LabCorp loses 2019 Horizon BCBSNJ exclusivity as Quest enters the fray

Dive Brief:

Horizon Blue Cross Blue Shield of New Jersey (BCBSNJ) is set to add Quest Diagnostics to its laboratory network in 2019, ending its long-running exclusive relationship with LabCorp.
LabCorp will remain the exclusive in-network clinical laboratory for Horizon BCBSNJ's 900,000 Medicaid members, but will share the insurer's other 2.8 million members with Quest and, in some cases, BioReference Laboratories in the coming year.
News of LabCorp's loss of exclusivity comes six months after Aetna and UnitedHealth signed deals to expand their laboratory networks beyond the single providers they used in the past.

Dive Insight:

Jan. 1 is shaping up to be an important day for the clinical laboratory sector. From the start of next year, LabCorp will lose its exclusive grip on United's business but gain access to Aetna. Quest will go through the same process in reverse, losing exclusivity with Aetna but gaining a chance to provide services to United's far larger customer base.

Now, Horizon BCBSNJ has added a small subplot to the story. Having used LabCorp as its exclusive in-network national clinical laboratory services provider for more than 20 years, the insurer has decided to expand its network.

From Jan. 1 on, LabCorp and Quest will both provide services to members of the Horizon Managed Care Network. The two rival labs and New Jersey's BioReference Laboratories will also have access to members of the Horizon PPO network. LabCorp was previously the sole national laboratory for Horizon PPO and Traditional members.

While LabCorp will retain an exclusive contract covering Horizon's 900,000 Medicaid members, it will have to share the larger portion of the insurer's customer base. Quest said the agreement will give it access to 2.8 million members of Horizon BCBSNJ.

The numbers involved are far smaller than in the deals with Aetna and United, which have around 22 million and 48 million members, respectively. However, Horizon BCBSNJ's move away from the sole provider model after more than 20 years nonetheless provides further evidence of a shift in how insurers are approaching clinical testing. Horizon BCBSNJ framed the expansion of its network as a way to "increase members' access to quality care."

For LabCorp, Horizon BCBSNJ's decision opens another competitive front at a time when Quest is gunning for its United business. LabCorp CEO David King discussed the competitive dynamics unleashed by the revised United deal on a conference call with investors last month.

"My sense from the market ... is that our competitor has been aggressively targeting our accounts where we have United business. ... It's no secret that we're the two largest [labs]. So, if you're looking to gain volume with a contract change, where are you going to go? You're going to go to the largest target. And we have the largest share of United business. So it certainly seems natural to me that our competitors is targeting our accounts," King said.

LabCorp expects to lose more business than it wins as a result of the revised Aetna and United deals, causing King to warn investors about the stiff headwinds the company will face in 2019. The Horizon BCBSNJ change may make the headwinds a fraction stiffer still.