Quest Diagnostics 2008 Annual Report Download - page 24

We believe that healthcare providers consider a number of factors when selecting a testing provider,
including:
•service capability and quality;
•accuracy, timeliness and consistency in reporting test results;
•pricing;
•patient insurance coverage;
•number and type of tests performed by the provider;
•number, convenience and geographic coverage of patient service centers;
•reputation in the medical community;
•healthcare information technology solutions;
•qualifications; and
•ability to develop new and useful tests.
We believe that we are an effective competitor in each of these areas. We also believe that the
differentiation we are creating through our focus on providing the most comprehensive test menu, innovative test
and information technology offerings, a superior patient experience, Six Sigma quality and unparalleled access
and distribution provides us with a competitive advantage and enables us to compete on more than price alone.
We believe that large commercial clinical laboratories may be able to increase their share of the overall
clinical testing market due to their large service networks and lower cost structures. These advantages should
enable larger clinical laboratories to more effectively serve large customers and members of large healthcare
plans. In addition, we believe that consolidation in the clinical testing industry will continue. However, a
significant portion of clinical testing is likely to continue to be performed by hospitals, which generally have
affiliations with community physicians that refer testing to us. As a result of these affiliations, we compete
against hospital-affiliated laboratories primarily on the basis of service capability and quality as well as other
non-pricing factors. Our failure to provide service superior to hospital-affiliated laboratories and other laboratories
could have a material adverse effect on our net revenues and profitability. In addition, recent market activity,
including actions by payers to exclude large national clinical laboratories from contracts, may enhance the
relative competitive position of regional laboratories.
The diagnostic testing industry is faced with changing technology and new product introductions. Advances
in technology may lead to the development of more cost-effective tests that can be performed outside of a
commercial clinical laboratory such as (1) point-of-care tests that can be performed by physicians in their offices;
(2) complex tests that can be performed by hospitals in their own laboratories; and (3) home testing that can be
carried out without requiring the services of clinical laboratories. Development of such technology and its use by
our customers and patients would reduce the demand for our laboratory testing services and negatively impact
our net revenues. With our point-of-care test strategy, we are positioning ourselves to service this market for
physicians and hospitals. We also believe that our overall point-of-care test strategy will strengthen our
relationship with our customers by enabling us to offer more solutions that improve their effectiveness and the
care of their patients by enabling faster diagnosis and treatment.
The diagnostic product market is highly competitive. We have many competitors, some of which have much
more extensive experience in this market and some of which have greater resources. We compete in this area by
attempting to find and exploit unique differentiated products, including products that take advantage of our
healthcare information technology solutions. There is no guarantee that we will be able to compete successfully
in this market.
Sales and Marketing. Our sales force is organized to focus on customer groups and service types. The
majority of representatives focus on marketing clinical laboratory testing, anatomic pathology and related services
to physicians, including physician specialists. Supporting our physician sales teams are genomics and esoteric
testing specialists, who are specially trained and focused on educating our clients on new and more complex
tests. In addition, we have a health plan sales organization that focuses on regional and national insurance and
healthcare organizations. We also have a hospital sales organization that focuses on meeting the unique clinical
testing needs of hospitals and promotes the specialized capabilities of our Nichols Institute esoteric testing
laboratories and our Focus Diagnostics infectious and immunologic disease testing laboratory. A smaller portion
of our sales force focuses on selling drugs-of-abuse and wellness testing to employers. We also have a sales force
that focuses on selling risk assessment testing services to life insurance companies. In addition, we have a sales
organization that focuses on selling diagnostic products to hospitals, commercial clinical laboratories, physician
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