Adam Schechter: Thank you. Yeah, I’ll ask them to jump in as well. I’d say the largest impact of margins, as I think about 2024 is PAMA. And we’ve built in about $80 million, almost $80 million of downside into our base case, assuming that PAMA comes next year. We’re still trying to see, working with our trade group if there’s a way to get the SALSA legislation approved. We have bipartisan support, but we had that last year. So, it’s very hard to get things approved right now. We’re also going to see if there’s a way to delay for another year the implementation, but for our base case, we’re assuming that there’s about an $80 million impact that would negatively impact the margins next year. That’s why we gave the long-term guidance.
And we said it’s 100 to 150 basis point increase over the time period. We said most of that will be after 2024. Because in 2024, we have to overcome PAMA. Let’s wait and see if PAMA doesn’t come or if it’s delayed, then we’ll have some upside there for sure.
Glenn Eisenberg: Yeah, Patrick, just I guess, as you look to the two businesses, we feel good about where we are with the margins, they continue to improve on a base business level. As we think about going into the fourth quarter. We commented that within the biopharma side, we expect margins to be up in the fourth quarter and year-on-year, such that for the full year, there’ll be flat to slightly up. In diagnostics, obviously, we have seasonality that impacts margins of fourth quarter sequentially, margins will be down, but they’ll still be up year-over-year. So, that we expect diagnostics margins for the full year, to be up slightly, even after absorbing the negative impact from the Ascension mix. As Adam commented in the 100, to call it 150 basis point margin improvement that we expect over the next three years.
We commented that the first-year margins would be relatively flat, we have around a 70-basis point headwind, if you will, between the combination of lower COVID testing, as well as the PAMA headwind that that Adam commented, but that’s reflected still in the three-year expectation that margins would grow that 100 basis points to 150 basis points.
Patrick Donnelly: Understood. Thanks, guys.
Operator: And our next question comes from the line of Jack Meehan from Nephron Research. Your question please.
Adam Schechter: Good morning, Jack.
Jack Meehan: Good morning, want to stick with the macro environment on the diagnostic lab side, Adam, are you seeing any recessionary signals at all in terms of the testing getting ordered? And then maybe on the flip side, hearing any change in the tenor of your hospital conversations around consolidation opportunities?
Adam Schechter: Yeah, Jack. So, you know, when you look at the macro dynamics, I would say for testing, it remains strong. And when you look at the volume that we’re seeing, it remains very strong as well. And it’s broad based across the country and esoteric and routine testing. If you go back to historical recessionary periods, the diagnostic business tends to continue to do well through those periods. So, I feel pretty confident that we’re going to continue to be see strength there. When it comes to hospitals. You know, I’ve talked about how the hospital health system but also local and regional laboratory acquisition possibilities remain extraordinarily strong. And I think it’s because they’re struggling in the economic environment, with reimbursement with wages, and other things.
And they’re looking for ways that they can get some capital, but also look for people that are like experts in hiring, the types of jobs that we hire for managing the type of people that we manage. So, I think the macro environment for the health systems and for these local smaller regional laboratories is very strong for us to continue to find ways to do business development and find visual partnerships. So, it’s actually a good environment for us to compete. But obviously, we want our hospital systems to remain solvent and, you know, they have a lot of things that they have to do to continue to be successful.
Jack Meehan: Great. And, Glenn, at the Analyst Day for 2024. You laid out some initial thinking it would be slightly below the 8.5% to 11%. EPS CAGR range. Just curious if anything, you know, in terms of the orders on the biopharma lab side or just anything else changes the way you’re thinking about that? Thanks.
Glenn Eisenberg: Yeah, no, Jack. Again, when we basically reaffirmed kind of our outlook for this year as well as our three years when we were at the Analyst Day, we knew there was some softness we had experienced within early development earlier. So, that continues, but as Adam said, kind of offset by the strength that we’re seeing with on the Central lab side. So, for Biopharma, and for Diagnostic segments, we feel very good. So, if you look at call it that 8.5% to 11.5% EPS target over the next three years, the CAGR, we still feel very good about that, realizing that for 2024, because again of the headwinds from less COVID testing and PAMA, you’d have around 800 basis point headwind to EPS in 2024. So, still positive EPS growth year-on-year even with those headwinds, but lower than, if you will, the range that we had, but again, that three-year range includes that expectation for 2024.
Operator: And our next question comes from the line of Eric Coldwell from Baird, your question, please.
Eric Coldwell: Good morning. Thank you I have two, the first one may be a bit confusing. So, bear with me, your largest competitor and early developments given some interesting color around their cancellations, and talked about how a majority of those cancellations they’ve experienced were predicated on awards that were made a year ago, two years ago stuff that was, you know, clients pre booking stuff when they were concerned about capacity and access in the future. You’re talking more about small clients. And it sounds like maybe this is more recent stuff. But I’m curious if you could talk at all about the aging of the cancellations, how long ago were these awards made? And is this something more in the moment? Or perhaps just clean up from past client activity that was abnormal? And then —
