What Comes Next? Predictions on COVID-19 Test Volumes in 2021-22

Some public lab companies have good insights

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CEO SUMMARY: Incoming data show that the number of referrals for both COVID-19 tests and routine tests is in a decline that started in October and is continuing. This complicates the strategic planning for hospital/health system labs, independent labs, and pathology groups. They need to make accurate predictions about the demand for tests in coming months, so that they can manage their supply chains and schedule lab staff. The financial consequences of guessing wrong about lab test volumes can be substantial. 

WHAT WILL THE COVID-19 PANDEMIC BRING NEXT to clinical laboratories and anatomic pathology groups? Will COVID-19 test volumes increase or decrease through 2021 and 2022? Will demand for SARS-CoV-2 serology tests increase in the coming 12 months? 

These are some of the most important questions now driving both short-term and long-term strategic planning at the nation’s labs. Every lab’s strategic planning must address the clinical and financial consequences in response to the evolving nature of this pandemic, along with unexpected changes in how patients access care. 

Lab administrators and pathologists walk a daily tight rope as they attempt to balance their purchases of SARS-CoV-2 test kits, collection supplies, transport media, and other lab consumables with the incoming flow of patient specimens. 

Similarly, clinical laboratory managers must align lab staffing schedules to the incoming volume of samples so as to maintain the desired turnaround times. This goal is particularly important now that the Medicare program pays a higher price per test for COVID-19 molecular tests reported within 48 hours. (See TDR, “Medicare to Cut Payment for COVID Tests Jan. 1,” Oct. 26, 2020.) 

Unfortunately, it is the nature of this pandemic to be entirely unpredictable. Since the first surge of cases in March, there have been three separate surges in daily test volumes. Each wave had a peak in the number of daily new COVID-19 cases, followed by a decline. 

One example is the third wave, which started in early October. From a baseline of 50,000 new cases per day, it grew to a peak of 314,000 daily new cases on Jan. 8, 2021. That was a 419% increase in new infections over the second wave’s peak of 75,100 cases, recorded on July 24, 2020. 

The good news is that, since Jan. 8, daily new cases of COVID-19 have fallen to as low as 50,013 on Monday of last week, according to data published by the federal Centers for Medicare and Medicaid Services (CMS). 

Just as the first two waves of new COVID-19 case crested, then declined, only to yield to an even bigger wave of daily new cases, one cannot rule out the potential for a fourth wave of daily new COVID-19 cases to hit in coming months. 

However, there are strong reasons to predict that the worst of the pandemic in the United States may have passed. A number of epidemiologists believe this current decline in daily new cases might continue downwards because of two factors. 

First, the number of people with at least one dose of COVID-19 vaccine is now greater than 115 million and is increasing by about two million people per day in this country, according to CDC data. So more than one-third of the U.S. population already have some protection against a SARS-CoV-2 infection. 

30 Million Cases in the U.S. 

Second, the total number of COVID-19 cases reported in the United States since the onset of the pandemic is now about 30 million, which is almost 10% of the population. These individuals have some level of immunity to a new infection. 

Together, these two factors would argue that the worst of the pandemic has passed. But it is the nature of pandemics to be unpredictable and new variations of SARS-CoV-2 are popping up all over the world. 

Further, there is the unanswered question as to whether SARS-CoV-2 will become endemic in the United States. In this scenario, new COVID-19 infections show up regularly—and just as with the common cold and influenza—cases of COVID-19 might increase in a pattern associated with the seasons. 

Thus, lab managers and pathologists have vexing questions to answer as they develop a strategy to respond to the pandemic, supported by operational tactics to handle the required volume of testing. 

The data above provide a starting point for labs as they do their business planning. But more information about the ongoing demand for molecular SARS-CoV-2 testing and COVID-19 serological testing is needed to help labs with their strategic planning. 

There is a credible source of insight about how the demand for COVID-19 testing may play out during 2021 and into 2022. It comes from the nation’s billion-dollar public laboratory companies. 

Both LabCorp and Quest Diagnostics have access to all that is happening with efforts to manage the pandemic. Their executives speak daily with the federal and state officials in charge of the pandemic response. This has been true since the earliest days of the pandemic, when the federal government was under great pressure to help clinical labs increase the number of molecular SARS-CoV-2 tests they could perform daily. 

Unique Access to Information

This means that the executives at the two blood brothers have unique access to information about the latest regional hot spots for infections and the actions federal and state officials are taking to control the pandemic and ensure an adequate number of COVID-19 tests across the nation.

LabCorp and Quest executives—along with administrators at such big organizations as ARUP Laboratories, Mayo Clinic Labs, and Sonic Healthcare, which each have a national network of labs—also know more about the daily changes in the supply chain of collection supplies, transport media, COVID-19 test kits, and primers than the administrators of other labs in the United States. 

Given the engagement of the executives at these two laboratory companies with government officials at the federal, state, and local levels, it can be assumed that their strategic planning incorporates this knowledge and information. 

During their respective fourth quarter and full year 2020 conference calls, the leadership at LabCorp and Quest did provide opinions on the demand for molecular and serological tests for SARS-CoV-2 during the balance of 2020 and into 2021. Their comments can be useful for lab managers and pathologists to use when developing forecasts and strategic plans for their own labs. 

On Feb. 4, Quest Diagnostics was first to issue its Q4-2020 earnings report and hold its conference call with financial analysts. LabCorp issued its Q4-2020 earnings report on on Feb. 11 and held its conference call the same day. Highlights of the financial performance for each public lab company are shown in the sidebar below.

During their respective earnings calls, executives at both companies discussed the following topics that can help inform strategic planning activities at other clinical labs and pathology groups. They include:

  • falling demand for COVID-19 tests in recent months;
  • decrease in daily number test referrals for routine and reference testing since fall of 2020;
  • speculation about a more important role for SARS-CoV-2 serology tests. 

The following statements were made during the Q4-2020 earnings calls conducted by Quest Diagnostics and LabCorp. The Dark Report presents below their statements about each of the three points shown above. 

Dropping Demand for COVID-19 tests

During the Quest earnings call, the COVID-19 test demand was mentioned early. “… demand for COVID testing is likely to decline throughout 2021 as more people become vaccinated and fewer new cases are reported,” stated Steve Rusckowski, Chairman, President, and CEO at Quest. “We believe that COVID-19 testing will continue into 2022.”

“The demand for and duration of COVID-19 testing—as well as the continued recovery in the base business—are significant swing factors that remain challenging to forecast,” commented Mark J. Guinan, Quest’s Chief Financial Officer.

“COVID-19 molecular testing volumes averaged roughly 100,000 tests per day in the first half of the year. However, we expect average daily volumes [of molecular COVID-19 tests] to decline throughout the first half of 2021 as more people become vaccinated. Therefore, we assume COVID-19 molecular volumes will be lower in the second quarter compared to Q1-2021.”

During LabCorp’s earnings call, the following statements addressed demand for COVID-19 testing. LabCorp provided guidance to financial analysts, with Glenn A. Eisenberg, LabCorp’s Chief Financial Officer, stating, “… COVID testing revenue [at LabCorp] will decline 35% to 50%” during 2021, compared to 2020.

“If the country vaccinates a significant portion of the population by the summer, we would expect a continued decline in COVID-19 molecular testing volumes in the second half of 2021 compared to our expectations for the first half,” added Eisenberg. “Similarly, demand for COVID-19 serology testing is likely to wane in the back half of the year.” 

“And I assume that the [molecular COVID-19 test] volume is going to continue to decline,” commented Adam H. Schechter, Chairman, President, and CEO of LabCorp. “… then for the second half of the year [2021], the [COVID-19 molecular test volume will] be significantly less than the first half of this year. That’s our base-case assumption.”

Decrease in Routine and Reference Testing

Recent declines in testing volume for routine clinical lab test referrals was discussed during each conference call. Both lab companies reported that this decline began last fall and continues into the first months of 2021.

During the Quest earnings call, CFO Guinan explained, “As we highlighted in our 2020 outlook update in mid-December, organic [routine] testing volumes ordered in our base business were down mid- to high-single digits versus the prior year in October and November. The recovery stalled in late November with organic testing volume trends down high single digits versus the prior year in December due to the surge in new infections across the country.

“Our first half outlook generally assumes a gradual improvement in base [routine] testing volumes, but we expect the base business to remain below our prepandemic 2019 baseline throughout the first half of the year,” added Guinan. 

LabCorp’s Schecter explained that “… we saw lower [routine test] volumes down 7.7%, but still, that’s an improvement [from our routine lab volume] trend through the earlier parts of the year [2020, during the lockdown months of March and April], and it was more than offset by favorable price and test mix.”

Even as LabCorp experiences an overall decline in the number of routine test orders, it spotted an increase in the average number of tests per requisition. “We continue to see an unusually high level of favorable [test] mix, primarily driven by higher tests per accession,” explained LabCorp’s Schecter. “The feeling is because there are fewer visits by patients to their physicians, physicians are conducting more [lab] tests per visit … going forward and [that is] reflected in the guidance.”

Speculation about Role for SARS-CoV-2 Serology Tests

Uncertainty continues about the demand for COVID-19 serology tests. Each lab offered perspectives on this subject. 

At Quest, “we do believe there’ll be increasing role of serology throughout 2021,” stated Rusckowski. “We see some early interest in understanding whether an individual has the antibodies or not, which might inform patients and physicians around their urgency of getting vaccinated. 

“At the same time, we’re bringing out a new capability called quantitative serology testing,” continued Rusckowski. “This will allow physicians and patients to see if, in fact, they do get the spike protein from the vaccines. We’ll be bringing that assay [to market] on two platforms in the next few weeks.

“So, we do believe that there will be some increased demands for serology. And this is on top of what we already do,” concluded Rusckowski. 

Serology testing for SARS-CoV-2 is also under development at LabCorp. “We are very specific to say COVID-19 testing and not break apart PCR and serology because it could go in multiple different directions,” observed LabCorp’s Schechter. “I think if you end up having to have a vaccination every year, serology might not be that important. If you need a vaccination every several years, then I believe serology will be very important.”

Schechter continued, saying “the real question is going to be what level? What’s the quantitative analysis that you need for a certain level of antibodies to feel like you’re protected. If there is a quantitative number that allows people to feel comfortable that they can fly, they can go to events, they can do many other things—then it will be very important [for COVID-19 serology testing].” 

LabCorp, Quest Diagnostics Report Earnings for Q4 and Full Year 2020, the Year of COVID

BECAUSE OF THE COVID-19 PANDEMIC, 2020 was a year like no other in the history of the clinical laboratory industry. The shutdown of the nation in March, 2020, caused a precipitous decline in both the volume of routine lab test specimens referred daily to the nation’s labs, along with a corresponding crash in cash flow. The fourth quarter and full-year 2020 earnings reports of both Quest Diagnostics and LabCorp reflect all of the disruptive consequences of the pandemic. Here are some of the financial highlights for both public lab companies.

quest-diagnostics-logo

Quest Diagnostics released its Q4 and full-year 2020 earnings report on Feb. 4. For the full year, revenue was $9.1 billion, a 23.4% increase over 2019’s revenue of $7.4 billion. Comparing 2020 to 2019:

• revenue per requisition was up 16.2%

• number of requisitions grew by 6.6%

• organic requisition growth was 4.5%

For the fourth quarter, revenue was $2.9 billion, a 58% increase over Q4-2019. Because COVID-19 test capacity had expanded over the year, Q4 performance was much greater compared to the same quarter in 2019:

• revenue per requisition was up 25.2%

• number of requisitions grew 26.8%

LabCorp-logo

On Feb. 11, LabCorp released its Q4 and full-year 2020 earnings report. For its diagnostics division (the clinical laboratory business), revenue for the full year 2020 was $9.3 billion compared to revenue of $7.0 billion in 2019, an increase of 32.2%. 

For the fourth quarter, diagnostics revenue was $2.9 billion, a 58% increase over Q4-2019. 

Comparing Q4-2020 to Q4-2019:

• revenue per requisition was up 34.0%

• number of requisitions grew by 33.9%

• organic requisition growth was 22.3%…

LabCorp’s other major division is Covance, its clinical trials business. When adding together all its businesses, LabCorp reported total revenue of $14.0 billion in 2020, compared to $11.6 billion in 2019, an increase of 21.0%.

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