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LabCorp, Quest Diagnostics Report Improved Q-3 Revenue

Both lab companies attributed increased sales and greater specimen volume to acquisitions

THIRD QUARTER EARNINGS at each of the nation’s two biggest public lab companies showed improved growth in revenue and specimen volume, as compared to recent years.

Laboratory Corporation of America was first to release its financial report for the quarter ending September 30, 2014. The company said that revenue totaled $1.55 billion, compared to $1.46 billion for Q3 in 2013. This was an increase of 6.1%. Specimen volume increased by 6.9% and was attributed to organic growth.

For the first nine months of 2014, LabCorp said its revenue was up 2.9% at $4.0 billion, compared to $4.37 billion during the first nine months of 2013. Specimen volume increased by 5%. LabCorp’s revenue per requisition for Q3 declined by 0.7% and by 2% for the full nine months of 2014.

Days later, Quest Diagnostics Incorporated issued its Q3 earnings report. It said Q3 revenue totaled $1.9 billion, an increase of 6.5% over the Q3 in 2013, mostly due to acquisitions. Specimen volume grew by 7.1% for Q3.

Quest Reports Revenue

For the first nine months of 2014, Quest Diagnostics reported revenue of $5.6 billion. This was an increase of 3.0% com- pared to the prior year. In its Q3 earnings press release, the company did not provide data on specimen volume and price changes for the full nine months of 2014.

During the respective conference calls with financial analysts, executives at both lab companies discussed issues of importance to all laboratories. One subject that came up early in both conference calls was regulation of laboratory-developed tests (LDTs) by the Food and Drug Administration.

LabCorp CEO Dave King responded to an analyst’s question by saying, “My perspective on FDA regulation of LDTs is quite clear and I’ve been pretty vocal about it. Diagnostic testing is not a device, it’s a medical service.

No Authority To Regulate

“The FDA, in our view, does not have the authority to regulate LDTs as medical devices,” he continued. “They don’t have the statutory authority to do that because medical tests are not devices.

“…the [FDA’s] attempt to make this kind of regulatory change through a guidance document—which on its face says that it’s not binding on the FDA and only reflects their current views—and yet… this document lays out a 10-year regulatory plan with registration requirements and penalties for those who don’t register,” explained king. “To me, this just incomprehensible.

“My perspective is this is one of the biggest land grab attempts in the history of regulation,” he emphasized. “And from my perspective, we intend to vigorously oppose it.

“…Furthermore, there’s been no study of the economic impact on our industry, on patients or on the practice of medicine related to this because FDA has not followed the proper administrative procedure for doing what it’s trying to do,” said king. “So I think you can tell that I feel very, very strongly about this, and my perspective is that we, as an industry, need to oppose this attempt at regulation as strongly as we possibly can.”

Also Opposed to FDA’s Plan

The CEO of Quest Diagnostics, Dennis Rusckowski, was equally emphatic about opposition to the FDA’s plans to regulate LDTs. On this point, Rusckowski stated “We continue to work closely with our trade association [ACLA] on another important issue. And that is to oppose the FDA’s proposal to regulate laboratory- developed tests, referred to as LDTs. We strongly believe that unnecessary and duplicative regulation could delay patient access to life saving treatments and compromise America’s leadership in diagnostic discovery.”

During both conference calls, the executives at each lab company emphasized the success of their respective cost-cutting initiatives. In particular, Quest CEO Rusckowski told analysts that his company was delivering on its goal of reducing annual costs by $500 million. He projected that the lab company would deliver $700 million of savings by the end of 2014 and would announce a plan to achieve $1 billion in annual savings at an upcoming investor conference.

Autonomous Robots

LabCorp called attention to the use of Propel robots to improve operational efficiency. These Propel robotic systems are in place in the company’s Burlington and Tampa lab facilities. The next lab scheduled to get these robotic systems is in Dublin, Ohio.

Another subject of interest to all labs was discussed on each conference call. Both lab companies reported that they are participating in discussions with CMS on how the lab price market survey will be formulated and conducted.

LabCorp Tells Analysts about BeaconLBS

BECAUSE OF ITS BUSINESS RELATIONSHIP WITH UnitedHealthcare (UHC), Laboratory Corporation of America has been able to position its BeaconLBS business as a lab test utilization management tool.

UHC’s laboratory benefit management program is conducting a pilot program in Florida that incorporates BeaconLBS. (See this article.) LabCorp CEO David King discussed BeaconLBS during the third quarter conference call. His comments are presented below:

As discussed on our last earnings call, we invested in BeaconLBS in 2011 because we understood that providers need assistance in selecting the right test for their patients and payers need help at appropriately managing the utilization of laboratory testing. After extensive market analysis and an enormous amount of hard work, we invented a tool that helps physicians choose the right test at the right time and helps payers improve quality of care and thoughtfully address concerns about unit cost and trend. UnitedHealthcare launched the innovative Laboratory Benefit Management Program with BeaconLBS in Florida on October 1, and we are pleased with the rollout thus far.

…I think it’s too early to draw any conclusions about more lab tests or fewer lab tests from the population of users of BeaconLBS …the point is, BeaconLBS is really less about overutilization/underutilization than it is about choosing the right test for the patient at the right time based on a Q&A that’s presented to the physician. I don’t think we’re talking about dramatic decreases in volume of laboratory testing as a result of trying to manage cost and trend. I think what we’re talking about is… better use of lab testing for diagnostics, better use of the tools to get at the disease state, and better use of lab testing in support of precision medicine and personalized care.

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