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Impact of UnitedHealthcare Dx Provider Program Muted So Far, but Labs See Pricing Pressure Ahead


NEW YORK – The clinical laboratory business has yet to feel significant impacts from UnitedHealthcare's Designated Diagnostic Provider (DDP) program, but many labs expect the insurer will use it going forward to exert downward pressure on pricing.

Rolled out at the beginning of the year, the DDP program lets UHC members reduce their out-of-pocket costs by choosing to have their tests run at DDP-participating facilities. DDP participating laboratories must meet various requirements, including accreditation from multiple industry organizations (such as the College of American Pathologists or the Joint Commission) as well as benchmarks for patient wait time and test turnaround times.

Thus far, UHC has launched the program in 21 states with implementation subject to the approval of state insurance regulators.

The program is similar to the insurer's Preferred Laboratory Network program, which similarly incentivizes patients to use participating labs by reducing out-of-pocket costs. The DDP program is focused on hospital outpatient and small independent labs, whereas PLN participants are primarily large national laboratories. The PLN currently includes 10 participating labs — AmeriPath, BioReference Laboratories, Clinical Pathology Laboratories, GeneDx, Invitae, Laboratory Corporation of America, Mayo Clinical Laboratories, Millennium Health, NeoGenomics, and Quest Diagnostics.

Scott Becker, senior director, national network programs at UHC, said the programs could be viewed as a pair of concentric circles, with the PLN at the center as "the highest bar when it comes to quality and cost criteria as well as service standards and member experience," and the DDP as an effort designed to expand that basic model to a broader range of labs.

He said that the criteria required for labs to participate in the DDP is a "subset of the expanded criteria that we ask for the Preferred Lab Network." For instance, Becker noted, the DDP's requirements around service and data security standards are less stringent than those required for participation in the PLN.

Both programs essentially create separate, smaller networks of labs within the overall set of UHC's in-network labs.

UHC had originally planned to make participation in the DDP program a requirement for covering lab services, effectively making in-network labs without DDP status out-of-network. This drew pushback from a number of organizations representing labs and other potentially impacted facilities (like imaging providers). For instance, in June of last year, the National Independent Laboratory Association (NILA) and the American Hospital Association (AHA) wrote a joint letter to the National Association of Insurance Commissioners asking that the NAIC oppose implementation of the program.

The NILA and AHA letter noted that under the DDP program, UHC "would effectively eliminate coverage for diagnostic tests at all independent and hospital laboratories, including those within its network, unless the facilities agree to participate in the DDP program." The organizations expressed concerns that this could limit access to testing and "confuse patients whose claims for laboratory services may be denied despite being conducted by an in-network provider." The College of American Pathologists (CAP) also expressed concern about the program.

UHC backed away from this initial version of the program, revising it to its current form where members will incur lower out-of-pocket costs when using DDP labs.

Jamie Walker, VP of ancillary network affordability at UHC, said this change was made "recognizing that from a consumer experience and engagement perspective, a tiered benefit design, at least at this point in time, is a better experience for members."

Healthcare providers have continued to express opposition to the revised version of the program. In January, CAP and six other provider organizations issued a letter to UHC asking the insurer to scrap the initiative, arguing that it would prove confusing for patients and could disrupt existing relationships between physicians and laboratories. The letter noted that the program would have a negative impact on smaller, independent laboratories and pathology groups, in particular.

Ann Lambrix, VP of revenue cycle management at lab consulting firm Lighthouse Lab Services, suggested that this was by design.

"I think it's really a push to try to remove these smaller, independent laboratories," she said, noting that such labs typically have higher prices than large national labs.

"You can partner with a Labcorp or Quest and their contracts may be significantly less than Medicare, and they are able to do that simply because they are doing more volume," Lambrix said. "Payors are looking to basically save money and push out the higher-cost labs."

The DDP program doesn't do this explicitly, but by, for instance, requiring that labs have accreditation from more than one certifying organization, it establishes criteria that could weed out smaller labs that are likely higher cost.

"UHC is pushing out the small guy that may not have both CAP and [Joint Commission] certification," Lambrix said. Such labs "may not see the need and wanted to cover the cost of being CAP certified, because it's not required. The bigger labs are able to [cover the cost], so they probably are CAP certified and [Joint Commission] certified."

While provider organizations have raised concerns that the DDP program could limit patient access to services, UHC's Walker said that over 98 percent of the insurer's members have access to a DDP participating lab.

By and large, her lab clients have not had trouble scoring acceptance to the DDP program, Lambrix said, noting that one client had not been able to because they were not CAP certified.

"He's a small, little regional lab, and his discussion around it is, 'Is it worth it to me to be CAP certified,' because there is an expense to that," she said.

The DDP program "is more just an irritation [for labs] at this point," Lambrix said. She added, though, that she believed that in the long term UHC would use the program to drive down pricing at smaller independent and hospital outreach labs.

"If I'm UnitedHealthcare, my first goal is to get everyone on the DDP program, get patients going to my designated diagnostic providers. And then my next step would be aligning all of my DDPs into a common fee schedule," she said. "What we'll probably see in the next couple of years is UHC will reach out to all of these DDPs and say, 'Here's our fee schedule. Take it or leave it.'"

Walker maintained that UHC's "cost conversation" is "based on a hospital-by-hospital basis." She said the insurer has pricing goals "we are seeking to achieve, but we do have conversations that are based on the specific requirements of the hospital in certain situations."