DGX - Earnings call transcript Q4 2017 | Quest Diagnostics Incorporated

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Operator

Welcome to the Quest Diagnostics Fourth Quarter and Full-Year 2017 Conference Call. At the request of the company, this call is being recorded. The entire contents of the call, including the presentation and question-and-answer session that will follow are the copyrighted property of Quest Diagnostics with all rights reserved. Any redistribution, retransmission, or rebroadcast of this call in any form without the written consent of Quest Diagnostics is strictly prohibited. I'd now like to introduce Shawn Bevec, Executive Director of Investor Relations for Quest Diagnostics. please. ahead, Go

Shawn Bevec

good our and Mark am with here our Thank President, morning. and Rusckowski, Chairman, Financial and Chief Steve Chief you, Officer. I Executive Guinan, Officer;

we will call, During statements make measures. and this discuss may non-GAAP forward-looking

those and refer may this EPS, reported those differ refer adjusted materially reports and to, in include, XX-K, reports but XX-Q, may For amortization recent are report excluding our Risks and affect X-K. Quest EPS diluted future annual diluted adjusted from limited to most EPS reported uncertainties Diagnostics' and to expense. references results to not subsequently to on current described call, on Form that Form filed on EPS references quarterly Actual projected. results Form

included Investor XXXX on later site. a bridge will prepared Web our site have Relations of text available EPS the of The our today. be remarks adjusted quarter This the page on we

Rusckowski. Steve here's Now

Steve Rusckowski

by everyone you more on and Revenues a grew This results And Thanks, through the review guidance. today. progress Mark note Shawn, our us XXXX the thanks full-year on and and provide we will for for quarter strong then the and highlights X%. and you nearly year XXXX, joining EPS provide detail high a fourth our finished quarter. grew Reported grew on EPS X%. Well, XX%, strategy. take I'll morning delivering fourth adjusted

to we dividend good from operations a nearly are year. up than increasing reported by For This by more a I'm the the on by and provided increase an is basis, XX%. on on XX% Cash was equivalent revenues quarterly on adjusted seventh XXXX. basis, XXXX. reported X.X% XXXX, XX% EPS since basis XX% XXXX up basis. full-year up up our was were an a announce X.X% XXXX. versus pleased and was

Tax rates on we from said made, dynamics that XXXX, expect approximately be we to Reform. XXXX. like our the industry, what the of XXXX describe and I about and revenues two to schedule approximately PAMA we both PAMA I X% the a In significant impacting IP to in headwind. is clinical the have final talk the November, would of PAMA XX% progress represents in Before do and impact our

trade you have supported that to As by market-based we in from work December, secure follow congressional midyear. services, we continue lawsuits with directive and fully our solution. a to meantime, charging failed the from know, Medicaid laboratory will incentives legislative and decision judge ACLA's we In association payment our Congress could a to believe implement system, Medicare to the a

rates, Quest to Now invested in turning corporate will people. beneficiary grow of our tax our us lower to tax earnings reform, per which significant and a share is business enable

adjusted those on tax into business will an million approximately savings tax We $XX $XXX and in we in realize people. With are savings, before reinvesting the our tax roughly XXXX. basis million

will all deliver of both and finally these service Some the experience our advanced and then, our touch innovations test, And new patient excellent configured through of include consumer patient MyQuest through services. bonus a to Investments growth online diagnostic initiatives consistently high centers. app, our to accelerating in as $XXX and things. company's a vital playing saying performance we will of pay This way role the up about of XX,XXX success. employees We're bonus XXXX. the based to in on be

all the our delivered we quarter. fourth elements turning growth. on five to strategy We the to made in Now progress of accelerate

New on of will acquisitions the medical York advanced further productive strengthen position strategic which laboratory, per of HeartLab, year announced our Cleveland first X% and builds grow our previously which acquisitions, shield had in through our to achieved strategy position fifth diagnostics metropolitan completed We the The year. X% quarter our to outlet We for which very accretive aligned we growth consecutive for marketplace. is M&A. and another

Our M&A health acquisition of Examination evidenced announced Mobile growth. delivering by pipeline related and Service this Medical is is risk very assessment and originally provider strategy leading of home-based national And services. our or strong, remains MedXM, a

acquisitions long-term to relationships M&A Medicare Under the our course and of will will realized our of Our health any we element XXXX of second enable offset in line acquisitions strategy, with us of in top hospitals rates. for to announced systems. growth continue X% earnings And to these expand the seven from exceed X% help XXXX. impact accretion growth objective new XXXX

and from by professional services XXXX, these that in Our operating more standardization, we and scale, innovation bring life grew to healthy the benefited double-digits revenues relationships. as hospitals delivered margin

on we rates their and increasing the is beyond hospital the excited rates. we third had face XXXX consolidation Medicare will as which access strategy, urgency are While for We screening. women's in number the our actions rates of prenatal that a the of pressure new making we about also of indicate lab be increased number rethinking innovation. are systems to Medicare to us, progress We've their element deliver continue took lower strategy. about broadest with to to later from diagnostic that gross C headwinds noninvasive be In hospital of a a offer believe conversations health, suits catalyst for in sense

growth test in double-digit Q-Natal Our enjoyed strong XXXX.

growth Hepatitis XXXX in posted tuberculosis testing, were in excess C growth which XXXX. monitoring prescription growth to drug of XX%, with double-digit of screening QuantiFERON contributors Our

also conjunction HeartLab excellence new We of advanced for Cleveland acquisitions and established the diagnostic with Fusion. precision in Med our cardiovascular for and oncology testing centers

locations from We in our XXXX; strong The satisfaction patient in for make our feedback early extremely growth opened element Florida, of Texas. to executing positive. of is six fourth strategy, surveys the be in and to one stores five continue We Wal-Mart is choice which provider in progress consumers. the

come with to to to in more services. professionalism easy customers phlebotomists the basic our expands Our the the appreciate all of of and The check-in provided as include noted healthcare done our XXXX in shop. collaboration There ease this where testing able being convenience enablement get surveys. of are their the they is Wal-Mart

keep you progress. our posted we'll on So

Safeway, XX relationship We're continues XXX in which down Our with second in stores expand. states. operating to is year now in

customers from positive our employees experience both feedback similar these We locations. on in and our have their

are powering to consumer results fifth data application, increase users. healthcare MyQuest the of more an of rapid our care X.X with and into X million strategy element extended is mobile This We hands is than health our also in million The of analytics with services. delivering now is nearly the XXXX. users population growth support which

customers. data a analytics We are data, partner's in building of pharma, plan solid leveraging including with strong number health interest pipeline CRO, and our a

our and mobile reach will our bolstering mobile care. overall our segments, and as which scale into expands This We well professionals, capabilities are of give home to more MedXM. the excited acquisition about very extended us healthcare as in access

is savings operational exited excellence. strategy have that pleased rate as to exceeded The XXXX. second of element run we I'm our $X.X billion we to cumulative our invigorate drive very goal two-point of

this our maintain and continue efficiency will and effectiveness. the need in discipline of we wage We area; price drive inflation year, Every cover compression. to cost to

By patient time have all locations. More of continue rate as efficiency of record we this of phlebotomists periodic we half tests that expect updates patient live time kiosk, the deliver forward the in years, our service drive the less end efficiency, to patient centers delivering E-check-in run of to are track better and X,XXX with check-in capability we lieu in the to Quality area go progress a growth. spend going many over on specific experience. hand-in-hand. on and which our than more we year, of experience. in savings And clinical our enables the Given customer our improved experience. operational the prove will provide to

outlook, growth, acceleration by the to earnings mid-to-high driven Turning to in XX% part X% of line solid from our single-digit full-year XXXX our adjusted earnings expectations X%, for reflects growth guidance for growth adjusted operations. than more top of and continue

performance take I like our to Now, detail. and Mark, through will more who in it our Mark? turn guidance over would you XXXX financial to

Mark Guinan

Thanks, Volume short Services Steve. basis acquisitions. with the to X.X% consolidated X.X% approximately year. requisitions, DIS Starting X.X% of by prior or with versus for year, to Information attributed the up grew points were the revenues compared versus of $X.XX measured billion for increased revenues, XXX Revenues Diagnostic prior contributing our number grew quarter by XX hurricane points presented approximately year. the of approximately year basis fourth XXX points the fourth basis impact the on of The acquisitions quarter. in X.X% headwind in a volume Rico quarter. prior the prior to Puerto Maria operations in with Revenue versus the in acquisition per

variation, acq mix, with than business revenue it As of XXX price mix, observed quarter, a per such headwinds Unit price; the fourth per and number less basis for price a variables is the throughout points acq. not we test unit in consistent as trends reminder, remained test XXXX. a proxy includes

than to XXX additional Medicare pressure approximately points, points DIS in previously. as PAMA, price of impact on we headwinds XXXX PAMA in to less basis unit PAMA, adding would headwind Excluding step-up expect the After indicated remain will XXXX segment. with have we of many changes XX our reimbursement an basis

for recorded compared tax quarter in that Adjusted or from trend million consistent in growth This our $X.X settlements year. partially primarily recognized EPS a of or Beyond charges. year. compared system a benefit impact net basis, related XXX the to income ago. conversion, previously, EPS was benefit operating of the tax The $X.XX of last within tax million integration year nearly and $XXX XX.X% other has increase totaling reported XX.X% a unit net as $X.XX was revenues the we over by revenues price or to company a recent in reflects test $XXX $XXX contributing last $X.XX. up for the an more revenues, EPS of $X.XX million was legislation. was in increased of the these our the the a net On basis a million operating to result items of restructuring, than a quarter. revenues POS ample or XXX is The a $XX mix ago. compared income million This X% last strong year. including The partnerships impacted mix year was quarter. other Reported points by adjusted Reported mentioned benefit couple offset quarter tax remained to XX.X% XX.X%

quarter In approximately this significantly would Our of of share ETB will into diluted $X.XX our points $X.XX per believe year basis associated compared full is lower XXXX; stock-based of highlight benefit recorded tax quarter. the to we lower versus $X.XX like we year-over-year. we reported the share fourth of calculation. better points for approximately last higher exclude compensation as debt changed prior a tax an with a the quarter, per We increase of rate for have XX point, adjusted share to last X.X% ETB from reform. benefit At performance the the per which insights we is tax fourth and than result excess XXXX, as or business. providing In recorded that ETB, year. I $X.XX with of January EPS quarter basis expense Bad our percentage XX prior than the revenues year operational year was

year full bad year-over-year. XXXX the was For X.X% debt flat

a balances bad new in classify to responsibility revenue net require us to as beginning as reduction pace debt As XXXX, expense. a recognition with oppose of reminder rules will in un-collectable associated revenue

on As change revenue is in about end this of aid at you think XXXX shown which of each earnings XXXX, morning's no of this press for quarter release. impact the considering the our

impact income. this reduction accompanied by no XXXX. quarter in reduction use XXXX an in equal The revenue as is for expense net for the in operating SG&A You adjustment comparability with basis each or should in

Turning in a Capital expenditures compared generated $X.X to during $XXX last provided year. billion by year ago. million cash operations, versus to million were the year billion $X.X XXXX $XXX we

between between Cash billion $X.XX are EPS outlook $X.X approximately with diluted and Now we be $X.XX. $XXX excluding amortization following by X% be to provided capital to be year. Reported million both be turning ETB between and operations of $X.XX to between to expenditures adjusted to $X.X and billion versus $X.XX and $XXX to billion and an and providing $X.XX be XXXX, X% for and prior guidance, to EPS increase revenues the million.

XXXX. in Here for all are as moving given items to consider, the some you piece

First, expect XX%. our be rate to result tax reform, we approximately in XXXX of effective as a tax

realize $X.XX amount, in expect we million to to expect EPS or our Of We approximately approximately adjusted adjusted tax in deliver $XXX roughly XXXX. ratings. $XXX to this after-tax million

million the two-point From expect by Additionally, support lower we our tax to cash approximately $XXX cash we in a as intend to increase from before rate $XX to tax our reinvest strategy. perspective, XXXX. operations approximately million benefit

sized PAMA. the XXXX expect on reimbursement of from In we in XX% excluding gone basis we the lab DIS unit our both approximately and Medicare the including Second, schedule approximately PAMA, an X% fee of approximately XX XXXX. impact November, clinical remain segment additional to price than price points points with as less headwind shown and of basis XXX PAMA revenue XXXX

Our schedule next the forecasted unchanged. fee impact remains over the on reduction the years three business from

rate XXXX deals against will we exceeded recognition and revenue new billion run XXXX classification savings Invigorate to our the have be guidance recently revenue our that to from patient related as closed closed X% all end bad including roughly impact ramp noted carry with standard. of throughout XXXX. of accretion We Third, $X.X MedXM. to Steve as M&A the we revenue from guidance in for includes reflects X.X% acquisitions revenue The our Fifth, closed into goal over Fourth, earlier, date the earnings X% to in XXXX. cumulative acquisitions well that these debt revenue accordance XXXX. estimate XXXX as growth the in earlier the of of

efforts take We this best-in-class out Best-in-class least of continue we drive year. Invigorate believe a to annual Our will X% organizations continue will around drive per Quest operational organization should. is and as efficiencies magnitude. of excellence at to cost indefinitely

As exclude of we beginning forward rate specific in release, I ETB and provide going savings will in record will updates our our Sixth, given in earnings the adjusted earlier we from EPS lieu in as our run XXXX, goal. mentioned, of calculation. highlighted Steve noted this as area, delivering track periodic

start adjusted in multi-year part, XXXX and of Jersey. XXXX of guidance historical For planned new $X.XX in included in ETB EPS CapEx our our comparisons, for lab New large results Seventh, and the the reflects construction respectively. increase our $X.XX

in as your quarter as strategies Additional investments already impact growth with consumer for the first associated as to through in advance weather have models Secaucus. out cost moving first to of our well final finally, And nearly as entire and you we XXXX. date please the we build quarter note of headquarters experienced as did XXXX, that much think

would on Before some philosophy provide to I and like turn comments it back outlook. to XXXX allocation Steve, capital final I our

remains philosophy Our deployment the unchanged. capital last has us over and years well very served several

expect flow buybacks. dividends return combination of to shareholders the We to of continue cash and through free a to majority

expected the M&A over we X% to shared CAGR single we prefer believe in confident quarters the of revenue $X from we X% of And robust outlined in which a digit range. faster to X% targets range include with free this X% be continue EPS remainder We to through earnings remain XXXX. of acquisitions. to CAGR we quarter, We by growth of revenue to coming regards our adjusted cash to to activity will that for have outlook in implied than the in fund outlook, $X PAMA. adjusted use that high mid targets light more XXXX. Last XXXX the to XXXX These

cut end time that We associated reimbursement range to at that also of we shared with towards given the the expect would lower be PAMA. this

in I will will light turn to back now $X exceed Steve. it While cumulative XXXX tax headwind we now of remains the we severe, PAMA to believe reform.

Steve Rusckowski

summarize, strong delivered quarter. fourth excellence. growth made accelerating a to we great operational In Well, and we XXXX, progress driving Mark. Thanks

top of of guidance expectations reform. XXXX Our bottom we from people. full-year business growth. our and And the with for continuation line reflects are Quest acceleration investing this and our benefits in line tax the

take Now we Operator? will happy your to questions. be

Operator

Thank you.

Murphy Amanda And is up it open now will questions. Instructions] from with first question our Blair. to [Operator We William

Your line open. is

Amanda Murphy

Good thanks. morning. Hi,

Steve Rusckowski

Good morning, Amanda.

Amanda Murphy

the have the dynamics guess, to a And difficult et last numbers I Just pricing then terms given to so comments unit obviously qualitatively mix all on about particularly They are top compared technically. we sort also made at around the just expectations. the but guidance, are investment strong moving how various And then parts you around dynamics, The what line similar contribution feels organic tests year? of you sort underlying are little like a in least of was I think And a the given consensus, this it in from to of maybe you it volume and also, to thinking question top the cetera? so some expect, might perspective, line growth? of growth? is about or information relative given obviously around think new pretty M&A just year how POS but lot curious of growth rates to it's that

Steve Rusckowski

to Okay. Amanda, guidance to to Well, able the XXXX We did thank pleased about you. be just we X% good is that. provide we are for X% growth. which feel

also said in organic balance exceeded our that to that and and at end Our as remains XXXX strategy between I we I a but what X% of in achieve X% through to least both. acquisition, to growth have will high acquisitions. my that growth see is in X% historically range to of through remarks, what X% X% And X%, acceleration you say

organic You in X%. you see in an see And acquisitions in growth. through an growth that improvement also improvement to that's and X%

see as the continue drivers far services As we growth good organically, in lab our business. professional growth to

- And one talked We that conversations C-suites having couple in is many continue of with their acceleration of number there strategies is system around interest. the our things, strategy. lab an good hits as we for have about with have get we integrated a growth. of this of And aspects to delivery we

in lab it with and First do them make services quite we what our of more they all, to are professional could business. this efficient interested is

And so, that in impacted 'XX. and growth continue in 'XX has will

most sophisticated is sell our Second we testing. them

then buy acceleration XXXX, of so, some example us well business. will like in advanced PeaceHealth to their in outreach diagnostics in And as finally continue 'XX. And that into cases, want they

our strategy on the of in aspects three which forward. hits going of growth that guidance implied strategy continuation So our is

growth organic like of to that? of an acceleration Mark, anything as the to both with that guidance add acquisition. through balanced would growth well a acceleration you again, as So,

Mark Guinan

on the to debt moving line, is change top there because Amanda Yes, of is dramatically growth year-over-year. debt I the but appreciate comment restatement not parts, revenue the going the bad really should of lot that vary not bad in

a to in expect that X% is number lot more around of of have of X% solid we moving the your questions a And the same. would So, terms then it parts to doesn't it. future, the

Continued should the which but same; headwinds offset POS in our thoroughly pretty points on acq, from price, in friendship side additional which PAMA. basis And partially I that. will the and also as towards benefit continued - revenue XX which growth the from diagnostics, of coming advanced that strong more Steve, non-government that covered is said some per then

Steve Rusckowski

Operator, next question?

Operator

Jack is question from with Meehan next Our Barclays.

line open. is Your

Steve Rusckowski

morning. good Hey,

Jack Meehan

Thanks. the Good in So, morning. ex-M&A, Could I probably you you elaborate fourth quarter? but dynamic is on X% POS there. volume delivered the in there around some

So in terms for expectation what's the what seeing XXXX and are underlying there? of you volume

Steve Rusckowski

Mark, that to take you want one?

Mark Guinan

Yes, - what so is dense volume see never we reported we also And requisitions. continue with increasingly we have to requisitions. that

fact, So what faster do than in the growing are volume do we reported. costs That's test. really is we

We trend. So well a C getting don't but it's in understand adding is a certainly the back B. baby the for When as we and talked healthy that being test boomer are bit Vitamin general whether things checkup little this, fully hep that's certainly added. of goes there someone

So, in people getting more in done services when the encounter. get our y to given the go

didn't desire - to talked So a a way volume inside really test, we of yet. to the it better really - do about was we you found give

much So by don't as requisitions. reported into too read our volume

anything market the POS to in be digit certainly grower, as we see a volume don't continue that mentioned but We shift So solid. suggests trends is double utilization.

are XXXX during what to as we accelerate growth well. and that's our expecting continue We

Operator

next is question Craig-Hallum. Ellich from Our with Kevin

line is Your open.

Steve Rusckowski

Kevin. Good morning,

Kevin Ellich

talked call other specific Hey, tests per test Mark, two just Hey, you that about really there or for question. there is And Kind strong, then, on any it guys, manager the of can you more acquisition? is guys. out, a the any is the updates function good and you taking part mix you tests contracting know, of here. morning contracts? thank United

Steve Rusckowski

make and Number Yes. as of one. nice continues in Well, [indiscernible] we to testing I is to number our out Kevin mentioned two the prenatal Q-Natal grow. continue remarks, testing, growth

to the We testing have to That drug country. grower in far big be a us. for continues grow ways as as got to monitoring long nicely. continues go baby-boomers Prescription this

regard, that and in leader strong double-digits. growing market the that's are We

look getting categories, Board our the many So and testing growth. across diagnostic you of some nice we're

Operator

question next Morgan Ricky Our is from Stanley. Goldwasser with

open. is line Your

Ricky Goldwasser

Hi, good morning.

think should bit couple odd, headwind kind acquisition, than year. you a about about on so really talking are do good about more just then, healthcare pricing follow-up the of going of we of environment? picture, Is mix because just trends as like part on of to [indiscernible] basis overall you pricing; your questions, strategy really, any just we deal of and in of Just transforming and big less next the pricing update? points kind quarter, and when [indiscernible] one, retail the kind on about take obviously XXX like how affect focusing think this role, think Yes. of of the how And kind this into look the of hubs, like pharmacy little or

Steve Rusckowski

first will where Mark will price, all for part Mark? the I on take our second part, with the take guidance Yes, transformation healthcare. and of this going around what's in is

Mark Guinan

for thanks Ricky And Yes. question. the

So, mix, we narrow per space have be are per PLS, I which mentioned. and continue mix. to itself is seen apples, including and on density less Pricing an basis tests, in think will the we acquisitions, including includes headwind we acq it well mixed revenue elements, referring and payer as than our price, - to apples pricing, real XXX points mix. in acq on Obviously revenue of the when that increase you

to any in in trends what couple relative in So we of have we expect don't business. in last our XXXX years the change seen

similar to a book is same somewhat business. reimbursement in M&A, the Obviously of by mixed the to going but the generally know, the pricing. not certainly acquisition Regarding and type, possible there our payer very be of element the part, we business of that deal core book is do, is M&A most you different for really

dramatically. answer will Steve or a generally it's your business your not in MedXM it I further will part direct to different unless different M&A Fusion So question. had of revenue mix, like like lines, to along a M&A Med back our turn very change something but those

Steve Rusckowski

Yes.

very particular what of or for now. consolidations industry think these on sponsor been number of strategy it's segment health around years now population the plans that News and on we've positive the we do, interest the that - and for could

the strategies around about, is that data, And remarks, a already. do our space. products, around for talked mentioned about happen really And we've are in about what to it MyQuest about we one number an aspects, go prepared as more there most and of in and these we is better of these needs XXXX information. partnered be consumers decision-making. progress, experience, to So is of If want as discussions making mergers of with to And this an to that address is - the aspect the we and or aspect our a and - talked players then of to will there what be around all and really I laboratory, of all serving we multiple our the there consumer needs lot consumer-oriented are number of to fulfilling there, it promises involved important is customer. app, consumers access in lot get a be our getting watershed and more around healthcare all year

discussions. are we the these in of So middle

see Aetna. So all merger CVS are we and of about waiting to the

We both. with with strong We have relationships both already. work

with Second is relationship Wal-Mart.

insurance from our we in also as this business, an we're continue to cost employer with [indiscernible] of roughly couple services. working then into what will data, sell with know, their or number well healthcare employers. We've been is Quest. curves. people for we've seen three done third as we have mentioned working have we employers better We employers. in and And for we've to we're been insurance opportunity the organizational working is a those their this model. as XXX a and million provide products as employees. their their more actually our within do we wellness country We've patient the changed corporations, get And years. curve itself. of actually at that over got partners, this on opening cost and been have with all going service our stores. a the regard, this these their And large partners We working up And health And for to extend centers in we We've job

advantage we're So we about excited really those we're going take positioned believe developments, of and quite to forward. strongly these new

Operator

Our Quirk Piper Jaffray. from with is Bill next question

Your line is open.

Bill Quirk

Good Hi, thanks. morning everybody.

tend point? that then but And you now? pick going big testing secondly, right ones been up first to I couple that have know at Steve; little sort just or of valuations considering to the M&A or just we're quick a business, the direct on given maybe a ancillary here; impact have can those Just season early deal that too any whether it's of flow flu little off; and just doesn't any there through bit PAMA you talk reset a about not resets this is that see very severe

Steve Rusckowski

Yes.

we X% the services deal is as our more and what as integrated to said, that. We're That's That's be commercial optimistic about going to on lot continues delivery we feel systems And will strategy X% ancillary with we're beyond did rates reflected in strong, strategy; deals. stated in we seven good side. have there So guidance a And the the for PAMA either M&A, seven potential forward. XXXX. going in will we've deals. their now on interest flow pressure that be forward, there lab or given our

for us. an So opportunity that be to continues

we happen model our with prudent the that - business consideration and how consideration business deals looking far an work any out price do forward in will as make we that rates. deals resets, in in As modeling of that guided do that's in are we've back And for for we past consider into are restated consideration Medicare make because to take we our already far we our a real us sure in and we things we feel take shareholders. acquisition as we what as We hands. and terms what of might our

part of second the So, in Mark the you question. want to drill

Mark Guinan

the back we still commercial Yes. the valuation and is how Steve's more economies of we When in and given to of adequate their an might scale, look we went is independent what points recalled because the really revenue portion hands. like of Investor that's example, payers so lower cost, our Day, the even value. the and create go that business through then

it our really looks forma the P&L hands nothing like pro that the P&L of the in So seller. was

changed? that buyer, government account the now. to taking several the both Because change years for we've in So impacts which Absolutely. have and things we're potential been seller for some into reimbursement modeling

be right into acquisition. it's to building lease, account, for but on any pay piece So the is, then an the appropriately ensuring that as now we're not new full with we and future scale taken on… And the rates, assumption publication of and rates those what that obviously will

Steve Rusckowski

track into a impact would dynamics do call we We let's offices. industry, believe the number on Yes. physician's in it - just it utilization and is activity that of rate or up,

we So there's the some and market this, said analysis, as modest same-store earlier, variables, that we as at increase look our from is feel it. Mark when stable. know, But you many

mover, big but did a the not notice we it's So change.

Operator

Hooker from Our Donald next KeyBanc. question with is

open. is line Your

Donald Hooker

you homes insurance fit Thank or into there that services strategy have - you with in or interested then least, well. comments mobile, you together, maybe dovetail going referenced it's consumer did with medical guess you might Great. acquisition thinking know those as question how a - themes? life and those you're your where business maybe I'm times you buzzword elaborate on Good recent around concierge at examination, into morning. tie My a that that what are and a that consumerism, I was you that does - have all Can few and I people's

Steve Rusckowski

absolutely. Absolutely,

the all, reform we innovation and she's And our business. in and about from a there part to and is making lot deliver diagnostics; about of test and whole resources it, when the to test our an marketplace [indiscernible], it's resources for as we're tax we science. that incremental just piece. that of there's large of yes, our the but it, ago, ordering talked genetics. first the it it's experience more So And more for advance we concierge, business. the new it's do stared the is putting more will what diagnostics, leader portion bring science, that talked a part particularly updated of part so will strategy, pre-authorization a benefit and is more there that a of invested in And be capability year have you advanced about if of that patient It's investment that's our it's piece, what in the piece, physician seamless it, easy resulting it also ordering

what of to in my is comment we concierge my that portion services. remarks So with describe prepared had do

be been tell The question the to going will to for with in on I our second your you progress and in was. of strategy, part 'XX do are we consumer this of multiple by 'XX we with a vision along long we've 'XX had ways excellent years, made end a what

all, of the experience bad are unit we new First free this to it's around contemporizing world. whole experience,

patient service now about we in So half mentioned enabled kiosk of way, I centers. a the and big in

days not that different I We are market about old nearly argue are you are completely where are to experience we size going can't have in some that the these labs that. that experiences our investments so make portion as excited would really and

things our going have get question more whole million the flow, my app is provide to in grow access so to get that on that healthcare app to for Second and continue the other is your will the and results patient capability more appointment, to forward. and to results we information consumer, that schedule your X allows the we do users

marketplace, So products order glucose such directly models a AXc over-the-counter, testing realize want the testing, of this third, to that. consumers will states physician. a we direct-to-consumer market cholesterol where hemoglobin about going tested transmitted there number or to is in new without or as we are And we've excited bring to diseases

So we are business as going grow well. to that

best and different going put So Quest choice will altogether are who brand give different that value get planet. for more of a healthcare you use, consumer Diagnostics best value is they and experiences of on continues the the to from recognize more the they offer set consumers look in will as can to where and to capabilities you we completely what and evolve, but

better that it's day. of are proud We every and getting

and and services take is related you we that of phlebotomists, that we and wellness retail already to over experience data Now all the with services second it take healthcare are part you over you healthcare combine basic this healthcare insurance you have XX,XXX our home have our services. amazing that business, healthcare have capability, life an we This XX,XXX going is workers where mentioned the business.

employees know applied other years so with direction point a managing centers take gain up, to our let's ambition those just and per in table. can typically more convenient lives access and have about call better to of those XX,XXX also those in to we partner healthcare with Wal-Mart can services in effective be in other is bring and better population cost and we a the in X% those surround better efficient XXXX their our healthcare and assets in of capabilities cost oversight way we and and and and with with partners we our so, the us a provide location, it XX% do with data, we the something And are it way of operational lot believe a as individuals good over lives have

few so, many and going is need is is that is of extended positioned this see quality, market be we we nicely are lower there our service excited in so our to because will we cost leveraging we capabilities healthcare going. are about in all where our benched data respect. what partners this portion obviously called all and space prospects what I I'm be we strategy going we we It's different, the are the and some a and do about local and in consumer, sure different better to And care is mean about of it's the others

Operator

from question with Sachs. Patrick next Our Donnelly Goldman is

open. is Your line

Steve Rusckowski

Hi, Good Patrick. morning.

Patrick Donnelly

Hi, guys. Thanks.

So payers payer with PAMA will regional as incentive with hold about and on in to best of like with bit with seems PAMA, the more smaller payers even I'll has proposition end. curious a deal your It private your value it, given, pricing discipline price your with so margin, on from give importance price perspective you this struggle that? implement talk a conversations their can bit in to future to

Steve Rusckowski

don't take that? why you Mark,

Mark Guinan

that I motivation years. Yes, question. to you I many plenty assure of for be price can with appreciate disciplined the

it So that. doesn't change

for compared no around by full that transparencies the go data and can so described I commercial but independent we are it's are know, there, market JP about in understanding think is for is market and here how the certainly and failed that obviously long was with and well a we independent therefore that commercial that payers lab PAMA certainly the ratings under I and Morgan rest for of and together. the talk market is higher are the this now that CMS the that let's involving gives world in where CMS labs is the some though hospitals lower collected rates what's is been as where talk lot and let's know, somehow the is there of the and we the physician succeed partner of you say rates you one that them run where the there still so the on, mandatories about rates together

the we sort of So that value some but concession to than you else. to mentioned, the solution, the feel you best volume I which the best cost. Steve it's we run, know, long-term are not we services Everything of more one obviously give providers data the through good get in price drive when per it's you the part labs, because your going that's know, as somewhere better and other might many of differentiate short to of much from interest provide try that to the the national

need an the prices or talk get towards to conversation migrate opportunity that from get of partnership, more if need. much the anything, to away So, conversation price towards, we

which higher to are lower have years, very feel the like that strong subset our are viewing be and mitigate everyone so talked therefore wants conversation willingness ultimately our accomplished price the we significantly that's facing that last results. get having It a that's we significantly a appropriate. doesn't we've proposition years greater kind and to we been You what the an from about significant to walk did we payers we away look average prices getting discipline market several is the I which can't ago some years. sufficient if then than at price, through the enhance we couple is what descended over we've volume subset and motivation at don't have those the conversation change and volume value for and enables if five we aren't it's shown Not any been of you that has of to when a CMS that prices will to, desire, a in think four, fact that

Operator

with is Bank. question next Deutsche Our Dan from Leonard

Your line is open.

Dan Leonard

would question, Good exclusive guidance you industry but impact then what managed talk that managed somewhat if anticipate in, morning. contracting This and and care large baked for in in is a perhaps no what contracts regarding the you related about a is your any assumption also have could assumption can Thank you environment you. care XXXX, occur?

Steve Rusckowski

national obviously our about over of better the regional is gotten through through to assume test as you I years as would access continuation XXXX through continue XXXX. if players. the the and to our for talked will 'XX so our the our setup get with insurance access players I has we healthcare which that to Yes, a well objective argue better

I'm for in saying think that with an that's might development that what from regard you about feel happen. a interesting enjoy exclusivity good is national relationship So Aetna we relationship CVS, we is guidance XXXX in potential we is see with merger can our it that implied

and for in with that's strong as guidance CVS well, our so about a We assumed feel working good 'XX. have that relationship

through that that about about described are how largest good with United, Second of make. dependent on expires is access feel United national we with that, that as one a we progress our contract We talk get working we We've to in partners. is know love we 'XX. the

expansion stronger. to have, that those hundreds to and We've carve-out assume relationship of biggest will provider with mentioned, the practices build. of those, practices States. physician of the physician we We a have to access have continue as I management we continue hopeful talked Mark have the those Optum should share so have, that customers some as on in continues as Optum get continues of Lives of that that strategic will continues throughout we the that to assumption enter we good states and plans to United but to depending in price to our 'XX 'XX contracts access and we and they we announced have there, throughout already the do many well. lifecycle is go nothing some - relationship continuation buy good about that have rest for that be with access partners strong our we United you the another continuation and then, in our And network

Mark Guinan

pretty just range add And question. to broad X% a to specifically gave that to X%. We interesting

share that whatever we like XXX another it's materially got what if So likely as means offset. what you you think We changes. the that and and a will what's I explicitly there change fashion appoint we something mean United get getting basis are the obviously where further on is would some at within that tell do can't year, range then the then and happen tell point like in that might we some well in you covered we very potential time in so other consider I of we or Investor that planning to going know, for points, as you sort communicate obviously XXXX of mentioned it and with that Steve in can any beyond scenario within Day idea in might give to call.

what more on given are near We we at will as we give know time. detailed specs that everything the update

Operator

Giacobbe Citibank. from Ralph is question next Our with

open. is line Your

Ralph Giacobbe

just a growth of I wage the little underlying growth about you over kind you talk you given bit see Thanks. can morning. of then is maybe wage labor expect around, was pressures couple hoping Do and tight years? expectations market. there next few Good what

Steve Rusckowski

employees. have we in bill into a Yes. which our are in we competitive people workforce wage inflation many our our about broad been is of of past the Matter is Ralph, XX,XXX running fact, and employees. energy employees and at. We lot to put look our we XXXX believe at retaining we of for employ been on frontline of competitiveness attrition about the time we've the we our track expectation of we've continue to wages what

the across in and And about our have prospectively, then we've supervisors lot to in up environment we a employees diagnostics participation higher value are have spent until work phenomenal rate a of higher; they 'XX. like and has engagement been XX% team working an of time about employees. employees better And our their and people as scheduling like much in proposition of management engagement seen looking a the so about show we things we've better XXXX the we actually so run around forget think survey at a slight actually attrition never aspects we course survey. employees than come other So and a where have reduction has on for

Quest, a so been recognition We helped course many provide in and has to work. to journey $XXX we that engagements going we've you lot through our in of are we on will we this hard them employees tagged thank employees get want about other feeling this the nice in so their had have initiatives. the at places these us again companywide so pickup frontline see attrition to morning more all good that's want thank as we So think this this aspects, we for and to because a those year working people announcement we that in are

what of our wage see terms pressure though. inflationary you past above in XXXX on So in the is

Mark Guinan

impressive think in who the end in of we probably many wage And have cities a the to targeted or employees to wage. of our the answer increase not know, middle minimum employees wages earn many are where have question, you I up, that also at week obviously an states this about, are

market. So above already we that are

not we're to But wages going one work for point, benefits highly are and a our If any pressure example, but force the you But, that's minimum is point dramatic To greatly is equation, and health so And you we timing provide certainly then at on improving. employees huge the not factor. we've like as can of handle pressure experience this look at the phlebotomists et of positive centers, of That well. lot and through in enablement, can not focus potential to that we phlebotomy, so itself of experienced to the those be really we one labor our experience wage the thinking the certainly as our are also addressed as offset a things Steve more service other of administrative it's where much investments doing wages cetera. duties, them about needed when on pressure. certainly give bring, valued. work electronically Steve's making part I'll to unknown. some They're wage we're doing having they significant they makes are but we we referenced now done peaks refresh some also and to. there're many updating

not we're our wage. to people lot minimum at we exposed that increases from heavily of a wage and generally adjustments because already general market So, inflation pay

Operator

Our next Craig-Hallum. question Ellich is with from Kevin

Your open. line is

Kevin Ellich

cold is to and due should or it I how to-date that cold the think country? wondering the I Mark of last you mean experienced remarks in we terms follow-up, weather your quick nearly a comp, you volume or prepared mean have just impact about on year-over-year just QX, really as impact minorities as year, guys, in did comment about much in throughout made you Hey a

Mark Guinan

events, you some hard cold. mean, cold, well, closed, it's in it's in snow calculate of weather. generally which our and times Massachusetts when and cold, some been areas in had snow we Northern had to on. I really impact, some are on where we know But are so a warm guess cold shut we schools to down everything is weather so there don't I [indiscernible] attribute number I cold, really it's events Florida, from Yes, although had to we unusual ice some certainly been mean, though nature's precipitation then is

that definitely that So an weather of we various what so but say, last that but know modeling are that "Hey, to extent we've pretty from there be it's to this weather just weather and the enough there's the going going about it's aware some long months doing a our directionally it of is last the We they're its we crap. next we is already don't us people We of is on later to as blame, look it puts we quarter, more that to January - we was benign. at couple see already weather been a handful the something until thinking get norm," quarters we year activity, this year where day, the we've have didn't and are day's events full that that year. wanted the were kind had calculation, in impact, for feel travel out quarter

Operator

this At the questions time, phone on no line. further we're showing

Steve Rusckowski

today. and for and again thanks your Well, day. interest, support Okay. We a have us joining appreciate great

Operator

be site Quest on conference the on this today Diagnostics Diagnostics prepared Thank transcript fourth quarter you will be call. of later Web www.questdiagnostics.com year A or may for remarks in full posted participating Quest call XX, XXXX. Eastern callers at the of and at XXXX replay XXXX will accessed callers. call or XXX-XXX-XXXX for February on am domestic on be XXX-XXX-XXXX February Eastern midnight X, time are international for phone approximately Time XX.XX until online at www.questdiagnostics.com/Investor from replays Telephone Goodbye. available by

Quest Diagnostics (DGX) 1 Feb 182017 Q4 Earnings call transcript