Quest Diagnostics 1998 Annual Report Download - page 6

the highly regarded hospitals of the
Johns Hopkins Health System in
Maryland and Sutter Health Systems
in California. During the year we
established or renewed long-term
supply arrangements with more
than 100 hospitals and hospital
systems;
A long-term contract with Oxford
Health Plans to manage a network of
laboratory service providers, as well
as provide lab services, for its 1.75
million members. We will provide
network management services using
QuestNet, an innovative new product
developed during the past year; and
A partnership with Premier
Inc., a leading group purchasing
organization for hospitals, through
which Quest Diagnostics obtained
an exclusive 10-year contract
to provide strategic services for
Premier members and affiliates.
Historically, our primary avenue
into the hospital testing market has
been the highly specialized esoteric
testing provided by our Nichols
Institute. We are proud that in 1998
Nichols Institute became the first
clinical laboratory in North America
to receive ISO 9001 Certification.
This internationally recognized
standard of quality encompasses the
management and document control
systems for design, development and
performance of diagnostic lab
testing, information and services.
Other Quest Diagnostics labs are
pursuing certification, and we
are intent on replicating Nichols
Institute’s success throughout our
company. Indeed, that achievement
helped set the tone for the company-
wide emphasis on quality excellence
that was reinvigorated in the fall
and will be our primary focus in the
new year.
Our Quality Journey
We began “Our Quality Journey”
by establishing some exceptionally
ambitious quality challenges that we
fully intend to meet by the end of
2002. The only way we can achieve
them is through a fundamentally
different approach to doing business
based on quality excellence – through
education and training in the
principles of quality management,
through rigorous process discipline,
and through performance-based
compensation linked directly to our
company-wide goals. Here is what
we have set out to accomplish:
Improve Employee Satisfaction:
Our goal is to reduce voluntary
employee turnover from almost
16% to 10% in 2000 and 7% by
the end of 2002. We estimate that
voluntary turnover is costing our
company at least $60 million each
year in terms of recruitment, training
and inefficient operations. Increased
retention willhave a significant impact
on the quality of our work and our
success at managing expenses.
Improve Customer Satisfaction:
Each quarter, we survey our customers
to determine their level of satisfaction
with our service. For the past four
years, our results have improved,
but only marginally.
Using benchmarks and measures
provided by outside specialists, we
have set specific numerical goals
for improvement for each of the
next four years. The bottom line:
Satisfactory is not acceptable. We
intend to become the benchmark
for quality in our industry.
Achieve Six Sigma Medical Quality:
The ultimate measure of our service
to customers andclients is the accuracy
of our medical test results and reports.
Generally speaking, our industry has
been comfortable with an accuracy
rate above 90%. We have established
a new goal of Six Sigma– an accuracy
rate of 99.99966% or only 3.4 errors
per million – which approaches error-
free testing and reporting. We fully
intend to become the first in our
industry to achieve this goal.
Deliver Bottom Line Growth:
Our goal is to more than double
operating profit (EBITA) by 2002.
That means we must continue
to remove costs while restoring
profitable growth to the top line.
These four goals are interrelated.
We must achieve the first three:
increased employee satisfaction,
greater customer satisfaction, and
dramatically improved medical
quality, to enable us to meet the
financial goal.
To help us accelerate growth and
improve organizational effectiveness,
we made two senior-level appoint-
ments in January. We added a
distinguished health care industry
veteran, Dr. Surya Mohapatra, as
Senior Vice President and Chief
Operating Officer. In this new
position, Surya, who comes to
us after nearly 18 years at Picker
International, will be responsible
for all facets of our core clinical
laboratory testing business. In
addition, Jim Chambers has accepted
a new assignment as Senior Vice
President and Chief Growth Officer.
He will lead the integration of
SBCL and Quest Diagnostics, while
continuing to spearhead our efforts to
grow beyond our traditional business.
6