As an international clinical laboratory, LabCorp’s network performs a comprehensive range of clinical analyses—from basic blood to complex genetic and oncology tests—on more than 470,000 patient specimens each day. Its general counsel, Sandy Van der Vaart, assesses partnership opportunities, measures the business terms to be included in contracts, and considers applicable federal or state laws.
LabCorp’s customers include health plans, physicians, hospitals, employers, military and law enforcement, and biotechnology and pharmaceutical companies. LabCorp forges partnerships with these entities to provide high-quality testing services to their members and reduce costs. Van der Vaart and her legal team determine what needs to be included in a partnership proposal and what can be addressed later in a contract. In crafting the proposal, Van der Vaart points out that it is imperative to understand the terms most critical to the company, what aspects are important to the other party, and the time frame involved. That last consideration can impact the way she and her team approach their work. Sometimes, meeting a partnership rollout deadline requires fast-tracking. In those situations, Van der Vaart practices flexibility to balance deadlines and due diligence.
Prioritize the Work
Van der Vaart makes sure her team can provide all the legal support that is needed by optimizing workload allocation, pulling in outside counsel as necessary, and putting other matters on the back burner if they are not as time-sensitive. She has a prioritization system for legal matters that come into the law department from the business units to determine which matters are most time-sensitive.
To avoid overlooking any day-to-day responsibilities, Van der Vaart says both internal and external communication is key. “Others in the company will know that we just completed a big transaction and that legal and other personnel will be focused on implementation,” she explains. “They’ll understand that responses may take a little longer than usual, but we want to make sure folks know how to escalate requests that really need prompt attention.” Communication with the outside customer (a health plan, for example) is important, as well. “They will want regular updates and can help progress by visiting provider offices to answer questions and address any concerns.”
LabCorp does not often have more than one national partnership deal in the works at the same time, but on a regional level, it’s more common. In those cases, Van der Vaart says it’s really a matter of looking at time lines and resources. Her legal team of 48 includes 19 attorneys who specialize in various areas, including one who focuses on IT to handle the company’s proprietary tech solutions. “That’s why we try to have several attorneys who work on various types of matters and outside attorneys available to provide overflow capacity,” she says.
Trim the Fat
When a deal needs to be fast-tracked, Van der Vaart and her team will off-load routine matters and tasks that aren’t part of implementation, including other types of contracts that outside counsel have reviewed in the past. But anything related to implementation is best kept in-house to achieve the fastest decisions, Van der Vaart says.
However, not everything can be rushed. For example, if Van der Vaart and her team are asked to share information that poses a privacy issue, they must thoroughly review that and ensure it can be shared under state and federal law. “We just can’t compromise that,” she stresses. In terms of business issues, Van der Vaart adds that taking unnecessary financial risks must also be avoided, regardless of time pressures.
Yet there are certain trade-offs that are unavoidable. For instance, when the company needs to establish a large number of patient service centers in a short period of time, some of the leases for those centers may end up with less-favorable terms (e.g., a higher rate of increase at renewal or longer termination notice provisions) than would typically be negotiated. For patient service center sites, which are much smaller sites than the company’s laboratory facilities, location is critical.
“If we really need a patient service center in a certain location,” Van der Vaart says, “we may just agree to the landlord’s terms because getting the lease signed and the patient service center open are so important to meeting our customer commitments.”
Because health plans often enroll new members in the fall with coverage starting in January, health-plan contracts generally must be in place by August or September. “We know on our side that if we don’t get that contract done by then, we may not get that deal,” Van der Vaart says. She and her team focus on the critical points of the contract.
Tighten Up
Once the contract is signed, the legal team turns its attention to other agreements needed for implementation, such as leases for patient service center sites and agreements with physicians. LabCorp’s agreements with its health-plan customers are multiyear contracts. Most will include a process for working through any issues that come up, such as new test offerings that were not included in the original agreement. That can be addressed through a predetermined formula for calculating the fee for a new test or through a predetermined negotiation process to reach agreement on the test fee.
