DGX - Earnings call transcript Q2 2018 | Quest Diagnostics Incorporated

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Operator

Welcome to the Quest Diagnostics Second Quarter 2018 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.

Now I’d like to introduce Shawn Bevec, Vice President of Investor Relations for Quest Diagnostics. please. ahead, Go

Shawn Bevec

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

and discuss make Form During to, we projected. those filed not most and future Risks subsequently may our differ forward-looking results non-GAAP that those measures. recent uncertainties described on Quest reports statements materially this current in on from X-K. Actual may Form reports annual limited and Form affect call, and include, may results are XX-K will quarterly report Diagnostics’ but XX-Q on

For adjusted references reported EPS reported excluding to to adjusted this to call, EPS, diluted EPS EPS refer refer amortization references to and expense. diluted

associated compensation. a with stock-based As diluted tax adjusted reminder, EPS excludes benefits excess

and rules, these retrospective historically became expenses the Additionally, associated general expenses. XXXX, reduction January the when reflect basis. selling, revenues restated for comparisons within Under the debt as in administrative that of net expense of and the as adopted impact the a general standard company patient bad administrative been responsibility effective and basis recognition have with selling, reports prior-year to were a on X, were revenue net new classified balances amounts and uncollectible now new revenues

Steve Now Rusckowski. is here

Steve Rusckowski

results. strong benefits tax on few and strategic joining share more of by drive Thanks, the establishing, review to long-term progress with partnership and UnitedHealthcare, quarter minutes. today. detail earnings this Shawn X-point you of This which quarter the on thanks highlights everyone continues on the quarter us Mark in with in quarter more on growth was and then driven relationship for highlight morning The the growth will revenue second a reform. the I’ll We delivered provide performance. strategy, And our provide I’ll our

XXXX, were in was the the more than quarters; despite marketplace, highlights from Here up the XX% up more XX%. grew revenues some than are EPS reported key X%, adjusted from EPS some headwinds

on Before I the made, update PAMA. progress an provide I describe we’ve like to

support efforts implement continue laboratory to We our reimbursement by association trade market-based to a schedule.

the proper rule the continue sides to step have for moreover our On outreach learn find used periods to solution. since on current to PAMA arguments. not the now. the asking is we key briefs any be is the reporting the care that stakeholders and front, collection submitted harm along, pleased was data or periods reporting connection legislative This undo efforts on to that judge effort model data CMS court, the as CMS, is the that we to their deliver comments. establish to flawed need undermine and requested with CMS comments this to collection does awaiting rates. does by collection Earlier And process Changing for the data establishing their In change sued future with we’re hear the provide in reported a improve what PAMA. were caused But the or the all said set has legal briefs requirements and will the current PAMA’s patients meantime, date the oral future and a need. sustainable also both month market-based the we ACLA

of Turning strategy our accelerate we on five to second quarter, elements the all delivered to growth.

Healthcare growth the provider strategically in acquisition aligned our X% announced to acquisitions. Cape Cape strategy to Massachusetts Cod business for laboratory outreach is completed of We through The first our leading services of grow of accretive healthcare visitors element services residents of X% previously of and the Cod.

remain and strong. M&A to drive pipeline continue XXXX, our growth in completed acquisitions from efforts integration Our revenue

it their has awareness them can more strategy. with it’s from growing of are execute there clear the about outreach country, their we talking business. is As the those around hospital discussion help on we impact CEO’s how laboratory last in a continued conversations system increasingly our PAMA CEO’s from interested and

As testing to involve you lab potentially recall, this outreach can reference and us improving business us. laboratory their selling with their operations, hospital working on

also PAMA, second strategic continue to partnership and hospital with January services for XXXX, like laboratory be the trend participants. Quest expand as like addition plan value health participating beginning Aetna hospital our seeing of In CEO’s in May plans on all announced our of to and with growth care. health cost systems. to plans down X, are plus bring with high of national partnering Under relationships health UnitedHealthcare reduce and spend strategy, providers UnitedHealthcare we we’ll the In we the laboratory UnitedHealthcare a provider element long-term

a about this drive easily includes value high it broad partnership, quality, excited real-time best of rewarding programs data at as accessible the to range more health. laboratory value-based and services personalized sharing We’re

be ourselves well customer to to with prepared positioning We’re members experience. a provide UnitedHealthcare first-class

to in on to and be to physician we’ll Our let work X. begun commercial out reaching with that already customers know, has team UnitedHealthcare January proactively

Additionally, fielding customers increasingly inquiries are specimens of UnitedHealthcare us selling their share to in an who we’ll patient be XXXX. from committed

growth the broadest offer to to delivering the which We’re on access third element strategy, of diagnostic innovation. our is

We continue second tuberculosis in marketplace. did the three impacted we prescription dynamics to monitoring, see test, the prenatal drug quarter, noninvasive screening. which growth strong QuantiFERON, experience In

than prescription by in opposed monitoring the changes was it marketplace to of payers strong, less some First, policy because limit we expected drug growth although saw testing.

these testing success its with policy far to getting the this one necessity directly to reverse and change. payer payers have of engaging We’re had so show least at medical

due opportunity therapy which still therapies. and This and in in does require not these Second, hepatitis in faster level we new tremendous was across testing works hepatitis of than same screening. resistance C see saw so the a testing. rapid C hepatitis previous the a that market, genotyping acceptance, largely the multiple genes as to decline C expected We

we Our still screening more of continues boomers be yet estimate million grow than to to business baby two-thirds XX and have screened.

quarter the did due slow it denials. to testing, D increased vitamin reimbursement on Finally

being need it. patients who performed testing providers We’re payers to working the and with for ensure appropriate is

continue for executing progress, make fourth our provider to growth the strategy, strong is element of consumers. which We of be the to choice

received see continue traffic and increased to locations Our by the well Walmart customers.

now help population operating in strategies our new offering Day support and to new locations MyQuest, we’ll Texas Investor experience extended a Trial development November. health data recruitment last services. and providing be fifth pharma the consumer element our Clinical and at more therapies. about digital analytics service in our The excited including Walmart our consumer of strategy companies in is with We’re Florida around and XX month’s our of sterile growth Connect I’m of and to Quest launch speed patient to care

pharma, to participated as American a companies related released this in The the in cost a of study strong reduce with the a the a In sterile of one-quarter catching Association showed BCD area healthcare AXc reduce Also more employers Session health participants curve. showing of already levels. is plans and behavioural third they screen at-risk by of risk, engaged weight This of employees body and wellness lost employer outcomes. normal both health to than opportunities reducing and diabetes attentions vendor of glucose identified population many several biotech on to solution. screening conditions. X% the who have association news look risk for program then health and proactively hemoglobin or more between Scientific the Diabetes study and wellness that healthcare at We June, we participation

position We’re marketplace. strengthening already strong in the

is of second operational The element our to drive X-point strategy excellence.

the the to experience. processes to effectiveness our Quest continued wage reimbursement cover digitize within pressure. customer and We’re referenced inflation improving are efficiency drive to cost and of I

are here of So opportunities two of real front simple in examples improving us.

requisition paper improve approximately previously, First, X both and a us as we enablement shared allows minutes, quality. the takes processing efficiency to

We’re our are making is XX% sent more up electronically the and efforts in approximately get requisitions to we of today received progress requisitions systemic, from in XX% than XXXX. electronic clients this

into to which requests of Portal a we received Second, occurrences up clients an client last Quanum have couriers launch lead order we early application, from we’re and developed through physicians to HCP up specimen empty over Since our XX% Each will and our of find box. more lot tick call on-demand, expect this a fewer adoption our adding to year clients translates electronically week. rapid allows the day call, if converted recall to in each through what than staffs pickups. new have are this online X,XXX continue. arriving XXX – Well And application. routine of significant we centre pick you their

the Now through let me take turn it over to financial performance. Mark, who’ll you Mark?

Mark Guinan

Steve. up revenues $X.XX billion prior versus Thanks, the of were year. X% Consolidated

acquisitions. contributing by points. a the the compared balances than uncollectable X.X% by Information quarter dynamics Revenue Volume, largely for a a points prior with recognition year. versus with reminder, of as Services, was per Volume specific number the short, Steve to by driven the versus by second approximately year, of instead X.X% now associated highlighted prior basis due grew part grew to prior requisitions, the of report bad net responsibility year Diagnostic for accounting. Revenues debt to revenue due change XX earlier. revenues XXX expected the reduction in softer measured DIS we in market or patient increased requisition in basis large acquisitions As

includes not a is mix as and revenue mix, it variables business per req. for unit a price per variation, reminder, price, number a As test of proxy req test such

XXX basis reimbursement we with unit previously. observed During with quarter consistent first Medicare PAMA, headwinds XXXX, remain approximately less have pressure indicated in of prices increase all to than points quarter, PAMA After factors. points will basis from other netting XX those the and from the second in headwind a changes as

XX.X% On the PAMA. elements $XXX therefore strong XX of to XX% including in which more was $XXX XX.X% a Reported was compared unit and and was early ago. to last XX.X% income tax of year to Adjusted or reform integration a $X.XX operating factors due not savings for acquisitions in to compared investments using last reimbursement larger revenues or of $X.XX year. XX.X% our Beyond a that basis year. the stages contribution yet mix in margin, $XXX revenues $X.XX The year had million or in price, headwinds. and than adverse revenues point other impact of of of operating margin are than remained income delivering on basis, more $X.XX decline or the million some several quarter up compared and the EPS adjusted operating million was EPS full quarter revenues offset quarter an operating $XXX million margin ago. was Reported from

balances ago, flat a a operations which higher patient to now were $XXX is $XXX CapEx million responsibility, $XXX the million year. expenditures which $XXX million with call versus last patient Capital price associated compared spend by During with we XXXX. year million planned line concessions year-over-year. provided was Cash quarter uncollectable in year-to-date were year-to-date for

Now turning guidance. to

between be versus to narrowing outlook billion year; provided billion between our $XXX X% $X.X as and follows; are be $X.XX; revenues and million. to expected cash to billion and reported $X.X $X.XX be to $X.XX We be XXXX the approximately to adjusted by of to EPS X.X% increase and be continues for operation prior $X.XX now an and between between capital EPS $XXX expenditures continue and million diluted $X.XX;

keep we of progress throughout investments business savings are in related the reform addition, in ramp will the continue the tax remainder we mind as In to XXXX. to that making up

Some UnitedHealthcare. to be preparing in for of are investments these network national related a to provider

revenue narrowed half. through performance the guidance Our reflects first our

health to the the and we are lab mentioned the following; half the first, help vitamin in execute second year of D strategy. As about PDM as their talking you about taking consider systems how the them can testing; more of we Steve us second, areas are actions think

a second agreements expect we have half. to the in professional services We lab few close

will expect of items these the together of as the Taken remainder build progress we the we through year. benefit

we it achieve I half remain throughout growth in as hurricane will back second Steve. year carryover was our impacts the expect of accelerate The XXXX fourth severe confident easier quarter To our to this impact now the in should the quarter for ability comparison in to with up, it last Finally, outlook. to the sum year. third make an and majority turn some well.

Steve Rusckowski

earnings strong the summarize, Thanks grew delivered in to Mark. second revenues And we quarter. and

on the the UnitedHealthcare have on that commitments XXXX. with build for to And are our X-point we we’ll Group. now and confident, we focused excited meet executing strategy strategic of remainder We’re we relationship remain our

questions. Now happy take to we’d be any Operator?

Operator

We [Operator now Instructions] the you. Thank session. begin will question-and-answer

with comes from Patrick Goldman Our Donnelly Sachs. first question

open. is line Your

You may question. ask your

Patrick Donnelly

Thanks. Great.

Steve Rusckowski

Hey Patrick.

Patrick Donnelly

How are you?

Steve Rusckowski

Good.

Patrick Donnelly

understand business the you then payer to quickly we you talk January? outside, initial think January? shifting ahead think contracts can about of And the just with going what the of your to up into nonexclusive, and you points When up ramp in just through the discussions dynamics from around the opening can your are capture United contract key share? How focus

Steve Rusckowski

Yes.

So the Patrick, for thanks question.

launched talked of this in lives. started the about and tremendous we started, opportunities new we’ve We have that working And we had to have we’ve the us. over million access relationship, opportunity already XX When a on aggressively. front

detailed So of thousands accounts which we which sales reps geographies have engage with will by out and customers.

the of them And prepared changes, to need do serve a of quickly aware broader as contractual ramp making to First as them up this talk be all, what is, finally to about way. in possible. potentially we to

with And so what left you and we’re running. the I will we’ve off share is blocks, already

second We’re throughout They’re accounts of back some receptivity those biggest of opportunity opportunity in many waiting services more the for then engaging The have share. now on time more us someone another gain accounts is contract. were for we that laboratory to the us And have broadly their to is, good. for bring because continue have laboratory might with we United, to opportunity customers to And with us is, United work. States. for quite an this just be contract not for an

So optimistic it hard at and we’re it. about working

Patrick Donnelly

That’s around seeing than in get is terms driving M&A long of just activity, the maybe capital or can market. what just around consummated. Are slower inside the a And are to Okay. on allocation the update more hospitals side, processes PAMA deal just the quarter then us things light you taking consolidation pretty it time in you developing you anticipate helpful.

Steve Rusckowski

increased. just the underscore Patrick, comments, to conversations Yes. my have

forward strategy. outreach today systems And their happening if that the what’s health business conversations given engaged happening with are for delivery have We’re around what more they they CEO’s they – they regard, lab change going with in given integrated with in PAMA and considering they of it. many see their plans, with should

So strategy. three Again, we’re prospect. our parts optimistic by of there’s the

services business. call laboratory is First what professional we

in As Mark said, opportunities of got few front a we’ve us.

of back be the announcing half We’re a to at in hopeful couple least. these

we Second more conversation when a around call sophisticated usually, in other do is, hospitals. which testing, it testing we conversations, opportunity to And have those have affords us the an outreach. reference we then

there’s more year funnel whole So in build continues conversation opportunity ago than for and that list to today a us. that

Shawn Bevec

question. next Operator,

Operator

next Stanley. you. Thank question Ricky with from comes Goldwasser The Morgan

open. is line Your

your ask may You question.

Steve Rusckowski

Hi, Ricky.

Ricky Goldwasser

Hey, good morning.

Steve Rusckowski

morning. Good

Ricky Goldwasser

D? we hep So first drug guidance of all, that C and of the half about a When year, point of the continued for clarification. monitoring, does think with incorporate second vitamin weakness

Mark Guinan

So impact, to we don’t Ricky, expect the hep reversed. C be

of kind a is that So permanent change.

But have some particular continues So part of Steve to we’ll on as continue C. mentioned, grow. screening to that hep headwinds

is So that it’s it’s still to largely an attractive business, going just away. the genotypic testing, which go

C will obviously but require continued drugs other do that So hep some testing. that there on certainly, mitigating business in be that remain headwinds because will

who drug On monitoring, their got one position. changed that the mentioned payer we’ve we prescription

discussing those We are in other made couple well who that road the with down a changes. of payers

very that our We’re area medically we think optimistic necessary view because approach of testing. to the is this appropriate important

couple coded like And of we’re making in plans are on really of there has in being There’s practices impact vitamin always to that eligible vitamin the D where appropriately. not And people that providers. make people there’s are lot still old changes payer space. have but place, market it’s probably the we’re then and D, others some that vitamin for an some that a we going progress in have on counting using D So on one not reversed, just coding, we’re feeling testing. not it’s understanding been a

appropriate could there ensure which, use we the of So of education accurately well but vitamin then ensuring an that I coded think as you pay. support around course, testing, is increasing that providers the D to

we the well. some year. that’s So back time, be that why throughout over of increasing of And the talked about that and half momentum will as we’re optimistic mitigated

Steve Rusckowski

for these half the year in guidance happened the does will address our half first what about in second the obviously, talked issues well. the as contemplating, what but So we we in full for three that remarks

yes, So it’s in.

Ricky Goldwasser

great. And thoughts then two here. Okay,

just In the price prepared then investments? is this versus United investment new second you bringing the volume, all, unit just unit talked to remarks, XXXX And do about reimbursement about a about reform when onetime carry of XXXX? in base think on the on And incremental mix First tax you on think the thought mix price. think past? XXXX savings little or about know as will the you how headwinds in unit about and about step as $XX that the million should should but you versus SG&A bit accelerate up the preparation think that talked for unit in the we investment the are that we I early, we SG&A should that pressure price price. to it’s a over mentioned in we a that related the in for will

Mark Guinan

Yes.

So for thank you the questions.

investments talked ramping in First we million. up off, that are about $XX the that included

We beginning talked a not being We, we onetime people invested growth, we million we incremental talked $XX PBM. it’s for bonus. portion third was some from in and earmarked of Well in that about didn’t that year, diagnostics investments because around piece about So and advanced the talk the of United. couldn’t $XXX areas about. that accelerated about the in the the talked really in our of we

volume importantly, all still sales. it’s initial within And SG&A. volume is it’s of And comes, of just talked investment it cost $XX all of its we the about. A actually So once cost it’s the then portion large not million but comes, sales. before contained then the

business. for to outlook then I’m incremental laboratory in tax it’s guidance And ensure that obviously, we was XXXX. we and reaffirmed centers of just normal fall, we of So But going terms is assure incremental fully for give its when multiyear as XXXX that I and PAMA to of I But we’re can our announced need the last presented investments. to volume support couriers time, what when expect to prepared in come you any over draw gave ahead contemplated. then in add the that yet phlebotomist, deliver you that all when not to XXXX, Ricky, we

we’ll at later So on pieces you give Day on the more Investor that those year. all – in the granularity

Ricky Goldwasser

much. very you Thank

Operator

question The you. from with next comes Blair. Murphy Thank William Amanda

You may ask your question.

Steve Rusckowski

Good morning, Amanda.

Unidentified Analyst

is on taking Hi. and Amanda. actually Good my you for thank This questions. morning Max for

Steve Rusckowski

Good morning.

Unidentified Analyst

other speak around those mentioned exactly follow-up from to know XXX XX price other little basis factors think headwinds point benefits some the around Can a also now PAMA factors. to and around quarter I factors mix how forward? bit are headwinds, be maybe from are. wanted And you points just we other moving How context much going what transitory that do basis contributed? terms that you Just additional the those of in from unit the some in

Mark Guinan

Sure.

So was it’s XXX. didn’t – say the To it clarify, we XXX. than less

of normal that which it business pricing business, through any we reference the we even whether who that stage we’ve where mark the it’s some nongovernmental of direct and kind of in where the of are part to it be the that’s whether physicians hospital then permitted extending client contracts, commercial had. actually it’s work our third-party in a years course as directly in And to can compete the up billing So bill it’s of couple do headwinds or it testing, has the third-party. with of other last then

going the and there’s points. of you revenue balance of basis of somewhere last and certainly still have we that said, basis to than when basis XXX tide several competition in be that’s all certainly between mentioned all our over these the points years and we’ve So together, of headwinds And where XXX we we favorable quarter-to-quarter mix and per some with pricing XX price elements degree was ago, XX points. business. generally take while as req less continues the And the years some amongst turned areas

tests it about south lower basis obviously which because So req we is of hospital in-patients, per for services, of points have more is. growth. significantly XXX elements. and then somewhere per req pricing, basic testing. XX we’ve basic done unique typically, what part professional the It’s that of other business is basis on a talked with other It fewer revenue we nature has And of of an our from where testing laboratory mix the have PAMA, increasing points lift finally,

We’re not doing advanced diagnostics and in on. that so business

lower It a a per headwinds, mixed just of attractive, very revenue and so It’s to req creates req. testing. our speak the has per and math doesn’t in that profitable tends be req more It So terms low in anyway revenue business. its still to basic volume it’s routine profitability.

Steve Rusckowski

Yes.

prepared per to something a and business eventually revenue managing Just this and considerations. do remarks, yields the when lot understanding into you how that there’s we say, reiterate calculation always Mark margins, But his in really, said requisition. on get of other we

than req requisition. Some actually of higher BNP more this business – higher dollar profitable req per lower revenue per

So to margins something it’s not all, necessarily a in at surrogate for so keep mind.

our per improved what revenue by with consideration we do lot but quarter, a good pieces, points, we in outlined. our the in of moving saw were you had requisition XX So for Mark quite different margin basis as to the

Unidentified Analyst

over Appreciate on define Got saw a preliminary few that tweaked the with proposed, CMS a lab little has physician purposes. that. reporting on And note. thresholds for the ago rule color following-up related applicable to a a week what’s bit it. a little an We of

there’s here or in you been implications to PAMA any adopt of XXXX? Just be this if internally continue externally around what could as discussions the wondered

Steve Rusckowski

needs we’re data be was do and Albeit, improve input related still we to it did my to remarks, to regard. that believe As need the encouraged the get that corrected Prospective, CMS prepared in right. Clinical us wrong in I current challenging said how and we’re they’re with we what for that Fee they asking reporting. Schedule to Lab

how and we legislative pursuing reflective engaging, to And to solution laboratory really we approach market-based the to we’re with do CMS, are as the of all statistics conclude have more that. how a along, on we get We labs services.

that. by encouraged we’re So

But small there piece be had notable that. schedule business our not think that’s nothing way. that necessarily pathology in billed the was a for us. modest for it’s physician XXXX anatomic on will of that that We material tweaks Second, for That our fee business.

Unidentified Analyst

it. Thank you. Got

Operator

from A.J. Rice next Suisse. Crédit The you. with question comes Thank

You your question. may ask

A.J. Rice

everybody. Hi,

previous can hep headwind the terms Is from from all, just questions represented? percentage in the cleanup First D saw there any headwind way that that vitamin maybe quantify you C, ones. we of drug testing

Mark Guinan

Yes.

So organic in that of from back the pretty primary steady rate obviously, been quarters. that drivers last then Really, we A.J. growth that. talked have improvements things at about we are of fallen the number difference, really over a And organic we’ve the of

not So I’m performance quarter. specific we’ve would What what to say run delivered kind going number. organic those reconciliation are in a give rate between the we second I of the is been delivering consistently and the

Steve Rusckowski

Yes.

the areas A.J., in done we we that outlined look the saw the thought you did if issues could remarks. what versus So really we at three do. we reflect we what And have

quantify will our we three, the be between broken down difference actually total the expectations and what delivered. of outline those do three we to expectations the from. will they But market, buckets the So exactly

A.J. Rice

Okay. And then my follow-up…

Steve Rusckowski

drug we’re QX. reverse work that work Now payers the with QX in we’re mentioned D. and with around of we the with to actions payers prescription said, a vitamin few those the are it We for monitoring, doing on taking doing

boomers is As there’s AbbVie. be left baby of the the But be care therapy to down longer Mark the a screening new plenty business needed testing genotyping will business to which resistance it’s hep because that to essentially need and the screened. opportunity give said, slow and no big for business, continues C

in that though slow to working did it things the even half. quarter, in second So the reverse we’re on

A.J. Rice

of couple then my I ago, is you discussion? process that about We at on And to you any them Group. I working opportunity could with sizing in lot those– exploring Have started to might your Any was extend. group you with update there in about update growth United, that to year, Okay. for that HCA, the just ask I go present work Medical a opportunities you. on given Denver DaVita just and years a talk you a opportunities. of then X.X lots practice want the that of and about Optum idea sort and buying follow-up, that tends of volume that? look medical of any know know And is

Steve Rusckowski

Yes.

Optum, when on group, talked with all, big. currently laboratory network services. We of about now are as in first well. relationship provider UHC XXXX UnitedHealthcare it’s in our in-network with That’s an So back we

on management. know, you partnered them have we revenue As with cycle

their biggest customers. We’re one of

Third is, provide we wellness for services Optum.

are So they’re for opportunity. becoming To OptumCare, provider the our another many wellness customers. to as you sell biggest their one physician our customers. they’re to beat exclusive opportunity their in Also, your they of supports existing somewhat the business those specific yet we of of up we’re – payers. buying and question when said, services And buying OptumCare physicians

close if they to also actively can that So growing how but working the on with be existing – all closes, physicians, we growing they’ll to – close physicians, have OptumCare. XX,XXX accounts of and serve them we’re better their their list physicians in

a practices OptumCare into build, bigger consolidate good prospect growth relationship with as and those to business forward. going a and this their better continues see relationship of building So we they

Second of part the question…

Mark Guinan

On HCA.

Steve Rusckowski

opportunity The continental called is which HCA. division the well. is Denver going

relationship rest we throughout the of that leverage optimistic can that We’re HCA.

second And announced half. will that. services be the as We continue to said, work more in relationships professional laboratory Mark there

posted. stay So

Mark Guinan

Yes. savings very can up ask you that I certainly and you them, we’ve delivered they the front. for confident would that add, and target quality but I’m looking A.J., tell just they the would were cost

it. very to worked good of well. the something what question time, I that announce, does think we the the we expand happy to to sites? But in if out was both is Could announce that point other are mean? it I is now, news we have happy think, would with parties are So mean and what it’s course, at delivered

A.J. Rice

lot. a Thanks great. Okay,

Steve Rusckowski

A.J. Thanks,

Operator

next Thank question from Jack Barclays. The comes you. with Meehan

question. ask your You may

Jack Meehan

morning. good Hey,

Steve Rusckowski

Good morning.

Jack Meehan

curious was in flu. the was on I and from quarter? question, impact think the some first weather My in the the quarter could Business Women’s if the in you I Health first there weigh

of quarter trends there? second seeing some you were the the in what Just were

Steve Rusckowski

Yes.

all, of continues our as First the to mentioned remarks, prenatal in nicely. we’ve testing business grow

So about that. optimistic we’re

any we let’s same would if we account accounts look general And at and true many showed stable. we’ve our Health share. just for in Women’s if ongoing of that’s know existing and say, have, we this analysis. I those call within you at times, I business. if general, or just do And market’s is many, just activity in lost look our say, would at look just accounts haven’t more the Second that you the you routine portion the activity, we same-store it

and past of the We in though The happening practice continues business. for Women’s continue to did Health that’s it’s in path affect from be in our phased general annually in, where been just to marketplace, in their guidelines continuation the our to change about general, the business continues Jack that used women But XXXX in decline five less the to stable. volume see check, a be back slow years. frequently even go

Jack Meehan

And repurchase revenue on then I was X% repurchase, had follow-ups volume, is XXXX. the the added capital with I total think I since M&A share of this what then contribution? deployment. Great. caught two no first quarter And on

So just if is on and what you why pacing repurchase from the could in quarter? give any here no think color you the

Mark Guinan

Yes.

our similar, buying, a contribution the M&A similar a Jack, is was business we’re very Obviously so business. big there difference. core wasn’t from to So what that’s

contribution. difference mix tremendous and volume see are differential So you revenue between wouldn’t the that a

Jack Meehan

then share And on repurchase.

Mark Guinan

Yes.

what quiet in the of we UnitedHealthcare. we stepped were the announcement So share We of quarter. to due was out the market actually thought repurchases, impending

– at So that amount share to of activity. to back of returned going XX% the should do Certainly, free expect any would the our repurchases to or But level be of to meet our dependent or commitment level going said, shareholders. have the other half forward, minimal our in on M&A cash half. we as activity least returned you flow cash we’re we

Jack Meehan

Steve. Great. and Thank Mark you,

Steve Rusckowski

Jack. Thanks,

Operator

comes Brian from The Tanquilut you. with next question Jefferies. Thank

You your may question. ask

Brian Tanquilut

good guys. Hey morning

Mark Guinan

Brian. Hey,

Brian Tanquilut

CMS, does of right? getting How recent I so the about and recent contracting, impact LabCorp as came that they’re Steve, hospitals. that the manage to the down rule repricing of How road? think view guess, getting and in out How proposal, to do United, the assuming that with PAMA a holds, viewing, you PAMA still I you years your – obviously, how excluding you Aetna? rule as do changes the few the

Steve Rusckowski

of schedule, data the of nationals. clinical the two points what of majority points vast the data from used, were they fee we a what large in for Well, the got for the majority a Brian, refresh

approach. So roughly that they incredibly that they of think it thousands we flawed laboratories And was from in buy what CMS is buys laboratories, of buy all the from its nationals. what was what was Imagine the XX% used. from

So the really date what they collected was a they distortion of buy.

got And in collect so They more and variation a marketplace one the is this laboratories. wide as Diagnostics. points this have. like you to company is biggest we And best from from know, the there’s value Quest data more of

data the they was So collected. that

We’re hopeful.

first the for again, they request the in collect data, now the challenging The data. did in get they they current next And got this the they they collected wrong advocacy by can time question, court. data. to right it It’s lawsuit. Given time asking and around what need more more it we’re still

consideration We’re But with hopeful that, parallel that favorable solution. will have progress, a a we’re looking we’ll for and in legislative there. that, also

case its this at we’ve outlined lab this fee that in to for is XXXX to because be was the sticks continues to year, and work the schedule in guidance we manage it. That if that, it and worst outlook the absorb, then we’ve done clinical hit core, outlined be case. despite given outlook and continue be will what – our this for and will business what we’ll believe, our But So XXXX in the refreshed we what able fact assuming all our wrongly. is we’re currently

assuming but have be quite into the bit. So needle a will there data in better so will then more therefore, move in from process, laboratories hopefully And But again, worst regard, that included payers. case. there’ll gathered be collection data the we’re the news hopefully, we’ll points yes, future, that

question. So hopefully, answers that your

Mark Guinan

Yes.

on let on quickly just PAMA. its comment, me impact So Brian,

So shared, that better speak know we we for best we know as we you prices provider, twice, can and for more you’re us providers, to value getting the we not with the And from paid means go than you has or the We talk a the think getting away tell the contract – like get national those been just paid the when in historically, be bonus provide than we’re our potentially prices. we paying to with contract, it more in getting very bit there’s from high-cost And any have part paid recently because already you’d prices. we’re fact, better But a that hey, fact the they’re amongst of is not if an competitor. more all median opportunity is where vocal opportunity and that I these move PAMA, certainly talk can’t us been in it’s and they for going about transparency. volume I best majority the are weighted now full volume a anything, because say, there the as when United, United of we for call contracting, less what getting the little And people value-based about rate. payers, paying. we it’s still

the us So patients perspective, should that ensure from. doesn’t basically, all to from but volume be performing it we’re comes payers healthcare positive we’re partner and how it and that savings we where and our share actually, that with the as system money damage neutral the PAMA growth depending will saving that on a

Brian Tanquilut

the I a how or the from built a of your and pace of you I to do heavy and networks think about how No. we from about as the lift necessarily And share that? appreciate national the Aetna, guess think What but shift? competitor how opportunity is of United that. that lift regional’s. follow-up market Not hard around is is that

Steve Rusckowski

Well, roughly more with the $X rest to regard. for have with of that still is in billion the share you up mathematics pick the us, We conversations of we shared about basically there’s – all strong an that you we talk lives, go million We of through opportunity relationship presence, than nationals having of about spend this quickly United, having when XX have opportunity, payers. the that. and laboratory opportunity the the talk United, the their spend in Despite front that’s two marketplace. we’re north

more nationals, of still a more in laboratory two cost, move look to it’s general us. still minority. It’s those at the If large healthcare you higher the volumes trend is opportunity expensive to in the given

now we’re is And that. so what detailing right precisely

many of but have in customers, aren’t laboratories knocking with they of those not And are in and doors big to many they longer large two those – are those have laboratories Brian. on opportunities. network United. the of those there many thousands some nationals, And because They the we many serve others. laboratories laboratories no need cases, supporters were them therefore, and We’re

opportunity continue other national but think particularly gain importantly, for need between really we market. to to and portion not just share, large the more the this regional us this So to of about the

Brian Tanquilut

I appreciate. Thanks Steve.

Steve Rusckowski

Thank you.

Operator

Thank Lisa comes you. JPMorgan. from The question Gill with next

Your line is open.

You may ask your question.

Lisa Gill

good Thanks Great. and morning.

Steve Rusckowski

Good morning, Lisa.

Lisa Gill

contracting the us and about as your that a And relationship, United way when talked talking prepared are you comments, my program. about in new about then That’s United, your the opportunities if new contracting programs, you When req? the of In the question. it lab that’s being the think you some understand for value-based about we Or when relationship Aetna case, we are can the think about value-based think morning. secondly, programs? around first value-based is around Good with seeing the paid you changes traditional not help contracts? especially for what

Mark Guinan

Yes.

traditional So is a it Lisa, relationship.

fully have performance. Generally, activity. on a obviously, most this contract. traditional But where paid for the they our We’re is portions fee-for-service difference plan. some the insured that HMO is where there’s is an for rate they’re dependent The part, variable

earlier, that saving just them, contracting, and and the When I the can about is I’m not especially by obviously, earn healthcare the as referenced talk about United we when there we but the value-based talking say So saving incentive payments money. I patient. system

work providers. So there’s going an to of high-cost awful lot

have it’s significantly prices. higher of they Some because

but we’ve regional talked about hospitals and players. So physician-owned laboratories some even

all we way. that the the in are ourselves payers is The that same other conduct thing becoming increasingly don’t aware

a one a a the for patient So driver. condition price for is with activity level but patient given thing of a also with is

as you a condition. can but some more pricing same charging labs actually might for have So they’re have activity with there’s lower that pricing more do we given because

around focus stakeholder, and really, per price. the that to cost by good overall interaction system in doing And saves money things come on with extent So a the that, total that a some what at back for us. medically that of saving patient money appropriate to the will the is

for also A the the more the be the their or talk financially where including incentives detail some down because the maybe highest of actually things that, conditions for ahead to United within network year of lot of and preferred So believe structures, some us. are a will value preferred design, preferred is will We preferred network others that are middle next any about of of little But will options including the patients that, and come around towards the quality what planned things a there’s provider. to road. of process benefit that we the at decision network there best hopeful and the network. drive about incentives in that be

kind from, it network share other So of we a do the get it And well is have would on that’s where about because we’re and do you you is about different actually hope sitting to us, be working because we great and that would certainly about talking relationships extent, and excited historically, sidelines right be that, can opening partnering our very what we not large we’re payers own. a good In now. the to I drive United to value. going some on just with that case, of of this all with luck,

Lisa Gill

is Great. did on retail That’s then but relationships very you on any the the any helpful. Walmart you secondly, And or comment relationship have that there update other market?

Steve Rusckowski

have great. of We’ve well. Well, approaching results Safeway stores. to go XXX continues stores those The first been that all, in we’re very said

encouraged very there. we’re So

conversation be also the in that. yes, will you a XX Walmart. out what stores, Second Walmart but services, is and broad become to with than more very a we opportunity. assure with healthcare significantly today, I’m And continue services. it’s providing of has putting The Matter healthcare, meeting draw that better call extended can I about it’s very number from Executive about presence we in, And of higher build stations the deep. Senior that healthcare a fact,

the and specifically healthcare. JV doing Our Walmart is in

that we out. then testing. So we build are third continue And is to

pilots some some doing other retailers. with We’re

CBS in Mediclinic’s their potential with work done we’ve Aetna. the merger past, the in with pending with mentioned we As

they great also here. been have relationship talking see with with relationship is We opportunity have what a we’ve about The we CBS. that Aetna, great

the merger those So as well. potential and we’re CBS more two with with as expand they working potentially optimistic of productivity companies Aetna

So a lot in us. front of

We making a we’re it of we’re have progress. lot the right and executing strategy,

Lisa Gill

you. Thank

Operator

you. Kevin Ellich next Thank question The comes with Craig-Hallum. from

Your line open. is

may you question. You ask

Kevin Ellich

for to you think we Thanks do the morning. revenue? to about Lisa’s to growth, can or taking Good comments guess, time, consumer your Steve, questions. follow-up consumer much it think big your really it’s add these holistically, whether to volume how picture initiatives I just as wanted over question. and on of Hey all

Steve Rusckowski

going. – you a and think we’re where take Well, back look at we step if

United access greater be Our with than XX%. would

strong greater to we many than network obstacles remove and when the So throughout United And we announced of the big majority of states, we States. ought with Florida states in XX%, the the California, the relationship, not access York, so in being very as big a mentioned, Texas, is health of united plans our New access.

we we opportunity have have and to an when access, for compete So laboratory accounts. services

So that’s number one.

access, it’s improving great every So day.

healthcare have consumers. patients asking could out-of-pocket they important, of as do more to are also Consumers, serve is what of becoming their consumer cost cost employers better lower themselves questions the a pushed increasingly to is in and in particularly Second the way.

we that consumer sure have for great patient making our addresses strategy is that the and so consumer. And that, that experience a

only into done One it registered get are users, to over day. electronic, e-tools, every is with continues that. stronger many have our application So we MyQuest. factored not million We aspects call our we’ve the what X

You results, appointment. an can now can get schedule to you lab

any come. a to could there will You more in be throughout late area Patient see times Service Center you’re in and

day. more looking exciting, a like that’s contemporary application So every consumer more and

better. access better our gets Second, and

over Centers. We’re Service Patient refreshing

the a settings, much throughout to easy more retail-like go that will augment we’ll Center United see have Service into Patient through if more physically retailers, making Diagnostics. and that it to of for number with You we States Quest access you go then the your consumers so

we’ll we Arizona Missouri is close direct to that can consumers. And products. now believe and in Third states in the We direct-to-consumer XX to in have with Colorado, we taken our also offering. experience that’s have go

the step and someone there’ll that say driving be or network with in And you their regard patient, Quest great on else? fall. to, they to experience. remember that, all more who on go working like eventually solution in take the and a would physician that we’re you They back ask that knows We’re to you that come when when

hemoglobin experiences not far physicians, as cholesterol And their and their by AXc. product directly their it’s also from the diabetes on have like or data. up ordered We as can check they they order know that us a

a we increasingly So in going think us directionally, it’s the healthcare more is marketplace. consumer becoming to of because share help gaining marketplace

Kevin Ellich

Got super you. That’s Steve. helpful,

Steve Rusckowski

Thank you.

Kevin Ellich

on per that And have call, any? then What on D. hep have your just that what a earlier drug requisition, any vitamin out quick you follow-up on on C, the the if testing, called did – did it impact or headwind your revenue impact –

Mark Guinan

cover overall mean, not the really I Yes, within the same that per businesses req. are revenue those substantive. anything

Kevin Ellich

Sounds Mark. good. Thanks,

Mark Guinan

Yeah, the a negative going impact. obviously, you to when get that’s one have denials difference is

per do tests don’t it So req. kind that’s the and we a when then hep But ordered in to certainly, has when then revenue aren’t a a get of like headwind C denied, obviously, and neutral you work case, impact.

Kevin Ellich

you. thank Yes,

Operator

you. Thank

from with Deutsche next question Leonard Bank. Dan You comes

You may question. ask your

Mark Guinan

Dan. Hi,

Dan Leonard

Hello.

of on one M&A. pacing Just the question

with discussions So by could you’re some how catalyst how accelerate the is a healthcare much to of CEOs? its you And system that UnitedHealthcare be value-based quickly contract do components? itself think with going you of think having

Steve Rusckowski

Well, for businesses. a the PAMA PAMA, substantial first renting is is hospitals outreach change So okay? catalyst

a outreach one. system their And hospital is XX% it’s at when they’re That’s essentially XX%, so many years, a difference. over cut Medicare three number XX%, businesses, notable not in mix looking insignificant. So

are with insurance United what also will Second is with rest seeing two and are have what’s Aetna. those place. to that health happening of they done large over hearing they carry nationals the there the And market

will case, services. there be commercial forward realizing for they’re and So this ancillary going services their in laboratory pressure race on

strategy, going to options had So all – them is pace we’ve we’ve – their them considering talking of already always accelerating this – around that, long their around last but it access great the so with as forward.

Dan Leonard

Okay. Thank you.

Operator

Thank you.

Massaro comes Genuity. Our from with Canaccord next Mark question

You you question. may ask

Mark Massaro

guys. thanks Hey

network that team lawsuit of your do your secondly, lab be And in competitor the in lab in beginning resolution need anything defend a perhaps there expect So your or Aetna from large that PAMA coming share QX? you then business? can XXXX. Is to will to to provider do

Steve Rusckowski

Yes.

we detailing old and actively and by to, broadly to we’re work way flip because with all, what of we The those And we’re that as accounts categories. laboratory out as One, account United, three for account we to using about do. be first try those – think great need have going an possible. we account the accounts. a might quickly So we’ll directly client have they in is

regional And throughout said States I accounts and using force earlier, left we’re thousands is United they’re running. as two, blocks model our of Number of our mixed there detailing sales teams. our and accounts So we’ve a And with laboratory potentially kind the we’re multiple now with the much their to where we labs. it’s volume lab we’re where service we more could share have get back of point, their and a tipping become of of majority opportunity because significant in potentially they providers. network, where an

consumer that value quality is as competitor our has quite accounts another that some third more of we’re is out outstanding, not And deliver our number cases, a strategy also is, good, share. the in have deliver, gets service we our outlined detailing we the is better, our we to majority performance national And make we we’ve sure our that those everyday what category are way. the in So categories resonating. we defend

think to as very, have – marketplace so And well. our proposition we that a very of value defend strong piece we requisition

Operator

next for ready you the Are question?

Steve Rusckowski

Yes.

Operator

Mizuho comes That Securities. you. from Thank Ann Hynes with

You the may question. ask

Ann Hynes

morning. good Hi,

Steve Rusckowski

Ann. Good morning,

Mark Guinan

Good morning.

Ann Hynes

four denials Just due are a follow-up couple and monitoring in testing? increased is of the up days to then for year-over-year sequentially, DSOs a questions. do that up lot D with is, drug Or that vitamin acquisitions? your five is the One to or

Mark Guinan

Yes.

So we Ann, increasing The DSOs. not don’t revenue. the denials recognize our are denials

done It’s really It’s things, a of things we’ve significant labs doing little nothing to of billing one what’s is it being that laboratory we’re driving conversion concerned over of just be major handful a our So of about. up in time. them delayed. rhythm more is a and one ends

not the at if of has the In look the aging profile fact, DSOs, really you changed.

even look So hasn’t proportion the changed metric if DSOs you days, it and the key our DSOs have at over what up. XX gone of though are

we’re very confident operating cash this just hit spike is we about $X.X So that at our that all to concerned something we’re a not and billion that guidance provided. going and temporary flow

Ann Hynes

in confident, I and accelerate about the make Okay. growth your you’re half think think the second then you remarks, talked guidance. you’ll your prepared will And you in

So reported will organic is that from do you X.X% driven by acquisitions? this Or that think that growth improve quarter? the you

Mark Guinan

We through We improve. compare impact majority part little but easier QX, just walked the about of QX. of we Obviously, the growth organic that our a bit it. remind to So that’s everybody will so in compares in of that, it’s markedly an drivers. had

entry little optimistic we’re And the get sequentially. of denials, where get bit organic. with that going taken near then to that about to of we’ve Steve volume they that we’ve as United early. talked back well. are feel So And each the for I, expect expecting those help will from the mentioned, the of professional course, very the services That’s lift vitamin close. laboratory a prescription we some as a we’re that of contract, accelerating some D we and to are that over actions we and deals we that and couple And We quarters some some that both that flip around then monitoring would that. that year, addressed, gotten that of have volume drug will are we in the some others cusp the in

when all why of pieces So that’s highly you together, put we’re those confident.

would on end we the do to deals the but and be depending year not of between we’re now the So executed some extent that M&A that upside. just obviously, additional

Ann Hynes

And great. just last Okay, one test.

monitoring C and that that C back hepatitis percentage the payers, won’t. testing percentage I you with of as come Is but D hep work the the highlighted testing? With huge C should volume testing, once you think a a the drug vitamin the hep

Mark Guinan

several It’s difference in dollars not It’s huge a small million percentage. percent. quarterly performance. a makes But a every No.

behind experts, the I us, think has we more half already And that we’re a AbbVie than that is but a behind not market lot us. is believe that of lot therefore, of because already.

Steve Rusckowski

you’ve decline. do is been part which a we to there’s care, is And call the parts drug is the – other that hep if prescribed the two we to going what C testing

this. Second part of the is screening piece

pharmaceutical did see growth in we still that marketplace. front to a a to build necessary companies us I us, there’s be decline the baby in the million going to we’re prepared still hopeful said there’s work we’re tremendous the that with continue as a So of small in rate, opportunity and XX on Because awareness to still screened. the my boomers, of majority of need remarks, in

slow in the build with up the as pick doing that’s as hopeful in So we’re work we’re awareness And well of pharma, that should some with well. back QX. half to

Mark Guinan

still it’ as just it clear, be to fast. didn’t just grow But growing,

Steve Rusckowski

Grow fast. Yes.

Ann Hynes

Okay.

Okay, you great. so Thank much.

Steve Rusckowski

you. Thank

Operator

Thank you.

Citi. Giacobbe from final Ralph Our with question comes

question. ask may You your

Ralph Giacobbe

you vitamin a and have rough do Good Just morning. makeup monitoring, you if of how late, C not a ballpark? Hopped total drug baseline gave much Thanks. on D little a sure but hep of in requisitions? all I’m so bit this,

Mark Guinan

that. we Ralph, haven’t provided

and are segments panels Certainly, obviously a franchises, on. that so other have chemistry other larger. and panels lot We our testing our lipid

areas, positive, practice screen that we, it’s are and screening. as I monitoring growth traditional with day mentioned somewhat definitive to think and not I sample. the well, prescription It’s has prescription – to drivers obviously a a driver. inappropriate. again, has policy And with the just the of Hep around after on as drug changes Steve revert automatically covering if same to really and much, monitoring, do are been, major The or It are the already definitive for be us. do D these move slowed these because as C – did continues testing but feel you everything growth Vitamin same you

deciding some the that make appropriate. are reasons back think payers they would patient change second come back for don’t We in of a and And medically for that trial. on that’s the pushing we

to PDM other in on certainly, our slowed near big of a our the business, we why was some expect nowhere volume continue C, that that we within nice So hep it’s then testing see headwind grow. requisition It’s we that a routine business. or but growth. certainly, And to

Steve Rusckowski

Yes.

outlined three we us in working areas of QX on we did some caused started we the less down. have to what is on had than for QX. So We what that expected slow that already remedies

strong but the particularly was nearly past, what with we in as so ones prescription talked around growth not monitoring, about And the that and strong again, drug Vitamin we D. rate the outlined

So will to not. QX portion outlined we’ve of a is But we those rebound in do And we already what we were do over the QX, this. and started we to work want in visibility on you. provide we these the where thought in three have we provided going stronger did some – carry performance in will that have to to that

Ralph Giacobbe

XXXX. other And the is In is there of X, anything timing contract we Okay. separately UNH there Jan – contract I anything with the know words, need starts be of? the to aware

have sooner the annual of sort out-of-network out-of-network and of open year this network? remain network sort without rate you So with or to UNH for charge rate still you even the agreed

Mark Guinan

Yes.

of are in there’s out-of-network, network not then year. to the vast I’m around as we of in the And specifics we we’re for So of January majority said, to majority for still for balance January we’ll plans, as for HMO remain out-of-network working we rates, but been But that their United, going adjudicated some we’ve any going the be be comment plans details. on X, of X. starting the

Ralph Giacobbe

could squeeze in. if Last Okay. one it I

moving that or we XXXX? mean some a that of XXXX opening we a think making. contraction and you’re as do can you expansion headwinds, investments the In margins there’s generally make does for flat? directionally sense margin year? you think Aetna you’re as think next Just sort on, at you we trend vice UNH of as coming – margin think obviously, can to be parts, but lot could of think you Do this and boost us your margin a the give Or mind, guide up, directional versa? just of I revenue going should know margin There’s about about with PAMA there point, for get

Mark Guinan

Yes.

talk top I what a but than earnings, earnings comment multi-year the did any about would Ralph, I am way So as over multi-year. sure specifically. in was faster can’t share, earnings grow I on would you not expect, But on XXXX basis per line we that

a be given from certainly, might a So year-to-year, that formula little bit different.

So we continued expansion. margin implies obviously – that

Now an would reduced update on that in that margin before on of margin look, on some tax Day. reform, margin, which – impact took had we made – year, that. give with our and and actually November this net Investor that investments, multi-year so some slightly advantage we expect we’ll But to continue tax over obviously our

Ralph Giacobbe

thank All you. right, Okay.

Steve Rusckowski

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

Operator

XXXX for at Diagnostics Conference XXX-XXXX in the callers. will Time. XX:XX approximately online available on A Thank Quarter Diagnostics’ call or you transcript (XXX) from the by international replay accessed at of later be on remarks Quest website may this Thank will Quest today replays Telephone XXX-XXXX be for prepared Eastern (XXX) for at or participating call Call. domestic of posted Second www.questdiagnostics.com. you. A.M. be callers phone www.questdiagnostics.com/investor A

Quest Diagnostics (DGX) 24 Jul 182018 Q2 Earnings call transcript