Welcome to the Quest Diagnostics fourth quarter and full year 2020 conference call. At the request of the company, this call is being recorded. The entire contents of the call, including the presentation and question and answer session that will follow, are the copyrighted property of Quest Diagnostics with all rights reserved. Any redistribution, retransmission, or rebroadcast of this call in any form without the written consent of Quest Diagnostics is strictly prohibited. Now I'd like to introduce Shawn Bevec, Vice President of Investor Relations for Quest Diagnostics. Go ahead, please. Thank you, and good morning. I'm on the line with Steve Rusckowski, our Chairman, Chief Executive Officer, and President, and Mark Guinan, our Chief Financial Officer. During this call, we may make forward-looking statements and will discuss non-GAAP measures. We provide a reconciliation of non-GAAP measures to comparable GAAP measures in the tables to our earnings press release. Actual results may differ materially from those projected. Risks and uncertainties, including the impact of the COVID-19 pandemic that may affect Quest Diagnostics' future results include, but are not limited to, those described in our most recent annual report on Form 10-K and subsequently filed quarterly reports on Form 10-Q and current reports on Form 8-K. The company continues to believe that the impact of the COVID-19 pandemic on future operating results, cash flows, and/or its financial condition will be primarily driven by the pandemic's severity and duration, healthcare insurer, government, and client payer reimbursement rates for COVID-19 molecular tests, the pandemic's impact on the U.S. healthcare system and the U.S. economy, and the timing, scope, and effectiveness of federal, state, and local governmental responses to the pandemic, which are drivers beyond the company's knowledge and control. For this call, references to reported EPS refer to reported diluted EPS from continuing operations and references to adjusted EPS refer to adjusted diluted EPS from continuing operations. References to base testing volumes or base business refer to testing volumes excluding COVID-19 molecular and serology testing volumes. Growth rates associated with our long-term outlook projections, including total revenue growth, revenue growth from acquisitions, organic revenue growth, and adjusted earnings growth are compound annual growth rates. Revenue growth rates from acquisitions will be measured against our base business. Here is Steve Rusckowski. Thanks, Shawn, and thanks, everyone, for joining us today. In a year dominated by the pandemic, Quest brought critical COVID-19 testing to our country and delivered record revenues, earnings, and cash from operations for the fourth quarter and the full year 2020. The pandemic has tested our nearly 50,000 employees, and they have responded as heroes by developing COVID-19 tests, building test capacity, innovating new testing models with our retail partners, transporting specimens, delivering results, and of course, supporting our customers. We finished the year as one of the country's leading providers of COVID-19 testing. I'm very proud of what we have achieved and optimistic about what we can accomplish in 2021. This morning, I'll discuss our performance for the fourth quarter and full year 2020, our ongoing role in the COVID-19 pandemic, and update you on our non-COVID base business. Mark will provide more detail on our financial results and our financial outlook for the H1 of 2021. Before we get into the details of the quarter and the full year of 2020, we wanted to share our perspective on the new strategy for fighting the COVID-19 pandemic proposed by the new administration. We are pleased by the efforts to expand access to testing across the country, especially in the underserved communities where there are known disparities in healthcare. We support the new administration's approach to controlling the pandemic by expanding the availability of testing supplies, enhancing laboratory testing capacity, and ensuring a clarity of messaging about the use of tests and insurance coverage. We also support the efforts of COVID-19 Pandemic Testing Board, and we look forward to additional details in days and weeks ahead. Turning to our results. Continued high demand for COVID-19 testing drove our performance throughout the quarter and the H2 of the year. For the fourth quarter, total revenues grew by more than 55% to $3 billion. Earnings per share increased by more than 126% on a reported basis to $4.21 and nearly 168% on an adjusted basis to $4.48. For the full year 2020, total revenues grew by more than 22% to $9.44 billion. Earnings per share increased by nearly 71% on a reported basis to $10.47 and more than 70% on an adjusted basis to $11.18. Cash provided by operations increased by more than 61% to $2 billion. We announced today that we are increasing our quarterly dividend by 10.7% to $0.62 per quarter. This is our 10th increase since 2011. Additionally, our board of directors has increased our share repurchase authorization by $1 billion. The increased authority is on top of the approximately $900 million that was available as of December 31st, 2020. In the fourth quarter, we continued to see strong COVID-19 testing volumes. Demand clearly spiked as the virus surged and people got tested in advance of the holiday gatherings. We performed an average of 135,000 COVID-19 molecular tests a day in the fourth quarter, well below our current capacity. We continue to innovate to further expand capacity, reduce turnaround times, and gain efficiencies. Finally, we are focused on addressing health disparities in underserved communities through our Quest for Health Equity initiative. We recently held our first COVID-19 testing event at Abyssinian Baptist Church in Harlem, in conjunction with leading Black clergy and the United Way of New York City. Testing is more important than ever as the vaccines roll out over the upcoming months to get at-risk patients into care when therapy can still be effective and to isolate infected individuals. We expect 2021 to be another very strong year for COVID-19 testing. Demand for COVID-19 testing is likely to decline throughout 2021 as more people become vaccinated and fewer new cases are reported. We believe that COVID-19 testing will continue into 2022. Turning to our base business. Organic volumes recovered rapidly throughout the summer and fall. The recovery stalled at the end of November and into December due to the surge in COVID-19 infections across the country. Mark will provide and share some more details regarding the trends in our base business later. With that, we continue to make progress on our two-point strategy to accelerate growth and to drive operational excellence. Let me share some of the highlights from our strategy to accelerate growth. Our M&A pipeline remains strong. We achieved our goal to exceed a 2% growth CAGR from acquisitions in our base business over the last three years. We continue to see increasing interest from our hospital partners about how we can help them with their lab strategy, which includes discussions around both their outreach acquisitions and professional lab service arrangements. The deals we closed in 2020, particularly the Memorial Hermann outreach and MACL acquisitions, position us well to achieve our M&A growth target this year. We remain confident that this year we will execute a more similar type of outreach for tuck-in deals in our pipeline. Last year was also a record year for our professional lab services strategy or PLS. This is the business that partners with hospitals to help them run their inpatient labs more efficiently. In the fourth quarter, we announced two small PLS partnerships with hospital systems in N.Y. and Indiana. In December, we announced our largest PLS relationship to date with Hackensack Meridian Health, the largest integrated health network in New Jersey. Plus, we'll manage laboratory operations and perform reference testing for 11 Hackensack Meridian Health hospitals. We also continue to execute our health plan strategy by shifting the dialogue to value-based contracting efforts from the recent past, when discussions focused primarily on price. We continue to make progress with our new strategic relationship with Anthem to improve quality and efficiency in the delivery of laboratory services. We're advancing our position with UnitedHealthcare within its Preferred Lab Network and also are building momentum with many of our other national and regional health plan partners. Finally, we continued to grow our direct-to-consumer services in the quarter. In December, we announced our zero out-of-pocket QuestDirect COVID-19 testing option. This service offers appointment scheduling and specimen collection at more than 500 participating Walmart drive-thru locations. Also in the quarter, we saw an acceleration in the number of consumers signing up for MyQuest patient portal. Today, roughly 15 billion patients have a MyQuest account, an increase of nearly 2 million since October. Recent market research indicates that our brand is strong and has strengthened over the past year with industry-leading net promoter scores. We have a strong foundation to accelerate growth in our consumer offerings. The second part of our two-point strategy is to drive operational excellence. We continue to pursue our goal to reduce our cost base by 3% per year. We also see opportunities ahead to drive further productivity gains and, at the same time, enhancing the customer experience. Once again, our Invigorate program delivered approximately $200 million of cost savings in 2020, and we continue to see more opportunities to deliver future efficiency in our cost base. Our new flagship laboratory in Clifton, New Jersey went live on January 4th. This is the most highly automated laboratory in our network, and over the course of 2021, we expect to consolidate volumes from Peterborough, Baltimore, and Philadelphia labs to this state-of-the-art facility. Before turning it over to Mark, I'd like to announce that we plan to update you on our strategy and market overview at our upcoming virtual Investor Day, and it will be held on Thursday, March 11th. Stay tuned for more details. Mark? Thanks, Steve. In the fourth quarter, consolidated revenues were $3 billion, up nearly 56% versus the prior year. Revenues for diagnostic information services grew approximately 58% compared to the prior year, which reflected ongoing demand for COVID-19 testing services, offset by a modest decline in our base testing revenue. Volume, measured by the number of requisitions, increased 26.8% versus the prior year, with acquisitions contributing 4.5%. As we highlighted in our 2020 outlook update in mid-December, organic testing volumes ordered in our base business were down mid to high single digits versus the prior year in October and November. The recovery stalled in late November with organic testing volume trends down high single digits versus the prior year in December due to the surge in new infections across the country. Additionally, many state and local governments imposed new orders designed to reduce the transmission of COVID-19. Compared to December, organic base volume trends remained relatively steady in January versus our pre-pandemic 2019 baseline. For the entire fourth quarter, total testing volumes declined roughly 2% versus the prior year and benefited from M&A and new PLS partnerships that began in 2020. Excluding M&A and new PLS wins, base testing volumes declined approximately 8% in Q4 versus the prior year. COVID-19 testing continued to be a meaningful contributor to volumes during the fourth quarter. We resulted approximately 12.5 million molecular tests and 1 million serology tests, contributing approximately 29% to volume growth in Q4. We exited the fourth quarter averaging approximately 130,000 COVID-19 molecular tests and 10,000 serology tests per day. Revenue per requisition increased 25.2% versus the prior year, driven largely by COVID-19 testing. This was partially offset by unit price headwinds of approximately 1.6% in the fourth quarter, which includes the impact of PAMA and was in line with our prior expectations. Reported operating income in the fourth quarter was $795 million, or 26.5% of revenues, compared to $363 million, or 18% of revenues last year. On an adjusted basis, operating income in Q4 was $860 million, or 28.6% of revenues, compared to $329 million, or 17% of revenues last year. The year-over-year increase in operating margin was driven by the strong revenue growth in the fourth quarter due to continued high demand for COVID-19 testing. Reported EPS was $4.21 in the quarter, compared to $1.86 a year ago. Adjusted EPS was $4.48, compared to $1.67 last year. Cash provided by operations was approximately $2 billion for the full year versus $1.24 billion in 2019. As a reminder, in the fourth quarter, we returned approximately $138 million of provider relief funds we had received under the CARES Act. Our financial position remains very strong. As we announced this morning, we increased our quarterly dividend approximately 10.7% to $0.62 per share, and the board expanded our share repurchase authorization by $1 billion. We now have nearly $2 billion available for future share repurchases. We resumed share repurchases in Q4 and bought back $250 million of company stock during the quarter. Turning to guidance, there continues to be a lot of uncertainty around the trajectory of the pandemic and its impact on COVID-19 testing trends, as well as further recovery in our base business. Therefore, we are currently providing an outlook for only the H1 of 2021 and expect to provide updates as the year progresses. Our outlook for the H1 of 2021 is as follows. Revenue is expected to be between $4.85 billion-$5.15 billion, an increase of approximately 33%-41% versus the prior year. Reported EPS expected to be in a range of $5.07-$6.07. An adjusted EPS to be in a range of $5.90-$6.90. Cash provided by operations is expected to be at least $800 million, and capital expenditures are expected to be approximately $200 million. The demand for and duration of COVID-19 testing, as well as the continued recovery in the base business, are significant swing factors that remain challenging to forecast. With that high degree of uncertainty in mind, please consider the following. Our first half outlook generally assumes a gradual improvement in base testing volumes, but we expect the base business to remain below our pre-pandemic 2019 baseline throughout the H1 of the year. COVID-19 molecular testing volumes averaging roughly 100,000 tests per day in the H1 of the year. However, we expect average daily volumes to decline throughout the H1 of 2021 as more people become vaccinated. Therefore, we assume COVID-19 molecular volumes will be lower in the second quarter compared to Q1. COVID-19 serology testing volumes averaging 15,000 tests per day for the H1 of 2021, with demand expected to increase modestly throughout the first two quarters of the year. Given the strength of our financial position and high cash balances, we expect to complete a larger amount of share repurchases in 2021 than we have done historically while maintaining significant flexibility to execute on our M&A pipeline. However, at this point, our EPS ranges only assume enough share repurchases to maintain a stable share count. We expect to share more details about our capital deployment priorities at our upcoming Investor Day in March. While we aren't providing a detailed outlook for the full year at this time, I'd like to offer some additional considerations for 2021. As a reminder, there will be no Medicare reimbursement cut under PAMA this year, given the one-year delay included in the CARES Act. We expect organic base testing trends to slowly recover throughout the year, with volumes likely approaching a full recovery compared to our 2019 baseline by the end of the year. If the country vaccinates a significant portion of the population by the summer, we would expect a continued decline in COVID-19 molecular testing volumes in the H2 of 2021 compared to our expectations for the first half. Similarly, demand for COVID-19 serology testing is likely to wane in the back half of the year. Finally, COVID-19 molecular reimbursement is likely to trend lower in 2021 compared to last year. As many of you know, beginning January 1st, CMS moved to a new reimbursement model with a rate of $100 for all tests reported within two days and $75 for all other results. Several commercial payers have now moved to this new reimbursement model as well. While we are encouraged that HHS now plans to extend the public health emergency throughout 2021, prospective changes to COVID molecular reimbursement are still possible. Furthermore, direct client bill reimbursement for COVID testing services remains competitive. I will now turn it back to Steve. Thanks, Mark. Well, to summarize, I'd like to thank all Quest Diagnostics employees who have worked tirelessly over the past year. They have delivered a significant portion of the country's COVID-19 testing while serving the needs of people who rely on Quest Diagnostics every day. Thanks to their heroic efforts, we delivered record revenues, earnings, and cash from operations for the fourth quarter and the full year of 2020. In light of the company's strong financial performance, we have increased our dividend and share repurchase authorization while maintaining flexibility to pursue our M&A strategy. We look forward to sharing a more in-depth update on our market views and strategy at our upcoming virtual Investor Day, to be held on Thursday, March 11th. Stay tuned for additional details on that day. Now we'd be happy to take your questions. Operator? Thank you. We will now open it up to questions. At the request of the company, we ask that you please limit yourself to one question. If you have additional questions, we ask that you please fall back into queue. To be placed in the queue, please press star one from your phone. To withdraw press star two. Again, to ask a question, please press star one. Please announce your name and company. Our first question comes from Ralph Giacobbe with Citi. Your line is open. Thanks. Good morning. Good morning, Ralph. I think I heard you say that you expected molecular reimbursement to trend lower. Wanted to flesh that out to understand that and maybe what have you assumed for reimbursement with PHE likely extended for the full year. Has there been any discussion or thoughts about proactively going to plans and perhaps not continuing to get that sort of inflated PHE reimbursement in exchange maybe for more favorable longer-term pricing escalators? Thanks. Mark, do you want to start it? Sure. We are expecting to still do quite well in terms of reimbursement in the near term. We believe we can meet the turnaround times, certainly the threshold that's required to be eligible for the higher rate, and then we get paid, obviously, based on the individual tests. We're still thinking in the near term that our average rate of reimbursement is going to be pretty strong. We also recognize the reality of the pressure on the industry from all the various payers, especially the commercial payers. Therefore, as we mentioned, throughout the H1 of the year, we would expect some reduction in that reimbursement. Not something that would be momentous, but certainly some downward pressure. As we said, the client area is very competitive. There's quite a few labs at this point, given the demand that have a significant capacity, and therefore in the client area, it's very competitive. In terms of your question, I'm sure you can appreciate, Ralph, that first off, we don't feel we're getting paid excessively for COVID PCR. We feel like we're being paid appropriately. Even if you could exactly forecast the volume of our COVID testing and forecast the base business over a period of time, which obviously would be nearly impossible, I'm not sure that we need to trade off anything. We're very happy with the relationships that we've built, as Steve mentioned, with the payers. We've moved away from a focus on price and moved toward more of a partnership and alignment around value creation, where they're looking for us to save them money and create value. A big piece of that is moving more work to us because we're already very high value compared to the rest of the industry and possible choices for patients. Good question, Ralph. Certainly appreciate it. For practical and for strategic reasons, because of where we think we are with the payers already with some of these new contracts, it's certainly not something that we're looking to pursue right now. Let me just add to that. Speaking to demand, what I would share is that over the course of the last 10 months, we've brought up our capacity considerably, and we're going to continue to build it. The reason for that is we want to continue to be prepared in the event that we do have another surge. Secondly, is we want to make sure we really have a capability to meet turnaround times that are expected in the market. Over the last 10 months, obviously a lot of our testing has been for the clinical purpose, and what we believe as we enter the second half, and we're having many discussions in this regard, there's going to be a lot more demand for return-to-work programs with employers, which have been pushed out, as you all know. Return to leisure activities. There's a number of cities that have large tourism bases that are thinking about what they need to do to get people back into those venues. There will be a lot of activity around just return to life. I know that we are still trying to figure that out, and that's going to offer us a lot of opportunity in the future. With that, there's always a COVID test, but there's also a number of services we provide. Those are yet to be defined. We're still trying to understand what that second half opportunity would be, but what we see so far, we will continue to have strong demand, but it may take a different form as we get into the second half and as we go into 2022. Thanks, Ralph. Thank you. Operator, next question. Pito Chickering with Deutsche Bank, your line is open. Hey, good morning. This is Justin Bowers on for Peter. Just with respect to the guide, can you frame the high end and the low end for us in terms of your testing assumptions? Also the thought process on the increase in serology testing through the quarter. Yeah, sure, Justin. It's multi-variable. There's several ways you could come to the high and low end. What I would say is, they're all based on the three major drivers, with most of it being on the base volume recovery and the level of PCR volume, to a lesser extent, serology. If we don't see a significant fall off from where we stand today in PCR, or if it surges up again because of these variants or some other unknown factor, certainly that would take us to the higher end, combined with if the base business also were to continue to recover and not go the opposite direction as COVID surged again. There is some negative correlation, obviously, between the two. If they both move in the same direction, that moves to the higher end. Then if for some reason COVID fell off markedly even more than we're planning, and as we talked about, we are planning for a decline over time in this first six months as that midpoint, and the base business did not show recovery or even potentially took a little bit of step back for economic or other reasons, then that would take you to the low end. I can't at this point provide exact changes in the base and COVID because obviously there's multiple ways to get to either one. Directionally, that's what ring-fences our guidance with the midpoint being, as I said, a modest recovery, but not full for the first six months of the base business, and then some step off, but still significant COVID testing for the first six months, with the second quarter being markedly lower than the first quarter. Okay, got it. Just to clarify the earlier comments, it sounded like the base business right now is kind of running stable month-over-month from December levels. Are we interpreting that correctly? Just in terms of the molecular tests reported on the website at 32.8 million, is that the right number? It looked like kind of a huge step up from February to January. More importantly, is that kind of where you guys are now for total molecular? I'll hop back in queue. Thank you. Sure. Steve, do you want to take that or would you like me to? The step up that we've seen based on the strong delivery that we had in the fourth quarter and the beginning of January. As I said in my introductory comments, we are one of the leading providers of COVID-19 testing. Second is it does not include serology, and you did ask a question about serology, because we do believe there'll be increasing role of serology throughout 2021. We seem to see some early indications that there's interest in understanding whether you have the antibodies or not, which might inform patients and physicians around their urgency of getting vaccinated. At the same time, we're bringing out a new capability called quant serology testing, and this will allow physicians and patients to see if, in fact, they do get the spike protein from the vaccines, and we'll be bringing that out on two platforms in the next few weeks. This can help us determine if the vaccine is being effective. We do believe that there will be some increased demands for serology, and this is on top of what we already do, and serology is providing a really important role for management of the disease, overall surveillance, epidemiology, and in measuring the response of what's happening pre and post the vaccinations in broad populations. We believe there's an opportunity in front of us in 2021 in that regard. Justin, just to close out on your other question. Yes, $32.8 million was the total through as of Monday, and that was up $1.8 million over the prior two weeks. About 130,000 a day in the prior two weeks. Operator, next question. Jack Meehan with Nephron Research, your line is open. Thanks. Hey, Jack. Hey, good morning. Steve, you mentioned the focus of the new administration on COVID testing. Can you talk about how you think Quest role might change at all serving the pandemic? If we start to see greater adoption of home testing, how do you think Quest is going to be positioned for that? I think the new administration is leveraging what we've done in the past as a country and as an industry and taking it to the next level. I mean, you see the capacity that's out there now in the country, that a few weeks ago we were doing about 2 million COVID-19 molecular tests. Obviously up considerably from where we all started last March. Going forward, Jack, I do see that there'll be a change beyond the PCR tests, as I mentioned earlier. There's going to be greater demand for programs that get to portions of the population that help us get back to work, get back to leisure activities, get back to life. We're having a number of dialogues around that, and that will include the role of antigen testing and more rapid testing workflows that allow us to see if, in fact, a person that wants to engage in whatever the activity is negative and safe for a reasonable period of time to participate. When we get into that world, we'll obviously be providing the testing, but as I said earlier, there's a number of services and also IT solutions that you need to provide. Like so much in healthcare, you see one, but we're currently engaged with a number of organizations, a number of municipalities, and a number of corporations on what they will be doing in this regard, particularly in the second half. I think the first quarter is outlined in our guidance. We're going to start to see improvement as we get into the second quarter. I think the second quarter will be a telling quarter for us all, and we do see a lot of people getting prepared for better infection rates, better position for populations to get back to work life and leisure activities. We're going to start to see more of that, and Quest has a significant role in helping in that regard. Great. Just to follow up, I have a two-parter on unit pricing. I was curious if you could weigh in. Do you have any notable commercial contract renewals in 2021? Maybe more broadly, as you have discussions with commercial payers now, do you feel like you have a little bit more of a good footing in terms of negotiating price given the role the labs have served amidst the pandemic? Let me start with where you ended. I think our relationship with the health plans has never been better. As you've seen over the last number of years, we've increased our presence. We have the best access to lives now that we've had in over a decade. We are in a very strong footing. Also during the pandemic, I'll share that we were deeply engaged with many of the plans of what they needed to take care of their membership and also their employees. The relationship has continued to strengthen. As I said in my introductory remarks, and Mark said as well, we're shifting the dialogue away from exclusively price to the value we deliver. When you go back to what we've talked about in the past around what we bring to the table in terms of our value proposition around quality, our service performance, our innovation, all at a very affordable price, we believe our value proposition is really second to none. As I said, in the course of the last year, we've done surveys to look at our reputation in the industry and net promoter scores, and those are quite strong. When you bring those facts to the table, Jack, our position in terms of working out the forward-booking relationships has provided a much stronger foundation and a better understanding on the other side that we really do deliver a lot more value. We're in a good position with our plans. We're in a good position with our contracts. We obviously don't provide specific details, but we feel very good about that. Also, I shared that we continue to make progress with our United relationship, with the Preferred Lab Network, and the building relationship with Anthem we're quite encouraged about as well. We feel good about our relationship and the progress we've made, but also the opportunities in front of us to continue to build on what we've been talking about. Mark, anything you'd like to add there? Sure. Jack, I understand the question, and several years ago, I think there was an expectation or people holding their breath every time we extended a contract with a major payer because it would imply some sort of major price concession. I can tell you, this has become largely invisible to you all, unless we talk about it, like Anthem, which was really a new contract and brought together a number of states under a single contract as opposed to having different periods of time in which we were negotiating across the Anthem network. We just extended with a major commercial payer. You didn't hear about it because there was no price concession, and in fact, we made huge headway with this payer. I'll tell you, getting them to acknowledge that in the world of PAMA, the whole notion of a discount to the CMS NLA rates no longer will apply going forward, and that, in fact, CMS will be setting the market, and that they should feel confident is a market rate that they can feel comfortable and represent to their prospective or current members. Really, that's what it's been about, is they all want to make sure that they can say they've got good prices, and now you've got an external benchmark you can look to. We just extended with a very large national. We do have one coming up this year, I can assure you that it will not come with major price concessions. We're going to continue to work on the value-based contracting. With that actually comes good pricing that we feel represents the market. These come with upside, whereas we perform, we both share in the benefit of that upside. That's the way we're really contracting in the last couple of years and how we would expect to contract going forward. Thanks. Thanks, everyone. Operator, next question. Kevin Caliendo with UBS, your line is open. Great. Thanks for the question. This is Adam Noble, and for Kevin. I just wanted to, I guess, double back to your comments around reimbursement for COVID PCR. One, just to confirm that you're assuming throughout the first half that the PHE is extended so that the Medicare rate, with the add-on payment, remains $100. You talked about the kind of the commercial reimbursement potentially declining over time. Just any thoughts around what the magnitude of changes on the commercial side you guys could potentially see in PCR? Yeah, sure. I'll comment on that, and Steve may want to add. Yes, we would expect that as long as the federal health emergency continues, that this structure with the opportunity to earn $100 per test from CMS will continue. That is a very small portion of our volume, but we would expect that. However, as I said in the prepared remarks, there is some risk. They could decouple it. There's no guarantee that that will continue. Not only could they decouple the reimbursement with the PHE, but they could also, like they did January 1st, change the approach. However, at this point, yes, we're assuming the highest probability is that as long as the PHE continues, CMS will continue to pay us under this new method. On commercial, obviously, we're not the only player, and so while we defend, and feel like we do a good job of explaining why our reimbursement makes sense, as we've negotiated some new payment methodologies, including some who wanted to move to the Medicare methodology, we think we've done a good job. Obviously, there are other labs as well, and to the extent that other labs don't do as good a job as we do, there could be additional pressure on us. That's why it's hard for us to predict exactly where this is going. Certainly in our mind, we would expect to continue to defend our commercial contracts as well through the PHE, so in the same basis for CMS paying us at that rate should apply to the commercial payers as well. I also want to remind everybody that as long as the zero patient out of pocket applies, that is also a huge tailwind for us because to avoid having to bill patients where historically we've shared that we get about $0.70 on the dollar and actually get 100% of that payment from the third party, is also a large enhancement to our revenue and our profitability as well. That's a factor I don't want people to forget about. Steve? Yeah, just to add to the CMS new methodology for reimbursement. As you know, we are reimbursed at $100 when we report the results in two days and $75 for all other results. To Mark's comments, we have seen a few payers to look at this model as well. We're encouraged by the Public Health Emergency extension through 2021. Also just to share our timeliness of our results are quite good. We have met that threshold of 50% of COVID-19 molecular test results within less than two days. We did that in the last few months. I'll share that the majority of our tests are resulted in two days or less. In my other comments, I did mention that we're continuing to build capacity because it just gives us a lot more operational flexibility to meet better turnaround times based upon where the demand is coming from. I think we're progressing well. We're a very good provider of the test. Time is one element in quality and reliability and also the type of testing we have done. Our methodology for PCR tests, both on the LDT side and obviously the kits are somewhat consistent throughout the industry, are really quite strong. If you look at the accuracy and the quality of our testing, people have come to consider us the gold standard, and I think that will bode us well going forward as well. If I could just- Operator, next question. Eugene Kim, your line is open with Wolfe Research. Good morning, thank you for all the color around guidance. Apologies if I missed this, have you guys provided the average reimbursement levels for the PCR testing in Q4? Can you comment whether you're embedding similar levels in the first half guidance? Yeah. We didn't specifically call that out, but I can tell you that it did not change much in Q4 from where it was in Q3. It was above $90. We do have some client bill customers that are less than 100, and we don't get paid for 100% of the testing, sometimes due to missing data and so on and so forth. We do get some denials. Certainly north of 90 was the AWR previously. Now we did talk about the fact that we expect that to have some pressure and to reduce over time through the first half. That doesn't mean that it absolutely will, but in our guidance, in the midpoint of that guidance, we did make an assumption that given the new model with the $75, not just with CMS, with some commercial payers, we're not going to get paid for 100% of our tests at that $100 where we had been done previously. Still a large majority, as Steve said, meet that two-day turnaround time. That'll create a little bit of erosion, and then also I mentioned that there's a lot of capacity and therefore a very competitive environment in that client bill arena, aside from the third party. Got it. Thank you. Just as a quick follow-up, on the base business, can I confirm you said you don't think you'll get back to pre-pandemic levels in first half? Is that compared to 2019, or does that include acquired volume as well? Thank you. Yeah, that is correct. What I said was, as we're looking at the back half, even though we're not giving guidance because there's too much uncertainty around it, we expect it to be back to pre-pandemic levels towards the end of 2021. In the first half, we still expect to be down versus 2019. We felt, even though the pandemic didn't start largely for our business till March, the easiest compare and how to talk about it is 2019 volumes. We did have a large growth for the first two months of 2020, as we shared at our first quarter earnings call. That compounds things a little bit on the year-to-year comparison. Yes, we're going to continue to talk about our volume performance relative to 2019 because it's the cleanest compare for the whole year. When we speak to that, and I heard it in your question, we are looking at organic growth. We spoke of a couple of acquisitions that we closed last year and in our organic discussions, we're excluding those and any other deals we might do prospectively. It's organic base business we're talking to. And we think that's- Derik De Bruin The best representation of utilization, that's why we think it's important. Our organic performance versus '19 kind of gives a sense because of our size and reach, we think we're the market overall is performing. Yeah. The acquisition revenue will be on top of that. We obviously announced a couple deals, and what we said is we have a good funnel and anything we might do prospectively would be on top of what we said. Derik De Bruin with Bank of America. Hi. Great. Thank you and good morning. Just one quick one. Good morning. Can you provide a little bit more color on how should we think about the margin progression throughout 2021, and particularly with the core business still being down, how much of that is a margin headwind, just sort of thinking about the dynamics as we go from the first half to the second half with COVID volumes testing coming down and the return to relatively more normal for the core business? Just wanted to get some thoughts on the margin progression and workflow, please. Thank you. Sure. It depends. When you say is it a headwind, it depends on to what you're comparing it. As we expect the base business to improve, that's a significant margin tailwind versus the prior period because we are, in any given window of time, a highly fixed cost operation on our base business. While we took some significant cost actions in the second quarter of last year in response to the significant downturn in our volume, and we've continued to manage our costs very tightly through the back half recovery to not get out in front of ourselves. We're not planning on any significant restructuring in the near term with volumes that are down single digits at this point. Our cost structure in the base business is to some extent what it is, and we'll add small pieces that are necessary as it recovers. That growth and recovery in that base business sequentially is a nice tailwind. On the other side, as we talked about, to expect erosion in our COVID volumes, that creates a headwind. How those two pieces offset each other is hard to predict slightly, I'm assuming specifically. I would at this point expect that the COVID reduction more than offsets the base, but at least they do partially offset each other as we move forward. The other dynamic is obviously reimbursement on the PCR test, and we shared that we expected some pressure on that as we go from the first quarter into the second quarter sequentially, and then likely even more so in the back half of the year. Without getting into specifics, those are kind of the things you should think about as you think about where our margins are going to go through the first half and into the H2 of 2021. Thank you. Lisa Gill with JP Morgan, your line is open. Hi. Thanks very much. Good morning. Thanks for taking my question. I just wanted to follow up on your comment around the acquisition opportunities. Steve, one of the things that was anticipated that with PAMA, there'd be a lot of pressure and you'd see more acquisition opportunities. With PAMA now being pushed out, does that change anything, number one? Number two, when we think about reimbursement, as we've been talking about for molecular tests, et cetera, I would think a lot of these labs have done well during this period of time. Does that change what their expectations are at all around what their business is worth as we think about acquisition opportunities? Yeah. Thanks, Lisa, for the question. The first part is really about acquisition opportunities around hospitals. You see that we announced a couple deals last year that we're happy we did, and that's going to help us. We continue to see a nice funnel for 2021 as well. As you all know, hospital volumes have been down through 2020. They have recovered for us. What we do see is a lot of renewed interest of looking at their lab strategies, which includes acquiring their outreach business and includes professional lab service agreements like we just announced in the fourth quarter. That relationship we announced in the fourth quarter with Hackensack Meridian Health System is the largest we've ever done. I can tell you it took a long time to get there, I believe the perspective reality of what's happening in the healthcare market this year helped bring that to a conclusion. I believe that that will happen with a number of dialogues we have going on with hospitals right now. That's one piece. The second is on other commercial laboratories. Yes, you're right. A number of commercial laboratories have jumped into the COVID testing arena. You see it with all the capacity we've added in the country. As that starts to be pulled back and they start to see what the prospects are, given what we're driving as an industry with consolidation, with tighter contracts and networks around health plans, we believe that there still will be a catalyst in the marketplace for us to continue to consolidate. Yes, there's been a short-term opportunity for a number of labs to take advantage, if you will, the opportunity to provide COVID-19 testing. As that starts to change, as we get throughout 2021, we believe the realities of what the new world will be with tighter networks, more consolidation will play nicely into our strategy and allow us to acquire more going forward. Obviously, given our cash position and strong balance sheet, we're in a very nice position to continue to do that. Also, Lisa, there's been a lot of discussion around all this additional capacity out there. People have added new systems and potentially does this present a risk for us that these people are going to get into other businesses outside of COVID, like Women's Health? We are watching it. Obviously, some hospitals have moved their molecular capacity to COVID, and we help them with some of the other work. For other commercial laboratories and hospitals to use that capacity to get into competing with us, by way of example, on its own, that's a long stretch. There's a lot more to getting a client to flip over than the lab capacity. You have to have a sales force, you have to have logistics capabilities, you have to do electronic interfaces, you have to work with the physicians, you have to be in a contract with the health plans. We are watching it, but at the same time, we're a little cautious in the belief that some of this will have a significant effect. At the same time, we're watching it carefully to make sure it doesn't, and we're staying on top of our clients to make sure we serve them well. Thank you. Yeah. If I could add, Steve, just a couple things, Lisa, around your question around our pipeline. At any given point in time, we've got multiple opportunities that we're discussing. I can tell you that none of the potential sellers that we're speaking to right now are expecting to get paid for that PCR bubble. Fortunately, I could see a mentality that, "Hey, my value's gone up dramatically because of COVID testing." The people we're talking to right now recognize that that's short-term and that should not be a part of the valuation discussion. Then while PAMA gets a pause this year, there's still some risk, but more importantly, as we've mentioned, and I'm sure you've seen, it's not just PMS, but the commercial payers are starting to put pressure on these high hospital outreach rates, recontracting that work that's outside the patients who are in the hospital, either admitted or outpatients, at independent laboratory rates. This pressure is not just coming from Washington, it's coming from the commercial payers as well, and from, quite frankly, patients who don't like those high prices when they have a high deductible plan. There's a number of things that are getting the C-suites of large hospital systems with outreach to think about, do they really want to be in this business and will this be a good time to monetize? Therefore, I really don't see the pipeline of interest having been impacted over the last 12 months negatively. Matt Larew with William Blair, your line is open. Hi, good morning. As I think about the various components of your response to COVID-19 and your role in testing, two things that stick out as step changes from a pre-COVID world are certainly capacity and then consumer engagement. I think the number of patients using QuestDirect has doubled in the last 15 months. Just curious, what can you do and as we move to sort of a post-COVID world, to leverage that increased consumer-facing presence, consumer engagement, as well as the added capacity that it sounds like you're still bringing on? Thanks for the question. We're very bullish on our consumer strategy. As you all know, we have five strategies for growth, one of which is the consumer strategy. Our direct-to-consumer business that we've built over the last several years has done quite well. We do believe that the pandemic has now been an accelerator for that. We're providing COVID-19 testing through that platform. We're going to look at using it for consumer genetics. As I said in my interactive comments, the interesting part of the pandemic has brought to the forefront the strong role of testing in overall healthcare. Quest name has been out there more than ever. Our brand has been built. Our brand is really second to none in our industry. We couple that with our service performance. We have this strong foundation coupled with the change in the marketplace, and we do believe there's going to be a continuation of the number of consumers that will engage differently with healthcare delivery systems and how they engage with the physician, with telehealth. We have a very strong presence with telehealth providers and with integrated delivery systems that offer a telehealth option. At the same time, a lot of patients as well, and consumers will want to receive their basic health checks and testing online as they buy so much else in their lives. We're very well positioned with reputation, with capabilities, and so we are investing in that in a significant way, more so than we would have if we did not have the pandemic. We think about the growth drivers going forward, and we'll talk about this some more at our investor day. We're very bullish about the opportunity we have in front of us around our QuestDirect, but also the consumer opportunity in general. Dan Leonard with Wells Fargo, your line is open. Thank you. Just one quick one on the deal side. Possible you could frame for us the Hackensack opportunity, the contribution to growth in 2021 and the first half guide. Thank you. Mark, you want to take that? Yeah. We don't typically announce the revenue impact of deals like this. Again, I want to remind you, this is organic. So this is not something we bought. We worked with Hackensack and demonstrated to them that we can perform the same work they do in their lab at a better cost, better value. For a system that size, there's significant lab spend. This is going to be quite impactful and beneficial to them. We see that as an opportunity, obviously, to also get other clients who will get their attention to see, hey, if Hackensack thinks that this will work well, in addition to some of the other hospital systems that we've won over the last couple of years. We're very excited about it. It is a large deal. It's the largest deal we've ever done. It will be material to our growth. We talked a couple of years ago at our Investor Day, and we'll likely give an update on this. We thought we could get more than 100 basis points and somewhere between 100 to 200 basis points of growth every year from our PLS business. Certainly, this one is a large contributor to that and might even give us an opportunity to exceed that. Very large deal, but we haven't had a historical precedent of calling out the exact revenue, but it will be noticeable and material as we go into 2021 and beyond. Ricky Goldwasser with Morgan Stanley, your line is open. Yeah. Hi, good morning. Clearly, there's a lot of uncertainty around the second half and the trajectory of the comeback of a more normalized utilization level. If we step away from the timing and just think about the margin trajectory, how should we think about the core margin trajectory from where they were, let's say, in the fourth quarter, to where they can expand to as utilization comes back to a more normalized level? Again, the question is more about the margin trajectory as it relates to utilization not about the timing. My second question is more about market demand. How do you think about changes in physician behavior patterns? We're seeing telehealth becoming more integrated into the workflow. Do you think that there's going to be any impact on the longer-term lab testing demand curve because of that? I don't know if the experiences early in the year could shed some light on that. Yeah, sure. Mark, do you want to take the first part? I'll take the second. Yeah. Ricky, obviously the size of the revenue we've generated from COVID, which more than offsets the base business, has materially impacted our margins and expanded them greatly relative to our historical margins. As we progress, and we'll talk more about this at Investor Day, but we progress into a future where COVID testing is still around for a while. As Steve said, we don't expect it to go away completely, certainly by 2022. It's going to be less material to our top line and to our margin. Where will our base business be? Once we get back to the pre-pandemic levels of 2019, I would expect our base business to be slightly higher margin than it was pre-pandemic. As you look at our Invigorate program, which we continued to drive even during the pandemic, and you look at the offsets or the pay-fors that we usually talk about, including wage inflation and price erosion, given the pause on PAMA this year and given the fact that we've done really well in other price concessions despite significant increases in our SWB that was warranted during the pandemic as we wanted to reward our employees for their incredible contributions in getting us up and running, operating well through it, and obviously driving strong company results. When I net all those together, that level of business should be more profitable. Going forward from that, when we get back to the growth that you saw in 2019 and you saw in the first two months of 2020 and our ability to leverage that growth, I would expect to see margin expansion on the base business. Of course, that will be partially offset for a period of time as the COVID revenues and margins fall down. Longer term, the good news is we were on a good path on growth and margin expansion pre-pandemic, and we'll get back there. For a while, it'll be somewhat masked by the COVID decline that's inevitable over the next, certainly 18 months or so. Yeah. The question about physicians, Ricky, we're watching this carefully because we do believe, going back to an earlier question about the consumer activity, that there will be a transition here now going forward with physicians serving the market in a different way. As we said before, about half the physicians have either sold their practices to integrated delivery systems or have strong affiliations with integrated delivery systems. That will be consistent going forward. The other half of the market, we believe there will be a growing percentage of that portion of physicians that are served by telehealth, and we have a very strong position with those telehealth providers. That was before the pandemic. Those telehealth providers are not going to work with handfuls of laboratories, they will work with a few. We'll have a real tight core lab network, as you would expect, and as you expect, Quest would be one of those options. We feel good about that. Second is you see more consolidation going on in physicians, and you see what's happening particularly with one of the health insurance companies, Optum, acquiring physicians, and a number of those physician practices are our customers. You think about that consolidation and think about their role and think about where they add value bringing all those physicians together. We believe there will be an opportunity for us to work with a consolidator like Optum to provide lab services more broadly and really reduce the variation they have with all their physicians. Just one last point to show that this world is moving to a tighter network of lab providers. In the fourth quarter of last year, UnitedHealthcare actually announced the removal of out-of-network benefit for some of their fully insured members. It's just another example of a major health plan tightening up the network. We think the physician side will change, and there'll be a different way of providing physician services to patients going forward. That trend, we believe, is a good trend and will provide tailwind for us to consolidate the market. Erin Wright with Credit Suisse, your line is open. Hey, Erin. Great. Thanks so much for squeezing me in. Just to follow up on that competitive landscape and consolidation. It sounds like you don't expect there to be any sort of meaningful impact on your opportunity around consolidation, just even given the dramatically expanded installed base of PCR instruments across the U.S. over the past year. I would assume that customers do want to monetize those investments to some extent, and I'm just curious what you're seeing in terms of market share shifting outside of maybe COVID testing that you're seeing already, if that's happening at all. It sounds like everything still remains an opportunity from an M&A perspective and consolidation standpoint. My second question is just on how should we be thinking about the long-term dynamics as it relates to COVID testing? It will obviously diminish with the vaccine rollout, but could it evolve into something more similar to flu testing in future years? Can you remind us of the flu testing exposure you do have? Thanks. Sure. As I said earlier, we believe that hospitals will be now increasingly looking at their options to become more efficient given the pressure the pandemic's put on many of them. We're encouraged by the level of discussions we had and the deals we've closed as an example that this is happening. We think that's good. On the commercial laboratory side, we believe that some have gotten into the COVID testing opportunity. It's provided somewhat of an opportunity for them to get through this year. As the dust settles and testing volumes go down, the reality of what we talk about dynamically doesn't change, and we think there would be many of those that would be looking at their options. We do believe that COVID testing will continue into 2022. We believe that this will be a virus that we'll have to manage. It will be more flu-like than something that will be behind us in the end of 2021. It's hard for us to scale at this time what that will be. You should not think that this is going to be a testing opportunity that'll go away at the end of this year. We do believe they'll be with us in 2022 as well. As far as the flu, we talked about in a prior earnings call that we have offered a combination panel. When a patient presents themselves with symptoms, the physician wants to rule out the flu and also COVID. We have seen that be accepted. As you all know, the incidence of flu this year is down considerably because of all our behaviors in the United States. That has changed somewhat. Shawn or Mark, you want to add something to flu testing in general and exposure to answer the final point of the question? Yeah, I don't have anything to add. Shawn? Our last question comes from Brian Tanquilut with Jefferies. Your line is open. Hey, good morning, and thanks for squeezing me in. I guess just one quick question, Mark. As I think about your capital deployment, obviously, you're generating a lot of cash, and it sounds like the hospital acquisition opportunities are the pipelines there, but maybe a little slow in coming through. How should we be thinking about your willingness to buy back more aggressively in the front end? How should we be thinking about just other capital deployment opportunities, whether it's internal on the CapEx side for growth? Sure. We are investing quite a bit internally. As you may have seen or you'll see in our capital spend for 2020, we ended up $418 million, which was above the initial range. A lot of that was related directly to the COVID capital that was necessary. We certainly have not stepped back on investing internally because we think it's the best way to drive returns. A lot of that obviously is related to our Invigorate program. We are moving all of our new assay test to a single platform. We continue to move forward on that. A big piece of the 2020 and the H1 of 2021 was really the Clifton, our new facility. Although we started operating in early January, we still have some final fit-out and equipment to put in, and that'll drive some of the spending in the first half. We absolutely have a high priority on internal capital, and we'll continue to do so. You can see we guided to $200 million in the first half, which is about 50% of what we spent in 2020 as we step back a little bit from COVID capital. We have some continued spending on Clifton and then also the normal priorities on which we'd spend. On share buybacks, as I mentioned, I will give a lot more color on the Investor Day. The reason for that is we do have some things that we're monitoring around potential cash deployments we'll have greater clarity on as we move over the next couple of weeks. We also wanted to get a little more of 2021 Q1 behind us to see how that performance continues and what our expectations for Q2 look like at that point, because every day, every couple of weeks, every month certainly gives us better line of sight into expectations. By us seeking and getting approval and announcing a billion-dollar increase in our authorization, certainly you correctly are taking that as a signal, and as I said specifically in my prepared remarks, that we're going to do more share buybacks than we have done historically. I'll remind you that our capital allocation strategy, which we have not changed to this point, is to give a majority of our free cash flow back to our shareholders through our dividend and our share repurchases. We suspended them for 2020 for a period of time. Even with the $250 we spent in Q4 and the increase in dividend over time, we're behind that 50%, so we have some catch-up to do. Yeah. Let me just add, too, that the performance we had in 2020 and the performance that we're indicating with our guidance in 2021 is affording us an opportunity to invest in our growth strategies. That includes what we've talked about on this call, working on the relationships with health plans or gaining traction with presenting our lab strategy view to health systems, hospital health systems, what we're doing around advanced diagnostics, and then finally, what was asked about earlier around the consumer opportunity in front of us. Implied in the guidance is an increase in investment for those growth drivers to accelerate growth of our base business within 2021, but as we enter 2022 as well. If there are no further questions, I'd like to thank everyone for, again, joining us on this call. We appreciate your continued support and interest, and you have a great day. Take care. Thank you for participating in the Quest Diagnostics fourth quarter and full year 2020 conference call. A transcript of prepared remarks on this call will be posted later today on Quest Diagnostics' website at www.questdiagnostics.com.