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

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

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?

Freeman: We work with various payers and providers on disease management programs, primarily by using our vast database of clinical results to help identify patterns of care and treatment across various patient populations. In addition, MedPlus’ ChartMaxx electronic medical record system and eMaxx Internet portal serve as clinical information repositories to help improve health. These products give physicians and hospitals confidential access to data from many sources not typically accessible in one place — lab test results, radiology results, hospital charts, clinical notes, specialist notes, and pharmaceutical scripts.

Pontius: What is Quest’s affiliation with these products?

Freeman: We acquired MedPlus in November 2001, and as a result, support the ongoing development and distribution of these products.

Pontius: How is Direct Access Testing going to affect the laboratory industry? What opportunities does DAT provide for professional laboratorians? What role will Quest Diagnostics play in the future of DAT (Are you a lobbying body? Does the Internet circumvent state prohibitions?)

Freeman: We believe consumerism in healthcare is a megatrend that has begun to change our industry. People are taking more responsibility for managing their own health. The Internet has helped spur this trend by providing easy access to consumer health information, and so have pharmaceutical companies, by targeting advertising directly at consumers, advertising that often implies the need for lab tests. People now go to cocktail parties and talk about their lab test “numbers” in much the same way they discuss their golf scores. In mid-2001, we launched a pilot direct-to-consumer testing service in five states with QuestDirect retail health testing stores located in high-traffic strip malls. We are still in a proof-of-concept mode, but we think this is an important part of the future. We continue to work with various state governments to make direct access testing available to a broader number of people.

Pontius: What role will computerization and/or the Internet play in customer/consumer relations for your business?

Freeman: The Internet is already playing an enormous role in our business, which we believe will only expand as time goes on. First, it enables us to make our services more convenient and useful for our customers. Physicians can log onto our main website, www.questdiagnostics. corn, and retrieve test results for their patients minutes after the results are reported by the laboratory information system. They can also use the Internet to order tests. We have also recently launched a consumer website, www., to provide easy-to-understand information about laboratory services, and we enhanced customer service on our website by enabling many patients to pay bills and file claims electronically. MedPlus’ ChartMaxx electronic patient record system helps hospitals and physicians by automating the often tedious chart-completion process that must be completed before a hospital can file a claim for payment. Doctors can complete charts electronically rather than physically spending time in the hospital’s medi cal records office filling out paper forms.

Pontius: Do you see regulatory changes making life simpler or more costly and burdensome for Quest Diagnostics?

Freeman: We are a highly regulated industry, and continue to work in partnership with the government to pursue administrative simplification through our trade association, the American Clinical Laboratory Association.

Pontius: Today we are very focused on bioterrorism. How did Sept. 11, 2001, impact Quest Diagnostics, and will it play a part in its future?

Freeman: We were affected profoundly by the events of Sept. 11. Our laboratory and offices in Teterboro, NJ, have a clear view of Manhattan, and many of our employees witnessed the tragedy firsthand. Also, one of the impacted commercial airliners was carrying several hundred specimens en route from Boston to Nichols Institute, our esoteric testing laboratory in San Juan Capistrano, CA.

Fortunately, our laboratories maintained continuous operations across the country despite the enormous logistical challenges posed by the lockdown of U.S. airspace immediately following the Sept. 11 tragedy. We have never before seen the level of cooperation among competitors that was exhibited by our industry when labs reached out to each other with offers to help – by transporting specimens and supplies or performing tests.

There will be a continuing need to prepare for future healthcare crises. As an industry we need to reach out collectively to support public health agencies during this challenging period in anyway we are able. Within the next few years, we believe a new aspect of national defense will develop to address the threat of bioterrorism. It will coexist with the traditional military defense industry as a “life sciences” defense sector.

Pontius: Since you believe genomics will have the greatest impact on the industry, how are you preparing for that in your future?

Freeman: We are focused on advanced diagnostics, including gene-based testing, as a high priority. Today we are the leader in gene-based testing, which is the fastest-growing portion of our business. Gene-based testing is a major portion of the esoteric testing performed at our Nichols Institute reference laboratory in San Juan Capistrano, CA. Nichols Institute is also our research and development center, developing new laboratory tests of its own, as well as collaborating with leading academic and commercial researchers to bring the best in new technology to the market.

Pontius: What is Quest Diagnostics doing to differentiate itself from other commercial laboratories?

Freeman: The single most important factor that differentiates Quest Diagnostics from the competition is our pursuit of Six Sigma quality. Six Sigma has helped companies like GE, Texas Instruments, Motorola, and countless others in manufacturing reduce defects and improve quality. In healthcare, improving quality not only makes good business sense; it is a moral imperative. At Quest Diagnostics, we launched our Six Sigma quality initiative in 2000. We have been underway for nearly two years, are making great progress, and have much more to achieve.

During 2001, I personally became what is called a Six Sigma Black Belt. I had to undergo four full weeks of training – a major time commitment. My first Six Sigma project is helping to improve customer satisfaction in the hospital segment, and I am about to embark on a second project.

We believe that the quality of laboratory testing in this country is very high – but everyone knows that overall, healthcare quality can and must improve, and that it encompasses much more than the accuracy of the results we provide. Other aspects of the overall lab experience hold tremendous opportunities for quality improvement, including billing for services.

C. Anne Pontius, MBA, CMPE, MT (ASCP), a member of MLO’s editorial advisory board, is president of Laboratory Compliance Consultants in Raleigh, NC.

COPYRIGHT 2002 Nelson Publishing

COPYRIGHT 2002 Gale Group