Logistics as the Key Core Competency of Quest Diagnostics

A lab professional colleague recounted to me a quote from a recent discussion with an executive of Quest Diagnostics. The Quest executive remarked that logistics was the key core competency of the company. Such a statement actually rings true to me. Just think about it. Quest has developed a courier and shipping system infrastructure that transports fragile biologic specimens from physicians' offices across the U.S. (and also from around the world) to their central lab facilities for rapid processing. However and in spite of this internal perspective, I suspect that the majority of purchasers of the Quest Diagnostics stock view it as an investment in sophisticated healthcare technology. If they are seeking a logistics play, they would buy FedEx or UPS.

I have published a number of notes commenting on the fact that health insurance and hospital executives as well as many clinicians view lab services as a commodity. Below is a quote from only one of them (see: UnitedHealth Threatens to Fine Doctors for Sending Specimens to Quest):

[The attitude of UnitedHealth] is that lab services are generally interchangeable and equal and that only the location and convenience of the patient service center is of paramount importance. The [article quoted] thus continues to telegraph the message that lab testing is a commodity and that all test results are of equal quality, which I do not believe is true.

I have also published a number of notes to the effect that hospital-based labs do not adequately market themselves and the scientific contributions of lab medicine. In a recent note (see: Performance vs. Utility of Clinical Lab Tests: A Marketing Perspective), I made the following point:

I have always held the opinion that the laboratory diagnostics industry, the clinical labs, and lab physicians do not market themselves and their services adequately to test-ordering physicians and to the general public. By way of contrast, I think that radiologists do an admirable marketing job for medical imaging. I am not sure if this latter group is more marketing-oriented or if the new imaging technologies just sell themselves

On its home web page, Quest describes itself in the following way: The world’s leader in diagnostic testing, information, and services. For me personally, there is a major disconnect when a company simultaneously describes itself as the world’s leader in diagnostic testing and also views its core competency as specimen logistics. Put another way, I believe that the major national reference labs view themselves primarily as competing in a commodity market and that they differentiate themselves in this market primarily on the basis of the cost of testing, the efficiency of blood collection, and specimen logistics, rather than underlying science and quality of the lab test results generated. In such a setting, it may be impossible for hospital lab professionals and esoteric reference lab personnel to change the general attitude that lab testing is anything other than a commodity.

Comments

[bev M.D.]

You are absolutely right, and lab services will be bid and paid for accordingly. This will come to include anatomic pathology services also, which is why I'm glad I'm retired!
An analogy is an interview with the new CEO of Sunrise Senior Services (now in financial trouble)that I recently read, extolling the real estate value and growth potential of Sunrise - without ONCE ever mentioning the patients who live there. This is the "new world" of health care.