COVER
STORY
10
2nd QUARTER 2014
In fact, in a bit over an hour, he’ll use the
word “people” 57 times.
‘Restore’ and ‘Drive’ with
a People Nexus
The five-point strategy at Quest
includes these mandates:
restore growth,
drive operational excellence, simplify the
organization, refocus on diagnostic
information services
, and
deliver
disciplined capital deployment.
Notice
what tops the list? For a number of
reasons, like many other health care
providers, the company has faced head-
winds to growth in recent years.
There was fallout when United
Healthcare, one of the largest payors in
the country, dropped Quest as an in-
network provider in 2007 and switched
to rival LabCorp. “A lot of people point
to that [as] a seminal event,” says Guinan.
Also, for a variety of reasons — from the
recession to revamped insurance plans —
consumers began to forgo medical tests.
Quest’s customers are medical practi-
tioners, hospitals, insurance companies,
employers, and individual patients, and
all those segments shifted their behavior
in this period. Hospitals bought up physi-
cian practices, while insurers and employ-
ers began designing policies that shifted
some cost-sharing to patients and em-
ployees, with the result that people have
higher deductibles and higher co-pays.
“There’s certainly statistics to point to the
fact that consumption of health care has
declined,” says Guinan. All these changes
impacted Quest’s growth trajectory.
While lab testing drives most clinical
decisions, the labs that provide biological,
molecular, gene-based, and pathological
testing form a fragmented market. They
include full-service providers like Quest,
and small, boutique labs handling the
more than 50 percent of the testing not
done in hospitals.
One way Quest is pursuing growth is
through newly created clinical franchises,
each with a general manager and estab-
lished around a particular health issue,
such as cancer or cardiovascular disease.
These organizational units are focused on
the customer: Is R&D pursuing the most
critical and highest-value innovation in
each testing area? Is the company getting
the new tests to market and are customers
aware of them?The ultimate goal is to be
highly responsive to clinicians, moving
as nimbly as the boutique labs can, while
providing a richer array of services. Quest
is also trying to enlarge its share of the
high-tech testing that hospital labs are not
equipped to perform.
Another growth initiative relates
to the company’s acquisition strategy.
Guinan projects 1 to 2 percent revenue
improvement every year by picking up
small, regional laboratories that are
accretive and strategically aligned. A new
sales structure is helping the company to
be more regionally focused as well, the
goal there being better customer service.
To
drive operational excellence
the
company is focused on reducing costs
—while improving standardization and
quality. Some gains are dramatic: Quest
is on track to deliver $700 million of
run-rate savings by the end of this year.
Based on his prior experience, Guinan
has played a role in coaching the
Get Out into the Field!
“Y
ou can’t
make great
decisions,
even if you’re working
with really smart people,
by sitting in the offices
in corporate headquar-
ters,” says Mark Guinan,
Quest Diagnostics’ CFO.
“You’ve got to understand
what the customers are
thinking.”
He learned the danger
of problem-solving
without input from the
field years ago when
he was working at
Procter & Gamble on the
Metamucil brand (which
had been acquired from
Searle). The company
had inherited a problem
with profitability of the
different SKUs and after
many weeks of work,
Guinan and partners
in sales and marketing
came up with what they
thought was a brilliant
solution. “It had to do
with relabeling the
product, putting doses
on it, and …
[in a balancing act] we
were going to do this
price change,” says
Guinan. Seven of the
SKUs would have price
increases and seven
would have decreases.
“It was going to be
great,” he says.
Guinan went along to
call on a customer in the
South and presented the
newly labeled products
and pricing. “We were
walking him through it
and we told him, ‘On
average this and on av-
erage that,’ and he said,
‘I don’t know what you’re
trying to do with this
on-average business. If
my head was in the oven
and my feet were in the
freezer, on average I’d be
quite comfortable.’”
In the end, Guinan and
his team reworked the
message based on the
customer feedback, not
“what we thought made
sense. One might think
they are always the same
— but they aren’t.”
ON AQUEST
“WE’RE REALLY HERE BECAUSE OF THE
GREATER PURPOSE OF WHAT WE’RE DOING,
AND THAT’S WHERE OUR PASSION IS.”
