Commercial insurers aim to lower lab reimbursements with pre-authorization programs

January 12, 2017

Laboratory pre-authorization or “management” programs are controversial models that have gained prominence in recent years after being implemented in Florida by UnitedHealthcare in Oct. 2014 as part of a partnership with Beacon Laboratory Benefit Solutions (a subsidiary of LabCorp). The primary goal of these programs is to ensure health care providers within a particular state only use labs within a carrier’s “choice network” when ordering certain outpatient lab services for members of that network. Under these rules, the use of out-of-network labs is not permitted. These programs have been largely opposed by physicians in states where they’ve been put into effect, given that these doctors believe this practice causes unnecessary delays for patient treatment, and creates unnecessary obstacles for physicians ordering tests.

Some doctors also believe these hurdles damage longstanding clinical relationships between physicians and their preferred labs. It also means that patients who may have been frequenting their doctor’s preferred labs now have to go to one of a handful of in-network labs.

Receiving a “lab of choice” designation under these programs typically depends on meeting certain “quality” standards (e.g., CAP or TJC Accreditation, secondary pathology reviews or sub-specialty credentials) and “efficiency” standards. Under UHC’s program, standards include accepting UHC payments in the lowest quartile for the lab’s place of service classification (independent lab, outpatient hospital lab, or physician office lab).

Since Beacon’s implementation in Florida, a couple commercial carriers in other states have followed suit and implemented their own authorization lab programs. Although they don’t all function in the exact same fashion, they each serve the purpose of funneling work to carriers’ preferred labs while alienating labs that choose not to play ball. Let’s take a quick look at some of the major players.

Beacon Laboratory Benefit Solutions (LBS)

  • Pre-authorization program first implemented as a pilot in Oct. 2014.
  • Under the program, physicians serving UHC’s commercial patients in Florida must notify UHC when ordering any of 80 clinical laboratory tests, including ANA, C. difficile toxins, Pap test (with or without HPV), biopsies, and thyroid panel, among others. Pre-authorization is also required for some, but not all of these tests.
  • The program has been largely opposed by Florida physicians, who believe it causes unnecessary delays for patient treatment, and create unnecessary obstacles for physicians ordering tests.
  • An in-network lab that is not a “Lab of Choice” may be chosen by the ordering physician, but Beacon’s system creates barriers to this selection. The physician must navigate to another screen and will be presented alerts warning that “reimbursement may be impacted.”
  • The program does not allow use of out-of-network laboratories.
  • Payments are denied for any lab tests that don’t meet the Beacon requirements, however there is no penalty to referring physicians who do not comply with the program. UHC expects laboratories to enforce compliance by pressuring referring physicians to complete the notification process when required.
  • Anecdotal evidence from Florida indicates referring physicians are frequently non-compliant, and that laboratories are simply not being paid for testing performed on UHC patients in those cases
  • UHC is Florida’s second largest health insurer with approximately a 14 percent share of the market.
  • Was originally slate to be implemented in Texas on March 1, 2017, however, pushback from various physician groups has delayed that implementation indefinitely.

Avalon Healthcare Solutions

eviCore Healthcare


Given that these carriers have not publicly provided data regarding the overall success of these program’s ability to control costs for consumers, it’s difficult to say whether they are meeting their intended goals of providing higher quality at a lower cost. However, it should be noted that cost alone should not drive health care choices independent of quality. Many physicians are claiming these programs ignore the negative consequences they’ve created for doctors and quality of care.

The fact of the matter is these programs essentially just create more avenues for carriers to deny claims for your services if you’re not selected to be in their club of preferred networks that have likely accepted anemic rates for this privilege. Unfortunately, you should expect more carriers in other states to establish their own pre-authorization programs in the very near future.

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