DGX - Earnings call transcript Q3 2019 | Quest Diagnostics Incorporated

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Operator

Welcome to the Quest Diagnostics Third Quarter 2019 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 our and Mark am with here our Thank Chief morning. Executive Rusckowski, Chairman, Financial and Officer Steve Chief you Officer. I and Guinan, President,

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 to 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 expense. to from refer operating call, to this adjusted reported to EPS EPS amortization reported operations income continuing all EPS excludes refer to excluding References EPS diluted operations adjusted amortization to references expense. and periods adjusted for continuing diluted from For

growth and Finally, growth revenue our organic – projections are acquisitions, from growth, outlook growth, total long-term revenue earnings Annual including Growth revenue growth Compound Rates. associated adjusted rates with

is Steve here Rusckowski. Now,

Steve Rusckowski

XXXX morning, thanks our review Mark And through Shawn. detail will today. guidance. the I’ll strategy. This for and to joining third more quarter Thanks results progress discuss two-point and us the our on on everyone Then you updates provide take

solid of line quarter top a had bottom We and growth.

our the network excellence focus throughout PAMA and industry, enabling driving expanded are reimbursement persist pressures While operational on access growth. laser

for the are have our and commitments to to well-positioned meet we date Based our progress updated on our year. outlook

X.X% up in X% Reported year-to-date revenues X%. volume is EPS X.X% $X.XX, XXXX. X.X%. from growth up strong EPS quarter, up growth the we was continued despite For at period very grew reimbursement remained the Volume was and nearly Adjusted same pressure. nearly $X.XX, third

healthcare. you you marketplace last know that Investor Day. three in we on as to Now, fundamental access And year’s PAMA, expanded and our update the our changes at consumerization discussed I’d network like of they briefly are the laboratory increased

lab remains in that First, for is We And and PAMA reimbursement Today, that industry having highlighted change reimbursement And pressures whenever catalyst acquisition mounting PAMA a already impact targets. evidence industry. the drive respected potential hurting there and journal, how consolidation see CAP this negative industry. PAMA, pressure evaluate hear we are structural PAMA recently starting to is the the in marketplace. a the is other

we PAMA to our took As this you of year reduce a actions Quest, cuts. further know, with align to here earlier at series costs

difficult, PAMA felt Some our that are we coming changes. have were and the employees More XXXX. made decisions reimbursement cuts in

to continues courts flawed industry the Congress. implementation in Our and in PAMA’s fight

last build to the a Beneficiaries extender with working favorable of Act, Appeals review by decision for in to is in and Congress cosponsors. and brief in is received bill six ACLA recently now sides a the expected We submitted of bill. Senate LAB introduced to from merits case. week, Court its court allow the initial ACLA’s decision encouraging the introduction of for a This XXXX. the so is of and Laboratory to Access U.S. care lower news, of both a companion health XX ACLA support is June LAB the Act larger members include nearly or end-of-year Act, aisle also

ever access lab The on payers and more their our spend. is driving expanded second change affecting in network better fundamental our value industry becoming than focused

also product their savings testing testing X. groups out-of-pocket the states program with make lab dollar began laboratory with fully October majority labs for insured offering available XXXX. from beginning will move volume for partnering for of on a employer in select self-insured lives in UnitedHealthcare the labs. member UnitedHealthcare like hospital to are We Quest out-of-network zero and high-cost high-value charges UnitedHealthcare to

health coverage and Kaiser care the Family of then And more borne consumers. ongoing September, care costs health families, the high decade. sponsored finally, for that continue has for employer with health time. annual we reported by for increased care premiums surpassing deductible the grew health past the The more Foundation X% consumerization to In see plans of number over $XX,XXX the employees in first

recent first strategy aligned accretive, with Turning part per two-point of growth, to diagnostic accelerate our and health is information broadest our support health analytics diagnostic extended expand innovation; and elements. then X% year as finally which To relationships consumer-friendly provider access hospital the through to be systems; population with services; progress, has services. five plans offer the strategically health data to recognized grow the and care acquisitions; of

accelerate take from few me through quarter. the let Now growth highlights a to you in our strategy

pipeline acquisition strong. Our remains

time we’ve our in more to in have develop pipeline deals the As said than they before, past. taking are most

systems with in getting taking are professional on CEOs Conversations hospital more with we Hospital help are of also broader. reference can interested lab how their and services work. them their

As a this proposed result take longer relationships of to develop. complexity,

new about innovative an that machine our Quest to unveiled utilization. more optimize learning test in Lab interested also learning are recently systems service laboratory help employs Hospital Stewardship,

partnered hospital that have Quest a to differentiated company, marketplace. a gives We a IT offering with care provide in solution health hcX, a competitive

plan and to solid of drivers as Each in continued continues customers. QuantiFERON categories a and Key quarter. the CardioIQ. strength drug result revenue and of the continue growth test aggregate, revenue to volume testing our in both our XX across monitoring, tuberculosis T-Spot; STD growth access. in In posted contributions these top growth major testing; test We in expanding quarter see network included health growth

increases continuing of XXXX part excellence. We to drive efficiencies our strategy operational drive to remain is deliver to second The productivity. track for on cost in two-point by X%

now include their more platform. patients making appointments We to We enhance now experience. technology using which results and some than digital have MyQuest customer our receiving million digital X.X the examples through have

across patient enabling We’ve us overall continued laboratory lab per to cost requisition. drive services, reduce productivity improvements services to logistics, our and

to We are innovations costs. work while also putting new reducing

to This millions of approach We enables greater save supplier. and expected single of platforms, year. consolidating are footprint, in efficient of the per more a our moving throughput, tens immunoassay process dollars a and is simplifying to

let Now, performance. take you over Mark, to Mark? financial who turn through me it will our

Mark Guinan

up $X.XX versus to measured higher year. Services and prior volume quarter, billion, pressure. reimbursement strong In growth by for the revenues versus Volume, X.X% number requisitions, acquisitions, Steve. the compared prior prior consolidated by Information X.X% Thanks, X.X% offset partially year Diagnostic the grew by driven increased the were the third of Revenues year.

volumes acquisitions, X.X%. Excluding grew

net Hurricane extra items these was impact We revenue organic an benefitted added of headwind. Dorian two the from roughly impact the growth X% in quarter, modest while third day the a The quarter. volume to of in

a this last growth. exited our recently quarter of we we capitated the change contracts. X% to volume headwind nearly highlighted represented Recall, some In organic that third also quarter,

versus Importantly, to acceleration reimbursement with contract. the higher in a associated driven by we declined see primarily prior our UnitedHealthcare requisition year continued modest growth our per pressure. by Revenue X.X% volume

XXX PAMA price impact a approximately headwinds approximately in third amounted headwind points. Unit were X.X% of of which includes This to the the basis quarter.

both as As the modest a price the impact floating PAMA Clinical indirect small to a Medicaid reminder, number Schedule changes direct of and as includes cuts from rate well Lab Fee contracts.

our operating an XX.X% driven $XXX compared operating or million, million, margin pressure. compared primarily revenues of Reported higher or adjusted Invigorate The partially On million, last and operating $XXX XX.X% revenues, growth increase of reimbursement income year. or to revenues by ongoing last XX% to of basis, strong initiatives, revenues, XX.X% was $XXX income in volume by $XXX million, was related was adjusted year. productivity offset or year-over-year to of improvements

Additionally, are patient year-over-year. concessions down

operations expenditures provided Reported $X.XX $X.XX by X% approximately million $X.XX last the year-to-date, year-to-date to $XXX million Adjusted was Cash year from ago. $XXX in compared were was year. EPS Capital quarter compared versus million million was $XXX a year. EPS year to a $X.XX, last ago. up $XXX

EPS, be billion, the follows: increase year. between approximately an guidance, outlook turning updated $X.XX X.X% prior XXXX Now, to expected and EPS approximately is $X.XX. Reported our $X.XX to and to be to versus $X.XX and as $X.XX between expected of be for adjusted Revenues

by to provided still be million. to million operations and Cash expected are billion $XXX capital approximately and $X.X is between $XXX expenditures be expected

turn it to I back Steve. will now

Steve Rusckowski

growth. To of and a summarize, line had quarter we bottom solid top

we expanded and updated well-positioned meet network of focus year. outlook access While the PAMA persist enabling on laser the date our driving industry, and growth. on are rest throughout excellence operational to to the have reimbursement for pressures commitments are progress Based our our our

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

Operator

you. Thank

open now to Citi. up questions. with Our Giacobbe Ralph will from [Operator it We comes Instructions] first question

open. is line Your

Steve Rusckowski

Ralph. Good morning,

Mark Guinan

Good morning, Ralph.

Ralph Giacobbe

us mix Thanks. that outside the expectation on of Good morning. maybe that if of comments what’s for are going PAMA? on your guess to Good ask on sort of wanted help reimbursement sort pressure. morning. I higher on forward, then and that driving Thanks. side, what’s expectations exclusive I you just just kind the of – could just PAMA? the I guess of sort pricing set where level pricing of And

Steve Rusckowski

Mark, do to… want you

Mark Guinan

Sure.

coming two factors, last So also in this is by this into the year, pressure as pricing year, Investor we’ve year’s before driven shared is Day primarily then PAMA. one

The second getting with United. rate. back out-of-network We network rates a in one to market-based from is moved in

So obviously, grown we our dramatically. have volume

reimbursed we price expected were but lab. it incremental said value the set, out-of-network – delivering we still the being we’ve are year, As significant offset we this price as a we enough to to rates and headwind is relative

the a less. those contractually rates agreed party. for pricing lot walked We’ve while really in reimbursement going past. pressure about, are with build bill, have sense. pricing There in be has A to are is physicians about The away made the faced of we’re directly client Number pricing XXX or price and disciplined the to of where to very changed. hospital third-party when what that talked those a the and pressure reality haven’t industry contracts typical basis from third health and they’re of also You coming it’s competitive that being certainly not this some the lot points we environment. in we’re a that we’ve don’t it competition. talked that and from area not around sell that it’s allowed we is pressures has business plan so all where And

not traditional two United I’m some about to change as its because rate. get PAMA. price guidance through should first but But of previously. the we once in And year we back the pricing get wasn’t then shared, big fully going in for transition given specific the we to in as So PAMA. would the it first This United was of implemented, the XX% be we reason any offsets pressure well. facing it the period this additionally, a to give no full kind we there going of is more the to had that have to believe the last we’ve historical year. expect really year PAMA And years, last in obviously year, of talked the that forward, over you

Ralph Giacobbe

Okay. And could year? this pricing you just quantify UNH pressure that

Steve Rusckowski

Ralph, it’s going to $XX $XX million to be million.

Ralph Giacobbe

you. Thank right. All Okay.

Operator

Piper with Quirk Bill from comes Jaffray. question next Our

is line open. Your

Steve Rusckowski

Hey, Bill.

Bill Quirk

Thank you. everyone. Good morning,

Steve Rusckowski

morning. Good

Bill Quirk

and I Steve, consolidate about pressure. whether there’s that Thanks. on the to chemistry us over an and follow comment can So bit opportunity couple here not hematology you made to vendors. offset just methods timing? the clinical want concerning some next think you speak you we decision This a And Can think bit the to consolidate like things a about some to the up should of if about testing help little other immunoassay help your of little of something such. PAMA a years so, is the or

Steve Rusckowski

Yes, sure, absolutely.

to all seven this and of do were the strategic years, consolidation with suppliers, we in in past future. Bill, So the and working continue lot done so we’ve getting more a more about for and on smarter we’ll our

So be as announced that on as shortly deciding we’re far to I that immunoassays, will is. who believe supplier. the close

course it offset are productivity provided that we to on that PAMA. in of at And X% offset to dialing the able opportunity. uplift need earnings PAMA this to we’ve all Day. our part it’s nice be a to able gains Of Investor We is be deliver

of our part And of example working and the suppliers that the with working X% while is of that so there with that part is immunoassay suppliers others. is and

that’s Clifton, New will us year newer particularly here be branding That Jersey would have in example big New in need facilities, we’re next have facility new investing also but one, it to consolidate to latest some the will maybe offset productivity, particularly platform, gains part that. Jersey. automation this price facilities that some us. for But after. productivity and us we – It’s all some PAMA from us we’re we get equally Another project a into the when X% our of X% approach automation, of our in increase to which our pressure with the place putting that will but our so in year allow in year

Mark Guinan

not is tests equipment there, on piece color some add separate performed understand consolidating is just actually in they to single multiple the sure where pieces new want can Bill, platform do just that of previously I make we a our And this on a were This equipment. purchases. innovation of

not actually drive, but labs. procurement our efficiencies efficiencies, So operational this will just will drive in

Operator

with Our Donald from comes KeyBanc. next question Hooker

Your line is open.

Steve Rusckowski

Hey, Donald.

Donald Hooker

Great. Good morning.

maybe – guys to you that hcX. you do I in What the something you collaboration can trying I elaborate mean doing? I things terms of space. maybe lot you with a bit? interesting on this I health announced are know of – exactly So just a that that you guess you’re... new in I’m little guys is population

Steve Rusckowski

have the can for talk and things them to we hospital efficient use we Laboratory our in in them dialogs to inpatient about regards acronym efficient. of laboratory? part sometimes about make our talk Services One Professional doing lab PLS, as running we’re their or continue about this What we three five-point client we that making Sure. them we more strategy, is more strategies. the where So is, Sure. to

good testing. that the can And that of sophisticated XX% a in they’re – of better about getting as of potentially referred a was their give send the them variation as consolidated look is within and and a now, what We this save at out the regard, But tool of – reference at to optimizing patterns look part do patterns better we’re testing offering what order ways XX%. like looking that with third from at for also buying hospital. and Part order to the is price. evidence to about job typically them testing smarter order hospital allows the their in interrogate looking of new

more ordering. part efficient two get there’s what And at to you’re One to that. is

but quarter in even what diagnostic much is this, some – smarter third in have today, workup should of part which making maybe administrators that sure more the the So inpatient more diagnosis. for also the right second because cases, you interested it’s many more hospital is we as are intriguing order

nothing look you buying if for more expensive And our at total outcomes there’s stay, and quality the than hospital diagnosis.

to on this smarter So clearly our part clients testing we of what providing that more on and account. is reference their inpatient this work as than allows to within getting us diagnostics tool that, vendor with do become strategic

business you we businesses then And those want some the the hospital have of we systems and piece bought what discussions outreach stay third from finally, to when work in with is outreach hospitals. we have

consolidates. outreach many our within We are numbers year reimbursement you have I aggressively this outreach their other of will having systems laboratory well would businesses continue that of to and pressures and business. aware buying for some are pursue as And hospital well aware now this tell in they industry PAMA

of So, funnel as we mentioned grow. in discussions continues that our to commentary

Operator

Credit Our Suisse. next from Wright comes with question Erin

Your line is open.

Steve Rusckowski

Hi, Erin.

Erin Wright

Hi.

anticipating be volume seeing from guess, stemming timing portion and the and in you’re possibly break from of you of access, that should that can guidance, care the terms be terms here? care from not contributions but contracts and to may what ramp underlying out of we conceptually and ramp? what growth How for thinking also managed should market In PLN magnitude asking are XXXX? in contributions be about early I managed those I’m XXXX still of we you the the about thinking days how into ramp

Steve Rusckowski

Sure.

the It We of share market both terms see marketplace will within with what inside hospital notable increases this don’t changes any in you also outside is the and stable. shared like every always the quarter. – the feels we so hospital, So stable. volume

a we’re look clearly care you at coming share. from of of if managed is share And large gains portion growth, relationships. that gaining So volume

over but lab with and that see this best as XXXX advantage that It of to to – the will have in also That for probably said changes, grow. be growth with in have a of network, access continue XXXX, in What XXXX will helped our in in for that is grow will continue those. year XXXX particularly we decade, we’ll which take we certain opportunity we UnitedHealthcare. is also it front in

access. for expanded because So you growth our of again should in network look continued XXXX

add to you’d to anything that? Mark, like So

Mark Guinan

Yes.

get the in they Day little, come we to of I’d to But the new had talked Erin. was the $X of news. going So, expect sized loyalist labs We the PLN, growth those, to asked in still of our some this share. share. any we Investor tranches Quest three of the them from managed of convert fair fair We us good the to were and obviously at moved if other price, access we about PLN accounts you network. once growth, kind to about at immediately easier our at about we to that is take front where book a us, of has fully volume were very, care quickly, billion early. date, out-of-network very that there still years call is which came say very To in-network the sending it’s that office our rest it’s work they were managed the were care and several to We

job gotten take of of those where some four into that had you from will in have of positions the will done some labs. when time, never wallet three, growth that of of picture We better sometimes per getting boxes they larger more that a certainly, but they a se accounts that, We’ve a share future. continue multiple period We were consolidating outside. we’ve the five some the showed but

think driver. really patients. none and how We that of labs preferred and a might to simple where use is if message of is we’re view to trying the hospital be outreach a we the some what the if of network option the lab. of ones Hey, free had That’s use of you that’s zero preferred out-of-pocket. physician-owned and would lab where have obviously a there, And going stay, the this laboratories to be big able in be we there simple to in have the compare hospital you of was one instead no, lot a five the then the very message expensive, to one very work it’s

to billion will So fair we’re and a multi-year excited. about get tailwind very This of that price. very $X going to share confident, in our eventually we’re be

Operator

comes Newshel next question Evercore Michael from ISI. Our with

line is Your open.

Steve Rusckowski

Hi, Michael.

Michael Newshel

any after self-insured have for the in point Maybe Do good PLN follow-up this on selling at for to of base morning. the United season Hi, level uptake XXXX you that. on visibility the from the

Mark Guinan

They could obviously. you are not have not lab. shared information, questions specific we’re only They the them ask because preferred

that us didn’t you’ve we to going as get difference. and about, but fact do. them in obviously plans whole the is available, role – people So very that in embrace where a talk to talk preferred be give us the information they this specific and talk into insured adapting then something process, sponsored conversation heard they providers we’ve or that that overall and their sure talk will in proportionality very any lab states the heard I’m about publicly marketing are XXXX, very, this, that it, make their we’ve that lives about percentage that going They them and south rolling same is that of are confident we shared have, to making the they early out, they us to still this network for insurance their the those

Operator

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

line open. is Your

Steve Rusckowski

Kevin. Hey,

Kevin Ellich

the taking question. Good morning. Thanks for

Steve Rusckowski

morning. Good

Kevin Ellich

things. Two Steve. quick Hey,

M&A pipeline. first So

then what historically. facilities? said that this about could also tailwinds maybe you’re to taking is changed environment behavioral within the or health if are the if opportunities deals materialize. and the from a longer testing talk And has little Wondering opioid experienced you any you’ve seeing You the bit

Steve Rusckowski

Sure. Yes.

the the bad around how for are having services there and topics more three these as the bad is more I in and complicated. discussion One mentioned be around good news – news. So and mentioned earlier. bigger remarks, takes opening good complex, news The on that is, there one, more laboratory first That’s I that time And more news their we’re they our complicated. getting the It’s that. in bigger is, it it therefore takes if time. could it’s deals more in clearly partner is

what And this where what do last that grow would of pressure partnering was can continues are the not year when level the of that aware business. interest nearly portion say I were share did on because people this around I of time. also at more well we we is their to

little So they’re if growth we our shy you a – look year. rate from X% that acquisition at last indicated year-to-date, it’s of just

well of that We’re north X%.

feel greater. time, to over confident period still continue that X% we’ll be an We or of extended

we acquire. confident we (X:XX:XX) the between buckets outreach, feel And that. engagement [indiscernible] One is so, around of that three lot hospital

laboratories. regional is, Second

that immune interest I capabilities mentioned there see. the to in As build smaller options we then continue to finally, continues because remarks, And and be they my a of around testing. we number operators in in for illness that. evaluating pressures is of fit good example A acquisitions capabilities also around bringing this have for attack, an which past tuberculosis the and testing of us new

going forward continue still confident provided three time. to be we’re a guidance our basis over focus all and CAGR X% we our multi-year around around will of period see a on that and you So

Mark Guinan

those dampen all of of putting changes. that that around testing, barriers start nice for frequency opioid despite other somewhat, for a is it’s gets us and strong that for that driver. policies us. larger growth and putting to something nice in, And still testing testing in and been the driver else, they’re a enough, restrictions large to continues pre-authorization, when the Like a It has monitoring of reimbursement growth growth if certainly be will drug business, they years tailwind hadn’t of which opioid anything those engine a things subset even our be and about of just made sorts you some payers prescription number asked

Operator

Jack with from Meehan Barclays. comes question next Our

Your open. line is

Steve Rusckowski

morning. good Jack, Hi

Jack Meehan

morning. Good

walk impact, So calendar? to think pieces look to in things nice too you do the to the between the so here, thinking are And a XXXX, together, through? us you wanted parts grow as through I the right – quarter, the of of focus flat you’re what’s we on all you the in to these moving margins way efficiency headwind some maybe just pricing Can to think are as that see about? about, programs margins big expansion. is the pull PAMA What

Steve Rusckowski

term. Yes, me touch Jack so let longer the first on

going about I to on So the could Day did But on our share not not XXXX. And we talked earnings about talk than talk a that top per the at although so outlook what but deploy share. the to I’m that Investor earnings count, was assumption, year cash, grow line. faster play how we out not may therefore depending growing that’s flat earnings on the actually we’re full

not So implies that tax we the you some of that sort that I can margin windfall. expecting expansion tell are

So that’s growth. before tax margin

the really good this drops for bottom to to to a shared element, bad continue bottom can’t we XXX basically the I’m to points. program pricing per Obviously, XXXX the X% but that having years, you our every And get really you top to going that can’t than multiple being not year, at with I over continue, every We’ll year, very we that. We time pricing assure will the that the happen efficiency that piece do small line. got headwinds. basis line. quarter. it our into quarter, expect In we’ve about for talked over it’s we all headwinds earnings drops tempering I assure line of adding faster it but grow need debt that.

much how Obviously, organic that how pretty and drop that flat enough hold quarter. pricing the growth, our volume of day, is So of extra through headwinds higher basically a lift from much is the and efficiency shared enough had growth. to we just have some in the we offset margin volume on we volume, the

precise any I’d to that, that So stretching ability give my be than I getting and be may credibility more map.

we’re to So some their our growth continue I quarter how that earnings you significant time, deliver grow pricing that say faster. is despite in margins headwinds, to drive strong of period would and pretty over and volume that, as a X%, this organic our just see going can we

Operator

question Our with Caliendo UBS. next comes Kevin from

Your is line open.

Kevin Caliendo

XXXX? thinking may trying fourth position Hi. are wondering taking better spending, by give bit you model, and you us just around about for XXXX in for the talk more Can my little revenue little I’m fall fourth a if quarter quarter EPS spending is in the Thanks the you in The spending higher a be there may call. to Could is color guidance guidance? with line short. any be XXXX? accelerated about

Steve Rusckowski

we’ve Yes, guidance year. raised our the so for

Importantly, we’re we signaling guidance. the the of stronger to until finish did original signaled than And the year. not above year we’ve beginning now anything at

So, we as quarters through going on based confident we we’re beginning are have saying over-deliver what that a which hopefully positive the QX, message, performance we’re relative people taking three to we’re our feeling and said the of at for year to what visibility the that of year.

of which compare we’ve the the top ordinary only The out the easy So, on ordinary line thing in about. terms out talked is in of the nothing that’s of QX. spending, there’s the

Operator

from Tanquilut question Our next comes Brian Jefferies. with

open. Your line is

Brian Tanquilut

Good morning guys.

Steve Rusckowski

morning. Good

Brian Tanquilut

about good this flattened you’ve G&A G&A Mark job It on about percentage think line, just earlier, follow-up Jack’s XX.X%. at I down. quarter obviously the a to as question out bringing done the

I that about that as to bottoming number, more efficiency your seems program, is range? it here out be thinking squeeze how or about we So out of in like there it’s this think XX.X% should

Steve Rusckowski

me on Let start this.

our invigorated there’s in categories. lot contrary, of G&A invigorated around sales. a of thinking show our actually the most our costs about savings a sort of up of reason, some show savings the of in up For lot To focus always expense

of our really about years. category, G&A think expense made and seven we’ve lot last is what’s if good a you So in the it progress over

with getting more organization, the the and our relationship everything it’s finance marketing in which administration, to with our category always we’re efficient. Optum. with from So the and costs, general cost running in our and IT getting P&L, outside the billing that’s more sales And our efficient operations, evaluating cost with cost associated

So we of leveraging already. a forward. going have out cost also lot taken And we’re fixed cost that

and that’s So top to leverage with growth do this what the that while perspective you the now line to related year. cost get operational see we maintaining generally lift the has same

So and gains of gain in expenses. a X% not our cost in the up productivity lot productivity show in sales the will of

do Mark, you have add like that? you’d to anything

Mark Guinan

would margin yes, in absolutely well over that to of continue is to to time, will that just G&A. not is focus a I on going Yes, efficiency will and cost of the Steve margin a sales be majority add like correct proportion that if gross drive large

look a expect, we this very some couple increases get self-funded quarter we’re managing, you in really done make what health claims large of high-cost noise quarter, employee minor in But and really costs. in had it’s some Over can we given quarter-to-quarter. time, to a couple healthcare a can’t very, You we’ve quarter-to-quarter. of that going good claims. In deliver our job

there’s line we’ve lost no drive always to to efficiency, in nothing there’s noise be should read terms So our going – there’s to continue quarter-to-quarter. ability that be on trend, where of

Operator

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

open. line Your is

Derik de Bruin

good How you? are Hi, morning.

Steve Rusckowski

good Hey, morning.

Derik de Bruin

just quick Hey, you question Good. a and judging many going platform vendor now you that a follow-up down? I is that IA and that look to talk to Can and bit on two consolidation. you’re like going to sort the different about have vendors of and how is process how – questions. particularly consolidation, little how the One want follow Bill’s the basically

sense. you in look of And cash I issues the quarter when patient concessions issues, some of the wanted obviously Can of versus… are down. going of bit weather you other you’re was, about of in these but number some on there the we into you comps were things talk lower follow-up just the little fourth of then year, more to that on issues, quarter sort sort how I But collections, know relative a the quarter concessions, to to question mentioned a talk had you fourth last just at were different fourth and about going

Steve Rusckowski

are our me And will laboratories. the is driving so we a comprehensive our the that look second Okay, the part, have hard of those Mark And we’ve actively portion particularly we suppliers our let take part our at first all we worked that relationship with spend. on with a all run and review a with take suppliers part. that the make seven so we how large perpetually first our that to this work sure of suppliers, years over strategic really past more

those IVD work from of suppliers And the there in a a replace over manufacturers we there the cells platforms that to with will of time. bringing different that that five allow is regard, consolidation as Mark with to are that mentioned. are about to in so number marketplace buy states, different up platforms number automation us And

forward. going of we do a then need. trial we product through We we a done of put platforms vendors do down narrowed what a marketplace actually then what that and a we’re evaluate what economics selecting in will what functionality sales suppliers so some they’ll either of one some that the that we meets all have and strokes the have, also marketplace review or those with have understanding a in their facilities We And are. for process of offering what few. the the they’ll choose final those we requirements few at in on in to have runs vendor those place And time, will product of one that at to force and that believe our around a the have and their is

And to yes, also holistically. – consolidate for – much those economics. by That to this able about But being productivity is we’re more a throughput is how think cost portion how it get operations. of we going getting

their what’s have around quality, service base. good You good in need confidence installed their sure confidence us, ability to around make confidence around that to you good their

So strategic will announced. operational going new this as forward. deciding of it be that a our And platform will comprehensive, I and at shortly very strokes said we’re who provider of the final it’s be review for

Mark Guinan

drivers second made Yes, of a last for Day on led question, in them couple the XXXX. change that were year to so and of on estimates there your outlook we that patients. obviously our the really change to relate Two in us Investor

was the timeframe, we of because plans, patient we terms be from from in were lagging flat expected as collections again, assumed actually we that with the September looked validate markedly the out the amount we’re the it to what based payer. how out. data happened with going more deductibles have was saw were proportion is of patients. coming. our responsibility of at on And what a accruing year was We year there in growth gone would play revenue high the pretty more we revenue one at people than a of deductible shared themselves to the instead year up first great as And The beginning of found our responsibility whether there started which available all why the always patient expectation the cash the forward-looking it in we

of So we’re owed anytime, as hundred from shared, payers. the almost party third shared we patients. we’ve collect dollar that claims And on accepted about from $X.XX a we that we’ve the percent collect

party X% That’s you revenue from of headwind. point move patient. third basis the XX the a to So

So pretty significant. it’s

The nothing changed significantly good year. this news year last is from

confident the with we being surprises surprise. there in, We’re that, our very there’s watching proportion revenue terms of that, very, and going very patients. no in Obviously was from no of diligent conservative were coming in

like not The with some had was more second lab some of but we’ve just the about had more our out, And And bills because actually more because really to we talked the concessions, more concessions way from the conversion them, south. was that have age in issues going of collect piece because the are delays to go. patient in we coming billing you’re less patients revenue conversions it. you going these that

have we converted, that’s fully that we’re well behind don’t us, anymore. So

behind So that’s us.

And with to conversion. denials, the level lab we been also spiked they but and had time have filings, we dealing because when late related higher we always conversion some some of themselves so denials with because went mid last to this to on, that then lab year of

behind you things last when well add we cleaned they’ve The that been those us. issues year are So up. up, had all

Operator

Our next question comes from Matt Larew Blair. with William

Your line is open.

Steve Rusckowski

Matt. Hi

Matt Larew

Hi. Walmart health Good that the broadly participating initiative. doing stores. first are in up wanted first think know of that transformation to retail just in update footprint with And that ask progress in. center you then you in on there’s anything setting, a morning. terms Safeway Georgia and in I you’re the just also I opened Walmart the an for the new

Steve Rusckowski

retail it. with we so Yes, move call as forward our strategy continuing we’re to

characterize are opportunities so about The XX% and retail can within good We which to you Safeway continues of relationship, Walmart. have more new a we like, relationship from work X,XXX forward optimistic be above of we’re are that and Safeway as XX% there. several Safeway of patient with kind which have service those some of to centers going stores actually one. We

as goes to as through you they well. as with that how are continue you presence for how store, if we content still know works. things that that know of they probably our you opened that we up new as about proactive And a like seeing their forward. we’re build provider out And second, them so be and and tune store to able mentioned, Walmart going Walmart, anything concept well lot on they’re then health and laboratory And working to working they’re with

goal And as what service to our centers. patient of we north said is of is our be XX%

differentiator will the it’s the with this of us, consumer-friendly think And a is some our for experience, one us think marketplace. have most better we we number to ways laboratory. be could things So be to in And there’s continue customer a for consistent a strategy, we go.

the of also for and Second demand can centers larger is and you and just period in lot of over flexibility if it of that operational better day ways manage with when it’s gives based are a the more have a demand us it time we in service time. there manage employees are extended people upon to more allows patient patients location lot providers, coming to

the come some in the pick as of have improvement us do quality finally access to they up after walk then their marketplace store to feedback the gradually flexibility shopping visit. good. they to flexibility the They patients will the Then ourselves where they in over really is that and time. and in, wait have And we believe differentiate share access allow that quite

with So we’re pleased it’s it. going well,

I And they with and we a relationship strategy lastly, Aetna, marketplace, we continue and then is the just the ours. continue doing with partner with we relationship others are but have the CVS, to of what in so Safeway, with we will their say, we’re have to yes around work work Walmart, yes, MinuteClinic

Operator

Our next comes question Stanley. Ricky Goldwasser from Morgan with

line Your is open.

Steve Rusckowski

morning. Good Ricky. Hey

Mark Guinan

Ricky. morning Good

Alexa Desai

This in Thank Good Alexa for Ricky. is you morning. actually my taking for question.

Mark Guinan

Alexa. Hi,

Alexa Desai

come just the to to I wanted United PLN. Health back

member remarks zero mentioned, your guys starting I charges. think, dollar You that out-of-pocket they’re in October offering X, earlier

network? to and that how that balance pocket of other in of PLN over incentivizing kind So are I looking for zero continue any the does my guess question to is, labs there do things compared year are the the the the of not use

Steve Rusckowski

you that? Mark take want to

Mark Guinan

would labs not be network, it so Yes benefit their determined design. out-of-pocket by for typical the in the plan

just high be had of cover they some plan won’t a with So, insurance, there deductible but zero. sort

over XX% and about average you patient do So and paid if XX% somewhere you math. requisition dollars, to think time can it responsibility time, $XX the for by over healthcare by the company, being $XX be balance being between the with their the employing responsibility typical proper of

Now an tests. there’s high cost some that’s very Obviously average.

you hundreds if a So big of genetic other big, run the have tests that screening advantage be it’d could a dollars. some test or of

not don’t what And the the hospital. a lab simplicity of national and and to as would same that series be to you have $XXX $XX It’s They’re does just from message tests good having access. me? and just about the just about not it’s service mean it’s worry and hey not it. of this also quality, of for price, worry But that, from about

were all we to but we did, lab into the We those we required anybody did know with definitely are So metrics our change not. pervert United do to else the in. in get not nor think price did get the that network, order

total the the So of offering. this is about value really

with to the go zero out-of-pocket, a want simple great a you for patient. also if very have So decision price and best lab to the it’s

So that’s important.

sending also this, things as that United physicians there’s There’s talk in but some also well. you should about doing around they’re in

not initiative to they’re doing So what and just talk United it’s on that about patient-driven a end. you let I’ll

can our you a sales obviously in the commercial this physicians because then own know field is aware patients, this with when of that. sure imagine doing their number work they really one is that good lot force And not are was not And their their most anybody to make they owner, thing patients. good their so for like for else, we’re patient, priority physicians

thing is of other a patient satisfaction getting some is The it’s bill. source a

you visit, from that cetera, lab got thought was a the covered about, to et et And have me, I so to call office now by don’t ordered the you office I cetera. hey, bill, it

So noise noise office, the patients. for the for reduces thing physician’s good payer, for us a reduces thing good for and obviously a

Steve Rusckowski

said, you’re the network. savings Yes but they’re has zero I’ll lower enough reimbursement copayments, driver through if with for rate the obviously to moving as just just what coinsurance the lab significant here Mark biggest then add that and is working laboratory a

to not the consumer portion So responses the they necessarily has the that differential, to But is very biggest considerable. with rate have with have us. do not the with of patient savings the might or

and opportunity big we’re a hopeful. So

United, our it’s mentioned change a hopeful, continue and we to it’s early. we also the to presence But we’re payers this grow overall this our it’s allow believe with in marketplace. the just changes in share will spoke that us As take with trend to coupled started getting we because XXXX other month, do with place but

Operator

Mark Massaro Genuity. comes Our with from Canaccord next question

line Your is open.

Steve Rusckowski

Hey Mark.

Mark Guinan

Mark. Hey

Mark Massaro

guess for first is the a Mark. is I seen strongest the my question you in question. Obviously long growth we’ve the volume for time. thanks guys, Hey

United continuing the talked with to access talked one You about extra day in But revenue build. the about plan quarter. you also health

little growth So a continue? you sense the is or of a us around there? us level can some sense of drivers give just can you puts Can and X% you a give not think the that whether the for takes just

Mark Guinan

Dorian we that that hurricane XXX fact about talked so extra gives day fact net Yes, about the of points. about the the the

very you leap much you’re days having transparency and year be next Saturdays really your QX kind terms amount talked bit can the about next have And the revenue usually and the similar whole different in year about you plays math year. as in than pretty possible. the quarter’s year year we thinking about as has think how day. when extra other and out. a have we’ve of puts and that Obviously a takes all you days, when the just little corner QX having give to revenue that And are play try we’ll the At of leap out that differently. thinking. on we year-over-year you of an obviously But will generally transparent year beginning of take each So about

laugh the did But then volume, you’re capitated next line. revenue, that about we change. And is not just impacting talk if bottom we focused at on year which the point some

points was that about basis a XXX So this quarter.

we If you basis recall, points in shared about QX. XX

headwind point volume at us. gets that some So behind

that little to a additional color pretty Now quarter, actually to testing business I’ll share our just headwind flat. was a pre-employment growth a in the is our employer

rate our So core that’s the growth I about my higher beginning non-DIS prepared clinical point a if you basis then remarks XX at of for shared remember the business.

see to the expanded we’re we’ll what from surface. the may performance So is and access clinical really think the it slightly on have stronger which drug actually how appeared want about was you the that if the business, pre-employment volume than benefiting where business but goes, is screening

fair of be going extra it to to day way positive into in that’s talked as Obviously to be going billion our an growth to about going is quarter. three $X expanded So, our the with plans. work that lives as every the continue share Absolutely eventually But I not expectation we to getting we’re organic is X%? future? revenue revenue into really have new access it these

Operator

with Coldwell Eric from comes question next Our Baird.

Your line is open.

Eric Coldwell

much. very thanks Hey

Mark Guinan

Eric. Hey

Eric Coldwell

deployment always you M&A emphatic capital get M&A. based more period on of inorganic But end explicit what around give the on growth and the us helpful fourth the the little it’s the can have deals. here in or prior of you’re growth commentary. all At a been It’s maybe expecting XQ. quarter you hoping I’m abate to start really timing from will some in then think I head to quarter around on. the sense Inorganic

you have have on people need comfortable Can in the built pulling a XXXX, you a a growth. that if placeholder? here, To would it us X% you the for like year. the be least with to Also, at beginning what be of a give the have in sense built extent place long-term plus holder in we sounds that analysts in M&A-driven model of

on see And cycles as M&A then is cash decision these you elongated third, building.

more would comfortable Thanks balance with you very the to you balances be sheet you repurchase with unnecessary some as or that are assuming that those cash maybe So leaving have much. on comfortable us build? start accelerated activity

Mark Guinan

our Yes, me back capital let so deployment strategy. go to

So our to M&A we’re do it’s a shareholders, to there’s as path. shared, where clear we’ve going value accretive

we’re that gave. not to just We’re said, going very some an that in But do we X% confident CAGR. that outlooks meet to M&A with

guidance. unexecuted in So our M&A we never include

QX are in implying not something, in low that just mean doesn’t of close just So in M&A we the next either level be might at practice. this not but or to early a our because that’s year, point we

actually until we our contract, So M&A guidance on. we in a don’t include signed and have so

CAGR. X% that in confident very we’re So

look we’re X% at what year what we’re to after applying and two years. we’ve year going done, of north you that this If be last well

to year We’re highly confident years that next two that in CAGR. complete four the

lot there We’re going interest. to be of at that level if beat not it, because is a

going shared several deals Steve wayside, As same deals thought that these the to about we’re taken fallen would are But a these have doesn’t we gotten they the mean very ago. have get months done we’d as have by completed. we’ve talked and we’re some it on working of optimistic just while still

do closed we we interim be if in point those mix about guidance. that we’ll January year. I’m – late talk guidance give some going the not have But organic at M&A for And include don’t and XXXX. the with that give then any comfortable that have guidance our otherwise to for obviously that I’m you deals additional typically in What I’ll will in the included.

Operator

with last Wolfe comes Research. Our question from Stephen Baxter

is line open. Your

Steve Rusckowski

Stephen. Hi,

Stephen Baxter

you? Hi, are how

Steve Rusckowski

Good.

Stephen Baxter

the follow-up want I to on patient question. concessions

So the was seeing we’re fairly report. and looks you it it like I’m a I report. mentioned in through trend Kaiser this year’s similar glad flipping

high the discussed but increasing much, Investor in Day deductibles similar last terms year deductible that clip. enrollment, a at continuing at to really not of upwards As march

XXXX that relative was a little level in of time you’re last improvement clarify terms seeing of bit what So hoping and you’re could ecosystem this to in into the your visibility I in you year. versus of in XXXX seeing where collections

of year’s give Thanks. out-of-network to to of that? it about has United or improvement should able us would something we be contributed than be impact the collections it terms quantification, in of this finally then offsetting what a thinking the growth? reasonable you sense think to Is less And about as

Steve Rusckowski

share revenue this of where point are. at sources so Yes, we our

And so is patient grown year-over-year. not at responsibility significantly this point,

the per year it’s So Kaiser increased impacted in se report not is despite of year-over-year. this what deduction, talking terms us about

in last One we we surprise was of things the of did we had year the to response shortened some our timeframe.

that way at the we’re years we years, term recent years. So for do use and to for our recognition, worked and revenue longer that looking have trend we more a us trends

more So year. us allow which at lot had like we’re recent, not last we surprises would a to looking have

So this. of we’ve on been top

We’re with we’ve what very been comfortable accruing.

cash We’re very our collections. comfortable with

the to reasons card of roll like patient a upfront. better but as partially partner at on We continue partner out poor very our And it that done tools was robust have particularly we and credit a shared earlier, part look for process. year we’ve collections offering we last concessions, because is of with things year some around I the doing Optum,

say covered and like or decision based pay responsibility on you most office We support our spot how tell to would has will the that where tool, you then for the estimation that what opportunity your where go not with like be of We we in-office have have can an and an an to healthcare lobotomist. you is coverage on center, patient our whether done. to service real-time come importantly test you into upfront if and the

the more difference significant up in front So cash our we’re collectability. collecting of that makes overall a

seen improvement an also We’ve in denials.

earlier, couple So we’re always we’re especially we payers in the the of them major I some about things you we where to as throw last year last that more changes, up space of were by us deal policy year, but the talked continue the balls, some opportunities tell things significant. to for payers, to I new a will having curve general with surprised in deny, new PBM of cleaned shared

of couple That’s test in reduced helpful. we’ve key overall So periods. denials a our

the that in some for in certain and they for a including don’t to actually couple shared get of they testing are. clinically and things, labs, wave treatment of on payers continue put them panels tests because where we excessive with testing, past know a partner we approach they right. couple preferential from also We’ve are We requirements that us pre-authorization appropriate we what do do to

us pre-auth only prescriber not our on makes also have is worry they because So labs, to don’t that based the about the it great denial challenges the for reduces rate for us. advantageous but work pre-auth to because

things margin actually getting are as of is So of Days. and helping actually they’re together all overall it revenue Jim multiple on costs, growth, the not of our is work Invigorate we part those at all for top our some Investor and of more line. Davis do said helping paid has It’s the on

So that space. in improvement we’re positive seeing good

Shawn Bevec

joining a to us Well, We day, you Okay. thank today. Have appreciate we support. everyone soon. and for great talk your

Operator

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

Quest Diagnostics (DGX) 22 Oct 192019 Q3 Earnings call transcript