James E. Davis
Chairman, Chief Executive Officer and President at Quest Diagnostics
Thanks, Shawn, and good morning, everyone. Before we get into the details from the third quarter, I want to recognize the Quest employees who are working hard to serve our patients and customers impacted by Hurricanes Helene and Milton, while also contending with the effects on their personal lives. I'm inspired by their commitment to our values, especially customer focus, collaboration and care, during this very difficult time. They bring to life our purpose: working together to create a healthier world, one life at a time.
Now, turning to our results, we delivered a strong third quarter with total revenue growth of 8.5%, including 4.2% organic growth, driven by new customer wins and expanded business with physicians and hospitals, as well as acquisitions. During the third quarter, we completed three acquisitions. We finalized our acquisition of LifeLabs, a trusted lab leader serving millions of Canadians. LifeLabs provides a strong foundation for us to expand in Canada, and we are excited about the growth opportunity serving a population that is growing and with more favorable demographics than in the US. We also completed our transaction with Allina Health, a leading nonprofit health system serving Minnesota and Western Wisconsin. And at the end of the quarter, we acquired the laboratory business of three physician groups in New York.
During the quarter, we also announced the plans to acquire select outreach lab assets from OhioHealth and University Hospitals, two leading nonprofit health systems in Ohio. We completed the transaction with OhioHealth just last week and expect to complete the acquisition with University Hospitals later this quarter. Our recent outreach acquisitions highlight our ability to attract top health systems seeking to evolve their lab strategies to improve access and affordability. They also position us to expand in geographic areas of the US where the influence of health systems had previously limited our reach. We are now on track to complete eight acquisitions this year that meet our criteria for growth, profitability and returns.
Now, I'll recap our strategy and discuss highlights from the third quarter, and then Sam will provide detail on our financial results and talk about our updated financial guidance for 2024.
Our strategy to drive growth is focused on delivering solutions that meet the evolving needs of our core customers: physicians, hospitals and consumers. We enable growth across our customer channels through advanced diagnostics with an intense focus on faster-growing clinical areas, including brain health and molecular genomics and oncology. In addition, acquisitions are a key growth driver with an emphasis on accretive outreach purchases, as well as other independent labs.
Our strategy also includes driving operational improvements across the business with the strategic deployment of automation and AI to improve quality, service, efficiency and the workforce experience. Here are some updates on the progress we have made in each of these areas.
In physician lab services, we delivered another quarter of high-single-digit revenue growth. Our performance was driven by new customer wins and expanded business, largely due to increased utilization of our advanced diagnostics. Our acquisitions also contributed to growth within this core customer channel. And as a reminder, volumes from both hospital outreach and independent lab acquisitions originate in physician offices. We also continued to see strong volume and revenue growth within Medicare Advantage plans, where narrow network strategies direct testing to high-quality, cost-efficient options like Quest.
During the quarter, we also made progress to expand into new geographies through our health plan partnerships. We renewed a large national health plan agreement with Elevance Health that will extend our reach in Virginia, Georgia, Colorado and Nevada, markets in which we had previously limited access. We also broadened our access in Virginia and Florida with our recently announced arrangements with Sentara Health Plans.
In hospital lab services, we grew revenues mid-single digits, which is above historical levels. Hospitals continue to struggle to fill specialized lab positions, including histology, cytotechnology and microbiology. In addition, the range and scope of testing being ordered is increasing as hospitals take advantage of our expanding advanced diagnostics portfolio rather than building their own in-house capability. These dynamics contributed to strong continued demand for reference testing.
Our expertise managing laboratories can help hospitals improve quality and efficiency in their core lab operations. During the quarter, we formed a professional lab services collaboration with a leading health system in New Jersey that includes reference testing, as well as laboratory and supply chain management.
Quest specializes in scaling diagnostic innovations to improve access, quality and affordability. This ability enables us to help hospitals address the many challenges that they face, from workforce shortages to capital constraints, to the demand for more affordable care from patients, health plans and employers. That's why premier health systems continue to seek us out for a range of collaborations, ranging from reference testing to professional lab management, to outreach acquisitions.
In consumer-initiated testing, our consumer-facing platform, questhealth.com, grew total revenues more than 40%. Our repeat customer rate has grown to 30% from less than 10% two years ago, driven by demand for comprehensive health, chronic disease and STI testing. During the quarter, we also introduced micronutrient blood tests to help identify vitamin and mineral deficiencies. In addition, we continued to expand our partner network with resellers and e-commerce providers.
In advanced diagnostics, we drove double-digit revenue growth across several clinical areas. The growth was particularly strong in areas of brain health, especially for our AD-DETECT blood-based Alzheimer's disease testing, as well as in women's health, cardiometabolic health and autoimmune disorders. Our investments in advanced diagnostics enable us to deliver and scale innovative services that improve patient care and drive growth.
In molecular genomics and oncology, we are pleased with the results to date from our Haystack MRD early experience program, through which providers from many leading academic and community oncology centers have used our Haystack MRD blood test to assess cancer recurrence and treatment response for solid tumor cancers. We are on track to make Haystack MRD available nationally to providers in the fourth quarter.
Our growth in women's health was largely driven by prenatal and hereditary genetic testing, consistent with recent quarters. We also saw continued robust testing demand in genital tract infections, which includes several STIs. This month, we introduced a specimen self-collection option at our 2,000 patient service centers that give women a fast, convenient and discreet way to access GTI testing.
In the area of autoimmune disorders, we saw strong demand for our testing solutions, which help primary care physicians comprehensively screen for autoimmune disorders in order to speed diagnosis and care by specialists.
Finally, we are pleased to be selected by the CDC to be one of a handful of diagnostic service providers to support the development of laboratory tests for H5N1 avian flu and Oropouche viruses. We plan to introduce an H5N1 avian flu test later this month.
Now, turning to operational excellence, our Invigorate program aims to deliver 3% annual cost savings and productivity improvements, driven largely through the use of automation and AI to improve productivity, as well as service levels and quality. During the quarter, we completed the build-out of full end-to-end automation for our core routine tests at our Lenexa, Kansas laboratory, making it the third fully automated lab in our national network. We are now piloting automated specimen accessioning in our Clifton lab, which will help increase productivity in specimen processing and improve quality.
Finally, we are pleased to extend our collaboration with Hologic to include their automated cytology solution, the Hologic Genius Digital Diagnostics System, which utilizes AI to help analyze cervical cell samples. We expect the solution will help us improve quality and efficiency in cervical cancer screening.
Now, before I turn it over to Sam, I want to take a moment to recognize the decision by Congress to delay Medicare reimbursement cuts and data collection scheduled under PAMA for 2025. While we are pleased with the delay, we continue to collaborate with our trade association, ACLA, to encourage Congress to secure a permanent legislative solution that provides fair reimbursement.
Now, Sam will give more details on our third quarter performance and our updated guidance for 2024. Sam?
