Talking with Kenneth Freeman of Quest Diagnostics - In the eyes of the experts Medical laboratory industry - 2007 - Interview

Medical Laboratory Observer, Feb, 2002 by C. Anne Pontius

This is the second installment in our yearlong series of interviews with executives in the clinical laboratory industry. We want to give you a "bird's eye view" of where these key players see the industry going in the next five years.

MLO editorial board member Anne Pontius, president of Laboratory Compliance Consultants Inc. in Raleigh, NC, is conducting the interviews.

The executives interviewed will also participate in a panel discussion, which will be co-sponsored by MLO and CLMA at next summer's CLMA annual meeting June 26-29 in New Orleans.

Our February interview is with Kenneth Freeman, Chairman and CEO of Quest Diagnostics Inc.

Celia Stevens, Editor

Anne Pontius What one factor do you believe will have the most impact on the laboratory industry's five-year future?

Kenneth Freeman: Genomics will have the greatest impact on the industry's near-term future. Genomics is changing medicine, and it all starts with a diagnostic laboratory test. New genomics-based pharmaceuticals are years away, but tests for new genetic markers are being developed almost weekly. New diagnostic laboratory tests will not only diagnose, but also predict disease, help the physician identify the most appropriate treatment option, and then monitor the effectiveness of that treatment. Diagnostic testing is becoming an even more vital partner in helping physicians improve patient health.

Pontius: The laboratory professional associations claim we are facing a personnel shortage that has recently started and may not peak for many years. With the many acquisitions and mergers of Quest Diagnostics with other laboratories, do you envision a decline or growth of the use of professional laboratorians?

Freeman: While we have seen spot shortages of qualified candidates for certain types of skilled jobs in certain regions, we believe these are temporary imbalances in supply and demand, and have not affected our ability to meet the needs of our customers. Given that the industry is growing between 5 percent and 7 percent each year, and the number of different types of tests is growing as well, the demand for qualified laboratorians will continue to increase.

Pontius: Do you see Quest doing on-the-job training or hiring professionally trained laboratorians in the future?

Freeman: That largely depends on the type of position we are looking to fill and the level of skill that is required. For example, we look to hire experienced laboratorians to review Pap tests. However, we expect to provide on-the job training for many new esoteric tests which we are bringing into the lab, because there is limited opportunity for prospective employees to acquire that experience elsewhere.

Pontius: Do you foresee over the next five years, more or less (or both over time) consolidation of industry manufacturers or laboratories (hospital and independent ones and hospitals purchasing physician offices)? What about Quest Diagnostics specifically?

Freeman: The laboratory testing industry continues to be highly fragmented, with as many as 5,000 independent laboratories and 5,000 hospital-based laboratories operating nationwide. Quest Diagnostics is the leading provider of diagnostic laboratory testing, information and services with approximately 10 percent of the overall market. We believe there will be continuing consolidation in the industry. Quest Diagnostics made two regional laboratory acquisitions during 2001 to strengthen our market position in Colorado and metropolitan New York. We continue to be interested in acquisitions that enable us to strengthen our position in a particular market or bring us unique technology or expertise. For example, we acquired MedPlus, Inc. during 2001 to help us improve our connectivity solutions and make our services easier to use for physician and hospital customers. We have a core competency in acquisitions that was demonstrated by our successful integration of SmithKline Beecham Clinical Labs, which was acquired in August 1999.

Pontius: As new technology emerges, do you believe reimbursement will cover costs?

Freeman: We believe the market generally is adept at recognizing and fairly reimbursing for technology that makes a difference in patient care. Probably the best example of this is the rapid rate of acceptance for the ThinPrep Pap Test, which now represents the great majority of cervical screening performed by Quest Diagnostics -- and our industry. Medicare's decision a few years ago to begin to reimburse for the PSA test is another example. Looking to the future, new gene-based diagnostic testing technologies that help identify patients at risk or qualify patients for certain therapies are perhaps most likely to receive rapid approval by payers, because of the ability to reduce total healthcare costs.

Pontius: Do you foresee "disease management" or "clinical pathways" dictating future test ordering habits of physicians? Is Quest Diagnostics involved in helping develop disease management tools or clinical pathways?