Quest Diagnostics 2006 Annual Report Download - page 22

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Item 1. Business
Overview
We are the nation’s leading provider of diagnostic testing, information and services, providing insights that
enable physicians and other healthcare professionals to make decisions to improve health. We offer patients and
physicians the broadest access to diagnostic laboratory services through our nationwide network of laboratories
and our owned patient service centers. We provide interpretive consultation through the largest medical and
scientific staff in the industry, with more than 500 M.D.’s and Ph.D.’s around the country. We are the leading
provider of esoteric testing, including gene-based testing and the leading provider of testing for drugs of abuse.
We are also a leading provider of anatomic pathology services, testing for clinical trials and risk assessment
services for the life insurance industry. We empower healthcare organizations and clinicians with state-of-the-art
information technology solutions that can improve patient care and medical practice.
During 2006, we generated net revenues of $6.3 billion and processed approximately 151 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 patients, physicians, hospitals, employers, governmental
institutions and other commercial clinical laboratories.
We operate a nationwide network of greater than 2,100 of our own patient service centers, principal
laboratories located in more than 30 major metropolitan areas throughout the United States and approximately
150 smaller “rapid response” laboratories (including, in each case, facilities operated at our joint ventures). We
provide full esoteric testing services, including gene-based testing, on both coasts through our Quest Diagnostics
Nichols Institute laboratory facilities, located in San Juan Capistrano, California and Chantilly, Virginia, as well
as infectious and immunologic disease testing through our Focus Diagnostics (“Focus Diagnostics”) laboratory
facility, located in Cypress, California. We also have laboratory facilities in Mexico City, Mexico, San Juan,
Puerto Rico and Heston, England.
We are a Delaware corporation. We sometimes refer to our subsidiaries and ourselves as the “Company” or
“Quest Diagnostics”. 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 1290 Wall Street West, Lyndhurst, New Jersey 07071,
telephone number: (201) 393-5000. 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 website is 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, including biopsies, and other samples, such as human cells. Many 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 estimate that the United States clinical laboratory testing market had approximately $45 billion in annual
revenues in 2006. Most laboratory tests are performed by one of three types of laboratories: commercial clinical
laboratories; hospital-affiliated laboratories; and physician-office laboratories. In 2006, we believe that hospital-
affiliated laboratories accounted for approximately 60% of the market, commercial clinical laboratories
approximately one-third and physician-office laboratories the balance.
Orders for laboratory testing are generated from physician offices, hospitals and employers. As such, factors
including changes in the United States economy which can affect the number of unemployed and uninsured, and
design changes in healthcare plans which impact the number of physician office and hospital visits, can impact
the utilization of laboratory testing.