Quest Diagnostics Tuesday announced that it is outsourcing its revenue-cycle services to Optum, a giant UnitedHealth Group subsidiary, to reduce costs and improve cost transparency to customers.
As part of the deal, Optum will become Quest's primary vendor for member biometric screening services that Optum provides to employers and health plans.
A biometric screening measures a person's height, weight, body mass index, blood pressure, blood cholesterol, blood glucose and aerobic fitness at a worksite to advise employees on wellness and track their health over time.
Quest's 2,400 revenue-cycle employees are being hired by Optum, the companies said in a release Tuesday.
Quest CEO Steve Rusckowski said the partnership “advances Quest's top strategic priorities to accelerate growth and drive operational efficiencies.”
“Optum's investments and technology tools combined with Quest's own deep lab industry expertise will improve the patient experience by reducing complexity in the healthcare billing process and improving access to quality diagnostic information services,” Rusckowski said.
Revenue-cycle management is a crucial department for healthcare providers. It uses software to register patients, authorize insurance payments, send bills, finance payments and collect debts that are not in arrears more than 120 days.
Quest is a leading provider of diagnostic health data. On second-quarter revenue of $1.91 billion, the company posted net income of $195 million, or $1.37 per share, compared with net income of $118 million, or 81 cents, in the year-earlier quarter.
The Optum deal, through its Optum360 revenue-cycle business, is another step on Quest's multiyear journey to cut costs and increase revenue through an initiative called Invigorate.
In a note to investors Tuesday, Barclays said the Optum plan furthers Quest's goals “to streamline billing and improve bad debt beyond what it thought it could do internally.”
Quest also said it was optimistic that its data put into Optum's data-analysis tools would provide customers of both Quest and Optum with greater visibility into diagnostic costs.
Since Quest launched the Invigorate program in 2012, the company has targeted annual cost savings of between $200 million and $250 million annually, Barclays said.
Given Quest's size with annual sales projected in 2016 of about $7.5 billion, the Quest deal is expected to yield revenue-cycle revenue for Optum360 of between $135 million and $225 million annually, according to a note Tuesday by securities firm Susquehanna International Group.
That volume should not have a material effect on the earnings of UnitedHealth, the nation's largest health carrier, the note said.