U.S. laboratory company Quest Diagnostics is eyeing hospital labs and smaller diagnostic facilities for potential acquisition as the coronavirus pandemic sets the stage "to help drive industry consolidation," CEOÂ Steve Rusckowski said Thursday.Â
Rusckowski said he expects more hospitals to "be open to discussions" in the months ahead. Quest recently acquired "substantially all" of the diagnostic labs from Houston's Memorial Hermann Health System. Hospitals across the country face new and pressing challenges as they stretch to meet the demands of the U.S. coronavirus outbreak, which continues to expand in a number of hot-spot states.
"At the same time, we all know that smaller regional laboratories have had their own challenges, which also produced more opportunities for talking acquisitions," he said on a conference call discussing the company's second-quarter earnings. "If anything, the pandemic could be an essential catalyst to help drive industry consolidation."
Much of the health-care industry has struggled as the coronavirus has displaced normal health-care services. Quest, which is one of the largest coronavirus diagnostic test manufacturers in the country, has played a central role in the U.S. response to the pandemic. But its revenue fell 6.4% during the second quarter from the same period last year as the pandemic disrupted other types of medical testing.
"We do believe there could be more acquisitions in front of us," Rusckowski said. "We'll have some natural recovery from the basic economy and as health care recovers and also through acquisitions."
Rusckowski added that the company expects a strong third quarter but there are "far more unknowns in the fourth quarter." The company, nonetheless, reinstated its full-year outlook, saying it expects 2020 revenue of between $8 billion and $8.6 billion. This outlook, Rusckowski said, incorporates the expectation that demand for the company's non-coronavirus testing services will remain below normal "at least through the third quarter."Â
Rusckowski acknowledged the company's struggle to keep up with testing demands amid the recent surge in coronavirus cases across the country. Demand for diagnostic testing has far outpaced laboratories' capacity to process and deliver test results. The company said last week that it's still able to process tests in a single day for "priority 1" patients, such as severely sick or hospitalized patients.
"However, our average turnaround time for all other populations is 7 or more days," the company said, adding that "this is not just a Quest issue. The surge in COVID-19 cases affects the laboratory industry as a whole."
Rusckowski said the company is able to process about 130,000 coronavirus tests per day and is working to ramp capacity up to 150,000 in the next "couple of weeks." The company is considering new technology to further boost capacity and to speed up turnaround time, he said, and considering how the country could use fewer tests more efficiently.
It's a critical issue, public health specialists say, because test results are currently being provided too late for diagnosed people to isolate or for health officials to adequately trace all their contacts.
The company is also in talks with businesses, colleges and universities about providing testing to screen incoming employees and students as some institutions prepare to resume at least some in-person operations, Rusckowski said.