this business.
Finally, I predict that there will be more at stake than several
hundred million dollars per year of lab testing business. This battle
will be over corporate honor. Given human nature, employees at both
firms are likely to make this a personal grudge match.
United
Health: Quest Is " Out"—LabCorp Is "In"
UnitedHealth
upends status quo and opts to use LabCorp exclusively
CEO
SUMMARY: Effective on January 1, 2007, UnitedHealth Group will have
one national contract laboratory. On that date, Laboratory Corporation
of America becomes the preferred provider and Quest Diagnostics
Incorporated becomes an out-of-network laboratory. With access to
34 million UnitedHealth beneficiaries at stake, competition is likely
to intensify between these two lab companies.
Evolving
Strategy Guides American Esoteric Labs
An
opportunistic AEL is acquiring strong, local routine testing lab
companies
CEO
SUMMARY: Back in April 2004, when American Esoteric Laboratories,
Inc. (AEL) launched operations, its declared ambition was to become
a national esoteric testing firm. However, given the positive experiences
from its acquisition of Memphis Pathology Laboratories in September
2004, AEL has evolved its core business strategy to include routine
testing and to focus on regional hospital and physician office opportunities.
News
Interview: LabCorp Exec Discusses Reasons Behind Its 10-Year Pact
with United
LabCorp’s
new CEO and executive team offer perspectives on lab industry trendss
CEO
SUMMARY: It was unprecedented when UnitedHealth Group announced
an exclusive, 10-year laboratory testing services agreement with
Laboratory Corporation of America Holdings. This is a high-stakes
development for both companies. To learn more about the motivations
and goals that encouraged UnitedHealth and LabCorp to partner up
in this fashion, THE DARK REPORT spoke with Bradford T. Smith, LabCorp's
Executive Vice President for Corporate Affairs. Two key objectives
are to lower UnitedHealth's cost of laboratory testing and to reduce
leakage. Several subtle goals align the interests of both parties.
Among them is a mutual interest in developing more standardized
laboratory test data and using that information to support efforts
in disease management and evidence-based medicine. The interview
was conducted by Robert L. Michel, Editor-In-Chief of THE DARK REPORT.
Lab
Management Trends:New Book Offers Guidance About Management of POCT
Authors
connect and integrate the trend of quality management systems with
POCT
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