Andrew Brackmann : Jim, I want to go back to your comments around reducing leakage to high cost labs. I think you talked about in your opening remarks. I know that’s sort of part of the strategy here, but can you maybe just sort of talk about that opportunity broadly and just sort of quantify how big that could be for your growth going forward?
Jim Davis: Yes. I think there’s 2 buckets of opportunity there. One is reducing leakage to out-of-network labs. And then the second is what I would call steerage of work from high-priced in-network labs generally in health systems to independent labs like Quest Diagnostics. So generally 2 different initiatives, but it really starts with just very strong and tight collaboration with our commercial payers. We work hand-in-hand with them. They provide us the information on what physicians are using out-of-network high-priced laboratories, and they provide us the information that what doctors are sending work into health system labs, which, as you know, not good for patients who are going to pay higher deductibles, higher co-pays and obviously not good for the people that are paying for the health care in general, that’s still employers in the country.
So it’s a really tight partnership. We get the information. We distribute that information out to our commercial team. We call on the customers, try to convince them to move the work. At the same time, we’re always messaging as are the commercial payers out to patients to remind them that they can save money by using independent labs like Quest Diagnostics. We continue to message physicians and providers, and that’s why we’re seeing significantly higher growth rates with the commercial plans where we have established these types of relationships.
Operator: Our next caller is Kevin Caliendo with UBS.
Kevin Caliendo : Congrats on the contract renewals with your major payer partners. Can you maybe talk a little bit about if there’s anything new in the contracts, the duration of the contracts? Is there — the last time you did this, there were incentives that actually benefited you in terms of driving volumes. Just wondering if anything has changed, both positively or negatively, pricing, duration, terms, incentives, that kind of thing?
Jim Davis: Yes. We generally don’t talk about the terms, duration and things like that. But what I will tell you is that the trend continues. We seek to establish a fair price first and foremost. And then second, as I just mentioned in the previous question, where we can move these requisitions and improve our share of the commercial payer spend. We try to design incentives around that. In addition, we try to design incentives, when we do a hospital outreach acquisition and the prices go from 300% of Medicare as an example down to our rates, we try to step those rates down over a period of time so that we derive benefit and the commercial plan derives benefit. So we work hard to build those types of incentives into the agreement and I think the trend just continues in the direction we want.
Kevin Caliendo : Does this lead to sort of more value-based care potential for you guys going forward?
Jim Davis: Well, I separate again, value-based care from value-based contracts. These are what we call value-based contracts, meaning when we deliver value back to the commercial payer, there can be incentive payments involved in that. When we talk about value-based care, these are really our arrangements with some of these ACO reach organizations and some of the other large physician groups that have taken on risk from Medicare Advantage plans. And we continue to embed ourselves when these within these ACO reach programs and continue to work closely with large physician groups that take on this risk. And as we said in the past as we said in the past, when these types of relationships are really good for the lab industry, they — if you’re managing risk, you’re managing the cost of health care to a fixed number every year, you’re generally going to be incented to provide early care and early diagnostics so that you don’t let disease progress into more expensive inpatient care and we continue to work towards that.
Operator: Our next caller is Jack Meehan with Nephron Research.
Jack Meehan : I have a couple of cleanup questions for Sam. First is on collections. So seeing a little AR build? I know you called it out, but anything — any color you can add on that? And then second is on the base growth, 5% pretty good. I was just wondering if weather weekdays had any impact could have actually been better on an underlying basis?
Sam Samad: Yes. Sure. I’ll take the first one, Jack, and Jim will talk a little bit about the — any one-timer, so to speak, whether days. Listen, collections nothing of note there. I think AR trending or DSO is trending a bit up. That’s really more normal trends given the reduction in COVID. With COVID, I think that would help our DSOs overall a shorter collection window and DSOs were down as a result of a higher mix of COVID. But if you look back to pre-pandemic, I think the DSOs are kind of trending back to where they were pre-pandemic. So really nothing of note there. There’s some timing at the end of Q3 as well, but that’s just normal timing within quarters. So I would say, in general, collections are on track, and we’re happy with where things are. But Jim, did you want to make a couple of comments around base earning growth and any one-timers?
Jim Davis: Yes, weather and days and things like that, versus last year, weather was a slight help I mean, not significant at all, Jack, but it was a slight help because last year’s hurricane in September was worse than this year’s hurricane. The only other comment on days that I would make is early in the quarter in July. The fourth of July fell on a Tuesday this year versus a Monday last year. So in essence, your Monday and Tuesday are really, really bad days versus a year ago. You only had one bad day called a Monday because the fourth fell on a Monday. But again, that’s one day out of 90. So yes, I mean, a little bit of an impact there, but not that significant.
Operator: Our next caller is Patrick Donnelly with Citi.
Patrick Donnelly : Maybe a couple of follow-ups on Haystack. It sounds like still a 24 time line there. Can you just talk about I guess, any more specific timing and the catalyst set there when we could expect to see some data? And then just also the spend expectations related to getting that through the approval process as we work our way through ‘24 would be helpful.
Jim Davis: Yes, as we’ve said, Haystack continues on the timeline that we set for ourselves, for the team. There’s been evidence generation, obviously that’s what we made our — was part of our decision-making process. Now as we get the assay, what I call ready for commercial release, commercial production, we’re in the process of establishing relationships with some of our key oncology partners. So when the assay is ready, we’ll start to do some of the testing likely we’ll use a lot of that early testing to then seek reimbursement once we get a substantial buildup of testing that we feel good about approaching the Maxon and so far, so good. We’re bringing up the assay, as we mentioned, in our Lewisville, Texas Oncology Center of Excellence and feel good about that. I’ll let Sam touch on the financials with respect to…
Sam Samad: Yes, sure. I mean with regards to spend, I’ll talk in dilution terms and EPS terms here this year, and then I’ll talk — address your question around ’24, Patrick. So again, very pleased with the progress that the team is making. This year, we’re expecting EPS dilution to be in the $0.15 to $0.20 range. We talked about that on the Q2 call. It’s still in the same range, $0.15 to $0.20. If you look towards ’24, what we’ve said and this still applies, is that the annualized dilution in 2024 is going to be less than what we expect to see — what you see this year. So the $0.15 to $0.20, if you annualize that, that’s $0.30 to $0.40 next year. So we expect on an annual basis next year to be less than where things are trending this year.
So improvement just on an annual basis. And then as we look forward, we expect 25% dilution to be lower than 24%, and then we expect 26% to actually be accretive. So that’s consistent with what we said when we announced the deal consistent with what we said on the Q2 call.
Operator: Our next caller is Erin Wright with Morgan Stanley.
