Good morning, ladies and gentlemen. Please welcome Shawn Bevec.
Thank you. Good morning, everyone. Welcome to Quest Diagnostics' 2018 investor meeting. My name is Shawn Bevec, Vice President of Investor Relations. Before we get going with the program this morning, we'll read through our safe harbor disclosure. The statements in the following presentations that are not historical facts may be forward-looking statements. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date 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 and 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, or strategic partners, and other factors discussed in the company's most recent filed annual report on Form 10-K and in the company's subsequently filed quarterly reports on Form 10-Q and current reports on Form 8-K, including those discussed in the Business Risk Factors, Cautionary Factors That May Affect Future Results, and Management's Discussion and Analysis of Financial Condition and Results of Operations sections of those reports. With that aside, let me briefly run through our agenda for this morning. First, you will hear from Steve and Mark, who will provide some perspectives on our financial outlook as well as our two-point strategy.
We'll follow that with the first of two Q&A sessions. Then we'll have a 20-minute break. After coming back from the break, you'll hear from a number of Quest Diagnostics senior management team, who'll provide more color and detail on our two-point strategy. Then we'll end the morning with a final Q&A session. With that, I'd like to invite Steve Rusckowski, our Chairman, President, and CEO, to the stage.
Thanks, Shawn, good morning, everyone. Thanks for joining us, we're excited to be in front of you to share with you the plans we have for the future. We've got a good morning for you. Hope you had an opportunity to see some of the demos outside. If you haven't done that already, please do that at break. They're pretty exciting, we'll speak to some of that in our presentation. You'll hear this morning an update on our two-point strategy. We've been working on growth, we've been working on operational excellence. With that, you'll hear about all the different capabilities we have and also what we've been executing. You'll hear about what we've done well and also where we stumbled. Second is we will also share the opportunities we see in front of us. Clearly, access is a big change for us.
We see an opportunity to consolidate in a very fragmented marketplace, we actually have a brand that is second to none. You put that together, we believe that we can grow the top line and the bottom line going forward. Then finally, we just updated last night our outlook for the future. For the next 4 years, we believe we can grow 3%-5% and grow our earnings mid-single digits. You'll be hearing some of the depth from the team in a few minutes. They'll take you through a lot of the detail, Mark and I will do the beginning of that. Before they get up, I'd like to share a couple facts, it's really important to say what's changed going forward. One of the big things that has changed is access.
We have not had as good access with our relationships with our healthcare insurance partners for over a decade. We're picking up over 40 million lives. That is a fundamentally big change for us as we enter 2019. Point number 2 is this marketplace is going through fundamental change, I would say healthcare overall, specifically when we talk about the lab marketplace, that affords us an opportunity to consolidate as the leader. Those of you that have followed us or have invested with us in the past know that one of our strategies is to buy about 1%-2% of consolidation growth over the past. We've done that. We're north of that this year, we plan on being north of that going forward.
What we shared in the note last night is, in fact, we do see an opportunity to be greater than 2% going forward with consolidation opportunities, our pipeline's never been richer. Those two facts alone actually gives us confidence why we believe the earnings and the top line can grow. With that said, we have just announced a guidance change for 2018. We intentionally did that last night, you had time to digest it. What we'd like to do is go through the numbers, Mark will do that with you. We'll clear the 2018 topic. We'll talk about our future projections. I will talk about where we are with our executing our strategy, Mark and I will do a question and answer. With that, Mark, why don't you come up?
Thanks, Steve. I'll start out with what we said two years ago. We told you that we believed we could grow our revenue at a compound growth rate from 2017 to 2020 at 3%-5% and to grow our earnings, not our earnings per share, at mid to high single digits.
What we've done on the revenue side is missed on the low side. When you look at that CAGR to get to the low end of the 3 to 5, it's about $75 million. Clearly, it's driven by our performance this year. If you look at the recent guidance revision, about two-thirds of that is related to the change that we just made, I'll address that in just a minute. On the earnings side, we've grown at greater than 11%. We did benefit significantly from tax reform, although, as we shared with you, we took some of that benefit, and we reinvested in the business in some things that are critical to growing our future. A lot of the things you're going to be hearing later this morning are, in fact, those things that we've been investing in to position ourselves even stronger going forward.
On the revenue side, earnings, obviously, a part of that is continued underperformance in volume. Some of that certainly was driven by the things we mentioned, acts of nature that beyond our control. These things do happen periodically. We had entered this year thinking we'd have a relatively easy comp given the hurricanes last year. When you look at the storms in January this year, off to a rough start, as we got into the fourth quarter, certainly some other events. There is some volume softness beyond that. It's not all explained by these acts of nature. There's the item we referenced, which is around our receivables, I want to take a couple of minutes to walk through that. Our revenue accruals is a very complicated process.
As you may or may not be aware, what we do is when we bill the payers, that is the trigger for our revenue, at that point in time, we have to make assumptions around a number of things. Those assumptions are based on history obviously some updated information around payer mix price and so on. Some of those key assumptions involve things that may change over time. It's around, what is the rate of denials? When we do get denied, do we have the right to bill the patient, or is that just a free test? When a claim is adjudicated will be paid, will it be paid by the payer? Will it be paid by the patient? A lot of complexity.
There's also the fact that with some of our payers, they don't always give us up-to-date membership lists, so there's times when we're billing thinking somebody's in one plan or they're in a fee-for-service plan, they're in a CAP plan, or they're in a different plan. There's a lot of complexity. How do we manage that? Well, what we do on a regular basis every month is we do a look back, and we say, "Okay, here's the revenue that we recorded based on expectations, and how is the cash coming in in support of that?" This is, as I said, a regular process we do every month, and this is a process that has worked for years and years and years. There's always some adjustments.
There's times when you look at that and you say, "Hey, looks like we need to bring the revenue down a little bit based on where cash is flowing." There's times when, "Hey, looks like we can bring the revenue up a little bit based on how cash is flowing." This is the process that we use. Let's go to the third quarter. At that point, as you saw and as I acknowledged, our DSOs were up year-over-year. I said at that point, I don't think there's any reason to be concerned. There were a number of drivers for that. One was in the month of September, we had fewer bank deposit days than we had the previous year.
We said, "Okay, that I think explains some of it." The other one was, as I mentioned, we are going through a system conversion in one of our regional labs, tends to delay billing. Of course, we had confidence that not only those bills are going to get out, but they're going to be paid. We're going to collect on that. We still have confidence. However, as you go through time, and we go through our rigor, and we look at this cash collection versus what's been booked, if the cash is not coming in, at some point, it's almost a mechanical exercise where you say, "Hey, even though I may still get some of this cash, the process that we use dictates at this point that we need to increase our reserves." As we moved into October, we had very strong cash.
In fact, I can tell you that since the end of the third quarter, one of the days was the highest cash collection day we've ever had in the history of the company. There were reasons to be encouraged. However, as we got into late October and we got into November, things leveled off a little bit. We went through October close process.
We said, "Okay, looks like we might have a little more risk here than we thought." As we progressed towards this Investor Day, we said, "There's enough risk that I feel an obligation and appropriate that I would, at this point, convey something to the community because we're out here on the Investor Day." If it were not for the Investor Day, we wouldn't be talking about this right now because ideally, we would have until the end of the year to look at this, and this is part of our normal process. That's how we ended up with this receivable reserve item, and I can tell you that we've been very thoughtful because this could have a fair amount of variability about it.
When we gave you the earnings guidance, we intentionally gave you a floor and said, "At least," because we want to make sure absolutely there's not a scenario where it's going to be another negative surprise. Of course, our expectations are that we're going to do better than that. Until we get to the end of the year, we don't know for sure because the process is dependent on what happens with our cash collections going forward. I can also tell you that based on what we looked at, we've also reflected that in our forward-going revenue accruals. It's not just, hey, your receivables might have an issue, but also as we're recording revenue going forward, we're also reflecting this, what could be a change.
We're going to have an opportunity to take more questions at the end of this time, and also at the end of the total session. If I haven't answered everything completely, happy to talk more about it, but I did want to spend a couple minutes on that before I jumped into the forward-looking outlook. The really strong thing about Quest is our ability to generate cash. When you look at. Since 2012, we've generated more than $8 billion of cash. Although we made a commitment to return a majority of our free cash flow to our shareholders, as you can see, we're still investing in the business. When you look at that $8 billion, a little bit less than half is deployed investing in the company, $2 billion of that through M&A, a little less than $2 billion in CapEx.
Despite that, not only have we delivered more than half of our free cash flow, we've actually delivered more than half the cash we've generated to our shareholders between the dividends and share repurchases. If you look over time, since we first rolled out this capital strategy in 2012 at our Investor Day, here's a bar graph that shows you the free cash flow and what dividends and buybacks have contributed in terms of returns. There's been $2.6 billion in buybacks over that period of time. We still have an authorization of a little less than $800 million. Importantly, because of our confidence in our cash and where we stand today, we announced last night with our release a 6% increase to $2.12 annually. With our current share price, that's greater than a 2% yield.
We consider a dividend to be a much stronger commitment to our shareholders versus other opportunities to give cash back. Quite frankly, another reason for that dividend is showing a confidence in our ability to continue to generate that high level of cash. This is our eighth increase since 2011. Again, here are the percentages. You can see that every year we've met our commitment, and we're projected to meet that this year in terms of a majority, which means more than 50%. You can see we had some years like 2013 and 2016, which benefited from some asset divestitures, so we were able to deliver even more than the cash that was generated from our ongoing operations. Again, just quickly, here's the dividend growth scenario since 2011.
You can see we've delivered about a 27% compound annual growth rate in our dividend increase since 2011. Again, continue to deliver that cash in a very regular basis. As our earnings and our revenue are growing directionally, we're increasing our dividend. I'm going to take a couple of minutes to talk about PAMA again, since obviously that's an important driver in the next several years for our business, and obviously has been this year as well. When you look at the estimated amount that's paid off the Clinical Laboratory Fee Schedule, again, that's the part of Medicare for labs that's impacted by PAMA, it's at around $7 billion. You look at over the three years, there's about $2 billion in potential cuts if it moves forward as it's currently been implemented.
The impact to Quest, as we've shared before, and this is a slide we've shown previously, is about $200 million over that period of time. Again, this year, we did not take the full 10% cut for the reasons we talked about. It had to do with a lot of the MACs. We're not at the NLA rate. They were actually below. When the NLA came down, there was not a full 10% change. I think the most important piece was that they started paying the chemistry panels appropriately. Historically, and that's a large part of our billings to Medicare is if you added analytes, you were almost getting paid nothing for each additional analyte. Now they've put in a process that actually pays NLA.
Initially in the first year, you actually get a lift, over time, those chemistry panels will go down with the cuts proportionally in the future. That's why we're back to the 10% in the next two years in terms of our projections. We've also talked about PAMA. Well, obviously, it's a challenge for us at Quest. It also presents an opportunity in terms of it being a catalyst for consolidation. In fact, I want to take you through some numbers here that shows that PAMA is disproportionately impacting the smaller labs, including the hospital outreach businesses. If you look at our best estimate of the discretely reimbursed laboratory services segment, last time we talked to you, we estimated about $50 billion. We think it's probably $52 billion now. A reasonable estimate for the industry EBITDA is somewhere around 10%.
There are some players such as Quest and other large labs that do better. If you look at, in general, the POLs, you look at hospital outreach, you look at some of the smaller labs, they're single digits. Probably a reasonable estimate, 10%, which gives you about $5 billion of industry EBITDA. You look at the cuts. First off, that EBITDA is split about 60/40 between the national labs and everybody else. However, the cuts are going to be 80/20 because if you look at the publicly available data on billings to CMS, you see that the national labs represent less than 20% of that volume. If you take that $2 billion approximate cut over the next three years, about $1.6 billion of it's going to go to all the smaller operations.
For all intents and purposes, it's going to wipe out the profit of the rest of the industry. As people are waking up to this, both they're getting on board more actively with the lobbying effort, but they're also realizing that it may be time to exit. It's not happening as quickly as many of us would have anticipated, but certainly, this is starting to give some traction to consolidation. As we get further into PAMA, if we're not able to fix it certainly will continue to accelerate the interest in consolidation. Importantly, we're positioned extremely well if and when that happens, which we expect.
When you look at our ability to do acquisitions, in our current level of business, we generate about $300 million more than we need for our internal CapEx, for our dividends, and the minimal level of share repurchases we need to do to meet our commitment. You then add on top of that the ability to lever up because we're relatively unlevered right now. Again, this is not precise, but directionally, you go up to maybe a three and a half times leverage level. We do value our investment-grade rating and in conversations with the rating agencies and of course, everything comes down to specifics. We feel this is reasonable. We could lever up as much for a short period of time to about three and a half without putting that investment rating at risk. Of course, we're buying EBITDA.
We're not buying a pipeline, we're not buying an early-stage technology. If you consider a 10, which is higher than actually we usually pay, but just for illustrative purposes, that says we'd have another $1.6 billion. That gives us about $4 billion of dry powder to do acquisitions. We've been able to do the 1%-2% that we've talked about as our target historically, and what we've executed, obviously above that 2% more recently with our operating cash flow. That shows you, given the opportunity of value creating M&A, we certainly have the ability to execute quite a bit more. I wanted to do a quick refresher on a slide that I did in 2016, just to remind everybody, and I know some of you are new to the story. How does this work with hospital outreach?
Here's an illustrative example of a hospital that have 1 million requisitions of volume a year. As we share their revenue per requisition is typically higher than ours, driven by the commercial rates that they enjoy. $75 here, $75 million of revenue. Despite that very rich value per requisition, as I mentioned, their operating margins typically are single digits if they're making money at all on their outreach business. A little less than $3.8 million in operating income. In this case, let's say we buy that outreach business for $80 million. How we do our modeling is we build in some level of attrition. If you look at the left-hand bars, in this case, I'm building in 10% attrition rate.
We certainly don't experience anywhere near that, but in order to ensure we have a path with some wiggle room for value creation, we build in a conservative level of attrition in our pro forma models. You can see I've now reflected a much lower revenue per requisition of $45, which is typically what we experience on our total portfolio and mix. There are significant revenue dyssynergies when we do this kind of acquisition. Despite those revenue dyssynergies, we are able to generate a much higher margin than they were because of the economies of scale in this business. Basically, we take that business and we plug it in and pretty much have a similar level of operating margin to what we have our core business. It's just going into our core laboratory. It's our same logistics drivers.
We're buying all the reagents off the same reagent contracts that we do for our same business. We consolidate the draw centers, if they have draw centers, then importantly, we do a better job of collecting the revenue, have a much lower level of patient concessions than a typical hospital. All of those are positive synergies that significantly more than offset the revenue dyssynergies. This is a win-win, because quite frankly, as we talk to hospitals, their outreach business is not a competitive differentiator for them. This is an ability for them to monetize that, invest in something that may differentiate them in the marketplace. Patients are better, payers are better, employers who are paying the bills better, and obviously, for Quest Diagnostics, it's a good deal. A couple other aspects of outreach that are important to note. This is a partnership.
This is not an arm's length transaction where they optimize whatever the price is. Of course, they want to try to do that. They understand that when they sell to a third party, they have to live with that lab. If they're owned and affiliated physicians perhaps, or other people who are within their geographical area that they're serving are now getting their labs done by somebody to whom they've sold their business, they have to be confident that that work is done well, that it's done in a quality fashion. Therefore, this is not an arm's length transaction where there's a bidding war. I think some people have asked in the past, "how do these work?" Are there people always at the table competing with each other?
I can tell you that we don't do these transactions as the highest bidder, unless there are situations where it's absolutely worth a lot more to us. That gets to my second bullet here, which is the cost synergies are the driver of the value creation here. Therefore, depending on where that business is, different potential buyers are going to have different cost synergies. Typically, when there is a process where something's being sold, very quickly it emerges which potential buyer can create a lot more value through those cost synergies than somebody else. In those cases, we might offer a higher price, because we can still meet our economic requirements, create a lot of value, because there's a lot of value creation in those cost synergies. We do include a non-compete. Obviously, we comply with the state laws in which we're doing the purchase.
It's an opportunity to do more. As you saw with PeaceHealth, involved more than buying their outreach. It also involved a PLS deal. Also in PeaceHealth's case, we're also doing the reference work for them. Really, as part of our strategy, which we hear more about this morning, really building these strong partnerships. These transactions are a lot more strategic than just buying their outreach business. The last bullet, maybe the most important one now, which is that can reduce costs for health plans and expand access.
In our conversations, and I'll touch more on this in just a minute, with health plans, the fact that when we buy an outreach, right away it saves them a ton of money, is a basis for talking about how do we then accelerate that, and how do we share in some of that, and how do we maybe make it easier for us to do some of these transactions because it's good for you, health payer, employer in the area, et cetera, not just good for Quest. There is some economic value in working together on some of these things, because there's a ton of savings to the system when we buy this from a high-priced hospital. Obviously, reimbursement pressure is an important topic right now. I just want to touch on it, kind of to paint expectations going forward for the next couple of years.
Obviously, this year we've got the first year of PAMA. We've got kind of this core level of price that we've had for a number of years pre-PAMA. Importantly, it's not all from third-party health plans. In fact, as we've been talking about more lately, a portion of this comes from what we call client bill. It's where we're doing business directly to hospitals for their reference business. It's where in the states that it's permitted, where a physician sets themselves up in a markup situation where they're billing the third party, we're doing the work for them, and we're actually billing the physician directly. There is a fair amount of price competition in those client bill areas, and actually in the hospital space, as you're going to hear later, that's probably accelerating. Going forward, obviously this year is the peak.
We've got a high level of PAMA, both in terms of a percentage and in absolute dollars, because as you saw, reimbursement, we get Clinical Laboratory Fee Schedule starts here. You cut it by 10%, you're cutting 10% off 90%, you're cutting 10% off 82%, et cetera. The dollar change year-over-year, even though the percentage change is consistent the next couple of years, is actually less. This is a year which is absolutely a good thing, a great thing for the company, you're going to hear a lot about health plan access in the first year because we're going from out-of-network higher rates to in-network. There's a significant price cut. Obviously, we are fully committed and confident we're going to deliver significant volume to offset that price, but it is a price hit in the current year.
When you go forward to 2020, PAMA will be slightly lower because of the math that I just walked through. The health plan access, for all intents and purposes, goes away. That's mostly a one-year phenomenon. That core level may or may not. You've seen it bounce around somewhere between 50 and 100 basis points. Depending on the circumstances and situation and the competitive environment, we're confident it's not going to be over that 100 basis points. There's certainly some opportunity and expectation and desire to make it even lower. When you go to 2021, again, we don't know because there's another collection period on PAMA.
If you look at the data where it stands today, if there's not significant different prices in the next collection period, which one would not expect if they use the same process that there should be, because you're talking about millions of data points and a weighted volume median, it's hard to move that a lot. There's a little bit of a tail in PAMA in 2021, but nowhere near as large as what we're incurring in '19 and '20. PAMA should be less. Obviously, the health plan access piece is gone. As we continue to strengthen our value proposition way beyond price, our expectation is that we're going to do better and better on the pricing end across all of our business. Like all businesses, we've got a handful of tailwinds and headwinds. I want to talk about the major tailwinds being reimbursement pressure.
Certainly every year, we have some level of SWB inflation. To answer the question, I'm sure people mind, at this point, we're not experiencing anything extraordinary there. You have your typical type of inflation year-over-year. On the tailwinds, you're going to hear a lot about the opportunity with health plan access, I'm not going to spend much time on it other than to say this, as I've said before, is not just a hunting license. This is truly moving to a partnership. We get asked all the time, I asked myself when I started in this business, "Why is this market not more rational? Why is there not more volume in the better value areas?" In that case, the national labs.
When you look across the stakeholders between the patient, the physician, the payer, and ultimately, in most cases, the employer who's paying the bill, there's not been everything necessary to drive that. You're going to hear the fact that for each of those stakeholders, transparency is improving. It's going to continue to improve. There's a lot of things we're doing, and we're working with the payers. You're going to hear about tools. They're important so that you can execute against the decision you want to make and feel confident with it. Finally, economics. To make the economics clear and even more compelling. When you have that transparency, the tools, and the economics across all those stakeholders, that's what is really going to make the difference. M&A, you notice we moved that up from 1% to 2%.
That's based on our recent history and looking at our pipeline and our confidence that we should be able to do at least 200 basis points on a CAGR over the next several years. That is without any assumption about a major move driven by PAMA in terms of consolidation. We've been able to do that plus 2% recently without getting much traction yet from PAMA. Then, of course, Invigorate. Jim's going to spend a fair amount of time, share a lot of really good detail on work that we're doing. We have a track record of six years of driving tremendous productivity. Again, this is cost and quality going hand-in-hand, not just cutting cost. We have voiced recently a high level of confidence that we can drive best-in-class 3% or so productivity every year.
Jim will share you some detail to also help you understand where those opportunities still are and give you the confidence that that will continue to be a critical lever in our ability to offset some of the pricing headwinds and obviously the annual inflation we have in our wage bill. As we've put on our press release, if you're looking forward, we still feel that a 3%-5% CAGR over the next four years is something that's achievable. The important thing for me to share is that not all this is coming from our core laboratory testing. As you look forward, and you're going to hear a fair amount of detail later about some of these growth opportunities, some of these adjacencies are going to contribute more to our growth.
This is not just taking a business that's been growing in an industry that's been growing in low single digits and gaining a ton of share or even through consolidation through M&A. This is actually growing businesses around our consumer opportunities. Our data will be a big driver. You're going to hear about our clinical trials offering, and you may have seen the demo out there. There's opportunity for some of our smaller businesses that are in their infancy to have very high growth rates over the next couple of years, which are going to supplement the core business that obviously, as we've gotten new access, we also expect to do better. I just wanted to make sure you understand this is not just taking our core laboratory testing business growing to 3%-5%.
We also have these other growth opportunities that are going to contribute as well. I already mentioned the acquisition of at least 200 basis points on a CAGR basis. That would put your organic at 1%-3%. We are committed to growing earnings, not earnings per share. I don't have any assumption about a high level of share buybacks to supplement our EPS. That decision will be made as it always has been, which is situational. What's the best way of deploying the cash that we're generating? We believe in the 4%-6% range, what would be faster than our top line growth, and then very importantly, we would expect our free cash flow to grow commensurate with our earnings growth. In closing, I'd ask your key takeaways to be, we will grow our earnings and revenue in 2019. I am not giving guidance today.
What I will address is the question, okay, this change you're making in 2018, what does that mean for 2019? Other than we're jumping off a lower point, nothing. This is a within-period adjustment that we're estimating at this point in time. It's nothing that's going to be a carryover, but we will be entering 2019 at a lower point than maybe we expected previously. There are certainly structural changes coming to this industry that are a great opportunity to accelerate consolidation and for us to gain share. Our really strong cash flow and flexible balance sheet give us the opportunity to take advantage of that. We will continue with our same capital allocation strategy that Steve rolled out back in 2012 to return the majority of our free cash flow to our shareholders. With that said, I'd like to bring Steve back on the stage.
Steve?
Thank you, Mark. With that as the backdrop, I'd like to take you through what we've been working on, as I said, and give you some of the outline of our strategy that we believe supports why we believe we can grow the top line and bottom line of our business. Yes, we are the world's largest laboratory, but what we have talked about for many years is that we're actually in the business of diagnostic information services. That is our focus. Back six years ago, we focused the business around that. We actually divested from some businesses that were not related to that scope. We believe that puts us in a leadership position that's very focused.
It gives us the scale to be able to take advantage of the opportunities in the marketplace that I will speak to, and also it leverages, broadly defined, the innovation we have as a company. If you look at our presence in healthcare, it is remarkably impressive. We serve roughly 50% of providers in this country. That's both physicians as well as hospital systems. Second is we interface with every EMRs on the planet, the big ones like Epic or Cerner, but all the small home-growns as well. We have a growing presence with retailers, and we'll talk about this. We think the physical presence that we have is an important attribute that we bring forward. We serve one-third of adult Americans each year, and over the course of three years, it's about 50% of adult Americans.
It's an impressive number. The depth and reach of what we have in the delivery system in the U.S. is quite strong. We keep that data for over a decade. Over 40 billion data points that we use, we'll be talking later on today of how we use that data to help the challenges in healthcare. We do that with a system of over 6,000 patient access points, many of which are our Patient Service Centers. Finally, we have over 20,000 healthcare workers, 12,000 phlebotomists and 8,000 other healthcare workers. You think about that presence, which allows us to generate the $7.6 billion and continues to have us be a deep and rich player in healthcare. In 2012, what we talked about, given that backdrop, yes, we're the world's largest lab, but we're in the business of diagnostic information services.
What we need to do is make sure we apply all that content to the problems in healthcare. What it's all about is really empowering better health with diagnostic insight. It's not just about the data, it's doing something with it. When we do that, we believe that there's three things we can achieve. We can make a contribution by making a difference in healthcare. Second is we will build value for our shareholders, which we have done. Third is we have 45,000 people that work with us on this, and they're going to be more inspired. Two years ago in 2016, we updated our strategy, we said there's only two areas we want to be focused on.
First is the continuation of our growth track, second is we're going to continue our work to make sure we operate a better quality business. Quality in terms of medical quality, service, and efficiency. With that as the backdrop, we also guided our thoughts around three areas of our business to think about the portfolio we're managing and how that would help accelerate growth. If you see the Venn diagram, you see three categories of our business, the first being the largest. It's our general diagnostics business. This is the core of the business, if you think about an $8 billion business, it's a business that's about $6 billion in size that we believe will continue to grow and is very profitable. That affords us an opportunity to invest in two other faster-growing portions of our portfolio.
First, what we described two years ago, advanced diagnostics. We define the term advanced diagnostics. It's really our genetics and molecular business. Second is invest in using that data with related services, we describe it as diagnostic services, that deal with and help the challenges in healthcare. That portfolio change you'll hear described in more detail as we talk through the course of today. How have we done? Past three years, you see our stock performance here versus various indexes. You see our dearest competitor. Actually, if you look at the bar to the right, that includes healthcare insurance companies, that in aggregate was 59%. If you take out the healthcare insurance industry, interestingly enough, that number is 23%. You look at five years, total TSR, you see our performance here.
You look through all the different industries. Again, on the right, if you take out the healthcare insurance industry, our performance in that industry is about 67. Interesting comparisons. We have delivered value through what we've delivered so far. We are talking about the future today. We are a significant player, as I described earlier. It is an impressive leverage story. It is about 2% of healthcare cost is spent in our industry. It represents the majority of the information that is used for healthcare decision-making is made with the diagnostic information services. We can use that data for population health, which we will talk about today. We will use that data to help employers manage the health and wellness of their employees. More and more healthcare is going into the home. Finally, we will work with pharma on recruiting patients for their trials.
As I said in my introduction comments, we are a very unique place in this industry. I would argue there is catalyst now as we sit here today, as we enter 2019, that we have never seen before. Mark brought you through the impact of PAMA. There is two sides of PAMA. On one side, it is a price cut. We described the impact on our business because of it. He also, Mark just described, is the impact on the profitability of the industry. If you think about the industry, if you take out half the profit of any industry, you know there is got to be structural change. That has to benefit the leader. Quest Diagnostics is the leader in this industry. Second is we are going to spend a lot of time talking about the increased access.
Yes, we will have more and more lives that we can help get access to that allow us to grow and gain share. More importantly, the working relationships with healthcare insurance companies are changing. Matter of fact, UnitedHealthcare Group at their analyst day or their investor day here this week, now a very active partner of ours of moving the change. Finally, as all of us employers, self-insure employers, are passing more of the cost of healthcare to our employees, those employers are becoming smarter and wiser consumers. We are offering up what we believe is the best value proposition in our industry. That will benefit us going forward. You think about the market, we update this every two years. It is about an $82 billion market.
The majority is serving physicians, with a large portion of this market in the hospital marketplace, about 36% of the total marketplace. Strikingly, despite what everyone thinks, we only have 9% in the market. The opportunity is clearly to gain share. You peel back the onion, you look at just the physician portion of this marketplace. It is about 52%. We believe with PAMA, it is growing slower than we talked about two years ago, around 1%-2%. You see the independent laboratory is around 54%. Strikingly, you see that hospital outreach and physician office labs represents around 46% of the market. Quest has only 13%, despite being the leader. The most narrowly defined portion of this market, independent laboratories, despite what everyone thinks, that this is a duopoly, this is not a duopoly, this is a fragmented marketplace.
Ourselves and the nearest competitor have about 46% of the marketplace. This portion of the marketplace is growing slower because of more price pressure versus the pricing power that some of the hospital systems have with the payers. It is growing at low single-digit rate, primarily from two years ago with the changes of PAMA. Again, big opportunity for us to gain share. You put it together, what you have, and the primary portion of our conversation today will be centered on that physician portion of the marketplace, and we do believe it's growing low single-digit growth, and the opportunity is for us to gain share. Mark brought you through the numbers on PAMA. What I'll share with you is a few things. One is we're planning for the worst.
What you see in our outlook assumes the worst case for PAMA, and Mark brought you through those numbers. Second is we strongly believe that CMS did not implement it correctly, they came to the wrong conclusions by not looking at all the data. Third is we're continuing to work with Congress and work on fighting this to make sure we get a better approach that represents the marketplace. We continue to plan for the worst and obviously hope for the best. Payers are all over trying to understand what they could do to manage the growing healthcare dollar. This is a slide that shows you one of the biggest opportunities that we all have, which is to take out the variation in healthcare spending throughout the U.S.
If you look at the $3.5 trillion we spend in healthcare, roughly $500 billion is representing the variation, either by provider type or by geography. This data is coming from one of the largest healthcare insurance companies. Laboratories represent one of the biggest opportunities to drive out some of that variation, and therefore, it presents us with a big opportunity. To show you an example of that, this is actually data, not our data, it's data from Massachusetts. It's in a website that Massachusetts provides to their citizens. The reason why Massachusetts is doing this is to inform their citizens to be smarter shoppers. What you see here, this is the data actually from the website, is you see Quest Diagnostics, and let's take lipids, cholesterol testing. Our average commercial price is around $19.
In the hospital systems mentioned here, about two and a half times that number. Consumers are seeing this, employers are seeing this, and health plans are seeing this, particularly for their fully insured book. There's an opportunity as all of us become smarter shoppers in healthcare. Being the best value in our industry, we believe this is an opportunity for us to gain share and grow. You put it together, we have these three fundamental drivers, which we believe are catalysts for change. Again, that PAMA effect will help us accelerate, we believe, the consolidation that we see in the marketplace.
Second is the health plans now have realized after a decade of working on a different plan, that it is best to have a couple nationals in contract and to work more closely in a variety of ways we'll talk through in the course of the day to be able to drive more of the laboratory purchases to those larger providers. Finally, the smart shopper and the consumer will affect our business and will benefit Quest as one of the strongest value propositions in our market. With that portfolio overlay I talked about, there's five strategies we've been working on, and we're going to be taking you through each of the five. First is to continue to accelerate consolidating the marketplace. 1%-2% growth from acquisitions, we've delivered on that.
What we shared last night and we'll talk about today, because we actually believe there's an opportunity for us to get north of 2% going forward. Big opportunities for continuing to consolidate. Second is the relationships with health plans we'll speak to. It's very important, but equally the relationship with hospital systems, integrated delivery systems, is important, an important growth driver for us. We're taking dollars and investment dollars and moving it to the faster-growing portion of our portfolio, advanced diagnostics. Two years ago, we put in place a new leader for that, Carrie Eglinton Manner. She'll be presenting the progress we've made and the belief that there's a big opportunity for us to accelerate growth with being more successful in that business. You'll see outside, if you have an opportunity to see the demos, please do, that we have moved to become a much more consumer-oriented company.
Our vision is to be the most consumer-oriented laboratory on the planet. That has multiple aspects. We've made a lot of progress. Finally, as we have a tremendous amount of data, we're wrapping that around with services either that we create ourselves or we can acquire, and that affords us another nice growth opportunity outside of the core. You think about this together, the portfolio I described and those strategies, they all support each other. In our description this morning of what we're working on in our strategies, you'll hear about acquisitions, not just with hospital outreach with hospitals, but in advanced diagnostics. You'll hear about our consumer strategy, which benefits working with health plans, but also benefits our advanced diagnostics business. You'll hear about opportunities in data and services that benefits the hospital systems as well.
All of these are focused on that portfolio redirection that we're working in the company. Let's quickly go through each of the five. What have we bought over the last two years? We've laid out here on the graph. Yes, we've done a number of outreach businesses. As Mark has said, we believe there's a lot more opportunity in front of us. We have done, as you see here, about eight outreach businesses, actually one this week, and we're in California. Second is there's been a few regional acquisitions that we have done, basically one a year on about that path. We actually announced another one in Missouri this week, Boyce and Bynum. Finally, we're acquiring a number of capabilities, and those capabilities are primarily those of faster-growing areas of our business, and we'll speak to that today.
If you look at the last two years, we've invested about $1 billion in acquisitions. About 60% of that is actually on the right in building capabilities to accelerate growth. Balanced approach to what we acquire. As Mark said, we believe there's going to be more and more opportunities around consolidating this market, particularly as hospitals consider the changes that they see happening in the healthcare landscape. Access, I mentioned in my introductory notes, we've never had better access. We estimate 43 million lives. We've talked a lot about UnitedHealthcare, but you might have read that we're also back in network after a decade in New Jersey and Horizon. Big change. It's our home state. You take UnitedHealthcare, you take Horizon, we've got a great growth opportunity in the state of New Jersey.
Also this week, we announced we're back in network in Anthem, Georgia. Big change in access. That change in access provides us about a $4 billion opportunity, a $4 billion market opportunity, which we'll speak to today to accelerate growth and into growth. Hospitals. We all know hospital costs continue to go up. The reimbursement is going down. I spend a lot of my time talking to hospital CEOs and CFOs. Interestingly enough, we do believe there's an opportunity as they understand really what's happening with PAMA, because despite what one would think, they're starting to learn about PAMA as we speak, and that will provide us an opportunity for growth going forward, as well as it has in the last year or two. As we get into the discussions around integrated delivery systems, it's really talking about three areas.
One is how we can help them with their inpatient cost, how they become more efficient. Second is how we can help them with their more sophisticated work, much of which is advanced diagnostics. Finally, is do you really want to stay in this outreach business, which we can provide you the opportunity to monetize that asset. Advanced diagnostics. Again, two years ago, we described it in a different way in the marketplace. We think this is a great way of describing because that's where the growth is. We are large. We're the largest in the industry, about $1 billion of our business. We believe there's an opportunity to accelerate our growth. This is the future of healthcare.
Like most of healthcare, it does take some time as an industry to develop, but we're very well positioned, making investments, and we will accelerate growth. Our consumer strategy, tremendous progress. If you haven't had an opportunity to see the kiosk work and the ads we're bringing out periodically with our software. Gone are the days of the clipboards and the whiteboards and paper. We're bringing healthcare in this industry, and specifically Quest Diagnostics, into the digital age. That digital experience will be a differentiator for us. It is today, and increasingly be more going forward. As you think about and you see the investments it takes to do what we do, smaller operators in this space could not possibly do that. Physical access or presence with Safeway stores is doing quite well.
Our joint venture with Walmart continues to build, we're optimistic, there's more opportunities as well in front of us with other physical partners that can help us with the healthcare challenge. We introduced new products. We are a partner with Ancestry. You can again see outside our new direct-to-consumer product we just introduced in the past week. Finally, it's not just about products, it's not just about systems, not just about process, it's about people. We spent a lot of time as a company making sure the 45,000 people that work for us, and those touchpoints they have with our patients every day are on top of that relationship. The data and services opportunity.
Again, remember taking from the core investigative advanced diagnostics, supporting data and services provides us an opportunity to monetize that data, use it for population health, use it to help payers, healthcare insurance companies manage their quality scores, manage their payment mechanisms. That will take us outside of traditional care settings. It will take us into the home and allows us to work with pharma in a way that we've never worked before. The clinical trial product that we just introduced this fall, again, there's a demo outside, is a great example where we're using our data. Also another great example to Mark's point, there's a lot of opportunities for growth for us outside of the traditional laboratory marketplace that you always think about with Quest Diagnostics. We put it all together with that portfolio redirection, with the five strategies.
That's why we're confident we can continue to grow the top line and continue to grow the bottom line. Now, the second part of our strategy is equally important. We believe that accelerating growth and driving operational excellence comes hand in hand, this has served us very well over the last six years. It's not just about cost. I'm often asked the question, have you taken all the cost out? It's not just about taking cost out. It's about getting better. It's about getting better quality, it's getting better service levels, and it's becoming more productive. When Jim Davis gets up and brings you through the examples of what we have done already and what we can do going forward, you will get it why we have more opportunity in the future.
We believe we need that opportunity to offset some of those headwinds we have going forward. The four categories that we'll bring you through is payment, how we get paid from patients, and also equally how we get paid for healthcare insurance companies. We believe there's an opportunity to get better there. Second is the whole digital opportunity, broadly defined. We have made a lot of progress, but we have more opportunities in front of us. We still have an opportunity to drive consistency. By driving consistency, it gets rid of waste, allows us to shut down systems, streamline processes, and become more efficient. We'll take you through some examples where the opportunities still exist for us to automate. A lot of opportunities across our business to do that. When we do that, we will continue to optimize this enterprise.
With that, as you realize, we've been on this journey of becoming more and more productive. The specific program we've talked about in the past is Invigorate. As you recall, we had a $1.3 billion goal last year. We exceeded that goal. We're happy about that. More importantly, we believe there's opportunity for us to continue to become more productive. What we describe our goal now to be is 3% productivity on a cost basis for the future. For those that are running the numbers, our cost base is about $6 billion. 3% is roughly $200 million a year. What we'll do today is to bring you through concrete examples to give you reasons to believe that there's still opportunities in front of us.
There's tremendous opportunities for us to get better, that $200 million a year will help us reduce the reimbursement pressures, helps us reduce that wage bill pressure we see in our labor-based industry. It allows us to achieve what we're talking about with growth and growth in earnings. In summary, I'd like to leave you with five things to think about, and we'll be talking about this more today. Number one, the catalyst I described is affording us change because there's structural change going on in this industry that we've never seen before, it's an opportunity for us to consolidate. We are the market leader, we will be consolidating. We're so confident about that and our pipeline is so robust that we've increased our goal around acquisitions from 1%-2%, to north of 2%. That's number one.
Second is our access with healthcare insurance has never been better. 43 million lives, $4 billion worth of opportunity. We have access now with UnitedHealthcare, access now with Horizon, new access with Anthem Georgia. That's the best we've seen in over a decade. It starts in 2019. What you'll hear from Everett Cunningham is we're not waiting for 2019. We've got a good head start. Third is hospitals need our help. You work with hospital executives. They're all struggling. Costs are going up, payments going down. We have an opportunity for them to have Quest Diagnostics be your lab partner. We can help you with your costs. We can get you more effective with your sophisticated testing. Oh, by the way, do you really want to be in this outreach business given what's happening with the industry consolidation?
The brand is the strongest brand in our category, it's getting stronger every day. Consumers will demand from their physicians going forward, they want to work with Quest Diagnostics. One strong reason is we have increasingly the strongest value proposition on the planet, it's getting stronger. Finally, is we will take that core business, which is so strong and will continue to generate cash, and we're going to invest in the two platforms of growth, advanced diagnostics and diagnostic services that will help us accelerate growth. With that as a backdrop, I'd like to have Mark come back up and we'll take all your questions. Mark?
Start over here with Dan.
Yeah, just a quick question on the guidance update. Thank you. First question on the guidance update. Mark, can you bridge for us how much of the update on the revenue side is due to underlying volume weakness versus mother nature versus a change in assumptions around revenue accruals?
Yeah. Again, I can't give you precision because we're forecasting forward to the end of the year. With that caveat, a large portion of the revenue change and really the large driver between the earnings change is this receivable adjustment that I am anticipating. At this point, as I said, we don't know for sure. We don't know how large it is. We don't know if it's certain. A smaller piece is the volume. Then within that volume, I'd say a meaningful portion of the volume is from the things that we mentioned, but certainly not all of it. Because Dan, I'm projecting, even if I was wanting to share with precision, I'm guessing on some of those things are all going to move a little bit.
Certainly, we have estimates on what the acts of nature impact is, but we still track some of those in those regions and see did some of that recover and seem to come back. That's still a work in progress, especially the snow storm we had in the east.
Over here to Anne. Up here.
Thanks. In your long-term guidance, could you, especially for 2019, can you tell us what you assume for all this increased access with UNH and the New Jersey and Georgia plans?
Why don't you start, Mark?
We're not going to size it precisely through all the math. Obviously, we haven't given guidance on 2019. I think when we come out with our 2019 guidance, you'll be able to build the pieces because you certainly have some view towards the PAMA impact. We'll talk a little bit about kind of general market growth and then how we're going to accelerate our share through the access. We'll shed a lot more light on that when we give the guidance. As I'm sure you can imagine, the three to five is really enabled by significant opportunity, and Jim will size that opportunity, Jim and Everett in a minute. It's not just 2019. This is something that will give us a tailwind for multiple years.
Obviously, there's some things that we've anticipated will move quickly, there's some other opportunities to gain share that will take a little bit longer. The good news is this is a multi-year opportunity on access and that is what's going to enable us to get through some of the headwinds of PAMA.
Anne, as Mark said, we'll be going through a presentation here that will take you through kind of the detailed buildup of the opportunity. Taking that $4 billion and talking about, okay, how does that get played into the marketplace? We'll talk about how many physicians we've already called on, there's a big difference between those physicians that are already strong accounts and how quickly they will come on board. As Mark said, this is an opportunity for growth, not just for 2019, but for 2020 and beyond. Okay? We'll kind of go through that. We'll have another panel at the end, if there's any other questions about that, please come back to it. We think we give you a little more visibility to the opportunity in front of us and when.
Can I ask one more question on the long-term guidance?
Sure.
Obviously, the four to six is an earnings guidance and doesn't include share repurchase. I guess what would get it over the four to six? What's your outlook on share repurchase? Like in one year, what would make you do share repurchase versus another year? Is it M&A opportunity or lack thereof?
Yes. As you know, what we have shared in the past, and if you look at our historical track record, is in any given period of time, we don't sit on the cash. We would prefer to deploy it to M&A, but the M&A has to meet our financial criteria, which includes a metric around return on invested capital, or it includes a metric around NPV, typical things that you would look for. Our return on invested capital is significantly above our cost of capital. Therefore, as we look at those hurdle rates, we're very comfortable that we have enough cushion for executional risk, and we feel very confident before we move forward on a transaction that we have a path to value creation. We're not going to do deals for deal's sake.
There are certainly some historical periods of time where you looked, and we gave back most of the cash to our shareholders because we didn't have a deal that was a better way to deploy that cash. The question is, it's going to be situational. At this point, without knowing that and not being able to project that, our assumption is that our share count is flat through the next four years.
Move up front here to Jack.
Sure. Thank you. Just wanted to focus a little bit more on the reserve adjustment again. What was different about the look back this year versus prior years? I appreciate all the commentary around some of the considerations that went into it, but I guess just given the magnitude of the change, the $50 million, it seems significant when, I guess you look across the broader landscape, we're not seeing these significant shifts. What's different about this year than prior years?
Right. First off, at this point, the reserve adjustment that I am projecting in the updated guidance, which is not final, is not anywhere near $50 million. Okay, some of that revenue adjustment is driven by the volume softness that we referenced. What's different? More it's the timing. As I said, we do this look back regularly. What we also do in partnership with our audit partners is we do an annual look back. What we have done over the last couple of months is looked at 2017. We looked at the receivable balances at the end of 2017. We looked at the cash collections over the first several months of 2018 to justify that 2017 revenue was correct, the receivable balance was defensible, and it looks spot on. That's what we always do.
As we progress through this year, obviously, we continue to do that analysis. How is cash coming in? Is it supporting the receivables that we're establishing this year? The reality is that, for 2018 revenue, you're not really going to have a good idea of any note until the second quarter because of the lagging collection timing. At the end of the first quarter, the receivables you have at that point, depending on whether it's coming to patients, depending on whether it's coming to the payer, you're talking, yeah, from the payer in the next 30 days, but a lot of it's not going to be there maybe 90 days. Even within the payers, you're going to see Jim is going to walk you through some statistics. Our initial rate of denials is significantly higher than where we end up. We're always appealing, challenging.
There's administrative reasons for denials that we fix and all this kind of stuff. Even with the payers, it's not as if when you get paid, that you're going to get paid in those first 30 days. They can take some time for the appeals process. It's a long-winded way of saying, as you look at 2017, everything we've looked at, absolutely clean. As you look at 2018, you're really not going to see any sort of an issue emerging for quite a while. Now, we got to the end of the third quarter, we looked at the DSO, we said, "Hm." We went through our regular process. We did it in partnership with our external partners. We used the same methodology, we said, "Yeah, we're not going to overreact because we had fewer banking days." We have some things I shared.
We, for instance, are going through a lab standardization transition, one of our larger labs. We also have a number, and this happens periodically, a handful of payers who are recouping money, just deducting it out of the payments for things that they claim were overpayments in the past. A lot of the times, in this case, we looked at them and said, "They're wrong, and we're going to prevail, and we're going to challenge this." Okay, there's a $couple million bucks that we haven't gotten, but we're going to get that because they're wrong. We go through-- There's obviously some thinking and judgment in this as well, but we approach it in the same way. To answer your question, Jack, is why we didn't do anything sooner, because the methodology we used didn't dictate anything sooner.
As I shared in October, we were really encouraged because we're never quite sure because I don't have an AR system where here's a particular requisition claim. Okay, I've got an invoice, I get a receipt, I match those, and I see how I got paid. We don't have that system. Never have. Okay, it's more of a high-level macro. We assume that we sent $100 worth of bills to Aetna, we're going to get paid $80. Did we get $80? Versus the individual claim stuff. That's why it is a little bit of art, but again, it's tried and true. It's been years and years. We just did the look back at 2017. I don't think there's a major issue with the process.
With that said, because of this, trust me, we're going to look at it real hard, and we're going to make sure that if there are ways to improve it, we're going to find ways to make sure this doesn't happen. As I said, this is generally under the radar. Every month and certainly every quarter, things are moving up and down slightly based on this methodology. It's just that given the timing, the fact that we have this Investor Day, felt I had to come out and mention something without all the complete information. Obviously, given the potential magnitude, I'm saying potential because we don't know, and we wanted to protect ourselves against any more bad surprises that we need to look at this hard and make sure that certainly something like this doesn't happen again.
Yeah, on that, given my earlier comments around operational excellence. We're using this as an opportunity to look at the historic way that we've done it, and we're getting to the root cause of all the different ways that we collect, if you will, and thinking about, okay, how do we take it to the next step? The last thing we need to do, and the last thing we want to do, is what we just did. Okay? We're thinking about how we can get it even a step improvement beyond what we've done so far historically.
Great. Did just have one clarification. This is part of the baseline, correct? As we think about the jumping off point from a long-term forecast, we should assume the greater than $630 for EPS is the new level, not this wasn't one time, right?
Right. With that said, if we had had visibility to this, which we didn't for obvious reasons, then we certainly would have had an opportunity to adjust our cost structure. As we plan for 2019, and obviously we're well down that process, but we're not final, and especially given where we're going to end the year, we're going to look at it. I don't want you to think that somehow this is like, a permanent level of profitability and so on. Yeah, we're going to do what we need to do to have a plan that is acceptable to our stakeholders, that's deliverable and so on. Yes. We're going to be jumping off a lower point, but that doesn't mean that there aren't levers we can pull to make sure that what we put forward in 2019 and beyond is not something that succeeds.
We'll be evaluating the resources to deliver on our commitments.
Go next to Kevin.
Thank you. Could you guys give a little bit more color on the organic growth? I think you're calling for 1%-3% for 2019. A little bit more detail as to.
Sure
is that coming from price or volume, especially given the headwinds next year? On top of that, with the M&A accelerating to 2%-
Yeah
what are you guys really focused on, especially with the hospital outreach opportunities?
Yeah. Well, let me say this-
Just real quick. First off, the one to three is not 2019, Kevin. To be clear, it's a CAGR for the next four years-
Yeah
on the organic.
Yeah, let's talk about organic growth. First of all, we have the headwinds, there's no question we have more headwinds in 2018 than we had in the prior years because of the start of PAMA. You saw the numbers from Mark. We have headwinds in 2019. Remember, PAMA, if this is done correctly, will tail off. It's all market based, we actually believe they've overcorrected. When we've shared this as an industry, we believe that the essentially 30% cut is more than they should have done. We need to have the facts that they collect to support that. We're hopeful, as they go through the process with us, that that will be saying that after we get through 2020, PAMA's in back of us as a substantial change in the headwinds. That's headwinds for organic growth.
Second is, when we talked about 2018, we did have 3 test categories that we saw a change in the market. You remember, we've talked about this in earnings call. It remains the same, prescription drug monitoring around vitamin D and hepatitis C. That causes about 100 basis points of headwind this year. It's not insignificant. We were hopeful that we'd be able to deal with some of these issues with payment, with the healthcare insurance partners we have. We've made some progress, but not nearly enough. That was about 100 basis points. Second is, if you look at some of the other opportunities that we saw in our plan and why we thought we would continue to stay in that march of improving organic growth, I tell you, the hospital market for us is a good market. We're the market leader. We've got about $1 billion.
You'll hear it later on, what we're doing in the hospital market. We were growing. We were growing for two to three years, I could tell you in that marketplace in 2018, there's been a lot more competition. Mark referred to it, if you noticed in the price category, this client bill. It's not just all healthcare insurance companies. There's actually price competition with hospital clients as well. Frankly, we lost some business. Okay? We didn't expect to lose. Second is, part of losing that business was not all on price because there's some portions of our value proposition that we need to strengthen. We're actually building on that, okay, to go forward. If you look at that hospital play, we actually saw some insourcing of business that we didn't expect.
One big chunk was in our anatomic pathology business where surprisingly, a hospital system took in some of their business. Also part of the growth we see, and we are growing in this category, professional lab services is where we help hospitals become more efficient with the laboratory. We have a lot of deals, it's been hard for us to get it over the goal line. Okay? We expected more of those in 2018. They're still with us. They haven't gone away. They're taking longer to close. It's a story that we've shared before. What we're doing is getting more and more deals, okay? We'll hear it later on today what our ambition is for growth.
You wind the clock forward because that gives you a little bit of a backdrop of 2018, because to be credible, we have to describe why didn't we grow organically in 2018. In 2019, access is the biggest opportunity we have, we'll be talking to that. Clearly, it's a big opportunity. Second is our product or our testing categories is getting stronger every day. advanced diagnostics, Carrie will get up and speak about that. What we're doing with the consumer is an incredible growth opportunity for us. What we're doing outside of the traditional areas, because you always think about the basic laboratory testing and not necessarily advanced diagnostics, but equally what we're doing around data in services.
We do continue to see, in my takeaway slide, the opportunity for us to consolidate, for us to gain access and therefore gain share, and for us to continue to build growth for a variety of product lines that fit into those strategies that we're working. In aggregate, that's why we feel that we can continue to grow organically going forward.
Yeah, if I could just add, real quick, if I could add a couple of things to Steve's comment on PLS. We didn't announce it, we just signed a PLS deal in the last week. This deal, we were firmly convinced, was going to be done in the second quarter. Okay? We got into the third quarter, literally we thought we were within days of signing. For all sorts of reasons that we've struggled to understand, these things just slide and slide and slide, I can assure you it's not on our end. Okay? Yes, we're learning from this in terms of what we can count on and build, in the PLS example, it's growth that will come. We're going to get these deals signed. It's not things we've lost or something that's a lost opportunity.
It's just that they're taking incredibly long and in ways that are not fully explainable. We're just going to have to take that and be more conservative on what we're betting on these. The other one, Steve mentioned PAMA. I'll make a little stronger statement. It's not that we think they got it wrong, we know they got it wrong. Okay? We've got data that shows they got it wrong, and it was the way that they approached it. If you really look at the commercial rates across the full market, it should be substantially higher than the rate that they're targeting right now based on the data collection. It's not a supposition. We've seen enough data that we know with absolute definition that the price that they're targeting is way too low.
We'll go to Ricky and then we'll go to Patrick after that.
Couple of questions. First of all, on the receivables one, when I think about the things that are different between this year and last year and that are unique to you, is the fact that you did sign an agreement with Optum, right? To do the collections.
Sure.
When you look at what happened, when you look at the visibility that you have, what is the role of Optum360 and the change in the system to what we are seeing with collections?
Yeah. Well, let me start and then Mark will go through the details of this. First of all, what we did with Optum was outsource our billing operation. Essentially, Ricky, we're taking the resources and the systems and the processes that we used for years, and they're rebadged as Optum. Okay? Obviously, by working with Optum, we believe there's an opportunity for us to get better. That's part of the opportunity we see for patient concessions as well as denials, as well as the efficiency of our billing operation. What we are doing now, and Mark will specifically address this, there's nothing that we see here that has anything to do with that change. Okay? There's an opportunity because of who Optum is and what we believe and why we formed that relationship.
We're going to be working together to get smarter and get more intelligence of what we can do to get better at how we estimate revenues, understand those payment mechanisms with payers at a much more granular level than we ever have done historically.
Yeah, what Steve said is absolutely correct. This is not an issue with Optum. Remember we had Optum for the full year in 2017. As I just shared, everything was really in good shape. Optum provides us the information we need for us to accrue our revenue, and they certainly help us as we're driving improvement in the collectability, especially when patients, a lot of the things that you're going to hear later from Jim, really Optum is helping us to do a better job to proportionally collect those patient bills which drive vast majority of what used to be bad debt now is called patient concessions. The uncollectibility of a given bill that has been adjudicated and it's agreed that we are owed money, which is separate from denials and some of the mixed things and other things that make this even more complicated.
When we are agreement that we should get paid and that payment has to come from the patient, Optum is helping us to do a better job there.
One other question. The growth algorithm is really heavily dependent on acquisitions, at least in the near to midterm. Can you give us more details on the integration that you're doing?
You talk about the cost savings, what's the timeline? How long does it take-
Yeah
for you to see that opportunity? That's one. Second of all, and it is tied to the whole receivable issue. How many billing systems are you operating now? How many technology systems are you operating and how long does it take? The one thing when I saw that slide, while yes, it contributes to top line growth, it does raises the question of you're doing a lot in a very short period of time. Is there some capacity-
issue there? Not financial capacity, but just-
Sure
operational capacity.
Yeah.
How should we think about that, and how should we think about system integration?
Yeah. First of all, if you remember, I talked to you on that slide, and that's over the last two years. Roughly about 60% of the money we spent is on capability building. A lot of those assets that we've acquired have really nothing to do with this issue. Okay? If you think about what we bought with MedXM around our data and services business, completely different billing mechanism outside of what we discussed here. This is primarily centered around healthcare insurance in our core business, in our advanced diagnostics business. What we acquired with Provant in our wellness business, again, very different business. A lot of the capability assets that we've acquired really are not in this at all. It's the hospital outreach, and you asked the question about integration. We have enough capacity to continue to integrate many more.
Even though there's a lot of names on there, Ricky, they're not all that big. Okay? Marin is a good, what you'd traditionally call a tuck-in. The integration is very easy in the West Coast. This will be done in months, not years. Okay? They fold into quickly, we take the client base, we move their diagnostic testing catalog and directory into our domain, and then we take the cost out, and that affords the opportunity you saw with Mark. Okay? No, I understand what you're asking, but no, that is not a root cause of what might have caused a change. What Mark described is our process, which we are going to get better with. Unfortunately led to this right now within the period comment discussion. Again, we wouldn't be saying all this unless we had this day. Okay.
We would be working our way through this to see what the real number is at the end of the quarter.
Yeah. When we do an acquisition, we integrate the billing into our systems. We don't end up with a proliferation of billing systems through the acquisitions. To your point, Ricky, and I accept it, but I just want to remind people that in our previous outlook, we were talking 1%-2% from M&A and 3%-5%, so a midpoint of 150 basis points. Yes, it's an increase, but we're still at that 3%-5%, so it's a greater proportion, but it's not as if it's a hugely different number that we're anticipating from M&A. As we pointed out, that's what we've been doing, and we look at our pipeline and we're very confident. To your question about integration, when we do an outreach lab, it happens very quickly.
To Steve's point on something like a MarinHealth, it's almost overnight. There's not assets, there's not draw centers to shut down, things like that. It's basically you just direct the testing to Quest as opposed to the hospital that sold it, as if we had won that business organically. It's very simple and almost immediately the profitability of that business is the same as our core business. Some of the larger hospital outreach acquisitions we've done, it's a little more work. It takes a little longer. There are some synergies that need to be executed, and some of it could be staffing, some of it could be real estate and so on. Those generally happen within a year. The capability acquisitions, and I'm generalizing here, take a little bit longer.
A number of those come with a laboratory, when we buy a hospital outreach business, we're not buying a laboratory. They keep their laboratory. They keep it for their inpatient, outpatient. Even if we do a PLS partnership, it's still their laboratory. We're just helping them to run it. We're not buying something that we have to divest or shut down. Whereas in a number of these capability examples, we might have a location, an administrative center that we have to synergize into our business. Obviously, as I mentioned, we might have a laboratory. Those take a little bit longer to get to kind of their going rate of profitability.
Move over here to Patrick.
Yeah, thanks. Maybe just one more on the collection side. Just trying to, again, figure out some historical context on the shortfall. You guys have mentioned timing being the primary reason we're hearing about it a few times. I guess when you look back, has there been something of this magnitude in terms of a step down where intra-quarter you kind of felt, uh-oh, and then by the end of the quarter things normalized and it wasn't even really a blip on the radar? Just trying to figure that out. Also, if you have the granularity in terms of where the shortfall came from, is it more from the payer denials or ability to collect from patients?
Yeah. I don't have the granularity yet because it's being done at a macro level, and as I said, there's not even certainty around it. As you look at our methodology and the metrics, it would say, "Hey, your cash is not what it needs to be for you to be comfortable with your current level of receivables." You can walk through and say, "Okay, well, I know some of it is the way billing" There's a lot of things that we understand, but ultimately to not make some sort of an adjustment, I have to have absolute confidence that all that cash is going to come in. Just prudence says at some point, even though I believe I'm going to get that cash, at some point I've got to take a reserve, and that is our methodology.
At some point that cash may come in. However, it's lagging enough that our tried and true methodology says at this point, I have to assume that I'm not going to get that. I know that's not as precise an answer as you would like, but that's the way we do it. Obviously, if the cash does not come in, and we're not waiting until it happens, but obviously we're looking at that now, then we get to the granularity of figuring out, what was the change? I went back to my earlier explanation on how we do revenue. Was it a higher denial rate than was on the surface? Certainly when certain test categories are getting a high denial rate, we've shared in the past Anthem was denying part of our PDM, Cigna was denying vitamin D.
That is a large enough level of denials that it hits our radar quickly and we say, "Ooh," and we work to address it and we immediately make a decision to impact our revenue recognition, saying that this is a real issue that needs to be addressed. In other cases, you can just have a lot of small changes in denials. When you're talking about doing 150 million requisitions a year, you're talking about almost 40 million requisitions a quarter. When you're talking about $billions and $billions, all it takes is small changes in that macro assumption that can add up to material numbers. The good news is because we're looking at this all the time, it's worked. As I said, you look at 2017 and there's not any evidence that this didn't work exactly.
We got to figure out, okay, what happened this year, to your point. First I have to get to the end of the year and say, did something happen and what do we need to do to correct it? No, I've not had inter-quarter points where I looked and said, "Hey, it looks like we've got an issue of this magnitude." We've had inter-quarter both directions. I've had good guys too, inter-quarter that were not inconsequential based on this methodology.
Over here to Brian, then Mark.
Just a follow-up to that point, Mark. Why does this seem to be more company specific? Is there something more industry-wide that you're seeing with patient denials or payer denials? The second part is, I think in the past you've talked about kind of like building capabilities on
Benefit verification, right?
How does that play into the part where you talked about your patients who actually don't have coverage getting tests-
that you're running?
Yeah. On your question about company-specific and denials, as I said, this particular issue, I don't yet have it figured out, A, whether we have an issue, how large the issue is. I know there's the potential for the issue, and that's why we're projecting this. Don't know that it's all denials. I think, certainly, we've talked about denials in other areas. They are not Quest-specific. Vitamin D denials, Anthem's approach to PDM. Everybody's being impacted the same way. Those are not Quest-specific items. Also had some people we've been talking to the last couple of days, and I'm sure you know about this more than I do, as we were sharing some of our thoughts who said, "Yeah, a handful of hospital systems have also hit the receivables based on some payment issues." That would suggest it's not just a Quest issue.
Again, I don't have that data that came from some bankers we were talking to. On the collection and our continued efforts, we are collecting a greater proportion of patient responsibility. The issue is that we are getting more and more of our revenue from patients. Because this is separate from the denials, because we don't typically record the revenue. We certainly don't do it willfully. It's only we discover it after the fact. It's not a uncollectibility issue as it is with patients where we say, "Hey, the patient owes us. We know they should pay us." A majority of our uncollectibility comes from patients. We're getting better at that.
The problem is, because it's such an order of magnitude difference than the uncollectibility on all our sources of revenue, as you see a mix change to those patients, it creates a headwind. That's where Optum is really helping us to work on that, to offset that headwind, and we are making progress, but the problem is, we continue to see more and more of our revenue coming directly from patients.
Go over here to Mark, we'll do one more. We'll have another Q&A session at the end as well.
Great.
Mark.
Thanks. Mark, you showed a slide where you characterized 2019 as the peak of reimbursement pressure, that you expect reimbursement pressure to moderate a bit in 2020, moderate further in 2021. Under PAMA, we could see reimbursement cuts up to 15% per year under the new collection period. I guess I'm sort of not understanding the disconnect between cuts potentially getting worse and pressures moderating.
Yeah. Part of the pressure moderating had to do with the health plan access in 2019 that I showed you, where it's not just United, it's a couple places going from out-of-network at higher rates to in-network. Obviously, we're fully expected and committed to enough volume to offset those price headwinds, but that, for all intents and purposes, goes away after 2019. On PAMA, my comment was, if you look at the current data, okay? It says that the weighted volume median somewhere 63%-64%. You take 30% out of the first three years, says you've got another tail, okay? As I said, that could move, but the law of big numbers says that to move the weighted median in millions of data points, it's just not likely it's going to move dramatically.
I happen to know the commercial price changes for my business and therefore do not anticipate, certainly, we would be a driver of a large change in that calculation. We were a very large part of that database. That's why I want to caution, because we don't know how they're going to execute it, and that's the big wildcard. If you look at the data that was collected previously and you assume that they collect it similarly and that prices don't move materially, which I think is a fair assumption, then yeah, there's a tail in 2021. It's not going to be as large a change as you're seeing in the first couple of years. Then it should be largely behind us.
In that data that Mark referred to, because PAMA is all about getting paid by Medicare based upon market-based rights. We know that the PAMA cuts, which were initiated with the refresh of the clinical fee schedule last year and starting this year, we know they're going way beyond based upon the real data that should have been collected, and that's what we're working on, making sure we can get a better data collection process. You might have seen that CMS, in one of the latest turns of the regs, is now putting in a mechanism to get more hospital data in the data collection in 2019. That will be helpful, but we're not stopping there. We're appealing it in court. We're working with legislative solutions. We believe that the 30% went too far, and the data supports it.
One more from Dave over here, as I said, we'll have another Q&A session at the end as well.
I guess a two-part question. First, Steve, just on M&A and the pipeline.
Sure.
When you're out talking to folks, do most folks have a clue in terms of the incremental nature of PAMA, or do you think there's another kind of uh-oh moment coming for a lot of your competitors as you get into early 2019? Just the second part of the question, Mark, just on collections, just one final one. Is it fair to assume that same store, I guess, for lack of a better term, collections are flat or improving and the challenge is basically coming pretty much exclusively from mix shift towards growing patient responsibility.
Yeah. The first part of that question, I referred to on the slide here, Dave, is that I spend a fair percentage of my time talking to hospital CEOs and the CFOs of the C-suite about their lab strategy. Surprisingly, I showed it on the data, very few are actually aware of PAMA, but we are raising their visibility. When we bring it to the table, they immediately write it down. We talk about the opportunities because it's getting more and more tense with hospital systems to be able to pay the bills. We most often get that next conversation to start to work through this and say, "Why is that?" Well, they've got a lot of things on their plate. Laboratory is a piece of their operation. From the internal team, they're not going to make this visible, and it's the first year.
When we get into 2019, now it's not going to be just 10, it's going to be 20. It's going to be notable. We're making it very visible. The hospital association is becoming much more aware of it, and that's creating a catalyst for us to continue these conversations. Our funnel for prospects, both what we talk about with our hospital strategy as well as for acquisitions, through outreach continues to grow. You'll see later a distribution of all those systems. There's some chunky ones, as you see in any market, but there's a long tail. We're also putting in place a process to go after some of those smaller tuck-ins that are easy for us to integrate. We think those are actually, in some places, very good acquisitions, and that's part of the ambition around 2%.
The answer is yes. When you look at each of the sources of our cash and what we collect, our collection rate is either flat in the cases where it's already extremely high or improving, and it's the mix and obviously, because it's called patient concessions, but that's driving that patient concessions number up slightly higher. Again, we don't know precisely, but as we said, we suspect based on data that came from third parties that you saw an increase in the average deductible this year. We didn't see a dramatic increase in the number of people who had a high deductible plan, and that's what we had anticipated and built our assumptions on.
What hadn't been on our radar is, hey, the average deductible went up by several hundred dollars. Therefore, more people are actually bearing 100% of their healthcare costs, and that certainly has an impact on our business.
Thanks for your questions. Thank you, Steve and Mark. We're going to take a 20-minute break and come back, and we'll hear from the rest of the team. Please be back in your seats at just after 10 o'clock.
Do you believe that you can walk on water? Can you even see what you're fighting for? Blood lust in a holy war. Listen up, hear the patriot shout. Times are changing. In the end, the choice was clear. Take a shot in the face of fear. Fists up in the firing line. Times are changing. Oh, oh. Do you believe that you can walk on water? Oh, oh. Do you believe that you can win this fight tonight? Look at the sky, see a dying star. White lies with the man on fire. Making love with the devil hurts. Times are changing. A thin line, the whole truth. The far right, the left view. Breaking all those promises made. Times are changing. Oh, oh. Do you believe that you can walk on water? Oh, oh. Do you believe that you can win this fight tonight? Oh, oh.
Do you believe that you can walk on water? Oh, oh. Do you believe that you can win this fight tonight? Do you believe? Walk on water. Do you believe? Walk on water. Do you believe? Walk on water. Do you believe? Walk on water. Do you believe? Walk on water. Do you believe? Walk on water. Do you believe? Walk on water. Do you believe? Walk on water. Oh, oh. Do you believe that you can walk on water? Oh, oh. Do you believe that you can win this fight tonight? Do you believe? Walk on water. Do you believe that you can walk on water? Do you believe? Walk on water. Do you believe that you can win this fight tonight? Do you believe? Oh, oh. Walk on water. Do you believe?
You can find a lover motorcade. You can build a reason justify anything. You can earn your own way home walking down a lonesome road. I know one. Yeah, I know one. You know they said I won't, but you know I can. You know I can. You know I can. If you lost your love, you will find your truth. You'll find your truth when he calls for you. Oh. You can find an ocean filled deep. Remember in the moment ways to conquer our fears. You can build a masterpiece all based on symmetry. Everyone we got to move on. You know they said I won't, but you know I can. You know I can. You know I can. If you lost your love, then you'll find your truth. You'll find your truth when it call for you. Oh.
We're searching for a reason don't make sense of his life. Said the fool when he discovers something true. Look outside. Look outside. She's not calling. She's not calling. She's not calling. No, she's not calling. Not calling. You know I can. If you lost your love, you will find your truth. You'll find your truth when it calls for you. Oh, oh. Oh my, oh my, she's not coming home. She's not coming home. She's not coming home. I said, oh my, oh my, she's not coming home. She's not coming home. She's not coming home. Oh my, oh my, she's not coming home. She's not coming home. She's not. She's not. Oh, she's not coming home. She's not. Well, sometimes you need to be alone. It don't matter now. Shut the door, unplug the phone. It don't matter now. Speak in a language they don't know.
It don't matter now. Well, I don't think about that stuff. No, I don't think about that stuff. It don't matter now. Build a castle out of sand. It don't matter now. Well, it won't last, and it won't stand. It don't matter now. With a suitcase in your hand. It don't matter now. Well, I don't think about that stuff. No, I don't think about that stuff. It don't matter now. The bad men running your hometown. Surf your way on through the crowd. It don't matter now. Change your name, you won't be found. It don't matter now. Well, I don't think about that stuff. No, I don't think about that stuff. It don't matter now. It don't matter now. It don't matter now. It don't matter now. Oh, it don't matter now.
Not a soul up ahead and nothing behind. There's a desert in my blood and a storm in the rise. Am I the king of nothing at all? You're the queen of nothing at all? Well, I remember the fight and I forget the pain. I've got my hand in your pocket and my key on your chain. Am I the king of nothing at all? You're the queen of nothing at all? Oh, through the wilderness. You and I, we're walking through the emptiness. Oh, my heart is a mess, is it the only defense against the wilderness? Cross my heart and hope to die. Taking this one step at a time. I've got your back if you got mine. Oh. One foot in front of the other. Ooh. One foot in front of the other. Ooh. One foot in front of the other.
One foot in front of the other. Ooh, we got each other. One foot in front of the other. Not a soul on the road, not a star in the sky. It's a desert in my heart, I know where to hide. I'm the king of nothing at all, you're my queen of nothing at all. Well, out here in the dust, if you don't have trust, ain't nothing left to us. This is the exodus. They just testing us. They can't flex with us. They can't mess with us. They can't mess with us. Oh, through the wilderness. How come even together there can be loneliness? Oh, our heart's a mess, but it's our only defense to brave the wilderness. Cross my heart and hope to die. Taking this one step at a time. I got your back if you got mine. Oh.
One foot in front of the other. Ooh. One foot in front of the other. Oh, we have each other. One foot in front of the other. We're out here in the dust. Oh, wilderness. How come even together there can be loneliness? Oh, our hearts a mess, but it's our only defense to brave the wilderness. Cross my heart and hope to die. Taking this one step at a time. I got your back if you got mine. Oh. One foot in front of the other. Oh. One foot in front of the other. Oh. One foot in front of the other. Wilderness. One foot in front of the other. Oh, we have each other. One foot in front of the other. Oh. Oh, in the still calm and the scream. One foot in front of the other. Oh. Don't you know we're only begun?
I'm trying, I keep falling down. I cry out nothing comes now. I've given my all I know peace will come. I never wanted to need someone.
Ladies and gentlemen, please take your seats. The meeting will resume momentarily. Thank you.
I wanted to play tough. Thought I could do all this on my own. Even Superwoman sometimes need a Superman, so. Help me out of this hell. Your love lifts me up like helium. Your love lifts me up when I'm down, down. When I hit the ground, you're all I need. 'Cause your love lifts me up like helium. With every echo, I float towards the sun. I'm stronger 'cause you fill me up. When the fear comes and I drift towards the ground, I am lucky that you're around. Yeah, I wanted to play tough. Thought I could do all this on my own. Even Superwoman sometimes need a Superman, so. Help me out of this hell. Your love lifts me up like helium.
Ladies and gentlemen, please take your seats and silence your cell phones. The meeting is about to resume. Thank you.
Lifts me up when I'm down, down. When I hit the ground, you're all I need. 'Cause your love lifts me up like helium. Lifts me up like helium.
That's good.
You lift me up when I am down. You lift me up before I hit the ground. You lift me up when I am down, down. You lift me up before I hit the ground. You lift me up when I'm down, down. You lift me up before I hit the ground. Your love lifts me up like helium. Your love lifts me up when I'm down, down. When I hit the ground, you're all I need. 'Cause your love lifts me up like helium. Your love.
If you love somebody, better tell them why they're here 'cause they just may run away from you. You'll never know why, well, well, again, it just depends on how long of time is left for you. I've had the highest mountains. I've had the deepest rivers. You can have it all, but I'll keep moving.
I've been waiting to smile, hey. Been holding in for a while, hey. Take you with me if I can. Been dreaming of this since a child. I'm on top of the world. I've tried to cut these corners. Tried to take the easy way out. I kept on falling short of something. I could've gave up then but then again I couldn't have 'cause. I've traveled all this way for something. I take it in but don't look down. I'm on top of the world, hey. I'm on top of the world, hey. Waiting on this for a while now. Paying my dues to the dirt. I've been waiting to smile, hey. Been holding it in for a while, hey. Take you with me if I can. Been dreaming of this since a child. I'm on top of the world.
Ladies and gentlemen, please welcome back Shawn Bevec.
All right, guys, we're going to get going with the second half of our day or our morning. I would like to invite Jim Davis, Executive Vice President of General Diagnostics, and Everett Cunningham, Senior Vice President of Commercial, to the stage to kick us off for our next presentation.
Good morning, and welcome back. Everett and I are going to go into a little more detail on what Steve talked about this morning, namely, what is the opportunity from this health plan access? We talked about the hospital space as well, what are we doing to grow our share and continue to work with health systems around the country to help them run their laboratories more efficiently and, where possible, to partner with them or outright buy their outreach book of business? Let's focus on the health plans and the network access side first. Steve showed a chart earlier.
With UnitedHealthcare, with Anthem of Georgia, with Horizon, we now have access to 43 million lives that we previously did not have access to, or we had access to them, but we had to go try to get those lives on an out-of-network basis, which, as you know, can be very difficult. I heard the question earlier, how much of this are you going to capture in 2019? While I'm not going to specifically talk about 2019, what we show here on the right-hand side is this is our aspiration, and it's to capture about 25% share of those available lives and the lab work that is thrown off from those lives. Why 25%? How did we pick that? Well, that is our commercial share today when we look across the U.S.
When we talk about Aetna, other Anthem plans that were in network, the Blues plans, Cigna, Humana, on average, our share in markets across the U.S. is about 25%. That's the goal we set for ourselves over the 3-year period. We want to get 25% of those lives and the lab work associated with that. As we discussed, that's a $4 billion market opportunity that those 43 million lives account for that we previously haven't had great access to. If you do the math, at 25% of $4 billion, we expect to get about $1 billion worth of incremental business over the timeframe that we're talking about here this morning. In order to go get that lab work and find those lives, you start with, well, where are the lives? Where are they located today?
We know where the UnitedHealthcare lives are. They tell us. If you look at the states that I show here, California, Texas, Florida, New York, Georgia, and New Jersey, these 6 states, by the way, account for 40% of the lives in the United States, and they are the biggest states where UnitedHealthcare members and obviously Horizon here in New Jersey and Anthem in Georgia are. Let's take California. Our access in California before we got in network with UHC is 81%, and it's going up 10 points with UHC. Even without UHC, we already have the leading market position in California today. Even without UHC. We serve many of the doctors, and they simply peel off that UHC work that we're serving to other lab providers, and we're going to go capture that. Texas, the same thing.
Even without UHC, we have the leading market share position in the state of Texas today. We have a phenomenal presence in the Dallas, Houston, and Austin marketplace, and we're going to capitalize on that. Florida is even the strongest. Florida is probably the strongest market position that we have in this country. We have access to 82% of the lives. With UHC, it takes it up to 96%. Again, we believe our strong market position will allow us to capitalize on that. You can see the rest. In New York, obviously in Georgia, our presence has been small. If you're not in network with Anthem, if you're not in network with UHC, that just kind of leaves Cigna, Humana, Aetna. Our position there is significantly strengthened.
New Jersey without Horizon and without UHC, you can see our commercial presence is relatively small at 31%. It takes it up to 86%. We believe we've got a strong home field advantage here with our headquarters with a large laboratory in Teterboro, which I'll talk about what we're doing to evolve that here in the state of New Jersey. We believe with this kind of commercial presence already, with this kind of leading market position in 4 of these states, that we're going to capture a significant portion of that $4 billion opportunity that's in front of us. I'm going to turn it over to Everett right now.
He's going to get a little more tactical and talk about what do we have to do with physicians and patients to win it and get a little more tactical and show you where that work is and how we plan on grabbing it. Everett?
Thanks, Jim. Hey, good morning, everyone. I think it's important to know that when we went through the negotiations with the health plans, the health plans actually wanted us in-network. The reason is because it benefits the plan itself, it benefits patients, it benefits the members when they have actually access to a quality national lab like Quest Diagnostics. That strong partnership with the health plans was really, really important. Also, we need to have continued engagement with 3 major segments, employers, members or patients, and also physicians. I want to illustrate not only the engagement or partnerships that we currently have with them, but how we're taking that to the next level to give us the best opportunity to drive the number 1 growth opportunity that we've had in the last decade, more than a decade. First, let me start with employers.
The great thing is we already have great relationships with employers. You see there that we perform drug testing for more than two-thirds of the Fortune 500 companies in the world, which is great. We already have access to them, great partnerships with employers, and that really stands as the base in terms of us providing diagnostics work to their employees. Number 2, they want really good quality diagnostics, and they want that at an affordable price. How do we do that? Well, we actually have lab redirection programs. Not just redirecting the lab, but when we redirect it, you'll see that we are proven to save 30%-60% on outpatient lab claims. Again, high-quality laboratory work for affordable cost. Employers want to keep their employees healthy. They talk about, "You know what?
Let's not really focus on sick care, but let's focus on keeping our employees healthy." We are absolutely in the sweet spot when it comes to health and wellness. We're the largest health and wellness screening company in the U.S., and we actually screen more than 3 million patients annually. Again, the relationship that we have with employers to when they're going to move that work to Quest Diagnostics, we have really good relationships. Then around sick care. We want to move the cost curve when it comes to sick care. We need to make sure that we really focus on those disease states that are meaningful for employers. One example of that is around our colorectal cancer screening test. You'll see there our InSure ONE results in lower false positives and fewer unnecessary colonoscopies.
Employers really, really care about that when they can offer that in partnership with Quest Diagnostics to their employees. This is one important segment that we're going to focus on to take advantage of our new in-network status of more than 43 million lives that we have an opportunity for. Number two, patients. You've seen through walking outside in terms of patients are playing more of a role themselves in their healthcare. They're more accountable for their healthcare. Patients also care about when they work with a lab, they want convenient access. In the 50 states, there's not a better lab across the country that offers convenient access. Steve talked this morning about the 6,000 patient access points that we have. We have more than 2,100 patient service centers across the U.S., more than 4,300 in-office phlebotomists.
We talked about our innovative consumerism, where patients are in our partnership, our joint venture with Walmart, and also our partnerships with Safeways across the country. This means a lot for patients. They can step out of their door and they know Quest Diagnostics is right there. In addition to that, taking it to the next level, they want to make sure that they can get their test results at the palm of their hand. You'll hear throughout the day, my colleagues are going to explain how we're taking the digital enablement to the next level to where they can get test results, real-time adjudication right in the palm of their hand with their iPhone, which is fantastic. All of this, we're doing it with still offering an affordable price, which is very important to patients.
That last segment, just as important are those decision-makers that are saying, "You know what? I'm going to move my lab work to Quest Diagnostics." Why would they do that? Number one, we have to make it easy, and we are making it easy through our Quanum tools. Not only those Quanum tools, but it has to fit into their office flow. We get feedback all the time in terms of, "You know what? You're not disrupting my office flow, but your new innovative tools fit right in nicely." Simplicity. One of the difficulties of being out of network is physicians then have to actually pick and choose. "You know what? I want to choose a lab that's actually in-network." As Jim talked about across the country, now on average, we have 90% plus access across the country.
If you think about a physician, I actually think about my wife. My wife is actually a physician here in the city. She tells me, "My office is complex. I have patients that come in, they have Emblem, they have Aetna, they have Anthem, they have United, they have Cigna, they have Humana. You know what? The last thing I want to do is pick and choose." The great thing is we have the most comprehensive healthcare coverage in the last decade, which is fantastic. They don't have to pick and choose. They know that we're going to be in-network with the large percentage of their plans. What does that offer? It offers no hassle to patients. That's the last thing that physicians want is to hassle their patients.
This new in-network status, again, more access is fantastic and allows the physicians to come to us with ease. Lastly, my job is I go out and I call on customers. My team goes out and they call on customers all across the 50 states. When we call on customers big and large, individual physicians, health systems, what they say to us is, "We want to go to a lab when there's one-stop shopping." Quest Diagnostics, we have the most comprehensive test menu in the marketplace. From your general diagnostics to your most advanced testing, they don't have to pick and choose. They don't have to go to boutique labs. They can come to Quest Diagnostics. That comprehensive test menu means a lot for physicians, again, to move their work. Makes it easy on them.
Not only that, it's backed up by amazing medical expertise, we have physicians that cover the multitude of disease states to ensure that they're partnering with physicians. Lastly, they care about their patients. We have proactive communication, proactive training that goes out to physicians that really kind of completes that partnership. When there is a problem, we can make sure that we have timely problem resolution, which is important. As Steve said, we're not waiting for January 1st, 2019. We've actually started. We made the announcement with United back on May 24th at 9:00 A.M. in the morning, right after that our sales team and our entire company actually put a plan in place to ensure that we're calling on the right physicians, our right customers to start driving this growth opportunity. Let me break this down.
We have a strong line of sight as a company to our top 25,000 accounts, those accounts that are already doing work with Quest Diagnostics, in addition to having the highest opportunity for United. Let me break out the marketplace. There's about 300,000 accounts out there that kind of order laboratories work. Of the 300,000, 170,000 are actually active Quest accounts. To really focus our sales force, on May 24th, we pushed out 25,000 accounts across the country. Even breaking that 25,000 accounts even more, oh, by the way, the 25,000 accounts they have an opportunity of about $700 million in terms of United. Of the 25,000 accounts, 11,000 of those accounts are Quest loyalists. What do I mean by that?
They are sending us already the majority of their work. Throughout the years, they've signaled to us, "Once you get in-network with United, I'm going to send you the United work also." We're actually starting to see that work come in because of our focused targeting and calls. The other 14,000 accounts, they actually are Quest users, but we're finding that they split. They're mixed users. They send to multiple labs. They have a high opportunity for United to move that work over. We're also calling on those 14,000. Like I said, the 25,000 accounts represents about a $700 million opportunity. Here's the great thing. Since May 24th, we've called on 100% of these 25,000 accounts.
Also, we're averaging about five calls to these folks because we know that multiple calls, talking about our value proposition, talking about how we can differentiate in the marketplace is critically important. We're not going to stop there. There's another 40,000 accounts. We call these the medium accounts, kind of medium in terms of United opportunity, but they're critically important because they're still using Quest Diagnostics. They represent about $750 million. The longer-term accounts, another 20,000 accounts, represent about $300 million. I'm here to tell you that we have granular focus, a granular plan, really what I would call hyper-focus on the accounts that we're going to call on. I talked about those loyalist accounts. This is just a depiction. As you walk down the street, you see this all the time. The loyalist accounts are those doctors' offices that have that one box outside.
That's the green box, that Quest box. That's what we shoot for. The mixed users that I talked about, they kind of split their laboratory work. They'll have multiple boxes sitting outside. Our goal with our incredible in-network status now is to move our customers to the right. We feel really, really good, positive, and upbeat about the opportunity that we're going to drive. We have been driving, and we will drive come January 1st, 2019, with our in-network opportunity. Let me shift gears and talk about another growth opportunity for Quest Diagnostics, and that's around our hospital health system customers and marketplace. You know, as Steve said, we are continually calling on C-suites of health systems. As the market is consolidating in response to market forces and also what C-suites are thinking about is they're thinking about, "You know what?
I need to rethink the role that laboratory plays in my strategy." Why? Because decelerating revenues are being challenged by reimbursements. Mark kind of highlighted what PAMA is doing. They might not be thinking about it now, but trust me, it's hitting kind of their bottom line. Steady cost growth. In the laboratory space, I'm going to break it down on the next slide, laboratory costs are significant, and they're starting to see it. They're starting to think, "Do I really want to pay for all the personnel that's in the lab? Do I want to pay for all that lab equipment?" They're starting to think that. Then obviously all this is shrinking their margins. Let me break down the total cost of the hospital. On the left, hospital costs. 14% of those costs are outpatient.
Another 30% at the bottom is the inpatient, their inpatient costs, the kind of room and board. 56% of the hospital costs belong in the ancillary services, kind of ancillary departments. Let me break down the 56% because that's where lab sits. Of the ancillary department costs, laboratory costs are 12% of the 56%. If I break down the laboratory costs even more, kind of double-click on that, almost half are personnel or FTEs. Another 25% of that are supplies and reagents. Another 10% are equipment. Another 10% are what we call reference testing, and then another 10% are blood components. You'll see there that hospital lab now represents a significant cost center for the hospital, the C-suites, the CEOs, the CFOs, the COs are starting to say, "You know what?
Do I really want to incur this cost moving forward with the market force changes?" Here's the great thing. When they talk to Quest Diagnostics, they can have a lab strategy discussion. Why? Because of the breadth of what we have to offer. We've been out there having these discussions, and we've been very successful in the past, and we think that these opportunities are going to pick up. First, around lab reference testing. This is more the foundational. It's a $4 billion marketplace of where we are. Quest Diagnostics is the market leader. We do more than $1 billion in this space. Why? Because they come to us for that esoteric, that advanced diagnostics testing, and we do it very well. The next is around managing their costs. Again, do they really want to be in that lab space, or can we help them manage their lab?
It could be anywhere from full lab management, of which Jim will highlight in a second, we are doing those across the country, to maybe doing a supply chain. Because of our breadth, we actually can buy supplies at a better rate. That lab management cost optimization, that's more of a $30 billion space. Do we have a really big strategic partnership, high-level impact? A great example of this is around monetizing their outreach and doing an outreach acquisition, and Jim's going to break it down on how this has picked up over the years, and we think it's going to increase or around doing joint ventures, of which we have several joint ventures around the country that have proven to be beneficial to the hospital itself and also Quest Diagnostics.
To give this more color, I'm going to throw it back to Jim, and Jim's going to go through the three segments. Jim.
Thank you, Everett. Again, I'll walk through these three, the first one being this $4 billion, we call it a reference market. This is what hospitals send out. These are tests that they can't do in-house or have chosen not to do for cost or complexity reasons. The first question is, well, why do they choose Quest? You may recall from one of Steve's slides that over 50% of the U.S. hospitals have chosen us today. We do work for over 2,600 hospitals. When you bundle those hospitals by health systems, over 70% of health systems in the U.S. actually do business with us. It's really based on three things. One is our clinical leadership, two is the experience that we provide to hospitals, the third part is our advanced solutions.
On the first piece, the clinical leadership, we have the biggest, broadest, deepest test menu in the industry. I'm not here to brag about that, but in addition to this $1 billion, we also do another $100 million worth of business with other commercial reference labs. Labs like the Mayo Clinic, labs like ARUP, even LabCorp will send us some work now and then based on the test menu that we have. When you look at the tests that hospitals order from us, they're not the routine glucose, cholesterol types of tests. These are tests that are very sophisticated tests, and they're really tests that we've developed. These are called laboratory-developed tests. Many of these are in the infectious disease space. Many of these are in the cancer space. Those are really the 2 biggest categories of tests that are ordered by hospitals. Who develops those tests?
We have a lot of MDs and PhDs in the company, but about 50 of them are focused on really new product or new test development. We continue to expand our test menu each and every day. The second piece is the customer experience itself. When a hospital sends a test out to us, it's generally because they have a patient that is in a bed sick, or it could have come from an outpatient procedure that the hospital did. It's generally because there's a patient that's sick in the bed, they really want rapid turnaround time. With the location of our esoteric laboratories, we have four primary esoteric labs today, two in California, one in the middle of the country in Texas, and one on the East Coast in Chantilly, Virginia.
We can offer very rapid turnaround time based on our geographic location. Some of our competitors just have one major laboratory where they do all of this advanced testing. We have four, as a result of that, we can get pretty rapid turnaround times. We have a team of 200 dedicated customer service reps that just serve hospitals. That's it. They don't talk to physicians in the outpatient market. They just serve hospitals. These are not routine calls about where are my tasks, what are the results. These are very consultative types of calls where physicians will call us and look for recommendations on a specific test to run given the condition that they're dealing with the patient that is in the bed. Finally, we have about 35 genetic counselors.
When physicians or other genetic counselors in hospitals call us and they're looking for what type of test they may want to run given the, again, clinical condition of the patient, our genetic counselors are there both to help recommend the type of testing as well as help them interpret the results that come back from us. Finally, the last thing we're providing these health systems is benchmarking services and utilization management services. If you take a health system that may have 10 to 12 hospitals, 10 to 12 different ICU units. Very often, the person looking after those laboratories will call us and say, "Can you give us utilization reports?" They want to understand what their physicians are ordering in the ICU department, as an example, across the 11 institutions. Increasingly, we're providing recommendations to these folks. We see one doctor whose ordering patterns look either too high.
We may see another physician where the ordering patterns are too low, or we may be able to recommend to the lab director, if you switch from test A to test B, this could potentially save you money and also help the patient. That's that $4 billion reference market. The next piece is what we call our professional lab services. This was the $30 billion chunk in the middle on that previous slide. Hospitals spend about $30 billion to run their own hospital laboratories, both for inpatients as well as some of the outpatient work that they do.
Increasingly, as we've discussed in the past, we have a service that goes in and offers to help them run those laboratories better, and those could be consultative types of services all the way to we're going to go in and we're going to put Quest employees, Quest equipment, and outside the laboratory, in the four walls of that hospital, you'll see a Quest Diagnostics sign. Here's the range of services that we offer. Number one, we can just go in as a consultative type of process. We look at who they're using for their reference partners. We look at the prices that we're paying. Many times, we find these hospitals will be using 20 or 30 different types of laboratories, very boutique laboratories.
They have a hard time getting physician consensus over who they should use, we simply come in and try to provide them with what we think is the best recommendation on who they should use, also with some financial data that says if you're able to consolidate, you can save X dollars per year. The second piece is we're going to take a more active role in helping you run your laboratory. When we go in and look at the typical test menu in a hospital, if we look at 100% of that menu, what we find is about 70% of the tests absolutely need to stay right there in the four walls of the hospital to address the critical needs of their patients and the timely needs of those patients.
About 30% of the work that they're doing really shouldn't be done there based on a cost analysis. Remember, the laboratory is a cost center for these hospitals, so anything we can do to reduce their cost improves their profitability because they're paid on a DRG formula. They're trying to manage costs based on a fixed revenue that they're getting from the DRG formula. We optimize the test menu. We can bring them our purchasing contracts, so for reagents, supplies, and equipment, which is always going to be lower cost than what they can procure at. We'll bring automation. We'll bring our set of quality processes and metrics. Increasingly, we're having laboratories come to us and asking us to run the laboratory, not even so much for financial reasons, but because they've failed a CAP inspection. They're having quality problems.
They're having difficulty getting talent to run their laboratories. On the right-hand side, again, these advanced data solutions, whether it's a reference partner or we're in the four walls of the hospitals, the expectation is that we are consulting with their physicians, recommending tests that they should do, recommending tests that they shouldn't do, providing utilization management reports, and looking for ways for them to optimize the testing that they're doing on patients. That's that middle chunk, that $30 billion. Here's just a representative list of the roughly 120 hospital laboratories that we're managing today. You can see some premier names up there. HCA is in their Denver marketplace.
We manage the labs of those six hospitals, and I can tell you, negotiating with HCA and trying to convince HCA that this is a smart move, they are a financially driven, profit-minded institution, our value proposition, we were able to convince them that we could take 10%-20% of the cost out of running their laboratory. Some other names up there you see, Montefiore, Barnabas, Inspira, right in this local market. We have a nice breadth that is across the nation. As we look out into the funnel of opportunities that we're looking at right now, we have over $280 million worth of opportunities that we're currently in discussions. These could be very near term, we're about to get the deal done, all the way to some initial discussions that have just started in the last few weeks.
We expect that we can generate at least 50 basis points of growth from completing these types of programs where we come in and run these hospital labs. The third chunk that we had on the chart was the $19 billion worth of work that a hospital goes and gets from their physician community, whether they own them or whether it's an independent physician. This is revenue that's going into the hospital from the work that they're doing, mostly third-party billing of work that comes from the physician offices. As Steve and Mark described, we think much of that work that goes into these hospital labs, number one, the hospitals generally don't understand if they're making money on this or not. Their primary mission is to run a hospital lab to serve the sick patients in beds.
Very often, they don't understand things like what the PAMA cuts are going to do to them. They'll generally understand after a year of seeing declining Medicare reimbursement. Here's just a list of the nine transactions we've completed since we last saw you. The Clinical Laboratory Partners in Hartford, Connecticut. PeaceHealth is a large multi-hospital system in Oregon, Washington, Alaska. Dignity, Providence, you can see. Hurley is one in Flint, Michigan. Not that big, $4 million or $5 million. Marin Hospital in California is one we just completed in the last week. Let me tell you how we think about these outreach deals and how we go after them. Here's just a look at over the 3,000 hospitals that do outreach work today. You can see that the top 100 institutions own about 40% of that $19 billion market.
Those large types of deals, $30 million, $40 million, $50 million. We have a colleague, Dermot, who you'll hear from later, that really has a central team that is highly involved in the discussions and negotiations. If you go over to the tail now, the roughly 2,500 institutions that are kind of playing around in this outreach, not in a very meaningful way. Again, these are the $5 million, $6 million, $7 million revenue types of opportunities. They're really, really nice. As much as we want the big ones, I can tell you, stringing together five $5 million, $7 million deals is actually pretty easy for us to do. It's easy because all we're doing is shifting that customer book of business from a hospital lab to our lab. We don't have to take on employees. We don't have to buy a laboratory.
We might take a few phlebotomists, some logistics, some couriers. They're really simple, easy, quick tuck-in deals that our regions have been empowered to do. I'll just leave you with one example that we completed since we saw you last. As I mentioned, PeaceHealth is a large health system out on the West Coast based in Oregon, but hospitals in Washington, Oregon, and Alaska. 16,000 caregivers, 10 medical centers. This is an institution where we combined all three. We bought their outreach book of business. They were serving independent physicians. They were serving their own physicians. We purchased that book of business from them. We then went in, we now run the 11 laboratories within the PeaceHealth system with Quest people, Quest employees. We bring our purchasing contracts, our supplies contracts.
We standardize the types of equipment they're doing so that they get the same types of efficiencies that we get. Then we became their reference partner. Obviously, if we're running their labs, we're going to be their reference partner. The final thing as a result of getting this deal done with PeaceHealth, we also got access to a payer that we were currently not in-network with in the state of Oregon, which helped facilitate this deal as well. What did we get out of this? We've doubled the size of our business in the state of Oregon. PeaceHealth got significant cost savings as a result of this. What I would tell you is the physicians and patients in the Oregon community are getting better results, quicker results, and we think higher and better medical quality.
In summary, for both the health plan access as well as the health systems discussion here, first, this expanded access is going to help us generate additional growth. We talked about a $4 billion market opportunity. We showed you what our aspirations are, at a minimum 25% share of that $4 billion. We know where the work is. Everett showed the 170,000 accounts that we serve today. There's at least $1 billion right in those accounts. We don't have to win any new customers. All we have to do is knock on the doors of the customers we're serving today to tap into that first $1 billion tranche that we think is out there.
Finally, we think we're best positioned to partner with hospitals, whether they choose to grow, partner, or outsource their outreach business, whether they choose to just use us as a reference partner, or whether they're interested in having us come in, manage their laboratory for lower cost and better quality. With that, I would like to now introduce Carrie Eglinton Manner.
Clicker.
Thank you. Thanks. I'm really excited since Steve introduced advanced diagnostics two years ago to all of you to share our story and what we've been doing, I'm going to absolutely tell you about why we're so excited about the growth opportunity. First, I want to give you a sense for it. I want to show you by having you hear from some of our super talented folks about the technology, our science and innovation, and some of our capabilities. We're going to start with that.
By investing in R&D at Quest, we're able to not only develop new applications which can add value to the healthcare system, but we're also able to engineer those solutions so that they can be of very high quality and lower cost over time.
The San Juan Capistrano Nichols Institute is one of the research hubs. We have multiple across the country. This happens to be one of the largest, and so we will develop the cutting-edge assays right here. We test with thousands, hundreds of thousands of samples, and once we say thumbs up, this is all good, then it will be moved out throughout the company.
What works for one part of the company, we bring it to other labs such as Las Vegas lab, which helps us reduce our turnaround time. Over 95% of our work is completed before 8:00 A.M. every day.
We're lucky to have almost every technology that is relevant in diagnostic testing today. Testing that uses molecular methods for infectious diseases, advanced Mass Spectrometry to measure small molecules and proteins, next generation sequencing to do genetics. We're continually improving the quality and scale of those technologies.
To me, advanced diagnostics is a combination of two factors. There's a personalized medicine factor, where we're actually looking at your genome, for example, and your phenome and how you're going to respond to a drug. There's replacing older technologies which may have flaws or weaknesses in them with newer technologies that come along. Liquid biopsy, a very high-end area that we believe is going to have a major impact on oncology. Our informatics, huge amount of informatics work. We move over into biomarker discovery and biomarker analysis. For example, Alzheimer's disease. All of those things combined is what puts us to the forefront.
Genetic testing is complicated, even the results are complicated. A lot of the doctors that are ordering testing now aren't genetics experts. We're there to translate it into usable information so that they can explain that to their patients.
When we're talking to a health plan, we can explain why our test needs to be done, needs to be covered, and the benefits around it. If patients need that testing, they're really only going to get it if it's a covered benefit. Utilizing my team to help explain that goes a long way in making positive coverage decisions that benefit the patients.
One of my groups here at SJC develops a lot of automation that gets tested initially here.
We're in a position to deliver technologies and automate them throughout our system.
That now allows the high-skilled humans to actually apply brain and be using their degrees or advanced degrees to look at the data at the end of it, rather than sorting samples.
The advanced technology capabilities that we have contribute to our ability to deliver solutions to the population. One example would be our home-based self-collection kits.
All they have to do is prick their finger, put it in the mail, and send it back to get a result. The level of effort that that person has to go through to actually do that drops, and you are going to catch some people that weren't getting checked.
By having technology like this, we can prevent chronic disease and we can better manage chronic disease, which accounts for 70% of our costs of our healthcare system.
We're going to be able to target tests and treatments specifically to an individual. We talk about personalized medicine, what does that mean? Well, that's what we're doing today, it's going to expand much larger scale.
Our future is only as good as our ability to bring new tests and differentiations to the marketplace to help patients, to help clinicians. That is our product.
We have the full menu here of testing. We also have the R&D people that can answer questions. We have physicians that can answer questions. We have our PhD directors that can, and our genetic counselors.
The level of expertise, passion, professionalism is second to none. I've never worked anywhere, whether it be in pharma or biotech, that could beat this place.
Our scientists spend a lot of time engineering our solutions to continually improve the quality, the automation, the throughput. There are very few companies in the world who can compete with us on that in the future.
I hope it gives you a sense of our excitement as well as the opportunity. Steve described it when he started today, which is that this is about precision medicine, and precision medicine is the future of healthcare. 20 years ago, ushering in this era of precision medicine was the FDA approval of a revolutionary drug with Herceptin, that rather than just blasting a woman with breast cancer with chemotherapy, we could begin to understand what was driving her tumor and how to specifically target it. This era is so exciting because even as recently as Tuesday, the FDA announced accelerated approval of another revolutionary drug, and there are tens on the market already and hundreds more that are coming. This drug, VITRAKVI, not only can target specific cancer in a much bigger way.
VITRAKVI can target the genetic drivers regardless of the tissue type and regardless of the cancer. The opportunity to better treat patients, to have a different quality of life, to change the paradigm of health, economic, and clinical value is in precision medicine. Advanced diagnostics unlocks all of this potential. It is the genetic and molecular insights that form the basis of how we will change healthcare moving forward. It's a significant opportunity, and here's how we're positioned. In what we think is about a $5 billion opportunity, and bigger depending on how you characterize it, we're a big leader. We're $1 billion today. We have significant growth, and we're incredibly well-positioned. You heard Jim and Everett describe why hospitals can't do this themselves, why they don't, why they come to us as a reference lab.
Because we have tremendous relationships, tremendous expertise, and they absolutely count on us when they are looking to do the most complex testing that their patients could possibly need. As we increase access for patients and as we increase access to this kind of testing, what's the real challenge? The challenge is to get reimbursed. What we are absolutely differentiated in the market in is our ability to do this profitably. We bring tests at scale to patients and to providers, to our physicians that get reimbursed by payers. Because we work with those payers, we know how to bring the evidence to bear. With that, it's not just oncology, although in this time I am going to describe a lot of oncology examples because they are so relatable and because it's what our consumers know about.
The breadth of our solutions really does cross in all of the clinical areas that we care about. Our positioning in a big market that's growing and as a leader today is positioning us incredibly well to accelerate growth for the company. I described a bit about the landscape, and now I want to describe a bit about our strengths. You've heard in the video, you've heard us describe our medical expertise. It's not just about the innovation. There are a lot of researchers out there. We love to partner with them. What we do well is to translate that to tests that can benefit patients that payers will reimburse.
The ability to bring these to market with the scale and bring it to patients who don't just live near Memorial Sloan Kettering or MD Anderson or Dana-Farber in Boston, but into community cancer where most of care gets delivered today. Our scale and access means that the growth opportunity is well beyond the historic, just, "Hey, you have to be at an academic medical center." We bring the science and innovation, I'll talk a little bit more about that, as well as operational efficiency. To do this at scale means you have to have automation.
You have to be able to take the information and make it translatable for customers in reports that they can understand, in clinical decision-making that makes sense for patients, and ultimately, to guide patients through a care journey that is absolutely the scariest of their lives, so that they know when they get genetic insights back, what that means for them. What should I do differently? What does that mean for my family members and my children who might be facing the same health concerns that I am today? How should I prepare for the next 20 years? We walk our physicians, we walk patients through that process. What does that look like geographically? Jim and I talked a bit about the scale and breadth of our esoteric labs. Those are full-service complex labs.
In addition, we have acquired a number of centers of expertise, and I'm going to describe a couple of those. In Boston, it's neurology expertise when we bought Athena Diagnostics. It's our recent announcement of fertility assessment expertise, which I'll talk a little bit more about with ReproSource. It's in the center of the country with our med fusion oncology acquisition in Dallas, where we absolutely are focusing on how we expand nationally into community cancer and better serve patients wherever they are. It's with our acquisition of Cleveland HeartLab and Oxford Immunotec in Memphis, where infectious disease and the future of tuberculosis testing is getting easier and less expensive. You saw the video on San Juan Capistrano. We affectionately refer to it as SJC. This is a hub of real genetics expertise. What we do well is scale. What we do well is translate those best practices.
We make advanced diagnostics accessible. We make it available where our physicians are because they want local experts. They want turnaround time that is fast. We don't want to have a single-point failure, like with a boutique lab, where if there's a problem there's a problem with supplies, reagents, turnaround time, you name it, fires. We are able to shift, and we are able to ensure that in the most critical times of a patient's life, hematologic cancers, blood cancers, have very, very rapid development. It is critical to get 24-hour turnaround time. Our ability to do that with the breadth of our network is incredibly important. It's a huge strength. This translates not only here, but it's absolutely attracted global interest. Our global partnerships with leading labs across all continents, except for the coldest ones.
We announced October 10th our Global Diagnostics Network, which is a partnership with these labs, which will ensure that we share innovation, information, and services, including the types of consistency for precision medicine, where companion diagnostics, the diagnostics that go with the drugs and say whether or not they will be useful, are available. That access in this partnership is very much at the core of our foundation of how we serve pharma. We serve pharma today in the U.S., partnering with labs across the globe where the consistency, the quality, the turnaround time, and access to an entirely broader population of patients is a huge differentiator for us. We are doing technology transfer. We're doing best practice sharing, and we will continue to partner with these global leaders to make sure that the accessibility of tests is not dependent on where you live.
I've given you a lot about our strengths. We are also putting a ton of energy into closing some gaps, and I'll talk a little bit about that. The science and innovation, it's not only what we can build, it's who we can partner with. We are a tremendous scalerator. We scale other people's innovation as well as we build it ourselves. We have the expertise to make this relevant and understandable in the market, and I'm going to talk more about the service experience that our customers have with us and that patients have is incredibly important to unlocking the growth here. It's not just about tests and test reports. Questions start with, "Am I covered? Can I get the test? And how much am I going to pay?" I'm going to go into that in a bit more detail.
Partnerships and acquisitions are so key because the science is evolving. The correlation between genes and disease and treatments is evolving. What we do well is we make those results actionable. We are fundamentally a diagnostic information services business, and advanced diagnostics is a poster child for how those results become actionable for patients to ultimately have better quality of life with the decisions that are made with them. Making sure that it is not just about patients in the right place to get those, but broadly accessible and reimbursable. Even if it's covered, if a test isn't covered at the right cost and a patient can't pay the right cost out of pocket to make it affordable for them, we know that people will not get the treatments they need.
To double-click on the product innovation, the science and innovation, we absolutely have the internal R&D capabilities ourselves. Most people think that it's just maybe academic sites. We showed you the SJC team to give you that feel for that expertise. We, since 2016, have launched pan-ethnic carrier screening. These are just a few. We're launching exome sequencing shortly in 2019. We use MassSpec in order to get insights into Alzheimer disease, and we're doing a lot of neurology that you'll have to hear more about later. There are so many opportunities, whether we do it ourself or whether we partner. What our partners count on is there is a lot of innovation. You see tons of companies spring up, and you often see them go away. Between that time, they're absolutely hoping we will acquire them.
They're absolutely hoping we will partner, and that we, who are great at bringing innovation to scale, it really is what we do best. Promising innovation coming is liquid biopsy. Artificial intelligence is I'm sure you've heard this, that to sequence a genome is now in the $1,000 range, where it was a couple of billion when it was originally sequenced in early 2000. The cost now is about bioinformatics and how you translate all of the information that we can get by sequencing a genome into usable information. We're spending significant investment and expertise to make sure we do that well.
Whether it's our focus on artificial intelligence and how we use that to accelerate the insights, the companion diagnostics I mentioned, which are how we unlock precision medicine and therapy, or our acquisition partnerships that are giving us new channels to make sure that in community cancer care, every patient gets access to the therapy and best quality of life they can possibly have. Steve mentioned our partnership with Ancestry, and we are an engine behind the heritage testing we do. We know how to do consumer genetics at scale, and we're absolutely taking advantage of the fact that consumers are becoming more and more aware because of companies that we call doing recreational genomics. I don't see that as a negative for us at all.
We have the opportunity to make sure in the learning curve for consumers, we move from recreational to diagnostic in what's really meaningful in people's lives. Some significant progress in product innovation and strengths that we leverage. I'm going to focus from that product and transition to services because I told you it's not just about a test and a test report. As complex as the questions are in advanced diagnostics, they start with very simple questions. Am I covered for this test? The test can depend on your age. It can depend on your family history. It can depend on why you're showing up at the doctor's with what kind of issue. Pre-authorization is a way that payers absolutely limit which of those tests, these expensive tests, they'll cover for which patients. Helping our customers through the process, in some cases, performing pre-authorization.
We've launched pilots where we perform pre-authorization, and there are a number of payers who say, "No, providers have to do it themselves." We have to educate people on how to collect family history and how to make sure the right information is provided so that patients get what they need. The next question is, how much will it cost? This is incredibly hard to do in healthcare, not just because of price transparency, but in large part because of patients' different plans, where they are in the year versus deductibles. When you add that to the complexity of whether or not they should be having the test, a complex test, this is a key to unlocking growth, is making sure that ahead of time, yes, it will change my decision if I know I'm going to pay $250 for a test versus $1,000 for the test.
I know my aunt had breast cancer. I'm a little bit worried about it. It's a big difference. Our ability to answer this question was so important to us that we invested in people who could manually answer the question for our physicians and patients ahead of time while we are simultaneously making significant investments in how we automate this across the huge number of payers we have and across the huge number of plans and patients. These are keys to unlocking growth. As is the more complex question of what do those results mean? Now I know I can get a test, I'm willing to pay for it. What do I do? What do I do if I have BRCA1 mutation and I may be more susceptible for breast or ovarian cancer? My son may have a higher likelihood of prostate cancer or pancreatic cancer.
What do I do with this? Most of our customers, most physicians, don't have genetic counselors at their side. We made patient-facing genetic counseling available, not only to help our physicians understand what these results mean, but most importantly, to help patients understand what they mean and what the potential next steps are. Services are key. We're making huge investments in how we meet and provide those services, and we will continue to grow as a result. These are really complex issues and none of us in healthcare can do this alone. Steve loves to say that healthcare is a team sport for this reason. It's why we're partnering to seize market opportunities across the board. We start, and I'm going to give you a little bit of insight into pharma. In the next 2 years, you'll hear a lot more about this.
We are already partnering with pharma, both through our Q2 joint venture in order to help bring therapies to market and develop the companion biomarkers and companion diagnostics that go with them to unlock the value and growth of precision medicine. We are absolutely partnering today and have great examples of our growth there already. In addition, we're developing the market because guidelines and payers have to align to cover these tests for the patients who need them. Partnering with US Oncology that came through our med fusion acquisition last year has meant that we now have access to 1,400 oncologists in the U.S., that's over 10% of all oncologists in the U.S., to work with them on developing clinical care pathways that make sure that the patient that shows up in their community with a potential blood cancer gets the same quality of care had they shown up somewhere else.
I have examples like that with Hologic in women's health, with Oxford Immunotec in tuberculosis. I just wanted to pique your interest and give you one more example on partnerships and research. The breadth of our expertise spans with the names you know. I'm going to give the example of the PROMISE trial because Dana-Farber is looking on how for multiple myeloma, 2% of all cancers, blood cancers are one of the growth areas, about a billion-dollar testing market today. Dana-Farber is partnered with Stand Up to Cancer and with us to look into high-risk populations for precursors to multiple myeloma to see if we can identify other biomarkers that may help us and help pharma figure out how to treat it earlier. Because for today, if you're diagnosed with multiple myeloma, very, very few people are cured.
30,000 people every year are diagnosed, and what generally happens is they stay on six-digit figure drugs for years, just keeping that cancer in check. Our ability to identify those patients earlier, identify the biomarkers that might be identifiable as precursors to the cancer itself and use that to develop treatments is a significant opportunity. I'm going to pull this together and not describe the entire page because a lot of this genetics may be new to you, and I know it's complex.
The point I want to make is with the expertise to span the care continuum in any clinical care area, whether it be oncology and this example or the next short one I'm going to share in women's health, is that the growth for us is being able to partner with our customers on how we stay with them and their patients to provide insights across the care experience.
Whether it's the screening I described to find patients earlier, you're going to hear Jay and Dermot talk about our ability to help identify clinical trial patients for pharmaceutical companies looking for them early on in the process, through to an oncologist who's trying to better diagnose the patient, figure out the prognosis for that patient and how their disease is likely to develop, which treatment will be most effective for them, or to monitor that treatment with our prescription drug monitoring, which allows us to see is the patient adhering to their regimen and is their course of treatment what we expect it to be? The ability to pull that together into data analytics in the population health that helps move precision medicine forward is an enormous growth opportunity, we are right in the midst of it.
Lastly, because I've spent a lot of time on oncology, I wanted to give one woman's health example before I wrap. The ability to serve a channel and our hospital relationships and the fact that we have such strength and when we get more access through payer access, and we have our patients access, we grow. We have tremendous strength in women's health in our OBGYN channel.
Whether a woman treats her OBGYN like her primary care physician, which many of us do, or we go to a primary care physician who serves women through their entire lives themselves, our ability to treat a woman and to help provide insights into her health, whether she's pre-conception or post, whether we are diagnosing sexual health while STDs have grown for the fourth consecutive year in a row, whether it's health and wellness, whether it's identifying the genetic markers, OBGYNs and primary care physicians want a single lab who can do all of it.
When I'm at my OBGYN and I'm perfectly well for an annual visit, or whether I'm thinking about fertility and assessing a woman's ovarian reserve like we do today in acquiring ReproSource, or whether she's thinking about getting pregnant and wants carrier screening to think about what could potentially be ahead for the baby she and her husband are trying to conceive. Our solutions are solutions that our physicians can provide with us hand in hand, understand the process all the way through to postnatal diagnostic insights. In total, our advanced diagnostics capabilities completely support our growth strategy, completely align with our M&A strategy for growth. Jim and Everett talked about why hospitals want to work with us. It's the same reason that our little innovators and potential partners want us to buy them. We can bring the right and relevant tests to bear at scale.
For the consumer who's becoming increasingly aware, while precision medicine is sort of two decades underway, patients are becoming consumers. They're beginning to understand the potential value for them in unlocking genetic insights, and we are absolutely at the forefront of that opportunity. Finally, you'll hear more later this afternoon or before lunch, you'll hear more from Dermot and Jay around the tremendous potential, and I know I just piqued your interest, or hopefully I piqued your interest, on data analytics and population health opportunity to ultimately pull it all together and to have this be the virtuous circle where advanced diagnostics insights feed the precision medicine potential for better care at better health economic value across the healthcare system. In summary, precision medicine is the future of healthcare, and advanced diagnostics has a strong growth potential as the foundation of that.
We lead today, we're profitable today, and we absolutely are well-positioned with our strengths to win more. Expanding health access is clearly one of those keys, I hope that these strengths I described for you give you the same excitements that we have. Thank you. Next, I will introduce Cathy Doherty, who's going to talk about our consumer lab provider of choice initiative.
Thanks, Carrie. Good morning, everyone. We've made a lot of progress on becoming the laboratory provider of choice for consumers since we last spoke to you in 2016. What I'd like to do is start with a short video that will provide you insight into that progress. Can we play the video, please?
Quest Diagnostics wants to be the lab provider of choice among consumers, and we do feel that we have a broad array of offerings that make us relevant to them. Consumers are looking for convenience, they're looking for a superior experience, and they are looking for diagnostics providers that are there to empower them on that journey.
The patients say that they are very relaxed coming here. They like the newer atmosphere, the changes that we have done to this PSC. We have pediatric rooms because it gives that special attention and makes the children more comfortable. We have six iPads that makes our check-in much easier. It's just less hassle.
I couldn't believe how nice it was to check in. I like that. I like those little pads. I'm all about tech stuff anyway. Amazing for an old lady, right?
There's some kind of thought and effort put into the design and the cleanliness. To me, that translates into quality. If I'm coming here for lab work, I want the results to be accurate, I want the staff to be professional. It starts when you walk in the door.
Safeway and Walmart present a really nice opportunity for us to be in locations where consumers are every single day. We can eliminate the whole waiting experience because they can be paged when we're ready for them while they're getting their shopping done.
Actually, I'm going to do that today. I'm going to go look for a trash can for my car. Yeah, hopefully, I'll be able to roll this into a shopping experience as well.
For our associates that work in the building, it allows them to take care of their needs without having to leave and go a long way from work to come back. It's a real quick convenience for them.
They're so happy that we're here. They just come in just to ask questions. Next thing you know, they're bringing their family over.
With MyQuest 2.0, we've redesigned the entire experience based on user feedback and best practices. We want to enable a seamless transition from the digital environment to the retail environment. Individuals can come in to our online site, jump to making an appointment. They can look through the QuestDirect offering and find out about testing offerings that are available to them. They can also get their test results back, and they can get a history of test information that they've had with us over a period of time so they can track the results. Then when they show up to the Patient Service Center, they're going to know exactly what the test is that they're there for, and most importantly, they're going to understand how to engage with that information and produce a better health outcome. We're very excited that we just announced an integration with Apple Health.
All of our consumer records that are in MyQuest are now available in the Health app. We've also introduced new capabilities like My Circle. MyQuest users are able to connect with anyone that they're trying to help manage care.
I manage my father's and my husband's health, and we go online and we make appointments. Technology's changing and so is Quest, so it's nice.
Everyday Excellence is a tremendous program that we've rolled out over the last couple of years to help make sure that everyone consistently across the country is providing the same level of high quality and superior service.
How did you find this location? Was it convenient for you?
Quest Diagnostics is the most recognized brand among any diagnostics provider, so we're very proud of that. As consumers become more empowered, they are seeking more from healthcare providers, and we think in health and wellness and in lab testing, we are a provider of choice for consumers.
They're keeping up. They're staying ahead of the game.
Time is money for me. This is a good transition to be able to get in here quickly and get my test done and be out quick.
They care a lot. That's one thing that you really know as soon as you come in. These people care.
What excites me the most is our patients. We're here to service them. We do a good job at it.
We are living in the age of the empowered healthcare consumer, and our vision at Quest Diagnostics is to become the laboratory provider of choice for consumers. We stated that back in 2016, I'm very proud to say that we're well on our way to achieving that vision. If you think back to what Steve mentioned earlier, this is a platform that supports all of our strategies, our strategies with our health plan customers, our health system customers in advanced diagnostics, and positions us uniquely to grow share in this marketplace. Market trends are making healthcare consumers an increasingly relevant segment for us to serve. Whether it's having the ability to order their tests directly or in just having conversations with their physician, they are increasingly focused on taking control over managing their health and their health information.
In fact, today's consumers expect greater transparency and choice when it comes to their healthcare experience. Their expectations of working with us today are vastly different than they were 10 years ago. In fact, their expectations from a customer experience perspective is predicated on the experiences they have with other companies like Apple, like Amazon, like Zappos. That critical factor has been informing our design for the whole experience, the whole consumer experience to appeal to that consumer. We've been doing a lot of research to understand what the consumer is seeking. What we've learned is that they want convenience. They want a superior experience. They need it to be personalized and highly relevant to their own needs, and they want to be empowered to make decisions along this healthcare journey. Recent Quest survey results indicate that the work we're doing to better understand that consumer is paying dividends.
For example, Quest has the highest level of unaided consumer brand awareness among all lab providers and high levels of satisfaction among patients who've experienced our services. Specifically, 81% of these folks state that they're extremely satisfied when they use our services. Going to where consumers are has been a winning strategy for us. Our retail strategy is based on finding the most convenient, comfortable, and efficient environment. It's about a network of access points, and it's about bringing that customer experience that brings the Quest brand and value proposition alive. Today, one-third of our Patient Service Centers are in retail settings with 10% in a partner store. Our goal over the next several years is to get that percentage up to 55%.
Shifting our footprint to be more and more in the retail setting, like in the Safeway and Walmart stores, is providing a convenient integration into the consumer's busy day. These trusted retail partners provide us the means to extend our visibility in these convenient locations and access large numbers of consumers. The feedback that we're receiving has been consistently positive. The consumers like the easy access, they like the new modern feel of our sites, and they like how smooth the patient traffic flow is. Delivering a superior experience is more than just an aspirational goal at Quest Diagnostics. We launched our Everyday Excellence initiative in 2016 to our 45,000 employees. Since that time, we've strengthened our commitment to the five Everyday Excellence guiding principles that you see here. We've integrated into our strategies and processes so that we can be our best with every interaction.
Everyday Excellence is integrated into our performance assessments as well as into the frontline behavioral standards. For every interaction, whether that's with a phlebotomist or it's on a phone call with a representative from client services, we want the people that use our services to have an excellent experience. The feedback that we're receiving is encouraging. More than a million patients actually provide feedback to us on an annual basis, and in the most recent survey, more than 93% feel like they were treated with care and compassion in our Patient Service Center. We're also building stronger digital experiences with our consumers to demonstrate how easy it is to interact with us. For example, you can schedule an online appointment time that's most convenient for you.
When you enter one of our PSCs, it's a full digital experience, and maybe some of you had the chance to experience that in the hallway, from eCheck-In to viewing your appointment status on screen. When you finish that appointment, we can send you your results directly via our MyQuest app. It's our patient platform that's currently used by more than 6 million people. For future planning, we can personally send you a reminder about your next appointment, again, through the MyQuest app. We've made tremendous investments in this digital experience to differentiate ourselves, and it matters to our health plan customers, our health system customers, as we think about that new network access or that 43 million patient lives that we're going to have access to in 2019, it's this kind of experience that's going to make a difference to enable us to drive share.
As Steve mentioned earlier, there's very few labs that are going to be able to make the kind of investment that we're making. Now, when we interact with our customers or our consumers, we want to be able to serve up content that's relevant to them. We want to create personalized and localized communication to help keep them engaged in their health and with us as an organization. For instance, if you were to walk into a Patient Service Center, we could send you a text message following that appointment telling you how to schedule an online appointment before your next visit. If you happen to be a baby boomer, we could message to you about the importance of hepatitis C testing.
In the new My Circle feature, we have the ability to have approved family members and other users connect through MyQuest to access important health information. We're also working on creating an environment where we meet the consumer where they want to be. That includes at their healthcare provider, it includes at our Patient Service Center, it includes at their workplace locations. For well over a year, through home-based testing, a huge convenience where we send the consumer a test kit, lab samples are self-collected, and we provide them with easy-to-understand results in their MyQuest app. We offer this through our Blueprint for Athletes offering. It's a biomarker testing service that provides insight to athletes around their own biology to help them improve their performance and their fitness.
Through our InSure ONE at Home colorectal cancer screening test, Everett mentioned it earlier as it relates to the employer service, we're able to do that at home. Again, those results are delivered to the consumer via their MyQuest app. Lastly, I indicated earlier that when we did our research, consumers were looking to be empowered to make healthcare decisions along their healthcare journey. Earlier this month, we launched QuestDirect, an enhanced consumer-initiated testing service that empowers consumers to take control and manage their health by ordering health and wellness lab tests from the convenience of their homes. Available in 48 states, QuestDirect's 35 test offering packages includes general health, it includes men's and women health, it includes digestive health, heart health, infectious disease, and sexually transmitted disease testing.
To access it, you can go to the MyQuest enhanced app or our new website called QuestDirect. To order, consumers can conveniently go online and choose their own lab tests. Independent physicians are providing oversight in the background and, if appropriate, will order those tests. The review of those results are also done by that same physician group. Consumers can go online to make an appointment to visit one of our 2,200 patient service centers. The results will take about a week to get back, and they can access them through MyQuest, which is also easily shareable with their own consumer physician, as well as family members through the new My Circle feature in the MyQuest app. As you can imagine, we are very excited about QuestDirect and entering a $300 million market that's growing double digit.
What I'd like to do is show a very short video to demonstrate how easy it is for a consumer to access QuestDirect.
We all have questions when it comes to our health. Now, you control how you get the answers. Finally, with QuestDirect, you can order your lab tests on your time. First, select and purchase the test you want from our online menu. All our tests have clear descriptions and upfront pricing. Next, easily create your personal MyQuest account. Use the online scheduling tool to make an appointment at a Quest location near you. Scheduling your appointment gets you in and out faster. When they're ready, your test results are sent directly to your secure MyQuest account. They're the same test results trusted by doctors and hospitals across the country. You can easily share those results with your doctor for any follow-up. Now you can get the answers you trust when it's convenient for you.
I don't think it could be any easier, in summary, Quest does have the highest level of consumer brand awareness among laboratory providers. Again, as we think about this new network access, that's going to play well in terms of driving share gain for Quest Diagnostics. Consumers are taking a much more active role in managing their health and their health information, and Quest Diagnostics is well-positioned as we enter this $300 million consumer-initiated testing market, which is growing double digits. With that, I'd like to introduce my colleagues, Dermot Shorten and Dr. Jay Wohlgemuth.
Thank you, Cathy.
Good morning. What Jay and I would like to take you through now is a couple of our high-growth emerging businesses, our data services business, and that leads very tightly into our population health services. In population health, we've got a number of organic growth there. We also, though, did the acquisition of MedXM, which is there, and also the majority JV with Walmart is there. Thanks, Jay.
Let's start with really our data services. We've talked a lot about the data, the 40 billion data points. What that is, we actually have more if you go back, but that's really 10 years of a master patient indexed longitudinal data that we're leveraging. We believe lab data, in general, is very under-leveraged. There's a couple of things there. Firstly, most of the work that's been done in terms of risk stratification, predictive algorithms, has really been done on claims or script data. Lab, we believe, is fairly standard. You've got to normalize it a little bit across labs, but an HbA1c is kind of the same thing. It's also very high frequency, right?
Instead of waiting for claims data or trying to work with EMR data, which often turns out to be unstructured, lab data, we're reporting that every morning at 8:00 from the previous day. It's a very fast pulse, and we're excited about the opportunities. We have a number of solutions out in the market already. We really bucket it into a few categories. One is sort of look-back retrospective analysis. What happened? Tell me about this population. What do you know about it? The more exciting areas are really analytics that we're serving up in physician office or health system workflows. The real Holy Grail here is to use lab to do more predictive analytics around risk identification, stratification. We're working on that. We're teamed up with some of our health system partners and with academic institutions to look at that.
Today, what we do for pharmaceutical companies, for instance, which today is a big piece of what we do, we're looking at classic pre-market, post-market launches. How big is the market? Tell me about the patient journey for a lung cancer patient. If the out test is negative, what do they reflex it to? How often is the sample insufficient? Things like that. We're also using it really to augment script data. As you know, there's a very big script market around sales operations planning for pharmaceutical companies, we're looking and using lab data to augment that. Rather than waiting to see that a patient is on a first-line therapy, we can sort of tell them, "Well, that physician had a set of patients that were tested, and they're positive." We're not going to tell them the patient name, but it's an earlier indication.
We also have worked with the public sector for a long time. We have a long relationship with the CDC. We extended that contract five years. It's helping them build out their Hep C data repository. We work with the NIH. For instance, we're working with them on the genetics of hotspot transmission of HIV. We work with state agencies in terms of understanding where they might target diabetes prevention programs, for instance, or opioid data. That's the big piece. We'll come and talk about the clinical trials piece in detail. Jim talked about lab stewardship, which is really this area of how do we help health systems and physician groups manage their lab spend better. Let's talk a little bit about the clinical trials. You've seen that out in the lobby. We launched it about three months. It is a live solution.
Today, we are recruiting patients in several condition states. We're recruiting patients, high cholesterol, high triglyceride, spinal muscular atrophy, Duchenne muscular dystrophy patients, celiac disease. What is unique about Quest compared to how CROs or pharma companies go after this, is because we're a provider, under HIPAA, we can reach out to patients. You may know some of these statistics, but in general, I don't think the CRO industry or pharma would argue about this. It's a pretty horribly inefficient process, right? Of 100 patients who put up their hand to say they want to participate in a trial, only seven will actually make it into the trial and complete it. 60% of those patients are screened out on that first screen, often because people are going by self-reported data or incomplete data.
What's unique about Quest, and lab inclusion is just one part of it, we understand that. The data is quantifiable, and we can reach to the patients. We're not cutting the physicians out of that loop. The reality is that of patients that are part of trials, only 20% of them actually learn of their eligibility from their physician. It's a very inefficient process. We're trying to activate the patient, get their consent for more dialogue, but we can reach them initially.
We also have a number of interesting assets to pharma and to CROs because as they move more and more to virtual trials, we have the retail sites, we have the Patient Service Centers that we can do a number of things there to keep the patients in the trial, retain them better because it's an easier trip to go to a PSC to have some biometrics done, for instance, versus having to go back to an investigator site. Overall, this is a big focus for us. We are live, working mainly with CROs. The joint venture with IQVIA, we didn't put any of this capability into that JV. That was a JV around central lab testing. IQVIA is a major partner for us, but we're sort of agnostic. We work across CROs, we work across pharma, direct to pharma.
It's not like you can only access this through one CRO. We're trying to serve that market broadly. Just a little bit on the data. This is just an example of a cardiovascular trial. We were working with a CRO. They were facing penalties because they couldn't find patients. Lab turned out to be a very important inclusion criteria. We had about 180,000 patients that looked eligible. Now, the problem with this was because the way they'd structured it and the way the business works today, they pick the investigators, and then they assume they'll find patients, which they may or may not. Here, the patients weren't actually near the investigator sites they picked, so they had to reshuffle that. It shows you the power of what we can do.
Our whole thrust is the trials are a lot more effective if you know where the patients are first before you start putting in all the site infrastructure and picking the investigators. The second example is, we talked about multiple myeloma earlier. This is one where we were working directly with a pharma company that's pretty big in this space. They asked us, "We work with these 300 physicians. We worked with them for a long time. We'd like to broaden that base. What can you tell us about who else we might want to work with, reach out to?" When we looked at our data, we had over 1,400 physicians who had more than ten multiple myeloma patients in that last year. We were able to kind of contact those physicians.
One of the great things we have is because we work with half of the physicians, 250 of these physicians, these new ones, already had a suitable licensure. It really expanded what this pharma could do in terms of bringing that in. That's one deep dive. Now to turn to population health, Jay will talk about what we're doing there, and I'll come back. The data is an important part of that. We have a lot of data. These are just some examples where we can look nationally, for instance, with the CDC, tell them what we see around HCV, where's the penetration of it. We can look at a particular state. The middle example is where we worked with a managed Medicaid plan that was bidding on winning this shift from state Medicaid to managed.
We frankly knew a lot more about the geography than they did because they hadn't been in that market. The third one, you can think of that as in our retail setting with our retail partnerships. We can look around that Walmart site or a Safeway site and say, "What really is going on in the community around that?" That really is a big feed from data. We also have a lot of data in our life insurance business that can be helpful as well. That tees up the insight into what's going on with the population, and Jay will talk about how we've actually now been working to bend that cost curve.
Thank you, Dermot. We have, as Dermot was saying, amazing data and data analytics capabilities. For me, the most exciting aspect of that is that the data and analytics are the front end of population health services. To define that, any risk-bearing entity, a large employer, a health plan, a government plan, and other risk-bearing provider groups who have responsibility for a population need to manage that population and improve the overall health, lower the overall cost of care in the long run for that population. We believe today there are many definitions of this marketplace, but based on the analytics and downstream services, one conservative estimate would be that it's a $7 billion market growing at 20% a year.
We have a very unique position in this space, because as we've shown, we have the data and we have those analytics capabilities, but remember also, we are connected to the hospitals and physician groups and 675 make and models of EMR. We can do that analytics work to identify populations who need interventions, and these interventions can be clinical interventions that we provide or that the partner provides. These are interventions that are proven to improve care and lower overall healthcare costs. The secret sauce that we also bring is the ability to engage consumers with those solutions. I want to emphasize that all healthcare is consumer healthcare, because on the end of every interaction in healthcare is a consumer, and if they don't engage with a population health solution, nothing happens and there's no benefit.
We are currently in the market with employers and with health plans, helping them close gaps in care. Remember, the outcomes there are meeting the triple aim in healthcare, improve quality of healthcare, improved experience for the patient, and management of overall healthcare costs. I'm going to give you a series of quick examples, and the first one is in employer-sponsored healthcare, where we have over 170 million people in the U.S. who get their healthcare through their employer. We know that relates to about a $1 trillion-plus spend, which is increasing for employers by 5% a year and is creating an unsustainable burden financially on our companies and our employees, and is a huge dissatisfier for our employees within health plans.
We have the leading employer healthcare screening and population health offering in the Blueprint for Wellness, which we offer to thousands of companies and millions of employees. Our best customer is Quest Diagnostics. We run our own self-insured health plan of 60,000 members, we have been very aggressively applying the Blueprint for Wellness in population health to our own population over recent years. I can tell you that we've had great success in that we've turned the ship relative to employee engagement around this issue, but we've also turned the ship relative to the costs, which is for the first time in over a decade, in 2017, we lowered the cost of healthcare for Quest Diagnostics and our employees last year, 2017, in the face of that 5% increase per year that we see in the market.
I'm going to give you one example of how this is not just screening, but population health in kidney failure. As you may know, kidney failure is often undiagnosed until it reaches an end stage. When it reaches that end stage, the results are kidney transplantation or hemodialysis, which are very expensive, bad outcomes for individuals and for a health system. In this example, we offer through to employers a service whereby we identify individuals who have early-stage renal failure. We provide telemedicine and retesting services and rapid referral to a local nephrologist who is in network and is high quality. If you think about it, in the old world where we just give that result to an employee and tell them to go figure it out, I'll tell you what happens, and it's nothing.
In this case, within a week of having that result, the individual has a discussion with a physician, has some retesting, and is referred into a nephrologist. That we have shown by doing that, we improve care and also have an ROI for the employer. It's a great example to give you an understanding of how this plays out in an employer setting.
Another example would be for diabetes, and this example of population health absolutely applies to self-insured employers, to health plans, to risk-bearing health systems, and to consumers, because this problem of diabetes causes a $300 billion cost burden to our system, and it is well known that diabetics need regular monitoring, lab-based interventions, a retinal exam, a foot exam, nutritional counseling, and pharmacy counseling. We have this ability on the analytics side through Quanum and Blueprint for Wellness to identify individuals at risk for diabetes or who have diabetes, and then to deliver these solutions that they need and that are proven. We can deliver those in this amazing set of locations whereby we can reach people who currently don't engage with the healthcare system. We can do this in a patient service center.
We can do this in a Walmart or a retail setting patient service center. We have 10,000 mobile resources who can go into the home or the workplace, and we can also send at-home self-collection kits to reach the person in the most convenient way. Diabetes is a great example. We're in the market with this, and I will also say that we're starting to see a strong interest in our services being value-based, in that as we work with health plans, we're structuring agreements whereby we will be paid by closing the gap in care and not just on a fee-for-service basis. Another good example that we're in the market with is our Medicare chronic conditions management offering. Medicare has a benefit for those beneficiaries with two or more chronic conditions. It calls for monitoring of that individual in their home on a monthly basis.
It allows for the physician who is doing that monitoring to be reimbursed on a monthly basis. That reimbursement that's in a roughly a $40 per patient per month level, totals a $15 billion benefit if all chronic condition patients in Medicare receive the service. By leveraging our infrastructure, our call centers, and our visiting nurses, we have stood up a service that allows that physician group to effectively monitor their patients, provide good care, document that good care, and receive reimbursement into their practice. An average size practice, where we provide this may supplement their compensation by $80,000 a year or more while providing high-quality care for their consumers and patients. The final point that I'd make is, we have all these different ways that we can reach a consumer and engage them with a population health solution.
This self-collection technology, which we have developed, is the most convenient that you can imagine, which is literally the box arrives on my doorstep. I'm able to self-collect. The technology that we've developed here is proprietary and allows for a very simple collection procedure and room temperature shipping, whereby that sample is stabilized, brought into our laboratories, tested, and then the results can come back both directly to the consumer and to the provider. We've made that available in 2017 for our athletes, Blueprint for Athletes. We're also making it available now for diabetics to help close gaps in care in the community for health systems and risk-bearing provider groups. Dermot is going to take us home with a little more on the consumer engagement.
Thanks, Jay. Just to wrap this up. As Jay said, we've got some really strong delivery channels. That's really where we're focusing in here is how to really deliver care to these patients. We talked about the home. We've got an extensive number of mobile resources that is really unique for a lab company. We had that really through our life insurance business, all the paramedical examiners we have through the wellness business that we have, and now with MedXM. We're out there in the home. We have the home collection kit. We have the retail capabilities. We have world-class, high-scale call centers. Quest, as you can imagine is in the business of handling large volumes of inbound and outbound calls. We're using those same centers to do the chronic care management, and we have a telehealth capability. Some of that is internal resources.
Other pieces of it are partnered with external providers. That's really an immense way that we can deliver a programmatic way to kind of reach these patients, multi-channel delivery. Just as an example, if you think of our retail settings now, what can we do there? We talk a lot now to payers and at-risk entities of providing bundles of services or what I call skinny bundles. What would that mean? For a diabetic population, we'd say to a payer, "Give us a set of your diabetic members." We're not going to manage their whole care. There's going to be a physician involved in that, their current physician, or we'll refer them into care if they don't have one. We are going to do a number of things to make sure care gets done.
The great thing about our retail settings is the volume of work and frankly is the heavyweight bias, if you like, around Medicare patients, Medicaid patients, right? There's a lot of these folks coming through the stores. We can engage with them where they are there in that retail setting. If they're chronic homebound, we can go to their home. Let's focus on retail. What can we do? We can absolutely make sure they get the HbA1c done twice a year or more frequently if they're diabetic. More than that, we can do the diabetic retinal exam, which we're doing. We can do the peripheral neuropathy test, the foot exams. We can get their health risk assessment twice a year and get that back to the payer, get it back to the physician group. We can provide nutrition counseling.
We can do medication adherence with the pharmacist to do those medication checks. If they don't have a primary care physician, we can help refer them into that. Those are a set of services which might be individually selected, or it might be that bundle, looking to get paid for providing those services, but more importantly, to get paid quality bonuses for hitting some quality metrics around that. That's really the idea. We're scaling that. We have some early pilots going, We're very excited overall around population health. Net, in terms of the takeaways, we do have an immense amount of structured data, including our genomic data, including our pathology data. That pathology data will get more and more structured. At the moment, we do a lot of natural language processing on it.
All of that is, regardless of the lab that does the testing, is in our central informatics database. The clinical trials piece in particular is exciting. That is about a billion-dollar market today, growing at about 6%. We think it's ripe for disruption. That data can feed population health in terms of understanding where those populations are, what their disease burden is, what needs to happen. We have a great platform, both delivery capabilities and consumer engagement. The ability to bring that data back to those 650 EMRs and back to the payers. We'd like Jim to come back up and talk about Drive.
I'm going to hand that off.
Yeah. You're a bit behind.
Yeah, I'll just take it there. Okay. Hopefully you have a little energy left here. I'm the last presenter before we get to a panel discussion. Drive is the second core strategy of the company. While it may have some cost connotation, I can assure you that, as of equal importance is the left-hand side of the mission, which is we continue to improve the customer experience, making our interactions with patients very transparent, especially when it comes to price, digitizing that experience, making the locations convenient, and always making sure that the results and service we provide is flawless. On the cost side of the equation, formerly known as our Invigorate program, we look across our value stream from specimen collection to moving the specimen to one of our laboratories, how we test it, medical reporting, claim billing.
We're always looking to save pennies in each of these operations. It's not one or the other. It's delivering on both sides of the equation here. The Invigorate program, we started, as you know, back in 2011. The original goal of $700 million, we exceeded by 2014 of $750 million in savings. We set a new goal of $1.3 billion off of that 2011 basis for 2017 and delivered over $1.4 billion in savings off of that 2011 baseline. As Steve mentioned earlier, our annual goal is about $200 million. We targeted 3% cost savings off of our cost structure of roughly $7 billion. You do the math, it's roughly $200 million a year. I'm not going to dwell so much on the things we've done in the past.
You can read those things, because I want to move forward and talk about what we're doing in the future. Before I get to that, again, really focusing on that left-hand side of the mission, I want to assure you that as we continue to look for efficiencies across our operation, we actually look for efficiencies, and we look to improve quality and service at the same time. Just a few metrics that we track all the time in the company. Recollections. It's a very low metric today. Less than 0.2% of all patients have to come back to get redrawn. That could be because we didn't draw enough, we didn't cycle or spin the blood sample down quick enough, we didn't store it at the right temperature, but we're good and always trying to get better. Honoring appointments.
If you make an appointment with Quest Diagnostics, our promise is to see you within 10 minutes of your appointment time. We've gone from 85%-95% adherence to that. Clinical turnaround time. Most physicians want their results back by 8:00, 9:00 in the morning, at least for the routine overnight work that we do, and we've improved that from 92%-95%. I'm going to talk a little more about real-time adjudication, real-time estimation. We now have 40 health plans that are doing this with us. It helps the health plans, it helps the provider, and it certainly helps the patient. Missing information. This is one of the reasons why we don't get paid. We have requisitions that come in.
If we look back two years ago, it was over 5% of the reqs that came in the door had missing information that wouldn't allow us to bill or bill properly. We've improved that by 23%. Medical quality revised reports. You never want to send a test result to a physician only to have to change it three days later. We're very close to Six Sigma in this measurement, but we continue to reduce it, and this could be simple reasons. A machine went out of calibration, and the operator didn't know it, so the results that we sent out had to be redone because the machine wasn't properly calibrated. All the time while we're doing this, we pay close attention to the satisfaction and engagement levels of our employees.
We send out an annual employment survey, it's really unheard of when 94% of your employees actually respond to the survey. 94% of the 44,000 employees in the company give us feedback every year. 74% engagement level is above top 20% of Fortune 500 companies. The other aspect of what we tried to drive with this culture, I mentioned this notion of finding pennies per requisition. We do over 180 million requisitions a year. Simple ideas that come from our frontline staff that can generate a penny a savings req is worth about $1.8 million in savings, which happens to be about a penny a share.
You string 10 of these ideas together, you can quickly pick up 10 points of EPS when you implement the ideas that come from our frontline. Let's look forward here and talk about what we're doing to continue to find that $200 million a year worth of cost savings. The first bucket, reducing denials, we used to call it bad debt. Before the accounting change, it was called bad debt. Now we have to take a hit to our revenue. Nonetheless, we still are going to go after this aggressively. Let me sort of describe the old healthcare model, which I'm sure many of you are familiar with. You go to your doctor. The doctor orders lab tests. In some cases, the doctor will do that draw right then and there. In other cases, they'll send you to Quest Diagnostics.
What happens is we get a requisition. We get some blood or some urine in our laboratory. We run the test, after we run the test, within 24 hours, we send a bill to a payer. It's all electronic. Generally, the payer responds pretty quick, they tell us, "Are we going to pay you for those tests? Is it going to be denied? Is it going to be covered?" Then, what is the patient responsibility? You can see with this model that we take all the risk. We don't find out if we're going to get paid for the work that we do until after we've done the work, we think that's a very outdated, outmoded way of running our business. What's the new model?
The new model is you go to your doctor, your doctor orders lab tests, you come to Quest Diagnostics. We have an electronic requisition in our hands. Hopefully, it's electronic. We're going to take that requisition, rather than adjudicate it 24 hours after we've done the test, we're going to adjudicate it right then and there in our PSC. We're going to send it up to Aetna, we're going to send it up to UHC or whoever the payer is, we're going to send it up as if it was a real requisition to be adjudicated. They're going to come back and tell us, is the test covered? First of all, they're going to tell us, is the patient really part of the plan? Are they eligible? Have they been paying their deductibles? Is the test covered?
If it's covered or not covered, what does the patient owe us? We're going to turn to the patient and say, "How would you like to pay?" It's a very similar model to when you check into a hotel. If your company has already prepaid or your company has given a credit card, they're still going to ask you for that credit card just in case or just to cover the incidentals of water or candy or whatever else you might eat in your room. Today, our net denials is about 6%. 6% of all the third-party work, third-party payer work we do is denied, then patients don't pay us roughly $300 million a year. That $300 million on $7.5 billion, that's four points of growth that we're losing in revenue each year because of patient concessions.
On the left-hand side, first, why would payers deny the work that we do? Why do they deny work? As I mentioned, our net denials rate about 6%, but we start out at close to 11% of the third-party work we do gets denied. Why do they deny it? Simple things, administrative requirements. Carrie talked about pre-authorization. In some cases, they want the physician to do it. In some cases, they're okay with Quest doing it. We've sent them work that wasn't pre-authorized. The second and the biggest or second biggest bucket is test coverage and benefits. The doctor ordered a test that was not covered by your plan, it gets denied. In some cases, we're able to bill the patient for the price of that test.
In other cases, the payer has kind of said to us, "We really don't like that test, and we don't want you running it on our patients, therefore, you can't even bill the patient." We eat that cost. The final piece is eligibility, data quality. We didn't get the right insurance information. We didn't get the right diagnostic code, it was bad data. We go back and have to try to chase the physician for that information. All of that, we work it hard. It costs a lot of money to go do this. We lose out on roughly $120 million of revenue through this denied work. In some cases, we recognize it could be cost avoidance as well.
Increasingly, we're turning to the patient and say, "Here's the bill, you can make the decision if you want that test run." Either we're going to capture this revenue opportunity, this $120 million, or we're going to avoid the cost. The total variable cost of doing this work, call it roughly half, you've got about $60 million of potential cost savings. We're either going to get paid for the work we do, or we're going to stop doing the work that we don't get paid for. On the right-hand side is why don't patients pay their bills? The first about 40% of the time they don't pay us because they don't think they owe us money, this is just they don't understand their plan benefits. We may send you a $10, $15, $20 bill. It could be a co-pay, co-insurance.
It could be what you're responsible for, members just don't understand that they're responsible for it. What do they do? They throw it away, and they think that Quest will go away. They think that the payer made a mistake. If you have $10 or $15 bills from us, we actually do want you to pay us because it's a big chunk of why we don't get paid. The second is the test is not covered. We ran a test. The payer said it wasn't covered. We bill the patient, and then the patient says, "You know what? It's not my fault.
You, doctor, ordered a test that wasn't covered, you should have known ahead of time." They call us and say, "Quest, if the doctor ordered a test that wasn't covered, well, surely you should have known that it wasn't going to be covered, I'm not going to pay for it." We chase them down, we dispute it, we try to get something, but in the end, many times we don't get paid. There is the third bucket of true financial hardship, and we have empathy. We have a heart for these patients. We have financial programs in the company if we can identify the patients ahead of time. Some of this we write off, and some of it is paid over time. The rest of it is just other reasons. We can't find the patient. They gave us the wrong address.
That's why we start to ask for driver's licenses now, so we can get the most accurate information, most timely information, and then a bunch of other reasons. All told, it's $300 million of potential revenue that we don't get into the company today. How do we fix it, and what do we do it? The first and most important piece starts with getting rid of paper requisitions. I've talked about this in the past, and in the past, I've talked about it as a cost savings. And it is a cost savings, because if I get a paper requisition, we have to have somebody in Quest Diagnostics enter all that information into a system. Rough order math, it costs us about $1 a req to enter that information. You can do the math.
38% still come in on paper, 38% of roughly 150 million just on the clinical side of our business, and it's easily a $50 million cost savings to the company. As important, though, it allows us to get good information. I mentioned today, 4% of the requisitions that come in our door have missing information that don't allow us to bill. When we look at that missing information rate on paper requisitions, it's over 8%. It's simply because doctors don't take the time to fill in the information requirements, and there's nothing I can do to stop that order from coming in. At least with an electronic order, if you haven't given me the right information, if you haven't put it in, I'm going to block you from sending me that order. I won't allow you to transmit until at least you fill out the field.
Once you have filled out the field, I can go check the quality of that information. I can send it up to a payer. I can see if, in fact, you are part of the plan, if you are eligible for the testing that's being ordered. Very, very important that we continue to drive this rate. We're at 72%. We're going to continue to improve it. It's not easy work changing the physician habits and practices, more and more, the EMR vendors continue to help us as they penetrate these offices. I want to give you a sense that we actually have made improvement here. On the left-hand side, today, when a doctor orders lab tests, about 50% of the time, the doctor still does the draw or collects the urine in their office. Okay?
About 50% of the time, the doctor said, "We're no longer going to provide that service. Go to Quest Diagnostics. They'll do the draw. They'll collect the urine." On the 50% that we collect, you can see it's only 30% of that patient concession, that bad debt. Okay? It's only $90 million. If I go back and look five years ago, I can assure you this was closer to 50%. With these tools that we've implemented in our patient service centers, this real-time adjudication, I'm now able to confidently turn to that patient and say, "Yes, you're a member of that plan. Yes, the doctor's tests that have been ordered are either covered or not covered." At the end of it, the payer actually sends me information that says the patient will owe this much money.
With that information, our phlebotomist has the confidence to now turn to the patient and say, "You're going to owe $54.23." Not, "Would you like to pay?" "How would you like to pay?" It's changing the paradigm of healthcare. Most people think they can walk into a doctor's office, get the service, and we'll pay you later. We cannot continue to take the kind of financial risks that we've taken in the company, and we're committed to solving this. How do we hit the other 50% where the client, we never see the patient because the physician is doing the draw? We're giving them the same tools. We have this Quanum suite of tools. We give this real-time estimation. We're rolling that back on a trial basis right now with a subset of physicians.
You might say, "Well, why are physicians motivated to do this? Why would they want to do it?" Because when the patient gets a surprise bill, generally the first person they call is the physician and complain to the physician's office, "Why did you order a test that wasn't covered?" Then they complain to us obviously as well, because we're the ones that are sending them the bill. The physicians are motivated to do this. We've got to work it into their workflow of the office. In the end, it provides the patient a real benefit, it provides the physician a benefit, and it provides the payer the benefit as well. Okay, make sense? Look, we think there's significant opportunity here.
We're going to continue to reduce those denials through this real-time adjudication, and we're going to continue to work on the patient concessions. We'll tell them what the price is and then ask for that credit card up front, so we take zero billing risk. We've talked a lot about digitizing the company from a patient standpoint, physician standpoint, and some of our own internal processes. Why do you digitize? I think you've all read the theory of the case. One is it's what consumers want, it's what physicians want. When you digitize a process, you also have the added benefit of taking cost out of our end. Some simple examples. When physicians order supplies and they give it to us on a fax paper, I have to have somebody else in the company that's going to enter that data.
When they give it to us electronically, it's easier, it's better quality, and I no longer need someone in Quest Diagnostics to manually enter that data. That's the theory of the case. We've talked a lot today about the digital clipboard, and we've moved our process to checking in from an iPad. It sounds rather simplistic. It wasn't exactly brain surgery, but I want to give you a feel for how this has really transformed some other processes in the company. It's now deployed at 2,200 PSCs. First, I got to tell you that the patients absolutely do love this, okay? Because now you walk into one of our patient services, you check in, and we're going to tell you the estimated time to when you're going to be seen.
The other thing it does for our phlebotomist is in the old world with a clipboard, they would walk out and they would call you as the patient, and if you came in at 9:15 and your colleague to the right of you came in at 9:20, you just think you ought to go first. If he had an appointment at 9:20 and he came in after you. He's going to call in first, then you're going to stand up and say, "Well, wait, what about me? I came in before he did." Our phlebotomist would have to sit there and negotiate and navigate these conflicts in the waiting room. Now we just tell you where you are in the queue, and it might be hard to see on there, but you can see we call out the people that had an appointment.
If you came in after the person who didn't have an appointment and we call you first, then logically, the person understands, yeah, they have an appointment. It provides you knowledge. Now, the other thing is, if there is a 20-minute wait time and you're in a Walmart or you're in a Safeway, you can go out and shop. In fact, our retail vendors actually don't mind long wait times because it helps them, and you get out there and shop and buy some of their goods. Good for the patient, good for our phlebotomist. Now that we have digitized this process, the other thing we can do is we can monitor on a real-time basis. Our supervisors who look after roughly 30 PSCs a piece, they can monitor the wait times real time. On the bottom, you see the green bars are the volume.
You see the appointment wait time, very low, under 10 minutes. You can see in this particular case, we had a lot of patients that came in, and the walk-in wait time continued to build. Okay. Our guarantee is to try to keep that under 20 minutes. In this case, it didn't work. Picture now a supervisor in Manhattan who's responsible for 30 PSCs. We can make real-time staffing movements. We have floaters that just go from PSC to PSC, depending on where the demand is. A supervisor sitting at their desktop can actually direct a phlebotomist to a site where the wait times are long. The other thing we do is we learn. We use real-time machine learning.
We know the demand patterns that are coming into our Patient Service Center, we can make real-time staffing decisions, we can take some of the staffing decisions out of the hands of the supervisors and tell them exactly what they're going to need at that facility next Tuesday at 9:00 A.M. Really good for our supervisors. Where are we going beyond this? You can get online today, if you need to go get blood work, you can click on one of those green arrows, which shows our PSC, you can click, it'll show you exactly what the wait time is in that Patient Service Center.
If it's a bit longer than you want to wait, you can click on another one, if they have a shorter wait time, you can go and choose to have your service done there. All of this is online. I encourage you to take a look, you can, next time you come to Quest Diagnostics, please use it. Where do we go beyond this simple eCheck-In? Appointments and pre-registration. Once we get an electronic requisition from your doctor, the minute I get it, I'm going to send you a text. I'm going to say, "Welcome to Quest Diagnostics." I'm going to put an appointment scheduling link in there, I'm hoping you're going to make an appointment because if you make an appointment, you're going to get better service.
Once you make that appointment, I'm then going to send you some information that I'd like you to fill out ahead of time. Provide your driver's license, provide your insurance card, your date of birth, all the information that you actually provide to us when you come into our Patient Service Center. In that typical 15-minute experience when you come in, about 5 to 7 minutes of that is wasted gathering information. If we can get that information ahead of time, one, it's going to help the patient. You don't have to provide it once you come to our Patient Service Center. Second, it's taking work off of our phlebotomist plate so we can shorten that window from 15 minutes down to 10 minutes. That's the goal with what we're doing here. Once you do that, we're going to send you a confirmation.
Use that to check in. If it's two weeks before your appointment, we're going to text you to remind you. If it's one week out, if it's one day out, we're going to send you reminders so that if, in fact, you can't come tomorrow morning at 9:00 because something came up, you can reschedule the appointment to when it's convenient for you. All kinds of nice consumer things that we're doing to make the experience better. This simple little project of replacing a clipboard with an iPad, here's what it's led to. Certainly patient convenience, patient satisfaction. They know exactly how long they need to wait. If they don't want to wait, they can go do something else. Operational efficiency. It's allowing us to take a 15-minute time slot down to 10 minutes. We can process more patients with the same amount of labor.
There's a $60 million savings there. Our phlebotomists absolutely love these tools. They didn't go into this business to enter data into computers. They didn't go into business to navigate conflicts out in a patient service center. They came into this business because they want to care for patients. We have similar types of digital tools for physicians. How do physicians interact with us? In the old world, they'd send us requests for supplies on paper. We'd have to enter it, send them the supplies. Results calls. They still do call us for results. You really never, ever have to do that, but they still do. All of our results are online. Many of them don't use it, we continue to try drive that down.
What we just introduced over the last year, if you collect your own blood and urine, you collect your own specimens, you used to have to call Quest Diagnostics if you weren't a routine customer for us to come and pick that specimen up. You don't have to do that anymore. It's an Uber-like service. You get online, request a pickup, we send you back a confirmation and tell you exactly when and where the driver will show up. It's great for our drivers too because we can take that online request, funnel it out to the driver that's actually nearest where that physician office is. What does all this save us from a digitization standpoint? On the patient pre-registration, I mentioned a $60 million number. There's $60 million worth of cost. We shorten that window from 15 minutes to 10 minutes.
eRequisition, driving more paper requisitions to electronic requisitions, $25 million. If we take it all the way, there's $50 million of opportunity over the next three years. There's easily $25 million to get. Physician office processes. Don't call us for supplies. Don't call us to pick up a specimen. Use the digital tools. It'll take out about $5 million worth of people that are just answering phones. "Yes, I'll come and pick up your specimen." Then our call center optimization. We still get about 25,000 calls a day inbound, people looking for results, looking for other where your PSC is, we make about 15,000 calls out a day. That is an old archaic process of we call a physician to tell you that you have a patient with a very high abnormal value. It's an outdated practice. We still do it. We're going to digitize that.
There's ways to confirm that the physician has actually got the data, received the data, and will take action when we send that stat alert. All told, we see about another $120 million of cost to realize here as we continue to digitize these processes. The final benefit, obviously, a patient employee satisfaction is immeasurable. Okay, let me move to the next bucket, standardization and automation. So very near-term opportunity that we work on today. One type of testing we do called immunoassays. These could be tests that detect AIDS, HIV, tests that detect hepatitis C, vitamin D testing, hormones, testosterone, PSA. These are some common tests that are referred to as immunoassays. There's about 73 distinct immunoassays in the company that we offer, and we do that work on seven different platforms that we get from six different suppliers. You know these suppliers.
It's Roche, it's Siemens, it's Beckman Coulter, it's Danaher, it's DiaSorin, some of the big players in this industry that supply us tests. Why did we go with six suppliers for all these tests? Well, it's how the industry evolved. It's a relative new type of testing, using these immunoassays to do this testing. For example, the first vitamin D testing was done by DiaSorin, and we had to buy their platform in order to do it. As this industry has matured, Roche can now do everybody else's immunoassays. DiaSorin can do a bunch of other folks' immunoassays. Beckman Coulter can do everybody else's immunoassays. We don't need these seven platforms anymore. We don't need 500 different units in the 16 regional laboratories that we have. We run a competition. We're going to get it down to one supplier.
We're going to save a lot of money as we work the competitive nature of the deal that we put in front of these suppliers, and easily over five years, it'll save us about $50 million. These are the types of things that generate, on average, about $40 million to $50 million a year in savings. We purchase about $2.5 million worth of materials a year, and we target 2% to 2.5% material cost reduction, namely through price reductions, but also through material utilization reduction as well. This goes a long way in terms of meeting that $200 million a year goal. I know a question was asked earlier about the Quest billing system and how many different billing systems you have left in the company. Let me start with our laboratory systems, because the two are intricately linked.
We made a commitment to standardize 100% of our regional laboratories. We're almost there. We started New York, New Jersey. It's our Teterboro facility at Pittsburgh. We started in 2018, will be completed in 2019. Those are the last two sites that have a non-standard billing system. After we complete these sites, 100% will be on one Quest laboratory system, 100% will be on Quest billing system. Our major esoteric sites have also converted to our Quest billing system. Other than that, the only ones that don't are some of the small acquisitions that we recently did. Why do we spend money in this area? Why is this standardization important? For several reasons. One, when you get down to one system, billing system, one lab system, it helps us reduce the IT resources, IT investment to maintain disparate systems.
Two, it gives us the ability to move work around the network to take advantage of capacity in Miami. If our capacity in Tampa is getting filled up, I can quickly shift work over to Miami where I may have capacity. Let me give you a real-time example of how having three labs in a geographic region really, really helped us. These were some pictures snapped by our laboratory leader in West Hills, which is our big mega laboratory in the Los Angeles area. Those red zones. Well, one, you can see the fire. This was taken from the parking lot of the laboratory, and I think this was a Friday night in early November. You can see how close we were to the fires and the regions that were being evacuated.
A portion of West Hills had to be evacuated that night and over that weekend. At about 9:00 that night, the lab leader called me and said, "I think we got to shut this lab down because our employees are getting really nervous. The fire is about a mile away. It is getting really, really smoky." At 9:00 on a Friday night, we're sitting in a laboratory with about 40,000 specimens, either in that laboratory or being delivered to that laboratory at that point in time. What do you do? You got 40,000 specimens that you could potentially not be able to service, that you might end up throwing them away. We lost almost none of them. We have a lab up in Sacramento. We have a lab in Las Vegas. They're on the same Quest laboratory system. We packaged up 40,000 specimens.
We drove many of those over to Las Vegas. We put them on an airplane out of Burbank up to Sacramento. We were able to process those specimens, maybe not by 9:00 that next morning, because each of those labs had their own demand that they had to service. We were able to get the results out by the next day for sure. Yes, we didn't make the 8:00 o'clock-9:00 o'clock turnaround time, but we didn't lose a specimen in the process. This is why having our laboratories on one common platform is so important to us. Okay, the last piece as we optimize processes, procedures, and how we do work across the company. Continuous improvement, as I mentioned up front, is a way of life in Quest Diagnostics.
Whether you call it continuous improvement or Kaizen, we continue to run events across our laboratories to ensure that how we do testing, how we do logistics, how we do draws is consistent everywhere you go in Quest Diagnostics. This is just an example in our prescription drug monitoring area. As this business grew up, and it grew up very rapidly as you know, we didn't have complete standardization across our laboratories. We had a team that came into our Valencia operations out on the West Coast, looked at the workflow being done, tore it up, value stream mapped it, took work out. In the end, where we were once only meeting 50% of the turnaround time requirements when the work was completed and the ideas generated, we're now 95% there in terms of meeting the turnaround time requirements.
Improved quality, improved cost, and improved our customer delivery to our physicians. Now, some of you have been up to our Marlborough laboratory up in the Boston area. You heard this story, if you were here last time, we collapsed 4 laboratories in the Connecticut, Massachusetts area into one big mega laboratory. Why do we do that? Because we can get more efficient. When we built out this new laboratory, it's one big, massive open environment. We can automate many of the labor manual processes in that laboratory, and it saved us a significant amount of money and really helped us reduce our cost of testing in excess of 10%. We put out a press release earlier this week. We're going to do the same thing here in the east region that we sit. We have an old, outdated mid-size laboratory in Baltimore, Maryland.
We have an older mid-size laboratory in Philadelphia, and we have a rather large facility in Teterboro. However, it's dated, it's cut off. It's very hard to automate many of the processes just given the structure of the building itself. We announced plans to build an all-new laboratory on the old Hoffmann-La Roche campus not too far from here in Clifton, New Jersey, and that work is underway. In the end, we're going to collapse those three laboratories into one laboratory. It'll process in excess of 80,000, 90,000 specimens a night. We'll improve the productivity about 15%, 30% greater capacity, and we'll be able to double the throughput that when we look at the throughput of the three laboratories collapsed into one, and we'll double the throughput in this individual lab. We'll pick up a lot of savings as we execute this project. What are the takeaways?
First, I hope you see the power of this digital transformation. It is really good for patients, really good for our providers, and it helps drive efficiency within Quest Diagnostics. Second is simplifying how customers engage with us. Also, it just simplifies how we do the work. Hopefully, I've showed you that this target of $200 million of savings a year between the patient concessions, between the denials, between the digitization opportunities, between the standardization and optimization work that we do across our value chain, we believe that there's easily $200 million worth of savings a year over the next three to four years. With that, we're done with the formal presentations, and I'll invite my colleagues up for a little Q&A.
We'll start with Derek.
Great. Thanks. Two questions, one, I'm just getting some emails from some clients. I'm getting asking some people explaining one more time why you don't think the issues that are impacting in terms of collections and accounting that you saw in Q4 are going to bleed over into 2019. I think just people want some more clarity on that.
Well, first off, it's never been an issue before. The second thing is we are going to get to the root cause once we figure out whether there is, in fact, an issue and to what extent it is. At this point, there looks like there could be, and that's why we're communicating it. You have our commitment to get to the root cause, and therefore, as we enter into 2019, we will put our plans together in place. We'll put together our guidance and everything else that we do that will ensure that this won't happen again.
Great. The other question I have is on advanced diagnostic testing and certainly on the reimbursement for that. I mean, right now the way PAMA is set, if you're a CLIA lab and you've got your own test, and you're offering it, you get some very nice price premiums for doing that. Obviously, if you see things like BRCA where you've got competition, pricing can come down pretty dramatically. I guess, how do you see sort of the reimbursement rate for testing and advanced testing going forward? Obviously at some point, everybody and their dog is going to be offering a liquid biopsy test, that's going to become something where you're probably going to see pricing come down a lot in.
I'm just sort of thinking how you're looking at the mix, the volume, and the price and all this because obviously, these are expensive tests, and the more they get utilized, the more pressure it's going to put on the system.
Yeah. We absolutely see that same declining price in genetics testing as well. You've seen it, whether it was the stacking codes reimbursement change in 2013 or now the pressures that you described. That's exactly what we've planned for. Part of our strategy and the operational efficiency in genetic testing is continuing to take our own cost out. We're in very strong position today. This is a highly profitable part of our business. It's accretive to Quest overall. We continue to not only have the operational rigor but the scale, which is really what underpins the ability to do genetic testing at the right profitable price. We're in great position there, we are planning for those price declines.
With Dan.
Couple of questions on trying to quantify the increased plan access. First off, is it right that you're looking for another $1 billion in revenue from increased plan access? I think that was 25% of the $4 billion over the next 3 years. If so, how do I square that with your guidance? Secondly, is it right-- Everett, I think in your presentation you quantified 25,000 near-term patient opportunities or doctor opportunities or whatever it was, $700 million. About 40% of that was low-hanging fruit, the Quest loyalists. Is it right to think about $300 million in new revenue from the enhanced plan access in 2019? Thank you.
First, your math is correct, $4 billion market. We said our commercial share today is roughly 25%, there's no reason why we don't expect to capture 25% of the future access. I think your math is good there. The issue is just timing, how quick we think we can get that 25% into our camp. Now realize it's not just us going out, by the way, against the other independent labs. There's a big chunk of that $4 billion that sits in hospitals, and that means we have to work with UnitedHealthcare to design programs to incent physicians and patients to not use the hospital labs, and Steve showed you the pricing on those hospital labs, but use one of the lower cost lab networks like Quest Diagnostics. Your second question about the near term opportunity. We showed you 300,000 accounts. We serve 170,000 of those.
Of the 170,000 that we currently serve, we looked at 25,000 high volume accounts, and we know that those 25,000 high volume accounts account for $700 million worth of UHC business. We know the accounts, we know where they are. We said little less than half of them are very loyal to us, and the remaining are mixed users, is what we call them. Will the loyalists, and you quantified that correctly, will they instantly drive that business to us? We think a lot of them will. Will 100% of them? No. Some of these loyalists actually, you know what, 80% comes to us, 20% goes to another competitor, and maybe they want two lab providers. We think a good portion of it will come to us.
Yeah. The only thing I'll add is it's not a hope type thing. We have a very rigorous process in the field to ensure that we're not just hoping for January 1st, 2019. We've been working on it since May 24th of using a very repeatable process to call on the physician. Once that office lets us know that, "Hey, listen, we're coming to Quest Diagnostics," we have a detailed checklist to ensure that everything is done, so when they are ready to flip the work, everything happens seamlessly. It's happening very-
Dan, the way you should think about it is that's the opportunity, and the reason we think it's important for you to share that is as you think about when we come out with guidance for 2019, and after us presenting this 3%-5%, and some of that, obviously 100 to 300 basis points coming from organic, how does the health plan access play into it? Is it plausible that they can get this kind of growth with the pricing headwinds they're facing the next couple of years? It's not when we say there's a $700 million chunk and this $300 million chunk and the $750 million chunk, it's not in any way committing exactly when we're going to get that, exactly what proportion we're going to get.
I do think it's a fair statement, as you said, and Jim verified, that if there's $4 billion of opportunity, we'd be extremely disappointed if over time we don't get our fair share of that, but we haven't exactly timestamped it. You can hopefully walk away from this understanding there's a ton of opportunity for us to grow organically with this expansion of access.
I mean, Mark, just is the issue in squaring this with guidance, is it really just timing, or is there some weaker underlying level of volume that you're assuming in this midterm guidance?
We never give guidance before the earnings call. We're not changing that at this point. It's not a change in what we've done. Obviously, the more information we have at the time that we give guidance, the more confidence you can have it. Why not give ourselves a couple of weeks into January, see how things are going, when we come out, we hopefully have some things we can share. Jack.
Thanks. Jim, you laid out the tale of the hospital outreach opportunities that you see on the market. I was curious, within those discussions, where you're seeing the most interest in terms of sale. Are the bigger outreach labs, actually thinking about scaling up in terms of in the face of some of the pressure? Do you think there's interest there in sales as well?
Yeah, I'll give you my initial thoughts. My colleague, Dermot here, certainly works with the systems that are to the left on that chart, the larger mega deals. There are some big health system opportunities out there that we're in discussions with. A few of these health systems are struggling financially. Selling their outreach book of business generates some near term benefit for them, that may be a motivator. On the right-hand side, the 2,000, 2,500 hospitals that are under $7 million, it's just so insignificant to what they do. With the pressures that they're seeing from a price standpoint, not only PAMA, but commercial payers, their thought process is it's just the right time to do it, take advantage of the opportunity while it presents. Dermot, I don't know if you have anything.
Yeah, no, I think that's right. I think we are seeing a lot more interest in the bigger systems, and we've certainly got half a dozen large potential deals. Still early, I think the more sophisticated health systems understand PAMA better. They understand their cost structure better. They really have been rethinking what their core capabilities are, they're more primed to say, "We don't really need to control lab. We just need the information, and we need it at lower cost." I think we're seeing good movement. There's always a lot of consultants involved. That in general can be a good thing, but it can extend it. There's always a lot of dialogue around joint ventures, which I think can complicate it.
We're pretty bullish on what we're seeing, and I think the smaller end is going to be more a case of getting them to understand what it really means for them. For a health system, the Medicare volume typically is going to be like 25% of their volume. In a lot of cases, it can be 40%.
Some of these health systems are very, very overweight in terms of their Medicare exposure.
Yeah. Two points on that. One is their exposure to Medicare is more than us. Ours is about 12%. It's a much larger percentage of their book. Second, as you might hear, some large healthcare systems that can have enough economies of scale to run their own labs, those are a handful or two. Okay? Very few can actually compete with us on the basis of cost and quality.
Ricky?
Thank you. First topic is on invigorating the cost savings. When you think about the cost savings that you identified and that are included in your long-term guides through 2022, what % of it is within your control versus depends on changes to patient and provider behavior?
Just trying to run through some math in my head. I think 60%-70% of it is in our control. Even changing physician practice is in our control. We go into these physicians that are giving us paper recs, we try to convert them back. Many of them already have EMRs. They've just gotten lazy and defaulted back to paper. The administrator in the office changed, they don't know how to use the system, we go back in, retrain them, the electronic recs start to flow. The behavior change with patients giving us a credit card is one that is a delicate balance and that we continue to work that with our payers. Many of the payers are coming around and now allowing us to demand a credit card as opposed to making it optional, because we'll have that conversation with the payer.
If we can't collect a credit card, maybe you would like to backstop that bad debt or patient concession, they really don't like that alternative. Again, I use the hotel industry as a comparison. You check into a hotel, you've already prepaid it, they still want your credit card, most people don't think twice about flipping it out to cover, quote, the incidentals. That's the attitude we're trying to drive through patients. It's an expectation that you do it. By the way, dentists, emergency room, outpatient types of settings, they're all demanding credit cards as well. The whole industry is coming around to this.
Ricky, to your point, there's a lot of this that we do control. There's some of it that we have to influence, I know Jim would say this, he has that goal of 3% or $200 million a year, him and his team, working with all of us, have delivered against that goal, even though you don't directly control it. Clearly in our sights.
That's what's important, is that it's not as if the we have to influence work is in front of us. Some of the we have to influence work is behind us, and we got it done. We're moving it.
Yeah.
The next question, I'll go back to the receivables, because I do think that that's really the area where all of us are focused. I understand that at this point, you don't necessarily have a handle of why the receivables have spiked. I think that what could help us, and help us just do the analysis ourselves is, if you give us some data points around the aging of the receivables. The receivables that you're writing off, were there at 180 days? Were there at 270 days? What are the buckets? What % of the receivables that you have on your book today are above 180 days?
Yeah. Very little. We actually don't have the ability to age our net receivables, so it's really gross receivables. What that means is, when we bill, we bill at list price. This is all around the third party. For our third-party payers, we're generally paid within 30 days. As said, there's some denials that we appeal and go back and forth. We have not seen an aging in our receivables to the third-party payers. You get the patient piece. We have a very rigorous process that's applied by Optum that, as they send out the patient bill, the clock starts, and a combination of as those patient receivables age, we start reserving against them with a very straightforward formula.
After a certain period of time, we write them off completely, and after a certain period of time, we actually sell them to a collection agency. We've not deviated from that once at all. This is not an aging of receivable question, Ricky. It goes back to what I said, which is our methodology that we have to make a bunch of assumptions. To some extent, those assumptions could have been wrong. When we made an assumption back in the end of July, and we assumed that our denial rate was going to be X, and it was X plus something slightly going forward, we don't know that until the cash starts coming in and we see that there's an issue. It's not necessarily an aging issue.
To some extent, as we get into this, it could be that our revenue actually shouldn't have been as high. We shouldn't have set up these receivables. The good news is it's all within the current fiscal year. It's not an issue that carries over from last year, as I shared before. As we get to the root of it, we're going to figure out what exactly drove it. As I said, going forward, when we notice this, then we start getting more conservative in our revenue accruals to make sure that we're not continuing to go in that direction. Certainly, as we got into the fourth quarter, the rate at which we're accruing that revenue, we're being more conservative. We're assuming there's more denials.
It's what we call the disallowance rate, the difference between what we bill at and what we get paid from third parties. We've actually built in a higher disallowance rate just to make sure that we get on top of this.
Just to clarify that, when we think about the guidance that you've provided, the top-line guidance, does that already factor in that higher denial rate? Right, because the organic-
Sure
growth rate somewhat slowed down. Is that why it slowed down? Is that already kind of building to guide?
I think we're getting a little granular beyond our capability, Ricky, quite frankly. This could be a very temporal issue that we're going to address. Until we know what the issue is, higher level of denials, as I said, quite often it's inappropriate. We go back to the payer and we say, "Hey, you shouldn't be denying this." Ricky, there's enough range within 3%-5% CAGR over four years that whatever scenario this plays out, I'm comfortable we're not being overly aggressive. In fact, if anything, as you've seen the growth opportunities from access, I think you see there's a lot of opportunity there.
As we have to make a call on a multi-year guidance, something like this issue while it's very painful because it's acute and within one quarter in one fiscal year right now, and it feels horrible, and certainly we're going to make sure that this doesn't happen again. The reality is in a four-year CAGR, this is largely noise.
To go back to something Mark said earlier, just to reinforce it, one is what we're providing to you is a four. Number one. Number two was asked earlier this morning, is this the new basis to plan on for 2019? The answer is yes. The growth we're assuming for 2019 and 2020, and as part of our outlook, is based upon the revenue that we're estimating now for 2018. It's not as if it's a one-time deal or a one-time effect. It is in the base of 2018.
Tim.
Thanks. Wanted to go back to the M&A outlook. We know there's a huge hospital outreach opportunity, but aside from that, which testing categories or areas within advanced diagnostics are the most attractive to you? Where do you see the puck going, Steve, and what capabilities would you like to add over the next three to five years? Is cancer diagnostics-
Yeah
really a big focus for the company? Thank you.
First of all, you remember we're taking the portfolio approach where you hear a lot of opportunities to grow that general diagnostics business. With the access changes, with the opportunities with hospital outreach, that is the core business, about $6 billion of the day, and we're moving more resources, and we believe there is an opportunity to continue to accelerate growth in advanced diagnostics. Also what we talk about is data diagnostic services or diagnostic data services. In both of those categories, we will be continuing to make investments in acquisitions. You saw the acquisition chart, and what I said is about 60% of the acquisitions actually is capability building. You should plan on seeing more acquisitions related to Carrie's discussion around advanced diagnostics as well as what we talked about with diagnostic data services.
Last year, we acquired a company called MedXM, which is positioning us nicely in a piece of what we talked about this morning. We also acquired a number of capabilities that Carrie spoke to in advanced diagnostics. You will continue to see those. Specifically, if you look at advanced diagnostics, because that was your specific question, clearly the biggest categories are the ones that have the most opportunities. If you look at what we have around oncology care, where we have gaps, you'll see gap-filling opportunities for us. Also women's health. We've added some pieces. There's more to go. I would say those two. Anything you would add to that, Carrie?
Absolutely focused on the capabilities building because services unlock the growth. Women's health, cancer, and some highlights into neurology, I would add as well, cardiometabolic. You're going to get every clinical franchise we cover, there's such big opportunity in genetics and the capabilities building we can do can absolutely unlock the accelerated growth potential.
Yeah, I just want to make a couple more comments that maybe will give you more confidence, not just you, Ricky, but others. First off, when we build our plan and we communicate our guidance for 2019, it will absolutely start with where we're exiting 2018, okay? That will be the basis for what we put together. The other point was what we said earlier was if you have foresight to this, you build a cost structure that's appropriate for that level of revenue, that level of gross margin. The other thing is around denials. We have a very strategic conversation going on with one of the major payers right now with the objective of completely eliminating denials. They want to do it as much as we do, okay?
Whether we get there or not, we'll see, but I can tell you denials are not just an issue for us. They are a major issue for the payers. Because remember, most of them are not fully insured, so you may think, well, denial is good for the payer because But no, they're administering the plan for an employer, and it's a major source of dissatisfaction for everybody in the ecosystem. We have one of the major payers so interested in this that right now, because their administrative cost and their pain, and they actually see this potentially as a competitive advantage for them. They want to talk about what can we do together to completely eliminate these denials. It should not be seen as, hey, yeah, you've had this headway you've talked about this year.
Vitamin D obviously is a separate issue around the view that it should not be used for screening. I get that, but it's not just a Quest issue on denials, it's a payer issue as well. It's on their radar, and they're trying to do something about it as well.
Time for a couple more questions. Mark.
Great. Well, thanks, guys, for the presentation. The 1%-3% organic revenue growth guide certainly seems to include the benefits of HCA, Ancestry, Walmart, and Safeway. I guess you've had the relationship with HCA Colorado for over a year or so, two years perhaps. What's barring you from potentially expanding that? I guess, what does HCA need to see-
Yeah
before they trust you to go?
Yeah. First of all, as you know, a big for-profit, they're a professionally managed organization. As many professional organizations do, they start with a pilot to see if it works. The Denver Continental division is where they started. We believe, and we believe they would say, based upon the conversations, that they feel good about that pilot. Been to Nashville over the course of the last year. My hope is that with that success and that pilot, we could extend it through more of their divisions at HCA. I'm also hopeful, given that proof point, there'll be other for-profits that we could tell you about in the future.
Any sense on timing of when you might know that that could expand or not?
Yeah, I won't foresee what they might do. They just had a change, too, with their CEO and the management change. I'm hopeful that when they see the data of what we've delivered, they'll extend it, because that's typically how they do things.
Understood. Last one from me. Steve, obviously you're very active with ACLA. You've indicated plans to work with Congress. Can you just give us an update? Seems to me that the stock is not assuming any potential change to PAMA whatsoever.
Yeah, it is.
Just give us a sense of what's.
Sure
actively going on.
Well, first of all, we need to plan on the worst, okay? I think that's what everyone's dialing in. We're not accepting that. Okay? We're not accepting that as a company, we're not accepting that as a trade association. First part of this is, we filed the lawsuit. First judgment in the lawsuit for jurisdictional reasons, not on the merits of the case, was ruled against us, but we have appealed that, so we're moving forward with that appeal. Second is we continue to engage with CMS. I'm actually hopeful there's some new leadership at CMS. We were just there a couple weeks ago. They are working with us. They understand where there's gaps in the data collection process. This latest change with capturing more of the hospital data in the data collection was a step in the right direction.
Frankly, they've admitted they haven't collected enough data with reaching out to us for that. Finally, is we're working all the different committees in Congress to tell them, in fact, we support this market-based pricing, but unfortunately, CMS got it wrong, and they're going to need a legislative solution to make sure they get it right. We keep on working those three prongs. I tell you, myself and my colleagues on the board and throughout the trade are trying to work this in an active way. It's an active part of what we do in Washington.
Time for one more.
One here.
I'm not looking for guidance for next year, but could you just frame for us how we should think about your uses of free cash flow for next year, given the fact that there will probably be sizable opportunities for some labs that can't afford to be in business?
Yep.
Just sort of putting that against the value of where your stock is today, and how we should think about that.
Absolutely. You want to take it first, then?
Sure. If you look at the environment of laboratory providers that are impacted by PAMA, we're not going to buy POLs. We can't buy POLs, it's more likely that as they feel this pressure, they're going to close up, and we're happy to come in and help serve their patients. You've got independent labs that absolutely are feeling pressure. We've done some of those acquisitions recently. Wouldn't be surprised that we have some additional independent labs. I really would expect the major momentum to come through hospital outreach. As you kind of cycle through this first year and then do a look back into the slide that Steve pointed out where 80% of the C-suite is not familiar with PAMA.
It wouldn't be shocking, because when you look at the revenue from their outreach business as part of their overall hospital system, it's just not big enough to necessarily be on the radar. If you're the laboratorian running that business, you're not very likely to raise the red flag and say, "C-suite, I've got a problem," because that could lead to a transaction. It's not entirely surprising that it's not been on the radar, but it's going to be. As they start looking back and this starts flowing through, especially into next year when it's more severe, as Dermot had shared and others, that typically a hospital system has a larger proportion of the revenue exposed to Medicare. Medicare pays for over 20% of the laboratory work in the country. We only have about 12% of our revenue from Medicare.
I believe our chief competitor is the same zip code, by definition, everybody else is way overdeveloped on Medicare. I would hope, and based on our pipeline and based on other things that we see, that we would deploy a significant portion of our free cash into acquisitions, and we think hospital outreach could be a major part of that.
If we could find real growth and we can have a positive accretive ROIC, we believe that's a good value story for our shareholders and we'll do the deal. If we can't, we won't do the deal. We have to find those processes to make money.
Okay. All right. Well, that is it. Steve, do you want to close us out?
Thank you very much. It's been a good day. We appreciate your time and attention. When we talk about all the opportunities, we think there's a lot of opportunities. We brought you through our strategy, which we think we've worked in a great deal over the last several years and made a lot of progress, and hopefully you do as well. As importantly, you saw the team. Okay. You saw the team, and the team's been with us for a number of years. What you see in this team is a team that's confident, a team that's competent, and a team that is committed. Equally, you see a team that is passionate. You need to have a good opportunity, you need to have the strategy, but you also have the team.
With that, I'd like to just remind you of what we said at the beginning, so you can leave this in your mind as you leave here today. First of all, we have a fabulous opportunity with access. If you haven't heard that today, please hear it now. Access is one of the biggest opportunity we've had for over a decade. Second is we will go through a structural change in this industry. There's no question in my mind. We have catalysts now in the marketplace we've never seen before. That's affording us an opportunity to buy at least 2% of revenue growth per year. That will be accretive to revenue, will accretive to our ROIC. We will make money. We believe PAMA has two sides of the sword. On the one side, Mark described it will be hard because we'll have to make it up in cost.
Hopefully, you saw an opportunity that we have more opportunity in front of us to get more efficient in how we run our operation and run it better. At the same time, the other side of that opportunity is it is going to be an accelerator for the consolidation that we see in this marketplace. We also believe that hospitals need our help. We've been on this for about four years. This is a fleeting opportunity. We built a business around that. We're engaged around hospital strategies. We're engaged with the CEOs and CFOs that need our help in thinking through their labs strategy, and we're a proven partner in delivering on that, and that affords us a fabulous opportunity for growth. The brand that we have in this marketplace is the strongest brand. The brand is getting stronger every day.
Increasingly, the brand in healthcare is the reason why patients and physicians will choose Quest Diagnostics in this category. Hopefully, you see that, you understand why we're behind it, and remember that only a few large players can make those kind of investments. Finally, you think about the portfolio. I hope we've made it clear we have a strong, growing, profitable business we call general diagnostics, but it affords us an opportunity to invest in advanced diagnostics and the fabulous opportunities around data and services. Those are going to grow faster than that core. Collectively, that's why we feel confident around that 3%-5% top line growth and mid-single digit earnings growth going forward. Thank you for your time, thank you for your attention, and thank you for your support. Have a great day.