Quest Diagnostics 2003 Annual Report Download - page 18

PART I
Item 1. Business
Overview
We are the nation’s leading provider of diagnostic testing, information and related services, providing
insights that enable physicians, hospitals, managed care organizations and other healthcare professionals to make
decisions to improve health. We offer patients and physicians the broadest access to diagnostic laboratory
services through our national network of laboratories and patient service centers. We provide interpretive
consultation through the largest medical and scientific staff in the industry, with over 300 physicians and Ph.D.’s
around the country. We are the leading provider of esoteric testing, including gene-based testing, and testing for
drugs of abuse. We are also a leading provider of anatomic pathology services and testing for clinical trials. We
empower healthcare organizations and clinicians with state-of-the-art information technology solutions that can
improve practice management and patient care.
During 2003, we generated net revenues of $4.7 billion and processed over 130 million requisitions for
testing. Each requisition form accompanies a patient specimen, indicating the tests to be performed and the
party to be billed for the tests. Our customers include physicians, hospitals, managed care organizations,
employers, governmental institutions and other commercial clinical laboratories.
We currently operate a nationwide network of approximately 1,925 patient service centers, principal
laboratories located in more than 30 major metropolitan areas throughout the United States, and approximately
155 smaller “rapid response’’ laboratories (including, in each case, facilities operated at our joint ventures). We
are the only company in our industry to provide full esoteric testing services, including gene-based testing, on
both coasts through our Quest Diagnostics Nichols Institute facilities, located in San Juan Capistrano, California
and Chantilly, Virginia. We also have laboratory facilities in Mexico City, Mexico and San Juan, Puerto Rico
and near London, England.
We are a Delaware corporation. We sometimes refer to our subsidiaries and ourselves as the “Company’’.
We are the successor to MetPath Inc., a New York corporation that was organized in 1967. From 1982 to 1996,
we were a subsidiary of Corning Incorporated, or Corning. On December 31, 1996, Corning distributed all of
the outstanding shares of our common stock to the stockholders of Corning. In August 1999, we completed the
acquisition of SmithKline Beecham Clinical Laboratories, Inc., or SBCL, which operated the clinical laboratory
business of SmithKline Beecham plc, or SmithKline Beecham.
Our principal executive offices are located at One Malcolm Avenue, Teterboro, New Jersey 07608,
telephone number: [phone]. Our filings with the Securities and Exchange Commission, or the SEC,
including our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and
amendments to those reports, are available free of charge on our website as soon as reasonably practicable after
they are filed with, or furnished to, the SEC. Our Internet website is located at http://www.questdiagnostics.com.
The United States Clinical Laboratory Testing Market
Clinical laboratory testing is an essential element in the delivery of healthcare services. Physicians use
laboratory tests to assist in the detection, diagnosis, evaluation, monitoring and treatment of diseases and other
medical conditions. Clinical laboratory testing is generally categorized as clinical testing and anatomic pathology
testing. Clinical testing is performed on body fluids, such as blood and urine. Anatomic pathology testing is
performed on tissues and other samples, such as human cells. Most clinical laboratory tests are considered
routine and can be performed by most commercial clinical laboratories. Tests that are not routine and that
require more sophisticated equipment and highly skilled personnel are considered esoteric tests. Esoteric tests,
including gene-based tests, are generally referred to laboratories that specialize in performing those tests.
We believe that the United States diagnostic testing industry had over $37 billion in annual revenues in
2003. Most laboratory tests are performed by one of three types of laboratories: commercial clinical
laboratories; hospital-affiliated laboratories; and physician-office laboratories. In 2003, we believe that hospital-
affiliated laboratories performed over one-half of the clinical laboratory tests in the United States, commercial
clinical laboratories performed approximately one-third of those tests, and physician-office laboratories performed
the balance.
The underlying fundamentals of the diagnostic testing industry have improved since the early to mid-1990s,
which was a period of declining reimbursement and reduced test utilization. During the early 1990s, the