Quest Diagnostics 2011 Annual Report Download - page 18

job market can impact the utilization of drugs of abuse testing. We seek to grow our employer volumes through
offering new and innovative programs to help companies with their goal of maintaining a safe and productive
workplace. We also offer employers our Blueprint for Wellness威program, providing wellness screening and
analytic services to employers, to help employers and their employees manage increasing healthcare costs and to
capitalize on trends in personalized health.
Other Laboratories and Other Customers. We also provide testing services to federal, state and local
governmental agencies and perform esoteric testing services for other commercial clinical laboratories. These
customers are charged on a fee-for-service basis.
GENERAL
Competition. While there has been significant consolidation in the clinical testing industry in recent years,
our industry remains fragmented and highly competitive. We primarily compete with three types of clinical
testing providers: other commercial clinical laboratories, hospital-affiliated laboratories and physician-office
laboratories. Our largest commercial clinical laboratory competitor is Laboratory Corporation of America
Holdings, Inc. In addition, we compete with many smaller regional and local commercial clinical laboratories and
specialized esoteric laboratories. In anatomic pathology, additional competitors include anatomic pathology
practices, including those in academic institutions. In addition, there has been a trend among specialty physician
practices to establish their own histology laboratory capabilities and/or bring pathologists into their practices,
thereby reducing referrals from these practices.
We believe that healthcare providers traditionally consider a number of factors when selecting a testing
provider, including:
•service capability and quality;
•accuracy, timeliness and consistency in reporting test results;
•patient insurance coverage;
•number and type of tests performed;
•pricing;
•access to medical/scientific thought leaders for consultation;
•number, convenience and geographic coverage of patient service centers;
•reputation in the medical community;
•healthcare information technology solutions;
•qualifications of its staff; 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 offering the
most comprehensive test menu in the industry, innovative test and information technology offerings, a superior
patient experience, a staff including medical and scientific experts, Six Sigma quality and unparalleled access and
distribution provide us with a competitive advantage.
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 customers, including 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. In addition, recent market activity may increase the competitive environment. For example,
health plan actions to exclude large national clinical laboratories from contracts may enhance the relative
competitive position of regional laboratories, and increased hospital acquisitions of physician practices enhance
the ties of the physicians to hospital-affiliated 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
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