Quest Diagnostics 2003 Annual Report Download - page 27

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of genes and their functions) and proteomics (the discovery of new proteins made possible by the human
genome project).
•Anatomic Pathology: While we are one of the leading providers of anatomic pathology services in the
United States, we have traditionally been strongest in cytology, and specifically in the analysis of Pap
tests to detect cervical cancer. During the last several years, we have led the industry in converting over
80% of our Pap smear business to the use of liquid-based technology for cervical cancer screening, a
higher quality and more profitable product offering. We intend to continue to expand our anatomic
pathology business into higher growth segments, including histology (tissue pathology), and actively
participate in the emerging use of molecular testing as a screening tool in conjunction with Pap tests.
We estimate that the current United States market for anatomic pathology services is approximately $6
billion per year. We estimate that cytology represents about $1 billion per year of this market, and that
tissue pathology represents about $5 billion per year of this market. We generated approximately $500
million in net revenues from such services during 2003.
•Information Technology: We continue to invest in the development and improvement of information
technology products for customers and providers by developing differentiated products that will provide
friendlier, easier access to ordering and resulting of laboratory tests and patient-centric information. In
February 2003, we launched our proprietary eMaxxt Internet portal to physicians nationwide. The
eMaxxt Internet portal enables doctors to order diagnostic tests and review laboratory results online, as
well as check patients’ insurance eligibility in real time and view clinical information from many
sources. In pilot markets, physicians are also able to use eMaxxt to prescribe pharmaceuticals. This
service allows us to replace older technology desktop products that we currently provide to many
physicians and thereby streamline our support structure. Demand has been growing for our information
technology solutions as physician offices have expanded their usage of the Internet. By the end of 2003,
we were receiving approximately 25% of all test orders and delivering about 35% of all test results via
the Internet.
The eMaxxt Internet portal was developed by MedPlus Inc., or MedPlus, which we acquired in
November 2001. MedPlus’ ChartMaxxt and eMaxxt patient record systems are designed to support the
creation and management of electronic patient records, by bringing together in one patient-centric view
information from various sources, including the physician’s records and laboratory and hospital data. We
intend to expand the services offered through our portal over time as other strategic arrangements are
realized, which will enhance our ability to introduce a broad range of electronic services to healthcare
providers.
•Selective Regional Acquisitions: The clinical laboratory industry remains highly fragmented. We expect
to continue to acquire other regional clinical laboratories that can be integrated with our existing
laboratories, thereby enabling us to reduce costs and improve efficiencies through the elimination of
redundant facilities and equipment, and reductions in personnel (see “Recent Acquisitions’’ for a
discussion of our recent acquisitions). We may also consider acquisitions of ancillary businesses as part
of our overall growth strategy, such as our November 2001 acquisition of MedPlus, which develops
clinical connectivity products designed to enhance patient care (see “Information Technology’’).
Information Systems
Information systems are used extensively in virtually all aspects of our business, including laboratory
testing, billing, customer service, logistics, and management of medical data. Our success depends, in part, on
the continued and uninterrupted performance of our information technology, or IT systems. Computer systems
are vulnerable to damage from a variety of sources, including telecommunications or network failures, malicious
human acts and natural disasters. Moreover, despite network security measures, some of our servers are
potentially vulnerable to physical or electronic break-ins, computer viruses and similar disruptive problems.
Despite the precautionary measures that we have taken to prevent unanticipated problems that could affect our
IT systems, sustained or repeated system failures that interrupt our ability to process test orders, deliver test
results or perform tests in a timely manner could adversely affect our reputation and result in a loss of
customers and net revenues.
During the 1980s and early 1990s when we acquired many of our laboratory facilities, our regional
laboratories were operated as local, decentralized units, and we did not standardize their billing, laboratory and
some of their other information systems. As a result, by the end of 1995 we had many different information
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