BECAUSE OF ACQUISITIONS, there remain only four public laboratory companies which do substantial business in testing referred by physicians’ offices.
As public companies, their quarterly financial reports provide useful insights into the competitive marketplace for lab testing services. That is true of the year-end financial reports for both Quest Diagnostics Incorporated and Laboratory Corporation of America.
For 2003, Quest Diagnostics generated revenues of $4.7 billion. This was an increase of 15.3%, compared to revenues of $4.1 billion in 2002. LabCorp’s revenues grew 17.2%, from $2.5 billion in 2003 to $2.9 billion in 2004.
On that revenue base, Quest Diagnostics generated EBITDA (earnings before interest, taxes, depreciation, and amortization) of $951 million, or 20.1% of revenues. LabCorp’s EBITDA was 24.2%, totaling $711 million.
For fourth quarter 2003, both companies disclosed that accessions had increased (12.7% at Quest, 7% at LabCorp) and average revenues per requisition were up (3.5% for Quest, 5.5% for LabCorp) over those of 2002.
The next largest public lab companies offering testing to physicians’ offices are Bio-Reference Laboratories, Inc. and LabOne, Inc. Bio-Reference ends its fiscal year on October 1, so it closed its 2003 fiscal year earlier than LabOne.
For 2003, Bio-Reference reported revenues of $109 million, a 13.5% increase over 2002 revenues of $96.6. LabOne generated 2003 revenues of $346 million, a growth rate of 16%. LabOne’s health services business includes testing done for office-based physicians. For 2003, those revenues were $88.5 million. This is an increase of 45% from the $61 million posted in 2002.
Ongoing Double-Digit Growth
All four of these public laboratory companies generated double-digit growth in revenues for 2003. This reflects the influence of two parameters. Specimen volume increases and price increases together contribute to higher revenues.
Among other conclusions, double-digit revenue growth demonstrates that these laboratory companies are seeing a shift in test mix toward assays which are reimbursed at higher rates. For example, Bio-Reference Laboratories noted that esoteric testing comprised 29% of its test mix for its fiscal quarter ending January 31, 2004 and helped contribute to a revenue per accession which increased 2.5%, from $49.56 to $50.85.
All four laboratories are posting respectable profits. This is certainly a contrast from the mid-1990s, when most public laboratories were posting sizeable losses.