Quest Diagnostics 2010 Annual Report Download - page 25

portion of the financial risk associated with providing testing services to their members through capitated
payment arrangements. In addition, some healthcare plans have been willing to limit the PPO or POS laboratory
network to only a single national laboratory to obtain improved fee-for-service pricing. There are also an
increasing number of patients enrolling in consumer driven products and high deductible plans that involve
greater patient cost-sharing.
The increased consolidation among healthcare plans also has increased the potential adverse impact of
ceasing to be a contracted provider with any such insurer. The 2010 federal healthcare reform legislation includes
provisions, including ones regarding the creation of healthcare exchanges, that may encourage healthcare
insurance plans to increase exclusive contracting.
We expect continuing efforts to reduce reimbursements, to impose more stringent cost controls and to reduce
utilization of clinical test services. These efforts, including future changes in third-party payer rules, practices and
policies, or ceasing to be a contracted provider to a healthcare plan, may have a material adverse effect on our
business.
Business development activities are inherently risky, and integrating our operations with businesses we
acquire may be difficult and, if unsuccessfully executed, may have a material adverse effect on our
business.
We plan selectively to enhance our business from time to time through business development activities, such
as strategic acquisitions, licensing, investments and alliances. However, these plans are subject to the availability
of appropriate opportunities and competition from other companies seeking similar opportunities. Moreover, the
success of any such effort may be affected by a number of factors, including our ability to properly assess and
value the potential business opportunity, and to integrate it into our business. The success of our strategic
alliances depends not only on our contributions and capabilities, but also on the property, resources, efforts and
skills contributed by our strategic partners. Further, disputes may arise with strategic partners, due to conflicting
priorities or conflicts of interests.
Each acquisition involves the integration of a separate company that was previously operated independently
and has different systems, processes, policies and cultures. Integration of acquisitions involves a number of risks
including the diversion of management’s attention to the assimilation of the operations of businesses we have
acquired, difficulties in the integration of operations and systems and the realization of potential operating
synergies, the assimilation and retention of the personnel of the acquired companies, challenges in retaining the
customers of the combined businesses, and potential adverse effects on operating results. The process of
combining companies may be disruptive to our businesses and may cause an interruption of, or a loss of
momentum in, such businesses as a result of the following difficulties, among others:
•loss of key customers or employees;
•difficulty in standardizing information and other systems;
•difficulty in consolidating facilities and infrastructure;
•failure to maintain the quality or timeliness of services that our Company has historically provided;
•diversion of management’s attention from the day-to-day business of our Company as a result of the need
to deal with the foregoing disruptions and difficulties; and
•the added costs of dealing with such disruptions.
If we are unable successfully to integrate strategic acquisitions in a timely manner, our business and our
growth strategies could be negatively affected. Even if we are able to successfully complete the integration of the
operations of other companies or businesses we may acquire in the future, we may not be able to realize all or
any of the benefits that we expect to result from such integration, either in monetary terms or in a timely
manner.
Our business could be negatively affected if we are unable to continue to improve our efficiency.
As noted above, government payers and healthcare insurers have taken steps to control the utilization and
reimbursement of healthcare services, including clinical testing services; such steps may continue. If we are
unable to continue to improve our efficiency to enable us to mitigate the impact on our profitability of these
activities, our business could be negatively affected.
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