This story has been updated to include comments from Quest's Q3 earnings call.
NEW YORK – Quest Diagnostics President, Chairman, and CEO Steve Rusckowski said that reform of the Protecting Access to Medicare Act (PAMA) by the end of the year is a key priority for the company, noting that without reform Quest will likely see reimbursement cuts totaling between $80 million and $90 million in 2023.
During a conference call following release of Quest's third quarter 2022 results, Rusckowski said the company, along with many of its peers in the lab industry, continues to lobby Congress to pass the Saving Access to Laboratory Service Act, or SALSA.
Introduced in June in both the House and the Senate, SALSA would modify PAMA by instituting a sampling-based approach to collecting lab test pricing data and placing caps limiting the maximum price cut or rise a test could see under PAMA to 5 percent a year.
The bill would also stop price cuts scheduled under current law to go into effect at the start of 2023, extending the time between price reporting periods from three years to four.
Rusckowski's remarks follow the launch last month of a campaign by the American Clinical Laboratory Association, which represents a number of lab firms including Quest, to advocate for passage of the act.
The bill was introduced by Sens. Sherrod Brown, D-Ohio, and Richard Burr, R-N.C., and Reps. Gus Bilirakis, R-Fla., Richard Hudson, R-N.C., Bill Pascrell, D-N.J., Scott Peters, D-Calif., and Kurt Schrader, D-Ore., and currently has four cosponsors in the Senate and 23 cosponsors in the House.
As Rusckowski noted, Congress has several times in recent years delayed lab price cuts scheduled under PAMA, indicating general support for the notion of PAMA reform. However, there remain obstacles to getting reform passed by the end of the year.
"Washington is busy," he said. "There are a lot of topics on the table."
Indeed, Congress is expected to take up a number of healthcare and lab-related topics by the end of the year, including, potentially, the Verifying Accurate Leading-edge IVCT Development (VALID) Act, which would give the Food and Drug Administration oversight of laboratory-developed tests.
Whether legislators have the bandwidth to add SALSA to this mix remains to be seen. Rusckowski said that advocates are "trying to find a [legislative] vehicle that we can attached it to." During a press call this week, ACLA President Susan Van Meter said the organization aimed to attached the law to an end-of-year legislative package.
Another potential challenge for SALSA is that, because the bill will reduce Medicare reimbursement cuts scheduled under PAMA, it will lead to an increase in spending that must be offset somewhere else in the federal budget. Rusckowski said legislators are currently working to get the bill scored by the Congressional Budget Office to determine what size offset will likely be needed.
Van Meter also addressed the need for a CBO score, noting that all three Congressional committees with jurisdiction over SALSA have requested CBO score the bill, though she added that "it is often difficult to get a score from CBO."
Van Meter called SALSA ACLA's "top advocacy priority."
PAMA concerns aside, Quest CEO-elect Jim Davis said on the Q3 call that the private payor "pricing environment" has "never been better."
He said that while price per requisition was down 50 basis points during the quarter, in 2018 and 2019 the company had typically seen declines of around 100 basis points per quarter.
Rusckowski noted that the 50 basis point figure included not only commercial payor pricing but all pricing and that the decline in commercial payor pricing was in fact less than 50 basis points.
"It's much improved from where it was years ago," he said.
For Q3, Quest reported a 10 percent year-over-year decline in revenues.
Revenues were $2.49 billion for the three-month period ended Sept. 30, down from $2.77 billion in the third quarter last year and beating the consensus Wall Street estimate of $2.35 billion.
Revenues from the company's base testing business were $2.17 billion, up 5 percent from $2.07 in Q3 2021. COVID-19 testing revenues were $316 million, down 55 percent from $709 million the year before.
Requisition volumes were down 6 percent in the quarter, with organic requisition volume also down 6 percent and revenue per requisition down 5 percent.
For Q3, net income attributable to Quest was $256 million, or $2.17 per share, down from $505 million, or $4.02 per share, for the same quarter in 2021.
Adjusted EPS was $2.36 per share for the quarter and beat the consensus analyst estimate of $2.19.
During the quarter, Quest spent $464 million on SG&A, up 9 percent from $427 million in the same quarter last year. The company ended Q3 2022 with $700 million in cash and cash equivalents.
For full-year 2022, the Secaucus, New Jersey-based company revised its revenue guidance to a new range of $9.72 billion to $9.86 billion from a previous range of $9.50 billion to $9.75 billion. It projected full-year 2022 adjusted EPS of $9.75 to $9.95, up from a previous guidance of $9.55 to $9.95.
In Thursday morning trading on the New York Stock Exchange, Quest shares were up 5 percent to $132.99.