奎斯特診斷 (DGX) 2010 Q4 法說會逐字稿

Welcome to the Quest Diagnostics fourth quarter and full-year conference call.

At the request of the Company, this call is being recorded.

The entire contents of this call, including the presentation and question-and-answer session that will follow, are the copyrighted property of Quest Diagnostics with all rights reserved.

Any redistribution, retransmission or rebroadcast of this call in any form without the expressed written consent of Quest Diagnostics is strictly prohibited.

Now, I'd like to introduce Kathleen Valentine, Director of Investor Relations for Quest Diagnostics.

Go ahead, please.

Thank you and good morning.I am here with Surya Mohapatra, our Chairman and Chief Executive Officer, and Bob Hagemann, our Chief Financial Officer.

Some of our commentary and answers to questions may contain forward-looking statements.

You're 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 current estimates, projections, expectations or beliefs and which involve risks and uncertainties that could cause actual results and outcomes to be materially different.

Risks or uncertainties that may affect the future results of the Company include, but are not limited to, adverse results from pending or future government investigations, lawsuits or private actions, the competitive environment, changes in government regulations, changing relationships with customers, payers, suppliers and strategic partners and other factors described in the Quest Diagnostics 2009 Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K.

A copy of our earnings press release is available and the text of our prepared remarks will be available later today in the Investor Relations quarterly update section of our website at www.questdiagnostics.com.

A PowerPoint presentation and spreadsheet with our results and supplemental analysis are also available on the website.

Now, here is Surya Mohapatra.

Thank you, Kathleen.

We generated strong cash flow in the quarter and were encouraged by the continued improvement in our volume trends and the stability in revenue for acquisition.

During the fourth quarter, earnings per share were $0.97, unchanged from 2009.

Revenues were $1.8 billion, 1.3% below 2009, and cash flow was $340 million.

For the full year, earnings per share increased 5% to $4.06.

Revenues were $7.4 billion, 1.2% below 2009, and cash from operations was $1.1 billion.

2010 was a year in which we saw pressure on our volume due to the general slowdown in physician office visits.

Despite being negatively impacted by the volume decline, our business remains strong and we grew earnings per share.

In addition, we are making progress on a number of key growth initiatives.

Looking ahead to 2011, we expect organic revenues to grow approximately 1%, earnings per share to increase to between $4.10 and $4.30 and we will generate approximately $1.1 billion in cash.

We are committed to using our substantial cash flow to generate value for our shareholders.

Our first priority is to deploy cash to grow the business.

In addition, we will deploy excess cash into share repurchases.

In 2010, we returned $750 million to our shareholders through share repurchases.

This morning, we announced that our Board of Directors has approved an additional $750 million for future share buybacks, bringing our current authorization to $1 billion.

I'll update you on our progress after Bob discusses the financial results.

Bob?

Thanks, Surya.

Revenues for the quarter were $1.8 billion, 1.3% below the prior year, and earnings per share were $0.97, unchanged from the prior year.

Included in EPS is a $0.03 charge associated with workforce reductions and a $0.03 charge for settlement of certain employment litigation.

These charges were partially offset by a $0.05 benefit associated with nonrecurring tax items.

Clinical testing revenues, which account for over 90% of our total revenues, were 1.4% below the prior year in the quarter.

For the full year, clinical testing revenues decreased 1.3%.

Revenue per acquisition in Q4 was 1.5% below the prior year and has been stable for the last three quarters.

For the full year, revenue per acquisition approximated that of the prior year level.

Year over year, revenue per acquisition continues to benefit from an increased mix of gene-based and esoteric testing and increases in the number of tests ordered per acquisition.

However, this benefit has been offset by some business and payer mix changes, the Medicare fee decrease and pricing changes in connection with several large contract extensions executed in 2009 and the first half of 2010.

The business and payer mix changes, which continue to pressure revenue per acquisition, include further rebound in lower price drugs of abuse testing and weakness in our higher priced anatomic pathology testing.

Volume in the quarter was 0.1% above the prior year and continued to be pressured by the general slowdown in physician office visits.

However, the fourth quarter volume reflects continued and steady improvement from the first part of the year.

For the full year, volume was off 1%.

Drugs of abuse testing has continued to rebound and grew 8.2% in the quarter, and contributed modestly to the improved volume trend.

Revenue in our non-clinical testing businesses, which include risk assessment, clinical trials testing, point of care testing and healthcare IT, was generally in line with the prior year level for the quarter and the full year.

In the quarter, operating income as a percentage of revenues was 16.1%, compared to 17.9% in the prior year.

The charges, which I referred to earlier, reduced the current year percentage by 1%.

We continue to make progress in managing our cost structure and driving quality improvements and are evaluating a number of new opportunities to further improve our efficiency and quality.

While doing so, we have also made recent investments in sales and service, which are temporarily pressuring margins but which we expect over the longer term will result in accelerated revenue growth and a return to margin expansion.

We continue to see strong performance in our billing and collection metrics.

Bad debt expense as a percentage of revenues was 3.8% in the quarter compared to 3.9% a year ago.

Days sales outstanding were 44 days compared to 43 days at the beginning of the year.

Cash from operations was $340 million and compares to $360 million in the fourth quarter of 2009.

Cash from operations totaled $1.1 billion for the full year.

Capital expenditures were $69 million in the quarter compared to $50 million a year ago.

While we did not repurchase any shares in the quarter, for the full year we repurchased 14.7 million shares for a total of $750 million.

Earlier today, we announced that our Board has authorized an additional $750 million of share repurchases, bringing our total authorization to $1 billion.

There is no set time frame for utilizing our current authority and the level of share repurchase in any given quarter will continue to be a function of a number of factors.

Acquisitions continued to be our first priority for deploying our cash and utilizing our credit capacity and we continue to evaluate a number of opportunities.

In addition, as we've done in the past, we plan to deploy our excess cash into share repurchases.

Before I discuss guidance, I would like to point you to footnote six in the press release which provides an update on the status of our litigation with respect to the California MediCal program.

Given that we are currently in litigation, we cannot comment beyond the information contained in the footnote.

In developing guidance for 2011, we have assumed that there will not be a material change in our MediCal reimbursement.

Turning to 2011 guidance.

We expect results from continuing operations before special items as follows.

Revenue to grow approximately 1% before potential acquisitions.

Operating income to approximate 18% of revenues.

Cash from operations to approximate $1.1 billion.

Capital expenditures to approximate $220 million.

And lastly, diluted earnings per share to be between $4.10 and $4.30.

While we do not provide quarterly guidance, in considering how 2011 will unfold, you should generally think about our earnings comparisons to 2010 being more favorable in the back half of the year as the year-over-year comparisons become less challenging.

Now, I'll turn it back to Surya.

Thanks, Bob.

As you have heard, we are seeing continued improvement in volume trends and stability in revenue per acquisition, which positions us for revenue growth this year.

I want to update you on the progress we are making on some of the growth initiatives we have shared with you recently.

We continue to promote new genetic esoteric and anatomic pathology tests, which represents 36% of our total revenues.

During the quarter, esoteric and gene-based testing revenues grew about 3% with sales primarily to hospitals and physician specialists.

The growth was driven largely by vitamin D testing, which grew more than 30%, as well as testing for blood cancers, particularly our Leumeta family of blood tests.

We have made good progress building our innovative test pipelines in areas of cancer, infectious disease and cardiovascular disease.

In cancer diagnostics, we introduced ColoVantage, the first blood test for the detection of colorectal cancer.

We also continued to see growing interest in OVA1, the first blood test cleared by the FDA to help detect ovarian cancer before surgery.

In infectious disease, our recently introduced SureSwab real-time PCR test for gynecologic infections is being well received.In addition, our focused diagnostics unit continues to enhance and expand its Simplexa platform with new influenza tests.

And in cardiovascular disease we are pleased at the growing recognition of the value of our AccuType CP test from physicians, patients and health plans.

This test helps assess the patient's response to the anti-clotting drug, Plavix.

We are making progress with our healthcare IT.

Our Care360 EHR achieved an important milestone during the quarter when it was certified for meaningful use.

This means that now our physician customers can qualify for government incentives of up to $44,000 by using our EHR.

Since introduced last year, more than 1800 doctors are using Care360 EHR.

Care360 EHR is not just any EHR, we use this platform to run our business and it has a track record of more than 40 billion transactions to date.

As we exited the year, our customers are using the e-prescribing features of Care360 at a rate of 22 million medications a year, up 70% compared to last year.

We continue to invest in our sales organization to respond to a changing marketplace.

During the quarter, we continued to add salespeople and our sales force expansion is now substantially complete.

We have filled a number of key sales positions including hiring new sales leaders for our hospital and physician businesses.

With these enhancements, we enter 2011 well positioned to capitalize on market opportunities in various sub specialties.

We see continued interest from health plans and employers in working collaboratively on reducing high cost and out-of-network lab utilization.

As we look at 2011, we have good visibility into health plan pricing with no major contract renewals.

We are driving operating efficiencies.

In the fourth quarter, we took actions to reduce costs and will continue to closely manage costs to align with volume levels and improve operational efficiencies.

We are committed to deploying our cash to drive growth and shareholder value.

We continue to actively evaluate opportunities for acquisitions.

Apart from fold-in acquisitions, we are focused on acquiring genetic and esoteric capabilities to further strengthen our positions in areas such as cancer, cardiovascular disease and infectious disease.

In closing, in 2010 we strengthened our business in a changing marketplace.

During the fourth quarter, we saw a continuous improvement in volume trends and stability in revenue per acquisition.

Our focus combined with our industry leadership and positive long-term demographic trends position us for sustained growth.

We remain committed to enhancing shareholder value by effectively executing our strategy.

Thank you.

We'll now take your questions.

Operator?

Thank you.

(Operator Instructions)Tom Gallucci with Lazard, you may ask your question.

Good morning, thank you.

First, I guess just curious about the assumptions behind the revenue growth for 2011.

You're talking about investing in the sales force.

I think the comps get easier in some cases on volume and on price.

So I might have thought it would have been a little better than the 1%.

Just curious if you can give us some color on the thinking in terms of the details?

Look I would tell you that we believe that the guidance that we put out there for both top line and bottom line is reasonable and certainly we're committed to achieving or exceeding that.

And with respect to top line growth, it's also before acquisitions, you should note.

Okay.

Are there any significant moving parts that you can let us in on in terms of either price or volume that we should be thinking about in terms of positives or negatives for the year?

Well, Tom, as you know, there's a Medicare fee decrease coming as of January -- or which hit us actually as of January 1, that was 1.75%.

Surya commented on the fact that we've got good visibility into our managed care contracts in terms of access and pricing.

So we feel very good about that.

In terms of physician office visits, we're not thinking that there's going to be a significant change from the level of physician office visits that we're seeing today, ie what that means is that we'll start to anniversary the declines that we saw in 2010 and see some stability going forward.

Those are really the key assumptions for us.

Okay.

And then just I understand you don't want to comment directly on the MediCal, maybe more broadly can you tell us why we should be concerned or not concerned about similar sort of issue popping up elsewhere in other states?

What I can tell you is California is by far our greatest percentage of Medicaid revenues.

At $66 million a year, it's a little over 25% of our total Medicaid revenues.

Every state has slightly different regulations but we believe we're compliant with those.

Okay.

And then just one clarification.

The drug testing you mentioned is up.

Is that more pain management driven as opposed to employer sort of driven or any color there?

No, it's principally employer driven, pre-employment drug testing is really what's driving that.

Okay.

Thank you.

Thank you.

Ralph Giacobbe with Credit Suisse.

Thanks.

Good morning.

Does the guidance include the share repurchase?

The guidance assumes that we will deploy our cash, either into acquisitions or into share repurchases.

We don't provide specific guidance on the amount of share repurchases that we plan to do in a given year and that share repurchase authorization that was announced today has no set time frame attached to it as well.

And as we mentioned in the prepared remarks, there's a number of factors that could either keep us in or out of the market in a particular quarter and the share repurchase amount's going to be variable, principally driven by the level of acquisition activity.

Okay.

So the EPS number you should think of as an all-in number, where we deployed the cash either into acquisitions or share repurchases, whereas the revenue number is principally an organic number, and that's consistent with what we've done historically.

And just I guess reconcile or clarify, if I just grow revenue 1% and I take an 18% margin, which is kind of what the guidance implies, and I just keep current share count, my numbers get to over 420, as it stands now.

Am I thinking about anything wrong?

Or are there other considerations I need to be thinking about when I do that math?

Seems pretty straightforward.

No, I think that gets you kind of right in the zone of what we put out there in terms of guidance.

Okay and again, that would assume no repurchase, but-- okay.

And then you talked a lot about sort of investing in the business, sales organization.

Maybe talk a little bit more about that.

It seems like you're by and large done, so I mean when do you expect to see the benefits and at this point should we think that some of the cost pressures that crimped margins maybe helped you in 2011?

Yes, in terms of the investments in the business, the areas certainly have been in the sales force to start to drive top line growth and overall improved sales effectiveness, and we're starting to get some traction there.

We're not quite there yet because as Surya said, we're now substantially complete in the sales force expansion but now we need to get those folks up to speed in producing at the rates that we'd expect them to produce once they're fully trained and out in the field.

In addition, though, we've been investing in service levels.

I think we mentioned in the past that we've added a number of phlebotomists, whether they be in offices or in our patient service centers, and we've opened up patient service centers.

And we think it's a combination of both the investments in the sales force and the investments in the service levels that are actually going to pay dividends longer term, in terms of accelerating top line growth and actually help us then to expand margins along with that.

And as you think about 2011, think about not anniversarying a lot of those investments until we get into the back half of the year.

Okay.

That's helpful.

Ralph, this is Surya.

Let me just make some comment about 2010.

2010 was really a difficult year but also an interesting year in which we saw a new water line as far as the physician office visit are concerned.

It was down by 5%.

Despite the decline in volume, we're able to generate $1 billion cash and we increase our (inaudible).

So the Company is strong.

But as far as 2010 is concerned, we also took an opportunity to strengthen our business while we're going through the healthcare reform.

Just to tell you, we strengthen and expanded our sales force.

We introduced new tests and also new technology like Care360.

And we have extended and renewed the managed care contracts for multiple years.

So when I look at what we have done in 2010 in a changing environment, I feel very good about 2011 and going forward.

Okay.

That's helpful.

And then just my last one, obviously there's been a lot of acquisition activity in the space.

Can maybe you talk about why you haven't been as active in the space in 2010?

And maybe just your thoughts on deals going forward.

Is it what you just said, Surya, are your focus area on other areas of the business as a reason maybe why you haven't been as active as acquisitions or why has that been the case and what should we expect for 2011?

Okay, the first thing, you should assume that we look at most of the acquisitions.

But as you have seen over the last 10 years, we have grown both organically and also through acquisitions, so we take acquisitions as a major strategy for our growth.

However, the acquisition has to make economic sense and strategic sense and we are very conservative when it comes to doing appropriate due diligence.

So having said that, what are we focused on?

We're focused on acquiring genetic, esoteric and anatomic pathology capabilities to strengthen our cancer, infectious disease and cardiovascular disease and other high-growth areas.

So that's actually our focus.

We are not looking at any international acquisitions at the moment and we believe that we have an active pipeline and if it makes sense for us, we will acquire.

And Ralph, acquisitions are sort of choppy, right?

While we're actively looking at just about everything that comes on the market, you need to get comfortable that a deal makes sense after you do a thorough diligence and then ultimately you need to reach agreement on value.

And unless all those things come together, you don't have a deal.

But rest assured, we are actively looking at just about anything in our space that comes on the market.

Okay.

Thank you.

Thank you.

Shelley Gnall, Goldman Sachs.

Hi, thank you.

Sorry, I had mute on.I was just wondering if you could comment on expectations from the FDA on lab developed tests during 2011?I guess any of your expectations on what we could be seeing from the FDA and any potential impact on longer term esoteric growth.

Yes, it's still a little too early to tell at this point in terms of what the FDA will do.

That's not finalized yet.

We do understand, though, that look, they are not looking to slow innovation.

They're not looking to take proven and reliable tests off the market, which have been on the market.

And we as a Company and as an industry are going to work through with them what needs to happen to make sure that this is beneficial for patients and quality doesn't slow innovation and add to costs.

And we feel very good about our capabilities in dealing with the FDA.

The knowledge that we have and the experience that we have through our focus division as well as through our Nichols Institute puts us in a good position to deal with what we believe will be just about anything that comes down the pike.

But it's a little too early to tell exactly what that will be.

Do you have any sense of when we may hear something?

I mean do you have a sense of whether it's a matter of months or maybe later in the year?

Probably sometime later in the year, it's not clear exactly when.

And Shelley, our trade association is in discussions with the FDA so it is progressing but we don't have a -- we don't have a sense for when during the year we'll get some clarity.

And the other thing, Shelley, to keep in mind is whatever does come out, we'd expect will take several years to implement.

It's not all going to happen at once, so that will give companies a chance to adjust to whatever changes might take place.

Okay.

Great, I really appreciate the color.

And then just one quick final question on vitamin D testing.

Do you have a sense, is it too early to tell when that growth, which I know has been good news for esoteric testing growth, do you have a sense of when that could be flattening?

Is it-- could that be a 2011 issue?

Well I-- we're expecting it to continue to grow in 2011.

Obviously, the rate of growth has to start to slow down as the total revenues in the base off which you're growing becomes larger.

But we expect that that will be a test that continues to grow in 2011.

Okay.

Great.

Thank you so much.

Amanda Murphy with William Blair.

Hi.

Thanks.

I had a question on underlying utilization.

I'm curious, you mentioned that you've seen improvement there.

Is there a way to tease out how much of that is relate to deductible effects, in other words, people using more tests into the end of the year or is it really just base underlying improvement?

Amanda, that's an interesting question and one which we look at all the time.

And to the degree that there's going to be that sort of phenomenon, you'd expect it to be in every fourth quarter, towards the end of every year.

We-- I will tell you that I don't think we've seen anything significantly different in this quarter than we've seen in the past.

So it is a little hard to tease that out though because you don't get that sort of information either through your physician customers or through your sales force.

But our view is that whatever impact there may have been is generally consistent with what we would have seen in the past.

Okay.

That's helpful.

And then a couple AP questions for you.

Last quarter you mentioned that the insourcing, or the growth in insourcing, has slowed, is that the same trend that you saw this quarter and could you even call sort of a bottom to that at this point?

Well I think it's too early to say that there's a bottom and insourcing is continuing.

The rate of growth we believe has slowed as we've gone through the back half of the year, but it's a little hard to say from quarter to quarter how much it may have slowed.

But we are starting to see a trend of that slowing, we believe.

Okay.

And then lastly, you mentioned the reimbursement on the clinical lab fee schedule.

I'm curious, though, on the other side, on the AP side it looks like there's a positive reimbursement benefits for Medicare in 2011.

Do you have any -- is that going to be a meaningful tailwind for you or is it just too small?

Amanda, the net impact from the physician fee schedule changes for 2011 will be very negligibly positive for us and it's the impact of the RVU changes coupled with some of the changes that they made on CF testing for example.

But net/net, it's a slight positive.

And to put it in perspective, our Medicare reimbursement, about 90% of that reimbursement comes off the clinical lab fee schedule and only about 10% comes off the physician fee schedule.

Okay.

Thanks very much.

Bill Quirk with Piper Jaffray.

Thanks.

Good morning, everybody.

Couple of quick clarifying questions, if I may.

Again, recognizing sensitivity around MediCal, but Bob, if I'm doing the math right, if we hadn't stopped billing them volume would have been a little over 1% in the fourth quarter, is that the right way to think about that?

No, Bill, the revenue and the volume for that testing we performed is in our numbers.

Understood.

Okay.

Great.

And then just a follow up to the earlier LDT question, Bob or Surya, any comment concerning the most recent election here, does that affect the overall pace or perhaps the breadth of what we might see in terms of eventual LDT regulations?

Thanks.

No I think the FDA is interested to make sure that the tests are done appropriately and tested fully and had clinical relevance, and as Kathleen said, we are working with the FDA through our trade association and we want to achieve the same as they want, but we just want to make sure that they don't do anything which is going to slow down innovation.

If you remember all those things started because of some genetic tests done by direct to consumer way.

So I think it's going to take some time but we are working with the FDA to do the right thing for the patients.

Thank you.

Jason Gurda with Leerink Swann.

Good morning, thanks.

Can you talk about the magnitude of the changes that you did with the sales force?

I think you had mentioned last quarter that you had added 100 new sales people.

If you could put that in perspective, the total size?

Well we don't break down the total size, but let me tell you philosophically what we have been doing.

We are organizing our sales force basically to focus on various subspecialties, whether they're physicians or they're the hospitals or whether it is oncologists or whether it's the employers.

And what we did over the last year that we have added more than 100 people, but also we have provided tools and training to improve the knowledge and efficiency of our sales people and in many cases we have also upgraded our sales force.

So I can't give you the breakdown but I feel very good about having subspecialty sales force and I feel very good about the new people we have added and we're just waiting for them to get fully trained.

Okay.

Another question, we're seeing increased interest in using capitated contracts to reimburse physicians, whether it's in Massachusetts, but also with some ACL pilot programs and I think you'll probably see more of that in the future.

But in these contracts there's a lot more-- relative to the '90s, there's a lot more focus on various quality metrics.

Do you have any sense for whether that leads to physicians ordering more or less tests?

Well, exactly I don't know the Massachusetts program.

But the whole healthcare reform, they started with (inaudible).

Basically pay for performance or quality and then (inaudible) and then accessibility.

So we have a number of discussions going with a lot of health plans where they want to get information and that's one of the reasons why we have invested money in healthcare IT and informatics and we see that going forward, whether it's accountable care organizations or whether it is the health plans or whether it is the physicians, not only do they have to practice evidence of those medicine, but the best evidence in medicine is lab results, lab tests.

So we feel that we will be net benefactor of this drive towards quality because we'll provide them with the data.

And I think the health plans are now getting involved to getting really substantial data, quality data, so they can monitor the progress of how they are doing in a particular disease and how a physician is practicing and some reimbursement is based on that.

Is it fair to say it's a little bit too early for you to have actual data on that, however?

Yes, I think it is a little bit too early.

And again this whole move towards accountable healthcare organization is going to make quality very important and how we provide information is very important.

But we are keeping an eye and it's too early to really make any comments, specific comments.

Okay.

Thank you.

Ricky Goldwasser with Morgan Stanley.

Good morning.

Good morning.

I have a couple of follow-up questions.

First of all, on the volume side, I think you said before that you expect no improvement in physician office utilization, so should we think about the volume increase that you've reported in the fourth quarter is a reasonable run rate for 2011?

Yes, Ricky, as we've stated in the past, we don't break out volume or revenue per acquisitions in providing revenue guidance.

And there's a lot of reasons for that, including making sure that we manage the business to be profitable business and sometimes walking away from volume that doesn't make sense, et cetera, a whole bunch of reasons.

But as you think about physician office visits and you think about our volume, volume for the year was down about 1% in the quarter.

It was about flat, up a 0.1%.

But physician office visits for the bulk of the year were down around 5% or so.

And with those physician office visits being off a pretty consistent level and our volumes starting to improve and show an improvement in trend, we feel good that some of the things that we've been talking about in terms of the sales force, the added focus, et cetera, are starting to pay off a little bit here.

And we would expect that we'll see continued improvement as we get into 2011.

But remember, we're coming off of a year where volumes have been down.

We're coming off of a quarter where revenues are still down versus the prior year.

And we need to get to the point where revenues are stable with the prior year and then they start to grow.

And we expect that as the year progresses we'll see continued improvement.

Okay and what do you think volume growth will stabilize and without -- not thinking about a time line, but just what do you think volume growth, where it stabilizes for the industry on a normalized level?

Well, Ricky, you know this industry as well as I do.

But we usually say that 3% to 5% revenue growth with 2% to 3% in pricing or revenue per acq and 2% to 3% in volume and I still believe that eventually is going to go back to this 5% to 6% growth a year.

All the long-term trends are positive and what we have gone through over the last 18 months, organic growth has been difficult, whether it is due to economic slowdown or due to the healthcare reform.

But I am very positive about 5% to 6% growth in this industry.

Okay.

And then lastly, just to clarify, does the guidance include the additional SG&A associated with just the sales force becoming effective and picking up, which I assume will show up as just additional compensation?

Yes, absolutely.

The cost of the sales force is fully baked into our guidance.

Okay.

Thank you.

Bill Bonello with RBC.

Hello, thanks.

Just wanted to revisit sort of how you think about leverage in the model.

I guess it seems a little surprising that you can maintain EBIT margin with just 1% revenue growth, especially when you've been adding sales and service headcount.

And so I'm just curious, I mean, should we think of that as sort of the natural leverage in the model, 1% growth allows sustainable margins or are there other cost reductions that are kind of offsetting those adds and allowing you to maintain margin?

And then I have a follow-up question to that.

I think Bill I'm going to pass it on to Bob.

Bill, look, here's the way I think you need to think about the leverage in the business.

At 1% revenue growth, it's really hard to maintain margins or expand them without doing something associated with your cost base.

And as I mentioned in my prepared remarks, we're continuing to take actions to drive efficiency in our business.

We're looking at additional programs to drive costs out of the business.

And that's a big driver of why you see margins stable despite the fact that we're only showing 1% top line growth.

And what that does do, though, as we continue to take costs out of the system, it really does help with the leverage so that as the top line starts to return, we'd expect to see nice incremental margins on that.

And that's exactly where I was heading.

Without getting too specific, do you want to give us some sense of how we should think about marginal profitability if volume starts to improve?

It strikes me that this is a high-fixed cost business and if you do start to get some volume growth, a lot of that flows through, but--.

It absolutely does and you've seen the way this business has performed over the years.

I think it's safe to say that there is strong incremental margins on that.

But then we've got to decide whether or not we want to reinvest that for future growth, we want to take it all to the bottom line.

But you should rest assured that incremental volume and incremental tests, which don't show up necessarily as volume, but show up in revenue per acquisition are strong drivers of margin enhancement.

Okay, and then just one last question, if I can.

On the acquisition front, you've been pretty clear about what it is you're looking at.

I guess two follow ups.

Should we take from those comments then that you're pretty committed that where you're going to be acquiring is sort of within the sort of core lab services itself as opposed to something sort of adjacently strategic like big a IT investment or that sort of thing?

And a follow up on that.

Okay.

Well, first of all, we're always looking to fold-in acquisitions, the regional lab or a hospital outsource (inaudible), but our main focus has been in the US, we want to further strengthen our franchise in cancer, cardiovascular disease, infectious disease and other high-growth areas.

We are not looking at any international acquisitions, nor any adjacent space in healthcare IT at the moment.

Okay.

And would you consider doing a meaningfully dilutive acquisition if it was strategically a good fit?

Bill, we'll always look at -- as you know, that we have grown the Company between both organic and acquisition growth and we will look at the deal and if it is going to provide us a long-term shareholder value we'll do it.

Okay.

Thanks a lot.

Thank you.

Brendan Strong with Barclays Capital.

Just calling in on Adam Feinstein's behalf this morning.

Just maybe first off, wanted to ask about the Empire contract.

That contract obviously opened up the competition over the summer.

The-- any losses under that contract that you've seen through the fourth quarter?

Is that sort of what we should be expecting for a run rate going forward or could there be some additional changes as we get into 2011 around that contract?

Yes, Brendan, that was a contract where other providers were added.

Obviously when you have additional providers added to a contract you'd expect them to pick up some volume but we have held on to a substantial portion of that business and it's very much in line with what we expected, maybe a little better than what we had expected.

So we feel pretty good about that, it speaks a lot to the value proposition.

And you've heard me say in the past, we're very comfortable competing for business on a level playing field we're one of the participating laboratories, we usually get more than our fair share and I think the Empire contract bears that out.

Just-- but in terms of incremental gains or losses there, do you think we've already seen enough time pass for us to have seen the full impact of it?

We're not expecting there to be any significant changes from the level of business that we've retained at this point.

Okay.

And then Bob, I wanted to follow up on guidance.

I just -- I'm struggling with the low end of guidance.

Is it-- is this more of a situation where you kind of come out maybe towards the middle but you're just trying to put some brackets around it and you go higher and lower, or is there something specific that really gets you down to that lower end of the range?

Well, look the guidance as we indicate, we used the words approximately in some of these numbers, particularly the top line.

Approximately 1% has some variability and as we just talked about a moment ago with Bill, there's a fair amount of leverage in this model.

So slight changes in the top line drop down to the bottom line pretty significantly.

So I think we've tried to give you as reasonable a range as we can at this point.

And as I said earlier, we're certainly committed to achieving that or exceeding it if we can.

Okay.

And then just two other maybe quick ones here.

On MediCal, and I know you don't want to comment on the settlement, but just around that $66 million a year that you generate from MediCal and you've still been recording revenue on it, is there a possibility that we see some increased bad debt expense around that in 2011?

I don't know that it's necessarily bad debt expense.

As we think about this, it's all going to be resolved ultimately I believe as part of the negotiations here.

But as we said earlier, we feel as though we're billing appropriately.

We're billing in compliance with the laws in the state.

And as a result, we've continued to service the patients there.

We do have an interim agreement with the state that expires March 1 and we've agreed with them to negotiate in good faith to extend that, and hopefully we'll get to that point.

But right now we're working through with the state but we're also trying to make sure that patients in the state aren't disadvantaged as a result of this.

Okay.

Maybe just the last one, I don't know if this is for you, Bob or for Surya.

But just one of the things in healthcare reform is it remove the co-pays and deductibles around a number of prevented services and a lot of those services I think end up having lab tests done around them.

Do you think there's any benefit either from some volume pickup or maybe even just slightly lower bad debt on the co-pays and deductibles as we get maybe later into the year?

Well as we always thought and we believe that the outcome of the healthcare reform is going to be a net positive for us as far as tests because we're adding some tests for preventative care, we're adding some tests for some of these particular monitoring of drugs, so those from a volume point of view and from new test point of view, I think it's going to be positive.

Now, as far as changing the health plans, we see the health plans are very anxious and they're working with us to reduce their out-of-network costs.

And Brendan, with respect to bad debt, the vast majority of our bad debt is associated with patient bills.

And about half of our patient bills are where we're billing uninsured, the other half is principally co-pays and deductibles.

And there's a much higher bad debt percentage on the billing of the uninsured than there is on the co-pays and the deductibles.

So I would think that over time as healthcare reform kicks in and we start to get more insured lives, that that will be beneficial to the bad debt percentage.

About (inaudible) patient is over 5% of total.

Yes, between 5% and 10%, yes.

All right.

Thanks a lot.

Darren Lehrich with Deutsche Bank, you may ask your question.

Thanks for taking my questions.

I did have a follow up with regard to the AP business and your revenue by product disclosures showed that the annual decrease was about 9% in 2010.

Bob, I think you've characterized that throughout 2010 maybe as getting slightly better in the back half of the year.

I'm just wondering if you can put a little bit more discussion around the trend and put that 9% number into context for us?

Well, yes, Darren, as you point out, yes, as we've been saying throughout the year the trend has been showing some signs of improving there, particularly on the insourcing piece.

And as you'd expect if we were down 9% for the year, we were down a little bit more than that in the first part of the year.

We're still down at this point and as we go into the beginning of 2011, that will still be down.

We won't anniversary those declines until hopefully the back end of the year next year or this year.

Okay.

So that's where I was going, I guess.

The expectation, and I know you-- you're not providing too much specific guidance on product line, but the expectation we should have then for AP is it is still negative for 2011?

Well again, I don't want to give guidance for the full year on it, but we're going to start out certainly down versus prior year.

Let me make a comment about it.

The reason why we provided this information is to really give you an indication of our various businesses and the strategy we have on various segments.

If we look at the esoteric and gene-based testing for the whole year, it grew almost 5%, 4.6%.

And that's much faster than the routine business because the routine business we're down 1.4%.

Anatomy pathology remains the very strong element of our cancer diagnostics.

And if you think of cancer diagnostics, and that is what we're going to provide eventually which will include (inaudible) pathology, molecular diagnostics and also [hempat].

Now it is down at the moment to some extent affected by the same general slowdown and some insourcing and we're working with the government as far as insourcing is concerned, but strategically anatomic pathology is very important for cancer diagnostics.

So all in all, we're giving you an opportunity to look at actually how we are driving strategy towards these esoteric, gene-based and AP to solve the issue of cancer, infectious disease and cardiovascular disease.

So that's the goal for that chart there.

Okay.

No, it's a helpful disclosure and we only get it once a year so that's why I'm asking the question.

All right, I guess the other question I have for you is you've suggested approximately 1% organic revenue growth for 2011 and, Bob, I just -- I want to make sure I understand, are there any known contract changes with hospital or reference clients or anything that you know today that would come out of that organic number?

Just want to make sure that we're not missing anything that you know at this point.

Darren, yes, anything that we know about contracts is baked into that number and you heard Surya say our largest health plan contracts are all locked up for 2011.

In fact, many of our largest ones are locked up beyond 2012 at this point.

So we feel very good about the is visibility there.

Our contracts on the hospital side with GPOs and whatnot, we feel good about those as well.

So yes I think we have pretty good visibility into access and reimbursement levels as we head into 2011.

And the one thing that will continue to be variable will be the business mix and how that changes and impacts things.

But in terms of contract access, we feel very good at this point.

And then just on the managed care contract, you've talked about steerage and some of the goals that you've had and reopening them and I know I've asked this before, but is there anything just with your contracts specifically that switches in 2011 such that you have some more visibility into measurable volume or incremental volume due to the steerage that you're hoping for?

There's nothing contractual that changes with respect to that.

I mean it's really execution.

We're continuing to work with multiple plans in driving this.

We've had some successes and we're hopeful that will continue to drive volume to us as a result of the continued effort between ourselves, the health plans and the employers.

Okay.

And my last question is just what actions specifically did you take in your restructuring in Q4 and maybe can you update us on the number of lab facilities that you have?

I'm not sure if there were any specific closures in your lab operation, per se.

And then my sort of last thing I'll put in this question is just on the patient service centers, it sounds like you're adding more service with more phlebotomists and more PSCs perhaps.

What have you done to expand the PSC footprint just to size it for us?

Okay, first let me start with the Q4 restructuring charge.

For the most part, there were no facilities that -- no testing facilities that were closed as part of that.

It was basically for the most part a workforce reduction.

It was principally folks that-- where we've started to look at spans and layers and these are individuals that don't necessarily touch the customer, administrative positions to a large degree are the ones that were taken out.

And that's why much of the charge showed up in SG&A as opposed to cost of sales.

With respect to patient service centers and phlebotomists, principally what we're adding are phlebotomists, we're adding them in physicians offices.

We're adding them in our patient service centers.

In physicians offices they're principally a tool to generate additional business and in getting to accounts where we may not have been able to get into before.

In the patient service centers, the goal there is really to continue to improve service levels and reduce wait times.

And while we've added some patient service centers in some very specific geographies that we're targeting, that's not been the biggest driver.

It's really been the additional phlebotomists.

Okay.

That's helpful.

Thank you.

Gary Lieberman with Wells Fargo.

Thanks for taking my question.

Bob, could you just clarify the guidance, does it include acquisitions or not?

So I guess you said a couple times it didn't include acquisitions, but in your answer to one of the questions you said that the guidance included the use of cash which might include acquisitions, so I thought just some clarification there would be helpful.

Yes, Gary just to further clarify, the top line guidance does not include any revenue from acquisitions, that's all organic.

The bottom line--

The EPS guidance.

I'm sorry.

I'm sorry, so the EPS guidance does include it?

The revenue number does not, the EPS guidance assumes that our cash is deployed and we're assuming that it's going to be deployed either into acquisitions or share repurchases.

Okay.

That's helpful.

And then maybe Surya, could you comment on some of the -- some of the comments you've made in the past couple quarters about the contracting process and I guess maybe similar visions to some of the matched share contracts, are you for the most part complete with that or is that still ongoing and how might that impact results in 2011?

Gary, most of our contract negotiations with the large (inaudible) are complete.

And as Bob said that we have now confirmed (inaudible) beyond 2012.

And many of them beyond 2013 even with some of our largest.

Okay.

So no-- so maybe fewer changes in the coming year than you've seen in the past year, is that a fair way to characterize it in?

Yes.

And over the next several years the percentage of revenues from (inaudible) are coming up.

Yes, I would say through 2012 into 2013 are generally less than what we would have averaged in the past.

Okay.

Great.

Thank you very much.

Thank you.

Bob Willoughby with Bank of America.

Thank you.

Just Bob, you've called out some of the spending on sales and services over the course of the year, can you size that for us in terms of what's not likely to recur, what was truly one-time in nature and forget about whatever revenues come in off of that, but just what falls out of the income statement next year or 2011?

Bob, we have not specifically quantified that for folks, obviously.

It has put some pressure on the margins at this point and I don't necessarily think about it as one time, those are going to be costs that continue.

What we're expecting, though, is that those costs will generate some top line growth for us which in the end will help us expand margins as opposed to putting pressure on.

But we haven't quantified the specific impact of those.

Can you maybe comment on in terms of the quarterly impact, there wasn't much in the first quarter was my understanding but second and third pretty heavy, how was the fourth relative to the second and third?

You started to see it ramp up in the second.

I would say in the third is where you got probably the most significant impact and it continued into the fourth.

Okay.

And I-- you commented on healthcare reform a number of different ways, obviously somewhat positive for you.

Some of the impact in terms of the preventative screening I guess for some plans would have been felt as early as the fourth quarter.

Anecdotally, I mean your sense of contribution from any type of reform issues either in the fourth quarter or just starting January 1 on the preventative screening, what has come in?

Bob, I would tell you that I don't think there's really been any impact at all to our business in the fourth quarter as a result of healthcare reform and what we might see in terms of additional volume there.

And it's really hard to say what we might be seeing at this point in the first quarter.

I think we'll have better visibility into that as we get later in the year but we're not expecting that in 2011 we're going to have a significant benefit from that.

Okay.

And maybe lastly, just pressure on the Medicare reimbursement rates, are you seeing any impact on the acquisition landscape, what are smaller labs doing?

Are they committing?

Are they retreating?

In the hospital labs, et cetera, what's been the competitive response?

Yes, I don't know that the changes in Medicare reimbursement are big enough at this point for a laboratory to use that as the reason to either put itself on the market or get out of the business.

Certainly as time goes on, to the degree regulation drives costs and reimbursement comes down, that might impact smaller laboratories but I don't think what we've seen to date is having that sort of impact.

Okay.

Thank you.

Steven Valiquette with UBS.

Hi, thanks.

The comments on physician insourcing are helpful, but there also seems to be more discussion now among investors around just the general trend of hospitals accelerating direct employment of physicians.

So I got really just two questions on that.

One, if you can just talk about whether that's something that you're kind of worried about at the moment?

And also if you had to rank order of the two risk factors of hospitals directly employing physicians versus just physicians insourcing lab work, which one's really a bigger challenge at the moment?

Well the bigger challenge at the moment is specialists insourcing their pathology work, whether it's urologists or whether it's oncologists.

Because that's the one which is affecting us more.

As far as the hospitals buying practices, the rate of acquisitions have gone up, but still they have to really increase capacity.

And I think what people have not realized, that even though some of the physicians may be a part of the hospital, that does not always lead into that those physicians have to only work with the hospital.

They still have to really do their outpatient.

So that's less impactful at the moment versus insourcing of pathology by specialists.

Okay.

Now as far as the hospitals, was it material enough or where it was like a factor in your guidance for 2011 or was it just so immaterial it's not really a factor on the decision tree?

It's not a factor in 2011.

Okay.

Okay, that's helpful.

Thanks.

Thank you.

Anthony Vendetti with Maxim Group.

Thanks.

Just back to the preventative care, as this rolls out, I know you said you're not seeing any significant impact yet and you're not expecting anything material right now, but as this rolls out additional screening and tests, should that contribute to volume this year?

And are the managed care companies going to, as there's additional tests, are they going to scrutinize -- do you expect them to scrutinize those tests or any additional tests and try to look at the overall testing volume in general and what tests are being administered?

Anthony, yes, again, I don't think that we're going to see a significant impact in utilization or volume this year as a result of healthcare reform.

There might be some modest up tick as a result now of having preventative services covered.

And with respect to whether or not the health plans will scrutinize that more, yes, I think it's really a function of not necessarily the utilization, because I would assume that they're expecting utilization on some of those tests to go up, but are they being ordered under the right circumstances.

And most of the health plans have edits for that, which we've seen historically to make sure that there's not over utilization of testing.

But I don't think generally they're going to be denying or looking to reduce any additional screening testing that might be done as a result of healthcare reform.

Okay, and then there's been no real mention of the weather.

Obviously we've had a pretty rough January so far on the East Coast.

Does your volume guidance for the year take into account the potential lower volume during this month?

Yes as we think about volume forecast and we think about certainly the first quarter which is the one that generally is impacted the most by weather, what we're looking at is generally what we've seen kind of on average over the years and in any particular year we have real severe weather, that tends to be something that you didn't anticipate in your guidance.

I would tell you at this point, look, we're not even through January yet.

It's a little too early to tell what the impact in the first quarter's going to be from weather.

It's certainly not helping us.

In fact, it's snowing outside the window right now.

But, look, as I think about the impact of weather on our business, it's something that happens.

It's something that we have to deal with.

But it doesn't impact the underlying performance or health of the business, and we just respond to it and move on.

Let me just clarify, though.

But you said that the guidance assumes second half to be stronger, right, back end loaded, is that correct?

Basically, what we're telling you is the comps get less difficult in the back half of the year.

So that I think as you're thinking about comparisons to the prior year, that's what we'd ask you to factor in.

Okay.

And then the revenue growth of 1%, because Surya, you mentioned that the goal is to get back up to the 5% or 6% and you could see 2% to 3%.

Is-- once again, the revenue growth is organic.

It sounds like what you're saying is right now as the landscape's changing, 1% is your kind of conservative kind of look and then leaving room for upside, is that about right or -- ?

Well I was responding to Ricky's question about the industry and this industry, 5% to 6% organic growth, as I said, 2% to 3% volume, 2% to 3% revenue per acq.

I believe that it is going to go back to that level.

But it will probably take a couple of years to grow to that level just because we're just going through the economic downturn and the healthcare reform.

As far as our Company is concerned, we have -- we think the guidance we have given for 2011 is reasonable, based on where we are coming from.

But when I look at our Company versus the competition and our differentiators, gene-based testing, esoteric testing, anatomy pathology, our focus on cancer, infectious disease and cardiovascular, and our strong Healthcare IT strategy is going to make us different from our competitors and certainly my goal and our goal is to really do better than the 1% we have.

But that's the guidance we have given.

So is that-- do you expect to be able to take some share from any competitors either small or large?

I always expect to take some share from our competitors.

Okay lastly, have you repurchased any shares so far in 2011?

We're actually out of the market between the end of the year and when we do our earnings release.

Okay.

All right.

Thank you very much.

Thank you.

Gary Taylor with Citigroup.

Good morning.

Most of my questions have been answered.

Just had three quick ones.

Going back to just the managed care discussion, I didn't have a chance to go back and check all my notes from the 2Q, but the biggest payer by far on the commercial side for you guys is Aetna.

Have you told us specifically when that contract expires?

No, we have not but that's one of our longest term contracts and goes out beyond 2013, along with several others.

Okay.

That's helpful.

Thank you.

And then I was listening, I was writing as quickly as I could but Surya was talking about I think esoteric and gene-based testing up 3% year over year including vitamin D up 30%.

Were those revenue figures or requisition figures?

Those are revenue figures.

Okay.

And then my last question, just going to the comment that with revenue growth being approximately 1%, it would basically take some hard work on the expense side to get the margins to be flat.

Is there going to be an opportunity I guess to provide more color around that or anything more detailed?

I guess I'm just thinking back to a few years ago when you had targeted several hundred million dollars of savings and it was a very formal and detailed proposal for what you were going to do on the cost side.

Is there an opportunity to do something like that again and to give us more visibility on what you can think-- you can do on expenses?

Gary, look we continue to drive the execution of that program, in fact, today.

And it's continuing to drive efficiencies in our operations.

As I said in the prepared remarks, we're looking at some other opportunities.

But yes, I won't expect there to be a big announcement from us any time in the near term about another program.

That program is continuing.

We're doing some things to enhance it and keep the momentum that we've got there and we do have good momentum there.

Okay.

Last question.

Can you just remind us that typically over the last five years it looks like there's some pretty pronounced seasonality where operating margins move sequentially lower from 4Q into 1Q, and that's not -- doesn't appear to always really be driven by any revenue weakness.

Can you kind of remind us some of the things that impact sort of first quarter margin seasonality?

Yes, well, certainly a lot of it does get driven by top line.

There isn't a whole lot of seasonality on the cost side of the business.

But a lot of it gets driven by top line, as well as in the first part of the year what you tend to see is slightly higher bad debt as there's more deductibles and co-pays that kick in and the bad debt starts to moderate a little bit as you get into the fourth-- the back half of the year.

And then in the fourth quarter, volumes do tend to be, and top line in general tends to be softer, simply because of all the holiday periods that you have in there.

The week between Christmas and New Year's for example is an extremely slow week.

So it's really just the general seasonality that you've got there.

The second quarter tends to be one of our strongest quarters.

You don't have a whole lot of holidays in there affecting things.

You don't necessarily have a lot of the summer vacations and whatnot that start to kick in when you get into August.

And that's been the general trend for the business and would expect will generally continue.

So your thought -- I know you don't give quarterly guidance, but your thought would be that operating margins would be probably weaker sequentially in 1Q, then building over the summer and through those easier comps, I guess?

The first and the fourth quarters tend to be the quarters with the lowest margin percentages.

Okay.

Thank you.

Art Henderson with Jefferies Company.

Hi, thanks for taking the question.

Just two things.

Bob, you referenced some of the success you'd had working with managed care on the leakage issue.

Is there anything you could mention there just in the terms of what is working and is it related more to the patient service centers you're doing?

Art, it's an interesting question.

I don't want to give too much in the way of details in terms of what we're doing with specific employers, but patient service centers is a piece of that but I would say it's not the biggest piece, necessarily.

It's really us working collaboratively with the health plans, getting in front of the employers, being able to communicate to their employees what the benefits are of using Quest Diagnostics versus using either an out-of-network laboratory or some higher cost in-network laboratory.

And a lot of it has to do with employee communication.

I would say that's probably the principal driver.

In some cases, though, what we might be doing is to the degree that there's an employer that has a significant concentration of employees in a particular area, we would look at our PSC footprint there and see if it makes sense to expand that in that area, to help capture more.

We would look at whether or not it makes sense to have phlebotomists potentially even at the employer's site to help in that regard.

But I would say the biggest driver is really just the ability to get in front of employees and communicate the benefits of working with Quest Diagnostics.

Got it.

That's helpful.

And then last question, Bob, is your sense that the training related to the sales force, that that all should relatively be completed in the first quarter?

I think that's -- as I recall, that's -- you thought through the first quarter would be the time it would take to get these folks trained and then second quarter they would-- the productivity factor would go higher.

Is that -- ?

Certainly as we get through the end of the first quarter, we would expect that the sales folks that we've hired in 2010 are going to be getting up to speed.

Generally think about a three to six month period or so for folks to fully get up to speed.

So there's still some of that as we come out of the first quarter, the folks that were hired in the latter part of the year, but generally we'd expect that the sales force productivity would be much stronger in the first quarter than it was in the back half of this year.

And are you planning to add the same degree to the sales force this year as you did last or does it slow down a bit?

No, as Surya said in his remarks, we're substantially complete with the expansion of the sales force at this point.

Okay.

Great.

Thank you.

Thank you.

Your last question is from Dawn Brock with Kaufman Brothers.

Good morning.

Thank you.

Just in terms of the discussion that's pursued on the volume side, would you be willing to more specifically distinguish between all the work you've been doing with the health plans and the employers?

Are you seeing the recent stability in volume coming more from some market share gains based on these new partnership initiatives or do you view it as an up tick in your demand based on these partnership initiatives?

Well, Dawn, it's a difficult question to answer precisely.

I would say that it's a combination of all of the things that we're doing.

I think it's clearly the focus that we placed on particular disease states, as Surya talked about cancer, cardiovascular and infectious disease, the fact that we've hired up sales folks to go after particular geographies or physician specialities, and the efforts that we have ongoing with health plans and employers.

But it's not any one thing, quite honestly.

It's a combination of all of those.

And where you're competing in more of the open network contracts, are you feeling as though you're gaining traction?

As I said earlier, I feel very good when we're in an open contract in terms of us getting more than our fair share of the work.

Okay.

And then my second question is can you talk a little bit about the more recent adoption pace of the HER system and the utilization trends that are accompanying the new adopters?

Well as I said that since we introduced, we have now more than 1800 doctors using our Care360.

I think the most important thing you should really note, that during the quarter we got certified for meaningful use.

That means now our physicians can earn up to $44,000, and that's really a great incentive.

But apart from that, the Care360 not only provides them (inaudible) laboratory orders and results but physician support and also electronic prescription.

So we are very pleased at how we are gaining ground in that area.

We're also very pleased at how it is differentiating us from our competitors and hopefully we are also counting on this to have some revenue as we expand in our installed base.

That's great.

And, Surya, just to follow up on that, are you seeing greater adoption from your existing physician relationships or are you seeing an up tick in new relationships?

I think it's a mix.

We're also looking at new relationships, we're also looking at the existing relationships we were changing.

We're seeing both.

And then just as far as utilization, do you feel as though you're getting more testing ie, not that the physicians are necessarily ordering more testing that were already using it, but you're seeing more tests go to Quest from the existing testing base?

Well we have seen results -- I don't have any current results, but we have seen each time one of our customer, physician customer use the Care360, we tend to get more business from that customer.

Excellent.

Thank you.

Thank you.

Thank you for participating in the Quest Diagnostics' fourth-quarter conference call.

A transcript of prepared remarks on this call will be posted later today on Quest Diagnostics' website at www.questdiagnostics.com.

A replay of the call may be accessed online at www.questdiagnostics.com/investor, or by phone at 866-350-3614 for domestic callers, or 203-369-0039 for international callers.

No access code will be required.

Telephone replays will be available 24 hours a day, beginning at 10.30 AM Eastern time today until midnight Eastern time on February 22, 2011.

Good-bye.