COUNTY OF SAN MATEO

Inter-Departmental Correspondence

San Mateo Medical Center

 

DATE:

July 18, 2003

BOARD MEETING DATE:

August 5, 2003

 

TO:

Honorable Board of Supervisors

FROM:

Nancy J. Steiger, Chief Executive Officer

 

SUBJECT:

Amendment to the Agreement with Unilab Corporation and Quest Diagnostics,Inc. and Agreement with Unilab Corporation, now a part of Quest Diagnostics, Inc.

 

Recommendation

Adopt a resolution:

1)

authorizing the President of the Board to execute amendments to the agreements with Quest Diagnostics and Unilab Corporation for the processing of laboratory specimens referred by the San Mateo Medical Center (SMMC) Laboratory

2)

waiving the equal benefits compliance ordinance to contract with Unilab, now a part of Quest Diagnostics

3)

authorizing the President of the Board to execute an agreement with Unilab Corporation, now a part of Quest Diagnostics, Inc. for the processing of laboratory specimens referred by the SMMC Laboratory.

   

Background

The SMMC Laboratory contracts with independent laboratories to perform lab tests which are not performed at SMMC because of the specialized and expensive equipment required. In the past, SMMC contracted with all laboratories that provide these special tests, allowing the hospital to be able to refer a specimen to the laboratory which charges the lowest fee for a given test. These lab tests were reimbursed depending on the patient's coverage.

 

On July 25, 2000, your Board approved agreements with Unilab Corporation and Quest Diagnostics under a single resolution for a maximum of $544,000 for both agreements for the term of March 1, 2000 through February 29, 2003. The agreements include a provision for rate increases not to exceed 3% annually

 

In July 2000 Abbot Laboratories, who provided the Medical Center with an analyzer for performing HgbAIC tests to determine sugar level on diabetic patients over the 12-day period, notified SMMC that their equipment did not meet FDA quality assurance standards. This situation made it necessary to resume sending HgbAIC testing to Unilab for seven months, through January 2003, at which time a new system from Biorad was implemented making it possible to bring this testing back to the Medical Center.

 

The initiation of a Hepatitis Clinic on May 1, 2002, further increased the cost of laboratory testing. These tests are currently being provided by Quest or Unilab and performed out of state. SMMC currently averages 165 panels per month compared to 75 per month a year ago.

 

In July 2002, North County, South San Francisco Clinic and Daly City Youth Clinics terminated their Contract with Quest for lab services. As part of the cost saving initiative, they began sending their lab work to SMMC Laboratory to process 95% of the testing. The other 5% of the lab work that could not be processed at SMMC was sent to Unilab.

 

Discussion

All these situations including the elimination of reference laboratory services from Abbott and Blood Centers of the Pacific, have contributed to the increase in the cost of services provided by Unilab by over 300% this last year. The monthly usage of reference lab services increased by 27% from 1999 to 2000 and 10% since 2000. The unanticipated cost of these services during the period July 2002 through January 2003 consequently depleted the maximum amount of the agreements.

 

These amendments increase the maximum amount of the agreement and incorporate HIPAA language to the agreements.

 

In January 2003, a Request for Proposals (RFP) process was developed and sent to four reference laboratories. Arup, LabCorp, Unilab, and Quest, responded to this RFP. Selection criteria included service, program costs, turn around time, and information systems interface. Quest Diagnostics, Inc. who proposed the lowest rate per test, merged with Unilab in February. As part of this reorganization, Quest proposed to upgrade their information system and move hospitals from Unilab to the Quest sites. A substantial number of tests will be rebuilt into the present systems and subsequently rebuilt into the upgrade. Due to this transition, it is beneficial to contract with Unilab until the upgrade is implemented. Unilab has agreed to honor Quest pricing for the term of the agreement.

 

SMMC is requesting a waiver of the Equal Benefits Compliance for Unilab Corporation because Unilab's benefits currently do not extend to domestic partners. Unilab has recently been bought by Quest and is going through a reorganization. Unilab's benefit package has already been negotiated for the year 2003. In the fall of 2003, Unilab will negotiate with its benefits providers a benefit package to include domestic partners.

 
 

County Counsel and Risk Management have approved the terms and conditions of the amendments and the agreement.

 

Vision Alignment

These agreements keep the commitment to Ensure Basic Health and Safety for All and goal number 5: Provide residents access to healthcare and preventive care. The Agreements contribute to this commitment and goal by continuing to provide laboratory services to county patients.

 

Fiscal Impact

The term of the agreements with Quest Diagnostics and Unilab Corporation remain the same, March 1, 2000 through February 29, 2003. The maximum amount the County shall be obligated to pay the Contractors is increased by $167,000 from $944,000 to $1,111,000. Funds to cover this cost have been included in the FY2002-2003 Adopted Budget. SMMC Laboratory staff will continue to evaluate bringing high volume tests in-house.

 

The term of the new agreement with Unilab Corporation, now a part of Quest Diagnostics, is March 1, 2003 through February 28, 2006. The maximum amount the County shall be obligated to pay the Contractor is $1,040,688. FY2003-04 Adopted Budgets and funds will be included in future budget request.

 

Exhibit A

1.

General Description of RFP

To provide a full service reference laboratory testing to San Mateo Medical Center Laboratory Department

2.

List key evaluation criteria

Service, program costs, turn around time, information system interface

3.

Where advertised

No advertised. A list of vendors was provided by the Laboratory

4.

In addition to any advertisement, list others to whom RFP was sent

Unilab Corporation

Quest Diagnostics Inc.

Associated Regional and University Pathologists, Inc. (ARUP)

Labcorp

5.

Total number sent to prospective proposers

4

6.

Number of proposals received

4

7.

Who evaluated the proposals

Laboratory management team and Materials Management

8.

In alphabetical order, names of proposers (or finalists, if applicable) and location

1. ARUP

500 Chipeta Way

Salt Lake City, Utah 84108

2. LabCorp

5601 Oberlin Drive

San Diego, CA 92121

3. Quest Diagnostics Incorporated

6511 Golden Gate Drive

Dublin, CA 94568-2907

4. Unilab Corporation

967 Mabury Road

San Jose, CA 95133