Publicly-Traded Lab Revenue Falls 1.4% In First-Half 2020

by Jondavid Klipp | Sep 15, 2020 | BioReference Labs, Labcorp, Quest Diagnostics, Sonic Healthcare

Publicly-Traded Lab Revenue Falls 1.4% In First-Half 2020

On a combined basis, 20 publicly-traded labs reported a revenue decrease of 1.4% to $9.8 billion during the first six months of 2020 (after adjusting for acquisitions), according to financial reports collected by Laboratory Economics.

Among five national clinic al labs (Quest Diagnostics, LabCorp, Sonic, BioReference and Enzo), combined revenue fell by 3.1% (after adjusting for acquisitions). BioReference had the strongest revenue growth, up 18% to $421.8 million, driven by Covid-19 PCR testing. BioReference processed approximately 2.2 million Covid-19 PCR tests during the first six months of 2020.

Among 15 specialty and genetic testing labs, combined pro-forma revenue increased by 7.3%.

Pro-forma revenue growth was fastest at DermTech, up 98.4% to $2.4 million. Other fast-growing companies included Castle Biosciences, up 54.9% to $30.1 million; Guardant Health, up 47.7% to $133.8 million; and CareDx, up 39.6% to $80.2 million.

Top 25 Fastest-Growing Labs by Medicare Part B Volume of Services

Quest Diagnostics Mid-Year 2020 Review

by Jondavid Klipp | Aug 15, 2020 | Quest Diagnostics

Quest Diagnostics Mid-Year 2020 Review

Quest Diagnostics (Madison, NJ) reported net income of $284 million for the six months ended June 30, 2020, down 27.2% from $390 million in the same period for 2019. Overall, Quest’s reported half-year revenue was down 5.1% to $3.649 billion. Looking specifically at Quest’s lab testing business: revenue was down 4.8% to $3.508 billion, including 0.7% gained from acquisitions. Here’s a summary of some key topics discussed during the company’s July 23 conference call with analysts.

Test Volume Trends
Quest reported a 10.2% decline in its requisition volume for the first six months of 2020 versus the same period in 2019. Non-Covid-19 requisition volume fell by approximately 19%.

Quest CEO Steve Rusckowski said volumes were rebounding strongest at primary care offices, including Ob/Gyns, and also for anatomic pathology testing. He said that the weakest volume trends were in life insurance testing, pre-employment drug screening and wellness program testing
for employers.

At the low end of its outlook, Quest is assuming an average 20% decline for its non-Covid-19 requisition volumes through the remainder of the year.

Covid-19 Testing
Quest has performed a total of roughly 8.5 million Covid-19 PCR-based tests year to date through June 30. Quest currently has the capacity to perform up to 130,000 Covid-19 PCR-based tests per day and plans to expand its capacity to 150,000 by early September.

Pooling patient samples for Covid-19 PCR-based tests will help expand capacity. Quest has begun combining four patient samples for pooled testing in locations where Covid-19 positivity rates are less than 5% (e.g., the Northeast). Quest has stated that it plans to bill for four tests when it performs pooled testing on four patient samples.

Meanwhile, Quest has performed a total of more than 2.5 million Covid-19 antibody tests year to date through June 30. Quest is currently performing about 20,000 antibody tests per day, well below its capacity for 200,000.

UnitedHealthcare’s Preferred Lab Network
Rusckowski said that as a member of UnitedHealthcare’s Preferred Lab Network, Quest had secured business from more than 180 out-of-network UHC labs.

Lab Acquisitions
“If anything, the pandemic could be an additional catalyst to help drive industry consolidation. Some transactions in the pipeline that were paused
because of the pandemic are being revisited,” said Rusckowski. Quest acquired Memorial Hermann Diagnostic Labs for $120 million on April 6, and completed its purchase of 100% of the joint venture Mid America
Clinical Labs in early August.

Top 25 Lab and Pathology Companies Receiving PRF Payments

by Jondavid Klipp | Jul 15, 2020 | BioReference Labs, Exact Sciences, Labcorp, Quest Diagnostics

Top 25 Lab and Pathology Companies Receiving PRF Payments

Not surprisingly, Quest Diagnostics ($65 million) and LabCorp ($56 million) top the list in terms of highest PRF payments received by lab and pathology companies. Exact Sciences, including Genomic Health, received $23.5 million, while Sonic Healthcare, including Aurora Diagnostics, received $12.4 million. In total, the top 25 lab and pathology companies received $222.6 million in PRF payments.

Quest Reports Full-Year 2019 Financial Results

by Jondavid Klipp | Feb 15, 2020 | Quest Diagnostics

Quest Reports Full-Year 2019 Financial Results

Quest Diagnostics reported net income of $858 million for full-year 2019, up from $736 million in 2018. Quest’s overall revenue increased by 2.6% to $7.726 billion, with acquisitions contributing more than 2% to revenue growth. Quest’s average revenue per requisition decreased by 1.3% to an estimated $44.86 per req. A summary of key topics discussed by CEO Steve Rusckowski and CFO Mark Guinan on a January 30 conference call follows.

Volume Growth
Overall, Quest’s gene-based and esoteric testing grew by approximately 5% to $2.5 billion in 2019. The growth drivers included drug monitoring, tuberculosis testing (QuantiFERON and T-SPOT), Hemepath, blood cancer testing and Cardio IQ cardiovascular testing, according to Rusckowski.

Immunoassay Vendor Consolidation
Siemens Healthineers has won a contract to provide up to 120 Atellica Solution immunoassay analyzers to 19 esoteric and core laboratories owned by Quest in the U.S. The Atellica system will also be installed at the new 250,000-square-foot lab that Quest is building in northern New Jersey. The consolidation to one immunoassay vendor is expected to save Quest $35 million per year.

Increased Competition for Hospital Send-Out Testing
Guinan said that hospitals are focusing more on pricing when selecting a reference lab. “In the past you might extend the [reference lab] contract with the understanding that you had a good reasonable price and they had good quality and all those kind of things. More and more of these are going to RFP where there’s an opportunity for price competitors to come in and compete on price very highly.”

Wage Pressure
“We have pressure in some geographies to up our wages more than we have historically because we have to be competitive with other companies,” said Rusckowski. He noted that Quest employs about 12,000 phlebotomists, more than 3,500 couriers, and thousands of specimen processors. “And so, if you look at the front end of our value chain, that’s where we see some pressure.”

UnitedHealth’s Preferred Laboratory Network Guinan said that United was focusing on how to reduce out-of-network usage. “They’ve done a number of things to try to reduce that, including sharing that information with members of the PLN, where we can go out and target some of those accounts and explain to the physician why there’s a benefit in steering patients to a preferred lab member.”

Guinan said that United began rolling out the PLN benefit, which offers members zero-dollar out-of-pocket cost for lab tests, to its fully-insured plans in January. “And then there’s the sponsored plans, which is the next step. So this is a long-term initiative that is certainly reaping some benefits. But it’s not in terms of a steep change where this is going to overnight move on dramatically.”

Quest Diagnostics Buys Assets From Bankrupt True Health

by Jondavid Klipp | Oct 15, 2019 | Quest Diagnostics, True Health

Quest Diagnostics Buys Assets From Bankrupt True Health

True Health and its parent company THG Holdings have finalized a bankruptcy court-approved sale of their assets to Cleveland HeartLab, a subsidiary of Quest Diagnostics, for $8.5 million.

The deal did not include True Health’s 100,000-square-foot lab in Richmond or its hundreds of employees. True Health acquired the Richmond lab when it purchased the assets of bankrupt Health Diagnostic Laboratory (HDL) for $37 million in late 2015.

HDL went bankrupt in 2015 after agreeing to pay $47 million to settle allegations that it defrauded Medicare and Medicaid by paying kickbacks to doctors in exchange for ordering its lipid test panels.

True Health filed for bankruptcy in July (see LE, August 2019) after CMS suspended all Medicare payments to the company based on “credible allegations of fraud.” According to an ongoing investigation by the OIG, True Health had set up labs inside rural hospitals that receive higher rates of
reimbursement from Medicare. From there, OIG investigators claim that True Health engaged in a kickback scheme by enlisting doctors into Management Service Organizations (MSOs) that incentivized them to send patient samples to the rural hospital labs. The OIG investigators say that
these physicians never had privileges with or visited the rural hospitals, and never provided their patients with a choice as to where to send their lab tests.

A Quest spokesman says that Quest chose not to acquire True Health’s facilities, staff, or accounts receivable “nor will we adopt its policies and business practices.” Essentially, Quest has purchased True Health’s client list and some instruments and supplies.

In the seven-month period January 1 through July 31, 2018, True Health recorded revenue of $38.5 million, equal to an annual rate of $66 million, according to its bankruptcy filings. If Quest’s Cleveland HeartLab can retain a fraction of True Health’s clients and revenue, then the $8.5 million purchase price will be a huge bargain, observes Laboratory Economics.

True Health is majority-owned by the private-equity firm The Riverside Company (New York City), while Founder and CEO Chris Grottenthaler has a 6% stake. True Health has $173 million in total liabilities. Its largest secured creditors are Monroe Capital Management (owed $123 million) and Riverside Strategic Capital (owed $34 million). True Health had initially filed for Chapter 11 bankruptcy reorganization in July, and is now likely headed for Chapter 7 liquidation.

Debt Collection Company Hack May Affect 20+ Million Patients

by Jondavid Klipp | Jun 15, 2019 | BioReference Labs, Labcorp, Quest Diagnostics

Debt Collection Company Hack May Affect 20+ Million Patients

Aweb payment page operated by American Medical Collection Agency
(AMCA-Elmsford, NY) has been hacked and may have exposed personal data on 20+ million patients from at least three commercial lab companies: Quest Diagnostics, LabCorp and BioReference Labs. AMCA, which also does business under the name Retrieval-Masters Credit Bureau, is a third-party debt collector with a reputation for aggressively pursuing patients for past due bills.

The hack was initially discovered in late February by the web payment
security monitoring firm Gemini Advisory (New York City), when they
found credit card information from patients linked to AMCA being sold
on a darknet marketplace. Gemini believes the AMCA hack may turn out
to be the largest medical breach of 2019.

Quest Diagnostics says that it was notified by AMCA of the data breach on May 14. AMCA said that an “unauthorized user” had gained access to social security numbers, credit card numbers, bank account information and other sensitive data from up to 11.9 million Quest patients between August 1, 2018 and March 30, 2019. Quest says that patient lab test results are not provided to AMCA and were therefore not affected by the hack. Quest has suspended sending collection requests to AMCA.

LabCorp says the data breach may have affected 7.7 million of its patients referred to AMCA. LabCorp has ceased sending new collection requests to AMCA and stopped the agency from working on any of its pending collection requests.

OPKO Health Inc. says that 422,600 of its patients may have been impacted by the hack through its subsidiary, BioReference Laboratories (Elmwood Park, NJ). BioReference has not sent any new collection requests to AMCA since October 2018, and has requested that it stop working on any pending collections.

In a statement, AMCA said it was notified of a potential data breach by a security compliance firm (i.e., Gemini) that works with credit card companies, which resulted in the collections agency conducting an internal review and then taking down its web payment page. As of early June, Gemini said that it can verify more than 200,000 compromised payment records related to the breach, and that more records are continually being added to dark web marketplaces.

Meanwhile, at least six state attorneys general—in Michigan, New York, Minnesota, North Carolina, Illinois and Connecticut—are now investigating the breach.