Quest Diagnostics Incorporated · NYSE:DGX
Quest Diagnostics — 37th Annual J.P. Morgan Healthcare Conference (January 2019)
25 slides from Quest Diagnostics's conference presentation, Jan 8, 2019
Slide 1: Accelerating Growth, Building Value
Accelerating Growth, Building Value Steve Rusckowski Chairman, President and Chief Executive Officer 37th Annual J.P. Morgan Healthcare Conference January 8, 2019
Slide 2: Safe Harbor Disclosure
SAFE HARBOR DISCLOSURE The statements in the following presentation that are not historical facts may be forward-looking statements. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date that they are made and which reflect management’s curr
Slide 3: Quest Diagnostics: the leader in Diagnostic Information Services
Quest Diagnostics: the leader in Diagnostic Information Services Leader in rapidly evolving market with unsurpassed focus, scale and innovation Serves Expanding Serves 675+ 40B+ 6,000+ 20,000+ 50% EMR retail 1/3 of the Patient Patient Phlebotomists, presence U.S. adult of U.S. interfaces data access
Slide 4: Vision and 2-Point Strategy
1 VISION Empowering better health with diagnostic insights 2 2-POINT STRATEGY Accelerate growth Grow General Diagnostics Extend Diagnostic Services Expand Advanced Diagnostics Drive operational excellence 3 GOALS & Promote a healthier world O Create an Inspiring workplace
Slide 5: We continue to deliver value
We continue to deliver value Strong record of value creation: TSR since 2016 and 2014 ended Dec 31, 2018 Total Shareholder Return: 3-year Total Shareholder Return: 5-year 43% 105% 30% 27% 72% 69% 24% 50% 38% 2% DGX LH S&P 500 S&P HC S&P HC DGX LH S&P 500 S&P HC S&P HC Svcs* Svcs* Note: S&P HC Svcs I
Slide 6: Quest plays a crucial role within the healthcare ecosystem
Quest plays a crucial role within the healthcare ecosystem Diagnostic Clinical trials information recruitment services Population health Home-based care Employer wellness benefit 6
Slide 7: Quest is uniquely positioned to grow and gain share
Quest is uniquely positioned to grow and gain share Laboratory market fundamentals are changing dramatically: 1 2 3 PAMA-driven reimbursement Health plan access will Growing consumerization in pressure will drive structural reduce variation in lab spend healthcare is driving sharper change and drive
Slide 8: The U.S. lab market is large and growing modestly
The U.S. lab market is large and growing modestly Total Physician Lab Independent U.S. Lab Market Services Segment Lab Segment $82B $52B $28B POL & other Hospital 10% DGX Lab 24% Services Independent 36% Physician Hospital Others Outreach Labs 54% Lab LH 36% 54% 22% Services 64% PHYSICIAN LAB SERVIC
Slide 9: Protecting Access to Medicare Act of 2014
PROTECTING ACCESS TO MEDICARE ACT OF 2014 9
Slide 10: PAMA price cuts are a catalyst for consolidation
PAMA price cuts are a catalyst for consolidation Smaller labs are disproportionately impacted by Medicare reimbursement cuts Rest of Industry absorbs 80% of PAMA cuts * EBITDA across the industry ranges between 0-20% 10
Slide 11: Payer strategies to reduce variation in lab spend create opportunity to grow
Payer strategies to reduce variation in lab spend create opportunity to grow Cost variation is a large and extraneous cost for payers Lab is a substantial source Payers spend of variation, greater than: Providers >$500B • Office procedures • Orthopedics on unnecessary • Advanced radiology cost varia
Slide 12: Employers and their employees are focused on cost and disparities in price
Employers and their employees are focused on cost and disparities in price Mass General Newton Hospital Lab Tests Quest Hospital Wellesley Mark-up Lipids $19 $68 $48 2.5x Kidney Function $12 $44 $77 4.2x Vitamin D-3 Level $41 $117 $80 2.0x Cardiac Enzyme Level $7 $28 $21 2.8x Blood Glucose Control $
Slide 13: Quest is uniquely positioned to grow and gain share
Quest is uniquely positioned to grow and gain share 1 2 3 PAMA Health Plan Access Consumerization This market remains fragmented and is poised to consolidate 13
Slide 14: Strategies
3 Offer the broadest access to diagnostic 2 Partner with health plans, hospital health systems and other innovation 4 Be recognized as the consumer-friendly risk-bearing entities provider of diagnostic information services 1 Grow >2% per Strategies 5 year through Support accretive, population strate
Slide 15: Grow General Diagnostics
1 Grow >2% per year through accretive, strategic acquisitions 5 Support 2 Partner with health Grow population health plans, hospital General with data analytics health systems Diagnostics and extended care and other risk- services bearing entities Expand Extend Advanced Diagnostic Diagnostics Servic
Slide 16: We are overdelivering on our strategy to deliver 1-2% growth from M&A
We are overdelivering on our strategy to deliver 1-2% growth from M&A Outreach Lab Purchases Regional Fold-in Capabilities Marin General Hospital MedFusion/ Cleveland ClearPoint Heart Lab Cape Cod Health 2018 West Broward 2017 2017 2018 Shiel Medical Hartford Hospital / Oxford Hurley Medical Backus
Slide 17: Our access to insured lives is the highest it has been in a decade
Our access to insured lives is the highest it has been in a decade Leader in rapidly evolving market with unsurpassed focus, scope and innovation Access to Insured Lives Representing an Incremental Growth Opportunity of +43M 90% of Lives Lives New Major Plans ~$4B 80% of Lives Annualized Lab Revenue
Slide 18: Hospitals are struggling financially and becoming more open to help with their lab strategy
Hospitals are struggling financially and becoming more open to help with their lab strategy Hospitals are struggling with growing costs and slowing revenues Most hospital CEOs and CFOs still not fully aware of how PAMA is impacting their outreach labs* Once aware, hospitals are much more open
Slide 19: Advanced Diagnostics. Faster growth
Advanced At a glance Diagnostics. >$1 billion in 2017 revenues Faster growth Genetic and molecular advanced testing through innovation An important part of precision medicine model A growing set of unique, innovation-based competitors Mid-to-high single-digit market growth Quest value prop
Slide 20: Quest is becoming the lab of choice for consumers
Quest is becoming the lab of choice for consumers DIGITAL EXPERIENCE RETAIL EVERYDAY PRODUCTS EXCELLENCE 20
Slide 21: We have built a growing business in population health and data analytics
We have built a growing business in population health and data analytics 001010010010011 1011101011101110 001010010010000 Monetize Data Pharma Population Health Extended Care Settings Improve Quality / Close Gaps 21
Slide 22: Strategies
3 Offer the broadest access to diagnostic 2 Partner with health plans, hospital health systems and other innovation 4 Be recognized as the consumer-friendly risk-bearing entities provider of diagnostic information services 1 Grow >2% per Strategies 5 year through Support accretive, population strate
Slide 23: Drive operational excellence
1 2 $ Reduce Denials and Patient Concessions Digital Experience DRIVE Standardize & Optimize Automate 4 3 23
Slide 24: $1.3B savings
SAVINGS Invigorate Target Quest continues to $1.3B drive operational excellence, with ~3% More opportunity savings in front of us EACH YEAR GOING FORWARD 2017 24
Slide 25: Key takeaways
Key takeaways Structural changes coming to our industry provide an opportunity to consolidate and gain share Quest has the best access to insured lives in a decade, providing us with a multi-year opportunity to grow Hospital systems are under significant pressure and more open to working with
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