After five years of competing in the direct access testing (DAT) market, QuesTest, the DAT arm of Quest Diagnostics, has called it quits. Here is the notice that has been posted on its web site (link here):
Important Notice to QuesTest Customers: Effective March 31, 2006, QuesTest consumer-selected laboratory testing services will no longer be available through Quest Diagnostics.
Below is an excerpt from an excellent article in the American Pathology Foundation (APF) newsletter (Winter, 2003) describing some of the trials and tribulations of the QuesTest business model in it early days. Link here.
Under its “QuestDirect” initiative, the company opened six retail locations at strip shopping malls in various markets in the Midwest in early 2001 with great fanfare. These lab stores were aimed at attracting consumers to walk in and order a lab test on their own and then pay by cash or credit card. However, low demand for the service led Quest to shut down all of its DAT retail sites last year. Quest spokesman Gary Samuels says that stand-alone retail lab centers turned out not to be an easy or cost effective way to attract demand. ...Meanwhile, Samuels says Quest has switched to using existing patient service centers as its “store front” for interacting with direct-paying customers. He says that this lower-cost model is being used in certain cities in seven states, including Nevada, Utah, Colorado, Montana, Missouri, Kansas, and Virginia. Kate Langevin, consumer health director for Quest, says the company is promoting QuestDirect in these markets through a combination of marketing brochures and newspaper and radio advertisements.
Beginning in 2002, QuesTest launched a new strategy for its DAT operations, using retail drug chains and grocery store chains to sell plastic cards representing various types of test panels (e.g., men's health panel). Following the purchase in a retail outlet, the customer would report to a Quest patient service center for venipuncture. Test results were mailed to the customer and could also be obtained on the web site. QuesTest begins offering testing services in Tampa, Florida and Columbus, Ohio, CVS stores in 2002 and also began to offer "Consumer Health Testing Services" in Connecticut with Stop & Shop in June, 2003. Links here, here, and here.
Throughout the life of QuesTest, there has always been interest in how Quest, a national reference lab with a market cap of $11B, could offer DAT services on a nation-wide basis given that such testing is not permitted in about half the states without a physician test order. Below is the explanation of how this was accomplished with the link here.
Quest Diagnostics contracts for a physician to review your test request to determine which tests are medically appropriate, order the test(s), receive a copy of and release your results. In some states, a health care professional will meet or talk with you to determine which tests are medically appropriate, and may deny your request for testing. If your request for testing is denied by a physician or health care professional you will be provided with a full refund of payment.
I never personally believed that DAT was a good fit for Quest so I am not surprised that they have backed out of this activity. Below are my reasons for this conclusion:
- Pursuing DAT business created a conflict in the company's business channels because test-ordering physicians account for a large portion of their business. They were circumventing their physician clients with their DAT line of business and thus risked alienating these important customers.
- Physician office business and hospital lab reference work involves wholesale sales whereas DAT is retail, more analogous to the fast food business but with an information product. Satisfying customers in the retail sector is quite different than providing services to physicians and their office staffs.
- There was little likelihood that the DAT revenue would ever begin to approach even a fraction of the revenue from Quest's other lines of business, so the activity was forever destined to be a minor sideline for the company.