Thursday, October 05, 2006

Quest Diagnostics and United Healthcare

After many long months of negotiations with United Healthcare, Quest made a business decision to walk away from the table because the last minute terms which United demanded of Quest were deemed by Quest Diagnostics to be bad business. Quest Diagnostic did not lose the contract.

Had the demands been accepted by Quest Diagnostics it would have impacted the entire industry negatively in the long run. Consider also that since it was deemed by Quest Diagnostics to be a bad business deal it stands to reason that Lab Corporation of America entered into a long term bad deal which will hurt the bottom line of Lab Corp.

Quest Diagnostics will prevail in re-establishing any lost market volume due to that fact that the entire company stands behind the leadership of the executive. Consider also that it is likely that the sheer volume of the conversion logistics will prevent Lab Corp. from making a smooth transition. That will impact negatively upon the overall image of Lab Corp.

As of now as it stands Quest Diagnostics still holds a valid contract with United Healthcare until 2007. After that it is still possible that Quest Diagnostics will still retain some of the volume due to actions which will make it possible for clients to direct the work out of network to Quest Diagnostics.

Lab Corp. as a part of the new contract had to protect United Healthcare from any possible financial loss due to “leakage” to the tune of $200,000,000.00 and that is something which Lab Corp. will have to assume as potential capital loss.

Quest Diagnostics is the biggest player on the street and is not going to roll over and die. At this moment D.G.X. is a great buy! Don’t write them off over one contract. The situation is always fluid and things change. And that is how Snake Oil Sam spins it. Keep your eye on the prize.
Snake Oil Sam
Snake Oil Sam Internet Media Publishing © 2006

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