Lab wars: Doctors caught in the middle

Quest Diagnostics and Laboratory Corp. of America are pulling out all stops to stay at the top of the independent clinical lab market. And if physicians get annoyed along the way -- well, business is business.

By Bob Cook, AMNews staff. June 11, 2007.

When Laboratory Corp. of America announced last fall that it had signed a 10-year deal to be the exclusive national clinical lab for UnitedHealth Group, it was the shot heard 'round the independent lab world.

Physicians not only heard the shot, but with United instituting the threat of fines for physicians who refer patients to LabCorp rival Quest Diagnostics, they also felt collateral damage.

Doctors might need to be ready for more shrapnel, because the battle between No. 1 Quest and No. 2 LabCorp -- which together dominate the independent lab business -- is just getting started.

Analysts expect more exclusive deals between the national labs and national health plans as the labs fight for more business and as the plans fight for lower costs. In fact, one deal -- between Quest and Aetna -- is set to get started July 1.

Analysts also expect Quest and LabCorp to continue acquiring other lab companies, particularly those engaged in the more profitable genomic and esoteric testing that is economically unfeasible for smaller hospital and office labs.

So perhaps the more accurate statement is that the Quest-LabCorp battle is getting re-started.

The two companies have fought to control the lion's share of the independent lab business for the last 10 years, ever since Lyndhurst, N.J.-based Quest was spun off from Corning Corp., and two smaller labs merged into Burlington, N.C.-based LabCorp. Getting exclusive deals with health plans is one key way for Quest and LabCorp to assert their power in the marketplace.