DGX - Earnings call transcript Q4 2018 | Quest Diagnostics Incorporated

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Operator

Welcome to the Quest Diagnostics Fourth Quarter and Full-year 2018 Conference Call. At the request of the company, the 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 our and Mark am with here our Thank President morning. and Rusckowski, Chairman, Financial and Chief Steve Chief you, Officer. I Executive Guinan, Officer;

to, we Risks reconciliation of materially results measures will call, quarterly include, During tables uncertainties statements in GAAP may from non-GAAP make described that press Form through Quest affect most are Annual in current those We a and Form limited measures. recent differ Diagnostics' future our X-K. our to and but and earnings this XX-K, provide not discuss may measures results on non-GAAP projected. the and comparable reports may those Report XX-Q, Form forward-looking reports on Actual subsequently on filed release.

references our to and refer including call, outlook this compound adjusted excluding reported refer adjusted earnings EPS annual with reported growth to are total references growth, organic expense. growth rates. diluted to associated long-term and EPS, amortization rate to from growth, EPS EPS growth acquisitions, adjusted revenue revenue projections revenue growth diluted Also, For

the historically reminder, classified bad patient as refer debt reduction balances within concession associated revenues as now which were we a As will reports responsibility, to net in expenses. SG&A a these patient company amounts when uncollectable with expense as

is Rusckowski. Steve here Now,

Steve Rusckowski

will strategy. Mark quarter XXXX guidance. the Shawn, our XXXX, Thanks, Then This and today. more and our and take thanks the everyone and results full-year fourth two-point through progress us we'll discuss detail for morning, you joining review on on provide

than revenue accounts in as day, well about call. expected the same increased later the change of X.X%. XX% revenues reimbursement was for which Performance reflects decreased X.X%, in in headwinds the softer XXXX, investor For $X.XX, volume EPS estimate period EPS reported receivable, $X.XX, quarter, the and Mark as cover reserves of down will down was at fourth organic and the and we quarter adjusted from

reported earnings revenues, you despite share X.X%, challenges quarter, our Adjusted extends XX%, and from the share, to revenues EPS United grew $X.XX. declined approximately roughly to in-network XXXX, to this commercially approximately the update perspective $X.XX. EPS in Mark full-year a adjusted XX% grew operations XXXX deliver off grew attached positioned grow our and will on well we the as insured Quest status For to lives XXXX, in start marketplace. X% the revenue growth are some XXXX. to States. on is now good year. of Volumes in In

growth continue Our It guidance continued for volume will XXXX program. year. pressure offset throughout partially also our strong reflects the significant execution reflects that reimbursement our our expectation of Invigorate by

we at November, investor discussed we for three growth in in changes are based the our day, on As marketplace. poised fundamental

market XX% rates, their which expect of these will a First, independent panel-driven smaller reimbursement will for a pressure reduction laboratories consolidation. a significant structural XXXX, and we on catalyst change. the In profit, reduction for eliminate cuts similar XXXX. be believe hospital in in about Medicare a reimbursement and outreach we is majority could provide of The catalyst impact more

low-price motivated employees, which are in variation ever about plan cost payers the their in than are gain like employers Second, healthcare to patients driving find focused than And to more the nobody providers, [indiscernible], payer. supports more and value cares Quest. better country's finally, of share. their largest Increasingly, high-value our the

to well-positioned are trends. very benefit these from we So,

has accelerate five Our growth strategy to elements.

we've the Now, I'll share progress made.

us laboratory acquisition this a Earlier clinical Boyce Midwest. services laboratory than XXXX, leading provider The deals diagnostic grow to meet and week, year our revenue of XXXX, we aim we X% clinical of contributed the of the beginning and to M&A. Bynum, of nine growth. and we to completed from a more this announced acquisitions services X% in First, closed, well target. than the position more XXXX business In since

systems. element health to relationships and plans is second health hospital with expand The

we're First best lives, billion as company status We've a entering the a Shield UnitedHealthcare, dollar of Blue represents opportunity on result Blue about which health and New Cross our decade. for XXXX XX assets Jersey, in with Blue plans, in-network added this million Georgia. Cross over has a Shield of Quest Blue Horizon had of with

relationships pressures, have access. in early volume As this Hospital with chain. in I facing network providing lab technical strategy. health operational them unprecedented the provide both already full oversight, growth supply therefore said for earlier, region. to maintaining We laboratory the systems lab recently can help signed In motivated professional discuss expanded management and laboratory their resulting ways agreements from lab financial we will encouraging Southeast and services employing XXXX staff, we two are new are responsibility lab we seen

PAMA be at will we CFOs PAMA this CEOs of to becomes work We visible, more fully aware hospital As with their which labs. outlined still our not most of laboratory more day, us believe that hospital hospital investor increasingly and are outreach on motivated impact impacts strategy.

IQ. which prescriptive growth provider made offer of third laboratory to our including element fourth diagnostic our access strategy, acquisitions testing, and of The capability our of we for made is progress innovation. number broadest enhance is strategy tuberculosis key a from service the XXXX, in growth offerings We XXXX the strong be growth We monitoring, significant key Cardio the categories, In drug element executing saw choice our of in test to XXXX. to and consumers. double-digit expand to

view for And once users, patients through or app. are is patient Apple patient our office, review financial then, know At service through in service Before an estimate patients the their MyQuest electronically center check results a and can real-time let's on available, the they now times we physician's patients their wait them enhanced before Health arriving digital or responsibility which can view the estimated more appointment. MyQuest at making in million platform, X.X collect specimen. center, than the them could available before

health And in Safeway and industry-leading United better, support as continue launched Clinical well. pleased is their At we'll also out we our and analytics strengthened volumes The Walmart script to to be strategy helping proposition and understand than Connect, value States. growing care XXXX, This consumers XXX and which have the it In of has lab recruit extended seen without locations. health which faster, we service the from more data growth a services. is help our launched of how Payers improve efficiently. Quest CROs in and in pharmaceutical Next, the We're population customers. trials Trials far. to patients outcomes. QuestDirect, we're our data and for build a test the element year-end, fifth them we value so XXXX, can more retail members' a with pharma strategy. continental enables revenues doctor's we've

part is to of two-point excellence. second our drive operational The strategy

Our ahead. Invigorate has and cost-cutting initiatives been see more successful, opportunities we

on there's to automate reimbursement a their or service year roughly business, reducing standardize number concessions, for continuing of and center as improve recent our well wage cost identified increases X% a optimize an and opportunity $XXX We to a we our about as pressures. day, investor million networks. and patient to areas denials At digitizing per as patient improvement, and further bill save lab of such continue confident are structure to offset in

we're increased the our in also structure. XXXX, pressure closely managing reimbursement Given cost

increases needed some ensuring We reducing expect to are we rebalancing the resources volume this on our the areas operational in deliver we while resources have expenses by year.

me in over and through let will Now, guidance who turn to performance you our Mark. our take Mark financial XXXX detail.

Mark Guinan

information for change versus Thanks, diagnostic increase prior to by adjustment down quarter billion, our will reserves to services consolidated the prior increased more declined the to due highlighted estimated the number a the moment. of on that in X.X% acquisitions Steve. net In year. X.X% November. on the year, fourth revenues Revenues in versus measured receivable share in year. compared for $X.XX X.X% this were we Volume a revenue prior accounts previously I primarily

acquisition acquisitions, patient fourth quarter grew the Excluding the versus the concessions. X.X%. by per X.X%, denials reserve driven increased and declined by in prior Revenue year, adjustments primarily volumes in

slightly were expectations price full-year, with the For than our X.X%. consistent headwinds of less

quarter. made to in Now, the provide fourth I'd reserve the adjustment color on we like

You'll to confident and around process in complex this one Day. denials our and on ability were following: a billing level Because timely impacted a historical these system estimate increase reserve and our Unexpected our this in timed to I patient the estimation accordance receivable we we and coverage resulted approximately in labs regional reserves this precisely increases reimbursement precision items going at change levels. by with of We Investor based not conversion filing forward. them in monitored process experience recall denials am increased our our accounts our responsibility the rates. $XX did We in we of discussed typical with have recorded estimate million. in that our

in D lapsed that C couple quarters. both in payers reimbursement significant PDM coverage. testing fourth an provide the quarter. to to volume drug continue of like and for also we've to reimbursement, restricted XXXX, we challenges test payer categories In headwinds I'd been that payers saw denials our but of hep prescription on on, seek expect we vitamin support prescription prior impacted monitoring policies the evidence more the two as more to we moving clinical Before an monitoring, increase update drug the and In over

significant we this headwinds previously, Turning grow noted genotype hep therapy expect for hepatitis finally, need of testing, QX, as C while vitamin share testing D last we lap by XXXX. the lapse payer the we testing to in more second pressure volume in higher to the And reduces XXXX. to on C, revenue D expect restrictive these One modestly, most in therapy national as market vitamin implemented March quarter. impacted expect which both a payer and continued policy to we but continues denials in

ago. $XXX Tax revenues Moving prior-year benefit Act. the was Capital the XX.X% the approximately a reported year income to XXXX. was compared operations billion provided in XX.X% adjusted $X.XX in million of prior income Adjusted year. revenues $X.XX $XXX XX% in or included or XXXX quarter by $XXX quarter fourth of $X.X down Note year. operating in million to of as basis, $XXX EPS of to ago. last and was year EPS a quarter compared million results, expenditures tax year. from of operating compared or versus Jobs $X.XX to on Cash of recorded result $X.XX revenues X% a our million XX% million $XXX in was a compared Reported $X.XX the last XXXX revenues the $XXX remainder On billion were to an million Cuts was or

we between Revenue expected to and Reported billion, increase the versus to billion an XXXX. are year. the be EPS than expected of billion, $XXX by to provided approximately and prior X% turning greater Cash and $XXX for $X.X than XXX. guidance, expenditures million. and following is to be be greater Now approximately X% to million between $X.X operations $X.XX outlook be be providing XXX is are expected to capital adjusted EPS to expected

to there considerations will XXXX. in are that several Now, for I think review you about now

we've as to $XXX we the facing This more of than year. million be spread previously, reimbursement shared expected pressure evenly relatively and is are this headwind throughout First, year.

I of easy the earlier, quarter Second, of fourth the based in factors discussed the quarter fourth create compare should an on XXXX XXXX.

our revenue build Fourth, includes continue executed. and throughout mentioned, we revenue more M&A year. are to has growth volumes X% Third, that to than and from to them start this our announced as a guidance year, good Steve off the been expect already

structure, costs to are restructuring cost expanded second starting yield and network first of Finally, a managing quarter in begin the XXXX, will savings quarter. the incurring quarter We're the also tightly incremental and from volume in our in support undertaken have the access. growth our first to we

to quarter, back highlighted, in we down to now fourth to to patient first XXXX, and increased As we approximately you about to And first adjusted is reported headwinds expected we turn concession while the less to carry items day. expect revenue revenue think XXXX. I EPS just flat consideration some quarter, quarter. you, EPS Steve. have it remind the of Taking adjusted are into be be similar these throughout the these with assuming in the denials we one the into will in I

Steve Rusckowski

Thanks, positioned in grow earnings. to Quest is well revenue and summarize, XXXX Mark. Well, to

extends XX% commercially status approximately now start. to the United off in-network a States, and lives volumes Our insured in of are the to good

reimbursement reflects volume strong XXXX continued and of for by our Invigorate guidance increases, offset execution program. Our pressures

your take Now, happy any to Operator? of questions. be we'd

Operator

you. Thank

comes up now with today question will it We for [Operator questions. Evercore. Muken first Our Instructions] from Ross open

Your line open. is

Ross Muken

Good morning, guys.

Steve Rusckowski

Ross. morning, Good

Ross Muken

us were general of of that and hopefully, volume and the of of So, of dealing is into, 'XX be the kind your occurred sort Because tough through better? obviously all us as in fourth sort do be together confident I we in And sort on so state that we're sort a walked market you a at are guess to for quarter is and look of rebasing looking point And the a headwinds structure, of saw obviously be positive end you part fourth of lot kind to sort implied accurately we 'XX the supposed back off this for some to jump going and as side. quarter, lot how now QX of that challenges of reimbursement I the beyond, this weaker, the toward then terms of sort lab your that year you be of then year, what the guess for and in the you balance found side? you're can over there's what's over for thesis balance should the to then the we we a in there's business, of that the yet of that had of I and but happening reflected bit guess, so the the that. a the clearly about challenging cost think with, the recovering. dealt of flexibility you you've of and you first of Mark we things year kind I it with part put year guys, could the of guess judge the then

the for moving So I'm your and confidence of some get to a of here. sense parts sort just in thesis evolved trying

Steve Rusckowski

Yes, And and the then Mark. for to start, it let thanks turn question. me I'll asking

market journey share, a to of up tremendous we XXXX. in day. we'd share. starts you start, go to the and pick in And leader with we kickoff We opportunity the our think back So what announced shared we just believe investor gain have I to still it as

so the couple told for we share of of our up targeting our that so it's believe M&A, pick far in so also our reimbursement most the parts and investor to have market we're X% gains, is closed, some actually one We X% and XXXX accelerate day, we ever two we What But reimbursement guidance seen what seen, for gains that only year. through there's this share costs, at going significant put in in with industry has guidance do can muting it's this we're is so in roughly guidance, said growth we will we we M&A. what the XXXX. you

to to in 'XX, pressure. Second is, able we up will XXXX. see organic be math, growth, opportunity and to to go the will that reimbursement pick an continue share believe there's and us But you for we pick the up in we offset have when volumes through that

significantly. but PAMA back believe be The a We industry, for second us, going it's points what's non catalyst more going of of market part hurt the consolidation. on will much leading this come three in I'll One to and to again. is, is further laboratories hurting those the all is this

lowest than with better then managing they physicians, proactively price. pushing the job spend. and ever working as their best in service the value the marketplace; are how back our best on questions consumers And of do access changes and best their at payers on pushing asking better about value the a employers the Second are with in back finally, are category our is, us the we quality, in best the marketplace, of

the deliver like have day. believe that would And of a 'XX we to at that we kicked we that? to outlined pick with we confidence add journey outlook you off Ross, to up here Mark, So, can investor really with that beginning share.

Mark Guinan

which state decisions day that. start Quest. and both Medicaid with investor I've don't think edit presumptive for including put programs and as same clinically second seen NCCI payment panels but there was we've prescription mentioned, that's D saying certainly to we the policies and monitoring is and big more year they've now. space. them payers necessarily and vitamin the in area year of around I a that making fibrosis, the service saw since testing, Ross, was think changes policies And day, one back for the that going times, are them more our last tightening in clinically that denials year Yes, they're for many we change appropriate quarter, several one squeezing is this about talked analytes deny fewer I'll at even saw throughout appropriate we've for sure, allergy, but We've way in in allergy of of were those I've fewer experienced the dramatic definitive of talked in the Steve. to significant an tests. cystic resulted put more that than paying any Denials [ph], in part again been on and about we pay

from So, year it denials a tough perspective. was a

We have guidance. into built XXXX that all our

And thinking the fully when I providing. about into guidance in all we accounted so that fourth QX, our the for quarter in business talked carrying we're

of area patients. was Keiser The into based we of Report more went knew see Obviously the the delay year actually the because of and we're match so finding experience a surprise that was we may the expecting we may adjudication then historical rate, collection other seen it in up coming on bills more others there not average to that the referenced out going meant patients, significantly, and impacted. we year, out informed the negatively that concessions. patient deductable -- our to start that about sure middle I'm was we you've starting so us to being rate was the what the actually a And collections there's that being concessions. patient and or an we similar and level as the process came send get that from were of we, and patients the that our to borne payers, in was by our revenue of just obviously

The conversions. have with lab other thing our did was one I some issues of mentioned we

that with a We're it We struggled, years have had therefore getting ago not do acquisition. with well of shared. Quest we as historically, things. deadlines part did we've process. I the as in filing done an mentioned, of these particular as a endpoint not was acquired This and a did of a was other we number standardization system, as We legacy lab to this conversion the couple system close we therefore and some

The is of other rate a versus other is in this where there's payment higher issue concessions geography historically geographies.

So, as more looked headwind. we less the is that we expect delays one fully that out behind got and a and patients to send definitely and good bills we on our created news more in as to directly to us. that to ability payers, be The

as And level said. a so within guidance. of the I of issue is which the more that's will patient denials, carry into XXXX, our And versus responsibility temporal and baked overall fully

Operator

with Our next Goldman question comes Patrick Sachs. Donnelly from

ask your question. may You

Patrick Donnelly

guys. Thanks, Great.

Steve Rusckowski

Patrick. morning, Good

Patrick Donnelly

morning. maybe some just color. Good trends, I United the know gave Steve, you on

are pretty what's… any in in expecting expectations through first Can of quickly. it's frame move tranche to way a expectations? would can guys then And year You appreciated come you certainly terms for you be the how just to the relative talk

Steve Rusckowski

sure. Yes,

to start, off it's said my opportunity this to to we So, 'XX, expectation our the to early a and be in year. of also we in start. also that that it growth what 'XX, what it's on it continue pick up is expected we would a into be will volume throughout into But beyond remarks, said so good okay. that 'XX, good prepared build I a us able 'XX, the provides to off And some expected

portion large 'XX, see a of billion worth 'XX. dollars when in we'll there opportunity, that guidance. about beyond portion talk So, a that's our billion of and of I that But contemplated in a is dollars

throughout will happy We're year. volumes to we early see. well. And tracking it's the build So with the continue it

Operator

from next Citi. with Giacobbe Ralph question comes Our

your ask may You question.

Ralph Giacobbe

good Thanks, morning.

Steve Rusckowski

Good morning.

Ralph Giacobbe

said that. you And rest does talked first bit million then away related go from million Medicaid Just I seeing about estimated, quarter, cost in you so and said whether if you understand worse you size previously seemed hoping PAMA. lab headwind, you of the the of reimbursement little a -- $XXX I size, for real an quick, equipment that than the can could, what headwind just to that, the -- think over incremental wanted incremental in think similar year. $XX you to you Are

Steve Rusckowski

Yes, Mark?

Mark Guinan

amount not Sure. shared Ralph, actually we're have tied the these may Medicaid the of $XXX The at have that schedule, fee is where fee hard reduced PAMA are to their Medicare It's directly it is service, programs consistent with outside rates, PAMA. headwinds justified from for what whether reimbursed million on lab clinical rates directly some know I investor There's PAMA or large. Medicaid cited they changes. day. to

changed can Not states, You direct across potentially of be to the all rates. some all seems there relationship. the have look them

aware in QX geographies all new we'll And our there's when yes, we're magnitude extra that specifically, of little outstanding. the not as the it's to is announced of what ahead volume, cost of that need versus adding amount wanted access a restructuring less, then, more also at continue this unusual, at couriers, the And to all monitor we side, from the patients the cost as of of doing obviously, coming investment base as providers. sales. volume certainly by more little people we adding to when see benefit a you or So not to cost add this quarter the the is, going cost people not bit bit ensure in [indiscernible] until is customer the service you understand inform making of look either to and our and we add that's are things initially on of we that asked we end of We're we to the stakeholder that the but actually not in centers, the to about. volume do year, there comes the us but Medicaid size we're that not patient the and as spending quarters QX, where only experience of headwind but typically the rhythm you

So, that's as cycling, fewer We wanted up we it make in but significant other of QX, the year item is what the impact sure QX versus to I really understood. significant. is day is mentioned, pick that losing a terms the And in quarterly day going people be year-over-year a revenue one to comparison. last then billing significant in it

Operator

Thank you.

Our Quirk next with Jaffray. Piper comes Bill question from

is Your line open.

Steve Rusckowski

Bill. Morning,

Bill Quirk

you. Good Thank morning, everyone.

you. So, a bit couple on universally of versus, on do confirm on over say, based covered, much diligence. PAMA Steve, then a play volumes how little Thank questions Medicaid big initial due here, hoping so on you could think quick, first because on off, could -- much levels. the for at your want least denials, period? picture period be from is it's PAMA volumes on just conversations, lower question lastly, just pressure pretty this expand reimbursement And vitamin the that three-year hospitals D, based to real that the Also our you for M&A was

Steve Rusckowski

Mark, you. take you why the Got two? first don't

Mark Guinan

often put intelligence a Yes, sure Bill, result including have clinically it we you're Also, order, where we payer based think I'm so we Historically lab. put Medicaid in work, of legitimate, it managed deny of obviously aware restrictive they not have requirements, get in new can a we a of once policy. on they in that some lifetime. and do the an We preauthorization referencing, it's it denials. this denials, in where ensure it. this they the -- only provide a once They weren't to what but in to by more and we had Medicaid the different lifetime combination appropriate it done arguably that may

are do combination. tightening was actually, it my mentioned, vitamin had the back I traditional fibrosis couple things don't D, stopped state we'll well. in programs as a circle And cystic have that I of have the with we have a that fingertips, And reimbursing as absolutely cystic Medicaid at and it those So fibrosis. states,

bunch still orders to D we codes. and common got So Quite certainly, of testing. part screening as of continue often get laboratory is with a other a ordered vitamin

to fall-off some vitamin have has there was But D that to seen be was determined a the of a number ordered is D significant being one the and rack. still been vitamin also test. revenue, because the don't revenue diagnostic for coming codes that. in you are get the not to headwinds tests absolutely and are are as appropriately, change that this not that payer, suggest clinically resulted in driving appropriate in Even those that, choose with us. them industry and And screen we a So physicians if have our driving headwind are The to initially denials appropriate. perform prescreening educate that not we're is the not for reimburse, doctors code to is with coding and just of use that The in gotten and denials has national really but not them resulting certainly, screening. so unfortunately,

Steve Rusckowski

Yes.

fact, roughly. on of year. said basis and diagnostics. slides points in reminding one years, of It's XXX charts we And some acquiring for second back opportunities we and been, prepared deals buying go services at that, me to really have Missouri. those if outreach, a use, if year for for capabilities finally And you vitamin it's past up in question say in our if about the we a been the laboratory what that recall, at acquired. few Bill, pick a And look look start by the we the voice is have Investor one regional then, Day Excuse done app about balance they strong but your a of hospital you you up and is M&A. acquiring we and still closed you deals, some on just of majority we advanced M&A, we the use and what said that, it's remarks let's hospital we've regional distribution So hospitals, in and everyone not Day And let you around are outreach Investor me, deals. XXXX, part, some good

it's So doing And we've do X% again. contemplated what once X%, XXXX. that prospectively, believe deals also said we that be obviously all M&A forward. we example indicated we also which three going are is a it's categories, north only of those guidance, good is for around our something of for And should in

portion that discussions acceleration good up Bill, feel laboratory two prepared that's And lab growth our with as opportunity. around we're again the professional have more engagements in And in pipeline about strategy. remarks have some the that we hospitals their picked So that discussions in we is an and discussions also the well. in organic around we half of we engagements services we those we back and 'XX have announced the having

you need that X% laboratory continue a up organically opportunity equally to contributor hospital our think to of about to but services organic announce. to professional So revenue also pick these the through really growth we because M&A from engagements strategy that

Operator

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

You may question. ask your

Steve Rusckowski

Good Morning, Lisa.

Lisa Gill

to Mark. the like the the happen the some this at commentary just we give more have Good networks, that just of of third that contracts, things is are thinking managed front other part just XXXX, you think that third as vastly along secondly, about I am earnings day of throughout understand things, about as that just also, vitamin in volume be year. the based see to the roughly then earnings in just throughout Steve. all will we come care the this those question. I Good fourth my like your you in maybe it's the look be hep of correctly are can the comfort And half. well D anniversary we're to going lot going around would lines, as If about us morning, to volume? quarter, it Steve I whether thinking how second the you on well XX% give you as to that it comment think educating quarter the a we're to different that see pertains that morning, came about first that incremental physicians are some the C, It in in build in being us XXXX, what as to will half, sounds made some I the color, XX% really looks that is it wanted make of cadence sure in so earnings year and XXXX

Steve Rusckowski

you. for It's Mark. Okay,

Mark Guinan

correct. cadence with start you're I'll Yes, So Lisa. quarterly the

So easy XXXX, in as at expected given XXXX Steve volumes to we that I referenced comment be change will build. significant also mentioned and we expect as an we we enhancements should QX, look color submitted, I but when more to compare the

incurred in so cycling the a in quarterly and QX. well, happen then calendar timing of mentioned certainly this significant, of more we got we those incremental volumes continuing the third the compete the So a going not to while into much insignificant. have we and in as are expect referenced also year, is the know will on and of time. you more when change at quarter, what And we're we we and to moved you of hopeful to to expecting the gotten offices we're not build transparency, probably to headwinds year-over-year last impact is that day waiting the all And beginning and year certainly we're as a included network. bunch us but more that access We over with getting yes, preferred we and will United And in And we're be United the some anticipating it so quarter, that first lab will that some the announce certainly announcement. past, hoping day impact that that are of losing provide patients. have benefit and left not we that finally be as think well,

cost that we some all earlier, compared would year-over-year so compares I those much for in Last with add QX. that have QX topic items therefore, the thing reasons a tougher combined is mentioned to patient in concessions. So I

As would directly we mentioned not did away anticipate shift the where beginning from. revenue we year, a from the on to significant patients the payers of come

day what in to one. headwind but time collections, certainly the that, saw of adjust our concessions be as from over last going a that's will year, we first higher we well. we that Now as are happened in a Obviously, we at quarter look patient building rate

that All the into of guidance provided built are the year. things for we those

Steve Rusckowski

in with and communicate in shared to first the network question volume tranche our We fill that the the to in XXXX around of back year so throughout Yes, what and when to Georgia. so to growth we we United just first the and we're with quarter, be that going out Horizon started is anthem announced customers.

And ready get so, you network to in flip quickly into back possible. first what and customers's accounts us will as the we will, of wanted really good that request to see first we're those quarter is the if those as they tranche,

the they of not opportunity 'XX this build, continue then that is and firsthand of 'XX mean, you'll on market it's to one. in back some rest is, the day this hearing see network. us it's flipping going of and So from and I why still we're for of that is is part into us everyone second to provide some that 'XX an and

your and customer calls we on takes is do accounts this those to work typically, the integration just of be as some We So to work make sure result do we need communication. can relatively the need some to sales new that issues to to question sometimes force, the do some flip IT and customers might a those answer takes continue that multiple our orders of get it to be what to we time. able to those and out with we

those only Blue of We in back for those lot in the of United. of more got Cross So where gun we of are Jersey taking access, accounts and chair we're network and -- we pick Shield XX% than detailing time did we've have the with state Blue so with of the up you picked a up Jersey system New New customers if take in maybe tranche. a essentially number first loyal that volume were had the to that a

we're see to and do we'll backup will and up what we in that's shares. in XXXX where So that and do need opportunities more pick going still continue to XXXX to

Operator

you. Thank

Barclays. Meehan comes from Jack Our with question next

ask question. your You may

Jack Meehan

Mark. Steve. Thanks. Hi, Hi,

Steve Rusckowski

Hi, Jack.

Mark Guinan

Hi, Jack.

Jack Meehan

I had a and couple quarter. volumes of just hoping for some details on both rack the rev the in per

was rev by math, down X.X% about the on receivable my rack So two accounts points. per change

if contribute and calendar of the moving be helpful. would the on the did So in side, could are? between what the That volume much will weather us M&A be pieces remaining, reach factors helpful? And you some how on

Steve Rusckowski

weather calendar in just? QX Jack, asking And in or you're

Jack Meehan

the quarter. to all Yes, fourth related

Steve Rusckowski

Okay.

So higher core explained the growth business. things mix, other higher had than per business like of include at lower rack as revenue per we rate as the so a drivers rack revenue in for our PLS instance, overall which, our past

what prior per on concessions rack. referenced created increasing throughout an relative then, of terms the also to the denials year. So headwinds that the the rev I of some year And that in a business experienced fact level patient and

wasn't have versus those as things actually but all tough the it req XXXX it revenue is XXXX, are that in change QX maybe a compared exiting QX year-over-year we the the So estimates per that recognition just so year. business

So those had certainly significant of of wasn't it as are weather it in the headwind We a well. impact, that some bit was little contributors. but a

end we year the the the thing will that in had as year. well. back In a changes before terms small that some was was days, the of annualize that And other the impact small price of negative in of half XXXX impact,

drivers decrease those things So were you year-over-year all certainly req. those in rev the and in combine the

Operator

you. Thank

question comes Kevin with from Caliendo Our next UBS.

You ask question. may your

Kevin Caliendo

Good guys. morning,

Steve Rusckowski

Kevin. Hi,

Kevin Caliendo

call. the for Thanks

preferred go So to wanted I United the network. just over the

be bit within the July to is behavior. just member what actually I changes you're comment clarify understand actually happen you're your planning I included but that You helpful now on what you can now little network like being that also if within that hoped you that X, that within United given comment to assume a that would the going want but come would to United Network think made the their you be in included. of behavior part And

sort really of that? helpful. be You That quantify would can

Steve Rusckowski

Sure, would one be preferred network in and fact forward United we all, we're back sure, in of that Nation's were a May laboratory think included. we're United largest with in when go the the commercial we announced first if that migratory would that to

is different us in certain know things the of Now we're in network customers would customers it's it can the on where the past include that them on working payers better in is about to included interest things include do strategy could could and we in on that, that on being the lead parties that that that. It best laboratories of they're and your will realizing this, things by of preferred spending laboratory I we shortlist gain designs, an geographies going having hospital in do be a like working planning my But could they within up geography. to also and they doing, that the think we more gains. mind tighten market work are to we drive make particularly clearly opportunity and with up job our hopeful on announce so for to sure think one by with strategy going laboratory United network, after all do taking network share. that a with that what proactively us is share all that And the to to that us a we're it to with where are share include there's benefit could and

you we're we're deep announced lot to as before that be but So our last be expect, would be course and national strategies a just we've within the can that network outlined help with and it the hopefully, announce given of market included of to through announced largest nine there'll this months. should given we plans we us it's that the we'll six

you like So to would that? Mark, to add

Mark Guinan

think criteria at is to need and work members we've leverage of what if it's confident. but well, applied sent lab it certain set we better the Steve largely particular captured those to ultimately a to and it's has looking of that I in network, therefore better terms there's looked ecosystem a that think very for for the as other that metrics everybody patients is who right announce, United, the covers preferred, But of it, we're benefit all desire we're network United's it's are more preferred respectful will you value and and United obviously then providers. obviously United for is in wait that there we and value in lab also aspects and reason quality is preferred their for things I

Operator

Thank you.

Goldwasser comes Ricky Our next from Morgan question Stanley. with

your ask may You question.

Mark Guinan

Ricky. morning, Good

Ricky Goldwasser

morning. Good

start XXXX, payer when talked me listed with in to impact on one, first March you going about into lab so in national when had let questions, quarter. denial price that you that factors two a started the negative is payer pay So the

payers conversations not going So specific factored the what risk in the have payers range? your one, are confidence with had gives national that lead and that to other you guidance you you of follow have in

Mark Guinan

while certainly but have our this timing, the there. go for relationship move the payers Medicare within don't national to a and we managed our and our well with on, who following and emanated there a that and for expect of is built really as MLCP are payer to they've be a close exact in Aetna, we guidance thanks we adopted the we in therefore the Aetna payers been know Ricky, it we that's all that obviously have direction where XXXX, there do significant assumptions don't expecting remaining from, know labs in for are and certainly already question. assumption, to space majority sure Actually very Cigna early to Aetna in the

Operator

you. Thank

next Our Hynes question Ann with comes from Securities. Mizuho

open. Your line is

Mark Guinan

Ann. Good morning,

Ann Hynes

Good morning.

to then minimum factors that could range? range and and share know of it guidance reason is this what swing guidance, provided cash minimum than reimbursement for secondly embedded, it that looks flow how cash you is is that how can let free the strong you. is M&A free a higher slated just biggest time, you your what you and flow get get it much guidance, the you you headwinds, where us that maybe despite Thank repurchase this doing pretty are much typically So embedded and on

Mark Guinan

Sure, Ann.

some we take calls earnings, on cash impact working change significant on other net cash guidance But commensurate puts forth change flow a largely pacing and $X.X flow, that not based around our account. year-over-year is so on and assumes operating our number, is within is so in tax items there is operating it billion the capital obviously into with and around the So of that our earnings. those

do to for between which majority up terms some capital ourselves I view cash equity XX% flow, our in from internal point basically least expectations towards shareholders share and that I us our to the at pick that to provided of reduction this XXX XXX dilution that to and In is built certainly dividend but we repurchases somewhere of talked we obviously our to XXX long now commitment gets down. given free guidance preventing to our way anticipating cash We're need get XXX our deployment, to commitment that in in program. a now ways any about

cash is flow remaining the with dependent. So going to free situationally be

time value have our same don't financial in discipline we have that shareholders move that have meets any then given So with the strategy main and shares deploy of on the and opportunity I carryover based closing executed with we're in on money have we're some an talked but we're coming Steve we've we we're deploy item announced we to but a going point as create deal excusable we buy year that good believe our always more deals M&A the mentioned use of will forward historically. there's back we a for deal will more and cash into that deal that if just as have we expectations beyond going expected to chunk we already that we

So others of majority and specific beyond that's the the this our commitment we but have and -- deploying beyond the point for balance I are acquisition. year the cash plan or don't a

Operator

you. Thank

comes from from Jefferies. question Brian next Our Tanquilut

open. Your is line

Brian Tanquilut

question now. contract thinking the about with that up something that that guys. that just Blue competitors call the just exploration market right about good give and a to payer Is and top have as so. that layers share that for start Cross terms them they could with talk Florida the talk of we detail you payer having goes they're you should in we Steve, on you set consolidating conversations about morning of a is your in Thanks? Hi, on if

Steve Rusckowski

Yes.

are the that were our know what to what up be with payer. big down is and strong we matter new others honestly out With Brian, going should have nice we well most in United with So, they obviously into bigger talked nationals we States. of say then comment we Investor XX relationships, the will we that is will But pass it XX as said you are states on in will about fact, some record the shape. specific and Day, what shape due specific shape, of we very have they their nice United good got a these would where states also pick we

at quite are strong other million New and If most shared XXX strong. the Texas, California relationship York, very you states Florida payer with look and lives are about our with

we nice in at doing deliver and that Blue Florida. position good relationship, states. And the our feel we a feel to true strong we're specific about relationship to that state good Shield about So go question of that good that working have Florida we Quest Cross shape a in Diagnostics we income is that in and we're back cousins over to We have about Florida. with share about of talked and in those in Florida, access in Blue because great our your feel on all nice we Florida

Mark Guinan

it's is we've year apologies, grow will might given volume to historically negative so some others, how obviously, uncertainty, Brian, of If reason we make I year, question, Ann's and et it's [indiscernible] a I this how quickly this Ann uncertainty come real in could the the volume, hear access, the come, from, call just second in jump cetera. the we've my not jumped variability than quick, didn't part where terms of to the more the we experienced on just we it move of chosen

guidance the the towards beat even revenue or surprise ourselves revenue we lower that the to extent be we're our obviously is guidance so upside. upper the And of the and that. end with guidance, our would the of hit floor potentially providing and end Those

obviously and think in there's the I of come which at variability lies and pace pretty on because through. the around good. overall got question pricing depending it margin they which payer So growth, we've comes our down which the Really, source costs the the is volume

to opportunity would hopefully be [indiscernible]. better your the that chose So answers question on we do that and why to

Shawn Bevec

next question? Operator,

Operator

Thank you.

Bruin from with question next Lynch. Derik Merrill of comes America Our Bank de

Your line is open.

Derik de Bruin

Hi, thanks taking for morning, good call. my

Steve Rusckowski

Hey, good morning.

Derik de Bruin

point told can you basically, the you're do to diagnostics work visit. some shop not have a that higher basis, you around their out-of-pocket I they guess, that seen one-off I creep to choice provider I you to that the done intervene but tests ask vendor run since telling send I'm I at regular doing there? certainly the my a or how to on can costs getting lab consumers aren't you to lower diagnostic may this if hospital to get to if do a for drive they're like sample, hospitals give to was intervene now the go Quest the cross what have and consumer when or annual noticed it's how at if a hospital it go

Steve Rusckowski

a question. good that's Yes,

consumers for awareness variation, raising wide on related and that approach. to been medical multi-pronged we've around the So broadly, is a and costs

First we at of some states of wide states, are in consumers. this actually a The Day. provided providing all, visibility for variation actually Investor

number the of picking aware share second the wide Web a laboratories. physicians for reasonably that the of become with healthy see considerable in versus but it's this practice, is consumers bring on a might variation a information and state once for they average they're if Massachusetts, state us part in care wide they hope a cases be you health pocket, this to consumers a Quest their are their that of are providing since of the which this in advocate, but once they site those coming not even a sold and And year. the of the it up though that patients' many the on And is money. year, fair to site of And typically, what commercial their costs go it's for start realize rates actually of and some Diagnostics be that for So Web will hospital patient, outreach their patients a of are systems that they that physician. have realized is hospital the sum you'll for still out the are could relationship of variation this

So out-of-pocket it's a our of portion cost. considerable

this doing look also visible. are we're when make the So making know you it you with what as the increasingly of physicians we're well then at the aware and sure payers that that payers

many more, the reach that And lab, realized payers and campaigns to of with and so know ancillary the pay there's why I out the like not messages you services related it's just you that simple know other membership all you their have -- have same to issue.

So radiology of a for visibility. is instance, getting lot

help they them cost then to simply it's point so that sense? they if we're doing Quest, topic And does go -- going asking they make but extra they getting they once is it. that's ask and the well in you why about what don't this that as they with consumers from can So to the And you demand -- then unacceptable it's therefore So getting we're can money [indiscernible] hospital equally payers in lab. we only are tell here visibility go they to to this Doc, question is from physicians network and general realize a questions.

Operator

you. Thank

Our final from Larew Blair. Matt question comes William with today

You question. may your ask

Matt Larew

Hi, good morning.

Steve Rusckowski

morning. Good

Matt Larew

ask partners. wanted about referral your I to

to care potential at what thanks? sense you a attributed that the quarter. wanted had Steve, level, volumes mentioned, market traded nicely for increasing I first end gains to share utilization get through of health that You just versus

Steve Rusckowski

Yes.

year first we of here all, good start. see the the but only five to happy we're First we're we're XXth, said Valentine's we as I Day, guess, six or of in yes, -- what and a off February weeks

or asked drops but in been think stable. not customers. our utilization share, about good I'll haven't We big we it, know, are We're seeing pickups volumes you

we think out there therefore, stable. is relatively So utilization environment

what from gains. So is expected. volume therefore, And coming we share that's the

build start. So, and the throughout up going picking We're good that's year. to share,

Shawn Bevec

Operator?

Operator

You're showing queue. in no questions

Shawn Bevec

Okay.

for appreciate Take and have care. We everyone day. thanks So questions, your and great today. support us a joining

Operator

from at Quest Conference call Fourth Thank Call. of transcript Quarter accessed Diagnostics on replay approximately remarks posted XXX-XXX-XXXX the may on you Goodbye. February at the callers in XX:XX on www.questdiagnostics.com. Time international later or available Eastern callers. be A A by XX, domestic XXXX be for XXX-XXX-XXXX Time on Telephone for site Eastern replays at or XX, February Diagnostics the Web participating www.questdiagnostics.com/investor online until XXXX. call be AM midnight XXXX for Quest will of phone prepared will today

Quest Diagnostics (DGX) 14 Feb 192018 Q4 Earnings call transcript