Quest Diagnostics Incorporated (DGX) Earnings Call Transcript & Summary

Hi, everybody. I'm A.J. Rice, the health care services analyst here at Credit Suisse. We're very pleased to have up next Quest Diagnostics. And representing the company, I've got Mark Guinan, Chief Financial Officer; and Shawn Bevec, Vice President of Investor Relations. I will say upfront to the extent that someone wants to e-mail me a question that I can ask the company on your behalf, I'm happy to take that. You can e-mail that at [email protected]. But Mark and Shawn, thanks for participating once again in the conference this year. I appreciate that.

Maybe just broadly, to kick it off, I think we're all trying to look toward coming out of this pandemic at some point. I would ask, Mark, at a high level, do you think your business has changed materially? Or are we going to revert back to pretty much what it was? What has the pandemic changed about the clinical lab testing business that's going to be a persistent change long term, do you think?

Thanks for the question, A.J., and thanks for inviting us to the conference. It's our pleasure. See, I'd point to a couple of things, A.J. There are more softer changes. I think the core diagnostics business will continue as it did. But we've become more agile out of necessity. I think we learned a lot with the pandemic. I think it set us up to be more agile in the future, certainly to respond if there's another pandemic of sorts, but also just in how we get work done within Quest. We've learned how to collaborate a lot better, and I think it's really been a positive for us as a company. And I do think that there's been a growing appreciation for the work we do. I don't think we were fully appreciated in Washington and some of the state houses. And obviously, we've gotten a lot of visibility, the work we do has gotten visibility, and I can't tie that specifically to tangible benefits, but directionally, I think that's a good thing for us as an industry and a good thing for us as a company. And then finally, with the bolus of COVID revenues and operating margin and cash, we were able to afford some larger investments in our core business that will accelerate growth over time relative to what we may have been able to do otherwise. We talked about those specifically at the Investor Conference back in March, but that's another change, I'd say, is we're probably going to be further along in some of those growth platforms that we may have been otherwise.

Okay. That's great. I think on the most recent conference call, the company reiterated the outlook offered at the March Investor Day, basically, for a '22 EPS of $7.40 to $8, and when the comment was made, you thought you were at the higher end of that range. When you think about next year and the open questions today where we sit, what are the biggest variables in making that comment in your mind. I'm sure COVID is one, but I would also assume that you're probably guiding fairly conservatively for COVID next year and whatever guidance you ultimately come out with formally. But what are the variables and open questions in your mind as you think about '22 at this point?

Yes. I think the biggest variable is COVID. It's the volume and it's the reimbursement. So when you say what are the key drivers for what we talked about, we haven't given guidance yet, but we reconfirmed our multiyear CAGR from 2018 to 2022, and really talked about the elements. The base business is pretty much what we would have expected. We did have -- we've talked about some inflationary pressures that we weren't necessarily anticipating, but we also have probably a stronger base business recovery than we were anticipating at this point. And I wouldn't expect that to deviate materially. We did mention that we have some COVID in our expectations of 2022. We've been saying we don't think it's going to go away completely anytime soon. But the amount of volume in addition to whether the [ FHE ] is going to get extended or not beyond January, those are probably the biggest wildcards at this point, A.J.

Okay. Obviously, the market was cheered on Friday or late last week with this news that Pfizer might have a treatment for COVID. If COVID were to either because of that drug or some other magic pill that comes along to go away January 1 of '22, do you still think you could make the comment that you'd be in that range? Or albeit, I wouldn't hold you to the $8, but in that range somewhere for next year? Or how would it change your outlook? Would it meaningfully change your outlook or go forward, if all of a sudden COVID was wiped out? Obviously, we don't expect that, but if it would?

Yes. So A.J., we got a pretty broad range, and we wouldn't have put it out there, and we didn't feel we could make the choices necessary in an environment where we don't control everything, but certainly, there are things that we do have some control and influence over, including the amount of our investments and other things. So that would mostly change the comment that COVID isn't going away anytime soon, but certainly would make things a little harder on us. But I wouldn't say that, that takes us out of that range. But when you think about it, A.J., as much as we'd all like to believe, and I certainly would like to believe, we can eradicate COVID. I don't think the epidemiology is understood by the medical scientific community yet, how it's spread, who gets it, et cetera, et cetera. And when you think about it, you still need a diagnostic in order to get treated. So maybe it would reduce the spread of the disease if you got a quick treatment, so you get people out of the infectious stage sooner and so on and so forth. But you've got a couple of other things I'd point to. One is a lot of STDs are fully treatable with antibiotics. They certainly haven't gone away. And it takes a lot less social interaction to spread COVID. And you're going to have other infections mirroring COVID potentially with the symptoms, flu, cold, et cetera. And so how is the diagnostic going to proceed if someone presents themselves with a headache, with a fever, with a sore throat, with congestion, I don't know, we'll see. But I would be surprised if COVID testing would be eliminated even if you do have a fabulous treatment and certainly, we're hoping that all of that happens for society.

Sure. Okay. I think the company at the Investor Day and an ongoing comment has been that think of long-term revenue CAGR at 4% to 5%. It doesn't sound like anything's changed in the pandemic that would make you move off of that, but I just feel like we should ask the question. Is there anything that's changed coming out of the pandemic that makes you think that number is a different number today than where you gave it back in the spring?

No. As I said, the base business has largely played out the way we expected. We get a lot of questions, as you might imagine, about M&A, pace of M&A during the pandemic. I can tell you the pipeline is still very, very deep. We're still confident in getting 200 basis points of growth from M&A, a CAGR over time, not every month, not even necessarily every year, although we have pretty much steadily delivered that since we first put that marker out in 2018. And then the organic growth of 2% to 3% that gets us to that 4% to 5%, we fully expect to deliver that. And it's really a combination of very low single-digit utilization growth, market growth, combined with some share gains, which a lot of that will come through our health plan relationships that we talked about and then some of it through what we think is the strengthening of our competitiveness within our hospital systems.

Yes. And when you mentioned the pipeline and on the call, you said the pipeline for deals is very strong. Is there any challenge with the sellers wanting to get paid for the COVID testing that they've done? Are they quick to realize that you need to sort of normalize those numbers? Or is that a sticking point that makes it hard to bring a deal to fruition these days?

Yes, good question, A.J. And I can tell you that surprisingly that really has not been an issue. So I was fully expecting these assets to be overpriced based on the sell high philosophy. But really in the dialogue, they understand we're buying a long-term business, and they understand that the COVID revenues and OEM are not going to stay at the level they've been at. We don't know exactly when they're going to settle out. So really, that's not been an impediment to our normal rhythm of engaging, having conversations and trying to see if we can get to and agree to broaden the sales price.

And I think one of the things that you said in the last few quarters is that the relationship with Managed Care is probably as strong as it's been in quite a long time. And one way that's manifesting itself is they're willing to work with you on the hospital-based Outreach Lab acquisitions, which traditionally you would have to take a hit on price right away and they're sharing some of that step down with you over a couple of years. How -- can you maybe talk about how that's impacting the pipeline? Because I assume that's probably limited to you and perhaps your closest peer are getting that opportunity. I'm not even sure your closest peers talked as much about this issue, but what does that do? Does that give you more optimism that you'll see more of these hospital Outreach Labs in the next few years as acquisitions?

Yes. I wouldn't say that there's been a deal yet where that was the critical part of making the deal work. So in my mind, it's more of an enhancement and just another signal that the commercial payers realize this is in their best interest when we buy Hospital Outreach. And so the fact that they're willing to step down that rate as opposed to the historical windfall they've received shows they're still getting a ton of benefit, but we're sharing in that. And it's really all around the spirit of partnership. So we've talked about our ability to earn what we call incentive payments by moving share out of high cost, either out of network or high-cost providers, and we have a very rigorous measurement systems with some of these payers and how we earn that. And then the partnership around them, identifying those targets and saying, here's some physician practices that are ordering a lot of expensive labs. We go in with their [ implementor ] and say, "Hey, we could save your patients, who have high deductible plans or coinsurance quite a bit of out-of-pocket money. You may not realize it, but you're sending work to really expensive labs. Here is the rates from this XYZ MCO." So it's not just questing, we're less expensive, we're a better deal, and we're high quality, but the payer themselves has sent us to you because they know we're going to do a really good job. We've got all these tools. And oh, by the way, we'll save money for your patients. So that -- all those elements has really brought us together much differently than a number of years ago where we were almost treated like a commoditized provider of laboratory results as if everybody was equal. And from the PLN, where there's only 5 labs out of several hundred that are in network for United, and it's based on a series of metrics around quality, around tools, around data analytics, et cetera. And you have to have a good price, but we didn't have to lower our price beyond the PLN. It was one of the considerations says that there is differentiation, and it's not just around price and there's better ways for the payers to create value than just always beat us up every contract on a price concession. So we really feel like we've turned the tide quite a bit. And it's a much more strategic and collaborative relationship with all the nationals and the large regions.

And when you think about that sort of incentive value-based aspect to the payment, any way to quantify how much that represents today versus a couple of years ago? And where you think it could go in terms of your total payment maybe with -- I don't know whether the way to describe that is with the national carrier or whatever. Obviously, I'm sure you don't want to talk about specific carriers, but just to get a sense of the order of magnitude of that component of the payment now it's changed over time and likely to change in the future.

Yes. And so we've gone from 0, a couple of years ago, so obviously, that's the important thing is every little bit helps here. And the pieces are really work in progress. So the incentive payment, this is really based on that largely with United. And as we've shared, the pandemic slowed some things down, that they were going to do, that we were going to do our ability to call on offices and move work because we weren't even allowed into those offices. So we got off to a good start, and hopefully, they tell you the same thing, and we're getting back on path. We talked about $1 billion of work between United, Horizon and Anthem of Georgia at our prices. And we've said that would take a number of years. So the incentive payment is obviously directionally tied to achieving that share gain. We talked about getting to about 25%, which is our fair share of the volume when we're typically in network. And so that will be increasing over time. And then the M&A incentive is obviously temporal and specific to deals. And we basically have these in place where we look at the volume, business we're buying, the rate of different structures. Some of them are multiyear, some of them are discrete payments, some of them are a temporary higher rate for all of our volume in that region. So there's different structures to the way they work, but they're all good news relative to our past and they're all helping us to maintain a better price and a better margin than we would have otherwise.

Yes. No, that's fine. So I go from some high-level questions to obviously got to ask the obligatory granular near-term one. You said on the third quarter conference call that the Delta surge sort of maybe slowed down the return to normalcy in the base testing business. But obviously, enjoyed a lot of testing around COVID. Any update on what you're seeing in the early part of the quarter, October, early November around the base business rebounded quickly? Is the COVID testing persisting at an elevated level?

Sure, A.J. So on the earnings call, we shared that in August, we saw a little bit of a step back on the base business that we assumed was Delta surge related, but September bounced back and we saw some good recovery. And then we also talked about early October, continuing to improve. I can confirm that throughout the month of October, the base business continued to improve, so that's very encouraging. And November, it's too early, and we're just a week through it. But certainly, October continued that trend towards a full recovery. On the COVID side, as expected, we saw a little bit of deterioration in volumes throughout October. It started to stabilize a little bit in late October and then actually recently, we actually saw our volume increase a little bit for COVID testing. So I don't know if that's just a very temporary blip or if that's indicative of as we enter the holiday season, and some other things and indoors. This cold and flu is more pervasive. We'll see how it plays out. But interestingly enough, it did not continue to deteriorate for the last couple of weeks.

And I know an area you've called out is lagging in the recovery has been the New York City area, which historically has been a very big market for Quest. Any update in what's happening there? And do you think that's a permanent change? Maybe people just moved out of the city or whatever or getting their care elsewhere? What's -- as you guys dissect that, what do you think is behind it?

Yes. So I can't imagine how it would be permanently impaired to the level that we're seeing the volume down. So we're still down double digits relative to 2019. And we've reached out to some of our key partners in the area, a couple of hospital partners and urgent care clinic that we do work for. And they're all saying the same thing, so it's not a Quest-specific issue. It definitely is a geographical issue, most pronounced in the 5 boroughs. And we're all trying to figure out what might be driving this or I've heard, like you implied, that maybe some people have moved. But I mean, not double digits. So there's something else going on. And to the best of our ability, as we've hypothesized, it might have to do with public transportation. So the New York metro area is the most dependent metro area in the country for public transportation. Until people get comfortable taking the buses and subways fully to the way they used to, obviously, there's some access issues around engaging with health care as they always have. So yes, there's the commuters in the Manhattan and certainly Manhattan is down quite a bit. But we're seeing it in the other boroughs as well. So we don't know for sure, but we can tell you that we're not alone in seeing this, and we're hopeful and expecting at some point it's going to come down, that it can't possibly be permanently impaired at the level we're seeing right now.

Right, right. I mean one of the big topics across the board in health care in the third quarter has been around labor and whether people are feeling challenges on the labor front and so forth. You've got different buckets of labor, the drivers and the couriers, you've got the phlebotomists, you've got the people that are processing samples when they come in. What are you seeing? And how does that factor into your thinking about next year, whatever labor challenges you're seeing?

Sure. So we're not immune. And we talked a little bit about the inflationary wage pressures and certainly, that's built into our current thinking, what we talked about on the earnings call. But beyond that, no matter what you do on wage and compensation, there does appear to be a shortage in the labor pool. So the good news is we never shut down like some other industries, so we didn't have to completely rebuild our workforce. And so we've been focused more on having to replace attrition instead of stepping back up from some sort of a pandemic trough. So we are seeing higher rates of turnover, especially in what we call specimen processing, which is the people that handle those samples as they arrive at the lab and sort them and put them in the system. Certainly seeing some in logistics as there's quite a bit of demand for drivers. Not as severe as it was probably a year ago when it was really extreme, but it's still there. Less so for phlebotomy, but some for phlebotomy as well. And then med techs, there is quite a demand for med techs in the labs as well. We're seeing a lot of pressure, especially from hospitals. And I think one of the drivers, we believe, is some people have made personal decisions to step out of the workforce. So it's not, I'll turn over to another company for higher compensation or quote a better job. I mean people really like working at Quest and I can tell you we just went through what we call an engagement survey and our results are outstanding. People are happy. They enjoy what they're doing. They're working hard and they have been working hard and acknowledge that. But we've had some of the highest scores we've ever had in terms of employee engagement recently. So it's really, I think, a labor shortage that's driven by other factors. And yes, we will lose some people to competitors, but that's not the biggest driver. There's just not enough people applying when we're looking to hire people.

And so when you think about your SWB year-to-year, do you think you've got to step up a little bit next year in your expectations? Or is this all sort of manageable within that? And it's still a low single-digit type of rate increase in SWB?

No. We tried to be clear on the earnings call that we will have a higher rate of SWB inflation in 2022 than we've experienced historically. And just it's -- reflects the market. I mean, there's no way to avoid that. However, we still were able to confirm what I said back in March. So we've built that in. We have a pretty good idea of what that's going to be. But yes, it's going to be higher than it's been historically, but we fortunately have some other things that have moved in the positive direction that help offset some of that.

Okay. And I should ask you because the other thing in the headlines generally about the economy's supply chain, any issues around supply chain that you're dealing with, reagents or otherwise maybe things we wouldn't think of?

No. The only thing we've had to do is probably spend a premium on logistics. And I'm talking about this case to get our supplies where they need to get to, not the picking up of specimens, logistics, which also has gone up a little bit, especially with fuel and some labor inflation. So we've been taking some more extraordinary measures to make sure that we get things where they need to and paying a premium, and that's just because the whole delivery infrastructure was not as dependable as has been historically. So I would hope that that's temporary, and we'll kind of get back to where we used to be and how and with whom we ship our supplies to our Patient Service Centers, how we get our reagents to our labs, et cetera. But that's been a little bit of a cost premium to ensure that we don't run short on what we need to run our business.

And you have had to make adjustments to be able to address the COVID testing demands on your business in terms of capacity and so forth. And you persisted when it looked like the surge was rolling over earlier in the year, and that turned out to be good as we had another surge. But what -- how do you guys think about when it's time to roll that testing capacity off? And what are the implications of that in terms of your cost structure and how we should think about the business?

Yes. So I think we are pretty flexible in moving the med techs in the lab where we need to. And we've shown that. And so I don't consider that to be a major headwind. I think we can, as I said, our agility has improved. So once we definitively feel that the demand is significantly lower for COVID testing, we'll be able to rightsize our organization pretty quickly because some of the resources are fungible to other molecular testing that continues to grow and recover. And as I said, we expect to grow share. So we're going to need more people in the base business as well. You look at some of the other things that we're doing like our relationship with CVS, we're still getting a substantial amount of volumes. So that logistics cost will go away when eventually either they aren't doing that anymore or we decided it doesn't make sense anymore to do those pickups because the volume generated. Then the other question, A.J., is things that aren't as much related to our business as they are to the pandemic. So the extra personal protective equipment, some of the other safety steps that we're doing within our laboratories, extra cleaning, other things around social distancing, which hits productivity a little bit, because of the spacing and so on that when do those things go away, and that's more like a lot of other businesses are facing, not specific to us and our COVID testing, but really just operating the business where human beings have to be protected from the spread of COVID. So that's not an inconsequential amount of expense that we've been incurring and haven't yet fully made plans yet to get out of. But hopefully, at some point, we remove that. So I'd say that's probably the big expense overhang that will go away, that's really when the pandemic gets to a point where we don't take those extra steps versus the staffing of our labs to do the testing itself.

Okay. And I have -- you've obviously got the Invigorate program, which is a target to reduce cost -- operating costs by 3% a year, and you've consistently done that. And is that getting tougher and tougher as you move forward here? Where are the big opportunities remaining? I maybe marry this with an e-mail question I've got in talking about the accelerated investment Quest has made in infrastructure. Do they think DGX will accelerate post pandemic? So this question is maybe even asking, can you step that up because of some of the comments you made earlier where you've accelerated investment. But at least, the 3%, is that something that still has reasonable visibility on it? And where are those opportunities coming from?

Sure. So the opportunities come across the board. Most of it's in cost of sales not necessarily in SG&A, and it's everything from making our phlebotomist more productive, to our logistics, to our laboratories and reagent costs, obviously, driving productivity and what we pay for our supplies. And the pipeline just continues significantly. You can point to a couple of things. We're still heavily involved in our consolidation of our immunoassay testing to a single platform on [ Intellico ], which we're still rolling out. That's certainly a productivity enhancement in multiple directions from not having the aliquot samples, the multiple pieces of equipment, to not having to staff those multiple pieces of equipment. You look at our Clifton lab and the automation that we put in there around the specimen processing. And that's another enhancement within our Patient Service Centers in the last couple of years, the tools and technology we put in there, everything from the kiosks, to register, to the ability to provide a lot of information and make an appointment online, so you can put in your insurance and all that, and our phlebotomists don't have to spend as much administrative time while they're in the PSC, but they can spend more time doing phlebotomy. So all of those things continue to be opportunities because there's always new technology, there's always a new opportunity to drive efficiency. And that's why we were -- we've been doing it for almost a decade now, and we're confident we'll continue to do it. I mean, best-in-class organizations find ways always to drive that kind of productivity. And we've really embedded it within what we do. So when you talk about the acceleration, I mean, I want to remind everybody, I know people know how to do math, but a 4% to 5% CAGR over a 4-year period of time on our base business over 4 years, the difference between the top and the bottom, it's several hundred million dollars. So our acceleration from these investments, we talked about a couple of them specifically. We said our consumer business is going to go from almost nothing in 2018, we believe, $0.25 billion by 2025. We talked about our advanced diagnostics business growing low to mid-single digits and getting that up in the next couple of years to the market growth rate of around 8%. And then the key component in the nearer term is really share gains and the relationships that we have with the health plans and the partnership is being enhanced by some of the things we're doing. So for instance, one of the things we were pretty much prohibited from doing in the past was calling directly on employers and explaining to employers how they could save a lot of money on labs and get better value and quality and so on. And through planned benefit design, anything from a carrier stick and the plan benefit design to what we call a lab card, where they really steer the work to Quest by providing them with almost like an insurance card. And the payers historically were uncomfortable with that. But now they're encouraging that. They're telling us, which employers have the worst spend problems in their labs. And so we had to resource that. That's a different skill set to call on the C-suite of a large employer and to explain this all to them and hopefully get them to their planned benefit design. So there's investments coming in multiple directions, and they're all behind these 4 growth pillars that we laid out at the Investor Day.

How long have you been making those direct calls to large employers? And how penetrated is that at this point? The Fortune 500 or something?

It's still very -- yes, A.J., it's still very early stage. So we did some of it sporadically and we've talked about some of these like Home Depot in the past and the U.S. Postal Service, where we've shown success. So those are kind of our proof points that we can go in and say, "Hey, when you do this, here's the kind of experience that people have had." So it really does move the work because one of the concerns, let's say, for instance, what some of them have done is, you waive the coinsurance or the deductible that you use one of the national labs or you use Quest. And the concern is, well, what if nobody changes their behavior. And I'm just basically paying more of my employees' lab costs for the people that are going to the nationals already, and that's just a cost to me. And so we can show them that it does influence behavior. And it's not going to move everybody because we all know that physicians don't play a very strong role in the decision and some patients wouldn't pay for convenience. So if I can walk down the hall, even if I could save myself $50 on my lab, I'll just walk down the hall and so I have to go somewhere else, so it's not perfect. But we can show them that it pays with just small movements. And so still early stages, but again, with the pandemic, we're not as advanced as we thought we would have been otherwise, but we're confident that this is going to be another one of the enhancements of moving work.

Okay. One thing you mentioned on the third quarter call that I hadn't focused on in a while. I think the way you described it was that 90% of insured lives are in network. I guess I was surprised, the 10% is out of network. What is that? And does that tend to be concentrated in any particular place?

Well, a big chunk of it is Kaiser. So you can argue that's really not an addressable market. If you exclude Kaiser, we're closer to the 95%. And then beyond that, I think people are aware that the only significant plan we're out of is in [indiscernible] in Philadelphia, which is sourced with our competitor. Then there's a couple of small Blues plans in low population states that we're not in. So really half of it is Kaiser and the other half is a couple of Blues plans with IBC being the most notable one.

Okay. Okay. Yes, I haven't focused on that in a while. You mentioned the CVS partnership. I think you also have partnerships with Walmart and Safeway. Is there any update on those? And where those could go over time?

Yes. So the update, it's not new news, I don't think, but we have about 200 retail locations between Safeway and Walmart, which is somewhat of a steady state at this point. We continuously evaluate that with our partner to make sure that we're both getting what we expected out of that. One of the things we have done is we're doing some COVID specimen collections through our Walmart patient service locations. So that's been another source of volume for us, which has been nice. And over time, we aspire in Walmart, certainly, to add some additional services. We have done some diabetic retinal screening in support of our Population Health businesses. We're helping the payers with gaps in care and so on. So there's other opportunities to bring value beyond just the core clinical laboratory testing through this partnership. And so we'll continue to look for ways to increase the value we have there because as we know, an awful lot of people go to Walmart, and so it's a great place to find those people when you need to engage them in health care.

And when you think about QuestDirect, that offering, can you comment a little bit on what you're learning there? The early adoption rates? And are you seeing the repeat customers? Is it someone that continues to come in for the same thing over and over again? Or do they tend to be a one-off situation that you have like a COVID thing or something, but how would you describe what you're seeing there? And what the potential for that is?

Yes. So this point, we're starting to see some repeat customers. A lot of the direct business is episodic. So in addition to COVID, its STDs, and we've talked about why that's likely to come through there. Some of it's privacy, et cetera. So you would hope you're not going to get too many repeat customers there. But we have seen the General Health and Wellness business start to get some traction, and we would expect those to be repeat customers. But that cycle time is probably more every 12 months or so, unless they have, again, an episodic health condition that would bring them to us. So still early stage. COVID [indiscernible] a piece of it. But from '18, when we started, we doubled our business in '19, and I can tell you that October of 2021 was our largest volume month non-COVID testing that we've had, so we continue to grow it.

Right. And I will just finish up by asking about these virtual offerings we're hearing more and more about. How -- it would seem like to me there might be a way for Quest or a national lab to position itself to particularly take advantage of that by working with the telemedicine companies that you become their referral source, but I don't know all the dynamics of that. What are those discussions like? And is there an opportunity there?

Yes. We believe there is a great opportunity there. We do work for almost all of them. And when you think about it with telehealth, and telehealth does tend to be like our direct business, more episodic. But versus being multi-test, it's usually 1 or 2 issues that you need to do diagnostics for when you need to do diagnostics. And since they're not seeing them in person, unlike our base business, where a substantial amount of draws are done by the physician's staff, you need somewhere to go to have it done or you need something sent to their home. So the good news is we've got more Patient Service Centers than anybody. We've got mobile phlebotomy services where they're needed and there's some instances where they're paid for. And then we've got at-home collection devices in the case where they want to do that as opposed to going out somewhere. So we're in a great place to support telemedicine. A lot of that work actually in the pandemic was for our classical physician business because they were only seeing people virtually and needed to get lab work done. But for these telemedicine companies, specifically, we think we're a great partner and we're a great option for them when they need the diagnostics done because of our footprint.

And who drives that referral volume? Because they aren't in the office with the doctor. Is the doctor still the one that's choosing the lab referral? Or is it -- can they tell -- can you have a contract with a telemedicine vendor and they do it? Or is it the payer ultimately behind it somehow? How is that referral? Is it the same or different in tele -- in a virtual environment, I guess?

Yes. Really, the payer doesn't typically get involved. It's really either the telemedicine offering has a preferred lab or they make suggestions, or in some cases, obviously, patients have had lab work done, so they -- they already know I have to get a lab. I think there's a Quest PSC down the road from here or something like that. So it's not one-size-fits-all, A.J. It kind of happens in multiple ways. Obviously, our preference would be to be the referral lab for the telemedicine companies. And for all the reasons I've shared earlier, we think we're a great place for them to refer to. But it's still evolving. And then some of them, obviously, like Everly Health capture a lot of lab work themselves or the kits that they sell retail and that they sell on Amazon and so on, and do some of that work themselves. And then they also refer some of that work out to other labs to do that testing for them.

Okay. All right. Well, great. We covered a lot of territory there. I appreciate you guys hanging with us there. Thanks, Mark. Thanks, Shawn. Again, appreciate Quest participating in the conference. And hopefully, next year, we'll be doing this in person. So take care.

Thank you.

Thanks, A.J.