Monday, November 13, 2006

A Perspective on Quest Diagnostics Future Business Strategy

People who have been following Quest Diagnostics and the issue of United Healthcare, and their no longer being under contract with Quest Diagnostics as of January 1, 2007 may be concerned about how this will affect the stature of Quest Diagnostics. To be clear, as of the publication date of this editorial comment Quest Diagnostics is still the contracted provider under the current contract. The specific contract remains in effect until the end of this calendar year 2006.

It is clear that Quest Diagnostics is not simply going to settle for less volume of business as much as they are able to control any loss due to this situation. You can be certain that the legal and business sectors of Quest Diagnostics have been hard at work, tirelessly checking all statutes and regulations affecting this matter on a State by State level.

Consider that any company which desires to remain competitive will not be idle while business slips away. Quest Diagnostics has, through much hard work and future vision at the hands of Dr. Surya N. Mohapatra Ph.D., in conjunction with the past efforts of former Quest C.E.O. Kenneth Freeman built the company into the preeminent provider of medical diagnostic testing services.

The issue of any contracts with Lab Corporation of America starting in 2007 does not necessarily rule out Quest Diagnostics as continuing to be the laboratory of client choice. Wherever laws permit, the actions of Quest Diagnostics will, I believe, be to match the contracted pricing arrangement negotiated between United Healthcare and Lab Corporation of America.

If in fact Quest Diagnostics is able to continue to provide service to the medical community and their patients without causing any undue expense to the patient then you can be certain that Quest Diagnostics will provide such service to the community. Even if it costs the patient a small amount to go out-of-network it is not an unthinkable situation that patients who have come to rely on and trust Quest Diagnostics might take that route.

The contract between United Healthcare and Lab Corp. has, as I understand it, been written in such a way as to protect United from loss caused by leakage to other laboratories. Yes, the executives of United Healthcare had the foresight to recognize that Lab Corp. might not be able to maintain the degree of performance required to retain all of the volume of business undertaken by Quest Diagnostics.

Realizing that they stood to lose a substantial amount of money in giving the business to Lab Corp. the executives at United Healthcare shielded that concern from such loss electing to lay off any accountability to the stock holders of Lab Corp. The contract makes Lab Corp accountable for as much as $200,000,000.00 of potential business redirects of specimen flow out-of-network.

With that little fact in mind I believe that it is the intention of the executive staff of Quest Diagnostics along with the work of their sales staff and the logistical support of the entire Quest Diagnostics family to have as much of that honey pot as is available. And since the amount of the original contract is far greater than that small amount of $200,000,000.00 it would seem to me, Snake Oil Sam that the remainder of any leakage would come from the source of the insurance provider, United Healthcare. That is the way I view the matter.

When you play in the big leagues you play with a big bat and a hardball. And the industry of diagnostic testing is a major league game. Out there is the glory of the win. When you play in such a game you play by the rules. But as in any fair game the rules never favor any one team. The only way that you can win is by thinking smart and being the best team. Quest Diagnostics is in this game to be the best team.

The contract with United was not lost as some have suggested. It was the decision of Dr. Mohapatra to walk away from the table as I stated in
another article on this subject. In the words of Surya Mohapatra to all 42,000 employees of Quest Diagnostics “If we had accepted the terms and conditions that United was proposing, I firmly believe that we would have damaged not only Quest Diagnostics but also our entire industry.”

Quest Diagnostics has recently launched a media campaign in major U.S. markets in an effort to develop strong name recognition within the community. The campaign is structured in such a way as to help the public understand that they do have choices in their healthcare. It also suggests that people understand that they should make certain that when selecting health insurance that the insurance company has contractual agreement with Quest Diagnostics.

When it comes to matter of business no company will be passive and remain competitive. Quest Diagnostics is no different in that aspect. Quest Diagnostics has created a website in order to give people a good overview of the company and why it is beneficial to the client to select Quest Diagnostics as the laboratory of choice.

That website can be found by going to
MYLABISQUEST.com and reviewing some of the important issues raised there. Quest Diagnostics will continue to grow with or without the business associated with this issue. It remains to be a leader in the medical industry and there is no reason to believe that is going to change.

Quest Diagnostics points out that it still has nearly six billion dollars in revenue from other business not related to United. Through the current efforts to retain as much of this business or through organic growth Quest Diagnostics will be there when the medical community needs them.
Snake Oil Sam
Snake Oil Sam Internet Media Publishing © 2006

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