Quest Diagnostics 2006 Annual Report Download - page 23

The diagnostic testing industry remains fragmented and highly competitive. Government payers, such as
Medicare (which principally serves patients 65 years and older) and Medicaid (which principally serves indigent
patients), as well as private payers and large employers, continue to take steps to control the cost, utilization and
delivery of healthcare services, including clinical laboratory services. We expect reductions in reimbursement
from Medicare and Medicaid will continue to be implemented from time to time. The continuing consolidation
among healthcare insurers has resulted in fewer but larger insurers with significant bargaining power to negotiate
fee arrangements with healthcare providers, including clinical laboratories. See “Recent Changes in Payer
Relationships” and “Payers and Customers – Healthcare Insurers”.
While the diagnostic testing industry in the United States will be impacted by a number of factors and may
continue to experience intensified pricing pressure in the near term, we believe it will continue to grow over the
long term as a result of the following:
•the growing and aging population;
•continuing research and development in the area of genomics (the study of DNA, genes and
chromosomes) and proteomics (the analysis of individual proteins and collections of proteins), which is
expected to yield new, more sophisticated and specialized diagnostic tests;
•increasing recognition by consumers and payers of the value of laboratory testing as a means to improve
health and reduce the overall cost of healthcare through early detection and prevention; and
•increasing affordability of, and access to, tests due to advances in technology and cost efficiencies.
Quest Diagnostics, as the largest clinical laboratory testing company with a leading position in most of its
domestic geographic markets and service offerings, is well positioned to benefit from the long-term growth
expected in the industry.
Corporate Strategy and Growth Opportunities
Our mission is to be the undisputed world leader in diagnostic testing, information and services. We focus
on Patients, Growth and People to help achieve our goals.
Patients are at the center of everything we do. Increasingly, patients and their doctors have a choice when it
comes to selecting a healthcare provider, and we strive to give them new and compelling reasons to put their
trust in us. We differentiate our Company to patients and doctors by:
•Providing the Highest Quality Services and a Unique Patient Experience: We strive to provide the highest
quality in all that we do including: phlebotomy and specimen transport services; analytical testing
processes in our laboratories; accurate and timely lab reports; and billing information. We use Six Sigma
and Lean processes to continuously reduce defects, enhance quality, and further increase the efficiency of
our operations. Six Sigma is a management approach that utilizes a thorough understanding of customer
needs and requirements, root cause analysis, process improvements and rigorous tracking and measuring to
enhance quality. Lean streamlines processes and eliminates waste. We also use Six Sigma and Lean
principles to help standardize operations and processes across our Company and identify and adopt
company best practices. Our phlebotomists are specially trained to provide a unique patient experience.
Patients are served at our patient service centers within 20 minutes, on average, and even faster where we
have deployed our automated appointment scheduling.
•Offering Unparalleled Access and Distribution: We offer the broadest test menu and national access to
testing services, with facilities in substantially all of the major metropolitan areas in the United States. Our
test menu includes more than 3,000 tests. 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 about 150 smaller “rapid response” laboratories that enable us to serve
patients, physicians, hospitals, employers and other healthcare providers throughout the United States. We
also operate approximately 65 locations in the United States and Canada where we provide paramedical
examinations. We believe that customers seek to utilize laboratory-testing providers that offer a
comprehensive range of tests and services and the most convenient access to those services.
Growth is driven organically and through acquisition. Over the long term, we expect to grow organically at
or above the industry growth rate by gaining more customers and selling more to existing customers. Historically,
our industry has focused primarily on service levels and aggressive pricing to drive organic volume growth. We
believe that the differentiation we are creating through our focus on Six Sigma quality, unparalleled access and
distribution, the most comprehensive test menu and innovative test and information technology offerings provides
us with a competitive advantage and enables us to compete on more than price alone. Additionally, we are
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